<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1998
REGISTRATION NO. 333-39643
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ANKER COAL GROUP, INC.
(EXACT NAME OF REGISTRANT ISSUER AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 1222 52-1990183
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
2708 CRANBERRY SQUARE
MORGANTOWN, WEST VIRGINIA 26505
(304)594-1616
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
BRUCE SPARKS
2708 CRANBERRY SQUARE
MORGANTOWN, WEST VIRGINIA 26505
(304)594-4216
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
WITH A COPY TO:
JOHN B. TEHAN, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212)455-2000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION
STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
===========================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE OFFERING PRICE(1) FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 3/4% Series B Senior Notes due
2007................................. $125,000,000 100% $125,000,000 $37,878.79(2)
- -----------------------------------------------------------------------------------------------------------
Guarantees of 9 3/4% Series B Senior
Notes(3)............................. $125,000,000 100% $125,000,000 $0(4)
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid.
(3) See inside facing page for table of additional registrant guarantors.
(4) Pursuant to Rule 457(n), no separate filing fee is required for the
guarantees.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
TABLE OF ADDITIONAL REGISTRANT GUARANTORS
<TABLE>
<CAPTION>
ADDRESS INCLUDING ZIP
CODE, AND TELEPHONE
STATE OR OTHER NUMBER INCLUDING
EXACT NAME OF REGISTRANT JURISDICTION OF I.R.S. EMPLOYER AREA CODE, OF
GUARANTOR INCORPORATION OR IDENTIFICATION REGISTRANT GUARANTOR'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION NUMBER EXECUTIVE OFFICES
- ------------------------------ ---------------- --------------- --------------------------------
<S> <C> <C> <C>
Anker Group, Inc. Delaware 13-2961732 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
Anker Energy Corporation Delaware 51-0217205 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
Bronco Mining Company, Inc. West Virginia 22-2094405 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
Anker Power Services, Inc. West Virginia 55-0700346 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
Anker West Virginia Mining West Virginia 55-0699931 2708 Cranberry Square
Company, Inc. Morgantown, West Virginia 26505
(304) 594-1616
Juliana Mining Company, Inc. West Virginia 55-0568083 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
King Knob Coal Co., Inc. West Virginia 55-0488823 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
Vantrans, Inc. Delaware 22-2093700 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
Melrose Coal Company, Inc. West Virginia 55-0746947 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
Marine Coal Sales Company Delaware 13-3307813 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
Hawthorne Coal Company, Inc. West Virginia 55-0742562 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
Upshur Property, Inc. Delaware 95-4484172 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
Heather Glen Resources, Inc. West Virginia 55-0746946 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
New Allegheny Land Holding West Virginia 31-1568515 2708 Cranberry Square
Company, Inc. Morgantown, West Virginia 26505
(304) 594-1616
Patriot Mining Company, Inc. West Virginia 55-0550184 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
Vindex Energy Corporation West Virginia 55-0753903 2708 Cranberry Square
Morgantown, West Virginia 26505
(304) 594-1616
Anker Virginia Mining Company, Virginia 54-1867395 2708 Cranberry Square
Inc. Morgantown, West Virginia 26505
(304) 594-1616
</TABLE>
i
<PAGE> 3
PROSPECTUS
FEBRUARY 10, 1998
$125,000,000
[ANKER LOGO] ANKER COAL GROUP, INC.
OFFER TO EXCHANGE $125,000,000 OF ITS 9 3/4% SERIES B SENIOR NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR $125,000,000 OF ITS OUTSTANDING 9 3/4% SENIOR NOTES DUE 2007
---------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY, ON
MARCH 11, 1998, UNLESS EXTENDED.
Anker Coal Group, Inc. (the "Company"), hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange an aggregate of up to $125,000,000 principal amount of 9 3/4% Series B
Senior Notes due 2007 (the "Exchange Notes") of the Company for an identical
face amount of the issued and outstanding 9 3/4% Senior Notes due 2007 (the "Old
Notes" and together with the Exchange Notes, the "Senior Notes") of the Company
from the Holders (as defined) thereof. As of the date of this Prospectus, there
is $125,000,000 aggregate principal amount of the Old Notes outstanding. The
terms of the Exchange Notes are identical in all material respects to the Old
Notes, except that the Exchange Notes have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), and therefore will not bear
legends restricting their transfer and will not contain certain provisions
providing for Liquidated Damages in respect of the Old Notes under certain
circumstances described in the Registration Rights Agreement (as defined), which
provisions will terminate as to all of the Notes upon the consummation of the
Exchange Offer.
Interest on the Senior Notes is payable semiannually in cash in arrears on
April 1 and October 1 of each year, commencing April 1, 1998. The Senior Notes
mature on October 1, 2007. The Senior Notes are redeemable at the option of the
Company, in whole or in part, at any time on or after October 1, 2002, at the
redemption prices set forth herein, plus accrued and unpaid interest and
Liquidated Damages (as defined), if any, to the date of redemption.
Notwithstanding the foregoing, at any time prior to October 1, 2000, the Company
may redeem up to 35% of the original aggregate principal amount of the Senior
Notes with the net proceeds of one or more offerings of common stock of the
Company at a redemption price equal to 109.75% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption; provided, that after any such redemption, at least 65% of the
original aggregate principal amount of the Senior Notes remains outstanding.
Upon the occurrence of a Change of Control (as defined), the Company is required
to offer to purchase the Senior Notes at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase. See "Description of Senior
Notes--Repurchase at the Option of Holders--Change of Control."
The Senior Notes are senior unsecured obligations of the Company and rank
pari passu in right of payment with all current and future unsecured senior
indebtedness of the Company and senior to all future subordinated indebtedness
of the Company. The Company's obligations under the Senior Notes are jointly and
severally guaranteed, fully and unconditionally on a senior unsecured basis by
each existing and future Restricted Subsidiary (as defined) (the "Guarantors")
of the Company. Each of the Guarantors is a wholly owned subsidiary of the
Company. As of December 31, 1997, the aggregate principal amount of secured
indebtedness of the Company and the Guarantors which would have effectively
ranked senior to the Senior Notes and the Guarantors' guarantees (the
"Subsidiary Guarantees") was approximately $1.6 million. In addition, the
Company's and the Guarantors' obligations under the Amended and Restated
Revolving Credit Facility (as defined) are secured by a first priority lien on
substantially all of the assets of the Company and the Guarantors and
effectively rank prior to the Senior Notes and the Subsidiary Guaranty. As of
December 31, 1997, the Company had approximately $7.0 million of outstanding
indebtedness under the Amended and Restated Revolving Credit Facility and had an
additional $18.0 million of undrawn availability (which total availability may
be increased to up to $75.0 million upon the achievement of certain financial
tests) thereunder. In addition, as of December 31, 1997, the Company's
subsidiaries had trade liabilities aggregating $29.3 million which would
effectively rank prior to the Senior Notes and the Subsidiary Guarantees. The
Indenture governing the Senior Notes (the "Indenture") permits the Company and
its Restricted Subsidiaries to incur additional indebtedness, including secured
indebtedness, subject to certain limitations. See "Description of Senior
Notes--Certain Covenants."
The Old Notes were issued and sold on September 25, 1997 in a transaction not
registered under the Securities Act in reliance upon an exemption from the
registration requirements thereof. In general, the Old Notes may not be offered
or sold unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act. The
Exchange Notes are being offered hereby in order to satisfy certain obligations
of the Company contained in the Registration Rights Agreement. Based on
interpretations by the staff of the Securities and Exchange Commission (the
"Commission") set forth in no-action letters issued to third parties, the
Company believes that the Exchange Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by any holder thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 promulgated under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business, such holder has no arrangement
with any person to participate in the distribution of such Exchange Notes and
neither such holder nor any such other person is engaging in or intends to
engage in a distribution of such Exchange Notes. However, the Company has not
sought, and does not intend to seek, its own no-action letter, and there can be
no assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer. Notwithstanding the foregoing, each
broker-dealer that receives Exchange Notes for its own account as a result of
market making or trading activities (each, a "Participating Broker-Dealer")
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with any resale of Exchange Notes received in exchange for such Old
Notes where such Old Notes were acquired by such Participating Broker-Dealer as
a result of market-making activities or other trading activities (other than Old
Notes acquired directly from the Company). The Company has agreed to make
available for a period equal to the lesser of (i) 180 days from the date on
which the Exchange Offer Registration Statement is declared effective or (ii)
the period ending on the date when all broker dealers holding Old Notes have
sold all Old Notes held by them, this Prospectus to any Participating Broker
Dealer and any other persons, if any, with similar prospectus delivery
requirements for use in connection with any resale of Exchange Notes. See "Plan
of Distribution."
The Company does not intend to apply for listing of the Exchange Notes on any
securities exchange or for inclusion of the Exchange Notes in any automated
quotation system. The Old Notes have been designated for trading in the Private
Offering, Resales and Trading through Automated Linkages (PORTAL) market of the
National Association of Securities Dealers, Inc.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. The date of acceptance and
exchange of the Old Notes (the "Exchange Date") will be the fourth business day
following the Expiration Date (as defined). Old Notes tendered pursuant to the
Exchange Offer may be withdrawn at any time prior to the Expiration Date. The
Company will not receive any proceeds from the Exchange Offer. The Company will
pay all of the expenses incident to the Exchange Offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS IN CONNECTION WITH AN
INVESTMENT IN THE SENIOR NOTES.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
contained elsewhere herein. Unless the context indicates otherwise, references
herein to the "Company" or "Anker" mean Anker Coal Group, Inc. and its
consolidated subsidiaries and predecessors. The estimates of the Company's
recoverable reserves as of June 1, 1997 set forth herein have been audited by
John T. Boyd Company ("Boyd") as of such date. All references to "tons" are
references to short tons. For definitions of certain coal-related terms see
"Industry Overview" and "Glossary of Selected Terms."
THE COMPANY
Anker is a growth-oriented producer of coal used principally for
electricity generation and steel production with a focus on selected niche coal
markets in the eastern United States. The Company currently owns and operates a
diverse portfolio of thirteen non-unionized deep and surface coal mines
strategically located in West Virginia and Maryland. In 1996, approximately 67%
of the Company's revenues from coal sales (including brokered and commission
sales) were made under long-term contracts. The Company's long-term contracts
had a weighted average term of approximately 7.4 years as of June 30, 1997.
Based on contracts currently in place and purchase orders and sales made to
date, the Company expects 1997 coal sales (including brokered and commission
sales) to exceed 13.0 million tons, a 14% increase over 1996 coal sales of 11.6
million tons. Through both acquisitions and development of the Company's
existing reserves, the Company's annual coal production has grown at a compound
annual rate of approximately 15%, from 4.2 million tons per year in 1992 to 7.7
million tons per year in 1996, and the Company's coal reserves have grown at a
compound annual rate of approximately 41%, from 147 million recoverable product
tons as of December 31, 1992 to approximately 664 million recoverable product
tons as of June 1, 1997.
The Company attributes its growth in reserves, production, revenues and
cash flow to its focus on serving niche coal markets and its cost-efficient
operations. The Company believes it has a competitive advantage due to, among
other things, the geographic location of its reserves and the diverse qualities
of its coal. For example, in 1996, the Company sold 2.3 million tons of steam
coal, or approximately 20% of shipments, to independent power producers ("IPPs")
and was the largest supplier of coal to IPPs in the eastern United States.
Because transportation costs can significantly increase the delivered cost of
coal over the mine price of coal, the Company believes its proximity to these
IPPs and other customers provides it with a competitive advantage over other
coal producers. The Company's strategy has been to enter into long-term supply
contracts with its customers, which it may initially fulfill with brokered coal
and subsequently replace with lower-cost coal from its own production. The
Company believes that its ability to supply customers with brokered coal permits
it to secure long-term contracts, which provide the stable source of revenues
and cash flow required to support the opening, expansion or maintenance of mines
to service such contracts.
The Company's niche market strategy has also focused on supplying specific
qualities of coal to satisfy customers' demands in the most cost efficient
manner. The Company supplies premium quality, lower volatility metallurgical
coal ("low vol met coal") to certain integrated steel and merchant coke
producers, for whom this quality of coal is an essential component of coke
production. Low vol met coal sales accounted for approximately 12% of the
Company's coal sales and related revenue for 1996, and the Company believes it
has an approximate 14% share of the domestic low vol met coal market. In
addition, the Company believes that its lower cost, high sulfur reserves are
strategically located near electric generation facilities which can economically
utilize high sulfur coal due to their use of sulfur-reduction technologies and
lower transportation costs.
Approximately 80% of the Company's 1996 shipments were to electric
generation facilities and, consequently, the Company believes that it is well
positioned to benefit from favorable trends in the electric generation industry.
Over the last ten years, coal consumption in the United States has generally
experienced steady annual growth, reaching a record level of 1.0 billion tons in
1996. This steady growth in coal consumption is attributable to similar growth
in the electric generation industry, which accounts for more than 89% of
domestic coal consumption. In 1996, coal-fired facilities generated
approximately 56% of the nation's
1
<PAGE> 5
electricity, followed by nuclear (22%), hydroelectric (11%) and gas-fired (9%)
facilities. Because coal is one of the least expensive and most abundant
resources for the production of electricity and imports of coal have not
historically exceeded 1% of domestic coal consumption, domestically produced
coal is expected to continue to play a significant role in the production of
electricity in the future.
The Company further believes that it will benefit from increasing federal
deregulation among electricity producers, which has primarily affected the
wholesale market for electricity. Since 1935, domestic electricity utilities
have operated in a regulated environment, with prices and return on investment
being determined by state utility and power commissions. In April 1996, the
Federal Energy Regulatory Commission (the "FERC") issued orders establishing
rules providing for open access to electricity transmission systems, thereby
initiating consumer choice in electricity purchasing on the wholesale level and
encouraging competition in the generation of electricity. The Company believes
that this trend towards wholesale deregulation will likely (i) increase the
popularity of coal as a source of electricity generation due to its relatively
low cost and (ii) favor coal producers, such as the Company, with diverse
reserves and cost and transportation advantages.
COMPETITIVE STRENGTHS
The Company believes that it possesses the following competitive strengths:
PORTFOLIO OF LONG-TERM CONTRACTS. The Company has secured long-term coal
supply contracts with a weighted average term of approximately 7.4 years as of
June 30, 1997. The Company's long-term contracts have accounted for an average
of approximately 65% of the Company's coal sales revenues (including brokered
and commission sales) from 1992 to 1996. Over the same period, approximately 3.4
million tons of the Company's annual coal shipments covered by long-term
contracts were up for renewal and contracts for 76% of this coal were rolled
over into new long-term contracts upon their expiration. See "Business--
Competitive Strengths."
EFFICIENT OPERATIONS. Historically, the Company has been successful in
reducing its cash cost of operations per ton produced. The Company's cash cost
of operations and selling expenses per ton of coal shipped has declined
approximately 13%, from $25.65 per ton in 1992 to $22.40 per ton in 1996. See
"Business--Competitive Strengths."
DEMONSTRATED RECORD OF RESERVES AND PRODUCTION EXPANSION. The Company has
demonstrated its ability to increase production from its existing reserve base
as well as grow through acquisitions. The Company has increased its reserve base
approximately 352%, from 147 million recoverable product tons as of December 31,
1992 to approximately 664 million recoverable product tons as of June 1, 1997,
substantially all of which increase was due to acquisitions of reserves. For the
nine months ended September 30, 1997, the Company increased its captive coal
production by approximately 17% over production levels for the same period in
1996. See "Business--Competitive Strengths."
DIVERSE PORTFOLIO OF OPERATIONS AND RESERVES. With a diverse reserve base
of approximately 664 million recoverable product tons, the Company believes that
its results of operations are not dependent on any one of its thirteen mines and
that it is well positioned to meet the varying needs of its customers. As of
June 1, 1997, approximately 22% of the Company's coal reserves met the rigorous
compliance standards for Phase II of the federal Clean Air Act ("compliance
coal"), 29% of its reserves was low sulfur (less than 1.0% sulfur) coal
(including compliance coal) and another 63% of its reserves was medium sulfur
(between 1.0% and 1.8% sulfur) coal. See "Business--Competitive Strengths."
EXPERIENCED MANAGEMENT TEAM. Bruce Sparks, the Company's President and
Chief Executive Officer, has 19 years of experience in the coal industry, has
worked at the Company for the past 12 years and owns 5.1% of the Company's
Common Stock (as defined). Prior to his death, John J. Faltis, the Company's
President, Chief Executive Officer and Chairman of the Board of Directors, had
worked at the Company for the past 22 years and owned 30.4% of the Company's
Common Stock, all of which currently is beneficially owned by his estate. See
"--Recent Developments."
2
<PAGE> 6
GROWTH STRATEGY
In August 1996, members of senior management and certain funds managed by
First Reserve Corporation (collectively, "First Reserve"), a private investment
firm specializing in the energy industry, acquired the outstanding Common Stock
of the Company (the "Recapitalization"). As a result of the Recapitalization,
First Reserve owns approximately 54.1% of the Company's Common Stock. Senior
management and First Reserve have adopted a business strategy to maintain and
enhance the Company's leading position in certain niche markets by increasing
revenues, cash flow and profitability. To implement this strategy, the Company
will:
EXPAND PRODUCTION FROM RECENTLY ACQUIRED RESERVES. Through the Company's
recent acquisitions and subsequent mine expansion or development, production is
expected to reach 8.5 million tons in 1997, an increase of approximately 10%
from the 7.7 million tons produced in 1996. See "Business--Growth Strategy" and
"Business--Recent Acquisitions and Development Plans."
EXPAND NICHE MARKETS. The Company has demonstrated its ability to enter
new markets and become a low-cost supplier of coal to end users in these
markets. The Company seeks to leverage this expertise by expanding in its niche
markets where it believes it has a competitive advantage due to coal quality,
proximity to end users, lower production costs or a combination of these and
other factors. See "Business--Growth Strategy."
GROW THROUGH ACQUISITIONS. From June 1, 1996 to May 31, 1997, the Company
acquired 310.3 million tons of recoverable reserves, increasing its reserve base
by approximately 89%. The Company believes that its niche strategy, together
with its proven ability to reduce cash operating costs, positions it to exploit
the increasing trend towards asset rationalization by larger coal mining
companies. See "Business--Growth Strategy."
RECENT DEVELOPMENTS
On October 12, 1997, John J. Faltis, the Company's President, Chief
Executive Officer and Chairman of the Board of Directors, was killed in a
helicopter accident in West Virginia. While Mr. Faltis' death may have an
adverse effect on the future direction of the Company, the Company does not
expect that his death will adversely affect the Company's operations, growth or
financial prospects due to the presence of a core management team focused on the
Company's operations. The Company's Board of Directors has elected John Shober,
presently a director of the Company, to succeed Mr. Faltis as Chairman of the
Board. The Company's Board of Directors also has elected Bruce Sparks, formerly
Executive Vice-President, Treasurer and Secretary, to succeed Mr. Faltis as
President of the Company. The Board of Directors also has elected Michael M.
Matesic as Treasurer and B. Judd Hartman as Secretary. Under the stockholders'
agreement, dated as of August 12, 1996, among the Company, Mr. Faltis, JJF Group
Limited Liability Company, a West Virginia limited liability company formerly
controlled by Mr. Faltis and now controlled by his estate ("JJF Group"), and
others (the "Stockholders' Agreement"), for so long as JJF Group owns at least
2% of the Company's Common Stock, it will have the right to nominate and have
elected by stockholders one member of the Company's Board of Directors to fill
the vacancy created by Mr. Faltis' death. On December 1, 1997, JJF Group elected
Mr. James Boyd, President of Boyd and executor of Mr. Faltis' estate, to the
Board of Directors.
In accordance with the Stockholders' Agreement, the Company has maintained
key man life insurance on the life of Mr. Faltis in the amount of $15 million.
Under the Stockholders' Agreement, the Company must use proceeds from the key
man policy to repurchase as much of the Company's Common Stock owned by JJF
Group as possible, based on the fair market value of such Common Stock,
determined in the manner discussed below. In December 1997, the Company received
$5 million in life insurance proceeds, which it has used to temporarily reduce
the outstanding indebtedness under the Amended and Restated Revolving Credit
Facility. As soon as the fair market value of the Common Stock owned by JJF
Group is determined, such proceeds will be reborrowed under the Amended and
Restated Revolving Credit Facility and applied to the purchase of such Common
Stock.
3
<PAGE> 7
For the eight month period following Mr. Faltis' death, the Company has the
option under the Stockholders' Agreement to repurchase for cash all (but not
less than all) of the remaining Common Stock held by JJF Group following the
Company's repurchase of Common Stock with proceeds of the key man life
insurance. If the Company does not exercise its option to repurchase JJF Group's
remaining Common Stock, then, for a period of 120 days following the expiration
of the foregoing eight month period, JJF Group has the option under the
Stockholder's Agreement to require the Company to repurchase any of the Common
Stock still held by JJF Group (the "JJF Group Put Option"). If JJF Group
exercises the JJF Group Put Option, the Company has the choice under the
Stockholders' Agreement to pay the repurchase price either in cash or pursuant
to a subordinated note (the principal amount of which would be required to be
payable in seven equal annual installments and interest on which would be
required to be payable annually in arrears).
The purchase price under the Stockholders' Agreement for the repurchase of
Common Stock from JJF Group is fair market value. In accordance with the
Stockholders' Agreement, the Company and JJF Group have engaged The Chase
Manhattan Bank to determine the fair market value of the Common Stock.
The Company's indirect thirty-two percent interest in Oak Mountain Energy,
L.L.C., has experienced higher than anticipated capital development costs, which
resulted in increased borrowings under Oak Mountain Energy, L.L.C.'s credit
facilities. By November 1997, Oak Mountan Energy, L.L.C. had borrowed under its
credit facilities the maximum amount available for the development of its
operations and was continuing to incur additional capital development costs. At
that time the Company and the other owners of Oak Mountain Energy, L.L.C.
attempted to raise additional capital for the project and also considered the
possible sale of the investment. In addition, in December 1997, Oak Mountain
Energy, L.L.C. experienced a methane ignition in its mine, which halted all
production for one week and reduced the level of operation at the mine until the
end of the first quarter of 1998. Rather than commit the additional funds needed
in the project, the Company decided to terminate its investment. As a result of
the pending disposition, the Company expects to record a loss for impairment of
$7 to $9 million in the fourth quarter of 1997.
As a result of the death of John Faltis, the Company will record in the
fourth quarter approximately $15 million of income relating to the proceeds from
key man life insurance policies.
4
<PAGE> 8
THE EXCHANGE OFFER
THE EXCHANGE OFFER......... The Company is offering to exchange pursuant to the
Exchange Offer up to $125,000,000 aggregate
principal amount of its new 9 3/4% Series B Senior
Notes due 2007 (the "Exchange Notes") for a like
aggregate principal amount of its outstanding
9 3/4% Senior Notes due 2007 (the "Old Notes" and
together with the Exchange Notes, the "Senior
Notes"). The terms of the Exchange Notes are
identical in all material respects (including
principal amount, interest rate and maturity) to
the terms of the Old Notes for which they may be
exchanged pursuant to the Exchange Offer, except
that the Exchange Notes are freely transferrable by
Holders (as defined) thereof (other than as
provided herein), and are not subject to any
covenant regarding registration under the
Securities Act. See "The Exchange Offer."
INTEREST PAYMENTS.......... Interest on the Exchange Notes shall accrue from
the last interest payment date (April 1 or October
1) on which interest was paid on the Notes so
surrendered or, if no interest has been paid on
such Notes, from September 25, 1997 (the "Interest
Payment Date").
MINIMUM CONDITION.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes
being tendered for exchange.
EXPIRATION DATE; WITHDRAWAL
OF TENDER................ The Exchange Offer will expire at 5:00 p.m., New
York City time, on March 11, 1998, unless the
Exchange Offer is extended, in which case the term
"Expiration Date" means the latest date and time to
which the Exchange Offer is extended. Tenders may
be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. See "The
Exchange Offer--Withdrawal Rights."
EXCHANGE DATE.............. The date of acceptance for exchange of the Old
Notes will be the fourth business day following the
Expiration Date.
CONDITIONS TO THE EXCHANGE
OFFER.................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Company currently expects that each of the
conditions will be satisfied and that no waivers
will be necessary. See "The Exchange Offer--Certain
Conditions to the Exchange Offer." The Company
reserves the right to terminate or amend the
Exchange Offer at any time prior to the Expiration
Date upon the occurrence of any such condition.
PROCEDURES FOR TENDERING
OLD NOTES................ Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Old Notes and any other required
documentation to the Exchange Agent (as defined) at
the address set forth therein. See "The Exchange
Offer--Procedures for Tendering Old Notes" and
"Plan of Distribution."
USE OF PROCEEDS............ There will be no proceeds to the Company from the
exchange of Notes pursuant to the Exchange Offer.
5
<PAGE> 9
FEDERAL INCOME TAX
CONSEQUENCES............. The exchange of Notes pursuant to the Exchange
Offer will not be a taxable event for federal
income tax purposes. See "Certain United States
Federal Income Tax Considerations."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS........ Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
beneficial owner's own behalf, such beneficial
owner must, prior to completing and executing the
Letter of Transmittal and delivering the Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such beneficial
owner's name or obtain a properly completed bond
power from the registered holder. The transfer of
registered ownership may take considerable time.
See "The Exchange Offer--Procedures for Tendering
Old Notes."
GUARANTEED DELIVERY
PROCEDURES............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date must
tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering Old Notes."
ACCEPTANCE OF OLD NOTES AND
DELIVERY OF EXCHANGE
NOTES.................... The Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date.
See "The Exchange Offer--Acceptance of Old Notes
for Exchange; Delivery of Exchange Notes."
EFFECT ON HOLDERS OF
OLD NOTES................ As a result of the making of, and upon acceptance
for exchange of all validly tendered Old Notes
pursuant to the terms of this Exchange Offer, the
Company will have fulfilled a covenant contained in
the Registration Rights Agreement (the
"Registration Rights Agreement") dated September
25, 1997 among the Company and Donaldson, Lufkin &
Jenrette Securities Corporation and Chase
Securities Inc. (the "Initial Purchasers") and,
accordingly, there will be no Liquidated Damages in
respect of the Old Notes pursuant to the terms of
the Registration Rights Agreement, and the holders
of the Old Notes will have no further registration
or other rights under the Registration Rights
Agreement. Holders of the Old Notes who do not
tender their Old Notes in the Exchange Offer will
continue to hold such Old Notes and will be
entitled to all the rights and limitations
applicable thereto under the Indenture between the
Company and Marine Midland Bank relating to the Old
Notes and the Exchange Notes (the "Indenture"),
except for any such rights under the Registration
Rights Agreement that by their terms terminate or
cease to have further effectiveness as a result of
the making of, and the acceptance for exchange of
all validly tendered Old Notes
6
<PAGE> 10
pursuant to, the Exchange Offer. All untendered Old
Notes will continue to be subject to the
restrictions on transfer provided for in the Old
Notes and in the Indenture. To the extent that Old
Notes are tendered and accepted in the Exchange
Offer, the trading market for untendered Old Notes
could be adversely affected.
CONSEQUENCE OF FAILURE TO
EXCHANGE................. Holders of Old Notes who do not exchange their Old
Notes for Exchange Notes pursuant to the Exchange
Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set
forth in the legend thereon as a consequence of the
offer or sale of the Old Notes pursuant to an
exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act
and applicable state securities laws. In general,
the Old Notes may not be offered or sold, unless
registered under the Securities Act, except
pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable
state securities laws. The Company does not
currently anticipate that it will register the Old
Notes under the Securities Act.
EXCHANGE AGENT............. Marine Midland Bank is serving as exchange agent
(the "Exchange Agent") in connection with the
Exchange Offer. See "The Exchange Offer--Exchange
Agent."
RISK FACTORS
Prospective investors in the Senior Notes should carefully consider the
matters set forth herein under "Risk Factors," including, but not limited to,
those risks associated with: consequences of failure to exchange; leverage and
debt service requirements; holding company structure; ranking of senior notes;
reliance on major contracts; customer concentration; CSX, Norfolk Southern
("NS") and Conrail dependence; importance of acquisitions and related risks;
highly competitive industry; transportation; restrictions imposed by terms of
Company's indebtedness; control by principal stockholder; purchase of senior
notes upon a change of control; risks inherent to mining; government regulation
of mining industry; impact of clean air act amendments on coal consumption;
replacement and recoverability of reserves; price fluctuations and markets;
reliance on estimates of recoverable reserves; dependence upon management;
unionization of labor force; absence of a public market for Exchange Notes and
restrictions on transfer; and fraudulent transfer considerations.
7
<PAGE> 11
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical and unaudited pro forma
consolidated financial data of the Company and Anker Group, Inc., the Company's
predecessor ("Anker Group" or the "Predecessor"), at the dates and for the
periods indicated. Historical data for the periods January 1, 1996 to July 31,
1996 and August 1, 1996 to December 31, 1996 have been derived from consolidated
financial statements of the Predecessor and the Company, respectively, audited
by Coopers & Lybrand L.L.P., independent certified public accountants, appearing
elsewhere herein. Historical data for the two years ended December 31, 1995 have
been derived from consolidated financial statements of the Predecessor audited
by Ernst & Young LLP, independent certified public accountants, appearing
elsewhere herein. Historical data for the nine months ended September 30, 1996
and as of and for the nine months ended September 30, 1997 have been derived
from unaudited interim consolidated financial statements of the Predecessor and
the Company, respectively, which, in the opinion of management, have been
prepared on the same basis as the audited consolidated financial statements and
include all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of the information. Data as of and for the nine months
ended September 30, 1997 do not purport to be indicative of results to be
expected for the full year. The adjusted combined statement of operations data,
other data and operating data for the nine months ended September 30, 1996 and
the year ended December 31, 1996 combine the audited results of operations of
the Predecessor for the period January 1, 1996 to July 31, 1996 and of the
Company for the period August 1, 1996 to September 30, 1996 and to December 31,
1996, respectively. The adjusted combined statement of operations data, other
data and operating data for the nine months ended September 30, 1996 and the
year ended December 31, 1996 do not purport to represent what the Company's
consolidated results of operations would have been if the Recapitalization had
actually occurred on January 1, 1996.
The pro forma statement of operations data and other data for the year
ended December 31, 1996 give effect to (i) the Company's acquisition of a 32%
interest in Oak Mountain Energy, L.L.C. which acquired substantially all of the
assets and assumed certain liabilities of Oak Mountain Energy Corporation, Boone
Resources, Inc. and certain of their affiliates (collectively, "Oak Mountain")
in April 1997 (the "Oak Mountain Acquisition"), (ii) the Recapitalization and
(iii) the offering of the Old Notes and the application of the net proceeds
therefrom as if each such transaction had occurred on January 1, 1996, and the
pro forma statement of operations data and other data for the nine months ended
September 30, 1997 give effect to (i) the Oak Mountain Acquisition and (ii) the
offering of the Old Notes and the application of the net proceeds therefrom as
if each such transaction had occurred on January 1, 1997.
The unaudited pro forma adjustments are based upon available information
and certain assumptions which management believes are reasonable. The pro forma
consolidated financial data do not purport to represent what the Company's
consolidated results of operations would have been had the transactions
described above actually occurred at the beginning of the relevant period. In
addition, the unaudited pro forma financial data do not purport to project the
Company's consolidated results of operations for the current year or any future
date or period.
The following information should be read in conjunction with "Unaudited Pro
Forma Consolidated Financial Statements," "Selected Consolidated Historical
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of the
Company, Oak Mountain Energy, L.L.C. and Oak Mountain and related notes thereto
(the "Consolidated Financial Statements") included elsewhere herein.
8
<PAGE> 12
<TABLE>
<CAPTION>
(UNAUDITED)
-------------------------------------------------------------
THE COMPANY PRO FORMA(1)
THE PREDECESSOR ADJUSTED ----------- ----------------------------
------------------- ADJUSTED COMBINED ADJUSTED
COMBINED FOR THE NINE MONTHS COMBINED
YEAR ENDED FOR THE NINE MONTHS ENDED FOR THE NINE MONTHS
DECEMBER 31, YEAR ENDED ENDED SEPTEMBER YEAR ENDED ENDED
------------------- DECEMBER 31, SEPTEMBER 30, 30, DECEMBER 31, SEPTEMBER 30,
1994 1995 1996 1996 1997 1996 1997
(DOLLARS IN THOUSANDS, EXCEPT PER TON DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Captive coal sales
revenue............. $170,792 $194,348 $211,675 $159,480 $ 177,630
Brokered coal sales
revenue............. 50,470 49,333 74,218 51,100 60,549
Other revenue......... 6,237 5,216 4,262 3,266 2,639
-------- -------- -------- -------- --------
Total coal sales and
related revenue....... 227,499 248,897 290,155 213,846 240,818 $300,314 $244,240
Gross profit............ 24,325 27,582 30,576 21,314 23,298 33,027 23,457
Total operating
expenses.............. 18,021 18,575 24,822 18,484 19,695 29,088 20,263
Operating income........ 6,304 9,007 5,754 2,830 3,603 3,939 3,194
OTHER DATA:
Adjusted EBITDA(2)...... $ 20,008 $ 23,847 $ 24,522 $ 17,303 $ 17,576(3) $ 26,595 $ 17,580(4)
Depreciation, depletion
and amortization...... 12,083 11,732 14,319 10,464 12,909 18,169 13,316
Other income............ 1,621 3,108 1,480 1,040 1,064 1,518 1,070
Capital expenditures.... 8,950 9,353 9,815 4,598 35,949
Interest expense........ 12,293 9,011
Ratio of Adjusted EBITDA
to interest expense... 2.2x 2.0x
Ratio of net debt to
Adjusted EBITDA(5).... 4.7x
CASH FLOW DATA:
Net cash provided by
(used in) operating
activities............ 13,421 2,168 19,144 18,048 2,112
Net cash provided by
(used in) investing
activities............ (32,434) 5,021 (86,732) (73,590) (47,884)
Net cash provided by
(used in) financing
activities............ 17,808 4,992 54,509 43,739 45,440
OPERATING DATA:
Captive coal sales(6)... 5,891 6,736 7,804 5,852 6,367
Brokered coal
sales(6).............. 1,442 1,769 2,404 1,656 1,931
Average captive sales
price per ton......... $ 28.99 $ 28.85 $ 27.12 $ 27.25 $ 27.90
Average brokered sales
price per ton......... 35.00 27.89 30.87 30.86 31.36
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Working capital................................................... $ 9,427
Total assets...................................................... 312,383
Long-term debt(7)................................................. 135,889
Mandatorily redeemable preferred stock............................ 22,182
Total stockholders' equity........................................ 74,098
</TABLE>
9
<PAGE> 13
- ------------------------------
(1) The pro forma statement of operations data and other data for the year ended
December 31, 1996 give effect to (i) the Oak Mountain Acquisition, (ii) the
Recapitalization and (iii) the offering of the Old Notes (at an interest
rate of 9.75% per annum) and the application of the net proceeds therefrom
as if each such transaction had occurred on January 1, 1996, and the pro
forma statement of operations data and other data for the nine months ended
September 30, 1997 give effect to (i) the Oak Mountain Acquisition and (ii)
the offering of the Old Notes and the application of the net proceeds
therefrom as if each such transaction had occurred on January 1, 1997.
(2) The Company's earnings before interest, taxes, depreciation, depletion,
amortization, non-cash stock compensation and non-recurring related expenses
and extraordinary item ("Adjusted EBITDA"), for the historical and pro forma
Adjusted Combined Year Ended December 31, 1996 and the Adjusted Combined
nine months ended September 30, 1996 excludes $3.0 million of one-time
charges for non-cash stock compensation and non-recurring related expenses.
Adjusted EBITDA should not be considered as an alternative to operating
earnings (loss) or net income (loss) (as determined in accordance with
generally accepted accounting principles) as a measure of the Company's
operating performance or to net cash provided by operating, investing and
financing activities (as determined in accordance with generally accepted
accounting principles) as a measure of the Company's ability to meet cash
needs. Adjusted EBITDA is included herein as it is a basis upon which the
Company assesses its financial performance and certain covenants in its
borrowing arrangements are tied to similar measures. Since all companies and
analysts do not necessarily calculate Adjusted EBITDA in the same fashion,
Adjusted EBITDA as presented in this Prospectus may not be comparable to
similarly titled measures reported by other companies.
(3) In the nine months ended September 30, 1997 the Company experienced a
decrease in Adjusted EBITDA which was attributable to $1.7 million in
increased costs related to adverse geological conditions at two of the
Company's mines. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(4) For a discussion of the factors affecting pro forma Adjusted EBITDA for the
nine months ended September 30, 1997, see "Notes to Unaudited Pro Forma
Consolidated Financial Statements."
(5) Net debt is defined as total debt less cash and cash equivalents of $6.1
million as of June 30, 1997, on an as adjusted basis.
(6) In thousands of tons.
(7) Includes current portion of long-term debt. See the Consolidated Financial
Statements included elsewhere herein.
10
<PAGE> 14
RISK FACTORS
Holders of Old Notes should consider carefully the risk factors set forth
below, as well as the other information set forth herein, before deciding to
tender Old Notes in the Exchange Offer. The risk factors set forth below are
generally applicable to the Old Notes as well as the Exchange Notes.
This Prospectus contains statements which constitute forward-looking
statements. Those statements appear in a number of places herein and include
statements regarding the intent, belief or current expectations of the Company,
primarily with respect to the future operating performance of the Company or
related industry developments. Holders of Old Notes are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ from those described
in the forward-looking statements as a result of various factors, many of which
are beyond the control of the Company. The information contained herein,
including, without limitation, the information set forth below and the
information under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations," identifies important factors that could
cause such differences.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
Old Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. The Company does not currently intend to register the Old Notes under the
Securities Act. Based on interpretations by the staff of the Commission, the
Company believes that Exchange Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by Holders thereof (other than any such Holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such Old Notes were acquired in the
ordinary course of such Holders' business and such Holders have no arrangement
with any person to participate in the distribution of such Exchange Notes. Each
Participating Broker-Dealer that receives Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution." To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes will be
adversely affected.
LEVERAGE AND DEBT SERVICE REQUIREMENTS
The Company has substantial indebtedness and significant debt service
obligations. As of September 30, 1997, the Company had total long-term
indebtedness, including the Old Notes and current maturities, in aggregate
principal amount of $140.5 million. The Indenture permits the Company and its
Restricted Subsidiaries to incur additional indebtedness, including secured
indebtedness, subject to certain limitations. See "Capitalization" and
"Description of Senior Notes--Certain Covenants." For the nine month period
ended September 30, 1997, on a pro forma basis, after giving effect to the
offering of the Old Notes and the application of the net proceeds therefrom, the
Company's earnings would have been insufficient to cover fixed charges in the
amount of approximately $4.7 million.
The Company's high degree of leverage could have important consequences to
the holders of the Senior Notes including, without limitation, (i) a substantial
portion of the Company's cash provided from operations will be committed to the
payment of debt service and will not be available to the Company for other
purposes, (ii) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures or acquisitions may be limited
and (iii) the Company's levels of indebtedness may limit the Company's
flexibility in reacting to changes in its business environment. See "Description
of Certain Indebtedness" and "Description of Senior Notes."
11
<PAGE> 15
The Company's ability to pay principal and interest on the Senior Notes and
to satisfy its other debt service obligations will depend upon the future
operating performance of its subsidiaries, which will be affected by prevailing
economic conditions in the markets they serve and financial, business and other
factors, certain of which are beyond their control, as well as the availability
of borrowings under the Amended and Restated Revolving Credit Facility or
successor facilities. To satisfy its debt service obligations, the Company may
be required to refinance all or a portion of its existing indebtedness,
including the Senior Notes, at or prior to maturity or sell assets or seek to
raise additional equity capital. No assurance can be given that any such debt or
equity financing will be available to the Company on acceptable terms, if at
all.
HOLDING COMPANY STRUCTURE; RANKING OF SENIOR NOTES
The Company is a holding company that conducts all of its operations
exclusively through its subsidiaries. The Company's only significant assets are
the capital stock of its wholly owned subsidiaries. As a holding company, the
Company is dependent on dividends or other distributions of funds from its
subsidiaries to meet the Company's debt service and other obligations, including
its obligations under the Senior Notes. The Guarantors guarantee the
indebtedness under the Amended and Restated Revolving Credit Facility, under
which all obligations are secured by a first priority lien on substantially all
of the assets of the Company and the Guarantors. As of December 31, 1997, the
Company had approximately $7.0 million of outstanding indebtedness under the
Amended and Restated Revolving Credit Facility and had an additional $18.0
million of undrawn availability (which total availability may be increased to up
to $75.0 million upon the achievement of certain financial tests) thereunder
which would effectively rank prior to the Senior Notes and the Subsidiary
Guarantees. See "Description of Certain Indebtedness."
As of December 31, 1997, the aggregate principal amount of secured
indebtedness of the Company and the Guarantors which would have effectively
ranked senior to the Senior Notes and the Subsidiary Guarantees would have been
approximately $1.6 million. In addition, as of December 31, 1997, the Company's
subsidiaries had trade liabilities aggregating $29.3 million which would
effectively rank prior to the Senior Notes and the Subsidiary Guarantees.
RELIANCE ON MAJOR CONTRACTS; CUSTOMER CONCENTRATION
A substantial portion of the Company's coal is sold pursuant to long-term
coal supply contracts which are significant to the stability and profitability
of the Company's operations. The execution of a satisfactory long-term contract
is frequently the basis on which the Company undertakes the development of coal
reserves required to be supplied under the contract. In 1996, approximately 67%
of the Company's revenues from coal sales (including brokered and commission
sales) were made under long-term contracts. The Company's long-term contracts
had a weighted average term of approximately 7.4 years as of June 30, 1997.
Twenty long-term and seven short-term contracts with twenty-one customers
collectively are expected to account for approximately 67% of revenues from coal
sales in 1997. As of the Issue Date of the Old Notes, most of the Company's
contracts provided for coal to be sold at a price which exceeded the price at
which such coal could be sold in the spot market.
The Company's long-term contracts with affiliates of AES Corporation
("AES") accounted for more than 16.0% of the Company's revenues in 1996 and are
expected to account for approximately 18% of revenues in 1997. In addition, the
Company's long-term contracts with Virginia Electric and Power Company ("VEPCO")
accounted for approximately 6.0% of the Company's revenues in 1996 and are
expected to account for approximately 8% of revenues in 1997. The loss of these
and other long-term contracts could have a material adverse effect on the
Company's financial condition and results of operations. See
"Business--Long-Term Coal Supply Contracts."
Virtually all of the Company's long-term coal supply contracts are subject
to price adjustment provisions which permit an increase or decrease at specified
times (typically annually) in the contract price to reflect changes in certain
price or other economic indices, taxes and other charges. Three of the Company's
twenty long-term coal supply contracts also contain price reopener provisions
which provide for the contract price to be adjusted upward or downward at
specified times on the basis of market factors. Failure of the parties to
12
<PAGE> 16
agree on a price pursuant to such price adjustment and reopener provisions can
lead to early termination of the contracts. The long-term contracts also
typically contain force majeure provisions allowing suspension of performance by
the Company or the customer to the extent necessary during the duration of
certain events beyond the control of the affected party, including labor
disputes and changes in government regulations. See "Business--Long-Term Coal
Supply Contracts."
The operating profit margins realized by the Company under its long-term
coal supply contracts depend on a variety of factors. In addition, price
adjustment, price reopener and other provisions may reduce the insulation from
short-term coal price volatility provided by such contracts. If any of the
Company's long-term contracts were modified or terminated, the Company could be
adversely affected to the extent that it is unable to find alternate customers
at the same level of profitability. The Company is currently involved in
discussions relating to the possible restructuring of a major contract pursuant
to which a lump-sum payment would be made in advance in exchange for a reduction
in per ton pricing for the remaining term of the contract. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business--Long-Term Coal Supply Contracts" and "Business--Legal Proceedings."
CSX, NORFOLK SOUTHERN ("NS") AND CONRAIL DEPENDENCE
Approximately 70% of the Company's coal shipments travel via rail on the
CSX, NS and Conrail railroad lines, while the remaining 30% travel by truck or
by barge. The Company's ability to deliver coal and reach its markets is to a
large extent dependent on the CSX, NS and Conrail railroad lines. Major work
stoppages or substantial increases in the cost of their services could adversely
affect the Company's ability to deliver coal shipments and the Company's
financial condition and results of operations.
CSX and NS are presently negotiating the acquisition of Conrail, which may
affect the Company's rail rates and access to markets. Further, those of the
Company's competitors who were only served by Conrail's MGA rail line prior to
the CSX/NS acquisition and merger with Conrail will be jointly served by CSX and
NS following the acquisition and merger. As a result of the acquisition and
merger, certain of the Company's competitors will be able to transport coal
without incurring switching costs between railroads ("single rail line hauls")
to most of the northeastern and southeastern coal markets. Access to single rail
line hauls may provide these competitors with improved market access and a
transportation cost advantage over the Company and other eastern coal producers.
IMPORTANCE OF ACQUISITIONS AND RELATED RISKS
The Company has grown through the acquisition of coal companies, coal
properties, coal leases and related assets, and management believes that such
acquisitions will continue to be important to the Company. The inability of the
Company to make such acquisitions in the future, due to restrictions under the
Company's existing or future debt agreements, competition from other coal
companies for such properties or the lack of suitable acquisition candidates,
could limit the Company's future growth. Further, acquisitions involve a number
of special risks, including possible adverse effects on the Company's operating
results, diversion of management's attention, failure to retain key acquired
personnel and risks associated with unanticipated events or liabilities, some or
all of which could have a material adverse effect on the Company's financial
condition and results of operations. There can be no assurance that the Company
will be successful in the development of such acquisitions or joint ventures or
that the acquired companies or other businesses acquired in the future will
achieve anticipated revenues and earnings. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
HIGHLY COMPETITIVE INDUSTRY
The United States coal industry is highly competitive, with numerous
producers in all coal producing regions. The Company competes with other large
producers and hundreds of small producers in the United States and abroad. Many
of the Company's customers are also customers of the Company's competitors. The
markets in which the Company sells its coal are highly competitive and affected
by factors beyond the Company's control. Continued demand for the Company's coal
and the prices that the Company will be able
13
<PAGE> 17
to obtain will depend primarily on coal consumption patterns of the domestic
electric utility industry, which in turn are affected by the demand for
electricity, coal transportation costs, environmental and other governmental
regulations and orders, technological developments and the availability and
price of competing coal and alternative fuel supply sources such as oil, natural
gas, nuclear energy and hydroelectric energy. See "Business--Regulation and
Laws" and "Business--Competition." In addition, during the mid-1970's and early
1980's, a growing coal market and increased demand attracted new investors to
the coal industry and spurred the development of new mines and added production
capacity throughout the industry. Although demand for coal has grown over the
recent past, the industry has since been faced with over-capacity, which in turn
has increased competition and lowered prevailing coal prices. Moreover, because
of greater competition for electricity and increased pressure from customers and
regulators to lower electricity prices, public utilities are lowering fuel costs
by buying higher percentages of spot coal through a competitive bidding process
and by only buying the amount of coal necessary to meet their requirements.
TRANSPORTATION
The United States coal industry depends on rail, trucking and barge
transportation to deliver shipments of coal to customers. Disruption of these
transportation services could temporarily impair the Company's ability to supply
coal to its customers and thus adversely affect the Company's business and
operating results. Transportation costs are a significant component of the total
cost of supplying coal to customers and can affect significantly a coal
producer's competitive position and profitability. Increases in the Company's
transportation costs, or changes in such costs relative to transportation costs
incurred by providers of competing coal or of other fuels, could have an adverse
effect on the Company's operations and business.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture contains certain covenants that, among other things: (i)
limit the incurrence by the Company and its Restricted Subsidiaries of
additional indebtedness and the issuance of certain preferred stock; (ii)
restrict the ability of the Company and its Restricted Subsidiaries to make
dividends and other restricted payments (including investments); (iii) limit the
ability of the Restricted Subsidiaries to incur dividend and other payment
restrictions; (iv) limit transactions by the Company and its Restricted
Subsidiaries with affiliates; (v) limit the ability of the Company and its
Restricted Subsidiaries to make asset sales; (vi) limit the ability of the
Company and its Restricted Subsidiaries to incur certain liens; (vii) limit the
ability of the Company to consolidate or merge with or into, or to transfer all
or substantially all of its assets to, another person and (viii) limit the
ability of the Company to engage in other lines of business. See "Description of
Senior Notes--Certain Covenants." In addition, the Amended and Restated
Revolving Credit Facility contains additional and more restrictive covenants as
compared to the Indenture and requires the Company to maintain specified
financial ratios and satisfy certain tests relating to its financial condition.
See "Description of Certain Indebtedness--Amended and Restated Revolving Credit
Facility."
The Company's ability to comply with the covenants in the Indenture and the
Amended and Restated Revolving Credit Facility may be affected by events beyond
its control, including prevailing economic, financial, competitive, legislative,
regulatory and other conditions. The breach of any such covenants or
restrictions could result in a default under the Indenture and/or the Amended
and Restated Revolving Credit Facility which would permit the holders of the
Senior Notes and/or the lenders under the Amended and Restated Revolving Credit
Facility, as the case may be, to declare all amounts borrowed thereunder to be
due and payable, together with accrued and unpaid interest, and the commitments
of the lenders to make further extensions of credit under the Amended and
Restated Revolving Credit Facility could be terminated. If the Company were
unable to repay its indebtedness to the lenders under the Amended and Restated
Revolving Credit Facility, such lenders could proceed against any or all of the
collateral securing the indebtedness under the Amended and Restated Revolving
Credit Facility, which collateral will consist of substantially all of the
assets of the Company and the Guarantors. In addition, if the Company fails to
comply with the financial and operating covenants contained in the Amended and
Restated Revolving Credit Facility, such failure could result in an event of
default thereunder, which could permit the acceleration of the debt incurred
thereunder and, in some cases, cross-acceleration and cross-default of
indebtedness outstanding under other debt
14
<PAGE> 18
instruments of the Company, including the Senior Notes. See "Description of
Senior Notes" and "Description of Certain Indebtedness--Amended and Restated
Revolving Credit Facility."
CONTROL BY PRINCIPAL STOCKHOLDER
Approximately 54.1% of the Company's outstanding common stock is owned by
First Reserve. Accordingly, First Reserve is able to control the election of the
directors of the Company and to determine the corporate and management policies
of the Company, including decisions relating to any mergers or acquisitions of
the Company, sales of all or substantially all of the Company's assets and other
significant corporate transactions, which transactions may result in a Change of
Control under the Indenture. See "Ownership of Common Stock."
PURCHASE OF SENIOR NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, the Company is required, subject to certain
conditions, to offer to purchase all outstanding Senior Notes at a purchase
price equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of purchase. The
source of funds for any such purchase would be the Company's available cash or
cash generated from other sources, including borrowings, sales of assets, sales
of equity or funds provided by a new controlling person. The Amended and
Restated Revolving Credit Facility restricts the purchase of Senior Notes upon a
Change of Control. A Change of Control likely would constitute an event of
default under the Amended and Restated Revolving Credit Facility that would
permit the lenders to accelerate the debt thereunder. In such event, the Company
likely would attempt to refinance the indebtedness outstanding under the Amended
and Restated Revolving Credit Facility and the Senior Notes. There can be no
assurance that sufficient funds will be available at the time of any Change of
Control to make any required purchases of Senior Notes tendered and to repay
indebtedness outstanding under the Amended and Restated Revolving Credit
Facility. See "Description of Certain Indebtedness--Amended and Restated
Revolving Credit Facility" and "Description of the Senior Notes--Repurchase at
the Option of the Holders--Change of Control."
RISKS INHERENT TO MINING
The Company's mining operations are subject to conditions beyond the
Company's control which can negatively or positively affect the cost of mining
at particular mines for varying lengths of time. These conditions include
weather conditions, unexpected maintenance problems, variations in coal seam
thickness, variations in the amount of rock and soil overlying the coal deposit,
variations in rock and other natural materials, disruption of transportation
services, variations in geological conditions and other conditions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
GOVERNMENT REGULATION OF THE MINING INDUSTRY
The coal mining industry is subject to regulation by federal, state and
local authorities on matters such as employee health and safety, permitting and
licensing requirements, air quality standards, water pollution, the reclamation
and restoration of mining properties after mining is completed, the discharge of
materials into the environment, surface subsidence from underground mining and
the effects that mining has on groundwater quality and availability. In
addition, the industry is affected by significant legislation mandating certain
benefits for current and retired coal miners. Numerous governmental permits and
approvals are required for mining operations. The Company believes all permits
required to conduct its present mining operations have been obtained. The
Company may be required to prepare and present to federal, state or local
authorities data pertaining to the effect or impact that any proposed
exploration for or production of coal may have upon the environment. All
requirements imposed by any such authority may be costly and time-consuming and
may delay commencement or continuation of exploration or production operations.
The possibility exists that new legislation and/or regulations and orders may be
adopted which may significantly impact the Company's mining operations, its cost
structure and/or its customers' ability to use coal. New legislation, including
proposals related to the protection of the environment which would further
regulate and tax the coal industry, may also require the Company or its
customers to change their operations significantly or incur increased
15
<PAGE> 19
costs. Such factors and legislation (if enacted) could have a material adverse
effect on the Company's financial condition and results of operations. See
"Business--Employees and Labor Relations" and "Business--Regulation and Laws."
IMPACT OF CLEAN AIR ACT AMENDMENTS ON COAL CONSUMPTION
The federal Clean Air Act ("Clean Air Act"), including the Clean Air Act
Amendments ("Clean Air Act Amendments"), and corresponding state laws which
regulate the emissions of materials into the air, affect coal mining operations
both directly and indirectly. Coal mining and processing operations may be
directly affected by Clean Air Act permitting requirements and/or emissions
control requirements relating to particulate matter (e.g., "fugitive dust").
Coal mining and processing may also be impacted by future regulation of fine
particulate matter measuring 2.5 micrometers in diameter or smaller. Regulations
relating to fugitive dust and coal emissions may restrict the Company's ability
to develop new mines or could require the Company to modify its existing
operations. The Clean Air Act indirectly affects coal mining operations by
extensively regulating the air emissions of coal-fueled electric power
generating plants. Title IV of the Clean Air Act Amendments places limits on
sulfur dioxide emissions from electric power generation plants. The limits set
baseline emission standards for such facilities. Reductions in such emissions
will occur in two phases: the first began in 1995 ("Phase I") (applicable to
certain identified facilities) and the second will begin in 2000 ("Phase II")
(applicable to all facilities, including those subject to the 1995
restrictions). The affected utilities have been and may be able to meet these
requirements by, among other ways, switching to lower sulfur fuels, installing
pollution control devices such as scrubbers, reducing electricity generating
levels or purchasing or trading "pollution credits." Specific emissions sources
will receive these credits which utilities and industrial concerns can trade or
sell to allow other units to emit higher levels of sulfur dioxide.
The effect of the Clean Air Act Amendments on the Company cannot be
completely ascertained at this time. The Company believes that implementation of
Phase II will likely exert a downward pressure on the price of high sulfur coal,
as additional coal-burning electric power plants become subject to the
restrictions of Title IV. This price effect is expected to result after the
large bank of pollution credits which has developed in connection with Phase I
has been reduced and before utilities electing to comply with Phase II by
installing scrubber sulfur-reduction technologies are able to implement this
compliance strategy. The extent to which this expected price decrease will
adversely affect the Company will depend upon a number of factors, including the
Company's ability to secure long-term contracts for its high sulfur coal. See
"--Reliance on Major Contracts; Customer Concentration," "Business--Long-Term
Coal Supply Contracts" and "Business--Regulation and Laws."
The Clean Air Act Amendments also require that existing major sources of
nitrogen oxides in moderate or higher ozone non-attainment areas install
reasonably available control technology ("RACT") for nitrogen oxides, which are
precursors of ozone. In addition, stricter ozone standards are expected to be
implemented by the United States Environmental Protection Agency (the "EPA") by
2003. The area from northern Virginia through Maine was designated as an ozone
transport region ("OTR"). The Ozone Transport Assessment Group ("OTAG"), formed
to make recommendations to the EPA for addressing ozone problems in the eastern
United States, submitted its final recommendations to the EPA in June 1997.
OTAG's recommendations regarding strategies for reducing ozone and precursor
emissions may result in even more stringent emissions limits for eastern states
such as West Virginia. In addition, petitions have been filed by several
northeastern states which, if acted on favorably by the EPA, could require
immediate design and implementation of additional emissions controls for ozone
precursor emissions sources to meet more stringent emissions limits by 2001.
Installation of RACT, and any control measures beyond RACT, that the Ozone
Transport Commission, states and the EPA may require will make it more costly to
operate coal fired power plants and, depending on the requirements of individual
state attainment plans and the development of revised new source performance
standards, could make coal a less attractive fuel alternative in the planning
and building of power plants in the future. If coal's share of the capacity for
power generation were to be reduced, a material adverse effect on the Company's
financial condition and results of operations could result. The effect such
legislation or other legislation that may be enacted in the future could have on
the coal industry in general and on the Company in particular cannot be
predicted with certainty. Such legislation limits the ability of some of the
16
<PAGE> 20
Company's customers to burn high sulfur coals unless these customers have or are
willing to install scrubbers, to blend coal or to bear the cost of acquiring
emission credits which permit them to burn high sulfur coal. No assurance can be
given that the implementation of the Clean Air Act Amendments will not adversely
affect the Company.
REPLACEMENT AND RECOVERABILITY OF RESERVES
The Company's future success depends upon its ability to find, develop or
acquire additional coal reserves that are economically recoverable. The
recoverable reserves of the Company will generally decline as reserves are
depleted, except to the extent that the Company conducts successful exploration
or development activities or acquires properties containing recoverable
reserves, or both. In order to increase reserves and production, the Company
must continue its development and exploration and recompletion programs or
undertake other replacement activities. The Company's current strategy includes
increasing its reserve base through acquisitions of producing properties and by
continuing to exploit its existing properties. There can be no assurance,
however, that the Company's planned development and exploration projects and
acquisition activities will result in significant additional reserves or that
the Company will have continuing success developing additional mines. For a
discussion of the Company's reserves, see "Business--Coal Reserves."
PRICE FLUCTUATIONS AND MARKETS
The Company's results of operations are highly dependent upon the prices
received for the Company's coal. Although 67% of the Company's sales in 1996
were made pursuant to long-term fixed-price contracts, the balance of sales in
1996 were made in the spot market, or pursuant to contracts based on spot market
prices and not pursuant to long-term, fixed-price contracts. Accordingly, the
prices received by the Company for a portion of its coal production are
dependent upon numerous factors beyond the control of the Company. These factors
include, but are not limited to, the level of consumer product demand for
electricity, governmental regulations and taxes, the price and availability of
alternative energy sources, and the overall economic environment. Furthermore,
virtually all of the Company's long-term contracts include price adjustment
provisions which permit an increase or decrease at specified times in the
contract price to reflect changes in certain price or other economic indices,
taxes and other charges, and three of the Company's twenty long-term coal supply
contracts contain price reopener provisions which provide for the contract price
to be adjusted upward or downward at specified times on the basis of market
factors. See "--Reliance on Major Contracts; Customer Concentration." Any
significant decline in prices for coal could have a material adverse effect on
the Company's financial condition, results of operation and quantities of
reserves recoverable on an economic basis. Should the industry experience
significant price declines from current levels or other adverse market
conditions, the Company may not be able to generate sufficient cash flow from
operations to meet its obligations and make planned capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Business--Regulation and
Laws."
The availability of a ready market for the Company's coal production also
depends on a number of factors, including the demand and supply of low sulfur
coal, and the availability of pollution credits. See "--Impact of Clean Air Act
Amendments on Coal Consumption."
RELIANCE ON ESTIMATES OF RECOVERABLE RESERVES
There are numerous uncertainties inherent in estimating quantities of
recoverable reserves, including many factors beyond the control of the Company.
The reserve data set forth herein represent only engineering estimates of the
Company audited by Boyd. Estimates of economically recoverable coal reserves and
future net cash flows necessarily depend upon a number of variable factors and
assumptions, such as geological and mining conditions (which may not be fully
identified by available exploration data and/or differ from experience in
current working faces), historical production from the area compared with
production from other producing areas, the assumed effects of regulations by
governmental agencies and assumptions concerning future coal prices, future
operating costs, severance and excise taxes, development costs and reclamation
costs, all of which may in fact vary considerably from actual results. For these
reasons, estimates
17
<PAGE> 21
of the economically recoverable quantities of coal attributable to any
particular group of properties, classifications of such reserves based on risk
of recovery and estimates of future net cash flows expected therefrom prepared
by different engineers or by the same engineers at different times may vary
substantially. Actual coal tonnage recovered from identified reserve areas or
properties, revenues and expenditures with respect to the Company's reserves may
vary from estimates, and such variances may be material. See "Business--Coal
Reserves."
DEPENDENCE UPON MANAGEMENT
On October 12, 1997, John J. Faltis, the Company's President, Chief
Executive Officer and Chairman of the Board of Directors, was killed in a
helicopter accident in West Virginia. While Mr. Faltis' death may have an
adverse effect on the future direction of the Company, the Company does not
expect that his death will adversely affect the Company's operations, growth or
financial prospects due to the presence of a core management team focused on the
Company's operations. The Company's Board of Directors has elected John Shober,
presently a director of the Company, to succeed Mr. Faltis as Chairman of the
Board. The Company's Board of Directors also has elected Bruce Sparks, formerly
Executive Vice-President, Treasurer and Secretary, to succeed Mr. Faltis as
President of the Company. The Board of Directors also has elected Michael M.
Matesic as Treasurer and B. Judd Hartman as Secretary. On December 1, 1997, JJF
Group elected Mr. James Boyd, President of Boyd and executor of Mr. Faltis'
estate, to the Board of Directors. With Mr. Faltis' death, the success of the
Company will become increasingly dependent on Mr. Sparks and other key
personnel. If Mr. Sparks becomes unwilling or unable to serve in his new role,
the Company's business, operations and prospects would likely be further
adversely affected. Mr. Sparks entered into an employment agreement with the
Company and several of its subsidiaries in connection with the Recapitalization.
See "Management -- Employment Agreements." The Company maintains key person life
insurance for Mr. Sparks.
UNIONIZATION OF LABOR FORCE
The Company is not a party to any collective bargaining agreement and
considers its relations with its employees to be good. If some or all of the
Company's currently non-union operations were to become unionized, the Company
could incur higher labor costs and an increased risk of work stoppages. There
can be no assurance that the Company's workforce will not unionize in the
future. In addition, even if the Company remains non-unionized, its operations
may still be adversely affected by work stoppages at unionized companies.
ABSENCE OF A PUBLIC MARKET FOR EXCHANGE NOTES AND RESTRICTIONS ON TRANSFER
The Exchange Notes will constitute a new issue of securities for which
there is no established trading market. The Company does not intend to list the
Exchange Notes on any national securities exchange or to seek the admission of
the Exchange Notes for quotation through the National Association of Securities
Dealers Automated Quotation System. Although the Initial Purchasers have advised
the Company that they currently intend to make a market in the Exchange Notes,
they are not obligated to do so and may discontinue such market making activity
at any time without notice. In addition, such market making activity will be
subject to the limits imposed by the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and may be limited during the
Exchange Offer and the pendency of any shelf registration statement. Although
the Old Notes have been designated for trading in the PORTAL market, there can
be no assurance as to the development or liquidity of any market for the
Exchange Notes, the ability of the holders of the Exchange Notes to sell their
Exchange Notes or the price at which the holders would be able to sell their
Exchange Notes. Future trading prices of the Exchange Notes will depend on many
factors, including among other things, prevailing interest rates, the Company's
operating results and the market for similar securities.
FRAUDULENT TRANSFER CONSIDERATIONS
Under federal or state fraudulent transfer laws, if a court were to find
that, at the time the Old Notes and Subsidiary Guarantees were issued, the
Company or a Guarantor, as the case may be, (i) issued the Old Notes or a
Subsidiary Guarantee with the intent of hindering, delaying or defrauding
current or future creditors or (ii)(A) received less than fair consideration or
reasonably equivalent value for incurring the
18
<PAGE> 22
indebtedness represented by the Old Notes or a Subsidiary Guarantee, and (B)(1)
was insolvent or was rendered insolvent by reason of the issuance of the Old
Notes or such Subsidiary Guarantee, (2) was engaged, or about to engage, in a
business or transaction for which its assets were unreasonably small or (3)
intended to incur, or believed (or should have believed) it would incur, debts
beyond its ability to pay as such debts mature (as all of the foregoing terms
are defined in or interpreted under such fraudulent transfer statutes), such
court could avoid all or a portion of the Company's or a Guarantor's obligations
to the holders of Senior Notes, subordinate the Company's or a Guarantor's
obligations to the holders of the Senior Notes to other existing and future
indebtedness of the Company or such Guarantor, as the case may be, the effect of
which would be to entitle such other creditors to be paid in full before any
payment could be made on the Senior Notes, and take other action detrimental to
the holders of the Senior Notes, including in certain circumstances,
invalidating the Senior Notes. In that event, there would be no assurance that
any repayment on the Senior Notes would ever be recovered by the holders of the
Senior Notes.
The definition of insolvency for purposes of the foregoing considerations
varies among jurisdictions depending upon the federal or state law that is being
applied in any such proceeding. However, the Company or a Guarantor generally
would be considered insolvent at the time it incurs the indebtedness
constituting the Old Notes or a Subsidiary Guarantee, as the case may be, if (i)
the fair market value (or fair saleable value) of its assets is less than the
amount required to pay its total existing debts and liabilities (including the
probable liability on contingent liabilities) as they become absolute or matured
or (ii) it is incurring debts beyond its ability to pay as such debts mature.
There can be no assurance as to what standard a court would apply in order to
determine whether the Company or a Guarantor was "insolvent" as of the date the
Old Notes and Subsidiary Guarantees were issued, or that, regardless of the
method of valuation, a court would not determine that the Company or a Guarantor
was insolvent on that date. Nor can there be any assurance that a court would
not determine, regardless of whether the Company or a Guarantor was insolvent on
the date the Old Notes and Subsidiary Guarantees were issued, that the payments
constituted fraudulent transfers on another ground.
The Company believes that it and each Guarantor will not be insolvent at
the time of or as a result of the consummation of the Offering, that it and each
Guarantor will not engage in a business or transaction for which its remaining
assets constitute unreasonably small capital and that it and each Guarantor did
not and does not intend to incur, or believes that it will incur, debts beyond
its ability to pay such debts as they mature. There can be no assurance,
however, that a court passing on such questions would agree with the Company.
19
<PAGE> 23
THE COMPANY
The Company is a growth-oriented producer of coal used principally for
electricity generation and steel production with a focus on selected niche coal
markets in the eastern United States. The Company currently owns and operates a
diverse portfolio of thirteen non-unionized deep and surface coal mines
strategically located in West Virginia and Maryland.
Prior to the Recapitalization, Anker Holding B.V., a trading company
incorporated in the Netherlands ("Anker Holding"), owned approximately 94% of
the common stock of the Predecessor. Willem G. Rottier owns 100% of the stock of
Anker Holding through various subsidiaries.
The Company was formed in August 1996 to effect the acquisition of the
Predecessor. The Company was capitalized with $50 million in cash from First
Reserve, in exchange for approximately 54.1% of the Common Stock of the Company
and 10,000 shares of Class B Preferred Stock (as defined). In addition, John J.
Faltis (through JJF Group), Anker Holding and Bruce Sparks (through PPK Group
Limited Liability Company ("PPK Group")) contributed an aggregate of 7.5% of the
common stock of the Predecessor in exchange for 30.4%, 10.4% and 5.1%,
respectively, of the Common Stock of the Company. The Company then acquired the
remaining 92.5% of common stock of the Predecessor from Anker Holding for
approximately $87 million, which was funded by the issuance of $25 million of
Class A Preferred Stock (as defined) to Anker Holding and the payment of $62
million in cash, $12 million of which was borrowed under the Credit Facility. In
addition, the Company assumed $152 million of the Predecessor's outstanding
liabilities.
The Company has accounted for the Recapitalization using the purchase
method of accounting as prescribed under Accounting Principles Bulletin No. 16,
"Accounting for Business Combinations." The Company has designated August 1,
1996 as the effective date of the Recapitalization.
The Company's principal offices are located at 2708 Cranberry Square,
Morgantown, West Virginia 26505 and its telephone number is (304) 594-1616.
20
<PAGE> 24
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Senior Notes
pursuant to the Exchange Offer.
The net proceeds from the offering of the Old Notes were $119.8 million,
which was used to repay bank indebtedness of the Company under the Credit
Facility outstanding at the time of the offering of the Old Notes. Such
indebtedness was incurred (i) to finance acquisitions made by the Company, (ii)
for capital expenditures and (iii) for working capital purposes. As of December
31, 1997, the Company had approximately $7.0 million of outstanding indebtedness
under the Amended and Restated Revolving Credit Facility and had an additional
$18.0 million of undrawn availability (which total availability may be increased
to up to $75.0 million upon the achievement of certain financial tests)
thereunder for working capital purposes, including acquisitions. See
"Description of Certain Indebtedness."
The Company's indebtedness under the Credit Facility accrued interest at an
average rate of (i) with respect to term loan Tranche A, 8.4% per annum,
maturing in June 2003, (ii) with respect to term loan Tranche B, 8.9% per annum,
maturing in June 2004, and (iii) with respect to the revolving component, 8.4%
per annum, maturing in June 2004.
21
<PAGE> 25
CAPITALIZATION
The following table sets forth the historical cash and cash equivalents and
capitalization of the Company as of September 30, 1997 and includes the effect
of the offering of the Old Notes and the application of the net proceeds
therefrom, and the Company entering into the Amended and Restated Revolving
Credit Facility. This table should be read in conjunction with "Use of
Proceeds," "Unaudited Pro Forma Consolidated Financial Statements,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Cash and cash equivalents................................................. $ 228
========
Long-term debt (including current portion):
Amended and Restated Revolving Credit Facility(1)....................... 4,600
Senior Notes............................................................ 125,000
Other debt(2)........................................................... 6,289
--------
Total debt...................................................... 135,889
--------
Mandatorily redeemable preferred stock(3)................................. 22,182
Total stockholders' equity:
Preferred stock(4)...................................................... 23,000
Common stock............................................................ --
Paid-in-capital......................................................... 57,900
Retained earnings (deficit)............................................. (6,802)
--------
Total stockholders' equity...................................... 74,098
--------
Total capitalization...................................................... $232,169
========
</TABLE>
- ------------------------------
(1) Subject to restrictions contained in the Amended and Restated Revolving
Credit Facility, on December 31, 1997, the Company had approximately $7.0
million of outstanding indebtedness under the Amended and Restated Revolving
Credit Facility and had an additional $18.0 million of undrawn availability
(which total availability may be increased to up to $75.0 million upon the
achievement of certain financial tests) thereunder. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Certain
Indebtedness--Amended and Restated Revolving Credit Facility."
(2) Other debt consists primarily of approximately $4.6 million of obligations
of Oak Mountain Energy, L.L.C., which are non-recourse to the Company, but
are required to be stated on the Company's balance sheet in accordance with
the proportionate consolidation method of accounting, and other notes
payable.
(3) Consists of 10,000 shares of Class A preferred stock, par value $2,500 per
share (the "Class A Preferred Stock"), and 1,000 shares of Class D preferred
stock, par value $7,000 per share (the "Class D Preferred Stock"). The Class
A Preferred Stock is recorded on the Company's Consolidated Financial
Statements at estimated fair market value, which is less than book value.
The difference of approximately $12 million will be accrued over the
remaining life of the Class A Preferred Stock. See "Description of Capital
Stock" and the notes to the Consolidated Financial Statements.
(4) Consists of 10,000 shares of Class B preferred stock, par value $1,000 per
share (the "Class B Preferred Stock"), and 1,000 shares of Class C preferred
stock, par value $13,000 per share (the "Class C Preferred Stock"). See
"Description of Capital Stock" and the notes to the Consolidated Financial
Statements.
22
<PAGE> 26
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Consolidated Financial Statements are
based on the Consolidated Financial Statements included elsewhere herein.
The Unaudited Pro Forma Adjusted Combined Statement of Operations for the
year ended December 31, 1996 gives effect to (i) the Oak Mountain Acquisition,
(ii) the Recapitalization and (iii) the offering of the Old Notes and the
application of the net proceeds therefrom as if each such transaction had
occurred on January 1, 1996.
The Unaudited Pro Forma Consolidated Statement of Operations for the nine
months ended September 30, 1997 gives effect to (i) the Oak Mountain Acquisition
and (ii) the offering of the Old Notes and the application of the net proceeds
therefrom as if each such transaction had occurred on January 1, 1997.
The unaudited pro forma adjustments are based upon available information
and certain assumptions which management believes are reasonable. The Unaudited
Pro Forma Consolidated Financial Statements do not purport to represent what the
Company's consolidated results of operations would have been had the
transactions described above actually occurred at the beginning of the relevant
period. In addition, the Unaudited Pro Forma Consolidated Financial Statements
do not purport to project the Company's consolidated results of operations for
the current year or any future date or period.
The Unaudited Pro Forma Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements included elsewhere
herein.
23
<PAGE> 27
UNAUDITED PRO FORMA ADJUSTED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------------------------------------------------
OAK MOUNTAIN
ACTUAL ACTUAL RECAPITALIZATION ACQUISITION PRO OFFERING AS
COMPANY(1) PREDECESSOR(2) ADJUSTMENTS(3) ADJUSTMENTS(4) FORMA ADJUSTMENTS(5) ADJUSTED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total coal sales and related
revenue...................... $123,246 $166,909 $ 10,159 $300,314 $300,314
Expenses:
Cost of operations and
selling expenses........... 110,215 149,364 $ (729)(a) 8,907 267,287 267,287
(470)(b)
Depreciation, depletion and
amortization............... 6,437 7,882 507(c) 1,700 18,437 $ (268)(a) 18,169
1,741(d)
170(e)
General and administrative... 3,738 3,796 416 7,950 7,950
Non-cash stock compensation
and non-recurring related
expenses................... -- 2,969 -- 2,969 2,969
-------- -------- ------- ------- -------- ------- --------
Operating income........... 2,856 2,898 (1,219) (864) 3,671 268 3,939
Interest expense............. 2,090 2,796 1,050(f) 106 6,042 6,251(b) 12,293
Other income (expense)....... 373 1,107 38 1,518 1,518
-------- -------- ------- ------- -------- ------- --------
Income before income
taxes.................... 1,139 1,209 (2,269) (932) (853) (5,983) (6,836)
Income taxes (tax benefit)... 485 (134) (635)(g) (261)(a) (545) (a) (1,675) (2,220)
-------- -------- ------- ------- -------- ------- --------
Net income (loss).......... 654 1,343 (1,634) (671) (308) (4,308) (4,616)
Preferred stock dividends.... 512 116 729(h) -- 1,241 -- 1,241
(116)(i)
-------- -------- ------- ------- -------- ------- --------
Net income (loss) available
to common stockholders... $ 142 $ 1,227 $ (2,247) $ (671) $ (1,549) $ (4,308) $ (5,857)
======== ======== ======= ======= ======== ======= ========
OTHER DATA:
Adjusted EBITDA(6)........... $ 26,595
Depreciation, depletion and
amortization............... 18,169
Other income................. 1,518
Interest expense............. 12,293
Ratio of Adjusted EBITDA to
interest expense........... 2.2x
Ratio of net debt to Adjusted
EBITDA(7).................. 4.7x
Ratio of earnings to fixed
charges(8)................. --
</TABLE>
24
<PAGE> 28
NOTES TO UNAUDITED PRO FORMA ADJUSTED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(1) Reflects results of the Company for the period from August 1, 1996 to
December 31, 1996.
(2) Reflects results of the Predecessor for the period from January 1, 1996 to
July 31, 1996.
(3) Reflects the Recapitalization as if the transaction had taken place
effective January 1, 1996.
(a) Reflects the elimination of reclamation expense related to acquired
properties, which was fully reserved at the time of the
Recapitalization.
(b) Reflects the elimination of expense related to the Coal Industry
Retiree Health Benefit Act of 1992 which was fully reserved at the
time of Recapitalization.
(c) Reflects the additional amortization of goodwill in connection with
the Recapitalization.
(d) Reflects the additional depreciation expense resulting from the
Recapitalization and the recorded basis of machinery and equipment.
(e) Reflects the additional depletion and amortization expense resulting
from the Recapitalization and the recorded basis of coal lands and
mineral rights.
(f) Reflects an increase in interest expense resulting from borrowings
under the Credit Facility at an assumed interest rate of 9%.
(g) Reflects the income tax effects of the pro forma adjustments at an
assumed tax rate of 28%.
(h) Reflects preferred stock dividends related to mandatorily redeemable
preferred stock after the Recapitalization.
(i) Reflects the elimination of existing preferred stock dividends.
(4) Reflects the Oak Mountain Acquisition as if the transaction had taken place
effective January 1, 1996. The Company's ownership percentage is 32.0% and
has been reflected on the proportionate consolidation method of accounting.
(a) Reflects the income tax effects of the pro forma adjustments at an
assumed tax rate of 28%.
(5) Reflects the offering of the Old Notes and the application of the net
proceeds therefrom.
(a) Reflects the additional amortization expense resulting from the
capitalization of fees and other deferred financing costs in
conjunction with the offering of the Old Notes in the amount of $520,
net of write-off of fees and other deferred financing costs related to
the Credit Facility in the amount of $788.
(b) Reflects the increase in interest expense resulting from the offering
of the Old Notes (at an interest rate of 9.75% per annum) in the amount
of $12,187, net of the decrease in interest expense resulting from the
prepayment of the outstanding Credit Facility in the amount of $5,936
on a pro forma basis.
(6) Adjusted EBITDA represents earnings before interest, taxes, depreciation,
depletion, amortization, non-cash stock compensation and non-recurring
related expenses. Adjusted EBITDA excludes $2,969 of one-time charges for
noncash stock compensation and non-recurring related expenses. Adjusted
EBITDA should not be considered as an alternative to operating earnings
(loss) or net income (loss) (as determined in accordance with generally
accepted accounting principles) as a measure of the Company's operating
performance or to net cash provided by operating, investing and financing
activities (as determined in accordance with generally accepted accounting
principles) as a measure of the Company's ability to meet cash needs.
Adjusted EBITDA is included herein as it is a basis upon which the Company
assesses its financial performance and certain covenants in the Company's
borrowing arrangements are tied to similar measures. Since all companies and
analysts do not necessarily calculate Adjusted EBITDA in the same fashion,
Adjusted EBITDA as presented in this Prospectus may not be comparable to
similarly titled measures reported by other companies.
(7) Net debt is defined as total debt less cash and cash equivalents of $6,118
as of June 30, 1997 on an as adjusted basis.
(8) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" represents income (loss) from continuing operations before income
taxes and cumulative effects of accounting changes and extraordinary items
plus fixed charges. "Fixed charges" consist of interest expense,
amortization of deferred financing costs and the component of rental expense
that management believes is representative of the interest component of
rental expense. For the pro forma year ended December 31, 1996, earnings
were insufficient to cover fixed charges in the amount of $6,836.
25
<PAGE> 29
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
-----------------------------------------------------------------------
OAK MOUNTAIN
ACQUISITION OFFERING
ACTUAL ADJUSTMENTS(1) PRO FORMA ADJUSTMENTS(2) AS ADJUSTED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Total coal sales and related
revenue........................ $240,818 $ 3,422 $ 244,240 $ 244,240
Expenses:
Cost of operations and selling
expenses.................... 217,520 3,263 220,783 220,783
Depreciation, depletion and
amortization................ 12,909 580 13,489 $ (173)(a) 13,316
General and administrative..... 6,786 161 6,947 6,947
-------- ------- --------- -------- ---------
Operating income
(loss)............... 3,603 (582) 3,021 173 3,194
Interest expense............... 6,646 70 6,716 2,295(b) 9,011
Other income (expense)......... 1,064 6 1,070 1,070
-------- ------- --------- -------- ---------
Loss before income
taxes................ (1,979) (646) (2,625) (2,122) (4,747)
Income tax benefit............. (554) (181)(a) (735) (594)(c) (1,329)
-------- ------- --------- -------- ---------
Net loss............... (1,425) (465) (1,890) (1,528) (3,418)
======== ======= ========= ======== =========
Preferred stock dividends........ (957) -- (957) -- (957)
-------- ------- --------- -------- ---------
Net income (loss) available to
common stockholders............ $ (2,382) $ (465) $ (2,847) $ (1,528) $ (4,375)(6)
======== ======= ========= ======== =========
OTHER DATA:
Adjusted EBITDA(3)(4).......... $ 17,580
Depreciation, depletion and
amortization................ 13,316
Interest expense............... 9,011
Ratio of Adjusted EBITDA to
interest expense............ 2.0
Ratio of earnings to fixed
charges(5).................. --
</TABLE>
26
<PAGE> 30
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(1) Reflects the Oak Mountain Acquisition as if the transaction had taken place
effective January 1, 1997. The Company's ownership percentage is 32.0% and
has been reflected on the proportionate consolidation method of accounting.
Effective January 1, 1997, Oak Mountain changed its method of accounting so
that certain expenses which had previously been capitalized were expensed.
Subsequent to the Company's acquisition of its interest in Oak Mountain,
this policy was reversed. Cost of operations and selling expenses have been
reduced by $332 representing the effects of the Company's accounting method
on Oak Mountain for the period prior to the Oak Mountain Acquisition.
(a) Reflects the income tax effects of the pro forma adjustments at an
assumed rate of 28%.
(2) Reflects the offering of the Old Notes and the application of the net
proceeds therefrom.
(a) Reflects the additional amortization expense resulting from the
capitalization of fees and other deferred financing costs in
conjunction with the offering of the Old Notes in the amount of $390,
net of write-off of fees and other deferred financing costs related to
the Credit Facility in the amount of $568.
(b) Reflects the increase in interest expense resulting from the offering
of the Old Notes (at an interest rate of 9.75% per annum) in the amount
of $9,141, net of the decrease in interest expense resulting from the
prepayment of the outstanding Credit Facility in the amount of $6,846.
(c) Reflects the income tax effects of the pro forma adjustments at an
assumed rate of 28%.
(3) Adjusted EBITDA represents earnings before interest, taxes, depreciation,
depletion, amortization, non-cash stock compensation, and non-recurring
related expenses and extraordinary item. Adjusted EBITDA should not be
considered as an alternative to operating earnings (loss) or net income
(loss) (as determined in accordance with generally accepted accounting
principals) as a measure of the Company's operating performance or to net
cash provided by operating, investing and financing activities (as
determined in accordance with generally accepted accounting principals) as a
measure of the Company's ability to meet cash needs. Adjusted EBITDA is
included herein as it is a basis upon which the Company assesses its
financial performance and certain covenants in the Company's borrowing
arrangements are tied to similar measures. Since all companies and analysts
do not necessarily calculate Adjusted EBITDA in the same fashion, Adjusted
EBITDA as presented in this Prospectus may not be comparable to similarly
titled measures reported by other companies.
(4) In the nine months ended September 30, 1997 the Company experienced a
decrease in Adjusted EBITDA, which was attributable to $1,700 in increased
costs related to adverse geological conditions at two of the Company's
mines.
(5) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" represents income (loss) from continuing operations before income
taxes and cumulative effects of accounting changes and extraordinary items
plus fixed charges. "Fixed charges" consist of interest expense,
amortization of deferred financing costs and the component of rental expense
that management believes is representative of the interest component of
rental expense. For the nine months ended September 30, 1997, earnings were
insufficient to cover fixed charges in the amount of $4,747.
(6) Excludes a non-recurring charge of $3.9 million, net of income taxes,
related to the Company's debt refinancing.
27
<PAGE> 31
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data of the Company and the Predecessor at the dates and for the periods
indicated. Data as of December 31, 1996 and for the periods January 1, 1996 to
July 31, 1996 and August 1, 1996 to December 31, 1996 have been derived from
consolidated financial statements of the Predecessor and the Company, audited by
Coopers & Lybrand L.L.P., independent certified public accountants, appearing
elsewhere herein. Data as of December 31, 1992, 1993, 1994, 1995 and for the
years then ended have been derived from consolidated financial statements of the
Predecessor audited by Ernst & Young LLP, independent certified public
accountants. The audited financial statements as of December 31, 1996 and for
the periods January 1, 1996 to July 31, 1996 and August 1, 1996 to December 31,
1996, and as of December 31, 1995 and 1994, and for the years then ended, appear
elsewhere herein. Data for the nine months ended September 30, 1996 and as of
and for the nine months ended September 30, 1997 have been derived from
unaudited interim consolidated financial statements of the Predecessor and the
Company, respectively, which, in the opinion of management, have been prepared
on the same basis as the audited consolidated financial statements and include
all adjustments, consisting of normal recurring adjustments, necessary for a
fair presentation of the information. Data as of and for the nine months ended
September 30, 1997 do not purport to be indicative of results to be expected for
the full year. The adjusted combined statements of operations data, other data
and operating data for the nine months ended September 30, 1996 and the year
ended December 31, 1996 combine the audited results of operations of the
Predecessor for the period January 1, 1996 to July 31, 1996 and of the Company
for the period August 1, 1996 to September 30, 1996 and to December 31, 1996,
respectively. The adjusted combined statements of operations data, other data
and operating data for the nine months ended September 30, 1996 and the year
ended December 31, 1996 do not purport to represent what the Company's
consolidated results of operations would have been if the Recapitalization had
actually occurred on January 1, 1996.
The following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements included elsewhere herein.
28
<PAGE> 32
<TABLE>
<CAPTION>
THE PREDECESSOR THE COMPANY
------------------------------------------------------------ ------------
YEAR ENDED JANUARY 1, AUGUST 1,
DECEMBER 31, 1996 TO 1996 TO
---------------------------------------------- JULY 31, DECEMBER 31,
1992 1993 1994 1995 1996 1996
(DOLLARS IN THOUSANDS, EXCEPT PER TON DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Captive coal sales revenue............. $121,483 $143,753 $170,792 $194,348 $126,500 $ 85,175
Brokered coal sales revenue............ 51,145 21,538 50,470 49,333 37,697 36,521
Other revenue.......................... 2,997 3,601 6,237 5,216 2,712 1,550
Total coal sales and related revenue.... 175,625 168,892 227,499 248,897 166,909 123,246
Operating expenses:
Cost of operations and selling
expenses............................. 152,278 147,418 203,174 221,315 149,364 110,215
Depreciation, depletion and
amortization......................... 10,028 10,238 12,083 11,732 7,882 6,437
General and administrative............. 5,053 5,193 5,938 6,843 3,796 3,738
Non-cash stock compensation and non-
recurring related expenses............. -- -- -- -- 2,969 --
-------- -------- -------- -------- -------- -------
Operating income (expense)............. 8,266 6,043 6,304 9,007 2,898 2,856
Interest expense........................ 2,824 2,718 3,523 6,612 2,796 2,090
Other income............................ 1,368 832 1,621 3,108 1,107 373
-------- -------- -------- -------- -------- -------
Income (loss) from continuing
operations before income taxes and
cumulative effect of accounting
changes and extraordinary item....... 6,810 4,157 4,402 5,503 1,209 1,139
Income taxes (tax benefit).............. 1,989 1,368 1,940 2,270 (134) 485
-------- -------- -------- -------- -------- -------
Income (loss) before cumulative effect
of accounting changes and
extraordinary item................... 4,821 2,789 2,462 3,233 1,343 654
Cumulative effect of accounting
changes(1)............................. -- 978 -- -- -- --
Extraordinary item(2)................... (1,363) -- -- -- -- --
-------- -------- -------- -------- -------- -------
Net income (loss)...................... 6,184 3,767 2,462 3,233 1,343 654
Preferred stock dividends(3)............ 161 215 215 215 116 512
-------- -------- -------- -------- -------- -------
Net income (loss) available to common
stockholders......................... $ 6,023 $ 3,552 $ 2,247 $ 3,018 $ 1,227 $ 142
======== ======== ======== ======== ======== =======
Ratio of earnings to fixed charges(4)... 2.6x 1.9x 1.8x 1.6x 1.3x 1.4x
OTHER DATA:
Adjusted EBITDA(5)...................... $ 19,662 $ 17,113 $ 20,008 $ 23,847 $ 14,856 $ 9,666
Depreciation, depletion and
amortization........................... 10,028 10,238 12,083 11,732 7,882 6,437
Other income............................ 1,368 832 1,621 3,108 1,107 373
Capital expenditures.................... 8,977 17,344 8,950 9,353 3,046 6,769
CASH FLOW DATA:
Net cash provided by operating
activities............................. $ 14,952 $ 10,381 $ 13,421 $ 2,168 $ 19,022 $ 1,220
Net cash provided by (used in) investing
activities............................. (14,294) (17,077) (32,434) 5,021 (1,764) (84,968)
Net cash provided by (used in) financing
activities............................. (1,559) 9,222 17,808 4,992 (29,795) 84,304
OPERATING DATA:
Captive coal sales(7)................... 4,397 5,361 5,891 6,736 4,635 3,169
Brokered coal sales(7).................. 1,539 725 1,442 1,769 1,212 1,192
Average captive sales price per ton..... $ 27.63 $ 26.81 $ 28.99 $ 28.85 $ 27.29 $ 26.87
Average brokered sales price per ton.... 33.23 29.71 35.00 27.89 31.10 30.63
BALANCE SHEET DATA (AT PERIOD END):
Working capital (deficit)............... $ 2,194 $ 8,310 $ 12,576 $ 27,599 $ 7,410
Total assets............................ 99,374 109,145 161,372 187,026 259,683
Total long-term debt(8)................. 36,526 45,748 69,910 74,902 88,029
Mandatorily redeemable preferred
stock.................................. 1,600 1,600 1,600 8,600 20,775
Total stockholders' equity.............. 35,386 38,938 41,185 57,203 80,779
<CAPTION>
(UNAUDITED)
------------------------------
ADJUSTED
ADJUSTED COMBINED THE COMPANY
COMBINED FOR THE -------------
FOR THE NINE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1997
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Captive coal sales revenue............. $211,675 $ 159,480 $ 177,630
Brokered coal sales revenue............ 74,218 51,100 60,549
Other revenue.......................... 4,262 3,266 2,639
Total coal sales and related revenue.... 290,155 213,846 240,818
Operating expenses:
Cost of operations and selling
expenses............................. 259,579 192,532 217,520
Depreciation, depletion and
amortization......................... 14,319 10,464 12,909
General and administrative............. 7,534 5,051 6,786
Non-cash stock compensation and non-
recurring related expenses............. 2,969 2,969 --
-------- -------- --------
Operating income (expense)............. 5,754 2,830 3,603
Interest expense........................ 4,886 3,702 6,646
Other income............................ 1,480 1,040 1,064
-------- -------- --------
Income (loss) from continuing
operations before income taxes and
cumulative effect of accounting
changes and extraordinary item....... 2,348 168 (1,979)
Income taxes (tax benefit).............. 351 60 (554)
-------- -------- --------
Income (loss) before cumulative effect
of accounting changes and
extraordinary item................... 1,997 108 (1,425)
Cumulative effect of accounting
changes(1)............................. -- -- --
Extraordinary item(2)................... -- -- 3,849
-------- -------- --------
Net income (loss)...................... 1,997 108 (5,274)
Preferred stock dividends(3)............ 628 324 957
-------- -------- --------
Net income (loss) available to common
stockholders......................... $ 1,369 $ (216) $ (6,231)
======== ======== ========
Ratio of earnings to fixed charges(4)... 1.3x 1.0x .80x
OTHER DATA:
Adjusted EBITDA(5)...................... $ 24,522 $ 17,303 $ 17,576(6)
Depreciation, depletion and
amortization........................... 14,319 10,464 12,909
Other income............................ 1,480 1,040 1,064
Capital expenditures.................... 9,815 4,598 35,949
CASH FLOW DATA:
Net cash provided by operating
activities............................. $ 2,112
Net cash provided by (used in) investing
activities............................. (47,880)
Net cash provided by (used in) financing
activities............................. 45,440
OPERATING DATA:
Captive coal sales(7)................... 7,804 5,852 6,367
Brokered coal sales(7).................. 2,404 1,656 1,931
Average captive sales price per ton..... $ 27.12 $ 27.25 $ 27.90
Average brokered sales price per ton.... 30.87 30.86 31.36
BALANCE SHEET DATA (AT PERIOD END):
Working capital (deficit)............... $ 9,427
Total assets............................ 312,383
Total long-term debt(8)................. 135,889
Mandatorily redeemable preferred
stock.................................. 22,182
Total stockholders' equity.............. 74,098
</TABLE>
29
<PAGE> 33
- ------------------------------
(1) Represents the cumulative effect recorded relating to the Company's adoption
of Financial Accounting Standards No. 109, "Accounting for Income Taxes."
(2) Represents the Company's utilization of its operating loss carryforwards
recorded as an extraordinary item in 1992 in accordance with the Company's
accounting method and the write-off of unamortized debt issuance costs
related to the Credit Facility in 1997.
(3) Represents accrued and unpaid dividends on Class A Preferred Stock
subsequent to the Recapitalization. See "Description of Capital Stock."
(4) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" represents income (loss) from continuing operations before income
taxes and cumulative effects of accounting changes and extraordinary items
plus fixed charges. "Fixed charges" consist of interest expense,
amortization of deferred financing costs and the component of rental expense
that management believes is representative of the interest component of
rental expense.
(5) Adjusted EBITDA represents earnings before interest, taxes, depreciation,
depletion, amortization, non-cash stock compensation, non-recurring related
expenses and extraordinary item. Adjusted EBITDA for the Adjusted Combined
Nine Months ended September 30, 1996, for the period from January 1, 1996 to
July 31, 1996 and for the Adjusted Combined Year Ended December 31, 1996
excludes $3.0 million of one-time charges for non-cash stock compensation
and non-recurring related expenses. Adjusted EBITDA should not be considered
as an alternative to operating earnings (loss) or net income (loss) (as
determined in accordance with generally accepted accounting principles) as a
measure of the Company's operating performance or to net cash provided by
operating, investing and financing activities (as determined in accordance
with generally accepted accounting principles) as a measure of the Company's
ability to meet cash needs. Adjusted EBITDA is included herein as it is a
basis upon which the Company assesses its financial performance and certain
covenants in the Company's borrowing arrangements are tied to similar
measures. Since all companies and analysts do not necessarily calculate
Adjusted EBITDA in the same fashion, Adjusted EBITDA as presented in this
Prospectus may not be comparable to similarly titled measures imported by
other companies.
(6) In the nine months ended September 30, 1997, the Company experienced a
decrease in Adjusted EBITDA, which was attributable to $1.7 million in
increased costs related to adverse geological conditions at two of the
Company's mines.
(7) In thousands of tons.
(8) Includes current portion of long-term debt. See the Consolidated Financial
Statements included elsewhere herein.
30
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Consolidated
Financial Statements included elsewhere herein.
GENERAL
Anker is a growth-oriented producer of coal used principally for
electricity generation and steel production with a focus on selected niche coal
markets in the eastern United States. The Company currently owns and operates a
diverse portfolio of thirteen non-unionized deep and surface coal mines
strategically located in West Virginia and Maryland. In 1996, approximately 67%
of the Company's revenues from coal sales (including brokered and commission
sales) were made under long-term contracts. The Company's long-term contracts
had a weighted average term of approximately 7.4 years as of June 30, 1997.
Based on contracts currently in place and purchase orders and sales made to
date, the Company expects 1997 coal sales (including brokered and commission
sales) to exceed 13.0 million tons, a 14% increase over 1996 coal sales of 11.6
million tons. Through both acquisitions and development of the Company's
existing reserves, the Company's annual coal production has grown at a compound
annual rate of approximately 15%, from 4.2 million tons per year in 1992 to 7.7
million tons per year in 1996, and the Company's coal reserves have grown at a
compound annual rate of approximately 41%, from 147 million recoverable product
tons as of December 31, 1992 to approximately 664 million recoverable product
tons as of June 1, 1997.
The Company was formed in August 1996 to effect the acquisition of the
Predecessor. The Company was capitalized with $50 million in cash from First
Reserve, in exchange for approximately 54.1% of the Common Stock of the Company
and 10,000 shares of Class B Preferred Stock. In addition, John J. Faltis
(through JJF Group), Anker Holding and P. Bruce Sparks (through PPK Group)
contributed an aggregate of 7.5% of the common stock of the Predecessor in
exchange for 30.4%, 10.4% and 5.1%, respectively, of the Common Stock of the
Company. The Company then acquired the remaining 92.5% of the common stock of
the Predecessor from Anker Holding for approximately $87 million, which was
funded by the issuance of $25 million of Class A Preferred Stock to Anker
Holding and the payment of $62 million in cash, $12 million of which was
borrowed under the Credit Facility. In addition, the Company assumed $56 million
of the Predecessor's outstanding indebtedness. The Company has accounted for the
Recapitalization using the purchase method of accounting as prescribed under
Accounting Principles Bulletin No. 16, "Accounting for Business Combinations."
The Company has designated August 1, 1996 as the effective date of the
Recapitalization.
The Company's indirect thirty-two percent interest in Oak Mountain Energy,
L.L.C., has experienced higher than anticipated capital development costs, which
resulted in increased borrowings under Oak Mountain Energy, L.L.C.'s credit
facilities. By November 1997, Oak Mountan Energy, L.L.C. had borrowed under its
credit facilities the maximum amount available for the development of its
operations and was continuing to incur additional capital development costs. At
that time the Company and the other owners of Oak Mountain Energy, L.L.C.
attempted to raise additional capital for the project and also considered the
possible sale of the investment. In addition, in December 1997, Oak Mountain
Energy, L.L.C. experienced a methane ignition in its mine, which halted all
production for one week and reduced the level of operation at the mine until the
end of the first quarter of 1998. Rather than commit the additional funds needed
in the project, the Company decided to terminate its investment. As a result of
the pending disposition, the Company expects to record a loss for impairment of
$7 to $9 million in the fourth quarter of 1997.
As a result of the death of John Faltis, the Company will record in the
fourth quarter approximately $15 million of income relating to the proceeds from
key man life insurance policies.
31
<PAGE> 35
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
statement of operations and other data of the Company and the Predecessor.
<TABLE>
<CAPTION>
UNAUDITED
-----------------------------
ADJUSTED
COMBINED
ADJUSTED FOR THE
YEAR ENDED DECEMBER COMBINED FOR NINE MONTHS NINE MONTHS
31, YEAR ENDED ENDED ENDED
------------------- DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996(1) 1996(1) 1997
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Captive sales revenue................ $170,792 $194,348 $211,675 $ 159,480 $ 177,630
Brokered sales revenue............... 50,470 49,333 74,218 51,100 60,549
Other revenue........................ 6,237 5,216 4,262 3,266 2,639
-------- -------- -------- -------- -------
Total coal sales and related
revenues............................. 227,499 248,897 290,155 213,846 240,818
Cost of operations and selling
expenses............................. 203,174 221,315 259,579 192,532 217,520
-------- -------- -------- -------- -------
Gross profit........................... 24,325 27,582 30,576 21,314 23,298
Operating expenses..................... 18,021 18,575 21,853 15,515 19,695
Non-cash stock compensation and non-
recurring related expenses........... -- -- 2,969 2,969 --
-------- -------- -------- -------- -------
Operating income....................... 6,304 9,007 5,754 2,830 3,603
Interest expense....................... 3,523 6,612 4,886 3,702 6,646
Other income........................... 1,621 3,108 1,480 1,040 1,064
Income taxes (tax benefit)............. 1,940 2,270 351 60 (554)
-------- -------- -------- -------- -------
Net income (loss) before extraordinary
item................................. 2,462 3,233 1,997 108 (1,425)
Extraordinary item, net of income taxes
of $1,497............................ -- -- -- -- 3,849
-------- -------- -------- -------- -------
Net income (loss)...................... $ 2,462 $ 3,233 $ 1,997 $ 108 $ (5,274)
======== ======== ======== ======== =======
OTHER DATA:
Adjusted EBITDA........................ $ 20,008 $ 23,847 $ 24,522 $ 17,303 $ 17,576
======== ======== ======== ======== =======
</TABLE>
- ------------------------------
(1) The adjusted combined statement of operations data and other data for the
nine months ended September 30, 1996 and the year ended December 31, 1996
combine the audited results of operations of the Predecessor for the period
January 1, 1996 to July 31, 1996 and of the Company for the period August 1,
1996 to September 30, 1996 and to December 31, 1996, respectively. The
adjusted combined statement of operations data and other data for the nine
months ended September 30, 1996 and the year ended December 31, 1996 do not
purport to represent what the Company's consolidated results of operations
would have been if the Recapitalization had actually occurred on January 1,
1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO
ADJUSTED COMBINED NINE MONTHS ENDED SEPTEMBER 30, 1996
COAL SALES AND RELATED REVENUES. Coal sales and related revenues were
$240.8 million for the nine months ended September 30, 1997 compared to $213.8
million for the nine months ended September 30, 1996, an increase of 12.6%. Coal
sales volume was 9.9 million tons for the nine months ended September 30, 1997
compared to 8.4 million tons for the nine months ended September 30, 1996, an
increase of 17.9%. The increased volume resulted primarily from an increase in
commission sales of 0.7 million tons and recent acquisitions and mine expansion
and development. The average price received for captive and brokered sales
increased by $0.65 per ton.
32
<PAGE> 36
COST OF OPERATIONS AND SELLING EXPENSES. The cost of operations and
selling expenses totalled $217.5 million for the nine months ended September 30,
1997 compared to $192.5 million for the nine months ended September 30, 1996, an
increase of 13.0%. The increase primarily resulted from an increased volume of
shipments, an increase in sales of higher cost brokered coal, and increased
costs of approximately $1.7 million related to adverse geological conditions at
two of the Company's mines. The cost of operations and selling expenses for the
Company was $21.95 per ton shipped for the nine months ended September 30, 1997
compared to $22.91 per ton for the nine months ended September 30, 1996, a
decrease of 4.2%.
OPERATING EXPENSES. Operating expenses for the nine months ended September
30, 1997 were $19.7 million compared to $15.5 million for the nine months ended
September 30, 1996, an increase of 27.1%. General and administrative expenses
increased 33.3%, to $6.8 million for the nine months ended September 30, 1997
compared to $5.1 million for the nine months ended September 30, 1996. The
increase in general and administrative costs primarily resulted from the
increase in the Company's management staff necessary to manage the additional
five mines developed or acquired since September 30, 1996. Depreciation,
depletion and amortization was $12.9 million for the nine months ended September
30, 1997 compared to $10.4 million for the nine months ended September 30, 1996,
an increase of 24.0%. The increase in depreciation, depletion and amortization
primarily resulted from purchase accounting adjustments relating to the
Recapitalization and from acquisitions made by the Company in the nine months
ended September 30, 1997.
NON-CASH STOCK COMPENSATION AND NON-RECURRING RELATED EXPENSES. During
June 1996 the Company made a non-cash common stock grant to one of its executive
officers in the amount of $1.5 million. This grant was intended to reward such
executive officer for past service and to ensure the continued top management of
the Company. In conjunction with that transaction, a cash bonus and related
expenses were awarded in the amount of $1.5 million. These transactions resulted
in an expense of $3.0 million in 1996 which did not reoccur in 1997.
INTEREST EXPENSE. Interest expense was $6.6 million for the nine months
ended September 30, 1997 compared to $3.7 million for the nine months ended
September 30, 1996, an increase of 78.4%. The primary reason for the increase
was the incurrence of debt under the Credit Facility in connection with the
Company's acquisitions and development costs of approximately $40.0 million
during the last twelve months.
INCOME TAXES. Income taxes from operations were $0.6 million in benefits
for the nine months ended September 30, 1997 compared to $0.06 million in
expense for the nine months ended September 30, 1996, a decrease of $0.54
million. This primarily resulted from the deductibility of the Company's taxable
loss for the nine months ended September 30, 1997. Pursuant to the United States
Internal Revenue Code of 1986, as amended, an economic interest in a mineral
property is available for a depletion tax deduction. The depletion deduction is
determined by either the cost of the mineral property or the income produced
from the property. The deduction relating to the income produced is equal to the
lesser of 10% of revenue and 50% of net taxable income (a "Percentage Depletion
Deduction"). When applicable, the Company utilizes the Percentage Depletion
Deduction, which can result in significant fluctuations in the Company's
effective tax rate from year to year.
NET INCOME. For the nine months ended September 30, 1997, the Company's
loss was $5.3 million compared to earnings of $0.1 million for the nine months
ended September 30, 1996. The primary reasons for the decrease in earnings by
the Company were the costs related to the write-off of unamortized debt cost
related to the Credit Facility, the additional costs at two of the Company's
mines related to adverse geological conditions and the increase in
administrative staff required to prepare for the Company's continuing growth.
EXTRAORDINARY ITEM. For the nine months ended September 30, 1997, the
Company wrote-off of the unamortized portion of debt issuance costs relating to
the Credit Facility in the amount of $3.9 million, net of income taxes.
ADJUSTED EBITDA. The Company's Adjusted EBITDA was $17.6 million for the
nine months ended September 30, 1997 compared to $17.3 million for the nine
months ended September 30, 1996, an increase of 1.7%, which was attributable to
increased revenues, partially offset by approximately $1.7 million in increased
costs related to adverse geological conditions at two of the Company's mines.
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<PAGE> 37
ADJUSTED COMBINED YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER
31, 1995
COAL SALES AND RELATED REVENUES. Coal sales and related revenues were
$290.2 million in 1996 compared to $248.9 million in 1995, an increase of 16.6%.
Coal sales volume was 11.6 million tons in 1996 compared to 9.7 million tons in
1995, an increase of 19.6%. These increases resulted primarily from increased
production at the Company's captive mines and an increase in tonnage brokered
from third party producers. The average price received decreased by $0.71 per
ton from $25.75 to $25.04, reflecting an increased percentage of the Company's
sales being made on a unprocessed coal basis, which is sold at lower sales
prices but similar profit margins.
COST OF OPERATIONS AND SELLING EXPENSES. The cost of operations and
selling expenses totaled $259.6 million in 1996 compared to $221.3 million in
1995, an increase of 17.3%. This increase resulted from an increased volume of
sales and production of 1.9 million tons in 1996 compared to 1995. The cost of
operations and selling expenses for the Company was $22.40 per ton shipped in
1996 compared to $22.90 per ton in 1995, a decrease of 2.2%. This decrease was a
direct result of improvements in productivity and reductions in operating costs.
OPERATING EXPENSES. Operating expenses for 1996 were $21.9 million
compared to $18.6 million for 1995, an increase of 17.7%. General and
administrative expenses for 1996 were $7.5 million compared to $6.8 million for
1995, an increase of 10.3%. This increase resulted primarily from an increase in
management staff. However, on a per ton basis, general and administrative
expenses for 1996 were $0.65 per ton sold compared to $0.71 per ton sold in
1995. Depreciation, depletion and amortization totaled $14.3 million in 1996
compared to $11.7 million for 1995, an increase of 22.2%. The increase in
depreciation, depletion and amortization was primarily attributable to purchase
accounting adjustments relating to the Recapitalization. Other income was $1.5
million in 1996 compared to $3.1 million in 1995. In 1995, the Company had $3.2
million of income from the sale of assets and a payment by AES for the delay of
the contract with the AES Warrior Run plant in Cumberland, Maryland (the
"Warrior Run Contract").
NON-CASH STOCK COMPENSATION AND NON-RECURRING RELATED EXPENSES. During
June 1996 the Company made a non-cash common stock grant to one of its executive
officers in the amount of $1.5 million. This grant was intended to reward such
executive officer for past service and to insure the continued top management of
the Company. In conjunction with that transaction, a cash bonus and related
expenses were awarded in the amount of $1.5 million. These transactions resulted
in an expense of $3.0 million in 1996 which did not occur in 1995.
INTEREST EXPENSE. Interest expense was $4.9 million in 1996 compared to
$6.6 million in 1995, a decrease of 25.8%. In connection with the acquisitions
of certain assets from Phillips Resources, Inc. and all of the outstanding stock
of Upshur Property, Inc. (the "Upshur Acquisition"), the Company received a cash
payment, the present value of which exceeds the liabilities assumed by the
Company, which was then used to reduce the Company's outstanding bank debt
which, in turn, reduced the Company's interest expense in 1996.
INCOME TAXES. Income taxes were $0.4 million in 1996 compared to $2.3
million in 1995, a decrease of $1.9 million. This was the result of a Percentage
Depletion Deduction, which decreased the Company's effective income tax rates to
14.9% for 1996 from 41.3% for 1995.
NET INCOME. In 1996, the Company's earnings were $2.0 million compared to
$3.2 million in 1995, a decrease of 37.5%. The primary reasons for the decrease
in earnings by the Company were the costs related to stock compensation and
related expenses and the Recapitalization in 1996, and the increase in
administrative staff required to prepare for the Company's continuing growth.
ADJUSTED EBITDA. The Company's Adjusted EBITDA was $24.5 million in 1996,
compared to $23.9 million in 1995 an increase of 2.5%.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
COAL SALES AND RELATED REVENUES. Coal sales and related revenues were
$248.9 million in 1995 compared to $227.5 million in 1994, an increase of 9.4%.
Coal sales volume totaled 9.7 million tons in 1995
34
<PAGE> 38
compared to 9.6 million tons in 1994. The average price received was $25.04 per
ton in 1995 as compared to $23.69 per ton in 1994, an increase of 8.3%. This
increase resulted primarily from (i) price escalations in certain of the
Company's long-term contracts and (ii) the Company's entry into the higher
priced low vol met coal market, which commands a price above the average price
for the Company's other products.
COST OF OPERATIONS AND SELLING EXPENSES. The cost of operations and
selling expense totaled $221.3 million in 1995, compared to $203.2 million in
1994, an increase of 8.9%. This increase was the result of an increase in the
volume of captive shipments and brokered shipments, and a decrease in commission
shipments. Captive shipments (which represent tons produced from the Company's
operations) and brokered shipments (which represent tons purchased from third
party producers resold by the Company) have a higher cost of operations and
selling expense than commission shipments (which represent tons shipped by the
Company for a third party for a commission).
OPERATING EXPENSES. Operating expenses were $18.6 million for 1995
compared to $18.0 million for 1994, an increase of 3.3%. General and
administrative expenses were $6.8 million for 1995 compared to $5.9 million for
1994, an increase of 15.3%. This increase primarily related to the continued
growth of the Company's captive operations and the related development of the
administrative, human resource and management information systems for such
operations. Depreciation, depletion and amortization totaled $11.7 million in
1995 compared to $12.1 million in 1994, a decrease of 3.3%. This decrease
related to lower depletion rates on new mines developed as compared to higher
depletion rates on older mines that had been closed. Other income for 1995 was
$3.1 million compared to $1.6 million in 1994, an increase of 93.8%. In 1995,
the Company had $3.2 million of income from the sale of assets and a payment by
AES for the delay of the Warrior Run Contract.
INTEREST EXPENSE. Interest expense was $6.6 million in 1995 compared to
$3.5 million in 1994, an increase of 88.6%. This increase resulted from the
incurrence of $17.1 million of debt under the Credit Facility in connection with
acquisitions during the period.
INCOME TAXES. Income taxes were $2.3 million in 1995 compared to $1.9
million in 1994, an increase of $0.4 million. This increase was the result of
higher earnings in 1995 than in 1994, although as a result of a Percentage
Depletion Deduction, the Company's effective income tax rate decreased to 41.3%
in 1995 compared to 44.1% in 1994.
NET INCOME. In 1995, the Company's earnings were $3.2 million, compared to
$2.5 million in 1994, an increase of 28.0%. The primary reason for the increase
in earnings was the Company's continued expansion in profitable niche markets.
ADJUSTED EBITDA. The Company's Adjusted EBITDA was $23.9 million in 1995,
compared to $20.0 million in 1994, an increase of 19.5%. This increase primarily
resulted from the Company's increase in coal sales and related revenues.
INFLATION
Inflation in the United States has not had a significant effect on the
Company's business or operations during recent periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company has substantial indebtedness and significant debt service
obligations. As of September 30, 1997, the Company had total long-term
indebtedness, including the Old Notes and current maturities, in aggregate
principal amount of $140.5 million. The Indenture permits the Company and its
Restricted Subsidiaries to incur additional indebtedness, including secured
indebtedness, subject to certain limitations. Such limitations will include
certain covenants that, among other things: (i) limit the incurrence by the
Company and its Restricted Subsidiaries of additional indebtedness and the
issuance of certain preferred stock; (ii) restrict the ability of the Company
and its Restricted Subsidiaries to make dividends and other restricted payments
(including investments); (iii) limit the ability of the Restricted Subsidiaries
to incur dividend and other payment restrictions; (iv) limit transactions by the
Company and its Restricted
35
<PAGE> 39
Subsidiaries with affiliates; (v) limit the ability of the Company and its
Restricted Subsidiaries to make asset sales; (vi) limit the ability of the
Company and its Restricted Subsidiaries to incur certain liens; (vii) limit the
ability of the Company to consolidate or merge with or into, or to transfer all
or substantially all of its assets to, another person and (viii) limit the
ability of the Company to engage in other lines of business. In addition, the
Amended and Restated Revolving Credit Facility contains additional and more
restrictive covenants as compared to the Indenture and requires the Company to
maintain specified financial ratios and satisfy certain tests relating to its
financial condition. See "Capitalization," "Description of Senior Notes--Certain
Covenants" and "Description of Certain Indebtedness--Amended and Restated
Revolving Credit Facility." As of September 30, 1997 the Company had
insufficient earnings to cover fixed charges in the amount of $2.0 million.
The Company's principal liquidity requirements are for debt service
requirements under the Senior Notes, the Amended and Restated Revolving Credit
Facility, other outstanding indebtedness, and for working capital needs and
capital expenditures. Historically, the Company has funded its capital and
operating requirements with a combination of operating cash flow, borrowings
under credit facilities and equity investments. The Company has utilized these
sources of funds to make acquisitions, to fund significant capital investments
in its properties, to fund operations and to service debt under credit
facilities. The indebtedness under the Credit Facility paid down with the
proceeds from the offering of the Old Notes was incurred (i) to finance
acquisitions made by the Company, (ii) for capital expenditures and (iii) for
working capital purposes.
In 1996, the Company used $9.8 million for capital expenditures. Excluding
capital expenditures relating to the Company's interest in Oak Mountain Energy,
L.L.C., the Company has budgeted approximately $37.0 million for capital
expenditures in 1997, $36.0 million of which has been spent as of September 30,
1997, and expects to fund its budgeted capital expenditures through a
combination of borrowings under the Amended and Restated Revolving Credit
Facility and cash generated from operations. Of the $37.0 million budgeted for
capital expenditures in 1997, approximately $26.1 million relates to the
acquisition of new properties and the development of previously non-producing
properties.
The Company is continually engaged in evaluating potential acquisitions.
The Company expects that funding for future acquisitions may come from a variety
of sources, depending on the size and nature of any such acquisitions. Potential
sources of capital include cash generated from operations, borrowings under the
Amended and Restated Revolving Credit Facility, additional equity investments
from First Reserve or other external debt or equity financings. There can be no
assurance that such additional capital sources will be available to the Company
on terms which the Company finds acceptable, or at all.
In connection with the offering of the Old Notes, the Company entered into
the Amended and Restated Revolving Credit Facility, under which, on December 31,
1997 it had approximately $7.0 million of outstanding indebtedness and
additional undrawn availability of approximately $18.0 million (which total
availability may be increased to up to $75.0 million upon the achievement of
certain financial tests). Interest rates on the revolving facility credit loans
are based, at the Company's option, on the Base Rate (as defined in the Amended
and Restated Revolving Credit Facility) or LIBOR (as defined in the Amended and
Restated Revolving Credit Facility). The Amended and Restated Revolving Credit
Facility commitment will mature six years after the Closing Date (as defined).
The Amended and Restated Revolving Credit Facility contains certain restrictions
and limitations, including financial covenants that require the Company to
maintain and achieve certain levels of financial performance and limitations on
the payment of cash dividends and similar restricted payments. See "Description
of Certain Indebtedness--Amended and Restated Revolving Credit Facility."
The Company believes that, in the absence of future acquisitions, its
liquidity, capital resources and cash flows from existing operations will be
sufficient to fund budgeted capital expenditures, working capital requirements
and interest and principal payments on its indebtedness for the foreseeable
future. However, the Company currently expects that it will make additional
acquisitions and in connection therewith, expects to incur additional
indebtedness. In the event that the Company incurs such additional indebtedness,
its ability to make principal and interest payments on its indebtedness,
including the Senior Notes, may be adversely affected.
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<PAGE> 40
INDUSTRY OVERVIEW
According to preliminary data compiled by the United States Department of
Energy's Energy Information Administration (the "EIA"), United States coal
production totaled approximately 1.1 billion tons in 1996, a 7.6% increase from
the 1.0 billion tons produced in 1995 and a record high. Most of the coal
consumed in the United States is used for the generation of electricity. In
1996, coal production levels were driven by an unusually large increase in coal
consumption for electricity generation resulting from the confluence of
increased natural gas prices, negligible growth in nuclear-powered generation,
colder-than-normal weather, and strong economic growth. Total United States coal
consumption reached approximately 1.0 billion tons in 1996, a 4.1% increase from
1995. In 1996, coal continued to be the principal energy source for United
States utilities, with its share of total utility generation rising to 56.4%
from 55.2% in 1995. In the last three years, coal prices have remained steady,
except for seasonal variations and supply and demand caused by weather.
Companies with improving productivity and efficient mines have filled the
increasing demand without price increases. Over the last ten years, many
inefficient mines have closed, thus bringing supply and demand into closer
balance. Coupled with increased competition in the generation of electricity,
utility buyers have been forced to operate and purchase coal in a more fiscally
responsible manner. This has led to lower stockpiles, increased spot market
activity and shorter contract terms, which has created greater price volatility
than has been experienced in the past.
The following table presents five year United States coal production by
region and consumption by sector (the United States coal industry data set forth
above and in the following table are derived from publications of the EIA):
<TABLE>
<CAPTION>
FIVE YEAR COAL PRODUCTION AND CONSUMPTION
---------------------------------------------------
1992 1993 1994 1995 1996
(IN MILLIONS OF TONS)
<S> <C> <C> <C> <C> <C>
PRODUCTION BY REGION
Appalachia................................... 456.6 409.7 445.4 434.9 445.1
Interior..................................... 195.2 167.2 179.9 168.5 172.2
Western...................................... 345.3 368.5 408.3 429.6 494.5
----- ----- ------- ------- -------
Total................................ 997.1 945.4 1,033.6 1,033.0 1,111.8
===== ===== ======= ======= =======
CONSUMPTION BY SECTOR
Utilities.................................... 779.9 813.5 817.3 829.0 873.7
Independent Power Producers.................. 14.8 17.8 20.9 21.2 24.0
Coke Plants.................................. 32.4 31.3 31.7 33.0 31.7
Other Industrial Plants...................... 74.0 74.9 75.2 72.8 70.6
Residential/Commercial Users................. 6.2 6.2 6.0 5.8 5.8
----- ----- ------- ------- -------
Total................................ 907.3 943.7 951.1 968.1 1,005.8
===== ===== ======= ======= =======
</TABLE>
Productivity gains, environmental legislation and a shift in the relative
importance of utility consumption compared to metallurgical and industrial usage
have worked together to exert pressures on the fundamental structure of the coal
industry. According to statistics compiled by the federal government, the number
of operating mines has declined 47% over the last ten years even though
production has increased 31%. During this period, work practice and
technological improvements, as well as the rapid expansion of surface mining in
Wyoming, have allowed production per man day to increase by 95% while industry
employment declined 42%. These productivity gains and resulting excess
productive capacity in most segments of the industry have contributed to the
stability of coal prices in recent years at levels lower than the 1970's and
early 1980's. Clean air concerns and legislation have increased consumption of
low sulfur products mined in Appalachia and the Western United States, and the
Company expects this trend to continue. Although the United States coal
industry's production has consolidated to some degree in recent years, the top
ten producers accounted for 44% of total production in 1996 and no company held
a market share of more than 10%.
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<PAGE> 41
COAL QUALITIES
In general, coals are classified by heat value and sulfur content. In
ascending order of heat values, there are four basic varieties of coal: lignite,
subbituminous, bituminous and anthracite. Lignite is a brownish-black coal with
a heat value that is less than 8,300 Btu per pound. Major lignite operations are
located in Texas, North Dakota, Montana and Louisiana. Subbituminous coal is a
dull black coal with a heat value that ranges from approximately 8,300 to 11,500
Btu per pound. Most subbituminous reserves are located in Montana, Wyoming,
Colorado, New Mexico, Washington and Alaska. Bituminous coal is a "soft" coal
with a heat value that ranges from 10,500 to 14,000 Btu per pound. This coal is
located primarily in Appalachia and the Midwest, and is the type most commonly
used for electric power generation in the United States. Bituminous coal also is
used for utility and industrial steam purposes as well as for making the coke
necessary for steel production. Coal used in metallurgical processes has higher
expansion/contraction characteristics than steam coal. Anthracite coal is a
"hard" coal with a heat value that can be as high as 15,000 Btu per pound.
Anthracite deposits are located primarily in the Appalachian region of
Pennsylvania. 100% of the Company's reserves are bituminous and are located east
of the Mississippi River.
Due to the importance of sulfur in environmental regulations, coal is
commonly described with reference to its sulfur content. Coal that emits no more
than 1.2 lb./MBtu of sulfur dioxide when burned is compliance coal.
Also relevant in determining the utilization and marketability of coals is
the percentage of ash (small particles of inert material), the percentage of
moisture, and the percentage of volatile matter (volatility). The percentage of
ash is important because its inert nature takes away from the heating value
(i.e., the higher the percentage of ash, the lower the heating value).
Metallurgical coal ("met coal") customers typically require coal containing less
than 8% ash. For utilities, the percentage of ash is relevant because of both
its effect on heating value and its effect on the amount of combustion
byproducts that must be disposed. Utility customers typically require 6% to 15%
ash, depending on individual power plant specifications.
The percentage of moisture is relevant because the higher the moisture, the
lower the heating value and because a high percentage of moisture will cause
handling problems with the coal.
Volatility, the percentage of matter which is volatized in the combustion
process, is particularly important for the creation of a stable and premium
quality coke. Although lower volatility and percentage of ash in coal generally
increase the yield and carbon content of the coke, too much low vol coal may
cause coke to stick in the coke ovens. Therefore, coke producers carefully blend
low vol and high vol met coals to create the proper coke characteristics. In
addition, although a plant's boiler can be designed to burn low vol coal, most
utilities consume high vol coals.
MINING METHODS
Coal is mined using either surface or underground methods. The method
utilized depends upon several factors, including, in particular, the proximity
of the target coal seam to the earth's surface and the geology of the
surrounding area. Surface techniques generally are employed when a coal seam is
within 200 feet of the earth's surface, and underground techniques are used for
deeper seems. In 1996, surface mining accounted for approximately 62% of total
United States coal production, with underground mining accounting for the
balance of production. The Company estimates that approximately 64% of the coal
it produced in 1996 was mined using underground mining techniques, with the
balance produced using surface mining methods. Surface mining generally is less
expensive and has a higher recovery percentage than underground mining, with
surface mining typically resulting in the removal of 80 to 90% and underground
mining resulting in the removal of 50 to 60% of the total coal from a particular
deposit.
Strip mining and auger mining constitute the two most common methods of
surface mining. Strip mining consists essentially of a large-scale earth moving
operation, with the rock and soil overlying a coal deposit (the "overburden")
being "stripped" away by means of large earth-moving machines. The coal exposed
by stripping is fractured by blasting and is loaded onto haul trucks or overland
conveyors for transportation to processing and loading facilities. The site then
is backfilled with the overburden and otherwise restored to its approximate
original contour and condition (the process of "reclamation"). Federal law
mandates the
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<PAGE> 42
reclamation of all new strip mining sites. In the auger mining method, miners
remain outside of the mine and a large, corkscrew-like machine (the "auger")
bores into the side of a hill and extracts coal by "twisting" it out.
Underground mining operations are used when a coal seam is too deep to
permit surface mining. Underground mines can be divided into three basic
classifications: (i) slope mines, where a coal seam is relatively close to the
earth's surface, and accessed through a sloped tunnel, (ii) shaft mines, for
deeper deposits, which are accessed through a vertical tunnel, and (iii) drift
mines, which are accessed through a horizontal entry.
COAL PREPARATION
After mining, coal can be prepared for shipment in a preparation plant.
This facility crushes the coal and cleans it by washing it in a liquid solution,
separates it into higher and lower grades and removes non-coal materials.
Cleaning upgrades the quality and heating value of the coal by removing or
reducing pyritic sulfur content, rock, clay and other ash-producing materials.
Coal blending or mixing of various sulfur types is often performed in order to
meet the specific combustion and environmental needs of customers. Depending on
its quality and customer requirements, coal may be shipped without being
prepared.
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<PAGE> 43
BUSINESS
OVERVIEW
Anker is a growth-oriented producer of coal used principally for
electricity generation and steel production with a focus on selected niche coal
markets in the eastern United States. The Company currently owns and operates a
diverse portfolio of thirteen non-unionized deep and surface coal mines
strategically located in West Virginia and Maryland. In 1996, approximately 67%
of the Company's revenues from coal sales (included brokered and commission
sales) were made under long-term contracts. The Company's long-term contracts
had a weighted average term of approximately 7.4 years as of June 30, 1997.
Based on contracts currently in place and purchase orders and sales made to
date, the Company expects 1997 coal sales (including brokered and commission
sales) to exceed 13.0 million tons, a 14% increase over 1996 coal sales of 11.6
million tons. Through both acquisitions and development of the Company's
existing reserves, the Company's annual coal production has grown at a compound
annual rate of approximately 15%, from 4.2 million tons per year in 1992 to 7.7
million tons per year in 1996, and the Company's coal reserves have grown at a
compound annual rate of approximately 41%, from 147 million recoverable product
tons as of December 31, 1992 to approximately 664 million recoverable product
tons as of June 1, 1997.
The Company attributes its growth in reserves, production, revenues and
cash flow to its focus on serving niche coal markets and its cost-efficient
operations. The Company believes it has a competitive advantage due to, among
other things, the geographic location of its reserves and the diverse qualities
of its coal. For example, in 1996, the Company sold 2.3 million tons of steam
coal, or approximately 20% of shipments, to IPPs and was the largest supplier of
coal to IPPs in the eastern United States. Because transportation costs can
significantly increase the delivered cost of coal over the mine price of coal,
the Company believes its proximity to these IPPs and other customers provides it
with a competitive advantage over other coal producers. The Company's strategy
has been to enter into long-term supply contracts with its customers, which it
may initially fulfill with brokered coal and subsequently replace with
lower-cost coal from its own production. The Company believes that its ability
to supply customers with brokered coal permits it to secure long-term contracts,
which provide the stable source of revenues and cash flow required to support
the opening, expansion or maintenance of mines to service such contracts.
The Company's niche market strategy has also focused on supplying specific
qualities of coal to satisfy customers' demands in the most efficient manner.
The Company supplies premium quality, low vol met coal to certain integrated
steel and merchant coke producers, for whom this quality of coal is an essential
component of coke production. Low vol met coal sales accounted for approximately
12% of the Company's coal sales and related revenue for 1996, and the Company
believes it has an approximate 14% share of the domestic low vol met coal
market. In addition, the Company believes that its lower cost, high sulfur
reserves are strategically located near electric generation facilities which can
economically utilize high sulfur coal due to their use of sulfur-reduction
technologies and lower transportation costs.
Approximately 80% of the Company's 1996 shipments were to electric
generation facilities and, consequently, the Company believes that it is well
positioned to benefit from favorable trends in the electric generation industry.
Over the last ten years coal consumption in the United States has generally
experienced steady annual growth, reaching a record level of 1.0 billion tons in
1996. This steady growth in coal consumption is attributable to similar growth
in the electric generation industry, which accounts for more than 89% of
domestic coal consumption. In 1996, coal-fired facilities generated
approximately 56% of the nation's electricity, followed by nuclear (22%),
hydroelectric (11%) and gas-fired (9%) facilities. Because coal is one of the
least expensive and most abundant resources for the production of electricity
and imports of coal have not historically exceeded 1% of domestic coal
consumption, domestically produced coal is expected to continue to play a
significant role in the production of electricity in the future.
The Company further believes that it will benefit from increasing federal
deregulation among electricity producers, which has primarily affected the
wholesale market for electricity. Since 1935, domestic electricity utilities
have operated in a regulated environment, with prices and return on investment
being determined by state utility and power commissions. In April 1996, the FERC
issued orders establishing rules providing for open access to electricity
transmission systems, thereby initiating consumer choice in electricity
purchasing on the wholesale level and encouraging competition in the generation
of electricity. The Company believes that
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<PAGE> 44
this trend towards wholesale deregulation will likely (i) increase the
popularity of coal as a source of electricity generation due to its relatively
low cost and (ii) favor coal producers, such as the Company, with diverse
reserves and cost and transportation advantages.
COMPETITIVE STRENGTHS
The Company believes that it possesses the following competitive strengths:
PORTFOLIO OF LONG-TERM CONTRACTS. The Company has secured long-term coal
supply contracts with a weighted average term of approximately 7.4 years as of
June 30, 1997. The Company's long-term contracts have accounted for an average
of approximately 65% of the Company's coal sales revenues (including brokered
and commission sales) from 1992 to 1996. Over the same period, approximately 3.4
million tons of the Company's annual coal shipments covered by long-term
contracts were up for renewal and contracts for 76% of this coal were rolled
over each year into new long-term contracts upon their expiration. In addition,
over the same period, the Company entered into new long-term contracts for 4.0
million tons of annual coal shipments. The Company has been successful in
negotiating long-term contracts for its high sulfur coal with IPPs and utilities
equipped with sulfur-reduction technologies. As of June 30, 1997, of the
Company's twenty long-term contracts, eight were for its high sulfur coal.
EFFICIENT OPERATIONS. Historically, the Company has been successful in
reducing its cash cost of operations per ton produced. The Company's cash cost
of operations and selling expenses per ton of coal shipped has declined
approximately 13% from $25.65 per ton in 1992 to $22.40 per ton in 1996. The
Company has achieved this decrease in costs by retaining a highly motivated,
non-unionized, workforce that, with management, has developed and instituted
more efficient mining techniques.
DEMONSTRATED RECORD OF RESERVES AND PRODUCTION EXPANSION. The Company has
demonstrated its ability to increase production from its existing reserve base
as well as grow through acquisitions. The Company has increased its reserve base
approximately 352%, from 147 million recoverable products tons as of December
31, 1992 to approximately 664 million recoverable product tons as of June 1,
1997, substantially all of which increase was due to acquisitions of reserves.
For the nine months ended September 30, 1997, the Company increased its captive
coal production by approximately 17% over production levels for the same period
in 1996. Approximately 21% of this increase was due to increased production from
the Company's existing reserves as of September 30, 1996 and approximately 79%
was due to acquisitions made subsequent to September 30, 1996.
DIVERSE PORTFOLIO OF OPERATIONS AND RESERVES. With a diverse reserve base
of approximately 664 million recoverable product tons, the Company believes that
its results of operations are not dependent on any one of its thirteen mines and
that it is well positioned to meet the varying needs of its customers. As of
June 1, 1997, approximately 22% of the Company's coal reserves was compliance
coal, 29% of its reserves was low sulfur (less than 1.0% sulfur) coal (including
compliance coal) and another 63% of its reserves was medium sulfur (between 1.0%
and 1.8% sulfur) coal. Many of the Company's current customers that possess the
technology to scrub high sulfur coal prefer such coal due to its lower cost. All
of the Company's coal is of a quality suitable for use in electricity generating
facilities. At June 1, 1997, the Company's reserve life index (defined as total
recoverable reserves divided by production for 1996) was approximately 86.7
years.
EXPERIENCED MANAGEMENT TEAM. Bruce Sparks, the Company's President and
Chief Executive Officer, has 19 years of experience in the coal industry, has
worked at the Company for the past 12 years and owns 5.1% of the Company's
Common Stock. Prior to his death, John J. Faltis, the Company's President, Chief
Executive Officer and Chairman of the Board of Directors, had worked at the
Company for the past 22 years and owned 30.4% of the Company's Common Stock, all
of which currently is beneficially owned by his estate. See "Prospectus
Summary--Recent Developments."
GROWTH STRATEGY
In August 1996, members of senior management and First Reserve, a private
investment firm specializing in the energy industry, acquired the outstanding
Common Stock of the Company. As a result of the Recapitalization, First Reserve
owns approximately 54.1% of the Company's Common Stock. Senior
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<PAGE> 45
management and First Reserve have adopted a business strategy to maintain and
enhance the Company's leading position in certain niche markets by increasing
revenues, cash flow and profitability. To implement this strategy, the Company
will:
EXPAND PRODUCTION FROM RECENTLY ACQUIRED RESERVES. Through the Company's
recent acquisitions and subsequent mine expansion or development, production is
expected to reach 8.5 million tons in 1997, an increase of approximately 10%
from the 7.7 million tons produced in 1996. Specifically, the majority of the
increased production in 1997 has resulted and will result from the operations
acquired in Grant County, West Virginia (0.4 million tons) and from the
operations recently developed in Harrison County, West Virginia (0.4 million
tons) and Upshur County, West Virginia (0.3 million tons). See "Business--Recent
Acquisitions and Development Plans."
EXPAND NICHE MARKETS. The Company has demonstrated its ability to enter
new markets and become a low-cost supplier of coal to end users in these
markets. The Company seeks to leverage this expertise by expanding in its niche
markets where it believes it has a competitive advantage due to coal quality,
proximity to end users, lower production costs or a combination of these and
other factors. The Company believes that its coal trading and brokering
operations will permit it to identify and create new development and acquisition
opportunities.
GROW THROUGH ACQUISITIONS. From July 1, 1996 to May 31, 1997, the Company
acquired 310.3 million tons of recoverable reserves, increasing its reserve base
by approximately 89%. The Company believes that its niche strategy, together
with its proven ability to reduce cash operating costs, positions it to exploit
the increasing trend towards asset rationalization by larger coal mining
companies. The Company presently focuses on building upon its existing market
strength in the mid-Atlantic utility and IPP market in the vicinity of its
existing coal mines, but will also consider the acquisition of mines outside its
primary geographic area of focus if the market and mine fit the Company's niche
strategy. The Company is currently evaluating several acquisition possibilities.
RECENT ACQUISITIONS AND DEVELOPMENT PLANS
Recently, the Company has developed or acquired mines in the following
locations which have begun production, or are scheduled to begin production, in
1997.
SHELBY COUNTY, ALABAMA. In April 1997, the Company, Anker Holding, Kiewit
Alabama Mining Company and certain members of management of Oak Mountain
acquired 32%, 16%, 48% and 4% interests, respectively, in Oak Mountain Energy,
L.L.C. to exploit a 108 million ton reserve of premium quality, low sulfur coal.
In the first quarter of 1998, the Company decided to terminate its investment in
Oak Mountain Energy, L.L.C. See "Prospectus Summary -- Recent Developments."
GRANT COUNTY, WEST VIRGINIA. In February 1997, the Company purchased the
assets of New Allegheny, Inc. ("New Allegheny") consisting of approximately 18
million tons of recoverable reserves with an average of 14% ash, 1.8% sulfur, 19
vol and 12,800 Btu per pound, a 200 tons per hour preparation plant, an
operating surface mine and related mine equipment, as well as a long-term coal
supply contract for 500,000 tons annually with VEPCO. Since February 1997, the
Company has increased the surface mine production from 11,000 tons per month to
30,000 tons per month.
UPSHUR COUNTY, WEST VIRGINIA. In 1996 and 1997, as part of the Spruce Fork
Project, the Company purchased an aggregate of approximately 15 million tons of
recoverable reserves in the Upper Freeport Seam and in the Middle Kittanning
Seam with an average of 8% ash, 1.2% sulfur, 33 vol and 13,000 Btu per pound, as
well as a 700 tons per hour preparation plant, warehouse and other surface
facilities. The Company began deep mine production in the Upper Freeport seam in
July 1997 and plans to produce up to 1.4 million tons per year from this mine.
HARRISON COUNTY, WEST VIRGINIA. In 1996, the Company acquired
approximately 5.6 million tons of recoverable reserves in Harrison County. The
Company owns 50% of a limited liability company organized in West Virginia which
operates the Sycamore Creek mine to service the nearby Harrison Power Station
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<PAGE> 46
("Harrison Power"), which burns over 5 million tons of coal per year. Harrison
Power, a division of Allegheny Power Service Corporation ("APS") recently
completed a scrubber addition which allows it to utilize the lower cost, high
sulfur coal produced at Sycamore Creek. The Company shipped 960,000 tons
annually into Harrison Power under its 1996/1997 contract. For 1998, the Company
was awarded a contract for 30,000 tons per month, or 360,000 tons per year. The
Company is currently negotiating with APS for an increase in such shipments for
1998 and for the future. The Sycamore Creek mine has approximately 5.6 million
tons of recoverable reserves with an average of 10% ash, 3.6% sulfur, 35 vol and
13,000 Btu per pound. The Company began deep mine production in May 1997 and
plans to produce up to 750,000 tons per year from this mine.
Recently, the Company has developed or acquired mines in the following
locations which are expected to begin production after 1997.
BUCHANAN AND TAZEWELL COUNTIES, VIRGINIA. In 1996, the Company, through a
lease with a subsidiary of NS, acquired a 100% interest in the Big Creek
Project, a premium quality, mid volatility metallurgical coal ("mid vol met
coal") project with approximately 40 million tons of recoverable reserves. This
new complex, which is to be serviced by NS, is scheduled to be constructed over
the next two years and is expected to produce over 1.2 million tons per year.
The coal quality will be 5% ash, 0.7% sulfur and 25 vol, which will permit it to
be sold in the mid vol met coal and steam coal markets. Currently, detailed
engineering, mine planning and permitting are underway with construction
beginning after 1998.
UPSHUR COUNTY, WEST VIRGINIA. In addition to the Spruce Fork deep mine,
the Company has acquired other assets in Upshur County, West Virginia, which it
plans to develop in the next five years. These mines will be developed in the
Sewell Seam which averages 8% ash, 0.8% sulfur, 33 vol and 13,300 Btu per pound.
The Company controls 15 million tons of recoverable reserves in the Sewell Seam
and plans to develop two mines, Area F East and Area F West. This coal will be
processed at the Upshur Property, Inc. preparation plant that was acquired as
part of the Upshur Acquisition at a favorable price when a larger competitor
ceased operations in the northern West Virginia coal fields. This 550 tons per
hour modern preparation plant will be refurbished as the Area F mines are
developed. With the Sewell Seam mines and this preparation plant, the Company
will be able to ship either a premium quality compliance steam coal or a high
volatility metallurgical coal ("high vol met coal"), which the Company believes
will provide strong market support for these mines.
HARRISON COUNTY, WEST VIRGINIA. In addition to the Sycamore Creek mine,
the Company acquired in May 1997 approximately 15.5 million tons of recoverable
reserves of the Pittsburgh seam reserves to further service Harrison Power
Station with an average of 10% ash, 3.6% sulfur, 35 vol and 13,000 Btu per
pound.
COAL RESERVES
As of June 1, 1997, the Company had an estimated reserve base totaling
approximately 664 million recoverable product tons, with approximately 22% being
compliance coal, 29% being low sulfur coal (including compliance coal) and
another 63% being medium sulfur coal. Approximately 94% of these reserves are
classified as deep and 6% as surface minable. Moreover, steam coal represents
approximately 532 million tons, or 80%, of the Company's reserves, while premium
quality met coal constitutes approximately 132 million tons, or 20%, of the
Company's reserves. Assigned reserves (i.e., coal that could be reasonably
expected to be processed in existing plants) represented approximately 59% of
the Company's reserves, while unassigned reserves (i.e., coal which will require
additional expenditures for processing facilities) represented the remaining
41%.
Reserve estimates are prepared by the Company's engineers and geologists
and are reviewed periodically to reflect data received and developments
affecting the reserves. Accordingly, reserve estimates will change from time to
time in reflection of mining activities, analysis of new engineering and
geological data, acquisition or divestment of reserve holdings, modification of
mining plans or mining methods and other factors. The Company has engaged Boyd,
independent mining and geological consultants, to audit the Company's estimates
of its coal reserves. This audit includes a review of the procedures used by the
Company to prepare its internal reserve estimates, verifying the accuracy of
selected property reserve estimates and retabulating reserve groups according to
standard classifications of reliability. The following table summarizes the
Company's coal reserves as of June 1, 1997. Estimates of measured, indicated and
total recoverable reserves
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<PAGE> 47
are based upon the reserve information contained in the reserve report by Boyd.
See Annex A-2--Boyd Report.
<TABLE>
<CAPTION>
(IN MILLIONS OF TONS)
UNDERGROUND TOTAL
(UG) OR RECOVERABLE
COUNTY AND STATE SURFACE(S) MEASURED(1) INDICATED(2) RESERVES SURFACE UNDERGROUND
<S> <C> <C> <C> <C> <C> <C>
Barbour, WV........................ UG 39.73 5.58 45.31 45.31
Braxton, WV........................ S/UG 5.87 19.18 25.05 3.61 21.44
Grant, WV.......................... S/UG 21.28 19.07 40.35 3.93 36.42
Harrison, WV....................... UG 15.64 14.70 30.34 30.34
Monongalia, WV..................... S 6.89 2.11 9.00 9.00
Preston, WV........................ UG 34.10 11.98 46.08 46.08
Raleigh, WV........................ UG 26.29 12.47 38.76 38.76
Taylor, WV......................... UG 42.83 167.99 210.82 210.82
Upshur, WV......................... UG 30.78 39.60 70.38 70.38
Webster, WV........................ S/UG 10.85 6.20 17.05 12.15 4.90
Allegany, MD....................... S 4.45 1.20 5.65 5.65
Garrett, MD........................ S/UG 19.30 6.52 25.82 7.32 18.50
Muhlenberg, KY..................... UG 3.08 5.02 8.10 8.10
Tazewell, VA....................... S/UG 23.56 16.18 39.74 1.22 38.52
Shelby, AL......................... UG 40.55 11.30 51.85 51.85
Greene, PA......................... S 0.08 0.08 0.08
------ ------ ------ ----- ------
Totals.................... 325.28 339.10 664.38 42.96 621.42
====== ====== ====== ===== ======
</TABLE>
<TABLE>
<CAPTION>
AVG. AVG. AVG. AVG.
COUNTY AND MINE RECOVERY MINE RECOVERY WASH RECOVERY WASH RECOVERY
STATE SURFACE UNDERGROUND SURFACE UNDERGROUND MET STEAM ASSIGNED UNASSIGNED
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Barbour, WV.... 60% 66% 45.31 45.31
Braxton, WV.... 85% 55% 90% 80% 25.05 25.05
Grant, WV...... 85% 55% 75% 70% 40.35 40.35
Harrison, WV... 50% 100% 30.34 30.34
Monongalia,
WV........... 85% 100% 9.00 9.00
Preston, WV.... 60% 70% 46.08 46.08
Raleigh, WV.... 50% 70% 38.76 38.76
Taylor, WV..... 60% 70% 210.82 210.82
Upshur, WV..... 60% 65% 14.60 55.78 70.38
Webster, WV.... 85% 67% 70% 68% 17.05 12.94 4.11
Allegany, MD... 90% 100% 5.65 5.65
Garrett, MD.... 86% 60% 91% 88% 25.82 12.58 13.24
Muhlenburg,
KY........... 50% 88% 8.10 8.10
Tazewell, VA... 85% 50% 100% 80% 31.45 8.29 39.74
Shelby, AL..... 50% 81% 47.50 4.35 51.85
Greene, PA..... 85% 100% 0.08 0.08
------ ------ ------ ------
Totals.. 132.31 532.07 390.74 273.64
====== ====== ====== ======
</TABLE>
- ------------------------------
(1) "Measured" refers to coal tonnages computed from seam measurements as
observed and recorded in drill holes, mine workings, and/or seam outcrop
prospect openings. The sites for measurement are so closely spaced and the
geologic character so well-defined that the thickness, areal extent, size,
shape and depth of coal are well-established. The maximum acceptable
distance for projection from seam data points varies with the geologic
nature of the coal seam being studied, but generally a radius of 1/4 mile is
recognized as the standard. Losses for extraction recovery and wash recovery
have been factored into measured reserves.
(2) "Indicated" refers to coal tonnages computed by projection of data from
available seam measurements for a distance beyond coal classed as measured.
The assurance, although lower than for measured, is high enough to assume
continuity between points of measurement. The maximum acceptable distance
for
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<PAGE> 48
projection of indicated tonnage is 1/2 to 3/4 mile from points of
observation. Further exploration is necessary to place these reserves in a
measured category. Losses for extraction recovery and wash recovery have
been factored into indicated reserves.
Of the total of the Company's reserves, approximately 49% are owned by the
Company or its subsidiaries, and approximately 51% are leased from third
parties. The Company's reserve leases from third parties generally have terms of
between 10 and 20 years, although they generally allow the Company the right to
renew the lease for a stated period or to maintain the lease in force until the
exhaustion of minable and merchantable coal. These leases provide for royalties
to be paid to the lessor either as a fixed amount per ton or as a percentage of
the sales price. Many leases also require payment of a lease bonus or minimum
royalties, payable either at the time of the execution of the lease or in
periodic installments. In most cases, the minimum royalty payments are applied
to reduce future production royalties. The loss of certain leases could
adversely affect the Company's ability to develop the corresponding mines.
Consistent with industry practices, the Company conducts limited
investigation of title to third-party coal properties prior to the Company's
leasing of such properties. The title of the lessors or grantors and the
boundaries of the Company's leased properties are not fully verified until such
time as the Company prepares to mine such reserves. If defects in title or
boundaries of undeveloped reserves arise in the future, the Company's control,
and right to mine, such reserves could be materially adversely affected.
MINING OPERATIONS
COAL PRODUCTION
The Company currently conducts mining operations at ten deep mines and
three surface mines in seven counties in West Virginia and in Garrett County,
Maryland. Approximately 70% of the Company's production originates from its ten
deep mines, and approximately 30% originates from its three surface mines. The
following table presents each mining region's production (including coal
purchased for blending), for the previous five years:
<TABLE>
<CAPTION>
(IN THOUSANDS OF TONS)
COUNTY AND STATE 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
Webster County, West Virginia..................... 975 1,592 2,108 1,889 1,998
Barbour County, West Virginia..................... 1,281 1,223 1,497 1,883 1,787
Monongalia County, West Virginia.................. 803 925 917 1,288 1,743
Raleigh County, West Virginia..................... -- -- 123 641 948
Preston County, West Virginia..................... 1,175 1,272 1,021 893 886
Garrett County, Maryland.......................... -- 14 156 293 300
Grant County, West Virginia(1).................... -- -- -- -- --
Upshur County, West Virginia(1)................... -- -- -- -- --
----- ----- ----- ----- -----
Total................................... 4,234 5,026 5,822 6,887 7,662
===== ===== ===== ===== =====
</TABLE>
- ------------------------------
(1) Production commenced in 1997.
WEBSTER COUNTY, WEST VIRGINIA
The Company produced approximately 2.0 million tons in 1996 of low sulfur
steam coal and has approximately 42.1 million tons of recoverable reserves in
Webster and adjacent Braxton Counties. All of such reserves are steam coal
reserves and 38.0 million tons, or 90%, of such reserves are assigned reserves.
Approximately 15.8 million tons, or 38%, of such reserves are surface minable.
The Company operates the Camp Creek mountaintop surface mine utilizing various
techniques of surface mining. The Company sells approximately 90% of Camp
Creek's production to Baltimore Gas & Electric Company ("BGE"), Delmarva Power &
Light Company ("Delmarva"), AES, Atlantic City Electric Company ("ACE Company")
and Salt City Energy Venture, L.P. ("Salt City"). Coal from Camp Creek's
Kittanning and Upper Freeport Seams averages 0.8% sulfur, 10% ash, 12,800 Btu
per pound, 6.0% moisture and 34 vol.
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<PAGE> 49
A contract mining company operates the Camp Creek #2 deep mine. In 1996,
the Camp Creek #2 deep mine produced approximately 976,000 tons of premium
quality coal. The Company blends and sells the Camp Creek #2's production with
the Camp Creek surface mine production. Coal from Camp Creek #2's Kittanning
Seam averages 0.75% sulfur, 8% ash, 12,800 Btu per pound, 6.0% moisture and 34
vol.
The Company owns and operates a computer-controlled 500 tons per hour
modern preparation plant located in close proximity to Camp Creek. It also owns
and operates an on-site, modern laboratory that allows for the precise blending
of the Camp Creek surface and deep mined coal. This allows the Company the
flexibility to sell various qualities of coal and ensures that the precise
quality of coal will be shipped for each contract. The site has a 100,000 ton
unprocessed coal storage capacity and a 100,000 ton processed coal storage
capacity. The total cost of the Company's plant and equipment associated with
its Webster County operations was approximately $8.7 million at September 30,
1997 and its net book value was approximately $7.4 million.
BARBOUR COUNTY, WEST VIRGINIA
The Company operates the Sentinel Deep Mine Complex in Barbour County which
produced approximately 1.8 million tons in 1996 of low to medium sulfur steam
coal and premium quality, high vol met coal. The Sentinel Deep Mine Complex has
approximately 45 million tons of recoverable reserves. All of such reserves are
steam coal, assigned reserves and are classified as deep. Some of the coal
produced is washed and sold as high vol met coal. The Company sells
approximately 95% of the Sentinel Mine Complex's production to Potomac Electric
Power Company of Washington, D.C. ("PEPCO"), BGE, AES and Logan Generating
Company L.P., formerly known as Keystone Energy Service Company, L.P. ("Logan
Generating"). Coal from the Sentinel Deep Mine Complex's Kittanning Seam
averages 1.3% sulfur, 8% ash, 13,200 Btu per pound, 6.0% moisture and 33 vol.
In addition to its Sentinel Deep Mine Complex, the Company has the ability
to purchase coal from surrounding smaller producers to provide additional sales
at various qualities for utility and industrial customers. With the Company's
preparation plant capacity, blending ability, on-site laboratory and large
stockpile area, the Company has the ability to blend the purchased coal with the
Sentinel Deep Mine Complex production to serve a variety of customers.
The Company owns and operates an on-site, 1,100 tons per hour modern
preparation plant. The plant is fed from a 100,000 ton open stockpile which
facilitates the shipment of coal through the attached 3,000 tons per hour train
loading facility. The Company also owns and operates an on-site modern
laboratory that provides sampling and blending capabilities. The total cost of
the Company's plant and equipment associated with its Barbour County operations
was approximately $12.4 million at September 30, 1997 and its net book value was
approximately $10.6 million.
MONONGALIA COUNTY, WEST VIRGINIA
The Monongalia County surface mine (the "Osage" mine) produced
approximately 1.2 million tons of coal in 1996. Approximately 15% of Osage's
production is shipped by truck to the Morgantown Energy Associates ("MEA") Power
Plant in Morgantown, West Virginia to be blended with coal refuse pursuant to a
long-term contract with MEA. The balance of Osage's production is shipped to the
Company's Anker Rail & River Terminal ("ARRT") in Monongalia County, where it is
shipped by rail and barge to various utilities. Coal from Osage's Waynesburg
Seam averages 1.7% sulfur, 14% ash and 11,700 Btu per pound. The Company's
Waynesburg Seam has approximately 9.0 million tons of recoverable reserves. All
of such reserves are steam coal, assigned reserves and are surface minable.
However, the Company is currently negotiating and intends to enter into leases
for additional reserves in order to meet future mining requirements.
The Company owns and operates ARRT in Monongalia County. ARRT is situated
such that the Company simultaneously is able to load trains in excess of 100
cars ("unit trains") on the Conrail rail line at a rate of 1,500 tons per hour
and onto barges on the Monongahela River at a rate of 1,200 tons per hour. The
loading facility will be served equally by CSX and NS after the pending merger
of the two rail companies and acquisition of Conrail. The facility is equipped
with modern crushing, screening and blending equipment, as well as quality
control and automated sampling systems. The Company operates ARRT for coal from
the
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<PAGE> 50
Osage mine, as well as third-party brokered coal. The Company earns additional
revenue from ARRT by loading coal for non-affiliated enterprises.
The Company also owns the Rosedale and Dippel river facilities, adjacent to
ARRT, which the Company uses for barge staging and additional ground storage.
The total cost of the Company's plant and equipment associated with its
Monongalia County operations was approximately $2.7 million at September 30,
1997 and its net book value was approximately $2.5 million.
RALEIGH COUNTY, WEST VIRGINIA
The Raleigh County Baybeck deep mine produced approximately 950,000 tons of
premium quality, low vol met coal in 1996. The Company sells approximately 85%
of the Baybeck production to LTV Steel, Citizens Gas and Coke Utility, Drummond
Coal Sales, Inc., Koppers Industries, Inc. and U.S. Steel Group. Coal from
Baybeck's Beckley Seam averages 0.7% sulfur, 6% ash, 6.0% moisture and 19 vol.
The Baybeck mine has approximately 9.8 million tons of recoverable reserves.
The Company has acquired approximately 29 million tons of premium quality
Pocahontas #3 Seam low vol met coal reserves that are known as the Bayhill
Project and are adjacent to the Baybeck mine and have already been substantially
prepared for production. The project is jointly served by NS and CSX.
All of the reserves in Raleigh County are met coal, assigned reserves and
are classified as deep.
The Company owns and operates a 300 tons per hour modern preparation plant,
with an on-site CSX train loading facility, capable of fast-loading a unit train
in four hours. The loading facility is fed by the attached 60,000 ton open
stockpile area adjacent to the preparation plant. The total cost of the
Company's plant and equipment associated with its Raleigh County operations was
approximately $11.2 million at September 30, 1997 and its net book value was
approximately $9.6 million.
PRESTON COUNTY, WEST VIRGINIA
The Company operates three deep mines in Preston County, West Virginia.
Each of these mines uses contract mining companies which provide the labor,
equipment, supplies and other materials needed to mine the coal and deliver it
to a stockpile at the mine site for the production of coal. The Company pays
each contract mining company a fixed price per ton for its mining services.
In 1996, the three deep mines collectively produced approximately 886,000
tons of coal. The Company sells approximately 95% of the production of these
mines to PEPCO, APS and AES. These three mines extract coal from the Upper
Freeport Seam, which averages 1.5% sulfur, 11% ash, 13,300 Btu per pound, 6.0%
moisture and 28 vol on a fully-washed basis. The Company controls in excess of
46 million tons of recoverable reserves in Preston County, West Virginia which
will require additional development costs. All of such reserves are steam coal,
assigned reserves and are classified as deep.
The Company owns and operates a 250 tons per hour modern plant in Preston
County, where the coal from its three contracted mines is processed. The plant
has blending capabilities and a sophisticated sampling system, with coal
preparation recovery averaging 80%. The Company also owns and operates a
fully-equipped coal and water quality laboratory and a 1,200 tons per hour CSX
unit train loading facility. The plant has a 60,000 ton storage capacity. The
total cost of the Company's plant and equipment associated with its Preston
County operations was approximately $2.7 million at September 30, 1997 and its
net book value was approximately $2.5 million.
The Company intends to cease operations in Preston County in 1998 due to
the depletion of reserves and its ability to service its markets from lower cost
mining operations currently being developed. The remaining plant and equipment
located in Preston County will be used in other operations of the Company.
GARRETT COUNTY, MARYLAND
The Garrett County deep mine (the "Steyer" mine) produced 300,000 tons of
processed coal in 1996, which were shipped primarily to MAPCO Coal Company. Coal
from Steyer's Bakerstown Seam averages 0.6% sulfur, 25% ash, 10,500 Btu per
pound, 5.0% moisture and 19 vol. The Steyer mine has approximately
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<PAGE> 51
11.4 million tons of recoverable reserves. The total cost of the Company's plant
and equipment associated with its Garrett County operations was approximately
$0.7 million at September 30, 1997 and its net book value was approximately $0.6
million. All 25.8 million tons of reserves in Garrett County are steam coal
reserves and 12.6 million tons, or 49%, of such reserves are assigned.
Approximately 7.3 million tons, or 28%, of such reserves are surface minable
GRANT COUNTY, WEST VIRGINIA
The Company acquired the assets of New Allegheny in February 1997,
consisting of 18 million tons of recoverable reserves, a 200 tons per hour
preparation plant, a long-term coal supply contract with VEPCO and an operating
surface mine. The Company also acquired, in a separate transaction, long-term
mining leases for an additional 32 million tons of recoverable deep mine
reserves adjacent to the assets acquired from New Allegheny. The Company has
expanded the surface mine and currently is increasing production in order to
service recently acquired long-term contracts with VEPCO. The Company currently
has two contracts with VEPCO to supply approximately 900,000 tons per year. A
new deep mine has been developed in the Bakerstown seam near the preparation
plant so the deep mine coal and the surface mine production can be blended to
service the Company's contracts with VEPCO. The surface mine production and deep
mine production will be blended to ship coal with 1.4% sulfur, 14% ash, 11,600
Btu per pound, 5.0% moisture and 19 vol. The surface and deep mines contain
approximately 40.4 million tons of recoverable reserves, all of which are
located within several miles of VEPCO's generating station. All of such reserves
are steam coal, assigned reserves. Approximately 3.9 million tons, or 8%, of
such reserves are surface minable.
The preparation plant that was acquired in the acquisition of assets from
New Allegheny has been upgraded with modern circuitry to improve the plant's
performance and is being used to process and blend the surface mine and deep
mine coal for the VEPCO contract shipments. The total cost of the Company's
plant and equipment associated with its Grant County operations was
approximately $8.1 million at September 30, 1997 and its net book value was
approximately $7.7 million.
UPSHUR COUNTY, WEST VIRGINIA
The Company recently commenced production from its Spruce Fork deep mine
complex located in Upshur County, West Virginia, which includes the development
of a 15 million ton reserve in the Upper Freeport Coal Seam and the Middle
Kittanning Seam. The Company believes the deep mine will produce 1.4 million
tons per year of coal. Based on preliminary estimates by the Company, coal from
the Upper Freeport Coal Seam averages 1.2% sulfur, 9% ash, 13,000 Btu per pound,
6.0% moisture and 33 vol. The Company has plans to develop the nearby Spruce
Fork #2 and Spruce Fork #3 deep mines in the future. These mines will be
developed in the Middle Kittanning Seam in reserves currently owned by the
Company. These reserves contain 28.0 million tons of recoverable coal with an
average quality of 1.1% sulfur, 10% ash, 13,000 Btu per pound and 34 vol.
Approximately 56.8, or 79%, of Upsher County's 70.4 million tons of reserves are
steam coal reserves. All 70.4 million tons are assigned reserves which are
classified as deep.
The Upshur County coal from the Spruce Fork deep mine and the planned
Spruce Fork #2 and #3 deep mines will be processed and loaded at the Sawmill Run
preparation plant and loading facility that was recently acquired with the
Spruce Fork deep mine from a subsidiary of Pittston Coal Company. The Company
believes that the acquisition of these assets was made at favorable prices,
which will allow it to refurbish the preparation plant and develop the deep mine
at a lower cost than building a new mine complex. However, the sellers of these
properties have retained certain residual interests in such properties. See
"Description of Capital Stock." The 700 tons per hour preparation plant has been
upgraded with modern circuitry and the loading facility has been converted to a
high-speed unit-train loading facility with an automatic coal sampling system.
The total cost of the Company's plant and equipment associated with its Upshur
County operations was approximately $29.8 million at September 30, 1997 and its
net book value was approximately $29.5 million.
COAL TRANSPORTATION
Transportation costs range from 10 to 15% of the cost of a customer's coal
for coal trucked to power plants located in coal fields and from 25 to 40% of
the cost of a customer's coal for eastern utilities supplied by
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rail. Customers typically directly incur the transportation costs from the mine
to the place of use (e.g., a customer's power plant). Consequently, the
availability and cost of transportation constitute important factors for the
marketability of coal.
In 1996, approximately 70% of the Company's tonnage travelled by rail on
NS, CSX and Conrail, with the remaining 30% traveling by truck and inland
waterway barges. Although all of the Company's mines are served by a single
railroad, the Company believes that the freight charges it pays are competitive
with the charges paid by other coal producers served by multiple railroads. The
practices of and rates set by the railroad serving a particular mine might
affect, either adversely or favorably, the Company's marketing efforts with
respect to coal produced from the relevant mine. See "Risk Factors--CSX, Norfolk
Southern ("NS") and Conrail Dependence."
COAL MARKETING AND SALES
The Company currently conducts its marketing and sales operations primarily
in the eastern and mid-western United States.
The Company's sales and marketing staff in Morgantown, West Virginia
focuses on steam coal sales in the Northeast and mid-Atlantic region and on met
coal sales across the entire United States, the Company's sales and marketing
staff in Carmel, Indiana focuses on sales in the midwestern United States and
the individual staff member in Knoxville, Tennessee focuses on sales in the
southeastern United States. Sales of coal in 1996 were 11.6 million tons,
including 4.4 million tons shipped under long-term contracts with utilities, 1.5
million tons under long-term contracts with IPPs, 1.6 million tons under spot
market contracts with utilities and 1.5 million tons to metallurgical and
industrial customers.
In February 1996, the Company established a joint marketing agreement (the
"CMS Agreement") with CMS Gas and CMS Electric (collectively, "CMS") pursuant to
which the Company and CMS cooperatively market electricity and natural gas in
the eastern United States to industrial, local distribution utility, municipal
utility and other customers. CMS is the nonutility energy marketing unit of CMS
Energy Corporation, an international energy company which owns a large United
States electric utility, Consumers Power, as well as a natural gas pipeline and
other energy-related businesses. During the first year of this arrangement, the
Company's share of revenue was $50,000.
Anker Holding, through its affiliates, purchases coal from the Company for
its international trading operations. These purchases amounted to $7.2 million
of coal in 1994, $11.7 million in 1995 and $16.2 million in 1996. Sales to Anker
Holding and its affiliates represented 5.6% of the Company's 1996 sales. The
Company believes that Anker Holding's expertise in the international arena
facilitates such sales.
LONG-TERM COAL SUPPLY CONTRACTS
The Company supplies coal to more than fifty customers on a regular basis.
The Company has entered into various long-term coal supply contracts with its
customers, particularly with its regional utility and IPP customers. The Company
has secured long-term coal supply contracts with a weighted average life of
approximately 7.4 years as of June 30, 1997. The Company's long-term contracts
have accounted for approximately 65% of the Company's coal sales revenues from
1992 to 1996. Over the same period, approximately 3.4 million tons of annual
coal shipments covered by long-term contracts were up for renewal and contracts
for 76% of this coal were rolled over into new long-term contracts upon their
expiration. In addition, over the same period, the Company entered into new
long-term contracts for 4.0 million tons of annual coal shipments. The Company
believes that customers enter into such long-term contracts principally to
secure a reliable source of coal at predictable prices. The Company enters into
such contracts to obtain stable sources of revenues required to support the
large expenditures needed to open, expand and maintain the mines servicing such
contracts. The Company's long-term contracts with affiliates of AES accounted
for more than 16.0% of the Company's revenues in 1996 and are expected to
account for approximately 18% of revenues in 1997. In addition, the Company's
long-term contracts with VEPCO accounted for approximately 6.0% of the Company's
revenues in 1996 and are expected to account for approximately 8% of revenues in
1997. The loss of these and other of its long-term contracts could have a
material adverse effect on the Company's financial condition and results of
operations.
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The following table sets forth information regarding the Company's
long-term coal supply contracts as of June 30, 1997:
<TABLE>
<CAPTION>
APPROXIMATE CURRENT
CURRENT ANNUAL
CONTINUOUS EXPIRATION CONTRACT CONTRACT
YEARS OF DATE OF CURRENT TERM TONNAGE
CUSTOMER SERVICE CONTRACT(1) (NUMBER OF YEARS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
BGE-Wagner Station.................... 8 1997 2 300
APS-Harrison Power Plant.............. 7 1997 2 960(2)
Anker Coal Company B.V./CPPE.......... 14 1997 13 220
BGE-Crane Station..................... 3 1997 2 300
Delmarva-Edge Moor Station............ 5 1998 2 300
VEPCO-Mt. Storm Station............... 6 1998 3 456
PEPCO-Dickerson Station............... 15 1999 4 336
American Electric Power-Philip Sporn
Station............................. 5 1999 3 300
PEPCO-Dickerson Station............... 15 1999 5 336
Delmarva-Indian River Station......... 6 1999 3 100
Alabama Power-Plant Gaston............ 3 1999 3 332
Atlantic City Electric................ 15 2001 6 200
VEPCO-Mt. Storm Station............... 6 2002 8 432
AES-Thames Plant...................... 9 2005 16 600(3)
Salt City-Hydraco Plant............... 5 2007 13 385(3)
MEA-Beechurst Plant................... 6 2007 15 120(3)
AES-Shady Point Plant................. 7 2007 18 600(3)
Logan Generating-Keystone Plant....... 3 2014 21 400(3)
AES-Beaver Valley Plant............... 12 2016 20 576(3)
AES-Warrior Run Plant(4).............. 0 2019 20 650(3)
</TABLE>
- ------------------------------
(1) Reflects stated term of contract and does not assume the exercise by the
Company of unilateral options to extend.
(2) For 1998, the Company was awarded a contract for 30,000 tons per month, or
360,000 tons per year, and is currently negotiating with APS for an increase
in such shipments for 1998 and for the future.
(3) Reflects shipments under a "total requirements" contract. Amounts are
averages of what the customer has asked for and is expected to ask for in
the future. A total requirements contract is a contract whereby the seller
agrees to supply all of the specific goods which the purchaser will need
during a certain period at an agreed price, and the purchaser agrees to
purchase all such goods exclusively from the seller.
(4) Contract commences in 1999 and the tonnage shown is expected from such date.
The terms of long-term coal supply contracts result from applicable bidding
procedures and extensive negotiations with customers. Consequently, the terms of
such contracts typically vary significantly in many respects, including price
adjustment features, price reopener terms, coal quality requirements, quantity
parameters, flexibility and adjustment mechanics, permitted sources of supply,
treatment of environmental constraints, options to extend, and force majeure,
termination and assignment provisions.
Virtually all of the Company's long-term coal supply contracts are subject
to price adjustment provisions which permit an increase or decrease at specified
times in the contract price to reflect changes in certain price indices or other
economic indices, taxes and other charges. Three of the Company's twenty
long-term coal supply contracts also contain price reopener provisions which
provide for the contract price to be adjusted upward or downward at specified
times on the basis of market factors. Price reopener provisions might specify an
index or other market pricing mechanism on which a new contract price is to be
based. Frequently, bid solicitations are sent by the customer to other suppliers
for use in establishing a new price or for the purpose of establishing a right
of first refusal. Some price reopener provisions contain limitations on the
magnitude of the price change that may result from application of the
provisions. Contract prices under long-term coal supply agreements frequently
vary from the price at which a customer could acquire and take delivery of coal
of similar quality in the spot market.
The Company's long-term coal supply contracts specify Btu, sulfur, ash,
moisture, volatility and other qualities. Most of the Company's contracts
specify the approved seams and/or approved locations from which the coal is to
be mined.
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The Company's long-term coal supply contracts contain force majeure
provisions allowing suspension of performance by the Company and/or the customer
to the extent necessary during the duration of certain events beyond the
reasonable control of the affected party.
From time to time, the Company has become involved in contract disputes
relating to, among other things, coal quality, pricing and quantity. While
customer disputes, if unresolved, could result in the termination or
cancellation of the applicable contract, the Company's experience has been that
curative and/or dispute resolution measures decrease the likelihood of
termination or cancellation. In addition, the Company's development of long-term
business relationships with many of its customers has generally permitted it to
resolve business disputes in a mutually acceptable manner. Nonetheless, the
Company from time to time has been involved in arbitration and other legal
proceedings regarding its long-term contracts, and there can be no assurance
that existing and future disputes can be resolved in a mutually satisfactory
manner. See "--Legal Proceedings."
Operating profit margins realized by the Company under its long-term coal
supply contracts vary from contract to contract and depend upon a variety of
factors, including, without limitation, price reopener and other price
adjustment provisions and the Company's production costs. Termination or
suspension of deliveries under a high-price contract could have a material
adverse effect on earnings and operating cash flow disproportionate to the
percentage of production represented by the tonnage delivered under contract.
Anker is party to a coal purchase agreement with Salt City under which it
supplies Salt City with all of its coal requirements at its co-generation plant
near Syracuse, New York. Under this contract, Anker shipped 340,000 tons in
1994, 349,600 tons in 1995, and 319,800 tons in 1996. Salt City sells the
electricity produced to Niagara Mohawk Power Corporation ("Niagara Mohawk").
Recent published reports indicate that Niagara Mohawk has reached a preliminary
agreement with several IPPs to buy out or restructure the current electric and
steam sales agreements between certain co-generation plants and Niagara Mohawk,
and that Salt City is among the co-generation plants that may be closed as a
result of the Niagara Mohawk offer. If the Salt City plant is closed, Salt City
has indicated that it will seek to terminate the contract with Anker.
Anker is party to a coal supply agreement with Logan Generating, under
which it supplies Logan Generating with all of its coal requirements at its
Logan Township, New Jersey co-generation facility. Under this contract, Anker
shipped 170,000 tons in 1994, 388,354 tons in 1995, and 415,113 tons in 1996.
Logan Generating sells the electricity that is generated at the Logan Township
plant to ACE Company. ACE Company and the Company are discussing the possible
restructuring of the contract pursuant to which a lump-sum payment would be made
in advance in exchange for a reduction in per ton pricing for the remaining term
of the contract. No assurance can be given that the parties will reach an
agreement, and any such agreement must be approved by the New Jersey Board of
Public Utilities. The Company is unable to predict what impact, if any,
resolution of this situation will have on the Company's results of operations
and financial condition.
OTHER
In addition to its mining operations, the Company provides ash handling and
utilization services. The Company believes that its customers afford a high
priority to the disposal and recycling of combustion by-products in a careful
and environmentally sound manner. In 1996, ash disposal services generated $4.3
million, or 1% of the Company's total revenues.
REGULATION AND LAWS
The coal mining industry is subject to regulation by federal, state and
local authorities on matters such as employee health and safety, permitting and
licensing requirements, air quality standards, water pollution, the reclamation
and restoration of mining properties after mining is completed, the discharge of
materials into the environment, surface subsidence from underground mining and
the effects that mining has on groundwater quality and availability. In
addition, the industry is affected by significant legislation mandating certain
benefits for current and retired coal miners. Numerous federal, state and local
governmental permits and approvals are required for mining operations. The
Company believes that all permits currently required to conduct its present
mining operations have been obtained. The Company may be required to prepare and
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present to federal, state or local authorities data pertaining to the effect or
impact that a proposed exploration for or production of coal may have on the
environment. Such requirements could prove costly and time-consuming, and could
delay commencement or continuation of exploration or production operations.
Future legislation and administrative regulations may emphasize the protection
of the environment and, as a consequence, the activities of the Company may be
more closely regulated. Such legislation and regulations, as well as future
interpretations and more rigorous enforcement of existing laws, may require
substantial increases in equipment and operating costs to the Company and
delays, interruptions or a termination of operations, the extent of which cannot
be predicted. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business--Employees and Labor Relations."
The Company's independent operating subsidiaries endeavor to conduct mining
operations in compliance with all applicable federal, state and local laws and
regulations. However, because of extensive and comprehensive regulatory
requirements, violations during mining operations occur from time to time in the
industry. Notwithstanding compliance efforts, the Company does not believe such
violations can be completely eliminated. None of the violations to date or the
monetary penalties assessed upon the Company's subsidiaries have been material.
While it is not possible to quantify the costs of compliance with all
applicable federal and state laws, those costs have been and are expected to
continue to be significant.
The remainder of the "Regulation and Laws" section provides a brief
description of the general purpose and impact of the principal federal, state
and local laws and regulations that affect the coal mining industry. These
descriptions do not address every material aspect or possible impact of the
applicable law or regulation.
MINING HEALTH AND SAFETY STANDARDS
Stringent safety and health standards have been imposed by federal
legislation since 1969 when the federal Coal Mine Health and Safety Act of 1969
(the "1969 Act") was adopted. The 1969 Act resulted in increased operating costs
and reduced productivity. The Federal Mine Safety and Health Act of 1977 (the
"1977 Act") significantly expanded the enforcement of health and safety
standards. The 1977 Act imposes safety and health standards on all mining
operations. Regulations are comprehensive and affect numerous aspects of mining
operations, including training of mine personnel, mining procedures, blasting,
the equipment used in mining operations and other matters. The Mine Safety and
Health Administration ("MSHA") monitors compliance with these federal laws and
regulations. The Black Lung Benefits Act of 1969 and the Black Lung Benefits
Reform Act of 1977 constitute parts of the 1969 Act and the 1977 Act. See
"Regulation and Laws--Black Lung Benefits." In addition to the federal
framework, most of the states in which the Company operates impose regulatory
and legal parameters for mine safety and health.
One of the Company's long-term goals is to achieve excellent health and
safety performance as measured by accident frequency rates and other measures.
The Company believes that attainment of this goal is inherently tied to the
attainment of productivity and financial goals. The Company seeks to implement
this goal by, among other measures, training employees in safe work practices;
openly communicating with employees; establishing, following and improving
safety standards; involving employees in establishing safety standards; and
recording, reporting and investigating all accidents, incidents and losses to
avoid reoccurrences. As evidence of the effectiveness of the Company's safety
program, the Company's Osage operation was awarded the Bart Lay Award by the
West Virginia Office of Miners' Health, Safety and Training as the safest coal
mine in West Virginia during 1996.
BLACK LUNG BENEFITS
In order to compensate miners who were last employed as miners prior to
1970, the Black Lung Benefits Revenue Act of 1977 and the Black Lung Benefits
Reform Act of 1977, as amended by the Black Lung Benefits Revenue Act of 1981
and the Black Lung Benefits Amendments of 1981 (the "1981 Acts"), levy a tax on
production of $1.10 per ton for deep-mined coal and $0.55 per ton for
surface-mined coal, neither amount to exceed 4.4% of the sales price. In
addition, the 1981 Acts provide that certain claims for which coal operators had
previously been responsible will be obligations of a government trust funded by
the tax. The
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Revenue Act of 1987 extended the termination date of the tax from January 1,
1996 to the earlier of January 1, 2014 or the first January on which the
government trust becomes solvent. The Company maintains a fully insured program
covering all black lung claims through the West Virginia Workers Compensation
and the West Virginia Coal Workers' Pneumoconiosis Funds. The Company has not
received any notice of claims for black lung disease which would not be covered
by the plans.
Legislation was introduced in the last Congress on black lung reform.
Although this legislation died when Congress adjourned in 1997, it is expected
that such legislation will be reintroduced for consideration by the current
Congress. The legislation expected to be introduced would restrict the evidence
that can be offered by a mining company, establish a standard for evaluation of
evidence that greatly favors black lung claimants, allow claimants who have been
denied benefits at any time since 1981 to refile their claims for consideration
under the new law, make surviving spouse benefits significantly easier to obtain
and retroactively waive repayment of preliminarily awarded benefits that are
later determined to have been improperly paid. If this or similar legislation is
passed, the number of claimants who are awarded benefits could significantly
increase. There can be no assurance that such proposed legislation or other
proposed changes in black lung legislation will not have an adverse effect on
the Company.
The United States Department of Labor has issued proposed amendments to the
regulations implementing the federal black lung laws which, among other things,
establish a presumption in favor of a claimant's treating physician and limit a
coal operator's ability to introduce medical evidence regarding the claimant's
medical condition. If adopted, the amendments could have an adverse impact on
the Company, the extent of which cannot be accurately predicted.
COAL INDUSTRY RETIREE HEALTH BENEFIT ACT OF 1992
The Coal Industry Retiree Health Benefit Act of 1992 (the "Health Benefits
Act") was enacted in October 1992 to provide for the funding of health benefits
for United Mine Workers Association ("UMWA") retirees. The Health Benefits Act
was enacted to eliminate the funding deficits of the 1950 and 1974 UMWA Benefit
Trusts by establishing a trust fund to which "signatory operators," are
obligated to pay annual premiums for assigned beneficiaries, together with a pro
rata share for certain beneficiaries ("unassigned beneficiaries") who never
worked for such employers, in amounts to be determined by the Secretary of
Health and Human Services on the basis set forth in the Health Benefits Act.
"Signatory operators" include operators who are signatory to the current NBCWA
or prior NBCWA's, and "related persons," including entities at one time owned by
the Company which were signatory operators. The Company's cash cost under the
Health Benefits Act amounts to approximately $470,000 per year. In 1996, the
Company contributed approximately $1.2 million under this legislation, which
represented payments which accrued and were owing in respect of prior years.
Based upon independent actuarial estimates, the Company believes that the amount
of its obligation under the new plan will be approximately $5.5 million as of
December 31, 1996, using a 10% discount rate, and this amount is recorded on the
Consolidated Financial Statements.
ENVIRONMENTAL LAWS
The Company is subject to various Federal environmental laws, including the
Surface Mining Control and Reclamation Act, the Clean Air Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Clean Water Act and
the Resource Conservation Recovery Act, as well as state laws of similar scope
in each state in which the Company operates. These laws require approval of many
aspects of coal mining operations, and both federal and state inspectors
regularly visit the Company's mines and other facilities in order to assure
compliance.
SURFACE MINING CONTROL AND RECLAMATION ACT. The federal Surface Mining
Control and Reclamation Act of 1977 ("SMCRA"), administered by the Office of
Surface Mining ("OSM"), establishes mining and reclamation standards for all
aspects of surface mining as well as many aspects of deep mining. SMCRA and
similar state statutes, among other things, require that mined property be
restored in accordance with specified standards and an approved reclamation
plan. In addition, the Abandoned Mine Lands Act ("AML"), which is part of SMCRA,
imposes a tax on all current mining operations the proceeds of which are used to
restore
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mines closed before 1977. The maximum tax is $0.35 per ton on surface-mined coal
and $0.15 per ton on underground-mined coal.
SMCRA also requires that comprehensive environmental protection and
reclamation standards be met during the course of and upon completion of mining
activities. For example, SMCRA requires the Company to restore a surface mine to
approximate original contour as contemporaneously as practicable with surface
coal mining operations. The mine operator must submit a bond or otherwise secure
the performance of these reclamation obligations. Permits for surface mining
operations must be obtained from the federal Office of Surface Mining
Reclamation and Enforcement or, where state regulatory agencies have adopted
federally approved state programs under SMCRA, the appropriate state regulatory
authority. The Company accrues for the liability associated with all end of mine
reclamation on a ratable basis as the coal reserve is being mined. The estimated
cost of reclamation, and the corresponding accrual on the Company's financial
statements, is updated periodically. The earliest a reclamation bond can be
released is five years after reclamation to the approximate original contour has
been achieved. The Company recently received an award for its reclamation
efforts at the Company's Osage operation in 1996 and has received other similar
awards in previous years.
All states in which the Company's active mining operations are located have
achieved primary jurisdiction for SMCRA enforcement through approved state
programs. Under SMCRA, responsibility for any coal operator which is currently
in violation of SMCRA can be imputed to other companies which are deemed,
according to regulations, to "own or control" the coal operator. Sanctions can
include being blocked from receiving new permits and rescission or suspension of
existing permits. Because of a recent federal court action invalidating the
SMCRA ownership and control regulations, the scope and potential impact of the
"ownership and control" requirements on the Company are unclear. OSM has
responded to the court action by promulgating interim regulations, which more
narrowly apply the ownership and control standards to coal companies. Although
the federal action should have a precedential effect on state regulations
dealing with "ownership and control," which are in many instances similar to the
invalidated federal regulations, it is not certain what impact the federal court
decision will have on these state regulations.
CLEAN AIR ACT. The Clean Air Act, including the Clean Air Act Amendments,
and corresponding state laws which regulate the emissions of materials into the
air, affect coal mining operations both directly and indirectly. Coal mining and
processing operations may be directly affected by Clean Air Act permitting
requirements and/or emissions control requirements relating to particulate
matter (e.g., "fugitive dust"). Coal mining and processing may also be impacted
by future regulation of fine particulate matter measuring 2.5 micrometers in
diameter or smaller. Regulations relating to fugitive dust and coal emissions
may restrict the Company's ability to develop new mines or require the Company
to modify its existing operations. The Clean Air Act indirectly affects coal
mining operations by extensively regulating the air emissions of coal-fueled
electric power generating plants. Title IV of the Clean Air Act Amendments
places limits on sulfur dioxide emissions from electric power generation plants.
The limits set baseline emission standards for such facilities. Reductions in
such emissions will occur in two phases: Phase I began in 1995 (applicable to
certain identified facilities) and Phase II will begin in 2000 (applicable to
all facilities, including those subject to the 1995 restrictions). The affected
utilities may be able to meet these requirements by, among other things,
switching to lower sulfur fuels, installing pollution control devices such as
scrubbers, reducing electricity generating levels or by purchasing or trading
"pollution credits." Specific emissions sources will receive these credits which
utilities and industrial concerns can trade or sell to allow other units to emit
higher levels of sulfur dioxide.
The effect of the Clean Air Act Amendments cannot be completely ascertained
at this time. Although it was generally anticipated that Phase I of the Clean
Air Act Amendments would increase prices for low sulfur coal, because of
over-investment in low sulfur production capacity and related transportation
facilities in the western United States (and to a lesser degree in Central
Appalachia) in reaction to the anticipated price increase, this effect did not
materialize. When the Clean Air Act Amendments were enacted, many plants
switched to low sulfur coal supplied from the Powder River Basin, located
predominately in Wyoming. This compliance strategy generated an unexpectedly
large number of pollution credits, which were then marketed together with lower
cost, higher sulfur coal and sold in competition with Central Appalachian
production. The
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Company believes these factors reduced or capped the anticipated price increase
for Central Appalachian low sulfur coal in Phase I.
The Company believes that in Phase II the price for low sulfur coal is more
likely to increase, and the price for high sulfur coal to decrease, because
additional coal-burning electric power plants will be affected by Phase II.
However, this is not expected to occur until well into Phase II, after the large
bank of pollution credits which has developed in connection with Phase I has
been reduced and before utilities electing to comply with Phase II by installing
scrubber sulfur-reduction technologies are able to implement this compliance
strategy. The Company does not believe that compliance strategies utilizing
scrubbers will result in significant downward pressure on compliance coal prices
during initial phases of Phase II. However, if the prices of compliance coal
and/or pollution credits rise, scrubber compliance strategies may become more
competitive. The expected reduction of the existing bank of pollution credits
during Phase II should also help to rationalize the market for compliance coal
during the long-term to the extent utilities are unable to utilize strategies to
create a new bank of pollution credits.
The Clean Air Act Amendments also require that existing major sources of
nitrogen oxides in moderate or higher ozone non-attainment areas install RACT
for nitrogen oxides, which are precursors of ozone. In addition, stricter ozone
standards are expected to be implemented by the EPA by 2003. The area from
northern Virginia through Maine was designated as an OTR. OTAG, formed to make
recommendations to the EPA for addressing ozone problems in the eastern United
States, submitted its final recommendations to the EPA in June 1997. OTAG's
recommendations regarding strategies for reducing ozone and precursor emissions
may result in even more stringent emissions limits for eastern states such as
West Virginia. In addition, petitions have been filed by several northeastern
states which, if acted upon favorably by the EPA, could require immediate design
and implementation of additional emissions controls for ozone precursor
emissions sources to meet more stringent emissions limits by 2001. Installation
of RACT, and any control measures beyond RACT, that the Ozone Transport
Commission, states and the EPA may require will make it more costly to operate
coal fired power plants and, depending on the requirements of individual state
attainment plans and the development of revised new source performance
standards, could make coal a less attractive fuel alternative in the planning
and building of power plants in the future. If coal's share of the capacity for
power generation were to be reduced, a material adverse effect on the Company's
financial condition and results of operations could result. The effect such
legislation or other legislation that may be enacted in the future could have on
the coal industry in general and on the Company in particular cannot be
predicted with certainty. Such legislation limits the ability of some of the
Company's customers to burn higher sulfur coals unless these customers have or
are willing to install scrubbers, to blend coal or to bear the cost of acquiring
emission credits which permit them to burn higher sulfur coal. The Company has
endeavored to mitigate the potential adverse effects of the legislation's
limitations on sulfur dioxide emissions through the acquisition and development
of compliance and low sulfur coal reserves and operations in Appalachia. No
assurance can be given that the implementation of the Clean Air Act Amendments
will not adversely affect the Company.
COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND LIABILITY ACT. The
federal Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") and similar state laws affect coal mining operations by imposing
clean-up requirements for threatened or actual releases of hazardous substances
that may endanger public health or welfare or the environment. Under CERCLA,
joint and several liability may be imposed on waste generators, site owners and
operators and others regardless of fault or the legality of the original
disposal activity. Waste substances generated by coal mining and processing are
generally not regarded as hazardous substances for purposes of CERCLA.
CLEAN WATER ACT. Both the federal Clean Water Act and corresponding state
statutes affect coal mining operations by imposing restrictions on effluent
discharge, including acid mine drainage, into waters. Permits for such
discharges must be obtained from the EPA and/or similar state agencies. Regular
monitoring, as well as compliance with reporting requirements and performance
standards, are requirements under the Clean Water Act and preconditions for the
renewal of such permits. In addition, to the extent not otherwise regulated by
applicable law, West Virginia's Groundwater Protection Act may affect coal
mining operations by imposing restrictions on groundwater quality.
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RESOURCE CONSERVATION RECOVERY ACT. The federal Resource Conservation
Recovery Act ("RCRA"), and corresponding state statutes, affects coal mining
operations by imposing requirements for the treatment, storage and disposal of
hazardous wastes. Although many mining wastes are excluded from the regulatory
definition of hazardous waste, and coal mining operations covered by SMCRA
permits are exempted from regulation under RCRA by statute, the EPA is studying
the possibility of expanding regulation of mining wastes under RCRA.
TOXIC SUBSTANCES CONTROL ACT. The Toxic Substances Control Act ("TSCA")
regulates, among other things, the use and disposal of polychlorinated biphenyls
("PCBs"), a substance which in the past was commonly found in coolants and
hydraulic fluids utilized by the mining industry. The penalties imposed under
TSCA for the improper disposal of PCBs can be significant.
COMPETITION
The United States coal industry is highly competitive, with numerous
producers in all coal producing regions. The Company competes with other large
producers and hundreds of small producers in the United States and abroad. Many
of the Company's customers are also customers of the Company's competitors. The
markets in which the Company sells its coal are highly competitive and affected
by factors beyond the Company's control. Continued demand for the Company's coal
and the prices that the Company will be able to obtain will depend primarily on
coal consumption patterns of the domestic electric utility industry, which in
turn are affected by the demand for electricity, coal transportation costs,
environmental and other governmental regulations and orders, technological
developments and the availability and price of competing coal and alternative
fuel supply sources such as oil, natural gas, nuclear energy and hydroelectric
energy. See "--Regulation and Laws." In addition, during the mid-1970's and
early 1980's, a growing coal market and increased demand attracted new investors
to the coal industry and spurred the development of new mines and added
production capacity throughout the industry. Although demand for coal has grown
over the recent past, the industry has since been faced with over-capacity,
which in turn has increased competition and lowered prevailing coal prices.
Moreover, because of greater competition for electricity and increased pressure
from customers and regulators to lower electricity prices, public utilities are
lowering fuel costs by buying higher percentages of spot coal through a
competitive bidding process and by only buying the amount of coal necessary to
meet their requirements.
EMPLOYEES AND LABOR RELATIONS
As of September 30, 1997, the Company and its subsidiaries employed
approximately 768 non-union employees, with an average employee age of 42 years.
The Company is not a party to any collective bargaining agreement and considers
its relations with its employees to be good. If some or all of the Company's
currently non-union operations were to become unionized, the Company could incur
higher labor costs and an increased risk of work stoppages. There can be no
assurance that the Company's workforce will not unionize in the future.
LEGAL PROCEEDINGS
In the ordinary course of its business, the Company is involved in certain
pending or threatened legal proceedings. The Company believes that none of such
proceedings of which it currently is aware will have a material adverse effect
on the financial position or results of operations of the Company.
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<PAGE> 60
MANAGEMENT
Set forth below are the names, ages (as of December 31, 1997) and positions
of the directors and executive officers of the Company. The terms of each of the
directors will expire annually upon the election and qualification of his
successor at the annual meeting of stockholders.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Bruce Sparks................ 42 President, Director
Michael M. Matesic.......... 32 Treasurer
B. Judd Hartman............. 34 Secretary
James A. Walls.............. 35 Assistant Secretary
John Shober................. 64 Chairman of the Board
Willem G. Rottier........... 58 Director
William Macaulay............ 51 Director
Bruce Rothstein............. 45 Director
John Hill................... 55 Director
James Boyd.................. 51 Director
</TABLE>
On October 12, 1997, John J. Faltis, the Company's President, Chief
Executive Officer and Chairman of the Board, was killed in a helicopter accident
in West Virginia. On October 28, 1997, the Company's Board of Directors elected
John Shober, presently a director, to succeed Mr. Faltis as Chairman of the
Board. The Company's Board also elected Bruce Sparks, formerly Executive Vice
President, Treasurer and Secretary to succeed Mr. Faltis as President. The Board
also elected Michael M. Matesic as Treasurer and B. Judd Hartman as Secretary.
On December 1, 1997, JJF Group elected Mr. James Boyd, President of Boyd and
executor of Mr. Faltis' estate, to the Board of Directors. See "Prospectus
Summary--Recent Developments."
MANAGEMENT BIOGRAPHIES
P. BRUCE SPARKS. Mr. Sparks has been President of Anker since October 28,
1997, and has been a stockholder of the Company since 1996. From 1988 to October
1997, he was Executive Vice President of Anker. Mr. Sparks was the Vice
President of Administration and Chief Financial Officer from 1985 until 1988. A
1976 business graduate from Concord College, he spent seven years in various
management positions with CoalARBED, Inc. (a coal company), the last of which
was as Vice President and Chief Financial Officer before joining Anker. Mr.
Sparks has been with Anker for 12 years.
MICHAEL M. MATESIC. Mr. Matesic is a Certified Public Accountant and has
been Treasurer of Anker since October 28, 1997 and Secretary/Treasurer of
certain of its subsidiaries since 1996. From 1990 to October 1997, he was
Controller of Anker. A 1987 graduate of Duquesne University with a B.S. in
Business Administration, he spent two years on the audit staff of Ernst & Young
LLP (certified public accountants). Mr. Matesic's responsibilities include
accounting, tax, financial administration, human resources and risk management.
Mr. Matesic is a member of the American Institute of Certified Public
Accountants, Pennsylvania Institute of Certified Public Accountants, and the
West Virginia Society of Certified Public Accountants. Mr. Matesic has been with
Anker for 8 years.
B. JUDD HARTMAN. Mr. Hartman was appointed Secretary effective November 1,
1997. He graduated from Washington and Lee University in 1985 with a B.A. in
Economics and received his J.D. Degree in 1989 from the Wake Forest University
School of Law. Prior to November 1997, Mr. Hartman was employed by Spilman,
Thomas and Battle (a law firm) in Charleston, West Virginia.
JAMES A. WALLS. Mr. Walls has been Assistant Secretary of Anker since
1993. He graduated from West Virginia University with a B.S./B.A. and J.D.
Degree in 1989. Prior to March of 1993, he was employed by Spilman, Thomas and
Battle in Charleston, West Virginia. Mr. Walls has been with Anker for 4 years.
JOHN SHOBER. Mr. Shober was elected Chairman of the Board on October 28,
1997 and has served as a Director of the Company since 1996. Mr. Shober is a
private investor and corporate director. Mr. Shober serves as a director of Penn
Virginia Corporation (a natural resources company), Airgas, Inc. (a distributor
of
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industrial gas and industrial gas supplies), BetzDearborn, Inc. (a manufacturer
of performance chemicals), C&D Technologies, Inc. (a manufacturer of stored
power systems), Ensign-Bickford Industries, Inc. (a manufacturer of detonation
devices) and MIBRAG mbH (a German coal mining company). He serves as a member of
the Advisory Board of First Reserve, which oversees the investment activities
and decisions of First Reserve acting in its capacity as manager for the Funds'
investment portfolios.
WILLEM G. ROTTIER. Mr. Rottier has served as a Director of the Company
since 1996. Mr. Rottier was a director of Anker Group from 1982 to 1996, and
Chairman of the Board of Anker Group from 1988 to 1996. Mr. Rottier also serves
as a managing director of Anker Holding.
WILLIAM MACAULAY. Mr. Macaulay has served as a Director of the Company
since 1996. Mr. Macaulay has been the President and Chief Executive Officer of
First Reserve since 1983. Mr. Macaulay serves as a director of Weatherford
Enterra, Inc. (an oilfield service company), Maverick Tube Corporation (a
manufacturer of steel pipe and casing), TransMontaigne Oil Company (an oil
products distribution and refining company), National-Oilwell, Inc. (a
manufacturer and distributor of equipment and products used in oil and gas
drilling and production), Hugoton Energy Corporation (an independent oil and gas
exploration and production company), Cal Dive International, Inc. (a provider of
subsea services in the Gulf of Mexico), James River Coal Corporation (a coal
producer) and Domain Energy Corporation (an oil and gas exploration company).
BRUCE ROTHSTEIN. Mr. Rothstein has served as a Director of the Company
since 1996. Mr. Rothstein has been a Managing Director of First Reserve since
1996 and served as a Vice-President of First Reserve from 1991 to 1996. Mr.
Rothstein serves as a director of National-Oilwell, Inc.
JOHN HILL. Mr. Hill has served as a Director of the Company since 1996.
Mr. Hill has been Chairman of First Reserve since 1983. Mr. Hill serves as a
director of Weatherford Enterra, Inc., a director of TransMontaigne Oil Company,
a director of James River Coal Corporation, a director of Snyder Oil (an
independent oil and gas company) and a director of Putnam Mutual Funds (an
investment manager of mutual funds and institutional accounts).
JAMES BOYD. Mr. Boyd has served as a Director of the Company since
December 1, 1997. Mr. Boyd has been President of John T. Boyd Company since
1984.
The following directors have been appointed to serve on the Company's
Executive Committee during 1997: Messrs. Shober and Macaulay. The following
directors have been appointed to serve on the Company's newly created Audit
Committee during 1997: Messrs. Sparks and Rothstein.
BOARD COMPENSATION
All directors are reimbursed for their usual and customary expenses
incurred in attending all Board and committee meetings. Each director receives
an aggregate annual fee of $12,000 for serving on the Company's Board of
Directors.
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<PAGE> 62
EXECUTIVE COMPENSATION
The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities for the two years ended December 31, 1997 for (i) the chief executive
officer of the Company and (ii) each of the four other most highly compensated
executive officers of the Company, determined as of December 31, 1997
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
--------------------------------------
ANNUAL COMPENSATION SECURITIES
---------------------------------- RESTRICTED UNDERLYING
NAME AND FISCAL OTHER ANNUAL STOCK OPTIONS/SARS LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS (#) PAYMENTS COMPENSATION
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John J. Faltis........ 1997 $268,442 $164,496 $ 12,590 -- -- -- --
President and Chief 1996 $311,371 $138,257 $ 4,116 -- -- -- --
Executive Officer(1)
P. Bruce Sparks....... 1997 $252,885 $ 90,953 $ 3,625 -- -- -- $2,885,000(2)
Executive Vice 1996 $210,005 $157,757 $ 1,600 -- -- --
President,
Chief Financial
Officer
and Secretary
Terrence J. Jackson... 1997 $175,000 $ 30,478 $ 40,657 -- -- -- --
Senior Vice President 1996 $ 61,250 $ 22,500 $ 268 -- -- -- --
Kim A. Burke.......... 1997 $175,000 $ 15,166 $ 4,143 -- -- -- --
Senior Vice President 1996 $136,615 $ 35,000 $ 4,841 -- -- -- --
Richard A. Bolen...... 1997 $175,000 $ 18,052 $ 15,126 -- -- -- --
Senior Vice President 1996 $152,000 $ 20,000 $ 3,036 -- -- -- --
Ben Daud.............. 1997 $ 23,557 $ 20,750 $ 450 -- -- -- --
Senior Vice
President(4)
</TABLE>
- ------------------------------
(1) On October 12, 1997, Mr. Faltis was killed in a helicopter accident in West
Virginia. See "Prospectus Summary--Recent Developments."
(2) In 1996, Mr. Sparks received a one-time bonus. Such amount consists of
$1,385,000 cash and $1,500,000 recognized compensation for stock received
pursuant to the Recapitalization.
(3) Mr. Jackson was hired by the Company on July 11, 1996. The listed amounts
represent only compensation received from July 11, 1996 through December 31,
1996. His annual compensation for the full year would have been: salary,
$175,000; bonus, $22,500; other annual compensation, $4,841.
(4) Mr. Daud was hired by the Company on November 1, 1997. The listed amounts
represent only compensation received from November 1, 1997 through December
31, 1997. His annual compensation for the full year would have been: salary,
$175,000; bonus, $22,500; other annual compensation, $4,841.
EMPLOYMENT AGREEMENTS
Mr. Faltis had employment agreements with each of the Company, Anker Group,
Inc. ("Anker Group"), Anker Energy Corporation ("Anker Energy") and Simba Group,
Inc. ("Simba"). The agreement with Anker Energy is dated as of August 1, 1996
and was due to expire on July 31, 2001 (the "Anker Energy Agreement"). The Anker
Energy Agreement provides for Mr. Faltis' employment as President and Chief
Executive Officer of Anker Energy at an annual salary of $330,000 for the period
August 1, 1996 through July 31, 1997, $339,900 for the period August 1, 1997
through July 31, 1998, $350,100 for the period August 1, 1998 through July 31,
1999, $360,600 for the period August 1, 1999 through July 31, 2000, and $371,400
for the period August 1, 2000 through July 31, 2001, a quarterly bonus of
$10,000 for each calendar quarter for its duration, and a yearly bonus based on
the financial performance of the Company. Mr. Faltis' yearly bonus for the
period August 1, 1996 through July 31, 1997 was $124,410.
Upon Mr. Faltis' death, the Anker Energy Agreement terminated. Such
agreement provided for the payment to Mr. Faltis' estate of any accrued but
unpaid salary, any amounts Mr. Faltis was entitled to receive under applicable
employee benefit plans, and any amounts due pursuant to the reimbursement
provisions of such agreement. Except for the indemnification provisions of such
agreement, which survive the termination of the Agreement without limit, the
Company is not required to make further payments to Mr. Faltis' estate. Each of
the employment agreements with Anker Group and Simba Group terminated upon the
termination of the Anker Energy Agreement, and neither one of such agreements
provided for compensation or benefits upon Mr. Faltis' death.
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<PAGE> 63
Mr. Sparks has an employment agreement with each of the Company, Anker
Group, Anker Energy and Simba. The agreement with Anker Energy is dated as of
August 1, 1996 and expires on July 31, 2002 (the "Sparks Anker Energy
Agreement"). The Sparks Anker Energy Agreement provides for Mr. Sparks'
employment as Executive Vice-President of Anker Energy at an annual salary of
$250,000 for the period August 1, 1996 through July 31, 1997, $257,500 for the
period August 1, 1997 through July 31, 1998, $265,200 for the period August 1,
1998 through July 31, 1999, $273,200 for the period August 1, 1999 through July
31, 2000, $281,200 for the period August 1, 2000 through July 31, 2001, and
$289,600 for the period August 1, 2001 through July 31, 2002, a quarterly bonus
of $3,750 for each calendar quarter during its duration, and a yearly bonus
based on the financial performance of the Company. Mr. Sparks' yearly bonus for
the period August 1, 1996 through July 31, 1997 was $75,400. Mr. Sparks'
employment may be terminated by him upon 30 days' notice. In the event Anker
Energy were to terminate Mr. Sparks other than for cause at any time prior to
August 1, 2000, Mr. Sparks would be entitled to receive the annual salary,
bonuses, and benefits which he would have received under the Sparks Anker Energy
Agreement through July 31, 2002, had Anker Energy not terminated his employment.
In the event Anker Energy were to terminate Mr. Sparks other than for cause at
any time on or after August 1, 2000, Mr. Sparks would have the option to receive
either (i) 250% of his then current annual salary or (ii) the compensation,
bonuses and other benefits he would have been entitled to receive pursuant to
the Sparks Anker Energy Agreement, had Anker Energy not terminated him, for a
period of two years. In addition, Mr. Sparks is entitled to participate in any
of Anker Energy's pension plans for which he is eligible. The Sparks Anker
Energy Agreement also provides that Mr. Sparks will not compete with Anker
Energy during the employment term and for a period of one year following its
termination. Mr. Sparks also has employment agreements, each without
compensation, with the Company, providing for his employment as a member of the
Board of Directors of Anker Group and Simba and as the Executive Vice-President
of the Company; with Anker Group, providing for his employment as a member of
the Board of Directors of Anker Energy and as Executive Vice-President of Anker
Group; and with Simba, providing for his employment as the Executive
Vice-President of Simba.
1997 OMNIBUS STOCK INCENTIVE PLAN
The Company adopted the 1997 Omnibus Stock Incentive Plan (the "Plan"),
providing for the issuance to certain officers and key employees of the Company
or an Affiliate (as defined therein) of the Company (the "Optionees") of up to
300 shares of authorized but unissued or reacquired shares of Common Stock of
the Company, subject to adjustment to reflect certain events such as stock
dividends, stock split-ups, subdivisions or consolidations of shares or other
events that, in the judgment of the Board of Directors, necessitates a similar
adjustment. The Plan is intended to, among other things, motivate, reward and
retain officers and key employees of the Company or an Affiliate (as defined
therein) for contributing to its long-term success by providing an opportunity
for meaningful capital accumulation linked to the future success of the Company
and appreciation in shareholder value.
The President and Executive Vice President of the Company will administer
the Plan. The President and Executive Vice President have the authority to
determine the forms and awards made to Optionees (each, a "Grant"). Such Grants
are subject to various limitations and conditions specified in the Plan
(including certain legal restrictions), and may take the form of restricted
stock or stock options subject to certain restrictions.
All key employees of the Company or an Affiliate (as defined therein) are
eligible to be granted awards under the Plan. The President and Executive Vice
President have the authority to designate the employees to whom shares of
Restricted Stock are to be awarded and to whom Options are to be granted and
will specify the number of shares of Common Stock subject to each award or
grant.
The President and Executive Vice President jointly have the authority to
make such amendments to any terms and conditions applicable to outstanding
Grants as are consistent with the Plan, except that no modification shall become
effective without prior approval of the Optionees if such approval is necessary
and
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comply with any tax or regulatory requirement or rule of any exchange or system
upon which the stock may be listed. No amendment shall, without an Optionee's
consent, adversely affect any rights of such Optionee under any Grant
outstanding at the time such amendment is made.
None of the Company's employees have been granted any options pursuant to a
Stock Option Grant Agreement or any shares of Common Stock pursuant to a
Restricted Stock Award Agreement.
STOCK OPTION GRANT AGREEMENTS
The exercise price of any options granted in the future would be determined
by the Stock Option Grant Agreement. In addition, such options would be
exercised based upon a schedule which referred to a date set forth in each
Optionee's Stock Option Grant Agreement (the "Option Trigger Date"). Generally,
an Optionee's options would vest 100% on the third anniversary date of such
Optionee's Option Trigger Date. Each Stock Option Grant Agreement will provide
for acceleration of exercisability of some or all of an Optionee's options upon
termination of employment because of death, permanent disability or retirement
of the Optionee, the Optionee's involuntary termination of employment with the
Company or an Affiliate (as defined therein) during the 90-day period
immediately following the date the Company merges with another entity, the
Optionee's voluntary termination of employment at any time after the expiration
of the 1-year period immediately following the date the Company merges with
another entity or a "change of control." A "change of control" will occur if any
person or group becomes the beneficial owner, directly or indirectly, in the
aggregate of securities of the Company representing seventy-five percent (75%)
or more of the total combined voting power of all classes of the Company's then
outstanding securities.
Options granted under the Plan pursuant to a Stock Option Agreement expire
at 5:00 p.m. Eastern Time on the day prior to the tenth (10th) anniversary of
its Grant Date.
RESTRICTED STOCK AWARD AGREEMENT
Pursuant to each Restricted Stock Award Agreement, the Award Recipient may
not transfer any shares of Common Stock acquired thereby or upon exercise of
vested options granted under the Plan (collectively, the "Plan Shares") within
five years after the date set forth in his or her Restricted Stock Award
Agreement (the "Purchase Trigger Date"), except as described below and except
for transfers to an Award Recipient's estate upon his or her death and transfers
to a trust whose beneficiaries are the Award Recipient, his or her spouse and
his or her lineal descendants (an "Award Recipient Trust").
Each Restricted Stock Award Agreement also provides the Company with the
right of first refusal to buy Plan Shares owned by each Award Recipient on
essentially the same terms and conditions as such Award Recipient proposes in a
sale of his or her Plan Shares to another bona fide third party purchaser.
Upon a change of control, the transfer restrictions, right of first
refusal, and certain other rights with respect to sale and repurchase of the
Plan Shares and cancellation of Options as described above will lapse.
MANAGEMENT INCENTIVE BONUSES
Certain members of management of the Company and its subsidiaries,
including the Named Executive Officers, are eligible to receive cash bonuses in
addition to their annual salary compensation. Such awards are based on the
performance of such individuals as determined by their direct supervisors and
other senior management and the financial performance of the Company and its
subsidiaries.
COMMON STOCK PURCHASED BY MANAGEMENT
Mr. Faltis and Mr. Sparks, in connection with the Recapitalization,
purchased 3,039 and 514 shares of Common Stock, respectively, by exchanging
shares they owned in Anker Group for shares in the Company. See "The Company."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
At a meeting of the Company's Board of Directors on May 22, 1997, Mr.
Shober and Mr. Macaulay were appointed to serve on the newly created
Compensation Committee. Mr. Shober was appointed the chairman of such committee.
At the same meeting, Mr. Rothstein and Mr. Sparks were appointed to serve on the
newly created Audit Committee.
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<PAGE> 65
OWNERSHIP OF COMMON STOCK
The following table sets forth, as of December 31, 1997, certain
information concerning the ownership of shares of Common Stock of the Company
by: (i) persons who own beneficially more than 5% of the outstanding shares of
Common Stock; (ii) each person who is a director or a nominee of the Company;
(iii) each person who is a Named Executive Officer; and (iv) all directors and
executive officers of the Company as a group. As of December 31, 1997, there
were 10,000 shares of Common Stock outstanding.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT
NATURE OF BENEFICIAL OF SHARES
NAME AND ADDRESS OWNERSHIP OUTSTANDING
<S> <C> <C>
First Reserve Corporation
475 Steamboat Road, Greenwich, Connecticut 06830(1)............ 5,407 54.07%
William Macaulay(2).............................................. 5,407 54.07
John Hill(2)..................................................... 5,407 54.07
Bruce Rothstein.................................................. -- --
John Shober...................................................... -- --
JJF Group Limited Liability Company(3)........................... 3,039 30.39
Anker Holding B.V................................................ 1,040 10.40
PPK Group Limited Liability Company(4)........................... 514 5.14
Estate of John J. Faltis(5)...................................... 3,039 30.39
Bruce Sparks(6).................................................. 514 5.14
James Boyd....................................................... -- --
Michael M. Matesic............................................... -- --
B. Judd Hartman.................................................. -- --
James A. Walls................................................... -- --
Terence J. Jackson............................................... -- --
Kim A Burke...................................................... -- --
Richard A. Bolen................................................. -- --
Ben Daud......................................................... -- --
Willem G. Rottier(7)............................................. 1,040 10.40
All executive officers and directors as a group ((13)
persons)(8).................................................... 10,000 100.00%
</TABLE>
- ------------------------------
(1) Shares of Common Stock shown as owned by First Reserve are owned of record
by American Oil & Gas Investors, Limited Partnership ("American Oil & Gas"),
AmGO II, Limited Partnership ("AmGO II"), First Reserve Fund V, Limited
Partnership ("First Reserve Fund V"), First Reserve Fund V-2, Limited
Partnership ("First Reserve Fund V-2"), First Reserve Fund VI, Limited
Partnership ("First Reserve Fund VI") and First Reserve Fund VII, Limited
Partnership ("First Reserve Fund VII", and together with American Oil & Gas,
AmGO II, First Reserve Fund V, First Reserve Fund V-2, First Reserve Fund
VI, and First Reserve Fund VII, the "Funds") each of which First Reserve is
the sole general partner and as to which it possesses sole voting and
investment power.
(2) Messrs. Macaulay and Hill may be deemed to share beneficial ownership of the
shares shown as beneficially owned by First Reserve as a result of their
ownership of common stock of First Reserve. Messrs. Macaulay and Hill
disclaim beneficial ownership of such shares. Their addresses are c/o First
Reserve Corporation, 475 Steamboat Road, Greenwich, Connecticut 06830.
(3) JJF Group is a limited liability company controlled by the estate of Mr.
Faltis. The estate of Mr. Faltis has the sole authority to exercise all
rights and remedies of JJF Group and all voting rights of the shares owned
by JJF Group.
(4) PPK Group is a limited liability company controlled solely by Mr. Sparks.
Mr. Sparks has the sole authority to exercise all rights and remedies of PPK
Group and all voting rights of the shares owned by PPK Group.
(5) The estate of Mr. Faltis may be deemed to share beneficial ownership of the
shares shown as being owned by JJF Group as a result of its ownership of
membership interests therein.
(6) Mr. Sparks may be deemed to share beneficial ownership of the shares shown
as being owned by PPK Group as a result of his ownership of common stock
therein.
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(7) Mr. Rottier may be deemed to share beneficial ownership of the shares shown
as owned by Anker Holding B.V. as a result of his ownership of common stock
of Anker Holding. Mr. Rottier disclaims beneficial ownership of such shares.
His address is c/o Anker Holding B.V., Vasteland 4, 3011 BK, Rotterdam, The
Netherlands.
(8) Includes 5,407 shares beneficially owned by First Reserve.
STOCKHOLDERS' AGREEMENT
In connection with the Recapitalization, the Company, Mr. Faltis, JJF
Group, Mr. Sparks, PPK Group, Anker Holding and First Reserve and the Funds
entered into the Stockholders' Agreement. Pursuant to the Stockholders'
Agreement, the parties thereto agreed, among other things, as follows:
NOMINATION OF DIRECTORS. The Funds shall nominate (i) four of the seven
members of the Board of Directors for so long as they hold in the aggregate more
than 50% of the issued and outstanding Common Stock of the Company, (ii) three
of the seven members of the Board of Directors, for so long as they hold in the
aggregate more than 10% of the issued and outstanding Common Stock of the
Company or (iii) one of the seven members of the Board of Directors for so long
as they hold in the aggregate more than 2% of the issued and outstanding Common
Stock of the Company. The Stockholders' Agreement also provides that each of JJF
Group, PPK Group and Anker Holding shall nominate one director for so long as
such stockholder holds at least 2% of the issued and outstanding Common Stock of
the Company.
FUNDAMENTAL ISSUES. So long as the Funds in the aggregate own 10% or more
of the issued and outstanding Common Stock, or so long as JJF Group and PPK
Group in the aggregate own 10% or more of the issued and outstanding Common
Stock, the Company shall not take, and the Company and the Stockholders (as
defined below) shall not permit to be taken any actions constituting a
"Fundamental Issue" without the favorable vote or written consent of at least
five-sevenths of the whole number of the Directors of the Company. Fundamental
Issues include, but are not limited to, the sale, lease or exchange of 50% or
more of the assets of the Company, any merger or consolidation of the Company,
any amendment to the Certificate of Incorporation of the Company and the
authorization, issuance or sale of shares of capital stock, any other type of
equity or debt securities or options, warrants or other rights to acquire equity
or debt securities of the Company.
ANTI-DILUTION. The Company shall not issue any additional shares of Common
Stock unless all Stockholders are offered on identical terms and conditions such
percentage of each type or class of such shares being offered in the aggregate,
subject to certain provisions of the Stockholders' Agreement.
RESTRICTIONS ON DISPOSITIONS OF STOCK. JJF Group, PPK Group, Anker Holding
and the Funds (each, a "Stockholder" and collectively, the "Stockholders") shall
not transfer any shares of Common Stock except pursuant to the Stockholders'
Agreement. Restrictions on dispositions of stock include, but are not limited
to, the following provisions:
LOCK-UP PERIOD. Prior to August 12, 2001, except as set forth in the
Stockholders' Agreement, no Stockholder shall transfer any shares without
the prior written approval of all of the other Stockholders.
RIGHT OF FIRST REFUSAL. Beginning on August 12, 2001, if a
Stockholder receives a bona fide offer (a "Purchase Offer") to purchase any
or all of its shares of Common Stock, the Company and the remaining
Stockholders shall have the opportunity to purchase such shares at the same
price per share and on the same terms and conditions as the Stockholder's
Purchase Offer.
TAG-ALONG RIGHTS. Each Stockholder has the right to participate in
the sale of Common Stock by another Stockholder (the "Initiating
Stockholder") to any third party at the same price per share and on the
same terms and conditions as the Initiating Stockholder.
REGISTRATION RIGHTS. Upon the written request of JJF Group, PPK Group,
Anker Holding or the Funds, the Company shall, as expeditiously as possible, use
its best efforts to effect the registration, pursuant to the Securities Act, of
the shares of Common Stock outstanding as of August 12, 1996 or acquired
thereafter by any of JJF Group, PPK Group, Anker Holding or the Funds.
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RELATED PARTY TRANSACTIONS
Anker Holding, through its affiliates, purchases coal from the Company for
its trading operations at prices which the Company believes are no less
favorable to the Company than those that would have been obtained in a
comparable transaction with an unrelated person. These purchases amounted to
$7.2 million of coal in 1994, $11.7 million in 1995 and $16.2 million in 1996.
See "Business--Mining Operations--Coal Marketing and Sales."
Mr. Faltis, owned 100% of an investment company, Resource Venture Analysis,
Inc., ("Resource Venture") which purchased the stock of University Tire Company
("University Tire") in August 1997. The Company has purchased off-road tires for
its mining operations from University Tire in the past, amounting to $738,197 in
1994, $632,167 in 1995 and $244,697 in 1996. Anker expects to continue buying
off-road tires from University Tire at prices which the Company believes are no
less favorable to the Company than those that would have been obtained in a
comparable transaction with an unrelated person. Pursuant to his employment
agreement with the Company, Mr. Faltis devoted substantially all of his time to
the Company. See "Management--Employment Agreements."
In addition, the Company made a $100,000 interest-free loan to Mr. Faltis,
the proceeds of which were used by Resource Venture in connection with certain
investments. The loan matures on December 31, 1999.
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THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $125 million
aggregate principal amount of Exchange Notes for a like aggregate principal
amount of Old Notes properly tendered on or prior to the Expiration Date and not
withdrawn as permitted pursuant to the procedures described below. The Exchange
Offer is being made with respect to all of the Old Notes.
As of the date of this Prospectus, $125 million aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about February 10, 1998, to all holders
of Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain conditions set
forth under "Certain Conditions to the Exchange Offer" below. The Company
currently expects that each of the conditions will be satisfied and that no
waivers will be necessary.
PURPOSE OF THE EXCHANGE OFFER
The Old Notes were issued on September 25, 1997 in a transaction exempt
from the registration requirements of the Securities Act. Accordingly, the Old
Notes may not be reoffered, resold, or otherwise transferred unless so
registered or unless an applicable exemption from the registration and
prospectus delivery requirements of the Securities Act is available.
In connection with the issuance and sale of the Old Notes, the Company
entered into the Registration Rights Agreement, which requires the Company to
file with the Commission a registration statement relating to the Exchange Offer
and to use its reasonable best efforts to cause the registration statement
relating to the Exchange Offer to become effective under the Securities Act
within 180 days after the date of issuance of the Old Notes. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Exchange Offer is being made by the Company to satisfy its obligations
with respect to the Registration Rights Agreement. The term "holder," with
respect to the Exchange Offer, means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Notes are held of record by The Depository Trust Company. Other than
pursuant to the Registration Rights Agreement, the Company is not required to
file any registration statement to register any outstanding Old Notes. Holders
of Old Notes who do not tender their Old Notes or whose Old Notes are tendered
but not accepted would have to rely on exemptions from registration requirements
under the securities laws, including the Securities Act, if they wish to sell
their Old Notes.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Company has not sought its
own interpretive letter and there can be no assurance that the staff would make
a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
Staff, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by a Holder (other than any Holder who is a broker-dealer
or an "affiliate" of the Company within the meaning of Rule 405 of the
Securities Act) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such Holder's business and that such
Holder is not participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of the Securities
Act) of such Exchange Notes. See "--Resale of Exchange Notes." Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
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TERMS OF THE EXCHANGE
The Company hereby offers to exchange to each Holder, subject to the
conditions set forth herein and in the Letter of Transmittal accompanying this
Prospectus, Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Old Notes held by such Holder. The terms of
the Exchange Notes are identical in all material respects to the terms of the
Old Notes for which they may be exchanged pursuant to this Exchange Offer,
except that the Exchange Notes will generally be freely transferable by holders
thereof and will not be subject to any covenant regarding registration. The
Exchange Notes will evidence the same indebtedness as the Old Notes and will be
entitled to the benefits of the Indenture. See "Description of Senior Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the
Exchange Notes issued pursuant to the Exchange Offer in exchange for the Old
Notes may be offered for sale, resold or otherwise transferred by any holder
without compliance with the registration and prospectus delivery provisions of
the Securities Act. Instead, based on an interpretation by the staff of the
Commission set forth in a series of no-action letters issued to third parties,
the Company believes that Exchange Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for sale, resold and otherwise
transferred by any holder of such Exchange Notes (other than any such holder
that is a broker-dealer or is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes and neither such holder nor any other
such person is engaging in or intends to engage in a distribution of such
Exchange Notes. Since the Commission has not considered the Exchange Offer in
the context of a no action letter, there can be no assurance that the staff of
the Commission would make a similar determination with respect to the Exchange
Offer. Any holder who is an affiliate of the Company or who tenders in the
Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes cannot rely on such interpretation by the staff of the Commission
and must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each holder, other
than a broker-dealer, must acknowledge that it is not engaged in, and does not
intend to engage in, a distribution of Exchange Notes. Each broker-dealer that
receives Exchange Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. Broker-dealers
who acquired the Old Notes directly from the Company in the initial offering and
not as a result of market making activities must, in the absence of an
exemption, comply with the registration and prospectus delivery requirements of
the Securities Act in connection with secondary resales of the Exchange Notes
and cannot rely on such interpretation by the Staff. In addition, such
broker-dealers cannot use this Prospectus for the Exchange Offer in connection
with resales of the New Notes. See "Plan of Distribution."
Interest on the Exchange Notes will accrue from the last Interest Payment
Date on which interest was paid on the Old Notes so surrendered or, if no
interest has been paid on such Notes, from September 25, 1997.
Tendering holders of the Old Notes shall not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Old Notes
pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 p.m., New York City time, on March
11, 1998, unless the Company, in its sole discretion, has extended the period of
time for which the Exchange Offer is open (such date, as it may be extended, is
referred to herein as the "Expiration Date"). The Expiration Date will be at
least 20 business days after the commencement of the Exchange Offer in
accordance with Rule 14e-1(a)
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under the Exchange Act. The Company expressly reserves the right, at any time or
from time to time, to extend the period of time during which the Exchange Offer
is open, and thereby delay acceptance for exchange of any Old Notes, by giving
oral or written notice to the Exchange Agent and by timely public announcement
no later than 9:00 a.m. New York City time, on the next business day after the
previously scheduled Expiration Date. During any such extension, all Old Notes
previously tendered will remain subject to the Exchange Offer unless properly
withdrawn.
The Company expressly reserves the right to (i) terminate or amend the
Exchange Offer and not to accept for exchange any Old Notes not theretofore
accepted for exchange upon the occurrence of any of the events specified below
under "--Certain Conditions to the Exchange Offer" which have not been waived by
the Company and (ii) amend the terms of the Exchange Offer in any manner which,
in its good faith judgment, is advantageous to the holders of the Old Notes,
whether before or after any tender of the Notes. If any such termination or
amendment occurs, the Company will notify the Exchange Agent and will either
issue a press release or give oral or written notice to the holders of the Old
Notes as promptly as practicable.
For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a date on which banking institutions are required or
authorized by New York State law to be closed, and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time. Unless the Company
terminates the Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date, the Company will exchange the Exchange Notes for the Old Notes
on the Exchange Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
A holder of Old Notes may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Old Notes being tendered and any required signature guarantees
and any other documents required by the Letter of Transmittal, to the Exchange
Agent at its address set forth below on or prior to the Expiration Date (or
complying with the procedure for book-entry transfer described below) or (ii)
complying with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
INSURE TIMELY DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO
THE COMPANY.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Old Notes are to be reissued) in the name
of the registered holder (which term, for the purposes described herein, shall
include any participant in The Depository Trust Company (also referred to as a
"book-entry transfer facility") whose name appears on a security listing as the
owner of Old Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Old Notes not exchanged are to be delivered to an address
other than that of the registered holder appearing on the note register for the
Old Notes, the signature in the Letter of Transmittal must be guaranteed by an
Eligible Institution.
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The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the Old
Notes at the book-entry transfer facility for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility's system
may make book-entry delivery of Old Notes by causing such book-entry transfer
facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the book-entry
transfer facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its address set forth below on or prior to the Expiration Date, a letter,
telegram or facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) from an Eligible Institution
setting forth the name and address of the tendering holder, the names in which
the Old Notes are registered and, if possible, the certificate numbers of the
Old Notes to be tendered, and stating that the tender is being made thereby and
guaranteeing that within three business days after the Expiration Date, the Old
Notes in proper form for transfer (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at the book-entry transfer
facility), will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Old Notes being tendered by the above-described
method are deposited with the Exchange Agent within the time period set forth
above (accompanied or preceded by a properly completed Letter of Transmittal and
any other required documents), the Company may, at its option, reject the
tender. Copies of the notice of guaranteed delivery ("Notice of Guaranteed
Delivery") which may be used by Eligible Institutions for the purposes described
in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer facility)
is received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of
Exchange Notes in exchange for Old Notes tendered pursuant to a Notice of
Guaranteed Delivery or letter, telegram or facsimile transmission to similar
effect (as provided above) by an Eligible Institution will be made only against
deposit of the Letter of Transmittal (and any other required documents) and the
tendered Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
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If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Old Notes, such Old Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered holder or holders appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, that neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that
neither the holder nor any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company, or if it is an affiliate it will
comply with the registration and prospectus requirements of the Securities Act
to the extent applicable.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact
to cause the Old Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The Transferor also warrants
that it will, upon request, execute and deliver any additional documents deemed
by the Exchange Agent or the Company to be necessary or desirable to complete
the exchange, assignment and transfer of tendered Old Notes or transfer
ownership of such Old Notes on the account books maintained by a book-entry
transfer facility. The Transferor further agrees that acceptance of any tendered
Old Notes by the Company and the issuance of Exchange Notes in exchange therefor
shall constitute performance in full by the Company of certain of its
obligations under the Registration Rights Agreement. All authority conferred by
the Transferor will survive the death or incapacity of the Transferor and every
obligation of the Transferor shall be binding upon the heirs, legal
representatives, successors, assigns, executors and administrators of such
Transferor.
The Transferor certifies that it is not an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act and that it is acquiring
the Exchange Notes offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Notes. Each holder, other than
a broker-dealer, must acknowledge that it is not engaged in, and does not intend
to engage in, a distribution of Exchange Notes. Each Transferor which is a
broker-dealer receiving Exchange Notes for its own account must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. By so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company will make available, for a period equal to the lesser of
(i) 180 days from the date on which the
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Exchange Offer Registration Statement is declared effective or (ii) the period
ending on the date when all broker dealers holding Old Notes have sold all Old
Notes held by them, this Prospectus to any Participating Broker-Dealer and any
other persons, if any, with similar prospectus delivery requirements for use in
connection with any resale of Exchange Notes.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent at the address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) specify the principal
amount of Notes to be withdrawn, (iv) include a statement that such holder is
withdrawing his election to have such Old Notes exchanged, (v) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Old Notes were tendered or as otherwise described above (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee under the Indenture register the transfer of such
Old Notes into the name of the person withdrawing the tender and (vi) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. The Exchange Agent will return the properly withdrawn Old
Notes promptly following receipt of notice of withdrawal. If Old Notes have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn Old Notes or otherwise
comply with the book-entry transfer facility procedure. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Company and such determination will be final and binding on
all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account with such
book-entry transfer facility specified by the holder) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "--Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly on the Exchange Date, all Old Notes properly
tendered and will issue the Exchange Notes promptly after such acceptance. See
"--Certain Conditions to the Exchange Offer" below. For purposes of the Exchange
Offer, the Company shall be deemed to have accepted properly tendered Old Notes
for exchange when, as and if the Company has given oral or written notice
thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note.
In all cases, issuance of Exchange Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
book-entry confirmation of such Old Notes into the Exchange Agent's account at
the book-entry transfer facility, a properly completed and duly executed Letter
of Transmittal and all other required documents. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount than
the holder desires to exchange, such unaccepted or non-exchanged Old Notes will
be returned without expense to the tendering holder thereof (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange
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Agent's account at the book-entry transfer facility pursuant to the book-entry
transfer procedures described above, such non-exchanged Old Notes will be
credited to an account maintained with such book-entry transfer facility) as
promptly as practicable after the expiration of the Exchange Offer.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company shall not be required to accept for exchange,
or to issue Exchange Notes in exchange for, any Old Notes and may terminate or
amend the Exchange Offer (by oral or written notice to the Exchange Agent or by
a timely press release) if at any time before the acceptance of such Old Notes
for exchange or the exchange of the Exchange Notes for such Old Notes, any of
the following conditions exist:
(a) any law, statute, rule or regulation or applicable interpretation
of the staff of the Commission is issued or promulgated which, in the good
faith determination of the Company, does not permit the Company to effect
the Exchange Offer; or
(b) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes to be offered for resale,
resold and otherwise transferred by holders thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such
Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to
participate in the distribution of such Exchange Notes; or
(c) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Exchange Offer
which, in the sole judgment of the Company, would prohibit the Company from
proceeding with or consummating the Exchange Offer.
The Company expressly reserves the right to terminate the Exchange Offer
and not accept for exchange any Old Notes upon the occurrence of any of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Company of properly tendered Old Notes). In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date if
any of the conditions set forth above occur. Moreover, regardless of whether any
of such conditions has occurred, the Company may amend the Exchange Offer in any
manner which, in its good faith judgment, is advantageous to holders of the Old
Notes.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time. If the Company waives or amends the foregoing
conditions, it will, if required by law, extend the Exchange Offer for a minimum
of five business days from the date that the Company first gives notice, by
public announcement or otherwise, of such waiver or amendment, if the Exchange
Offer would otherwise expire within such five business-day period. Any
determination by the Company concerning the events described above will be final
and binding upon all parties.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no Exchange Notes will be issued in exchange for any such Old
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended. In any such event the Company is required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange.
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EXCHANGE AGENT
Marine Midland Bank has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below:
<TABLE>
<S> <C>
By Hand/Overnight Courier: By Mail:
Marine Midland Bank Marine Midland Bank
Attention: Attention:
Corporate Trust Department Corporate Trust Department
140 Broadway, Level A 140 Broadway, Level A
New York, New York 10005-1180 New York, New York 10005-1180
</TABLE>
By Facsimile:
212-658-2292
Attention: Corporate Trust Department
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the address and
telephone number set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF
TRANSMITTAL, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER
OTHER THAN THE ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE
A VALID DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Company will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this and other related documents to the beneficial owners of the Old
Notes and in handling or forwarding tenders for their customers.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and include fees and expenses of the Exchange
Agent, Trustee, registration fees, accounting, legal, printing and related fees
and expenses.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Old Notes
in such jurisdiction. In any jurisdiction in which the securities laws or blue
sky laws of which require the Exchange Offer to be made by a licensed broker or
dealer, the Exchange Offer is being made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
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TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the Old Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of Exchange Notes for Old Notes. Expenses incurred in
connection with the issuance of the Exchange Notes will be amortized over the
term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. Old Notes not
exchanged pursuant to the Exchange Offer will continue to remain outstanding in
accordance with their terms. In general, the Old Notes may not be offered or
sold unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register the Old Notes under the Securities Act.
Participation in the Exchange Offer is voluntary, and holders of Old Notes
should carefully consider whether to participate. Holders of Old Notes are urged
to consult their financial and tax advisors in making their own decision on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will be entitled to all
the rights and limitations applicable thereto under the Indenture, except for
any such rights under the Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a result of the making of
this Exchange Offer. All untendered Old Notes will continue to be subject to the
restrictions on transfer set forth in the Indenture. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered Old Notes could be adversely affected.
The Company may in the future seek to acquire, subject to the terms of the
Indenture, untendered Old Notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The Company has
no present plan to acquire any Old Notes which are not tendered in the Exchange
Offer.
RESALE OF EXCHANGE NOTES
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Company has not sought its
own interpretive letter and there can be no assurance that the Staff would make
a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff, the Company believes that the Exchange Notes issued pursuant to the
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<PAGE> 77
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by a Holder (other than any Holder who is a broker-dealer
or an "affiliate" of the Company within the meaning of Rule 405 of the
Securities Act) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such Holder's business and that such
Holder is not participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of the Securities
Act) of such Exchange Notes. However, any holder who is an "affiliate" of the
Company or who has an arrangement or understanding with respect to the
distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, or any broker-dealer who purchased Old Notes from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act
(i) could not rely on the applicable interpretations of the staff and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act. A broker-dealer who holds Old Notes that were acquired for its
own account as a result of market-making or other trading activities may be
deemed to be an "underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of Exchange Notes. Each such broker-dealer that
receives Exchange Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge in the Letter of
Transmittal that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the Exchange Notes may not be offered or sold unless they have
been registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the Exchange Notes for
offer or sale under the securities or blue sky laws of such jurisdictions as any
holder of the Exchange Notes reasonably requests. Such registration or
qualification may require the imposition of restrictions or conditions
(including suitability requirements for offerees or purchasers) in connection
with the offer or sale of any Exchange Notes.
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<PAGE> 78
DESCRIPTION OF SENIOR NOTES
GENERAL
The Old Notes were issued and the Exchange Notes offered hereby will be
issued under an indenture dated as of September 25, 1997 (the "Indenture")
between the Company, as issuer, the Subsidiary Guarantors and Marine Midland
Bank, as trustee (the "Trustee"). The terms of the Exchange Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
Exchange Notes are subject to all such terms, and holders of the Exchange Notes
are referred to the Indenture and the Trust Indenture Act for a statement
thereof. Each of the Indenture and the Registration Rights Agreement is an
exhibit to the Registration Statement of which this Prospectus is a part. The
following summary of the material provisions of the Indenture does not purport
to be complete and is qualified in its entirety by reference to the Indenture,
including the definitions therein of certain terms used below. Copies of the
proposed form of Indenture and Registration Rights Agreement are available as
set forth herein under "--Available Information." The definitions of certain
terms used in the following summary are set forth under "--Certain Definitions."
For purposes of this summary, the term "Company" refers only to Anker Coal
Group, Inc. and not to any of its Subsidiaries.
On September 25, 1997, the Company issued $125 million aggregate principal
amount of Old Notes under the Indenture. The terms of the Exchange Notes are
identical in all material respects to the Old Notes, except for certain transfer
restrictions and registration and other rights relating to the exchange of the
Old Notes for Exchange Notes. The Trustee will authenticate and deliver Exchange
Notes for original issue only in exchange for a like principal amount of Old
Notes. Any Old Notes that remain outstanding after the consummation of the
Exchange Offer, together with the Exchange Notes, will be treated as a single
class of securities under the Indenture. Accordingly, all references herein to
specified percentages in aggregate principal amount of the outstanding Senior
Notes shall be deemed to mean, at any time after the Exchange Offer is
consummated, such percentage in aggregate principal amount of the Old Notes and
Exchange Notes then outstanding.
The indebtedness evidenced by the Senior Notes are senior unsecured
obligations of the Company, ranking pari passu in right of payment with all
existing and future senior indebtedness of the Company and ranking senior in
right of payment to all existing and future indebtedness of the Company that is,
by its terms, expressly subordinated to the Senior Notes.
Holders of secured indebtedness of the Company, including the lenders under
the Amended and Restated Revolving Credit Facility, will have claims with
respect to the assets constituting collateral for such indebtedness that are
prior to the claims of holders of the Senior Notes. In the event of a default on
the Senior Notes, or a bankruptcy, liquidation or reorganization of the Company,
such assets will be available to satisfy obligations with respect to the
indebtedness secured thereby before any payment therefrom could be made on the
Senior Notes. To the extent that the value of such collateral is not sufficient
to satisfy the indebtedness secured thereby, amounts remaining outstanding on
such indebtedness would be entitled to share with the Senior Notes and their
claims with respect to any other assets of the Company. As of September 30,
1997, the Company and its Restricted Subsidiaries would have had secured
indebtedness of approximately $1.7 million outstanding. The Company's and the
Guarantors' obligations under the Company's Amended and Restated Revolving
Credit Facility are secured by substantially all of the assets of the Company
and the Guarantors. On September 30, 1997, the Company had approximately $4.6
million of outstanding indebtedness under the Amended and Restated Revolving
Credit Facility and had an additional $20.4 million of undrawn availability
(which total availability may be increased to up to $75.0 million upon the
achievement of certain financial tests) thereunder. The Indenture permits the
Company and its Restricted Subsidiaries to incur additional Indebtedness,
including secured Indebtedness, subject to certain limitations.
Under certain circumstances, the Company will be able to designate current
or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries
will not be subject to the restrictive covenants set forth in the Indenture. As
of the date of the Indenture, (i) all of the Company's Subsidiaries other than
Anker Capital Corporation, Anker Alabama L.L.C., Simba Group, Inc., U.S. Coal
Sales Company, L.L.C. and Oak
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Mountain Group, Inc. and (ii) Sycamore Group, L.L.C., a joint venture in which
the Company owns a 50% interest, were Restricted Subsidiaries.
PRINCIPAL, MATURITY AND INTEREST
$125.0 million in aggregate principal amount of Senior Notes were issued in
the Offering of the Old Notes. The Senior Notes mature on October 1, 2007.
Interest on the Senior Notes accrues at the rate of 9 3/4% per annum and is
payable semi annually in arrears on April 1 and October 1, commencing on April
1, 1998, to Holders of record on the immediately preceding March 15 and
September 15, respectively. Interest on the Senior Notes accrues from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of original issuance. Interest is computed on the basis of a
360-day year comprised of twelve 30-day months. Principal, premium, if any, and
interest and Liquidated Damages, if any, on the Senior Notes is payable at the
office or agency of the Company maintained for such purpose within the City and
State of New York or, at the option of the Company, payment of interest and
Liquidated Damages, if any, may be made by check mailed to the Holders of the
Senior Notes at their respective addresses set forth in the register of Holders
of Senior Notes; provided that all payments of principal, premium, if any,
interest and Liquidated Damages, if any, with respect to Senior Notes the
Holders of which have given wire transfer instructions to the Company will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose. The Senior Notes will be issued in
denominations of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Senior Notes are jointly and
severally guaranteed (the "Subsidiary Guarantees") fully and unconditionally, on
a senior unsecured basis, by the Guarantors, each of which is wholly owned. Each
of the Guarantors has guaranteed the Company's indebtedness under the Amended
and Restated Revolving Credit Facility on a senior secured basis. The Subsidiary
Guarantee of each Guarantor is effectively subordinated to the prior payment in
full of all secured indebtedness of such Guarantors, including secured
indebtedness under the Amended and Restated Revolving Credit Facility. The
obligations of each Guarantor under its Subsidiary Guarantee will be limited so
as not to constitute a fraudulent conveyance under applicable law. See, however,
"Risk Factors--Fraudulent Conveyance Considerations."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation (other than the Company or any other Guarantor), Person or entity
unless (i) subject to the provisions described in the following paragraph, the
Person formed by or surviving any such consolidation or merger (if other than
such Guarantor) assumes all the obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Senior Notes, the Indenture, the Subsidiary Guarantee and the
Registration Rights Agreement; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; and (iii) the Company would
be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio,
immediately after giving effect to such transaction, to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the covenant described below under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under its Subsidiary
Guarantee and the Indenture; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the Indenture. See "--Repurchase at the Option of Holders--Asset Sales."
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OPTIONAL REDEMPTION
The Senior Notes are not redeemable at the Company's option prior to
October 1, 2002. Thereafter, the Senior Notes will be subject to redemption at
any time at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on October 1 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002........................................ 104.875%
2003........................................ 103.250%
2004........................................ 101.625%
2005 and thereafter......................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to October 1, 2000,
the Company may (but shall not have the obligation to) redeem, on one or more
occasions, up to an aggregate of 35% of the aggregate principal amount of Senior
Notes originally issued at a redemption price equal to 109.75% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the redemption date, with the net cash proceeds of one or more Equity
Offerings; provided that at least 65% of the aggregate principal amount of
Senior Notes originally issued remain outstanding immediately after the
occurrence of such redemption; and provided further, that such redemption shall
occur within 45 days of the date of the closing of such Equity Offering.
SELECTION AND NOTICE
If less than all of the Senior Notes are to be redeemed or repurchased in
an offer to purchase at any time, selection of Senior Notes for redemption or
repurchase will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Senior Notes
are listed, or, if the Senior Notes are not so listed, on a pro rata basis;
provided that no Senior Notes of $1,000 or less shall be redeemed or repurchased
in part. Notices of redemption or repurchase shall be mailed by first class mail
at least 30 but not more than 60 days before the redemption date or repurchase
date to each Holder of Senior Notes to be redeemed or repurchased at its
registered address. If any Senior Note is to be redeemed or repurchased in part
only, the notice of redemption or repurchase that relates to such Senior Note
shall state the portion of the principal amount thereof to be redeemed or
repurchased. A new Senior Note in principal amount equal to the unredeemed or
unrepurchased portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Senior Note. On and after the redemption or
repurchase date, interest ceases to accrue on Senior Notes or portions of them
called for redemption or repurchase.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Senior Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Senior Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof), of such Holder's Senior Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Senior Notes on the date specified in such notice, which date
shall be no earlier than 30 days and no later than 60 days from the date
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such notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by the Indenture and described in such notice. The Company
will comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Senior Notes
as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Senior
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Company. The Paying Agent will promptly mail to
each Holder of Senior Notes so tendered the Change of Control Payment for such
Senior Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book-entry) to each Holder a new Senior Note equal in
principal amount to the unpurchased portion of the Senior Notes surrendered, if
any; provided that each such new Senior Note will be in a principal amount of
$1,000 or an integral multiple thereof. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the Senior
Notes to require that the Company repurchase or redeem the Senior Notes in the
event of a takeover, recapitalization or similar transaction.
The Amended and Restated Revolving Credit Facility prohibits the Company
from purchasing any Senior Notes, and also provides that certain change of
control events with respect to the Company would constitute a default
thereunder. Any future credit agreements or other agreements to which the
Company becomes a party may contain similar restrictions and provisions. In the
event a Change of Control occurs at a time when the Company is prohibited from
purchasing Senior Notes, the Company could seek the consent of its lenders to
the purchase of Senior Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or repay
such borrowings, the Company will remain prohibited from purchasing Senior
Notes. In such case, the Company's failure to purchase tendered Senior Notes
would constitute an Event of Default under the Indenture, which would, in turn,
constitute a default under the Amended and Restated Revolving Credit Facility.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Senior Notes validly tendered and not withdrawn under such Change
of Control Offer.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act), other than to the Permitted Holders, (ii) the adoption of a
plan relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Permitted Holders, becomes the "beneficial owner" (as such term
is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, of 50% or more of the Voting Stock of the Company (measured by
voting power rather than number of shares), (iv) at any time during any period
of 12 consecutive months, the individuals who at the beginning of any such
12-month period were Continuing Directors cease to constitute a majority of the
members of the Board of Directors of the Company or (v) the Company consolidates
with, or merges with or into, any Person, other than the Permitted Holders, or
any Person, other than the Permitted Holders, consolidates with, or merges with
or into, the Company, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where the Voting
Stock of the Company outstanding immediately
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prior to such transaction is converted into or exchanged for Voting Stock (other
than Disqualified Stock) of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of such surviving or
transferee person (immediately after giving effect to such issuance).
"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"PERMITTED HOLDERS" means First Reserve Corporation, Anker Holding B.V.,
the estate of John J. Faltis, P. Bruce Sparks and any of their respective
Affiliates.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Senior Notes to require the Company
to repurchase such Senior Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the Board of Directors) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration therefor received by the Company or such Restricted
Subsidiary is in the form of (a) cash or Cash Equivalents or (b) property or
assets referred to in clause (b) or (c) of the following paragraph; provided
that the amount of (x) any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet) of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Senior Notes or any guarantee thereof)
that are assumed by the transferee of any such assets pursuant to an agreement
that releases the Company or such Restricted Subsidiary from further liability
and (y) any securities, notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are converted by the
Company or such Restricted Subsidiary into cash within 90 days after such Asset
Sale (to the extent of the cash received), shall be deemed to be cash for
purposes of this provision.
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or such Restricted Subsidiary may apply such Net Proceeds, at its
option, (a) to repay Senior Indebtedness or Guarantor Senior Indebtedness (and
to correspondingly permanently reduce commitments with respect thereto in the
case of revolving borrowings), or (b) to the acquisition of a controlling
interest in another Person primarily engaged in a Permitted Business, or (c) to
the making of a capital expenditure in a Permitted Business or the acquisition
of other long-term assets, to be used in a Permitted Business. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
Indebtedness under the Credit Facilities or invest such Net Proceeds in any
manner that is not prohibited by the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $10.0 million, the Company will be required to
make an offer to all Holders of Senior Notes (an "Asset Sale Offer") to purchase
the maximum principal amount of Senior Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate amount of Senior Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate purposes. If
the aggregate principal amount of Senior Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Senior Notes
to be
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purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any dividend or distribution in connection with any merger
or consolidation involving the Company) or to the direct or indirect holders of
the Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem
or otherwise acquire or retire for value (including, without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company; (iii)
make any principal payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is subordinated
to the Senior Notes, except a scheduled repayment of principal or a payment of
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under caption "--Incurrence of Indebtedness
and Issuance of Disqualified Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix) and
(x)) is less than the sum (without duplication) of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds and the fair market value of
marketable securities (as determined in good faith by the Company) received
by the Company from the issue or sale since the date of the Indenture of
Equity Interests of the Company (other than Disqualified Stock) or of
Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Restricted
Subsidiary of the Company, other than Disqualified Stock or convertible
debt securities that have been converted into Disqualified Stock, in each
case pursuant to the terms of such securities, and other than Equity
Interests to the extent the cash proceeds of which have been applied to the
making of Restricted Payments by virtue of clause (v)(A) of the next
succeeding paragraph), plus (iii) 100% of the aggregate net cash proceeds
and the fair market value of marketable securities (as determined in good
faith by the Company) received by the Company as an equity contribution
from a holder or holders of Equity Interests of the Company (other than
Disqualified Stock), plus (iv) to the extent that any Restricted Investment
that was made after the date of the Indenture is sold or otherwise
liquidated or repaid, the aggregate amount of cash and the fair market
value of marketable securities (as determined in good faith by the
Company), received as the return of capital with respect to such Restricted
Investment (less the cost of disposition, if any), plus (v) the amount
resulting from redesignations of Unrestricted Subsidiar-
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ies, such amount not to exceed the amount of Investments made by the
Company or any Restricted Subsidiary in such Unrestricted Subsidiary since
the date of the Indenture that was treated as a Restricted Payment under
the Indenture, plus (vi) the amount of the net reduction in Investments in
Unrestricted Subsidiaries resulting from the payment of cash dividends
received by the Company or any Restricted Subsidiary of the Company from
such Unrestricted Subsidiaries, plus (vii) $5.0 million.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Company) of, other Equity
Interests of the Company (other than any Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (c)(ii) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase or other acquisition of Subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the
payment of any dividend by a Subsidiary of the Company to the holders of its
common Equity Interests on a pro rata basis; (v) the repurchase, retirement or
other acquisition or retirement for value of common Equity Interests of the
Company held by any future, present or former employee or director of the
Company or any of the Company's Restricted Subsidiaries or the estate, heirs or
legatees of, or any entity controlled by, any such employee or director,
pursuant to any management equity plan or stock option plan or any other
management or employee benefit plan or agreement in connection with the
termination of such person's employment for any reason (including by reason of
death or disability); provided, however, that the aggregate Restricted Payments
made under this clause (v) does not exceed in any calendar year $2.5 million
(with unused amounts in any calendar year being carried over to succeeding
calendar years subject to a maximum (without giving effect to the following
proviso) of $7.5 million in any calendar year); provided further that such
amount in any calendar year may be increased by an amount not to exceed (A) the
cash proceeds received by the Company from the sale of Equity Interests of the
Company to members of management or directors of the Company and its Restricted
Subsidiaries that occurs after the Issue Date (to the extent the cash proceeds
from the sale of such Equity Interests have not otherwise been applied to the
payment of Restricted Payments by virtue of the preceding paragraph (c)), plus
(B) the cash proceeds of key man life insurance policies received by the Company
and its Restricted Subsidiaries after the Issue Date, less (C) the amount of any
Restricted Payments previously made pursuant to clauses (A) and (B) of this
subparagraph (v); (vi) so long as no Default or Event of Default shall have
occurred and be continuing, the declaration and payment of dividends to the
extent permitted thereby on, and the making of scheduled mandatory redemptions
commencing on May 31, 2006 of, the Company's Class A Preferred Stock, par value
$2,500 per share (the "Class A Preferred Stock"), in accordance with the terms
thereof as in effect on the Issue Date; (vii) in the event of a Change of
Control under the Indenture, the making of mandatory redemptions on the
Company's Class A Preferred Stock and the Company's Class B Preferred Stock, par
value $1,000 per share, in each case in accordance with the terms of the change
of control provisions thereof as in effect on the Issue Date; provided, however,
that (A) no such redemption shall be made until after the applicable Change of
Control Payment Date and (B) on the applicable Change of Control Payment Date no
restrictions shall exist on the repurchase of Senior Notes pursuant to a Change
of Control Offer; (viii) the declaration and payment of dividends on, and the
making of scheduled mandatory redemptions of, the Company's Coal Acquisition
Preferred Stock in accordance with the terms thereof; (ix) so long as no Default
or Event of Default shall have occurred and be continuing, the declaration and
payment of dividends to holders of any such class or series of Disqualified
Stock of the Company issued in accordance with the covenant entitled
"--Incurrence of Indebtedness and Issuance of Disqualified Stock", (x)
repurchases of Equity Interests deemed to occur upon exercise of stock options
if such Equity Interests represent a portion of the exercise price of such
options; and (xi) so long as no Default or Event of Default shall have occurred
and be continuing, the payment of dividends on the Company's Common Stock,
following the first public offering of the Company's Common Stock after the
Issue Date, of up to 6% per annum of the net proceeds received by the Company in
such public offering, other than public offerings with respect to the
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Company's Common Stock registered on Form S-8 in connection with employee
benefit plans or Form S-4 in connection with an acquisition.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation is permitted by this covenant and
otherwise would not cause a Default. For purposes of making such determination,
all outstanding Investments by the Company and its Restricted Subsidiaries
(except to the extent repaid in cash) in the Subsidiary so designated will be
deemed to be Restricted Payments at the time of such designation and will reduce
the amount available for Restricted Payments under the first paragraph of the
covenant. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the fair market value of such Investments at
the time of such designation. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be based on the good faith determination of
the Board of Directors. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "--Restricted Payments"
were computed.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not, and will
not permit any of its Restricted Subsidiaries to issue any shares of
Disqualified Stock; provided, however, that the Company or any Guarantor may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2.00 to 1, if such
incurrence or issuance is on or prior to the second anniversary of the Issue
Date or 2.25 to 1, if such incurrence or issuance is thereafter, in each case,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The Indenture also provides that neither the Company and nor any Guarantor
will incur any Indebtedness (other than Existing Indebtedness) that is
contractually subordinated to any other Indebtedness of the Company or such
Guarantor, respectively, unless such Indebtedness is also contractually
subordinated to the Senior Notes or the Subsidiary Guarantee of such Guarantor,
respectively, on substantially identical terms; provided, however, that no
Indebtedness of the Company or any Guarantor shall be deemed to be contractually
subordinated to any other Indebtedness of the Company or such Guarantor,
respectively, solely by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company (and the guarantee thereof by
Guarantors) of Indebtedness and letters of credit (with letters of credit
being deemed to have a principal amount equal to the maximum potential
liability of the Company and the Guarantors thereunder) under all Credit
Facilities; provided that the aggregate principal amount of all
Indebtedness and letters of credit outstanding under all Credit Facilities
after giving effect to such incurrence, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (i), does not exceed an
amount equal to the greater of (A) $40.0 million and (B) the amount
permitted by the terms thereof to be borrowed thereunder up to a maximum of
$75.0 million, less the aggregate amount of
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all Net Proceeds of Asset Sales applied to repay any such Indebtedness (or
any such Permitted Refinancing Indebtedness) pursuant to the covenant
described above under the caption "--Asset Sales";
(ii) the incurrence by the Company and the Guarantors of Existing
Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Senior Notes and the incurrence by the Guarantors of the Subsidiary
Guarantees;
(iv) the incurrence by the Company or any of the Guarantors of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price, lease or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Guarantor, in an aggregate principal amount
not to exceed $5.0 million at any time outstanding;
(v) the incurrence by the Company or any of the Guarantors of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinancing or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred;
(vi) the incurrence by the Company or any of the Guarantors of
intercompany Indebtedness between or among the Company and any of the
Guarantors; provided, however, that (i) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Senior Notes
and (ii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Guarantor and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Guarantor
shall be deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Guarantor, as the case may be;
(vii) incurrence by the Company or any of the Guarantors of Hedging
Obligations;
(viii) Indebtedness incurred in respect of performance, surety and
similar bonds and completion guarantees provided by the Company or any
Restricted Subsidiary in the ordinary course of business;
(ix) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt; provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company;
(x) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Guarantor of the Company that was
permitted to be incurred by another provision of this covenant; and
(xi) the incurrence by the Company or any of the Guarantors of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (xi), not to exceed $10.0
million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xi) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest, the accretion of accreted
value and the payment of interest in the form of additional Indebtedness will
not be deemed to be an incurrence of Indebtedness for purposes of this covenant.
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LIENS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien securing Indebtedness or trade payables on any asset
now owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens, unless the
Senior Notes are secured equally and ratably with (or prior to in the case of
Subordinated Indebtedness) the obligation or liability secured by such Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
consensual restriction on the ability of any Restricted Subsidiary to (i)(a) pay
dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (b) pay any
indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii)
make loans or advances to the Company or any of its Restricted Subsidiaries or
(iii) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Amended and Restated Revolving Credit Facility as in effect
as of the date of the Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are no more restrictive with respect to such dividend and other
payment restrictions than those contained in the Amended and Restated Revolving
Credit Facility as in effect on the date of the Indenture, (c) the Indenture and
the Senior Notes, (d) applicable law, rules or regulations, or any order or
ruling by a governmental authority, (e) any instrument of a Person acquired by
the Company or any of its Restricted Subsidiaries as in effect at the time of
such acquisition (but not created in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (f) customary non-assignment provisions in leases, licenses,
encumbrances, contracts or similar agreements entered into or acquired in the
ordinary course of business, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) on the property so acquired, (h) contracts for
the sale of assets, including, without limitation, customary restrictions with
respect to a Subsidiary pursuant to an agreement that has been entered into for
the sale or disposition of all or substantially all of the Capital Stock or
assets of such Subsidiary, (i) restrictions on cash or other deposits imposed by
customers under contracts entered into in the ordinary course of business, (j)
customary provisions in joint venture agreements at the time of creation of such
joint venture and other similar agreements entered into in the ordinary course
of business; and (k) any encumbrances or restrictions of the type referred to in
clauses (i), (ii) and (iii) above imposed by any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of the contracts, instruments or obligations referred to in clauses
(a) through (j) above, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are, in the good faith judgment of the Company's Board of
Directors, no more restrictive with respect to such dividend and other payment
restrictions than those contained in the dividend or other payment restrictions
prior to such amendment, modification, restatement, renewal, increase,
supplement, refunding, replacement or refinancing.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or
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entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Senior
Notes and the Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately after such transaction
no Default or Event of Default exists; and (iv) except in the case of a merger
of the Company with or into a Wholly Owned Subsidiary of the Company, the
Company or the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made will, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Disqualified Stock." Notwithstanding the foregoing clause (iv), (a)
any Restricted Subsidiary may consolidate with, merge into or transfer all or
part of its properties and assets to the Company and (b) the Company may merge
with an Affiliate incorporated solely for the purpose of reincorporating the
Company in another State of the United States so long as the amount of
Indebtedness of the Company and its Restricted Subsidiaries is not increased
thereby.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to or Investment in, or
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction") unless (i) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to
the Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view issued by an Independent Financial Advisor.
The foregoing provisions will not apply to the following: (i) any
employment agreement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business of the Company or such
Restricted Subsidiary; (ii) transactions between or among the Company and/or its
Restricted Subsidiaries; (iii) Restricted Payments that are permitted by the
provisions of the Indenture described above under the caption "--Restricted
Payments": (iv) the payment of reasonable and customary fees paid to, and
indemnity provided on behalf of, officers, directors or employees of the Company
or any Restricted Subsidiary; (v) transactions in which the Company or any of
its Restricted Subsidiaries, as the case may be, delivers to the Trustee a
letter from an Independent Financial Advisor stating that such transaction meets
the requirements of clause (i) of the preceding paragraph; (vi) loans to
employees which are approved by a majority of the Board of Directors of the
Company in good faith; (vii) any agreement as in effect as of the Issue Date or
any amendment thereto (so long as any such amendment is no less favorable to the
holders of the Senior Notes in any material respect than the original agreement
as in effect on the Issue Date) or any transaction contemplated thereby; (viii)
the existence of, or the performance by the Company or any of its Restricted
Subsidiaries of its obligations under the terms of, the Stockholders' Agreement,
dated as of August 12, 1996, as in effect on the Issue Date, and any similar
agreements which it may enter into thereafter; provided, however, that the
existence of, or the performance by the Company or any of its Restricted
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Subsidiaries of obligations under any future amendment to any such existing
agreement or under any similar agreement entered into after the Issue Date shall
only be permitted by this clause (viii) so long as the terms of any such
amendment or new agreement are no less favorable to the holders of the Senior
Notes in any material respect than the original agreement as in effect on the
Issue Date; and (ix) coal supply agreements with Anker Holding B.V. and its
Affiliates in the ordinary course of business and otherwise in compliance with
the terms of the Indenture which comply with the requirements of clause (i) of
the preceding paragraph.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses, except to such extent as would not be
material to the Company and its Subsidiaries taken as a whole.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Senior Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Senior Notes unless such consideration is
offered to be paid or is paid to all Holders of the Senior Notes that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall acquire or create another Restricted Subsidiary (other than a
Foreign Subsidiary) after the date of the Indenture, then such newly acquired or
created Restricted Subsidiary (other than a Foreign Subsidiary) shall execute a
Subsidiary Guarantee and deliver an opinion of counsel, in accordance with the
terms of the Indenture.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Senior Notes are outstanding, the Company will furnish to the
Holders of Senior Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
the Company and its consolidated Subsidiaries and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports, in
each case within the time periods set forth in the Commission's rules and
regulations. In addition, whether or not required by the rules and regulations
of the Commission, at any time after the effectiveness of the Exchange Offer
contemplated by the Registration Rights Agreement, the Company will file a copy
of such information and report with the Commission for public availability
within the time periods set forth in the Commission's rules and regulations
(unless the Commission will not accept such a filing). In addition, the Company
and the Guarantors have agreed that, until the effectiveness of the registration
statement relating to the Exchange Offer pursuant to the Registration Rights
Agreement, they will furnish to the Holders and to prospective investors, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default; (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Senior Notes; (ii) default in
payment when due of the principal of or premium, if any, on the Senior Notes;
(iii) failure by the Company or any of its Restricted Subsidiaries to comply
with the provisions described under the captions
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"--Repurchase at the Option of the Holders--Change of Control," "--Repurchase at
the Option of the Holders--Asset Sales" or "--Certain Covenants--Merger,
Consolidation or Sale of Assets"; (iv) failure by the Company or any of its
Restricted Subsidiaries for 60 days after notice by the Trustee or by the
Holders of at least 25% of Senior Notes then outstanding to comply with any of
its other agreements in the Indenture or the Senior Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries), other than
Indebtedness owed to the Company or a Restricted Subsidiary, whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness,
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $5.0 million or more; (vi) failure by
the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $5.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days (net of applicable insurance coverage which is acknowledged in
writing by the insurer); (vii) except as permitted by the Indenture, any
Subsidiary Guarantee by a Significant Subsidiary or any Subsidiaries that, taken
together, would constitute a Significant Subsidiary shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Guarantor that is a Significant Subsidiary
or any Guarantors that taken together would constitute a Significant Subsidiary,
or any Person acting on behalf of any such Guarantor or Guarantors, shall deny
or disaffirm its obligations under its Subsidiary Guarantee; and (viii) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior Notes
may declare all the Senior Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Guarantor constituting a Significant Subsidiary or any group of Guarantors that,
taken together, would constitute a Significant Subsidiary, all outstanding
Senior Notes will become due and payable without further action or notice.
Holders of the Senior Notes may not enforce the Indenture or the Senior Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Senior Notes may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Senior Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Senior Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Senior Notes, the Indenture or the Subsidiary Guarantee or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of Senior Notes by accepting a Senior Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Senior Notes. Such waiver may not be effective to waive liabilities under
the federal securities laws and it is the view of the Commission that such a
waiver is against public policy.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding Senior Notes ("Legal Defeasance") except for (i) the rights of
Holders of outstanding Senior Notes to receive payments in respect of the
principal of, premium, if any, and interest and Liquidated Damages, if any, on
such Senior Notes when such payments are due from the trust referred to below,
(ii) the Company's obligations with respect to the Senior Notes concerning
issuing temporary Senior Notes, registration of Senior Notes, mutilated,
destroyed, lost or stolen Senior Notes and the maintenance of an office or
agency for payment and money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Senior Notes. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Senior Notes, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages, if any, on the outstanding Senior Notes on the stated
maturity or on the applicable redemption date, as the case may be, and the
Company must specify whether the Senior Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Senior Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred; (iii) in
the case of Covenant Defeasance, the Company shall have delivered to the Trustee
an opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Senior Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the borrowing of funds to be applied
to such deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Senior Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for in the Indenture relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
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TRANSFER AND EXCHANGE
A Holder may transfer or exchange Senior Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Senior Note selected for redemption. Also, the Company is not required to
transfer or exchange any Senior Note for a period of 15 days before a selection
of Senior Notes to be redeemed.
The registered Holder of a Senior Note will be treated as the owner of it
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture,
the Subsidiary Guarantees or the Senior Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Senior Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Senior Notes), and any existing default or compliance with any provision of
the Indenture, the Subsidiary Guarantees or the Senior Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Senior Notes (including consents obtained in connection with a
tender offer or exchange offer for Senior Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Senior Notes held by a non-consenting Holder): (i) reduce
the principal amount of Senior Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Senior Note or alter the provisions with respect to the redemption of the
Senior Notes (other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holder"), (iii) reduce the rate
of or change the time for payment of interest on any Senior Note, (iv) waive a
Default or Event of Default in the payment of principal of or premium, if any,
or interest on the Senior Notes (except a rescission of acceleration of the
Senior Notes by the Holders of at least a majority in aggregate principal amount
of the Senior Notes and a waiver of the payment default that resulted from such
acceleration), (v) make any Senior Note payable in money other than that stated
in the Senior Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of holders of Senior Notes to
receive payments of principal of or premium, if any, or interest on the Senior
Notes, (vii) waive a redemption payment with respect to any Senior Note (other
than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders"), (viii) release any Guarantor
from any of its obligations under its Subsidiary Guarantee or the Indenture, or
amend the provisions of the Indenture relating to the release of Guarantors, or
(ix) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Senior
Notes, the Company, the Guarantors and the Trustee may amend or supplement the
Indenture, the Subsidiary Guarantees or the Senior Notes to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Senior Notes in addition
to or in place of certificated Senior Notes, to provide for the assumption of
the Company's or a Guarantor's obligations to Holders of Senior Notes in the
case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of Senior Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
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The Holders of a majority in principal amount of the then outstanding
Senior Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Senior Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
BOOK-ENTRY DELIVERY AND FORM
The certificates representing the Exchange Notes will be issued in fully
registered form. Except as described in the next paragraph, the Exchange Notes
initially will be represented by a single, permanent global Exchange Note, in
definitive, fully registered form without interest coupons (the "Global Exchange
Note") and will be deposited with the Trustee as custodian for The Depository
Trust Company, New York, New York ("DTC") and registered in the name of a
nominee of DTC.
Exchange Notes held by persons who elect to take physical delivery of their
certificates instead of holding their interest through the Global Exchange Note
(collectively referred to herein as the "Non-Global Holders") will be issued in
registered certificated form (a "Certificated Exchange Note"). Upon the transfer
of any Certificated Exchange Note initially issued to a Non-Global Holder, such
Certificated Exchange Note will, unless the transferee requests otherwise or a
Global Exchange Note has previously been exchanged in whole for Certificated
Exchange Notes, be exchanged for an interest in such Global Exchange Note.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provision of Section 17A of the Exchange Act. DTC was created to hold securities
for its participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Upon the issuance of the Global Exchange Note, DTC or its custodian will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Exchange Note to the
accounts of persons who have accounts with such depositary. Such accounts
initially will be designated by or on behalf of the Initial Purchasers.
Ownership of beneficial interests in the Global Exchange Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in the Global
Exchange Note will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants).
So long as DTC or its nominee is the registered owner or holder of the
Global Exchange Note, DTC or such nominee, as the case may be, will be
considered the sole record owner or holder of the Exchange Notes represented by
such Global Exchange Note for all purposes under the Indenture and the Exchange
Notes. No beneficial owners of an interest in the Global Exchange Note will be
able to transfer that interest except in accordance with DTC's applicable
procedures.
The Company understands that, under existing industry practices, in the
event that the Company requests any action of Holders, or an owner of a
beneficial interest in such permanent Global Exchange Note desires to give or
take any action (including a suit for repayment of principal, premium or
interest) that a Holder is entitled to give or take under the Notes, DTC would
authorize the participants holding the relevant beneficial
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interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instruction of beneficial owners owning through
them.
Payments of the principal of, premium, if any, and interest on the Global
Exchange Note will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither the Company, the Trustee, nor any paying agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Exchange Note or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global Exchange Note
will credit participants' accounts with payments in amounts proportionate to
their respective beneficial ownership interests in the principal amount of such
Global Exchange Note, as shown on the records of DTC or its nominee. The Company
also expects that payments by participants to owners of beneficial interests in
such Global Exchange Note held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a Holder requires physical delivery of
Certificated Exchange Notes for any reason, including to sell Exchange Notes to
persons in states which require such delivery of such Exchange Notes or to
pledge such Exchange Notes, such holder must transfer its interest in the Global
Exchange Note, in accordance with the normal procedures of DTC and the
procedures set forth in the Indenture.
Neither the Company nor the Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Subject to certain conditions, any person having a beneficial interest in
the Global Exchange Note may, upon request to the Trustee, exchange such
beneficial interest for Exchange Notes in the form of Certificated Exchange
Notes. Upon any such issuance, the Trustee is required to register such
Certificated Exchange Notes in the name of, and cause the same to be delivered
to, such person or persons (or the nominee of any thereof). In addition, if DTC
is at any time unwilling or unable to continue as a depositary for the Global
Exchange Note and a successor depositary is not appointed by the Company within
90 days, the Company will issue Certificated Exchange Notes in exchange for the
Global Exchange Note.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
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"AMENDED AND RESTATED REVOLVING CREDIT FACILITY" means that certain credit
facility, to be entered into on or prior to the Issue Date, by and among the
Company and The Chase Manhattan Bank, as agent, and the lenders' party thereto,
including any related notes, guarantees, collateral documents, instruments,
agreements executed in connection therewith, and in each case as amended,
extended, modified, renewed, refunded, replaced or refinanced from time to time.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of (A) a sale and
leaseback or (B) a Contract Settlement) other than in the ordinary course of
business (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company and its Subsidiaries taken as
a whole will be governed by the provisions of the Indenture described above
under the caption "--Redemption at the Option of Holders--Change of Control"
and/or the provisions described above under the caption "--Certain
Covenants--Merger, Consolidation or Sale of Assets" and not by the provisions of
the Asset Sale covenant), and (ii) the issue or sale by the Company or any of
its Restricted Subsidiaries of Equity Interests of any of the Company's
Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions that have a fair market
value (as determined in good faith by the Board of Directors) in excess of $1.0
million or for net cash proceeds in excess of $1.0 million. Notwithstanding the
foregoing: (i) a transfer of assets by the Company to a Guarantor or by a
Guarantor to the Company or to another Guarantor, (ii) an issuance of Equity
Interests by a Guarantor to the Company or to another Guarantor, (iii) a
Restricted Payment that is permitted by the covenant described above under the
caption "--Certain Covenants-- Restricted Payments," (iv) a disposition of Cash
Equivalents; (v) a disposition in the ordinary course of business of either
obsolete equipment or equipment otherwise no longer useful in the business; (vi)
any sale of Equity Interests in, or Indebtedness or other securities of, an
Unrestricted Subsidiary and (vii) any sale and leaseback of an asset within 90
days after the completion of construction or acquisition of such asset shall not
be considered an Asset Sale.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the full faith and credit of the
United States government or any agency or instrumentality thereof having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the Amended and Restated Revolving Credit Facility or
with any domestic commercial bank having capital and surplus in excess of $500.0
million and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") and
in each case maturing within six months after the date of acquisition, (vi)
investment funds investing substantially all of their assets in securities of
the types described in clauses (i)-(v) above and (vii) readily marketable direct
obligations issued by any state of the United States of America or any political
subdivision thereof having one of the two highest rating categories obtainable
from either Moody's or S&P.
"COAL ACQUISITION PREFERRED STOCK" means preferred stock which (i) is
issued to a seller of coal properties or assets or the entire equity interest in
a Person owning such properties or assets, as part of the consideration or
financing of the acquisition thereof and (ii) provides for the payment of
dividends in an
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amount not to exceed a percentage of the revenues from coal production of the
properties or assets referred to in clause (i), which percentage is determined
in good faith by the Board of Directors of the Company to yield, together with
any other consideration paid by the Company therefor an aggregate purchase price
that is fair to the Company. For purposes of the Indenture, the Company's Class
C Preferred Stock, par value $13,000 per share, and Class D Preferred Stock, par
value $7,000 per share, each as in effect on the Issue Date, are each Coal
Acquisition Preferred Stock.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), to the extent that any
such expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, depletion and amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, minus (v) non-cash revenues
increasing such Consolidated Net Income for such period (excluding any non-cash
income to the extent it represents an accrual of cash revenues in any future
period), in each case, on a consolidated basis and determined in accordance with
GAAP. Notwithstanding the foregoing, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash charges
of, a Subsidiary of a Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent (and in the same proportion)
that the Net Income of such Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
such Subsidiary without prior approval (that has not been obtained), pursuant to
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash (or to the extent converted into cash) to the referent Person or a Wholly
Owned Restricted Subsidiary thereof, (ii) the Net Income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of its Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders unless waived), (iii) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded, (iv) the cumulative
effect of a change in accounting principles shall be excluded and (v) any net
after-tax extraordinary gains or losses shall be excluded.
"CONTRACT SETTLEMENT" means the termination (direct or indirect, in one
transaction or a series of transactions), for which the Company or any of its
Restricted Subsidiaries receives any cash consideration, of any agreement under
which the Company or any of its Restricted Subsidiaries is to sell coal.
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"CREDIT FACILITIES" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Amended and Restated Revolving
Credit Facility) or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, term loans or
letters of credit, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Senior Notes mature.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EQUITY OFFERING" means any public or private offering of common stock by
the Company other than (i) issuances of Disqualified Stock, (ii) issuances in
payment of or to finance the purchase price of an acquisition or (iii) issuances
of common stock pursuant to employee benefit plans of the Company or otherwise
as compensation to employees of the Company.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Amended and Restated Revolving
Credit Facility) in existence on the date of the Indenture, until such amounts
are repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or banker's acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is Guaranteed by such person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon)
and (iv) the product of (a) all cash dividend payments, on any series of
preferred stock of such Person or any of its Restricted Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests (other
than Disqualified Stock) of the Company, times (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current combined
federal, state and local effective tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio for the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the Company or
any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues or redeems
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions and Investments that have been made by the Company or any of
its Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period
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and Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"FOREIGN SUBSIDIARY" means a Restricted Subsidiary that is incorporated in
a jurisdiction other than the United States or a state thereof or the District
of Columbia and with respect to which more than 80% of any of its sales,
earnings or assets (determined on a consolidated basis in accordance with GAAP)
are located in, generated from or derived from operations located in territories
outside the United States of America and jurisdictions outside the United States
of America.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accounts and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"GUARANTORS" means each of the Subsidiaries of the Company that executes a
Subsidiary Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
"GUARANTOR SENIOR INDEBTEDNESS" means all Indebtedness of a Guarantor other
than Guarantor Subordinated Indebtedness.
"GUARANTOR SUBORDINATED INDEBTEDNESS" means all Indebtedness of a Guarantor
that is subordinated in right of payment to the Guarantee of such Guarantor.
"HEDGING OBLIGATIONS" means with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements with respect to Indebtedness that
is permitted by the terms of the Indenture and (ii) other agreements or
arrangements designed to protect such Person against fluctuation in interest
rates or the value of foreign currencies purchased or received by such Person in
the ordinary course of business.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit or
reimbursement agreements in respect thereof (other than letters of credit
securing obligations not constituting Indebtedness that are issued in the
ordinary course of business by a Person to the extent not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit) or bankers' acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness that does not require current payment
of interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
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"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal or
investment banking firm of national standing, which does not have any financial
interest in the Affiliate Transaction upon which it is opining.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or such other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "--Certain Covenants--Restricted Payments."
"ISSUE DATE" means the date on which the Senior Notes are originally
issued.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any extraordinary
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss); provided further, that in determining Consolidated Net Income for the
purpose of the covenant described under the caption "--Certain
Covenants--Limitation on Restricted Payments" only, items (i) and (ii) shall not
be so excluded.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), or, in the case of a
Contract Settlement, 65% of such aggregate cash proceeds, net of the direct
costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sale commissions) and any relocation
expenses incurred as a result thereof, taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements), amounts required to be applied to the repayment of
Indebtedness (other than Indebtedness under the Credit Facilities) secured by a
Lien on the asset or assets that were the subject of such Asset Sale and any
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), as reflected in the express terms of the instrument governing such
Indebtedness, or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any Indebtedness (other than the
Senior Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
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"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PERMITTED BUSINESS" means coal producing, coal mining, coal brokering or
mine development, or any business that is reasonably similar thereto or a
reasonable extension, development or expansion thereof or ancillary thereto
(including ash disposal and/or environmental remediation).
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Guarantor; (b) any Investment in Cash Equivalents; (c) any Investment by the
Company or any Guarantor in a Person, if as a result of such Investment (i) such
Person becomes a Guarantor or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Guarantor; (d) any Investment
made as a result of the receipt of non-cash consideration from an Asset Sale
that was made pursuant to and in compliance with the covenant described above
under the caption "--Repurchase at the Option of Holders--Asset Sales"; (e) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Company; (f) any Investment existing on
the Issue Date; (g) any Investment acquired by the Company or any of its
Restricted Subsidiaries (A) in exchange for any other Investment or accounts
receivable held by the Company or any such Restricted Subsidiary in connection
with or as a result of a bankruptcy, workout, reorganization or recapitalization
of the issuer of such other Investment or accounts receivable or (B) as a result
of the transfer of title with respect to any secured investment in default as a
result of a foreclosure by the Company or any of its Restricted Subsidiaries
with respect to such secured Investment; (h) Hedging Obligations permitted under
the "--Certain Covenants; Limitation of Incurrence of Indebtedness and Issuance
of Disqualified Stock" covenant; (i) loans and advances to officers, directors
and employees for business-related travel expenses, moving expenses and other
similar expenses, in each case, incurred in the ordinary course of business; (j)
any guarantees permitted to be made pursuant to the covenant entitled "Certain
Covenants--Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock"; and (k) other Investments in any Person (including, without
limitation, Investments in Unrestricted Subsidiaries) primarily engaged in a
Permitted Business having an aggregate fair market value (measured on the date
each such Investment was made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to this
clause (k) that are at the time outstanding, not to exceed $10.0 million.
"PERMITTED LIENS" means (i) Liens on assets of the Company or any of its
Subsidiaries securing Senior Indebtedness that was permitted by the terms of the
Indenture to be incurred (including pursuant to the Credit Facilities); (ii)
Liens in favor of the Company; (iii) Liens on property of a Person existing at
the time such Person is merged into or consolidated with the Company or any
Subsidiary of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory or regulatory obligations, leases, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (vi) Liens to secure Indebtedness (including
Capital Lease Obligations) permitted by clause (iv) of the second paragraph of
the covenant entitled "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Disqualified Stock" covering only the assets acquired with such
Indebtedness; (vii) Liens existing on the date of the Indenture; (viii) Liens
for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (ix) Liens incurred in the ordinary course of business of
the Company or any Subsidiary of the Company with respect to obligations that do
not exceed $5.0 million at any one time outstanding and that (a) are not
incurred in connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary course of business) and (b)
do not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Company or
such Subsidiary; (x) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries; and (xi) Liens on assets of
Guarantors to secure Guarantor Senior Indebtedness of such Guarantors that was
permitted by the Indenture to be incurred.
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"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith including
premiums paid, if any, to the holders thereof); (ii) such Permitted Refinancing
Indebtedness has a final maturity date at or later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Senior Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Senior Notes on terms at least
as favorable to the Holders of Senior Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary. Notwithstanding the definition of
"Subsidiary" herein, Sycamore Group, L.L.C. shall be deemed to be a Restricted
Subsidiary on the Issue Date for all purposes hereunder; except that such entity
shall not be required to be a Guarantor of the Senior Notes pursuant to the
covenant entitled "Additional Subsidiary Guarantees" until such time as it
satisfies the first sentence of this definition of "Restricted Subsidiary."
"SENIOR INDEBTEDNESS" means all Indebtedness of the Company other than
Subordinated Indebtedness.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBORDINATED INDEBTEDNESS" means all Indebtedness of the Company that is
subordinated in right of payment to the Senior Notes.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"SUBSIDIARY GUARANTEE" means, individually and collectively, the Guarantees
given by the Guarantors pursuant to the Indenture, including a notation in the
Senior Notes substantially in the form attached to the Indenture as an exhibit.
"UNRESTRICTED SUBSIDIARY" means (i) Anker Capital Corporation,
Anker-Alabama, L.L.C., Simba Group, Inc., U.S. Coal Sales Company, LLC and Oak
Mountain Group, Inc., and (ii) any other Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such other Subsidiary: (a) has no Indebtedness other
than Non-Recourse Debt; (b) is
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not party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; and (d)
has not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described above under the caption "--Certain Covenants--Restricted
Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the
conditions referred to above as an Unrestricted Subsidiary, it shall thereafter
cease to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Disqualified Stock," the Company shall be in default of such covenant). The
Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock," calculated on a pro forma
basis as if such designation had occurred at the beginning of the four-quarter
reference period, and (ii) no Default or Event of Default would be in existence
following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following description of certain material provisions of certain
indebtedness of the Issuer does not purport to be complete, and is subject to,
and is qualified in its entirety by reference to, the forms of such instruments,
copies of which may be obtained as described under "Available Information."
AMENDED AND RESTATED REVOLVING CREDIT FACILITY
The Amended and Restated Revolving Credit Facility is provided by a
syndicate of banks and other financial institutions (the "Lenders") for which
The Chase Manhattan Bank acts as administrative agent (the "Administrative
Agent"), and Chase Securities Inc., acts as arranger. The Amended and Restated
Revolving Credit Facility provides for revolving borrowings of up to $75
million, subject to certain reductions based on certain financial performance
tests. The commitments under the Amended and Restated Revolving Credit Facility
will be reduced to $67.5 million on the third anniversary of the closing date of
the Offering of the Old Notes (the "Closing Date"), to $60 million on the fourth
anniversary of the Closing Date and $50 million on the fifth anniversary of the
Closing Date; provided, however, that at the Company's request not less than 30
and not more than 60 days prior to any such anniversary, any lender may elect
not to require its pro rata share of any such reduction. The commitments under
the Amended and Restated Revolving Credit Facility will terminate on the sixth
anniversary of the Closing Date.
The interest rate under the Amended and Restated Revolving Credit Facility
will be, for the period from the Closing Date through March 31, 1998, LIBOR plus
1.75% or ABR plus 0.75%, at the option of the Company. Thereafter, the interest
rate will be, subject to change based on the ratio of (i) total indebtedness
minus the amount of cash and permitted investments of the Company and the
Restricted Subsidiaries to (ii) EBITDA (the "net leverage ratio") of the
Company, in a range of LIBOR plus 1.00% to 2.50% or ABR to ABR plus 1.50%, the
type of borrowing to be determined at the option of the Company. The Company may
elect interest periods of one, two, three or six months (or nine or 12 months,
to the extent available under the Amended and Restated Revolving Credit
Facility) for LIBOR borrowings. ABR is the highest of (i) the Administrative
Agent's Prime Rate and (ii) the Federal Funds Effective Rate plus one-half of
1.0%. LIBOR will at all times include statutory reserves to the extent actually
incurred.
For the period from the Closing Date through March 31, 1998, the Company
will pay a commitment fee at a rate equal to 0.375% per annum on the undrawn
portion of the commitments in respect of the Amended and Restated Revolving
Credit Facility, which began to accrue on the Closing Date, payable quarterly in
arrears. Thereafter, the Company will pay a commitment fee based on the net
leverage ratio of the Company in a range equal to 0.25% to 0.50% per annum on
the undrawn portion of the commitments in respect of the Amended and Restated
Revolving Facility, payable quarterly in arrears.
The Amended and Restated Revolving Credit Facility contains provisions
under which commitment fees and interest rates for the Amended and Restated
Revolving Credit Facility will be adjusted in increments based on the
achievement of certain financial performance goals.
Voluntary prepayments and Amended and Restated Revolving Credit Facility
commitment reductions are permitted in whole or in part at the option of the
Issuer, in minimum principal amounts, without premium or penalty, subject to
reimbursement of certain of the Lenders' costs under certain conditions.
The Amended and Restated Revolving Credit Facility provides that the
Company must meet or exceed a net interest coverage ratio and must not exceed
the net leverage ratio. The Amended and Restated Revolving Credit Facility also
contains customary covenants including but not limited to the delivery of
financial statements, reports, notices, and other information, access to
information and properties, maintenance of insurance, payment of taxes,
maintenance of properties, nature of business, corporate existence and rights,
compliance with applicable laws, prohibitions on fundamental changes,
limitations on investments, minimum shareholders equity, limitations on capital
expenditures in excess of $15 million, certain restrictions relating to
Subsidiary Guarantors, transactions with affiliates, use of proceeds,
limitations on indebtedness, limitations on liens, limitations on dividends and
other distributions and limitations on debt payments, including prepayment or
redemption of the Senior Notes.
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The Amended and Restated Revolving Credit Facility permits dividend
payments on the Class A Preferred Stock after August 12, 2001, provided that no
Event of Default (as defined therein) exists or would result therefrom and the
Fixed Charges Ratio (as defined therein) is greater than 1.25 to 1.00 on a pro
forma basis. On such date, there would be approximately $7.7 million of accrued
and unpaid dividends on the Class A Preferred Stock.
The Amended and Restated Revolving Credit Facility includes customary
events of default.
On December 26, 1997, the Company, the Guarantors, the Lenders and The
Chase Manhattan Bank, as administrative agent, entered into an amendment to the
Amended and Restated Revolving Credit Facility which (i) increased the net
leverage ratio for the period from October 1, 1997 through September 30, 1998,
(ii) reduced the net interest coverage ratio for the period from January 1, 1998
through September 30, 1998 and (iii) established a limit on the amount of
capital expenditures in 1998 and reduced the amount of such expenditures with
respect to reserves acquired after the closing of the Amended and Restated
Revolving Credit Facility. In addition, the amendment increased (i) the interest
rate on borrowings (a) for the period from January 1, 1998 through March 31,
1998, to LIBOR plus 2.75% or ABR plus 1.75%, and (b) thereafter, to a range of
LIBOR plus 1.00% to 3.00% or ABR to ABR plus 2.00%, depending on the net
leverage ratio, and (ii) increased the commitment fee (a) for the period from
January 1, 1998 through March 31, 1998, to 0.5% per annum, and (b) thereafter,
to a range of 0.25% to 0.50%, depending on the net leverage ratio.
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<PAGE> 105
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock does not purport
to be complete and is subject in all respects to applicable Delaware law and to
the provisions of the Company's Certificate of Incorporation.
The authorized capital stock of the Company consists of (i) 10,000 shares
of common stock, par value $0.01 per share (the "Common Stock"), (ii) 10,000
shares of Class A Preferred Stock, (iii) 10,000 shares of Class B Preferred
Stock, (iv) 1,000 shares of Class C Preferred Stock, and (v) 1,000 shares of
Class D Preferred Stock (collectively the "Preferred Stock"). As of August 31,
1997, all of the authorized shares of Common Stock and Preferred Stock were
issued and outstanding.
COMMON STOCK
Each share of Common Stock has equal voting, dividend, distribution and
liquidation rights. Each share of Common Stock is not redeemable and has no
preemptive, conversion or cumulative voting rights. The declaration and payment
of dividends are restricted by certain covenants in the Indenture and the
Amended and Restated Revolving Credit Facility. In the event of a liquidation,
dissolution or winding-up of the Company, the holders of the Common Stock are
entitled to share equally and ratably in the assets of the Company, if any,
remaining after the payment of all debts and liabilities of the Company
(including the Senior Notes) and the liquidation preference of any outstanding
Preferred Stock.
PREFERRED STOCK
CLASS A PREFERRED STOCK
In connection with the Recapitalization, the Company issued 10,000 shares
of Class A Preferred Stock to Anker Holding. The Class A Preferred Stock is
generally non-voting. The Class A Preferred Stock is entitled to annual
cumulative cash dividends payable on each December 31 in an amount per share
equal to 5% of the sum of (i) $2,500 plus (ii) all accrued and unpaid dividends.
As of September 30, 1997, there would be approximately $1.5 million of accrued
and unpaid dividends on the Class A Preferred Stock. In the event of the
Company's public offering of Common Stock, each holder of Class A Preferred
Stock has the right to convert its holdings into Common Stock in accordance with
a specified formula, subject to certain restrictions. In addition, 10% of the
Class A Preferred Stock outstanding on May 31, 2006 is mandatorily redeemable on
such date and on each subsequent May 31 until all the Class A Preferred Stock is
redeemed, at a price per share equal to (i) $2,500 plus (ii) all accrued and
unpaid dividends. In addition, all of the Class A Preferred Stock is mandatorily
redeemable in the event of (i) a bankruptcy of the Company or (ii) a merger or
the transfer of all the Company's Common Stock to a single person. However, the
Company has no obligation to redeem the Class A Preferred Stock to the extent
(i) such redemption would violate the Credit Facility, (ii) the Company has no
funds legally available therefor or (iii) there are any accrued and unpaid
dividends on the Class C Preferred Stock or Class D Preferred Stock. The Class A
Preferred Stock is recorded on the Company's Consolidated Financial Statements
at estimated fair market value, which is less than book value. The difference of
approximately $12 million will be accrued over the remaining life of the Class A
Preferred Stock. See the Consolidated Financial Statements included elsewhere
herein. For a discussion of certain limitations on payment of dividends on the
Class A Preferred Stock, see "Description of Certain Indebtedness."
CLASS B PREFERRED STOCK
In connection with the Recapitalization, the Company issued 10,000 shares
of Class B Preferred Stock to First Reserve. The Class B Preferred Stock is
generally non-voting and is entitled to no dividends. The Class B Preferred
Stock is mandatorily redeemable for cash at a price per share of $1,375 in the
event of (i) a bankruptcy of the Company or (ii) a Sale (as defined in the
Certificate of Designation, Preferences and Rights of Class B Preferred Stock of
Anker Coal Group, Inc.) of the Company; provided, however, that the Class B
Preferred Stock is not redeemable upon a Sale for so long as First Reserve is
entitled to designate a majority of the Board of Directors, unless the Sale is
approved by a majority of the directors not so designated; provided, further,
that the Class B Preferred Stock is not redeemable to the extent that (A) such
redemption
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<PAGE> 106
would violate the Credit Facility, (B) all redemptions of the Company's Class A
Preferred Stock and Class D Preferred Stock required by the Company have not
been effected prior to or simultaneously with the redemption of the Class B
Preferred Stock, (C) there are any accrued but unpaid dividends on the Class A
Preferred Stock, Class C Preferred Stock or Class D Preferred Stock, or (D) the
Company has no funds legally available therefor. The Class B Preferred Stock is
also redeemable at the option of the Company for cash at a price of $1,375 in
whole but not in part; provided, however, that the Company may not elect to
redeem the Class B Preferred Stock for so long as First Reserve is entitled to
designate a majority of the Board of Directors, unless such redemption is
approved by majority of the directors of the Company not so designated. In
addition, in the event of a public offering of Common Stock, the Class B
Preferred Stock is redeemable for Common Stock at the option of the Company or
the holders of the Class B Preferred Stock; provided, however, that the Company
may not elect to redeem the Class B Preferred Stock for so long as First Reserve
is entitled to designate a majority of the Board of Directors, unless such
redemption is approved by a majority of the directors of the Company not so
designated; provided, further, that the holders of the Class B Preferred Stock
may not elect to have the Company redeem the Class B Preferred Stock for so long
as First Reserve is entitled to designate a majority of the Board of Directors,
unless the public offering is approved by a majority of the directors of the
Company not so designated.
CLASS C PREFERRED STOCK
In connection with its purchase of the common stock of Upshur Property,
Inc. from Glenn Springs Holdings, Inc. ("Glenn Springs"), a wholly owned
subsidiary of Occidental Petroleum Company, the Company issued 1,000 shares of
Class C Preferred Stock to Glenn Springs. The Class C Preferred Stock is
generally non-voting and is entitled to annual cumulative cash dividends payable
on February 15 in an amount equal to 4% of the gross realization from coal sales
from certain coal reserves in Upshur County, West Virginia for the immediately
preceding calendar year. In addition, in the event that the Company sells,
leases, subleases or otherwise transfers certain mineral property in Upshur
County for $500,000 or more (a "Mineral Property Transfer"), the Class C
Preferred Stock is entitled to receive special dividends calculated by dividing
the total acreage of mineral property originally transferred to the Company by
Glenn Springs (28,051 acres) into the number of acres transferred as part of the
Mineral Property Transfer, and multiplying the result by the sales price
received by the Company as a result of the Mineral Property Transfer. The Class
C Preferred Stock is not mandatorily redeemable. However, the Class C Preferred
Stock is redeemable for cash at the option of the Company at a price per share
equal to (i) $13,000 plus (ii) all accrued and unpaid dividends (other than the
aggregate amount of any special dividends payable). No dividends have been paid
on the Class C Preferred Stock as of the date hereof.
CLASS D PREFERRED STOCK
In connection with the purchase of assets from Phillips Resources, Inc.
("Phillips"), the Company issued 1,000 shares of Class D Preferred Stock to
Glenn Springs, which also owns Phillips. The Class D Preferred Stock is
generally non-voting and is entitled to receive, (i) for a period of fifteen
years from and after January 1, 1996, quarterly cumulative cash dividends in an
amount equal to 2 1/2% of the gross realization from coal sales from certain
properties in Upshur and Randolph Counties for the immediately preceding
calendar quarter, and (ii) thereafter, quarterly cumulative cash dividends equal
to 1 1/2% of the gross realization from such sales for the immediately preceding
calendar quarter. If aggregate dividends of $5,000,000 or more on the Class D
Preferred Stock are not paid on or before December 31, 2005, then the Company,
if requested by a holder of Class D Preferred Stock, must redeem such holder's
shares over the five year period beginning December 31, 2006 by redeeming 20% of
such holder's shares on such date and on December 31 of the succeeding four
years, at a price, per share, equal to (i) $7,000 plus (ii) all accrued and
unpaid dividends (the "Class D Redemption Price"). If aggregate dividends of
$5,000,000 or more on the Class D Preferred Stock are paid on or before December
31, 2005, then the Company must redeem the Class D Preferred Stock over the five
year period beginning December 31, 2011 by redeeming 20% of the issued and
outstanding shares of Class D Preferred Stock on such date and on December 31 of
each succeeding year, at the Class D Redemption Price. Furthermore, the Class D
Preferred Stock is redeemable at any time at the option of the Company at a
price per share equal to the Redemption Price. No dividends have been paid on
the Class D Preferred Stock as of the date hereof.
103
<PAGE> 107
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The exchange of Old Notes for Exchange Notes will not constitute
recognition events for federal income tax purposes. Consequently, no gain or
loss should be recognized by Holders upon receipt of the Exchange Notes. For
purposes of determining gain or loss upon the subsequent sale or exchange of
Exchange Notes, a Holder's basis in Exchange Notes should be the same as such
Holder's basis in the Old Notes exchanged therefor. Holders should be considered
to have held the Exchange Notes from the time of their original acquisition of
the Old Notes.
IN ANY EVENT, PERSONS CONSIDERING THE EXCHANGE OF OLD NOTES FOR EXCHANGE
NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTIONS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. To the extent any such
broker-dealer participates in the Exchange Offer and so notifies the Company, or
causes the Company to be so notified in writing, the Company has agreed that
during the period equal to the lesser of (i) 180 days from the date on which the
Exchange Offer Registration Statement is declared effective or (ii) the period
ending on the date when all broker dealers holding Old Notes have sold all Old
Notes held by them, it will make this Prospectus, as amended or supplemented,
available to any Participating Broker Dealer and any other persons, if any, with
similar prospectus delivery requirements, for use in connection with any resale
of Exchange Notes, and will promptly send additional copies of this Prospectus
and any amendment or supplement to this Prospectus to any broker-dealer that
requests such documents in the Letter of Transmittal.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at prevailing market prices at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers or any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Exchange Offer
(other than commissions and concessions of any broker-dealers), subject to
certain prescribed limitations, and will indemnify the holders of the Old Notes
against certain liabilities, including certain liabilities that may arise under
the Securities Act.
By its acceptance of the Exchange Offer, any broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby acknowledges and agrees
that, upon receipt of notice from the Company of the happening of any event
which makes any statement in the Prospectus untrue in any material respect or
which requires the making of any changes in the Prospectus in order to make the
statements therein not misleading (which notice the Company agrees to deliver
promptly to such broker-dealer), such broker-dealer will suspend use of the
Prospectus until the Company has notified such broker-dealer that delivery of
the
104
<PAGE> 108
Prospectus may resume and has furnished copies of any amendment or supplement to
the Prospectus to such broker-dealer.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Simpson
Thacher & Bartlett (a partnership which includes professional corporations), New
York, New York.
EXPERTS
The consolidated financial statements of the Predecessor as of December 31,
1995 and 1994, and for the years then ended, included herein have been audited
by Ernst & Young LLP, independent auditors, as stated in their report appearing
herein. The consolidated financial statements of the Company as of December 31,
1996 and for the period from August 1, 1996, to December 31, 1996, and the
consolidated financial statements of the Predecessor for the period from January
1, 1996 to July 31, 1996 included herein have been audited by Coopers & Lybrand
L.L.P., independent auditors, as stated in their report appearing herein. The
combined financial statements of Oak Mountain as of December 31, 1996, and for
the year then ended, included herein have been audited by Coopers & Lybrand
L.L.P., independent auditors, as stated in their report appearing herein. The
audited consolidated and combined financial statements referred to above have
been so included in reliance upon such reports given upon the authority of the
firms as experts in accounting and auditing.
In July 1996, the Company terminated its relationship with Ernst & Young
LLP and engaged Coopers & Lybrand L.L.P. as its new independent accountants. The
reports of Ernst & Young LLP on the financial statements of the Predecessor as
of December 31, 1995 and 1994, and for the years then ended, contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principle. In connection with its
audits of the financial statements of the Predecessor for the two years ended
December 31, 1994 and 1995 and through July 1996, there have been no
disagreements with Ernst & Young LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Ernst & Young LLP would
have caused them to make reference thereto in their report on the financial
statements of the Predecessor for such years. During the two years ended
December 31, 1994 and 1995 and through July 1996, there were no reportable
events (as defined in Regulation S-K Item 304 (a)(l)(v)).
The reserve reports and estimates of the Company's net proved coal reserves
included herein have, to the extent described herein, been prepared by the
Company and audited by Boyd. Summaries of these estimates contained in the audit
letter of Boyd have been included herein as Appendix A-2 in reliance upon such
firm as an expert with respect to such matters. On December 1, 1997, JJF Group
elected Mr. James Boyd, President of Boyd and executor of Mr. Faltis' estate, to
the Board of Directors. See "Prospectus Summary -- Recent Developments."
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Exchange Notes being offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the Exchange Notes, reference is made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and, where such contract or other
document is an exhibit to the Registration Statement, each such statement is
qualified in all respects by the provisions in such exhibit, to which reference
is hereby made. The Registration Statement can be inspected and copied at the
Public Reference Section of the Commission located at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at regional public
reference facilities maintained by the Commission located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material
including copies of all or any portion of the Registration Statement, can be
obtained from the Public Reference Section of the Commission
105
<PAGE> 109
at prescribed rates. Such material may also be accessed electronically by means
of the Commission's home page on the Internet (http://www.sec.gov).
From and after the effective date of the Registration Statement of which
the Prospectus is a part, so long as the Exchange Notes are outstanding, the
Company will be required to file periodic reports and other information with the
Commission pursuant to the Indenture. During such period, the Company will
furnish to the holders of Exchange Notes copies of all periodic reports filed by
the Company with the Commission.
106
<PAGE> 110
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------
AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31,
1996:
<TABLE>
<S> <C>
Report of Independent Accountants.................................................. F-2
Report of Independent Accountants.................................................. F-3
Consolidated Balance Sheet at December 31, 1996.................................... F-4
Consolidated Statement of Operations for the period August 1, 1996 (date of
acquisition) through December 31, 1996 and for the period January 1, 1996
through July 31, 1996........................................................... F-5
Consolidated Statement of Stockholders' Equity for the period August 1, 1996 (date
of acquisition) through December 31, 1996....................................... F-6
Consolidated Statement of Stockholders' Equity for the period January 1, 1996
through July 31, 1996........................................................... F-7
Consolidated Statement of Cash Flows for the period from August 1, 1996 (date of
acquisition) through December 31, 1996 and for the period January 1, 1996
through July 31, 1996........................................................... F-8
Notes to Consolidated Financial Statements......................................... F-9
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheet at September 30, 1997......................... F-17
Condensed Consolidated Statement of Operations for the nine months ended September
30, 1997 and for the period August 1, 1996 (date of acquisition) through
September 30, 1996 and January 1, 1996 through July 31, 1996.................... F-18
Condensed Consolidated Statement of Cash Flows for the nine months ended September
30, 1997 and for the period August 1, 1996 (date of acquisition) through
September 30, 1996 and January 1, 1996 through July 31, 1996.................... F-19
Notes to Condensed Consolidated Financial Statements............................... F-20
AUDITED ANNUAL CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWO YEARS ENDED DECEMBER 31,
1995:
Report of Independent Auditors..................................................... F-23
Consolidated Balance Sheet at December 31, 1995 and 1994........................... F-24
Consolidated Statement of Operations for years ended December 31, 1995 and 1994.... F-25
Consolidated Statement of Stockholders' Equity for the years ended December 31,
1995 and 1994................................................................... F-26
Consolidated Statement of Cash Flows for the years ended December 31, 1995 and
1994............................................................................ F-27
Notes to Audited Consolidated Financial Statements................................. F-28
OAK MOUNTAIN ENERGY, L.L.C.
Report of Independent Accountants.................................................. F-35
Combined Balance Sheet at December 31, 1996 and September 30, 1997................. F-36
Combined Statement of Operations for the year ended December 31, 1996 and for the
period January 1, 1997 through April 16, 1997 and April 17, 1997 through
September 30, 1997.............................................................. F-37
Combined Statement of Stockholders' Equity for the year ended December 31, 1996 and
for the period January 1, 1997 through April 16, 1997........................... F-38
Combined Statement of Stockholders' Equity for the period April 17, 1997 through
September 30, 1997.............................................................. F-39
Combined Statement of Cash Flows for the year ended December 31, 1996 and for the
period January 1, 1997 through April 16, 1997 and April 17, 1997 through
September 30, 1997.............................................................. F-40
Notes to Combined Financial Statements............................................. F-41
</TABLE>
F-1
<PAGE> 111
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Anker Coal Group, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheet of Anker Coal
Group, Inc. and Subsidiaries as of December 31, 1996 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the period August 1, 1996 (date of acquisition) through December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Anker Coal Group, Inc. and Subsidiaries as of December 31, 1996 and the
consolidated results of their operations and their cash flows for the period
August 1, 1996 (date of acquisition) through December 31, 1996 in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Pittsburgh, Pennsylvania
February 28, 1997
F-2
<PAGE> 112
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Anker Group, Inc. and Subsidiaries:
We have audited the accompanying consolidated statement of operations,
stockholders' equity and cash flows of Anker Group, Inc. and Subsidiaries
(Predecessor) for the period January 1, 1996 through July 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of their
operations and their cash flows of Anker Group, Inc. and Subsidiaries
(Predecessor) for the period January 1, 1996 through July 31, 1996 in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Pittsburgh, Pennsylvania
February 28, 1997
F-3
<PAGE> 113
ANKER COAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
ASSETS
<TABLE>
<S> <C>
Current assets:
Cash and cash equivalents....................................................... $ 556
Accounts receivable:
Trade........................................................................ 28,526
Affiliates................................................................... 1,137
Inventories..................................................................... 6,085
Current portion of long-term notes receivable................................... 415
Prepaid expenses and other...................................................... 2,127
Deferred income taxes........................................................... 303
--------
Total current assets.................................................... 39,149
Properties:
Coal lands and mineral rights................................................... 80,899
Machinery and equipment......................................................... 67,732
--------
148,631
Less allowances for depreciation, depletion and amortization.................... 5,685
--------
142,946
Other assets:
Advance minimum royalties....................................................... 15,473
Goodwill, net of accumulated amortization of $362............................... 39,270
Other intangible assets, net of accumulated amortization of $390................ 7,644
Notes receivable, including $4,500 with an affiliate............................ 9,019
Other assets.................................................................... 6,182
--------
Total assets............................................................ $259,683
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................ 17,508
Accrued expenses and other...................................................... 10,032
Current maturities of long-term debt............................................ 4,199
--------
Total current liabilities............................................... 31,739
Long-term debt.................................................................... 83,830
Other liabilities:
Accrued reclamation expenses.................................................... 18,861
Deferred income taxes........................................................... 17,576
Other........................................................................... 6,123
--------
Total liabilities....................................................... 158,129
Mandatorily redeemable preferred stock............................................ 20,775
Stockholders' equity:
Preferred stock................................................................. 23,000
Common stock.................................................................... --
Paid-in capital................................................................. 57,900
Accumulated Deficit............................................................. (121)
--------
Total stockholders' equity.............................................. 80,779
--------
Total liabilities and stockholders' equity.............................. $259,683
========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-4
<PAGE> 114
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
------------ -----------
PERIOD PERIOD
AUGUST 1 JANUARY 1
THROUGH THROUGH
DECEMBER 31, JULY 31,
1996 1996
<S> <C> <C>
Coal sales and related revenue........................................ $123,246 $ 166,909
Expenses:
Cost of operations and selling expenses............................. 110,215 149,364
Depreciation, depletion and amortization............................ 6,437 7,882
General and administrative.......................................... 3,738 3,796
Stock compensation and related expenses............................. -- 2,969
------------ -----------
Operating income............................................ 2,856 2,898
Interest.............................................................. 2,090 2,796
Other income, net..................................................... 373 1,107
------------ -----------
Income before income taxes.................................. 1,139 1,209
Income tax expense (benefit).......................................... 485 (134)
------------ -----------
Net income.................................................. 654 1,343
Less: redeemable preferred stock dividends............................ 512 116
------------ -----------
Net income available to common stockholders................. $ 142 $ 1,227
========== ========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-5
<PAGE> 115
ANKER COAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD AUGUST 1, 1996 THROUGH DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED COMMON PAID-IN ACCUMULATED
STOCK STOCK CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C> <C>
Balance at August 1, 1996.................. -- -- -- -- --
Initial Company capitalization............. $ 23,000 -- $ 57,900 -- $80,900
Net income................................. -- -- -- $ 654 654
Redeemable preferred stock dividends....... -- -- -- (512) (512)
Preferred stock accretion.................. -- -- -- (263) (263)
--------- ------- -------- ----------- -------
Balance at December 31, 1996............... $ 23,000 -- $ 57,900 $(121) $80,779
======= ======= ======= ========= =======
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-6
<PAGE> 116
PREDECESSOR
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD JANUARY 1, 1996 THROUGH JULY 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED COMMON PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995............... $ 14,122 $ 50 $40,007 $3,024 $57,203
Stock compensation......................... -- -- 1,500 -- 1,500
Net income................................. -- -- -- 1,343 1,343
Redeemable preferred stock dividends....... -- -- -- (116) (116)
--------- ------ ------- -------- -------
Balance at July 31, 1996................... $ 14,122 $ 50 $41,507 $4,251 $59,930
======= ====== ======= ====== =======
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-7
<PAGE> 117
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
----------- -----------
PERIOD PERIOD
AUGUST 1 JANUARY 1
THROUGH THROUGH
DECEMBER JULY 31,
31, 1996 1996
<S> <C> <C>
Operating activities:
Net income........................................................ $ 654 $ 1,343
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, depletion and amortization....................... 6,437 7,882
Minority interest.............................................. 31 (5)
Deferred taxes................................................. 485 (257)
Gain on sale of equipment...................................... (203) (806)
Stock compensation............................................. -- 2,969
Changes in operating assets and liabilities (net of assets and
liabilities acquired):
Accounts receivable.......................................... (434) 2,153
Inventories, prepaid expenses and other...................... 5,515 (1,258)
Advance minimum royalties.................................... (2,095) (706)
Accounts payable, accrued expenses and other................. (8,303) 8,095
Other liabilities............................................ (867) (388)
----------- -----------
Net cash provided by operating activities................. 1,220 19,022
----------- -----------
Investing activities:
Purchase of Anker Group, Inc., including related acquisition cost
of $7,534, net of cash acquired of $6,980 and liabilities
assumed of $151,873............................................ (66,554) --
Acquisitions (net of $4,214 for liabilities assumed).............. (4,262) --
Purchases of properties........................................... (6,769) (3,046)
Proceeds from sale of properties.................................. 213 1,560
Issuances of notes receivable..................................... (4,991) (671)
Payments received on notes receivable............................. 518 889
Intangible assets................................................. (277) --
Other assets...................................................... (2,846) (496)
----------- -----------
Net cash used in investing activities..................... (84,968) (1,764)
----------- -----------
Financing activities:
Proceeds from revolving line of credit and long-term debt......... 79,676 49,389
Principal payments on revolving line of credit and long-term
debt........................................................... (45,372) (79,184)
Proceeds from issuance of preferred and common stock.............. 50,000 --
----------- -----------
Net cash provided by (used in) financing activities....... 84,304 (29,795)
----------- -----------
Increase (decrease) in cash and cash equivalents.................... 556 (12,537)
Cash and cash equivalents at beginning of period.................... -- 13,526
----------- -----------
Cash and cash equivalents at end of period.......................... $ 556 $ 989
========== ========
Supplemental information:
Cash paid for interest............................................ $ 2,747 $ 2983
========== ========
Cash paid for taxes............................................... $ 202 $ 8
========== ========
Supplemental non-cash financing activities:
Stock exchanged in purchase of Anker Group, Inc................... $ 50,900 --
========== ========
Redeemable preferred stock dividends.............................. $ 512 $ 116
========== ========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-8
<PAGE> 118
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Anker Coal Group, Inc. and subsidiaries (the Company) is a newly formed
company that was capitalized with approximately $50 million in cash and $14.1
million of preferred and common stock exchanged for similar stock in the
predecessor company. Subsequently, the Company acquired the remaining 92.5% of
the common stock of Anker Group, Inc. and subsidiaries (the Predecessor) for
approximately $87 million, which was funded by the issuance of $25 million of
Class A Preferred Stock and the payment of $62 million in cash, $12 million of
which was borrowed under the Company's credit facilities. The acquisition was
effective on August 12, 1996 but for accounting purposes, the Company has
designated August 1, 1996 as the effective date of the acquisition. The
acquisition of the Predecessor was accounted for using the purchase method of
accounting as prescribed under Accounting Principles Bulletin No. 16,
"Accounting for Business Combination."
The operating results of this acquisition are included in the Company's
consolidated results of operations from the date of acquisition. The following
unaudited adjusted results have been prepared to illustrate results of
operations had the acquisition been made on January 1, 1996 and do not purport
to be indicative of what would have occurred had the acquisition been made as of
those dates or of results which may occur in the future.
<TABLE>
<CAPTION>
1996
(IN THOUSANDS)
(UNAUDITED)
<S> <C>
Coal sales and related revenue................. $290,155
===========
Income before interest, depletion and
amortization................................. $ 21,553
===========
Net income..................................... $ 1,997
===========
</TABLE>
The Company's principal operations, which are located in West Virginia and
Maryland, consist of mining and selling coal from mineral rights which it owns
and/or leases, as well as brokering coal from other producers.
The accompanying consolidated financial statements present the Company's
consolidated operations and cash flows from the acquisition effective date of
August 1, 1996 through December 31, 1996 and the consolidated operations and
cash flows of the Predecessor for the period January 1, 1996 through July 31,
1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements as of December 31, 1996 and for the
period August 1, 1996 through December 31, 1996 include the accounts of Anker
Coal Group, Inc. and its wholly and majority-owned subsidiaries. The
consolidated financial statements for the period January 1, 1996 through July
31, 1996 include the accounts of the Predecessor. All significant intercompany
accounts and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include highly liquid investments with original
purchase maturities of three months or less. Approximately $543,000 of the cash
and cash equivalents balance at December 31, 1996 relates to the Company's
venture capital subsidiary and is restricted for the purchase of qualified
investments in accordance with requirements of the State of West Virginia
venture capital laws.
F-9
<PAGE> 119
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INVENTORIES:
Inventories consist of coal and mining supplies. Coal inventories are
stated at the lower of average cost or market. Supply inventories are stated at
the lower of cost (first in, first out) or market.
PROPERTIES:
Properties are recorded at cost, which includes the allocated purchase
price for the acquisition described in Note 1. Provisions for depreciation are
based upon the estimated useful lives of the respective assets and are computed
by the straight-line method.
Coal lands represent the investment in land and related mineral and/or
surface rights, including capitalized mine development costs, which are being
mined or will be mined. Mine development costs of $22.7 million represent
expenditures incurred, net of revenue received, in development of coal mines
until the principal operating activity becomes coal production. Depletion and
amortization of coal lands is computed on a tonnage basis calculated to amortize
its costs fully over the estimated recoverable reserves.
GOODWILL AND OTHER INTANGIBLE ASSETS:
Intangible assets consist of the excess of the purchase price over the fair
value of the net assets acquired (goodwill), organization costs, debt issuance
costs, and various noncompete agreements, which are being amortized on the
straight-line method over the useful lives of these assets. Goodwill,
principally related to the acquisition described in Note 1, is being amortized
over 40 years in conjunction with the expected useful life of existing mineral
rights. The Company periodically evaluates the carrying value of goodwill based
on whether the goodwill is recoverable from expected future undiscounted
operating cash flows. Additionally, the Company periodically reviews the
carrying value of other intangible assets and will recognize impairments when
the expected future operating cash flow derived from such intangible assets is
less than their carrying value.
ACCRUED RECLAMATION EXPENSES:
Provisions to reclaim disturbed acreage remaining after production has been
completed and related mine closing costs are accrued during the life of the
mining operation or recorded in conjunction with the acquisition of related
properties. The annual provision is made at a rate per ton equivalent to the
estimated reclamation cost divided by the estimated tonnage to be mined.
INCOME TAXES:
Deferred tax assets and liabilities are determined based on temporary
differences between the financial statement and the tax basis of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements.
Estimates also affect the amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
F-10
<PAGE> 120
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts of cash and cash equivalents, long-term debt and the
interest rate collar agreements approximate fair value. The fair value of the
Company's borrowings under its credit agreement and other notes payable is
estimated using discounted cash flow analyses, based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements.
3. COAL SALES AND RELATED INCOME
Coal sales and related income consist of the following:
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
------------ -----------
PERIOD PERIOD
AUGUST 1 JANUARY 1
THROUGH THROUGH
DECEMBER 31, JULY 31,
1996 1996
(IN THOUSANDS)
<S> <C> <C>
Coal mining revenue................................. $ 85,175 $ 126,500
Brokered coal revenue............................... 36,521 37,697
Ash disposal and waste fuel revenue................. 1,550 2,712
------------ -----------
$123,246 $ 166,909
========== ========
</TABLE>
Included in revenue are sales to unconsolidated affiliated companies
aggregating approximately $9.2 million for the period August 1, 1996 through
December 31, 1996 and approximately $7 million for the period January 1, 1996
through July 31, 1996.
The Company recognizes revenue either upon shipment or customer receipt of
coal, based on contractual terms. The Company's coal mining revenue is
substantially generated from long-term coal supply contracts with domestic
utilities throughout the United States. These contracts range from one to twenty
years with fixed based prices which change based on certain industry and
government indices. Receivables generally are due within 30 to 45 days. Sales to
one customer represented 26% of total revenue for the two periods ended December
31, 1996. The Company performs credit evaluations on all new customers, and
credit losses have historically been minimal.
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
(IN THOUSANDS)
<S> <C>
Credit agreement:
Term loan A.................................................. $ 66,000
Term loan B.................................................. 19,900
Notes payable to seller........................................ 1,934
Other notes payable............................................ 195
--------------
88,029
Less current maturities of long-term debt...................... (4,199)
--------------
$ 83,830
===========
</TABLE>
The Company's credit agreement provides for two term loans amounting to $70
and $20 million, respectively, which are payable in quarterly installments of
principal and interest through 2003 and 2004, respectively.
The Company also has a $25 million revolving line of credit under the
credit facilities agreement, which is available through June 30, 2004.
Borrowings under the line of credit are subject to established levels of trade
receivables and inventory. There were no borrowings outstanding on the line of
credit at December 31, 1996.
F-11
<PAGE> 121
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Borrowings under the credit agreement bear interest at the Company's option
at either a base rate or Eurodollar rate. Borrowings under the base rate are
subject to interest at the higher of the banks' prime rate (8.25% at December
31, 1996) or the Federal Funds rate (8.0% at December 31, 1996) plus 1/2%.
Borrowings under the Eurodollar rate are subject to interest at the rate
available on the London Interbank Offered Rate (LIBOR) (5.56% at December 31,
1996). All borrowings are subject to an additional margin based on established
leverage ratios. For the period August 1, 1996 through December 31, 1996, the
Company's average interest rate was approximately 8.30% and the rate at December
31, 1996 was 8.32%.
In addition, term loan A and the revolving line of credit are subject to a
1/2% annual commitment fee, payable quarterly, on the unused portion of the
available borrowings.
In October 1996, the Company entered into an interest rate collar
agreement, which expires October 1, 1998, to mitigate the fluctuations of
variable interest rates. The collar agreement is on a $50 million notional
amount of the term loans which converts the variable interest rate to a fixed
LIBOR rate of 8% in the event LIBOR rates exceed 8%.
The credit agreement is collateralized by substantially all of the
Company's present and future assets. The credit agreement also contains
covenants which, among other matters, restrict or limit the ability of the
Company to pay dividends, incur indebtedness, merge, acquire or sell assets and
make capital expenditures. The Company must also maintain certain financial
ratios regarding interest, leverage, fixed charges and net worth among other
restrictions.
In conjunction with an acquisition, the Company assumed an outstanding note
payable with the seller, which bears interest at 7.47% and is payable in monthly
installments through April 1, 2000.
Future required principal payments on long term debt over the next five
years are: $4,199,000 in 1997; $8,479,000 in 1998; $9,830,000 in 1999;
$11,421,000 in 2000; and $12,700,000 in 2001.
5. MANDATORILY REDEEMABLE PREFERRED AND CAPITAL STOCK
Mandatorily redeemable preferred and capital stock consists of the
following:
<TABLE>
<CAPTION>
TOTAL
NUMBER OF SHARES DECEMBER 31,
AUTHORIZED, ISSUED 1996
DESCRIPTION AND OUTSTANDING PAR VALUE (IN THOUSANDS)
<S> <C> <C> <C>
Common Stock:
Class A..................................... 10,000 $ 0.01 --
============= ===========
Preferred Stock:
Class B..................................... 10,000 1,000 $ 10,000
Class C..................................... 1,000 13,000 13,000
------- --------------
11,000 $ 23,000
============= ===========
Mandatorily Redeemable Preferred Stock:
Class A..................................... 10,000 2,500 25,512
Class D..................................... 1,000 7,000 7,000
Less: preferred stock discount................ -- (11,737)
------- --------------
11,000 $ 20,775
============= ===========
</TABLE>
PREFERRED STOCK:
Class B preferred stock is nonvoting, with no dividends, redeemable at
$1,375 per share upon the event of liquidation or other action described in the
preferred stock agreement.
F-12
<PAGE> 122
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Class C preferred stock is nonvoting with 4% cumulative dividends,
calculated on the gross realization from certain coal sales, redeemable at par
value upon the event of liquidation or other action described in the preferred
stock agreement.
MANDATORILY REDEEMABLE PREFERRED STOCK:
Class A preferred stock is nonvoting with 5% cumulative dividends,
mandatorily redeemable at par value over ten years beginning May 31, 2006.
Dividends are predicated on meeting certain established debt covenants.
Class D preferred stock is nonvoting with 2 1/2% cumulative dividends
through 2011, reducing to 1 1/2% cumulative dividends thereafter, calculated on
the gross realization from certain coal sales, redeemable at par value over five
years beginning December 31, 2006, if aggregate dividends paid on or before
December 31, 2005 are less than $5,000,000; otherwise mandatorily redeemable at
par value over five years beginning December 31, 2011.
The mandatorily redeemable preferred stock is recorded at estimated fair
market value, which is less than book value. This difference of $12 million will
be accreted over the remaining life of the preferred stock.
6. INCOME TAXES:
The provision (benefit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
----------- -----------
PERIOD PERIOD
AUGUST 1 JANUARY 1
THROUGH THROUGH
DECEMBER JULY 31,
31, 1996 1996
(IN THOUSANDS)
<S> <C> <C>
Current:
Federal........................................... -- $ 123
Deferred:
Federal........................................... $ 1,253 (45)
Tax benefit from recognition of net operating
losses......................................... (768) (212)
----------- -----------
Total..................................... $ 485 $(134)
========== ========
</TABLE>
In the predecessor period, the Predecessor was subject to alternative
minimum taxes, accordingly, the $123,000 represents amounts payable under the
alternative tax structure, which is a creditable tax that can be used to reduce
any future regular income taxes.
The Company has tax net operating losses in the current and predecessor
periods, which can be carried forward for fifteen years and used to offset any
future taxable income.
F-13
<PAGE> 123
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The reconciliation of the federal statutory tax rate to the consolidated
effective tax rate is as follows:
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
----------- -----------
PERIOD PERIOD
AUGUST 1 JANUARY 1
THROUGH THROUGH
DECEMBER JULY 31,
31, 1996 1996
<S> <C> <C>
Federal statutory tax rate.......................... 34.0% 34.0%
Goodwill............................................ 10.7 --
Business meals exclusion............................ 4.4 0.7
Use of percentage depletion......................... (8.3) (50.0)
Other............................................... 1.8 4.2
----- -----------
42.6% (11.1)%
========== ========
</TABLE>
The components of net deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
(IN THOUSANDS)
<S> <C>
Deferred tax assets (liabilities)--current:
Inventory.................................................... $ 50
Other current assets......................................... 253
--------------
$ 303
===========
Deferred tax assets (liabilities)--noncurrent:
Depreciation, depletion and amortization..................... (11,558)
Other long-term liabilities.................................. (2,965)
Accrued reclamation.......................................... 1,208
Acquisition assets........................................... 1,059
Fair market value adjustments................................ (6,088)
Net operating loss carryforward.............................. 768
--------------
$(17,576)
===========
</TABLE>
Based upon the Company's current and historical taxable income, the
anticipated level of future taxable income and existing taxable temporary
differences, management believes it is more likely than not that all of the
deferred tax assets will be realized. Accordingly, no valuation allowance has
been established against the deferred tax assets.
7. RETIREMENT BENEFITS
The Company has a contributory defined contribution retirement plan
covering all employees who meet eligibility requirements. The plan provides for
employer contributions representing 5% of compensation. The Company's
contributions amounted to $577,000 for the period August 1, 1996 through
December 31, 1996 and $547,000 for the period January 1, 1996 through July 31,
1996.
The Company also has a 401(k) savings plan which is a contributory defined
contribution plan for all employees who meet eligibility requirements. The plan
provides for mandatory employer contributions to match 50% of employee
contributions up to a maximum of 2% of each participant's compensation. In
addition, the Company may make discretionary contributions up to 5% of employee
compensation. The Company's contributions amounted to $185,000 for the period
August 1, 1996 through December 31, 1996 and $182,000 for the period January 1,
1996 through July 31, 1996.
F-14
<PAGE> 124
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In addition, the Company has a 401(h) savings plan for the purpose of
providing retiree health care benefits. The plan is a defined contribution plan
for all employees who meet eligibility requirements and provides for mandatory
employer contributions between .237% and 1.66% of each participant's
compensation, based on years of service. The Company's contributions amounted to
$143,000 for the period August 1, 1996 through December 31, 1996 and $150,000
for the period January 1, 1996 through July 31, 1996.
8. COMMITMENTS AND CONTINGENCIES
COAL INDUSTRY RETIREE HEALTH BENEFIT ACT:
Current and projected operating deficits in the United Mine Workers of
America Benefit Trust Funds (the Funds) resulted in the Coal Industry Retiree
Health Benefit Act of 1992 (the Act). The Act created a multiemployer benefit
plan called the United Mine Workers of America Combined Benefit Fund (the
Combined Fund). The Combined Fund provides medical and death benefits for all
beneficiaries of the earlier trusts who were actually receiving benefits as of
July 20, 1992. The Act provides for the assignment of beneficiaries to former
employers and the allocation of any unassigned beneficiaries (referred to as
orphans) to companies using a formula included in the legislation. The Act
requires that responsibility for funding those payments be assigned to companies
that had been signatories to the National Bituminous Coal Wage Agreement
(Agreement). Although the Company does not currently have any operations which
are signatory to the Agreement, it is subject to certain liabilities as a result
of being signatory to a prior agreement.
A company's annual cost of benefits is based on the number of beneficiaries
assigned to the company plus a percentage of the cost of unassigned
beneficiaries, which is a function of the number of orphans times the
per-beneficiary premium. As part of the acquisition described in Note 1, the
Company recorded a liability of approximately $6.5 million to recognize the
anticipated unfunded obligations under this act. The Company contributed
$725,000 for the period August 1, 1996 through December 31, 1996 and $470,000
for the period January 1, 1996 through July 31, 1996.
ADVANCE MINIMUM ROYALTIES:
Tonnage royalty payments on leased properties range from 2% to 10% of the
realization. The 1997 through 2001 leases require minimum royalty payments
aggregating approximately: $3,962,000 in 1997; $4,258,000 in 1998; $4,453,000 in
1999; $4,367,000 in 2000; and $4,367,000 in 2001.
OPERATING LEASES:
The Company has office and mining equipment operating lease agreements.
Total rent expense approximated $3,277,998 for the period August 1, 1996 through
December 31, 1996 and $5,002,472 for the period January 1, 1996 through July 31,
1996. Minimum annual rentals for office and equipment leases for the next five
years are approximately $6,530,000 in 1997; $5,346,000 in 1998; $3,158,000 in
1999; $1,444,000 in 2000; and $726,000 in 2001.
CONTINGENCIES:
The Company is a party to various lawsuits and claims incidental to its
business. While it is not possible to predict accurately the outcome of these
matters, management believes that none of these actions will have a material
effect on the Company's consolidated financial position, results of operations
or cash flows.
F-15
<PAGE> 125
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. SUBSIDIARY GUARANTEES
All of the guarantor subsidiaries are wholly owned and the securities are
guaranteed on a full, unconditional and joint and several basis by all of the
subsidiaries. The following table summarizes the financial position, results of
operations and cash flows for the Company and its guarantor and nonguarantor
subsidiaries as of December 31, 1996 and for the period August 1, 1996 through
December 31, 1996.
<TABLE>
<CAPTION>
ANKER
COAL
ANKER COAL GUARANTOR NONGUARANTOR CONS. GROUP
GROUP SUBS. SUBS. ADJUST. CONS.
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
Total current assets...................... $ 303 $ 38,277 $ (1,215) $ 1,784 $ 39,149
Investment in subsidiaries................ 45,925 -- -- (45,925) --
Properties, net........................... -- 141,700 1,246 -- 142,946
Other assets.............................. -- 72,770 4,818 -- 77,588
------- -------- ------- --------- --------
Total assets.................... $ 46,228 $ 252,747 $ 4,849 $ (44,141) $259,683
======= ======== ======= ========= ========
Total current liabilities................. 3,700 25,565 690 1,784 31,739
Long-term debt............................ 9,300 73,155 1,375 -- 83,830
Intercompany payable, net................. (85,248) 87,291 (2,043) -- --
Other long-term liabilities............... 17,576 24,984 -- -- 42,560
Mandatorily redeemable preferred stock.... 20,775 -- -- -- 20,775
Total stockholders equity................. 80,125 41,752 4,827 (45,925) 80,779
------- -------- ------- --------- --------
Total liabilities and stockholders
equity.................................. $ 46,228 $ 252,747 $ 4,849 $ (44,141) $259,683
======= ======== ======= ========= ========
STATEMENT OF OPERATIONS
Coal sales and related revenues........... $ -- $ 231,957 $ 4,170 $(112,881) $123,246
Cost of operations and operating
expenses................................ -- 231,393 4,282 (113,195) 122,480
------- -------- ------- --------- --------
Operating income.......................... -- 564 (112) 314 766
Other (income) expense.................... -- (580) (107) 314 (373)
------- -------- ------- --------- --------
Income (loss) before taxes................ -- 1,144 (5) -- 1,139
Income tax expense (benefit).............. -- 523 (38) -- 485
------- -------- ------- --------- --------
Net income (loss)......................... $ -- $ 621 $ (33) $ -- $ 654
======= ======== ======= ========= ========
STATEMENT OF CASH FLOWS
Net cash (used in) provided by operating
activities.............................. $ -- $ (3,925) $ 5,145 $ -- $ 1,220
======= ======== ======= ========= ========
Net cash used in investing activities..... $ -- $ (80,379) $ (4,589) $ -- $(84,968)
======= ======== ======= ========= ========
Net cash provided by financing
activities.............................. $ -- $ 84,304 $ -- $ -- $ 84,304
======= ======== ======= ========= ========
</TABLE>
F-16
<PAGE> 126
ANKER COAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
<S> <C>
Current assets:
Cash and cash equivalents...................................................... $ 228
Accounts receivable:
Trade....................................................................... 32,523
Inventories.................................................................... 15,213
Current portion of long-term notes receivable.................................. 420
Prepaid expenses and other..................................................... 5,370
Deferred income taxes.......................................................... 303
--------
Total current assets................................................... 54,057
Properties:
Coal lands and mineral rights.................................................. 105,619
Machinery and equipment........................................................ 85,465
--------
191,084
Less: allowances for depreciation, depletion and amortization.................. 14,879
--------
176,205
Other assets:
Advance minimum royalties...................................................... 18,965
Goodwill, net of accumulated amortization of $1,122............................ 45,181
Other intangible assets, net of accumulated amortization of $242............... 5,626
Notes receivable............................................................... 5,183
Other assets................................................................... 7,166
--------
Total assets........................................................... $ 312,383
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade....................................................................... $ 27,664
Affiliates.................................................................. 945
Accrued expenses and other..................................................... 10,868
Current maturities of long-term debt........................................... 5,153
--------
Total current liabilities.............................................. 44,630
Long-term debt................................................................... 130,736
Other liabilities:
Accrued reclamation expenses................................................... 18,836
Deferred income taxes.......................................................... 15,905
Other.......................................................................... 5,996
--------
Total liabilities...................................................... 216,103
Mandatorily redeemable preferred stock........................................... 22,182
Stockholders' equity:
Preferred stock................................................................ 23,000
Common stock................................................................... --
Paid-in capital................................................................ 57,900
Accumulated deficit............................................................ (6,802)
--------
Total stockholders' equity............................................. 74,098
--------
Total liabilities and stockholders' equity............................. $ 312,383
========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-17
<PAGE> 127
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY THE COMPANY PREDECESSOR
------------- ------------- -----------
PERIOD PERIOD PERIOD
JANUARY 1 AUGUST 1 JANUARY 1
THROUGH THROUGH THROUGH
SEPTEMBER 30, SEPTEMBER 30, JULY 31,
1997 1996 1996
<S> <C> <C> <C>
Coal sales and related revenue........................ $ 240,818 $46,937 $ 166,909
Expenses:
Cost of operations and selling expenses............. 217,520 43,168 149,364
Depreciation, depletion and amortization............ 12,909 2,582 7,882
General and administrative.......................... 6,786 1,255 3,796
Stock compensation and related expenses............. -- -- 2,969
-------- ------- --------
Operating income............................ 3,603 (68) 2,898
Interest.............................................. 6,646 906 2,796
Other income (expense), net........................... 1,064 (67) 1,107
-------- ------- --------
Income (loss) before income taxes and
extraordinary item........................ (1,979) (1,041) 1,209
Income tax expense (benefit).......................... (554) 194 (134)
-------- ------- --------
Income (loss) before extraordinary item..... (1,425) (1,235) 1,343
Extraordinary item, net of income taxes of $1,497..... 3,849 -- --
-------- ------- --------
Net income (loss)........................... (5,274) (1,235) 1,343
Less: Redeemable preferred stock dividends............ 957 208 116
-------- ------- --------
Net income (loss) applicable to common
stockholders.............................. $ (6,231) $(1,443) $ 1,227
======== ======= ========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-18
<PAGE> 128
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THE COMPANY THE COMPANY PREDECESSOR
------------- ------------- -----------
PERIOD PERIOD PERIOD
JANUARY 1 AUGUST 1 JANUARY 1
THROUGH THROUGH THROUGH
SEPTEMBER 30, SEPTEMBER 30, JULY 31,
1997 1996 1996
<S> <C> <C> <C>
Operating activities:
Net income (loss)...................................................... $ (5,274) $ (1,235) $ 1,343
Adjustments to reconcile net income to net cash provided by operating
activities:
Extraordinary item................................................... 3,849 -- --
Depreciation, depletion and amortization............................. 12,909 2,582 7,882
Minority interest.................................................... -- 32 (5)
Deferred taxes....................................................... -- (325) (257)
Gain on sale of equipment............................................ -- -- (806)
Stock compensation and related expenses.............................. -- -- 2,969
Changes in operating assets and liabilities (net of assets and
liabilities acquired):
Accounts receivable................................................ (2,154) 3,378 2,153
Inventories, prepaid expenses and other............................ (12,057) 2,831 (1,258)
Advance minimum royalties.......................................... (3,692) (1,216) (706)
Accounts payable, accrued expenses and other....................... 8,658 (7,050) 8,095
Other liabilities.................................................. (127) 29 (388)
--------- -------- --------
Net cash provided by (used in) operating activities............. 2,112 (974) 19,022
--------- -------- --------
Investing activities:
Purchase of Anker Group, Inc. including related acquisition costs of
$7,543, net of cash acquired of $6,980 and liabilities assumed of
$151,873............................................................. -- (66,554) --
Acquisitions (including related acquisition cost of $185, net of cash
acquired of $117 and liabilities and seller note assumed of
$8,752).............................................................. (9,883) -- --
Purchases of properties................................................ (35,949) (1,552) (3,046)
Proceeds from sale of properties....................................... -- -- 1,560
Issuances of notes receivable.......................................... (751) (4,500) (671)
Payments received on notes receivable.................................. 4,582 12 889
Intangible assets...................................................... (4,792) -- --
Other assets........................................................... (1,087) 768 (496)
--------- -------- --------
Net cash used in investing activities........................... (47,880) (71,826) (1,764)
--------- -------- --------
Financing activities:
Proceeds from issuance of Senior Notes................................. 125,000 -- --
Proceeds from revolving line of credit and long term debt.............. 135,902 68,676 49,389
Principal payments on revolving line of credit and long-term debt...... (215,462) (45,142) (79,184)
Proceeds from issuance of preferred common stock....................... -- 50,000 --
--------- -------- --------
Net cash provided by (used in) financing activities............. 45,440 73,534 (29,795)
--------- -------- --------
(Decrease) increase in cash and cash equivalents......................... (328) 734 (12,537)
Cash and cash equivalents at beginning of period......................... 556 -- 13,526
--------- -------- --------
Cash and cash equivalents at end of period............................... $ 228 $ 734 $ 989
========= ======== ========
Supplemental non-cash financing activities:
Redeemable preferred stock dividends................................... $ 957 $ 208 $ 116
========= ======== ========
</TABLE>
Non-cash Transaction: During the period January 1 through July 31, 1997,
adjustments were made to goodwill due to changes in assumptions or
underestimates relating to certain preacquisition, contingent assets and
liabilities, respectively. Accordingly, goodwill was adjusted by $4,296, net of
income taxes.
The accompanying notes are an integral
part of the consolidated financial statements.
F-19
<PAGE> 129
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ACCOUNTING POLICIES
Reference is made elsewhere in the document which includes additional
information about the Company, its operations and its consolidated financial
statements, and contains a summary of major accounting policies followed by the
Company in preparation of its consolidated financial statements. These policies
were also followed in preparing the quarterly condensed consolidated financial
statements included herein.
The management of the Company believes that all adjustments necessary to
make a fair statement of the results in these interim periods have been made.
All adjustments reflected in the financial statements are of a normal recurring
nature except as described in the Notes to Condensed Consolidated Financial
Statements. Net results for the nine month period ended September 30, 1997 and
1996 are not necessarily indicative of the results to be expected for the full
year.
2. INCOME TAX
Income taxes are provided for financial reporting purposes based on
management's best estimate of the effective tax rate expected to be applicable
for the full calendar year.
3. ACQUISITION
On April 17, 1997, the Company, an affiliate and unrelated parties entered
into a joint venture agreement to acquire substantially all of the assets and
assume certain liabilities of Oak Mountain Energy Corporation and its affiliates
for approximately $40.3 million of which $10.0 million was provided by the
Company. (See historical financial statements included herein.)
The Company owns an undivided interest in each of the assets and is
proportionately liable for its share of each liability of Oak Mountain Energy
L.L.C. In connection with industry practice and purchase accounting, the Company
has presented their proportionate ownership, amounting to 32.0%, in Oak Mountain
Energy L.L.C. in the unaudited consolidated financial statements from the date
of acquisition. As described in the historical financial statements included
herein, total outstanding indebtedness and total liabilities amounted to $17.1
million and $20.8 million, respectively, at September 30, 1997.
The following summary, prepared on a pro forma basis, combines the
consolidated results of operations as if Oak Mountain Energy Corporation and its
affiliates had been acquired as of the beginning of the periods presented, after
including the impact of certain adjustments:
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
AUGUST 1, 1996 JANUARY 1
THE COMPANY THROUGH THROUGH
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 JULY 31, 1996
<S> <C> <C> <C>
Total coal sales and related revenue.............. $244,240 $ 48,115 $ 173,491
============== ============== =========
Net loss.......................................... $ (5,739) $ (1,395) $ (1,028)
============== ============== =========
Net loss available to common stockholders......... $ (6,696) $ (1,603) $ (912)
============== ============== =========
</TABLE>
4. STOCK BENEFIT PLANS
In February 1997, the Company's Board of Directors approved a Stock
Incentive Plan (the Plan) which provides for grants of restricted stock and
nonqualified, compensatory stock options to key employees of the Company of
affiliates. The Company accounts for the Plan in accordance with the
disclosure-only provision of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation." As of September 30, 1997 no
restricted stock or compensatory stock options have been granted.
F-20
<PAGE> 130
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. SUBSIDIARY GUARANTEES
All of the guarantor subsidiaries are wholly owned and the securities are
guaranteed on a full, unconditional and joint and several basis by all of the
subsidiaries. The following tables summarize the financial position, results of
operations and cash flow for the Company and its guarantor and nonguarantor
subsidiaries as of and for the period ended September 30, 1997:
<TABLE>
<CAPTION>
ANKER ANKER COAL
COAL GUARANTOR NONGUARANTOR CONSOLIDATING GROUP
GROUP SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
Total current assets.............. $ 303 $ 44,942 $ 1,468 $ 7,344 $ 54,057
Investment in subsidiaries........ 55,925 -- -- (55,925) --
Properties, net................... -- 156,175 20,030 -- 176,205
Other assets...................... -- 78,241 3,880 -- 82,121
------- -------- ------- -------- --------
Total assets............ $ 56,228 $279,358 $ 25,378 $ (48,581) $312,383
======= ======== ======= ======== ========
Total current liabilities......... (2,051) 32,715 6,622 7,344 44,630
Long-term debt.................... 13,000 109,362 8,374 -- 130,736
Intercompany payable, net......... (75,248) 78,967 (3,719) -- --
Other long-term liabilities....... 17,576 23,087 74 -- 40,737
Mandatorily redeemable preferred
stock........................... 22,182 -- -- -- 22,182
Total stockholders' equity........ 80,769 35,227 14,027 (55,925) 74,098
------- -------- ------- -------- --------
Total liabilities and
stockholders'
equity................ $ 56,228 $279,358 $ 25,378 $ (48,581) $312,383
======= ======== ======= ======== ========
STATEMENT OF OPERATIONS
Coal sales and related revenue.... -- 386,232 7,177 (152,591) 240,818
Cost of operations and operating
expenses........................ -- 381,879 7,927 (152,591) 237,215
------- -------- ------- -------- --------
Operating income................ -- 4,353 (750) -- 3,603
Other expense (income)............ -- 5,533 49 -- 5,582
------- -------- ------- -------- --------
Loss before income taxes and
extraordinary item........... -- (1,180) (799) -- (1,979)
Income tax benefit................ -- (330) (224) -- (554)
------- -------- ------- -------- --------
Net loss before extraordinary
item............................ -- (850) (575) -- (1,425)
Extraordinary item.............. -- 3,849 -- -- 3,849
------- -------- ------- -------- --------
Net loss........................ $ -- $ (4,699) $ (575) $ -- $ (5,274)
======= ======== ======= ======== ========
STATEMENT OF CASH FLOWS
Net cash provided by (used in)
operating activities............ $ -- $ 6,604 $ (4,492) $ -- $ 2,112
======= ======== ======= ======== ========
Net cash provided by (used in)
investing activities............ $ -- $(45,210) $ (2,670) $ -- $(47,880)
======= ======== ======= ======== ========
Net cash provided by financing
activities...................... $ -- $ 38,606 $ 6,834 $ -- $ 45,440
======= ======== ======= ======== ========
</TABLE>
F-21
<PAGE> 131
ANKER COAL GROUP, INC. AND SUBSIDIARIES AND PREDECESSOR
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. REFINANCING
On September 25, 1997, the Company issued $125,000,000 of 9 3/4% Series B
Senior Notes due 2007. In connection therewith, the Company repaid all
outstanding indebtedness together with accrued interest and fees associated with
such repayment under the Credit Facility. The Company incurred a loss on the
refinancing of approximately $3.9 million, net of income taxes of $1.5 million.
The loss has been classified as an extraordinary item in the condensed
consolidated financial statements.
7. ADJUSTMENTS TO GOODWILL
During the period January 1 through July 31, 1997, adjustments were made to
goodwill due to changes in assumptions or underestimates relating to certain
preacquisition, contingent assets and liabilities, respectively. Accordingly,
goodwill was adjusted by $4,296, net of income taxes.
8. SUBSEQUENT EVENTS
On October 12, 1997, John J. Faltis, the Company's President, Chief
Executive Officer and Chairman of the Board of Directors, was killed in a
helicopter accident in West Virginia. The Company has maintained key man life
insurance on the life of Mr. Faltis in the amount of $15 million. The Company
will classify this amount as other income when received.
The Company's indirect thirty-two percent interest in Oak Mountain Energy,
L.L.C., has experienced higher than anticipated capital development costs, which
resulted in increased borrowings under Oak Mountain Energy, L.L.C.'s credit
facilities. By November 1997, Oak Mountan Energy, L.L.C. had borrowed under its
credit facilities the maximum amount available for the development of its
operations and was continuing to incur additional capital development costs. At
that time the Company and the other owners of Oak Mountain Energy, L.L.C.
attempted to raise additional capital for the project and also considered the
possible sale of the investment. In addition, in December 1997, Oak Mountain
Energy, L.L.C. experienced a methane ignition in its mine, which halted all
production for one week and reduced the level of operation at the mine until the
end of the first quarter of 1998. Rather than commit the additional funds needed
in the project, the Company decided to terminate its investment. As a result of
the pending disposition, the Company expects to record a loss for impairment of
$7 to $9 million in the fourth quarter of 1997.
As a result of the death of John Faltis, the Company will record in the
fourth quarter approximately $15 million of income relating to the proceeds from
key man life insurance policies.
F-22
<PAGE> 132
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Anker Group, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Anker
Group, Inc. and Subsidiaries as of December 31, 1995 and 1994 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Anker Group, Inc. and Subsidiaries as of December 31, 1995 and 1994, the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
March 18, 1996
F-23
<PAGE> 133
ANKER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 13,526 $ 1,345
Accounts receivable:
Trade............................................................ 31,323 27,531
Affiliates....................................................... 59 445
Inventories......................................................... 10,229 12,227
Current portion of long-term notes receivable....................... 1,125 679
Prepaid expenses and other.......................................... 2,740 3,779
Deferred income taxes............................................... 1,655 2,274
-------- --------
Total current assets........................................ 60,657 48,280
Properties:
Coal lands and mineral rights....................................... 66,590 64,237
Machinery and equipment............................................. 83,297 68,459
-------- --------
149,887 132,696
Less allowances for depreciation, depletion and amortization........ (52,062) (45,926)
-------- --------
97,825 86,770
Other assets:
Advance minimum royalties........................................... 13,141 11,420
Other intangible assets............................................. 1,406 2,577
Notes receivable.................................................... 9,385 9,364
Other assets........................................................ 4,612 2,961
-------- --------
Total assets................................................ $187,026 $161,372
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade............................................................ $ 12,273 $ 20,460
Affiliate........................................................ 583 --
Accrued expenses and other.......................................... 8,424 11,356
Current maturities of long-term debt................................ 11,778 3,888
-------- --------
Total current liabilities................................... 33,058 35,704
Long-term debt........................................................ 58,124 61,022
Other liabilities:
Accrued reclamation expenses........................................ 15,728 7,612
Deferred income taxes............................................... 8,229 6,740
Other............................................................... 721 2,209
-------- --------
Total liabilities..................................................... 115,860 113,287
Minority interest..................................................... 363 300
Subordinated debt..................................................... 5,000 5,000
Mandatorily redeemable preferred stock (Note 5)....................... 8,600 1,600
Stockholders' equity:
Preferred stock..................................................... 14,122 1,122
Common stock, $100 par value, authorized 500 shares each of Class A
and B; issued and outstanding 250 shares each of Class A and B... 50 50
Paid-in capital..................................................... 40,007 40,007
Retained earnings................................................... 3,024 6
-------- --------
Total stockholders' equity.................................. 57,203 41,185
-------- --------
Total liabilities and stockholders' equity.................. $187,026 $161,372
======== ========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-24
<PAGE> 134
ANKER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Coal sales and related revenue.......................................... $248,897 $227,499
Expenses:
Cost of operations and selling expenses............................... 221,315 203,174
Depreciation, depletion and amortization.............................. 11,732 12,083
General and administrative............................................ 6,843 5,938
-------- --------
Operating income.............................................. 9,007 6,304
Interest................................................................ 6,612 3,523
Other income, net....................................................... 3,108 1,621
-------- --------
Income before income taxes.................................... 5,503 4,402
Income tax expense...................................................... 2,270 1,940
-------- --------
Net income.................................................... 3,233 2,462
Less: redeemable preferred stock dividends.............................. 215 215
-------- --------
Net income available to common stockholders................... $ 3,018 $ 2,247
======== ========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-25
<PAGE> 135
ANKER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
PREFERRED CAPITAL PAID-IN EARNINGS
STOCK STOCK CAPITAL (DEFICIT) TOTAL
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994..................... $ 1,122 $50 $40,007 $ (2,241) $38,938
Net income..................................... -- -- -- 2,462 2,462
Redeemable preferred stock dividends........... -- -- -- (215) (215)
--------- ------- ------- -------- -------
Balance at December 31, 1994................... 1,122 50 40,007 6 41,185
Issuance of preferred stock.................... 13,000 -- -- -- 13,000
Net income..................................... -- -- -- 3,233 3,233
Redeemable preferred stock dividends........... -- -- -- (215) (215)
--------- ------- ------- -------- -------
Balance at December 31, 1995................... $ 14,122 $50 $40,007 $ 3,024 $57,203
======= ===== ======= ======= =======
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-26
<PAGE> 136
ANKER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Operating activities:
Net income............................................................ $ 3,233 $ 2,462
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, amortization and depletion........................... 11,732 12,083
Minority interest.................................................. 63 300
Deferred income taxes.............................................. 2,108 1,897
Gain on sale of equipment.......................................... (955) (376)
Changes in operating assets and liabilities (net of assets and
liabilities acquired):
Accounts receivable.............................................. (3,406) (10,527)
Inventories, prepaid expenses and other.......................... 3,037 (5,939)
Advance minimum royalties........................................ (1,521) (1,989)
Accounts payable, accrued expenses and other..................... (11,009) 14,640
Other liabilities................................................ (1,114) 870
-------- -------
Net cash provided by operating activities..................... 2,168 13,421
-------- -------
Investing activities:
Acquisitions (net of $12,154 in 1994 for liabilities assumed)......... 15,000 (17,100)
Purchases of properties............................................... (9,353) (8,950)
Proceeds from sale of properties...................................... 2,232 681
Issuance of notes receivable.......................................... (744) (3,290)
Payments received on notes receivable................................. 586 79
Other assets.......................................................... (2,700) (3,854)
-------- -------
Net cash provided by (used in) investing activities........... 5,021 (32,434)
-------- -------
Financing activities:
Proceeds from revolving line of credit and long-term debt............. 111,394 93,724
Principal payments on revolving line of credit and long-term debt..... (106,402) (75,916)
-------- -------
Net cash provided by financing activities..................... 4,992 17,808
-------- -------
Increase (decrease) in cash and cash equivalents........................ 12,181 (1,205)
Cash and cash equivalents at beginning of year.......................... 1,345 2,550
-------- -------
Cash and cash equivalents at end of year................................ $ 13,526 $ 1,345
======== =======
Supplemental non-cash financing activities:
Redeemable preferred stock dividends.................................. $ 215 $ 215
======== =======
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
F-27
<PAGE> 137
ANKER GROUP, INC. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND PRINCIPLES OF CONSOLIDATION:
At December 31, 1995, the outstanding common stock of Anker Group, Inc.
("Anker") is substantially owned by Anker Holding B.V., a foreign corporation,
with the President of Anker owning a minority interest.
The consolidated financial statements include the accounts of Anker and its
wholly and majority owned subsidiaries ("Company"). All significant intercompany
accounts and transactions are eliminated in consolidation.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include highly liquid investments with original
purchase maturities of three months or less. Approximately $2,632,000 and
$1,190,000 of the cash and cash equivalents balance at December 31, 1995 and
1994, respectively, relates to the Company's venture capital subsidiary and is
restricted for the purchase of qualified investments in accordance with
requirements of the State of West Virginia venture capital laws.
INVENTORIES:
Inventories consist of coal and mining supplies. Coal inventories are
stated at the lower of average cost or market. Supply inventories, which are
stated at lower of cost (first in, first out) or market, amounted to $2,441,000
and $2,887,000 on December 31, 1995 and 1994, respectively.
PROPERTIES:
Properties are stated at cost. Provisions for depreciation are based upon
the estimated useful lives of the respective assets and are computed by the
straight-line method.
Coal lands represent the investment in land and related mineral and/or
surface rights, including mine development costs, which are being mined or will
be mined. Depletion of coal lands is computed on a tonnage basis calculated to
amortize its costs fully over the estimated recoverable reserves.
NONCOMPETE AGREEMENTS:
Noncompete agreements are amortized on a straight-line basis over the term
of the related agreements. Accumulated amortization amounted to $4,995,000 and
$3,637,000 at December 31, 1995 and 1994, respectively.
ACCRUED RECLAMATION EXPENSES:
Provisions to reclaim disturbed acreage remaining after production has been
completed and related mine closing costs are accrued during the life of the
mining operation or recorded in conjunction with the acquisition of related
properties. The provision is made at a rate per ton equivalent to the estimated
reclamation cost divided by the estimated tonnage to be mined.
INCOME TAXES:
Deferred income taxes are provided for temporary differences between
financial and tax accounting relating principally to certain accrued expenses,
depreciation, depletion, mine development, reclamation, investment tax credits
and alternative minimum taxes.
F-28
<PAGE> 138
ANKER GROUP, INC. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. OPERATIONS
The Company's principal operations consist of mining and selling coal from
mineral rights which it owns and/or leases, as well as brokering coal from other
producers. In addition, the Company receives revenue for the disposal of ash.
Following is a summary of coal sales and related income:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
(IN THOUSANDS)
<S> <C> <C>
Coal mining revenue.................................... $194,348 $170,792
Brokered coal revenue.................................. 49,333 50,470
Ash disposal revenue................................... 5,216 6,237
-------- --------
$248,897 $227,499
======== ========
</TABLE>
Included in coal mining revenue are sales to companies affiliated through
common ownership aggregating approximately $11,668,000 in 1995 and $7,232,000 in
1994.
The Company's coal mining revenue is substantially generated from long-term
coal supply contracts with domestic utilities throughout the United States.
These contracts range from one to twenty years with fixed base prices which
change based on certain industry and government indices. Receivables generally
are due within 30 to 45 days. The Company performs credit evaluations on all new
customers, and credit losses have historically been minimal.
In 1995 and 1994, other income-net includes approximately $1,500,000 and
$4,300,000, respectively, related to the modification of long-term contracts.
The amount in 1994 represents the present value, discounted at 8% of the
$500,000 annual cash payments to be received in years 1995 through 2004. At
December 31, 1995 and 1994, receivables of approximately $3,585,000 and
$3,310,000 are recorded which are net of unearned discounts of $1,415,000 and
$1,690,000, respectively.
3. ACQUISITIONS
On December 30, 1995, the Company acquired coal reserves and cash from
Phillips Resources, Inc. through the issuance of mandatorily redeemable
preferred stock valued at $7,000,000 based on estimated cash flows for dividend
and mandatory redemption payments (see Note 5) discounted at approximately 10%.
Also, on December 30, 1995, the Company acquired the outstanding stock of Upshur
Property, Inc. ("Upshur") through the issuance of preferred stock valued at
$13,000,000. The net assets of Upshur consist of a preparation plant, machinery
and cash less a reclamation liability. The effects of these acquisitions have
been excluded from the consolidated statement of cash flows, except for the $15
million of cash acquired in connection with the transactions.
Effective January 1, 1994, the Company acquired the outstanding stock of
Marine Coal Sales Company ("Marine") for $2,700,000 in cash. Marine's activities
consist primarily of brokering coal in the midwest United States.
Through various transactions beginning March 7, 1994, and culminating
August 10, 1994, the Company acquired, through a newly formed subsidiary, 95% of
the outstanding stock of Beckley Smokeless Limited Liability Company, a start-up
deep mining operation, for $4,900,000.
F-29
<PAGE> 139
ANKER GROUP, INC. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On June 28, 1994, the Company acquired certain coal reserves and leases
from Reserve Coal Properties Company for approximately $2,700,000.
On October 31, 1994, the Company acquired mineral rights and other related
mining assets from Westmoreland Coal Company for $3,800,000 and assumed a
reclamation liability estimated at $1,500,000.
On November 10, 1994, the Company acquired certain coal reserves and leases
from the Endres Company and two individuals for approximately $3,000,000.
These acquisitions have been accounted for using the purchase method of
accounting with results of operations of the acquired entities included in the
Company's consolidated statement of operations from the respective date of
acquisition.
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
(IN THOUSANDS)
<S> <C> <C>
Revolving note payable to bank................................... $57,000 $45,205
Note payable to bank, due in monthly principal installments of
$243,435 plus interest at 7.51% through January 5, 1999,
secured by property and equipment.............................. 9,007 11,928
Note payable to bank, due in monthly principal installments of
$71,430 with a balloon payment of $1,571,370 due on June 1,
1998, plus interest at various rate options chosen by the
Company (8.07% at December 31, 1995), secured by property and
equipment...................................................... 3,714 4,500
Note payable to a foreign affiliated company, unsecured, due
January 31, 1996, plus interest at the prime rate (8.5% at
December 31, 1994) refinanced through a revolving note payable
to a bank in March 1995........................................ -- 3,000
Miscellaneous notes payable...................................... 181 277
------- -------
69,902 64,910
Less current maturities of long-term debt........................ 11,778 3,888
------- -------
$58,124 $61,022
======= =======
</TABLE>
A description of the terms of the revolving note payable to a bank is as
follows:
- Revolving credit loan with a total availability of $30,000,000 subject
to a borrowing base formula, expiring March 30, 1998. At December 31,
1995 and 1994, $12,000,000 and $205,000, respectively, was outstanding.
- Reducing revolving credit loan with a total availability of
$45,000,000 reducing by $8,000,000 beginning in 1996, $-0- in 1997,
$6,500,000 in 1998, $7,000,000 in 1999 and $23,500,000 in 2000. At
December 31, 1995 and 1994, $45,000,000 was outstanding.
- A $20 million standby line of credit becomes available on March 30,
1996 if the Company achieves certain financial performance and may only
be used for acquisitions. Borrowings under the line of credit have a
term of five years beginning at the time of each borrowing, with equal
quarterly principal repayments. All outstanding borrowings are due
March 31, 2000.
Interest on the revolving note payable is charged at various interest
options periodically chosen by the Company (ranging from 8.16% to 8.07% at
December 31, 1995 and expiring on January 11, 1996 and May 6, 1996,
respectively). Equipment, property and working capital is pledged as security.
In connection with the revolving note payable and both notes payable to a
bank, the Company is required to maintain certain financial ratios consistent
with these types of financing.
F-30
<PAGE> 140
ANKER GROUP, INC. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future required principal payments on long-term debt are: $11,778,000 in
1996; $3,778,000 in 1997; $23,603,000 in 1998; $7,243,000 in 1999; and
$23,500,000 in 2000.
Under the terms of the bank debt agreements, the Class A Mandatorily
Redeemable Preferred Stock (Note 5), which is with a foreign affiliate may be
repaid provided that such payment is part of a transaction in which additional
preferred stock and/or loans are made to the Company in amounts at least equal
to the face value of the preferred stock and are subordinated to the bank debt.
The subordinated debt, which is with a foreign affiliate, is due December 31,
1996 and bears interest at a floating rate (8.0% at December 31, 1995), based on
the lender's borrowing rate, and is secured by certain equipment and property.
Under the bank debt agreements, the subordinated debt may not be repaid until
all amounts outstanding under the bank debt agreements have been repaid and is
therefore classified as long term as of December 31, 1995.
Total interest paid by the Company was $6,305,000 and $3,701,000 for the
years ended December 31, 1995 and 1994, respectively.
5. PREFERRED STOCK
The following is a description of the terms of outstanding mandatorily
redeemable and other preferred stock:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
(IN THOUSANDS)
<S> <C> <C>
Mandatorily Redeemable Preferred Stock:
Class A, authorized 200 shares; issued and outstanding
160 shares; nonvoting, 9.9% cumulative dividend,
mandatorily redeemable at $10,000 per share on
December 31, 1996, subject to restrictions under the
revolving note payable (Note 4)...................... $ 1,600 $1,600
Class D, par value $7,000, authorized 1,000 shares;
issued and outstanding 1,000 shares; nonvoting, 2.5%
cumulative dividend, reducing to 1.5% after January
1, 2011, calculated on the gross realization from
certain coal sales, mandatorily redeemable beginning
December 31, 2006 at $1,400,000 per year through
December 31, 2010 if aggregate dividends paid on or
before December 31, 2005 are not $5,000,000 or more,
otherwise mandatorily redeemable beginning December
31, 2011 at $1,400,000 per year through December 31,
2015................................................. 7,000 --
Preferred Stock:
Class B, par value $2,500, authorized 10,000 shares;
issued and outstanding 449 shares; nonvoting, 5.0%
cumulative dividend.................................. 1,122 1,122
Class C, par value $13,000, authorized 1,000 shares;
issued and outstanding 1,000 shares; nonvoting,
cumulative dividend payment calculated on 4.0% of the
gross realization from certain coal sales, redeemable
at par value upon the event of liquidation or other
action described in the preferred stock agreement.... 13,000 --
</TABLE>
F-31
<PAGE> 141
ANKER GROUP, INC. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. INCOME TAXES
The reconciliation of the federal statutory rate to the consolidated
effective rate is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1994
(IN THOUSANDS)
<S> <C> <C>
Federal statutory tax rate................................... 34.0% 34.0%
Permanent differences........................................ 8.0 10.7
Other........................................................ (0.7) (0.6)
---- ----
41.3% 44.1%
==== ====
</TABLE>
The components of net deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
(IN THOUSANDS)
<S> <C> <C>
Deferred tax asset (liabilities)--current:
Net operating loss carryforward........................ $ 1,305 --
Other current assets................................... 22 --
Other current liabilities.............................. 228 $ 1,872
Investment tax credits................................. 100 402
------- -------
$ 1,655 $ 2,274
======= =======
Deferred tax assets (liabilities) -- noncurrent:
Depreciation, depletion and amortization............... $(7,422) $(6,263)
Other long-term assets................................. (2,955) (2,316)
Other long-term liabilities............................ -- 311
Alternative minimum tax................................ 2,958 2,485
Investment tax credits................................. 352 491
Accrued reclamation.................................... 1,193 1,193
Acquisition assets and liabilities..................... (2,355) (2,641)
------- -------
$(8,229) $(6,740)
======= =======
</TABLE>
At December 31, 1995, the Company has cumulative alternative minimum tax
credits of $2,958,000 which may be carried forward indefinitely, and investment
tax credits of $452,000 which expire at various dates through the year 2000. For
the year ended December 31, 1995, the Company incurred a net operating loss of
$3,267,000 for tax purposes to be utilized against future federal and state
income taxes. These amounts are recorded as deferred tax assets.
Total income taxes paid by the Company were $263,000 and $738,000 for the
years ended December 31, 1995 and 1994, respectively.
7. RETIREMENT BENEFITS
The Company has a contributory defined contribution retirement plan
covering all employees who meet eligibility requirements. The plan provides for
employer contributions representing 5% of compensation. The Company
contributions amounted to $1,034,000 and $1,060,000 for the years ended December
31, 1995 and 1994, respectively.
The Company also has a 401(k) savings plan which is a contributory defined
contribution plan for all employees who meet eligibility requirements. The Plan
provides for mandatory employer contributions to match 50% of employee
contributions up to a maximum of 2% of each participant's compensation. In
addition,
F-32
<PAGE> 142
ANKER GROUP, INC. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the Company may make discretionary contributions up to 5% of employee
compensation. The Company contributions amounted to $351,000 and $372,000 for
the years ended December 31, 1995 and 1994, respectively.
The Company also has a 401(h) savings plan for the purpose of providing
retiree health care benefits. The plan is a defined contribution plan for all
employees who meet eligibility requirements and provides for mandatory employer
contributions between .237% and 1.66% of each participant's compensation, based
on years of service. The Company contributions amounted to $287,000 and $265,000
for the years ended December 31, 1995 and 1994, respectively.
8. STATE TAX CREDITS
The Company has Business Investment and Jobs Expansion Tax Credits which
are available to reduce certain taxes payable to West Virginia. The Company
recorded credits amounting to $1,165,000 and $1,103,000 for the years ended
December 31, 1995 and 1994, respectively, and the Company expects to realize
similar tax credits for the next 12 years.
In December 1993, the Company formed and qualified a venture capital
subsidiary with the State of West Virginia for the purpose of investing in
emerging businesses. During 1995, the Company made an additional contribution to
the capital base of the subsidiary. This entitled the Company to a tax credit of
$1,250,000 which reduced severance tax in 1995.
9. COMMITMENTS AND CONTINGENCIES
COAL INDUSTRY RETIREE HEALTH BENEFIT ACT:
Current and projected operating deficits in the United Mine Workers of
America Benefit Trust Funds (the "Funds") resulted in the Coal Industry Retiree
Health Benefit Act of 1992 (the "Act"). The Act created a multiemployer benefit
plan called the United Mine Workers of America Combined Benefit Fund (the
"Combined Fund"). The Combined Fund provides medical and death benefits for all
beneficiaries of the earlier trusts who were actually receiving benefits as of
July 20, 1992. The Act provides for the assignment of beneficiaries to former
employers and the allocation of any unassigned beneficiaries (referred to as
orphans) to companies using a formula included in the legislation. The Act
requires that responsibility for funding those payments be assigned to companies
that had been signatories to the National Bituminous Coal Wage Agreement
("Agreement"). Although the Company does not currently have any operations which
are signatory to the Agreement, it is subject to certain liabilities as a result
of being signatory to a prior agreement.
A company's annual cost of benefits is based on the number of beneficiaries
assigned to the company plus a percentage of the cost of unassigned
beneficiaries, which is a function of the number of orphans times the
per-beneficiary premium. The Company's annual cost for 1995 was approximately
$450,000 and, during 1995, the Company was assigned certain additional
beneficiaries under the Act which will result in total cost of approximately
$1,388,000 in 1996, based on some retroactive assessments. Thereafter, the
Company's annual cost relating to the Act is approximately $478,000. The Company
has taken action to attempt to reduce this assessment and accounts for the cost
incurred relating to this Act on a pay-as-you-go basis.
ADVANCE MINIMUM ROYALTIES:
Tonnage royalty payments on leased properties range from 2% to 10% of the
realization. The leases require minimum royalty payments aggregating
approximately: $1,678,000 in 1996; $1,794,000 in 1997; $1,789,000 in 1998;
$1,784,000 in 1999 and $1,791,000 in 2000.
In connection with a prior year acquisition of assets and assumption of
certain liabilities, the Company entered into a royalty agreement requiring
minimum royalty payments of $200,000 per year for the next ten years. A deferred
credit with a balance of $721,000 at December 31, 1995 is recorded in other
long-term
F-33
<PAGE> 143
ANKER GROUP, INC. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
liabilities related to the royalty agreement representing the net present value
of the payments discounted at 12.0%.
OPERATING LEASES:
The Company has office and mining equipment operating lease agreements with
minimum annual rentals for the next five years of approximately $7,622,000 in
1996; $4,101,000 in 1997; $2,489,000 in 1998; $1,206,000 in 1999; and $499,000
in 2000. Total rent expense approximated $8,213,000 in 1995 and $7,988,000 in
1994.
CONTINGENCIES:
In February 1995, the Company lost its final appeal on a lawsuit related to
an alleged agreement to purchase coal and paid $3,731,000 representing total
damages and interest. This amount is included in accrued expenses and other on
the consolidated balance sheet and in other income-net on the consolidated
statement of operations for the year ended December 31, 1994.
During 1995, the Company settled a severance tax appeal with the State of
West Virginia for approximately $507,000. In prior years, a liability of
$1,375,000 was recorded. The reduction in the liability is recorded as a
reduction of cost of operations in 1995.
Additionally, the Company is a party to various lawsuits and claims
incidental to its business. While it is not possible to predict accurately the
outcome of these matters, management believes that none of these actions will
have a material effect on the Company's consolidated financial position.
Upon the occurrence of certain events, Anker Holding B.V. or the Company
has the obligation to buy back current outstanding common stock of the President
and any additional shares obtained through the exercise of outstanding stock
options. The buy-back price escalates annually based on a formula defined in the
shareholder agreement ("Agreement"). In the event there is a change in control
of Anker Group, Inc., such obligation is eliminated under the Agreement.
10. FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107, "Disclosures About
Fair Value of Financial Instruments" requires disclosure of information
regarding the fair value of financial instruments for which it is practicable to
estimate and value, whether or not such value is recognized in the balance
sheet.
The carrying amounts of cash and cash equivalents and long-term debt
approximates fair value. The fair value of the Company's borrowings under its
revolving and other notes payable to a bank was estimated using discounted cash
flow analyses, based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements.
It was not practicable to estimate the fair value of the Company's notes
receivable without incurring excessive costs. The notes carry interest rates
applicable to the nature of the transaction and the borrower. The carrying
amount ($7,090,000) represents the outstanding balance, which management
believes is not impaired.
F-34
<PAGE> 144
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Oak Mountain Energy
Corporation and Affiliates:
We have audited the accompanying combined balance sheet of Oak Mountain
Energy Corporation and Affiliates (Predecessor) as of December 31, 1996 and the
related combined statements of operations, stockholders' equity and cash flows
for the year then ended. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Oak
Mountain Energy Corporation and Affiliates as of December 31, 1996, the combined
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Pittsburgh, Pennsylvania
August 8, 1997
F-35
<PAGE> 145
OAK MOUNTAIN ENERGY, L.L.C. AND PREDECESSOR
COMBINED BALANCE SHEETS
DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
------------ -------------
DECEMBER 31, SEPTEMBER 30,
1996 1997
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 276 $ 29
Accounts receivable:
Trade......................................................... 1,513 1,647
Others........................................................ 9 428
Inventories...................................................... 951 824
Prepaid expenses and other....................................... 147 564
------- -------
Total current assets..................................... 2,896 3,492
Properties:
Coal lands and mineral rights.................................... 8,408 26,245
Machinery and equipment.......................................... 18,360 11,317
------- -------
26,768 37,562
Less allowances for depreciation, depletion and amortization..... 6,813 963
------- -------
19,955 36,599
Other assets:
Goodwill, net of accumulated amortization of $29 in 1997......... -- 7,352
Intangibles and other assets, net of accumulated amortization of
$40 in 1996 and $33 in 1997................................... 90 1,229
------- -------
Total assets............................................. $ 22,941 $48,672
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. 2,009 3,955
Accrued expenses and other....................................... 1,815 2,062
Current maturities of long-term debt............................. 9,552 11,037
------- -------
Total current liabilities................................ 13,376 17,054
Long-term debt..................................................... 9,027 3,508
Accrued reclamation expenses....................................... 218 229
------- -------
Total liabilities........................................ 22,621 20,791
Stockholders' equity:
Common stock..................................................... 6 --
Paid-in capital.................................................. 644 31,278
Notes receivable -- members...................................... -- (1,277)
Treasury stock................................................... (245) --
Accumulated deficit.............................................. (85) (2,120)
------- -------
Total stockholders' equity............................... 320 27,881
------- -------
Total liabilities and stockholders' equity............... $ 22,941 $48,672
======= =======
</TABLE>
The accompanying notes are an integral
part of the combined financial statements.
F-36
<PAGE> 146
OAK MOUNTAIN ENERGY, L.L.C. AND PREDECESSOR
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
---------------------------
PREDECESSOR THE COMPANY
-------------------------- -------------
FOR THE PERIOD PERIOD
YEAR JANUARY 1 APRIL 17
ENDED THROUGH THROUGH
DECEMBER 31, APRIL 16, SEPTEMBER 30,
1996 1997 1997
<S> <C> <C> <C>
Coal sales and related revenue......................... $ 31,748 $10,693 $14,350
Expenses:
Cost of operations and selling expenses.............. 27,834 11,233 13,774
Depreciation, depletion and amortization............. 3,636 1,314 1,670
General and administrative........................... 1,300 504 506
-------- -------- --------
Operating loss............................... (1,022) (2,358) (1,600)
Interest............................................... 1,458 546 520
Other income, net...................................... 118 18 --
-------- -------- --------
Net loss..................................... $ (2,362) $(2,886) $(2,120)
======== ======== ========
</TABLE>
The accompanying notes are an integral
part of the combined financial statements.
F-37
<PAGE> 147
PREDECESSOR TO OAK MOUNTAIN ENERGY, L.L.C.
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
FOR THE PERIOD JANUARY 1, 1997 THROUGH APRIL 16, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON PAID-IN TREASURY ACCUMULATED
STOCK CAPITAL STOCK DEFICIT TOTAL
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995............. $6 $ 644 $ (245) $ 2,277 $ 2,682
Net loss................................. -- -- -- (2,362) (2,362)
--- ---- ----- ------- -------
Balance at December 31, 1996............. 6 644 (245) (85) 320
Net loss (unaudited)..................... -- -- -- (2,886) (2,886)
--- ---- ----- ------- -------
Balance at April 16, 1997 (unaudited).... $6 $ 644 $ (245) $(2,971) $(2,566)
=== ==== ===== ======= =======
</TABLE>
The accompanying notes are an integral
part of the combined financial statements.
F-38
<PAGE> 148
OAK MOUNTAIN ENERGY, L.L.C.
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
FOR THE PERIOD APRIL 17, 1997 THROUGH SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES
PAID-IN RECEIVABLE ACCUMULATED
CAPITAL MEMBERS DEFICIT TOTAL
<S> <C> <C> <C> <C>
Balance at April 17, 1997........................ -- -- -- --
Initial capitalization........................... $31,278 $ (1,277) -- $30,001
Net loss......................................... -- -- $(2,120) (2,120)
------- ------- ------- -------
Balance at September 30, 1997.................... $31,278 $ (1,277) $(2,120) $27,881
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral
part of the combined financial statements.
F-39
<PAGE> 149
OAK MOUNTAIN ENERGY, L.L.C. AND PREDECESSOR
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
-------------------------
THE COMPANY
PREDECESSOR -----------
-------------------------- PERIOD
PERIOD APRIL 17
FOR THE JANUARY 1 THROUGH
YEAR ENDED THROUGH SEPTEMBER
DECEMBER 31, APRIL 16, 30,
1996 1997 1997
<S> <C> <C> <C>
Operating activities:
Net loss.............................................. $ (2,362) $(2,886) $ (2,120)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation, depletion and amortization........... 3,636 1,314 1,670
Gain on sale of properties......................... (77) (49) --
Changes in operating assets and liabilities (net of
assets and liabilities acquired):
Accounts receivable.............................. 129 (634) 382
Inventories, prepaid expenses and other.......... (667) 118 (411)
Accounts payable, accrued expenses and other..... 1,413 1,206 1,509
-------- ------- --------
Net cash provided by (used in) operating
activities.................................. 2,072 (931) 1,030
-------- ------- --------
Investing activities:
Purchase of Predecessor, including related acquisition
cost of $577, net of cash acquired of $367 and
liabilities and seller note assumed of $27,350..... -- -- (13,210)
Purchases of properties............................... (11,730) (514) (8,829)
Proceeds from sale of properties...................... 100 65 --
Intangible assets..................................... (68) (10) (154)
Other assets.......................................... 19 (8) (164)
-------- ------- --------
Net cash used in investing activities......... (11,679) (467) (22,357)
-------- ------- --------
Financing activities:
Proceeds from long-term debt.......................... 11,876 2,400 15,200
Principal payments on long-term debt.................. (2,929) (911) (23,845)
Proceeds from issuance of common stock................ 3 -- --
Proceeds from issuance of member units................ -- -- 30,001
-------- ------- --------
Net cash provided by financing activities..... 8,950 1,489 21,356
-------- ------- --------
(Decrease) increase in cash and cash equivalents........ (657) 91 29
Cash and cash equivalents at beginning of period........ 933 276 --
-------- ------- --------
Cash and cash equivalents at end of period.............. $ 276 $ 367 $ 29
======== ======= ========
Supplemental information:
Cash paid for interest................................ $ 1,255 $ 345 $ 1,060
======== ======= ========
Supplemental non-cash financing activities:
Acquisition of equipment under capital leases......... $ 793 -- --
======== ======= ========
</TABLE>
Noncash Transactions: During 1997, the Company entered into various sale
leaseback agreements whereby they sold certain fixed assets and in exchange the
buyer assumed the related debt and accrued interest on the assets. The realized
loss was recorded as an adjustment to goodwill.
The accompanying notes are an integral
part of the combined financial statements.
F-40
<PAGE> 150
OAK MOUNTAIN ENERGY, L.L.C. AND PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Oak Mountain Energy, L.L.C. (the Company or Companies), is a newly formed
joint venture used to acquire the assets of Oak Mountain Energy Corporation and
its Affiliates (Predecessor). The acquisition was effective on April 17, 1997
and was accounted for using the purchase method of accounting as prescribed
under Accounting Principles Bulletin No. 16, "Accounting for Business
Combinations." The allocation of the purchase price related to the acquisition
was as follows (in thousands):
<TABLE>
<S> <C>
Properties......................................................... $36,182
Current assets..................................................... 4,168
-------
40,350
Liabilities and seller note assumed................................ 27,350
-------
Cash paid.......................................................... 13,000
Less cash acquired................................................. 367
-------
Net cash paid for acquisition...................................... $12,633
=======
</TABLE>
The Company's principal operations, which are located in Alabama, consist
of mining and selling coal from mineral rights which it owns and/or leases.
Sales to one customer represented 66% of total revenue for the year ended
December 31, 1996, 70% for the period January 1, 1997 through April 16, 1997 and
85% for the period April 17, 1997 through September 30, 1997.
The accompanying combined financial statements present the Company's
unaudited combined operations and cash flows from the acquisition effective date
of April 17, 1997 through September 30, 1997 and the unaudited combined
operations and cash flows of the Predecessor for the period January 1, 1997
through April 16, 1997. These unaudited combined financial statements, in the
opinion of management, have been prepared on the same basis as the audited
combined financial statements and include all significant adjustments,
consisting only of normal recurring adjustments, necessary for the fair
presentation of the results of the interim periods. The data disclosed in these
notes to the combined financial statements for these periods are also unaudited.
Operating results for the interim periods ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the entire year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION:
The accompanying combined financial statements as of December 31, 1996 and
for the period January 1, 1997 through April 16, 1997 present the accounts of
the Predecessor (see Note 9). The combined financial statements for the period
April 17, 1997 (date of acquisition) through September 30, 1997 present the
combined financial statements of the Company. The financial statements present
the combined operations due to common ownership. All significant intercompany
accounts and transactions have been eliminated in combination.
REVENUE RECOGNITION:
The Company recognizes revenue either upon shipment or customer receipt of
coal, based on contractual terms. The Company's coal mining revenue is
substantially generated from long-term coal supply contracts with domestic
utilities principally in Alabama. These contracts typically are one-year
renewable with fixed based prices which change based on certain industry and
government indices. Receivables generally are due within 30 to 45 days. The
Company performs credit evaluations on all new customers, and credit losses have
historically been minimal.
F-41
<PAGE> 151
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include highly liquid investments with original
purchase maturities of three months or less.
INVENTORIES:
Inventories consist of coal and mining supplies. Coal inventories are
stated at the lower of average cost or market. Supply inventories are stated at
the lower of cost (first in, first out) or market.
PROPERTIES:
Properties are recorded at cost, which includes the allocated purchase
price for the acquisition described in Note 1. Provisions for depreciation are
based upon the estimated useful lives of the respective assets and are computed
by the straight-line method.
Coal lands represent the investment in land and related mineral and/or
surface rights, including capitalized mine development costs, which are being
mined or will be mined. Mine development costs of 9.5 million at September 30,
1997 and $8 million at December 31, 1996 represent expenditures incurred, net of
revenue received, in development of coal mines until the principal operating
activity becomes coal production. Depletion and amortization of coal lands is
computed on a tonnage basis calculated to amortize its costs fully over the
estimated recoverable reserves.
GOODWILL AND OTHER INTANGIBLE ASSETS:
Intangible assets consist of the excess of the purchase price over the fair
value of the net assets acquired (goodwill), organization costs, and debt
issuance costs, which are being amortized on the straight-line method over the
useful lives of these assets. Goodwill, principally related to the acquisition
described in Note 1, is being amortized over 30 years in conjunction with the
expected useful life of existing mineral rights. The Company periodically
evaluates the carrying value of goodwill based on whether the goodwill is
recoverable from expected future undiscounted operating cash flows.
Additionally, the Company periodically reviews the carrying value of other
intangible assets and will recognize impairments when the expected future
operating cash flow is less than their carrying value.
ACCRUED RECLAMATION EXPENSES:
Provisions to reclaim disturbed acreage remaining after production has been
completed and related mine closing costs are accrued during the life of the
mining operation or recorded in conjunction with the acquisition of related
properties. The annual provision is made at a rate per ton equivalent to the
estimated reclamation cost divided by the estimated tonnage to be mined.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements.
Estimates also affect the amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
INCOME TAX STATUS:
The Company and its Predecessor are not subject to federal and state income
taxes. Accordingly, net income or loss are allocated to the members in
proportion to their income and loss rates of participation.
F-42
<PAGE> 152
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. RELATED PARTY TRANSACTIONS
Interest expense includes interest on notes receivable to stockholders
amounting to $377,589 in 1996 and $107,138 for the period January 1, 1997
through April 16, 1997.
As compensation for personal guarantees on loans and letters of credit, the
Company paid the stockholders a fee of 1.5% of the outstanding balances. Such
fees amounted to $110,768 for the year ended December 31, 1996 and $28,610 for
the period January 1, 1997 through April 16, 1997.
Accrued expenses and other includes $211,953 at 1996 and $276,203 at April
16, 1997, related to the above referenced interest and fees.
Accounts payable includes $834,000 of financing costs payable to a
shareholder. In addition, general and administrative expenses include $84,000
for management fees payable to the shareholders.
4. LONG-TERM DEBT
Long-term debt consists of the following as of December 31, 1996 and
September 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
(UNAUDITED)
------------------------------
(IN THOUSANDS)
<S> <C> <C>
Equipment notes payable(A)......................... $ 2,121 $ 52
Notes payable to shareholders(B)................... 11,823 --
Line of credit(C).................................. 500 --
Term loan(D)....................................... 2,000 --
Credit agreement(E)................................ -- 9,300
Other notes payable(F)............................. 95 5,131
Capital leases(G).................................. 2,040 62
------- -------
18,579 14,545
Less: current maturities of long-term debt......... (9,552) (11,037)
------- -------
$ 9,027 $ 3,508
======= =======
</TABLE>
- ------------------------------
(A) Represents a note payable, which bears interest at a rate of 7.92% and is
payable in June 1998.
(B) Note payable to shareholder in the amount of $7.5 million. Interest only is
payable quarterly at the prime rate (8.25% at December 31, 1996) plus 1%.
Principal is payable upon maturity in February 1999. In connection with the
acquisition described in Note 1, the remaining outstanding principal was
repaid on April 16, 1997.
Three notes payable to stockholders. The notes bear interest at prime rate
(8.25% at December 31, 1996) and are payable in August 1997. These notes
are collateralized by the Company's current and future accounts
receivable, inventory and equipment.
(C) Line of credit with a bank which provides for borrowings of up to $3 million
based on specified levels of accounts receivable. Interest is payable
monthly at the bank's prime rate (8.25% at December 31, 1996) plus 1%. The
commitments entered into under the agreement expired on March 31, 1997.
(D) Term loan in the amount of $2 million. Interest only is payable monthly at
the bank's prime rate (8.25% at December 31, 1996) and the principal is
payable in March 1997. This loan was collateralized by the personal assets
of the stockholders.
(E) The Company's credit agreement provides for a revolving credit facility and
a term loan amounting to $3 million and $27 million, respectively.
Borrowings under the credit agreement bear interest at the LIBOR rate
(5.66% at September 30, 1997) plus 2% until April 1999. From that time
until the
F-43
<PAGE> 153
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
expiration of the agreement, April 2004, borrowings will bear interest at a
variable rate based on the Company's option of the bank's prime rate or the
LIBOR rates based upon the ratio of funded debt to earnings before income,
depreciation, depletion and amortization. The agreement is subject to a
variable monthly commitment fee on the unused portion of the available
borrowings.
(F) A note payable with an original amount of $4,035,604. The Company has
approximately $1,923,750 outstanding at September 30, 1997. The note bears
interest at the prime rate (8.5% at September 30, 1997) plus 1%. A
principal payment of $961,875 is due on December 1, 1997, plus interest
accrued. On December 1, 1998, the remaining principal balance together with
all accrued and unpaid interest is due.
A note payable with an original amount of $3,500,000. The Company has
approximately $3,208,335 outstanding at September 30, 1997. The note bears
interest at the prime rate (8.5% at September 30, 1997). Principal and
interest payments are due in monthly installments over a five year period
ending on April 30, 2002.
Four notes for various equipment. The notes bear interest from 8% to 11.5%
and principal and interest payments were due monthly over periods ending
at various dates through March 2000. The remaining balance on these notes
was paid during 1997.
(G) The Company has one capital lease outstanding at September 30, 1997. The
lease bears interest of 10.45% annually. Principal and interest payments are
due monthly through December, 1999.
The equipment notes and capital leases are collateralized by the related
equipment. The credit agreement is collateralized by substantially all of the
Company's present and future assets.
The credit agreement contains covenants which require the Company to
maintain certain levels of income before interest, depreciation, depletion, and
amortization maintain a certain minimum net worth, maintain a minimum level of
production tons, limit capital expenditures, and not exceed a maximum level of
production costs per ton.
As of September 30, 1997, the Company is in default of various covenants of
the credit agreement. The Company has requested waivers of the covenant
violations and is in the process of renegotiating certain covenants.
Accordingly, the entire balance outstanding on the credit agreement at September
30, 1997 has been classified as current on the balance sheet.
Future required principal payments at September 30, 1997 are:
<TABLE>
<S> <C>
October 1, 1997 - December 31,
1997............................................................ $10,459,882
1998............................................................ 1,722,902
1999............................................................ 729,220
2000............................................................ 700,000
2001............................................................ 700,000
2002............................................................ 233,333
</TABLE>
A financial institution has issued four letters of credit totaling $709,011
on the Companies' behalf. As of September 30, 1997 and December 31, 1996 no
amounts were outstanding on these letters of credit. The collateral consists of
the personal guarantee of the Predecessor's majority stockholder at December 31,
1996 and the guarantee of the Companies.
5. PROFIT SHARING PLAN
The Companies have a deferred compensation 401(k) plan for the benefit of
their employees. All employees who have obtained one year of service and worked
1,000 hours are eligible to participate.
F-44
<PAGE> 154
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The Companies' contributions to the plan are entirely voluntary. The
Companies' contributions for any plan year are allocated to all eligible
employees based upon the ratio of the employee's compensation to the
compensation of all eligible employees. During the periods presented the
Companies made no contribution to the plan.
6. ROYALTIES
The Predecessor and the Company operate under royalty agreements. Royalty
costs were $2,365,525 for 1996, $642,346 for the period January 1, 1997 through
April 16, 1997 and $1,056,871 for the period April 17, 1997 through September
30, 1997. Several of these royalty agreements require future minimum royalty
payments aggregating approximately: $129,000 for the period October 1, 1997
through December 31, 1997, $548,000 in 1998, $612,000 in 1999, $537,000 in 2000,
$352,000 in 2001, $432,000 in 2002 and $2,291,000 in years thereafter.
7. OPERATING LEASES
The Companies have various noncancelable leases for equipment and
facilities which are classified as operating leases. Rent expense under these
noncancelable leases was $821,000 in 1996, $382,000 for the period January 1,
1997 through April 16, 1997 and $1,160,751 for the period April 17, 1997 through
September 30, 1997.
The approximate remaining annual minimum lease payments under the
noncancelable operating leases existing as of September 30, 1997 are:
<TABLE>
<S> <C>
October 1, 1997 - December 31,
1997............................................................ $ 943,931
1998............................................................ 3,945,454
1999............................................................ 3,284,858
2000............................................................ 1,716,818
2001............................................................ 204,873
-----------
$10,095,934
===========
</TABLE>
8. COMMON STOCK
Common stock of the Predecessor at December 31, 1996 is comprised of the
following:
<TABLE>
<CAPTION>
PAR SHARES SHARES SHARES
VALUE AUTHORIZED ISSUED OUTSTANDING
<S> <C> <C> <C> <C>
Oak Mountain Energy Corporation........ $ 1 1,000 1,000 1,000
Boone Resources, Inc................... 1 5,000 1,000 625
Kodiak Coal, Inc....................... 1 1,000 1,000 1,000
Coal Handling and Processing, Inc...... 1 1,000 1,000 1,000
Cahaba Coal Engineering and Land
Surveying, Inc....................... 1 1,000 1,000 1,000
Mountaineer Management, Inc............ 1 1,000 1,000 1,000
</TABLE>
Boone Resources, Inc. includes 375 shares of stock held in treasury at
cost.
F-45
<PAGE> 155
ANNEX A-1
GLOSSARY OF SELECTED TERMS
BTU-BRITISH THERMAL UNIT. A measure of the energy required to raise the
temperature of one pound of water one degree Fahrenheit.
COAL SEAM. Coal deposits occur in layers. Each such layer is called a
"seam."
COKE. A hard, dry carbon substance produced by heating coal to a very high
temperature in the absence of air. Coke is used in the manufacture of iron and
steel. Its production results in a number of useful byproducts.
COMPLIANCE COAL. Coal which, when burned, emits less than 1.2 pounds of
sulfur dioxide per million Btu.
DEEP MINE. An underground coal mine.
DRIFT MINE. A coal mine entered directly through a horizontal opening
mined into the side of a hill or mountain.
INDICATED RESERVES. Coal tonnages computed by projection of data from
available seam measurements for a distance beyond coal classed as measured. The
assurance, although lower than for measured, is high enough to assume continuity
between points of measurement. The maximum acceptable distance for projection of
indicated tonnage is 1/2 to 3/4 mile from points of observation. Further
exploration is necessary to place these reserves in a measured category.
MEASURED RESERVES. Tonnages computed from seam measurements as observed
and recorded in drill holes, mine workings, and/or seam outcrop prospect
openings. The sites for measurement are so closely spaced and the geologic
character so well-defined that the thickness, areal extent, size, shape and
depth of coal are well-established. The maximum acceptable distance for
projection from seam data points varies with the geologic nature of the coal
seam being studied, but generally a radius of 1/4 mile is recognized as the
standard.
METALLURGICAL COAL. The various grades of coal suitable for carbonization
to make coke for steel manufacture. Also known as "met" coal, it possesses four
important qualities: volatility, which affects coke yield; the level of
impurities, which affects coke quality; composition, which affects coke
strength; and basic characteristics, which affect coke oven safety. Met coal has
a particularly high Btu, but low ash content.
OVERBURDEN. Layers of earth and rock covering a coal seam. In surface
mining operations, overburden is removed prior to coal extraction.
PREPARATION PLANT. Usually located on a mine site, although one plant may
serve several mines. A preparation plant is a facility for crushing, sizing and
washing coal to prepare it for use by a particular customer. The washing process
has the added benefit of removing some of the coal's sulfur content.
RECLAMATION. The restoration of land and environmental values to a mining
site after the coal is extracted. Reclamation operations are usually underway
where the coal has already been taken from a mine, even as mining operations are
taking place elsewhere at the site. The process commonly includes "recontouring"
or reshaping the land to its approximate original appearance, restoring topsoil
and planting native grass and ground covers. Reclamation is closely regulated by
both state and federal law.
RECOVERABLE RESERVES. The amount of coal that can be recovered from the
reserve base. The average recovery factor for underground mines is about 57
percent, and about 80 percent from surface mines. Using these percentages, there
are about 300 billion tons of recoverable reserves in the United States, enough
to last more than 300 years at current consumption levels.
SCRUBBER. Any of several forms of chemical/physical devices which operate
to neutralize sulfur compounds formed during coal combustion. These devices
combine the sulfur in gaseous emissions with other chemicals to form inert
compounds, such as gypsum, which must then be removed for disposal. Although
<PAGE> 156
effective in substantially reducing sulfur from combustion gases, scrubbers
require about 6 to 7 percent of a power plant's electrical output and thousands
of gallons of water to operate.
SPOT MARKET. Sales of coal pursuant to an agreement for shipments over a
period of one year or less. Spot market sales are generally obtained via a
competitive bidding process.
STEAM COAL. Coal used by power plant and industrial steam boilers to
produce electricity or process steam. It generally is lower in Btu content and
higher in volatile matter than metallurgical coal.
SULFUR CONTENT. Coal is commonly described by its sulfur content due to
the importance of sulfur in environmental regulations. "Compliance" coal, when
burned, emits no more than 1.2 pounds of sulfur dioxide per million Btu. This
term originated as a description of coal as it related to the Clean Air Act.
"Low sulfur" coal has a variety of definitions but typically is used to describe
coals consisting of 1.0% or less sulfur. A majority of the Company's Appalachian
Powder River Basin reserves are of compliance and low sulfur grades.
SURFACE MINE. A mine in which the coal lies near the surface and can be
extracted by removing the covering layer of soil (see "Overburden"). About 60
percent of total United States coal production comes from surface mines.
TONS. A "short" or net ton is equal to 2,000 pounds. A "long" or British
ton is 2,240 pounds; a "metric" ton is approximately 2,205 pounds. The short ton
is the unit of measure referred to in this document.
UNDERGROUND MINE. Also known as a "deep" mine. Usually located several
hundred feet below the earth's surface, an underground mine's coal is removed
mechanically and transferred by shuttle car or conveyor to the surface. Most
underground mines are located east of the Mississippi River and account for
about 40 percent of annual United States coal production.
UNIT TRAIN. A train of 100 or more cars, carrying only coal. A typical
unit train can carry at least 10,000 tons of coal in a single shipment.
<PAGE> 157
ANNEX A-2
AUDIT OF ESTIMATED COAL RESERVES
Alabama, Kentucky, Maryland, Pennsylvania,
Virginia and West Virginia
Prepared For
ANKER COAL GROUP, INC.
Morgantown, West Virginia
By
JOHN T. BOYD COMPANY
MINING AND GEOLOGICAL CONSULTANTS
Pittsburgh, Pennsylvania
[Logo]
Report No. 2175.11
AUGUST 1997
<PAGE> 158
[JOHN T. BOYD COMPANY LETTERHEAD]
JOHN T. BOYD COMPANY
Mining and Geological Consultants
August 26, 1997
File: 2175.11
Anker Coal Group, Inc.
2708 Cranberry Square
Morgantown, WV 26505
Attention: Mr. Bruce Sparks
Executive Vice President
Subject: Audit of Estimated Coal Reserves
Gentlemen:
John T. Boyd Company (BOYD) has completed an overview audit of coal
reserve estimates prepared and presented by Anker Group, Inc. (Anker) and its
subsidiaries as of June 1, 1997. These coal reserve estimates are the
responsibility of Anker management. The assignment of this report is to express
an independent opinion on these estimates based on our audit review,
familiarity with the properties, and knowledge of the coal mining industry in
the regions being studied.
<PAGE> 159
CONCLUSIONS
- -----------
It is our professional opinion that:
1. Reserve estimates presented by Anker are properly calculated in
accordance with Anker's stated procedures and parameters, which comply with
practices and standards generally employed by industry.
2. As of June 1, 1997, Anker controlled an estimated 664 million recoverable
product tons of demonstrated coal reserves as summarized on Tables 1 and 2
which follow.
TABLE 1
-------
RESERVE SUMMARY BY STATE AND STATUS
-----------------------------------
Demonstrated Product Tons (000)
-----------------------------------------------------
By Reserve Classification By Mining Method
------------------------------ ------------------
Demon- Under-
State Status Measured Indicated strated Surface ground
----- ------ -------- --------- ------- ------- ------
Alabama Active 11,181 1,864 13,045 - 13,045
Inactive 29,366 9,436 38,802 - 38,802
------- ------- ------- ------- -------
40,547 11,300 51,847 - 51,847
Kentucky Inactive 3,076 5,020 8,096 - 8,096
Maryland Active 11,359 - 11,359 - 11,359
Inactive 12,397 7,719 20,116 12,979 7,137
------- ------- ------- ------- -------
23,756 7,719 31,475 12,979 18,496
Pennsylvania Inactive 77 - 77 77 -
Virginia Inactive 23,556 16,182 39,738 1,221 38,517
West Virginia Active 75,799 20,634 96,433 8,884 87,549
Inactive 158,470 278,239 436,709 19,804 416,905
------- ------- ------- ------- -------
234,269 298,873 533,142 28,688 504,454
Grand Total Active 98,339 22,498 120,837 8,884 111,953
Inactive 226,942 316,596 543,538 34,081 509,457
------- ------- ------- ------- -------
325,281 339,094 664,375 42,965 621,410
<PAGE> 160
TABLE 2
-------
RESERVE SUMMARY BY STATE AND COUNTY
-----------------------------------
Demonstrated Product Tons (000)
-------------------------------------
Mining
State County Method Measured Indicated Total
----- ------- -------- -------- --------- -------
Alabama Shelby UG 40,457 11,300 51,847
Kentucky Muhlenberg UG 3,076 5,020 8,096
Maryland Allegany S 4,451 1,204 5,655
Garrett S/UG 19,305 6,515 28,820
Pennsylvania Greene S 77 - 77
Virginia Tazewell S/UG 23,556 16,182 39,738
West Virginia Barbour UG 39,732 5,579 45,311
Braxton S/UG 5,866 19,179 25,045
Grant S/UG 21,284 19,071 40,355
Harrison UG 15,641 14,703 30,344
Monongalia S 6,888 2,108 8,996
Preston UG 34,099 11,977 46,076
Raleigh UG 26,305 12,465 38,770
Taylor UG 42,831 167,988 210,819
Upshur UG 30,776 39,600 70,376
Webster S/UG 10,847 6,203 17,050
Total 325,281 339,094 664,375
S = Surface
UG = Underground
DEFINITIONS
Definitions of terms and criteria applied in our study follow:
Reserve Base -- Defined as that portion of the resource that meets
------------
specified minimum physical and analytical criteria related to
demonstrated mining and production practices. Reserve base may include
tonnages which are economic
<PAGE> 161
and marginally economic. The terms reserve base and reserve are used
interchangeably in this report. Economic viability of any reserve is
directly related to current market conditions or sales commitments,
location, and the mining operator's technical and managerial
capabilities.
Reserve Classification -- Refers to the reliability or accuracy of the
----------------------
reserve estimate and is defined in three categories: measured,
indicated, and inferred (in descending order of geologic assurance).
Measured -- Tonnages computed from seam measurements as observed and
--------
recorded in drill holes, mine workings, and/or seam outcrop prospect
openings. The sites for measurement are so closely spaced and the
geologic character so well-defined that the thickness, areal extent,
size, shape and depth of coal are well-established. The maximum
acceptable distance for projection from seam data points varies with
the geologic nature of the coal seam being studied, but generally a
raduis of 1/4 mile is recognized as the standard.
Indicated -- Coal tonnages computed by projection of data from
---------
available seam measurements for a distance beyond coal classed as
measured. The assurance, although lower than for measured, is high
enough to assume continuity between points of measurement. The maximum
acceptable distance for projection of indicated tonnage is 1/2 to 3/4
mile from points of observation. Further exploration is necessary to
place these reserves in a measured category.
Demonstrated -- The sum of coal tonnage classified as measured and
------------
indicated.
In preparing this report we have relied on property information
provided by Anker. We have not independently investigated property ownership,
verified such data or examined any agreements in regard to Anker reserve
ownership or control.
QUALIFICATIONS
BOYD is familiar with anker's coal holdings having prepared:
. Previous audits of Anker reserve estimated for properties
controlled in 1994 and 1995.
. Independent reserve estimate of Anker controlled properties in
1985.
<PAGE> 162
. Independent reserve estimate in 1991 of Oneida Coal Company
properties subsequently acquired by Anker.
. Review of selected property coal reserves as specific assignments
for others (e.g., Anker's Maryland Property, Baylor Mine, "Area F,"
etc.).
Our audit was planned and performed to obtain reasonable assurance on
the reserve estimates. The audit included examining, on a test basis, evidence
supporting the reserve estimates as well as assessing the methodology and
practices applied in formulating the estimates. We judge our audit provides a
reasonable basis for our opinion.
We believe our findings are reasonable and realistic and have been
developed using accepted engineering practices. All findings are subject to the
accuracy and reliability of the source data as the basis of this report.
Respectfully submitted,
JOHN T. BOYD COMPANY
By:
Russell P. Moran
---------------------------
Russell P. Moran
Vice President
Ronald L. Lewis
---------------------------
Ronald L. Lewis
Senior Vice President
James W. Boyd
---------------------------
James W. Boyd
President
<PAGE> 163
======================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE,
SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY OFFER TO BUY THE NOTES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH
THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary................... 1
Risk Factors......................... 11
The Company.......................... 20
Use of Proceeds...................... 21
Capitalization....................... 22
Unaudited Pro Forma Consolidated
Financial Statements............... 23
Selected Consolidated Historical
Financial Data..................... 28
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 31
Industry Overview.................... 37
Business............................. 40
Management........................... 57
Ownership of Common Stock............ 62
Related Party Transactions........... 64
The Exchange Offer................... 65
Description of Senior Notes.......... 75
Description of Certain
Indebtedness....................... 100
Description of Capital Stock......... 102
Certain U.S. Federal Income Tax
Consequences....................... 104
Plan of Distribution................. 104
Legal Matters........................ 105
Experts.............................. 105
Available Information................ 105
Index to Consolidated Financial
Statements......................... F-1
Glossary of Selected Terms........... ANNEX A-1
Report of John T. Boyd Company....... ANNEX A-2
</TABLE>
UNTIL MAY 11, 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
[ANKER LOGO]
ANKER COAL GROUP, INC.
OFFER TO EXCHANGE $125,000,000 OF ITS 9 3/4% SERIES B SENIOR NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR $125,000,000 OF ITS
OUTSTANDING 9 3/4% SENIOR NOTES DUE 2007.
FEBRUARY 10, 1998
======================================================
<PAGE> 164
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
for, among other things:
a. permissive indemnification for expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by designated persons, including directors and officers
of a corporation, in the event such persons are parties to litigation other
than stockholder derivative actions if certain conditions are met;
b. permissive indemnification for expenses (including attorneys' fees)
actually and reasonably incurred by designated persons, including directors
and officers of a corporation, in the event such persons are parties to
stockholder derivative actions if certain conditions are met;
c. mandatory indemnification for expenses (including attorneys' fees)
actually and reasonably incurred by designated persons, including directors
and officers of a corporation, in the event such persons are successful on
the merits or otherwise in defense of litigation covered by a. and b.
above; and
d. that the indemnification provided for by Section 145 is not deemed
exclusive of any other rights which may be provided under any by-law,
agreement, stockholder or disinterested director vote, or otherwise.
In addition to the indemnification provisions of the DGCL described above,
the Registrant's restated certificate of incorporation (the "Restated
Certificate of Incorporation") authorizes indemnification of each person, and
his heirs, distributees, next of kin, successors, appointees, executors,
administrators, legal representatives and assigns, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, domestic or foreign, against expenses,
attorney's fees, court costs, judgments, fines, amounts paid in settlement and
other losses actually and reasonably incurred by him in connection with such
action, suit or proceeding.
The Restated Certificate of Incorporation also requires the advancement of
expenses (including attorney's fees) incurred by an officer or director in
defending such civil, criminal, administrative or investigative action, suit or
proceeding of the fullest extent authorized or permitted by the laws of the
State of Delaware upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized by
Section 145 of the DGCL. In addition, as permitted by the DGCL, the Registrant
has entered into an Employment Agreement with Bruce Sparks that provide contract
rights substantially identical to the rights to indemnification and advancement
of expenses set forth in the Restated Certificate of Incorporation, as described
above, except that the Company is not required to indemnify Mr. Sparks for gross
negligence or willful or wanton misconduct.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See the Exhibit Index included immediately preceding the exhibits to this
Registration Statement.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration
II-1
<PAGE> 165
form with respect to reofferings by persons who may be deemed to be
underwriters, in addition to the information called for by the other items of
the applicable form.
The Registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding undertaking or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 166
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
ANKER COAL GROUP, INC.
By: /s/ BRUCE SPARKS
------------------------------------
President
Pursuant to the requirements of the Securities Act, this Registration
Statement, or amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
/s/ BRUCE SPARKS President and Director (Principal Executive Officer)
- -----------------------------------
Bruce Sparks
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer)
Michael M. Matesic
* Director
- -----------------------------------
William G. Rottier
* Director
- -----------------------------------
William Macaulay
* Director
- -----------------------------------
Bruce Rothstein
* Director
- -----------------------------------
John Hill
Director
- -----------------------------------
James Boyd
* Chairman
- -----------------------------------
John Shober
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-3
<PAGE> 167
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
ANKER GROUP, INC.
By: /s/ BRUCE SPARKS
------------------------------------
President
Pursuant to the requirements of the Securities Act, this Registration
Statement, or amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
/s/ BRUCE SPARKS President (Principal Executive Officer) and Director
- -----------------------------------
Bruce Sparks
/s/ MICHEAL M. MATESIC Treasurer (Principal, Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
* Director
- -----------------------------------
Bruce Rothstein
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 168
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
ANKER ENERGY CORPORATION
By: /s/ BRUCE SPARKS
------------------------------------
President
Pursuant to the requirements of the Securities Act, this Registration
Statement, or amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
/s/ BRUCE SPARKS President (Principal Executive Officer) and Director
- -----------------------------------
Bruce Sparks
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
</TABLE>
II-5
<PAGE> 169
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
BRONCO MINING COMPANY, INC.
By: /s/ BRUCE SPARKS
------------------------------------
President
Pursuant to the requirements of the Securities Act, this Registration
Statement, or amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
/s/ BRUCE SPARKS President (Principal Executive Officer) and Director
- -----------------------------------
Bruce Sparks
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer)
Michael M. Matesic
</TABLE>
II-6
<PAGE> 170
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
ANKER POWER SERVICES, INC.
By: /s/ MICHAEL M. MATESIC
------------------------------------
Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
* President (Principal Executive Officer) and Director
- -----------------------------------
Kenneth James
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 171
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
ANKER WEST VIRGINIA MINING COMPANY,
INC.
By: /s/ MICHAEL M. MATESIC
------------------------------------
Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
* President (Principal Executive Officer) and Director
- -----------------------------------
Richard Bolen
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-8
<PAGE> 172
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
JULIANA MINING COMPANY, INC.
By: /s/ MICHAEL M. MATESIC
------------------------------------
Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
* President (Principal Executive Officer) and Director
- -----------------------------------
Charles Dunbar
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-9
<PAGE> 173
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or an amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
KING KNOB COAL CO., INC.
By: /s/ MICHAEL M. MATESIC
------------------------------------
President and Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or an amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
/s/ MICHAEL M. MATESIC President (Principal Executive Officer), Treasurer
- ----------------------------------- (Principal Financial and Accounting Officer) and
Michael M. Matesic Director
</TABLE>
II-10
<PAGE> 174
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or an amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
VANTRANS, INC.
By: /s/ MICHAEL M. MATESIC
------------------------------------
President and Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or an amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
/s/ MICHAEL M. MATESIC President (Principal Executive Officer), Treasurer
- ----------------------------------- (Principal Financial and Accounting Officer) and
Michael M. Matesic Director
/s/ BRUCE SPARKS Director
- -----------------------------------
Bruce Sparks
</TABLE>
II-11
<PAGE> 175
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or an amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
MELROSE COAL COMPANY, INC.
By: /s/ MICHAEL M. MATESIC
------------------------------------
Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or an amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
* President (Principal Executive Officer) and Director
- -----------------------------------
Jeffrey P. Kelley
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-12
<PAGE> 176
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or an amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
MARINE COAL SALES COMPANY
By: /s/ MICHAEL M. MATESIC
------------------------------------
Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or an amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
* President (Principal Executive Officer) and Director
- -----------------------------------
Larry Kaelin
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
/s/ BRUCE SPARKS Director
- -----------------------------------
Bruce Sparks
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-13
<PAGE> 177
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or an amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
HAWTHORNE COAL COMPANY, INC.
By: /s/ MICHAEL M. MATESIC
------------------------------------
Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or an amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
* President (Principal Executive Officer) and Director
- -----------------------------------
Kim A. Burke
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-14
<PAGE> 178
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or an amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
UPSHUR PROPERTY, INC.
By: /s/ MICHAEL M. MATESIC
------------------------------------
Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or an amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
* President (Principal Executive Officer) and Director
- -----------------------------------
Ronald L. Hamric
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-15
<PAGE> 179
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or an amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
HEATHER GLEN RESOURCES, INC.
By: /s/ MICHAEL M. MATESIC
------------------------------------
Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or an amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
* President (Principal Executive Officer) and Director
- -----------------------------------
Ronald L. Hamric
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-16
<PAGE> 180
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or an amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
NEW ALLEGHENY LAND HOLDING COMPANY,
INC.
By: /s/ MICHAEL M. MATESIC
------------------------------------
Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or an amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
* President (Principal Executive Officer) and Director
- -----------------------------------
Mark A. Lantz
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-17
<PAGE> 181
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or an amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
PATRIOT MINING COMPANY, INC.
By: /s/ MICHAEL M. MATESIC
------------------------------------
Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or an amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
* President (Principal Executive Officer) and Director
- -----------------------------------
Ronald L. Hamric
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-18
<PAGE> 182
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or an amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
VINDEX ENERGY CORPORATION
By: /s/ MICHAEL M. MATESIC
------------------------------------
Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or an amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
* President (Principal Executive Officer) and Director
- -----------------------------------
Mark A. Lantz
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-19
<PAGE> 183
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or an amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 10, 1998.
ANKER VIRGINIA MINING COMPANY, INC.
By: /s/ MICHAEL M. MATESIC
------------------------------------
Treasurer
Pursuant to the requirements of the Securities Act, this Registration
Statement, or an amendment thereto, has been signed on the 10th day of February,
1998 by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------------- ----------------------------------------------------
<C> <S>
* President (Principal Executive Officer) and Director
- -----------------------------------
Richard B. Bolen
/s/ MICHAEL M. MATESIC Treasurer (Principal Financial and Accounting
- ----------------------------------- Officer) and Director
Michael M. Matesic
*By: /s/ MICHAEL M. MATESIC
- -----------------------------------
Michael M. Matesic
Attorney-in-Fact
</TABLE>
II-20
<PAGE> 184
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- ----------------------------------------------------------------------------------
<C> <S>
** 1 Senior Notes Purchase Agreement dated as of September 22, 1997 among the Company,
the Guarantors, and Donaldson Lufkin & Jenrette Securities Corporation and Chase
Securities, Inc.
3.1 Certificate of Incorporation of the Company.
3.2 Bylaws of the Company.
** 3.3 Certificate of Designation, Preferences and Rights of Class A Preferred Stock of
the Company.
** 3.4 Certificate of Designation, Preferences and Rights of Class B Preferred Stock of
the Company.
** 3.5 Certificate of Designation, Preferences and Rights of Class C Preferred Stock of
the Company.
** 3.6 Certificate of Designation, Preferences and Rights of Class D Preferred Stock of
the Company.
3.7 Certificate of Incorporation of Anker Group, Inc.
3.8 Bylaws of Anker Group, Inc.
3.9.1 Certificate of Incorporation of Anker Energy Corporation.
3.9.2 Certificate of Ownership and Merger merging Anker Mining and Development Co., Inc.
into Anker Energy Corporation
3.9.3 Certificate of Merger of Energy Resource Management Services, Inc. into Anker
Energy Corporation
3.10 Bylaws of Anker Energy Corporation.
3.11 Articles of Incorporation of Bronco Mining Company, Inc.
3.12 Bylaws of Bronco Mining Company, Inc.
3.13 Articles of Incorporation of Anker Power Services, Inc.
3.14 Bylaws of Anker Power Services, Inc.
3.15.1 Articles of Incorporation of Anker West Virginia Mining Company, Inc.
3.15.2 Articles of Merger of Anker West Virginia Mining Company, Inc. and Advantage
Energy Corporation
3.15.3 Articles of Merger of Anker West Virginia Mining Company, Inc. and Beckley
Smokeless Limited Liability Company
3.15.4 Articles of Merger of Anker West Virginia Mining Company, Inc. and Pine Valley
Coal Company, Inc.
3.15.5 Articles of Merger of Anker West Virginia Mining Company, Inc. and Spruce Fork
Coal Company, Inc.
3.16 Bylaws of Anker West Virginia Mining Company, Inc.
3.17 Articles of Incorporation of Juliana Mining Company, Inc.
3.18 Bylaws of Juliana Mining Company, Inc.
3.19.1 Articles of Incorporation of King Knob Coal Co., Inc.
3.19.2 Articles of Merger of Brook Coal Company into King Knob Coal Co., Inc.
3.19.3 Articles of Merger of King Aviation, Inc. into King Knob Coal Co., Inc.
3.19.4 Articles of Merger of Peaser Branch Coal Company into King Knob Coal Co., Inc.
3.19.5 Articles of Merger of Sparta Mining Company, Inc. into King Knob Coal Co., Inc.
3.20 Bylaws of King Knob Coal Co., Inc.
3.21 Certificate of Incorporation of Vantrans, Inc.
3.22 Bylaws of Vantrans, Inc.
</TABLE>
<PAGE> 185
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- ----------------------------------------------------------------------------------
<C> <S>
3.23 Articles of Incorporation of Melrose Coal Company, Inc.
3.24 Bylaws of Melrose Coal Company, Inc.
3.25.1 Certificate of Incorporation of Marine Coal Sales Company.
3.25.2 Certificate of Merger of Leflore Energy Corporation into Marine Coal Sales Company
3.26 Bylaws of Marine Coal Sales Company.
3.27 Articles of Incorporation of Hawthorne Coal Company, Inc.
3.28 Bylaws of Hawthorne Coal Company, Inc.
3.29 Certificate of Incorporation of Upshur Property, Inc.
3.30 Bylaws of Upshur Property, Inc.
3.31 Articles of Incorporation of Heather Glen Resources, Inc.
3.32 Bylaws of Heather Glen Resources, Inc.
3.33 Articles of Incorporation of New Allegheny Land Holding Company, Inc.
3.34 Bylaws of New Allegheny Land Holding Company, Inc.
3.35.1 Articles of Incorporation of Patriot Mining Company, Inc.
3.35.2 Articles of Merger of Ajax Mining Company, Inc. into Patriot Mining Company, Inc.
3.35.3 Articles of Merger of Sandy Creek Land Company, Inc. into Patriot Mining Company,
Inc.
3.36 Bylaws of Patriot Mining Company, Inc.
3.37 Articles of Incorporation of Vindex Energy Corporation.
3.38 Bylaws of Vindex Energy Corporation.
3.39 Articles of Incorporation of Anker Virginia Mining Company, Inc.
3.40 Bylaws of Anker Virginia Mining Company, Inc.
** 4.1 Senior Notes Indenture, dated as of September 25, 1997, among the Company, the
Guarantors, and Marine Midland Bank.
** 4.2 Form of 9 3/4% Senior Note due 2007. (Included as part of Senior Notes Indenture
filed as Exhibit 4.1 hereto).
** 4.3 Form of 9 3/4% Series B Senior Note due 2007. (Included as part of Senior Notes
Indenture filed as Exhibit 4.1 hereto).
** 4.4 Senior Notes Registration Rights Agreement, dated as of September 25, 1997, by and
among the Company, the Guarantors and Donaldson Lufkin & Jenrette Securities
Corporation and Chase Securities, Inc. as initial purchasers.
** 5.1 Opinion of Simpson Thacher & Bartlett.
**10.1 Credit Agreement dated as of September 25, 1997, among The Chase Manhattan Bank,
as Administrative Agent, and the other financial institutions party thereto.
**10.2 Security Agreement dated as of August 12, 1996, as amended by Amendment No. 1,
dated as of April 1, 1997, and Amendment No. 2, dated as of September 25, 1997.
**10.3 Stockholders Agreement among Anker Coal Group, Inc., John J. Faltis, JJF Group
Limited Liability Company, P. Bruce Sparks, PPK Group Limited Liability Company,
Anker Holding B.V., First Reserve Corporation, American Oil & Gas Investors,
Limited Partnership, AMGO II, Limited Partnership, First Reserve Fund V, Limited
Partnership, First Reserve Fund V-2, Limited Partnership, First Reserve Fund VI,
Limited Partnership and First Reserve Fund VII, Limited Partnership, dated as of
August 12, 1996.
10.4 Employment Agreement, between P. Bruce Sparks, Anker Energy Corporation and the
Company, dated August 1, 1996.
10.5 Employment Agreement between John J. Faltis, Anker Energy Corporation and the
Company, dated August 1, 1996.
</TABLE>
<PAGE> 186
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- ----------------------------------------------------------------------------------
<C> <S>
10.6 Anker Coal Group, Inc. Omnibus Stock Incentive Plan.
10.7 Form of Restricted Stock Award Agreement.
10.8 Form of Stock Option Grant Agreement.
10.9 Asset Purchase Agreement among Oak Mountain Energy, L.L.C., Oak Mountain Energy
Corporation, Boone Resources, Inc., Kodiak Coal, Inc., Cahaba Coal Engineering &
Land Surveying, Inc., Coal Handling and Processing, Inc., Mountaineer Management,
Inc. and Jimmie R. Ryan and Duane Stranahan, Jr., dated February 20, 1997.
10.10.1 Operating Agreement of Oak Mountain Energy, L.L.C., dated February 20, 1997
10.10.2 Amendment No. 1 to Operating Agreement of Oak Mountain Energy, L.L.C., dated April
9, 1997
10.11.1 Operating Agreement of Shelby Energy Group, L.L.C., dated February 20, 1997
10.11.2 Amendment No. 1 to Operating Agreement of Shelby Energy Group, L.L.C., dated April
9, 1997
10.12 Registration Rights Agreement, dated as of August 12, 1996, by and among Anker
Coal Group, Inc., JJF Group Limited Liability Company, PPK Group Limited Liability
Company, Anker Holding B.V., American Oil and Gas Investors, Limited Partnership,
AMGO II, Limited Partnership, First Reserve Fund V, Limited Partnership, First
Reserve Fund V-2, Limited Partnership, First Reserve Fund VI, Limited Partnership
and First Reserve Fund VII, Limited Partnership.
10.13 Stock Purchase Warrant, dated as of August 12, 1996.
12 Computation of ratio of earnings to fixed charges.
16 Letter regarding change in certifying accountant.
**21 List of Subsidiaries of the Company.
**23.1 Consent of Simpson Thacher & Bartlett (Included as part of its opinion filed as
Exhibit 5.1 hereto).
23.2 Consent of Coopers & Lybrand LLP, independent auditors for the Company and Oak
Mountain. (Filed herewith).
23.3 Consent of Ernst & Young LLP, independent public accountants. (Filed herewith).
**23.4 Consent of John T. Boyd Company.
**24 Powers of Attorney.
**25 Statement of Eligibility of Marine Midland Bank on Form T-1.
27 Financial Data Schedule.
**99.1 Form of Letter of Transmittal.
**99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- ---------------
* To be filed by amendment.
**Previously filed.
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ANKER COAL GROUP, INC.
The name of the Corporation is ANKER COAL GROUP, INC. The original
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of the State of Delaware on June 28th, 1996. This Amended and Restated
Certificate of Incorporation was duly adopted by the directors of the
Corporation in accordance with the provisions of Sections 241 and 245 of the
General Corporation Law of the State of Delaware, no payment having been
received for the Corporation's stock.
1. The name of the Corporation is Anker Coal Group, Inc.
2. The address of its registered office in the State of Delaware is 1013
Centre Road, Wilmington, Delaware, 19805. The name of its registered agent at
such address is Corporation Service Company.
3. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
4. The total number of shares of all classes of capital stock which the
Corporation is authorized to issue shall be 122,000 shares, which shall be
divided into the following classes: a) 100,000 shares of common stock having a
par value of $.01 per share, b) 10,000 shares of Class A Preferred Stock having
a par value of $2,500.00 per share, c) 10,000 shares of Class B Preferred Stock
having a par value of $1,000.00 per share, d) 1,000 shares of Class C Preferred
Stock having a par value of $13,000 per share, and e) 1,000 shares of Class D
Preferred Stock having a par value of $7,000 per share. Preferred stock of the
Corporation may be issued in various series as may be determined from time to
time by the board of directors. The preferred stock shall be issued with such
designations and powers, preferences and rights, and the qualifications,
limitations and restrictions as shall be stated in the resolution or resolutions
<PAGE> 2
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providing for the issue of such stock as shall be adopted from time to time by
the board of directors.
5. Subject to the provisions of the Stockholders Agreement among certain
stockholders of the Corporation, the Corporation and certain other parties, to
be entered into on or about August 9, 1996, holders of capital stock of the
Corporation shall be entitled to such anti-dilution purchase rights as may be
accorded to such holders pursuant to Article II of the Stockholders Agreement,
so long as such agreement remains in effect.
6. The Corporation is to have perpetual existence.
7. The Corporation shall indemnify to the full extent authorized or
permitted by the laws of the State of Delaware, any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, domestic or foreign,
against expenses, attorneys' fees, court costs, judgments, fines, amounts paid
in settlement and other losses actually and reasonably incurred by him in
connection with such action, suit or proceeding and shall advance expenses
incurred by an officer or director in defending such civil or criminal action,
suit or proceeding to the full extent authorized or permitted by the laws of the
State of Delaware upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized by
Section 145 of the Delaware General Corporation Law.
8. A director shall have no personal liability to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director;
however, the foregoing provision shall not eliminate the liability of a director
(i) for breach of the director's duty of
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loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit.
9. The principal place of business of the Corporation may be located
within or outside the State of Delaware. Meetings of the stockholders may be
held within or outside the State of Delaware, as the by-laws may provide. The
books of the Corporation may be kept (subject to any applicable provision of
law) outside the State of Delaware at such place or places as may be designated
from time to time by the board of directors or in the by-laws of the
Corporation.
10. For the management of the business and for the conduct of the affairs
of the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, its directors and its stockholders, it is further
provided that (a) the board of directors of the Corporation is expressly
authorized and empowered to adopt, amend or repeal by-laws subject to the power
of the stockholders to amend or repeal by-laws made by the board of directors
and (b) elections of directors of the Corporation need not be by written ballot.
IN WITNESS WHEREOF, Anker Coal Group, Inc. has caused this Restated and
Amended Certificate of Incorporation to be signed by its directors John J.
Faltis and Bruce Sparks, this 8th day of August, 1996.
/s/ John J. Faltis
-----------------------------------------
John J. Faltis, Director
/s/ Bruce Sparks
-----------------------------------------
Bruce Sparks, Director
<PAGE> 1
Exhibit 3.2
FIRST RESTATED AND AMENDED
BY-LAWS
OF
ANKER COAL GROUP, INC.
(a Delaware Corporation)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be established
and maintained at 1209 Orange Street, in the City of Wilmington, County of New
Castle, Delaware. The Corporation Trust Company shall be the registered agent of
this corporation in charge thereof.
Section 2. Other Offices. The Corporation may have other offices, either
within or without the State of Delaware, at such place or places as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting shall be held at such place, either within or without the State
of Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of the meeting.
Section 2. Other Meetings. Meetings of stockholders for any purpose other
than the election of directors may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting.
Section 3. Voting. Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder. Upon
the demand of any stockholder, the vote for directors, and the vote upon any
question before the meeting, shall be by ballot. All elections for directors and
all other questions shall be decided by majority vote except as otherwise
provided elsewhere in these By-Laws, in the Certificate of Incorporation or the
laws of the State of Delaware, or in the Stockholders Agreement dated on or
about August 9, 1996 among Corporation, John J. Faltis, P. Bruce Sparks, JJF
Group Limited Liability Company, PPK Group Limited Liability Company, Anker
Holding B.V., First Reserve Corporation, American Oil & Gas Investors, AmGO II,
First
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Reserve Fund V, Limited Partnership, First Reserve Fund V-2, Limited
Partnership, First Reserve Fund VI, Limited Partnership, and First Reserve Fund
VII, Limited Partnership (the "Stockholders Agreement").
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be opened to the examination of any
stockholder for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 4. Quorum. Except as otherwise required by law, the presence, in
person or by proxy, of stockholders holding a majority of the stock of the
Corporation entitled to vote shall constitute a quorum at all meetings of the
stockholders. In case a quorum shall not be present at any meeting, a majority
in interest of the stockholders entitled to vote thereat, present in person or
by proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until the requisite amount of
stock entitled to vote shall be present. At such adjourned meeting at which the
requisite amount of stock entitled to vote shall be represented, any business
may be transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof.
Section 5. Special Meetings. Special meetings of the stockholders for any
purpose or purposes may be called by the President of the Corporation, or by
resolution of the Board of Directors and shall be called by the President or
Secretary of the Corporation if requested in writing by the holders of not less
than 25% of the outstanding common stock of the Corporation.
Section 6. Notice of Meetings. Written notice, stating the place, date and
time of the meeting, and the general nature of the business to be considered,
shall be given to each stockholder entitled to vote thereat at his address as it
appears on the records of the Corporation, not less than ten nor more than sixty
days before the date of the meeting. No business other than that stated in the
notice shall be transacted at any meeting without the unanimous consent of all
the stockholders entitled to vote thereat.
Section 7. Action Without Meeting. Any action required to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
any annual or special
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meeting, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE III
DIRECTORS
Section 1. Number and Term. The number of directors shall be seven (7).
The directors shall be elected at the annual meeting of the stockholders and
each director shall be elected to serve until his successor shall be elected and
qualified. Directors need not be stockholders.
Section 2. Removal. Any director or directors may be removed either for or
without cause at any time by the affirmative vote of the holders of a majority
of all the shares of stock outstanding and entitled to vote, at a special
meeting of the stockholders called for the purpose, and the vacancies thus
created may be filled, at the meeting held for the purpose of removal, by the
affirmative vote of a majority in interest of the stockholders entitled to vote.
Section 3. Powers. The Board of Directors shall exercise all of the powers
of the Corporation except such as are by law, by the Certificate of
Incorporation of the Corporation, or by these By-Laws conferred upon or reserved
to one or more of the stockholders or their designees.
Section 4. Committees. (a) The Board of Directors shall establish an Audit
Committee consisting of all of the directors other than any director who is the
chief financial officer of the Corporation. The Audit Committee
shall have the following duties and responsibilities:
1. To meet with the Corporation's independent accountants, the chief
financial officer of the Corporation and any other executives of the Corporation
as the Audit Committee deems appropriate to review:
(A) the scope of the audit plan;
(B) the Corporation's financial statements;
(C) the results of external and internal audits;
(D) the effectiveness of the Corporation's system of internal
controls; and
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(E) any limitations imposed by personnel of the Corporation on the
independent public accountants.
2. To consult with the Corporation's independent accountants out of the
presence of the chief financial officer of the Corporation in order to establish
direct communication between such accountants and the Board of Directors.
(b) Unless otherwise agreed by a stockholder (and except as may result
from the operation of Section 4(a)), each committee of the Board of Directors
shall include a number of directors nominated by each stockholder (rounded to
the next highest whole number) equivalent to the proportion of directors
nominated by such stockholder then serving on the whole Board of Directors.
(i) The creation of any committee (other than the Audit Committee as set
forth in Section 4(a)) of the Board of Directors or the appointment
of any members thereof shall require the unanimous vote of the full
Board of Directors.
(ii) No Director shall receive additional compensation for serving on a
committee of the Board of Directors.
Section 5. Meetings. The newly-elected directors shall hold their first
meeting for the purpose of organization and the transaction of business, if a
quorum be present, immediately after the annual meeting of the stockholders; or
the time and place of such meeting may be fixed by consent in writing of all the
directors.
Regular meetings of the directors may be held with at least five days'
notice to each director at such places and times as shall be determined from
time to time by resolution of the directors.
Special meetings of the Board shall be called by an officer of the
Corporation on the written request of any two directors on at least five days'
notice to each director and shall be held at such place or places as may be
determined by the directors, or as shall be stated in the call of the meeting.
Notice of any meetings of the Board of Directors shall specify the time,
date and place of the meeting and the purpose or purposes for which the meeting
is called, and shall be given to each director.
Section 6. Quorum. Except as provided below, five (5) directors shall
constitute a quorum for the transaction of business. Except as set forth in
Article V of these Bylaws, the affirmative vote of a majority of the directors
present at such meeting will constitute a decision of the Board of Directors. If
at any meeting of the Board of Directors there shall be less than a
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quorum present, a majority of those present may adjourn the meeting from time to
time until a quorum is obtained, and no further notice thereof need be given
other than by announcement at the meeting which shall be so adjourned. If a
meeting is adjourned because of the failure of a quorum to be present, provided
that notice of such adjournment is delivered to all directors and the meeting is
adjourned to a date at least five days after the initially scheduled meeting
date, four (4) directors shall constitute a quorum for the transaction of
business at the reconvened meeting.
Section 7. Compensation. Directors shall be entitled to be reimbursed for
the reasonable out-of-pocket expenses of attending meeting of the Board of
Directors. Directors who are not officers of the Corporation or of a direct or
indirect subsidiary of the Corporation shall receive an annual fee of $12,000.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity as an officer, agent or otherwise,
and receiving compensation therefor.
Section 8. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof, may
be taken without a meeting, if a written consent thereto is signed by all
members of the Board of Directors, or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board of
Directors or committee.
Section 9. Participation by Conference Telephone. Members of the Board of
Directors of the Corporation, or any committee designated by such Board, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
shall constitute presence in person at such meeting.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the Corporation shall be a Chairman
of the Board, President, Chief Executive Officer, Executive Vice President,
Treasurer, Secretary and Assistant Secretary, all of whom shall be elected by
the Board of Directors and who shall hold office until their successors are
elected and qualified. None of the officers of the Corporation need be
directors. The officers shall be elected at the first meeting of the Board of
Directors after each annual meeting. Two or more offices may be held by the same
person. All officers shall be
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subject to the reasonable supervision and direction of the Board of Directors in
a manner consistent with the offices held by such officers.
Section 2. Other Officers and Agents. The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 3. Chairman. The Chairman of the Board of Directors shall preside
at all meetings of the Board of Directors and he shall have and perform such
other suitable duties as from time to time may be assigned to him by the Board
of Directors.
Section 4. President. The President shall be the chief executive officer
of the Corporation and shall have the general powers and duties of supervision
and management usually vested in the office of president of a corporation, shall
exercise supervision and direction over all the business, affairs and property
of the Corporation, and shall perform such duties as are incident to the conduct
of its business. He shall preside at all meetings of the stockholders if present
thereat, and, in the absence of the Chairman of the Board of Directors, at all
meetings of the Board of Directors. Except as the Board of Directors shall
authorize the execution thereof in some other manner, he shall execute deeds,
bonds, mortgages and other contracts and writings on behalf of the Corporation,
and shall cause the seal to be affixed to any instrument requiring it and when
so affixed the seal shall be attested by the signature of the Secretary or the
Treasurer or an Assistant Secretary or an Assistant Treasurer.
Section 5. Executive Vice-President. The Executive Vice-President shall
have the duties and powers and perform the executive functions of the President
in the absence or incapacity of the President, and shall have such other powers
and shall perform such other suitable duties as shall be assigned to him by the
directors. The Executive Vice-President shall be the chief financial officer of
the Corporation.
Section 6. Vice Presidents. Each Vice-President, if any, shall have
such powers and shall perform such suitable duties as shall be assigned to
him by the directors.
Section 7. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
Corporation in such depositaries as may be designated by the Board of Directors.
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The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation.
Section 8. Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by law or by these By-Laws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the President, or by the directors, or stockholders, upon whose requisition
the meeting is called as provided in these By-Laws. He shall record all the
proceedings of the meetings of the Corporation and of the directors in a book to
be kept for that purpose, and shall perform such other suitable duties as may be
assigned to him by the directors or the President. He shall have the custody of
the seal of the Corporation and shall affix the same to all instruments
requiring it, when authorized by the directors or the President, and attest the
same.
Section 9. Assistant Treasurers and Assistant Secretaries. Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such suitable duties as shall be assigned to them,
respectively, by the directors.
ARTICLE V
FUNDAMENTAL CORPORATE ISSUES
(a) No action shall be taken by the stockholders or the Board of Directors
with regard to any of the following matters without the favorable vote or
written consent of five or more Directors and, in the event that stockholder
approval also is required by law with respect to such matter, the favorable vote
of the holders of more than two-thirds of the total number of shares of the
Corporation's issued and outstanding common stock:
(i) Any sale, lease or exchange of 50% or more of the assets of the
Corporation in a single transaction or series of related
transactions, including but not limited to real property, goodwill
or franchises.
(ii) Any merger or consolidation of the Corporation with or into another
entity or the liquidation or dissolution of the Corporation.
(iii) Any amendment to the Certificate of Incorporation of the
Corporation.
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(iv) The authorization, issuance or sale of shares of capital stock,
any other type of equity or debt securities or options, warrants
or other rights to acquire equity or debt securities of the
Corporation, except (A) the issuance by the Corporation of
securities upon the conversion and in accordance with the terms
of any securities convertible into other securities of the
Corporation, or upon the exercise and in accordance with the
terms of any options, warrants or rights to acquire securities of
the Corporation, in each case issued by the Corporation either on
or prior to August 12, 1996 or in accordance with the provisions
of this Section 5(a)(iv), but only to the extent that such
conversion or exercise rights are mandatory to the Corporation
and not at the Corporation's option, and (B) the issuance by the
Corporation to key members of management of the Corporation and
its Subsidiaries, pursuant to a management stock purchase plan or
in the alternative a stock option plan, stock appreciation rights
plan or similar type of management incentive plan approved by a
majority of the directors, of Common Stock of the Corporation,
options to purchase Common Stock of the Corporation or stock
appreciation rights, provided that at no time shall the aggregate
number of shares of Common Stock of the Corporation issued and
outstanding pursuant to any such plan (whether issued directly or
as a result of the exercise of options or stock appreciation or
other rights issued pursuant to any such plan), together with the
aggregate number of shares of Common Stock of the Corporation
issuable upon the exercise of options, stock appreciation rights
and other rights issued and outstanding pursuant to any such plan
(whether or not vested) and the aggregate number of stock
appreciation rights issued and outstanding pursuant to any such
plan, exceed an amount equal to 3% of the issued and outstanding
Common Stock of the Corporation.
(v) Subject to Section 5(b), any redemption, repurchase or other
acquisition of capital stock or other equity securities of the
Corporation (or any option, warrant or other right to acquire
such capital stock or other equity securities), except the
purchase or redemption of stock options, warrants, rights and
convertible or redeemable securities previously issued by the
Corporation when such purchase or redemption is required to be
made by the Corporation in accordance with the terms of such
securities or the agreements under which they were issued.
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(vi) Entering into or engaging in business or entering into any
transactions with any stockholder or any Affiliate of a
stockholder (other than the Corporation and its Subsidiaries)
other than any transaction involving the sale, purchase, exchange
or trading of coal or coal-related products between the
Corporation and (1) Anker Holding B.V., (2) any investment fund
of which First Reserve Corporation is the managing general
partner and that is a stockholder of the Corporation (the
"Funds"), or (3) any Affiliate of Anker Holding B.V. or any of
the Funds, in the ordinary course of business through an arm's
length transaction. For purposes of this Article V the term
"Affiliate" means with respect to any stockholder, (i) any person
that directly or indirectly through one or more intermediaries
controls, is controlled by or is under common control with, such
stockholder, or (ii) any director, officer, partner, manager or
employee of such stockholder or any person specified in clause
(i) above, or (iii) any immediate family member of any person
specified in clauses (i) or (ii) above.
(b) Any action by the Corporation with respect to the redemption,
repurchase or other acquisition of capital stock or other equity
securities of the Corporation (or any option, warrant or other right to
acquire such capital stock or other equity securities) from any
stockholder or any Affiliate thereof and other financing, or other actions
related thereto, except the purchase or redemption of stock options,
warrants, rights and convertible or redeemable securities previously
issued by the Corporation when such purchase or redemption is required to
be made by the Corporation in accordance with the terms of such securities
or the agreements under which they were issued, shall be taken by a
majority vote of the Board of Directors excluding for these purposes any
director nominated by any such stockholder.
(c) In the event that the Funds in the aggregate own 50% or less of the
issued and outstanding Common Stock of the Corporation at any time in the
future, commencing at such time, for so long as the Funds in the aggregate
own at least 10% of the issued and outstanding Common Stock of the
Corporation, each of the following additional actions also shall require
the favorable vote or written consent of five or more Directors and, in
the event that stockholder approval also is required by law with respect
to such matter, the favorable vote of the holders of more than two-thirds
of the total number of shares of the Corporation's issued and outstanding
common stock:
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(i) Any sale, lease, exchange, transfer or other disposition by the
Corporation, of (A) any of the outstanding capital stock or other
equity securities of any subsidiary (except to a wholly-owned
subsidiary of the Corporation) or (B) assets or other rights for a
consideration in excess of $2 million in a single transaction or
series of related transactions, other than dispositions of assets or
other rights in the ordinary course of business.
(ii) Any purchase, lease, exchange or other acquisition of assets or
other rights (including securities) by the Corporation for a
consideration in excess of $2 million in a single transaction or a
series of related transactions.
(iii) Subject to Section 5(b), any financing, refinancing or other
incurrence of indebtedness by the Corporation (whether new
indebtedness or in replacement of existing indebtedness) with a
principal amount in excess of $2 million in a single transaction or
a series of related transactions, other than working capital
borrowings under the Corporation's principal Credit Agreement in the
ordinary course of business.
(iv) Any capital expenditure by the Corporation not provided for in an
annual budget for the then-current fiscal year of the Corporation
approved by the directors which expenditure is either (A) in
excess of $1 million in a single transaction or a series of
related transactions or (B) together with the aggregate of all
other non-budgeted capital expenditures made by the Corporation
and its subsidiaries in such fiscal year of the Corporation, in
excess of $2 million.
(v) Any amendment to or modification or repeal of any provision of the
By-Laws of the Corporation which would materially alter the rights
of any stockholder.
(vi) Any amendment to the employment agreements of John Faltis or Bruce
Sparks.
(vii) The dissolution of the Corporation; the adoption of a plan of
liquidation of the Corporation; any action by the Corporation to
commence any suit, case proceeding or other action (I) under any
existing or future law of any jurisdiction relating to bankruptcy,
insolvency, reorganization or relief of debtors seeking to have an
order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it, or (II) seeking
appointment of a receiver, trustee, custodian or other similar
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official for it or for all or any substantial part of its assets, or
making a general assignment for the benefit of its creditors.
(viii) The investment of additional funds in, or extension of additional
credit to (including, without limitations, guaranteeing any
obligations or liabilities of, or providing any form of credit
support to), Anker Capital Corporation or any subsidiary of Anker
Capital Corporation or other investment.
(ix) The entry of the Corporation (other than through Anker Capital
Corporation) into any business other than mining, processing,
shipping, purchasing and selling coal, or any other business
currently engaged in by the Corporation (other than through Anker
Capital Corporation).
(d) Anything contained in Sections 5(a) and 5(c) to the contrary
notwithstanding, the authorization of a sale of the Corporation pursuant
to Section 5.1 of the Stockholders Agreement, or any action necessary or
appropriate in connection with such a sale shall not be subject to the
provisions of this Article V.
ARTICLE VII
MISCELLANEOUS
Section 1. Resignations. Any director, member of a committee or corporate
officer may, provided the same would not result in a breach of any contract to
which said person is a party, resign at any time. Such resignation shall be made
in writing, and shall take effect at the time specified therein, and if no time
be specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
Section 2. Vacancies. If the office of any director becomes vacant, by
reason of death, disability or otherwise, the vacancy may be filled by the
affirmative vote of a majority in interest of the stockholders entitled to vote.
If the office of any corporate officer becomes vacant, by reason of death,
disability or otherwise, the Board of Directors may appoint any qualified person
to fill such vacancy, who shall hold office for the unexpired term and until his
successor shall be duly chosen.
Section 3. Certificates of Stock. Certificates of stock, signed by the
Chairman of the Board of Directors, or the President or any Vice President, and
the Treasurer or an Assistant Treasurer, or Secretary or an Assistant Secretary,
shall be issued to each stockholder certifying the number of shares owned by him
in the Corporation. When such certificates are counter
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signed (1) by a transfer agent other than the Corporation or its employee, or
(2) by a registrar other than the Corporation or its employee, the signatures of
such officers may be facsimiles.
Section 4. Lost Certificates. A new certificate of stock may be issued in
the place of any certificate theretofore issued by the Corporation, alleged to
have been lost or destroyed, and the directors may, in their discretion, require
the owner of the lost or destroyed certificate, or his legal representatives, to
give the Corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock represented by such certificate, to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss of any such certificate, or the issuance of any such new
certificate.
Section 5. Transfer of Shares. The shares of stock of the Corporation
shall be transferable only upon the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal
representatives, and upon such transfer the old certificates shall be
surrendered to the Corporation by the delivery thereof to the person in charge
of the stock transfer books and ledgers, or to such other person as the
directors may designate, by whom they shall be canceled, and new certificates
shall thereupon be issued. A record shall be made of each transfer and whenever
a transfer shall be made for collateral security, and not absolutely, it shall
be so expressed in the entry of the transfer. No transfer shall be made in
violation of the Stockholders Agreement.
Section 6. Stockholders Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 7. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the Corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the Corporation
12
<PAGE> 13
available for dividends, such sum or sums as the directors from time to time in
their discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the Corporation.
Section 8. Seal. The corporate seal shall be circular in form and shall
contain the name of the Corporation, the year of its creation and the words
"CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.
Section 9. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors. In the absence of such
determination, the fiscal year shall be the calendar year.
Section 10. Checks. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officer or officers, agent or agents of the
Corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 11. Notice and Waiver of Notice. Whenever any notice is required
by these By-Laws to be given, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in the United States mail, postage prepaid, addressed to the
person entitled thereto at his address as it appears on the records of the
Corporation, and such notice shall be deemed to have been given on the day of
such mailing. Stockholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by statute.
Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation of the
Corporation or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE VIII
INDEMNIFICATION
Except as provided in any valid written agreement among all of the
stockholders of the Corporation or among such stockholders and the Corporation,
to the fullest extent permitted by law, the Corporation shall indemnify each
person, and his heirs, distributees, next of kin, successors, appointees,
executors, administrators, legal representatives and assigns, who was or
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<PAGE> 14
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, domestic or foreign,
against expenses, attorneys' fees, court costs, judgments, fines, amounts paid
in settlement and other losses actually and reasonably incurred by him in
connection with such action, suit or proceeding and shall advance expenses
(including attorney's fees) incurred by an officer or director in defending such
civil, criminal, administrative or investigative action, suit or proceeding of
the fullest extent authorized or permitted by the laws of the State of Delaware
upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the Corporation as authorized by Section 145 of the
Delaware General Corporation Law.
ARTICLE IX
AMENDMENTS
These By-Laws amend and restate in their entirety the previous By-Laws of
the Company. These By-Laws may be altered or repealed and new By-Laws may be
made at any annual meeting of the stockholders or at any special meeting thereof
by the affirmative vote of the holders of a majority of the stock issued and
outstanding and entitled to vote thereat, or by the affirmative vote of a
majority of the Board of Directors, at any regular meeting of the Board of
Directors, or at any special meeting of the Board of Directors.
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<PAGE> 1
Exhibit 3.7
RESTATED CERTIFICATE OF INCORPORATION
OF
ANKER GROUP, INC.
The name of the corporation is ANKER GROUP, INC. and the name under which
the corporation was originally incorporated was Vebe International, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on September 1, 1978; Restated
Certificates of Incorporation were filed with the Secretary of State on November
21, 1980, February 23, 1983, June 29, 1990 and December 31, 1990; and
Certificates of Amendment of Restated Certificate of Incorporation were filed
with the Secretary of State on April 1, 1991 and December 31, 1991. This Fifth
Restated Certificate of Incorporation was duly adopted by the directors and by
the stockholders of the corporation in accordance with the provisions of
Sections 245 and 242 of the General Corporation Law of the State of Delaware.
1. The name of the corporation is ANKER GROUP, INC.
2. The address of the corporation's registered office in the State of
Delaware is No. 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
<PAGE> 2
2
3. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
4. The total number of shares of all classes of capital stock which the
corporation is authorized to issue shall be 13,200 shares, which shall consist
of six classes as follows: a) 500 shares of Class A Common Stock having a par
value of $100 per share, b) 500 shares of Class B Common Stock having a par
value of $100 per share, c) 200 shares of Class A preferred stock having a par
value of $1.00 per share, d) 10,000 shares of Class B Preferred Stock having a
par value of $2,500.00 per share, e) 1,000 shares of Class C Preferred Stock
having a par value of $13,000 per share, and f) 1,000 shares of Class D
Preferred Stock having a par value of $7,000 per share.
4.1 The Class A Preferred Stock shall have the following powers,
preferences and other rights and the following qualifications, limitations and
restrictions:
(A) Voting. Except as otherwise provided by law, the holders of the
Class A Preferred Stock shall have no voting rights on matters put to a
vote of the stockholders of the corporation.
(B) Dividends. The holders of record of the Class A Preferred Stock
shall be entitled to receive, as and when declared by the directors,
dividends as follows: From and after January 1, 1991, fixed cumulative
preferential dividends at the rate of nine and nine-tenths percent (9.9%)
per annum on the Liquidation Value of the Class A Preferred Stock and no
more, such dividends to accrue whether or not declared and be cumulative
<PAGE> 3
3
from said date and to be payable annually on December 31 of each year.
Such dividends shall be cumulative and no dividend shall be declared, paid
or set apart for payment upon the Class B Preferred Stock, the Class C
Preferred Stock, the Class D Preferred Stock or the Common Stock of the
corporation unless all then unpaid and accumulated dividends on the Class
A Preferred Stock up to and including the dividend payment of the last
completed period for which such dividends shall be payable shall have been
declared and paid or set apart for payment. Dividends on account of
arrearages for any past dividend may be declared and paid at any time
without reference to any regular dividend payment date.
(C) Liquidation. In the event of the liquidation, dissolution or
winding-up of the corporation or other distribution of assets of the
corporation among stockholders for the purpose of winding up its affairs,
the holders of the Class A Preferred Stock shall, before any amount shall
be paid to or any property or assets of the corporation distributed among
the holders of the Class B Preferred Stock, the Class C Preferred Stock,
the Class D Preferred Stock or the Common Stock of the corporation, be
entitled to receive a sum equal to $10,000.00 per share (the "Liquidation
Value of the Class A Preferred Stock") together with all accrued and
unpaid dividends (which for such purpose shall be calculated as if such
dividends were accruing from day to day for the period from the expiration
of the last period for which dividends have been paid up to and including
the date of distribution). After payment to the holders of the Class A
Preferred Stock of the amounts so payable to them, they shall not be
entitled to share in any further distribution of the property or assets of
the corporation. In the event the amounts above provided for cannot be
paid in full as above provided in respect of the Class A Preferred Stock
then outstanding, the holders of shares of Class A Preferred Stock then
outstanding shall share ratably in any amounts available for such
payments.
(D) Mandatory Redemption. On December 31, 1996, (the "Class A
Redemption Date"), the corporation shall, out of funds legally available
<PAGE> 4
4
therefor, redeem the Class A Preferred Stock in whole at a redemption
price equal to $10,000 per share together with all accrued and unpaid
dividends (which for such purpose shall be calculated as if such dividends
were accruing from day to day for the period from the expiration of the
last period for which dividends have been paid up to and including the
date of redemption); provided, however, that if, as of the Class A
Redemption Date, the corporation shall not have funds legally available
therefor sufficient to redeem all shares of Class A Preferred Stock then
outstanding, then the corporation shall redeem on such date such number of
shares of Class A Preferred Stock as it shall have funds legally available
therefor and the remainder of the shares of Class A Preferred Stock
outstanding after such redemption shall be redeemed promptly from time to
time as the corporation shall have funds legally available therefore. In
the event that less than all of the shares of Class A Preferred Stock then
outstanding are to be redeemed, the shares shall be redeemed pro rata. On
and after the Redemption Date and until the corporation shall have
redeemed all of the shares of the Class A Preferred Stock in accordance
with this Section 4.1(D), no dividend shall be declared, paid or set apart
for payment upon the Class B Preferred Stock, the Class C Preferred Stock,
the Class D Preferred Stock or the Common Stock of the corporation.
4.2 The Class B Preferred Stock shall have the following powers,
preferences and other rights and the following qualification, limitations and
restrictions:
(A) Voting. Except as otherwise provided by law, the holders of the
Class B Preferred Stock shall have no voting rights on matters put to a
vote of the stockholders of the corporation.
(B) Dividends. The holders of record of the Class B Preferred Stock
shall be entitled to receive, if, as and when declared by the directors,
dividends as follows: From and after the date of issuance of the Class B
Preferred Stock, fixed non-cumulative preferential dividends at the rate
of five percent (5%) per annum on the Liquidation Value of the Class B
Preferred Stock
<PAGE> 5
5
and no more. No dividend shall be declared, paid or set apart for payment
upon the Class C Preferred Stock, the Class D Preferred Stock or the
Common Stock of the corporation in any calendar year unless dividends on
the Class B Preferred Stock for such full calendar year shall have been
declared and paid or set apart for payment.
(C) Liquidation. In the event of the liquidation, dissolution or
winding-up of the corporation or other distribution of assets of the
corporation among stockholders for the purpose of winding up its affairs,
the holders of the Class B Preferred Stock shall, before any amount shall
be paid to or any property or assets of the corporation distributed among
the holders of the Class C Preferred Stock, the Class D Preferred Stock or
the Common Stock of the corporation, be entitled to receive a sum equal to
$2,500.00 per share (the "Liquidation Value of the Class B Preferred
Stock") together with any declared but unpaid dividends. After payment to
the holders of the Class B Preferred Stock of the amounts so payable to
them, they shall not be entitled to share in any further distribution of
the property or assets of the corporation. In the event the amounts above
provided for cannot be paid in full as above provided in respect of the
Class B Preferred Stock then outstanding, the holders of shares of Class B
Preferred Stock then outstanding shall share ratably in any amounts
available for such payments.
4.3 The designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions, in respect of each class of Common
Stock are as follows:
(A) Voting Rights. Each share of Common Stock of each class shall
entitle the holder to one vote. Except in the election or removal of
directors or as otherwise provided by law or elsewhere in this Certificate
or in the by-laws of the corporation, on each matter submitted to
stockholders for their approval the affirmative vote of a majority of all
outstanding shares, without regard to class, shall be required for
approval.
<PAGE> 6
6
(B) Election or Removal of Directors. There shall be two classes of
directors, Class A Directors and Class B Directors. In the election of
directors, the holders of the outstanding Class A Common Stock shall be
entitled as a class to nominate and elect the Class A Directors and the
holders of the outstanding Class B Common Stock shall be entitled as a
class to nominate and elect the Class B Directors. Only the holders of
Class A Common Stock shall be entitled to remove a Class A Director and
fill a vacancy caused by the removal, death or resignation of a Class A
Director and only the holders of Class B Common Stock shall be entitled to
remove a Class B Director and fill a vacancy caused by the removal, death
or resignation of a Class B Director. In any election of directors or any
action by the stockholders to remove a director or to fill a vacancy on
the board of directors, each share of Common Stock shall entitle the
holder to a number of votes equal to the number of directors to be
elected; such stockholder may cast all of such votes for a single director
or may distribute them among the directors to be voted for as such
stockholder may see fit.
(C) Convertibility of Common Stock. Shares of Common Stock of the
corporation shall be convertible from one class of Common Stock to another
at the request of the holder or holders thereof and with the approval of
the board of directors or stockholders as provided herein.
4.4 The Class C Preferred Stock shall have the following powers,
preferences and other rights and the following qualifications, limitations and
restrictions:
(A) Voting. Except as otherwise provided by law, the holders of the
Class C Preferred Stock shall have no voting rights on matters put to a
vote of the stockholders of the corporation.
(B) Dividends and Special Dividends. (i) The holders of record of
the Class C Preferred Stock shall be entitled to receive, as and when
declared by the directors, dividends as follows: From and after January 1,
1996, cumulative preferential
<PAGE> 7
7
dividends in an amount equal to four percent (4%) of the Excess Gross
Realization from Area A Coal (as hereinafter defined) during the
immediately preceding calendar year, or during so much of such calendar
year as such holders' shares of Class C Preferred Stock were outstanding,
and no more, such dividends to accrue whether or not declared and be
cumulative from said date and to be payable annually no latter than
February 15 of each year or, if February 15 is not a day when banks are
open for business in Pittsburgh, Pennsylvania, the next succeeding
business day. Such dividends shall be cumulative and no dividend shall be
declared, paid or set apart for payment upon the Common Stock of the
corporation unless all then unpaid and accumulated dividends on the Class
C Preferred Stock up to and including the dividend payment of the last
completed period for which such dividends shall be payable shall have been
declared and paid or set apart for payment. Dividends on account of
arrearages for any past dividend may be declared and paid at any time
without reference to any regular dividend payment date.
(ii) As used in this section 4.4, the following terms shall
have the following meanings: Excess Gross Realization from Area A Coal
during a calendar year means Gross Realization from Area A Coal in excess
of 1.35 million tons during such calendar year. Gross Realization from
Area A Coal means the aggregate sale price obtained by the Area A Mining
Companies (as hereinafter defined), f.o.b. rail or truck at the loading
point, for all Area A Coal produced and sold by the Area A Mining
Companies and the sale of which was accrued on the books of the Area A
Mining Companies during such calendar year. Area A Coal means coal which
as been produced from the reserves identified as Area A in that certain
Area A Designation Agreement made as of the 28th day of December, 1995,
between the corporation and Heather Glen Resources, Inc., a West Virginia
corporation (the "Area A Designation Agreement") and which are owned,
leased or subleased by the corporation or any Subsidiary (as hereinafter
defined) at the Time of Designation as defined in the Area A Designation
Agreement. A copy of the Area A Designation Agreement is on file in the
office of the Secretary of the corporation and shall be made
<PAGE> 8
8
available without charge to any stockholder of record of the corporation
upon request. As used in this Article 4, Subsidiary means a corporation,
limited liability company, partnership or other entity which is, directly
or indirectly, majority owned by the corporation.
(iii) As used in this section 4.4, Area A Mining Companies
means one or more of the following: (a) the corporation or a Subsidiary
where the corporation or such Subsidiary owns, leases or subleases coal
reserves in Area A and is engaged in the extraction of such coal, whether
directly through the conduct of mining operations or indirectly through
the employment of contract miners, and (b) a person or entity other than
the corporation or a Subsidiary which leases or subleases coal reserves in
Area A from the corporation or a Subsidiary, extracts such coal and sells
it to the corporation or a Subsidiary.
(iv) The holders of record of the Class C Preferred Stock
shall be entitled to receive, as and when declared by the directors,
special dividends as follows: In the event that a Mineral Property
Transfer (as hereinafter defined) occurs, a special dividend shall be
payable in an amount calculated as hereinafter set forth, and no more,
each such special dividend to accrue and be cumulative from the date of
the Mineral Property Transfer or Subsequent Payment (as hereinafter
defined) giving rise thereto and to be payable, except as otherwise
provided in this paragraph with respect to a Subsequent Payment, no later
than forty-five (45) days following the date of such Mineral Property
Transfer. As used in this paragraph 4.4(b)(iv), the term Mineral Property
Transfer means a sale, lease, sublease or other transfer by the
corporation or a Subsidiary to a transferee other than the corporation or
a Subsidiary of Mineral Property (as hereinafter defined) for an aggregate
consideration greater than $500,000. As used in this paragraph 4.4(b)(iv),
the term Mineral Property means mineral property in Upshur County
designated as Mineral Property in the Area A Designation Agreement. Each
special dividend payable in the event of a Mineral Property Transfer shall
be calculated by dividing the total acreage of Mineral Property at the
Time of Designation
<PAGE> 9
9
(consisting of 28,051 acres) into the number of acres of Mineral Property
transferred pursuant to such Mineral Property Transfer, and multiplying
the result by the Sales Price (as hereinafter defined). As used in this
paragraph 4.4(B)(iv), Sales Price means the consideration paid to the
corporation or a Subsidiary in consideration for such Mineral Property
Transfer. In the event that all or any portion of the consideration
received for Mineral Property is not monetary, the Sales Price shall
include the Fair Market Value of such non-monetary consideration. In the
event that Mineral Property is leased or subleased by the corporation or a
subsidiary and any portion of the consideration to the corporation or such
Subsidiary is payable as lease payments, royalties or otherwise over the
term of the lease or sublease ("Subsequent Payments"), then in such event,
unless the corporation determines that the aggregate Subsequent Payments
for such Mineral Property will exceed $500,000, the corporation or such
Subsidiary shall obtain from an independent surveyor or appraiser an
estimate of the Subsequent Payments for such Mineral Property, and in the
further event that the corporation or such subsidiary or such independent
surveyor or appraiser determines that the consideration including the
aggregate Subsequent Payments for such Mineral Property will exceed
$500,000, then the special dividend with respect to any portion of the
Sales Price which constitutes a Subsequent Payment shall be payable within
sixty (60) days after the end of the calendar year in which each such
Subsequent Payment was received and shall be calculated by dividing the
total acreage of Mineral Property at the Time of Designation (consisting
of 28,051 acres) into the number of acres of Mineral Property transferred
in consideration for such Subsequent Payment, and multiplying the result
by each such Subsequent Payment. As used in this paragraph 4.4(B)(iv), the
term Fair Market Value means the monetary amount which would be obtained
in an arm's-length free market transaction. Any such special dividend
shall be cumulative and no dividend shall be declared, paid or set apart
for payment upon the Common Stock of the corporation unless all then
unpaid and accumulated special dividends on the Class C Preferred Stock
shall have been declared and paid or set apart for payment.
<PAGE> 10
10
(C) Liquidation. In the event of the liquidation, dissolution or
winding-up of the corporation or other distribution of assets of the
corporation among stockholders for the purpose of winding up its affairs,
the holders of the Class C Preferred Stock shall, before any amount shall
be paid to or any property or assets of the corporation distributed among
the holders of the Common Stock of the corporation, be entitled to receive
a sum equal to $13,000 per share less the aggregate amount of any special
dividends previously paid on such share pursuant to paragraph 4.4(B)(iv)
of this Article 4 (the "Class C Liquidation Value") together with all
accrued and unpaid dividends (which for such purpose shall be calculated
from the expiration of the last period for which dividends have been paid
up to and including the date of distribution of the Class C Liquidation
Value, and paid within 45 days following the date of distribution of the
Class C Liquidation Value) other than special dividends payable pursuant
to paragraph 4.4(B)(iv) of this Article 4. After payment to the holders of
the Class C Preferred Stock of the amounts so payable to them, they shall
not be entitled to share in any further distribution of the property or
assets of the corporation. In the event the amounts above provided for
cannot be paid in full as above provided in respect of the Class C
Preferred Stock then outstanding, the holders of shares of Class C
Preferred Stock then outstanding shall share ratably in any amounts
available for such payments.
(D) Redemption. In the event the corporation elects at any time to
redeem shares of the Class C Preferred Stock, the corporation shall redeem
the shares at a price equal to the Class C Liquidation Value together with
all accrued and unpaid dividends (which for such purpose shall be
calculated from the expiration of the last period for which dividends have
been paid up to and including the date of distribution of the Class C
Liquidation Value, and paid within 45 days following the date of
distribution of the Class C Liquidation Value) other than special
dividends payable pursuant to paragraph 4.4(B)(iv) of this
<PAGE> 11
11
Article 4. The holders of shares of the Class C Preferred Stock shall not
have the right at any time to require the redemption of such shares.
4.5 The Class D Preferred Stock shall have the following powers,
preferences and other rights and the following qualifications, limitations and
restrictions:
(A) Voting. Except as otherwise provided by law, the holders of the
Class D Preferred Stock shall have no voting rights on matters put to a
vote of the stockholders of the corporation.
(B) Dividends. (i) The holders of record of the Class D Preferred
Stock shall be entitled to receive, as and when declared by the directors,
dividends as follows: For a period of fifteen years from and after
[January 1, 1996], cumulative preferential dividends in an amount equal to
two and one-half percent (2-1/2%), and thereafter cumulative preferential
dividends in an amount equal to one and one-half percent (1-1/2%), of the
Gross Realization from Area F Coal (as hereinafter defined) during the
immediately preceding calendar quarter, or during so much of such calendar
quarter as such holders' shares of Class D Preferred Stock were
outstanding, and no more, such dividends to accrue whether or not declared
and be cumulative from said date and to be payable quarterly. Such
dividends shall be cumulative and no dividend shall be declared, paid or
set apart for payment upon the Class C Preferred Stock or the Common Stock
of the corporation unless all then unpaid and accumulated dividends on the
Class D Preferred Stock up to and including the dividend payment of the
last completed period for which such dividends shall be payable shall have
been declared and paid or set apart for payment. Dividends on account of
arrearages for any past dividend may be declared and paid at any time
without reference to any regular dividend payment date.
(ii) As used in this section 4.5, the following terms shall
have the following meanings: Gross Realization from Area F Coal during a
calendar quarter means the aggregate sale price obtained by the Area F
Mining Companies (as
<PAGE> 12
12
hereinafter defined), f.o.b. rail or truck at the loading point, for all
Area F Coal produced and sold by the Area F Mining Companies and the sale
of which was accrued on the books of the Area F Mining Companies during
such calendar quarter. Area F Coal means coal which has been produced from
the reserves owned, leased or subleased by the corporation or any
Subsidiary in Upshur and Randolph Counties, West Virginia, identified as
Area F in that certain Area F Designation Agreement made as of the 28th of
December, 1995, between the corporation and Melrose Coal Company, Inc., a
West Virginia corporation (the "Area F Designation Agreement"). A copy of
the Area F Designation Agreement is on file in the office of the Secretary
of the corporation and shall be made available without charge to any
stockholder of record of the corporation upon request. Area F Mining
Companies means one or more of the following: (a) the corporation or a
Subsidiary where the corporation or such Subsidiary owns, leases or
subleases coal reserves in Area F and is engaged in the extraction of such
coal, whether directly through the conduct of mining operations or
indirectly through the employment of contract miners, and (b) a person or
entity other than the corporation or a Subsidiary which leases or
subleases coal reserves in Area F from the corporation or a Subsidiary,
extracts such coal and sells it to the corporation or a Subsidiary.
(C) Liquidation. In the event of the liquidation, dissolution or
winding-up of the corporation or other distribution of assets of the
corporation among stockholders for the purpose of winding up its affairs,
the holders of the Class D Preferred Stock shall, before any amount shall
be paid to or any property or assets of the corporation distributed among
the holders of the Class C Preferred Stock or the Common Stock of the
corporation, be entitled to receive a sum equal to $7,000 per share (the
"Class D Liquidation Value") together with all accrued and unpaid
dividends (which for such purpose shall be calculated from the expiration
of the last period for which dividends have been paid up to and including
the date of distribution of the Class D Liquidation Value, and paid within
45 days following the date of distribution of the Class D Liquidation
Value). After payment to the holders of the Class D
<PAGE> 13
13
Preferred Stock of the amounts so payable to them, they shall not be
entitled to share in any further distribution of the property or assets of
the corporation. In the event the amounts above provided for cannot be
paid in full as above provided in respect of the Class D Preferred Stock
then outstanding, the holders of shares of Class D Preferred stock then
outstanding shall share ratably in any amounts available for such
payments.
(D) Redemption and Mandatory Redemption. (i) In the event the
corporation elects at any time to redeem shares of the Class D Preferred
Stock, the corporation shall redeem the shares at a price equal to the
Class D Liquidation Value together with all accrued and unpaid dividends
(which for such purpose shall be calculated from the expiration of the
last period for which dividends have been paid up to and including the
date of distribution of the Class D Liquidation Value, and paid within 45
days following the date of distribution of the Class D Liquidation Value).
(ii) In the event that on or before December 31, 2005, the
corporation shall not have paid dividends and special dividends in respect
of the Class D Preferred Stock in an aggregate amount of $5,000,000 or
more, then the corporation, if so requested by a holder of Class D
Preferred Stock in a written notice received by the corporation no later
than January 31, 2006, shall, out of funds legally available therefor,
redeem such stockholder's shares of Class D Preferred Stock over a period
of five years by redeeming twenty percent (20%) of such stockholder's
shares of Class D Preferred Stock on or before December 31, 2006 and
December 31 of each of the next four succeeding years (the "Class D
Redemption Dates") at a redemption price equal to the Class D Liquidation
Value together with all accrued and unpaid dividends (which for such
purpose shall be calculated from the expiration of the last period for
which dividends have been paid up to and including the date of
distribution of the Class D Liquidation Value, and paid within 45 days
following the date of distribution of the Class D Liquidation Value);
provided, however, that if, as of any Class D Redemption Date the
corporation shall not have funds legally available therefor sufficient to
redeem all shares of Class D Preferred Stock to be redeemed on such date,
then the corporation
<PAGE> 14
14
shall redeem on such date such number of shares of Class D Preferred Stock
to be redeemed as it shall have funds legally available therefor and the
remainder of the share of Class D Preferred Stock which were to have been
redeemed shall be redeemed promptly from time to time as the corporation
shall have funds legally available therefor. On and after any Class D
Redemption Date and until the corporation shall have redeemed all of the
shares of the Class D Preferred Stock to be redeemed on such date in
accordance with this paragraph 4.5(D)(ii), no dividend shall be declared,
paid or set apart for payment upon the Class C Preferred Stock or the
Common Stock of the corporation. No fractional shares shall be redeemed.
(iii) The corporation shall, out of funds legally available
therefor, redeem any shares of the Class D Preferred Stock which are
issued and outstanding on December 31, 2010, over a period of five years
by redeeming twenty percent (20%) of the shares held by each holder of
Class D Preferred Stock on or before December 31, 2011 and December 31 of
each of the next four succeeding years (the "Class D Final Redemption
Dates") at a redemption price equal to the Class D Liquidation Value
together with all accrued and unpaid dividends (which for such purpose
shall be calculated from the expiration of the last period for which
dividends have been paid up to and including the date of distribution of
the Class D Liquidation Value, and paid within 45 days following the date
of distribution of the Class D Liquidation Value); provided, however, that
if, as of any Class D Final Redemption Date the corporation shall not have
funds legally available therefor sufficient to redeem all shares of Class
D Preferred Stock to be redeemed on such date, then the corporation shall
redeem on such date such number of shares of Class D Preferred Stock to be
redeemed as it shall have funds legally available therefor and the
remainder of the shares of Class D Preferred Stock which were to have been
redeemed shall be redeemed promptly from time to time as the corporation
<PAGE> 15
15
shall have funds legally available therefor. On and after any Class D
Final Redemption Date and until the corporation shall have redeemed all of
the shares of the Class D Preferred Stock to be redeemed on such date in
accordance with this paragraph 4.5(D)(ii), no dividend shall be declared,
paid or set apart for payment upon the Class C Preferred Stock or the
Common Stock of the corporation. No fractional shares shall be redeemed.
(iv) The holders of shares of the Class D Preferred Stock
shall not have the right at any time to require the redemption of such
shares, except as provided in paragraphs 4.5(D)(ii) and 4.5(D)(iii) of
this Article 4.
5. The corporation is to have perpetual existence.
6. To the full extent permitted by law, the corporation shall (a)
indemnify any person or such person's heirs, distributees, next of kin,
successors, appointees, executors, administrators, legal representatives or
assigns who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that such person
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, domestic or foreign, against expenses, attorneys' fees, court costs,
judgments, fines, amounts paid in settlement and other losses actually and
reasonably incurred by such person in connection with such action, suit or
proceeding and (b) advance expenses incurred by an
<PAGE> 16
16
officer or director in defending such civil or criminal action, suit or
proceeding to the full extent authorized or permitted by the laws of the State
of Delaware upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that such
director or officer is not entitled to be indemnified by the corporation as
authorized by Section 145 of the Delaware General Corporation Law.
7. A director shall have no personal liability to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director;
however, the foregoing provision shall not eliminate the liability of a director
(i) for breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit.
8. Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of
<PAGE> 17
17
the corporation. Elections of directors need not be by written ballot unless the
by-laws of the corporation shall so provide.
9. On any matter requiring approval of the board of directors, each Class
A Director shall be entitled to cast a number of votes equal to the number of
outstanding shares of Class A Common Stock divided by the number of Class A
Directors then on the board of directors and each Class B Director shall be
entitled to cast a number of votes equal to the number of outstanding shares of
Class B Common Stock divided by the number of Class B Directors then on the
board of directors. Fractional votes shall be permitted. A director shall not
split his vote, but shall vote all of his votes the same way on any single
matter. Except as otherwise provided by law or by this certificate or the
by-laws of the corporation, approval of any matter submitted to the board of
directors shall require a number of affirmative votes at least equal to a
majority of the number of outstanding shares of Common Stock of the corporation,
without regard to class.
10. Any action taken by the board of directors or the stockholders of the
corporation to amend this Fifth Restated Certificate of Incorporation, or merge
or consolidate with another corporation, or dissolve, shall require a number of
affirmative votes equal to more than two-thirds of the
<PAGE> 18
18
number of outstanding shares of Common Stock of the corporation, without regard
to class, or the affirmative vote of the holders of more than two-thirds of the
outstanding Common Stock of the corporation, without regard to class.
11. The by-laws of the corporation currently in effect may be amended or
repealed by a resolution of the board of directors passed by a number of
affirmative votes equal to more than two-thirds of the number of outstanding
shares of Common Stock of the corporation.
IN WITNESS WHEREOF, said Vebe International, Inc. has caused this Fifth
Restated Certificate of Incorporation to be signed by John J. Faltis, its
President, and attested by Bruce Sparks, its Secretary, this 28th day of
December, 1995.
ANKER GROUP, INC.
By: /s/ John J. Faltis
------------------------------
John J. Faltis, President
ATTEST:
/s/ Bruce Sparks
- ---------------------------
Bruce Sparks, Secretary
<PAGE> 1
Exhibit 3.8
THIRD AMENDED
BY-LAWS
OF
VEBE INTERNATIONAL, INC.
(a Delaware corporation)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be established
and maintained at No. 100 West Tenth Street, Wilmington, Delaware. The
Corporation Trust Company shall be the registered agent of this corporation in
charge thereof.
Section 2. Other Offices. The corporation may have other offices, either
within or without the State of Delaware, at such place or places as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting shall be held at such place, either within or without the State
of Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of the meeting.
<PAGE> 2
2
Section 2. Other Meetings. Meetings of stockholders for any purpose may be
held at such time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting.
Section 3. Voting. Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall, except as provided in the next succeeding
sentence, be entitled to one vote, in person or by proxy, for each share of
stock entitled to vote held by such stockholder, but no proxy shall be voted
after three years from its date unless such proxy provides for a longer period.
At all elections of directors of the corporation, each share of Class A common
stock shall entitle the holder to as many votes as shall equal the number of
Class A directors to be elected and each share of Class B common stock shall
entitle the holder to as many votes as shall equal the number of Class B
directors to be elected. Each stockholder may cast all of such votes for a
single director or may distribute them among the number to be voted for, or for
any two or more of them as he may see fit, except that each holder of Class A
common stock shall vote only for Class A directors and each holder of Class B
common stock shall vote only for Class B directors.
Upon the demand of any stockholder entitled to vote, the vote for
directors and the vote upon any question before the meeting shall be by ballot.
All elections for directors shall be decided by plurality vote within each class
of common stock; all other questions shall be decided by a majority of votes
cast and entitled to vote except as otherwise provided by the Certificate of
Incorporation, by the laws of the State of Delaware or by these By-Laws.
<PAGE> 3
3
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be-inspected by any
stockholder who is present.
Section 4. Quorum. Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders;
and the presence, in person or by proxy, of stockholders holding a majority of
any class of the stock of the corporation entitled to vote for the election of
directors shall constitute a quorum at any meeting of the holders of stock of
such class for the purpose of electing a director or directors representing such
class. In case a quorum shall not be present at any meeting, a majority in
interest of the stockholders entitled to vote thereat, present in person or by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until the requisite amount of
stock entitled to vote shall be present. At such adjourned meeting at which the
requisite amount of stock entitled to vote shall be represented, any business
may be transacted which might have been transacted at the meeting as originally
noticed; `but only those stockholders entitled to
<PAGE> 4
4
vote at the meeting as originally noticed shall be entitled to vote at any
adjournment or adjournments thereof.
Section 5. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called by the President or Secretary, by resolution
of the directors, or by stockholders holding 25% or more of the outstanding
stock of the corporation entitled to vote at such meeting.
Section 6. Notice of Meetings. Written notice, stating the place, date and
time of the meeting, and in the case of a special meeting the purpose or
purposes for which such meeting is called, shall be given to each stockholder
entitled to vote thereat at his address as it appears on the records of the
corporation, not less than ten nor more than fifty days before the date of the
meeting. No business other than that stated in the notice shall be transacted at
any special meeting without the consent of the holders of more than two-thirds
of the shares entitled to vote thereat.
Section 7. Action Without Meeting. Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders
entitled to vote thereon who have not consented in writing.
<PAGE> 5
5
ARTICLE III
DIRECTORS
Section 1. Number and Term. The number of directors shall be five. Of that
number, there shall be two Class A directors and three Class B directors. The
number of directors may be increased or decreased by the stockholders entitled
to vote. The directors shall be elected at the annual meeting of stockholders
and may be elected at special meetings of stockholders, and each director shall
be elected to serve until his successor shall be elected and qualified.
Directors need not be stockholders.
Section 2. Removal. Any Class A director may be removed by the affirmative
vote of the holders of more than two-thirds of the shares of Class A common
stock outstanding and entitled to vote, and any Class B director may be removed
by the affirmative vote of the holders of more than two-thirds of the shares of
Class B common stock outstanding and entitled to vote, either for or without
cause at any time at a special meeting of stockholders called for the purpose;
provided, however, that if less than the entire Board of Directors is to be
removed, no director may be removed without cause if the votes cast against his
removal would be sufficient to elect him if then cumulatively voted at an
election of the class of directors of which he is a part. An election of a new
Board of Directors held at a meeting of shareholders called for such purpose
pursuant to the provision of any written agreement among shareholders holding at
least two-thirds of all of the issued and outstanding shares of stock of the
corporation entitled to vote shall not be deemed to constitute a removal of
directors within the meaning of this Section 2 of Article III.
<PAGE> 6
6
Section 3. Powers. The Board of Directors shall exercise all of the powers
of the corporation except such as are by law or by the Certificate of
Incorporation of the corporation or by these By-Laws conferred upon or reserved
to the stockholders.
Section 4. Voting. On any matter requiring approval of the Board of
Directors, each Class A director shall be entitled to cast a number of votes
equal to the number of outstanding shares of Class A common stock divided by the
number of Class A directors then on the Board of Directors and each Class B
director shall be entitled to cast a number of votes equal to the number of
outstanding shares of Class B common stock divided by the number of Class B
directors then on the Board of Directors. Fractional votes shall be permitted. A
director may not split his vote, but must vote all of his vote the same way on
any single matter. Except as otherwise required by law or by the Certificate of
Incorporation or by these By-Laws, approval of any matter submitted to the Board
of Directors shall require a number of affirmative votes at least equal to a
majority of the number of outstanding shares of stock of the corporation
entitled to vote, without regard to class.
Section 5. Committees. The Board of Directors may, by action approved by a
number of affirmative votes equal to more than two-thirds of the number of
outstanding shares of stock of the corporation entitled to vote, designate one
or more committees, each committee to consist of two or more of the directors of
the corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of such committee or committees.
<PAGE> 7
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Any such committee, to the extent provided in the resolution of the Board
of Directors, or in these By-Laws, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority to amend the Certificate of Incorporation, to adopt an
agreement of merger or consolidation, to recommend to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, to recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, to amend the By-Laws of the corporation, to declare
a dividend, to authorize in issuance of stock, or to take any action with
respect to any matter referred to in Article VIII of these By-Laws.
Section 6. Meetings. The newly elected directors shall hold their first
meeting for the purpose of organization and the transaction of business, if a
quorum be present, immediately after the annual meeting of stockholders; or the
time and place of such meeting may be fixed by consent in writing of all the
directors.
Regular meetings of the directors may be held without notice at such
places and times as shall be determined from time to time by resolution of the
directors.
Special meetings of the Board may be called by the President or by the
Secretary on the written request of any two directors on at least two days'
notice to each director and shall be held at such place or places as may be
determined by the directors, or as shall be stated in the call of the meeting.
Section 7. Quorum. The presence of directors entitled to case a number of
votes equal to a majority of the outstanding shares of stock of the corporation
entitled to vote,
<PAGE> 8
8
and of not less than one director representing each class of stock of the
corporation entitled to vote, shall constitute a quorum for the transaction of
business. If at any meeting of the Board of Directors there shall be less than a
quorum present, a majority of those present may adjourn the meeting from time to
time until a quorum is obtained, and no further notice thereof need be given
other than by announcement at the meeting which shall be so adjourned.
Section 8. Compensation. Directors shall not receive any stated salary for
their services as directors or as members of committees, but by resolution of
the Board of Directors a fixed fee and expenses of attendance may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
Section 9. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting if a written consent thereto is signed by all members
of the Board of Directors, or of such committee as the case may be, and such
written consent is filed with the minutes of proceedings of the Board of
Directors or committee.
Section 10. Participation by Conference Telephone. Members of the Board of
Directors of the corporation, or any committee designated by such Board, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
shall constitute presence in person at such meeting.
<PAGE> 9
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ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the corporation shall be a President,
a Treasurer and a Secretary, all of whom shall be elected by the Board of
Directors and who shall hold office until their successors are elected and
qualified. In addition, the Board of Directors may elect a Chairman, one or more
Vice Presidents and such Assistant Secretaries and Assistant Treasurers as they
may deem proper. None of the officers of the corporation need be directors. The
officers shall be elected at the first meeting of the Board of Directors after
each annual meeting. More than two offices may be held by the same person.
Section 2. Other Officers and Agents. The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 3. Chairman. The Chairman of the Board of Directors, if one be
elected, shall preside at all meetings of the Board of Directors and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors.
Section 4. President. The President shall be the chief executive officer
of the corporation and shall have the general powers and duties of supervision
and management usually vested in the office of president of a corporation. He
shall preside at all meetings of the stockholders if present thereat, and, in
the absence or non-election of the Chairman of the Board of Directors, at all
meetings of the Board of Directors, and shall have general supervision,
direction and control of the business of the corporation. Except as
<PAGE> 10
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the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages and other contracts in behalf of the
corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the signature of the
Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer.
Section 5. Vice President. Each Vice President shall have such powers and
shall perform such duties as shall be assigned to him by the directors.
Section 6. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the Board of Directors shall prescribe.
Section 7. Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by law or by these By-Laws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the President, or by the directors, or
<PAGE> 11
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stockholders, upon whose requisition the meeting is called as provided by these
By-Laws. He shall record all the proceedings of the meetings of the corporation
and of the directors in a book to be kept for that purpose, and shall perform
such other duties as may be assigned to him by the directors or the President.
He shall have the custody of the seal of the corporation and shall affix the
same to all instruments requiring it, when authorized by the directors or the
President, and attest the same.
Section 8. Assistant Treasurers and Assistant Secretaries. Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
Section 9. Annual Budget and Business Plan. Prior to the commencement of
each fiscal year, the President and Treasurer shall present to the Board of
Directors for approval a budget and business plan for the corporation and its
subsidiaries for such fiscal year.
ARTICLE V
MISCELLANEOUS
Section 1. Resignations. Any director, member of a committee or corporate
officer may, provided the same would not result in a breach of any contract to
which said person is a party, resign at any time. Such resignation shall be made
in writing, and shall take effect at the time specified therein, and if no time
be specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
<PAGE> 12
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Section 2. Vacancies. If the office of any director becomes vacant, by
reason of death, disability, resignation, removal or otherwise, or if any newly
created directorships result from an increase in the authorized number of
directors, the President or Secretary, the remaining directors, or any
stockholders holding 25% or more of the outstanding shares of stock entitled to
vote for the election of such director or directors may call a special meeting
of stockholders for the purpose of filling such vacancy or such new
directorships; no such vacancy may be filled by the Board of Directors. If the
office of any member of a committee or corporate officer becomes vacant, by
reason of death, disability, resignation, removal or otherwise, the Board of
Directors may by action approved by a number of affirmative votes equal to more
than two-thirds of the number of outstanding shares of stock of the corporation,
appoint any qualified person to fill such vacancy, who shall hold office for the
unexpired term and until his successor shall be duly chosen.
Section 3. Certificates of Stock. Certificates of stock, signed by the
Chairman of the Board of Directors, or the President or any Vice President, and
the Treasurer or an Assistant Treasurer, or Secretary or an Assistant Secretary,
shall be issued to each stockholder certifying the number of shares owned by him
in the corporation. When such certificates are countersigned (1) by a transfer
agent other than the corporation or its employee, or (2) by a registrar other
than the corporation or its employee, the signatures of such officers may be
facsimiles.
Section 4. Lost Certificates. A new certificate of stock may be issued in
the place of any certificate theretofore issued by the corporation, alleged to
have been lost or destroyed, and the directors may, in their discretion, require
the owner of the lost or
<PAGE> 13
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destroyed certificate, or his legal representatives, to give the corporation a
bond, in such sum as they may direct, not exceeding double the value of the
stock represented by such certificate, to indemnify the corporation against any
claim that may be made against it on account of the alleged loss of any such
certificate, or the issuance of any such new certificate.
Section 5. Transfer of Shares. The shares of stock of the corporation
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such transfer
the older certificates shall be surrendered to the corporation by the delivery
thereof to the person in charge of the stock transfer books and ledgers, or to
such other person as the directors may designate, by whom they shall be canceled
and new certificates shall thereupon be issued. A record shall be made of each
transfer and whenever a transfer shall be made for collateral security, and not
absolutely, its shall be so expressed in the entry of the transfer.
Section 6. Stockholders Record Date. In order that the corporation may
determine the stockholders entitled to notice of or vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of
<PAGE> 14
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stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 7. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, by action approved by a number of
affirmative votes equal to more than two thirds of the number of outstanding
shares of stock of the corporation entitled to vote, out of funds legally
available therefor at any regular or special meetings, declare dividends upon
the capital stock of the corporation as and when they deem expedient. Before
declaring any dividend there may be set apart out of any funds of the
corporation available for dividends, such sum or sums as the directors from time
to time in their discretion deem proper for working capital or as a reserve fund
to meet contingencies or for equalizing dividends or for such other purposes as
the directors shall deem conducive to the interests of the corporation.
Section 8. Seal. The corporate seal shall be circular in form and shall
contain the name of the corporation, the year of its creation and the words
"CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.
Section 9. Fiscal Year. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors. In the absence of such
determination, the fiscal year shall. be the calendar year.
Section 10. Checks. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
<PAGE> 15
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Section 11. Notice and Waiver of Notice. Whenever any notice is required
by these By-Laws to be given, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in the mail, postage prepaid, addressed to the person
entitled thereto at his address as it appears on the records of the corporation,
and such notice shall be deemed to have been given on the day of such mailing.
Stockholders not entitled to vote shall not be entitled to receive notice of any
meetings except as otherwise provided by statute.
Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation of the
corporation or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE VI
INDEMNIFICATION
To the full extent permitted by law, the corporation may indemnify any
person or his heirs, distributees, next of kin, successors, appointees,
executors, administrators, legal representatives and assigns who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, domestic or foreign,
against expenses, attorneys'
<PAGE> 16
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fees, court costs, judgments, fines, amounts paid in settlement and other losses
actually and reasonably incurred by him in connection with such action, suit or
proceeding.
ARTICLE VII
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at any
annual meeting of all of the stockholders or at any special meeting thereof by
the affirmative vote of more than two-thirds of the stock issued and outstanding
and entitled to vote thereat, or by a resolution approved by the Board of
Directors by a number of affirmative votes equal to more than two-thirds of the
number of outstanding shares of stock of the corporation entitled to vote at any
regular meeting of the Board of Directors or at any special meeting of the Board
of Directors.
ARTICLE VIII
FUNDAMENTAL ISSUES
Except as otherwise provided by the Certificate of Incorporation or by the
laws of the State of Delaware, in no event may action be taken by the
stockholders or the Board of Directors with regard to each of the following
matters except by the affirmative vote of the holders of more than two-thirds,
of the issued and outstanding shares of stock of the corporation entitled to
vote or by a resolution approved by the Board of Directors by a number of
affirmative votes equal to more than two-thirds of the number of outstanding
shares of stock of the corporation entitled to vote, provided that any such
matter included in an annual budget and business plan previously approved by the
holders of more than two-thirds of the issued and outstanding shares of stock of
the corporation entitled to
<PAGE> 17
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vote, or by a resolution approved by the Board of Directors by a number of
affirmative votes equal to more than two-thirds of the number of outstanding
shares of stock of the corporation entitled to vote, shall not require further
approval pursuant to this Article VIII:
(i) issuance of additional shares of capital stock or other increase of
a stockholder's equity;
(ii) merger or consolidation with another entity;
(iii) transactions with any stockholder or its affiliates other than in
the ordinary course of business;
(iv) contracts or commitments for capital expenditures in excess of
$500,000 per item or group of related items or for purchase or sale
of assets other than in the ordinary course of business;
(v) incurrence of liabilities in excess of $500,000 in the aggregate,
except in the ordinary course of business;
(vi) redemption of stock;
(vii) changes in compensation of any Shareholder Employee;
(viii) material changes in employee benefits of any Shareholder Employee
except under tax-qualified employee benefit plans;
(ix) material changes in accounting methods or policies;
(x) removal or replacement of officers;
(xi) approval of the annual budget and business plan in accordance with
Section 9 of Article IV of these By-Laws; and
(xii) dissolution.
<PAGE> 18
18
As used herein, the term "Shareholder Employee" means any individual
officer, director, employee, consultant or agent of the corporation who owns
beneficially or of record, directly or indirectly, 5% or more of the equity or
voting power of any stockholder or of any corporation or entity which owns
beneficially or of record, directly or indirectly, 50% or more of the equity or
voting power of any stockholder.
<PAGE> 1
Exhibit 3.9.1
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF
ANKER HOLDING, INC.
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
THE UNDERSIGNED, being the President of ANKER HOLDING, INC. does hereby
certify:
FIRST: That the Certificate of Incorporation was filed in the office of
the Secretary of State of Delaware on the 11th day of March, 1975, and a
certified copy thereof was recorded in the office of the Recorder of Kent
County, Delaware, on the 11th day of March 1975.
SECOND: That Article 1. of the Certificate of Incorporation is amended to
read as follows:
"1: The name of the Corporation is
ANKER ENERGY CORPORATION".
THIRD: That such amendment has been duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 31st day of
December, 1980.
/s/ Mark R. Joseph
------------------------------
President
ATTEST:
/s/ Marvin E. Milbauer
- --------------------------------
Marvin E. Milbauer, Secretary
<PAGE> 2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
VITOL-ANKER HOLDING, INC.
(Pursuant to Section 242 of the Delaware Corporation Law)
VITOL-ANKER HOLDING, INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware does hereby
certify that:
FIRST: The Board of Directors of Vitol-Anker Holding Inc., by the
unanimous written consent of its members, filed with the minutes of the board,
duly adopted resolutions setting forth a proposed amendment to the Certificate
of Incorporation of said corporation, declaring said amendments to be advisable
and calling for consideration thereof by the stockholders. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation
be amended by changing Article "1" thereof so that, as amended, said
Article shall be and read as follows:
"1. The name of the corporation is
ANKER HOLDING, INC."
SECOND: Thereafter, pursuant to resolution of the Board of Directors and
in accordance with Section 228 of the General Corporation Law of the State of
Delaware, unanimous
<PAGE> 3
written consent to the amendment was given by the stockholders. Written notice
of such action was not given or required to be given, such consent having been
given by unanimous written consent of the stockholders.
THIRD: Said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said VITOL-ANKER HOLDING, INC. has caused this
certificate to be signed by its Vice President and attested by its Secretary
this 23rd day of April, 1976.
VITOL-ANKER HOLDING, INC.
By /s/ Mark R. Joseph
-----------------------------------
Mark R. Joseph, Vice President
ATTEST:
/s/ Marvin E. Milbauer
- -------------------------------------
Marvin E. Milbauer, Secretary
-2-
<PAGE> 4
CERTIFICATE OF INCORPORATION
of
VITOL-ANKER HOLDING, INC.
1. The name of the corporation is
VITOL-ANKER HOLDING, INC.
2. The address of its registered office in the State of Delaware is No.
100 West Tenth Street, in the city of Wilmington, County of New Castle. The name
of its registered agent at such address is The Corporation Trust Company.
3. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
4. The total number of shares of stock which the corporation is authorized
to issue is one thousand (1,000) and the par value of each of such shares is One
Hundred Dollars ($100.00) amounting in the aggregate to One Hundred Thousand
Dollars ($100,000.00).
5. The name and mailing address of the incorporator is
NAME MAILING ADDRESS
---- ---------------
Brian E. McGunigle 200 Park Avenue
New York, New York 10017
6. The corporation is to have perpetual existence.
7. The corporation shall indemnify to the full extent authorized by the
laws of the State of Delaware any person who was or is a party or is threatened
to be made a party to
<PAGE> 5
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint-venture, trust or other enterprise.
8. Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation. Elections of directors
need not be by written ballot unless the by-laws of the corporation shall so
provide.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 10th day of March, 1975.
/s/ Brian E. McGunigle
--------------------------------
2
<PAGE> 6
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
BE IT REMEMBERED THAT on this 10th day of March A.D., 1975, personally
came before me, Margaret T. Rush a Notary Public in and for the County and State
aforesaid, BRIAN E. McGUNIGLE, signatory of the foregoing Certificate of
Incorporation, known to me personally to be such, and acknowledged the said
Certificate to be his act and deed, and that the facts therein stated are truly
set forth.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ Margaret T. Rush
-----------------------------
NOTARIAL SEAL MARGARET T. RUSH
Notary Public, State of New York
No. 31-4521855
Qualified in New York County
Commission Expires March 30, 1978
3
<PAGE> 1
Exhibit 3.9.2
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
ANKER MINING AND DEVELOPMENT CO., INC.
INTO
ANKER ENERGY CORPORATION
ANKER ENERGY CORPORATION, a corporation organized and existing under
the laws of Delaware, DOES HEREBY CERTIFY:
FIRST: That this Corporation was incorporated on the 11th day of
March, 1975, pursuant to the General Corporation Law of the State of Delaware.
SECOND: That this Corporation owns all of the outstanding shares of
the stock of ANKER MINING AND DEVELOPMENT CO., INC., a corporation incorporated
on the 2nd day of April, 1975, pursuant to the Business Corporation Law of the
State of Pennsylvania.
THIRD: That this Corporation by the following resolutions of its
Board of Directors, duly adopted by the unanimous written consent of its members
dated the 30th day of December, 1981, determined to merge Anker Mining and
Development Co., Inc. into this Corporation:
RESOLVED, that in order to merge Anker Mining and Development Co.,
Inc., a Pennsylvania corporation, into this Corporation, the Plan of
Merger attached hereto as Annex I is hereby approved and adopted; and it
is further
RESOLVED, that the President and the Secretary be and hereby are
authorized and directed to make, execute and file such agreements,
certificates, consents and other papers as may in their judgment, be
necessary or desirable to effectuate the aforementioned merger.
<PAGE> 2
FOURTH: That a copy of the Plan of Merger adopted by the Corporation
as set forth above is attached hereto as Exhibit A.
IN WITNESS WHEREOF, Anker Energy Corporation has caused this
certificate to be signed by Mark R. Joseph, its President, and attested by
Marvin E. Milbauer, its Secretary, this 26th day of January, 1982.
ANKER ENERGY CORPORATION
By /s/ Mark R. Joseph
-----------------------------
President
ATTEST:
By /s/ Marvin E. Milbauer
------------------------------
Secretary
<PAGE> 3
Exhibit A
PLAN OF MERGER
OF
ANKER MINING AND DEVELOPMENT CO., INC.
(a Pennsylvania Corporation)
INTO
ANKER ENERGY CORPORATION
(a Delaware Corporation)
ARTICLE FIRST: As of the Effective Date (as defined in Article Third
hereof) and upon the terms set forth in Article Second hereof, Anker Mining and
Development Co., Inc., a Pennsylvania corporation incorporated on April 2, 1975
("Anker Mining"), shall be merged into Anker Energy Corporation, a Delaware
corporation incorporated on March 11, 1975 ("Anker Energy"). Anker Energy shall
be the surviving corporation in such merger (the "Surviving Corporation").
ARTICLE SECOND: The terms and conditions of the merger are as follows:
A. Share Cancellation. Each share of common stock of Anker Mining
outstanding immediately prior to the Effective Date shall forthwith
automatically be cancelled on the Effective Date and no additional shares of the
common stock of Anker Energy shall be issued as a result of the merger.
B. Articles of Incorporation and By-Laws; Name. The Articles of
Incorporation and By-Laws of Anker Energy shall continue as the Articles of
Incorporation and By-Laws of the Surviving Corporation. The name of the
Surviving Corporation shall be Anker Energy Corporation.
<PAGE> 4
-2-
C. Directors and Officers. The directors and officers of the surviving
Corporation shall be as follows:
John J. Faltis Director
Mark R. Joseph Director
Mark R. Joseph President
John J. Faltis Executive Vice President
William D. Harper Vice President
Edward M. Alan Treasurer
Michael Zagwoski Secretary
William D. Harper Assistant Secretary
The directors and officers named above shall serve in accordance with the
By-Laws of Anker Energy Corporation until such time as their successors have
been elected and qualified.
D. Assets and Liabilities. Upon the Effective Date all the property, real
and personal, rights, privileges, immunities, powers, purposes, franchises,
patents, licenses, trademarks, registrations, causes of action, and every other
asset of Anker Mining and Anker Energy shall be transferred to, vest in and
devolve upon the Surviving Corporation without further act or deed, and every
interest of Anker Mining and Anker Energy shall be as effectively the property
of the Surviving Corporation as they were of Anker Mining and Anker Energy.
E. Abandonment. Notwithstanding approval and adoption of this Plan of
Merger by the Directors of Anker Mining and Anker Energy, and by the Shareholder
of Anker Mining, this Plan of Merger may be abandoned and the merger of Anker
Mining and Anker Energy terminated at any time prior to the Effective Date by
decision of the Board of Directors of either party.
ARTICLE THIRD: The effective date of the merger of Anker Mining and Anker
Energy (the "Effective Date") shall be January 29, 1982, or, if later, the date
a Certificate of Ownership and Merger is filed with the Secretary of State of
Delaware or the Articles of Merger
<PAGE> 5
-3-
are filed by the Department of State of Pennsylvania, in accordance with the
provisions of applicable state law.
<PAGE> 1
Exhibit 3.9.3
CERTIFICATE OF MERGER
OF
ENERGY RESOURCE MANAGEMENT SERVICES, INC.
INTO
ANKER ENERGY CORPORATION
(Under Section 252 of the General
Corporation Law of the State of Delaware)
Anker Energy Corporation hereby certifies that:
1. The name and state of incorporation of each of the constituent
corporations are:
(a) Energy Resource Management Services, Inc., a West Virginia
corporation; and
(b) Anker Energy Corporation, a Delaware corporation.
2. An Agreement of Merger and Reorganization (the "Merger Agreement") has
been approved, adopted, certified, executed and acknowledged by Energy Resource
Management Services, Inc. and by Anker Energy Corporation in accordance with the
provisions of subsection (c) of Section 252 of the General Corporation Law of
the State of Delaware.
3. The name of the surviving corporation is Anker Energy Corporation.
4. The certificate of incorporation of Anker Energy Corporation shall be
the certificate of incorporation of the surviving corporation.
5. The executed Merger Agreement is on file at the principal place of
business of Anker Energy Corporation at Route 12, Box 245, Morgantown, West
Virginia 26505.
6. A copy of the Merger Agreement will be furnished by Anker Energy
Corporation, on request and without cost, to any stockholder of Energy Resource
Management Services, Inc. or Anker Energy Corporation.
7. The authorized capital stock of Energy Resource Management Services,
Inc., the corporation whose existence is terminated by this merger, is 500
shares of $10 par value common stock.
<PAGE> 2
IN WITNESS WHEREOF, Anker Energy Corporation has caused this certificate
to be signed by John J. Faltis, its President, and attested by Bruce Sparks, its
Secretary, on the 12th day of November, 1992.
By: /s/ John J. Faltis
---------------------------
Name: John J. Faltis
Title: President
ATTEST:
By: /s/ Bruce Sparks
------------------------
Name: Bruce Sparks
Title: Secretary
<PAGE> 3
AGREEMENT OF MERGER AND REORGANIZATION
ENERGY RESOURCE MANAGEMENT SERVICES, INC.
INTO
ANKER ENERGY CORPORATION
This Agreement of Merger and Reorganization is made as of November 12,
1992 by and among Anker Energy Corporation, a Delaware corporation ("AEC"),
Energy Resource Management Services, Inc., a West Virginia corporation ("ERMS")
and Anker Group, Inc., a Delaware corporation ("AGI").
WHEREAS, as of the date of this Agreement, AEC is authorized to have
outstanding 1,000 shares of Common Stock, $100 par value ("AEC Common"), of
which 10 shares are issued and outstanding and held and owned by AGI;
WHEREAS, as of the date of this Agreement, ERMS is authorized to have
outstanding 500 shares of Common Stock, $10 par value ("ERMS Common"), of which
100 shares are issued and outstanding and owned and held by Anker Group B.V., a
Netherlands corporation ("AGBV");
WHEREAS, AEC, ERMS and AGI desire to effect a merger and reorganization in
accordance with the laws of Delaware and West Virginia and within the meaning of
Sections 368(a)(1) and 368(a)(2)(D) of the United States Internal Revenue Code
of 1986 as amended;
WHEREAS, the directors of AEC, ERMS (such corporations being sometimes
called herein the "Constituent Corporations") and AGI have approved this
Agreement;
NOW, THEREFORE, in accordance with the laws of Delaware and West Virginia,
the parties hereto have agreed and do hereby agree that, subject to the
conditions hereinafter set forth, ERMS shall be merged with and into AEC (the
"Merger"); AEC shall be the surviving corporation (hereinafter sometimes called
the "Surviving Corporation"); the Surviving Corporation shall be governed by the
laws of Delaware; and the terms and conditions of the Merger and the mode of
carrying the same into effect shall be as follows:
1. Effective Date
The term "Effective Date" shall mean November 16, 1992 or, if later,
the time at which a Certificate of Merger shall have been filed in the office of
the Secretary of State of Delaware in accordance with Section 252(c) of the
Delaware General Corporation Law, and Articles of Merger shall have been filed
in the office of the Secretary of State of West Virginia in accordance with
Section 31-1-36(b) of the West Virginia Corporation Act.
<PAGE> 4
2
2. Articles of Incorporation
The Articles of Incorporation of AEC, as in effect immediately prior
to the Effective Date, shall be the Articles of Incorporation of the Surviving
Corporation until amended in accordance with law.
3. By-Laws
The By-Laws of AEC, as in effect immediately prior to the Effective
Date, shall be the By-Laws of the Surviving Corporation until amended in
accordance with law.
4. Exchange of Shares
As of the Effective Date, each share of ERMS Common issued and
outstanding immediately prior to the Effective Date shall be automatically
converted into the right to receive from AGI one-tenth (1/10) of one share of
AGI's Class B Preferred Stock, $2,500 par value.
5. Effect of Merger
(a) From and after the Effective Date, the effect of the Merger shall be
as provided in the applicable provisions of Delaware law; at such time, the
separate existence of ERMS shall cease; AEC shall be the Surviving Corporation
and the name of the Surviving Corporation shall be Anker Energy Corporation,
which shall possess all assets and property of every description, and every
interest therein, wherever located, and the rights, privileges, powers,
franchises, whether or not assignable, immunities and authority of a public as
well as a private nature, of each of the Constituent Corporations; all
obligations belonging to or due to each of the Constituent Corporations shall be
vested in, and become the obligation of, the Surviving Corporation without
further act or deed in the same manner as if the Surviving Corporation had
itself incurred them; title to any real estate or any interest therein vested in
either of the Constituent Corporations shall not revert or in any way be
impaired by reason of the Merger; and all rights of creditors of each
constituent Corporation and all liens upon the property of each of the
Constituent Corporations shall be preserved unimpaired, provided that such liens
upon the property of ERMS shall be limited to the property affected thereby
immediately prior to the Effective Date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized and their
respective seals to be affixed and attested, all as of the day and year first
above written.
ANKER ENERGY CORPORATION
By: /s/ John J. Faltis
---------------------------
John J. Faltis, President
<PAGE> 5
3
Attest: /s/ Bruce Sparks
---------------------------
Bruce Sparks, Secretary
ENERGY RESOURCE MANAGEMENT SERVICES, INC.
By: /s/ John J. Faltis
---------------------------
John J. Faltis, President
Attest: /s/ Bruce Sparks
----------------------------
Bruce Sparks, Secretary
ANKER GROUP, INC.
By: /s/ John J. Faltis
---------------------------
John J. Faltis, President
Attest: /s/ Bruce Sparks
-----------------------------
Bruce Sparks, Secretary
<PAGE> 1
Exhibit 3.10
BY-LAWS
OF
ANKER ENERGY CORPORATION
(Formerly Vitol-Anker Holding, Inc.)
(a Delaware corporation)
----------------------------------
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be established
and maintained at the office of the Corporation Trust Company, Wilmington,
Delaware, and said corporation shall be the registered agent of this corporation
in charge thereof.
Section 2. Other Offices. The corporation may have other offices, either
within or without the State of Delaware, at such place or places as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting shall be held at such place, either within or without the State
of
<PAGE> 2
Delaware, and at such time and date as the Board of Directors, by resolution,
shall determine and as set forth in the notice of the meeting.
Section 2. Other Meetings. Meetings of stockholders for any purpose other
than the election of directors may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting.
Section 3. Voting. Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three years from its date unless such proxy provides
for a longer period. Upon the demand of any stockholder, the vote for directors
and the vote upon any question before the meeting, shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a
2
<PAGE> 3
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 4. Quorum. Except as otherwise required by law, by the Certificate
of Incorporation or by these By-Laws, the presence, in person or by proxy, of
stockholders holding a majority of the stock of the corporation entitled to vote
shall constitute a quorum at all meetings of the stockholders. In case a quorum
shall not be present at any meeting, a majority in interest of the stockholders
entitled to vote thereat, present in person or by proxy, shall have the power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until the requisite amount of stock entitled to vote shall be
present. At such adjourned meeting at which the requisite amount of stock
entitled to vote shall be represented, any business may be transacted which
might have been transacted at the meeting as originally noticed; but only those
stockholders entitled to vote at the meeting as originally noticed shall be
entitled to vote at any adjournment or adjournments thereof.
3
<PAGE> 4
Section 5. Special Meetings. Special meetings of the stockholders for any
purpose or purposes may be called by the President or Secretary, or by
resolution of the directors.
Section 6. Notice of Meetings. Written notice, stating the place, date and
time of the meeting, and the general nature of the business to be considered,
shall be given to each stockholder entitled to vote thereat at his address as it
appears on the records of the corporation, not less than ten nor more than fifty
days before the date of the meeting. No business other than that stated in the
notice shall be transacted at any meeting without the unanimous consent of all
the stockholders entitled to vote thereat.
Section 7. Action Without Meeting. Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
4
<PAGE> 5
ARTICLE III
DIRECTORS
Section 1. Number and Term. The number of directors shall be not less than
two and not more than seven. The directors shall be elected at the annual
meeting of the stockholders and each director shall be elected to serve until
his successor shall be elected and qualified. Directors need not be
stockholders.
Section 2. Removal. Any director or directors may be removed either for or
without cause at any time by the affirmative vote of the holders of a majority
of all the shares of stock outstanding and entitled to vote, at a special
meeting of the stockholders called for the purpose and the vacancies thus
created may be filled, at the meeting held for the purpose of removal, by the
affirmative vote of a majority in interest of the stockholders entitled to vote.
Section 3. Increase of Number. The number of directors may be increased by
amendment of these By-Laws by the affirmative vote of a majority of the
directors, though less than a quorum, or, by the affirmative vote of a majority
in interest of the stockholders, at the annual meeting or at a special meeting
called for that purpose, and by like vote the additional directors may be chosen
at such meeting to hold office until the next annual election and until their
successors shall have been elected and qualified.
5
<PAGE> 6
Section 4. Powers. The Board of Directors shall exercise all of the
powers of the corporation except such as are by law or by the Certificate of
Incorporation of the corporation or by these By-Laws conferred upon or
reserved to the stockholders.
Section 5. Committees. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of such committee or committees. The member or members thereof present
at any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, or in these By-Laws, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority to amend the Certificate of Incorporation, to adopt an
agreement of merger or consolidation, to recommend to the stockholders the sale,
lease or exchange of
6
<PAGE> 7
all or substantially all of the corporation's property and assets, to recommend
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or to amend the By-Laws of the corporation; and, unless the
resolution, these By-Laws, or the Certificate of Incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock.
Section 6. Meetings. The newly elected directors may hold their first
meeting for the purpose of organization and the transaction of business, if a
quorum be present, immediately after the annual meeting of the stockholders; or
the time and place of such meeting may be fixed by consent in writing of all the
directors.
Regular meetings of the directors may be held without notice at such
places and times as shall be determined from time to time by resolution of the
directors.
Special meetings of the board may be called by the President or by the
Secretary on the written request of any two directors on at least two days'
notice to each director and shall be held at such place or places as may be
determined by the directors, or as shall be stated in the call of the meeting.
Section 7. Quorum. One-third of the directors shall constitute a quorum
for the transaction of business. If at any meeting of the Board of Directors
there shall be less than a quorum present, a majority of those present may
adjourn the
7
<PAGE> 8
meeting from time to time until a quorum is obtained, and no further notice
thereof need be given other than by announcement at the meeting which shall be
so adjourned.
Section 8. Compensation. Directors shall not receive any stated salary for
their services as directors or as members of committees, but by resolution of
the Board of Directors a fixed fee and expenses of attendance may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
Section 9. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting, if a written consent thereto is signed by all
members of the Board of Directors, or of such committee as the case may be, and
such written consent is filed with the minutes of proceedings of the Board of
Directors or committee.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the corporation shall be a President,
a Treasurer, and a Secretary, all of whom shall be elected by the Board of
Directors and who shall hold office until their successors are elected and
qualified. In addition,
8
<PAGE> 9
the Board of Directors may elect a Chairman, one or more Vice Presidents and
such Assistant Secretaries and Assistant Treasurers as they may deem proper.
None of the officers of the corporation need be directors. The officers shall be
elected at the first meeting of the Board of Directors after each annual
meeting. More than two offices may be held by the same person.
Section 2. Other Officers and Agents. The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 3. Chairman. The Chairman of the Board of Directors, if one be
elected, shall preside at all meetings of the Board of Directors and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors.
Section 4. President. The President shall be the chief executive officer
of the corporation and shall have the general powers and duties of supervision
and management usually vested in the office of president of a corporation. He
shall preside at all meetings of the stockholders if present thereat, and, in
the absence or non-election of the Chairman of the Board of Directors, at all
meetings of the Board of Directors, and shall have general supervision,
direction and control of the business of the corporation. Except as the Board of
Directors shall
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authorize the execution thereof in some other manner, he shall execute bonds,
mortgages and other contracts in behalf of the corporation, and shall cause the
seal to be affixed to any instrument requiring it and when so affixed the seal
shall be attested by the signature of the Secretary or the Treasurer or an
Assistant Secretary or an Assistant Treasurer.
Section 5. Vice President. Each Vice President shall have such powers and
shall perform such duties as shall be assigned to him by the directors.
Section 6. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the Board of Directors shall prescribe.
10
<PAGE> 11
Section 7. Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by law or by these By-Laws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the President, or by the directors, or stockholders, upon whose requisition
the meeting is called as provided in these By-Laws. He shall record all the
proceedings of the meetings of the corporation and of the directors in a book to
be kept for that purpose, and shall perform such other duties as may be assigned
to him by the directors or the President. He shall have the custody of the seal
of the corporation and shall affix the same to all instruments requiring it,
when authorized by the directors or the President, and attest the same.
Section 8. Assistant Treasurers and Assistant Secretaries. Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
ARTICLE V
MISCELLANEOUS
Section 1. Resignations. Any director, member of a committee or corporate
officer may, provided the same would not result in a breach of any contract to
which said person is a party, resign at any time. Such resignation shall be made
in
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writing, and shall take effect at the time specified therein, and if no time be
specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
Section 2. Vacancies. If the office of any director, member of a committee
or corporate officer becomes vacant, by reason of death, disability or
otherwise, the remaining directors in office, though less than a quorum, by a
majority vote may appoint any qualified person to fill such vacancy, who shall
hold office for the unexpired term and until his successor shall be duly chosen.
Section 3. Certificates of Stock. Certificates of stock, signed by the
Chairman of the Board of Directors, or the President or any Vice President, and
the Treasurer or an Assistant Treasurer, or Secretary or an Assistant Secretary,
shall be issued to each stockholder certifying the number of shares owned by him
in the corporation. When such certificates are countersigned (1) by a transfer
agent other than the corporation or its employee, or (2) by a registrar other
than the corporation or its employee, the signatures of such officers may be
facsimiles.
Section 4. Lost Certificates. A new certificate of stock may be issued in
the place of any certificate theretofore issued by the corporation, alleged to
have been lost or destroyed, and the directors may, in their discretion, require
the owner of the
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lost or destroyed certificate, or his legal representatives, to give the
corporation a bond, in such sum as they may direct, not exceeding double the
value of the stock represented by such certificate, to indemnify the corporation
against any claim that may be made against it on account of the alleged loss of
any such certificate, or the issuance of any such new certificate.
Section 5. Transfer of Shares. The shares of stock of the corporation
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such transfer
the old certificates shall be surrendered to the corporation by the delivery
thereof to the person in charge of the stock transfer books and ledgers, or to
such other person as the directors may designate, by whom they shall be
cancelled, and new certificates shall thereupon be issued. A record shall be
made of each transfer and whenever a transfer shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer.
Section 6. Stockholders Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or
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exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of such meeting, nor more than sixty days
prior to any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
Section 7. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
Section 8. Seal. The corporate seal shall be circular in form and shall
contain the name of the corporation, the year of its creation and the words
"CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.
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<PAGE> 15
Section 9. Fiscal Year. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors. In the absence of such
determination, the fiscal year shall be the calendar year.
Section 10. Checks. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 11. Notice and Waiver of Notice. Whenever any notice is required
by these By-Laws to be given, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient and if given
by depositing the same in the United States mail, postage prepaid, addressed to
the person entitled thereto at his address as it appears on the records of the
corporation, and such notice shall be deemed to have been given on the day of
such mailing. Stockholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by statute.
Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation of the
corporation or these By-Laws, a waiver thereof in writing, signed by the person
or persons
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entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE VI
INDEMNIFICATION
To the full extent permitted by law, the corporation may indemnify any
person or his heirs, distributees, next of kin, successors, appointees,
executors, administrators, legal representatives and assigns who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, domestic or foreign,
against expenses, attorneys' fees, court costs, judgments, fines, amounts paid
in settlement and other losses actually and reasonably incurred by him in
connection with such action, suit or proceeding.
ARTICLE VII
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at any
annual meeting of the stockholders or at any special
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<PAGE> 17
meeting thereof if notice of the proposed alteration or repeal or By-Law or
By-Laws to be made be contained in the notice of such special meeting, by the
affirmative vote of a majority of the stock issued and outstanding and entitled
to vote thereat, or by the affirmative vote of a majority of the Board of
Directors, at any regular meeting of the Board of Directors, or at any special
meeting of the Board of Directors, if notice of the proposed alteration or
repeal, or By-Law or By-Laws to be made, be contained in the notice of such
special meeting.
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Exhibit 3.11
ARTICLES OF INCORPORATION
OF
BRONCO MINING COMPANY, INC.
I. The undersigned agree to become a corporation by the name of:
BRONCO MINING COMPANY, INC.
II. The address of the principal office of said corporation will be located at
Kingswood P. O. Box #306, in county of Preston and State of West Virginia,
26537.
III. The purpose or purposes for which this corporation is formed are as
follows:
(a) To engage in the general business of mining and to do all things
incident thereto;
(b) To purchase, lease or otherwise acquire, to hold, and to sell, lease
or otherwise dispose of real property, mines, mineral and mining
rights, oil and gas wells, oil and gas royalties, and interests of
any nature in all of the foregoing, whether in the United States of
America or elsewhere;
(c) To mine, drill for and otherwise extract coal, oil, gas, metals,
ores and minerals and to otherwise acquire, produce, prepare for
market, process, store, transport, sell and deal in the same and the
products and by-products thereof;
<PAGE> 2
(d) To operate and conduct mines, wells and mining and drilling
operations;
(e) To acquire, construct, operate, maintain and dispose of lands,
factories, works, facilities, machinery, equipment and buildings of
whatever nature;
(f) To carry on the business of consulting, advising and managing mining
and drilling operations;
(g) To engage in the transaction of any or all other lawful business for
which corporations may be incorporated under the corporation laws of
the State of West Virginia, as the same may be from time to time
amended;
(h) To enter into and participate in one or more joint ventures with
individuals or corporations to carry out the objects, purposes and
powers of the Corporation;
(i) To do all things necessary, convenient or incident to the
accomplishment of the foregoing objects, purposes and powers.
IV. Provisions limiting or denying to shareholders preemptive rights are:
None.
V. Provisions for the regulation of the internal affairs of the corporation
are: None.
2
<PAGE> 3
VI. The amount of the total authorized capital stock of said corporation shall
be 5,000 dollars, which shall be divided into 500 shares of the par value
of 10 dollars each.
VII. The full names and addresses of the incorporator(s), including street and
street numbers, if any, and the city, town or village, including ZIP
number:
NAME ADDRESS
---- -------
Mark R. Joseph 1114 Avenue of the Americas
New York, New York 10036
VIII. The existence of this corporation is to be perpetual.
IX. The name and address of the person appointed to whom shall be sent notice
or process served upon, or service of which is accepted by, the secretary
of state is W. M. WOODROE, CHARLESTON NATIONAL PLAZA, CHARLESTON, WEST
VIRGINIA 25301.
X. The number of directors constituting the initial board of directors of the
corporation is four, and the names and addresses of the persons, if any,
who are to serve as directors until the first annual meeting of
shareholders or until their successors are elected and shall qualify are:
NAME ADDRESS
---- -------
Mark R. Joseph 1114 Avenue of the Americas
New York, N.Y. 10036
Lars Garrison 1114 Avenue of the Americas
New York, N.Y. 10036
3
<PAGE> 4
Joop van Eck Vasteland 4
Rotterdam, Netherlands
William Rottier Vasteland 4
Rotterdam, Netherlands
I, THE UNDERSIGNED, for the purpose of forming a Corporation under the
laws of the State of West Virginia, do make and file this ARTICLES OF
INCORPORATION, and we have according hereunto set our respective hands this 3rd
day of October, 1975.
/s/ Mark R. Joseph
----------------------
Articles of Incorporation prepared by:
Coudert Brothers
200 Park Avenue
New York, NY 10017
4
<PAGE> 5
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
I, Ruta Lacis, a Notary Public in and for the County and State aforesaid,
hereby certify that:
/s/ Mark R. Joseph
-------------------------
whose names are signed to the foregoing Articles, bearing date on the 3rd day of
October, 1975, this day personally appeared before me in my said county and
severally acknowledged their signatures to the same.
Given under my hand and the official seal this 3rd day of October, 1975.
/s/ Ruta Lacis
--------------------------
Notary Public
(NOTARIAL SEAL)
RUTA LACIS
NOTARY PUBLIC, State of New York
No. 24-4525102
Qualified in Kings County
My Commission expires: Commission Expires March 30, 1976
5
<PAGE> 1
Exhibit 3.12
BY-LAWS
of
BRONCO MINING COMPANY, INC.
(A West Virginia corporation)
* * *
ARTICLE 1
OFFICES
The principal office or place of business shall be located in Kingwood,
County of Preston, West Virginia. The corporation may have other offices, either
within or without the State of West Virginia, at such place or places as the
board of directors may from time to time designate or the business of the
corporation may require.
ARTICLE 2
SHAREHOLDERS
2.1 Annual Meetings. Annual meetings of shareholders for the election of
directors and for such other business as may properly come before the meeting
shall be held at such place, either within or without the State of West
Virginia, and at such time and date as may be fixed from time to time by the
board of directors.
2.2 Special Meetings. Special meetings of shareholders may be held at any
time and place, within or
<PAGE> 2
without the State of West Virginia. Special meetings of the shareholders for any
purpose or purposes, unless otherwise prescribed by law, may be called by the
board of directors, the President or Secretary, or by the holders of not less
than one-tenth of all outstanding shares of the corporation entitled to vote at
the meeting.
2.3 Notice of Meeting. Written notice, stating the place, date and hour of
the meeting, and in case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten nor more than fifty
days before the date of the meeting either personally or by mail by or at the
direction of the President, or the Secretary, or the person calling the meeting,
to each shareholder of record entitled to vote at such meeting.
2.4 Action Without Meeting. Any action required or permitted to be taken
at an annual or special meeting of shareholders may be taken without a meeting
and without prior notice if a consent in writing, setting forth the action so
taken, shall be signed by all of the shareholders who would have been entitled
to vote upon the action if such meeting were held. Such action by unanimous
written consent may be taken without regard to any provision of these By-Laws or
any resolution of the board of directors fixing the time, date or place of
meetings of shareholders.
2
<PAGE> 3
2.5 Quorum. Except as otherwise required by law, by the Articles of
Incorporation, or by these By-Laws, the holders of a majority of the outstanding
shares entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of the shareholders. If, however, such a quorum shall not be
present at any meeting, a majority in interest of the shareholders who are
entitled to vote thereat and are present in person or by proxy, shall have power
to adjourn the meeting from time to time, without notice other than announcement
at the meeting, until the requisite number of shares entitled to vote shall be
present. At such adjourned meeting at which the requisite number of shares
entitled to vote shall be represented, any business may be transacted which
might have been transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
2.6 Voting. If a quorum is present, the affirmative vote of a majority of
the shares represented at the meeting shall be the act of the shareholders,
unless the vote of a greater number of shares is required by law, the Articles
of Incorporation, or these By-Laws.
Each outstanding share having voting power shall be entitled to one vote
on each matter submitted to a vote at a
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<PAGE> 4
meeting of shareholders. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or by his duly authorized
attorney-in-fact. No proxy shall be valid after eleven months from the date of
its execution, unless otherwise provided in the proxy.
At each election for directors every shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected and
for whose election he has a right to vote, or to cumulate his votes by giving
one candidate as many votes as the number of such directors multiplied by the
number of his shares shall equal, or by distributing such votes on the same
principle among any number of such candidates.
ARTICLE 3
DIRECTORS
3.1 Number and Term. The number of directors shall be not less than two
and not more than seven, as shall be determined from time to time by election of
directors or other action of the shareholders or by resolution of the board of
directors. The total number of directors as most recently set by such election,
action or resolution shall constitute the "full board". Directors need not be
residents of the State of West Virginia nor shareholders of
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<PAGE> 5
the corporation. The directors, other than the first board of directors, shall
be elected at the annual meeting of the shareholders, and each director elected
shall serve until the next succeeding annual meeting and until his successor
shall have been elected and qualified. The first board of directors shall hold
office until the first meeting of the shareholders.
3.2 Resignations. Any director may resign at any time. Such resignation
shall be made in writing, and shall take effect at the time specified therein,
and if no time be specified, at the time of its receipt by the President or
Secretary. The acceptance of a resignation shall not be necessary to make it
effective.
3.3 Vacancies. Any vacancy occurring in the board of directors and any
directorship to be filled by reason of an increase in the number of directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the board of directors. A director elected to fill
a vacancy shall be elected for the unexpired portion of the term of his
predecessor in office.
3.4 Removal. At a meeting of shareholders called expressly for that
purpose, any director or the entire board of directors may be removed, with or
without cause, by a vote of the holders of a majority of the shares entitled to
vote at an election of directors. If less than the entire
5
<PAGE> 6
board is to be removed, no one of the directors may be removed if the votes cast
against his removal would be sufficient to elect him.
3.5 Powers. The business and affairs of the corporation shall be managed
by its board of directors, which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the Articles
of Incorporation directed or required to be exercised or done by the
shareholders. The board of directors is expressly authorized, without the assent
or vote of the shareholders, to authorize and cause to be executed mortgages and
liens upon the real and personal property of the corporation, including
after-acquired property. The enumeration in these By-Laws of particular powers
of the board of directors shall not imply the denial of, or any limitation on,
any other power vested in the board of directors by law or by the Articles of
Incorporation or by these By-Laws.
3.6 Compensation. The board of directors, by the affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise.
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<PAGE> 7
3.7 Meetings. The newly elected directors may hold their first meeting for
the purpose of organization and the transaction of business, if a quorum is
present, immediately after the annual meeting of the shareholders; or the time
and place of such meeting may be fixed by consent in writing of all the
directors.
Regular meetings of the directors may be held without notice at such
places and times as shall be determined from time to time by resolution of the
directors.
Special meetings of the directors may be called by the President or
Secretary or by any two directors on at least two days' notice to each director
and shall be held at such place or places as may be determined by the directors,
or as shall be stated in the notice of meeting.
Any directors' meeting may be held either within or without the State of
West Virginia.
3.8 Quorum of Directors. A majority of the full board of directors shall
constitute a quorum for the transaction of business at any meeting of the board
of directors, but if less than such majority is present at a meeting, a majority
of the directors present may adjourn the meeting from time to time without
further notice.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the board of directors.
7
<PAGE> 8
3.9 Action by Directors Without a Meeting. Any action required or
permitted to be taken at a meeting of the directors or of a committee thereof
may be taken without a meeting if a consent in writing, setting forth the action
so taken, shall be signed by all of the directors or all of the members of the
committee, as the case may be, entitled to vote with respect to the subject
matter thereof.
3.10 Executive and Other Committees. The board of directors, by resolution
adopted by a majority of the full board, may designate from among its members an
executive committee and one or more other committees. The designation of such
committee and the delegation thereof of authority shall not operate to relieve
the board of directors, or any member thereof, of any responsibility imposed by
law.
The executive committee, when the board of directors is not in session,
shall have and may exercise all of the authority of the board of directors
except to the extent, if any, that such authority shall be limited by the
resolution adopting the executive committee and except also that the executive
committee shall not have the authority of the board of directors in reference to
amending the Articles of Incorporation, adopting a plan of merger or
consolidation, recommending to the shareholders the sale, lease, exchange or
other disposition of all or substantially all of the property and assets of the
corporation otherwise than in the
8
<PAGE> 9
usual and regular course of its business, recommending to the shareholders a
voluntary dissolution of the corporation or a revocation, amending the By-Laws
of the corporation, filling vacancies on the board of directors, or changing the
number of authorized directors.
Any vacancy in the executive committee may be filled by a resolution
adopted by a majority of the full board of directors.
The executive committee shall keep regular minutes of its proceedings and
report the same to the board of directors for its information at the meeting
thereof held next after the proceedings shall have been taken.
ARTICLE 4
NOTICES
4.1 Notices. Whenever, under the provisions of law or of the Articles of
Incorporation or of these By-Laws, notice is required to be given to any
director or shareholder, such notice may be given in writing, by mail, addressed
to such director or shareholder, at his address as it appears on the records of
the corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. If notice be given by telegram, such notice shall be deemed to
9
<PAGE> 10
be delivered when the telegram is delivered to the telegraph company.
With the exception of special meetings of directors for the purpose of
amending the By-Laws or authorizing the sale of all or substantially all of the
assets of the corporation and special meetings of shareholders, neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of shareholders or of the board of directors need be specified in the notice or
waiver of notice of such meeting.
4.2 Waiver of Notice. Whenever any notice is required to be given to any
shareholder or director of the corporation under the provisions of these By-Laws
or the Articles of Incorporation or by law, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
4.3 Waiver by Attendance. The attendance of a shareholder, in person or by
proxy, or a director at a meeting shall constitute a waiver of notice of such
meeting, except where a shareholder or director attends a meeting for the
express purpose of objecting the transaction of any business because the meeting
is not lawfully called or convened.
10
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ARTICLE 5
OFFICERS
5.1 Officers. The officers of the corporation shall consist of a
President, a Secretary and a Treasurer, each of whom, shall be elected by the
board of directors. The board of directors may also elect a Chairman, a Vice
Chairman, one or more Vice Presidents, and one or more Assistant Secretaries and
Assistant Treasurers. None of the officers of the corporation need be directors.
Any two or more offices, except those of President and Secretary, may be held by
the same person.
5.2 Election. The officers shall be elected at the first meeting of the
board of directors after each annual meeting.
5.3 Other Officers. The board of directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
5.4 Term, Vacancies. The officers of the corporation shall hold office
until their successors are chosen and qualify. Any officers elected or appointed
by the board of directors may be removed at any time by the board of directors
but such removal shall be without prejudice to the contract rights, if any, of
the officer so removed. Any
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<PAGE> 12
vacancy occurring in any office of the corporation shall be filled by the board
of directors.
5.5 Chairman. The Chairman of the board of directors, if one be elected,
shall preside at all meetings of the board of directors and shall have and
perform such other duties as from time to time may be assigned to him by the
board of directors.
5.6 Vice Chairman. The Vice Chairman of the board of directors, if one be
elected, shall have such powers and perform such duties as from time to time may
be assigned to him by the board of directors.
5.7 President. The President shall be the chief executive officer of the
corporation and shall have the general powers and duties of supervision and
management usually vested in the office of president of a corporation. He shall
preside at all meetings of the shareholders if present thereat, and in the
absence of the Chairman or if none was elected, at all meetings of the board of
directors, and shall have general supervision, direction and control of the
business of the corporation. Except as the board of directors shall authorize
the execution thereof in some other manner, he shall execute bonds, mortgages
and other contracts on behalf of the corporation, and shall cause the seal to be
affixed to any instrument requiring it. When so affixed the seal shall be
attested by the signature of the
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Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer.
5.8 Vice President. Each Vice President shall have such powers and shall
perform such duties as shall be assigned to him by the directors. The Vice
President, or if there is more than one Vice President the senior Vice
President, shall, in the absence or disability of the President, perform the
duties and exercise the powers of the President.
5.9 Treasurer. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate account of receipts and
disbursements in books belonging to the corporation. He shall deposit all moneys
and other valuables in the name and to the credit of the corporation in such
depositories as may be designated by the board of directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the board of directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and board of directors at
the regular meetings of the board of directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the board of directors, he shall give the
corporation a bond for the
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faithful discharge of his duties in such amount and with such surety as the
board shall prescribe.
5.10 Secretary. The Secretary shall give, or cause to be given, notice of
all meetings of shareholders and directors and all other notices required by law
or by these By-Laws, but any such notice may be given by any other person as
authorized or directed. He shall record all the proceedings of the shareholders
and directors in books maintained for that purpose, and shall have custody of
the seal of the corporation. He shall affix the seal of the corporation to all
instruments requiring it and attest the same.
5.11 Assistant Treasurers and Assistant Secretaries. Assistant Treasurers
and Assistant Secretaries, if any shall be elected, shall have such powers and
shall perform such duties as shall be assigned to them, respectively, by the
directors.
ARTICLE 6
INDEMNIFICATION
To the full extent permitted by law, the corporation may indemnify
any person and his heirs, distributees, next of kin, successors, appointees,
executors, administrators, legal representatives and assigns who was or is a
party or is threatened to be made a party to
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any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, domestic or foreign, against expenses, attorneys' fees, court costs,
judgments, fines, amounts paid in settlement and other losses actually and
reasonably incurred by him in connection with such action, suit or proceeding.
ARTICLE 7
MISCELLANEOUS
7.1 Share Certificates. The shares of the corporation shall be represented
by certificates signed by the President or a Vice-President and the Secretary or
an Assistant Secretary of the corporation, and may be sealed with the seal of
the corporation or a facsimile thereof. Such certificates shall be issued to
each shareholder certifying the number of shares owned by him in the
corporation. When such certificates are countersigned by a transfer agent or
registrar, other than the corporation or its employee, the required officers'
signatures thereupon may be facsimiles.
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No certificates shall be issued for any share unless such share is fully paid.
7.2 Lost Certificates. The board of directors may direct a new certificate
to be issued in place of any certificate theretofore issued by the corporation
alleged to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost or destroyed.
7.3 Transfer of Shares. Transfer of shares of the corporation shall be
made only on the transfer books of the corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
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<PAGE> 17
7.4 Closing of Transfer Books. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the board
of directors may fix in advance a record date for any such determination of
shareholders, such date to be not more than fifty days and, in case of a meeting
of shareholders, not less than ten days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If no record date is fixed for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders, or shareholders entitled to
receive payment of a dividend, the date on which notice of the meeting is mailed
or the date on which the resolution of the board of directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof.
7.5 Voting Record. The officer or agent having charge of the transfer
books of the corporation shall make a
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complete record of the shareholders entitled to vote at each meeting of
shareholders or any adjournment thereof, arranged in alphabetical order, with
the address of and the number of shares held by each. Such record shall be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the meeting for
the purposes thereof.
7.6 Dividends. The board of directors may, from time to time, declare and
the corporation may pay dividends on its outstanding shares in the manner and
upon the terms and conditions provided by law and the Articles of Incorporation.
Before payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors in their
absolute discretion deem proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall deem conducive to
the interests of the corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
7.7 Reliance on Records. Each officer and director shall in the
performance of his duties be fully protected in relying in good faith upon the
books of account of the corporation, or upon reports made to the corporation by
any
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of its officials, or by an independent certified public accountant, or by an
appraiser selected with reasonable care, or in relying in good faith upon other
records of the corporation.
7.8 Checks. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate by resolution.
7.9 Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
7.10 Seal. The corporate seal shall be circular in form and shall contain
the name of the corporation, the year of its incorporation and the words
"Corporate Seal, West Virginia".
7.11 Amendments. These By-Laws may be amended or repealed and new By-Laws
may be adopted: (1) by the shareholders at any annual meeting, or at any special
meeting if notice of the proposed amendment or repeal is contained in the notice
of such special meeting, by the affirmative vote of a majority of the shares
entitled to vote thereat; (2) by the board of directors at any regular meeting,
or at any special meeting if notice of the proposed amendment or repeal is
contained in the notice of such special meeting; or (3) by unanimous written
consent of the shareholders or directors.
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Exhibit 3.13
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
ANKER POWER PROJECTS, INC.
I. The name of the corporation is ANKER POWER PROJECTS, INC.
II. Article I of the Articles of Incorporation of Anker Power Projects, Inc.
is hereby amended as follows:
I. The undersigned agrees to become a corporation by the name of:
ANKER POWER SERVICES, INC.
III. The foregoing amendment was adopted by the sole shareholder of the
corporation pursuant to an Agreement to Corporate Action dated August 12,
1994. The corporation has only one class of stock, the number of shares of
which are outstanding and entitled to vote on said amendment is One
Hundred (100); the number of shares voted for said amendment was One
Hundred (100); and the number voted against said amendment was zero.
DATED: August 12, 1994.
ANKER POWER PROJECTS, INC.
By /s/ John J. Faltis
--------------------------------
Its President
and /s/ Bruce Sparks
-------------------------------
Its Secretary
<PAGE> 2
STATE OF WEST VIRGINIA,
COUNTY OF MONONGALIA, to-wit:
I, Charlene E. Gaston, a Notary Public, do hereby certify that on this
12th day of August, 1994, personally appeared before me John J. Faltis, who,
being by me first duly sworn, declared that he is the President of Anker Power
Projects, Inc., that he signed the foregoing document as President of the
corporation, and that the statements therein contained are true.
My commission expires: May 17, 1999.
/s/ Charlene E. Gaston
---------------------------------
Notary Public
(NOTARIAL SEAL)
OFFICIAL SEAL
Notary Public, State of West Virginia
Charlene E. Gaston 1332 Pineview Dr., No. 21
Morgantown, WV 26505
My Commission Expires May 17, 1999
The foregoing Articles of Amendment were prepared by the law firm of Spilman,
Thomas & Battle, P. O. Box 273, Charleston, West Virginia 25321.
2
<PAGE> 3
ARTICLES OF INCORPORATION
OF
ANKER POWER PROJECTS, INC.
I. The undersigned agrees to become a corporation by the name of:
ANKER POWER PROJECTS, INC.
II. The existence of this corporation shall be perpetual.
III. The purposes for which this corporation is organized shall include the
transaction of any or all lawful business for which corporations may be
incorporated in the State of West Virginia.
IV. The principal office of this corporation shall be at Route 12, Box 245,
Morgantown, West Virginia 26505. The name and address of the person to
whom shall be sent notice or process served upon, or service of which is
accepted by, the Secretary of State, is Bruce Sparks, Route 12, Box 245,
Morgantown, West Virginia 26505.
V. The name and address of the sole incorporator is:
David B. Shapiro
P.O. Box 273
Charleston, WV 25321
VI. The initial Board of Directors of this corporation shall consist of the
following two persons:
Name Address
---- -------
John J. Faltis Route 12, Box 245
Morgantown, WV 26505
Bruce Sparks Route 12, Box 245
Morgantown, WV 26505
<PAGE> 4
The bylaws of this corporation, when adopted by the initial Board of
Directors, shall provide for a Board of Directors which may consist of any
number of persons provided for in said bylaws, or such number of persons
as may be determined from time to time by the shareholders.
VII. The amount of the total authorized capital stock of this corporation shall
be Five Thousand Dollars ($5,000.00), which shall be divided into 500
shares of the par value of Ten Dollars ($10.00) each, and which shall
constitute a single class of shares.
VIII. The shareholders of this corporation shall not have a preemptive right to
subscribe for, purchase, or take nay part of any unissued or treasury
shares issued or to be issued or sold by this corporation, or any
securities of this corporation convertible into shares of this corporation
issued or to be issued by it, after its incorporation.
The undersigned, for the purpose of forming a corporation under the laws
of the State of West Virginia, does hereby make and file these Articles of
Incorporation, and has accordingly hereunto set his hand this 12th day of April,
1990.
/s/ David B. Shapiro
------------------------------------
David B. Shapiro
<PAGE> 5
STATE OF WEST VIRGINIA
COUNTY OF KANAWHA, to-wit:
I, Deborah L. Raines, a Notary Public in and for the County and
State aforesaid, hereby certify that David B. Shapiro, whose name is signed to
the foregoing Articles, bearing date on the 12th day of April, 1990, this day
personally appeared before me in my said county and acknowledged his signature
to the same.
Given under my hand and official seal this 12th day of April, 1990.
/s/ Deborah L. Raines
-----------------------------------
Notary Public
My commission expires: April 19, 1993
(NOTORIAL SEAL)
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINIA
DEBORAH L. RAINES
811 Quarrier Street
Charleston, West Virginia 25301
My Commission Expires April 19, 1993
The foregoing Articles of Incorporation were prepared by the law firm of
Spilman, Thomas, Battle, & Klostermeyer, P.O. Box 273, Charleston, WV 25321.
3
<PAGE> 1
Exhibit 3.14
BYLAWS
OF
ANKER POWER SERVICES, INC.
(Formerly Anker Power Projects, Inc.)
APRIL 14, 1990
ARTICLE I
OFFICES
Section 1.1. The principal office and place of business of this
corporation will be in the City of Morgantown, County of Monongalia, State of
West Virginia, Route 12, Box 245. The Board of Directors may change the location
of said principal office and of said principal place of business, or either,
from time to time as it may deem advisable, and may also establish such offices
or places of business elsewhere as in the opinion of the Board may be advisable.
ARTICLE II
SHAREHOLDERS
Section 2.1. Annual Meetings. The annual meetings of the
shareholders of this corporation shall be held in the month of January of each
year, on such date as may be fixed by the Board of Directors, either at the
principal office of the corporation or at such other place, either within or
without the State of West Virginia, as the Board of Directors may fix by
resolution. The Board of Directors may by resolution authorize any officer or
officers to fix the date and place of such annual meeting.
Section 2.2. Special Meetings. Special meetings of the shareholders
may be called at any time by the Board of Directors, the President and
Secretary, or any number of shareholders holding in the aggregate at least
one-tenth of the number of shares entitled to vote at the meeting. Such meetings
shall be held at the principal office of the corporation unless the Board of
Directors or other persons calling such meeting shall fix some other place for
the meeting, in which event the meeting shall be held at such other place, which
may be either within or without the State of West Virginia.
Section 2.3. Notice of Meetings. Notice of the annual and all other
meetings of the shareholders shall be given by written notice stating the place,
day and hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which and the officers or persons by whom the meeting is called,
and shall be delivered not less than ten and not more than fifty days before the
date of the meeting, either personally or by mail. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his last post office address appearing on the records of the
corporation, with postage thereon prepaid. It shall be the duty of every
shareholder to furnish to the Secretary of the corporation his post office
address and to notify the Secretary of any change therein. Notice of all
meetings shall be given to each shareholder of record entitled to vote at the
meeting.
<PAGE> 2
Section 2.4. Waiver of Notice. Any meeting of the shareholders may
be held by agreement in writing signed by all shareholders, and, where notice of
publication of any notice is required, the same may be waived in writing signed
by all the shareholders entitled to such notice, filed with the records of the
meeting, whether before or after the time stated therein. Any meeting of the
shareholders at which every shareholder is present or represented by proxy shall
be valid, notwithstanding lack or insufficiency of notice.
Section 2.5. Action by Shareholders Without Meeting. Whenever the
vote of the shareholders at a meeting thereof is required or permitted to be
taken in connection with any corporate action, the meeting and vote of such
shareholders may be dispensed with if all of the shareholders who would have
been entitled to vote upon the action, if such meeting were held, shall agree in
writing to such corporate action being taken, and such agreement shall have like
effect and validity as though the action were duly taken by the unanimous action
of all shareholders entitled to vote at a meeting of such shareholders duly
called and legally held.
Section 2.6. Quorum; Adjournments. At all meetings of the
shareholders, a quorum shall consist of at least a majority of all of the shares
of stock issued and outstanding and entitled to vote, represented either in
person or by proxy. If a sufficient number of shares is not present at the time
and place appointed, any number of shares present or represented, less than a
quorum, may adjourn any shareholders meeting from time to time until a quorum is
present and the business to come before the meeting is completed.
Section 2.7. Voting. If a quorum is present at any meeting of the
shareholders duly and properly called and held, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be and constitute the act of the shareholders, except in
the matter of election of directors, and unless the vote of a greater number, or
other vote, is required by law or by the Articles of Incorporation or bylaws of
this corporation. Except as otherwise provided by law, or by the Articles of
Incorporation or bylaws of this corporation, each outstanding share shall be
entitled to one vote on each matter submitted to vote at any meeting of the
shareholders, and may be voted by the shareholder either in person or by written
proxy. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
Section 2.8. Record of Meetings. A record shall be kept of the
meetings of the shareholders and the action taken at the same, which shall be
verified by the signature of the Chairman of the meeting and the person acting
as Secretary thereof.
ARTICLE III
DIRECTORS
Section 3.1. Number, Qualification and Term of Office. The business,
property and affairs of the corporation shall be managed and controlled by its
Board of Directors. The Board of Directors shall consist of not fewer than two
and not more than five persons, as may be
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determined by the shareholders from time to time, and shall be elected at the
first annual meeting of the shareholders and at every annual meeting thereafter.
Directors need not be shareholders of the corporation nor residents of the State
of West Virginia. They shall hold office until the next succeeding annual
meeting and until their successors are elected and qualified.
Section 3.2. Elections. In all elections of directors each
shareholder shall have the right to vote, in person or by proxy, the number of
shares owned by him and entitled to vote, for as many persons as there are
directors to be elected, and for whose election he has a right to vote, or he
may cumulate such votes and give one candidate as many votes as the number of
directors to be elected multiplied by the number of his shares shall equal; or
he may distribute them on the same principle among as many candidates and in
such manner as he shall desire.
Section 3.3. Removal of Directors. The shareholders, at any meeting
thereof called expressly for the purpose, may remove any director or the entire
Board of Directors, with or without cause, by vote of the holders of a majority
of the shares entitled to vote at an election of directors. However, if less
than the entire Board is to be removed, no one of the directors may be removed
if the votes cast against his removal would be sufficient to elect him.
Section 3.4. Vacancies. Any vacancy in the Board of Directors
resulting from removal of a director shall be filled by the shareholders at the
meeting at which such removal occurs. A vacancy resulting from an increase in
the number of directors shall likewise be filled by the shareholders at the
meeting at which such increase is made. A vacancy in the Board occurring from
any other cause, or from the failure of the shareholders to act, may be filled
by the affirmative vote of a majority of the remaining directors, though less
than a quorum. Any director elected or appointed to fill a vacancy shall serve
until the next annual election of directors.
Section 3.5. Meetings. Regular meetings of the Board of Directors
may be held at such time and place as may be prescribed by these bylaws, or as
the Board may from time to time designate. Special meetings of the Board may be
called by the President, a Vice President, or any two directors. Meetings of the
Board may be held either within or without the State of West Virginia. Notice of
all meetings of the Board shall be given by the Secretary of the corporation or
by the person or persons calling such meeting, and, in the case of a special
meeting, shall state by whom it is called. Such notice shall be given at least
twenty-four hours before the time of such meeting, either by written notice
thereof mailed to each director, or by telegram or telephone. Except as
otherwise provided by law, the notice of any meeting of the Board need not
specify the purpose of or the business to be transacted at the meeting.
Section 3.6. Waiver of Notice. Any meeting of the directors may be
held by agreement in writing signed by all the directors, and where notice of
any meeting is required, a waiver thereof in writing, signed by the director or
directors entitled to notice, filed with the records of the meeting, whether
before or after the time stated therein, shall be equivalent to the giving of
such notice. Attendance of a director at a meeting of the directors shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called
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or convened. Except as provided in the next preceding sentence, any meeting of
the directors at which every director is present in person shall be valid,
notwithstanding lack or insufficiency of notice.
Section 3.7. Action by Directors Without Meeting. Whenever the vote
of directors at a meeting thereof is required or permitted to be taken in
connection with any corporate action, the meeting and vote of such directors may
be dispensed with if all the directors shall agree in writing to such corporate
action being taken, and such agreement shall have like effect and validity as
though the action were duly taken by the unanimous action of all directors at a
meeting thereof duly called and legally held.
Section 3.8. Quorum. A majority of the number of directors fixed by
the shareholders, as provided in these bylaws, shall constitute a quorum for the
transaction of business. The act of a majority of the directors present at any
meeting at which a quorum is present shall be and constitute the act of the
Board of Directors. If at any meeting of the Board there is less than a quorum
present, a majority of the directors present may adjourn the meeting from time
to time until a quorum is present.
Section 3.9. Conflicts of Interest. No contract or transaction
between this corporation and any one or more of its directors, or between this
corporation and any other corporation, firm, association, or entity in which one
or more of its directors are directors or officers, or are financially
interested, shall be either void or voidable because of such relationship or
interest, or because such director or directors are present at the meeting of
the Board of Directors, or a committee thereof, which authorizes, approves, or
ratifies such contract or transaction, or because his or their votes are counted
for such purpose, if:
(a) The fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves, or
ratifies the contract or transaction by a vote or consent sufficient for
the purpose without counting the votes or consents of such interested
directors; or
(b) The fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote, and they authorize, approve or
ratify such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable to this
corporation.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or a committee thereof wich
authorizes, approves, or ratifies such contract or transaction. On any question
involving the authorization, approval, or ratification of any such contract or
transaction, the names of those voting each way shall be entered on the record
of the proceedings.
Section 3.10. Record of the Board. The Board of Directors shall
cause to be kept a record of its proceedings, which shall be verified by the
signatures of the persons acting as
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Chairman and Secretary of the meeting. Any member of the Board of Directors, at
his request, shall have the right to have his vote recorded in the minutes of
the meeting on any question coming before the Board.
Section 3.11. Voting of Corporate Stock. The Board of Directors may
by resolution provide that any shares of the capital stock of any other
corporation or corporations owned by this Corporation shall be voted by such one
or more officers of this Corporation, or by such other person or persons, as the
Board shall designate, either generally or with respect to any specific
corporation, meeting or matter. In the absence of any resolution of the Board of
Directors applying to the shares of the capital stock of a corporation, or to
any meeting or matter, the President of this Corporation is authorized to vote
such shares of the capital stock of such other corporation, either in person or
by proxy given to any other officer or person, or persons, in his discretion, in
such manner as he shall deem advisable and for the best interests of this
Corporation.
ARTICLE IV
OFFICERS AND AGENTS
Section 4.1. Election and Appointment. As soon as may be after their
election the Board of Directors shall choose a President of the corporation from
among the directors, who shall hold office until the next annual election of
officers and until his successor is elected and qualified. At the same time the
Board of Directors shall choose a Secretary and a Treasurer, none of whom need
be members of the Board. At the same time the Board of Directors may elect one
or more Executive Vice Presidents or Vice Presidents, none of whom need be
members of the Board. The directors may at any time elect from among the
directors a Chairman of the Board of Directors, and may also elect an Assistant
Secretary and an Assistant Treasurer, who need not be members of the Board. Any
two or more offices may be held by the same person, except the offices of
President and Secretary.
Section 4.2. Other Officers and Agents. The Board of Directors may
employ a manager and such other employees, servants, agents, attorneys and
representatives as the Board may deem advisable, to perform such duties as the
Board may prescribe.
Section 4.3. Bond. If required by the Board, the Treasurer,
Secretary, or any other officer, agent or employee shall give bond payable to
the corporation in such penalty and with such conditions and security as the
Board may approve.
Section 4.4. Compensation. The Board of Directors of this
corporation shall have the authority to fix the compensation of all officers,
including members of the Board of Directors.
Section 4.5. President. The President shall be the chief executive
officer of the corporation. He shall preside at all meetings of the shareholders
and directors at which he is in
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<PAGE> 6
attendance, unless the directors shall elect a Chairman of the Board to preside
at meetings of the Board. Unless some other officer or agent is specially
appointed and authorized for the purpose, the President shall sign the corporate
name of the corporation to all deeds, mortgages, writings and other contracts
made by the corporation, except such as are necessary or incidental to the
exercise of the powers vested in other officers or agents by the Board of
Directors; and, generally, the President shall have and exercise supervision and
control over all the business, affairs and property of the corporation, and
shall perform such duties as are incident to the conduct of its business not
otherwise provided for in these bylaws or by action of the Board of Directors.
Section 4.6. Executive Vice President. The Executive Vice President
shall in the absence or incapacity of the President perform the duties of the
President and shall have such other powers and authority as may be assigned to
him by the Board of Directors, either generally or specially. If there shall be
more than one Executive Vice President, each shall have such duties, powers and
authority as may be assigned to him by the Board of Directors, and, unless
otherwise provided by the Board of Directors, each shall be authorized to
perform the duties of the President in his absence or incapacity in the order of
their designation or election.
Section 4.7. Vice President. The Vice President shall, in the
absence or incapacity of the President and all Executive Vice Presidents,
perform the duties of the President and shall have such other powers and
authority as may be assigned to him by the Board of Directors, either generally
or specially. If there shall be more than one Vice President, each shall have
such duties, powers and authority as may be assigned to him by the Board of
Directors, and, unless otherwise provided by the Board of Directors, each shall
be authorized to perform the duties of the President, in the absence or
incapacity of the President and all Executive Vice Presidents of the
corporation, in the order of their designation or election.
Section 4.8. Secretary. The Secretary, or an Assistant Secretary,
shall have the custody of the minute book, stock book, corporate seal and all
records and papers of the corporation, subject to the supervision and control of
the President, except such as the Board may put in the custody of other
officers, agents or employees. The Secretary, or an Assistant Secretary, shall
attend all meetings of the share holders and of the Board of Directors and act
as Secretary thereof, keeping a record of the proceedings of such meetings in a
book to be maintained for the purpose. He shall give or cause to be given,
unless otherwise specially provided, notice of all meetings of the shareholders,
directors, committees and other meetings of the officers or representatives of
the corporation, and shall perform such other duties as may be prescribed for
him by the Board of Directors or the President.
Section 4.9. Treasurer. The Treasurer, or an Assistant Treasurer,
shall have custody of the corporate funds and securities, subject to the
supervision and control of the President. He shall cause to be kept full and
accurate accounts of receipts and disbursements of the corporation in proper
books to be furnished for that purpose by the corporation; cause all moneys and
other valuable effects to be deposited to the credit of the corporation, in such
depositories as may be designated by the Board of Directors; be responsible for
disbursing the funds of the corporation subject to such regulations as may be
prescribed by the Board of
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Directors, taking proper vouchers for such disbursements; and he shall render to
the President and to the directors at regular meetings of the Board, whenever
they, or any of them, may request it, an account of all transactions of his
office and of the financial condition of the corporation, and such other reports
as may from time to time be required of him by the President or the Board.
Section 4.10. Removal of Officers. Any officer, employee, or agent
of the corporation may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. The election or appointment of any officer, employee, or agent of
the corporation shall not of itself be deemed to create any contract right.
Section 4.11. Signature of Orders for the Payment of Money. All
checks, notes, drafts and other orders of the corporation for the payment of
money shall be drawn, signed or counter-signed as the Board of Directors may
from time to time prescribe.
ARTICLE V
CAPITAL STOCK
Section 5.1. Certificate of Stock. The Board of Directors shall
cause to be issued to any person appearing on the books of the corporation to be
the owner of any shares of its stock, a certificate or certificates therefor,
under the corporate seal of the corporation, to be signed by the President, an
Executive Vice President or a Vice President, and the Secretary, or an Assistant
Secretary, of the corporation. Each certificate representing shares of the
capital stock of the corporation shall state on the face thereof that the
corporation is organized under the laws of the State of West Virginia; the name
of the person to whom issued; the number and class of shares which such
certificate represents; and the par value of each share represented by such
certificate; and shall otherwise be in such form as the Board of Directors may
adopt. Such certificates shall be issued in order from a stock certificate book
to be kept by the Secretary under the supervision of the Board. No such
certificate shall be issued or delivered until the stock represented thereby has
been fully paid for; such payment may be made in cash, in property, tangible or
intangible, or in labor or services actually performed for the corporation, but
neither promissory notes nor future services shall constitute such payment or
part payment.
Section 5.2. Transfer of Stock. Shares of the capital stock of the
corporation shall be transferable only upon the books of the corporation by the
holder thereof in person or by attorney upon surrender and cancellation of the
certificate for the same.
Section 5.3. Lost Certificates. When a person, who appears by the
books of the corporation to own stock therein, claims that the certificate for
such stock has been lost, destroyed, or wrongfully taken, the proper officers of
the corporation shall issue to him a certificate in place and stead of the lost,
destroyed, or wrongfully taken certificate, if he shall
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request the issuance of a new certificate before the corporation has notice that
the old certificate has been acquired by a bona fide purchaser, upon his
compliance with the following conditions:
(a) he shall file with the Secretary of the corporation an affidavit
setting forth the time, place and circumstances of the loss, destruction,
or taking, to the best of his knowledge and belief; and
(b) he shall execute and deliver to the corporation a bond with good
security in a penalty at least equal to the value of the shares of stock
represented by the lost, destroyed, or wrongfully taken certificate, in
form approved by the Board of Directors, to indemnify the corporation and
all persons whose rights may be affected by the issuance of the new
certificate against any loss in consequence of the issuance of the new
certificate.
A new certificate may be issued, in the discretion of the Board of Directors,
without compliance with the foregoing requirements, upon such terms and
conditions as the Board of Directors may prescribe.
Section 5.4. Other Regulations. The Board of Directors shall have
the authority to make such other rules and regulations, not inconsistent with
law or these bylaws, concerning the issue, transfer, and delivery of
certificates of stock, as it may deem advisable.
ARTICLE VI
INDEMNIFICATION
Section 6.1. It shall be the policy of this corporation to indemnify
any person who serves, or has served, as a director, officer, employee or agent
of this corporation, or who serves or has served as a director, officer,
partner, employee, or agent of any other corporation, partnership, joint
venture, trust or enterprise at the request or direction of this corporation,
against expenses (including attorneys' fees), judgments, fines, taxes,
penalties, interest, and payments in settlement, in connection with any
threatened, pending or completed action or proceeding, and to pay any such
expenses in advance of the final disposition of any such action or proceeding,
to the full extent contemplated and permitted by Section 9 of Chapter 31,
Article 1 of the Code of West Virginia of 1931, as amended, upon such finding or
determination as shall be requisite or appropriate under said section; and the
corporation is specifically empowered and authorized to purchase and maintain,
at the expense of the corporation, insurance on behalf of any such director,
officer, partner, employee or agent against any liability asserted against him
or her in such capacity or arising out of his or her status as such, whether or
not this corporation would have the power to indemnify him or her under the
provisions of said section.
ARTICLE VII
CORPORATE SEAL
8
<PAGE> 9
Section 7.1. The seal to be here impressed, containing the name of
this corporation and the words "Corporate Seal, West Virginia", is hereby
adopted as and for the corporate seal of this corporation.
(CORPORATE SEAL)
ARTICLE VIII
AMENDMENTS
Section 8.1. These bylaws may be amended by the Board of Directors,
subject, however, to the power of the shareholders to repeal or change any
amendment made by the Board of Directors by affirmative vote of a majority of
the stock then issued and outstanding and entitled to vote thereon; and in the
event of any conflict the vote of the shareholders shall be controlling.
9
<PAGE> 1
Exhibit 3.15.1
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
PHILIPPI DEVELOPMENT, INC.
I. The name of the corporation is PHILIPPI DEVELOPMENT, INC.
II. The Articles of Incorporation of PHILIPPI DEVELOPMENT, INC. are hereby
amended as follows:
A. Article I. of the Articles of Incorporation of PHILIPPI DEVELOPMENT,
INC., which currently states:
The undersigned agrees to become a corporation by the name of:
PHILIPPI DEVELOPMENT, INC.
is hereby amended to read as follows:
The undersigned agrees to become a corporation by the name of: ANKER
WEST VIRGINIA MINING COMPANY, INC.
B. Article IV. of the Articles of Incorporation of PHILIPPI
DEVELOPMENT, INC., which currently states:
The principal office of this corporation shall be at Route 12, Box
245, Morgantown, West Virginia 26505. The name and address of the
person to whom shall be sent notice or process served upon, or
service of which is accepted by, the Secretary of State, is Bruce
Sparks, Route 12, Box 245, Morgantown, West Virginia 26505.
is hereby amended to read as follows:
The principal office of this corporation shall be at 2708 Cranberry
Square, Morgantown, West Virginia 26505. The name and address of the
person to whom shall be sent notice or process served upon, or
service of which is accepted by, the Secretary of State, is Bruce
Sparks, 2708 Cranberry Square, Morgantown, West Virginia 26505.
<PAGE> 2
2
III. The foregoing amendment was adopted by the sole shareholder of the
corporation pursuant to an Agreement to Corporate Action dated as of July
31, 1997. The corporation has only one class of stock, the number of
shares of which are outstanding and entitled to vote on said amendment is
Five Hundred (500); the number of shares voted for said amendment was Five
Hundred (500), and the number voted against said amendment was zero (0).
DATED: July 31, 1997
PHILIPPI DEVELOPMENT, INC.
a West Virginia corporation
By: /s/ Gary D. McCauley
----------------------------
Name: Gary D. McCauley
Its: President
and
By: /s/ Michael M. Matesic
----------------------------
Name: Michael M. Matesic
Its: Secretary
<PAGE> 3
3
STATE OF WEST VIRGINIA,
COUNTY OF Barbour, To-Wit:
I, Willa Jo Baughman, a Notary Public, do hereby certify that on the 31st
day of July, 1997, personally appeared before me Gary D. McCauley, who, being by
me first duly sworn, declared that he is the President of PHILIPPI DEVELOPMENT,
INC., that he signed the foregoing document as President of the corporation, and
that the statements therein contained are true.
My commission expires: April 3, 2003
[SEAL] /s/ Willa Jo Baughman
----------------------------------
Notary Public
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINIA
WILLA JO BAUGHMAN
1 N. Main Street
Philippi, West Virginia 26416
My Commission Expires Apr. 3, 2003
The foregoing Articles of Amendment were prepared by the firm of Spilman, Thomas
& Battle, 990 Elmer Prince Drive, Suite 205, P. O. Box 4474, Morgantown, West
Virginia, 26504-4474.
<PAGE> 4
ARTICLES OF INCORPORATION
OF
PHILIPPI DEVELOPMENT, INC.
I. The undersigned agrees to become a corporation by the name of:
PHILIPPI DEVELOPMENT, INC.
II. The existence of this corporation shall be perpetual.
III. The purposes for which this corporation is organized shall include the
transaction of any or all lawful business for which corporations may be
incorporated in the State of West Virginia.
IV. The principal office of this corporation shall be at Route 12, Box 245,
Morgantown, West Virginia 26505. The name and address of the person to
whom shall be sent notice or process served upon, or service of which is
accepted by, the Secretary of State, is Bruce Sparks, Route 12, Box 245,
Morgantown, West Virginia 26505.
V. The name and address of the sole incorporator is:
David B. Shapiro
P. O. Box 273
Charleston, WV 25321
VI. The initial Board of Directors of this corporation shall consist of the
following two persons:
Name Address
---- -------
John J. Faltis Route 12, Box 245
Morgantown, WV 26505
Bruce Sparks Route 12, Box 245
Morgantown, WV 26505
<PAGE> 5
The bylaws of this corporation, when adopted by the initial Board of
Directors, shall provide for a Board of Directors which may consist of any
number of persons provided for in said bylaws, or such number of persons
as may be determined from time to time by the shareholders.
VII. The amount of the total authorized capital stock of this corporation shall
be Five Thousand Dollars ($5,000.00), which shall be divided into 500
shares of the par value of Ten Dollars ($10.00) each, and which shall
constitute a single class of shares.
VIII. The shareholders of this corporation shall not have a preemptive right to
subscribe for, purchase, or take any part of any unissued or treasury
shares issued or to be issued or sold by this corporation, or any
securities of this corporation convertible into shares of this corporation
issued or to be issued by it, after its incorporation.
The undersigned, for the purpose of forming a corporation under the
laws of the State of West Virginia, does hereby make and file these
Articles of Incorporation, and has accordingly hereunto set his hand this
23rd day of May, 1990.
/s/ David B. Shapiro
--------------------------------
David B. Shapiro
2
<PAGE> 6
STATE OF WEST VIRGINIA,
COUNTY OF KANAWHA, to-wit:
I, /s/ Deborah L. Raines, a Notary Public in and for the County and State
aforesaid, hereby certify that David B. Shapiro, whose name is signed to the
foregoing Articles, bearing date on the 23rd day of May, 1990, this day
personally appeared before me in my said county and acknowledged his signature
to the same.
Given under my hand and official seal this 23rd day of May, 1990.
/s/ Deborah L. Raines
----------------------------------------
Notary Public
My commission expires: April 19, 1993
[NOTARIAL SEAL]
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINIA
DEBORAH L. RAINES
811 Quarrier Street
Charleston, West Virginia 25321
My Commission Expires April 19, 1993
The foregoing Articles of Incorporation were prepared by the law firm of
Spilman, Thomas, Battle & Klostermeyer, P. O. Box 273, Charleston, WV 25321.
3
<PAGE> 1
Exhibit 3.15.2
ARTICLES OF MERGER
OF
ANKER WEST VIRGINIA MINING COMPANY, INC.
AND
ADVANTAGE ENERGY CORPORATION
I. The Plan of Merger of Anker West Virginia Mining Company, Inc., the
Surviving Corporation, and Advantage Energy Corporation, the Merging
Corporation, is as follows:
PLAN OF MERGER
OF
ANKER WEST VIRGINIA MINING COMPANY, INC.
AND
ADVANTAGE ENERGY CORPORATION
1. Anker West Virginia Mining Company, Inc. is a corporation
organized and existing under the laws of the State of West
Virginia.
2. Advantage Energy Corproation, is a corporation organized and
existing under the laws of the State of West Virginia.
3. Advantage Energy Corporation (the "Merging Corporation") shall
be merged with and into Anker West Virginia Mining Company,
Inc. (the "Surviving Corporation") under and pursuant to the
Code of West Virginia of 1931, as amended, Chapter 31, Article
1, Sections 34 and 117.
4. The shares of the Merging Corporation shall be surrendered and
shall not be converted into shares, obligations or other
securities of the Surviving
<PAGE> 2
Corporation, or of any other corporation, or, in whole or in
part, into cash or other property.
5. The merger of the Merging Corporation with and into the
Surviving Corporation shall be effective at midnight on the
date on which the Certificate of Merger is issued by the
Secretary of State of West Virginia.
II. The number of outstanding shares of capital stock of the Surviving
Corporation is Five Hundred (500) shares of common stock. The number of
outstanding shares of capital stock of the Merging Corporation is Five
Hundred (500) shares of common stock.
III. The number of shares of the Surviving Corporation voted for and against
the foregoing Plan of Merger were Five Hundred (500) shares and zero (0)
shares, respectively. The number of shares of the Merging Corporation
voted for and against the foregoing Plan of Merger were Five Hundred (500)
shares and zero (0) shares, respectively.
DATED: August 26, 1997.
ANKER WEST VIRGINIA MINING COMPANY, INC.,
a West Virginia corporation,
By: /s/ Richard B. Bolen
----------------------------------------
Name: Richard B. Bolen
Its: President
and
By: /s/ Michael M. Matesic
----------------------------------------
Name: Michael M. Matesic
Its: Secretary
<PAGE> 3
ADVANTAGE ENERGY CORPORATION,
a West Virginia corporation,
By: /s/ Michael J. Haynes
----------------------------------------
Name: Michael J. Haynes
Its: President
and
By: /s/ Michael M. Matesic
----------------------------------------
Name: Michael M. Matesic
Its: Secretary
STATE OF WEST VIRGINIA,
COUNTY OF Raleigh, to-wit:
I, Mary Ann Worley, a Notary Public, do hereby certify that on this
26th day of August, 1997, personally appeared before me Richard B. Bolen, who,
being by me first duly sworn, declared that he is the President of Anker West
Virginia Mining Company, Inc., a West Virginia corporation, that he signed the
foregoing document as President of the corporation, and that the statements
contained therein are true.
My Commission Expires: September 25, 2006
/s/ Mary Ann Worley
----------------------------------------
Notary Public
[NOTARY SEAL]
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINIA
MARY ANN WORLEY
105 MORTON AVE.
BECKLY, WV 25801
My commission expires Sept. 25, 2006
<PAGE> 4
STATE OF WEST VIRGINIA,
COUNTY OF Raleigh, to-wit:
I, Mary Ann Worley, a Notary Public, do hereby certify that on this
26th day of August, 1997, personally appeared before me Michael J. Haynes, who,
being by me first duly sworn, declared that he is the President of Advantage
Energy Corporation, a West Virginia corporation, that he signed the foregoing
document as President of the corporation, and that the statements contained
therein are true.
My Commission Expires: September 25, 2006.
/s/ Mary Ann Worley
----------------------------------------
Notary Public
[NOTARY SEAL]
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINIA
MARY ANN WORLEY
105 MORTON AVE.
BECKLY, WV 25801
My commission expires Sept. 25, 2006
The foregoing Articles of Merger were prepared by:
Carl H. Cather, III
SPILMAN, THOMAS & BATTLE
990 Elmer Prince Drive - Suite 205
P. O. Box 4474
Morgantown, WV 26504-4474
<PAGE> 1
Exhibit 3.15.3
ARTICLES OF MERGER
OF
ANKER WEST VIRGINIA MINING COMPANY, INC.
AND
BECKLEY SMOKELESS LIMITED LIABILITY COMPANY
I. A Plan of Merger has been approved and signed by Anker West Virginia
Mining Company, Inc., the Surviving Entity, and Beckley Smokeless
Limited Liability Company, the Merging Entity.
1. Anker West Virginia Mining Company, Inc. is a corporation
organized and existing under the laws of the State of West
Virginia.
2. Beckley Smokeless Limited Liability Company, is a limited
liability company organized and existing under the laws of the
State of West Virginia. Beckley Smokeless is a manager-managed
limited liability company.
II. The Articles of Organization of Beckley Smokeless Limited Liability
Company were filed with the Secretary of State of West Virginia on March
4, 1994.
III. Anker West Virginia Mining Company, Inc., shall be the surviving entity
and the street address of its principal place of business is 2708
Cranberry Square, Morgantown, West Virginia, 26505.
<PAGE> 2
-2-
IV. The effective time and date of the merger shall be 5:00 p.m. on September
2, 1997.
V. Anker West Virginia Mining Company, Inc., as the surviving entity,
hereby agrees that it may be served with process in West Virginia and
is subject to liability in any action or proceeding for the enforcement
of any liability or obligation of Beckley Smokeless Limited Liability
Company previously subject to suit in West Virginia and for the
enforcement, as provided in the Code of West Virginia of 1931, as
amended, Chapter 31B, of the right of any member of Beckley Smokeless
Limited Liability Company to receive payment for its interest.
DATED: August 29, 1997.
ANKER WEST VIRGINIA MINING COMPANY, INC.,
a West Virginia corporation,
By: /s/ Richard B. Bolen
---------------------------------------
Name: Richard B. Bolen
Its: President
and
By: /s/ Michael M. Matesic
---------------------------------------
Name: Michael M. Matesic
Its: Secretary
<PAGE> 3
-3-
BECKLEY SMOKELESS LIMITED LIABILITY COMPANY,
a West Virginia limited liability company,
By: /s/ Bruce Sparks
---------------------------------------
Name: Bruce Sparks
Its: Manager
STATE OF WEST VIRGINIA,
COUNTY OF Monongalia, to-wit:
I, Kimberly Lynn Morehead, a Notary Public, do hereby certify that on this
29th day of August, 1997, personally appeared before me Richard B. Bolen, who,
being by me first duly sworn, declared that he is the President of Anker West
Virginia Mining Company, Inc., a West Virginia corporation, that he signed the
foregoing document as President of the corporation, and that the statements
contained therein are true.
My Commission Expires: October 9, 2005
/s/ Kimberly Lynn Morehead
--------------------------------------
Notary Public
[NOTARIAL SEAL]
OFFICIAL SEAL
KIMBERLY LYNN MOREHEAD
R.D. 1, BOX 19, LOT 6
CORE, WEST VIRGINIA 26529
"COMMISSIONER FOR WEST VIRGINIA"
<PAGE> 4
-4-
STATE OF WEST VIRGINIA,
COUNTY OF Monongalia, to-wit:
I, Kimberly Lynn Morehead, a Notary Public, do hereby certify that
on this 29th day of August, 1997, personally appeared before me Bruce Sparks,
who, being by me first duly sworn, declared that he is the Manager of Beckley
Smokeless Limited Liability Company, a West Virginia limited liability company,
that he signed the foregoing document as Manager of the limited liability
company, and that the statements contained therein are true.
My Commission Expires: October 9, 2005.
/s/ Kimberly Lynn Morehead
--------------------------------------
Notary Public
[NOTARIAL SEAL]
OFFICIAL SEAL
KIMBERLY LYNN MOREHEAD
R.D. 1, BOX 19, LOT 6
CORE, WEST VIRGINIA 26529
"COMMISSIONER FOR WEST VIRGINIA"
The foregoing Articles of Merger were prepared by:
F. Thomas Rubenstein
SPILMAN, THOMAS & BATTLE
990 Elmer Prince Drive - Suite 205
P. O. Box 4474
Morgantown, WV 26504-4474
<PAGE> 1
Exhibit 3.15.4
ARTICLES OF MERGER
OF
ANKER WEST VIRGINIA MINING COMPANY, INC.
AND
PINE VALLEY COAL COMPANY, INC.
I. The Plan of Merger of Anker West Virginia Mining Company, Inc., the
Surviving Corporation, and Pine Valley Coal Company, Inc., the Merging
Corporation, is as follows:
PLAN OF MERGER
OF
ANKER WEST VIRGINIA MINING COMPANY, INC.
AND
PINE VALLEY COAL COMPANY, INC.
1. Anker West Virginia Mining Company, Inc. is a corporation
organized and existing under the laws of the State of West
Virginia.
2. Pine Valley Coal Company, Inc., is a corporation organized and
existing under the laws of the State of West Virginia.
3. Pine Valley Coal Company, Inc. (the "Merging Corporation")
shall be merged with and into Anker West Virginia Mining
Company, Inc. (the "Surviving Corporation") under and pursuant
to the Code of West Virginia of 1931, as amended, Chapter 31,
Article 1, Sections 34 and 117.
4. The shares of the Merging Corporation shall be surrendered and
shall not be converted into shares, obligations or other
securities of the Surviving
<PAGE> 2
Corporation, or of any other corporation, or, in whole or in
part, into cash or other property.
5. The merger of the Merging Corporation with and into the
Surviving Corporation shall be effective at midnight on the
date on which the Certificate of Merger is issued by the
Secretary of State of West Virginia.
II. The number of outstanding shares of capital stock of the Surviving
Corporation is Five Hundred (500) shares of common stock. The number of
outstanding shares of capital stock of the Merging Corporation is One
Thousand (1,000) shares of common stock.
III. The number of shares of the Surviving Corporation voted for and against
the foregoing Plan of Merger were Five Hundred (500) shares and zero (0)
shares, respectively. The number of shares of the Merging Corporation
voted for and against the foregoing Plan of Merger were One Thousand
(1,000) shares and zero (0) shares, respectively.
DATED: August 26, 1997.
ANKER WEST VIRGINIA MINING COMPANY, INC.,
a West Virginia corporation,
By: /s/ Richard B. Bolen
---------------------------------------
Name: Richard B. Bolen
Its: President
and
By: /s/ Michael M. Matesic
---------------------------------------
Name: Michael M. Matesic
Its: Secretary
2
<PAGE> 3
PINE VALLEY COAL COMPANY, INC.,
a West Virginia corporation,
By: /s/ Michael J. Haynes
---------------------------------------
Name: Michael J. Haynes
Its: President
and
By: /s/ Michael M. Matesic
---------------------------------------
Name: Michael M. Matesic
Its: Secretary
STATE OF WEST VIRGINIA,
COUNTY OF Raleigh, to-wit:
I, Mary Ann Worley, a Notary Public, do hereby certify that on this
26th day of August, 1997, personally appeared before me Richard B. Bolen, who,
being by me first duly sworn, declared that he is the President of Anker West
Virginia Mining Company, Inc., a West Virginia corporation, that he signed the
foregoing document as President of the corporation, and that the statements
contained therein are true.
My Commission Expires: September 25, 2006
/s/ Mary Ann Worley
--------------------------------------
Notary Public
[NOTARY SEAL]
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINIA
MARY ANN WORLEY
105 MORTON AVE.
BECKLEY, WV 25801
My commission expires Sept. 25, 2006
3
<PAGE> 4
STATE OF WEST VIRGINIA,
COUNTY OF Raleigh, to-wit:
I, Mary Ann Worley, a Notary Public, do hereby certify that on this
26th day of August, 1997, personally appeared before me Michael J. Haynes, who,
being by me first duly sworn, declared that he is the President of Pine Valley
Coal Company, Inc., a West Virginia corporation, that he signed the foregoing
document as President of the corporation, and that the statements contained
therein are true.
My Commission Expires: September 25, 2006.
/s/ Mary Ann Worley
--------------------------------------
Notary Public
[NOTARY SEAL]
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINIA
MARY ANN WORLEY
105 MORTON AVE.
BECKLEY, WV 25801
My commission expires Sept. 25, 2006
The foregoing Articles of Merger were prepared by:
Carl H. Cather, III
SPILMAN, THOMAS & BATTLE
990 Elmer Prince Drive, Suite 205
P. O. Box 4474
Morgantown, WV 26504-4474
4
<PAGE> 1
Exhibit 3.15.5
ARTICLES OF MERGER
OF
ANKER WEST VIRGINIA MINING COMPANY, INC.
AND
SPRUCE FORK COAL COMPANY, INC.
I. The Plan of Merger of Anker West Virginia Mining Company, Inc., the
Surviving Corporation, and Spruce Fork Coal Company, Inc., the Merging
Corporation, is as follows:
PLAN OF MERGER
OF
ANKER WEST VIRGINIA MINING COMPANY, INC.
AND
SPRUCE FORK COAL COMPANY, INC.
1. Anker West Virginia Mining Company, Inc. is a corporation
organized and existing under the laws of the State of West
Virginia.
2. Spruce Fork Coal Company, Inc., is a corporation organized and
existing under the laws of the State of West Virginia.
3. Spruce Fork Coal Company, Inc. (the "Merging Corporation")
shall be merged with and into Anker West Virginia Mining
Company, Inc. (the "Surviving Corporation") under and pursuant
to the Code of West Virginia of 1931, as amended, Chapter 31,
Article 1, Sections 34 and 117.
<PAGE> 2
4. The shares of the Merging Corporation shall be surrendered and
shall not be converted into shares, obligations or other
securities of the Surviving Corporation, or of any other
corporation, or, in whole or in part, into cash or other
property.
5. The merger of the Merging Corporation with and into the
Surviving Corporation shall be effective at midnight on the
date on which the Certificate of Merger is issued by the
Secretary of State of West Virginia.
II. The number of outstanding shares of capital stock of the Surviving
Corporation is Five Hundred (500) shares of common stock. The number of
outstanding shares of capital stock of the Merging Corporation is One
Hundred (100) shares of common stock.
III. The number of shares of the Surviving Corporation voted for and against
the foregoing Plan of Merger were Five Hundred (500) shares and zero (0)
shares, respectively. The number of share of the Merging Corporation voted
for and against the foregoing Plan of Merger were One Hundred (100) shares
and zero (0) shares, respectively.
DATED: August 26, 1997.
ANKER WEST VIRGINIA MINING COMPANY, INC.,
a West Virginia corporation,
By: /s/ Richard B. Bolen
---------------------------------------
Name: Richard B. Bolen
Its: President
and
By: /s/ Michael M. Matesic
---------------------------------------
Name: Michael M. Matesic
Its: Secretary
<PAGE> 3
SPRUCE FORK COAL COMPANY, INC.,
a West Virginia corporation
By: /s/ Jeffrey P. Kelley
---------------------------------------
Name: Jeffrey P. Kelley
Its: President
and
By: /s/ Michael M. Matesic
---------------------------------------
Name: Michael M. Matesic
Its: Secretary
STATE OF WEST VIRGINIA,
COUNTY OF Raleigh, to-wit:
I, Mary Ann Worley, a Notary Public, do hereby certify that on this
26th day of August, 1997, personally appeared before me Richard B. Bolen, who,
being by me first duly sworn, declared that he is the President of Anker West
Virginia Mining Company, Inc., a West Virginia corporation, that he signed the
foregoing document as President of the corporation, and that the statements
contained therein are true.
My Commission Expires: September 25, 2006.
/s/ Mary Ann Worley
--------------------------------------
Notary Public
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINIA
MARY ANN WORLEY
105 MORTON AVE.
BECKLEY, WV 25801
My commission expires Sept. 25, 2006
[NOTARIAL SEAL]
<PAGE> 4
STATE OF WEST VIRGINIA,
COUNTY OF UPSHUR, to-wit:
I, EDWARD F. SUMMERFIELD, a Notary Public, do hereby certify that on
this 27 day of August, 1997, personally appeared before me Jeffrey P. Kelley,
who, being by me first duly sworn, declared that he is the President of Spruce
Fork Coal Company, Inc., a West Virginia corporation, that he signed the
foregoing document as President of the corporation, and that the statements
contained therein are true.
My Commission Expires: 12-16-2002.
/s/ Edward F. Summerfield
--------------------------------------
Notary Public
[NOTARIAL SEAL]
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINIA
EDWARD F. SUMMERFIELD
8 CIRCLE DRIVE
BUCKHANNON, WV 26201
My Commission Expires December 15, 2002
The foregoing Articles of Merger were prepared by:
Carl H. Cather, III
SPILMAN, THOMAS & BATTLE
990 Elmer Prince Drive - Suite 205
P. O. Box 4474
Morgantown, WV 26504-4474
<PAGE> 1
Exhibit 3.16
AMENDED BY-LAWS
of
ANKER WEST VIRGINIA MINING COMPANY, INC.
(formerly Philippi Development, Inc.)
(A West Virginia Corporation)
* * *
ARTICLE I
OFFICES
The principal office or place of business shall be located in the City of
Morgantown, County of Monongalia, State of West Virginia. The corporation may
have other offices, either within or without the State of West Virginia, at such
place or places as the board of directors may from time to time designate or the
business of the corporation may require.
ARTICLE II
SHAREHOLDERS
2.1 Annual Meetings. Annual meetings of shareholders for the election of
directors, for the approval of the annual report and for such other business as
may properly come before the meeting shall be held within the first six months
of the calendar year at such place, either within or without the State of West
Virginia, and at such time and date as may be fixed from time to time by the
board of directors.
<PAGE> 2
2.2 Special Meetings. Special meetings of shareholders may be held at any
time and place, within or without the State of West Virginia. Special meetings
of the shareholders for any purpose or purposes, unless otherwise prescribed by
law, may be called by the board of directors, the President or Secretary, or by
the holders of not less than one-tenth of all outstanding shares of the
corporation entitled to vote at the meeting.
2.3 Notice of Meetings. Written notice, stating the place, date and hour
of the meeting, and in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten nor more than
fifty days before the date of the meeting either personally or by mail by or at
the direction of the President, or the Secretary, or the person calling the
meeting, to each shareholder of record entitled to vote at such meeting.
2.4 Action Without Meeting. Any action required or permitted to be taken
at an annual or special meeting of shareholders may be taken without a meeting
and without prior notice if a consent in writing, setting forth the action so
taken, shall be signed by all of the shareholders who would have been entitled
to vote upon the action if such meeting were held. Such action by unanimous
written consent may be taken without regard to any provision of these By-Laws or
any resolution of the board of directors fixing the time, date or place of
meetings of shareholders.
2.5 Quorum. Except as otherwise required by law, by the Articles of
Incorporation, or by these By-Laws, the holders of a majority of the outstanding
shares entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of the shareholders. If, however, such a quorum shall not be
present at any meeting, a majority in interest of the shareholders who are
entitled to vote thereat and are present in
2
<PAGE> 3
person or by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until the requisite
number of shares entitled to vote shall be present. At such adjourned meeting at
which the requisite number of shares entitled to vote shall be represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
2.6 Voting. If a quorum is present, the affirmative vote of a majority of
the shares represented at the meeting shall be the act of the shareholders,
unless the vote of a greater number of shares is required by law, the Articles
of Incorporation, or these By-Laws.
Each outstanding share having voting power shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders. A shareholder
may vote either in person or by proxy executed in writing by the shareholder or
by his duly authorized attorney-in-fact. No proxy shall be valid after eleven
months from the date of its execution, unless otherwise provided in the proxy.
At each election for directors every shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected and
for whose election he has a right to vote.
2.7 Power. The shareholders shall have all of the powers granted to them
by the West Virginia Corporation Act, the general laws of the State of West
Virginia and the
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<PAGE> 4
Articles of Incorporation, as the same may be in effect from time to time and,
except as may be otherwise provided by law or by the Articles of Incorporation:
(a) The shareholders shall, without limitation, have the sole power to:
(i) elect and remove directors,
(ii) provide for and set the compensation of directors, and
(iii) select the auditors of the corporation;
(b) The approval of the shareholders, either by unanimous written consent
or at an annual or special meeting of shareholders, shall be required for:
(i) amendment of the Articles of Incorporation, including, without
limitation, any amendment altering the capital structure of
the corporation,
(ii) merger or consolidation of the corporation with another
corporation,
(iii) sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the
corporation if not in the usual and regular course of its
business, and
(iv) voluntary dissolution of the corporation.
ARTICLE III
DIRECTORS
3.1 Number and Term. The number of directors shall be not less than one
and not more than seven, as shall be determined from time to time by election of
directors or other action of the shareholders. The total number of directors as
most recently set by such election, action or resolution shall constitute the
"full board". Directors need not be
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residents of the State of West Virginia nor shareholders of the corporation. The
directors, other than the first board of directors, shall be elected at the
annual meeting of the shareholders, and each director elected shall serve until
the next succeeding annual meeting and until his successor shall have been
elected and qualified. The first board of directors shall hold office until the
first meeting of the shareholders.
3.2 Resignations and Removal. Any director may resign at any time. Such
resignation shall be made in writing, and shall take effect at the time
specified therein, and if no time be specified, at the time of its receipt by
the President or Secretary. The acceptance of a resignation shall not be
necessary to make it effective.
At a meeting of shareholders called expressly for that purpose, any
director or the entire board of directors may be removed, with or without cause,
by a vote of the holders of a majority of the shares entitled to vote at an
election of directors.
3.3 Vacancies. Any vacancy occurring in the board of directors and any
directorship to be filled by reason of an increase in the number of directors
may be filled only by the affirmative vote of a majority of the shares. A
director elected to fill a vacancy shall be elected for the unexpired portion of
the term of his predecessor in office.
3.4 Powers. The business and affairs of the corporation shall be managed
by its board of directors. The board of directors shall have all of the powers
granted to them by the West Virginia Corporation Act, the general laws of the
State of West Virginia and the Articles of Incorporation, as the same may be in
effect from time to time, including, without limitation, except as otherwise
provided by law or by the Articles of Incorporation, the power to:
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(i) establish basic business strategy and policies for the corporation
to be executed by the officers under the general supervision of the
board of directors,
(ii) elect and remove officers, and set and provide for their
compensation,
(iii) require regular reports of officers as to the affairs of the
corporation and the conduct of its business,
(iv) make determinations regarding any proposed transactions by the
corporation which are not in the ordinary course of its business,
(v) authorize and cause to be executed, without the assent or vote of
the shareholders, liens upon the real and personal property of the
corporation, including after-acquired property.
The board of directors may by resolution specify those actions which shall not
be undertaken on behalf of the corporation without the specific approval in each
instance of the board of directors.
3.5 Compensation. Reasonable compensation of all directors for services to
the corporation as directors or otherwise shall be established by action of the
shareholders of the corporation.
3.6 Meetings. The newly elected directors may hold their first meeting for
the purpose of organization and the transaction of business, if a quorum is
present, immediately after the annual meeting of the shareholders; or the time
and place of such meeting may be fixed by consent in writing of all the
directors.
Regular meetings of the directors may be held without notice at such
places and times as shall be determined from time to time by resolution of the
directors.
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Special meetings of the directors may be called by the President or
Secretary or by any two directors on at least two days' notice to each director
and shall be held at such place or places as may be determined by the directors,
or as shall be stated in the notice of meeting.
Any directors' meeting may be held either within or without the State of
West Virginia.
3.7 Telephonic Meetings Permitted. One or more directors may participate
in a meeting of the board or a committee of the board by means of conference
telephone or similar electronic communications equipment by means of which all
persons participating in the meeting can hear each other.
Whenever a vote of the directors is required or permitted in connection
with any corporate action this vote may be taken orally during this electronic
conference. The agreement thus reached shall have like effect and validity as
though the action were duly taken by the action of the directors at a meeting of
directors if the agreement is reduced to writing and approved by the directors
at the next regular meeting of the directors after the conference.
3.8 Quorum of Directors. A majority of the full board of directors shall
constitute a quorum for the transaction of business at any meeting of the board
of directors, but if less than such majority is present at a meeting, a majority
of the directors present may adjourn the meeting from time to time without
further notice.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the board of directors.
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<PAGE> 8
3.9 Action by Directors Without a Meeting. Any action required or
permitted to be taken at a meeting of the directors may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors entitled to vote with respect to the subject
matter thereof.
ARTICLE IV
NOTICES
4.1 Notices. Whenever, under any provision of law, or of the Articles of
Incorporation or of these By-Laws, notice is required to be given to any
director or shareholder, such notice shall be given by telex to such director or
shareholder at his telex address as it appears on the records of the
corporation, or, with respect to any director or shareholder who does not
possess such a telex address, by mailing such notice, postage prepaid, to the
director or shareholder at his mailing address as it appears on the records of
the corporation. Notice shall be deemed to be given at the time of transmission
with respect to telexes, and at the time when deposited in the mail with respect
to notices by mail.
With the exception of special meetings of directors for the purpose of
amending the By-Laws, or of endorsing and recommending for shareholder approval
the sale of all or substantially all of the assets of the corporation, and the
exception of special meetings of shareholders, neither the business to be
transacted at, nor the purpose of, any regular or special meeting of
shareholders or of the board of directors need be specified in the notice or
waiver of notice of such meeting.
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4.2 Waiver of Notice. Whenever any notice is required to be given to any
shareholder or director of the corporation under the provisions of these By-Laws
or the Articles of Incorporation or by law, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
4.3 Waiver by Attendance. The attendance of a shareholder, in person or by
proxy, or a director at a meeting shall constitute a waiver of notice of such
meeting, except where a shareholder or director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
5.1 Officers. The officers of the corporation shall in general be
responsible for managing the corporation's daily operations and the ordinary
course of the corporation's business, and for executing as agents of the
corporation basic business policies and strategy established by the board of
directors. The officers shall consist of a President, a Secretary and a
Treasurer, each of whom shall be elected by the board of directors. The board of
directors may also elect a Chairman, a Vice Chairman, an Executive Vice
President, one or more Vice Presidents, one or more Assistant Secretaries and
Assistant Treasurers, one or more Presidents of operating divisions of the
Corporation, one or more Vice Presidents of Operations of operating divisions of
the Corporation, and such other officers, with such powers and duties not
inconsistent with these By-Laws, as may be appointed by the board of directors.
None of the officers of
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the corporation need be directors. Any two or more offices, except those of
President and Secretary, may be held by the same person.
5.2 Election. The officers shall be elected at the first meeting of the
board of directors after each annual meeting.
5.3 Term and Vacancies. The officers of the corporation shall hold office
until their successors are chosen and qualify. Any officers elected or appointed
by the board of directors may be removed at any time by the board of directors
but such removal shall be without prejudice to the contract rights, if any, of
the officer so removed. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
5.4 Chairman. The Chairman of the board of directors, if one be elected,
shall preside at all meetings of the board of directors and shall have and
perform such other duties as from time to time may be assigned to him by the
board of directors.
5.5 Vice Chairman. The Vice Chairman of the board of directors, if one be
elected, shall have such powers and perform such duties as from time to time may
be assigned to him by the board of directors.
5.6 President. The President shall be the chief executive officer of the
corporation and shall have the general powers and duties of supervision and
management usually vested in the office of president of a corporation,
including, except as otherwise provided by law, by the Articles of
Incorporation, by these By-Laws or by resolution of the board of directors, the
power and duty to:
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(i) exercise general supervision over the daily business of the
corporation and give directions with respect to matters arising in
the ordinary course of the business of the corporation,
(ii) supervise implementation of the basic business policies and strategy
established by the board of directors,
(iii) preside at all meetings of the shareholders if present thereat and,
in the absence of the Chairman or if none was elected, at all
meetings of the board of directors,
(iv) execute bonds, mortgages and other contracts on behalf of the
corporation, causing the seal of the corporation to be affixed to
any instrument requiring it, which seal shall be attested by the
signature of the Secretary or the Treasurer or an Assistant
Secretary or an Assistant Treasurer.
Neither the President nor any other officer of the corporation shall be
empowered to take those actions reserved to the shareholders or the board of
directors by law, by the Articles of Incorporation or by these By-Laws, and they
shall not act without the approval of the board of directors as to those matters
specified by the board of directors as requiring action by the board of
directors in each instance.
5.7 Vice President. Each Vice President shall have such powers and shall
perform such duties as shall be assigned to him by the directors. The Vice
President, or if there is more than one Vice President, the senior Vice
President, shall, if no Executive Vice President has been elected, in the
absence or disability of the President , perform the duties and exercise the
powers of the President.
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5.8 Treasurer. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate account of receipts and
disbursements in books belonging to the corporation. He shall deposit all moneys
and other valuables in the name and to the credit of the corporation in such
depositories as may be designated by the board of directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the board of directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and board of directors at
the regular meetings of the board of directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the board of directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
5.9 Secretary. The Secretary shall give, or cause to be given, notice of
all meetings of shareholders and directors and all other notices required by law
or by these By-Laws, but any such notice may be given by any other person as
authorized or directed. He shall record all the proceedings of the shareholders
and directors in books maintained for that purpose, and shall have custody of
the seal of the corporation. He shall affix the seal of the corporation to all
instruments requiring it and attest the same.
5.10 Assistant Treasurers and Assistant Secretaries. Assistant Treasurers
and Assistant Secretaries, if any shall be elected, shall have such powers and
shall perform such duties as shall be assigned to them, respectively, by the
directors.
5.ll Executive Vice President. The Executive Vice President, if one should
be elected, shall assist the President in the supervision and management of the
Corporation
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and shall have such powers and perform such duties as shall be assigned to him
by the President or by the directors. The Executive Vice President, if one be
elected, shall, in the absence or disability of the President, perform the
duties and exercise the powers of the President.
5.12 President/Operating Divisions. The Presidents of Operating Divisions,
if one or more shall be elected, shall have the general powers and duties of
supervision and management of the respective operating division(s) they are
assigned to by the board of directors, including, except as otherwise provided
by law, by the Articles of Incorporation, by these By-Laws or by resolution of
the board of directors, the power and duty to:
(i) exercise general supervision over the daily business of the
operating division(s) assigned to and give directions with respect
to matters arising in the ordinary course of the business of the
operating division(s).
(ii) supervise implementation of the basic business policies and strategy
established by the board of directors for their respective operating
divisions(s).
(iii) execute bonds, mortgages and other contracts on behalf of their
respective operating division(s).
5.13 Vice Presidents of Operations/Operating Divisions. The Vice
Presidents of Operations/Operating Divisions, if one or more shall be elected,
shall have such powers and shall perform such duties with respect to the
applicable operating division(s) as shall be assigned to him by the President of
the Corporation, the President of the applicable operating division(s) or by the
board of directors of the Corporation. The
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Vice President of Operations of an operating division shall, in the absence or
disability of the President of the applicable operating division, perform the
duties and exercise the powers of the President of the operating division.
ARTICLE VI
INDEMNIFICATION
To the full extent permitted by Section 31-1-9 of the West Virginia
Corporation Act or any successor provision thereto, the corporation may
indemnify any person and his heirs, distributees, next of kin, successors,
appointees, executors, administrators, legal representatives and assigns who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
domestic or foreign, against expenses, attorneys' fees, court costs, judgments,
fines, amounts paid in settlement and other losses actually and reasonably
incurred by him in connection with such action, suit or proceeding.
ARTICLE VII
MISCELLANEOUS
7.1 Share Certificates. The shares of the corporation shall be represented
by certificates signed by the President or a Vice-President and the Secretary or
an Assistant Secretary of the corporation, and may be sealed with the seal of
the corporation or a facsimile thereof. Such certificates shall be issued to
each shareholder certifying the
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number of shares owned by him in the corporation. When such certificates are
countersigned by a transfer agent or registrar, other than the corporation or
its employee, the required officers' signatures thereupon may be facsimiles. No
certificates shall be issued for any share unless such share is fully paid.
7.2 Lost Certificates. The board of directors may direct a new certificate
to be issued in place of any certificate theretofore issued by the corporation
alleged to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and will require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost or destroyed.
7.3 Transfer of Shares. Transfer of shares of the corporation shall be
made only on the transfer books of the corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
7.4 Closing of Transfer Books. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the board
of directors may fix in advance a record date for any
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such determination of shareholders, such date to be not more than fifty days
and, in case of a meeting of shareholders, not less than ten days prior to the
date on which the particular action, requiring such determination of
shareholders, is to be taken. If no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the board
of directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof.
7.5 Voting Record. The officer or agent having charge of the transfer
books of the corporation shall make a complete record of the shareholders
entitled to vote at each meeting of shareholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. Such record shall be produced and kept open at the time and place
of the meeting and shall be subject to the inspection of any shareholder during
the whole time of the meeting for the purposes thereof.
7.6 Dividends. The board of directors may, from time to time, declare and
the corporation may pay dividends on its outstanding shares in the manner and
upon the terms and conditions provided by law and the Articles of Incorporation.
Before payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors in their
absolute discretion deem proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or
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maintaining any property of the corporation, or for such other purpose as the
directors shall deem conducive to the interests of the corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
In addition, the board of directors may, in its absolute discretion, and
pursuant to Article VI of the Articles of Incorporation, declare and pay
dividends in cash out of the depletion reserve; provided that each such dividend
shall be identified as a distribution of such reserves and the amount per share
paid from such reserve shall be disclosed to the shareholders receiving the same
concurrently with the distribution thereof.
7.7 Reliance on Records. Each officer and director shall in the
performance of his duties be fully protected in relying in good faith upon the
books of accounts of the corporation, or upon reports made to the corporation by
any of its officials, or by an independent certified public accountant, or by an
appraiser selected with reasonable care, or in relying in good faith upon other
records of the corporation.
7.8 Checks. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate by resolution.
7.9 Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
7.10 Seal. The corporate seal shall be circular in form and shall contain
the name of the corporation, the year of its incorporation and the words
"Corporate Seal, West Virginia".
7.11 Amendments. These By-Laws may be amended or repealed and new By-Laws
may be adopted: (1) by the shareholders at any annual meeting, or at any special
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meeting if notice of the proposed amendment or repeal is contained in the notice
of such special meeting, by the affirmative vote of a majority of the shares
entitled to vote thereat; (2) by the board of directors at any regular meeting,
or at any special meeting if notice of the proposed amendment or repeal is
contained in the notice of such special meeting; or (3) by unanimous written
consent of the shareholders or directors.
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Exhibit 3.17
ARTICLES OF INCORPORATION
OF
JULIANA MINING COMPANY, INC.
I. The undersigned agree to become a corporation by the name of:
JULIANA MINING COMPANY, INC.
II. The address of the principal office of said corporation will be located at
P. O. Box 306, Kingwood street, in county of Preston and State of West
Virginia ZIP 26537.
III. The purpose or purposes for which this corporation is formed are as
follows:
(a) To engage in the general business of mining and to do all things
incident thereto;
(b) To purchase, lease or otherwise acquire, to hold, and to sell, lease
or otherwise dispose of real property, mines, mineral and mining
rights, oil and gas wells, oil and gas royalties, and interests of
any nature in all of the foregoing, whether in the United States of
America or elsewhere;
(c) To mine, drill for and otherwise extract coal, oil, gas, metals,
ores and minerals and to otherwise acquire, produce, prepare for
market, process, store, transport, sell and deal in the same and the
products and by-products thereof;
<PAGE> 2
(d) To operate and conduct mines, wells and mining and drilling
operations; (e) To acquire, construct, operate, maintain and dispose
of lands, factories, works, facilities, machinery, equipment and
buildings of whatever nature; (f) To carry on the business of
consulting, advising and managing mining and drilling operations;
(g) To engage in the transaction of any or all other lawful business for
which corporations may be incorporated under the corporation laws of
the State of West Virginia, as the same may be from time to time
amended;
(h) To enter into and participate in one or more joint ventures with
individuals or corporations to carry out the objects, purposes and
powers of the Corporation;
(i) To do all things necessary, convenient or incident to the
accomplishment of the foregoing objects, purposes and powers.
IV. Provisions limiting or denying to shareholders preemptive rights are:
None.
V. Provisions for the regulation of the internal affairs of the corporation
are: None.
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VI. The amount of the total authorized capital stock of said corporation shall
be five thousand (5,000) dollars, which shall be divided into 500 shares
of the par value of ten (10) dollars each.
VII. The full names and addresses of the incorporator(s), including street and
street numbers, if any, and the city, town or village, including ZIP
number.
NAME ADDRESS
---- -------
Mark R. Joseph 1114 Avenue of the Americas
New York, New York 10036
VIII. The existence of this corporation is to be perpetual.
IX. The name and address of the person appointed to whom shall be sent notice
or process served upon, or service of which is accepted by, the secretary
of state is W. M. WOODROE, CHARLESTON NATIONAL PLAZA, CHARLESTON, WEST
VIRGINIA 25301.
X. The number of directors constituting the initial board of directors of the
corporation is three (3), and the names and addresses of the persons, if
any, who are to serve as directors until the first annual meeting of
shareholders or until their successors are elected and shall qualify are:
NAME ADDRESS
---- -------
Joop van Eck Vasteland 4
Rotterdam, Netherlands
Mark R. Joseph 1114 Avenue of the Americas
New York, N.Y. 10036
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Willem Rottier Vasteland 4
Rotterdam, Netherlands
I/WE, THE UNDERSIGNED, for the purpose of forming a Corporation under the
laws of the State of West Virginia, do make and file this ARTICLES OF
INCORPORATION, and we have according hereunto set our respective hands this 19th
day of July, 1976.
/s/ Mark R. Joseph
---------------------------------------
Articles of Incorporation prepared by:
Coudert Brothers
200 Park Avenue
New York, NY 10017
4
<PAGE> 5
STATE OF NEW YORK )
) SS:
COUNTY OF NEW YORK )
I, Mary Jo Sletten, a Notary Public in and for the County and State
aforesaid, hereby certify that
Mark R. Joseph /s/ Mark R. Joseph
--------------------------
whose names are signed to the foregoing Articles, bearing date on the 19th day
of July, 1976, this day personally appeared before me in my said county and
severally acknowledged their signatures to the same.
Given under my hand and the official seal this 18th day of August, 1976.
/s/ Mary Jo Sletten
--------------------------
Notary Public
(NOTARIAL SEAL)
MARY JO SLETTEN
Notary Public, State of New York
No. 31-9042115
Qualified in New York County
My Commission expires: Commission Expires March 30, 1978
5
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Exhibit 3.18
BY-LAWS
OF
JULIANA MINING COMPANY, INC.
(A West Virginia corporation)
* * *
ARTICLE 1
OFFICES
The principal office or place of business shall be located in
Kingwood, County of Preston, West Virginia. The corporation may have other
offices, either within or without the State of West Virginia, at such place or
places as the board of directors may from time to time designate or the business
of the corporation may require.
ARTICLE 2
SHAREHOLDERS
2.1 Annual Meetings. Annual meetings of shareholders for the
election of directors and for such other business as may properly come before
the meeting shall be held at such place, either within or without the State of
West Virginia, and at such time and date as may be fixed from time to time by
the board of directors.
2.2 Special Meetings. Special meetings of shareholders may be held
at any time and place, within or without the State of West Virginia. Special
meetings of the shareholders for any purpose or purposes, unless otherwise
prescribed by law,
<PAGE> 2
may be called by the board of directors, the President or Secretary, or by the
holders of not less than one-tenth of all outstanding shares of the corporation
entitled to vote at the meeting.
2.3 Notice of Meetings. Written notice, stating the place, date and
hour of the meeting, and in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than ten nor more
than fifty days before the date of the meeting either personally or by mail or
at the direction of the President, or the Secretary, or the person calling the
meeting, to each shareholder of record entitled to vote at such meeting.
2.4 Action Without Meeting. Any action required or permitted to be
taken at an annual or special meeting of shareholders may be taken without a
meeting and without prior notice if a consent in writing, setting forth the
action so taken, shall be signed by all of the shareholders who would have been
entitled to vote upon the action if such meeting were held. Such action by
unanimous written consent may be taken without regard to any provision of these
By-Laws or any resolution of the board of directors fixing the time, date or
place of meetings of shareholders.
2.5 Quorum. Except as otherwise required by law, by the Articles of
Incorporation, or by these By-Laws, the holders of a majority of the outstanding
shares entitled to vote,
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represented in person or by proxy, shall constitute a quorum at a meeting of the
shareholders. If, however, such a quorum shall not be present at any meeting, a
majority in interest of the shareholders who are entitled to vote thereat and
are present in person or by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until the
requisite number of shares entitled to vote shall be present. At such adjourned
meeting at which the requisite number of shares entitled to vote shall be
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The shareholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
2.6 Voting. If a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting shall be the act of the
shareholders, unless the vote of a greater number of shares is required by law,
the Articles of Incorporation, or these By-Laws.
Each outstanding share having voting power shall be entitled to one
vote on each matter submitted to a vote at a meeting of shareholders. A
shareholder may vote either in person or by proxy executed in writing by the
shareholder or by his duly authorized attorney-in-fact. No proxy shall be valid
after
3
<PAGE> 4
eleven months from the date of its execution, unless otherwise provided in the
proxy.
At each election for directors every shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected and
for whose election he has a right to vote, or to cumulate his votes by giving
one candidate as many votes as the number of such directors multiplied by the
number of his shares shall equal, or by distributing such votes on the same
principle among any number of such candidates.
ARTICLE 3
DIRECTORS
3.1 Number and Term. The number of directors shall be not less than
two and not more than seven, as shall be determined from time to time by
election of directors or other action of the shareholders or by resolution of
the board of directors. The total number of directors as most recently set by
such election, action or resolution shall constitute the "full board". Directors
need not be residents of the State of West Virginia nor shareholders of the
corporation. The directors, other than the first board of directors, shall be
elected at the annual meeting of the shareholders, and each director elected
shall serve until the next succeeding annual meeting and until his successor
shall
4
<PAGE> 5
have been elected and qualified. The first board of directors shall hold office
until the first meeting of the shareholders.
3.2 Resignations. Any director may resign at any time. Such
resignation shall be made in writing, and shall take effect at the time
specified therein, and if no time be specified, at the time of its receipt by
the President or Secretary. The acceptance of a resignation shall not be
necessary to make it effective.
3.3 Vacancies. Any vacancy occurring in the board of directors and
any directorship to be filled by reason of an increase in the number of
directors may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the board of directors. A director
elected to fill a vacancy shall be elected for the unexpired portion of the term
of his predecessor in office.
3.4 Removal. At a meeting of shareholders called expressly for that
purpose, any director or the entire board of directors may be removed, with or
without cause, by a vote of the holders of a majority of the shares entitled to
vote at an election of directors. If less than the entire board is to be
removed, no one of the directors may be removed if the votes cast against his
removal would be sufficient to elect him.
3.5 Powers. The business and affairs of the corporation shall be
managed by its board of directors, which may exercise all such powers of the
corporation and do all such
5
<PAGE> 6
lawful acts and things as are not by statute or by the Articles of Incorporation
directed or required to be exercised or done by the shareholders. The board of
directors is expressly authorized, without the assent or vote of the
shareholders, to authorize and cause to be executed mortgages and liens upon the
real and personal property of the corporation, including after-acquired
property. The enumeration in these By-Laws of particular powers of the board of
directors shall not imply the denial of, or any limitation on, any other power
vested in the board of directors by law or by the Articles of Incorporation or
by these By-Laws.
3.6 Compensation. The board of directors, by the affirmative vote of
a majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise.
3.7 Meetings. The newly elected directors may hold their first
meeting for the purpose of organization and the transaction of business, if a
quorum is present, immediately after the annual meeting of the shareholders; or
the time and place of such meeting may be fixed by consent in writing of all the
directors.
6
<PAGE> 7
Regular meetings of the directors may be held without notice at such
places and times as shall be determined from time to time by resolution of the
directors.
Special meetings of the directors may be called by the President or
Secretary or by any two directors on at least two days' notice to each director
and shall be held at such place or places as may be determined by the directors,
or as shall be stated in the notice of meeting.
Any directors' meeting may be held either within or without the
State of West Virginia.
3.8 Quorum of Directors. A majority of the full board of directors
shall constitute a quorum for the transaction of business at any meeting of the
board of directors, but if less than such majority is present at a meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice.
The act of the majority of the directors present at a meeting at
which a quorum is present shall be the act of the board of directors.
3.9 Action by Directors Without a Meeting. Any action required or
permitted to be taken at a meeting of the directors or of a committee thereof
may be taken without a meeting if a consent in writing, setting forth the action
so taken, shall be signed by all of the directors or all of the members of the
7
<PAGE> 8
committee, as the case may be, entitled to vote with respect to the subject
matter thereof.
3.10 Executive and Other Committees. The board of directors, by
resolution adopted by a majority of the full board, may designate from among its
members an executive committee and one or more other committees. The designation
of such committee and the delegation thereof of authority shall not operate to
relieve the board of directors, or any member thereof, of any responsibility
imposed by law.
The executive committee, when the board of directors is not in
session, shall have and may exercise all of the authority of the board of
directors except to the extent, if any, that such authority shall be limited by
the resolution appointing the executive committee and except also that the
executive committee shall not have the authority of the board of directors in
reference to amending the Articles of Incorporation, adopting a plan of merger
or consolidation, recommending to the shareholders the sale, lease, exchange or
other disposition of all or substantially all of the property and assets of the
corporation otherwise than in the usual and regular course of its business,
recommending to the shareholders a voluntary dissolution of the corporation or a
revocation thereof, amending the By-Laws of the corporation, filling vacancies
on the board of directors, or changing the number of authorized directors.
8
<PAGE> 9
Any vacancy in the executive committee may be filled by a resolution
adopted by a majority of the full board of directors.
The executive committee shall keep regular minutes of its
proceedings and report the same to the board of directors for its information at
the meeting thereof held next after the proceedings shall have been taken.
ARTICLE 4
NOTICES
4.1 Notices. Whenever, under the provisions of law or of the
Articles of Incorporation or of these By-Laws, notice is required to be given to
any director or shareholder, such notice may be given in writing, by mail,
addressed to such director or shareholder, at his address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by telegram. If notice be
given by telegram, such notice shall be deemed to be delivered when the telegram
is delivered to the telegraph company.
With the exception of special meetings of directors for the purpose
of amending the By-Laws or authorizing the sale of all or substantially all of
the assets of the corporation and special meetings of shareholders, neither the
business to be transacted at, nor the purpose of, any regular or special meeting
9
<PAGE> 10
of shareholders or of the board of directors need be specified in the notice or
waiver of notice of such meeting.
4.2 Waiver of Notice. Whenever any notice is required to be given to
any shareholder or director of the corporation under the provisions of these
By-Laws or the Articles of Incorporation or by law, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice.
4.3 Waiver by Attendance. The attendance of a shareholder, in person
or by proxy, or a director at a meeting shall constitute a waiver of notice of
such meeting, except where a shareholder or director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE 5
OFFICERS
5.1 Officers. The officers of the corporation shall consist of a
President, a Secretary and a Treasurer, each of whom shall be elected by the
board of directors. The board of directors may also elect a Chairman, a Vice
Chairman, one or more Vice Presidents, and one or more Assistant Secretaries and
Assistant Treasurers. None of the officers of the corporation need be directors.
Any two or more offices, except those of President and Secretary, may be held by
the same person.
10
<PAGE> 11
5.2 Election. The officers shall be elected at the first meeting of
the board of directors after each annual meeting.
5.3 Other Officers. The board of directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
5.4 Term, Vacancies. The officers of the corporation shall hold
office until their successors are chosen and qualify. Any officers elected or
appointed by the board of directors may be removed at any time by the board of
directors but such removal shall be without prejudice to the contract rights, if
any, of the officer so removed. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
5.5 Chairman. The Chairman of the board of directors, if one be
elected, shall preside at all meetings of the board of directors and shall have
and perform such other duties as from time to time may be assigned to him by the
board of directors.
5.6 Vice Chairman. The Vice Chairman of the board of directors, if
one be elected, shall have such powers and perform such duties as from time to
time may be assigned to him by the board of directors.
5.7 President. The President shall be the chief executive officer of
the corporation and shall have the general
11
<PAGE> 12
powers and duties of supervision and management usually vested in the office of
president of a corporation. He shall preside at all meetings of the shareholders
if present thereat, and in the absence of the Chairman or if none was elected,
at all meetings of the board of directors, and shall have general supervision,
direction and control of the business of the corporation. Except as the board of
directors shall authorize the execution thereof in some other manner, he shall
execute bonds, mortgages and other contracts on behalf of the corporation, and
shall cause the seal to be affixed to any instrument requiring it. When so
affixed the seal shall be attested by the signature of the Secretary or the
Treasurer or an Assistant Secretary or an Assistant Treasurer.
5.8 Vice President. Each Vice President shall have such powers and
shall perform such duties as shall be assigned to him by the directors. The Vice
President, or if there is more than one Vice President the senior Vice
President, shall, in the absence or disability of the President, perform the
duties and exercise the powers of the President.
5.9 Treasurer. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate account of receipts and
disbursements in books belonging to the corporation. He shall deposit all moneys
and other valuables in the name and to the credit of the corporation
12
<PAGE> 13
in such depositories as may be designated by the board of directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the board of directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and board of directors at
the regular meetings of the board of directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the board of directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
5.10 Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of shareholders and directors and all other notices
required by law or by these By-Laws, but any such notice may be given by any
other person as authorized or directed. He shall record all the proceedings of
the shareholders and directors in books maintained for that purpose, and shall
have custody of the seal of the corporation. He shall affix the seal of the
corporation to all instruments requiring it and attest the same.
5.11 Assistant Treasurers and Assistant Secretaries. Assistant
Treasurers and Assistant Secretaries, if any shall be elected, shall have such
powers and shall perform such duties as shall be assigned to them, respectively,
by the directors.
13
<PAGE> 14
ARTICLE 6
INDEMNIFICATION
To the full extent permitted by law, the corporation may indemnify
any person and his heirs, distributees, next of kin, successors, appointees,
executors, administrators, legal representatives and assigns who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, domestic or foreign,
against expenses, attorneys' fees, court costs, judgments, fines, amounts paid
in settlement and other losses actually and reasonably incurred by him in
connection with such action, suit or proceeding.
ARTICLE 7
MISCELLANEOUS
7.1 Share Certificates. The shares of the corporation shall be
represented by certificates signed by the President or a Vice President and the
Secretary or an Assistant Secretary of the corporation, and may be sealed with
the seal of the corporation or a facsimile thereof. Such certificates shall be
issued to each shareholder certifying the number of shares owned by him in
14
<PAGE> 15
the corporation. When such certificates are countersigned by a transfer agent or
registrar, other than the corporation or its employee, the required officers'
signatures thereupon may be facsimiles. No certificates shall be issued for any
share unless such share is fully paid.
7.2 Lost Certificates. The board of directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
corporation alleged to have been lost or destroyed. When authorizing such issue
of a new certificate, the board of directors, in its discretion and as a
condition precedent to the issuance thereof, may prescribe such terms and
conditions as it deems expedient, and may require such indemnities as it deems
adequate, to protect the corporation from any claim that may be made against it
with respect to any such certificate alleged to have been lost or destroyed.
7.3 Transfer of Shares. Transfer of shares of the corporation shall
be made only on the transfer books of the corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
15
<PAGE> 16
7.4 Closing of Transfer Books. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the board
of directors may fix in advance a record date for any such determination of
shareholders, such date to be not more than fifty days and, in case of a meeting
of shareholders, not less than ten days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If no record date is fixed for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders, or shareholders entitled to
receive payment of a dividend, the date on which notice of the meeting is mailed
or the date on which the resolution of the board of directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof.
7.5 Voting Record. The officer or agent having charge of the
transfer books of the corporation shall make a complete record of the
shareholders entitled to vote at each meeting of shareholders or any adjournment
thereof, arranged in alphabetical
16
<PAGE> 17
order, with the address of and the number of shares held by each. Such record
shall be produced and kept open at the time and place of the meeting and shall
be subject to the inspection of any shareholder during the whole time of the
meeting for the purposes thereof.
7.6 Dividends. The board of directors may, from time to time,
declare and the corporation may pay dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and the Articles of
Incorporation. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors in their absolute discretion deem proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other purpose as the directors shall
deem conducive to the interests of the corporation, and the directors may modify
or abolish any such reserve in the manner in which it was created.
7.7 Reliance on Records. Each officer and director shall in the
performance of his duties be fully protected in relying in good faith upon the
books of account of the corporation, or upon reports made to the corporation by
any of its officials, or by an independent certified public accountant, or by an
appraiser selected with reasonable care, or in relying in good faith upon other
records of the corporation.
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<PAGE> 18
7.8 Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate by resolution.
7.9 Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the board of directors.
7.10 Seal. The corporate seal shall be circular in form and shall
contain the name of the corporation, the year of its incorporation and the words
"Corporate Seal, West Virginia".
7.11 Amendments. These By-Laws may be amended or repealed and new
By-Laws may be adopted: (1) by the shareholders at any annual meeting, or at any
special meeting if notice of the proposed amendment or repeal is contained in
the notice of such special meeting, by the affirmative vote of a majority of the
shares entitled to vote thereat; (2) by the board of directors at any regular
meeting, or at any special meeting if notice of the proposed amendment or repeal
is contained in the notice of such special meeting; or (3) by unanimous written
consent of the shareholders or directors.
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<PAGE> 1
Exhibit 3.19.1
ARTICLES OF INCORPORATION
OF
KING KNOB COAL CO., INC.
I. The undersigned agree to become a corporation by the name of:
King Knob Coal Co., Inc.
II. The principal Office or Place of Business of said Corporation will be
located at No. 215 Mill street, in the city of Fairmont in county of
Marion and State of West Virginia. Its chief works will be located in 215
Mill Street, Fairmont, Marion County, West Virginia.
III. The objects for which this Corporation is formed are as follows:
1. To mine, remove or otherwise extract, to manufacture or otherwise
produce, to buy, import or otherwise obtain, to mix, treat or otherwise
prepare for market, and to sell, distribute, transport, export and
generally to deal in any and all manner of coal, ores, stone or other
minerals, timber, petroleum, oil, gas and other volatile minerals,
substances, chemicals, chemical agents and materials, and products of a
similar, allied or different nature of every sort and description.
2. To contract for, lease, purchase and otherwise acquire, to hold,
own, maintain, improve, develop, work, mine, explore, exploit, operate,
deal in and otherwise use, enjoy and turn to account, and to let,
mortgage, exchange, sell, grant, transfer, convey and otherwise use, enjoy
and
<PAGE> 2
2
turn to account, and to let, mortgage, exchange, sell, grant, transfer,
convey and otherwise dispose of any and all kinds of lands and real estate
and any and all rights, privileges, operations, leases, concessions,
licenses, claims, patents, grants, franchises, exemptions, royalties,
tenements, estates, hereditaments and interests in and to property, real
or personal, tangible or intangible, of every kind and description,
including, without limiting the generality of the foregoing, any and all
property prospectively or actually productive of coal, ores, minerals,
metals, wood, stone, petroleum, oil and gas or of chemicals or raw
materials of any kind.
3. To construct, lease, purchase or otherwise acquire, to hold, own,
maintain, improve, operate or otherwise use, and to let, mortgage, sell,
convey or otherwise dispose of or turn to account, any and all kinds of
real and personal property and any and all rights and interests therein,
useful or convenient in the conduct of the corporation's business.
4. To manufacture, process, purchase, own, handle, sell, import,
export and generally to trade and deal in and with substances, raw
materials, goods, wares and merchandise of every kind, nature and
description, and to engage, as principal or agent and either alone or
jointly
<PAGE> 3
3
with others, in any merchantile, industrial or trading business of any
kind or character whatever.
5. To conduct, carry on and engage in any experimental or research
work in coal, petroleum, oil, gas, chemical, engineering and any other
scientific or technical fields, and to render to any person, firm,
association or corporation services of an engineering scientific,
technical or business nature.
6. To acquire, hold, sell, liquidate or otherwise dispose of, all or
any part of the business, good will, rights, assets and property of any
person, firm, association, corporation or otherwise, and to assume all or
any part of the obligations and liabilities of any such firm, person,
association or corporation.
7. To apply for, register, obtain, take leases, licenses and
immunities in respect of, purchase or otherwise acquire, and to hold, own,
introduce, use, enjoy, develop, manufacture and sell under, grant leases,
licenses and immunities in respect of, mortgage, pledge, sell, assign,
transfer or otherwise dispose of or turn to account, and in any manner
deal with:
a. Inventions, devices, designs, formular, processes and any
improvements and modifications thereof.
b. Letters patent, patent rights, copyrights, trade named,
trademarks and other distinctive words and symbols
<PAGE> 4
4
indicating original ownership, granted or recognized under the laws of the
United States of America or any state or subdivision thereof of any
foreign country or subdivision thereof.
c. Any and all rights, privileges, licenses, grants and concessions
connected with or appertaining to the foregoing.
8. To acquire by purchase, subscription or otherwise, to receive,
own and hold for investment or otherwise, to mortgage, pledge, deposit,
exchange, sell, assign, transfer or otherwise make disposal of and
generally to deal in or with any and all of the following (hereinafter
sometimes referred to collectively as "securities") to-wit: All kinds of
shares, stocks, voting trust certificates, trust certificates, scrip,
warrants, rights, bonds, mortgages, debentures, trust receipts, notes and
other choses in action, obligations and evidences of indebtedness of any
corporation, joint stock corporation, trust, association, partnership,
syndicate, person or governmental or public agency or authority, domestic
or foreign, and evidences of any interest therein or with respect thereto;
and while the owner or holder of any such securities to exercise all the
rights, powers and privileges of ownership or interest in respect thereof,
including the right to vote and give consents and to do any and all acts
and things deemed by
<PAGE> 5
5
the corporation to be necessary or advisable for the preservation,
protection, improvement or advancement of the value of such securities.
9. To purchase or otherwise acquire, hold, sell, pledge, transfer,
or otherwise dispose of, and to reissue or cancel, shares of the
corporation's own capital stock and any other securities or obligations of
the corporation in the manner and to the extent now or hereafter permitted
by the laws of the State of West Virginia; provided that shares of its own
capital stock belonging to the corporation shall not be voted upon
directly or indirectly.
10. To enter into, make and perform contracts of every kind and
description with any person, firm, association, corporation, municipality,
country, state, body politic or government or colony or dependency
thereof.
11. To borrow or raise money for any of the purposes of the
corporation from time to time without limit as to the amount, to draw,
make, accept, endorse, execute and issue promissory notes, drafts, bills
of exchange, warrants, bonds, debentures and other negotiable and
non-negotiable instruments and evidences of indebtedness, and to secure
the payment thereof and of the interest thereon by mortgage upon, or
pledge, conveyance or assignment in trust, the whole or any part of the
assets and property of the corporation, whether at the time owned or
hereafter
<PAGE> 6
6
acquired, and to sell, pledge or otherwise despose of such securities or
other obligations of the corporation for its corporate purposes.
12. To lend money to others, with or without collateral security.
13. To guarantee the payment of dividends on any stock, or the
principal or interest or both of any bonds or other securities or
obligations, and the performance of any contracts.
14. To establish and maintain one or more offices, to conduct and
carry on its business or operations or any part thereof, and to exercise
any or all of its corporate rights, privileges and powers, if any or all
of the states, districts, territories, colonies or dependencies of the
United States of America and in any and all foreign countries and the
territories, colonies or dependencies thereof.
15. To exercise any and all powers and privileges which it may now
or hereafter may be lawful for any corporation to exercise under and
pursuance of the law of the State of West Virginia or any other law that
may now or hereafter be applicable to the corporation.
16. In general, to do any and all acts and things and to exercise
any and all powers as may be necessary, appropriate or convenient for the
furtherance of the
<PAGE> 7
7
business, objective and purposes herein enumerated and for the exercise of
the powers herein conferred.
The objectives and purposes specified in the foregoing clauses shall
be construed as powers as well as objectives and purposes, and the matters
referred to in each clause shall, unless herein otherwise expressly
provided, be in no wise limited by reference to or inference from the
terms of any other clause (or any other matter within the same clause),
but shall be regarded as independent objects, purposes and powers. The
enumeration herein of objects, purposes and powers shall not be deemed to
exclude by inference or otherwise any of the rights, privileges, powers,
objects or purposes which this corporation is or may be entitled to
exercise under the laws of the State of West Virginia now or hereinafter
in effect or implied by reasonable instruction of said laws.
IV. The amount of the total authorized capital stock of said corporation shall
be Fifty Thousand dollars, which shall be divided into 500 shares of the
par value of One Hundred dollars each.
The amount of capital stock with which it will commence business is
Fifty Thousand Dollars ($50,000.00) being Five Hundred shares One Hundred
($100.00) each.
V. The names and post office addresses of the incorporators and the number of
shares of stock subscribed for by each are as follows:
<PAGE> 8
8
<TABLE>
<CAPTION>
No. of Shares No. of Shares Total No. of
NAME P.O. ADDRESS Common Stock Preferred Stock Shares
<S> <C> <C> <C> <C>
Herschel Rose 810 8th Street 374 ---- 374
Fairmont, W. Va.
L. E. Johnson 724 Mt. Vernon Ave. 1 ---- 1
Fairmont, W. Va.
Charles T. Brown Circle Drive 125 ---- 125
Fairmont, W. Va.
</TABLE>
VI. The existence of this corporation is to be perpetual.
WE, THE UNDERSIGNED, for the purpose of forming a Corporation under the
laws of the State of West Virginia do make and file this Agreement; and we have
accordingly hereunto set our respective hands this 4th day of May, 1967.
/s/ L. E. Johnson
--------------------------------
/s/ Herschel Rose
--------------------------------
/s/ Charles T. Brown
--------------------------------
<PAGE> 1
Exhibit 3.19.2
ARTICLES OF MERGER
OF A DOMESTIC SUBSIDIARY CORPORATION
(Brook Coal Company)
INTO
DOMESTIC PARENT CORPORATION
(King Knob Coal Co., Inc.)
Pursuant to the provisions of Section 119, Article 1, Chapter 31 of the
Code of West Virginia, 1931, as amended, the undersigned corporation adopts the
following Articles of Merger for the purpose of merging a subsidiary corporation
into the undersigned as the surviving corporation:
The following Plan of Merger was approved by the Board of Directors of the
undersigned, as the surviving corporation, in the manner prescribed by Section
119, Article 1, Chapter 31 of the Code of West Virginia, 1931, as amended:
PLAN OF MERGER
OF
BROOK COAL COMPANY
(a West Virginia Corporation)
INTO
KING KNOB COAL CO., INC.
(a West Virginia Corporation)
ARTICLE FIRST: As of the Effective Date (as defined in Article Third
hereof) and upon the terms set forth in Article Second hereof, Brook Coal
Company, a West Virginia corporation ("Brook"), shall be merged into King Knob
Coal Co., Inc., a West
<PAGE> 2
-2-
Virginia corporation ("King Knob"). King Knob shall be the surviving corporation
in such merger (the "Surviving Corporation").
ARTICLE SECOND: The terms and conditions of the merger are as follows:
A. Share Cancellation. Each share of common stock of Brook
outstanding immediately prior to the Effective Date shall forthwith
automatically be cancelled on the Effective Date and no additional shares of the
common stock of King Knob shall be issued as a result of the merger.
B. Articles of Incorporation and By-Laws; Name. The Articles of
Incorporation and By-Laws of King Knob shall continue as the Articles of
Incorporation and By-Laws of the Surviving Corporation. The name of the
Surviving Corporation shall be King Knob Coal Co., Inc.
C. Directors and Officers. The directors and officers of King Knob
shall continue in office as directors and officers of the Surviving Corporation
in accordance with the By-Laws of King Knob until such time as their successors
have been elected and qualified.
D. Assets and Liabilities. Upon the Effective Date all the property,
real and personal, rights, privileges, immunities, powers, purposes, franchises,
patents, licenses, trademarks, registrations, causes of action, and every other
asset of Brook and King Knob shall be transferred to, vest in and devolve upon
the Surviving Corporation without further act or deed, and every interest of
Brook and King Knob shall be as effectively the property of the Surviving
Corporation as they were of Brook and King Knob.
<PAGE> 3
-3-
E. Abandonment. Notwithstanding approval and adoption of this Plan
of Merger by the Directors of King Knob, this Plan of Merger may be abandoned
and the merger of Brook and King Knob terminated at any time prior to the
Effective Date by decision of the Board of Directors of King Knob.
ARTICLE THIRD: The effective date of the merger of Brook and King Knob
(the "Effective Date") shall be the date the Articles of Merger are filed by the
Department of State of West Virginia in accordance with the provisions of
applicable state law.
The number of outstanding shares of each class of the subsidiary
corporation and the number of such shares of each class owned by the surviving
corporation are as follows:
<TABLE>
<CAPTION>
Number of Shares
Number of Shares Owned by
Name of Corporation Shares Designationn of Surviving
(Subsidiary) Outstanding Class Corporation
- ------------------- ---------------- --------------- -----------------
<S> <C> <C> <C>
Brook Coal Company 5,000 Common 5,000
</TABLE>
King Knob Coal Co., Inc., as sole shareholder of Brook Coal Company,
hereby waives its right to receive a copy of the Plan of Merger by mail.
Dated: 8/19/82 , 1982
-----------------
KING KNOB COAL CO., INC.
By: /s/ Jesse L. Anderson
-------------------------
Name: Jesse L. Anderson
Title: President
By: /s/ Robert McCarthy
-------------------------
Name: Robert McCarthy
Title: Secretary
<PAGE> 4
-4-
STATE OF PENNSYLVANIA )
) ss:
COUNTY OF ALLEGHENY )
I, Elizabeth L. Thomas, a Notary Public, do hereby certify that on this
20th day of August, 1982, personally appeared before me Robert McCarthy, who,
being by me first duly sworn, declared that he is the Secretary of King Knob
Coal Co., Inc., that he signed the foregoing document as Secretary of the
corporation, and that the statements therein contained are true.
/s/Elizabeth L. Thomas
----------------------------
Notary Public
My commission expires: ELIZABETH L. THOMAS, NOTARY PUBLIC
------------------------------------
UPPER ST CLAIR TWP, ALLEGHENY COUNTY
MY COMMISSION EXPIRES NOV. 19, 1983
Member Pennsylvania Association of Notaries
<PAGE> 1
Exhibit 3.19.3
ARTICLES OF MERGER
OF DOMESTIC SUBSIDIARY CORPORATION
(KING AVIATION, INC.)
INTO
DOMESTIC PARENT CORPORATION
(KING KNOB COAL CO., INC.)
Pursuant to the provisions of Section 119, Article 1, Chapter 31 of the
Code of West Virginia, 1931, as amended, the undersigned corporation adopts the
following Articles of Merger for the purpose of merging a subsidiary corporation
into the undersigned as the surviving corporation:
The following Plan of Merger was approved by the Board of Directors of the
undersigned, as the surviving corporation, in the manner prescribed by Section
117, Article 1, Chapter 31 of the Code of West Virginia, 1931, as amended:
PLAN OF MERGER
WHEREAS, King Knob Coal Co., Inc., a West Virginia corporation
("King Knob"), is the sole owner of all of the outstanding shares of the
stock of King Aviation, Inc., a West Virginia corporation ("King
Aviation"); and
WHEREAS, King Knob desires to merge with King Aviation into a single
corporation, with King Knob being the surviving corporation;
NOW, THEREFORE, pursuant to the West Virginia Corporation Act, the
provisions of which permit the merger of a subsidiary corporation
organized and existing under the laws of West Virginia into a parent
corporation organized and existing under the laws of West Virginia, King
Knob, being the parent corporation, hereby adopts a Plan of Merger as
follows:
<PAGE> 2
1. The name of the corporations proposing to merge are King Knob
Coal Co., Inc., and King Aviation, Inc.
2. The surviving corporation shall be King Knob Coal Co., Inc.
3. In view of the fact that King Knob owns directly all of the
outstanding capital stock of King Aviation, each share of the stock of
King Aviation outstanding immediately prior to the effective date of this
merger and all rights in respect thereof shall forthwith be cancelled and
no additional shares of the stock of King Knob shall be issued as a result
of the merger.
4. The terms and conditions of the merger are as follows:
(a) The Certificate of Incorporation of King Knob as in effect
on the date of the merger provided for in this Plan of Merger shall
continue in full force and effect as the Certificate of
Incorporation of the surviving corporation.
(b) The by-laws of the surviving corporation as they shall exist
on the effective date of the merger provided for in this Plan of
Merger and in particular the number of directors and officers set
forth therein shall be and remain the by-laws of the surviving
corporation until the name shall be altered, amended or repealed as
therein provided.
(c) This merger shall become effective upon filing.
SECOND: The outstanding shares of all classes of stock of King
Aviation, Inc. are comprised of two hundred and fifty (250) shares of
common stock, all of which are owned by King Knob Coal Co., Inc.
THIRD: King Knob Coal Co., Inc., the sole shareholder of King
Aviation, Inc. has waived as of August 29, 1980 the requirement of a
mailing of a copy of the Plan of Merger, and accordingly no Plan of Merger
has been mailed to the shole shareholder of King Aviation, Inc. pursuant
to Section 31-1-119(c) of the West Virginia Corporation Act.
<PAGE> 3
IN WITNESS WHEREOF, said KING KNOB COAL CO., INC. has caused these
Articles of Merger to be executed by its duly authorized officers, this 24th day
of December, 1980.
By: /s/ Daniel A. Mathews
-------------------------
Name: Daniel A. Mathews
Title: Vice President
By: /s/ Timothy N. Wallach
-------------------------
Name: Timothy N. Wallach
Title: Assistant Secretary
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
I, Stephen M. Vine, a Notary Public, do hereby certify that on this 24th
day of December, 1980, personally appeared before me Daniel A. Mathews, who,
being by me first duly sworn, declared that he is the Vice President of King
Knob Coal Co., Inc., that he signed the foregoing document as Vice President of
the corporation, and that the statements therein contained are true.
/s/ Stephen M. Vine
-------------------------
Notary Public
(NOTARIAL SEAL)
<PAGE> 1
Exhibit 3.19.4
ARTICLES OF MERGER
OF A DOMESTIC SUBSIDIARY CORPORATION
(Peaser Branch Coal Company)
INTO
DOMESTIC PARENT CORPORATION
(King Knob Coal Co., Inc.)
Pursuant to the provisions of Section 119, Article 1, Chapter 31 of the
Code of West Virginia, 1931, as amended, the undersigned corporation adopts the
following Articles of Merger for the purpose of merging a subsidiary corporation
into the undersigned as the surviving corporation:
The following Plan of Merger was approved by the Board of Directors of the
undersigned, as the surviving corporation, in the manner prescribed by Section
119, Article 1, Chapter 31 of the Code of West Virginia, 1931, as amended:
PLAN OF MERGER
OF
PEASER BRANCH COAL COMPANY
(a West Virginia Corporation)
INTO
KING KNOB COAL CO., INC.
(a West Virginia Corporation)
ARTICLE FIRST: As of the Effective Date (as defined in Article Third
hereof) and upon the terms set forth in Article Second hereof, Peaser Branch
Coal Company, a West Virginia corporation ("Peaser Branch"), shall be merged
into King Knob Coal Co.,
<PAGE> 2
-2-
Inc., a West Virginia corporation ("King Knob"). King Knob shall be the
surviving corporation in such merger (the "Surviving Corporation").
ARTICLE SECOND: The terms and conditions of the merger are as follows:
A. Share Cancellation. Each share of common stock of Peaser Branch
outstanding immediately prior to the Effective Date shall forthwith
automatically be cancelled on the Effective Date and no additional shares of the
common stock of King Knob shall be issued as a result of the merger.
B. Articles of Incorporation and By-Laws; Name. The Articles of
Incorporation and By-Laws of King Knob shall continue as the Articles of
Incorporation and By-Laws of the Surviving Corporation. The name of the
Surviving Corporation shall be King Knob Coal Co., Inc.
C. Directors and Officers. The directors and officers of King Knob
shall continue in office as directors and officers of the Surviving Corporation
in accordance with the By-Laws of King Knob until such time as their successors
have been elected and qualified.
D. Assets and Liabilities. Upon the Effective Date all the property,
real and personal, rights, privileges, immunities, powers, purposes, franchises,
patents, licenses, trademarks, registrations, causes of action, and every other
asset of Peaser Branch and King Knob shall be transferred to, vest in and
devolve upon the Surviving Corporation without further act or deed, and every
interest of Peaser Branch and King Knob shall be as effectively the property of
the Surviving Corporation as they were of Peaser Branch and King Knob.
<PAGE> 3
-3-
E. Abandonment. Notwithstanding approval and adoption of this Plan
of Merger by the Directors of King Knob, this Plan of Merger may be abandoned
and the merger of Peaser Branch and King Knob terminated at any time prior to
the Effective Date by decision of the Board of Directors of King Knob.
ARTICLE THIRD: The effective date of the merger of Peaser Branch and King
Knob (the "Effective Date") shall be the date the Articles of Merger are filed
by the Department of State of West Virginia in accordance with the provisions of
applicable state law.
The number of outstanding shares of each class of the subsidiary
corporation and the number of such shares of each class owned by the surviving
corporation are as follows:
<TABLE>
<CAPTION>
Number of Shares
Number of Shares Owned by
Name of Corporation Shares Designationn of Surviving
(Subsidiary) Outstanding Class Corporation
- ---------------------- ---------------- --------------- -----------------
<S> <C> <C> <C>
Peaser Branch Coal Company 50,000 Common 50,000
</TABLE>
King Knob Coal Co., Inc., as sole shareholder of Peaser Branch Coal
Company, hereby waives its right to receive a copy of the Plan of Merger by
mail.
Dated: September 28, 1982
KING KNOB COAL CO., INC.
By: /s/ Jesse L. Anderson
-------------------------
Name: Jesse L. Anderson
Title: President
By: /s/ Robert McCarthy
-------------------------
Name: Robert McCarthy
Title: Secretary
<PAGE> 4
-4-
STATE OF PENNSYLVANIA )
) ss:
COUNTY OF ALLEGHENY )
I, Elizabeth L. Thomas, a Notary Public, do hereby certify that on this
28th day of September, 1982, personally appeared before me Robert McCarthy, who,
being by me first duly sworn, declared that he is the Secretary of King Knob
Coal Co., Inc., that he signed the foregoing document as Secretary of the
corporation, and that the statements therein contained are true.
/s/ Elizabeth L. Thomas
-------------------------
Notary Public
My commission expires: ELIZABETH L. THOMAS, NOTARY PUBLIC
------------------------------------
UPPER ST CLAIR TWP, ALLEGHENY COUNTY
MY COMMISSION EXPIRES NOV. 19, 1983
Member Pennsylvania Association of Notaries
<PAGE> 1
Exhibit 3.19.5
ARTICLES OF MERGER
OF A DOMESTIC SUBSIDIARY CORPORATION
(Sparta Mining Company, Inc.)
INTO
DOMESTIC PARENT CORPORATION
(King Knob Coal Co., Inc.)
Pursuant to the provisions of Section 119, Article 1, Chapter 31 of the
Code of West Virginia, 1931, as amended, the undersigned corporation adopts the
following Articles of Merger for the purpose of merging a subsidiary corporation
into the undersigned as the surviving corporation:
The following Plan of Merger was approved by the Board of Directors of the
undersigned, as the surviving corporation, in the manner prescribed by Section
119, Article 1, Chapter 31 of the Code of West Virginia, 1931, as amended:
PLAN OF MERGER
OF
SPARTA MINING COMPANY
(a West Virginia Corporation)
INTO
KING KNOB COAL CO., INC.
(a West Virginia Corporation)
ARTICLE FIRST: As of the Effective Date (as defined in Article Third
hereof) and upon the terms set forth in Article Second hereof, Sparta Mining
Company Inc., a West Virginia corporation ("Sparta"), shall be merged into King
Knob Coal Co., Inc., a
<PAGE> 2
-2-
West Virginia corporation ("King Knob"). King Knob shall be the surviving
corporation in such merger (the "Surviving Corporation").
ARTICLE SECOND: The terms and conditions of the merger are as follows:
A. Share Cancellation. Each share of common stock of Sparta
outstanding immediately prior to the Effective Date shall forthwith
automatically be cancelled on the Effective Date and no additional shares of the
common stock of King Knob shall be issued as a result of the merger.
B. Articles of Incorporation and By-Laws; Name. The Articles of
Incorporation and By-Laws of King Knob shall continue as the Articles of
Incorporation and By-Laws of the Surviving Corporation. The name of the
Surviving Corporation shall be King Knob Coal Co., Inc.
C. Directors and Officers. The directors and officers of King Knob
shall continue in office as directors and officers of the Surviving Corporation
in accordance with the By-Laws of King Knob until such time as their successors
have been elected and qualified.
D. Assets and Liabilities. Upon the Effective Date all the property,
real and personal, rights, privileges, immunities, powers, purposes, franchises,
patents, licenses, trademarks, registrations, causes of action, and every other
asset of Sparta and King Knob shall be transferred to, vest in and devolve upon
the Surviving Corporation without further act or deed, and every interest of
Sparta and King Knob shall be as effectively the property of the Surviving
Corporation as they were of Sparta and King Knob.
<PAGE> 3
-3-
E. Abandonment. Notwithstanding approval and adoption of this Plan
of Merger by the Directors of King Knob, this Plan of Merger may be abandoned
and the merger of Sparta and King Knob terminated at any time prior to the
Effective Date by decision of the Board of Directors of King Knob.
ARTICLE THIRD: The effective date of the merger of Sparta and King Knob
(the "Effective Date") shall be the date the Articles of Merger are filed by the
Department of State of West Virginia in accordance with the provisions of
applicable state law.
The number of outstanding shares of each class of the subsidiary
corporation and the number of such shares of each class owned by the surviving
corporation are as follows:
<TABLE>
<CAPTION>
Number of Shares
Number of Shares Owned by
Name of Corporation Shares Designationn of Surviving
(Subsidiary) Outstanding Class Corporation
- ------------------- ---------------- --------------- -----------------
<S> <C> <C> <C>
Sparta Mining Company, Inc. 100 Common 100
</TABLE>
King Knob Coal Co., Inc., as sole shareholder of Sparta Mining Co., Inc.,
hereby waives its right to receive a copy of the Plan of Merger by mail.
Dated: ______________, 1982
KING KNOB COAL CO., INC.
By: /s/ Jesse L. Anderson
------------------------
Name: Jesse L. Anderson
Title: President
By: /s/ Robert McCarthy
------------------------
Name: Robert McCarthy
Title: Secretary
<PAGE> 4
-4-
STATE OF PENNSYLVANIA )
) ss:
COUNTY OF ALLEGHENY )
I, Ruth F. Hanley, a Notary Public, do hereby certify that on this 6th day
of July, 1982, personally appeared before me Robert McCarthy, who, being by me
first duly sworn, declared that he is the Secretary of King Knob Coal Co., Inc.,
that he signed the foregoing document as Secretary of the corporation, and that
the statements therein contained are true.
/s/ Ruth F. Hanley
------------------------
Notary Public
RUTH F. HANLEY, NOTARY PUBLIC
UPPER ST. CLAIR TWP., ALLEGHENY COUNTY
My Commission Expires: MY COMMISSION EXPIRES JAN. 12, 1985
-----------------------------------
Member, Pennsylvania Association of Notaries
<PAGE> 1
Exhibit 3.20
Amended and Restated
BY-LAWS
of
KING KNOB COAL CO., INC.
(A West Virginia corporation)
Adopted by Unanimous Written Consent
of the Board of Directors dated June 9, 1978
* * *
ARTICLE 1
OFFICES
The principal office or place of business shall be located in Anmoore,
County of Harrison, West Virginia. The corporation may have other offices,
either within or without the State of West Virginia, at such place or places as
the board of directors may from time to time designate or the business of the
corporation may require.
ARTICLE 2
SHAREHOLDERS
2.1 Annual Meetings. Annual meetings of shareholders for the election of
directors and for such other business as may properly come before the meeting
shall be held at such place, either within or without the State of West
Virginia, and at such time and date as may be fixed from time to time by the
board of directors.
<PAGE> 2
2.2 Special Meetings. Special meetings of shareholders may be held at any
time and place, within or without the State of West Virginia. Special meetings
of the shareholders for any purpose or purposes, unless otherwise prescribed by
law, may be called by the board of directors, the President or Secretary, or by
the holders of not less than one-tenth of all outstanding shares of the
corporation entitled to vote at the meeting.
2.3 Notice of Meetings. Written notice, stating the place, date and hour
of the meeting, and in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten nor more than
fifty days before the date of the meeting either personally or by mail by or at
the direction of the President, or the Secretary, or the person calling the
meeting, to each shareholder of record entitled to vote at such meeting.
2.4 Action Without Meeting. Any action required or permitted to be taken
at an annual or special meeting of shareholders may be taken without a meeting
and without prior notice if a consent in writing, setting forth the action so
taken, shall be signed by all of the shareholders who would have been entitled
to vote upon the action if such meeting were held. Such action by unanimous
written consent may be taken without regard to any provision of these By-
2
<PAGE> 3
Laws or any resolution of the board of directors fixing the time, date or place
of meetings of shareholders.
2.5 Quorum. Except as otherwise required by law, by the Articles of
Incorporation, or by these By-Laws, the holders of a majority of the outstanding
shares entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of the shareholders. If, however, such a quorum shall not be
present at any meeting, a majority in interest of the shareholders who are
entitled to vote thereat and are present in person or by proxy, shall have power
to adjourn the meeting from time to time, without notice other than announcement
at the meeting, until the requisite number of shares entitled to vote shall be
present. At such adjourned meeting at which the requisite number of shares
entitled to vote shall be represented, any business may be transacted which
might have been transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
2.6 Voting. If a quorum is present, the affirmative vote of a majority of
the shares represented at the meeting shall be the act of the shareholders,
unless the vote of a greater number of shares is required by law, the Articles
of Incorporation, or these By-Laws.
3
<PAGE> 4
Each outstanding share having voting power shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders. A shareholder
may vote either in person or by proxy executed in writing by the shareholder or
by his duly authorized attorney-in-fact. No proxy shall be valid after eleven
months from the date of its execution, unless otherwise provided in the proxy.
At each election for directors every shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected and
for whose election he has a right to vote, or to cumulate his votes by giving
one candidate as many votes as the number of such directors multiplied by the
number of his shares shall equal, or by distributing such votes on the same
principle among any number of such candidates.
ARTICLE 3
DIRECTORS
3.1 Number and Term. The number of directors shall be not less than two
and not more than seven, as shall be determined from time to time by election of
directors or other action of the shareholders or by resolution of the board of
directors. The total number of directors as most recently set by such election,
action or resolution shall constitute the "full board". Directors need not be
4
<PAGE> 5
residents of the State of West Virginia nor shareholders of the corporation. The
directors, other than the first board of directors, shall be elected at the
annual meeting of the shareholders, and each director elected shall serve until
the next succeeding annual meeting and until his successor shall have been
elected and qualified. The first board of directors shall hold office until the
first meeting of the shareholders.
3.2 Resignations. Any director may resign at any time. Such resignation
shall be made in writing, and shall take effect at the time specified therein,
and if no time be specified, at the time of its receipt by the President or
Secretary. The acceptance of a resignation shall not be necessary to make it
effective.
3.3 Vacancies. Any vacancy occurring in the board of directors and any
directorship to be filled by reason of an increase in the number of directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the board of directors. A director elected to fill
a vacancy shall be elected for the unexpired portion of the term of his
predecessor in office.
3.4 Removal. At a meeting of shareholders called expressly for that
purpose, any director or the entire board of directors may be removed, with or
without cause, by a vote of the holders of a majority of the shares entitled to
vote at an election of directors. If less than the entire
5
<PAGE> 6
board is to be removed, no one of the directors may be removed if the votes cast
against his removal would be sufficient to elect him.
3.5 Powers. The business and affairs of the corporation shall be managed
by its board of directors, which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the Articles
of Incorporation directed or required to be exercised or done by the
shareholders. The board of directors is expressly authorized, without the assent
or vote of the shareholders, to authorize and cause to be executed mortgages and
liens upon the real and personal property of the corporation, including
after-acquired property. The enumeration in these By-Laws of particular powers
of the board of directors shall not imply the denial of, or any limitation on,
any other power vested in the board of directors by law or by the Articles of
Incorporation or by these By-Laws.
3.6 Compensation. The board of directors, by the affirmative vote of a
majority of the directors then in office, an irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise.
3.7 Meetings. The newly elected directors may hold their first meeting for
the purpose of organization and the
6
<PAGE> 7
transaction of business, if a quorum is present, immediately after the annual
meeting of the shareholders; or the time and place of such meeting may be fixed
by consent in writing of all the directors.
Regular meetings of the directors may be held without notice at such
places and times as shall be determined from time to time by resolution of the
directors.
Special meetings of the directors may be called by the President or
Secretary or by any two directors on at least two days' notice to each director
and shall be held at such place or places as may be determined by the directors,
or as shall be stated in the notice of meeting.
Any directors' meeting may be held either within or without the State of
West Virginia.
3.8 Quorum of Directors. A majority of the full board of directors shall
constitute a quorum for the transaction of business at any meeting of the board
of directors, but if less than such majority is present at a meeting, a majority
of the directors present may adjourn the meeting from time to time without
further notice.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the board of directors.
3.9 Action by Directors Without a Meeting. Any action required or
permitted to be taken at a meeting of the directors or of a committee thereof
may be taken without a
7
<PAGE> 8
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors or all of the members of the committee, as the
case may be, entitled to vote with respect to the subject matter thereof.
3.10 Executive and Other Committees. The board of directors, by resolution
adopted by a majority of the full board, may designate from among its members an
executive committee and one or more other committees. The designation of such
committee and the delegation thereof of authority shall not operate to relieve
the board of directors, or any member thereof, of any responsibility imposed by
law.
The executive committee, when the board of directors is not in session,
shall have and may exercise all of the authority of the board of directors
except to the extent, if any, that such authority shall be limited by the
resolution appointing the executive committee and except also that the executive
committee shall not have the authority of the board of directors in reference to
amending the Articles of Incorporation, adopting a plan of merger or
consolidation, recommending to the shareholders the sale, lease, exchange or
other disposition of all or substantially all of the property and assets of the
corporation otherwise than in the usual and regular course of its business,
recommending to the shareholders a voluntary dissolution of the corporation or a
revocation thereof, amending the By-Laws of the
8
<PAGE> 9
corporation, filling vacancies on the board of directors, or changing the number
of authorized directors.
Any vacancy in the executive committee may be filled by a resolution
adopted by a majority of the full board of directors.
The executive committee shall keep regular minutes of its proceedings and
report the same to the board of directors for its information at the meeting
thereof held next after the proceedings shall have been taken.
ARTICLE 4
NOTICES
4.1 Notices. Whenever, under the provisions of law or of the Articles of
Incorporation or of these By-Laws, notice is required to be given to any
director or shareholder, such notice may be given in writing, by mail, addressed
to such director or shareholder, at his address as it appears on the records of
the corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company.
With the exception of special meetings of directors for the purpose of
amending the By-Laws or authorizing the sale
9
<PAGE> 10
of all or substantially all of the assets of the corporation and special
meetings of shareholders, neither the business to be transacted at, nor the
purpose of, any regular or special meeting of shareholders or of the board of
directors need be specified in the notice or waiver of notice of such meeting.
4.2 Waiver of Notice. Whenever any notice is required to be given to any
shareholder or director of the corporation under the provisions of these By-Laws
or the Articles of Incorporation or by law, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
4.3 Waiver by Attendance. The attendance of a shareholder, in person or by
proxy, or a director at a meeting shall constitute a waiver of notice of such
meeting, except where a shareholder or director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
ARTICLE 5
OFFICERS
5.1 Officers. The officers of the corporation shall consist of a
President, a Secretary and a Treasurer, each of whom shall be elected by the
board of directors. The board of directors may also elect a Chairman, a Vice
Chairman, one
10
<PAGE> 11
or more Vice Presidents, and one or more Assistant Secretaries and Assistant
Treasurers. None of the officers of the corporation need be directors. Any two
or more offices, except those of President and Secretary, may be held by the
same person.
5.2 Election. The officers shall be elected at the first meeting of the
board of directors after each annual meeting.
5.3 Other Officers. The board of directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
5.4 Term, Vacancies. The officers of the corporation shall hold office
until their successors are chosen and qualify. Any officers elected or appointed
by the board of directors may be removed at any time by the board of directors
but such removal shall be without prejudice to the contract rights, if any, of
the officer so removed. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
5.5 Chairman. The Chairman of the board of directors, if one be elected,
shall preside at all meetings of the board of directors and shall have and
perform such other duties as from time to time may be assigned to him by the
board of directors.
11
<PAGE> 12
5.6 Vice Chairman. The Vice Chairman of the board of directors, if one be
elected, shall have such powers and perform such duties as from time to time may
be assigned to him by the board of directors.
5.7 President. The President shall be the chief executive officer of the
corporation and shall have the general powers and duties of supervision and
management usually vested in the office of president of a corporation. He shall
preside at all meetings of the shareholders if present thereat, and in the
absence of the Chairman or if none was elected, at all meetings of the board of
directors, and shall have general supervision, direction and control of the
business of the corporation. Except as the board of directors shall authorize
the execution thereof in some other manner, he shall execute bonds, mortgages
and other contracts on behalf of the corporation, and shall cause the seal to be
affixed to any instrument requiring it. When so affixed the seal shall be
attested by the signature of the Secretary or the Treasurer or an Assistant
Secretary or an Assistant Treasurer.
5.8 Vice President. Each Vice President shall have such powers and shall
perform such duties as shall be assigned to him by the directors. The Vice
President, or if there is more than one Vice President the senior Vice
President, shall, in the absence or disability of the
12
<PAGE> 13
President, perform the duties and exercise the powers of the President.
5.9 Treasurer. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate account of receipts and
disbursements in books belonging to the corporation. He shall deposit all moneys
and other valuables in the name and to the credit of the corporation in such
depositories as may be designated by the board of directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the board of directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and board of directors at
the regular meetings of the board of directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the board of directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
5.10 Secretary. The Secretary shall give, or cause to be given, notice of
all meetings of shareholders and directors and all other notices required by law
or by these By-Laws, but any such notice may be given by any other person as
authorized or directed. He shall record all the proceedings of the shareholders
and directors in books
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maintained for that purpose, and shall have custody of the seal of the
corporation. He shall affix the seal of the corporation to all instruments
requiring it and attest the same.
5.11 Assistant Treasurers and Assistant Secretaries. Assistant Treasurers
and Assistant Secretaries, if any shall be elected, shall have such powers and
shall perform such duties as shall be assigned to them, respectively, by the
directors.
ARTICLE 6
INDEMNIFICATION
To the full extent permitted by law, the corporation may indemnify
any person and his heirs, distributees, next of kin, successors, appointees,
executors, administrators, legal representatives and assigns who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, domestic or foreign,
against expenses, attorneys' fees, court costs, judgments, fines, amounts paid
in settlement
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<PAGE> 15
and other losses actually and reasonably incurred by him in connection with such
action, suit or proceeding.
ARTICLE 7
MISCELLANEOUS
7.1 Share Certificates. The shares of the corporation shall be represented
by certificates signed by the President or a Vice-President and the Secretary or
an Assistant Secretary of the corporation, and may be sealed with the seal of
the corporation or a facsimile thereof. Such certificates shall be issued to
each shareholder certifying the number of shares owned by him in the
corporation. When such certificates are countersigned by a transfer agent or
registrar, other than the corporation or its employee, the required officers'
signatures thereupon may be facsimiles. No certificates shall be issued for any
share unless such share is fully paid.
7.2 Lost Certificates. The board of directors may direct a new certificate
to be issued in place of any certificate theretofore issued by the corporation
alleged to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made
15
<PAGE> 16
against it with respect to any such certificate alleged to have been lost or
destroyed.
7.3 Transfer of Shares. Transfer of shares of the corporation shall be
made only on the transfer books of the corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
7.4 Closing of Transfer Books. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the board
of directors may fix in advance a record date for any such determination of
shareholders, such date to be not more than fifty days and, in case of a meeting
of shareholders, not less than ten days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If no record date is fixed for the determination of shareholders
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<PAGE> 17
entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the board of directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
7.5 Voting Record. The officer or agent having charge of the transfer
books of the corporation shall make a complete record of the shareholders
entitled to vote at each meeting of shareholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. Such record shall be produced and kept open at the time and place
of the meeting and shall be subject to the inspection of any shareholder during
the whole time of the meeting for the purposes thereof.
7.6 Dividends. The board of directors may, from time to time, declare and
the corporation may pay dividends on its outstanding shares in the manner and
upon the terms and conditions provided by law and the Articles of Incorporation.
Before payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors in their
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absolute discretion deem proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall deem conducive to
the interests of the corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
7.7 Reliance on Records. Each officer and director shall in the
performance of his duties be fully protected in relying in good faith upon the
books of account of the corporation, or upon reports made to the corporation by
any of its officials, or by an independent certified public accountant, or by an
appraiser selected with reasonable care, or in relying in good faith upon other
records of the corporation.
7.8 Checks. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate by resolution.
7.9 Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
7.10 Seal. The corporate seal shall be circular in form and shall contain
the name of the corporation, the year of its incorporation and the words
"Corporate Seal, West Virginia".
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7.11 Amendments. These By-Laws may be amended or repealed and new By-Laws
may be adopted: (1) by the shareholders at any annual meeting, or at any special
meeting if notice of the proposed amendment or repeal is contained in the notice
of such special meeting, by the affirmative vote of a majority of the shares
entitled to vote thereat; (2) by the board of directors at any regular meeting,
or at any special meeting if notice of the proposed amendment or repeal is
contained in the notice of such special meeting; or (3) by unanimous written
consent of the shareholders or directors.
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<PAGE> 1
Exhibit 3.21
CERTIFICATE OF INCORPORATION
-of-
VANTRANS, INC.
1. The name of the corporation is
VANTRANS, INC.
2. The address of its registered office in the State of Delaware is
No. 100 West Tenth Street in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
3. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
4. The total number of shares of stock which the corporation is
authorized to issue is one thousand (1,000) and the par value of each of such
shares is One Hundred Dollars ($100.00) amounting in the aggregate to One
Hundred Thousand Dollars ($100,000.00).
The name and mailing address of the incorporator is:
NAME MAILING ADDRESS
- ---- ---------------
Mark R. Joseph 1114 Avenue of the Americas
New York, New York 10036
6. The corporation is to have perpetual existence.
7. The corporation shall indemnify to the full extent authorized by
the laws of the State of Delaware any person who was or is a party or is
threatened to be
<PAGE> 2
2
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including an action by
or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint-venture, trust or other enterprise.
8. Meetings of stockholders may be held within or without the State
of Delaware, as the by-laws may provide. The books of the corporation may be
kept (subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the by-laws of the corporation. Elections of directors
need not be by written ballot unless the by-laws of the corporation shall so
provide.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 3rd day of October, 1975.
/s/ Mark R. Joseph
---------------------------
Mark R. Joseph
<PAGE> 3
3
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
BE IT REMEMBERED THAT on this 3rd day of October A.D., 1975,
personally came before me, Ruta Lacis a Notary Public in and for the County and
State aforesaid, MARK R. JOSEPH, signatory of the foregoing Certificate of
Incorporation, known to me personally to be such, and acknowledged the said
Certificate to be his act and deed, and that the facts therein stated are truly
set forth.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ Ruta Lacis
----------------------------------
NOTARIAL SEAL
RUTA LACIS
NOTARY PUBLIC, State of New York
No. 24-4525102
Qualified in Kings County
Commission Expires March 30, 1976
<PAGE> 1
Exhibit 3.22
BY-LAWS
OF
VANTRANS, INC.
(a Delaware corporation)
----------------------------------
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be established
and maintained at No. 100 West Tenth Street, Wilmington, Delaware. The
Corporation Trust Company shall be the registered agent of this corporation in
charge thereof.
Section 2. Other Offices. The corporation may have other offices, either
within or without the State of Delaware, at such place or places as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting shall be held at such place, either within or without the
<PAGE> 2
State of Delaware, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of the meeting.
Section 2. Other Meetings. Meetings of stockholders for any purpose other
than the election of directors may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting.
Section 3. Voting. Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three years from its date unless such proxy provides
for a longer period. Upon the demand of any stockholder, the vote for directors
and the vote upon any question before the meeting shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any
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<PAGE> 3
purpose germane to the meeting, during ordinary business hours, for a period of
at least ten days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 4. Quorum. Except as otherwise required by law, by the
Certificate of Incorporation or by these by-laws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have the power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until the requisite amount of stock entitled
to vote shall be present. At such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall
3
<PAGE> 4
be entitled to vote at any adjournment or adjournments thereof.
Section 5. Special Meetings. Special meetings of the stockholders for any
purpose or purposes may be called by the President or Secretary, or by
resolution of the directors.
Section 6. Notice of Meetings. Written notice, stating the place, date and
time of the meeting, and the general nature of the business to be considered,
shall be given to each stockholder entitled to vote thereat at his address as it
appears on the records of the corporation, not less than ten nor more than fifty
days before the date of the meeting. No business other than that stated in the
notice shall be transacted at any meeting without the unanimous consent of all
the stockholders entitled to vote thereat.
Section 7. Action Without Meeting. Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize
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<PAGE> 5
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. Number and Term. The number of directors shall be not less than
two and not more than seven. The directors shall be elected at the annual
meeting of the stockholders and each director shall be elected to serve until
his successor shall be elected and qualified. Directors need not be
stockholders.
Section 2. Removal. Any director or directors may be removed either for or
without cause at any time by the affirmative vote of the holders of a majority
of all the shares of stock outstanding and entitled to vote, at a special
meeting of the stockholders called for the purpose, and the vacancies thus
created may be filled, at the meeting held for the purpose of removal, by the
affirmative vote of a majority in interest of the stockholders entitled to vote.
Section 3. Increase of Number. The number of directors may be increased by
amendment of these By-Laws by
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<PAGE> 6
the affirmative vote of a majority of the directors, though less than a quorum,
or, by the affirmative vote of a majority in interest of the stockholders, at
the annual meeting or at a special meeting called for that purpose, and by like
vote the additional directors may be chosen at such meeting to hold office until
the next annual election and until their successors shall have been elected and
qualified.
Section 4. Powers. The Board of Directors shall exercise all of the powers
of the corporation except such as are by law or by the Certificate of
Incorporation of the corporation or by these By-Laws conferred upon or reserved
to the stockholders.
Section 5. Committees. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole board, designate one or more
committees, each committee to consist of two or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of such committee or committees. The member or members thereof present
at any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
6
<PAGE> 7
Any such committee, to the extent provided in the resolution of the Board
of Directors, or in these By-Laws, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority to amend the Certificate of Incorporation, to adopt an
agreement of merger or consolidation, to recommend to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, to recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or to amend the By-Laws of the corporation; and,
unless the resolution, these By-Laws, or the Certificate of Incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock.
Section 6. Meetings. The newly elected directors may hold their first
meeting for the purpose of organization and the transaction of business, if a
quorum be present, immediately after the annual meeting of the stockholders; or
the time and place of such meeting may be fixed by consent in writing of all the
directors.
7
<PAGE> 8
Regular meetings of the directors may be held without notice at such
places and times as shall be determined from time to time by resolution of the
directors.
Special meetings of the board may be called by the President or by the
Secretary on the written request of any two directors on at least two days'
notice to each director and shall be held at such place or places as may be
determined by the directors, or as shall be stated in the call of the meeting.
Section 7. Quorum. One-third of the total number of directors shall
constitute a quorum for the transaction of business. If at any meeting of the
Board of Directors there shall be less than a quorum present, a majority of
those present may adjourn the meeting from time to time until a quorum is
obtained, and no further notice thereof need be given other than by announcement
at the meeting which shall be so adjourned.
Section 8. Compensation. Directors shall not receive any stated salary for
their services as directors or as members of committees, but by resolution of
the Board of Directors a fixed fee and expenses of attendance may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
8
<PAGE> 9
Section 9. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting, if a written consent thereto is signed by all
members of the Board of Directors, or of such committee as the case may be, and
such written consent is filed with the minutes of proceedings of the Board of
Directors or committee.
Section 10. Participation by Conference Telephone. Members of the Board of
Directors of the corporation, or any committee designated by such board, may
participate in a meeting of such board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
shall constitute presence in person at such meeting.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the corporation shall be a President,
a Treasurer, and a Secretary, all of whom shall be elected by the Board of
Directors and who shall hold office until their successors are elected and
qualified. In addition, the Board of Directors may elect a Chairman, one or more
Vice Presidents and such Assistant
9
<PAGE> 10
Secretaries and Assistant Treasurers as they may deem proper. None of the
officers of the corporation need be directors. The officers shall be elected at
the first meeting of the Board of Directors after each annual meeting. More than
two offices may be held by the same person.
Section 2. Other Officers and Agents. The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 3. Chairman. The Chairman of the Board of Directors, if one be
elected, shall preside at all meetings of the Board of Directors and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors.
Section 4. President. The President shall be the chief executive officer
of the corporation and shall have the general powers and duties of supervision
and management usually vested in the office of president of a corporation. He
shall preside at all meetings of the stockholders if present thereat, and, in
the absence or non-election of the Chairman of the Board of Directors, at all
meetings of the Board of Directors, and shall have general supervision,
direction and control of the business of the corporation.
10
<PAGE> 11
Except as the Board of Directors shall authorize the execution thereof in some
other manner, he shall execute bonds, mortgages and other contracts in behalf of
the corporation, and shall cause the seal to be affixed to any instrument
requiring it and when so affixed the seal shall be attested by the signature of
the Secretary or the Treasurer or an Assistant Secretary or an Assistant
Treasurer.
Section 5. Vice President. Each Vice President shall have such powers and
shall perform such duties as shall be assigned to him by the directors.
Section 6. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial
11
<PAGE> 12
condition of the corporation. If required by the Board of Directors, he shall
give the corporation a bond for the faithful discharge of his duties in such
amount and with such surety as the Board of Directors shall prescribe.
Section 7. Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by law or by these By-Laws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the President, or by the directors, or stockholders, upon whose requisition
the meeting is called as provided in these By-Laws. He shall record all the
proceedings of the meetings of the corporation and of the directors in a book to
be kept for that purpose, and shall perform such other duties as may be assigned
to him by the directors or the President. He shall have the custody of the seal
of the corporation and shall affix the same to all instruments requiring it,
when authorized by the directors or the President, and attest the same.
Section 8. Assistant Treasurers and Assistant Secretaries. Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
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ARTICLE V
MISCELLANEOUS
Section 1. Resignations. Any director, member of a committee or corporate
officer may, provided the same would not result in a breach of any contract to
which said person is a party, resign at any time. Such resignation shall be made
in writing, and shall take effect at the time specified therein, and if no time
be specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
Section 2. Vacancies. If the office of any director, member of a committee
or corporate officer becomes vacant, by reason of death, disability or
otherwise, the remaining directors in office, though less than a quorum, by a
majority vote may appoint any qualified person to fill such vacancy, who shall
hold office for the unexpired term and until his successor shall be duly chosen.
Section 3. Certificates of Stock. Certificates of stock, signed by the
Chairman of the Board of Directors, or the President or any Vice President, and
the Treasurer or an Assistant Treasurer, or Secretary to an Assistant Secretary,
shall be issued to each stockholder certifying the number of shares owned by him
in the corporation. When such certificates are countersigned (1) by a transfer
agent other than the corporation or its employee, or (2) by a registrar
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other than the corporation or its employee, the signatures of such officers may
be facsimile.
Section 4. Lost Certificates. A new certificate of stock may be issued in
the place of any certificate theretofore issued by the corporation, alleged to
have been lost or destroyed, and the directors may, in their discretion, require
the owner of the lost or destroyed certificate, or his legal representatives, to
give the corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock represented by such certificate, to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss of any such certificate, or the issuance of any such new
certificate.
Section 5. Transfer of Shares. The shares of stock of the corporation
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such transfer
the old certificates shall be surrendered to the corporation by the delivery
thereof to the person in charge of the stock transfer books and ledgers, or to
such other person as the directors may designate, by whom they shall be
cancelled, and new certificates shall thereupon be issued. A record shall be
made of each transfer and whenever a transfer shall
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be made for collateral security, and not absolutely, it shall be so expressed in
the entry of the transfer.
Section 6. Stockholders Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 7. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any
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funds of the corporation available for dividends, such sum or sums as the
directors from time to time in their discretion deem proper for working capital
or as a reserve fund to meet contingencies or for equalizing dividends or for
such other purposes as the directors shall deem conducive to the interests of
the corporation.
Section 8. Seal. The corporate seal shall be circular in form and shall
contain the name of the corporation, the year of its creation and the words
"CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.
Section 9. Fiscal Year. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors. In the absence of such
determination, the fiscal year shall be the year beginning June 1 and ending May
31.
Section 10. Checks. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 11. Notice and Waiver of Notice. Whenever any notice is required
by these By-Laws to be given, personal
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notice is not meant unless expressly so stated, and any notice so required shall
be deemed to be sufficient if given by depositing the same in the United States
mail, postage prepaid, addressed to the person entitled thereto at his address
as it appears on the records of the corporation, and such notice shall be deemed
to have been given on the day of such mailing. Stockholders not entitled to vote
shall not be entitled to receive notice of any meetings except as otherwise
provided by statute.
Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation of the
corporation or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE VI
INDEMNIFICATION
To the full extent permitted by law, the corporation may indemnify any
person or his heirs, distributees, next of kin, successors, appointees,
executors, administrators, legal representatives and assigns who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the
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<PAGE> 18
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, domestic or foreign, against expenses,
attorneys' fees, court costs, judgments, fines, amounts paid in settlement and
other losses actually and reasonably incurred by him in connection with such
action, suit or proceeding.
ARTICLE VII
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at any
annual meeting of the stockholders or at any special meeting thereof by the
affirmative vote of a majority of the stock issued and outstanding and entitled
to vote thereat, or by the affirmative vote of a majority of the Board of
Directors, at any regular meeting of the Board of Directors, or at any special
meeting of the Board of Directors.
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<PAGE> 1
Exhibit 3.23
ARTICLES OF INCORPORATION
OF
MELROSE COAL COMPANY, INC.
I. The undersigned agrees to become a corporation by the name of
MELROSE COAL COMPANY, INC.
II. The existence of this corporation shall be perpetual.
III. The purposes for which this corporation is organized shall include the
transaction of any or all lawful business for which corporations may be
incorporated in the State of West Virginia.
IV. The principal office of this corporation shall be at 2708 Cranberry
Square, Morgantown, West Virginia 26505. The name and address of the
person to whom shall be sent notice or process served upon , or service of
which is accepted by, the Secretary of State, is James A. Walls, Esquire,
2708 Cranberry Square, Morgantown, West Virginia 26505.
V. The name and address of the sole incorporator is:
B. Judd Hartman
300 Kanawha Boulevard, East
Charleston, WV 25301
VI. The number of directors constituting the initial Board of Directors of
this corporation is one, and the name and address of the person who shall
serve as the sole director until the first annual meeting of shareholders
or until his successor or successors are elected and qualified is:
Bruce Sparks
2708 Cranberry Square
Morgantown, WV 26505
<PAGE> 2
VII. The bylaws of this corporation, when adopted by the initial Board of
Directors, shall provide for a Board of Directors which may consist of any
number of persons provided for in said bylaws, or such number of persons
as may be determined from time to time by the shareholders.
VIII. The amount of the total authorized capital stock of this corporation shall
be One Thousand Dollars ($1,000), which shall be divided in to One Hundred
(100) shares of the par value of Ten Dollars ($10.00) each, and which
shall constitute a single class of shares. The shareholders of this
corporation shall not have a preemptive right to subscribe for, purchase,
or take any part of any unissued or treasury shares issued or to be issued
or sold by this corporation, or any securities of this corporation
convertible into shares of this corporation issued or to be issued by it,
after its incorporation.
The undersigned, for the purpose of forming a corporation under the laws
of the State of West Virginia, does hereby make and file these Articles of
Incorporation, and has accordingly hereunto set his hand this 26th day of
December, 1995.
/s/ B. Judd Hartman
-----------------------------
B. Judd Hartman
2
<PAGE> 3
STATE OF WEST VIRGINIA,
COUNTY OF KANAWHA, ss:
I, C.A. Baker, a Notary Public in and for the County and State
aforesaid, hereby certify that B. Judd Hartman, whose name is signed to the
foregoing Articles of Incorporation, bearing date on the 26th day of December,
1995, this day personally appeared before me in my said county and acknowledged
his signature to the same.
Given under my hand and official seal this 26th day of December,
1995.
My commission expires: 12//23/97 .
-----------------
/s/ C.A. Baker
---------------------------------
Notary Public
(NOTARIAL SEAL)
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINA
C.A. BAKER
P.O. Box 2214
Charleston, West Virginia 25328
My Commission Expires Dec. 23, 1997
The foregoing Articles of Incorporation were prepared by B. Judd Hartman,
Esquire, SPILMAN, THOMAS & BATTLE, 300 Kanawha Boulevard, East, Charleston, West
Virginia 25301.
3
<PAGE> 1
Exhibit 3.24
BYLAWS
OF
MELROSE COAL COMPANY, INC.
December 27, 1995
ARTICLE I
OFFICES
Section 1.1. The principal offices and place of business of this
corporation will be in the City of Morgantown, County of Monongalia, State of
West Virginia, at 2708 Cranberry Square. The Board of Directors may change the
location of said principal office and of said principal place of business, or
either, from time to time as it may deem advisable, and may also establish such
offices or places of business elsewhere as in the opinion of the Board may be
advisable.
ARTICLE II
SHAREHOLDERS
Section 2.1. Annual Meetings. The annual meetings of the
shareholders of this corporation shall be held sometime during the first quarter
of each year, on such date as may be fixed by the Board of Directors, either at
the principal office of the corporation or at such other place, either within or
without the State of West Virginia, as the Board of Directors may fix by
resolution. The Board of Directors may by resolution authorize any officer or
officers to fix the date and place of such annual meeting.
Section 2.2. Special Meetings. Special meetings of the shareholders
may be called at any time by the Board of Directors, the President and
Secretary, or any number of shareholders holding in the aggregate at least
one-tenth of the number of shares entitled to vote at the meeting. Such meetings
shall be held at the principal office of the corporation unless the Board of
Directors or other persons calling such meeting shall fix some other place for
the meeting, which may be either within or without the State of West Virginia.
Section 2.3. Notice of Meetings. Notice of the annual and all other
meetings of the shareholders shall be given by written notice stating the place,
day and hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which and the officers or persons by whom the meeting is called,
and shall be delivered not less than ten and not more than fifty days before the
date of the meeting, either personally or by mail. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his last post office address appearing on the records of the
corporation, with postage thereon prepaid. It shall be the duty of every
shareholder to furnish to the Secretary of the corporation his post office
address and to notify the Secretary of any change therein. Notice of all
meetings shall be given to each shareholder of record entitled to vote at the
meeting.
<PAGE> 2
Section 2.4. Waiver of Notice. Any meeting of the shareholders may
be held by agreement in writing signed by all shareholders, and, where notice of
publication of any notice is required, the same may be waived in writing signed
by all the shareholders entitled to such notice, filed with the records of the
meeting, whether before or after the time stated therein. Any meeting of the
shareholders at which every shareholder is present or represented by proxy shall
be valid, notwithstanding lack or insufficiency of notice.
Section 2.5. Action by Shareholders Without Meeting. Whenever the
vote of the shareholders at a meeting thereof is required or permitted to be
taken in connection with any corporate action, the meeting and vote of such
shareholders may be dispensed with if all of the shareholders who would have
been entitled to vote upon the action, if such meeting were held, shall agree in
writing to such corporate action being taken, and such agreement shall have like
effect and validity as though the action were duly taken by the unanimous action
of all shareholders entitled to vote at a meeting of such shareholders duly
called and legally held.
Section 2.6. Quorum; Adjournments. At all meetings of the
shareholders, a quorum shall consist of at least a majority of all of the shares
of stock issued and outstanding and entitled to vote, represented either in
person or by prosy. If a sufficient number of shares is not present at the time
and place appointed, any number of shares present or represented, less than a
quorum, may adjourn any shareholders meeting from time to time until a quorum is
present and the business to come before the meeting is completed.
Section 2.7. Voting. If a quorum is present at any meeting of the
shareholders duly and properly called and held, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be and constitute the act of the shareholders, except in
the matter of election of directors, and unless the vote of a greater number, or
other vote, is required by law or by the Articles of Incorporation or bylaws of
this corporation. Except as otherwise provided by law, or by the Articles of
Incorporation or bylaws of this corporation, each outstanding share shall be
entitled to one vote on each matter submitted to vote at any meeting of the
shareholders, and may be voted by the shareholder either in person or by written
proxy. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
Section 2.8. Record of Meetings. A record shall be kept of the
meetings of the shareholders and the action taken at the same, which shall be
verified by the signature of the Chairman of the meeting and the person acting
as Secretary thereof.
ARTICLE III
DIRECTORS
Section 3.1. Number, Qualification and Term of Office. The business,
property and affairs of the corporation shall be managed and controlled by its
Board of Directors. The Board of Directors shall consist of not fewer than one
and not more than five persons, as may be determined by the shareholders from
time to time, and shall be elected at the first annual meeting of the
shareholders and at every annual meeting thereafter. Directors need
2
<PAGE> 3
not be shareholders of the corporation nor residents of the State of West
Virginia. They shall hold office until the next succeeding annual meeting and
until their successors are elected and qualified.
Section 3.2. Elections. In all elections of directors each
shareholder shall have the right to vote, in person or by proxy, the number of
shares owned by him and entitled to vote, for as many persons as there are
directors to be elected, and for whose election he has a right to vote, or he ma
cumulate such votes and give on candidate as many votes as the number of
directors to be elected multiplied by the number of his shares shall equal; or
he may distribute them on the same principle among as many candidates and in
such manner as he shall desire.
Section 3.3. Removal of Directors. The shareholders, at any meeting
thereof called expressly for the purpose, may remove any director or the entire
Board of Directors, with or without cause, by vote of the holders of a majority
of the shares entitled to vote at an election of directors. However, if less
than the entire Board is to be removed, no none of the directors may be removed
if the votes cast against his removal would be sufficient to elect him.
Section 3.4. Vacancies. Any vacancy in the Board of Directors
resulting from removal of a director shall be filled by the shareholders at the
meeting at which such removal occurs. A vacancy resulting from an increase in
the number of directors shall likewise be filled by the shareholders at the
meeting at which such increase is made. A vacancy in the Board occurring from
any other cause, or from the failure of the shareholders to act, may be filled
by the affirmative vote of a majority of the remaining directors, though less
than a quorum. Any director elected or appointed to fill a vacancy shall serve
until the next annual election of directors.
Section 3.5. Meetings. Regular meetings of the Board of Directors
may be held at such time and place as may be prescribed by these bylaws, or as
the Board may from time to time designate. Special meetings of the Board may be
called by the President, a Vice-President, or any two directors. Meetings of the
Board may be held either within or without the State of West Virginia. Notice of
all meetings of the Board shall be given by the Secretary of the corporation or
by the person or persons calling such meeting, and , in the case of a special
meeting, shall state by whom it is called. Such notice shall be given at least
forty-eight hours before the time of such meeting, either by written notice
thereof mailed to each director, or by telegram or telephone. Except as
otherwise provided by law, the notice of any meeting of the Board need not
specify the purpose of or the business to be transacted at the meeting.
Section 3.6. Wavier of Notice. Any meeting of the directors may be
held by agreement in writing signed by all the directors, and where notice of
any meeting is required, a waiver thereof in writing, signed by the director or
directors entitled to notice, filed with the records of the meeting, whether
before or after the time stated therein, shall be equivalent to the giving of
such notice. Attendance of a director at a meeting of the directors shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called
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<PAGE> 4
or convened. Except as provided in the next preceding sentence, any meeting of
the directors at which every director is present in person shall be valid,
notwithstanding lack or insufficiency of notice.
Section 3.7. Action by Directors Without Meeting. Whenever the vote
of directors at a meeting thereof is required or permitted to be taken in
connection with any corporate actions, the meeting and vote of such directors
may be dispensed with if all the directors shall agree in writing to such
corporate action being taken, and such agreement shall have like effect and
validity as though the action were duly taken by the unanimous action of all
directors at a meeting thereof duly called and legally held.
Section 3.8. Quorum. A majority of the number of directors fixed by
the shareholders, as provided in these bylaws, shall constitute a quorum for the
transaction of business. The act of a majority of the directors present at any
meeting at which a quorum is present shall be and constitute the act of the
Board of Directors. If at any meeting of the Board there is less than a quorum
present, a majority of the directors present may adjourn the meeting from time
to time until a quorum is present.
Section 3.9. Conflicts of Interest. No contract or transaction
between this corporation and any one or more of its directors, or between this
corporation and any other corporation, firm, association, or entity in which one
or more of its directors are directors or officers, or are financially
interested, shall be either void or voidable because of such relationship or
interest, or because such director or directors are present at the meeting of
the Board of Directors, or a committee thereof, which authorizes, approves, or
ratifies such contract or transaction, or because his or their votes are counted
for such purpose, if:
(a) The fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves, or
ratifies the contract or transaction by a vote or consent sufficient for
the purpose without counting the votes or consents of such interested
directors; or
(b) The fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote, and they authorize, approve or
ratify such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable to this
corporation.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or a committee thereof wich
authorizes, approves, or ratifies such contract or transaction. On any question
involving the authorization, approval, or ratification of any such contract or
transaction, the names of those voting each way shall be entered on the record
of the proceedings.
Section 3.10. Record of the Board. The Board of Directors shall
cause to be kept a record of its proceedings, which shall be verified by the
signatures of the persons acting as
4
<PAGE> 5
Chairman and Secretary of the meeting. Any member of the Board of Directors, at
his request, shall have the right to have his vote recorded in the minutes of
the meeting on any question coming before the Board.
Section 3.11. Voting of Corporate Stock. The Board of Directors may
by resolution provide that any share of the capital stock of any other
corporation or corporations owned by this corporation, or by such other person
or persons, as the Board shall designate, either generally or with respect to
any specific corporation, meeting or matter. In the absence of any resolution of
the Board of Directors applying tot he shares of the capital stock of the
corporation, or to any meeting or matter, the President of this corporation is
authorized to vote such shares of the capital stock of such other corporation,
either in person or by proxy given to any other officer of person, or persons,
in his discretion, in such manner as he shall deem advisable and for the best
interests of this corporation.
ARTICLE IV
OFFICERS AND AGENTS
Section 4.1. Election and Appointment. As soon as may be after their
election the Board of Directors shall choose a President of the corporation, who
shall hold office until the next annual election of officers and until his
successor is elected and qualified. At the same time the Board of Directors
shall choose a Secretary and a Treasurer. The directors may at any time elect
from among the directors a Chairman of the Board of Directors, and may also
elect one or more Vice-Presidents, an Assistant Secretary and an Assistant
Treasurer. The person holding any office may, but need not be, a member of the
Board. Any two or more offices may be held by the same person, except the
offices of President and Secretary.
Section 4.2. Other Officers and Agents. The Board of Directors may
employ a manager and such other employees, servants, agents, attorneys and
representatives at the Board may deem advisable, to perform such duties as the
Board may prescribe.
Section 4.3. Bond. If required by the Board, the Treasurer,
Secretary, or any other officer, agent or employee shall give bond payable to
the corporation in such penalty and with such conditions and security as the
Board may approve.
Section 4.4. Compensation. The Board of Directors of this
corporation shall have the authority to fix the compensation of all officers,
including members of the Board of Directors.
Section 4.5. President. The President shall be the chief executive
officer of the corporation. HE shall preside at all meetings of the shareholders
and directors at which he is in attendance, unless the directors shall elect a
Chairman of the Board to preside at meetings of the Board. Unless some other
officer or agency is specially appointed and authorized for the purpose, the
President shall sign the corporate name of the corporation to all deeds,
mortgages,
5
<PAGE> 6
writings and other contracts made by the corporation, except such as are
necessary or incidental to the exercise of the powers vested in other officers
or agents by the Board of Directors; and, generally, the President shall have
and exercise supervision and control over all the business, affairs and property
of the corporation, and shall perform such duties as are incident to the conduct
of its business not otherwise provided for in these bylaws or by action of the
Board of Directors.
Section 4.6. Vice-President. The Vice-President shall in the absence
or incapacity of the President perform the duties of the President and shall
have such other powers and authority as may be assigned to him by the Board of
Directors, either generally or specially. If there shall be more than one
Vice-President, each shall have duties, powers and authority as may be assigned
to him by the Board of Directors, and, unless otherwise provided by the Board of
Directors, each shall be authorized to perform the duties of the President in
his absence or incapacity in the order of their designation or election.
Section 4.7. Secretary. The Secretary or an Assistant Secretary,
shall have the custody of the minute book, stock book, corporate seal and all
records and papers of the corporation, subject to the supervision and control of
the President, except such as the Board may put in the custody of other
officers, agents or employees. The Secretary, or an Assistant Secretary, shall
attend all meetings of the shareholders and of the Board of Directors and act as
Secretary thereof, keeping a record of the proceedings of such meetings in a
book to be maintained for the purpose. He shall give or cause to be given,
unless otherwise specially provided, notice of all meetings of the shareholders,
directors, committees and other meetings of he officers or representatives of
the corporation, and shall perform such other duties as may be prescribed for
him by the board of Directors or the President.
Section 4.8. Treasurer. The Treasurer, or an Assistant Treasurer,
shall have custody of the corporate funds and securities, subject to the
supervision and control of the President. He shall cause to be kept full and
accurate accounts of receipts and disbursements of the corporation in proper
books to be furnished for that purpose by the corporation; cause all moneys and
other valuable effects to be deposited to the credit of the corporation, in such
depositories as may be designated by the Board of Directors; be responsible for
disbursing the funds of the corporation subject to such regulations as may be
prescribed by the Board of Directors, taking proper vouchers for such
disbursements; and he shall render to the President and to the directors at
regular meetings of the Board, whenever they, or any of them, may request it,
and account of all transactions of his office and of the financial condition of
the corporation, and such other reports as may from time to time be required of
him by the President or the Board.
Section 4.9. Removal of Officers. Any officer, employee, or agent of
the corporation may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. The election or appointment of any officer, employee, or agent of
the corporation shall not of itself be deemed to create any contract right.
6
<PAGE> 7
Section 4.10. Signature of Orders for the Payment of Money. All
checks, notes, drafts and other orders of the corporation for the payment of
money shall be drawn, signed or counter-signed as the Board of Directors may
from time to time prescribe.
ARTICLE V
CAPITAL STOCK
Section 5.1. Certificate of Stock. The Board of Directors shall
cause to be issued to any person appearing on the books of the corporation to be
the owner of any shares of its stock, a certificate or certificates therefore,
under the corporate seal of the corporation, to be signed by the President, or a
Vice-President, and the Secretary, or an Assistant Secretary, of the
corporation. Each certificate representing shares of the capital stock of the
corporation shall state on the face thereof that the corporation is organized
under the laws of the State of West Virginia; the name of the person to whom
issued; the number and class of shares which such certificate represents; and
the par value of each share represented by such certificate; and shall otherwise
be in such form as the Board of Directors may adopt. Such certificates shall be
issued in order from a stock certificate book to be kept by the Secretary under
the supervision of the Board. No such certificate shall be issued or delivered
until the stock represented thereby has been fully paid for; such payment may be
made in cash, in property, tangible or intangible, or in labor or services
actually performed for the corporation, but neither promissory notes nor future
services shall constitute such payment or part payment.
Section 5.2. Transfer of Stock. Shares of the capital stock of the
corporation shall be transferable only upon the books of the corporation by the
holder thereof in person or by attorney upon surrender and cancellation of the
certificate for the same.
Section 5.3. Lost Certificates. When a person, who appears by the
books of the corporation to own stock therein, claims that the certificate for
such stock has been lost, destroyed, or wrongfully taken, the proper officers of
the corporation shall issue to him a certificate in place and stead of the lost,
destroyed, or wrongfully taken certificate, if he shall request the issuance of
a new certificate before the corporation has notice that the old certificate has
been acquired by a bona fide purchaser, upon his compliance with the following
conditions:
(a) he shall file with the Secretary of the corporation an affidavit
setting forth the time, place and circumstances of the loss, destruction,
or taking, to the best of his knowledge and belief; and
(b) he shall execute and deliver to the corporation a bond with good
security in a penalty at least equal to the value of the shares of stock
represented by the lost, destroyed, or wrongfully taken certificate, in
form approved by the Board of Directors, to indemnify the corporation and
all persons whose rights may be affected by the issuance of the new
certificate against any loss in consequence of the issuance of the new
certificate.
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<PAGE> 8
A new certificate may be issued, in the discretion of the board of Directors,
without compliance with the foregoing requirements, upon such terms and
conditions as the Board of Directors may prescribed.
Section 5.4. Other Regulations. The Board of Directors shall have
the authority to make such other rules and regulations, not inconsistent with
law or these bylaws, concerning the issue, transfer, and delivery of
certificates of stock, as it may deem advisable.
ARTICLE VI
INDEMNIFICATION
Section 6.1. It shall be the policy of this corporation to indemnify
any person who serves, or has served, as a director, officer, employee or agent
of this corporation, or who serves or has served as a director, officer,
partner, employee, or agent of any other corporation, partnership, joint
venture, trust or enterprise at the request or direction of this corporation,
against expenses (including attorneys' fees), judgments, fines, taxes,
penalties, interest, and payments in settlement, in connection with any
threatened, pending or completed action or proceeding, and to pay any such
expenses in advance of the final disposition of nay such action or proceeding,
to the full extent contemplated and permitted by Section 9 of Chapter 31,
Article 1 of the Code of West Virginia of 1931, as amended, upon such finding or
determination as shall be requisite or appropriate under said section; and the
corporation is specifically empowered and authorized to purchase and maintain,
at the expense of the corporation, insurance on behalf of any such director,
officer, partner, employee or agent against any liability asserted against him
or her in such capacity or arising out of his or her status as such, whether or
not this corporation would have the power to indemnify him or her under the
provisions of said section.
ARTICLE VII
CORPORATE SEAL
Section 7.1. The seal to be here impressed,
containing the name of this corporation and the words (CORPORATE SEAL)
Corporation and the words "Corporate Seal, West
Virginia", is hereby adopted as and for the corporate
seal of this corporation.
ARTICLE VIII
AMENDMENTS
Section 8.1. These bylaws may be amended by the Board of Directors,
subject, however, to the power of the shareholders to repeal or change any
amendment made by the Board of Directors by affirmative vote of a majority of
the stock then issued and outstanding and entitled to vote thereon; and in the
event of any conflict the vote of the shareholders shall be controlling.
8
<PAGE> 1
Exhibit 3.25.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CONAS TRADING CORPORATION
(Pursuant to Section 242 of the General
Corporation Law of the State of Delaware)
CONAS TRADING CORPORATION, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Company"), does hereby
certify and set forth as follows:
FIRST: The amendment to the Company's Certificate of Incorporation set
forth below was unanimously approved by written consent of the Company's Board
of Directors, approved by written consent of the sole stockholder of the Company
and duly adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
SECOND: Article 1 of the Certificate of Incorporation of the Company is
hereby amended to read in its entirety as follows:
The name of the Corporation is MARINE COAL SALES COMPANY.
IN WITNESS WHEREOF, Conas Trading Corporation has caused this Certificate
of Amendment to be signed and attested by its duly authorized officers this 5th
day of January, 1994.
CONAS TRADING CORPORATION
By: /s/ Bruce Sparks
-------------------------
Bruce Sparks
Vice President
ATTEST: /s/ Marvin E. Milbauer
------------------------------
Secretary
<PAGE> 2
CERTIFICATE OF INCORPORATION
OF
CONAS TRADING CORPORATION
* * * * *
1. The name of the Corporation is CONAS TRADING CORPORATION.
2. The address of its registered office in the State of Delaware is 1209
Orange Street, in the City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is
to purchase and sell coal and other natural resources and products derived
therefrom, to participate in the ownership of other business entities, and to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the Corporation shall have
authority to issue is one thousand (1000) and the par value of each of such
shares is One Hundred Dollars ($100), amounting in the aggregate to One Hundred
Thousand Dollars ($100,000).
5. The name and mailing address of the incorporator is as follows:
<PAGE> 3
Name Mailing Address
---- ---------------
Marvin E. Milbauer 200 Park Avenue
New York, N.Y. 10166
6. The Corporation is to have perpetual existence.
7. The Corporation shall indemnify to the full extent authorized or
permitted by the laws of the State of Delaware any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
8. Meetings of stockholders may be held within or without the State of
Delaware as the by-laws may provide. The books of the Corporation may be kept
(subject to any provisions contained in the statutes) outside the State of
Delaware of such place or places as may be designated from time to time by the
Board of Directors or in the by-laws of the Corporation. Election of directors
need not be by written ballot unless the by-laws of the Corporation shall so
provide.
9. Following adoption by the incorporator of the Corporation's original
by-laws, the Board of Directors of
2
<PAGE> 4
the Corporation shall have the power to adopt, amend or repeal the Corporation's
by-laws.
10. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this Certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 24th day of September, 1985.
/s/ Marvin E. Milbauer
-----------------------------------
Marvin E. Milbauer
<PAGE> 1
writings and other contracts made by the corporation, except such as are
necessary or incidental to the exercise of the powers vested in other officers
or agents by the Board of Directors; and, generally, the President shall have
and exercise supervision and control over all the business, affairs and property
of the corporation, and shall perform such duties as are incident to the conduct
of its business not otherwise provided for in these bylaws or by action of the
Board of Directors.
Section 4.6. Vice-President. The Vice-President shall in the absence
or incapacity of the President perform the duties of the President and shall
have such other powers and authority as may be assigned to him by the Board of
Directors, either generally or specially. If there shall be more than one
Vice-President, each shall have duties, powers and authority as may be assigned
to him by the Board of Directors, and, unless otherwise provided by the Board of
Directors, each shall be authorized to perform the duties of the President in
his absence or incapacity in the order of their designation or election.
Section 4.7. Secretary. The Secretary or an Assistant Secretary,
shall have the custody of the minute book, stock book, corporate seal and all
records and papers of the corporation, subject to the supervision and control of
the President, except such as the Board may put in the custody of other
officers, agents or employees. The Secretary, or an Assistant Secretary, shall
attend all meetings of the shareholders and of the Board of Directors and act as
Secretary thereof, keeping a record of the proceedings of such meetings in a
book to be maintained for the purpose. He shall give or cause to be given,
unless otherwise specially provided, notice of all meetings of the shareholders,
directors, committees and other meetings of he officers or representatives of
the corporation, and shall perform such other duties as may be prescribed for
him by the board of Directors or the President.
Section 4.8. Treasurer. The Treasurer, or an Assistant Treasurer,
shall have custody of the corporate funds and securities, subject to the
supervision and control of the President. He shall cause to be kept full and
accurate accounts of receipts and disbursements of the corporation in proper
books to be furnished for that purpose by the corporation; cause all moneys and
other valuable effects to be deposited to the credit of the corporation, in such
depositories as may be designated by the Board of Directors; be responsible for
disbursing the funds of the corporation subject to such regulations as may be
prescribed by the Board of Directors, taking proper vouchers for such
disbursements; and he shall render to the President and to the directors at
regular meetings of the Board, whenever they, or any of them, may request it,
and account of all transactions of his office and of the financial condition of
the corporation, and such other reports as may from time to time be required of
him by the President or the Board.
Section 4.9. Removal of Officers. Any officer, employee, or agent of
the corporation may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. The election or appointment of any officer, employee, or agent of
the corporation shall not of itself be deemed to create any contract right.
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<PAGE> 2
Section 4.10. Signature of Orders for the Payment of Money. All
checks, notes, drafts and other orders of the corporation for the payment of
money shall be drawn, signed or counter-signed as the Board of Directors may
from time to time prescribe.
ARTICLE V
CAPITAL STOCK
Section 5.1. Certificate of Stock. The Board of Directors shall
cause to be issued to any person appearing on the books of the corporation to be
the owner of any shares of its stock, a certificate or certificates therefore,
under the corporate seal of the corporation, to be signed by the President, or a
Vice-President, and the Secretary, or an Assistant Secretary, of the
corporation. Each certificate representing shares of the capital stock of the
corporation shall state on the face thereof that the corporation is organized
under the laws of the State of West Virginia; the name of the person to whom
issued; the number and class of shares which such certificate represents; and
the par value of each share represented by such certificate; and shall otherwise
be in such form as the Board of Directors may adopt. Such certificates shall be
issued in order from a stock certificate book to be kept by the Secretary under
the supervision of the Board. No such certificate shall be issued or delivered
until the stock represented thereby has been fully paid for; such payment may be
made in cash, in property, tangible or intangible, or in labor or services
actually performed for the corporation, but neither promissory notes nor future
services shall constitute such payment or part payment.
Section 5.2. Transfer of Stock. Shares of the capital stock of the
corporation shall be transferable only upon the books of the corporation by the
holder thereof in person or by attorney upon surrender and cancellation of the
certificate for the same.
Section 5.3. Lost Certificates. When a person, who appears by the
books of the corporation to own stock therein, claims that the certificate for
such stock has been lost, destroyed, or wrongfully taken, the proper officers of
the corporation shall issue to him a certificate in place and stead of the lost,
destroyed, or wrongfully taken certificate, if he shall request the issuance of
a new certificate before the corporation has notice that the old certificate has
been acquired by a bona fide purchaser, upon his compliance with the following
conditions:
(a) he shall file with the Secretary of the corporation an affidavit
setting forth the time, place and circumstances of the loss, destruction,
or taking, to the best of his knowledge and belief; and
(b) he shall execute and deliver to the corporation a bond with good
security in a penalty at least equal to the value of the shares of stock
represented by the lost, destroyed, or wrongfully taken certificate, in
form approved by the Board of Directors, to indemnify the corporation and
all persons whose rights may be affected by the issuance of the new
certificate against any loss in consequence of the issuance of the new
certificate.
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Exhibit 3.26
FIRST AMENDED AND RESTATED
BY-LAWS
OF
MARINE COAL SALES COMPANY
(a Delaware corporation)
Adopted January 10, 1994
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be established
and maintained at 1209 Orange Street, Wilmington, Delaware 19801. The
Corporation Trust Company shall be the registered agent of this corporation in
charge thereof.
Section 2. Other Offices. The corporation may have other offices, either
within or without the State of Delaware, at such place or places as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meetings. Annual meetings of stockholders for the
election of directors and for such other business as may be stated in the notice
of the meeting shall be held at such place, either within or without the
<PAGE> 2
State of Delaware, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of the meeting.
Section 2. Other Meetings. Meetings of stockholders for any purpose other
than the election of directors may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting.
Section 3. Voting. Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three years from its date unless such proxy provides
for a longer period. Upon the demand of any stockholder, the vote for directors
and the vote upon any question before the meeting, shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder for any
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purpose germane to the meeting, during ordinary business hours, for a period of
at least ten days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 4. Quorum. Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have the power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until the requisite amount of stock entitled
to vote shall be present. At such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall
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be entitled to vote at any adjournment or adjournments thereof.
Section 5. Special Meetings. Special meetings of the stockholders for any
purpose or purposes may be called by the President or Secretary, or by
resolution of the directors.
Section 6. Notice of Meetings. Written notice, stating the place, date and
time of the meeting, and the general nature of the business to be considered,
shall be given to each stockholder entitled to vote thereat at his address as it
appears on the records of the corporation, not less than ten nor more than fifty
days before the date of the meeting. No business other than that stated in the
notice shall be transacted at any meeting without the unanimous consent of all
the stockholders entitled to vote thereat.
Section 7. Action Without Meeting. Unless otherwise provided by the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares
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<PAGE> 5
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. Number and Term. The Board of Directors shall consist of no
fewer than two and no more than four directors. Directors shall be elected at
the annual meeting of the stockholders and each director shall be elected to
serve until his successor shall be elected and qualified. Directors need not be
stockholders.
Section 2. Removal. Any director or directors may be removed either for or
without cause at any time by the affirmative vote of the holders of a majority
of all the shares of stock outstanding and entitled to vote, at a special
meeting of the stockholders called for the purpose, and the vacancies thus
created may be filled, at the meeting held for the purpose of removal, by the
affirmative vote of a majority in interest of the stockholders entitled to vote.
Section 3. Increase of Number. The number of directors may be increased by
amendment of these By-Laws by the affirmative vote of a majority of the
directors, though
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<PAGE> 6
less than a quorum, or, by the affirmative vote of a majority in interest of the
stockholders, at the annual meeting or at a special meeting called for that
purpose, and by like vote the additional directors may be chosen at such meeting
to hold office until the next annual election and until their successors shall
have been elected and qualified.
Section 4. Powers. The Board of Directors shall exercise all of the powers
of the corporation except such as are by law or by the Certificate of
Incorporation of the corporation or by these By-Laws conferred upon or reserved
to the stockholders.
Section 5. Committees. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole Board, designate one or more
committees, each committee to consist of two or more of the directors of the
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of such committee or committees. The member or members thereof present
at any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
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Any such committee, to the extent provided in the resolution of the Board
of Directors, or in these By-Laws, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority to amend the Certificate of Incorporation, to adopt an
agreement of merger or consolidation, to recommend to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, to recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or to amend the By-Laws of the corporation; and,
unless the resolution, these By-Laws, or the Certificate of Incorporation
expressly so provides, no such committee shall have the power or authority to
declare a dividend or to authorize the issuance of stock.
Section 6. Meetings. The newly elected directors shall hold their first
meeting for the purpose of organization and the transaction of business, if a
quorum be present, immediately after the annual meeting of the stockholders; or
the time and place of such meeting may be fixed by consent in writing of all the
directors.
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Regular meetings of the directors may be held without notice at such
places and times as shall be determined from time to time by resolution of the
directors.
Special meetings of the Board may be called by the President or by the
Secretary on the written request of any two directors on at least two days'
notice to each director and shall be held at such place or places as may be
determined by the directors, or as shall be stated in the call of the meeting.
Section 7. Quorum. A majority of the total number of directors shall
constitute a quorum for the transaction of business. If at any meeting of the
Board of Directors there shall be less than a quorum present, a majority of
those present may adjourn the meeting from time to time until a quorum is
obtained, and no further notice thereof need be given, other than by
announcement at the meeting which shall be so adjourned.
Section 8. Compensation. Directors shall not receive any stated salary for
their services as directors or as members of committees, but by resolution of
the Board of Directors a fixed fee and expenses of attendance may be allowed for
attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
8
<PAGE> 9
Section 9. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting, if a written consent thereto is signed by all
members of the Board of Directors, or of such committee as the case may be, and
such written consent is filed with the minutes of proceedings of the Board of
Directors or committee.
Section 10. Participation by Conference Telephone. Members of the Board of
Directors of the corporation, or any committee designated by such Board, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
shall constitute presence in person at such meeting.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the corporation shall be a President,
a Treasurer, and a Secretary, all of whom shall be elected by the Board of
Directors and who shall hold office until their successors are elected and
qualified. In addition, the Board of Directors may elect a Chairman, one or more
Vice Chairmen, one or more Vice
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<PAGE> 10
Presidents and such Assistant Secretaries and Assistant Treasurers as they may
deem proper. None of the officers of the corporation need be directors. The
officers shall be elected at the first meeting of the Board of Directors after
each annual meeting. More than two offices may be held by the same person.
Section 2. Other Officers and Agents. The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 3. Chairman. The Chairman of the Board of Directors, if one be
elected, or in the Chairman's absence a Vice-Chairman, if one be elected, shall
preside at all meetings of the Board of Directors and shall have and perform
such other duties as from time to time may be assigned to such officer by the
Board of Directors.
Section 4. President. The President shall be the chief executive officer
of the corporation and shall have the general powers and duties of supervision
and management usually vested in the office of president of a corporation. He
shall preside at all meetings of the stockholders if present thereat, and, in
the absence or non-election of the Chairman or Vice-Chairman of the Board of
Directors, at all
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meetings of the Board of Directors, and shall have general supervision,
direction and control of the business of the corporation. Except as the Board of
Directors shall authorize the execution thereof in some other manner, he shall
execute bonds, mortgages and other contracts in behalf of the corporation, and
shall cause the seal to be affixed to any instrument requiring it and when so
affixed the seal shall be attested by the signature of the Secretary or the
Treasurer or an Assistant Secretary or an Assistant Treasurer.
Section 5. Vice President. Each Vice President shall have such powers and
shall perform such duties as shall be assigned to him by the directors.
Section 6. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and Board of Directors at
the regular meetings of the Board of
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Directors, or whenever they may request it, an account of all his transactions
as Treasurer and of the financial condition of the corporation. If required by
the Board of Directors, he shall give the corporation a bond for the faithful
discharge of his duties in such amount and with such surety as the Board of
Directors shall prescribe.
Section 7. Secretary. The Secretary shall give, or cause to be given,
notice of all meetings of stockholders and directors, and all other notices
required by law or by these By-Laws, and in case of his absence or refusal or
neglect so to do, any such notice may be given by any person thereunto directed
by the President, or by the directors, or stockholders, upon whose requisition
the meeting is called as provided in these By-Laws. He shall record all the
proceedings of the meetings of the corporation and of the directors in a book to
be kept for that purpose, and shall perform such other duties as may be assigned
to him by the directors or the President. He shall have the custody of the seal
of the corporation and shall affix the same to all instruments requiring it,
when authorized by the directors or the President, and attest the same.
Section 8. Assistant Treasurers and Assistant Secretaries. Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such
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powers and shall perform such duties as shall be assigned to them, respectively,
by the directors.
ARTICLE V
MISCELLANEOUS
Section 1. Resignations. Any director, member of a committee or corporate
officer may, provided the same would not result in a breach of any contract to
which said person is a party, resign at any time. Such resignation shall be made
in writing, and shall take effect at the time specified therein, and if no time
be specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
Section 2. Vacancies. If the office of any director, member of a committee
or corporate officer becomes vacant, by reason of death, disability or
otherwise, the remaining directors in office, though less than a quorum, by a
majority vote may appoint any qualified person to fill such vacancy, who shall
hold office for the unexpired term and until his successor shall be duly chosen.
Section 3. Certificates of Stock. Certificates of stock, signed by the
Chairman of the Board of Directors, or the President or any Vice President, and
the Treasurer or an Assistant Treasurer, or Secretary to an Assistant Secretary,
shall be issued to each stockholder certifying the number of
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<PAGE> 14
shares owned by him in the corporation. When such certificates are countersigned
(1) by a transfer agent other than the corporation or its employee, or (2) by a
registrar other than the corporation or its employee, the signatures of such
officers may be facsimiles.
Section 4. Lost Certificates. A new certificate of stock may be issued in
the place of any certificate theretofore issued by the corporation, alleged to
have been lost or destroyed, and the directors may, in their discretion, require
the owner of the lost or destroyed certificate, or his legal representatives, to
give the corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock represented by such certificate, to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss of any such certificate, or the issuance of any such new
certificate.
Section 5. Transfer of Shares. The shares of stock of the corporation
shall be transferable only upon its books by the holders thereof in person or by
their duly authorized attorneys or legal representatives, and upon such transfer
the old certificates shall be surrendered to the corporation by the delivery
thereof to the person in charge of the stock transfer books and ledgers, or to
such other person as the directors may designate, by whom they shall be
cancelled,
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and new certificates shall thereupon be issued. A record shall be made of each
transfer and whenever a transfer shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer.
Section 6. Stockholders Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 7. Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock
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of the corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the corporation.
Section 8. Seal. The corporate seal shall be circular in form and shall
contain the name of the corporation, the year of its creation and the words
"CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise reproduced.
Section 9. Fiscal Year. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors. In the absence of such
determination, the fiscal year shall be the calendar year.
Section 10. Checks. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer or officers, agent or agents of the
corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
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Section 11. Notice and Waiver of Notice. Whenever any notice is required
by these By-Laws to be given, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in the United States mail, postage prepaid, addressed to the
person entitled thereto at his address as it appears on the records of the
corporation, and such notice shall be deemed to have been given on the day of
such mailing. Stockholders not entitled to vote shall not be entitled to receive
notice of any meetings except as otherwise provided by statute.
Whenever any notice whatever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation of the
corporation or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
ARTICLE VI
INDEMNIFICATION
To the full extent permitted by law, the corporation may indemnify any
person or his heirs, distributees, next of kin, successors, appointees,
executors, administrators, legal representatives and assigns who was or is a
party or is threatened to be made a party to any threatened, pending
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or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, domestic or foreign,
against expenses, attorneys' fees, court costs, judgments, fines, amounts paid
in settlement and other losses actually and reasonably incurred by him in
connection with such action, suit or proceeding.
ARTICLE VII
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be made at any
annual meeting of the stockholders or at any special meeting thereof by the
affirmative vote of a majority of the stock issued and outstanding and entitled
to vote thereat, or by the affirmative vote of a majority of the Board of
Directors, at any regular meeting of the Board of Directors, or at any special
meeting of the Board of Directors.
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Exhibit 3.27
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
ANKER DEVELOPMENT, INC.
I. The name of the corporation is ANKER DEVELOPMENT, INC.
II. Article I of the Articles of Incorporation of the corporation is hereby
amended in its entirety as follows:
I. The undersigned agrees to become a corporation by the name of
HAWTHORNE COAL COMPANY, INC.
III. The foregoing amendment was adopted by the sole shareholder of the
corporation by written agreement to corporate action dated October 16,
1996. The corporation has only one class of stock, the number of shares of
which are outstanding and entitled to vote on said amendment is 100; the
number of shares voted for said amendment was 100; and the number of voted
against said amendment was 0.
DATED: October 16, 1996
ANKER DEVELOPMENT, INC.
By: /s/ Kim A. Burke
-----------------------
Kim A. Burke
President
and /s/ Michael M. Matesic
-----------------------
Michael M. Matesic
Its Secretary
<PAGE> 2
STATE OF WEST VIRGINIA,
COUNTY OF MONONGALIA, to-wit:
I, Kimberly L. Morehead, a Notary Public, do hereby certify that on this
16th day of October, 1996, personally appeared before me Kim A. Burke, who,
being by me first duly sworn, declared that he is the President of Anker
Development, Inc., a West Virginia Corporation, that he signed the foregoing
document as President of the corporation, and that the statements therein
contained are true.
My commission expires: October 9, 2005
---------------------
/s/ Kimberly L. Morehead
------------------------------------
Notary Public
(NOTARIAL SEAL)
OFFICIAL SEAL
KIMBERLY LYNN MOREHEAD
R.D. 1, BOX 19, LOT 6
CORE, WEST VIRGINIA 26529
"COMMISSIONER FOR WEST VIRGINIA"
The foregoing Articles of Amendment were prepared by B. Judd Hartman, Spilman,
Thomas & Battle, 300 Kanawha Boulevard, East, Charleston, West Virginia, 25301.
<PAGE> 3
ARTICLES OF INCORPORATION
OF
ANKER DEVELOPMENT, INC.
I. The undersigned agrees to become a corporation by the name of
ANKER DEVELOPMENT, INC.
II. The existence of this corporation shall be perpetual.
III. The purposes for which this corporation is organized shall include the
transaction of any or all lawful business for which corporations may be
incorporated in the State of West Virginia.
IV. The principal office of this corporation shall be at 2708 Cranberry
Square, Morgantown, West Virginia 26505. The name and address of the
person to whom shall be sent notice or process served upon, or service of
which is accepted by, the Secretary of State, is James A. Walls, Esquire,
2708 Cranberry Square, Morgantown, West Virginia 26505.
V. The name and address of the sole incorporator is:
B. Judd Hartman
300 Kanawha Boulevard, East
Charleston, WV 25301
VI. The number of directors constituting the initial Board of Directors of
this corporation is two, and the names and addresses of the persons who
shall serve as directors until the first annual meeting of shareholders or
until their successors are elected and qualified are:
Bruce Sparks
2708 Cranberry Square
Morgantown, West Virginia 26505
<PAGE> 4
Kim Burke
2708 Cranberry Square
Morgantown, West Virginia 26505
The bylaws of this corporation, when adopted by the initial Board of
Directors, shall provide for a Board of Directors which may consist of any
number of persons provided for in said bylaws, or such number of persons
as may be determined from time to time by the shareholders.
VII. The amount of the total authorized capital stock of this corporation shall
be One Thousand Dollars ($1,000), which shall be divided into One Hundred
(100) shares of the par value of Ten Dollars ($10.00) each, and which
shall constitute a single class of shares.
VIII. The shareholders of this corporation shall not have a preemptive right to
subscribe for, purchase, or take any part of any unissued or treasury
shares issued or to be issued or sold by this corporation, or any
securities of this corporation convertible into shares of this corporation
issued or to be issued by it, after its incorporation.
The undersigned, for the purpose of forming a corporation under the laws
of the State of West Virginia, does hereby make and file these Articles of
Incorporation, and has accordingly hereunto set his hand this 28th day of April,
1995.
/s/ B. Judd Hartman
--------------------------------
B. Judd Hartman
2
<PAGE> 5
STATE OF WEST VIRGINIA,
COUNTY OF KANAWHA, ss:
I, Karen F. Peterson, a Notary Public in and for the County and
State aforesaid, hereby certify that B. Judd Hartman, whose name is signed to
the foregoing Articles of Incorporation, bearing date on the 28th day of April,
1995, this day personally appeared before me in my said county and acknowledged
his signature to the same.
Given under my hand and official seal this 28th day of April, 1995.
My commission expires: Dec. 11, 1995 .
--------------------
/s/ Karen F. Peterson
----------------------------------
Notary Public
(NOTARIAL SEAL)
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VAGINA
KAREN F. PETERSON
P.O. Box 273
Charleston, West Virginia 25321
My Commission Expires Dec. 11, 1995
The foregoing Articles of Incorporation were prepared by B. Judd Hartman,
Esquire, SPILMAN, THOMAS & BATTLE, 300 Kanawha Boulevard, East, Charleston, West
Virginia 25301.
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<PAGE> 1
Exhibit 3.28
BYLAWS
OF
HAWTHORNE COAL COMPANY, INC.
(Formerly Anker Development, Inc.)
April 28, 1995
ARTICLE I
OFFICES
Section 1.1. The principal office and place of business of this
corporation will be in the City of Morgantown, County of Monongalia, State of
West Virginia, at 2708 Cranberry Square. The Board of Directors may change the
location of said principal office and of said principal place of business, or
either, from time to time as it may deem advisable, and may also establish such
offices or places of business elsewhere as in the opinion of the Board may be
advisable.
ARTICLE II
SHAREHOLDERS
Section 2.1. Annual Meetings. The annual meetings of the
shareholders of this corporation shall be held sometime during the first quarter
of each year, on such date as may be fixed by the Board of Directors, either at
the principal office of the corporation or at such other place, either within or
without the State of West Virginia, as the Board of Directors may fix by
resolution. The Board of Directors may by resolution authorize any officer or
officers to fix the date and place of such annual meeting.
Section 2.2. Special Meetings. Special meetings of the shareholders
may be called at any time by the Board of Directors, the President and
Secretary, or any number of shareholders holding in the aggregate at least
one-tenth of the number of shares entitled to vote at the meeting. Such meetings
shall be held at the principal office of the corporation unless the Board of
Directors or other persons calling such meeting shall fix some other place for
the meeting, in which event the meeting shall be held at such other place, which
may be either within or without the State of West Virginia.
Section 2.3. Notice of Meetings. Notice of the annual and all other
meetings of the shareholders shall be given by written notice stating the place,
day and hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which and the officers or persons by whom the meeting is called,
and shall be delivered not less than ten and not more than fifty days before the
date of the meeting, either personally or by mail. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his last post office address appearing on the records of the
corporation, with postage thereon prepaid. It shall be the duty of every
shareholder to furnish to the Secretary of the corporation his post office
address and to notify the Secretary of any change therein. Notice of all
meetings shall be given to each shareholder of record entitled to vote at the
meeting.
<PAGE> 2
Section 2.4. Waiver of Notice. Any meeting of the shareholders may
be held by agreement in writing signed by all the shareholders, and, where
notice or publication of any notice is required, the same may be waived in
writing signed by all the shareholders entitled to such notice, filed with the
records of the meeting, whether before or after the time stated therein. Any
meeting of the shareholders at which every shareholder is present or represented
by proxy shall be valid, notwithstanding lack or insufficiency of notice.
Section 2.5. Action by Shareholders Without Meeting. Whenever the
vote of the shareholders at a meeting thereof is required or permitted to be
taken in connection with any corporate action, the meeting and vote of such
shareholders may be dispensed with if all of the shareholders who would have
been entitled to vote upon the action, if such meeting were held, shall agree in
writing to such corporate action being taken, and such agreement shall have like
effect and validity as though the action were duly taken by the unanimous action
of all shareholders entitled to vote at a meeting of such shareholders duly
called and legally held.
Section 2.6. Quorum; Adjournments. At all meetings of the
shareholders, a quorum shall consist of at least a majority of all of the shares
of stock issued and outstanding and entitled to vote, represented either in
person or by proxy. If a sufficient number of shares is not present at the time
and place appointed, any number of shares present or represented, less than a
quorum, may adjourn any shareholders meeting from time to time until a quorum is
present and the business to come before the meeting is completed.
Section 2.7. Voting. If a quorum is present at any meeting of the
shareholders duly and properly called and held, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be and constitute the act of the shareholders, except in
the matter of election of directors, and unless the vote of a greater number, or
other vote, is required by law or by the Articles of Incorporation or bylaws of
this corporation. Except as otherwise provided by law, or by the Articles of
Incorporation or bylaws of this corporation, each outstanding share shall be
entitled to one vote on each matter submitted to vote at any meeting of the
shareholders, and may be voted by the shareholder either in person or by written
proxy. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
Section 2.8. Record of Meetings. A record shall be kept of the
meetings of the shareholders and the action taken at the same, which shall be
verified by the signature of the Chairman of the meeting and the person acting
as Secretary thereof.
ARTICLE III
DIRECTORS
Section 3.1. Number, Qualification and Term of Office. The business,
property and affairs of the corporation shall be managed and controlled by its
Board of Directors. The Board of Directors shall consist of not fewer than two
and not more than five persons, as may be determined by the shareholders from
time to time, and shall be elected at the first annual meeting of the
shareholders and at every annual meeting thereafter. Directors need
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<PAGE> 3
not be shareholders of the corporation nor residents of the State of West
Virginia. They shall hold office until the next succeeding annual meeting and
until their successors are elected and qualified.
Section 3.2. Elections. In all elections of directors each
shareholder shall have the right to vote, in person or by proxy, the number of
shares owned by him and entitled to vote, for as many persons as there are
directors to be elected, and for whose election he has a right to vote, or he
may cumulate such votes and give one candidate as many votes as the number of
directors to be elected multiplied by the number of his shares shall equal; or
he may distribute them on the same principle among as many candidates and in
such manner as he shall desire.
Section 3.3. Removal of Directors. The shareholders, at any meeting
thereof called expressly for the purpose, may remove any director or the entire
Board of Directors, with or without cause, by vote of the holders of a majority
of the shares entitled to vote at an election of directors. However, if less
than the entire Board is to be removed, no one of the directors may be removed
if the votes cast against his removal would be sufficient to elect him.
Section 3.4. Vacancies. Any vacancy in the Board of Directors
resulting from removal of a director shall be filled by the shareholders at the
meeting at which such removal occurs. A vacancy resulting from an increase in
the number of directors shall likewise be filled by the shareholders at the
meeting at which such increase is made. A vacancy in the Board occurring from
any other cause, or from the failure of the shareholders to act, may be filled
by the affirmative vote of a majority of the remaining directors, though less
than a quorum. Any director elected or appointed to fill a vacancy shall serve
until the next annual election of directors.
Section 3.5. Meetings. Regular meetings of the Board of Directors
may be held at such time and place as may be prescribed by these bylaws, or as
the Board may from time to time designate. Special meetings of the Board may be
called by the President, a Vice-President, or any two directors. Meetings of the
Board may be held either within or without the State of West Virginia. Notice of
all meetings of the Board shall be given by the Secretary of the corporation or
by the person or persons calling such meeting, and, in the case of a special
meeting, shall state by whom it is called. Such notice shall be given at least
forty-eight hours before the time of such meeting, either by written notice
thereof mailed to each director, or by telegram or telephone. Except as
otherwise provided by law, the notice of any meeting of the Board need not
specify the purpose of or the business to be transacted at the meeting.
Section 3.6. Waiver of Notice. Any meeting of the directors may be
held by agreement in writing signed by all the directors, and where notice of
any meeting is required, a waiver thereof in writing, signed by the director or
directors entitled to notice, filed with the records of the meeting, whether
before or after the time stated therein, shall be equivalent to the giving of
such notice. Attendance of a director at a meeting of the directors shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called
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or convened. Except as provided in the next preceding sentence, any meeting of
the directors at which every director is present in person shall be valid,
notwithstanding lack or insufficiency of notice.
Section 3.7. Action by Directors Without Meeting. Whenever the vote
of directors at a meeting thereof is required or permitted to be taken in
connection with any corporate action, the meeting and vote of such directors may
be dispensed with if all the directors shall agree in writing to such corporate
action being taken, and such agreement shall have like effect and validity as
though the action were duly taken by the unanimous action of all directors at a
meeting thereof duly called and legally held.
Section 3.8. Quorum. A majority of the number of directors fixed by
the shareholders, as provided in these bylaws, shall constitute a quorum for the
transaction of business. The act of a majority of the directors present at any
meeting at which a quorum is present shall be and constitute the act of the
Board of Directors. If at any meeting of the Board there is less than a quorum
present, a majority of the directors present may adjourn the meeting from time
to time until a quorum is present.
Section 3.9. Conflicts of Interest. No contract or transaction
between this corporation and any one or more of its directors, or between this
corporation and any other corporation, firm, association, or entity in which one
or more of its directors are directors or officers, or are financially
interested, shall be either void or voidable because of such relationship or
interest, or because such director or directors are present at the meeting of
the Board of Directors, or a committee thereof, which authorizes, approves, or
ratifies such contract or trans action, or because his or their votes are
counted for such purpose, if:
(a) The fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves, or
ratifies the contract or transaction by a vote or consent sufficient for
the purpose without counting the votes or consents of such interested
directors; or
(b) The fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote, and they authorize, approve or
ratify such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable to this
corporation.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or a committee thereof which
authorizes, approves, or ratifies such contract or transaction. On any question
involving the authorization, approval, or ratification of any such contract or
transaction, the names of those voting each way shall be entered on the record
of the proceedings.
Section 3.10. Record of the Board. The Board of Directors shall
cause to be kept a record of its proceedings, which shall be verified by the
signatures of the persons acting as
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Chairman and Secretary of the meeting. Any member of the Board of Directors, at
his request, shall have the right to have his vote recorded in the minutes of
the meeting on any question coming before the Board.
Section 3.11. Voting of Corporate Stock. The Board of Directors may
by resolution provide that any shares of the capital stock of any other
corporation or corporations owned by this Corporation shall be voted by such one
or more officers of this Corporation, or by such other person or persons, as the
Board shall designate, either generally or with respect to any specific
corporation, meeting or matter. In the absence of any resolution of the Board of
Directors applying to the shares of the capital stock of a corporation, or to
any meeting or matter, the President of this Corporation is authorized to vote
such shares of the capital stock of such other corporation, either in person or
by proxy given to any other officer or person, or persons, in his discretion, in
such manner as he shall deem advisable and for the best interests of this
Corporation.
ARTICLE IV
OFFICERS AND AGENTS
Section 4.1. Election and Appointment. As soon as may be after their
election the Board of Directors shall choose a President of the corporation from
among the directors, who shall hold office until the next annual election of
officers and until his successor is elected and qualified. At the same time the
Board of Directors shall choose one or more Vice-Presidents, a Secretary and a
Treasurer, who may, but need not be, members of the Board. The directors may at
any time elect from among the directors a Chairman of the Board of Directors,
and may also elect an Assistant Secretary and an Assistant Treasurer, who need
not be members of the Board. Any two or more offices may be held by the same
person, except the offices of President and Secretary.
Section 4.2. Other Officers and Agents. The Board of Directors may
employ a manager and such other employees, servants, agents, attorneys and
representatives as the Board may deem advisable, to perform such duties as the
Board may prescribe.
Section 4.3. Bond. If required by the Board, the Treasurer,
Secretary, or any other officer, agent or employee shall give bond payable to
the corporation in such penalty and with such conditions and security as the
Board may approve.
Section 4.4. Compensation. The Board of Directors of this
corporation shall have the authority to fix the compensation of all officers,
including members of the Board of Directors.
Section 4.5. President. The President shall be the chief executive
officer of the corporation. He shall preside at all meetings of the shareholders
and directors at which he is in attendance, unless the directors shall elect a
Chairman of the Board to preside at meetings of the Board. Unless some other
officer or agent is specially appointed and authorized for the purpose,
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<PAGE> 6
the President shall sign the corporate name of the corporation to all deeds,
mortgages, writings and other contracts made by the corporation, except such as
are necessary or incidental to the exercise of the powers vested in other
officers or agents by the Board of Directors; and, generally, the President
shall have and exercise supervision and control over all the business, affairs
and property of the corporation, and shall perform such duties as are incident
to the conduct of its business not otherwise provided for in these bylaws or by
action of the Board of Directors.
Section 4.6. Vice-President. The Vice-President shall in the absence
or incapacity of the President perform the duties of the President and shall
have such other powers and authority as may be assigned to him by the Board of
Directors, either generally or specially. If there shall be more than one
Vice-President, each shall have such duties, powers and authority as may be
assigned to him by the Board of Directors, and, unless otherwise provided by the
Board of Directors, each shall be authorized to perform the duties of the
President in his absence or incapacity in the order of their designation or
election.
Section 4.7. Secretary. The Secretary, or an Assistant Secretary,
shall have the custody of the minute book, stock book, corporate seal and all
records and papers of the corporation, subject to the supervision and control of
the President, except such as the Board may put in the custody of other
officers, agents or employees. The Secretary, or an Assistant Secretary, shall
attend all meetings of the share holders and of the Board of Directors and act
as Secretary thereof, keeping a record of the proceedings of such meetings in a
book to be maintained for the purpose. He shall give or cause to be given,
unless otherwise specially provided, notice of all meetings of the shareholders,
directors, committees and other meetings of the officers or representatives of
the corporation, and shall perform such other duties as may be prescribed for
him by the Board of Directors or the President.
Section 4.8. Treasurer. The Treasurer, or an Assistant Treasurer,
shall have custody of the corporate funds and securities, subject to the
supervision and control of the President. He shall cause to be kept full and
accurate accounts of receipts and disbursements of the corporation in proper
books to be furnished for that purpose by the corporation; cause all moneys and
other valuable effects to be deposited to the credit of the corporation, in such
depositories as may be designated by the Board of Directors; be responsible for
disbursing the funds of the corporation subject to such regulations as may be
prescribed by the Board of Directors, taking proper vouchers for such
disbursements; and he shall render to the President and to the directors at
regular meetings of the Board, whenever they, or any of them, may request it, an
account of all transactions of his office and of the financial condition of the
corporation, and such other reports as may from time to time be required of him
by the President or the Board.
Section 4.9. Removal of Officers. Any officer, employee, or agent of
the corporation may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. The election or appointment of any
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officer, employee, or agent of the corporation shall not of itself be deemed to
create any contract right.
Section 4.10. Signature of Orders for the Payment of Money. All
checks, notes, drafts and other orders of the corporation for the payment of
money shall be drawn, signed or counter-signed as the Board of Directors may
from time to time prescribe.
ARTICLE V
CAPITAL STOCK
Section 5.1. Certificate of Stock. The Board of Directors shall
cause to be issued to any person appearing on the books of the corporation to be
the owner of any shares of its stock, a certificate or certificates therefor,
under the corporate seal of the corporation, to be signed by the President, or a
Vice-President, and the Secretary, or an Assistant Secretary, of the
corporation. Each certificate representing shares of the capital stock of the
corporation shall state on the face thereof that the corporation is organized
under the laws of the State of West Virginia; the name of the person to whom
issued; the number and class of shares which such certificate represents; and
the par value of each share represented by such certificate; and shall otherwise
be in such form as the Board of Directors may adopt. Such certificates shall be
issued in order from a stock certificate book to be kept by the Secretary under
the supervision of the Board. No such certificate shall be issued or delivered
until the stock represented thereby has been fully paid for; such payment may be
made in cash, in property, tangible or intangible, or in labor or services
actually performed for the corporation, but neither promissory notes nor future
services shall constitute such payment or part payment.
Section 5.2. Transfer of Stock. Shares of the capital stock of the
corporation shall be transferable only upon the books of the corporation by the
holder thereof in person or by attorney upon surrender and cancellation of the
certificate for the same.
Section 5.3. Lost Certificates. When a person, who appears by the
books of the corporation to own stock therein, claims that the certificate for
such stock has been lost, destroyed, or wrongfully taken, the proper officers of
the corporation shall issue to him a certificate in place and stead of the lost,
destroyed, or wrongfully taken certificate, if he shall request the issuance of
a new certificate before the corporation has notice that the old certificate has
been acquired by a bona fide purchaser, upon his compliance with the following
conditions:
(a) he shall file with the Secretary of the corporation an affidavit
setting forth the time, place and circumstances of the loss, destruction,
or taking, to the best of his knowledge and belief; and
(b) he shall execute and deliver to the corporation a bond with good
security in a penalty at least equal to the value of the shares of stock
represented by the lost, destroyed, or wrongfully taken certificate, in
form approved by the Board of Directors, to indemnify the corporation and
all persons whose rights may be affected by the issuance
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of the new certificate against any loss in consequence of the issuance of
the new certificate.
A new certificate may be issued, in the discretion of the Board of Directors,
without compliance with the foregoing requirements, upon such terms and
conditions as the Board of Directors may prescribe.
Section 5.4. Other Regulations. The Board of Directors shall have
the authority to make such other rules and regulations, not inconsistent with
law or these bylaws, concerning the issue, transfer, and delivery of
certificates of stock, as it may deem advisable.
ARTICLE VI
INDEMNIFICATION
Section 6.1. It shall be the policy of this corporation to indemnify
any person who serves, or has served, as a director, officer, employee or agent
of this corporation, or who serves or has served as a director, officer,
partner, employee, or agent of any other corporation, partnership, joint
venture, trust or enterprise at the request or direction of this corporation,
against expenses (including attorneys' fees), judgments, fines, taxes,
penalties, interest, and payments in settlement, in connection with any
threatened, pending or completed action or proceeding, and to pay any such
expenses in advance of the final disposition of any such action or proceeding,
to the full extent contemplated and permitted by Section 9 of Chapter 31,
Article 1 of the Code of West Virginia of 1931, as amended, upon such finding or
determination as shall be requisite or appropriate under said section; and the
corporation is specifically empowered and authorized to purchase and maintain,
at the expense of the corporation, insurance on behalf of any such director,
officer, partner, employee or agent against any liability asserted against him
or her in such capacity or arising out of his or her status as such, whether or
not this corporation would have the power to indemnify him or her under the
provisions of said section.
ARTICLE VII
CORPORATE SEAL
Section 7.1. The seal to be here impressed,
containing the name of this corporation and the words (CORPORATE SEAL)
"Corporate Seal, West Virginia", is hereby adopted as
and for the corporate seal of this corporation.
ARTICLE VIII
AMENDMENTS
Section 8.1. These bylaws may be amended by the Board of Directors,
subject, however, to the power of the shareholders to repeal or change any
amendment made by the Board of Directors by affirmative vote of a majority of
the stock then issued and outstanding and entitled to vote thereon; and in the
event of any conflict the vote of the shareholders shall be controlling.
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Exhibit 3.29
CERTIFICATE OF INCORPORATION
OF
UPSHUR PROPERTY, INC.
ARTICLE I
The name of the corporation is Upshur Property, Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover 19901,
County of Kent. The name of its registered agent at that address is The
Prentice-Hall Corporation System, Inc.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware as set forth in Title 8 of the Delaware Code.
ARTICLE IV
The total number of shares of stock which the corporation shall have
authority to issue is 2,000 shares of Common Stock, par value $1.00 per share.
ARTICLE V
The name and mailing address of the sole incorporator is as follows:
Name Mailing Address
---- ---------------
Stephen P. Parise 10889 Wilshire Boulevard
Suite 1500
Los Angeles, CA 90024
ARTICLE VI
The corporation is to have perpetual existence.
ARTICLE VII
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the corporation is expressly authorized to make,
amend, alter or repeal the By-laws of the corporation.
<PAGE> 2
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided by the By-laws of the corporation.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the By-laws of the corporation may provide. The books of the
corporation may be kept (subject to any provision contained in applicable law)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors of the corporation or in the By-laws of
the corporation.
ARTICLE X
A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except that this Article X shall not eliminate or limit a
director's liability (i) for any breach of such director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which such director derived an improper
personal benefit. No amendment to or repeal of this Article X shall apply to or
have any effect on the liability or alleged liability of any director of the
corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
ARTICLE XI
The corporation reserves the right to amend, alter, change or repeal any
provision contained in the Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this Certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 10th day of June, 1994.
/s/ Stephen P. Parise
-----------------------------------
Stephen P. Parise
Sole Incorporator
<PAGE> 1
Exhibit 3.30
BY-LAWS
OF
UPSHUR PROPERTY, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be in the City
of Dover, County of Kent, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or as the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Location. All meetings of the stockholders for the election of
directors shall be held in the City of Los Angeles, State of California, at such
place as may be fixed from time to time by the board of directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
<PAGE> 2
Section 2. Annual Meetings. Annual meetings of stockholders, commencing
with the year 1994, shall be held on the third Tuesday in May if not a legal
holiday, and if a legal holiday, then on the next secular day following, at or
before 5:00 P.M., or at such other date and time as shall be designated from
time to time by the board of directors and stated in the notice of the meeting,
at which they shall elect by a plurality vote a board of directors and transact
such other business as may properly be brought before the meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual meeting,
stating the place, date and hour of the meeting, shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 4. Stockholders List. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
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Section 5. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the president and shall be called
by the president or secretary at the request in writing of a majority of the
board of directors or at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. Notice of Special Meeting. Written notice of a special meeting,
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given, not less than ten nor more than
sixty days before the date of the meeting, to each stockholder entitled to vote
at such meeting.
Section 7. Business. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. Quorum; Adjournment. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise provided by
statute or by the certificate of incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting, at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
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If the adjournment is for more than thirty days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 9. Stockholder Vote. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting unless the question is one upon which, by express provision of the
statutes or of the certificate of incorporation, a different vote is required,
in which case such express provision shall govern and control the decision of
such question.
Section 10. Proxies. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date unless the proxy provides for a longer period.
Section 11. Written Consent. Unless otherwise provided in the certificate
of incorporation, any action required to be taken at any annual or special
meeting of stockholders of the corporation, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
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corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. Number; Term. The number of directors which shall constitute
the whole board shall be 3. The directors shall be elected at the annual meeting
of the stockholders, except as provided in Section 2 of this Article, and each
director elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and shall
qualify unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at the
time of filling any vacancy or any newly created directorship, the directors
then in office shall constitute less than a majority of the whole board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
of the total number of the shares at the time outstanding having the right to
vote for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships or to replace the directors chosen by
the directors then in office.
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Section 3. Duty; Powers. The business of the corporation shall be managed
by or under the direction of its board of directors which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these by-laws directed or
required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. Location. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. Organizational Meeting. The first meeting of each newly elected
board of directors shall be held at such time and place as shall be fixed by the
vote of the stockholders at the annual meeting and no notice of such meeting
shall be necessary to the newly elected directors in order legally to constitute
the meeting, provided a quorum shall be present. In the event of the failure of
the stockholders to fix the time or place of such first meeting of the newly
elected board of directors, or in the event such meeting is not held at the time
and place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors or as shall be specified in a written
waiver signed by all of the directors.
Section 6. Regular Meetings. Regular meetings of the board of directors
may be held without notice at such time and at such place as shall from time to
time be determined by the board.
Section 7. Special Meetings. Special meetings of the board may be called
by the president on one day's notice to each director, either personally or by
mail or by
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telegram. Special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of two directors unless the
board consists of only one director, in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.
Section 8. Quorum: Adjournment. At all meetings of the board a majority of
the directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Written Consent. Unless otherwise restricted by the certificate
of incorporation or these by-laws, any action required or permitted to be taken
at any meeting of the board of directors or of any committee thereof may be
taken without a meeting, if all members of the board or committee, as the case
may be, consent thereto in writing and the writing or writings are filed with
the minutes of proceedings of the board or committee.
Section 10. Telephonic Participation. Unless otherwise restricted by the
certificate of incorporation or these by-laws, members of the board of
directors, or any committee designated by the board of directors, may
participate in a meeting of the board of directors, or any committee, by means
of conference telephone or similar communications equipment, by means of which
all persons participating in the meeting
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can hear each other, and such participation in a meeting shall constitute
presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. Composition; Powers. The board of directors may, by resolution
passed by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution of the
board of directors, shall have and may exercise all the powers and authority of
the board of directors in the management of the business and affairs of the
corporation and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the by-laws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the board of directors.
Section 12. Minutes. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.
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COMPENSATION OF DIRECTORS
Section 13. Compensation. Unless otherwise restricted by the certificate
of incorporation or these by-laws, the board of directors shall have the
authority to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the board of directors and
may be paid a fixed sum for attendance at each meeting of the board of directors
or a stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefore. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Removal. Unless otherwise restricted by the certificate of
incorporation or by-laws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Manner. Whenever, under the provisions of the statutes or of
the certificate of incorporation or of these by-laws, notice is required to be
given to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such
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notice shall be deemed to be given at the time when the same shall be deposited
in the United States mail. Notice to directors may also be given by telegram.
Section 2. Waiver. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. General. The officers of the corporation shall be chosen by the
board of directors and shall be a president, any number of executive
vice-presidents, one or more of whom may be designated senior executive
vice-president, any number of vice-presidents, with such rank as the board of
directors may determine, a secretary, any number of assistant secretaries, a
treasurer and any number of assistant treasurers. Any number of offices may be
held by the same person, unless the certificate of incorporation or these
by-laws otherwise provide.
Section 2. Election. The board of directors at its first meeting after
each annual meeting of stockholders may elect the officers of the corporation.
The officers may, but need not, be members of the board of directors.
Section 3. Other Officers and Agents. The board of directors may appoint
such other officers and agents as it shall deem necessary, who shall hold their
offices for such terms, and shall exercise such powers and perform such duties,
as shall be determined from time to time by the board of directors.
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Section 4. Salaries. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. Term; Removal; Vacancies. The officers of the corporation shall
hold office until their successors are chosen and qualify. Any officer elected
or appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the board of directors, with or without cause.
Any vacancy occurring in any office of the corporation shall be filled by the
board of directors.
Section 6. President. The president shall be the chief executive officer
of the corporation; shall preside at all meetings of the stockholders, the board
of directors, and the executive committee, if any; shall have general and active
management of the business and affairs of the corporation; shall have plenary
power to issue orders and instructions to all officers and employees of the
corporation; and shall see that all orders and resolutions of the board of
directors are carried into effect. He may, on behalf of the corporation, enter
into and execute any and all contracts, bonds, mortgages and other instruments
in the course of the corporation's business and affairs, except where required
or permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
Section 7. Executive Vice-Presidents and Vice-Presidents. The executive
vice-presidents and vice-presidents, in the order determined by the board of
directors, shall perform such duties and have such powers as the board of
directors or the president may from time to time prescribe.
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Section 8. The Secretary. The Secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and, when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 9. Assistant Secretaries. The assistant secretary or, if there be
more than one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the secretary and shall perform such other duties and have such other powers
as the board of directors may from time to time prescribe.
Section 10. Treasurer. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors. He shall disburse the funds of the
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corporation as may be ordered by the board of directors, taking proper vouchers
for such disbursements, and shall render to the president and the board of
directors, at its regular meetings or when the board of directors so requires,
an account of all of his transactions as treasurer and of the financial
condition of the corporation. If required by the board of directors, he shall
give the corporation a bond, in such sum and with such surety or sureties as
shall be satisfactory to the board of directors, for the faithful performance of
the duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 11. Assistant Treasurers. The assistant treasurer or, if there
shall be more than one, the assistant treasurers in the order determined by the
board of directors, shall, in the absence or disability of the treasurer or in
the event of his inability or refusal to act, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
Section 12. Officers of Divisions. The officers of divisions shall perform
such duties and have such powers as the president may from time to time
prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Execution. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a
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vice-president and the treasurer or an assistant treasurer or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Section 2. Facsimile Signatures. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost, Stolen or Destroyed Certificates. The board of directors
may direct a new certificate or certificates to be issued, in place of any
certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
board of directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 4. Transfers of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of
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the corporation to issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
Section 5. Record Date. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting nor more than sixty days prior to any other action. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
Section 6. Registered Shareholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner, and to hold liable for
calls and assessments a person registered on its books as the owner of shares,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
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ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 3. Annual Statement. The board of directors shall present at each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
Section 4. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the board of directors.
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Section 6. Seal. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 7. Stock Held by Corporation. The president, or such other officer
or officers as the board of directors or the president may designate, shall have
full power and authority on behalf of the corporation, in person or by proxy, to
attend, and to act and vote at, any meeting of shareholders of any corporation
in which the corporation may hold stock, and at any such meeting shall possess,
and may exercise, any and all of the rights and powers incident to the ownership
of such stock.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered, amended or repealed or new
by-laws may be adopted by the stockholders, or by the board of directors when
such power is conferred upon the board of directors by the certificate of
incorporation, at any regular meeting of the stockholders or of the board of
directors or at any special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting, or by written
consent of the stockholders or directors, as the case may be, given pursuant to
these by-laws. If the power to adopt, amend or repeal by-laws is conferred upon
the board of directors by the certificate of incorporation, it shall not divest
or limit the power of the stockholders to adopt, amend or repeal by-laws.
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Exhibit 3.31
ARTICLES OF INCORPORATION
OF
HEATHER GLEN RESOURCES, INC.
I. The undersigned agrees to become a corporation by the name of
HEATHER GLEN RESOURCES, INC.
II. The existence of this corporation shall be perpetual.
III. The purposes for which this corporation is organized shall include the
transaction of any or all lawful business for which corporations may be
incorporated in the State of West Virginia.
IV. The principal office of this corporation shall be at 2708 Cranberry
Square, Morgantown, West Virginia 26505. The name and address of the
person to whom shall be sent notice or process served upon, or service of
which is accepted by, the Secretary of State, is James A. Walls, Esquire,
2708 Cranberry Square, Morgantown, West Virginia 26505.
V. The name and address of the sole incorporator is:
B. Judd Hartman
300 Kanawha Boulevard, East
Charleston, West Virginia 25301
VI. The number of directors constituting the initial Board of Directors of
this corporation is one, and the name and address of the person who shall
serve as the sole director until the first annual meeting of shareholders
or until his successor or successors are elected and qualified is:
Bruce Sparks
2708 Cranberry Square
Morgantown, West Virginia 26505
<PAGE> 2
The bylaws of this corporation, when adopted by the initial Board of
Directors, shall provide for a Board of Directors which may consist of any
number of persons provided for in said bylaws, or such number of persons
as may be determined from time to time by the shareholders.
VII. The amount of the total authorized capital stock of this corporation shall
be One Thousand Dollars ($1,000), which shall be divided into One Hundred
(100) shares of the par value of Ten Dollars ($10.00) each, and which
shall constitute a single class of shares.
VIII. The shareholders of this corporation shall not have a preemptive right to
subscribe for, purchase, or take any part of any unissued or treasury
shares issued or to be issued or sold by this corporation, or any
securities of this corporation convertible into shares of this corporation
issued or to be issued by it, after its incorporation.
The undersigned, for the purpose of forming a corporation under the laws
of the State of West Virginia, does hereby make and file these Articles of
Incorporation, and has accordingly hereunto set his hand this 26th day of
December, 1995.
/s/ B. Judd Hartman
--------------------------------
B. Judd Hartman
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<PAGE> 3
STATE OF WEST VIRGINIA,
COUNTY OF KANAWHA, ss:
I, C.A. Baker, a Notary Public in and for the County and State
aforesaid, hereby certify that B. Judd Hartman, whose name is signed to the
foregoing Articles of Incorporation, bearing date on the 26th day of December,
1995, this day personally appeared before me in my said county and acknowledged
his signature to the same.
Given under my hand and official seal this 26th day of December,
1995.
My commission expires: 12/23/97 .
-------------------
/s/ C.A. Baker
--------------------------------
Notary Public
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINIA
C.A. BAKER
P.O. Box 2214
Charleston, West Virginia 25328
My Commission Expires Dec. 23, 1997
The foregoing Articles of Incorporation were prepared by B. Judd Hartman,
Esquire, SPILMAN, THOMAS & BATTLE, 300 Kanawha Boulevard, East, Charleston, West
Virginia 25301.
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Exhibit 3.32
BYLAWS
OF
HEATHER GLEN RESOURCES, INC.
December 27, 1995
ARTICLE I
OFFICES
Section 1.1. The principal office and place of business of this
corporation will be in the City of Morgantown, County of Monongalia, State of
West Virginia, at 2708 Cranberry Square. The Board of Directors may change the
location of said principal office and of said principal place of business, or
either, from time to time as it may deem advisable, and may also establish such
offices or places of business elsewhere as in the opinion of the Board may be
advisable.
ARTICLE II
SHAREHOLDERS
Section 2.1. Annual Meetings. The annual meetings of the
shareholders of this corporation shall be held sometime during the first quarter
of each year, on such date as may be fixed by the Board of Directors, either at
the principal office of the corporation or at such other place, either within or
without the State of West Virginia, as the Board of Directors may fix by
resolution. The Board of Directors may by resolution authorize any officer or
officers to fix the date and place of such annual meeting.
Section 2.2. Special Meetings. Special meetings of the shareholders
may be called at any time by the Board of Directors, the President and
Secretary, or any number of shareholders holding in the aggregate at least
one-tenth of the number of shares entitled to vote at the meeting. Such meetings
shall be held at the principal office of the corporation unless the Board of
Directors or other persons calling such meeting shall fix some other place for
the meeting, in which event the meeting shall be held at such other place, which
may be either within or without the State of West Virginia.
Section 2.3. Notice of Meetings. Notice of the annual and all other
meetings of the shareholders shall be given by written notice stating the place,
day and hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which and the officers or persons by whom the meeting is called,
and shall be delivered not less than ten and not more than fifty days before the
date of the meeting, either personally or by mail. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his last post office address appearing on the records of the
corporation, with postage thereon prepaid. It shall be the duty of every
shareholder to furnish to the Secretary of the corporation his post office
address and to notify the Secretary of any change therein. Notice of all
meetings shall be given to each shareholder of record entitled to vote at the
meeting.
<PAGE> 2
Section 2.4. Waiver of Notice. Any meeting of the shareholders may
be held by agreement in writing signed by all the shareholders, and, where
notice or publication of any notice is required, the same may be waived in
writing signed by all the shareholders entitled to such notice, filed with the
records of the meeting, whether before or after the time stated therein. Any
meeting of the shareholders at which every shareholder is present or represented
by proxy shall be valid, notwithstanding lack or insufficiency of notice.
Section 2.5. Action by Shareholders Without Meeting. Whenever the
vote of the shareholders at a meeting thereof is required or permitted to be
taken in connection with any corporate action, the meeting and vote of such
shareholders may be dispensed with if all of the shareholders who would have
been entitled to vote upon the action, if such meeting were held, shall agree in
writing to such corporate action being taken, and such agreement shall have like
effect and validity as though the action were duly taken by the unanimous action
of all shareholders entitled to vote at a meeting of such shareholders duly
called and legally held.
Section 2.6. Quorum; Adjournments. At all meetings of the
shareholders, a quorum shall consist of at least a majority of all of the shares
of stock issued and outstanding and entitled to vote, represented either in
person or by proxy. If a sufficient number of shares is not present at the time
and place appointed, any number of shares present or represented, less than a
quorum, may adjourn any shareholders meeting from time to time until a quorum is
present and the business to come before the meeting is completed.
Section 2.7. Voting. If a quorum is present at any meeting of the
shareholders duly and properly called and held, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be and constitute the act of the shareholders, except in
the matter of election of directors, and unless the vote of a greater number, or
other vote, is required by law or by the Articles of Incorporation or bylaws of
this corporation. Except as otherwise provided by law, or by the Articles of
Incorporation or bylaws of this corporation, each outstanding share shall be
entitled to one vote on each matter submitted to vote at any meeting of the
shareholders, and may be voted by the shareholder either in person or by written
proxy. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
Section 2.8. Record of Meetings. A record shall be kept of the
meetings of the shareholders and the action taken at the same, which shall be
verified by the signature of the Chairman of the meeting and the person acting
as Secretary thereof.
ARTICLE III
DIRECTORS
Section 3.1. Number, Qualification and Term of Office. The business,
property and affairs of the corporation shall be managed and controlled by its
Board of Directors. The Board of Directors shall consist of not fewer than one
and not more than five persons, as may be determined by the shareholders from
time to time, and shall be elected at the first annual meeting of the
shareholders and at every annual meeting thereafter. Directors need
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not be shareholders of the corporation nor residents of the State of West
Virginia. They shall hold office until the next succeeding annual meeting and
until their successors are elected and qualified.
Section 3.2. Elections. In all elections of directors each
shareholder shall have the right to vote, in person or by proxy, the number of
shares owned by him and entitled to vote, for as many persons as there are
directors to be elected, and for whose election he has a right to vote, or he
may cumulate such votes and give one candidate as many votes as the number of
directors to be elected multiplied by the number of his shares shall equal; or
he may distribute them on the same principle among as many candidates and in
such manner as he shall desire.
Section 3.3. Removal of Directors. The shareholders, at any meeting
thereof called expressly for the purpose, may remove any director or the entire
Board of Directors, with or without cause, by vote of the holders of a majority
of the shares entitled to vote at an election of directors. However, if less
than the entire Board is to be removed, no one of the directors may be removed
if the votes cast against his removal would be sufficient to elect him.
Section 3.4. Vacancies. Any vacancy in the Board of Directors
resulting from removal of a director shall be filled by the shareholders at the
meeting at which such removal occurs. A vacancy resulting from an increase in
the number of directors shall likewise be filled by the shareholders at the
meeting at which such increase is made. A vacancy in the Board occurring from
any other cause, or from the failure of the shareholders to act, may be filled
by the affirmative vote of a majority of the remaining directors, though less
than a quorum. Any director elected or appointed to fill a vacancy shall serve
until the next annual election of directors.
Section 3.5. Meetings. Regular meetings of the Board of Directors
may be held at such time and place as may be prescribed by these bylaws, or as
the Board may from time to time designate. Special meetings of the Board may be
called by the President, a Vice-President, or any two directors. Meetings of the
Board may be held either within or without the State of West Virginia. Notice of
all meetings of the Board shall be given by the Secretary of the corporation or
by the person or persons calling such meeting, and, in the case of a special
meeting, shall state by whom it is called. Such notice shall be given at least
forty-eight hours before the time of such meeting, either by written notice
thereof mailed to each director, or by telegram or telephone. Except as
otherwise provided by law, the notice of any meeting of the Board need not
specify the purpose of or the business to be transacted at the meeting.
Section 3.6. Waiver of Notice. Any meeting of the directors may be
held by agreement in writing signed by all the directors, and where notice of
any meeting is required, a waiver thereof in writing, signed by the director or
directors entitled to notice, filed with the records of the meeting, whether
before or after the time stated therein, shall be equivalent to the giving of
such notice. Attendance of a director at a meeting of the directors shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called
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or convened. Except as provided in the next preceding sentence, any meeting of
the directors at which every director is present in person shall be valid,
notwithstanding lack or insufficiency of notice.
Section 3.7. Action by Directors Without Meeting. Whenever the vote
of directors at a meeting thereof is required or permitted to be taken in
connection with any corporate action, the meeting and vote of such directors may
be dispensed with if all the directors shall agree in writing to such corporate
action being taken, and such agreement shall have like effect and validity as
though the action were duly taken by the unanimous action of all directors at a
meeting thereof duly called and legally held.
Section 3.8. Quorum. A majority of the number of directors fixed by
the shareholders, as provided in these bylaws, shall constitute a quorum for the
transaction of business. The act of a majority of the directors present at any
meeting at which a quorum is present shall be and constitute the act of the
Board of Directors. If at any meeting of the Board there is less than a quorum
present, a majority of the directors present may adjourn the meeting from time
to time until a quorum is present.
Section 3.9. Conflicts of Interest. No contract or transaction
between this corporation and any one or more of its directors, or between this
corporation and any other corporation, firm, association, or entity in which one
or more of its directors are directors or officers, or are financially
interested, shall be either void or voidable because of such relationship or
interest, or because such director or directors are present at the meeting of
the Board of Directors, or a committee thereof, which authorizes, approves, or
ratifies such contract or trans action, or because his or their votes are
counted for such purpose, if:
(a) The fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves, or
ratifies the contract or transaction by a vote or consent sufficient for
the purpose without counting the votes or consents of such interested
directors; or
(b) The fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote, and they authorize, approve or
ratify such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable to this
corporation.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or a committee thereof wich
authorizes, approves, or ratifies such contract or transaction. On any question
involving the authorization, approval, or ratification of any such contract or
transaction, the names of those voting each way shall be entered on the record
of the proceedings.
Section 3.10. Record of the Board. The Board of Directors shall
cause to be kept a record of its proceedings, which shall be verified by the
signatures of the persons acting as
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Chairman and Secretary of the meeting. Any member of the Board of Directors, at
his request, shall have the right to have his vote recorded in the minutes of
the meeting on any question coming before the Board.
Section 3.11. Voting of Corporate Stock. The Board of Directors may
by resolution provide that any shares of the capital stock of any other
corporation or corporations owned by this Corporation shall be voted by such one
or more officers of this Corporation, or by such other person or persons, as the
Board shall designate, either generally or with respect to any specific
corporation, meeting or matter. In the absence of any resolution of the Board of
Directors applying to the shares of the capital stock of a corporation, or to
any meeting or matter, the President of this Corporation is authorized to vote
such shares of the capital stock of such other corporation, either in person or
by proxy given to any other officer or person, or persons, in his discretion, in
such manner as he shall deem advisable and for the best interests of this
Corporation.
ARTICLE IV
OFFICERS AND AGENTS
Section 4.1. Election and Appointment. As soon as may be after their
election the Board of Directors shall choose a President of the corporation, who
shall hold office until the next annual election of officers and until his
successor is elected and qualified. At the same time the Board of Directors
shall choose a Secretary and a Treasurer. The directors may at any time elect
from among the directors a Chairman of the Board of Directors, and may also
elect one or more Vice-Presidents, an Assistant Secretary and an Assistant
Treasurer. The person holding any office may, but need not be, a member of the
Board. Any two or more offices may be held by the same person, except the
offices of President and Secretary.
Section 4.2. Other Officers and Agents. The Board of Directors may
employ a manager and such other employees, servants, agents, attorneys and
representatives as the Board may deem advisable, to perform such duties as the
Board may prescribe.
Section 4.3. Bond. If required by the Board, the Treasurer,
Secretary, or any other officer, agent or employee shall give bond payable to
the corporation in such penalty and with such conditions and security as the
Board may approve.
Section 4.4. Compensation. The Board of Directors of this
corporation shall have the authority to fix the compensation of all officers,
including members of the Board of Directors.
Section 4.5. President. The President shall be the chief executive
officer of the corporation. He shall preside at all meetings of the shareholders
and directors at which he is in attendance, unless the directors shall elect a
Chairman of the Board to preside at meetings of the Board. Unless some other
officer or agent is specially appointed and authorized for the purpose, the
President shall sign the corporate name of the corporation to all deeds,
mortgages, writings
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<PAGE> 6
and other contracts made by the corporation, except such as are necessary or
incidental to the exercise of the powers vested in other officers or agents by
the Board of Directors; and, generally, the President shall have and exercise
supervision and control over all the business, affairs and property of the
corporation, and shall perform such duties as are incident to the conduct of its
business not otherwise provided for in these bylaws or by action of the Board of
Directors.
Section 4.6. Vice-President. The Vice-President shall in the absence
or incapacity of the President perform the duties of the President and shall
have such other powers and authority as may be assigned to him by the Board of
Directors, either generally or specially. If there shall be more than one
Vice-President, each shall have such duties, powers and authority as may be
assigned to him by the Board of Directors, and, unless otherwise provided by the
Board of Directors, each shall be authorized to perform the duties of the
President in his absence or incapacity in the order of their designation or
election.
Section 4.7. Secretary. The Secretary, or an Assistant Secretary,
shall have the custody of the minute book, stock book, corporate seal and all
records and papers of the corporation, subject to the supervision and control of
the President, except such as the Board may put in the custody of other
officers, agents or employees. The Secretary, or an Assistant Secretary, shall
attend all meetings of the share holders and of the Board of Directors and act
as Secretary thereof, keeping a record of the proceedings of such meetings in a
book to be maintained for the purpose. He shall give or cause to be given,
unless otherwise specially provided, notice of all meetings of the shareholders,
directors, committees and other meetings of the officers or representatives of
the corporation, and shall perform such other duties as may be prescribed for
him by the Board of Directors or the President.
Section 4.8. Treasurer. The Treasurer, or an Assistant Treasurer,
shall have custody of the corporate funds and securities, subject to the
supervision and control of the President. He shall cause to be kept full and
accurate accounts of receipts and disbursements of the corporation in proper
books to be furnished for that purpose by the corporation; cause all moneys and
other valuable effects to be deposited to the credit of the corporation, in such
depositories as may be designated by the Board of Directors; be responsible for
disbursing the funds of the corporation subject to such regulations as may be
prescribed by the Board of Directors, taking proper vouchers for such
disbursements; and he shall render to the President and to the directors at
regular meetings of the Board, whenever they, or any of them, may request it, an
account of all transactions of his office and of the financial condition of the
corporation, and such other reports as may from time to time be required of him
by the President or the Board.
Section 4.9. Removal of Officers. Any officer, employee, or agent of
the corporation may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. The election or appointment of any officer, employee, or agent of
the corporation shall not of itself be deemed to create any contract right.
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Section 4.10. Signature of Orders for the Payment of Money. All
checks, notes, drafts and other orders of the corporation for the payment of
money shall be drawn, signed or counter-signed as the Board of Directors may
from time to time prescribe.
ARTICLE V
CAPITAL STOCK
Section 5.1. Certificate of Stock. The Board of Directors shall
cause to be issued to any person appearing on the books of the corporation to be
the owner of any shares of its stock, a certificate or certificates therefor,
under the corporate seal of the corporation, to be signed by the President, or a
Vice-President, and the Secretary, or an Assistant Secretary, of the
corporation. Each certificate representing shares of the capital stock of the
corporation shall state on the face thereof that the corporation is organized
under the laws of the State of West Virginia; the name of the person to whom
issued; the number and class of shares which such certificate represents; and
the par value of each share represented by such certificate; and shall otherwise
be in such form as the Board of Directors may adopt. Such certificates shall be
issued in order from a stock certificate book to be kept by the Secretary under
the supervision of the Board. No such certificate shall be issued or delivered
until the stock represented thereby has been fully paid for; such payment may be
made in cash, in property, tangible or intangible, or in labor or services
actually performed for the corporation, but neither promissory notes nor future
services shall constitute such payment or part payment.
Section 5.2. Transfer of Stock. Shares of the capital stock of the
corporation shall be transferable only upon the books of the corporation by the
holder thereof in person or by attorney upon surrender and cancellation of the
certificate for the same.
Section 5.3. Lost Certificates. When a person, who appears by the
books of the corporation to own stock therein, claims that the certificate for
such stock has been lost, destroyed, or wrongfully taken, the proper officers of
the corporation shall issue to him a certificate in place and stead of the lost,
destroyed, or wrongfully taken certificate, if he shall request the issuance of
a new certificate before the corporation has notice that the old certificate has
been acquired by a bona fide purchaser, upon his compliance with the following
conditions:
(a) he shall file with the Secretary of the corporation an affidavit
setting forth the time, place and circumstances of the loss, destruction,
or taking, to the best of his knowledge and belief; and
(b) he shall execute and deliver to the corporation a bond with good
security in a penalty at least equal to the value of the shares of stock
represented by the lost, destroyed, or wrongfully taken certificate, in
form approved by the Board of Directors, to indemnify the corporation and
all persons whose rights may be affected by the issuance of the new
certificate against any loss in consequence of the issuance of the new
certificate.
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A new certificate may be issued, in the discretion of the Board of Directors,
without compliance with the foregoing requirements, upon such terms and
conditions as the Board of Directors may prescribe.
Section 5.4. Other Regulations. The Board of Directors shall have
the authority to make such other rules and regulations, not inconsistent with
law or these bylaws, concerning the issue, transfer, and delivery of
certificates of stock, as it may deem advisable.
ARTICLE VI
INDEMNIFICATION
Section 6.1. It shall be the policy of this corporation to indemnify
any person who serves, or has served, as a director, officer, employee or agent
of this corporation, or who serves or has served as a director, officer,
partner, employee, or agent of any other corporation, partnership, joint
venture, trust or enterprise at the request or direction of this corporation,
against expenses (including attorneys' fees), judgments, fines, taxes,
penalties, interest, and payments in settlement, in connection with any
threatened, pending or completed action or proceeding, and to pay any such
expenses in advance of the final disposition of any such action or proceeding,
to the full extent contemplated and permitted by Section 9 of Chapter 31,
Article 1 of the Code of West Virginia of 1931, as amended, upon such finding or
determination as shall be requisite or appropriate under said section; and the
corporation is specifically empowered and authorized to purchase and maintain,
at the expense of the corporation, insurance on behalf of any such director,
officer, partner, employee or agent against any liability asserted against him
or her in such capacity or arising out of his or her status as such, whether or
not this corporation would have the power to indemnify him or her under the
provisions of said section.
ARTICLE VII
CORPORATE SEAL
Section 7.1. The seal to be here impressed, containing the name of
this corporation and the words "Corporate Seal, West Virginia", is hereby
adopted as and for the corporate seal of this corporation.
(CORPORATE SEAL)
ARTICLE VIII
AMENDMENTS
Section 8.1. These bylaws may be amended by the Board of Directors,
subject, however, to the power of the shareholders to repeal or change any
amendment made by the Board of Directors by affirmative vote of a majority of
the stock then issued and outstanding and entitled to vote thereon; and in the
event of any conflict the vote of the shareholders shall be controlling.
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Exhibit 3.33
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
NEW ALLEGHENY LAND HOLDING COMPANY, INC.
The undersigned officers of New Allegheny Land Holding Company, Inc.
hereby set forth and verify the following:
I. The name of the corporation is New Allegheny Land Holding Company, Inc.
II. The Articles of Incorporation of the corporation are hereby amended as
follows:
(a) Section II of the Articles of Incorporation is hereby amended in
its entirety to read as follows:
II.
The address of the principal office of said corporation is P. O. Box
310, Mt. Storm, West Virginia 26739.
(b) Section VIII of the Articles of Incorporation is hereby amended
in full to read as follows:
VIII.
The name and address of the appointed person to whom shall be sent
notice or process served upon, or service of which is accepted by,
the Secretary of State, is James A. Walls, 2708 Cranberry Square,
Morgantown, West Virginia 26505.
III. The foregoing amendments to the Articles of Incorporation were
adopted and approved by unanimous written agreement of the sole shareholder of
the corporation
<PAGE> 2
on February 8, 1997, in lieu of a special meeting, in the manner prescribed by
Section 107, Article 1, Chapter 31 of the Code of West Virginia. The corporation
has only one class of stock, the number of shares of which are outstanding and
entitled to vote on the said amendments is ten (10). The numbers of shares voted
for said amendments was ten (10), and the number voted against said amendments
was None (0), by virtue of the aforesaid written agreement of the sole
shareholder executed in lieu of a special meeting.
IV. This amendment does not provide for any exchange, reclassification or
cancellation of issued shares, and it does not effect a change in the amount of
stated capital of the corporation.
DATED: February 8, 1997
NEW ALLEGHENY LAND HOLDING COMPANY, INC.
By: /s/ Mark A. Lantz
------------------------------------
Mark A. Lantz
President
By: /s/ Michael M. Matesic
------------------------------------
Michael M. Matesic
Secretary
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<PAGE> 3
STATE OF WEST VIRGINIA,
COUNTY OF Monongalia, to-wit:
I, Kimberly Lynn Morehead, a Notary Public, do hereby certify that
on this 8th day of December, 1997, personally appeared before me Mark A. Lantz,
who, being by me first duly sworn, declared that he is the President of New
Allegheny Land Holding Company, Inc., that he signed the foregoing document as
President of the corporation, and that the statements contained therein are
true.
/s/ Kimberly Lynn Morehead
--------------------------------
Notary Public
OFFICIAL SEAL
KIMBERLY LYNN MOREHEAD
R.D. 1, BOX 19, LOT 6
CORE, WEST VIRGINIA 26529
"COMMISSIONER FOR WEST VIRGINIA"
/s/ My Commission Expires on: October 9, 2005
The foregoing Articles of Amendment were prepared by the Firm of Spilman, Thomas
& Battle, P. O. Box 273, Charleston, West Virginia 25321-0273.
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<PAGE> 4
ARTICLES OF INCORPORATION
OF
NEW ALLEGHENY LAND HOLDING COMPANY, INC.
The undersigned, acting as incorporator of a corporation under and
pursuant to Section 27, Article 1, Chapter 31 of the Code of West Virginia,
adopts the following Articles of Incorporation for such corporation, FILED IN
DUPLICATE:
I.
The undersigned agrees to become a corporation by the name of: NEW
ALLEGHENY LAND HOLDING COMPANY, INC.
II.
The address of the principal office of said corporation will be Rt. 42,
South, Mt. Storm, Grant County, West Virginia 26739. Its mailing address will be
P.O. Box 307, Mt. Storm, West Virginia, 26739. Its chief works will be located
in Grant County, West Virginia.
III.
The objects, powers and purposes for which this corporation is formed are
as follows:
1. To buy, sell, lease, develop and otherwise deal in real estate
transactions and investment properties.
2. To buy, sell, trade and deal in all fixtures, equipment, and real and
personal properties of all kinds relating to the foregoing purposes.
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3. To purchase, take, own, hold, deal in, mortgage, or otherwise encumber,
and to lease, sell, exchange, transfer, or in any manner whatsoever dispose of,
real and personal property of any kind and nature, wheresoever situate, in
connection with the other purposes of the corporation;
4. To borrow money in connection with the operation of the corporation and
its other purposes, and to assign, mortgage, pledge or give as security for any
such loan.
5. To engage in any other business, trade, occupation or profession or
activity permitted to general business corporations for profit by the laws of
the State of West Virginia.
6. To have all general corporate powers and rights enumerated in Section 8
of Article 1 of Chapter 31 of the West Virginia Code, as amended, as if such
rights were more fully set out herein.
7. To do and perform every other act and thing not inconsistent with law
which may at any time seem to the Board of Directors of this corporation to be
directly or indirectly appropriate to promote, attain or exercise all the
objects, purposes and powers set forth in this Agreement and conferred by law.
The objects and purposes specified in the foregoing clauses shall, except
where otherwise expressed, be in no way limited or restricted by reference to,
or inference from, the terms of any other clause in this Articles of
Incorporation; and the objects and purposes specified in each of the foregoing
clauses of the article shall be regarded as independent objects and purposes.
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IV.
The amount of the total authorized capital stock of said corporation shall
be Five Thousand and No/100 ($5,000.00) Dollars, which shall be divided into
fifty (50) shares with a par value of One Hundred ($100.00) Dollars per share.
V.
The full name and address of the incorporator is James R. Christie, P.O.
Box 2142, Charleston, West Virginia 25328.
VI.
The existence of this corporation is to be perpetual.
VII.
The number of directors constituting the initial board of directors of the
corporation is two, and the names and addresses of the persons who are to serve
as directors until the first annual meeting of shareholders, or until their
successors are elected and shall qualify, are:
NAME ADDRESS
1. John R. Kortas P.O. Box 307
Mt. Storm, WV 25739
2. Janey H. Kortas 234 Maple Del Lane
Oakland, MD 21550
VIII.
The name and address of the appointed person to whom notice or process may
be sent: John R. Kortas, P.O. Box 307, Mt. Storm, West Virginia 26739.
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IX.
Provisions limiting preemptive rights are: None.
This Articles of Incorporation is prepared by: James R. Christie, Attorney
at Law, P.O. Box 2142, Charleston, WV 25328-2142.
The undersigned, for the purpose of forming a corporation under the laws
of the State of West Virginia, do hereby make and file this "Articles of
Incorporation."
/s/ James R. Christie
-------------------------------------
JAMES R. CHRISTIE
STATE OF WEST VIRGINIA
COUNTY OF KANAWHA, TO-WIT:
I, D. Brooks Hall, a Notary Public, in and for the county and state
aforesaid, hereby certify that JAMES R. CHRISTIE, whose name is signed to the
foregoing Articles of Incorporation, this day personally appeared before me in
my said county and acknowledged their signatures.
Date this 8th day of January, 1997
OFFICAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINIA
D. BROOKS HALL
ROUTE 1, BOX 275H
WESTON, WV 26452
My Commission Expires September 27, 2002
My commission expires: 9/27/02
-------------------
/s/ D. Brooks Hall
-------------------------------------
Notary Public
4
<PAGE> 1
Exhibit 3.34
NEW ALLEGHENY LAND HOLDING COPMANY, INC.
BY-LAWS
OFFICES
Section 1. The principal office or place of business shall be in Mt. Storm,
Grant County, State of West Virginia, and the corporation may also have offices
at such other places as the Board of Directors may from time to time determine
or the business of the corporation may require.
STOCKHOLDERS' MEETINGS
Section 2. Regular and special meetings of the stockholders shall be held at the
offices of the corporation in Mt. Storm, Grant county, West Virginia, or at such
other place and at such time as shall be stated in the notice of the meeting or
a duly executed waiver of notice thereof.
Section 3. An annual meeting of the stockholders shall be held each year as
shall be agreed to by the stockholders, or if not so designated or agreed to, on
the 1st Tuesday in October in each year if not a legal holiday, and if a legal
holiday, then on the next business day following, at 10:00 a.m., local time, at
the principal office of the corporation. Any business may be transacted at the
annual meeting, irrespective of whether the notice of such meeting contains a
reference thereto, except as otherwise expressly required herein or by law. At
the annual meeting, the stockholders shall elect by a plurality vote a Board of
Directors and transact such other business as may properly be brought before the
meeting.
Section 4. Written notice of the annual meeting shall be served upon or mailed
to each stockholder entitled to vote thereat at such address as appears on the
stock book of the corporation, at least five (5) days prior to the meeting.
Section 5. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or the agreement of incorporation, may be
called by the board of Directors, the president and secretary or any number of
stockholders owning in the aggregate at least one-tenth of the number of shares
outstanding.
Section 6. Written notice of a special meeting of stockholders, stating the time
and place thereof, and the business to be transacted thereat, shall be served
upon or mailed, postage prepaid, to each stockholder entitled to vote thereat at
such address as appears on the books.
<PAGE> 2
Section 7. The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person, or represented by proxy, shall be
requisite and shall constitute a quorum at all meetings of the stockholders for
the transaction of business except as otherwise provided by statute, by the
agreement of incorporation or by these By-Laws. If, however, such majority shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person, or represented by
proxy, shall have power to adjourn the meeting from time to time without,
without notice other than announcement of the meeting until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 8. When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which by express provision of the statutes or of the agreement of
incorporation or of these By-Laws a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 9. At any meeting of the stockholders every stockholder having the right
to vote shall be entitled to vote in person, or by proxy appointed by an
instrument in writing subscribed by such stockholder and bearing a date not more
than three (3) years prior to said meeting, unless said instrument specifically
confers the right to vote for a longer period. Each stockholder shall have one
vote for each share of stock having voting power, registered in his name on the
books of the corporation, except where the transfer books of the corporation
shall have been closed or a date shall have been fixed as a record date for the
determination of its stockholders entitled to vote, and, in all election for
Directors, may cast one vote for each such share for as many persons as there
are Directors to be elected, or may cumulate such votes and give one candidate
as many votes as the number of directors to be elected multiplied by the number
of such share of stock shall equal, or to distribute them on the same principal
among as many candidates as he shall desire, and the Directors shall not be
elected in any other manner.
DIRECTORS
Section 10. The corporate business and affairs of the corporation 9but not
professional services performed in any particular case by a board of
stockholders and employees of the corporation) shall be managed by a board of
two (2) Directors, or such other number of Directors as is established by a duly
adopted amendment of the Articles of Incorporation or of this By-Law. The
Directors shall be elected at the annual meeting of the stockholders, to serve
until their successors shall be elected and shall qualify. Directors need not be
stockholders nor residents of the State of West Virginia.
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<PAGE> 3
Section 11. The Directors shall have the power from time to time and any time,
when the stockholders, as such, are not assembled in a meeting, regular or
special, to increase the number of Directors to not more than six (6), and
forthwith appoint and elect any other person, or persons, to be Directors, to
hold office until the next annual election or until their successors are elected
and qualify.
Section 12. The directors may hold their meeting and keep the books of the
corporation at the principal office of the corporation or at such other places,
within or without the State of West Virginia, as may be determined from time to
time.
Section 13. If the office of any Director of Directors becomes vacant by reason
of death, resignation, retirement, disqualification, removal from office, or
otherwise, a majority of the remaining directors, though less then a quorum,
shall choose a successor or successors, who shall hold office for the unexpired
term in respect to which such vacancy occurred or until the next election of
Directors.
Section 14. The property and business of the corporation shall be managed by its
Board of Directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the agreement of
incorporation or by these By-Laws directed or required to be exercised or done
by the stockholders.
COMPENSATION OF DIRECTORS
Section 15. Directors, as such, shall not receive any stated salary for their
service, but by resolution of the Board, a fixed sum and expense of attendance,
if any, may be allowed for attendance of each regular or special meeting of the
Board; provided, that noting herein contained shall be construed to preclude any
Director from serving the corporation in any other capacity and receiving
compensation therefore.
MEETNGS OF THE BOARD
Section 16. An organization meeting of the newly elected Board of Directors
shall be held each year at the same place as and promptly after the annual
meeting of stockholders. At such meeting, the Board of Directors shall organize
itself and elect the executive officers of the corporation for the ensuing year,
and may transact any other business. Notice of the organization meeting of the
Board or of the business to be transacted thereat shall not be required to be
given, except as otherwise expressly required herein or by law.
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Section 17. Regular meetings of the board may be held without notice at such
time and place either within or without the State of West Virginia as shall from
time to time be determined by the Board.
Section 18. Special meetings of the Board of Directors may be called by the
president, vice-president, if any, or any two (2) of the Directors, on five (5)
days' notice to each Director, either personally or by mail, fax or telegram.
Section 19. At all meetings of the Board a majority of the authorized Directors
shall be necessary and sufficient to constitute a quorum for the transaction of
business, and the act of a majority of he Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by stature or by the agreement of
incorporation or by these By-Laws. If a quorum shall not be present at any
meeting of the Directors, the Directors present threat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
NOTICES
Section 20. Whenever under the provisions of the statutes or of the agreement of
incorporation or of these By-Laws, notice is required to be given to any
director of Stockholder, it shall not be construed to mean personal notice, but
such notices may be given in writing, by mail, addressed to such Director or
stockholder, at such address as appears on the books of the corporation, or by
fax, at the telephone number provided to the corporation by such Director or
stockholder, and such notice shall be deemed to be given at the time when the
same shall be thus mailed or faxed.
Section 21. Notice of the time, place and purpose of any meeting of Stockholders
of Directors whether required by the provisions of the statute, the agreement of
incorporation or these By-Laws may be dispensed with if every stockholder shall
attend either in person or by proxy, or if every Director shall attend in
person, or if every absent stockholder or Director shall, in writing, filed with
the records of the meeting either before or after the holding thereof, waive
such notice.
ACTION BY STOCKHOLDERS AND DIRECTORS WITHOUT MEETING
Section 22. Notwithstanding any provision set forth herein, whenever the vote of
stockholders at the meeting thereof is required or permitted to be taken in
connection with any corporate action by any provisions of the statutes or of the
agreement of incorporation or of these By-Laws, the meeting and vote of the
stockholders may be dispensed with, if all the stockholders who would have been
entitled to vote upon the action, if such meeting were held, shall agree in
writing to such corporate action being
4
<PAGE> 5
taken. Whenever the vote of Directors at a meeting thereof is required or
permitted to be taken in connection with any corporate action by any provisions
of the statutes or of the agreement of incorporation or of these By-Laws, the
meeting and vote of Directors may be dispensed with if all the Directors agree
in writing to such corporate action being taken.
OFFICERS
Section 23. The officers of the corporation shall be chosen by the Directors and
shall be president, secretary and treasurer. The Board of Directors may also
choose a chief executive officer, a chief operating officer, one or more
vice-presidents, assistant secretaries and assistant treasurers. Any two (2) of
the above named officers, except those of president and vice-president may be
held by the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity, if such instrument is required by law or
by these By-Laws to be executed, acknowledge, verified or countersigned by two
(2) or more officers.
Section 24. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a president from their own number, and a
secretary and a treasurer, none of whom need to be a member of the Board.
Section 25. The Board may appoint such other officers and agents as it shall
deem necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the Board.
Section 26. The salaries of all officers and agents of the corporation shall be
fixed by the Board of Directors.
Section 27. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at nay time by the
affirmative vote of a majority of the whole Board of Directors. If the office of
any officer becomes vacant for any reason, the vacancy shall be filled by the
Board of Directors.
THE PRESIDENT
Section 28. The president shall be the chief executive officer of the
corporation; he shall preside at all meeting of the Stockholders and Directors,
shall have such general and active management of the business of the corporation
and shall see that all orders and resolutions of the Board are carried into
effect.
5
<PAGE> 6
Section 29. he shall execute bond, mortgages and other contracts requiring a
seal, under the seal of the corporation, except where required or permitted by
law to be other wise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the corporation.
VICE-PRESIDENT
Section 30. The vice-presidents in the order of their seniority shall, in the
absence or disability of the president, perform the duties and exercise the
powers of the president, and shall perform such other duties as the Board of
Directors shall prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 31. The secretary shall attend all sessions of the Board and all
meetings of the stockholders and record all records and the minutes of all
proceedings in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. He or she shall give, or cause to be
given, notice of all meetings of the stockholders and special meeting of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors or president, under whose supervision he or she shall be.
He or she shall keep in safe custody the seal of the corporation and, when
authorized by the Board, affix the same to any instrument requiring it, and when
so affixed, it shall be attested by his or her signature or by the signature of
the treasurer or any assistant secretary.
Section 32. The assistant secretaries in the order of their seniority shall, in
the absence or disability of the secretary, perform the duties and exercise the
powers of the secretary, and shall perform such other duties as the Board of
Directors shall prescribe.
THE TREASURER AND ASSITANT TREASURER
Section 33. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all monies
and other valuable effects in he name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 34. He or she hall disburse the funds to the corporation as may be
ordered by the Board, taking proper vouchers for such disbursements, and shall
render
6
<PAGE> 7
to the president and Directors, at the regular meetings of the Board, or
whenever they may require it, an account of all his or her transactions as
treasurer and of the financial condition of the corporation.
Section 35. If required by the Board of Directors, he or she shall give the
corporation a bond in a sum, and with such surety or sureties as may be
satisfactory to the Board of the faithful performance of the duties of his
office, and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his or her
control belonging to the corporation.
Section 26. The assistant treasurers in the order of their seniority shall, in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer and shall perform such other duties as the Board of
Directors shall prescribe.
CERTIFICATES OF STOCK
Section 37. The certificates of stock of the corporation shall be numbered and
shall be entered in the books of the corporation as they are issued. They shall
exhibit the holder's name and number of shares and shall be signed by the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary of any assistant secretary. If any stock certificate is signed by
a transfer agent or an assistant transfer agent or a transfer clerk acting on
behalf of the corporation, and a registrar, the signature of any such officer
may be facsimile. No certificate for any share of stock shall be issued or
delivered to any stockholder until his subscription or sale price for such share
is paid in full.
TRANSFER OF STOCK
Section 38. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
REGISTERED STOCKHOLDERS
Section 39. The corporation shall be entitled to treat the holder of record of
any share or shares of stock as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share on the part of any other
7
<PAGE> 8
person, whether or not it shall have express or other notice thereof, save as
expressly provided by the laws of West Virginia.
LOST CERTIFICATE
Section 40. The Board of Directors may direct a new certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of any affidavit of the fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of the
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require, and/or give the
corporation a bond, in such sum as it may direct to indemnify the corporation
against any claim that may be made against it with respect to the certificate
alleged to have been lost or destroyed.
DIVIDENDS
Section 41. Dividends upon the capital stock of the corporation, subject to the
provision of incorporation, if any, may be declared by the Board of Directors at
any regular, annual or special meeting, pursuant to law. Dividends may be paid
in cash, in property, or in shares of the capital stock.
Section 42. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the Directors shall think conducive to the interests of the
corporation, and the Directors may abolish any such reserve in the manner in
which it was created.
Section 43. If any stockholders be indebted to the corporation, any dividend
payable to such stockholders, or so much thereof as is necessary may be applied
to he payment of such indebtedness if then due and payable.
ANNUAL STATEMENT
Section 44. The president shall annually prepare a fully and true statement of
the affairs of the corporation, which shall be submitted at the annual meeting
and filed within
8
<PAGE> 9
twenty days thereafter at the principal office in West Virginia, where it shall,
during the usual business hours of each secular day be open for inspection by
any stockholder.
CHECKS
Section 45. All checks or demands for money and notes of the corporation shall
be signed by such officer or officers or such other person or persons as the
Board of Directors may from time to time designate.
Section 46. The tax year of the corporation shall end on December 31 of each
year.
SEAL
Section 47. The Board of Directors shall prescribe the form of a suitable
corporate seal, which shall contain the full name of the corporation and state
or incorporation.
AMENDMENTS
Section 48. These By-Laws may be altered or repealed at any regular or annual
meeting of the stockholders or at any special meeting of the stockholders of
which a quorum is present or represented provided notice of the proposed
alteration or repeal be contained in the notice of such special meeting, by the
affirmative vote of a majority of the issued and outstanding stock entitled to
vote at such meeting and present or represented thereat, or by the affirmative
vote of a majority of the Board of Directors at any regular or annual meeting of
the Board, or at any special meeting of the Board if notice of the proposed
alteration or repeal be contained in the notice of such special meeting.
INDEMNIFICATION
Section 49. Any person who or was a Director, officer, employee or agent of the
corporation, or of any other corporation, partnership, joint venture, trust or
other business enterprise which he or she serves or served as such at the
request of the corporation, shall, in accordance with Section 50 of these
By-Laws, be indemnified by the corporation against any and all liability and
reasonable expenses (including, but not limited to, counsel fees and
disbursements and amounts paid in settlement or in satisfaction of judgments or
as fines or penalties) paid or incurred by him or her in connection with or
resulting from any action, suit or proceeding, including any appeal related
thereto, in
9
<PAGE> 10
which he or she may be involved or threatened to be involved, a party or
otherwise, by reason of his or her being or having been a Director, officer,
employee or agent of the corporation or of such other corporation, partnership,
joint venture, trust or other enterprise at corporation's request or be reason
of any action taken or not taken in the course of him employment as such
Director, officer, employee or agent, provided that there shall be no such
indemnification unless such Director, officer, employee or agent acted in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation or such other corporation,
partnership, joint venture, trust or other enterprise and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful, and provided, further, that, in the case of an action,
suite or proceeding brought by or in the right of the corporation or of such
other corporation, partnership, joint venture, trust or other enterprise to
procure a judgment in its favor, if such officer, Director, employee or agent
has been adjudge to be liable for negligence or misconduct in the performance of
his or her duty to the corporation or to such other corporation, partnership,
join venture, trust or other enterprise, then such person shall not be
indemnified unless (and only to the extent that) the Circuit Court of the county
in which the registered office of the corporation is located or such other court
in which such action at suit was brought shall determine upon application that
despite the adjudication of the liability, but in view of all the circumstances
of the case, such person is fairly and reasonable entitled to indemnity for such
expenses as the said Circuit Court or such other court shall deem proper. The
termination of any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the Director, officer, employee or agent did not meet the
standard of conduct as set forth in the Section.
Section 50. The grant of indemnification under these By-Laws shall be at the
discretion of the Board of Directors unless such grant is awarded by a court or
granted by the shareholders of the corporation, or the Director, officer,
employee or agent concerned has been successful on the merits or otherwise in
defense of any action, suite or proceeding referred to in Section 49 of these
By-Laws. Indemnification may be granted only if the Board of Directors, by a
majority vote of a quorum consisting of Directors not parties to such action,
suit or proceeding, shall find that the Director, officer, employee or agent has
met the applicable standard of conduct set forth in Section 49 of these By-Laws,
or, if no such quorum is obtainable (or even if obtainable, if such quorum so
directs), upon the written determination of independent legal counsel that in
its opinion the applicable standard of conduct have been met.
Section 51. Expenses incurred with respect to any action, suit or proceeding of
the character described in Section 59 of these By-Laws may be advanced by the
corporation prior to the final disposition thereof upon receipt of an
undertaking by or on behalf of the recipient to repay such amount or expense
unless it shall ultimately be determined that he or she is entitled to and is
granted indemnification under these By-Laws.
10
<PAGE> 11
Section 52. The rights of indemnification provided by these By-Laws shall be in
addition to any rights to which any such Director, officer, employee or agent
may be entitled under any contract, vote of shareholders or of disinterested
Director or otherwise; and shall continue as to a person who has ceased to be a
Director, officer, employee or agent of the corporation or of such other
corporation, partnership, trust or other enterprise, and in the event of such
person's death, the rights provided under the terms of these By-Laws shall inure
to his heirs and legal representatives.
11
<PAGE> 1
Exhibit 3.35.1
ARTICLES OF INCORPORATION
OF
PATRIOT MINING COMPANY, INC.
I. The undersigned agree to become a corporation by the name of:
PATRIOT MINING COMPANY, INC.
II. The principal Office or Place of Business of said Corporation will be
located at P. O. Box 306, in the town of Kingwood, in county of Preston
and State of West Virginia. Its chief works will be located in Kingwood
District, Preston County, State of West Virginia.
III. The objects for which this Corporation is formed are as follows:
(a) To engage in the general business of mining and to do all things
incident thereto;
(b) To purchase, lease or otherwise acquire, to hold, and to sell, lease
or otherwise dispose of real property, mines, mineral and mining
rights, oil and gas wells, oil and gas royalties, and interests of
any nature in all of the foregoing, whether in the United States of
America or elsewhere;
(c) To mine, drill for and otherwise extract coal, oil, gas, metals,
ores and minerals and to otherwise acquire, produce, prepare for
market, process, store, transport, sell and deal in the same and the
products and by-products thereof;
<PAGE> 2
(d) To operate and conduct mines, wells and mining and drilling
operations;
(e) To acquire, construct, operate, maintain and dispose of lands,
factories, works, facilities, machinery, equipment and buildings of
whatever nature;
(f) To carry on the business of consulting, advising and managing mining
and drilling operations;
(g) To engage in the transaction of any or all other lawful business for
which corporations may be incorporated under the corporation laws of
the State of West Virginia, as the same may be from time to time
amended;
(h) To enter into and participate in one or more joint ventures with
individuals or corporations to carry out the objects, purposes and
powers of the Corporation;
(i) To do all things necessary, convenient or incident to the
accomplishment of the foregoing objects, purposes and powers.
IV. The amount of the total authorized capital stock of said corporation shall
be Five Thousand dollars, which shall be divided into five hundred shares
of the par value of ten dollars each.
The amount of capital stock with which it will commence business is
One Thousand Dollars ($1,000.00) being one hundred shares of the par value
of ten Dollars ($10.00) each.
VII. The full names and addresses, including street and street numbers, if any,
and the city, town or village, of the
2
<PAGE> 3
incorporators, and if a stock corporation, the number of shares subscribed
by each.
No. of Shares Total No.
NAME ADDRESS Common Stock of Shares
- ---- ------- ------------ ---------
Marvin E. Milbauer 200 Park Avenue
New York, New York 10017 40 40
Christopher S. 200 Park Avenue 30 30
Armstrong New York, New York 10017
Brian E. McGunigle 200 Park Avenue 30 30
New York, New York 10017
VI. The existence of this corporation is to be perpetual.
WE, THE UNDERSIGNED, for the purpose of forming a Corporation under the
laws of the State of West Virginia do make and file this Agreement; and we have
accordingly hereunto set our respective hands this 10th day of March, 1975.
/s/ Marvin E. Milbauer
------------------------------
/s/ Christopher S. Armstrong
------------------------------
/s/ Brian E. McGunigle
------------------------------
Chapter 31, Article 1, Section 6, Code 1931, as amended.
Effective June 10, 1967.
AGREEMENT OF INCORPORATION and/or AMENDMENT prepared by:
Coudert Brothers
200 Park Avenue
New York, New York 10017
3
<PAGE> 1
Exhibit 3.35.2
ARTICLES OF MERGER
OF DOMESTIC CORPORATIONS
INTO
PATRIOT MINING COMPANY, INC.
Pursuant to the provisions of Section 36, Article 1, Chapter 31 of the
Code of West Virginia, 1931, as amended, the undersigned domestic corporations
adopt the following Articles of Merger for the purpose of merging them into one
of such corporations:
FIRST: The following Plan of Merger was approved by the Board of Directors
and by the Sole Shareholder of each of the undersigned corporations in the
manner prescribed by Sections 31-1-34, 31-1-117 and 31-1-73 of the West Virginia
Corporation Act:
PLAN OF MERGER
OF
AJAX MINING COMPANY, INC.
(a West Virginia Corporation)
INTO
PATRIOT MINING COMPANY, INC.
(a West Virginia Corporation)
ARTICLE FIRST: As of the Effective Date (as defined in Article Third
hereof) and upon the terms set forth in Article Second hereof, Ajax Mining
Company, Inc., a West Virginia corporation ("Ajax"), shall be merged with and
into Patriot Mining Company, Inc., a West Virginia corporation ("Patriot").
Patriot shall be the surviving corporation in such merger (the "Surviving
Corporation").
<PAGE> 2
-2-
ARTICLE SECOND: The terms and conditions of the merger are as follows:
A. Share Cancellation. Each share of common stock of Ajax outstanding
immediately prior to the Effective Date shall forthwith automatically be
cancelled on the Effective Date and no additional shares of the common stock of
Patriot shall be issued as a result of the merger.
B. Articles of Incorporation and By-Laws; Name. The Articles of
Incorporation and By-Laws of Patriot shall continue as the Articles of
Incorporation and By-Laws of the Surviving Corporation. The name of the
Surviving Corporation shall be Patriot Mining Company, Inc.
C. Directors and Officers. The directors and officers of Patriot shall
continue in office as directors and officers of the Surviving Corporation in
accordance with the By-Laws of Patriot until such time as their successors have
been elected and qualified.
D. Assets and Liabilities. Upon the Effective Date all the property, real
and personal, rights, privileges, immunities, powers, purposes, franchises,
patents, licenses, trademarks, registrations, causes of action, and every other
asset of Ajax and Patriot shall be transferred to, vest in and devolve upon the
Surviving Corporation without further act or deed, and every interest of Ajax
and Patriot shall be as effectively the property of the Surviving Corporation as
they were of Ajax and Patriot.
E. Abandonment. Notwithstanding approval and adoption of this Plan of
Merger by the Directors of Patriot and Ajax, this Plan of Merger may be
abandoned and the merger of Ajax and Patriot terminated at any time prior to the
Effective Date by decision of the Board of Directors of Patriot.
ARTICLE THIRD: The effective date of the merger of Ajax and Patriot (the
"Effective Date") shall be January 1, 1988 or, if later, the date the Articles
of Merger are filed by the Secretary of State of West Virginia in accordance
with the provisions of applicable state law.
<PAGE> 3
-3-
SECOND: As to each of the undersigned corporations, the number of shares
outstanding and the designation and number of outstanding shares of each class
entitled to vote as a class on such Plan of Merger, are as follows:
<TABLE>
<CAPTION>
Entitled to Vote as a Class
---------------------------
Number of Shares Designation
Name of Corporation Outstanding of Class Number of Shares
- ------------------- ---------------- ----------- ----------------
<S> <C> <C> <C>
Ajax Mining
Company, In. 500 Common 500
Patriot Mining
Company, Inc. 100 Common 100
</TABLE>
THIRD: For each of the undersigned corporations, the Plan of Merger was
approved by the Unanimous Written Consent of the Board of Directors and by the
Written Consent of the Sole Shareholder of each of the corporations as if voted
upon at a meeting, pursuant to Section 31-1-73 of the West Virginia Corporation
Act.
Dated December 21, 1987
AJAX MINING COMPANY, INC.
By: /s/ Richard B. Bolen
-----------------------------
Name: Richard B. Bolen
Title: President
By: /s/ Bruce Sparks
-----------------------------
Name: Bruce Sparks
Title: Secretary
PATRIOT MINING COMPANY, INC.
By: /s/ Richard B. Bolen
-----------------------------
Name: Richard B. Bolen
Title: President
By: /s/ Bruce Sparks
-----------------------------
Name: Bruce Sparks
Title: Secretary
<PAGE> 4
-4-
Verification
I, the undersigned, Secretary of Patriot Mining Company, Inc., hereby
verify that I have read the Articles of Merger dated December 21, 1987, relating
to the merger of Ajax Mining Company, Inc. with and into Patriot Mining Company,
Inc. pursuant to a Plan of Merger duly adopted by the boards of directors and
the shareholders of such corporations, which plan has not been revoked or
amended, and, to the best of my knowledge, the statements in said Articles of
Merger are true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand this 21 day of December,
1987.
/s/ Bruce Sparks
-----------------------------
Name: Bruce Sparks
Title: Secretary, Patriot Mining
Company, Inc.
STATE OF WEST VIRGINIA )
) SS.:
COUNTY OF )
I, Mary J. Josta, a Notary Public, do hereby certify that on this 21 day
of December, 1987, personally appeared before me Bruce Sparks, who, being by me
first duly sworn, declared that he is the Secretary of Patriot Mining Company,
Inc., that he signed the foregoing document as Secretary of Patriot Mining
Company, Inc., and that the statements therein contained are true.
/s/ Mary J. Josta
-----------------------------
Notary Public
My commission expires: July 17, 1995
---------------------
OFFICIAL SEAL
Notary Public, State of West
Virginia
Mary J. Josta
Rt. 8, Box 205, Lot 11 Morgantown, WV 26505
My Commission Expires July 17, 1995
<PAGE> 5
-5-
Verification
I, the undersigned, Secretary of Ajax Mining Company, Inc., hereby verify
that I have read the Articles of Merger dated December 21, 1987, relating to the
merger of Ajax Mining Company, Inc. with and into Patriot Mining Company, Inc.
pursuant to a Plan of Merger duly adopted by the boards of directors and the
shareholders of such corporations, which plan has not been revoked or amended,
and, to the best of my knowledge, the statements in said Articles of Merger are
true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand this 21 day of December,
1987.
/s/ Bruce Sparks
-----------------------------
Name: Bruce Sparks
Title: Secretary, Ajax Mining
Company, Inc.
STATE OF WEST VIRGINIA )
) SS.:
COUNTY OF )
I, Mary J. Josta, a Notary Public, do hereby certify that on this 21 day
of December, 1987, personally appeared before me Bruce Sparks, who, being by me
first duly sworn, declared that he is the Secretary of Ajax Mining Company,
Inc., that he signed the foregoing document as Secretary of Ajax Mining Company,
Inc., and that the statements therein contained are true.
/s/ Mary J. Josta
-----------------------------
Notary Public
My commission expires: July 17, 1995
-----------------
OFFICIAL SEAL
Notary Public, State of West Virginia
Mary J. Josta
Rt. 8, Box 205, Lot 11 Morgantown, WV 26505
My Commission Expires July 17, 1995
<PAGE> 1
Exhibit 3.35.3
ARTICLES OF MERGER
OF DOMESTIC SUBSIDIARY CORPORATION
INTO
DOMESTIC PARENT CORPORATION
Pursuant to the provisions of Section 119, Article 1, Chapter 31 of the
Code of West Virginia, 1931, as amended, the undersigned domestic corporation
adopts the following Articles of Merger for the purpose of merging a subsidiary
corporation into the undersigned as the surviving corporation:
The following Plan of Merger was approved by the Board of Directors of the
undersigned, as the surviving corporation, in the manner prescribed by Section
117, Article 1, Chapter 31 of the Code of West Virginia, 1931, as amended:
PLAN OF MERGER
SANDY CREEK LAND COMPANY, INC.
(a West Virginia Corporation)
INTO
PATRIOT MINING COMPANY, INC.
(a West Virginia Corporation)
ARTICLE FIRST: As of the Effective Date (as defined in Article Third
hereof) and upon the terms set forth in Article Second hereof, Sandy Creek Land
Company, Inc., a West Virginia Corporation ("Sandy Creek"), shall be merged into
Patriot Mining Company, Inc., a West Virginia corporation ("Patriot"). Patriot
shall be the surviving corporation in such merger (the "Surviving Corporation").
<PAGE> 2
-2-
ARTICLE SECOND: The terms and conditions of the merger are as follows:
A. Share Cancellation. Each share of common stock of Sandy Creek
outstanding immediately prior to the Effective Date shall forthwith
automatically be cancelled on the Effective Date and no additional shares of the
common stock of Patriot shall be issued as a result of the merger.
B. Articles of Incorporation and By-Laws; Name. The Articles of
Incorporation and By-Laws of Patriot shall continue as the Articles of
Incorporation and By-Laws of the Surviving Corporation. The name of the
Surviving Corporation shall be Patriot Mining Company, Inc.
C. Directors and Officers. The directors and officers of Patriot
shall continue in office as directors and officers of the Surviving Corporation
in accordance with the By-Laws of Patriot until such time as their successors
have been elected and qualified.
D. Assets and Liabilities. Upon the Effective Date all the property,
real and personal, rights, privileges, immunities, powers, purposes, franchises,
patents, licenses, trademarks, registrations, causes of action, and every other
asset of Sandy Creek and Patriot shall be transferred to, vest in and devolve
upon the Surviving Corporation without further act or deed, and every interest
of Sandy Creek and Patriot shall be as effectively the property of the Surviving
Corporation as they were of Sandy Creek and Patriot.
E. Abandonment. Notwithstanding approval and adoption of this Plan
of Merger by the Board of Directors of Patriot, this Plan of Merger may be
abandoned and the merger of Sandy Creek and Patriot terminated at any time prior
to the Effective Date by decision of the Board of Directors of Patriot.
<PAGE> 3
-3-
ARTICLE THIRD: The effective date of the merger of Sandy Creek and Patriot
(the "Effective Date") shall be the later of December 28, 1984 or the date on
which the Articles of Merger are filed by the Department of State of West
Virginia.
The number of outstanding shares of each class of the subsidiary
corporation and the number of such shares of each class owned by the Surviving
Corporation are as follows:
<TABLE>
<CAPTION>
Number of Shares
Number of Shares Designation Owned by
Name of Corporation Outstanding of Class Surviving Corporation
<S> <C> <C> <C>
Sandy Creek Land 392 Common 392
Company, Inc.
</TABLE>
Dated December , 1984
PATRIOT MINING COMPANY, INC.
By: /s/ Richard B. Bolen
---------------------------------
Name: Richard B. Bolen
Title: President
By: /s/ Elizabeth L. Thomas
---------------------------------
Name: Elizabeth L. Thomas
Title: Secretary
<PAGE> 4
-4-
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
I, Cynthia K. Haluszczak, a Notary Public, do hereby certify that on this
19th day of December, 1984, personally appeared before me Elizabeth L. Thomas,
who, being by me first duly sworn, declared that she is the Secretary of Patriot
Mining Company, Inc., that she signed the foregoing document as Secretary of the
Corporation, and that the statements therein contained are true.
/s/ Cynthia K. Haluszczak
--------------------------------------
Notary Public
CYNTHIA K. HALUSZCZAK NOTARY PUBLIC
UPPER ST CLAIR TWP ALLEGHENY COUNTY
MY COMMISSION EXPIRES MAY 2 1988
My commission expires: Member Pennsylvania Association of Notaries
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<PAGE> 1
Exhibit 3.36
Amended and Restated
BY-LAWS
of
PATRIOT MINING COMPANY, INC.
(A West Virginia corporation)
Adopted by Unanimous Written Consent
of the Board of Directors dated June 9, 1978
* * *
ARTICLE 1
OFFICES
The principal office or place of business shall be located in Kingwood,
County of Preston, West Virginia. The corporation may have other offices, either
within or without the State of West Virginia, at such place or places as the
board of directors may from time to time designate or the business of the
corporation may require.
ARTICLE 2
SHAREHOLDERS
2.1 Annual Meetings. Annual meetings of shareholders for the election of
directors and for such other business as may properly come before the meeting
shall be held at such place, either within or without the State of West
Virginia, and at such time and date as may be fixed from time to time by the
board of directors.
<PAGE> 2
2.2 Special Meetings. Special meetings of shareholders may be held at any
time and place, within or without the State of West Virginia. Special meetings
of the shareholders for any purpose or purposes, unless otherwise prescribed by
law, may be called by the board of directors, the President or Secretary, or by
the holders of not less than one-tenth of all outstanding shares of the
corporation entitled to vote at the meeting.
2.3 Notice of Meetings. Written notice, stating the place, date and hour
of the meeting, and in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten nor more than
fifty days before the date of the meeting either personally or by mail by or at
the direction of the President, or the Secretary, or the person calling the
meeting, to each shareholder of record entitled to vote at such meeting.
2.4 Action Without Meeting. Any action required or permitted to be taken
at an annual or special meeting of shareholders may be taken without a meeting
and without prior notice if a consent in writing, setting forth the action so
taken, shall be signed by all of the shareholders who would have been entitled
to vote upon the action if such meeting were held. Such action by unanimous
written consent may be taken without regard to any provision of these By-
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Laws or any resolution of the board of directors fixing the time, date or place
of meetings of shareholders.
2.5 Quorum. Except as otherwise required by law, by the Articles of
Incorporation, or by these By-Laws, the holders of a majority of the outstanding
shares entitled to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of the shareholders. If, however, such a quorum shall not be
present at any meeting, a majority in interest of the shareholders who are
entitled to vote thereat and are present in person or by proxy, shall have power
to adjourn the meeting from time to time, without notice other than announcement
at the meeting, until the requisite number of shares entitled to vote shall be
present. At such adjourned meeting at which the requisite number of shares
entitled to vote shall be represented, any business may be transacted which
might have been transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
2.6 Voting. If a quorum is present, the affirmative vote of a majority of
the shares represented at the meeting shall be the act of the shareholders,
unless the vote of a greater number of shares is required by law, the Articles
of Incorporation, or these By-Laws.
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Each outstanding share having voting power shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholders. A shareholder
may vote either in person or by proxy executed in writing by the shareholder or
by his duly authorized attorney-in-fact. No proxy shall be valid after eleven
months from the date of its execution, unless otherwise provided in the proxy.
At each election for directors every shareholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected and
for whose election he has a right to vote, or to cumulate his votes by giving
one candidate as many votes as the number of such directors multiplied by the
number of his shares shall equal, or by distributing such votes on the same
principle among any number of such candidates.
ARTICLE 3
DIRECTORS
3.1 Number and Term. The number of directors shall be not less than two
and not more than seven, as shall be determined from time to time by election of
directors or other action of the shareholders or by resolution of the board of
directors. The total number of directors as most recently set by such election,
action or resolution shall constitute the "full board". Directors need not be
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residents of the State of West Virginia nor shareholders of the corporation. The
directors, other than the first board of directors, shall be elected at the
annual meeting of the shareholders, and each director elected shall serve until
the next succeeding annual meeting and until his successor shall have been
elected and qualified. The first board of directors shall hold office until the
first meeting of the shareholders.
3.2 Resignations. Any director may resign at any time. Such resignation
shall be made in writing, and shall take effect at the time specified therein,
and if no time be specified, at the time of its receipt by the President or
Secretary. The acceptance of a resignation shall not be necessary to make it
effective.
3.3 Vacancies. Any vacancy occurring in the board of directors and any
directorship to be filled by reason of an increase in the number of directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the board of directors. A director elected to fill
a vacancy shall be elected for the unexpired portion of the term of his
predecessor in office.
3.4 Removal. At a meeting of shareholders called expressly for that
purpose, any director or the entire board of directors may be removed, with or
without cause, by a vote of the holders of a majority of the shares entitled to
vote at an election of directors. If less than the entire
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board is to be removed, no one of the directors may be removed if the votes cast
against his removal would be sufficient to elect him.
3.5 Powers. The business and affairs of the corporation shall be managed
by its board of directors, which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the Articles
of Incorporation directed or required to be exercised or done by the
shareholders. The board of directors is expressly authorized, without the assent
or vote of the shareholders, to authorize and cause to be executed mortgages and
liens upon the real and personal property of the corporation, including
after-acquired property. The enumeration in these By-Laws of particular powers
of the board of directors shall not imply the denial of, or any limitation on,
any other power vested in the board of directors by law or by the Articles of
Incorporation or by these By-Laws.
3.6 Compensation. The board of directors, by the affirmative vote of a
majority of the directors then in office, an irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise.
3.7 Meetings. The newly elected directors may hold their first meeting for
the purpose of organization and the
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transaction of business, if a quorum is present, immediately after the annual
meeting of the shareholders; or the time and place of such meeting may be fixed
by consent in writing of all the directors.
Regular meetings of the directors may be held without notice at such
places and times as shall be determined from time to time by resolution of the
directors.
Special meetings of the directors may be called by the President or
Secretary or by any two directors on at least two days' notice to each director
and shall be held at such place or places as may be determined by the directors,
or as shall be stated in the notice of meeting.
Any directors' meeting may be held either within or without the State of
West Virginia.
3.8 Quorum of Directors. A majority of the full board of directors shall
constitute a quorum for the transaction of business at any meeting of the board
of directors, but if less than such majority is present at a meeting, a majority
of the directors present may adjourn the meeting from time to time without
further notice.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the board of directors.
3.9 Action by Directors Without a Meeting. Any action required or
permitted to be taken at a meeting of the directors or of a committee thereof
may be taken without a
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meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors or all of the members of the committee, as the
case may be, entitled to vote with respect to the subject matter thereof.
3.10 Executive and Other Committees. The board of directors, by resolution
adopted by a majority of the full board, may designate from among its members an
executive committee and one or more other committees. The designation of such
committee and the delegation thereof of authority shall not operate to relieve
the board of directors, or any member thereof, of any responsibility imposed by
law.
The executive committee, when the board of directors is not in session,
shall have and may exercise all of the authority of the board of directors
except to the extent, if any, that such authority shall be limited by the
resolution appointing the executive committee and except also that the executive
committee shall not have the authority of the board of directors in reference to
amending the Articles of Incorporation, adopting a plan of merger or
consolidation, recommending to the shareholders the sale, lease, exchange or
other disposition of all or substantially all of the property and assets of the
corporation otherwise than in the usual and regular course of its business,
recommending to the shareholders a voluntary dissolution of the corporation or a
revocation thereof, amending the By-Laws of the
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corporation, filling vacancies on the board of directors, or changing the number
of authorized directors.
Any vacancy in the executive committee may be filled by a resolution
adopted by a majority of the full board of directors.
The executive committee shall keep regular minutes of its proceedings and
report the same to the board of directors for its information at the meeting
thereof held next after the proceedings shall have been taken.
ARTICLE 4
NOTICES
4.1 Notices. Whenever, under the provisions of law or of the Articles of
Incorporation or of these By-Laws, notice is required to be given to any
director or shareholder, such notice may be given in writing, by mail, addressed
to such director or shareholder, at his address as it appears on the records of
the corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram. If notice be given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company.
With the exception of special meetings of directors for the purpose of
amending the By-Laws or authorizing the sale
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<PAGE> 10
of all or substantially all of the assets of the corporation and special
meetings of shareholders, neither the business to be transacted at, nor the
purpose of, any regular or special meeting of shareholders or of the board of
directors need be specified in the notice or waiver of notice of such meeting.
4.2 Waiver of Notice. Whenever any notice is required to be given to any
shareholder or director of the corporation under the provisions of these By-Laws
or the Articles of Incorporation or by law, a waiver thereof in writing signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
4.3 Waiver by Attendance. The attendance of a shareholder, in person or by
proxy, or a director at a meeting shall constitute a waiver of notice of such
meeting, except where a shareholder or director attends a meeting for the
express purpose of objecting the transaction of any business because the meeting
is not lawfully called or convened.
ARTICLE 5
OFFICERS
5.1 Officers. The officers of the corporation shall consist of a
President, a Secretary and a Treasurer, each of whom shall be elected by the
board of directors. The board of directors may also elect a Chairman, a Vice
Chairman, one
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or more Vice Presidents, and one or more Assistant Secretaries and Assistant
Treasurers. None of the officers of the corporation need be directors. Any two
or more offices, except those of President and Secretary, may be held by the
same person.
5.2 Election. The officers shall be elected at the first meeting of the
board of directors after each annual meeting.
5.3 Other Officers. The board of directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
5.4 Term, Vacancies. The officers of the corporation shall hold office
until their successors are chosen and qualify. Any officers elected or appointed
by the board of directors may be removed at any time by the board of directors
but such removal shall be without prejudice to the contract rights, if any, of
the officer so removed. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
5.5 Chairman. The Chairman of the board of directors, if one be elected,
shall preside at all meetings of the board of directors and shall have and
perform such other duties as from time to time may be assigned to him by the
board of directors.
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5.6 Vice Chairman. The Vice Chairman of the board of directors, if one be
elected, shall have such powers and perform such duties as from time to time may
be assigned to him by the board of directors.
5.7 President. The President shall be the chief executive officer of the
corporation and shall have the general powers and duties of supervision and
management usually vested in the office of president of a corporation. He shall
preside at all meetings of the shareholders if present thereat, and in the
absence of the Chairman or if none was elected, at all meetings of the board of
directors, and shall have general supervision, direction and control of the
business of the corporation. Except as the board of directors shall authorize
the execution thereof in some other manner, he shall execute bonds, mortgages
and other contracts on behalf of the corporation, and shall cause the seal to be
affixed to any instrument requiring it. When so affixed the seal shall be
attested by the signature of the Secretary or the Treasurer or an Assistant
Secretary or an Assistant Treasurer.
5.8 Vice President. Each Vice President shall have such powers and shall
perform such duties as shall be assigned to him by the directors. The Vice
President, or if there is more than one Vice President the senior Vice
President, shall, in the absence or disability of the
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President, perform the duties and exercise the powers of the President.
5.9 Treasurer. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate account of receipts and
disbursements in books belonging to the corporation. He shall deposit all moneys
and other valuables in the name and to the credit of the corporation in such
depositories as may be designated by the board of directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the board of directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and board of directors at
the regular meetings of the board of directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the board of directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
5.10 Secretary. The Secretary shall give, or cause to be given, notice of
all meetings of shareholders and directors and all other notices required by law
or by these By-Laws, but any such notice may be given by any other person as
authorized or directed. He shall record all the proceedings of the shareholders
and directors in books
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maintained for that purpose, and shall have custody of the seal of the
corporation. He shall affix the seal of the corporation to all instruments
requiring it and attest the same.
5.11 Assistant Treasurers and Assistant Secretaries. Assistant Treasurers
and Assistant Secretaries, if any shall be elected, shall have such powers and
shall perform such duties as shall be assigned to them, respectively, by the
directors.
ARTICLE 6
INDEMNIFICATION
To the full extent permitted by law, the corporation may indemnify
any person and his heirs, distributees, next of kin, successors, appointees,
executors, administrators, legal representatives and assigns who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, domestic or foreign,
against expenses, attorneys' fees, court costs, judgments, fines, amounts paid
in settlement
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and other losses actually and reasonably incurred by him in connection with such
action, suit or proceeding.
ARTICLE 7
MISCELLANEOUS
7.1 Share Certificates. The shares of the corporation shall be represented
by certificates signed by the President or a Vice-President and the Secretary or
an Assistant Secretary of the corporation, and may be sealed with the seal of
the corporation or a facsimile thereof. Such certificates shall be issued to
each shareholder certifying the number of shares owned by him in the
corporation. When such certificates are countersigned by a transfer agent or
registrar, other than the corporation or its employee, the required officers'
signatures thereupon may be facsimiles. No certificates shall be issued for any
share unless such share is fully paid.
7.2 Lost Certificates. The board of directors may direct a new certificate
to be issued in place of any certificate theretofore issued by the corporation
alleged to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as it
deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made
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against it with respect to any such certificate alleged to have been lost or
destroyed.
7.3 Transfer of Shares. Transfer of shares of the corporation shall be
made only on the transfer books of the corporation by the holder of record
thereof or by his legal representative, who shall furnish proper evidence of
authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
7.4 Closing of Transfer Books. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the board
of directors may fix in advance a record date for any such determination of
shareholders, such date to be not more than fifty days and, in case of a meeting
of shareholders, not less than ten days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If no record date is fixed for the determination of shareholders
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entitled to notice of or to vote at a meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the board of directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
7.5 Voting Record. The officer or agent having charge of the transfer
books of the corporation shall make a complete record of the shareholders
entitled to vote at each meeting of shareholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. Such record shall be produced and kept open at the time and place
of the meeting and shall be subject to the inspection of any shareholder during
the whole time of the meeting for the purposes thereof.
7.6 Dividends. The board of directors may, from time to time, declare and
the corporation may pay dividends on its outstanding shares in the manner and
upon the terms and conditions provided by law and the Articles of Incorporation.
Before payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors in their
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absolute discretion deem proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall deem conducive to
the interests of the corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
7.7 Reliance on Records. Each officer and director shall in the
performance of his duties be fully protected in relying in good faith upon the
books of account of the corporation, or upon reports made to the corporation by
any of its officials, or by an independent certified public accountant, or by an
appraiser selected with reasonable care, or in relying in good faith upon other
records of the corporation.
7.8 Checks. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate by resolution.
7.9 Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
7.10 Seal. The corporate seal shall be circular in form and shall contain
the name of the corporation, the year of its incorporation and the words
"Corporate Seal, West Virginia".
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7.11 Amendments. These By-Laws may be amended or repealed and new By-Laws
may be adopted: (1) by the shareholders at any annual meeting, or at any special
meeting if notice of the proposed amendment or repeal is contained in the notice
of such special meeting, by the affirmative vote of a majority of the shares
entitled to vote thereat; (2) by the board of directors at any regular meeting,
or at any special meeting if notice of the proposed amendment or repeal is
contained in the notice of such special meeting; or (3) by unanimous written
consent of the shareholders or directors.
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Exhibit 3.37
ARTICLES OF INCORPORATION
OF
VINDEX ENERGY CORPORATION
I. The undersigned agrees to become a corporation by the name of
VINDEX ENERGY CORPORATION
II. The existence of this corporation shall be perpetual.
III. The purpose for which this corporation is organized shall include the
transaction of any or all lawful business for which corporations may be
incorporated in the State of West Virginia.
IV. The principal office of this corporation shall be at 2708 Cranberry
Square, Morgantown, West Virginia 26505. The name and address of the
person to whom shall be sent notice or process served upon, or service of
which is accepted by, the Secretary of State, is James A. Walls, Esquire,
2708 Cranberry Square, Morgantown, West Virginia 26505.
V. The name and address of the sole incorporator is:
David P. Ferretti
300 Kanawha Boulevard, East
Charleston, West Virginia 25301
VI. The number of directors constitution the initial Board of Directors of
this corporation is two, and the names and addresses of the persons who
shall serve as the initial directors until the first annual meeting of
shareholders or until their successors are elected and qualified are:
Gerald Ramsburg
2708 Cranberry Square
Morgantown, West Virginia 26505
<PAGE> 2
Bruce Sparks
2708 Cranberry Square
Morgantown, West Virginia 26505
The bylaws of this corporation, when adopted by the initial Board of
Directors, shall provide for a Board of Directors that may comprise any
number of persons provided for in said bylaws, or such number of persons
as may be determined from time to time by the shareholders.
VII. The amount of the total authorized capital stock of this corporation shall
be One Thousand Dollars ($1,000), which shall be divided into One Hundred
(100) shares of common stock the par value of Ten Dollars ($10.00) each,
and which shall constitute a single class of shares.
VIII. The shareholders of this corporation shall not have a preemptive right to
subscribe for, purchase, or take any part of any unissued or treasury
shares issued or to be issued or sold by this corporation, or any
securities of this corporation convertible into shares of this corporation
issued or to be issued by it, after its incorporation.
The undersigned, for the purpose of forming a corporation under the laws
of the State of West Virginia, does hereby make and file these Articles of
Incorporation, and has accordingly hereunto set his hand this 8th day of
October, 1996
/s/ David P. Ferretti
---------------------------------
David P. Ferretti
2
<PAGE> 3
STATE OF WEST VIRGINIA,
COUNTY OF KANAWHA, To-Wit:
I, Pamela Jane Coffield, a Notary Public in and for the County and
State aforesaid, hereby certify that David P. Ferretti, whose name is signed to
the foregoing Articles of Incorporation, bearing date on the 8th day of October,
1996, this day personally appeared before me in my said county and acknowledged
his signature to the same.
Given under my hand and official seal this 8th day of October, 1996.
My commission expires: January 11, 2005.
/s/ Pamela Jane Coffield
---------------------------------
Notary Public
(NOTARIAL SEAL)
OFFICIAL SEAL
NOTARY PUBLIC
STATE OF WEST VIRGINIA
PAMELA JANE COFFIELD
611 RUFFNER AVENUE
CHARLESTON, WV 25301
My Commission Expires Jan. 11, 2005
The foregoing Articles of Incorporation were prepared by David P. Ferretti,
Esq., Spilman, Thomas & Battle, Post Office Box 273, Charleston, West Virginia,
25321.
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Exhibit 3.38
BYLAWS
OF
VINDEX ENERGY CORPORATION
October 8, 1996
ARTICLE I
OFFICES
Section 1.1. The principal office and place of business of this
corporation will be in the City of Morgantown, County of Monongalia, State of
West Virginia, at 2708 Cranberry Square. The Board of Directors may change the
location of said principal office and of said principal place of business, or
either, from time to time as it may deem advisable, and may also establish such
offices or places of business elsewhere as in the opinion of the Board may be
advisable.
ARTICLE II
SHAREHOLDERS
Section 2.1. Annual Meetings. The annual meetings of the
shareholders of this corporation shall be held sometime during the first quarter
of each year, on such date as may be fixed by the Board of Directors, either at
the principal office of the corporation or at such other place, either within or
without the State of West Virginia, as the Board of Directors may fix by
resolution. The Board of Directors may by resolution authorize any officer or
officers to fix the date and place of such annual meeting.
Section 2.2. Special Meetings. Special meetings of the shareholders
may be called at any time by the Board of Directors, the President and
Secretary, or any number of shareholders holding in the aggregate at least
one-tenth of the number of shares entitled to vote at the meeting. Such meetings
shall be held at the principal office of the corporation unless the Board of
Directors or other persons calling such meeting shall fix some other place for
the meeting, in which event the meeting shall be held at such other place, which
may be either within or without the State of West Virginia.
Section 2.3. Notice of Meetings. Notice of the annual and all other
meetings of the shareholders shall be given by written notice stating the place,
day and hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which and the officers or persons by whom the meeting is called,
and shall be delivered not less than ten and not more than fifty days before the
date of the meeting, either personally or by mail. If mailed, such notice shall
be deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his last post office address appearing on the records of the
corporation, with postage thereon prepaid. It shall be the duty of every
shareholder to furnish to the Secretary of the corporation his post office
address and to notify the Secretary of any change therein. Notice of all
meetings shall be given to each shareholder of record entitled to vote at the
meeting.
<PAGE> 2
Section 2.4. Waiver of Notice. Any meeting of the shareholders may
be held by agreement in writing signed by all the shareholders, and, where
notice or publication of any notice is required, the same may be waived in
writing signed by all the shareholders entitled to such notice, filed with the
records of the meeting, whether before or after the time stated therein. Any
meeting of the shareholders at which every shareholder is present or represented
by proxy shall be valid, notwithstanding lack or insufficiency of notice.
Section 2.5. Action by Shareholders Without Meeting. Whenever the
vote of the shareholders at a meeting thereof is required or permitted to be
taken in connection with any corporate action, the meeting and vote of such
shareholders may be dispensed with if all of the shareholders who would have
been entitled to vote upon the action, if such meeting were held, shall agree in
writing to such corporate action being taken, and such agreement shall have like
effect and validity as though the action were duly taken by the unanimous action
of all shareholders entitled to vote at a meeting of such shareholders duly
called and legally held.
Section 2.6. Quorum; Adjournments. At all meetings of the
shareholders, a quorum shall consist of at least a majority of all of the shares
of stock issued and outstanding and entitled to vote, represented either in
person or by proxy. If a sufficient number of shares is not present at the time
and place appointed, any number of shares present or represented, less than a
quorum, may adjourn any shareholders meeting from time to time until a quorum is
present and the business to come before the meeting is completed.
Section 2.7. Voting. If a quorum is present at any meeting of the
shareholders duly and properly called and held, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be and constitute the act of the shareholders, except in
the matter of election of directors, and unless the vote of a greater number, or
other vote, is required by law or by the Articles of Incorporation or bylaws of
this corporation. Except as otherwise provided by law, or by the Articles of
Incorporation or bylaws of this corporation, each outstanding share shall be
entitled to one vote on each matter submitted to vote at any meeting of the
shareholders, and may be voted by the shareholder either in person or by written
proxy. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
Section 2.8. Record of Meetings. A record shall be kept of the
meetings of the shareholders and the action taken at the same, which shall be
verified by the signature of the Chairman of the meeting and the person acting
as Secretary thereof.
ARTICLE III
DIRECTORS
Section 3.1. Number, Qualification and Term of Office. The business,
property and affairs of the corporation shall be managed and controlled by its
Board of Directors. The Board of Directors shall consist of not fewer than one
and not more than five persons, as may be determined by the shareholders from
time to time, and shall be elected at the first annual meeting of the
shareholders and at every annual meeting thereafter. Directors need
<PAGE> 3
not be shareholders of the corporation nor residents of the State of West
Virginia. They shall hold office until the next succeeding annual meeting and
until their successors are elected and qualified.
Section 3.2. Elections. In all elections of directors each
shareholder shall have the right to vote, in person or by proxy, the number of
shares owned by him and entitled to vote, for as many persons as there are
directors to be elected, and for whose election he has a right to vote, or he
may cumulate such votes and give one candidate as many votes as the number of
directors to be elected multiplied by the number of his shares shall equal; or
he may distribute them on the same principle among as many candidates and in
such manner as he shall desire.
Section 3.3. Removal of Directors. The shareholders, at any meeting
thereof called expressly for the purpose, may remove any director or the entire
Board of Directors, with or without cause, by vote of the holders of a majority
of the shares entitled to vote at an election of directors. However, if less
than the entire Board is to be removed, no one of the directors may be removed
if the votes cast against his removal would be sufficient to elect him.
Section 3.4. Vacancies. Any vacancy in the Board of Directors
resulting from removal of a director shall be filled by the shareholders at the
meeting at which such removal occurs. A vacancy resulting from an increase in
the number of directors shall likewise be filled by the shareholders at the
meeting at which such increase is made. A vacancy in the Board occurring from
any other cause, or from the failure of the shareholders to act, may be filled
by the affirmative vote of a majority of the remaining directors, though less
than a quorum. Any director elected or appointed to fill a vacancy shall serve
until the next annual election of directors.
Section 3.5. Meetings. Regular meetings of the Board of Directors
may be held at such time and place as may be prescribed by these bylaws, or as
the Board may from time to time designate. Special meetings of the Board may be
called by the President, a Vice-President, or any two directors. Meetings of the
Board may be held either within or without the State of West Virginia. Notice of
all meetings of the Board shall be given by the Secretary of the corporation or
by the person or persons calling such meeting, and, in the case of a special
meeting, shall state by whom it is called. Such notice shall be given at least
forty-eight hours before the time of such meeting, either by written notice
thereof mailed to each director, or by telegram or telephone. Except as
otherwise provided by law, the notice of any meeting of the Board need not
specify the purpose of or the business to be transacted at the meeting.
Section 3.6. Waiver of Notice. Any meeting of the directors may be
held by agreement in writing signed by all the directors, and where notice of
any meeting is required, a waiver thereof in writing, signed by the director or
directors entitled to notice, filed with the records of the meeting, whether
before or after the time stated therein, shall be equivalent to the giving of
such notice. Attendance of a director at a meeting of the directors shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called
<PAGE> 4
or convened. Except as provided in the next preceding sentence, any meeting of
the directors at which every director is present in person shall be valid,
notwithstanding lack or insufficiency of notice.
Section 3.7. Action by Directors Without Meeting. Whenever the vote
of directors at a meeting thereof is required or permitted to be taken in
connection with any corporate action, the meeting and vote of such directors may
be dispensed with if all the directors shall agree in writing to such corporate
action being taken, and such agreement shall have like effect and validity as
though the action were duly taken by the unanimous action of all directors at a
meeting thereof duly called and legally held.
Section 3.8. Quorum. A majority of the number of directors fixed by
the shareholders, as provided in these bylaws, shall constitute a quorum for the
transaction of business. The act of a majority of the directors present at any
meeting at which a quorum is present shall be and constitute the act of the
Board of Directors. If at any meeting of the Board there is less than a quorum
present, a majority of the directors present may adjourn the meeting from time
to time until a quorum is present.
Section 3.9. Conflicts of Interest. No contract or transaction
between this corporation and any one or more of its directors, or between this
corporation and any other corporation, firm, association, or entity in which one
or more of its directors are directors or officers, or are financially
interested, shall be either void or voidable because of such relationship or
interest, or because such director or directors are present at the meeting of
the Board of Directors, or a committee thereof, which authorizes, approves, or
ratifies such contract or transaction, or because his or their votes are counted
for such purpose, if:
(a) The fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves, or
ratifies the contract or transaction by a vote or consent sufficient for
the purpose without counting the votes or consents of such interested
directors; or
(b) The fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote, and they authorize, approve or
ratify such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable to this
corporation.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or a committee thereof which
authorizes, approves, or ratifies such contract or transaction. On any question
involving the authorization, approval, or ratification of any such contract or
transaction, the names of those voting each way shall be entered on the record
of the proceedings.
Section 3.10. Record of the Board. The Board of Directors shall
cause to be kept a record of its proceedings, which shall be verified by the
signatures of the persons acting as
<PAGE> 5
Chairman and Secretary of the meeting. Any member of the Board of Directors, at
his request, shall have the right to have his vote recorded in the minutes of
the meeting on any question coming before the Board.
Section 3.11. Voting of Corporate Stock. The Board of Directors may
by resolution provide that any shares of the capital stock of any other
corporation or corporations owned by this Corporation shall be voted by such one
or more officers of this Corporation, or by such other person or persons, as the
Board shall designate, either generally or with respect to any specific
corporation, meeting or matter. In the absence of any resolution of the Board of
Directors applying to the shares of the capital stock of a corporation, or to
any meeting or matter, the President of this Corporation is authorized to vote
such shares of the capital stock of such other corporation, either in person or
by proxy given to any other officer or person, or persons, in his discretion, in
such manner as he shall deem advisable and for the best interests of this
Corporation.
ARTICLE IV
OFFICERS AND AGENTS
Section 4.1. Election and Appointment. As soon as may be after their
election the Board of Directors shall choose a President of the corporation, who
shall hold office until the next annual election of officers and until his
successor is elected and qualified. At the same time the Board of Directors
shall choose a Secretary and a Treasurer. The directors may at any time elect
from among the directors a Chairman of the Board of Directors, and may also
elect one or more Vice-Presidents, if elected, an Assistant Secretary and an
Assistant Treasurer. The person holding any office may, but need not be, a
member of the Board. Any two or more offices may be held by the same person,
except the offices of President and Secretary.
Section 4.2. Other Officers and Agents. The Board of Directors may
employ a manager and such other employees, servants, agents, attorneys and
representatives as the Board may deem advisable, to perform such duties as the
Board may prescribe.
Section 4.3. Bond. If required by the Board, the Treasurer,
Secretary, or any other officer, agent or employee shall give bond payable to
the corporation in such penalty and with such conditions and security as the
Board may approve.
Section 4.4. Compensation. The Board of Directors of this
corporation shall have the authority to fix the compensation of all officers,
including members of the Board of Directors.
Section 4.5. President. The President shall be the chief executive
officer of the corporation. He shall preside at all meetings of the shareholders
and directors at which he is in attendance, unless the directors shall elect a
Chairman of the Board to preside at meetings of the Board. Unless some other
officer or agent is specially appointed and authorized for the purpose, the
President shall sign the corporate name of the corporation to all deeds,
mortgages, writings and other contracts made by the corporation, except such as
are necessary or incidental to the
<PAGE> 6
exercise of the powers vested in other officers or agents by the Board of
Directors; and, generally, the President shall have and exercise supervision and
control over all the business, affairs and property of the corporation, and
shall perform such duties as are incident to the conduct of its business not
otherwise provided for in these bylaws or by action of the Board of Directors.
Section 4.6. Vice-President. The Vice-President, if elected, shall
in the absence or incapacity of the President perform the duties of the
President and shall have such other powers and authority as may be assigned to
him by the Board of Directors, either generally or specially. If there shall be
more than one Vice-President, each shall have such duties, powers and authority
as may be assigned to him by the Board of Directors, and, unless otherwise
provided by the Board of Directors, each shall be authorized to perform the
duties of the President in his absence or incapacity in the order of their
designation or election.
Section 4.7. Secretary. The Secretary, or an Assistant Secretary,
shall have the custody of the minute book, stock book, corporate seal and all
records and papers of the corporation, subject to the supervision and control of
the President, except such as the Board may put in the custody of other
officers, agents or employees. The Secretary, or an Assistant Secretary, shall
attend all meetings of the share holders and of the Board of Directors and act
as Secretary thereof, keeping a record of the proceedings of such meetings in a
book to be maintained for the purpose. He shall give or cause to be given,
unless otherwise specially provided, notice of all meetings of the shareholders,
directors, committees and other meetings of the officers or representatives of
the corporation, and shall perform such other duties as may be prescribed for
him by the Board of Directors or the President.
Section 4.8. Treasurer. The Treasurer, or an Assistant Treasurer,
shall have custody of the corporate funds and securities, subject to the
supervision and control of the President. He shall cause to be kept full and
accurate accounts of receipts and disbursements of the corporation in proper
books to be furnished for that purpose by the corporation; cause all moneys and
other valuable effects to be deposited to the credit of the corporation, in such
depositories as may be designated by the Board of Directors; be responsible for
disbursing the funds of the corporation subject to such regulations as may be
prescribed by the Board of Directors, taking proper vouchers for such
disbursements; and he shall render to the President and to the directors at
regular meetings of the Board, whenever they, or any of them, may request it, an
account of all transactions of his office and of the financial condition of the
corporation, and such other reports as may from time to time be required of him
by the President or the Board.
Section 4.9. Removal of Officers. Any officer, employee, or agent of
the corporation may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. The election or appointment of any officer, employee, or agent of
the corporation shall not of itself be deemed to create any contract right.
<PAGE> 7
Section 4.10. Signature of Orders for the Payment of Money. All
checks, notes, drafts and other orders of the corporation for the payment of
money shall be drawn, signed or countersigned as the Board of Directors may from
time to time prescribe.
ARTICLE V
CAPITAL STOCK
Section 5.1. Certificate of Stock. The Board of Directors shall
cause to be issued to any person appearing on the books of the corporation to be
the owner of any shares of its stock, a certificate or certificates therefor,
under the corporate seal of the corporation, to be signed by the President, or a
Vice-President, and the Secretary, or an Assistant Secretary, of the
corporation. Each certificate representing shares of the capital stock of the
corporation shall state on the face thereof that the corporation is organized
under the laws of the State of West Virginia; the name of the person to whom
issued; the number and class of shares which such certificate represents; and
the par value of each share represented by such certificate; and shall otherwise
be in such form as the Board of Directors may adopt. Such certificates shall be
issued in order from a stock certificate book to be kept by the Secretary under
the supervision of the Board. No such certificate shall be issued or delivered
until the stock represented thereby has been fully paid for; such payment may be
made in cash, in property, tangible or intangible, or in labor or services
actually performed for the corporation, but neither promissory notes nor future
services shall constitute such payment or part payment.
Section 5.2. Transfer of Stock. Shares of the capital stock of the
corporation shall be transferable only upon the books of the corporation by the
holder thereof in person or by attorney upon surrender and cancellation of the
certificate for the same.
Section 5.3. Lost Certificates. When a person, who appears by the
books of the corporation to own stock therein, claims that the certificate for
such stock has been lost, destroyed, or wrongfully taken, the proper officers of
the corporation shall issue to him a certificate in place and stead of the lost,
destroyed, or wrongfully taken certificate, if he shall request the issuance of
a new certificate before the corporation has notice that the old certificate has
been acquired by a bona fide purchaser, upon his compliance with the following
conditions:
(a) he shall file with the Secretary of the corporation an affidavit
setting forth the time, place and circumstances of the loss, destruction,
or taking, to the best of his knowledge and belief; and
(b) he shall execute and deliver to the corporation a bond with good
security in a penalty at least equal to the value of the shares of stock
represented by the lost, destroyed, or wrongfully taken certificate, in
form approved by the Board of Directors, to indemnify the corporation and
all persons whose rights may be affected by the issuance of the new
certificate against any loss in consequence of the issuance of the new
certificate.
<PAGE> 8
A new certificate may be issued, in the discretion of the Board of Directors,
without compliance with the foregoing requirements, upon such terms and
conditions as the Board of Directors may prescribe.
Section 5.4. Other Regulations. The Board of Directors shall have
the authority to make such other rules and regulations, not inconsistent with
law or these bylaws, concerning the issue, transfer, and delivery of
certificates of stock, as it may deem advisable.
ARTICLE VI
INDEMNIFICATION
Section 6.1. It shall be the policy of this corporation to indemnify
any person who serves, or has served, as a director, officer, employee or agent
of this corporation, or who serves or has served as a director, officer,
partner, employee, or agent of any other corporation, partnership, joint
venture, trust or enterprise at the request or direction of this corporation,
against expenses (including attorneys' fees), judgments, fines, taxes,
penalties, interest, and payments in settlement, in connection with any
threatened, pending or completed action or proceeding, and to pay any such
expenses in advance of the final disposition of any such action or proceeding,
to the full extent contemplated and permitted by Section 9 of Chapter 31,
Article 1 of the Code of West Virginia of 1931, as amended, upon such finding or
determination as shall be requisite or appropriate under said section; and the
corporation is specifically empowered and authorized to purchase and maintain,
at the expense of the corporation, insurance on behalf of any such director,
officer, partner, employee or agent against any liability asserted against him
or her in such capacity or arising out of his or her status as such, whether or
not this corporation would have the power to indemnify him or her under the
provisions of said section.
ARTICLE VII
CORPORATE SEAL
Section 7.1 The seal to be here impressed, containing the name of
this corporation and the words "Corporate Seal, West Virginia", is hereby
adopted as and for the corporate seal of this corporation.
ARTICLE VIII
AMENDMENTS
Section 8.1 These bylaws may be amended by the Board of Directors,
subject, however, to the power of the shareholders to repeal or change any
amendment made by the Board of Directors by affirmative vote of a majority of
the stock then issued and outstanding and entitled to vote thereon; and in the
event of any conflict the vote of the shareholders shall be controlling.
<PAGE> 1
Exhibit 3.39
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
ANKER-VIRGINIA MINING COMPANY, INC.
The undersigned, pursuant to Chapter 9 of Title 13.1 of the Code of
Virginia, states as follows:
I. The name of the corporation is Anker-Virginia Mining Company, Inc.
II. The Articles of Incorporation of the corporation are hereby amended as
follows:
Article 1 of the Articles of Incorporation is hereby amended and restated
in full as follows:
1. The name of the corporation is:
ANKER VIRGINIA MINING COMPANY, INC.
III. The foregoing amendment does not provide for an exchange,
reclassification, or cancellation of issued shares.
IV. The foregoing amendment was adopted on the 25th day of July, 1997.
V. The corporation has not issued any shares of its capital stock and has no
board of directors. Accordingly, the foregoing amendment was adopted
pursuant to Section 13.1-709 of the Code of Virginia by the sole
incorporator of the corporation without shareholder action.
VI. The undersigned incorporator declares that the facts herein stated are
true as of July 25, 1997.
ANKER-VIRGINIA MINING COMPANY, INC.
By: /s/ B. Judd Hartman
--------------------------------------
B. Judd Hartman
Incorporator
<PAGE> 2
ARTICLES OF INCORPORATION
OF
ANKER-VIRGINIA MINING COMPANY, INC.
The undersigned, pursuant to Chapter 9 of Title 13.1 of the Code of
Virginia, states as follows:
1. The name of the corporation is:
ANKER-VIRGINIA MINING COMPANY, INC.
2. The total number of shares the corporation is authorized to issue is one
hundred (100) shares of common stock of the par value of ten dollars
($10.00) per share, which shall constitute a single class of shares.
3. The address of the corporation's initial registered office is 5511 Staples
Mill Road, Richmond, Virginia, 23228. The registered office is physically
located in the County of Henrico.
4. The name of the corporation's initial registered agent is Edward R.
Parker, an individual who is a resident of Virginia and a member of the
Virginia State Bar.
By: /s/ B. Judd Hartman
--------------------------------------
B. Judd Hartman
Incorporator
<PAGE> 1
Exhibit 3.40
BYLAWS
OF
ANKER VIRGINIA MINING COMPANY, INC.
(Formerly Anker-Virginia Mining Company, Inc.)
July 29, 1997
ARTICLE I
OFFICES
Section 1. The registered office of Anker Virginia Mining Company,
Inc. (the "Corporation") shall be located at 5511 Staples Mill Road, Richmond,
Henrico County, Virginia.
Section 2. The Corporation may also have offices at such other
places both within and without the Commonwealth of Virginia as the board of
directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. Annual meetings of shareholders, commencing with the year
1998, shall be held during the first calendar quarter of each year, at such
time, date and place as the board shall from time to time determine, at which
they shall elect a board of directors and transact such other business as may
properly be brought before the meeting.
Section 2. Written or printed notice of the annual meeting stating
the date, time and place of the meeting shall be delivered not less than ten nor
more than sixty days before the date of the meeting, either personally or by
mail, by or at the direction of the president, the secretary, or the officer or
persons calling the meeting to each shareholder of record entitled to vote at
such meeting.
<PAGE> 2
ARTICLE III
SPECIAL MEETING OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any purpose other
than the election of directors may be held at such time and place within or
without the State of Virginia as shall be stated in the notice of the meeting or
in a duly executed waiver of notice thereof.
Section 2. Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the chairman of the board of directors, the
president, or the board of directors.
Section 3. Written or printed notice of a special meeting stating
the date, time and place of the meeting and the purpose or purposes for which
the meeting is called, shall be delivered not less than ten nor more than sixty
days before the date of the meeting, either personally or by mail, by or at the
direction of the president, the secretary, or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such meeting.
Notice of a shareholders' meeting to act on an amendment of the
articles of incorporation, on a plan of merger or share exchange, on a proposed
sale of assets other than in the regular course of business, or on a plan of
dissolution shall be given, in the manner provided herein, not less than
twenty-five nor more than sixty days before the date of the meeting. Any such
notice shall be accompanied by a copy of the proposed amendment, plan of merger,
or share exchange, or plan of proposed sale of assets.
Section 4. The business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
2
<PAGE> 3
ARTICLE IV
QUORUM AND VOTING OF SHARES
Section 1. A majority of the votes entitled to be cast on a matter
by the voting group constitutes a quorum of that voting group for action on that
matter except as otherwise provided by statute or by the articles of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the shareholders, the shareholders present in person or
represented by proxy shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 2. If a quorum is present, action on a matter by a voting
group is approved if the votes cast within the voting group favoring the action
exceed the votes cast opposing the action unless the vote of a greater number of
affirmative votes is required by law or the articles of incorporation.
Section 3. Each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders unless the articles of incorporation or law provides otherwise. A
shareholder may vote either in person or by proxy executed in writing by the
shareholder or by his duly authorized attorney-in-fact.
In all elections for directors each outstanding share, regardless of
class, is entitled to one vote for as many persons as there are directors to be
elected, or if the articles of incorporation so provide to cumulate their votes
and give one candidate as many votes as the number of directors multiplied by
the number of his shares shall equal, or to distribute the votes on the same
principle among as many candidates as he may see fit.
3
<PAGE> 4
Section 4. Any action required to be taken at a meeting of the
shareholders may be taken without a meeting if one or more consents in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof. All consents shall
be delivered to the secretary for inclusion in the minutes or filing with the
corporate records. The action taken shall be effective according to its terms
when all consents are in the possession of the corporation. Any action taken
without a meeting is effective as of the date specified in the consent provided
the consent states the date of execution by each shareholder.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall be not less than one nor
more than three. The number of directors may be fixed or changed within the
minimum or maximum by the shareholders or by the board of directors. Only the
shareholders may change the range or switch to a fixed size board. Directors
need not be residents of the State of Virginia nor shareholders of the
corporation. The directors, other than the first board of directors, shall be
elected at the annual meeting of the shareholders, and each directors elected
shall serve until the next succeeding annual meeting and until his successor
shall have been elected and qualified. The first board of directors shall hold
office until the first annual meeting of shareholders.
Section 2. Any vacancy occurring in the board of directors,
including a vacancy resulting from an increase in the number of directors, may
be filled by the shareholders, the board of directors, or if the directors
remaining in office constitute fewer than a quorum of the board, the vacancy may
be filled by the affirmative vote of the directors remaining in office.
4
<PAGE> 5
Section 3. The business affairs of the Corporation shall be managed
by its board of directors which may exercise all such powers of the corporation
and do all such lawful acts and things as are not by statute or by the articles
of incorporation or by these bylaws directed or required to be exercised or done
by the shareholders.
Section 4. The directors may keep the books of the Corporation,
except such as are required by law to be kept within the Commonwealth of
Virginia, outside of said Commonwealth, at such place or places as they may from
time to time determine.
Section 5. The board of directors, by the affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular of special,
may be held either within or without the Commonwealth of Virginia.
Section 2. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the shareholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be held
upon such notice, or without notice, and at such time and at such place as shall
from time to time be determined by the board.
5
<PAGE> 6
Section 4. Special meetings of the board of directors may be called
by the President on three days' notice to each director, either personally or by
mail or by telegram: special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of any
director.
Section 5. Attendance of a director at any meeting shall constitute
a waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. A majority of the directors then in office shall
constitute a quorum for the transaction of business unless a greater number is
required by law or by the articles of incorporation. The act of a majority of
the directors present at any meeting at which a quorum is present shall be the
act of the board of directors, unless the act of a greater number is required by
law or by the articles of incorporation. If a quorum shall not be present at any
meeting of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
Section 7. Any action required or permitted to be taken at a meeting
of the directors may be taken without a meeting if one or more consents in
writing, setting forth the action so taken, shall be signed by each director
entitled to vote with respect to the subject matter thereof and included in the
minutes or filed with the corporate records reflecting the action taken. Said
action shall become effective when the last director signs the consent unless a
different effective date is specified in the consent. If a different effective
date is specified in the
6
<PAGE> 7
consent, the action taken shall be effective as of the date specified therein
provided the consent states the date of execution by each director.
ARTICLE VII
COMMITTEES OF DIRECTORS
Section 1. A majority of the number of directors fixed by the bylaws
or otherwise, may create one or more committees and appoint members of the board
to serve on the committee or committees. To the extent provided by the board of
directors or articles of incorporation, each committee shall have and exercise
all of the authority of the board of directors in the management of the
corporation, except as otherwise required by law. Each committee shall have two
or more members who serve at the pleasure of the board of directors. Each
committee shall keep regular minutes of its proceedings and report the same to
the board when required.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
articles of incorporation or of these bylaws, notice is required to be given to
any director or shareholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
shareholder, at his address as it appears on the records or the corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegrams.
7
<PAGE> 8
Section 2. Whenever any notice whatever is required to be given
under the provisions of the statutes or under the provisions of the articles of
incorporation or these bylaws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the Corporation shall be chosen by the
board of directors and shall be a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers.
Section 2. The board of directors at its first meeting after each
annual meeting of shareholders shall choose a president and one or more
vice-presidents, a secretary and a treasurer, none of whom need be a member of
the board.
Section 3. The board of directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5. The officers of the Corporation shall hold office until
the next succeeding annual election of officers and until their successors are
elected and qualified. Any officer elected or appointed by the board of
directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the corporation
shall be filled by the board of directors.
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THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the shareholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. The vice-president, or if there shall be more than one,
the vice-presidents in the order determined by the board of directors, shall, in
the absence or disability of the president, perform the duties and exercise the
powers of the president and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the shareholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the shareholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or
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an assistant secretary, shall have authority to affix the same to any instrument
requiring it and when so affixed, it may be attested by his signature or by the
signature of such assistant secretary. The board of directors may give general
authority to any other officer to affix the seal of the corporation and to
attest the affixing by his signature.
Section 10. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the board of directors,
shall, in the absence or disability or the secretary, perform the duties and
exercise the powers of the secretary and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the
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corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 14. The assistant treasurer, or, if there shall be more than
one, the assistant treasurers in the order determined by the board of directors,
shall, in the absence or disability of the treasurer, perform the duties and
exercise the powers of the treasurer and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
ARTICLE X
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by
certificates or shall be uncertificated. Certificates shall be signed by the
president or a vice-president and the secretary or an assistant secretary of the
corporation, and may be sealed with the seal of the corporation or a facsimile
thereof.
In addition to the above officers the treasurer or an assistant
treasurer may sign in lieu of the secretary or an assistant secretary.
When the corporation is authorized to issue shares of more than one
class there shall be set forth upon the face or back of each certificate, or
each certificate shall have a statement that the corporation will furnish to any
shareholder upon request and without charge, a full statement of the
designations, preferences, limitations, and relative rights of the shares of
each class authorized to be issued and, if the corporation is authorized to
issue different series within a class, the variations in the relative rights and
preferences between the shares of each
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such series so far as the same have been fixed and determined and the authority
of the board of directors to fix and determine the relative rights and
preferences of subsequent series.
Section 2. The signatures of the officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the corporation itself or an employee of
the corporation. In case any officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such officer
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer at the date of its issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
uncertificated security to be issued in place of any certificate theretofore
issued by the corporation alleged to have been lost or destroyed. When
authorizing such issue of a new certificate or uncertificated security, the
board of directors, in its discretion and as a condition precedent to the
issuance thereof, may prescribe such terms and conditions as it deems expedient,
and may require such indemnities as it deems adequate, to protect the
corporation from any claim that may be made against it with respect to any such
certificate alleged to have been lost or destroyed.
TRANSFERS OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent
of the corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto, and
the old certificate cancelled and the transaction recorded upon the books of the
corporation.
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CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders, or any adjournment thereof
or entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the board or
directors may fix in advance a date as the record date for the determination of
shareholders, such date in any case to be not more than seventy days. If no
record date is fixed for the determination of shareholders entitled to notice of
or to vote at a meeting of shareholders, or shareholders entitled to receive
payment of a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the board of directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Virginia.
LIST OF SHAREHOLDERS
Section 7. The officer or agent having charge of the transfer books
for shares shall make, at least ten days before each meeting of shareholders, a
complete list of the
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shareholders entitled to vote at such meeting, arranged by voting group and
within each voting group by class or series of shares, with the address of each
and the number of shares held by each, which list, for a period of ten days
prior to such meeting, shall be kept on file at the principal business office of
the corporation and shall be subject to inspection by any shareholder at any
time during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any shareholder during the whose time of the meeting. The original share
transfer book, or a duplicate thereof, shall be prima facie evidence as to who
are the shareholders entitled to examine such list or share transfer book or to
vote at any meeting of the shareholders.
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the articles of
incorporation relating thereto, if any, dividends may be declared by the board
of directors at any regular of special meeting, pursuant to law. Dividends may
be paid in money or other property subject to any provisions of the articles of
incorporation.
Section 2. Before payment of any dividend, there may be set aside
out of any funds of the corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer of officers or such other person or
persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words "Corporate Seal,
Virginia". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any manner reproduced.
ARTICLE XII
AMENDMENTS
Section 1. These bylaws may be amended or repealed or new bylaws may
be adopted by the affirmative vote of a majority of the board of directors at
any regular or special meeting of the board unless the articles of incorporation
or law reserve this power to the shareholders.
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of the first
day of August, 1996, by and among BRUCE SPARKS (the "Executive"), ANKER ENERGY
CORPORATION, a Delaware corporation ("Anker"), and ANKER COAL GROUP, INC., a
Delaware corporation ("Anker Coal Group").
WHEREAS, the Executive has been Executive Vice-President of Anker
and its parent company, Anker Group, Inc., a Delaware corporation ("AGI"), for a
number of years, and the services of the Executive, his managerial experience
and his knowledge of the affairs of Anker are of great value to Anker and Anker
Coal Group; and,
WHEREAS, Anker wishes to assure itself of the continued services of
the Executive for the period provided for in this Agreement, and the Executive
is willing to serve in the employ of Anker on a full time basis for said period
as herein provided;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Employment. Anker hereby agrees to continue the Executive in its
employ, and the Executive agrees to remain in the employ of Anker, for the
period stated in paragraph 2 hereof upon the terms and conditions set forth in
this Agreement.
2. Term and Termination.
2.1 The term of this Agreement shall be for a period of six
(6) years beginning on the date of this Agreement
<PAGE> 2
and continuing until 11:59 p.m. on July 31, 2002, unless sooner terminated as
provided in paragraphs 2.2 and 17.3 below.
2.2(a) This Agreement may be terminated by Anker at any time
"For Cause." Upon the termination of this Agreement For Cause by Anker, this
Agreement, other than paragraphs 8.3, 10 and 11 hereof, shall automatically
terminate, and Anker shall be under no further obligation to make any additional
payments to Executive, except that Anker shall (i) make the payments as required
in paragraph 11, (ii) pay the Executive for any accrued but unpaid salary and
such other amounts as Executive may be entitled to under the applicable employee
benefit plans in which Executive participates pursuant to paragraph 8 and (iii)
perform its obligation under paragraph 8.3. For purposes of this Agreement, the
parties expressly acknowledge and agree that the term "For Cause" shall include
only the following events:
(i) Conviction of Executive of a felony, other than a
felony associated with the mining or environmental operations of Anker and
the performance of Executive's duties hereunder; or
(ii) Gross failure of Executive to perform his material
duties hereunder or material breach by Executive of any of the terms of
this Agreement, and Executive's failure to satisfactorily cure or
adequately justify such failure or breach within ten (10) days of receipt
of a written notice to cure from the Board of Directors of Anker or Anker
Coal Group.
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<PAGE> 3
(b) This Agreement may be terminated by Anker in
the event the Executive becomes disabled as determined under the long-term
disability policy maintained by Anker with respect to the Executive. Upon the
termination of this Agreement by Anker under this paragraph 2.2(b), this
Agreement, other than paragraphs 8.3, 10 and 11 hereof, shall automatically
terminate, and Anker shall be under no further obligation to make any additional
payments to the Executive, except that Anker shall (i) make the payments
required under paragraph 11, (ii) pay the Executive for any accrued but unpaid
salary and such other amounts as the Executive may be entitled to under the
applicable employee benefit plans in which the Executive participates pursuant
to paragraph 8, (iii) continue to maintain and provide, at Anker's sole cost and
expense, the same life and health insurance coverage provided to Executive (and
Executive's dependents) as of the date of the termination of this Agreement
under this paragraph 2.2(b) until the Executive reaches the age of 65, and (iv)
perform its obligations under paragraph 8.3.
2.3(a) In the event Anker terminates this Agreement for any
reason other than as provided in paragraphs 2.2(a) or 2.2(b) at any time prior
to August 1, 2000, the Executive shall be entitled to receive the annual salary,
bonuses and other benefits which he would have received under this Agreement
through July 31, 2002, had Anker not terminated this Agreement.
(b) In the event Anker terminates this Agreement
for any reason other than as provided in paragraphs
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<PAGE> 4
2.2(a) or 2.2(b) at any time on or after August 1, 2000, the Executive shall
have the following two options, either of which may be selected by Executive in
his sole and absolute discretion: (i) Executive may elect to receive, within ten
(10) days of the date on which Anker terminated this Agreement, an amount equal
to two hundred fifty percent (250%) of Executive's then current annual salary;
or (ii) Executive may elect to receive the compensation, bonuses and other
benefits under this Agreement for a period of two (2) years from the date on
which Anker terminated this Agreement, and for any period after July 31, 2002,
the annual salary under paragraph 4, quarterly bonus under paragraph 5, bonus
compensation under paragraph 6 and benefits under paragraphs 8 and 9 shall be
calculated and paid in a manner consistent with the way in which said annual
salary, quarterly bonus, bonus compensation and benefits are calculated and paid
under this Agreement.
3. Position and Responsibilities.
3.1 During the period of his employment hereunder, Anker and
the Executive agree that the Executive shall serve as Executive Vice-President
of Anker.
3.2 The Executive shall perform such duties and have such
responsibilities and powers as are reasonably assigned to him by the Board of
Directors of Anker and which are consistent with the offices held by the
Executive under paragraph 3.1.
3.3 During the term of his employment hereunder, and except
for illness, reasonable vacation periods, reasonable
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<PAGE> 5
leaves of absence and reasonable amounts of time required to be devoted by
Executive to the business and operations of Zither Mining Company, Inc.,
Transocean Coal Company, Inc. or Apex Resources LLC in accordance with a
services agreement between each such company and Anker, the Executive shall
devote all of his business time, attention, skill and efforts to the faithful
performance of his duties under this Agreement and separate Employment
Agreements of even date herewith entered into by Executive and AGI (the "AGI
Agreement"), Executive and Anker Coal Group (the "Anker Coal Group Agreement"),
and Simba Group, Inc., a Delaware corporation and subsidiary of Anker Coal
Group, provided, however, that the determination of the reasonableness of the
amount of time devoted to the business and operations of such companies shall be
made by the Board of Directors of Anker, and in no event shall such activities
be permitted if they substantially and materially prevent Executive from
performing his obligations hereunder. Except as permitted by the preceding
sentence, the Executive shall not, during the term of this Agreement, directly
or indirectly own, manage, operate, be employed by or control, or participate in
the ownership, management, operation or control of, any entity engaged, directly
or indirectly, in the business of mining, producing, marketing or selling coal,
except that this paragraph 3.3 shall not prohibit the Executive from acquiring
not more than two percent (2%) of any outstanding class of securities of any
company whose shares are publicly traded on any exchange or in any established
over-the-counter market.
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<PAGE> 6
3.4 The Executive shall (i) notify the Board of Directors of
Anker in writing reasonably in advance of any proposed transaction between Anker
or any other direct or indirect subsidiary of AGI and Executive, any member of
Executive's family or any entity in which the Executive or any member of
Executive's family shall have any interest and (ii) not effect any such
transaction and shall use his best efforts to cause his family members and any
such entity to not effect any such transaction unless the transaction has been
approved by the Board of Directors of Anker Coal Group. For purposes of this
paragraph 3.4, the members of Executive's family shall be limited to the
Executive's spouse, parents, siblings and children.
4. Annual Salary. During the term of this Agreement, Anker shall pay
Executive for each twelve-month period set forth below the salary set opposite
said period:
<TABLE>
<CAPTION>
Period Annual Salary
------ -------------
<S> <C>
8/1/1996 through 7/31/1997 $250,000
8/1/1997 through 7/31/1998 $257,500
8/1/1998 through 7/31/1999 $265,200
8/1/1999 through 7/31/2000 $273,200
8/1/2000 through 7/31/2001 $281,200
8/1/2001 through 7/31/2002 $289,600
</TABLE>
Anker shall pay Executive his annual salary in equal installments on a bi-weekly
basis. The increase in the annual salary from period to period as reflected in
the foregoing table is based on a cost of living adjustment equal to
approximately three percent (3%). In the event the rate of inflation in the
United States of America exceeds three percent (3%) for any of the periods
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<PAGE> 7
identified above, Anker agrees to consider making a reasonable increase to
Executive's annual salary for the following period. In the event any such
increase is made to the Executive's annual salary as provided in the preceding
sentence, the annual salary for each of the subsequent periods shall be
increased by an equal amount.
5. Quarterly Bonus. In addition to his annual salary as provided in
paragraph 4 above, Anker shall pay Executive $3,750 upon the execution of this
Agreement and $3,750 on the first day of each subsequent calendar quarter during
the term of this Agreement.
6. Bonus Compensation.
6.1 For purposes of this Agreement, the term "Anker Coal Group
EBITDA" ("ACGE") shall mean with respect to a particular year the audited
consolidated net income of Anker Coal Group, plus interest, taxes, depreciation,
depletion and amortization, based on the audited annual consolidated financial
statements of Anker Coal Group certified by its independent certified public
accountants. ACGE shall not include extraordinary and unusual items shown as
extraordinary and unusual items on said audited annual consolidated financial
statements of Anker Coal Group, unless such extraordinary and unusual items were
included in ACGBE (as defined below). The Board of Directors of Anker Coal Group
may also exclude from ACGE gains or losses resulting from sales outside the
ordinary course of business, unless such gains or losses were included in ACGBE.
The term "Anker Coal Group Budgeted EBITDA" ("ACGBE") shall mean
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<PAGE> 8
with respect to a particular year the consolidated net income of Anker Coal
Group, plus interest, taxes, depreciation, depletion and amortization, based on
the annual budget of Anker Coal Group adopted by its Board of Directors. The
parties acknowledge and agree that ACGBE for the calendar year 1996 shall equal
$27,500,000 less an amount equal to all costs and expenses related to the
recapitalization of the ownership of AGI and the refinancing of the indebtedness
of AGI, and not contemplated in the 1996 budget of AGI adopted by its Board of
Directors, including, without limitation, the fees and expenses of attorneys,
accountants, consultants, appraisers, valuation firms and other professionals,
the direct and indirect expenses relating to the negotiation, preparation,
execution and delivery of all documentation associated with said
recapitalization and refinancing, and the direct and indirect expenses
(including bonuses) relating to the issuance of common stock of AGI to Bruce
Sparks.
6.2 In addition to his annual salary and quarterly bonus as
provided in paragraphs 4 and 5 above, Anker shall pay Executive for each year
during the term of this Agreement an annual bonus equal to a percentage of the
Executive's annual salary for said year, which percentage shall be calculated
based upon the relationship of ACGE to ACGBE. If ACGE for a particular year is
equal to or less than 75% of ACGBE for that year, then Executive shall not be
entitled to receive any annual bonus for that year. If ACGE for a particular
year is greater than 75% of ACGBE for that year, then Anker shall pay
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<PAGE> 9
Executive a bonus for that year in an amount equal to the result of the
following formula:
{[(ACGE/ACGBE) - 0.50] x 0.80} x Executive's annual salary for such year.
6.3 Where the Executive is employed hereunder for only a
portion of a calendar year, and, pursuant to the terms of this Agreement, is
entitled to receive a bonus payment under paragraph 6.2 hereof, the Executive's
bonus shall be computed based upon ACGE for such year and shall be pro-rated
based upon the number of days Executive is employed hereunder during such year.
All calculations of ACGE, ACGBE and bonus payments under this paragraph 6 shall
be made by the chief financial officer of Anker subject to the review and
confirmation by the Compensation Committee of the Board of Directors of Anker
Coal Group and, upon such confirmation, shall be final and binding upon all
parties hereto. Each bonus payment shall be paid to the Executive on or before
the later of (i) April 17 of the year following the year to which such bonus
applies or (ii) the 30th day after Anker Coal Group's independent certified
public accountants certify Anker Coal Group's audited annual consolidated
financial statements for the year to which such bonus applies.
7. Expenses. Anker agrees to reimburse the Executive for all
ordinary, necessary and reasonable expenses incurred by him in the performance
of his duties and responsibilities under this Agreement, provided that the
Executive submits receipt vouchers or other evidences of payment of expenses in
such form
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<PAGE> 10
and within such reasonable time periods as may be required by Anker.
8. Executive Benefits.
8.1 Following the commencement of the term of this Agreement
and during the term hereof, Anker shall maintain all life, health, director and
officer, disability (short and long-term) and liability insurance coverage
provided to the Executive on the date hereof and shall allow the Executive to
participate in any pension, profit-sharing or other employee benefit plans of
Anker to the extent he is eligible under the terms of those plans. Anker shall
update such coverage and plans from time to time to provide such benefits to the
Executive on a basis consistent with the coverage and plans provided to other
senior executives of Anker.
8.2 Throughout the term of this Agreement, Anker shall, at its
expense, provide Executive with a suitable vehicle and such country club
memberships and other prerequisites as the Board of Directors of Anker shall
deem reasonable and commensurate with the positions and responsibilities of the
Executive under this Agreement.
8.3 Anker and Anker Coal Group hereby jointly and severally
agree to indemnify, defend and hold the Executive harmless from and against any
and all claims, demands, suit, actions, proceedings, judgments, losses,
liabilities, damages, fines, amounts paid in settlement, costs and expenses of
every kind and nature (including, without limitation, reasonable attorneys'
fees) incurred or suffered in connection with the fact
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<PAGE> 11
that Executive is or was a director, officer, employee or agent of Anker, AGI or
Anker Coal Group, or is or was serving at the request of Anker, AGI or Anker
Coal Group as a director, officer, manager, employee or agent of another
corporation, partnership, limited liability company, joint venture, trust or
other entity or enterprise; provided, however, that Anker and Anker Coal Group
shall have no obligation to indemnify the Executive under this paragraph 8.3 for
gross negligence or willful and wanton misconduct. Notwithstanding anything in
this Agreement to the contrary, the parties expressly acknowledge and agree that
the covenant of indemnification under this paragraph 8.3 is independent of all
other covenants in this Agreement and shall survive the expiration or
termination of this Agreement without limit.
9. Vacation. Executive shall be entitled, in the aggregate, to four
weeks paid vacation for each year during the term of this Agreement. If the
Executive does not use this allotted time for vacation, he will not be
compensated in lieu of vacation time.
10. Confidential Information. In the course of his employment, the
Executive has had and will have access to confidential financial and business
records, data, specifications, supplier and customer lists and other proprietary
information owned by Anker Coal Group and its direct and indirect subsidiaries
(collectively, the "Companies") and used in the course of their respective
business, including, without limitation, information of a business or technical
nature
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<PAGE> 12
imparted to or learned by the Executive in the course of his employment,
irrespective of whether the same has been formally stamped "confidential"
(collectively, "Proprietary Information"). Proprietary Information shall not
include any information which is known generally to the public or which can be
determined from publicly-available sources. The Executive agrees that during the
term of his employment and for a period of three (3) years immediately following
the expiration or termination of this Agreement, he shall not use, divulge,
furnish or make accessible to anyone (other than an authorized representative of
any of the Companies or unless required in the ordinary course of business of
any of the Companies) any knowledge or information with respect to Proprietary
Information. All records, files, drawings, documents, equipment and the like
relating to the business of any of the Companies which the Executive shall
prepare, use or come into contact with shall remain the sole property of the
Companies. The Executive further agrees that upon expiration or termination of
this Agreement, he will return to the Companies all tangible property relating
to the Proprietary Information of which he has custody, including, but not
limited to, all business records, notebooks, documents, drawings, photographs
and copies thereof. The provisions of this paragraph 10 shall survive the
termination or expiration of this Agreement for the aforesaid three-year period.
11. Non-Competition. The Executive agrees that during the term of
the Executive's employment under this Agreement he shall abide by the provisions
of paragraph 3.3 above. In
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addition, and for a period of one(1) year immediately following the expiration
or termination of this Agreement, the Executive will not, directly or
indirectly, own, manage, operate, be employed by or control, or participate in
the ownership, management, operation or control of, any entity, directly or
indirectly, engaged in the business of mining, producing, marketing or selling
coal in West Virginia or Maryland, nor will the Executive during such one-year
period solicit, induce or attempt to persuade any employee of Anker or the other
direct or indirect subsidiaries of Anker Coal Group to leave its employ or
solicit any customer of Anker or the other direct or indirect subsidiaries of
Anker Coal Group with respect to the business of mining, producing, marketing or
selling coal in West Virginia or Maryland on behalf of any other person or
entity, and Executive expressly acknowledges and agrees that the foregoing
restrictions are reasonable both in scope and duration; provided, however, that
the provisions of this paragraph 11 shall not apply to Executive following the
expiration of this Agreement on July 31, 2002, or the termination of this
Agreement under paragraph 2.2(a) or paragraph 2.2(b) unless Anker elects in its
sole discretion to pay (either in lump sum or through installments on a
bi-weekly basis) the Executive in respect of said one-year period an amount
equal to the annual salary which the Executive was receiving at the time of the
termination or expiration hereof. This paragraph 11 shall not prohibit the
Executive (i) from acquiring not more than two percent (2%) of any outstanding
class of securities of any company whose shares are publicly-traded on any
exchange or
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in any established over-the-counter market or (ii) with the prior written
consent of the Board of Directors of Anker Coal Group, providing services under
a consulting arrangement to persons or entities engaged in the business of
mining, producing, marketing or selling coal. The provisions of this paragraph
11 (other than the first sentence hereof) shall survive the termination or
expiration of this Agreement for the aforesaid one-year period.
12. Enforcement; Covenants Independent; Survival.
12.1 Enforcement. The Executive hereby acknowledges and agrees
that an award of money damages alone is likely to be an inadequate remedy for
breach by the Executive of any of the covenants set forth in paragraphs 10 and
11, and that in the event of any breach of these covenants the Executive hereby
agrees and consents that Anker and Anker Coal Group shall be entitled to the
remedies of injunction, specific performance, mandamus or other equitable relief
to enforce the performance of such covenants in addition to seeking money
damages.
12.2 Covenants Independent; Survival. The covenants of the
Executive contained in paragraphs 10 and 11 shall be construed as independent of
all other provisions contained in this Agreement. The Executive agrees that, to
the extent set forth in such paragraphs, the provisions of such paragraphs shall
survive the termination of this Agreement and his employment with Anker in
accordance with and upon all of the terms and conditions of this Agreement.
13. Guaranty. Anker Coal Group hereby absolutely, unconditionally
and irrevocably guarantees to the Executive, as
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primary obligor and not merely as surety, the full and prompt payment and
performance of all present and future liabilities and obligations of Anker under
this Agreement, together with all costs and expenses incurred by the Executive
in connection with the enforcement of all of the obligations under this
Agreement, including, without limitation, all of the Executive's reasonable
attorney's fees and legal expenses; provided, however, that Anker Coal Group
shall be liable for such enforcement expenses only to the extent that Executive
prevails in any such enforcement action.
14. Reimbursement. For each year during the term of this Agreement,
Anker agrees to reimburse the Executive, up to a maximum of $3,000, for all
fees, costs and expenses incurred by him in connection with obtaining
accounting, tax and legal services, provided that the Executive submits bills,
receipt vouchers or other evidences of payment of expenses to Anker in such form
as may be required by Anker. Anker shall reimburse the Executive within thirty
(30) days after the Executive submits acceptable bills, receipt vouchers or
other evidences of payment to Anker.
15. Notice. All notices, requests, elections and other
communications under this Agreement shall be made in writing and shall be deemed
to have been given when delivered personally, or when mailed by certified mail,
postage prepaid, addressed in the case of service upon the Executive, to the
residence of the Executive as listed in Anker's records, and in the case of
service upon Anker or Anker Coal Group, to its
15
<PAGE> 16
principal office or, in any case, at such other address as any party hereto may
furnish to the others in accordance with this paragraph.
16. Arbitration. Other than a dispute or controversy arising solely
under paragraph 10 or 11, any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before an arbitrator (or arbitrators) in West Virginia who is (are)
mutually acceptable to the Executive and Anker in West Virginia in accordance
with the rules of the American Arbitration Association then in effect or, if the
Executive and Anker are unable to agree on an arbitrator (or arbitrators),
before an arbitrator in West Virginia chosen in accordance with the rules of the
American Arbitration Association. Judgment may be entered on the award of the
arbitrator or arbitrators in any court in the State of West Virginia having
jurisdiction.
17. Miscellaneous.
17.1 Binding Effect and Benefit. All rights and obligations
under this Agreement shall inure to the benefit of and shall be binding upon the
parties hereto, the successors and assigns of Anker and Anker Coal Group, and
the personal representative of the estate of the Executive. The parties hereto
further agree that the terms and conditions of this Agreement are to be fully
assumed by any party succeeding to the interest of Anker or Anker Coal Group, as
the case may be, including, but not limited to, any party succeeding to such
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<PAGE> 17
interest by reason of a consolidation, merger, reorganization, transfer of
assets, liquidation or dissolution.
17.2 Withholding. Anker shall be responsible for complying
with all Federal and state laws concerning withholding of income and other taxes
required to be withheld from the compensation of the Executive. All payments to
be made to Executive pursuant to this Agreement shall be reduced by all
applicable withholding and other taxes, as determined by Anker and Anker Coal
Group.
17.3 Additional Termination Events. This Agreement shall
terminate upon the effective date of Executive's resignation of employment with
Anker or upon Executive's death; provided, however, that Executive may resign
from Anker upon no less than thirty (30) days prior written notice (or such
earlier notice as may be agreed to between the parties hereto), which notice
shall set forth the date of resignation (the "Resignation Date"). As soon as
practicable following the Resignation Date or date of death, Anker shall pay to
Executive or Executive's estate, as applicable, any accrued but unpaid salary,
such amounts as Executive may be entitled to under the applicable employee
benefit plans in which Executive participates pursuant to paragraph 8 hereof and
the amounts required under paragraph 11, and thereafter Anker shall be under no
further obligation to make any additional payments to Executive hereunder
(except as may be required under paragraph 8.3).
17.4 Entire Agreement and Amendment. This Agreement (together
with the AGI Agreement and the Anker Coal
17
<PAGE> 18
Group Agreement) constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior or contemporaneous
negotiations, promises, covenants, agreements or representations of every nature
whatsoever with respect thereto. This Agreement may not be changed except by
written instrument duly executed by all of the parties hereto.
17.5 Waiver. Waiver by any party of any breach of the terms
and conditions of this Agreement, or of any election available to that party
hereunder, shall not be deemed to be a waiver of any subsequent breach of any
term or condition of this Agreement or a waiver of a similar or dissimilar
provision or condition at the same time or at any prior or subsequent time, or
of the right of the applicable party to make any subsequent election under this
Agreement.
17.6 Severability. If, for any reason, any provision or part
thereof, of this Agreement, is held invalid, such invalidity shall not affect
any other provision, or any other part of such provision, not held to be
invalid, and each such other provision, or part thereof, shall to the full
extent consistent with law continue in full force and effect.
17.7 Governing Law. The validity, performance and enforcement
of this Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of West Virginia.
17.8 Headings. The headings and subheadings appearing in this
Agreement are solely for convenience in
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reference and shall have no effect upon the meaning and construction of this
Agreement.
17.9 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
17.10 Decisions of the Board of Directors. The Executive may
participate in any discussions of the Board of Directors of Anker or Anker Coal
Group regarding any decision required to be made pursuant to this Agreement, but
Executive will abstain or excuse himself from any vote of the Board of Directors
of Anker or Anker Coal Group with respect to any such matter.
IN WITNESS WHEREOF, the Executive, Anker and Anker Coal Group have
executed this Agreement as of the date first above written.
/s/ Bruce Sparks
-------------------------------------
BRUCE SPARKS
ANKER ENERGY CORPORATION
By /s/ John J. Faltis
---------------------------------
Its President
---------------------------------
ANKER COAL GROUP, INC.
By /s/ John J. Faltis
---------------------------------
Its President
---------------------------------
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<PAGE> 20
SHAREHOLDER APPROVAL
The undersigned, having been provided with full disclosure of all
material facts concerning the payments to be made pursuant to the foregoing
Employment Agreement, hereby approves all such payments.
ANKER GROUP, INC.
By /s/ John J. Faltis
---------------------------------
Its President
---------------------------------
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of the first
day of August, 1996, by and among JOHN J. FALTIS (the "Executive"), ANKER ENERGY
CORPORATION, a Delaware corporation ("Anker"), and ANKER COAL GROUP, INC., a
Delaware corporation ("Anker Coal Group").
WHEREAS, the Executive has been President and Chief Executive
Officer of Anker and its parent company, Anker Group, Inc., a Delaware
corporation ("AGI"), for a number of years, and the services of the Executive,
his managerial experience and his knowledge of the affairs of Anker are of great
value to Anker and Anker Coal Group; and,
WHEREAS, Anker wishes to assure itself of the continued services of
the Executive for the period provided for in this Agreement, and the Executive
is willing to serve in the employ of Anker on a full time basis for said period
as herein provided;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
1. Employment. Anker hereby agrees to continue the Executive in its
employ, and the Executive agrees to remain in the employ of Anker, for the
period stated in paragraph 2 hereof upon the terms and conditions set forth in
this Agreement.
2. Term and Termination.
2.1 The term of this Agreement shall be for a period of five
(5) years beginning on the date of this Agreement
<PAGE> 2
and continuing until 11:59 p.m. on July 31, 2001, unless sooner terminated as
provided in paragraphs 2.2 or 17.3 below.
2.2 (a) This Agreement may be terminated by Anker at any time
"For Cause." Upon the termination of this Agreement For Cause by Anker, this
Agreement, other than paragraphs 8.3, 10 and 11 hereof, shall automatically
terminate, and Anker shall be under no further obligation to make any additional
payments to Executive, except that Anker shall (i) make the payments as required
in paragraph 11, (ii) pay the Executive for any accrued but unpaid salary and
such other amounts as Executive may be entitled to under the applicable employee
benefit plans in which Executive participates pursuant to paragraph 8 and (iii)
perform its obligations under paragraph 8.3. For purposes of this Agreement, the
parties expressly acknowledge and agree that the term "For Cause" shall include
only the following events:
(i) Conviction of Executive of a felony, other than a
felony associated with the mining or environmental operations of Anker and
the performance of Executive's duties hereunder; or
(ii) Gross failure of Executive to perform his material
duties hereunder or material breach by Executive of any of the terms of
this Agreement, and Executive's failure to satisfactorily cure or
adequately justify such failure or breach within ten (10) days of receipt
of a written notice to cure from the Board of Directors of Anker or Anker
Coal Group.
2
<PAGE> 3
(b) This Agreement may be terminated by Anker in the
event the Executive becomes disabled as determined under the long-term
disability policy maintained by Anker with respect to the Executive. Upon the
termination of this Agreement by Anker under this paragraph 2.2(b), this
Agreement, other than paragraphs 8.3, 10 and 11 hereof, shall automatically
terminate, and Anker shall be under no further obligation to make any additional
payments to the Executive, except that Anker shall (i) make the payments
required under paragraph 11, (ii) pay the Executive for any accrued but unpaid
salary and such other amounts as the Executive may be entitled to under the
applicable employee benefit plans in which the Executive participates pursuant
to paragraph 8, (iii) continue to maintain and provide, at Anker's sole cost and
expense, the same life and health insurance coverage provided to Executive (and
Executive's dependents) as of the date of the termination of this Agreement
under this paragraph 2.2(b) until the Executive reaches the age of 65, and (iv)
perform its obligations under paragraph 8.3.
2.3 (a) In the event Anker terminates this Agreement for any
reason other than as provided in paragraphs 2.2(a) or 2.2(b) at any time prior
to August 1, 1999, the Executive shall be entitled to receive the annual salary,
bonuses and other benefits which he would have received under this Agreement
through July 31, 2001, had Anker not terminated this Agreement.
(b) In the event Anker terminates this Agreement for
any reason other than as provided in paragraphs
3
<PAGE> 4
2.2(a) or 2.2(b) at any time on or after August 1, 1999, the Executive shall
have the following two options, either of which may be selected by Executive in
his sole and absolute discretion: (i) Executive may elect to receive, within ten
(10) days of the date on which Anker terminated this Agreement, an amount equal
to two hundred fifty percent (250%) of Executive's then current annual salary;
or (ii) Executive may elect to receive the compensation, bonuses and other
benefits under this Agreement for a period of two (2) years from the date on
which Anker terminated this Agreement, and for any period after July 31, 2001,
the annual salary under paragraph 4, quarterly bonuses under paragraph 5, bonus
compensation under paragraph 6 and benefits under paragraphs 8 and 9 shall be
calculated and paid in a manner consistent with the way in which said annual
salary, quarterly bonuses, bonus compensation and benefits are calculated and
paid under this Agreement.
3. Position and Responsibilities.
3.1 During the period of his employment hereunder, Anker and
the Executive agree that the Executive shall serve as President and Chief
Executive Officer of Anker.
3.2 The Executive shall perform such duties and have such
responsibilities and powers as are reasonably assigned to him by the Board of
Directors of Anker and which are consistent with the offices held by the
Executive under paragraph 3.1.
3.3 During the term of his employment hereunder, and except
for illness, reasonable vacation periods, reasonable
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<PAGE> 5
leaves of absence and reasonable amounts of time required to be devoted by
Executive to the business and operations of Zither Mining Company, Inc.,
Transocean Coal Company, Inc., or Apex Resources LLC in accordance with a
services agreement between each such company and Anker, or Resource Venture
Analysis, Inc. or other companies in which Executive has investments, the
Executive shall devote all of his business time, attention, skill and efforts to
the faithful performance of his duties under this Agreement and separate
Employment Agreements of even date herewith entered into by Executive and AGI
(the "AGI Agreement"), Executive and Anker Coal Group (the "Anker Coal Group
Agreement"), and Executive and Simba Group, Inc., a Delaware corporation and
subsidiary of Anker Coal Group, provided, however, that the determination of the
reasonableness of the amount of time devoted to the business and operations of
such companies shall be made by the Board of Directors of Anker, and in no event
shall such activities be permitted if they substantially and materially prevent
Executive from performing his obligations hereunder. Except as permitted by the
preceding sentence, the Executive shall not, during the term of this Agreement,
directly or indirectly own, manage, operate, be employed by or control, or
participate in the ownership, management, operation or control of, any entity
engaged, directly or indirectly, in the business of mining, producing, marketing
or selling coal, except that this paragraph 3.3 shall not prohibit the Executive
from acquiring not more than two percent (2%) of any outstanding class of
securities of any company whose shares
5
<PAGE> 6
are publicly traded on any exchange or in any established over-the-counter
market.
3.4 The Executive shall (i) notify the Board of Directors of
Anker in writing reasonably in advance of any proposed transaction between Anker
or any other direct or indirect subsidiary of AGI and Executive, any member of
Executive's family or any entity in which the Executive or any member of
Executive's family shall have any interest and (ii) not effect any such
transaction and shall use his best efforts to cause his family members and any
such entity to not effect any such transaction unless the transaction has been
approved by the Board of Directors of Anker Coal Group. For purposes of this
paragraph 3.4, the members of Executive's family shall be limited to the
Executive's spouse, parents, siblings and children.
4. Annual Salary. During the term of this Agreement, Anker shall pay
Executive for each twelve-month period set forth below the annual salary set
opposite said period:
<TABLE>
<CAPTION>
Period Annual Salary
------ -------------
<S> <C>
8/1/1996 through 7/31/1997 $330,000
8/1/1997 through 7/31/1998 $339,900
8/1/1998 through 7/31/1999 $350,100
8/1/1999 through 7/31/2000 $360,600
8/1/2000 through 7/31/2001 $371,400
</TABLE>
Anker shall pay Executive his annual salary in equal installments on a bi-weekly
basis. The increase in the annual salary from period to period as reflected in
the foregoing table is based on a cost of living adjustment equal to
approximately three percent (3%). In the event the rate of inflation in the
United States of
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<PAGE> 7
America exceeds three percent (3%) for any of the periods identified above,
Anker agrees to consider making a reasonable increase to Executive's annual
salary for the following period. In the event any such increase is made to the
Executive's annual salary as provided in the preceding sentence, the annual
salary for each of the subsequent periods shall be increased by an equal amount.
5. Quarterly Bonus. In addition to his annual salary as provided in
paragraph 4 above, Anker shall pay Executive $10,000 upon the execution of this
Agreement and $10,000 on the first day of each subsequent calendar quarter
during the term of this Agreement.
6. Bonus Compensation.
6.1 For purposes of this Agreement, the term "Anker Coal Group
EBITDA" ("ACGE") shall mean with respect to a particular year the audited
consolidated net income of Anker Coal Group, plus interest, taxes, depreciation,
depletion and amortization, based on the audited annual consolidated financial
statements of Anker Coal Group certified by its independent certified public
accountants. ACGE shall not include extraordinary and unusual items shown as
extraordinary and unusual items on said audited annual consolidated financial
statements of Anker Coal Group, unless such extraordinary and unusual items were
included in ACGBE (as defined below). The Board of Directors of Anker Coal Group
may also exclude from ACGE gains or losses resulting from sales outside the
ordinary course of business, unless such gains or losses were included in ACGBE.
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<PAGE> 8
The term "Anker Coal Group Budgeted EBITDA" ("ACGBE") shall mean with respect to
a particular year the consolidated net income of Anker Coal Group, plus
interest, taxes, depreciation, depletion and amortization, based on the annual
budget of Anker Coal Group adopted by its Board of Directors. In the event the
Board of Directors of Anker Coal Group fails to adopt an annual budget for Anker
Coal Group for a particular year, ACGBE for said year shall equal ACGBE for the
immediately preceding year. The parties acknowledge and agree that ACGBE for the
calendar year 1996 shall equal $27,500,000 less an amount equal to all costs and
expenses related to the recapitalization of the ownership of AGI and the
refinancing of the indebtedness of AGI, and not contemplated in the 1996 budget
of AGI adopted by its Board of Directors, including, without limitation, the
fees and expenses of attorneys, accountants, consultants, appraisers, valuation
firms and other professionals, the direct and indirect expenses relating to the
negotiation, preparation, execution and delivery of all documentation associated
with said recapitalization and refinancing, and the direct and indirect expenses
(including bonuses) relating to the issuance of common stock of AGI to Bruce
Sparks.
6.2 In addition to his annual salary and quarterly bonus as
provided in paragraphs 4 and 5 above, Anker shall pay Executive for each year
during the term of this Agreement an annual bonus equal to a percentage of the
Executive's annual salary for said year, which percentage shall be calculated
based upon the relationship of ACGE to ACGBE. If
8
<PAGE> 9
ACGE for a particular year is equal to or less than 75% of ACGBE for that year,
then Executive shall not be entitled to receive any annual bonus for that year.
If ACGE for a particular year is greater than 75% of ACGBE for that year, then
Anker shall pay Executive a bonus for that year in an amount equal to the result
of the following formula:
[(ACGE/ACGBE) - .50] x Executive's annual salary for such year.
6.3 Where the Executive is employed hereunder for only a
portion of a calendar year, and, pursuant to the terms of this Agreement, is
entitled to receive a bonus payment under paragraph 6.2 hereof, the Executive's
bonus shall be computed based upon ACGE for such year and shall be pro-rated
based upon the number of days Executive is employed hereunder during such year.
All calculations of ACGE, ACGBE and bonus payments under this paragraph 6 shall
be made by the chief financial officer of Anker subject to the review and
confirmation by the Compensation Committee of the Board of Directors of Anker
Coal Group and, upon such confirmation, shall be final and binding upon all
parties hereto. Each bonus payment shall be paid to the Executive on or before
the later of (i) April 17 of the year following the year to which such bonus
applies or (ii) the 30th day after Anker Coal Group's independent certified
public accountants certify Anker Coal Group's audited annual consolidated
financial statements for the year to which such bonus applies.
7. Expenses. Anker agrees to reimburse the Executive for all
ordinary, necessary and reasonable expenses incurred by
9
<PAGE> 10
him in the performance of his duties and responsibilities under this Agreement,
provided that the Executive submits receipt vouchers or other evidences of
payment of expenses in such form and within such reasonable time periods as may
be required by Anker.
8. Executive Benefits.
8.1 Following the commencement of the term of this Agreement
and during the term hereof, Anker shall maintain all life, health, director and
officer, disability (short and long-term) and liability insurance coverage
provided to the Executive on the date hereof and shall allow the Executive to
participate in any pension, profit-sharing or other employee benefit plans of
Anker to the extent he is eligible under the terms of those plans. Anker shall
update such coverage and plans from time to time to provide such benefits to the
Executive on a basis consistent with the coverage and plans provided to other
senior executives of Anker.
8.2 Throughout the term of this Agreement, Anker shall, at its
expense, provide Executive with a suitable vehicle and such country club
memberships and other perquisites as the Board of Directors of Anker shall deem
reasonable and commensurate with the positions and responsibilities of the
Executive under this Agreement.
8.3 Anker and Anker Coal Group hereby jointly and severally
agree to indemnify, defend and hold the Executive harmless from and against any
and all claims, demands, suit, actions, proceedings, judgments, losses,
liabilities, damages,
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<PAGE> 11
fines, amounts paid in settlement, costs and expenses of every kind and nature
(including, without limitation, reasonable attorneys' fees) incurred or suffered
in connection with the fact that Executive is or was a director, officer,
employee or agent of Anker, AGI or Anker Coal Group, or is or was serving at the
request of Anker, AGI or Anker Coal Group as a director, officer, manager,
employee or agent of another corporation, partnership, limited liability
company, joint venture, trust or other entity or enterprise; provided, however,
that Anker and Anker Coal Group shall have no obligation to indemnify the
Executive under this paragraph 8.3 for gross negligence or willful and wanton
misconduct. Notwithstanding anything in this Agreement to the contrary, the
parties expressly acknowledge and agree that the covenant of indemnification
under this paragraph 8.3 is independent of all other covenants in this Agreement
and shall survive the expiration or termination of this Agreement without limit.
9. Vacation. Executive shall be entitled, in the aggregate, to four
weeks paid vacation for each year during the term of this Agreement. If the
Executive does not use this allotted time for vacation, he will not be
compensated in lieu of vacation time.
10. Confidential Information. In the course of his employment, the
Executive has had and will have access to confidential financial and business
records, data, specifications, supplier and customer lists and other proprietary
information owned by Anker Coal Group and its direct and indirect
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<PAGE> 12
subsidiaries (collectively, the "Companies") and used in the course of their
respective business, including, without limitation, information of a business or
technical nature imparted to or learned by the Executive in the course of his
employment, irrespective of whether the same has been formally stamped
"confidential" (collectively, "Proprietary Information"). Proprietary
Information shall not include any information which is known generally to the
public or which can be determined from publicly-available sources. The Executive
agrees that during the term of his employment and for a period of three (3)
years immediately following the expiration or termination of this Agreement, he
shall not use, divulge, furnish or make accessible to anyone (other than an
authorized representative of any of the Companies or unless required in the
ordinary course of business of any of the Companies) any knowledge or
information with respect to Proprietary Information. All records, files,
drawings, documents, equipment and the like relating to the business of any of
the Companies which the Executive shall prepare, use or come into contact with
shall remain the sole property of the Companies. The Executive further agrees
that upon the expiration or termination of this Agreement, he will return to the
Companies all tangible property relating to the Proprietary Information of which
he has custody, including, but not limited to, all business records, notebooks,
documents, drawings, photographs and copies thereof. The provisions of this
paragraph 10 shall survive the termination or expiration of this Agreement for
the aforesaid three-year period.
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<PAGE> 13
11. Non-Competition. The Executive agrees that during the term of
the Executive's employment under this Agreement he shall abide by the provisions
of paragraph 3.3 above. In addition, and for a period of one (1) year
immediately following the expiration or termination of this Agreement, the
Executive will not, directly or indirectly, own, manage, operate, be employed by
or control, or participate in the ownership, management, operation or control
of, any entity, directly or indirectly, engaged in the business of mining,
producing, marketing or selling coal in West Virginia or Maryland, nor will the
Executive during such one-year period solicit, induce or attempt to persuade any
employee of Anker or the other direct or indirect subsidiaries of Anker Coal
Group to leave its employ or solicit any customer of Anker or the other direct
or indirect subsidiaries of Anker Coal Group with respect to the business of
mining, producing, marketing or selling coal in West Virginia or Maryland on
behalf of any other person or entity, and Executive expressly acknowledges and
agrees that the foregoing restrictions are reasonable both in scope and
duration; provided, however, that the provisions of this paragraph 11 shall not
apply to Executive following the expiration of this Agreement on July 31, 2001,
or the termination of this Agreement under paragraph 2.2(a) or paragraph 2.2(b)
unless Anker elects in its sole discretion to pay (either in lump sum
immediately following such expiration or termination or through installments on
a bi-weekly basis) the Executive in respect of said one-year period an amount
equal to the annual salary which the Executive was receiving at the time
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<PAGE> 14
of the termination or expiration hereof. This paragraph 11 shall not prohibit
the Executive (i) from acquiring not more than two percent (2%) of any
outstanding class of securities of any company whose shares are publicly-traded
on any exchange or in any established over-the-counter market or (ii) with the
prior written consent of the Board of Directors of Anker Coal Group, providing
services under a consulting arrangement to persons or entities engaged in the
business of mining, producing, marketing or selling coal. The provisions of this
paragraph 11 (other than the first sentence hereof) shall survive the
termination or expiration of this Agreement for the aforesaid one-year period.
12. Enforcement; Covenants Independent; Survival.
12.1 Enforcement. The Executive hereby acknowledges and agrees
that an award of money damages alone is likely to be an inadequate remedy for
breach by the Executive of any of the covenants set forth in paragraphs 10 and
11, and that in the event of any breach of these covenants the Executive hereby
agrees and consents that Anker and Anker Coal Group shall be entitled to the
remedies of injunction, specific performance, mandamus or other equitable relief
to enforce the performance of such covenants in addition to seeking money
damages.
12.2 Covenants Independent; Survival. The covenants of the
Executive contained in paragraphs 10 and 11 shall be construed as independent of
all other provisions contained in this Agreement. The Executive agrees that, to
the extent set forth in such paragraphs, the provisions of such paragraphs shall
survive the termination of this Agreement and
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<PAGE> 15
his employment with Anker in accordance with and upon all of the terms and
conditions of this Agreement.
13. Guaranty. Anker Coal Group hereby absolutely, unconditionally
and irrevocably guarantees to the Executive, as primary obligor and not merely
as surety, the full and prompt payment and performance of all present and future
liabilities and obligations of Anker under this Agreement, together with all
costs and expenses incurred by the Executive in connection with the enforcement
of all of the obligations under this Agreement, including, without limitation,
all of the Executive's reasonable attorney's fees and legal expenses; provided,
however, that Anker Coal Group shall be liable for such enforcement expenses
only to the extent that Executive prevails in any such enforcement action.
14. Reimbursement. For each year during the term of this Agreement,
Anker agrees to reimburse the Executive, up to a maximum of $3,000, for all
fees, costs and expenses incurred by him in connection with obtaining
accounting, tax and legal services, provided that the Executive submits bills,
receipt vouchers or other evidences of payment of expenses to Anker in such form
as may be required by Anker. Anker shall reimburse the Executive within thirty
(30) days after the Executive submits acceptable bills, receipt vouchers or
other evidences of payment to Anker.
15. Notice. All notices, requests, elections and other
communications under this Agreement shall be made in writing and shall be deemed
to have been given when delivered
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<PAGE> 16
personally, or when mailed by certified mail, postage prepaid, addressed in the
case of service upon the Executive, to the residence of the Executive as listed
in Anker's records, and in the case of service upon Anker or Anker Coal Group,
to its principal office or, in any case, at such other address as any party
hereto may furnish to the others in accordance with this paragraph.
16. Arbitration. Other than a dispute or controversy arising solely
under paragraph 10 or 11, any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before an arbitrator (or arbitrators) in West Virginia who is (are)
mutually acceptable to the Executive and Anker in accordance with the rules of
the American Arbitration Association then in effect or, if the Executive and
Anker are unable to agree on an arbitrator (or arbitrators), before an
arbitrator in West Virginia chosen in accordance with the rules of the American
Arbitration Association. Judgment may be entered on the award of the arbitrator
or arbitrators in any court in the State of West Virginia having jurisdiction.
17. Miscellaneous.
17.1 Binding Effect and Benefit. All rights and obligations
under this Agreement shall inure to the benefit of and shall be binding upon the
parties hereto, the successors and assigns of Anker and Anker Coal Group, and
the personal representative of the estate of the Executive. The parties hereto
further agree that the terms and conditions of this
16
<PAGE> 17
Agreement are to be fully assumed by any party succeeding to the interest of
Anker or Anker Coal Group, as the case may be, including, but not limited to,
any party succeeding to such interest by reason of a consolidation, merger,
reorganization, transfer of assets, liquidation or dissolution.
17.2 Withholding. Anker shall be responsible for complying
with all Federal and state laws concerning withholding of income and other taxes
required to be withheld from the compensation of the Executive. All payments to
be made to Executive pursuant to this Agreement shall be reduced by all
applicable withholding and other taxes, as determined by Anker and Anker Coal
Group.
17.3 Additional Termination Events. (a) This Agreement shall
terminate upon the effective date of Executive's resignation of employment with
Anker or upon Executive's death; provided, however, that Executive may resign
from Anker upon no less than thirty (30) days prior written notice (or such
earlier notice as may be agreed to between the parties hereto), which notice
shall set forth the date of resignation (the "Resignation Date"). As soon as
practicable following the Resignation Date or date of death, Anker shall pay to
Executive or Executive's estate, as applicable, any accrued but unpaid salary,
such amounts as Executive may be entitled to under the applicable employee
benefit plans in which Executive participates pursuant to paragraph 8 hereof and
the amounts required under paragraph 11, and thereafter Anker shall be under no
further obligation to
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make any additional payments to Executive hereunder (except as may be required
under paragraph 8.3).
(b) This Agreement shall terminate upon the consummation of
any Sale Transaction (as defined below) that has been approved by the Board of
Directors of Anker Coal Group by a vote that includes the affirmative vote of
the director designee(s) of JJF Group Limited Liability Company ("JJF Group"), a
West Virginia limited liability company (an "Approved Sale Transaction"). On the
date that any Approved Sale Transaction is consummated, Anker shall pay to
Executive any accrued but unpaid salary, such amounts as Executive may be
entitled to under the applicable employee benefit plans in which Executive
participates pursuant to paragraph 8 hereof and the amounts required under
paragraph 11, and thereafter Anker shall be under no further obligation to make
any additional payments to Executive hereunder (except as may be required under
paragraph 8.3). A "Sale Transaction" shall mean: (i) the sale of all or
substantially all of the shares of common stock of Anker Coal Group (including
the shares of common stock of Anker Coal Group held by JJF Group) or AGI
(whether by merger or otherwise); or (ii) the sale of all or substantially all
of the assets of Anker Coal Group or AGI.
17.4 Entire Agreement and Amendment. This Agreement (together
with the AGI Agreement and the Anker Coal Group Agreement) constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior or contemporaneous negotiations, promises, covenants,
agreements or representations of every nature
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<PAGE> 19
whatsoever with respect thereto. This Agreement may not be changed except by
written instrument duly executed by all of the parties hereto.
17.5 Waiver. Waiver by any party of any breach of the terms
and conditions of this Agreement, or of any election available to that party
hereunder, shall not be deemed to be a waiver of any subsequent breach of any
term or condition of this Agreement or a waiver of a similar or dissimilar
provision or condition at the same time or at any prior or subsequent time, or
of the right of the applicable party to make any subsequent election under this
Agreement.
17.6 Severability. If, for any reason, any provision or part
thereof, of this Agreement, is held invalid, such invalidity shall not affect
any other provision, or any other part of such provision, not held to be
invalid, and each such other provision, or part thereof, shall to the full
extent consistent with law continue in full force and effect.
17.7 Governing Law. The validity, performance and enforcement
of this Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of West Virginia.
17.8 Headings. The headings and subheadings appearing in this
Agreement are solely for convenience in reference and shall have no effect upon
the meaning and construction of this Agreement.
17.9 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be an
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<PAGE> 20
original, but all of which together shall constitute one and the same agreement.
17.10 Decisions of the Board of Directors. The Executive may
participate in any discussions of the Board of Directors of Anker or Anker Coal
Group regarding any decision required to be made pursuant to this Agreement, but
Executive will abstain or excuse himself from any vote of the Board of Directors
of Anker or Anker Coal Group with respect to any such matter.
IN WITNESS WHEREOF, the Executive, Anker and Anker Coal Group have
executed this Agreement as of the date first above written.
/s/ John J. Faltis
--------------------------------------
JOHN J. FALTIS
ANKER ENERGY CORPORATION
By /s/ Bruce Sparks
----------------------------------
Its Executive Vice President
----------------------------------
ANKER COAL GROUP, INC.
By /s/ Bruce Sparks
----------------------------------
Its Executive Vice President
----------------------------------
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<PAGE> 21
SHAREHOLDER APPROVAL
The undersigned, having been provided with full disclosure of all material
facts concerning the payments to be made pursuant to the foregoing Employment
Agreement, hereby approves all such payments.
ANKER GROUP, INC.
By /s/ Bruce Sparks
----------------------------------
Its Executive Vice President
----------------------------------
<PAGE> 1
Exhibit 10.6
ANKER COAL GROUP, INC.
1997 OMNIBUS STOCK INCENTIVE PLAN
<PAGE> 2
ARTICLE I
Definitions
1.01 Affiliate means any "subsidiary" or "parent" corporation of the Company,
within the meaning of Section 424 of the Code.
1.02 Agreement means a written agreement (including any amendment or supplement
thereto) between the Company and a Participant specifying the terms and
conditions of an award of Restricted Stock or an Option granted to such
Participant.
1.03 Board means the Board of Directors of the Company.
1.04 Code means the Internal Revenue Code of 1986, and any amendments thereto.
1.05 Common Stock means the voting common stock of the Company.
1.06 Company means Anker Coal Group, Inc., a Delaware corporation.
1.07 Fair Market Value means, on any given date, the fair value of Common Stock
as determined by the Board.
1.08 Option means a non-qualified stock option that entitles the holder to
purchase from the Company a stated number of shares of Common Stock at the
price set forth in an Agreement.
1.09 Participant means an employee of the Company or an Affiliate, including an
employee who is a member of the Board, who satisfies the requirements of
Article IV and is selected by the President and Executive Vice President
of the Company to receive a Restricted Stock award, an Option or a
combination thereof.
1.10 Plan means the Anker Coal Group, Inc. 1997 Omnibus Stock Incentive Plan.
1.11 Restricted Stock means Common Stock awarded to a Participant under Article
IX. Shares of Common Stock shall cease to be Restricted Stock when, in
accordance with the terms of the applicable Agreement, the shares become
transferable and free of substantial risks of forfeiture.
1.12 A Change of Control shall occur if any person or group becomes the
beneficial owner, directly or indirectly, in the aggregate of securities
of the Company representing seventy-five percent (75%) or more of the
total combined voting power of all classes of the Company's then
outstanding, securities. For this purpose, the terms "person," "group" and
"beneficial owner" shall have the respective meanings prescribed in the
Securities Exchange Act of 1934. In addition, the terms "person" or
"group" shall not include any person or group which is a beneficial owner,
directly or indirectly, of any securities of the Company as of the date
the Plan is adopted. Moreover, an initial public offering of the Company's
securities shall not be considered a change of control for purposes of the
Plan.
1
<PAGE> 3
ARTICLE II
Purposes
The Plan is intended to motivate, reward and retain officers and key employees
of the Company or an Affiliate for contributing to its long-term success by
providing an opportunity for meaningful capital accumulation linked to the
future success of the Company and appreciation in shareholder value. The Plan is
intended to permit the award of shares of Restricted Stock and the grant of
Options.
The Plan is a compensatory benefit plan within the meaning of Rule 701 under the
Securities Act of 1933 (the "Securities Act"). Except to the extent any other
exemption from the Securities Act is expressly relied upon in connection with
any Agreement entered into pursuant to the Plan or the securities issuable
hereunder are registered under the Securities Act, the issuance of Common Stock
pursuant to the Plan is intended to qualify for the exemption from registration
under the Securities Act provided by Rule 701. To the extent that an exemption
from registration under the Securities Act provided by Rule 701 is unavailable,
all unregistered offers and sales of Common Stock hereunder are intended to be
exempt from registration under the Securities Act in reliance upon the private
offering exemption contained in Section 4(2) of the Securities Act, or other
available exemption, and the Plan shall be so administered.
ARTICLE III
Administration
Subject to the approval of the Board, the President and Executive Vice President
of the Company shall determine the award of Restricted Stock and the grant of
Options upon such terms (not inconsistent with the provisions of this Plan) as
such officers may consider appropriate. Such terms may include conditions (in
addition to those contained in this Plan) on the exercisability of all or any
part of an Option or on the transferability or forfeitability of Restricted
Stock. Notwithstanding any such conditions, the Board may, in its discretion,
accelerate the time at which any Option may be exercised or the time at which
Restricted Stock may become transferable or nonforfeitable. In addition, the
Board shall have complete authority to interpret all provisions of this Plan; to
prescribe the form of Agreements; to adopt, amend, and rescind rules and
regulations pertaining to the administration of the Plan; and to make all other
determinations necessary or advisable for the administration of this Plan. The
express grant in the Plan of any specific power to the Board shall not be
construed as limiting any power or authority of the Board. Any decision made, or
action taken, by the Board in connection with the administration of this Plan
shall be final and conclusive. All expenses of administering this Plan shall be
borne by the Company.
ARTICLE IV
Eligibility
The President and the Executive Vice President of the Company, with the approval
of the Board, shall designate the employees to whom shares of Restricted Stock
are to be awarded and to whom Options for shares of Common Stock are to be
granted and will specify the number of shares of Restricted Stock or Common
Stock, as the case may be, subject to each award or grant. All shares of
Restricted Stock awarded and all Options for shares of Common Stock granted
under this Plan shall be evidenced
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<PAGE> 4
by Agreements which shall be subject to applicable provisions of this Plan and
to such other provisions as the Board may adopt.
ARTICLE V
Stock Subject to Plan
Upon the award of shares of Restricted Stock the Company may issue shares of
Common Stock from its authorized but unissued Common Stock. Upon the exercise of
any Option, the Company may deliver to the Participant shares of Common Stock
from its authorized but unissued Common Stock. The maximum aggregate number of
shares of Common Stock that may be issued pursuant to the exercise of Options
and the award of Restricted Stock under this Plan is 300 shares. The maximum
aggregate number of shares of Common Stock that may be issued under this Plan
shall be subject to adjustment as provided in Article X. If any award, portion
of an award or Option under the Plan expires or terminates unexercised, becomes
unexercisable or is forfeited or otherwise terminated, surrendered or canceled
as to any shares without the delivery of shares of Common Stock or other
consideration, the shares subject to such award shall thereafter be available
for further awards under the Plan.
ARTICLE VI
Option Price
The price per share of an Option shall be one hundred percent (100%) of the Fair
Market Value of a share of Common Stock on the date the Option is granted.
ARTICLE VII
Exercise of Options
7.01 Maximum Option Period. The term during which an Option may be exercised
shall be determined by the Board; provided, however, that in no event
shall an Option be exercisable more than ten (10) years from the date it
is granted.
7.02 Vesting. Except as otherwise specified by the Board, each Option shall
vest three (3) years from the date it is granted, provided the Participant
has remained in continuous employment with the Company or an Affiliate
during such three (3)-year period.
7.03 Acceleration of Vesting as a Result of Retirement, Death or Disability.
Upon termination of a Participant's employment with the Company or an
Affiliate on account of death, disability (as defined in the Company's
long term disability plan) or normal retirement at age 65 or otherwise
pursuant to the Company's policy, any unvested portion of an Option shall
become one hundred percent (100%) vested as of such date of termination.
7.04 Acceleration of Vesting as a Result of Change of Control. Upon a Change of
Control (as defined in Section 1.12 of the Plan), any unvested portion of
an Option shall become one hundred percent (100%) vested as of such Change
of Control.
3
<PAGE> 5
7.05 Acceleration of Vesting as a Result of a Merger. Upon a merger of the
Company with another entity, any unvested portion of an Option which was
granted prior to the date of merger shall become one hundred percent
(100%) vested if the Participant is involuntarily terminated during the
ninety (90)-day period immediately following the merger date, or
voluntarily terminates at any time after the expiration of the one (1)
year period immediately following the merger date.
7.06 Nontransferability. Any Option granted under this Plan shall be
nontransferable except by will or by the laws of descent and distribution.
An Option may be exercised during the lifetime of a Participant only by
the Participant or, during the period a Participant is under a legal
disability, by the Participant's guardian or legal representative. No
right or interest of a Participant in any Option shall be liable for, or
subject to, any lien, obligation, or liability of such Participant.
7.07 Employee Status. Options under this Plan may be exercised only during
employment with the Company or an Affiliate or within a specified period
of time after such termination as determined by the Board or as otherwise
set forth in the Plan. For this purpose, the Board may decide to what
extent leaves of absence for governmental or military service, illness,
temporary disability, or other reasons shall not be deemed interruptions
of continuous employment.
7.08 Other Terms and Conditions. Options may contain such other provisions, not
inconsistent with the provisions of the Plan, as the Board shall determine
appropriate from time to time.
ARTICLE VIII
Method of Exercise
8.01 Exercise. Subject to the other applicable provisions of the Plan, an
Option may be exercised in whole or in part at such times and in
compliance with such requirements as the Board shall determine. An Option
granted under this Plan may be exercised with respect to any number of
whole shares less than the full number for which the Option could be
exercised. A partial exercise of an Option shall not affect the right to
exercise the Option from time to time in accordance with this Plan and the
applicable Agreement with respect to the remaining shares subject to the
Option.
8.02 Payment. Unless otherwise provided by the Agreement, payment of the Option
price shall be made in cash, through a recourse loan or a cash equivalent
or any combination thereof acceptable to the Board. If the Agreement so
provides, payment of all or part of the Option price may be made by
surrendering shares of Common Stock to the Company. If Common Stock is
used to pay all or part of the Option price, the shares surrendered must
have a Fair Market Value (determined as of the day preceding the date of
exercise) that is not less than such price or part thereof.
8.03 Shareholder Rights. Prior to the exercise of an Option and the delivery of
the shares of Common Stock in connection therewith, a Participant shall
have none of the rights of a stockholder with respect to any shares
subject to an outstanding Option.
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<PAGE> 6
ARTICLE IX
Restricted Stock
9.01 Award. Subject to the other applicable provisions of the Plan, the
President and the Executive Vice President of the Company, with the
approval of the Board, shall from time to time designate the employees to
whom awards of Restricted Stock are to be made and shall specify the
number of shares of Common Stock covered by such awards.
9.02 Restrictions. A Participant's rights in the Restricted Stock shall be
forfeitable and nontransferable for a period of six (6) years from the
date the shares are awarded. These restrictions shall postpone
transferability of the shares and provide that the shares shall be
forfeited if the Participant's employment with the Company or an Affiliate
is terminated for any reason before the sixth (6th) anniversary of the
date the shares are awarded.
9.03 Shareholder Rights. If provided in the Agreement, prior to their
forfeiture (in accordance with the terms of the Agreement and while the
shares are Restricted Stock), a Participant will have the rights of a
stockholder with respect to the Restricted Stock, including the right to
receive dividends; provided, however, that (i) a Participant may not sell,
transfer, pledge, exchange, hypothecate, or otherwise dispose of
Restricted Stock, (ii) the Participant must assign voting rights to the
Company or to other persons designated by the Board, (iii) the Company
shall retain custody of the certificates evidencing shares of Restricted
Stock, and (iv) the Participant will deliver to the Company a stock power,
endorsed in blank, with respect to each award of Restricted Stock. The
limitations set forth in the preceding sentence shall not apply after the
shares cease to be Restricted Stock.
9.04 Other Terms and Conditions. Awards of Restricted Stock may contain such
other provisions, not inconsistent with the provisions of the Plan, as the
Board shall determine appropriate from time to time.
ARTICLE X
Adjustments and Liquidation
10.01 Adjustments Upon Change in Common Stock. The maximum number of shares as
to which Restricted Stock may be awarded and as to which Options may be
granted under this Plan shall be proportionately adjusted, and the terms
of outstanding Restricted Stock awards and Options shall be adjusted, as
the Board shall determine to be equitably required in the event that the
Company effects one or more stock dividends, stock split-ups, subdivisions
or consolidations of shares, or there occurs any other event that, in the
judgment of the Board, necessitates such action. Any determination made by
the Board under this Section 10.01 of the Plan shall be final and
conclusive.
In the event of any proposed Change of Control, the Board shall take such
action as it deems appropriate and equitable to effectuate the purposes of
this Plan and to protect the Participants, which action may include, but
without limitation, any one or more of the following: (i) acceleration or
change of the exercise dates of any awards; (ii) arrangements with
Participants for the payment of appropriate consideration to them for the
cancellation and surrender of any
5
<PAGE> 7
award; and (iii) in any case where equity securities other than Common
Stock of the Company are proposed to be delivered in exchange for or with
respect to Common Stock of the Company, arrangements providing that any
award of Restricted Stock shall become one or more awards with respect to
such other equity securities.
The Board is authorized to make adjustments in the terms and conditions
of, and the criteria included in, awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described
in the preceding two paragraphs of this Section 10.01 of the Plan)
affecting the Company, or the financial statements of the Company or any
Affiliate, or of changes in applicable laws, regulations, or accounting
principles, whenever the Board determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.
The issuance by the Company of shares of any class, or securities
convertible into shares of stock of any class, for cash or property, or
for labor or services, whether upon direct sale or upon the exercise of
rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be
made with respect to, outstanding awards of Restricted Stock or Options.
10.02 Liquidation of Company. In the event the Company dissolves and liquidates
(other than in connection with a reorganization), then notwithstanding any
restrictions on exercise set forth in this Plan or any Agreement: (i) each
Participant shall have the right to exercise his Option, or to require
delivery of share certificates representing any award of Restricted Stock,
at any time up to ten (10) days prior to the effective date of such
liquidation and dissolution; and (ii) the Board may make arrangements with
the Participants for the payment of appropriate consideration to them for
the cancellation and surrender of any Option or Restricted Stock that is
so canceled or surrendered at any time up to ten (10) days prior to the
effective date of such liquidation and dissolution. Any Option not so
exercised, canceled, or surrendered shall terminate on the last day for
exercise prior to such effective date; and any Restricted Stock as to
which there has not been such delivery of share certificates or that has
not been so canceled or surrendered, shall be forfeited on the last day
prior to such effective date. The Board shall give to each Participant
written notice of the commencement of any proceedings for such liquidation
and dissolution of the Company and the Participant's rights with respect
to his outstanding awards.
ARTICLE XI
Call Rights and Right of First Refusal
11.01 Call Rights of Company. Except as otherwise specified by the Board, so
long as the Common Stock is not publicly traded, the Company shall have
the right to purchase, and the Participant shall have the corresponding
obligation to sell, upon delivery of written notice to the Participant,
any or all of the Participant's vested Options and any or all of the
shares of Common Stock then owned by the Participant, ownership of which
shares was acquired through exercise of an Option or award of Restricted
Stock pursuant to an Agreement under the Plan. The purchase price of
shares of Common Stock pursuant to this Section 11.01 of
6
<PAGE> 8
the Plan shall be the Fair Market Value of such shares of Common Stock as
of the date the Company mails or otherwise delivers such written notice to
the Participant. The purchase price of any vested Option pursuant to this
Section 11.01 of the Plan shall be the difference between the Option price
per share and the Fair Market Value of one share of Common Stock, measured
as of the date the Company malls or otherwise delivers such written notice
to the Participant, multiplied by the number of shares to which the Option
relates that are being purchased. The provisions of this Section 11.01 of
the Plan shall apply in the event of a Participant's death, to the
Participant's executor, personal representative or the person to whom the
Option and/or shares of Common Stock shall have been transferred by will
or the laws of descent and distribution, as though such person is the
Participant.
11.02 Company's Right of First Refusal. Except as otherwise specified by the
Board, so long as the Common Stock is not publicly traded, the Common
Stock issued pursuant to the exercise of an Option and the grant of
Restricted Stock shall be subject to a right of first refusal pursuant to
which a Participant shall be required to provide written notice to the
Company of the Participant's intention to dispose of all or any portion of
such Common Stock. The written notice shall contain information regarding
the identity of the proposed purchaser or purchasers (the "Proposed
Purchaser(s)"), the number of shares of Common Stock subject to the
proposed transaction, the proposed price and terms of sale and the
proposed closing date of such sale. For a period of thirty (30) days after
the receipt by the Company of the written notice specified above, the
Company shall have a right of first refusal to purchase the Common Stock
subject to the proposed disposition at the price and on the terms offered
by the Proposed Purchaser(s). The Company must exercise its right to
purchase by giving written notice to the Participant and to the Proposed
Purchaser(s) within thirty (30) days following receipt of the notice,
which notice shall specify the number of shares of Common Stock the
Company intends to purchase. If the Company does not exercise its purchase
right within the time period provided herein with respect to all of the
offered Common Stock, the Participant shall be free for a period of thirty
(30) days thereafter to sell such shares to the Proposed Purchaser(s), at
the same price and on the same terms and conditions as set forth in the
notice. If the Participant shall not, within such thirty (30) day, period,
consummate the sale with the Proposed Purchaser(s), any subsequent sale by
the Participant to the Proposed Purchaser(s) or to any other purchaser on
the same or other terms and conditions must comply again with the
provisions of this Section 11.02 of the Plan.
ARTICLE XII
Compliance with Law and Approval of Regulatory Bodies
12.1 General. No Option shall be exercisable, no Common Stock shall be issued,
no certificates for shares of Common Stock shall be delivered under this
Plan except in compliance with all applicable federal and state laws and
regulations (including, without limitation, withholding tax requirements).
The Company shall have the right to rely on an opinion of its counsel as
to such compliance. Any share certificate issued to evidence Common Stock
for which shares of Restricted Stock are awarded or for which an Option is
exercised may bear such legends and statements as the Board may deem
advisable to assure compliance with federal and state laws and
regulations. No Option shall be exercisable, no Restricted Stock shall be
awarded, no Common Stock shall be issued, no certificate for shares shall
be delivered under this Plan until
7
<PAGE> 9
the Company has obtained such consent or approval as the Board of
Directors may deem advisable from regulatory bodies having jurisdiction
over such matters.
12.2 Compliance with Securities Law. The Company may require that a
Participant, as a condition to exercise of an award, and as a condition to
the delivery of any share certificate, provide to the Company, at the time
of each such exercise and each such delivery, a written representation
that the shares of Common Stock being acquired shall be acquired by the
Participant solely for investment and will not be sold or transferred
without registration or the availability of an exemption from registration
under the Securities Act and applicable state securities laws. The Company
may also require that a Participant submit other written representations
which will permit the Company to comply with federal and applicable state
securities laws in connection with the issuance of the Common Stock,
including representations as to the knowledge and experience in financial
and business matters of the Participant and the Participant's ability to
bear the economic risk of the Participant's investment. The Company may
require that the Participant obtain a "purchaser representative" as that
term is defined in applicable federal and state securities laws. The stock
certificates for any shares of Common Stock issued pursuant to this Plan
may bear a legend restricting transferability of the shares of Common
Stock unless such shares are registered or an exemption from registration
is available under the Securities Act and applicable state securities
laws. The Company may notify its transfer agent to stop any transfer of
shares of Common Stock not made in compliance with these restrictions.
12.3 Withholding of Taxes. The Company may require, as a condition to the grant
of any award under the Plan or exercise pursuant to any Option or to the
delivery of certificates for shares issued or payments of cash to a
Participant to the Plan or an Agreement (hereinafter collectively referred
to as a "taxable event"), that the Participant pay to the Company, in cash
or, unless otherwise determined by the Company, in shares of Common Stock,
including shares acquired upon grant of the award or exercise of the
award, valued at Fair Market Value on the date as of which the withholding
tax liability is determined, any federal, state or local taxes of any kind
required by law to be withheld with respect to any taxable event under the
Plan. The Company, to the extent permitted or required by law, shall have
the right to deduct from any payment of any kind (including salary or
bonus) otherwise due to a Participant any federal, state or local taxes of
any kind required by law to be withheld with respect to any taxable event
under the Plan, or to retain or sell without notice a sufficient number of
the shares to be issued to such Participant to cover any such taxes.
ARTICLE XIII
General Provisions
13.01 Effect on Employment. Neither the adoption of this Plan, its operation,
nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any individual any right to continued
employment with the Company or an Affiliate or in any way affect any right
and power of the Company or an Affiliate to terminate the employment of
any employee at any time with or without assigning a reason therefor.
13.02 Unfunded Plan. The Plan, insofar as it provides for grants, shall be
unfunded, and the Company shall not be required to segregate any assets
that may at any time be represented by
8
<PAGE> 10
grants under this Plan. Any liability of the Company to any person with
respect to any grant under this Plan shall be based solely upon any
contractual obligations that may be created pursuant to this Plan. No such
obligation of the Company shall be deemed to be secured by a pledge of, or
other encumbrance on, any property of the Company.
13.03 Rules of Construction. Headings are given to the articles and sections of
this Plan solely as a convenience to facilitate reference. The reference
to any statute, regulation, or other provision of law shall be construed
to refer to any amendment to or successor of such provision of law.
ARTICLE XIV
Amendment
The Board, without further approval of the stockholders, may amend or terminate
the Plan or any portion thereof at any time, except that no modification shall
become effective without prior approval of the stockholders of the Company if
stockholder approval is necessary to comply with any tax or regulatory
requirement or rule of any exchange or system upon which the Common Stock may be
listed or quoted. No amendment shall, without a Participant's consent, adversely
affect any rights of such Participant under any outstanding Restricted Stock
award or under any Option outstanding at the time such amendment is made.
ARTICLE XV
Governing Law
The validity, construction and effect of the Plan, of Agreements entered into
pursuant to the Plan, and of any rules, regulations, determinations or decisions
made by the Board relating to the Plan or such Agreements, and the rights of any
and all persons having or claiming to have any interest therein or thereunder,
shall be determined exclusively in accordance with applicable federal laws and
the laws of the State of Delaware, without regard to its conflict of laws rules
and principles.
ARTICLE XVI
Effective Date and Duration of Plan
The Plan is effective as of the date on which the Plan is adopted by the Board.
No award shall be granted under the Plan after the close of business on the day
immediately preceding the tenth anniversary of the effective date of the Plan.
Subject to other applicable provisions of the Plan, all awards made under the
Plan prior to such termination of the Plan shall remain in effect until such
awards have been satisfied or terminated in accordance with the Plan and the
terms of the related Agreements.
Date Approved and Adopted by the Board: May 22, 1997
9
<PAGE> 1
Exhibit 10.7
ANKER COAL GROUP, INC.
1997 OMNIBUS STOCK INCENTIVE PLAN
RESTRICTED STOCK AWARD AGREEMENT
AGREEMENT, made effective as of _______________, 1998, by and between
Anker Coal Group, Inc., a Delaware corporation ("Company"), and ________________
("Award Recipient"):
WHEREAS, the Company maintains the Anker Coal Group, Inc. 1997 Omnibus
Stock Incentive Plan (the "Plan") under which the Company's President and
Executive Vice President, with the approval of the Company's Board of Directors
("Board") may, among other things, award shares of the Company's Common Stock of
$.01 par value ("Common Stock") to certain employees, subject to terms,
conditions, or restrictions as the Board may deem appropriate; and
WHEREAS, pursuant to the Plan, the Board has awarded to the Award
Recipient a restricted stock award subject to this Agreement setting forth all
the terms and conditions applicable to such award in accordance with Article IX
of the Plan; and
WHEREAS, the Award Recipient desires to accept said award in accordance
with the terms and provisions of the Plan and this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements contained herein, the Company and Award Recipient agree as follows:
1. DEFINITIONS: Unless otherwise defined, capitalized terms used herein shall
have the meanings given to them in the Plan.
2. AWARD OF SHARES:
Under the terms of the Plan, the Board has awarded to the Award Recipient,
and has caused same to be recorded on the books of the Company, a restricted
stock award as of ________________, 1998 ("Award Date"), of ________________ ( )
shares of Common Stock ("Award Shares") subject to the terms, conditions, and
restrictions set forth in this Agreement and the Plan. The Fair Market Value of
the Award Shares on such date was $__________ per share as determined pursuant
to the terms of the Plan.
The Award Recipient and the Company agree that the award of Restricted
Stock hereunder is intended to comply with the exemption from registration
provided by Rule 701 of the Securities Act of 1933, and each shall use his or
its best efforts to comply with Rule 701.
3. AWARD RESTRICTIONS:
<PAGE> 2
The Award Shares shall be nontransferable and subject to forfeiture until
such shares vest on the annual anniversary of the Award Date set forth below
(hereinafter referred to as the "restriction period"); provided, however, that
in order for such shares to vest, the Award Recipient shall have been in the
continuous employ of the Company or an Affiliate from the Award Date through the
specified anniversary of such Award Date:
Annual Anniversary of Award Date Percent of Award Shares Vested
- -------------------------------- ------------------------------
Sixth Anniversary 100%
Upon the vesting of Award Shares by virtue of the lapse of the restriction
period set forth above or under Paragraph 5 of this Agreement, the Company shall
deliver to the Award Recipient (or his estate, as may be applicable) a stock
certificate covering the requisite number of vested shares registered on the
Company's books in the name of the Award Recipient within 30 days after vesting.
Any such stock certificate shall not include vested fractional shares. Upon
receipt of such stock certificate, the Common Stock shall continue, to the
extent provided herein, to be subject to the Company's call rights and right of
first refusal as provided in Paragraphs 6 and 7 of this Agreement, as well as
any applicable securities laws or regulations governing transferability of
shares of the Company.
During the restriction period, the Award Shares not already vested are not
transferable by the Award Recipient by means of sale, assignment, exchange,
pledge, hypothecation, or otherwise (other than by will or the laws of descent
and distribution).
4. STOCK CERTIFICATES:
The stock certificate(s) evidencing the Award Shares shall be registered
on the Company's books in the name of the Award Recipient as of the Award Date.
Physical possession or custody of such stock certificate(s) shall be retained by
the Company until such time as the shares are vested (i.e., the restriction
period lapses). While in its possession, the Company reserves the right to place
a legend on the stock certificate(s) restricting the transferability of such
certificate(s) and referring to the terms and conditions (including forfeiture)
approved by the Board and applicable to the shares represented by the
certificate(s). The Award Recipient shall deliver to the Company a stock power,
endorsed in blank, with respect to the Award Shares to be held by the Company
during the restriction period.
During the restriction period, except as otherwise provided in Paragraph 3
of this Agreement, the Award Recipient shall have the rights of a stockholder,
including
2
<PAGE> 3
the rights to receive dividends and/or other distributions declared on the Award
Shares; provided, however, the Award Recipient must assign voting rights to the
Company during such restriction period. The Award Recipient shall deliver to the
Company an irrevocable proxy with respect to the Award Shares to be held by the
Company during the restriction period.
5. ACCELERATION OF VESTING:
Unless the Award Shares have been earlier forfeited pursuant to the
provisions of this Agreement, the vesting of the Award Shares granted hereunder
shall be accelerated so that the Award Recipient shall become one hundred
percent (100%) vested in the Award Shares upon the earlier to occur of: (i) the
Award Recipient's termination of employment with the Company or an Affiliate on
account of death, disability (as defined in the Company's long term disability
plan) or normal retirement at age 65 or otherwise pursuant to the Company's
policy, (ii) the Award Recipient's involuntary termination of employment with
the Company or an Affiliate during the ninety (90)-day period immediately
following the date the Company merges with another entity, (iii) the Award
Recipient's voluntary termination of employment with the Company or an Affiliate
at any time after the expiration of the one (1) year period immediately
following the date the Company merges with another entity, or (iv) a Change of
Control, as defined in the Plan.
If the Award Recipient's employment with the Company or an Affiliate
terminates for any other reason during the restriction period, the Award Shares
shall be forfeited (subject to acceleration of vesting by the Board in its sole
and absolute discretion). The Board shall have absolute discretion to determine
whether an authorized leave of absence or absence on military or government
service or otherwise shall constitute a termination of employment for purposes
of this Agreement.
6. COMPANY'S CALL RIGHTS:
So long as the Common Stock is not publicly traded, the Company shall have
the right to purchase, and the Award Recipient shall have the corresponding
obligation to sell, upon delivery of written notice to the Award Recipient, any
or all of the Award Recipient's shares of Common Stock then owned by the Award
Recipient, whether or not vested, ownership of which shares was acquired
pursuant to this Agreement. The purchase price of shares of Common Stock
pursuant to this Paragraph 6 of the Agreement shall be the Fair Market Value of
such shares of Common Stock as of the date the Company mails or otherwise
delivers such written notice to the Award Recipient.
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<PAGE> 4
The provisions of this Paragraph 6 of the Agreement shall apply in the
event of the Award Recipient's death, to the Award Recipient's executor,
personal representative or the person to whom the Award Shares shall have been
transferred by will or the laws of descent and distribution, as though such
person is the Award Recipient.
7. COMPANY'S RIGHT OF FIRST REFUSAL:
So long as the Common Stock is not publicly traded, the Award Shares
issued hereunder shall be subject to a right of first refusal pursuant to the
terms and conditions set forth in the Plan.
8. WITHHOLDING TAXES:
The Company or any Affiliate shall have the right to deduct from any
compensation or any other payment of any kind (including withholding the
issuance of shares of Common Stock) due the Award Recipient the amount of any
federal, state or local taxes required by law to be withheld as a result of the
grant of the restricted stock award or the lapse of the restriction period in
whole or in part; provided, however, that the value of the shares of Common
Stock withheld may not exceed the statutory minimum withholding amount required
by law. In lieu of such deduction, the Company may require the Award Recipient
to make a cash payment to the Company or an Affiliate equal to the amount
required to be withheld. If the Award Recipient does not make such payment when
requested, the Company may refuse to issue any Common Stock certificate under
this Agreement until arrangements satisfactory to the Board for such payment
have been made.
9. ADMINISTRATION:
The Board shall have full authority and discretion (subject only to the
express provisions of the Plan) to decide all matters relating to the
administration, interpretation and implementation of the Plan and this
Agreement. All such Board determinations shall be final, conclusive, and binding
upon the Company, the Award Recipient, and any and all interested parties.
10. NO RIGHT TO CONTINUED EMPLOYMENT:
Nothing in the Plan or this Agreement shall be construed as a contract of
employment between the Company (or an Affiliate) and the Award Recipient, or as
a contractual right of the Award Recipient to continued employment with the
Company
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<PAGE> 5
or an Affiliate, or as a limitation of the right of the Company or an Affiliate
to terminate the Award Recipient's employment at any time.
11. AMENDMENTS:
This Agreement contains the entire agreement between the parties with
respect to the subject matter contained herein and may not be modified, except
as provided in the Plan or in a written document signed by each of the parties
hereto.
12. FORCE AND EFFECT:
This Agreement is intended to conform in all respects with, and is subject
to all applicable provisions of, the Plan, which is incorporated herein by
reference. Inconsistencies between the Agreement and the Plan shall be resolved
in accordance with the terms of the Plan. In the event of any ambiguity in the
Agreement or any matters as to which the Agreement is silent, the Plan shall
govern.
13. PREVAILING LAWS:
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the conflict of
laws principles thereof.
14. SUCCESSORS:
This Agreement shall be binding upon and inure to the benefit of the
successors, assigns and heirs of the respective parties.
15. REPRESENTATIONS AND WARRANTIES OF AWARD RECIPIENT:
The Award Recipient (the "Undersigned") hereby represents and warrants to,
and agrees with, the Company, as follows:
(a) The Undersigned is acquiring the Award Shares and the Common Stock
which may be issued by virtue of the lapse of the restrictions set forth herein
(collectively, the "Shares") for the Undersigned's own account, for investment
purposes only, not for the account of any other person, and not with a view to
the distribution, assignment or resale of the Shares to others or to
fractionalization in whole or in part. The Undersigned has been advised that the
Shares have not been registered under the Securities Act of 1933, as amended
(the "Act"), or under the securities laws of any state, on the ground that no
distribution or public offering of the
5
<PAGE> 6
Shares is to be effected, and that in this connection, the Company is relying on
the Undersigned's representations and agreements contained in this Agreement.
(b) The Undersigned understands that the Undersigned must bear the
economic risk of an investment in the Shares for an indefinite period of time
because the Shares have not been registered under the Act or under any
applicable state securities laws. In addition to the other restrictions on
transfer set forth herein, the Undersigned agrees that the Undersigned will not
offer, sell, pledge or otherwise dispose of the Shares except pursuant to (i) an
effective registration statement under the Act and qualification under
applicable state securities laws, or (ii) pursuant to an exemption from the
registration requirements of the Act and applicable state securities laws.
(c) The Undersigned understands that (i) the Shares are "restricted
securities" as defined in Rule 144 under the Act; (ii) the provisions of Rule
144 are not presently available to permit resales of the Shares, and it is
unlikely that the conditions necessary to permit sales under Rule 144 will ever
be satisfied; (iii) even if Rule 144 should become available, routine sales made
in reliance upon its provisions could be made only in limited amounts and in
accordance with the terms of Rule 144; and (iv) the Company is under no
obligation to register the Shares in a public offering or to comply with the
conditions of Rule 144 or to take any other action necessary in order to make an
exemption for the sale of the Shares without registration available.
(d) The Undersigned understands and acknowledges that legal counsel for
the Company does not represent the Undersigned in connection with the
transactions contemplated in this Agreement. The Undersigned has carefully
considered and to the extent the Undersigned believes such discussion necessary,
discussed with the Undersigned's professional legal, tax, accounting and
financial advisers, the suitability of an investment in the Company for the
Undersigned's particular tax and financial situation. The Undersigned has
determined that the Shares being acquired by the Undersigned are a suitable
investment for the Undersigned.
(e) The Undersigned has been given the opportunity to ask questions of,
and receive answers from, the executive officers of the Company regarding the
terms and conditions of the offering of the Shares and the Company. The
Undersigned has been furnished with and has carefully reviewed the following
documents concerning the Company: (i) the Plan, (ii) the Amended and Restated
Certificate of Incorporation of the Company, including the Certificates of
Designation of the Class A Preferred Stock, Class B Preferred Stock, Class C
Preferred Stock and Class D Preferred Stock, (iii) the First Restated and
Amended Bylaws of the Company, (iv) audited financial statements of the Company
for the period ended December 31, 1996, (v) Company-prepared
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<PAGE> 7
balance sheet and income statement, for the period ended June 30, 1997, and (vi)
this Agreement and all documents delivered pursuant hereto, including the
Irrevocable Proxy, Stock Power, Section 83(b) Election Form and Letter from the
Company concerning the Section 83(b) election. In addition, the executive
officers of the Company have made available to the Undersigned all other
documents and information that the Undersigned has requested relating to an
investment in the Company.
(f) The Undersigned has adequate means of providing for his current needs
and possible personal or family contingencies, and has no need for liquidity in
his investment in the Shares. The Undersigned is financially able to bear the
economic risk of this investment, and consequently, the Undersigned is able to
hold the Shares for an indefinite period of time. The Undersigned understands
that he may loose his entire investment in the Shares and the Undersigned has a
sufficient net worth to bear the loss of the entire investment in the Shares in
the event such loss should occur.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer, and the Award Recipient has hereunto set his
hand on this ___ day of ____________, 1998.
ANKER COAL GROUP, INC.
By:______________________________________
Title:___________________________________
_________________________________________
Award Recipient
7
<PAGE> 1
Exhibit 10.8
ANKER COAL GROUP, INC.
1997 OMNIBUS STOCK INCENTIVE PLAN
STOCK OPTION GRANT AGREEMENT
This Grant Agreement (the "Agreement") is entered into this ____ day of
______________, 199___, to be effective _____________, 19___ (the "Grant Date"),
by and between Anker Coal Group, Inc., a Delaware corporation (the "Company"),
and ____________________________________ ("Grantee").
Grantee and the Company agree that the grant of options hereunder and the
purchase and sale of Stock upon exercise thereof are intended to comply with the
exemption from registration provided by Rule 701 of the Securities Act of 1933
and each shall use his or its best efforts to comply with Rule 701.
Unless otherwise defined herein, capitalized terms used in this Agreement
shall have the meanings given to them in the Plan.
ARTICLE 1
GRANT OF OPTION
Section 1.1 Grant of Options. Subject to the provisions of this Agreement
and pursuant to the provisions of the Plan, the Company hereby grants to Grantee
as of the Grant Date a Non-Qualified Stock Option (the "Option") to purchase all
or any part of _______ shares of voting common stock of the Company (the
"Stock") at an exercise price of $______ per share (the "Exercise Price"), which
is equal to the Fair Market Value of the Stock on the Grant Date.
Section 1.2 Term of Options. Unless the Option granted pursuant to Section
1.1 hereof terminates earlier pursuant to other provisions of the Agreement or
the Plan, the Option shall expire at 5:00 p.m. Eastern Time on the day prior to
the tenth (10th) anniversary of its Grant Date.
ARTICLE 2
VESTING
Section 2.1 Vesting Schedule. Unless the Option has earlier terminated
pursuant to the provisions of the Agreement or the Plan, Grantee shall become
vested in the underlying shares of Stock exercisable under the Option in
accordance with the schedule below, provided, however, that Grantee shall have
been in the continuous employ of the Company or an Affiliate from the Grant Date
through the specified anniversary of such Grant Date:
<PAGE> 2
Anniversary of Grant Date Percentage Vested
------------------------- -----------------
Third 100%
Section 2.2 Acceleration of Vesting. Unless the Option has earlier
terminated pursuant to the provisions of the Agreement, vesting of the Option
granted hereunder shall be accelerated so that the Grantee shall become one
hundred percent (100%) vested in the unvested portion of the Option upon the
earlier to occur of: (i) Grantee's termination of employment with the Company or
an Affiliate on account of death, disability (as defined in the Company's long
term disability plan) or normal retirement at age 65 or otherwise pursuant to
the Company's policy, (ii) Grantee's involuntary termination of employment with
the Company or an Affiliate during the ninety (90)-day period immediately
following the date the Company merges with another entity, (iii) Grantee's
voluntary termination of employment at any time after the expiration of the one
(1) year period immediately following the date the Company merges with another
entity, or (iv) a Change of Control, as defined in the Plan.
ARTICLE 3
EXERCISE F OPTION
Section 3.1 Exercisability of Option. No portion of the Option granted to
Grantee shall be exercisable by Grantee prior to the time such portion of the
Option has vested.
Section 3.2 Manner of Exercise. The vested portion of the Option may be
exercised, in whole or in part, by delivering written notice to the Board in
accordance with Section 6.8 hereof in such form as the Board may require from
time to time and by delivering to the Board the Option Exercise Letter attached
as Exhibit A hereto, executed by Grantee. Such notice shall specify the number
of shares of Stock subject to the Option as to which the Option is being
exercised, and shall be accompanied by full payment of the Exercise Price of the
shares of Stock as to which the Option is being exercised. Payment of the
Exercise Price shall be made in cash (or cash equivalents acceptable to the
Board in the Board's discretion). In the Board's sole and absolute discretion,
the Board may authorize payment of the Exercise Price to be made, in whole or in
part, by such other means as the Board may prescribe. The Option may be
exercised only in multiples of whole shares and no partial shares shall be
issued.
Section 3.3 Issuance of Shares upon Exercise. Upon exercise of the Option,
in whole or in part, in accordance with the terms of the Agreement and upon
payment of the Exercise Price for the shares of Stock as to which the Option is
exercised, the Company shall issue to Grantee the number of shares of Stock so
paid for, in the form of fully paid and nonassessable Stock. The stock
certificates for any shares of Stock issued hereunder shall, unless such shares
are registered or an exemption from registration is available under applicable
federal and state law, bear a legend restricting transferability of such shares.
2
<PAGE> 3
ARTICLE 4
TERMINATION OF OPTION
Section 4.1 Termination of Employment for Reason Other Than Death,
Disability or Retirement. Unless the Option has earlier terminated pursuant to
the provisions of the Agreement, the Option granted to Grantee shall terminate
in its entirety, regardless of whether the Option is vested in whole or in part,
three (3) months after the date Grantee is no longer employed by the Company or
an Affiliate for any reason other than Grantee's death, disability or
retirement.
Notwithstanding the foregoing, the Option granted to Grantee shall
terminate in its entirety, regardless of whether the Option is vested in whole
or in part, upon termination of Grantee's employment by the Company or an
Affiliate for "cause", as defined hereinafter. For purposes of this Section 4.1,
"Cause" means the termination of Grantee's employment by the Company or an
Affiliate because of (i) a felony conviction; (ii) the commission of an act of
fraud or embezzlement against the Company or an Affiliate; (iii) willful
misconduct which is materially detrimental to the Company or an Affiliate; (iv)
continued failure to implement reasonable requests or directions arising from
actions of the Board after thirty (30) days written notice to Grantee; (v)
wrongful dissemination of confidential or proprietary information; or (vi) the
intentional and habitual neglect by Grantee of his or her duties to the Company
or an Affiliate. The good faith determination by the Board of whether Grantee's
employment or other service relationship was terminated by the Company for
"cause" shall be final and binding for all purposes hereunder.
Section 4.2 Upon Grantee's Death or Disability. Unless the Option has
earlier terminated pursuant to the provisions of the Agreement, upon Grantee's
death or disability, Grantee or Grantee's executor, personal representative, the
person to whom the Option shall have been transferred by will or the laws of
descent and distribution, or such other permitted transferee, as the case may
be, may exercise all or any part of the outstanding Option, provided such
exercise occurs within one (1) year after the date of Grantee's death or
disability, as the case may be, but not later than the end of the stated term of
the Option.
Section 4.3 Termination of Employment by Reason of Retirement. Unless the
Option has earlier terminated pursuant to the provisions of the Agreement, in
the event Grantee ceases, by reason of retirement, to be an employee of the
Company or an Affiliate, all or any part of the outstanding Option may be
exercised any time within six (6) months after the date of retirement, but not
later than the stated term of the Option. For purposes of this Agreement,
retirement shall mean retirement from active employment with the Company or an
Affiliate pursuant to the normal or early retirement policies and procedures of
the Company or an Affiliate.
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<PAGE> 4
ARTICLE 5
COMPANY'S CALL RIGHTS AND RIGHT OF FIRST REFUSAL
Section 5.1 Call Rights of Company. So long as the Stock is not publicly
traded, the Company shall have the right to purchase, and Grantee shall have the
corresponding obligation to sell, upon delivery of written notice to Grantee,
any or all of Grantee's Options and any or all of the shares of Stock then owned
by Grantee, ownership of which shares was acquired through exercise of the
Option. The purchase price of shares of Stock pursuant to this Section 5.1 shall
be the Fair Market Value of such shares of Stock as of the date the Company
mails or otherwise delivers such written notice to Grantee. The purchase price
of any Options pursuant to this Section 5.1 shall be the difference between the
Exercise Price per share and the Fair Market Value of one share of Stock,
measured as of the date the Company mails or otherwise delivers such written
notice to Grantee, multiplied by the number of shares to which the Option
relates that are being purchased.
The provisions of this Section 5.1 shall apply in the event of
Grantee's death, to Grantee's executor, personal representative or the person to
whom the Option and/or shares of Stock shall have been transferred by will or
the laws of descent and distribution, as though such person is Grantee.
Section 5.2 Company's Right of First Refusal. So long as the Stock is not
publicly traded, the Stock issued upon exercise of the Option shall be subject
to a right of first refusal pursuant to which Grantee shall be required to
provide written notice to the Company of Grantee's intention to dispose of all
or any portion of such Stock. The written notice shall contain information
regarding the identity of the proposed purchaser or purchasers (the "Proposed
Purchaser(s)"), the number of shares of Stock subject to the proposed
transaction, the proposed price and terms of sale and the proposed closing date
of such sale.
For a period of thirty (30) days after the receipt by the Company of
the written notice specified above, the Company shall have a right of first
refusal to purchase the Stock subject to the proposed disposition at the price
and on the terms offered by the Proposed Purchaser(s). The Company must exercise
its right to purchase by giving written notice to the Grantee and to the
Proposed Purchaser(s) within thirty (30) days following receipt of the notice,
which notice shall specify the number of shares of Stock the Company intends to
purchase.
The closing of the purchase and sale pursuant to this Section 5.2
shall be held at the Company's principal office on the date determined by the
Company but not more than thirty (30) days following the Company's election to
purchase the Stock. At the closing, certificates representing the shares to be
sold shall be delivered to the Company, duly endorsed for transfer in blank or
with assignments separate from certificates duly endorsed, with all necessary
transfer tax stamps, if any, affixed or provided for against delivery of the
purchase price.
If the Company does not exercise its purchase rights within the time
period provided herein with respect to all of the offered Stock, Grantee shall
be free for a period of thirty (30) days thereafter to sell such shares to the
Proposed Purchaser(s), at the same price and on the same terms and conditions as
set forth in the notice, subject to all of the provisions of this Section 5.2.
If Grantee shall not, within such thirty (30) day period, consummate the sale
with the Proposed
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<PAGE> 5
Purchaser(s) in accordance with the terms of this Section 5.2, any subsequent
sale by Grantee to the Proposed Purchaser(s) or to any other purchaser on the
same or other terms and conditions must comply again with the provisions of this
Section 5.2.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Non-Guarantee of Employment. Nothing in the Plan or the
Agreement shall be construed as a contract of employment between the Company (or
an Affiliate) and Grantee, or as a contractual right of Grantee to continued
employment with the Company or an Affiliate, or as a limitation of the right of
the Company or an Affiliate to terminate Grantee's employment at any time.
Section 6.2 No Rights of Stockholder. Grantee shall not have any of the
rights of a stockholder with respect to the shares of Stock that may be issued
upon the exercise of the Option until such shares of Stock have been issued to
him upon the due exercise of the Option.
Section 6.3 Withholding of Taxes. The Company or any Affiliate shall have
the right to deduct from any compensation or any other payment of any kind
(including withholding the issuance of shares of Stock) due Grantee the amount
of any federal, state or local taxes required by law to be withheld as the
result of the exercise of the Option; provided, however, that the value of the
shares of Stock withheld may not exceed the statutory minimum withholding amount
required by law. In lieu of such deduction, the Board may require Grantee to
make a cash payment to the Company or an Affiliate equal to the amount required
to be withheld. If Grantee does not make such payment when requested, the
Company may refuse to issue any Stock certificate under the Plan until
arrangements satisfactory to the Board for such payment have been made.
Section 6.4 Nontransferability of Option. The Option shall be
nontransferable otherwise than by will or the laws of descent and distribution,
and during the lifetime of Grantee, the Option may be exercised only by Grantee
or, during the period Grantee is under a legal disability, by Grantee's guardian
or legal representative.
Section 6.5 Agreement Subject to Charter, By-Laws and Governing Laws. This
Agreement is subject to the Charter and By-Laws of the Company, and any
applicable Federal or state laws, rules or regulations, including without
limitation, the laws, rules, and regulations of the State of Delaware, other
than the conflict of laws principles thereof.
Section 6.6 Gender. As used herein the masculine shall include the
feminine as the circumstances may require.
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<PAGE> 6
Section 6.7 Headings. The headings in the Agreement are for reference
purposes only and shall not affect the meaning or interpretation of the
Agreement.
Section 6.8 Notices. All notices and other communications made or given
pursuant to the Agreement shall be in writing and shall be sufficiently made or
given if hand delivered or mailed by certified mail, addressed to Grantee at the
address contained in the records of the Company, or addressed to the Board, care
of the Company for the attention of its Secretary at its principal office or, if
the receiving party consents in advance, transmitted and received via telecopy
or via such other electronic transmission mechanism as may be available to the
parties.
Section 6.9 Entire Agreement; Modification. The Agreement contains the
entire agreement between the parties with respect to the subject matter
contained herein and may not be modified, except as provided in the Plan or in a
written document signed by each of the parties hereto.
Section 6.10 Conformity with Plan. This Agreement is intended to conform
in all respects with, and is subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Unless stated otherwise herein,
capitalized terms in this Agreement shall have the same meaning as defined in
the Plan. Inconsistencies between this Agreement and the Plan shall be resolved
in accordance with the terms of the Plan. In the event of any ambiguity in the
Agreement or any matters as to which the Agreement is silent, the Plan shall
govern.
Section 6.11 Governing Law. The validity, construction and effect of this
Agreement shall be determined exclusively in accordance with the laws of the
State of Delaware, without regard to its conflict of laws rules and principles.
IN WITNESS WHEREOF, the parties have executed the Agreement as of the date
first above written.
ATTEST: ANKER COAL GROUP, INC.
_____________________________ By: ______________________________
WITNESS: GRANTEE
_____________________________ __________________________________
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<PAGE> 7
EXHIBIT A
OPTION EXERCISE LETTER
To: Anker Coal Group, Inc.
Pursuant to the provisions of the Stock Option Grant Agreement (the
"Agreement"), the undersigned Grantee (the "Undersigned") hereby exercises the
option to purchase _____________________________ shares of the Common Stock (the
"Shares") of Anker Coal Group, Inc. (the "Company") and delivers to the Company
herewith the sum of $_____________ (by certified or official bank check payable
to the order of the Company) in payment in full for those shares.
The Undersigned hereby represents and warrants to, and agrees with, the
Company, as follows:
(a) The Undersigned is acquiring the Shares for the Undersigned's own
account, for investment purposes only, not for the account of any other person,
and not with a view to the distribution, assignment or resale of the Shares to
others or to fractionalization in whole or in part. The Undersigned has been
advised that the Shares have not been registered under the Securities Act of
1933, as amended (the "Act"), or under the securities laws of any state, on the
ground that no distribution or public offering of the Shares is to be effected,
and that in this connection, the Company is relying on the Undersigned's
representations and agreements contained in the Agreement.
(b) The Undersigned understands that the Undersigned must bear the
economic risk of an investment in the Shares for an indefinite period of time
because the Shares have not been registered under the Act or under any
applicable state securities laws. In addition to the other restrictions on
transfer set forth in the Agreement, the Undersigned agrees that the Undersigned
will not offer, sell, pledge or otherwise dispose of the Shares except pursuant
to (i) an effective registration statement under the Act and qualification under
applicable state securities laws, or (ii) pursuant to an exemption from the
registration requirements of the Act and applicable state securities laws.
(c) The Undersigned understands that (i) the Shares are "restricted
securities" as defined in Rule 144 under the Act; (ii) the provisions of Rule
144 are not presently available to permit resales of the Shares, and it is
unlikely that the conditions necessary to permit sales under Rule 144 will ever
be satisfied; (iii) even if Rule 144 should become available, routine sales made
in reliance upon its provisions could be made only in limited amounts and in
accordance with the terms of Rule 144; and (iv) the Company is under no
obligation to register the Shares in a public offering or to comply with the
conditions of Rule 144 or to take any other action necessary in order to make an
exemption for the sale of the Shares without registration available.
(d) The Undersigned understands and acknowledges that legal counsel for
the Company does not represent the Undersigned in connection with the
transactions contemplated in the Agreement. The Undersigned has carefully
considered and to the extent the Undersigned believes such discussion necessary,
discussed with the Undersigned's professional legal, tax, accounting and
financial advisers,
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<PAGE> 8
the suitability of an investment in the Company for the Undersigned's particular
tax and financial situation. The Undersigned has determined that the Shares
being acquired by the Undersigned are a suitable investment for the Undersigned.
(e) The Undersigned has been given the opportunity to ask questions of,
and receive answers from, the executive officers of the Company regarding the
terms and conditions of the offering of the Shares and the Company. The
Undersigned has been furnished with and has carefully reviewed the following
documents concerning the Company: (i) the Company's 1997 Omnibus Stock Incentive
Plan, (ii) the Amended and Restated Certificate of Incorporation of the Company,
including the Certificates of Designation of the Class A Preferred Stock, Class
B Preferred Stock, Class C Preferred Stock and Class D Preferred Stock, (iii)
the First Restated and Amended Bylaws of the Company, (iv) Financial Statements
of the Company for the period ended _________________, and (v) the Stock Option
Grant Agreement and all documents delivered pursuant hereto. In addition, the
executive officers of the Company have made available to the Undersigned all
other documents and information that the Undersigned has requested relating to
an investment in the Company.
(f) The Undersigned has adequate means of providing for his current needs
and possible personal or family contingencies, and has no need for liquidity in
his investment in the Shares. The Undersigned is financially able to bear the
economic risk of this investment, and consequently, the Undersigned is able to
hold the Shares for an indefinite period of time. The Undersigned understands
that he may loose his entire investment in the Shares and the Undersigned has a
sufficient net worth to bear the loss of the entire investment in the Shares in
the event such loss should occur.
Please forward a certificate or certificates for the Shares purchased
hereby at the address shown below.
Date: __________________ __________________________________
Holder
Address:
__________________________________
__________________________________
__________________________________
8
<PAGE> 1
Exhibit 10.9
ASSET PURCHASE AGREEMENT
February 20, 1997
Among
OAK MOUNTAIN ENERGY, L.L.C.
(Buyer)
OAK MOUNTAIN ENERGY CORPORATION
BOONE RESOURCES, INC.
KODIAK COAL, INC.
CAHABA COAL ENGINEERING AND LAND SURVEYING, INC.
COAL HANDLING AND PROCESSING, INC.
MOUNTAINEER MANAGEMENT, INC.
(Sellers)
JIMMIE R. RYAN
DUANE STRANAHAN, JR.
(Shareholders)
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND CONVENTIONS
1.01 Defined Terms................................................ 2
1.02 Conventions.................................................. 4
ARTICLE II
SALE AND TRANSFER OF ASSETS; CLOSING
2.01 Assets to be Acquired........................................ 4
2.02 Excluded Assets.............................................. 6
2.03 Purchase Price............................................... 6
2.04 Allocation of Purchase Price................................. 7
2.05 Assumed and Retained Liabilities............................. 7
2.06 Closing...................................................... 8
2.07 Deliveries at the Closing.................................... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS AND SHAREHOLDERS
3.01 Organization and Good Standing............................... 12
3.02 Authorization................................................ 12
3.03 No Violation................................................. 12
3.04 Capitalization; Ownership; Directors and Officers............ 13
3.05 No Subsidiaries.............................................. 13
3.06 No Options................................................... 13
3.07 Financial Statements......................................... 14
3.08 No Undisclosed Liabilities................................... 14
3.09 Absence of Changes........................................... 15
3.10 Condition and Sufficiency of Acquired Assets................. 16
3.11 Accounts Receivable; Bank Accounts........................... 16
3.12 Title to Acquired Assets; Liens.............................. 16
3.13 Contracts.................................................... 18
3.14 Permits and Licenses......................................... 19
3.15 Intangible and Intellectual Property......................... 20
3.16 Tax Matters.................................................. 20
3.17 Litigation................................................... 21
3.18 Insurance.................................................... 22
3.19 Environmental Matters........................................ 23
3.20 Employee Matters............................................. 26
3.21 Labor Matters................................................ 27
3.22 Workers' Compensation; Black Lung............................ 28
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<PAGE> 3
3.23 Compliance with Law.......................................... 28
3.24 Related Parties; Conflicts of Interest....................... 29
3.25 Mining and Geological Information............................ 29
3.26 Reclamation.................................................. 29
3.27 Brokers or Finders........................................... 30
3.28 Disclosure................................................... 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
4.01 Corporate Organization and Standing.......................... 30
4.02 Authorization................................................ 30
4.03 No Violation................................................. 31
4.04 Disclosure................................................... 31
4.05 Brokers and Finders.......................................... 31
4.06 Litigation................................................... 31
4.07 Financial Statements......................................... 31
ARTICLE V
COVENANTS BEFORE CLOSING
5.01 Covenants of the Sellers and the Shareholders Before the
Closing...................................................... 32
5.02 Covenants of the Buyer Before the Closing.................... 36
ARTICLE VI
OTHER COVENANTS
6.01 Property Taxes............................................... 37
6.02 Removal of Excluded Assets................................... 37
6.03 Existing Citations........................................... 37
6.04 Remedial Action.............................................. 37
6.05 Transfer of Permits.......................................... 38
6.06 Assigned Contracts........................................... 38
6.07 Accounts Receivable.......................................... 39
6.08 Sellers' Employees........................................... 39
6.09 Specific Performance......................................... 39
6.10 Expenses..................................................... 40
6.11 Public Announcements......................................... 41
6.12 Confidentiality; Return and Retention of Documents........... 41
6.13 Further Assurances........................................... 41
6.14 Covenant Not to Compete...................................... 41
6.15 Delivery of Promissory Notes................................. 42
6.16 Change of Name; Liquidation.................................. 42
6.17 Buyer's Financial Statements................................. 42
ii
<PAGE> 4
ARTICLE VII
CONDITIONS PRECEDENT TO THE
SELLERS' AND THE SHAREHOLDERS' PERFORMANCE
7.01 Performance of Agreements.................................... 43
7.02 Accuracy of Representations and Warranties................... 43
7.03 Absence of Litigation and Proceedings........................ 43
7.04 Hart Scott Rodino Act........................................ 43
7.05 Authority.................................................... 43
7.06 Deliveries................................................... 43
7.07 Additional Documents......................................... 43
7.08 Release of Liability......................................... 44
7.09 Documents Delivered.......................................... 44
7.10 Employment Agreements........................................ 44
ARTICLE VIII
CONDITIONS PRECEDENT TO THE BUYER'S PERFORMANCE
8.01 Performance of Agreements.................................... 44
8.02 Accuracy of Representations and Warranties................... 45
8.03 Permits...................................................... 45
8.04 Absence of Litigation and Proceedings........................ 45
8.05 Documents Delivered.......................................... 45
8.06 Material Adverse Changes..................................... 45
8.07 Authority.................................................... 45
8.08 No Prohibition............................................... 46
8.09 Due Diligence................................................ 46
8.10 Financing.................................................... 46
8.11 Hart Scott Rodino Act........................................ 46
8.12 Title Matters................................................ 46
8.13 Deliveries................................................... 47
8.14 Additional Documents......................................... 47
8.15 Employment Agreements........................................ 47
8.16 Title Due Diligence.......................................... 47
ARTICLE IX
TERMINATION
9.01 Termination Events........................................... 47
9.02 Effect of Termination........................................ 48
ARTICLE X
SURVIVAL; INDEMNIFICATION; REMEDIES
10.01 Survival..................................................... 49
10.02 Indemnification and Reimbursement by the Sellers............. 49
10.03 Indemnification and Reimbursement by the Buyer............... 49
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<PAGE> 5
10.04 Limitations.................................................. 50
10.05 Procedure for Indemnification C Third-Party Claims........... 52
10.06 Procedure for Indemnification C Other Claims................. 54
ARTICLE XI
GENERAL PROVISIONS
11.01 Entire Agreement; Amendment.................................. 54
11.02 Binding Effect and Benefit................................... 54
11.03 Assignment................................................... 54
11.04 Waiver....................................................... 54
11.05 Severability................................................. 55
11.06 Third Parties................................................ 55
11.07 Governing Law................................................ 55
11.08 Jurisdiction; Service of Process............................. 55
11.09 Notices...................................................... 55
11.10 Time of Essence.............................................. 56
11.11 Headings..................................................... 56
11.12 Counterparts................................................. 57
iv
<PAGE> 6
INDEX OF SCHEDULES
Schedule
Section
Reference Description
- --------- ----------------------------------------------------------------
1.01 Permitted Liens
2.01(a) The Owned Real Property
2.01(b) The Real Property Leases
2.01(c) The Real Property Contracts
2.01(d) The Tangible Personal Property
2.01(e) The Other Contracts
2.01(f) Inventories of Coal and Other Products or Goods
2.01(g) Accounts Receivable as of January 31, 1997
2.01(j) Intangible and Intellectual Property
2.01(k) Claims Relating to the Acquired Assets
2.01(m) Sellers' Bank Accounts
2.02 The Excluded Assets
2.03(d) Purchase Price Adjustment
2.04 Allocation of Purchase Price
2.05(a) The Assumed and Retained Liabilities
3.01 Dates of Incorporation for the Sellers
3.03 Consents and Approvals
3.04 Ownership and Management of Sellers
3.05 Sellers' Ownership and Interests in Other Entities
3.06 Obligations as to Sellers' Stock
v
<PAGE> 7
Schedule
Section
Reference Description
- --------- ----------------------------------------------------------------
3.07(A) Audited Financial Statements of the Sellers
3.07(B) The Sellers' Company Prepared Financial Statements as at December
31, 1996
3.07(C) Exceptions as to Preparation of Financial Statements
3.09 Material Changes
3.09(c) Increases in Compensation
3.12(a)(i) Exceptions as to Title to the Acquired Assets
3.12(a)(ii) Map of the Real Property and Real Property Interests
3.12(c)(i) Exceptions to the Real Property Leases and Real Property
Contracts
3.12(c)(ii) Defaults under the Real Property Leases and the Real
Property Contracts
3.12(d) Adverse Claims
3.12(e) Lease Defaults and Forfeitures
3.12(f) Additional Ancillary Rights
3.13 Defaults under Other Contracts
3.14(a) The Mining Permits
3.14(b) The Other Permits
3.14(c) Exceptions to the Required Permits
3.16 Pending Tax Proceedings
3.17(a) Litigation and Proceedings
vi
<PAGE> 8
Schedule
Section
Reference Description
- --------- ----------------------------------------------------------------
3.17(b) Notice of Proceedings
3.18(a) Insurance Policies and Bonds
3.18(b) Exceptions as to Insurance Matters
3.19(a) Exceptions as to Environmental Matters
3.19(b) Information on Hazardous Materials
3.20(a) Employee Benefit Programs
3.20(e) Employee Benefit Programs-Adverse Proceedings
3.20(f) Employment Contracts
3.23 Exceptions as to Compliance with Law
3.24 Related Parties and Conflicts of Interest
3.26 Exceptions as to Reclamation, Environmental and Related Work
4.03 Exceptions as to No Violations
4.07 Balance Sheet of Buyer
5.01(h)(iii) Estoppel Certificates to be Obtained
7.08 Releases for Sellers and Shareholders
vii
<PAGE> 9
INDEX OF EXHIBITS
Schedule
Section
Reference Description
- --------- ----------------------------------------------------------------
2.03(b) The Note
2.03(c) The Royalty Agreement
2.07(a)(i) Form of General Warranty Deed
2.07(a)(ii) Form of Bills of Sale
2.07(a)(iii) Form of Assignments for Leased Real Property
2.07(a)(iv) Form of Assignments for the Real Property Contracts, the Other
Contracts, the Permits and the Accounts Receivable
2.07(a)(ix) Form of Opinion-Counsel for Sellers
2.07(a)(xiii) The Ryan Employment Agreement
2.07(b)(v) Form of Opinion-Counsel for Buyer
6.15(A)&(B) Form of Promissory Notes for Shareholders
7.10(A) Form of Employment Agreement for Rodney Camp
7.10(B) Form of Employment Agreement for Terry Charcandy
i
<PAGE> 10
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), made and entered into
this 20th day of February, by and among OAK MOUNTAIN ENERGY, L.L.C., an Alabama
limited liability company (the "Buyer"); and OAK MOUNTAIN ENERGY CORPORATION, an
Alabama corporation ("Oak Mountain Energy"), BOONE RESOURCES, INC., an Alabama
corporation ("Boone"), KODIAK COAL, INC., an Alabama corporation ("Kodiak"),
CAHABA COAL ENGINEERING AND LAND SURVEYING, INC., an Alabama corporation
("Cahaba"), COAL HANDLING AND PROCESSING, INC., an Alabama corporation ("Coal
Handling"), and MOUNTAINEER MANAGEMENT, INC., an Alabama corporation
("Mountaineer") (Oak Mountain Energy, Boone, Kodiak, Cahaba, Coal Handling and
Mountaineer are hereinafter referred to as the "Sellers"); and JIMMIE R. RYAN,
an individual residing in Shelby County, Alabama ("Ryan"), and DUANE STRANAHAN,
JR., an individual residing in Collier County, Florida ("Stranahan") (Ryan and
Stranahan are hereinafter referred to as the "Shareholders").
WHEREAS, the Shareholders together own all of the issued and outstanding
shares of stock of Oak Mountain Energy, Boone, Cahaba and Coal Handling and own
a majority of the issued and outstanding shares of stock of Kodiak and
Mountaineer; and
WHEREAS, the Sellers are actively engaged as an integrated group in the
business of mining, processing, marketing, selling and distributing coal and
related activities in Shelby and Bibb Counties, Alabama; and
WHEREAS, the Shareholders and the Sellers desire to sell all or
substantially all of the assets of each of the Sellers to the Buyer; and
WHEREAS, following the closing of the transactions contemplated herein,
the Shareholders intend to (i) dissolve and liquidate each of the Sellers (other
than Oak Mountain Energy), (ii) cause the proceeds from the sale of assets
hereunder to be distributed to the shareholders of the Sellers (other than Oak
Mountain Energy), and (iii) cause Oak Mountain Energy to redeem its shares of
stock owned by Stranahan, after which Oak Mountain Energy will be wholly-owned
by Ryan and will not engage in any active business; and
WHEREAS, because of the substantial benefits to be received by the
Shareholders as a result of the transactions contemplated hereunder, including
the planned liquidations and redemption, and as an inducement to the Buyer to
acquire all or substantially all of the assets of the Sellers as contemplated
herein, the Shareholders have agreed to execute, deliver and perform this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements, covenants, representations, warranties and indemnities herein
contained, and other good and valuable
<PAGE> 11
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Buyer, the Sellers and the Shareholders agree as follows:
ARTICLE I
DEFINITIONS AND CONVENTIONS
1.01 Defined Terms. In addition to the terms defined throughout this
Agreement, the following capitalized terms as used in this Agreement shall have
the meanings given to them in this Section 1.01:
"Acquired Assets" shall have the meaning set forth in Section 2.01.
"Actual Knowledge" means present or prior knowledge of a fact or
other matter.
"Actual Knowledge of the Sellers" means the Actual Knowledge of
Ryan, Stranahan, Rodney Camp, Terry Charcandy, Kareina F. Farley-Miller, Michael
A. Ryan, Christopher T. Ryan, Leslie Stephens, Lee M. Pearson or James M.
Brooks.
"Affiliate" means, with respect to any natural person, corporation,
partnership, limited liability company or other entity, a natural person or
entity that directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, such person or
entity.
"Assets" means all of the Sellers' properties and assets, real,
personal, or mixed, tangible and intangible, of every kind, nature and
description, wherever located, including the Acquired Assets and the Excluded
Assets.
"Business" means the use and operation of the Assets by the Sellers.
"Closing" means the consummation of the transactions contemplated in
this Agreement, including the sale and transfer of the Acquired Assets and the
delivery of the Purchase Price.
"Closing Date" means the date on which the Closing takes place.
"Contract" means any agreement, obligation, promise, commitment,
understanding or other arrangement (whether written or oral and whether express
or implied) that is legally binding.
"Excluded Assets" shall have the meaning set forth in Section 2.02.
2
<PAGE> 12
"Governmental Authority" means any federal, state, local or
municipal government, governmental or quasi-governmental authority, agency or
body exercising, or purporting to exercise, any administrative, executive,
judicial, investigative, legislative, policy, regulatory, taxing or other power
or authority of any nature.
"Knowledge" means (i) Actual Knowledge or (ii) knowledge of a fact
or other matter that should have been known by the party if the party had acted
in a manner reasonable for a person in his or her position.
"Knowledge of the Buyer" means the Knowledge of John J. Faltis,
Bruce Sparks or James A. Walls.
"Knowledge of the Sellers" means the Knowledge of Ryan, Stranahan,
Rodney Camp, Terry Charcandy, Kareina F. Farley-Miller, Michael A. Ryan,
Christopher T. Ryan, Leslie Stephens, Lee M. Pearson or James M. Brooks.
"Legal Requirement" means any federal, state, local or municipal
constitution, law, ordinance, regulation, rule or statute (including any of the
foregoing which have been enacted or adopted but are not yet effective).
"Lien" means any pledge, security interest, lien, mortgage, deed of
trust, hypothecation, charge, restriction, reservation, right, claim or other
encumbrance, whether consensual, statutory or otherwise, of any kind, nature or
description whatsoever other than Permitted Liens.
"Material Adverse Effect" means anything which directly or
indirectly generates, precipitates, initiates, causes, gives rise to or results
in any liability, obligation, settlement, loss, damage, expense or diminution in
value in excess of $25,000.
"Order" means any order, agreed order, injunction, judgment, decree,
ruling, assessment, arbitration award or arbitration decision.
"Permitted Liens" means materialmen's and similar statutory liens
arising in the ordinary course of business, purchase money security interests
arising in the ordinary course of business, and the other liens identified on
Schedule 1.01.
"Proceeding" means action, arbitration, hearing, investigation,
litigation or suit (whether civil, criminal, administrative or investigative,
formal or informal).
"Purchase Price" shall have the meaning set forth in Section 2.03.
3
<PAGE> 13
1.02 Conventions.
Unless otherwise indicated:
(a) The word "including" followed by a listing does not limit the
preceding words or terms and shall mean "including, without limitation."
(b) The word "Sellers", and any pronoun used to refer thereto, shall
mean all of the Sellers, any combination of the Sellers, and each Seller
individually.
(c) The word "Shareholders", and any pronoun used to refer thereto,
shall mean both of the Shareholders and each Shareholder individually.
(d) The phrase "the Sellers and the Shareholders" shall mean all of
the Sellers and the Shareholders, any combination of the Sellers and the
Shareholders, each Seller individually and each Shareholder individually.
ARTICLE II
SALE AND TRANSFER OF ASSETS; CLOSING
2.01 Assets to be Acquired. Subject to and upon the terms, conditions,
representations, warranties, covenants and indemnities made herein, at the
Closing, the Sellers shall sell, grant, convey, assign, transfer and deliver to
the Buyer, and the Buyer shall purchase, acquire and accept from the Sellers,
all of the Sellers' right, title and interest in and to all of their properties
and assets, real, personal, or mixed, tangible and intangible, of every kind,
nature and description, wherever located, belonging to the Sellers on the
Closing Date, other than the Excluded Assets (all of which are hereinafter
collectively referred to as the "Acquired Assets"), including the following:
(a) all right, title and interest in and to any real property,
including coal, oil, gas and other minerals, if any, owned by the Sellers and
identified on Schedule 2.01(a), together with all improvements thereon and
appurtenances thereunto belonging (the "Owned Real Property");
(b) all of the Sellers' interests in and rights to real property,
including coal, oil, gas and other minerals, if any, in and under the leases and
subleases, including all amendments, modifications, extensions and renewals
thereof (the "Real Property Leases") identified on Schedule 2.01(b) (the real
property, including coal, oil, gas and other mineral, if any, subject to the
Real Property Leases is hereinafter referred to as the "Leased Real Property");
4
<PAGE> 14
(c) all of the Sellers' interests in and rights to and under all
Contracts incident to the Owned Real Property or the Leased Real Property
(including rights-of-way, easements, reversionary rights and licenses related
thereto) identified on Schedule 2.01(c) (the "Real Property Contracts");
(d) all of the buildings, structures, mine structures, improvements,
fixtures, trade fixtures, plants, preparation plants, facilities, coal loading
and handling facilities, equipment, mining equipment, vehicles, machinery,
furniture, supplies, materials, tools, spare parts, laboratory equipment,
computer hardware, and other tangible property of the Sellers, whether owned or
leased by the Sellers, identified on Schedule 2.01(d) (the "Tangible Personal
Property");
(e) all of the Sellers' interest in and rights to and under all
Contracts (other than the Real Property Contracts and the Real Property Leases)
identified on Schedule 2.01(e) (the "Other Contracts") and, if requested by the
Buyer at least ten days prior to the Closing, to the extent assignable, any or
all of the insurance policies identified as items 2, 5 and 6 on Schedule
3.20(a);
(f) all inventories of coal (in stockpiles or otherwise) and other
products or goods held for sale by the Sellers, wherever located (the
"Inventories") (Schedule 2.01(f) identifies all Inventories as of January 31,
1997);
(g) all accounts receivable and other rights to receive payments
from customers of the Sellers, and the full benefit of all security for such
accounts receivable (the "Accounts Receivables"), as of the Closing Date
(Schedule 2.01(g) identifies all Accounts Receivable as of January 31, 1997);
(h) to the extent transferrable to the Buyer, all permits, licenses,
bonds, orders, approvals and other authorizations of any Governmental Authority
owned, held or used by the Sellers in connection with the Acquired Assets or the
Business, and all pending applications therefor and pending renewals thereof;
(i) all operating, mining and reserve data and records of the
Sellers, wherever located, and whether or not kept in tangible, electronic or
other format, including all engineering, reserve, geological, mining, core hole,
lithologic, washability, feasibility and similar data, surveys, maps, drawings,
measurements, reports, plans, analyses, customer lists and records, research and
development reports and records, production reports and records, equipment logs,
operating guides and manuals, copies of financial and accounting records,
correspondence and other similar documents and records;
5
<PAGE> 15
(j) all of the intangible and intellectual property of the Sellers,
including all software, products, trade secrets, know-how processes, methods,
plans, research data, marketing plans and strategies, forecasts, trademarks,
service marks, trade names, patents and patent rights, logos and copyrights
identified on Schedule 2.01(j);
(k) all claims of the Sellers against third parties relating to the
Acquired Assets, whether choate or inchoate, known or unknown, contingent or
otherwise, identified on Schedule 2.01(k);
(l) all insurance claims (including applicable deductibles,
copayments or self-insured requirements) arising in connection with damage to
the Acquired Assets occurring prior to the Closing Date, to the extent not
expended for the repair or restoration of the Acquired Assets;
(m) all cash and cash equivalents of the Sellers, and all of the
bank accounts used by the Sellers for the Business identified on Schedule
2.01(m); and
(n) the going concern value and goodwill of the Sellers and the
Business.
2.02 Excluded Assets. Notwithstanding anything contained in Section 2.01
or elsewhere in this Agreement, the properties, assets and items identified on
Schedule 2.02 (collectively, the "Excluded Assets") are not part of the sale and
purchase contemplated hereunder, are excluded from the Acquired Assets to be
transferred to the Buyer hereunder, and shall remain the property of the Sellers
after the Closing. The Excluded Assets shall also include any other assets which
Buyer designates as Excluded Assets in writing to the Sellers and the
Shareholders at least five (5) days prior to the Closing. The Purchase Price
shall not be changed by the Buyer's designation of additional Excluded Assets.
2.03 Purchase Price. The total purchase price (the "Purchase Price") for
the Acquired Assets shall be:
(a) $13,000,000 in cash;
(b) $3,500,000 payable pursuant to a promissory note or notes
substantially similar in form to that attached hereto as Exhibit 2.03(b) (the
"Note");
(c) a royalty agreement between the Buyer and Oak Mountain Energy
substantially similar in form to that attached hereto as Exhibit 2.03(c) (the
"Royalty Agreement");
6
<PAGE> 16
(d) such sums determined and payable solely in accordance with
Schedule 2.03(d); and
(e) such sums, up to a maximum of $1,650,000, to allow the Sellers
(i) to pay all wages, salaries, bonuses, accrued vacation, vehicle lease
payments, bereavement pay, jury duty pay, sick leave pay, severance pay and
accrued holiday pay (including related payroll and withholding taxes) owing to
the Sellers' employees on the Closing Date and (ii) to make all payments on
behalf of the Sellers' employees to any pension, retirement, profit-sharing
plan, thrift-savings plan, or deferred compensation plan, if any.
2.04 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Sellers, and among the Acquired Assets and the covenant not to compete
set forth in Section 6.14, in accordance with the allocation set forth on
Schedule 2.04. After the Closing, the parties agree to make consistent use of
the allocation specified in Schedule 2.04 in any and all filings, declarations
and reports with the Internal Revenue Service in respect thereof, including the
reports required to be filed under Section 1060 of the Internal Revenue Code of
1986, as amended, if applicable, it being understood that the Buyer shall
prepare and deliver IRS Form 8594 to the Sellers within forty-five (45) days
after the Closing Date. The Sellers and the Shareholders agree to cooperate with
and assist the Buyer in finalizing and filing said Form.
2.05 Assumed and Retained Liabilities.
(a) From and after the Closing, subject to and based upon the
representations, warranties, covenants and indemnities contained herein and in
any agreement, instrument or document delivered hereunder, the Buyer shall
assume the liabilities and obligations identified on Schedule 2.05(a) (the
"Assumed Liabilities"). The Sellers and the Shareholders acknowledge and agree
that the assumption of liabilities by the Buyer under this Section 2.05(a) shall
not limit, restrict, impair or otherwise affect the right of the Buyer to rely
on the representations, warranties and covenants of the Sellers and the
Shareholders made in this Agreement and any agreement, instrument or document
delivered pursuant hereto or the right of the Buyer to seek indemnification from
the Sellers and the Shareholders in accordance with the provisions of Article X
of this Agreement. For example, if the Buyer pursuant to this Section 2.05(a)
assumes the liabilities related to "A," and there is a breach of a
representation, warranty or covenant of the Sellers and the Shareholders with
respect to "A," the Buyer shall be entitled to seek indemnification under
Article X of this Agreement notwithstanding the Buyer's assumption of the
liabilities related to "A."
7
<PAGE> 17
(b) Except for the liabilities and obligations specifically assumed
by the Buyer in accordance with Section 2.05(a), the Buyer does not assume or
agree to be responsible for, and shall not be deemed to assume or be responsible
for, any liability or obligation of the Sellers and the Shareholders of any
kind, nature or description, whether such liabilities or obligations relate to
payment, performance or otherwise, are matured or unmatured, known or unknown,
contingent or otherwise, fixed or absolute, present, future or otherwise,
including: (i) any liability or obligation arising from or relating to any of
the Excluded Assets; (ii) any liability or obligation relating to federal, state
or local income taxes of the Sellers and the Shareholders; (iii) the Prudential
Retirement Accumulation 401(k) Plan in the name of Boone Resources, Inc. and
also executed by Oak Mountain Energy Corporation; (iv) the legal proceeding
known as April Hendricks v. Beth Energy Mines, Inc., et al., (including Boone
Resources, Inc.), Employers, Claim No. 94-66086, pending before the West
Virginia Working Compensation Office of Judges; (v) any liability to Bibb
Energy, Inc. or Boone Equipment Company, Inc., or their shareholders, directors,
officers, affiliates, successors or assigns, relating to (A) pond fines which
may never be mined or removed and (B) acts or omissions of the Sellers related
to the failure to mine or remove coal in connection with the contracts
identified as items 4 and 5 on Schedule 2.01(e) prior to the Closing Date
(provided, however, that the Buyer agrees to pay the legal fees of John F.
DeBuys, Jr. incurred by the Sellers in connection with defending Sellers in any
proceeding relating to (A) or (B) above, up to a maximum total amount of
$50,000); and (vi) any payments to be made to the employees of the Sellers
pursuant to Section 6.08 hereof; and (vii) any liability or obligation of the
Sellers or relating to the Business which arises prior to the Closing Date or
which arises after the Closing Date as a result of facts or circumstances
occurring or existing prior to the Closing Date (collectively, the "Retained
Liabilities"); it being expressly acknowledged, understood and agreed that any
and all of the Retained Liabilities shall remain the sole responsibility of and
shall be retained, paid, performed and discharged by the Sellers and the
Shareholders.
2.06 Closing.
(a) The Closing shall take place at the offices of Bradley Arant
Rose & White LLP, 2001 Park Place, Suite 1400, Birmingham, Alabama, on or before
April 2, 1997, as may be extended by Buyer pursuant to Section 9.01(e), or at
such other time and place as the parties shall mutually agree.
2.07 Deliveries at the Closing.
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(a) At the Closing, the Sellers and the Shareholders shall deliver,
or shall cause to be delivered, to the Buyer the following:
(i) one or more deeds, containing covenants of general warranty,
substantially similar in form to that attached hereto as Exhibit 2.07(a)(i),
duly executed and acknowledged by the Sellers, as appropriate, pursuant to which
the Sellers shall transfer and convey title to the Owned Real Property to the
Buyer, free and clear of any Lien;
(ii) one or more bills of sale substantially similar in form and
substance to that attached hereto as Exhibit 2.07(a)(ii), duly executed by the
Sellers, as appropriate, pursuant to which the Sellers shall transfer and convey
title to all of the Tangible Personal Property and the Inventories to the Buyer,
free and clear of any Lien;
(iii) one or more assignments substantially similar in form and
substance to that attached hereto as Exhibit 2.07(a)(iii), duly executed and
acknowledged by the Sellers, as appropriate, pursuant to which the Sellers shall
assign and transfer the Real Property Leases and the rights of the Sellers
thereunder to Buyer, free and clear of any Lien;
(iv) one or more assignments substantially similar in form and
substance to that attached hereto as Exhibit 2.07(a)(iv), duly executed by the
Sellers, as appropriate, pursuant to which the Sellers shall assign and transfer
the Real Property Contracts, the Other Contracts, the Required Permits (as
defined in Section 3.14(b) hereof, to the extent transferable) and the Accounts
Receivable to Buyer, free and clear of any Lien;
(v) certificates of title to all motor vehicles included in the
Acquired Assets, in such form as is necessary in the State of Alabama to
transfer title to such vehicles to the Buyer, duly executed by one or more of
the Sellers, as appropriate, and properly acknowledged, if necessary;
(vi) all other instruments and documents that the Buyer
reasonably deems necessary or advisable to transfer good and marketable title to
the Acquired Assets, free and clear of any Lien, to the Buyer, in such form and
substance as the Buyer may reasonably require;
(vii) originals of all consents and approvals referred to in
Section 3.03 and Schedule 3.03;
(viii) originals of all estoppel certificates obtained pursuant
to Section 5.01(h)(iii), duly executed by the appropriate parties;
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(ix) an opinion of Burr & Forman, counsel to the Sellers and
the Shareholders, in the form attached hereto as Exhibit 2.07(a)(ix);
(x) originals of all Real Property Leases identified in
Schedule 2.01(b);
(xi) originals of all the Real Property Contracts, the Other
Contracts and the Required Permits;
(xii) an original of the Royalty Agreement, duly executed by
Oak Mountain Energy;
(xiii) an original of an employment agreement between the
Buyer and Ryan substantially similar in form and substance to that attached
hereto as Exhibit 2.07(a)(xiii), duly executed by Ryan (the "Ryan Employment
Agreement");
(xiv) original letters, executed by the Sellers, to all
account debtors relative to the accounts receivable transferred to the Buyer
hereunder, directing such account debtors to make all future payments to the
Buyer;
(xv) certificates executed by the Shareholders and the Sellers
certifying:
(A) that each of the representations and warranties
of the Sellers and the Shareholders contained in this Agreement was accurate in
all respects as of the date of this Agreement and is accurate in all respects as
of the Closing Date, as if made on the Closing Date; and
(B) that the Sellers and the Shareholders have performed
in all material respects their obligations and covenants under this
Agreement;
(xvi) a certificate of the Secretary of each Seller certifying
the adoption of resolutions by the stockholders and board of directors of each
Seller authorizing the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated herein;
(xvii) a FIRPTA affidavit evidencing that the grantors and
assignors of the real property interests are non-foreign persons within the
meaning of the Foreign Investment in Real Property Tax Act;
(xviii) the title insurance company's standard form of
owner's/seller's affidavit;
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(xix) updated Schedules 2.01(f) and 2.01(g) identifying the
Inventories and Accounts Receivable of the Sellers as of the Closing Date,
together with a certificate signed by the Sellers and the Shareholders
certifying that said updated Schedules contain a true, correct and complete list
of the Inventories and Accounts Receivable of the Sellers as of the Closing
Date; and
(xx) a certificate executed by the Sellers estimating the
amount necessary to allow the Sellers (A) to pay all wages, salaries, bonuses,
accrued vacation, vehicle lease payments, bereavement pay, jury duty pay, sick
leave pay, severance pay and accrued holiday pay (including related payroll and
withholding taxes) owing to the Sellers' employees on the Closing Date and (B)
to make all payments on behalf of the Sellers' employees to any pension,
retirement, profit-sharing plan, thrift-savings plan, or deferred compensation
plan, if any.
(b) At the Closing, the Buyer shall deliver to the Sellers and the
Shareholders, as appropriate, the following:
(i) $13,000,000 in readily available funds by wire transfer to
the Sellers in accordance with Schedule 2.04;
(ii) the Note;
(iii) an original of the Royalty Agreement, duly executed by
the Buyer;
(iv) an original of the Ryan Employment Agreement, duly
executed by the Buyer;
(v) the opinion of counsel to the Buyer in the form attached
hereto as Exhibit 2.07(b)(v);
(vi) a certificate executed by the Buyer certifying:
(A) that each of the Buyer's representations and
warranties in this Agreement was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the Closing Date, as if made on
the Closing Date; and
(B) that the Buyer has performed in all material
respects its obligations and covenants under this Agreement;
(vii) a certificate of a manager of the Buyer certifying the
adoption of resolutions by the members and managers of the Buyer authorizing the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein;
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(viii) a reducing letter of credit in the original face amount
of $1,923,750 in favor of The Trust Company of Toledo, N. A. to secure the
principal payments due and owing on December 1, 1997, and December 1, 1998,
under that certain Amended and Restated Promissory Note in the form attached
hereto as Exhibit 6.15(B); and
(ix) evidence reasonably satisfactory to the Sellers and the
Shareholders that all contributions to the capital of the Buyer required to be
made by Shelby Energy Group, L.L.C., a Delaware limited liability company, have
been made, and releases for all collateral securing that certain Third Amended
and Restated Negotiable Promissory Note dated January 21, 1997, from Oak
Mountain Energy to Zither Mining Company, Inc. in the maximum principal amount
of $8,000,000, as the same may be hereafter amended.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS AND SHAREHOLDERS
The Sellers and the Shareholders hereby jointly and severally represent
and warrant to the Buyer as follows:
3.01 Organization and Good Standing. Each of the Sellers is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Alabama. Each of the Sellers has the requisite power and authority to
carry on its business as it is now being and contemplated to be conducted and to
own and operate its properties and assets. Each of the Sellers is duly qualified
to do business as a foreign corporation in, and is in good standing under the
laws of, each state or other jurisdiction in which the ownership or use of its
properties or assets, or the nature of its activities, requires such
qualification. Each of the Sellers has delivered to the Buyer true, correct and
complete copies of its articles of incorporation and bylaws, as amended and in
effect as of the date hereof. Schedule 3.01 contains a true and correct list of
the dates of incorporation for each of the Sellers.
3.02 Authorization. The Sellers have the requisite power and authority to
execute, deliver and perform this Agreement and the agreements and documents
referred to herein, and to consummate the transactions contemplated herein and
therein. The board of directors and the stockholders of the Sellers have taken
all action required by law, the Sellers' articles of incorporation and bylaws or
otherwise to authorize the execution, delivery and performance of this Agreement
and the agreements and documents referred to herein, and to consummate the
transactions contemplated herein and therein. This Agreement and the documents
and agreements referred to herein will, when executed and delivered by the
Sellers and the Shareholders, constitute the legal, valid and binding obligation
of
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the Sellers and the Shareholders, enforceable in accordance with their
respective terms.
3.03 No Violation. Except as set forth on Schedule 3.03, the execution,
delivery and performance of this Agreement and the agreements and documents
referred to herein, and the consummation of the transactions contemplated herein
and therein, will not, with or without the passage of time or the giving of
notice, or both:
(a) Conflict with or result in a violation or breach of, or a
default, right to accelerate, or loss of rights under, or require the consent,
authorization, waiver by, filing or registration with, or notice to any
Governmental Authority or any person or entity under:
(i) any provision of the articles of incorporation or
bylaws of any of the Sellers;
(ii) any franchise, mortgage, deed of trust, security
agreement, pledge agreement, lease, license, permit, instrument, Contract,
consent, approval or waiver (in each case, whether oral or written) which would
have a Material Adverse Effect on the Sellers, the Business or the Assets;
(iii) any Legal Requirement which would have a Material
Adverse Effect on the Sellers, the Business or the Assets; or
(iv) any Order arising from any Proceeding to which the
Sellers are a party or by which the Sellers or the Assets are bound or affected
which would have a Material Adverse Effect on the Sellers, the Business or the
Assets; or
(b) Result in the creation or imposition at or after the Closing of
any Lien upon any of the Acquired Assets.
3.04 Capitalization; Ownership; Directors and Officers. The authorized
capitalization of each Seller consists of 1,000 shares of common stock of the
par value of $1.00 per share. All shares of common stock of each Seller are
issued and outstanding, and no shares are held in treasury. The issuance of all
of the shares of common stock of each Seller was duly authorized, and all of the
shares are validly issued, fully paid and nonassessable. No Seller has
authorized the issuance of any other capital stock or security. The record and
beneficial ownership of the issued and outstanding shares of common stock of
each Seller is as set forth on Schedule 3.04. The duly elected and incumbent
directors and officers of the Sellers are identified on Schedule 3.04.
3.05 No Subsidiaries. There are not and never have been any subsidiaries,
direct or indirect, wholly-owned or otherwise, of any
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Seller. Except as set forth on Schedule 3.05, none of the Sellers has any
equity, financial, record, ownership or other interest in, or control, direct or
indirect, over any corporation, joint venture, general partnership, limited
partnership, limited liability company or other entity.
3.06 No Options. Except as set forth on Schedule 3.06, the Sellers and the
Shareholders do not have outstanding any option, warrant, convertible security
or other right to purchase or convert any obligation into shares of the Sellers'
stock, and have not agreed to issue or sell shares of the Sellers' stock. None
of the Sellers has any obligation, contingent or otherwise, to sell, lease,
assign, transfer or otherwise dispose of any of the Assets, or any interest
therein (other than in the ordinary course of the Business consistent with past
practice), to merge or consolidate with any person or entity, or to enter into
any similar or related transaction.
3.07 Financial Statements. Attached hereto as Schedule 3.07(A) are true,
correct and complete copies of the audited balance sheets of Oak Mountain Energy
and Boone as at December 31, 1995, and December 31, 1994, and the related
audited statements of income, changes in stockholders' equity and cash flow for
Oak Mountain Energy and Boone for the years then ended, together with the notes
to such financial statements and the report of Duval & Associates, P.C. with
respect to the financial statements for the period ending December 31, 1995, and
the report of Stone, Avant & Co. with respect to the financial statements for
the period ending December 31, 1994. Attached hereto as Schedule 3.07(B) are
true, correct and complete copies of the company prepared balance sheets of each
of the Sellers as at December 31, 1996, and the related company prepared
statements of income, changes in stockholders' equity and cash flow for the
twelve month period then ended, together with the notes to such financial
statements. Except as described in Schedule 3.07(B), the financial statements
contained in Schedules 3.07(A) and 3.07(B) (and the related notes) have been
prepared, and those to be delivered to the Buyer under Section 5.01(d) will be
prepared, in accordance with generally accepted accounting principles and fairly
present the financial condition and the results of operations, changes in
stockholders' equity and cash flow of each of the Sellers as at the respective
dates of and for the periods referred to in such financial statements. Except as
set forth on Schedule 3.07(C), the financial statements referred to in this
Section 3.07 reflect, and those to be delivered under Section 5.01(d) shall
reflect, the consistent application of such accounting principles throughout the
periods involved and have been, and will be, prepared from and in accordance
with the books and records of the Sellers. Kodiak, Cahaba, Coal Handling and
Mountaineer did not engage in any activity or operation prior to January 1,
1996, and do not have financial statements, audited or otherwise, for any period
prior to January 1, 1996.
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3.08 No Undisclosed Liabilities. Except for the liabilities disclosed in
the schedules hereto, to the Knowledge of the Sellers there is no liability or
obligation of any kind, nature or description (whether absolute, accrued,
contingent or otherwise) of any Seller that is not reflected on or reserved
against in the Balance Sheet of said Seller as at December 31, 1995 (or the
notes thereto) which would directly or indirectly generate, precipitate,
initiate, cause, give rise to or result in any liability, obligation,
settlement, loss, damage, expense or diminution in value in excess of $200,000
with respect to the Sellers, the Business or the Assets, other than liabilities
or obligations incurred in the ordinary course of business of such Seller since
December 31, 1995, consistent with past practice. Notwithstanding anything in
this Section 3.08 to the contrary, to the extent that any representation or
warranty in this Article III is limited to the Actual Knowledge of the Sellers
(an "Actual Knowledge Representation"), this Section 3.08 shall not impose any
greater liability on the Sellers and the Shareholders with respect to the
subject matter of such Actual Knowledge Representation than that imposed by such
Actual Knowledge Representation.
3.09 Absence of Changes. Since December 31, 1995, except as disclosed in
Schedule 3.09 and the other schedules attached hereto (other than Schedule
2.05(a)), the Sellers have operated the Business only in the ordinary course
consistent with past practice and there has not been, with respect to the
Sellers:
(a) any change in the Business or the Sellers' financial condition
which has had or, to the Actual Knowledge of the Sellers, would have, a Material
Adverse Effect on the Sellers, the Business or the Assets, except such changes
that have occurred in the ordinary course of the Business;
(b) the incurrence of any indebtedness or other obligation to pay
money or some other valuable property, either presently or in the future
(including loans, borrowings, lines of credit, bonds, debentures, capital leases
or other similar credit facilities, whether short-term, long-term or otherwise)
in excess of $50,000 or the creation of any Lien on any of the Assets having an
aggregate value in excess of $50,000;
(c) except as set forth on Schedule 3.09(c), any increase, or any
announcement of any increase, in the wages, salaries, compensation, bonuses,
commissions, incentives, pension or other benefits payable by the Sellers to any
director, officer or employee of the Sellers;
(d) any new agreement, plan, policy, program or arrangement to pay
pensions, retirement allowances or other employee benefits to any director,
officer or employee, whether past or present, including any severance or
consulting arrangement;
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(e) any commitment or amendment to any pension, profit-sharing,
deferred compensation, group insurance, severance pay, retirement or other
employee benefit plan, fund or similar arrangement in existence on the date
hereof;
(f) any capital expenditure in excess of $50,000;
(g) any damage, destruction or loss (whether or not covered by
insurance) to all or any part of the Acquired Assets, other than damage,
destruction or losses which, in the aggregate over such period, did not directly
or indirectly generate, precipitate, initiate, cause, give rise to or result in
any liability, obligation, settlement, loss, damage, expense or diminution in
value in excess of $100,000 with respect to the Sellers, the Business or the
Assets; or
(h) any declaration, setting aside or payment of any dividend or
other distribution on or in respect of its shares of capital stock, or any
direct or indirect redemption, retirement, purchase or other acquisition of any
such shares.
3.10 Condition and Sufficiency of Acquired Assets. The Acquired Assets
include all interests, rights, properties and other assets necessary for the
Buyer to own, operate, manage and maintain the Business in all material respects
in the same manner as the Business is owned, operated, managed and maintained by
the Sellers. No interests, right, property or asset necessary for the ownership,
operation, management or maintenance of the Business in the manner in which the
Sellers presently own, operate, manage and maintain the Business is owned by any
person or entity other than one of the Sellers.
3.11 Accounts Receivable; Bank Accounts.
(a) Schedule 2.01(g) sets forth a true, correct and complete list of
all Accounts Receivable as of January 31, 1997. The Accounts Receivable
identified on Schedule 2.01(g) represent, and the Accounts Receivable as of the
Closing Date will represent, valid obligations arising from sales actually made
or services actually performed in the ordinary course of the Business.
(b) Schedule 2.01(m) contains a true, correct and complete list of
all bank accounts used by the Sellers for the Business, including the bank, the
account number, the type of account and the person(s) authorized with respect to
each account.
3.12 Title to Acquired Assets; Liens.
(a) Except as set forth on Schedule 3.12(a)(i): (i) the Sellers
have good and marketable title to all of the Acquired Assets, free and clear of
any Lien; and (ii) the interests and
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rights in and to the Acquired Assets to be conveyed to Buyer hereunder include
all assets, properties, interests and rights reasonably necessary for the Buyer
to use the Acquired Assets as now used by the Sellers, free from damage and
unreasonable interference by others who may have other interests or rights in
and to the Acquired Assets. To the Actual Knowledge of the Sellers, the map
attached hereto as Schedule 3.12(a)(ii) shows the true and correct boundaries of
the Owned Real Property, the Leased Real Property and the property subject to
the Real Property Contracts, taking into account minor distortions of boundary
lines which may arise because of the scale of said map.
(b) To the Knowledge of the Sellers, the interests in real property,
coal, oil, gas and other minerals described on Schedule 2.01(a) constitute all
of such property owned by the Sellers. The Real Property Leases and the Real
Property Contracts constitute all Contracts of the Sellers pursuant to which the
Sellers lease, sublease or otherwise possess any occupancy, usage or mining
rights with respect to any real property, coal, oil, gas or other minerals.
(c) Except as set out on Schedule 3.12(c)(i), all of the Real
Property Leases and the Real Property Contracts are valid and in full force and
effect in accordance with their respective terms, free and clear of any Lien.
Except as set forth on Schedule 3.12(c)(ii) and except for defaults,
circumstances or states of fact which would not have a Material Adverse Effect
on the Sellers, the Business or the Assets, the Sellers are not in default under
the Real Property Leases or the Real Property Contracts in any respect and, to
the Knowledge of the Sellers, no other party thereto is in default thereunder
nor, to the Actual Knowledge of the Sellers, does there exist any circumstance
or state of facts which constitute, or with the passage of time or the giving of
notice, or both, would constitute a default thereunder. The Sellers have
delivered to the Buyer true and correct copies of all of the Real Property
Leases and the Real Property Contracts, including all amendments and
modifications thereto.
(d) To the Knowledge of the Sellers, and except as set forth on
Schedule 3.12(d), there are no adverse claims to the Owned Real Property, the
Real Property Leases, the rights of the Sellers under the Real Property Leases,
or the property subject to the Real Property Contracts or the rights of the
Sellers thereto. The Sellers have not received any notice of default under any
of the Real Property Leases or Real Property Contracts, and to the Knowledge of
the Sellers the quiet possession of the Leased Real Property by the Sellers has
not been disturbed.
(e) To the Knowledge of the Sellers, and except as disclosed on
Schedule 3.12(e), there are no facts or circumstances which, with the giving of
notice or the passage of time, or both,
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would constitute grounds for a forfeiture under any of the Real Property Leases.
To the Actual Knowledge of the Sellers, and except as set forth in any of the
Real Property Leases, each of the lessors under the Real Property Leases has
good and marketable title to all surface property, coal and other real property
interests leased thereunder, together with all rights necessary to mine and
remove such coal by deep mining methods, and necessary ancillary rights to
conduct mining by such methods, and, to the Actual Knowledge of the Sellers, has
the right to lease or sublease the same to the Sellers in accordance with the
terms of the Real Property Leases.
(f) Except as set forth in Schedule 3.12(f) and in the Real Property
Leases and the Real Property Contracts, the Sellers are not dependent upon any
rights of others to use or occupy any real property, or interests in real
property, in connection with the Business. To the Knowledge of the Sellers, the
Sellers own or control all material ancillary rights (including surface access
rights, rights of ingress and egress, rights-of-way, access to utilities and
similar rights) to provide access to, and to permit the mining, processing,
production and selling of coal from, the Owned Real Property, the Leased Real
Property and the property subject to the Real Property Contracts, free from
interference or use by others. To the Actual Knowledge of the Sellers, there are
no parties other than the Sellers in possession of the Owned Real Property, the
Leased Real Property or the property subject to the Real Property Contracts. To
the Knowledge of the Sellers, there are no parties asserting a right of
possession adverse to the possession of the Sellers to the Owned Real Property,
the Leased Real Property or the property subject to the Real Property Contracts.
To the Knowledge of the Sellers, there are no parties asserting title adverse to
the title of the Sellers to the Owned Real Property, the Real Property Leases or
the property subject to the Real Property Contracts which, if successful, would
materially detract from the value or materially interfere with the use of such
property by the Sellers.
(g) The Sellers and the Shareholders understand that the Buyer
intends to proceed to mine coal from the Gholson and Coke seams of coal included
within the Assets pursuant to mining plans one of which is expected to take as
its starting point the face of the Gholson seam now being mined by Boone.
Assuming the existence of coal as reflected in studies obtained by the Sellers
and heretofore provided to the Buyer, and assuming the existence of reasonable
mining conditions (i.e. the lack of geological or physical conditions which
would prohibit or inhibit the mining process from continuing in a
non-interruptible manner), the Sellers and Ryan warrant that there are no
deficiencies in title to the coal under the Real Property Leases that would
prevent the Buyer from mining in a continuous manner within the Gholson seam or
the Coke seam so that a total of 30,000,000 tons of coal can be
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extracted from said seams. It is specifically understood that this paragraph is
not intended for the Sellers and Ryan to warrant that 30,000,000 tons of coal
exists or is capable of being mined or will be mined or removed from the Gholson
or Coke seams; this representation and warranty is specifically limited to
matters pertaining to title to said coal.
3.13 Contracts. Except for the Real Property Leases and the Real Property
Contracts, Schedule 2.01(e) contains a true, correct and complete list of all
material Contracts to which the Sellers are a party or by which they or any of
the Acquired Assets or the Business is bound. Except as set forth on Schedule
3.13, and except for matters that would not have a Material Adverse Effect on
the Sellers, the Business or the Assets, the Sellers are in compliance with the
terms and conditions of the Other Contracts and all of the Other Contracts are
valid, binding and enforceable in accordance with their respective terms, and no
breach or default by the Sellers or event which, with the giving of notice or
the passage of time, or both, would constitute a breach or default by the
Sellers, exists with respect thereto, and no party thereto has given notice or
asserted to the Sellers that the Sellers are in default thereunder and, to the
Actual Knowledge of the Sellers, no other party thereto is in breach or default
thereunder.
3.14 Permits and Licenses.
(a) Schedule 3.14(a) contains a true, correct and complete list of
all permits, licenses, bonds, orders, approvals and other authorizations of any
Governmental Authority that are required under any Legal Requirement, including
any Environmental Law (as hereinafter defined in Section 3.19(c)), to engage in
or conduct the mining and related operations of the Business substantially in
the manner as currently conducted (the "Mining Permits").
(b) Schedule 3.14(b) contains a true, correct and complete list of
all permits, licenses, bonds, orders, approvals and other authorizations (other
than the Mining Permits) of any Governmental Authority that are required under
any Legal Requirement, including any Environmental Law, to engage in or conduct
the Business substantially in the manner as currently conducted (the "Other
Permits"), except such permits, licenses, bonds, orders, approvals and other
authorizations of any Governmental Authority the absence or lack of which would
not have a Material Adverse Effect on the Sellers, the Business or the Assets.
The Other Permits and the Mining Permits are hereinafter collectively referred
to as the "Required Permits."
(c) Except as set forth on Schedule 3.14(c):
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(i) Each of the Required Permits is in full force and effect
and there is no Proceeding pending or, to the Knowledge of the Sellers,
threatened relative to any of the Required Permits;
(ii) Each of the Sellers is in compliance with the terms,
provisions and conditions of the Required Permits, except such failures to
comply which would not have a Material Adverse Effect on the Sellers; and there
is no outstanding violation with respect to any of the Required Permits, nor, to
the Knowledge of the Sellers, any Order, notice of violation, notice of
noncompliance or agreement affecting any of the Required Permits, except those
which would not have a Material Adverse Effect on the Sellers, the Business or
the Assets;
(iii) To the Knowledge of the Sellers, no condition exists and
no event has occurred which constitutes a material violation of or a failure to
comply with any term or requirement of any of the Required Permits or which
would result, directly or indirectly, in the suspension, revocation, withdrawal,
cancellation or termination of, or any modification to, any of the Required
Permits;
(iv) To the Knowledge of the Sellers, all applications
required to be filed for the renewal of the Required Permits have been duly and
timely filed with the appropriate Governmental Authority and all other filings
required to have been made with respect to the Required Permits have been duly
and timely made with the appropriate Governmental Authority, except where any
failure to duly and timely file would not have a Material Adverse Effect on the
Sellers, the Business or the Assets; and
(v) The Sellers have not received any notice from any source
to the effect that they are lacking any permit, license, bond, Order, approval
or other authorization of any Governmental Authority that is required under any
Legal Requirement, including any Environmental Law, to engage in or conduct the
Business where the failure to have such permit, license, bond, Order, approval
or other authorization would have a Material Adverse Effect on the Sellers, the
Business or the Assets.
(d) The Sellers have supplied to the Buyer copies of all Orders,
notices of violations, notices of noncompliance, Contracts and material
correspondence relating to the Required Permits.
3.15 Intangible and Intellectual Property. The intangible and intellectual
property identified in Schedule 2.01(j) constitutes all of such property owned,
leased or licensed by the Sellers and is all of the intangible and intellectual
property which is necessary for the conduct of the Business. To the Knowledge of
the Sellers, the Sellers are not infringing upon
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or otherwise acting adversely to the rights of any other person or entity
whatsoever under or with respect to any copyrights, trade names, trademarks,
patents, patent applications or patent rights, and there is no such claim
pending or threatened against the Sellers with respect thereto.
3.16 Tax Matters.
(a) All federal, state, local and other tax returns with respect to
the Business (including income, franchise, ad valorem, estimated tax, and state
or local sales or use tax returns) have been timely filed by the Sellers as
required by law, and all taxes (including black lung excise taxes), assessments,
interest, penalties, fines, fees and other governmental charges upon the Sellers
or upon any of the Assets, or the income or franchises of the Business, which
are due, have been paid in full or adequate provision therefor has been included
by each of the Sellers in the balance sheet as at December 31, 1996, for each
such Seller. The federal and state income tax returns of the Sellers have not
been audited by the Internal Revenue Service or the applicable state taxing
authority, except as set forth on Schedule 3.16. To the Knowledge of the
Sellers, all items of income, gain, loss, deduction and credit have been
properly determined and reported by the Sellers in accordance with the rules of
the applicable Governmental Authority.
(b) Proper and accurate amounts have been withheld by the Sellers
from their respective employees for all periods in full and complete compliance
with the tax withholding provisions of applicable federal, state and local law.
Proper and accurate federal, state, local and other returns have been filed by
the Sellers for all periods for which returns are due with respect to employment
taxes (including income tax withholding, FICA, Medicare and FUTA and state
unemployment taxes); and the amounts due for such taxes (whether payable by the
Sellers or withheld from their employees) have been paid in full or adequate
provision thereof has been included by each of the Sellers in the balance sheet
as at December 31, 1996, for each such Seller.
(c) Except as set forth on Schedule 3.16, there are no pending
Proceedings relating to, or claims asserted for, taxes or assessments of any
kind against the Sellers; nor are there outstanding any agreements or waivers
extending the statutory period of limitation applicable to any federal, state or
local tax return for any period. Except as set forth on Schedule 3.16, no claim
has been made by any taxing authority against any of the Sellers for additional
taxes, or any interest thereon or penalties or fines related thereto, that has
not been paid or otherwise disposed of.
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(d) Each of the Sellers has properly filed and received
acknowledgement from the Internal Revenue Service of its election to be taxed
under Subchapter S of the Internal Revenue Code of 1986, as amended, effective
as of the date of incorporation of each Seller, and the Subchapter S election
has not been voluntarily, involuntarily or inadvertently terminated with respect
to any subsequent tax year.
3.17 Litigation.
(a) Except as otherwise set out on Schedule 3.17(a), there is no
action, Proceeding or claim pending against the Sellers, or, to the Actual
Knowledge of the Sellers, threatened, and, to the Actual Knowledge of the
Sellers, no basis exists which would give rise to any action, Proceeding or
claim, (i) which relates to or involves, or which would have a Material Adverse
Effect on, any of the Sellers, the Assets or the Business or (ii) which
questions the validity of this Agreement, the transactions contemplated herein,
or of any actions taken or to be taken by the Sellers or the Shareholders in
connection with this Agreement. None of the Sellers and the Shareholders, the
Assets or the Business is subject to any Order which would have a Material
Adverse Effect on the Sellers, the Business or the Assets.
(b) The Sellers have not received notice of, or been served with
process in, any condemnation or eminent domain proceeding against or affecting
any of the Assets, any interest therein or any portion thereof. Except as
otherwise set out on Schedule 3.17(b), no written notice or other written
communication from any Governmental Authority of any violation of any Legal
Requirement or Order, including any violation relating to zoning, employees,
wages, and occupational health and safety, applicable to any of the Assets or
the Business has been filed or communicated to the Sellers and the Shareholders,
except such notices or communications as have been complied with in all respects
and except where the failure to comply with such notices or communications would
not have a Material Adverse Effect on the Sellers, the Business or the Assets.
3.18 Insurance.
(a) Except as set forth thereon, Schedule 3.18(a) contains a true,
correct and complete list of all insurance policies and bonds to which the
Sellers are a party or that provide coverage to the Sellers, which list
identifies the insurer, type of coverage, policy number and such other
information necessary to properly identify the policy or bond.
(b) Except as set forth on Schedule 3.18(b):
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(i) all insurance policies and bonds listed on Schedule
3.18(a) are valid and enforceable and are sufficient for compliance in all
respects with all Legal Requirements and Contracts to which the Sellers are
parties or by which they or any of their properties are bound, except such
failures to comply with any Legal Requirement or Contract which would not have a
Material Adverse Effect on the Sellers, the Business or the Assets;
(ii) None of the Sellers has received any refusal of coverage,
notice of cancellation or any indication that any insurance policy or bond
listed on Schedule 3.18(a) is no longer in full force or effect;
(iii) The Sellers have paid all premiums due and have
otherwise performed all of their obligations under each insurance policy and
bond listed on Schedule 3.18(a), except where any such failure to perform would
not materially adversely affect the Sellers' rights under such policies; and
(iv) The Sellers have given timely notice to the insurer of
all claims that the Sellers believe to be insured by any insurance policy of the
Sellers identified on Schedule 3.18(a).
3.19 Environmental Matters.
(a) Except as set forth on Schedule 3.19(a):
(i) To the Knowledge of the Sellers, the Sellers are in and
have been in compliance with all applicable Environmental Laws, except where
such failure to comply would not directly or indirectly generate, precipitate,
initiate, cause, give rise to or result in any liability, obligation,
settlement, loss, damage, expense or diminution in value in excess of $100,000
with respect to the Sellers, the Business or the Assets;
(ii) To the Knowledge of the Sellers, all real property owned,
operated, leased, licensed or used by the Sellers and, to the Actual Knowledge
of the Sellers, all property adjacent to such real property is free from
contamination by any Hazardous Material, except such contamination which is
usual and customary in deep coal mining operations and which would not directly
or indirectly generate, precipitate, initiate, cause, give rise to or result in
any liability, obligation, settlement, loss, damage, expense or diminution in
value in excess of $100,000 with respect to the Sellers, the Business or the
Assets;
(iii) To the Knowledge of the Sellers, none of the Sellers is
subject to Environmental Costs and Liabilities and no facts or circumstances
could give rise to Environmental Costs and Liabilities, except (A) such
Environmental Costs and Liabilities which arise in the ordinary course of a deep
coal mining operation
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or (B) such Environmental Costs and Liabilities which are not the result of a
violation of any Environmental Law, Order or Contract with any Governmental
Authority or any person or entity and which would not directly or indirectly
generate, precipitate, initiate, cause, give rise to or result in any liability,
obligation, settlement, loss, damage, expense or diminution in value in excess
of $100,000 with respect to the Sellers, the Business or the Assets;
(iv) To the Knowledge of the Sellers, neither the Sellers nor
any of their Facilities or operations, nor, to the Actual Knowledge of the
Sellers, any predecessor of any of the Sellers, any owner of property leased or
operated by the Sellers, any property or Facility to, on or over which Hazardous
Material generated by the Sellers or any person or entity for whose conduct the
Sellers are responsible was transported, treated, stored, handled, transferred,
dumped or recycled, are subject to any Order of or any Contract with any
Governmental Authority or any person or entity, or to any Proceeding respecting
(A) applicable Environmental Laws, (B) Remedial Action, (C) any Environmental
Claim or (D) the Release or threatened Release of any Hazardous Material;
(v) There is no Environmental Claim or Proceeding pending or
threatened against the Sellers or the Assets alleging violation of or seeking to
impose liability pursuant to any Environmental Law;
(vi) Neither the Sellers nor, to the Actual Knowledge of the
Sellers, any owner of property leased, licensed or operated by the Sellers, have
filed any notice under federal, state, local or foreign law indicating past or
present treatment, storage or disposal, or reporting a Release or threatened
Release, of Hazardous Material on or into the Environment; and
(vii) To the Knowledge of the Sellers, there is not now, nor,
to the Actual Knowledge of the Sellers, has there been in the past, on, in or
under any real property owned, leased, licensed or operated by the Sellers (A)
any underground storage tanks, aboveground storage tanks, dikes, or
impoundments; (B) any asbestos or asbestos containing materials; (C) any
polychlorinated biphenyls; or (D) any radioactive substances.
(viii) Notwithstanding anything to the contrary contained in
this Section 3.19(a), to the extent that the representations and warranties
contained in clauses (i), (ii), (iii), (iv) and (vii) above relate to leases of
mineral rights in portions of the Leased Real Property which have been mined by
persons or entities other than the Sellers, each of the representations and
warranties contained therein is made only to the Actual Knowledge of the
Sellers.
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(b) To the Knowledge of the Sellers, Schedule 3.19(b) contains a
true, correct and complete list of any reports, studies, analyses, tests or
monitorings possessed or initiated by the Sellers and the Shareholders
pertaining to Hazardous Materials in, on or under the Facilities or concerning
compliance by the Sellers with Environmental Laws.
(c) As used in this Section and this Agreement, the following
capitalized terms shall have the meaning given to them in this subsection:
(i) "Environment" means soil, land surface or subsurface
strata, surface waters (including navigable and nonnavigable waters and ocean
waters), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
(ii) "Environmental Claim" means any notice of violation,
action, Proceeding, Lien arising under any Environmental Law, written demand or
claim, Order or directive (conditional or otherwise) issued, filed or asserted
by any Governmental Authority or any person or entity for personal injury
(including sickness, disease or death), tangible or intangible property damage,
damage to the Environment, nuisance, pollution, contamination or other adverse
effects on the Environment, or for fines, penalties or restrictions resulting
from or based upon (i) the existence, or the continuation of the existence of a
Release (including, without limitation, sudden or non-sudden accidental or
non-accidental Releases) of, or exposure to, any Hazardous Material, odor or
audible noise in, into or onto the Environment at, in, by, from or related to
any property owned, operated or leased by the Sellers or any activities or
operations of the Sellers; (ii) the generation, transportation, storage,
treatment or disposal of Hazardous Materials in connection with any property
owned, operated or leased by the Sellers or their operations or Facilities, or
(iii) the violation, or alleged violation of any Environmental Law, Order or
Environmental Permit of or from any Governmental Authority relating to
environmental matters connected with any property owned, leased or operated by
the Sellers.
(iii) "Environmental Costs and Liabilities" means any and all
losses, liabilities, obligations, corrective or remedial measures, damages,
fines, penalties, judgments, capital expenditures, claims, costs and expenses
(including, without limitation, costs of financial responsibility obligations,
disbursements and expenses of legal counsel, experts, engineers and consultants
and the costs of investigation and feasibility studies and Remedial Action)
arising from, under or pursuant to any applicable Environmental Law or any
Proceeding, Order or Contract,
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involving any Governmental Authority or any person or entity relating to the
Environment.
(iv) "Environmental Law" means any federal, state, local or
municipal law (including common law), statute, code, ordinance, rule, regulation
or other Legal Requirement relating to the Environment including the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. ss. 9601 et seq., the Hazardous Materials Transportation Act, 49
U.S.C. ss. 1801, et seq., the Resource Conservation and Recovery Act ("RCRA"),
42 U.S.C. ss. 6901, et seq., the Clean Water Act, 33 U.S.C. ss. 1251, et seq.,
the Clean Air Act, 33 U.S.C. ss. 2601 et seq., the Toxic Substances Control Act,
15 U.S.C. ss. 2601 et. seq., the Federal Insecticide, Fungicide, and Rodenticide
Act, 7 U.S.C. ss. 136 et seq., and the Oil Pollution Act of 1990, 33 U.S.C. ss.
2701 et seq., as such laws have been amended or supplemented, and the
regulations promulgated pursuant thereto, and all analogous state or local
statutes.
(v) "Environmental Permits" means any permit, approval,
authorization, license, variance, registration or permission required under any
applicable Environmental Law or Order relating to the Environment.
(vi) "Facilities" means any real property, leasehold or other
interest owned, leased, licensed or operated by the Sellers.
(vii) "Hazardous Material" means any substance, material or
waste which is regulated by any Governmental Authority, including any material,
substance or waste which is defined as a "hazardous waste," "hazardous
material," "hazardous substance," extremely hazardous waste," "restricted
hazardous waste," "contaminant," "toxic waste," or "toxic substance" under any
provision of any applicable Environmental Law, including petroleum, petroleum
products, chemical, asbestos, presumed asbestos-containing material or
asbestos-containing material, urea formaldehyde and polychlorinated biphenyls.
(viii) "Release" means any release, spill, emission, leaking,
pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge,
dispersal, leaching, or migration on or into the indoor or outdoor Environment
or into or out of any property, whether or not intentional, negligent or
otherwise.
(ix) "Remedial Action" means all actions, including any
capital expenditures required or voluntarily undertaken to (A) clean up, remove,
treat, or in any other way address any Hazardous Material or other substance;
(B) prevent the Release or threat of Release, or minimize the further Release of
any Hazardous Material or other substance so it does not migrate or endanger or
threaten
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to endanger public health or welfare or the Environment; (C) perform
pre-remedial studies and investigations or post-remedial monitoring and care; or
(iv) bring Facilities on any property owned, operated or leased by the Seller
and the Facilities located and operations conducted thereon into compliance with
all Environmental Laws and Environmental Permits.
3.20 Employee Matters.
(a) Schedule 3.20(a) hereto identifies (i) each "employee benefit
plan" as such term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), that is covered by ERISA and that is
or has been maintained or otherwise contributed to by any of the Sellers for the
benefit of any employees of the Sellers (a "Plan" and collectively the "Plans"),
copies or descriptions of which have been furnished or made available to the
Buyer (together with the most recent Annual Report on Form 5500 required to be
filed in connection with any Plan), and (ii) each plan or arrangement not
subject to ERISA maintained or otherwise contributed to by the Sellers for the
benefit of employees and providing for deferred compensation, bonuses, stock
options, employee insurance coverage or any similar compensation or welfare
benefit plan (a "Benefit Arrangement"), copies or descriptions of which have
been furnished or made available to the Buyer.
(b) Each Plan or Benefit Arrangement (an "Employee Benefit Program")
has been maintained and administered at all times in compliance with all Legal
Requirements, including ERISA and the Internal Revenue Code of 1986, as amended
(the "Code"), applicable to such Employee Benefit Programs and in such a manner
as to obtain the intended tax consequences, except such failures to comply which
would not have a Material Adverse Effect on the Sellers, the Business or the
Assets.
(c) No "reportable event" (as such term is used in Section 4043 of
ERISA), "prohibited transaction" (as such term is used in Section 406 of ERISA
or Section 4975 of the Code) or "accumulated funding deficiency" (as such term
is used in Section 412 or Section 4971 of the Code) has heretofore occurred with
respect to any Plan.
(d) Neither the Sellers nor any ERISA affiliate of the Sellers has
contributed to or participated in any pension plan which is a "multiemployer
plan," as defined in Section 3(37) of ERISA, in respect of any of the Sellers'
employees.
(e) Except as disclosed on Schedule 3.20(e), no Proceeding involving
an Employee Benefit Program has occurred or is pending or, to the Knowledge of
the Sellers, is threatened.
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(f) Except as set forth in Schedule 3.20(f) hereto, there are no
other employment agreements or Contracts with any of the Sellers' employees.
3.21 Labor Matters. The Sellers are not parties to or bound by any
collective bargaining agreement, memorandum of understanding, recognition
agreement or Contract with any collective bargaining agent or representative of
the Sellers' employees. None of the Sellers has ever entered into any collective
bargaining agreement, memorandum of understanding, recognition agreement or
Contract with any collective bargaining agent or representative, nor have the
Sellers ever entered into a contract mining agreement or other arrangement
wherein, to the Knowledge of the Sellers, the person or entity conducting the
mining was a party, or had at any time been a party, to any collective
bargaining agreement, memorandum of understanding, recognition agreement or
Contract with any collective bargaining agent or representative. None of the
Shareholders have ever entered into any collective bargaining agreement,
memorandum of understanding, recognition agreement or Contract with any
collective bargaining agent or representative which could give rise, directly or
indirectly, to any liability or obligation being incurred by or imposed upon the
Sellers, the Buyer or the Assets. There are no labor controversies pending or,
to the Actual Knowledge of the Sellers, threatened against the Sellers by any
employee, labor organization, or Governmental Authority.
3.22 Workers' Compensation; Black Lung.
(a) The Sellers have continuously since commencement of any
activities of the Sellers and in accordance with all Legal Requirements carried
insurance providing coverage for any liability arising from any workers'
compensation claim filed by any of the Sellers' employees, and there has been no
lapse in such insurance coverage, and there are no uninsured workers'
compensation or intentional tort claims now pending, or, to the Actual Knowledge
of the Sellers, threatened or anticipated.
(b) The Sellers have continuously since commencement of any
activities of the Sellers and in accordance with all Legal Requirements carried
insurance providing coverage for any liability arising from any federal black
lung claim filed by any of the Sellers' employees, and there has been no lapse
in such insurance coverage, and there are no uninsured black lung claims now
pending, or, to the Actual Knowledge of the Sellers, threatened or anticipated.
3.23 Compliance with Law. Except as set forth in Schedule 3.23:
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(a) to the Knowledge of the Sellers, the Sellers are, and at all
times have been in compliance with all Legal Requirements applicable to the
Sellers, the Business or the Assets, except (A) such failures to comply which
have been remedied and for which there is no further liability or obligation to
any Governmental Authority or person or entity on account thereof and (B) such
failures to comply which would not directly or indirectly generate, precipitate,
initiate, cause, give rise to or result in any liability, obligation,
settlement, loss, damage, expense or diminution in value in excess of $100,000
with respect to the Sellers, the Business or the Assets;
(b) to the Knowledge of the Sellers, no event has occurred or
circumstance exists which, with or without the passage of time or the giving of
notice, or both:
(i) would constitute or result in a violation by the Sellers
of, or a failure on the part of the Sellers to comply with, any Legal
Requirement which would directly or indirectly generate, precipitate, initiate,
cause, give rise to or result in any liability, obligation, settlement, loss,
damage, expense or diminution in value in excess of $100,000 with respect to the
Sellers, the Business or the Assets; or
(ii) would give rise to any obligation on the part of the
Sellers to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature which would directly or indirectly generate, precipitate,
initiate, cause, give rise to or result in any liability, obligation,
settlement, loss, damage, expense or diminution in value in excess of $100,000
with respect to the Sellers, the Business or the Assets; and
(c) None of the Sellers has received any notice or other
communication (whether oral or written) from any Governmental Authority or any
person or entity regarding:
(i) any actual or alleged violation of, or failure to
comply with, any Legal Requirement; or
(ii) any actual or alleged obligation on the part of the
Sellers to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature.
3.24 Related Parties; Conflicts of Interest. Except as set forth on
Schedule 3.24 to this Agreement, no officer, director or shareholder of any of
the Sellers, nor any Affiliate of any of the foregoing: (a) owns, directly or
indirectly, any interest in, or is an employee or agent of, any entity which is
a competitor, lessor, lessee, customer or supplier of the Sellers or the
Business; (b) owns, directly or indirectly, any interest in any tangible or
intangible property, asset or right which is part of the Acquired
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Assets or which is used in or pertains to the Business; (c) has any cause of
action or claim against, owes any amount to, or is owed any amount by the
Sellers or the Business; (d) is a party to any Contract with or Proceeding
involving the Sellers or relating to the Business; or (e) received a loan, gift
or advance from the Sellers or the Business in the three year period preceding
the Closing Date.
3.25 Mining and Geological Information. The Sellers and the
Shareholders have provided by the Buyer all material geological data, reserve
data, mine maps, core hole logs and associated data, coal measurements, coal
samples, lithologic data, coal reserve calculations or reports, washability
analyses or reports, mine plans, mining feasibility studies or analyses, mining
permit applications and supporting data, preparation plant flowcharts,
preparation plant efficiency reports or analyses, engineering studies and all
other information, maps, material, reports and data in the possession or under
the control of the Sellers or the Shareholders relating to or affecting the coal
reserves, coal ownership, coal leases to the Sellers, coal leases from the
Sellers to third parties, mining conditions, mines, preparation plant(s) and
mining plans of the Sellers (collectively the "Mining Data"). To the Knowledge
of the Sellers, true, correct and complete copies of the Mining Data, together
with all exhibits, maps or supporting appendices thereto, have been delivered to
the Buyer.
3.26 Reclamation. Except as disclosed on Schedule 3.26, and except for
matters which would not have a Material Adverse Effect on the Sellers, the
Business or the Assets, (A) all reclamation, environmental and related work
required by or under any Required Permit, Order of any Governmental Authority or
any reclamation bond issued or held in connection with the Business or any of
the Assets has been performed and completed in all respects in accordance with
all applicable terms, conditions and Legal Requirements, and (B) the Sellers and
the Shareholders are not delinquent or in default in carrying out and performing
in all respects all such required reclamation, environmental and related work.
3.27 Brokers or Finders. None of the Sellers nor any of the Sellers'
officers, directors, employees or agents, nor any of the Shareholders, have
incurred any obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
the sale of the Acquired Assets or the transactions contemplated by this
Agreement.
3.28 Disclosure. Except for statements or omissions which would not
directly or indirectly generate, precipitate, initiate, cause, give rise to or
result in any liability, obligation, settlement, loss, damage, expense or
diminution in value in excess of $200,000 with respect to the Sellers, the
Business or the Assets, no representation, warranty, information or statement
made
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by the Sellers and the Shareholders in this Agreement or in any schedule or
exhibit hereto contains any untrue statement of fact or omits to state any fact
necessary in order to make the representation, warranty, information or
statement herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Sellers and the
Shareholders as follows:
4.01 Corporate Organization and Standing. The Buyer is a limited liability
company duly organized and validly existing under the laws of the State of
Alabama. The Buyer has the requisite power and authority to carry on its
business as it is now being and contemplated to be conducted and to own and
operate its properties and assets.
4.02 Authorization. The Buyer has the requisite power and authority to
execute, deliver and perform this Agreement and the agreements and documents
referred to herein, and to consummate the transactions contemplated herein and
therein. The Buyer has taken all actions required by law, its articles of
organization and operating agreement or otherwise to authorize the execution,
delivery and performance of this Agreement and the agreements and documents
referred to herein, and to consummate the transactions contemplated herein and
therein. This Agreement and the agreements and documents referred to herein
will, when executed and delivered by the Buyer, constitute the legal, valid and
binding obligation of the Buyer enforceable in accordance with their respective
terms.
4.03 No Violation. Except as set forth on Schedule 4.03, the execution,
delivery and performance of this Agreement and the agreements and documents
referred to herein, and the consummation of the transactions contemplated herein
and therein, will not, with or without the passage of time or the giving of
notice, or both, conflict with or result in a violation or breach of, or a
default, right to accelerate, or loss of rights under, or require the consent,
authorization, waiver by, filing or registration with, or notice to any
Governmental Authority or any person or entity under:
(a) any provision of the articles of organization or operating
agreement of the Buyer;
(b) any franchise, mortgage, deed of trust, security agreement,
pledge agreement, lease, license, permit, instrument, Contract, consent,
approval or waiver (in each case, whether oral or written) which would have a
Material Adverse Effect on the Buyer;
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(c) any Legal Requirement which would have a Material Adverse Effect
on the Buyer or the transactions contemplated hereby; or
(d) any Order arising from any Proceeding to which the Buyer is a
party or by which the Buyer may be bound or affected which would have a Material
Adverse Effect on the Buyer or the transactions contemplated hereby.
4.04 Disclosure. Except for statements or omissions which would not have a
Material Adverse Effect on the Buyer, no representation, warranty, information
or statement made by the Buyer in this Agreement or in any schedule or exhibit
hereto contains any untrue statement of fact or omits to state any fact
necessary in order to make the representation, warranty, information or
statement herein or therein not misleading.
4.05 Brokers and Finders. Neither the Buyer nor any of the Buyer's
members, managers, officers, employees or agents have incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with the purchase of the
Acquired Assets or the transactions contemplated by this Agreement.
4.06 Litigation. There is no Proceeding or claim pending or, to the
Knowledge of the Buyer, threatened which questions the validity of this
Agreement, the transactions contemplated herein, or any actions taken or to be
taken by the Buyer in connection with this Agreement.
4.07 Financial Statements. Attached hereto as Schedule 4.07 is a true,
correct and complete copy of the company prepared balance sheet of the Buyer
dated as of December 31, 1996. Said balance sheet has been prepared in
accordance with generally accepted accounting principles and fairly presents the
financial condition of the Buyer as of the date thereof.
ARTICLE V
COVENANTS BEFORE CLOSING
5.01 Covenants of the Sellers and the Shareholders Before the Closing.
From the date of this Agreement to the Closing Date, the Sellers and the
Shareholders hereby agree to, and the Shareholders hereby agree to cause the
Sellers to comply with, the following:
(a) Affirmative Covenants - Operation of the Business. Except as the
Buyer may otherwise consent to in writing (it being understood that for purposes
of this Section 5.01 the consent of the Buyer must be evidenced by a writing
signed on behalf of the Buyer by John J. Faltis):
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(i) Operation of the Business. The Sellers shall hold and use
the Assets and conduct the Business, and keep its books and records, only in the
ordinary course of the Business consistent with past practice. The Sellers shall
report to the Buyer periodically or promptly upon the Buyer's request concerning
the status of the Business and the finances of each of the Sellers; and they
shall confer with the Buyer before implementing any operational, management,
personnel or other decision of a material nature. The Sellers shall maintain the
Tangible Personal Property to be conveyed hereunder in good condition and
repair, normal wear and tear excepted. The Sellers shall maintain insurance on
the Assets and the Business, in full force and effect with responsible
companies, comparable in amount, scope and coverage to that in effect on the
date of this Agreement.
(ii) Preservation of the Business. Without making any
commitment on the Buyer's behalf, the Sellers and the Shareholders shall use
their best efforts to preserve the Business, including preserving the Sellers'
business organizations intact, keeping available the services of the current
officers, employees and agents of the Sellers, keeping in full force and effect
all material rights relating to the Assets and the Business and maintaining the
relations and good will of the Sellers with suppliers, customers, landlords,
creditors, employees, agents and others having business relationships with the
Sellers.
(iii) Compliance with Contracts and Licenses. The Sellers
shall fully and promptly perform and comply with each term, provision, condition
and limitation of, and take all reasonable actions to keep in full force and
effect, each of the Real Property Leases, the Real Property Contracts, the Other
Contracts and the Required Permits in accordance with their terms.
(iv) Compliance with Law. The Sellers shall duly comply with
all Legal Requirements and Orders applicable to the Assets or the Business.
(b) Negative Covenants-Operation of the Business. Except as the
Buyer may otherwise consent to in writing:
(i) Liens. The Sellers shall not, in whole or in part,
encumber, pledge, mortgage or subject to any Lien all or any part of the Assets
or any right or interest therein.
(ii) Sales of Assets. The Sellers shall not convey, sell or
otherwise transfer all or any part of the Assets or any right or interest
therein, or grant or sell any option or right to purchase all or any part of the
Assets, except in the ordinary course of the Business consistent with past
practice.
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(iii) Contracts and Licenses. The Sellers shall not agree to
or permit any modification, alteration or amendment of any of the terms,
provisions, or conditions, or any termination, of any of the Real Property
Leases, the Real Property Contracts, the Other Contracts or the Required
Permits.
(iv) Inventories. The Sellers shall not allow the inventories
of coal or the levels of raw materials, supplies, spare parts and other
materials needed for the Business and included in the Acquired Assets to vary
materially from the levels maintained consistent with past practices and except
through sales in the ordinary course of the Business consistent with past
practice.
(v) Settlements and Compromises. The Sellers shall not enter
into any compromise or settlement of any Proceeding relating to the Assets, the
Assumed Liabilities or the Business.
(vi) Dividends and Distributions. The Sellers shall not
declare or pay any dividends or any other distributions of any kind or character
on, or purchase or otherwise acquire or agree to acquire for consideration of
any kind, any shares of their common stock.
(vii) Compensation. The Sellers shall not increase, or enter
into any new agreement or plan for, the compensation of any director, officer or
employee.
(c) Conduct. Except as provided for in this Agreement, or as the
Buyer may otherwise consent to in writing, the Sellers and the Shareholders
shall not enter into any transaction, take any action, or, to the best of the
ability of the Sellers and the Shareholders, permit any event to occur, which
would result, at any time, in any of the representations and warranties
contained in this Agreement, or the information set forth on any Schedule
attached hereto, not being true and correct immediately after such transaction
has been entered into or consummated, or immediately after such event has
occurred, or on the Closing Date.
(d) Interim Financial Statements. The Sellers shall deliver to the
Buyer within 25 days after the end of each month a copy of the company-prepared
balance sheet of each Seller for such month and the related company prepared
statements of income and cash flow for such month, together with the notes to
such financial statements.
(e) Advice of Changes. The Sellers shall promptly advise the Buyer
in writing of any occurrence, fact or condition of which any of the Sellers
becomes aware which, if it had taken place, had existed or had been known on the
date hereof, would cause or constitute a breach of any representation or
warranty under this Agreement. Should any such occurrence, fact or
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condition require any change to any schedule to this Agreement, the Sellers
shall promptly deliver to the Buyer a written supplement to the affected
schedule specifying such change. During the same period, the Sellers and the
Shareholders also shall promptly notify the Buyer of the occurrence of any event
that would make the satisfaction of the conditions in Article VIII impossible or
unlikely.
(f) Access. Each of the Sellers shall provide to the Buyer and to
its counsel, accountants and other representatives full and free access during
normal business hours to all of the Sellers' properties, personnel, Contracts,
books and records, and other documents and data relevant to the Assets or the
Business and shall furnish to the Buyer and such representatives all such
additional financial, operating, and other relevant information and data with
respect to the Assets and the Business that the Buyer may, from time to time,
reasonably request. The Buyer shall have the right to make copies of all such
Contracts, books and records and other documents and data, at its expense. The
Sellers shall cooperate and assist, to the extent reasonably requested by the
Buyer, with the Buyer's investigation of the Assets and the Business.
(g) Cooperation. The Sellers and the Shareholders shall, upon
request of the Buyer or its representatives, execute and deliver all documents,
provide information, testify in any Proceeding, and do all other acts that may
be reasonably necessary, incidental or advisable, in the Buyer's opinion, to
consummate the transactions contemplated in this Agreement, including the
financing to be obtained by the Buyer, all without further consideration;
provided, however, that the Buyer shall reimburse the Sellers and the
Shareholders for their reasonable, pre-approved out-of-pocket expenses incurred
in performing the obligations under this subsection.
(h) Consents and Approvals.
(i) General. The Sellers and the Shareholders shall use their
best efforts to obtain, in writing, as promptly as possible all approvals,
consents and authorizations required to be obtained in order to effect the
transactions contemplated under this Agreement, which shall be in form and
substance satisfactory to the Buyer and its counsel, and shall deliver to the
Buyer copies of all such approvals, consents and authorizations.
(ii) Required Approvals. As promptly as practicable after the
date of this Agreement, the Sellers and the Shareholders shall make all filings
legally required to be made by them to effect the transactions contemplated
under this Agreement (including all filings under the Hart-Scott-Rodino Act
("HSR Act")) and shall cooperate with the Buyer in taking all further actions to
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obtain such approvals as soon as practicable (including taking all actions
requested by the Buyer to cause early termination of any applicable waiting
period under the HSR Act). The Sellers and the Shareholders shall also cooperate
with the Buyer and its representatives in regard to all filings the Buyer elects
or is legally required to make to effect the transactions contemplated under
this Agreement and obtaining such approvals as soon as practicable.
(iii) Estoppel Certificates. The Sellers and the Shareholders
shall obtain a certificate dated not more than 30 days before the Closing Date,
from each party contracting with the Sellers under the Contracts set forth on
Schedule 5.01(h)(iii) certifying that, so far as the interests of the certifying
party are concerned the relevant Contract is in good standing and in full force
and effect, that the relevant Contract has not been amended, supplemented or
extended (except as set out in this Agreement or any Schedule to this Agreement)
and that no known default, or known event that, with notice or the passage of
time, or both, would constitute a default under the relevant Contract has
occurred and is continuing.
(i) No Negotiations. Upon execution of this Agreement, the Sellers
and the Shareholders shall immediately terminate all discussions with any person
or entity (other than the Buyer) relating to any transaction involving the sale
of any of the shares of stock or Assets of the Sellers (other than sales of
assets in the ordinary course of the Business consistent with past practice),
and shall promptly request in writing the return of all information distributed
to any third party relating to the Sellers or the Assets. From the date of this
Agreement until such time as this Agreement shall be terminated pursuant to
Section 9.01, the Sellers and the Shareholders shall not, directly or
indirectly, solicit, initiate or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of, act on or bring to a vote of the directors or shareholders of any
of the Sellers any inquiries or proposals from any person or entity (other than
the Buyer) relating to any transaction involving (A) the sale of any of the
Assets (other than in the ordinary course of the Business consistent with past
practice), (B) the sale by any of the Shareholders of his stock in any of the
Sellers, or any part thereof, (C) the sale of the Business or any part thereof,
or (D) the merger, consolidation or other reorganization of any of the Sellers.
After the Closing, the Sellers and the Shareholders shall use reasonable efforts
to recover any information regarding the Sellers and the Assets not returned by
any third party.
(j) Corporate Approvals. The Sellers and the Shareholders shall
promptly take all actions necessary to obtain all approvals by the directors or
shareholders of Sellers, or both,
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of the transactions contemplated in this Agreement as required by law and the
articles of incorporation and the bylaws of the Sellers. In any vote of the
shareholders of the Sellers on the transactions contemplated herein, the
Shareholders agree to vote their shares of stock in the Sellers in such a manner
as to approve the transactions contemplated in this Agreement.
(k) Best Efforts. The Sellers and the Shareholders shall use their
best efforts to cause the conditions in Article VIII to be satisfied.
5.02 Covenants of the Buyer Before the Closing. From the date of this
Agreement to the Closing Date:
(a) Permits. The Buyer shall, as soon as practicable, file all
documents and information, and respond to any and all requests for information
and documents, which may be required by any Governmental Authority for the
transfer, assignment or termination and reissuance of any of the Required
Permits.
(b) Confidentiality. The Buyer shall keep confidential and shall not
disclose any of the documents and information related to the Assets or the
Business which the Buyer reviews or has in its possession to any third party,
other than the Buyer's counsel, accountants consultants and other authorized
representatives.
(c) Best Efforts. The Buyer shall use its best efforts to cause the
conditions in Article VII to be satisfied.
(d) Cooperation. The Buyer shall, upon the reasonable request of the
Sellers, execute and deliver all documents, provide information, testify in any
Proceeding, and do all other acts that may be reasonably necessary, incidental
or advisable, in the Sellers' opinion, to consummate the transactions
contemplated in this Agreement.
(e) Financing. The Buyer shall use its best efforts to obtain the
financing which is a condition precedent in Section 8.10.
ARTICLE VI
OTHER COVENANTS
The Buyer and the Sellers and the Shareholders hereby agree to, and the
Shareholders hereby agree to cause the Sellers to comply with, the following:
6.01 Property Taxes. The Buyer shall assume ad valorem property taxes in
accordance with Schedule 2.05(a).
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6.02 Removal of Excluded Assets. All Excluded Assets shall be removed by
the Sellers and the Shareholders, at their expense, from any property which is a
part of the Acquired Assets no later than sixty (60) days after the Closing
Date, unless the Buyer otherwise consents in writing to a longer period for such
removal, such consent not to be unreasonably withheld. The Sellers and the
Shareholders hereby release the Buyer from any liability or obligation with
respect to the Excluded Assets and agree to maintain adequate insurance with
respect thereto, naming the Buyer as an additional named insured, until such
time as all of the Excluded Assets are removed as provided herein. If the
Sellers and the Shareholders fail to remove such property within said 60 day
period, or such longer period consented to by the Buyer, then at the expiration
of such period, the Buyer may, in its sole discretion, remove and dispose of
such property and the Sellers and the Shareholders shall reimburse the Buyer for
the costs, expenses and liabilities relating to such removal and disposal. The
Buyer hereby grants the Sellers access to the property which is a part of the
Acquired Assets and on which any Excluded Asset is situate for the purpose of
the removal thereof.
6.03 Existing Citations. Without affecting the responsibility of the
Sellers and the Shareholders for the Retained Liabilities, the Sellers and the
Shareholders specifically agree that they shall, from and after the date hereof,
diligently seek to remedy and correct, prior to the Closing, any and all
violations or deficiencies relating to or affecting the Assets or the Business
that are set out in Schedule 3.14(c) attached hereto.
6.04 Remedial Action. Without affecting the responsibility of the Sellers
and the Shareholders for the Retained Liabilities, responsibility for taking and
bearing the expense of any remedial action required by any notice, Order,
citation, letter, report, or other directive issued by any Governmental
Authority, with respect to the Assets or the Business shall be allocated among
the parties as follows:
(i) If such notice, Order, citation, letter, report or other
directive is issued on or before the Closing Date relating to activities or
operations conducted outside the ordinary course of business, or is issued after
the Closing Date relating to operations or activities conducted outside the
ordinary course of business on or before the Closing Date, the Sellers and the
Shareholders shall be responsible for taking the remedial action required, all
at the expense of the Sellers and the Shareholders.
(ii) If such notice, Order, citation, letter, report or other
directive is issued on or before the Closing Date relating to activities or
operations conducted in the ordinary course of business, or is issued after the
Closing Date relating to activities or operations conducted in the ordinary
course of
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business on or before the Closing Date, the Buyer shall be responsible for
taking the remedial action required, all at the expense of the Buyer.
(iii) If such notice, Order, citation, letter, report or other
directive is issued after the Closing Date relating to any of the Excluded
Assets, the Retained Liabilities, or the operations or activities of the Sellers
related to the Excluded Assets or the Retained Liabilities after the Closing
Date, the Sellers and the Shareholders shall be responsible for taking the
remedial action required, all at the expense of the Sellers and the
Shareholders.
(iv) If such notice, Order, citation, letter, report or other
directive is issued after the Closing Date relating to operations or activities
conducted by the Buyer after the Closing Date, the Buyer shall be responsible
for taking the remedial action required, at the Buyer's expense.
6.05 Transfer of Permits. If the consent of any Governmental Authority or
any person or entity is required as a condition of the assignment and transfer
to the Buyer of any of the Required Permits, the Buyer and the Sellers and the
Shareholders agree to cooperate fully with each other in every reasonable way
and to take all reasonable steps to obtain such consent and to effect such
assignments and transfers. If any of such Required Permits cannot be assigned
and transferred to the Buyer, the Buyer may promptly apply for a replacement;
and the Sellers agree to cooperate fully in every reasonable way to obtain such
replacement. In the event all of the conditions precedent to the Closing have
been either satisfied or waived except for the condition precedent contained in
Section 8.03, the parties agree to close the transaction contemplated in this
Agreement in escrow pending satisfaction of the condition precedent in Section
8.03 pursuant to a mutually satisfactory escrow agreement.
6.06 Assigned Contracts. To the extent that any of the Contracts to be
assigned hereunder is not assignable without the consent of another party, this
Agreement shall not constitute an assignment or an attempted assignment thereof,
if such assignment would constitute a breach thereof. If the Sellers shall be
unable to obtain a consent necessary for the assignment of their title to,
interest in, or rights under any Contract to be assigned hereunder, then, if the
Buyer waives such consent as a condition to the performance of its obligations
hereunder, the Sellers and the Shareholders will fully cooperate in any
reasonable arrangement designed to enable the Sellers and the Shareholders to
perform their obligations hereunder, and to provide for the assumption by the
Buyer of the benefits, risks and burdens of any such Contract, including
enforcement at the cost of and for the account of the Buyer of any and all
rights of any of the Sellers against the other party thereto arising out of the
future cancellation thereof after
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the Closing by such other party; but the Buyer shall not be required by this
Section to enter into, or to accept as a substitute for performance by the
Sellers and the Shareholders hereunder, any arrangement that would impose any
material additional cost, expense or liability on the Buyer or that would
deprive the Buyer of any material benefits or rights contemplated to be
transferred to the Buyer pursuant to the transactions contemplated under this
Agreement.
6.07 Accounts Receivable. From and after the Closing, (i) the Buyer shall
undertake to collect the Accounts Receivable, (ii) if requested by the Buyer,
the Sellers and the Shareholders shall cooperate with the Buyer in the
collection of the Accounts Receivable, and (iii) the Sellers and the
Shareholders shall promptly remit to the Buyer all monies received by them in
payment of the Accounts Receivable.
6.08 Sellers' Employees. It is understood and agreed to by the parties
hereto that, upon the Closing of the transactions contemplated in this
Agreement, the Buyer has no obligation to hire or employ any of the employees of
the Sellers. The Sellers shall, prior to the Closing, discharge all of their
employees before the Closing, pay all wages, salaries, bonuses, accrued
vacation, vehicle lease payments, bereavement pay, jury duty pay, sick leave
pay, severance pay and accrued holiday pay (including related payroll and
withholding taxes) owing to the Sellers' employees and make all payments on
behalf of the Sellers' employees to any pension, retirement, profit-sharing
plan, thrift-savings plan, or deferred compensation plan, if any. The Sellers
agree to promptly use all sums paid to them under Section 2.03(e) for the sole
purpose of discharging their obligations under this Section 6.08. Any sums paid
to the Sellers under Section 2.03(e) which are not used by the Sellers to
discharge their obligations under this Section 6.08 shall be promptly returned
to the Buyer.
6.09 Specific Performance. The Sellers and the Shareholders acknowledge
that the Buyer will have no adequate remedy at law if the Sellers and the
Shareholders fail to perform their obligations under this Agreement; and the
Buyer acknowledges that the Sellers and the Shareholders will have no adequate
remedy at law if the Buyer fails to perform any of its obligations under this
Agreement. If the Sellers and the Shareholders fail to perform any of their
obligations under this Agreement, the Buyer shall have the right, in addition to
any other rights it may have, to specific performance of this Agreement. If the
Buyer fails to perform any of its obligations under this Agreement, the Sellers
and the Shareholders shall have the right, in addition to any other rights they
may have, to specific performance of this Agreement.
6.10 Expenses. Whether or not the transactions contemplated in this
Agreement are consummated or fail to be consummated for any
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reason whatsoever, the responsibility for payment of the costs and expenses of
the transactions contemplated in this Agreement shall be allocated as follows:
(a) The Sellers and the Shareholders shall be responsible for and
shall pay the following costs and expenses:
(i) all sales, use, bulk sales, transfer and other taxes
payable to any Governmental Authority in connection with the transactions
contemplated by this Agreement;
(ii) all transfer, filing, excise, documentary, revenue stamp
and similar fees and taxes payable in connection with the transactions
contemplated by this Agreement; and
(iii) one-half of all fees paid to the Federal Trade
Commission or the Department of Justice in connection with any filings required
under the HSR Act; and
(iv) all charges, costs and fees owed to any accountants,
financial advisors, attorneys and other consultants, professionals, experts,
agents or representatives engaged by any of the Sellers and the Shareholders in
connection with the transactions contemplated by this Agreement.
(b) The Buyer shall be responsible for and shall pay the following
costs and expenses:
(i) all licensing fees and taxes payable to the State of
Alabama in connection with the registration of certificates of title to all
motor vehicles transferred by the Sellers to the Buyer pursuant to this
Agreement;
(ii) all recording fees payable in connection with the
transactions contemplated by this Agreement;
(iii) one-half of all fees paid to the Federal Trade
Commission or the Department of Justice in connection with any filings required
under the HSR Act; and
(iv) all charges, costs and fees owed to any accountants,
financial advisors, attorneys and other consultants, professionals, experts,
agents or representatives engaged by the Buyer in connection with the
transactions contemplated by this Agreement.
(c) With respect to any other costs or expenses, each of the parties
hereto shall pay its own costs and expenses.
(d) In the event of termination of this Agreement, the obligations
of each party to pay the costs and expenses as provided
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under the preceding subsections of this Section 6.10 will be subject to any
rights of such party arising from a breach of this Agreement by another party.
6.11 Public Announcements. Any public announcement or similar publicity
with respect to this Agreement or the transactions contemplated herein will be
issued, if at all, at such time and in such manner as the parties shall
determine. Unless consented to by the other parties hereto in advance (which
consent shall not be unreasonably withheld) or legally required, the parties
agree to keep the terms of this Agreement strictly confidential and to make no
disclosure thereof to any Governmental Authority or person or entity.
6.12 Confidentiality; Return and Retention of Documents. If the parties
fail to close the transactions contemplated in this Agreement for any reason
permitted hereunder, then the Buyer shall promptly return to the Sellers all
documents delivered by any of the Sellers to the Buyer or obtained by the Buyer
from any of the Sellers in connection herewith, and the Buyer shall not disclose
to third parties, unless required to do so by law, any information obtained from
any of the Sellers in connection with this Agreement or during the prior and
subsequent negotiations relating to this Agreement. The Sellers may, at their
expense, make and retain copies of any document of the Sellers delivered to the
Buyer which relates to the Assets and the Business as the Sellers deem advisable
for their files. After the consummation of the transaction contemplated in this
Agreement, the Sellers and the Shareholders shall not disclose to any third
party, unless required to do so by law, any information regarding the Acquired
Assets or the Business. In the event the Sellers and the Shareholders are
required by law to disclose any such information, the Sellers and the
Shareholders shall promptly notify the Buyer prior to any required disclosure
and shall cooperate with the Buyer to obtain a protective order for such
information required to be disclosed.
6.13 Further Assurances. At or after the Closing, the Sellers will, at the
request of the Buyer, execute and deliver to the Buyer all such further
assignments, agreements and other documents as the Buyer may reasonably request
in order to accomplish, and to perfect and record, if necessary, the sale,
conveyance, transfer and delivery to the Buyer of the Acquired Assets as
contemplated in this Agreement and to otherwise carry out the intent of this
Agreement.
6.14 Covenant Not to Compete. For a period of five years from the Closing
Date, the Sellers and Stranahan hereby agree that they will not, individually or
collectively, directly or indirectly, within the State of Alabama, own, manage,
operate, control, be employed by, loan money to, participate in, or be connected
in any manner whatsoever with the ownership, management,
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financing, operation or control of any business engaged in the mining or
producing coal in Alabama, or marketing or selling coal to be used in Alabama,
or any other business conducted by the Sellers in connection with the Business.
If the final judgment of a court of competent jurisdiction declares that any
term or provision of this Section 6.14 is invalid or unenforceable, the parties
agree that the court making the determination of invalidity or unenforceability
shall have the power to reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified after the expiration of the time within which the judgment may be
appealed.
6.15 Delivery of Promissory Notes. Immediately following the Closing, the
Buyer shall execute and deliver to the Shareholders, as appropriate, promissory
notes in amounts and upon terms and conditions substantially similar to those
attached hereto as Exhibits 6.15(A) and 6.15(B), and the Shareholders shall
simultaneously deliver to the Buyer the originals of all of the notes or other
evidences of indebtedness, marked canceled, which are being replaced by the
promissory notes delivered by the Buyer hereunder.
6.16 Change of Name; Liquidation. Contemporaneous with the Closing Date,
Oak Mountain Energy shall take all actions necessary or incidental to change its
name to one dissimilar to its present name and the Buyer's name. After the
Closing, each of the other Sellers shall promptly liquidate its assets and
dissolve.
6.17 Buyer's Financial Statements. So long as the Buyer has any obligation
to Stranahan under the Note, Section 2.03(d) or the promissory note delivered to
Stranahan pursuant to Section 6.15, the Buyer shall provide Stranahan with a
copy of the Buyer's quarterly internal financial statements and a copy of the
Buyer's annual audited financial statements as soon as reasonably possible after
the same have been completed. Stranahan shall maintain such financial statements
in strict confidence and shall not use or disclose such financial statements to
any person or entity.
ARTICLE VII
CONDITIONS PRECEDENT TO THE
SELLERS' AND THE SHAREHOLDERS' PERFORMANCE
The performance of the obligations of the Sellers and the Shareholders
under this Agreement is subject to the satisfaction, on or before the Closing
Date, of each of the following conditions, any or all of which may be waived, in
whole or in part, without prior notice:
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7.01 Performance of Agreements. The Buyer shall have performed, satisfied
and complied with, in all material respects, all covenants, agreements,
obligations and conditions required by this Agreement to be performed or
complied with by it on or before the Closing Date.
7.02 Accuracy of Representations and Warranties. All representations and
warranties of the Buyer contained in this Agreement or any written statement
delivered by the Buyer to the Sellers and the Shareholders under this Agreement
shall be true and correct in all respects on and as of the date of this
Agreement and on and as of the Closing Date, as though made on and as of that
date, without giving effect to any supplement to the Schedules hereto.
7.03 Absence of Litigation and Proceedings. No Proceeding or claim before
any Governmental Authority or any person or entity challenging the transactions
contemplated by this Agreement shall have been instituted or be pending; and no
Legal Requirement or Order of any Governmental Authority which prohibits the
sale of the Acquired Assets, or any material part thereof, to the Buyer or the
consummation of any of the transactions contemplated under this Agreement shall
have been adopted or issued or shall otherwise be in effect.
7.04 Hart Scott Rodino Act. If applicable, any waiting period for the HSR
Act shall have expired without a request for further information or a filing of
a complaint for injunctive relief.
7.05 Authority. The execution and delivery of this Agreement by the Buyer
and the performance of the Buyer's covenants and obligations hereunder shall
have been duly authorized by all necessary action of the Buyer and its members
and managers.
7.06 Deliveries. The Sellers and the Shareholders shall have received from
the Buyer all of the deliveries required to be made under Section 2.07(b).
7.07 Additional Documents. The Buyer shall have caused the delivery to the
Sellers and the Shareholders of such other documents as they may reasonably
request for the purpose of:
(i) enabling their counsel to provide the opinion referred
to in Section 2.07;
(ii) evidencing the accuracy of any representation or warranty
of the Buyer under this Agreement;
(iii) evidencing the Buyer's performance or satisfaction of,
or compliance with, in all material respects, any
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covenant or obligation required to be performed or complied with by the Buyer
under this Agreement prior to the Closing;
(iv) evidencing the satisfaction of any condition referred to
in this Article VII; or
(v) otherwise facilitating the consummation of any of the
transactions contemplated by this Agreement.
7.08 Release of Liability. Except for the release of Ryan and Oak Mountain
Energy under the contract identified as item 4 on Schedule 2.01(e), the Sellers
and the Shareholders shall have been released from any liability or obligation
under any guaranty or Contract relating to the Assumed Liabilities and
identified on Schedule 7.08. The Sellers and the Shareholders agree to use their
best efforts to assist the Buyer in obtaining the releases under this Section
7.08.
7.09 Documents Delivered. The form and substance of all consents,
approvals, certificates, instruments, opinions and other documents to be
delivered by or relating to Buyer under this Agreement shall be satisfactory in
all reasonable respects to the Sellers and their counsel.
7.10 Employment Agreements. The execution by the Buyer of employment
agreements with Rodney Camp and Terry Charcandy substantially similar in form
and substance to those attached hereto as Exhibits 7.10(A) and 7.10(B).
ARTICLE VIII
CONDITIONS PRECEDENT TO THE BUYER'S PERFORMANCE
The performance of the obligations of the Buyer hereunder is subject to
the satisfaction, on or before the Closing Date, of each of the following
conditions, any of which may be waived by the Buyer, in whole or in part,
without prior notice:
8.01 Performance of Agreements. The Sellers and the Shareholders shall
have performed, satisfied and complied with, in all material respects, all
covenants, agreements, obligations and conditions required by this Agreement to
be performed or complied with by them on or before the Closing Date.
8.02 Accuracy of Representations and Warranties. All representations and
warranties of the Sellers and the Shareholders contained in this Agreement or in
any written instrument delivered to the Buyer by the Sellers and the
Shareholders under this Agreement shall be true and correct in all respects as
of the date of this Agreement and as of the Closing Date, as though made on and
as of that date, without giving any effect to any supplement to the Schedules
hereto.
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8.03 Permits. All Required Permits for the Buyer's continuation after the
Closing of the Business as operated by the Sellers must have been transferred to
and obtained by the Buyer and must be in full force and effect.
8.04 Absence of Litigation and Proceedings.
(a) Except as set out in this Agreement or on a Schedule attached
hereto, no Proceeding or claim before any Governmental Authority (i) pertaining
to the transactions contemplated by this Agreement, or (ii) involving any of the
Assets or the Business shall have been instituted, be pending or, to the
Knowledge of the Sellers, be threatened on the Closing Date.
(b) Since the date of this Agreement, there must not have been
commenced or threatened against the Buyer or against any Affiliate of the Buyer
any Proceeding
(i) involving any challenge to, or seeking damages or other
relief in connection with, any of the transactions contemplated by this
Agreement, or
(ii) that is likely to have the effect of preventing,
delaying, making illegal, imposing limitations or conditions on, or otherwise
interfering with any of the transactions contemplated by this Agreement.
8.05 Documents Delivered. The form and substance of all consents,
approvals, certificates, instruments, opinions and other documents to be
delivered by or relating to the Sellers and the Shareholders under this
Agreement shall be satisfactory in all reasonable respects to the Buyer and its
counsel.
8.06 Material Adverse Changes. From the date of this Agreement to the
Closing Date, there shall not have been, or be, any material adverse change in
the Acquired Assets or the Business.
8.07 Authority. The execution and delivery of this Agreement by the
Sellers and the Shareholders and the performance of their obligations and
covenants hereunder shall have been duly authorized by all necessary action,
corporate or otherwise, of the Sellers and their shareholders.
8.08 No Prohibition. Neither the consummation nor the performance of any
of the transactions contemplated by this Agreement will directly or indirectly
(with or without notice or lapse of time), materially contravene, or conflict
with, or result in a material violation of, or cause the Buyer or any Affiliate
of the Buyer to suffer any material adverse consequences under any Legal
Requirement or Order.
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8.09 Due Diligence. The Buyer shall have completed a due diligence
investigation satisfactory to the Buyer relating to the Assets, the Business,
the Sellers and the Shareholders. Without limiting the foregoing, such due
diligence investigation shall include receipt of environmental, reserve,
feasibility and other such studies with respect to the Assets and the Business
which are acceptable to the Buyer in its sole discretion, and receipt of (i)
title and lien searches and other evidence certifying that the title to the
Acquired Assets is as described in Section 3.12 and (ii) title abstracts or
similar reports acceptable to the Buyer relating to the title of the lessors to
the coal subject to the Real Property Leases.
8.10 Financing. The Buyer shall be in a position to close and receive
funding under a non-recourse long-term credit facility to provide funds to
consummate the transactions under this Agreement and to use and operate the
Acquired Assets after the Closing as contemplated by the Buyer. The financing
under the non-recourse long-term credit facility shall (i) be provided by a
lender or lenders reasonably satisfactory to the Buyer, and who accept the
existing contracts, lease, security and the executed asset purchase agreement
"as is", and (ii) be upon such terms and conditions as are (A) customary in
providing non-recourse financing for the acquisition and expansion of a large
scale deep coal mining operation on a non-recourse basis and (B) reasonably
satisfactory to the Buyer.
8.11 Hart Scott Rodino Act. If applicable, any waiting period for the HSR
Act shall have expired without a request for further information or a filing of
a complaint for injunctive relief.
8.12 Title Matters. The Buyer shall have obtained at standard rates from a
title insurance company satisfactory to the Buyer policies of title insurance,
or conditional commitments to issue same dated the Closing Date in face amounts
and in form satisfactory to the Buyer insuring the Buyer's interest in each
parcel of Owned Real Property identified on Schedule 2.01(a), subject only to
the matters set forth on Schedule 3.12(a) and such other matters as may be
approved by the Buyer in its sole discretion.
8.13 Deliveries. The Buyer shall have received from the Sellers and the
Shareholders all of the deliveries required to be made under Section 2.07(a).
8.14 Additional Documents. The Sellers and the Shareholders shall have
caused the delivery to the Buyer of such other documents as it may reasonably
request for the purpose of:
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(i) enabling their counsel to provide the opinion referred
to in Section 2.07;
(ii) evidencing the accuracy of any of the Sellers' and the
Shareholders' representations and warranties;
(iii) evidencing the Sellers and the Shareholders performance
or satisfaction of, or compliance with, in all material respects, any covenant
or obligation required to be performed or complied with by the Sellers and the
Shareholders under this Agreement prior to the Closing;
(iv) evidencing the satisfaction of any condition referred to
in this Article VIII; or
(v) otherwise facilitating the consummation or performance of
any of the transactions contemplated by this Agreement.
8.15 Employment Agreements. The execution by Rodney Camp and Terry
Charcandy of employment agreements with the Buyer substantially similar in form
and substance to those attached hereto as Exhibits 7.10(A) and 7.10(B).
8.16 Title Due Diligence. The Buyer shall not have discovered any defects
in the title to surface property or coal subject to the Real Property Leases
that would have a material adverse effect on the Buyer or the Acquired Assets.
ARTICLE IX
TERMINATION
9.01 Termination Events. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by either the Buyer or the Sellers and the Shareholders if a
material breach of any provision of this Agreement has been committed by any of
the parties on the other side of the transactions contemplated herein and such
breach has not been waived;
(b) by the Buyer, if any of the conditions in Article VIII has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of the Buyer to comply
with its obligations under this Agreement), and the Buyer has not waived such
condition on or before the Closing Date; provided, the Buyer's right of
termination under this Section 9.01(b) due to its findings as a result of its
due diligence investigation and inquiry pursuant to Section 8.09 above, and
which do not otherwise provide a right of termination by the Buyer hereunder,
shall expire at midnight on
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March ____, 1997, and further provided that the Buyer's right of termination
under this Section 9.01(b) due to a failure to comply with the Closing
conditions set forth in Section 8.04(a)(ii), 8.06 and 8.16 shall expire at
midnight on April 2, 1997;
(c) by the Sellers and the Shareholders, if any of the conditions in
Article VII has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of the
Sellers and the Shareholders to comply with their obligations under this
Agreement), and the Sellers and the Shareholders have not waived such condition
on or before the Closing Date;
(d) by mutual consent of the Buyer and the Sellers and the
Shareholders; or
(e) by either the Buyer or the Sellers and the Shareholders if the
Closing has not occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under this
Agreement) on or before midnight on April 2, 1997; provided, however, that if
all of the conditions precedent in Article VIII have been either satisfied or
waived by the Buyer except the conditions precedent in Section 8.10 or Section
8.11, and provided further, if the Buyer shall have provided the Sellers and the
Shareholders with a copy of a standard commitment letter with respect to the
financing specified in Section 8.10, containing usual and customary terms and
conditions for financings of like nature, the Buyer shall have the right to
extend the termination date from midnight on April 2, 1997, to midnight on April
17, 1997. In such event, the conditions to Closing not specifically terminating
in Section 9.01(b) above must be either satisfied or waived by Buyer before it
shall be obligated to satisfy its obligations hereunder on the Closing Date.
9.02 Effect of Termination. Each party's right of termination under
Section 9.01 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of such right of termination will not be an
election of remedies. If this Agreement is terminated pursuant to Section 9.01,
all further obligations of the parties under this Agreement will terminate,
except that obligations in Sections 5.02(b), 6.10, 6.11, and 6.12 will survive;
provided, however, that if this Agreement is terminated by a party because of
the breach of this Agreement by the other party or because one or more of the
conditions to the terminating party's obligations under this Agreement is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
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ARTICLE X
SURVIVAL; INDEMNIFICATION; REMEDIES
10.01 Survival. Subject to the limitations set forth in Section 10.4(a)
below, all representations, warranties, covenants, and obligations in this
Agreement (including indemnification obligations), the Schedules, the
supplements to the Schedules, and any certificate, document or conveyance
instrument delivered pursuant to this Agreement will survive the Closing. The
waiver of any condition based on the accuracy of any representation or warranty,
or on the performance of or compliance with any covenant or obligation, will not
affect the right to indemnification, reimbursement, or other remedy with respect
to the breach or violation of any other representation, warranty, covenant or
obligation.
10.02 Indemnification and Reimbursement by the Sellers. Subject to the
limitations set forth in Section 10.04, the Sellers and the Shareholders,
jointly and severally, shall indemnify and hold harmless the Buyer, and its
managers, members, officers, representatives, agents, employees and Affiliates
(collectively, the "Indemnified Persons"), and will reimburse the Indemnified
Persons, for any loss, liability, claim, settlement, damage, expense (including
costs of investigation and defense and reasonable attorneys' fees, including
attorneys' fees connected with any enforcement of this covenant) diminution of
value, costs of cleanup, containment or other remediation, whether or not
involving a third-party claim (collectively, "Damages"), arising from or in
connection with any or all of the following:
(a) any breach of any representation or warranty made by the Sellers
and the Shareholders in this Agreement, the Schedules, the supplements to the
Schedules, the certificate delivered pursuant to Section 2.07(a), or any
conveyance instrument or any other document, writing or instrument delivered by
the Sellers and the Shareholders pursuant to this Agreement; or
(b) any breach by the Sellers and the Shareholders of any covenant
or obligation of the Sellers and the Shareholders in this Agreement, any
conveyance instrument or in any document, writing or instrument delivered by the
Sellers and the Shareholders pursuant to this Agreement.
10.03 Indemnification and Reimbursement by the Buyer. Subject to the
limitations set forth in Section 10.04, the Buyer will indemnify and hold
harmless the Sellers and the Shareholders, and their Affiliates and the Sellers'
stockholders, directors, officers, representatives and agents, and will
reimburse them for any Damages arising from or in connection with:
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(a) any breach of any representation or warranty made by the Buyer
in this Agreement or in any document, writing or instrument delivered by the
Buyer pursuant to this Agreement; or
(b) any breach by the Buyer of any covenant or obligation of the
Buyer in this Agreement or in any document, writing or instrument delivered by
the Buyer pursuant to this Agreement.
10.04 Limitations. The indemnification obligations under this Article X
shall be limited as follows:
(a) No indemnified party shall have any right to indemnification
under this Agreement from any indemnifying party, unless notice of the claim of
the party to be indemnified has been given to the indemnifying party within two
years after the Closing Date, provided, however, that:
(i) with regard to an indemnity claim relating to tax matters,
notice of the claim of the party to be indemnified must be given to the
indemnifying party on or before the expiration of the statute of limitations
applicable to such tax matters; and
(ii) the obligations of the Sellers and the Shareholders to
indemnify for Damages under any indemnity claim arising from or related to any
of the Excluded Assets, any of the Retained Liabilities, any general warranty of
title in any deed delivered to the Buyer pursuant to Section 2.07(a), or the
power and authority of the Sellers and the Shareholders to execute, deliver and
perform this Agreement and to consummate the transactions contemplated herein
shall continue indefinitely.
(b) Except as provided in Section 10.04(f), the Sellers and the
Shareholders shall have no obligation to indemnify the Indemnified Persons for
Damages under any indemnity claim until such time, if ever, as the aggregate
amount of all such Damages shall exceed $200,000 (the "Basket"), and then,
subject to Section 10.04(c) below, only to the extent of such excess. If there
is a breach of a representation or warranty that contains its own threshold
amount, then the entire Damages resulting from such breach shall be applied
against the Basket. For example, if there is a breach of Section 3.19(a)(i)
(which contains a $100,000 threshold amount), and the Damages resulting from
such breach total $150,000, then the entire $150,000 shall be applied against
the Basket.
(c) Except as provided in Section 10.04(f), the aggregate liability
of the Sellers and the Shareholders with respect to all indemnity claims shall
not exceed $13,000,000 (the "Ceiling Amount").
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(d) Except as provided in Section 10.04(f):
(i) the liability of Stranahan with respect to any indemnity
claim shall not exceed 40% of the amount of such indemnity claim, and the
aggregate liability of Stranahan with respect to all indemnity claims shall not
exceed 40% of the Ceiling Amount; and
(ii) the liability of Ryan with respect to any indemnity claim
shall not exceed 60% of the amount of such indemnity claim, and the aggregate
liability of Ryan with respect to all indemnity claims shall not exceed 60% of
the Ceiling Amount.
(e) Except as provided in Section 10.04(f) and in Subsection
10.04(e)(iii) below, until such time, if ever, as the aggregate amount of all
Damages asserted by the Buyer against the Sellers and the Shareholders under
this Article X exceeds $8,750,000, the Buyer and the Sellers and the
Shareholders agree that each indemnity claim asserted by the Buyer shall be
satisfied as follows:
(i) 40% of each such indemnity claim shall be satisfied by
immediately reducing the outstanding principal balance and accrued interest due
under the Note. Thereafter, the amount of each subsequent principal installment
due under the Note shall be adjusted so that the principal balance due
thereunder after set-off under this paragraph shall be paid over the remaining
term of the Note in approximately equal monthly installments. In the event the
principal balance and accrued interest due under the Note is less than 40% of
any indemnity claim, then the Buyer may satisfy such indemnity claim by
immediately reducing the outstanding principal balance and accrued interest due
under the Note to zero and proceeding against the Sellers and the Shareholders
under Subsection (iii) below with respect to that portion of the indemnity claim
not satisfied under this subparagraph (i).
(ii) the remaining 60% of each such indemnity claim (the
"Remaining Amount") shall be satisfied by ceasing all payments under the Royalty
Agreement and the bonus in paragraph 5 of the Ryan Employment Agreement until
such time as the amount of the payments which would have been paid under said
Royalty Agreement and bonus equals the Remaining Amount plus interest at the
rate of 10% per annum on that portion of the Remaining Amount outstanding from
time to time. Thereafter, payments under the Royalty Agreement and bonus under
paragraph 5 of the Ryan Agreement shall resume in accordance with their terms.
(iii) In the event the aggregate amount of all Damages
asserted by the Buyer against the Sellers and the Shareholders pursuant to this
Article X exceeds $8,750,000, the Buyer shall have the right to seek an
indemnity claim for such
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excess Damages from the Sellers and the Shareholders as provided under this
Agreement and by law.
(f) The limitations set forth in Sections 10.04(b), (c), (d) and (e)
shall not apply with respect to any obligation of the Sellers and the
Shareholders to indemnify for Damages under any indemnity claim arising from or
related in any way to (i) any of the Excluded Assets, (ii) any of the Retained
Liabilities, (iii) the breach or violation of any covenant of the Sellers and
the Shareholders in Section 6.04(i), 6.04(iii), 6.07, 6.08, 6.10, 6.13 or 6.14,
or (iv) any general warranty of title in any deed delivered to the Buyer
pursuant to Section 2.07(a).
(g) The Buyer shall have no obligation to indemnify the Sellers and
the Shareholders for Damages until such time, if ever, as the aggregate amount
of all such Damages shall exceed $200,000, and then only to the extent of such
excess; provided, however, that this limitation shall not apply with respect to
any obligation of the Buyer to indemnify for Damages under any indemnity claim
arising from or related in any way to the Acquired Assets or the Assumed
Liabilities.
(h) The provisions of this Article X shall not limit, restrict or
otherwise affect any representation or warranty contained in any agreement,
instrument or document delivered pursuant hereto.
(i) The indemnification obligations of the parties under this
Article X shall be effective only upon the Closing of the transactions
contemplated in this Agreement.
10.05 Procedure for Indemnification C Third-Party Claims.
(a) Within a reasonable time after receipt by an indemnified party
under Section 10.02 or Section 10.03 of notice of the commencement of any
Proceeding against it, such indemnified party will, if a claim is to be made
against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such Proceeding, but the failure to
notify the indemnifying party will not relieve the indemnifying party of any
liability that it may have to any indemnified party, except to the extent that
the indemnifying party demonstrates that the defense of such Proceeding is
prejudiced by the indemnifying party's failure to give such notice.
(b) Except as provided in Section 10.05(c) and (d), if any
Proceeding referred to in Section 10.05(a) is brought against an indemnified
party and it gives notice to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party
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to such Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Article X for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding, in
each case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, no compromise or
settlement of such claims may be effected by the indemnifying party without the
indemnified party's consent unless (x) there is no finding or admission of any
violation of Legal Requirements or any violation of the rights of any person or
entity and no effect on any other claims that may be made against the
indemnified party; (y) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (z) the indemnified party will have
no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
days after notice from the indemnified party, give notice to the indemnified
party of its election to assume the defense of such Proceeding, the indemnifying
party will be bound by any determination made in such Proceeding or any
compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its Affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to (i) defend such Proceeding (with counsel
reasonably satisfactory to the indemnified party and the indemnifying party) and
(ii) compromise or settle the same, but the indemnifying party will not be bound
by any compromise or settlement effected without its consent (which may not be
unreasonably withheld); provided, however, that with respect to a Proceeding
relating to the matters identified in Section 2.05(b)(v)(A) or (B), the Buyer
agrees that if it elects to assume the defense of such Proceeding, the Buyer
will be responsible for its own fees incurred in investigating the matter and
defending its interests.
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(d) Notwithstanding the other provisions of this Section 10.05, the
Buyer shall be entitled to control any cleanup, any related Proceeding, and any
other Proceeding with respect to any environmental matter for which indemnity is
sought hereunder.
(e) The Sellers and the Shareholders hereby consent to the
non-exclusive jurisdiction of any court in which a Proceeding is brought by a
third party against any Indemnified Person for purposes of any claim that an
Indemnified Person may have against the Sellers and the Shareholders under this
Agreement with respect to such Proceeding or the matters alleged therein, and
agree that process may be served on the Sellers and the Shareholders with
respect to such a claim anywhere in the world.
10.06 Procedure for Indemnification C Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
ARTICLE XI
GENERAL PROVISIONS
11.01 Entire Agreement; Amendment. This Agreement, together with the
attached Schedules and Exhibits and the supplements thereto, constitutes the
entire agreement among the parties with respect to the subject matter hereof and
may not be amended except by writing duly executed by the parties hereto.
11.02 Binding Effect and Benefit. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, their respective successors
and permitted assigns.
11.03 Assignment. The rights and obligations of any party arising under
this Agreement, or any interest therein, shall not be assigned or otherwise
transferred, in whole or in part, without obtaining the prior written consent of
the other party or parties hereto.
11.04 Waiver. The waiver by any party to this Agreement of compliance by
any other party with, or of a breach of any other party of, any provision of
this Agreement shall be made in writing executed by the party waiving such
compliance and breach and shall be delivered to the party whose compliance or
breach is being waived. The waiver by any party hereto of compliance with or
breach of any provision of this Agreement shall not operate, or be construed, as
a waiver of any subsequent breach or failure to comply with any other provision
of this Agreement. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party hereto, shall be deemed to constitute
a waiver by the party taking such action or making such investigation
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of compliance by any other party hereto with any representation, warranty,
covenant or agreement contained in this Agreement.
11.05 Severability. So long as the remaining provisions of this Agreement
are sufficient to carry out the intent of the parties hereto, in the event one
or more of the provisions of this Agreement shall, for any reason, be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
any other provision of this Agreement, and the Agreement shall be construed as
if such invalid, illegal or unenforceable provision was not a part of this
Agreement.
11.06 Third Parties. Nothing in this Agreement, whether expressed or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to this Agreement and their
respective successors and permitted assigns, nor is anything in this Agreement
intended to relieve or discharge the obligation or liability of any third person
to any party to this Agreement, nor shall any provision give any third person
any right of subrogation or action over or against any party to this Agreement.
11.07 Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the State of Alabama without
regard to conflicts of laws principles.
11.08 Jurisdiction; Service of Process. Any Proceeding to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against any of the parties in the courts of the State of Alabama, County
of Shelby,; and each of the parties hereto consents to the jurisdiction of such
courts (and of the appropriate appellate courts) in any such Proceeding and
waives any objection to venue laid therein. Process in any Proceeding referred
to in the preceding sentence may be served on any party anywhere in the world.
11.09 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) on the date when delivered personally, (b) when transmitted by
telecopy (receipt confirmed), provided that a copy is mailed by the end of the
following business day by certified mail, return receipt requested, postage
prepaid; (c) on the fifth business day after mailing, by United States certified
mail, postage prepaid, return receipt requested, or (d) on the next business day
following deposit with a nationally recognized overnight delivery service for
next day delivery, to the parties at the following addresses and telecopy
numbers:
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TO THE SELLERS: [Name of appropriate Seller]
1051 Oak Mountain Drive
Pelham, AL 35124
Attn: Jimmie R. Ryan
Telecopy No: (205) 620-9070
TO SHAREHOLDERS: Jimmie R. Ryan
1051 Oak Mountain Drive
Pelham, AL 35124
Telecopy No: (205) 620-9070
Duane Stranahan, Jr.
4001 Tamiami Trail
Suite 390
Naples, FL 34103-3555
Telecopy No: (941) 643-3125
With a copy to: John F. De Buys, Esquire
Burr & Forman
Suite 3100, SouthTrust Tower
420 North Twentieth Street
Birmingham, AL 35203
Telecopy No: (205) 458-5100
TO THE BUYER: Oak Mountain Energy, L.L.C
2708 Cranberry Square
Morgantown, WV 26505
Attn: President
Telecopy No: (304) 594-1685
With a copy to: Anker Coal Group, Inc.
2708 Cranberry Square
Morgantown, WV 26505
Attn: President
Telecopy No: (304) 594-1685
and
Kiewit Alabama Mining Company
1000 Kiewit Plaza
Omaha, NE 68131
Attn: President
Telecopy No: (402) 271-2830
Any party may change its address or telecopy number for the purposes of this
section by giving the other parties hereto written notice of such new address or
number in the manner set forth above.
11.10 Time of Essence. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
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11.11 Headings. The table of contents, lists of exhibits and schedules,
headings, and subheadings contained in this Agreement are included for purpose
of convenience of reference only and shall have no effect upon the construction
or interpretation of any of the provisions of this Agreement.
11.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original of this Agreement and
all of which, when taken together, shall be deemed to constitute one and the
same agreement. This Agreement shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the other
party, it being understood that all parties need not sign the same counterpart.
IN WITNESS WHEREOF, the Shareholders have executed this Agreement and the
Sellers and the Buyer have caused this Agreement to be executed below by their
respective officers or managers, as the case may be, duly authorized, all on the
date first above written.
The Buyer:
OAK MOUNTAIN ENERGY, L.L.C.
By: /s/ John J. Faltis
--------------------------------
Its Manager
The Sellers:
OAK MOUNTAIN ENERGY CORPORATION
By: /s/ Jimmie R. Ryan
------------------------------------
Its President
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BOONE RESOURCES, INC.
By: /s/ Jimmie R. Ryan
------------------------------------
Its President
KODIAK COAL, INC.
By: /s/ Jimmie R. Ryan
------------------------------------
Its President
CAHABA COAL ENGINEERING AND LAND
SURVEYING, INC.
By: /s/ Jimmie R. Ryan
------------------------------------
Its President
COAL HANDLING AND PROCESSING, INC.
By: /s/ Jimmie R. Ryan
------------------------------------
Its President
MOUNTAINEER MANAGEMENT, INC.
By: /s/ Jimmie R. Ryan
------------------------------------
Its President
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The Shareholders:
/s/ Jimmie R. Ryan
------------------------------------
Jimmie R. Ryan
/s/ Duane Stranahan, Jr.
------------------------------------
Duane Stranahan, Jr.
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<PAGE> 1
EXHIBIT 10.10.1
OPERATING AGREEMENT
OF
OAK MOUNTAIN ENERGY, L.L.C.,
AN ALABAMA LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
FORMATION OF COMPANY
Section 2.1 Organization .............................................. 7
Section 2.2 Registered Agent and Office................................ 7
Section 2.3 Principal Place of Business................................ 7
Section 2.4 Permitted Businesses ...................................... 7
ARTICLE III
NAMES AND ADDRESSES OF MEMBERS
ARTICLE IV
RIGHTS AND DUTIES OF MANAGERS
Section 4.1 Management ................................................ 8
Section 4.2 Number, Tenure and Qualifications.......................... 8
Section 4.3 Manager Voting ............................................ 8
Section 4.4 Certain Powers of Managers................................. 8
Section 4.5 Limitation on Powers of Managers........................... 9
Section 4.6 Liability for Certain Acts................................. 10
Section 4.7 Committees of the Managers................................. 10
Section 4.8 Officers .................................................. 10
Section 4.9 Managers Have No Exclusive Duty to Company................. 11
Section 4.10 Property .................................................. 11
Section 4.11 Bank Accounts ............................................. 11
Section 4.12 Records, Audits and Reports to be Maintained............... 11
Section 4.13 Access to Records ......................................... 11
Section 4.14 Reports to Members ........................................ 12
Section 4.15 Accounts .................................................. 12
Section 4.16 Records of Membership Units................................ 12
Section 4.17 Resignation ............................................... 12
Section 4.18 Removal ................................................... 12
Section 4.19 Vacancies ................................................. 12
Section 4.20 Salaries .................................................. 12
ARTICLE V
MEETINGS OF MANAGERS
Section 5.1 Application of Article .................................... 12
Section 5.2 Meetings .................................................. 12
Section 5.3 Regularly Scheduled Meeting................................ 12
Section 5.4 Meeting of All Managers.................................... 13
Section 5.5 Record Date ............................................... 13
Section 5.6 Action by Managers Without a Meeting....................... 13
Section 5.7 Waiver of Notice .......................................... 13
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
i
<PAGE> 3
Section 6.1 Member Management Rights................................... 13
Section 6.2 Liability of Members to Third Parties...................... 13
Section 6.3 Approval of Sale of All of the Company's Property.......... 13
Section 6.4 Approval of Merger or Consolidation........................ 13
Section 6.5 Right of Withdrawal ....................................... 14
Section 6.6 Conflicts of Interest ..................................... 14
ARTICLE VII
MEETINGS OF MEMBERS
Section 7.1 Meetings .................................................. 14
Section 7.2 Manner of Acting .......................................... 14
Section 7.3 Action by Members Without a Meeting........................ 14
Section 7.4 Waiver of Notice .......................................... 15
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification of Members, Managers, Etc.................. 15
Section 8.2 Determination of Meeting Applicable Standard............... 15
Section 8.3 Payment of Expenses in Advance of Disposition of Action.... 15
Section 8.4 Non-Exclusivity of Article................................. 15
Section 8.5 Insurance ................................................. 15
ARTICLE IX
CONTRIBUTIONS AND CAPITAL ACCOUNTS
Section 9.1 Initial Capital Contributions.............................. 16
Section 9.2 Additional Capital Contributions........................... 16
Section 9.3 Maintenance of Capital Accounts............................ 16
Section 9.4 Sale or Exchange of Interest............................... 17
Section 9.5 Compliance with ss. 704(b) of the Code..................... 17
ARTICLE X
ALLOCATIONS AND DISTRIBUTIONS
Section 10.1 Net Profits ............................................... 17
Section 10.2 Net Losses ................................................ 18
Section 10.3 Company Minimum Gain Chargeback............................ 18
Section 10.5 Member Nonrecourse Deductions.............................. 18
Section 10.6 Member Minimum Gain Chargeback............................. 19
Section 10.7 Qualified Income Offset.................................... 19
Section 10.9 Tax Allocations: ss. 704(c) of the Code.................... 19
Section 10.10 Interim Distributions ..................................... 19
Section 10.11 Limitations on Distributions............................... 20
ARTICLE XI
CERTAIN TAX MATTERS
Section 11.1 Elections ................................................. 20
Section 11.2 Taxes of Taxing Jurisdictions.............................. 20
Section 11.3 Tax Matters Partner ....................................... 20
Section 11.4 Method of Accounting ...................................... 21
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ARTICLE XII
DISPOSITION OF MEMBERSHIP UNITS
Section 12.1 Limitations ............................................... 21
Section 12.2 Consent, Etc. ............................................. 21
Section 12.3 Permitted Sales ........................................... 21
Section 12.4 Transfer Upon Dissociation of a Member (Other Than Death
or Incompetency)........................................... 22
Section 12.5 Transfer Upon Dissociation of a Member Due to Death or
Incompetency............................................... 22
Section 12.6 Company Redemption Right................................... 22
Section 12.7 Put Rights ................................................ 23
Section 12.8 Purchase Price ............................................ 23
Section 12.9 Certain Additional Permitted Transfers..................... 24
ARTICLE XIII
ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS
Section 13.1 Rights of Assignees ....................................... 24
Section 13.2 Admission of Substitute Members............................ 24
Section 13.3 Admission of Additional Members............................ 24
ARTICLE XIV
DISSOCIATION, DISSOLUTION AND WINDING UP
Section 14.1 Dissociation .............................................. 25
Section 14.2 Rights of Dissociating Member.............................. 25
Section 14.3 Dissolution ............................................... 25
Section 14.4 Distribution of Assets on Dissolution...................... 26
Section 14.5 Winding Up and Articles of Dissolution..................... 26
Section 14.6 Effect of Dissolution ..................................... 26
ARTICLE XV
AMENDMENT
Section 15.1 Operating Agreement May Be Modified........................ 26
Section 15.2 Amendment or Modification of Operating Agreement........... 26
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Entire Agreement .......................................... 27
Section 16.2 Rights of Creditors and Third Parties...................... 27
Section 16.3 Changes in Applicable Law.................................. 27
Section 16.4 Interpretation ............................................ 27
Section 16.5 Governing Law ............................................. 27
Section 16.6 Execution of Additional Instruments........................ 27
Section 16.7 Construction of Terms ..................................... 27
Section 16.8 Captions .................................................. 27
Section 16.9 Waivers ................................................... 28
Section 16.10 Rights and Remedies Cumulative............................. 28
Section 16.11 Heirs, Successors and Assigns.............................. 28
Section 16.12 Counterparts .............................................. 28
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Operating Agreement
Of
Oak Mountain Energy, L.L.C.,
An Alabama Limited Liability Company
This Operating Agreement of Oak Mountain Energy, L.L.C., a limited
liability company organized pursuant to the Alabama Limited Liability Company
Act, shall be effective as of the Effective Date (as defined herein), by and
among the Persons executing this Operating Agreement as Members.
ARTICLE I
DEFINITIONS
The following terms used in this Operating Agreement shall have the
following meanings unless otherwise expressly provided herein:
Section 1.1 "Act" shall mean the Alabama Limited Liability Company Act, as
amended from time to time, and any successor thereto.
Section 1.2 "Additional Capital Contribution" shall mean any Capital
Contribution other than an Initial Capital Contribution and the Initial Delayed
Capital Contribution that a Member is obligated to make in accordance with
Section 9.2.
Section 1.3 "Additional Member" shall mean a Member, other than an Initial
Member or a Substitute Member, who has acquired a Membership Unit of the Company
and has become a Member in accordance with Section 13.3.
Section 1.4 "Adjusted Deficit" shall mean with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentences of
Regulation ss.ss. 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in ss.ss.
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Deficit is intended to comply with the
provisions of ss. 1.704-1(b)(2)(ii)(d) of the Regulations and shall be so
construed.
Section 1.5 "Affiliate" shall mean, with respect to any Person, (i) any
Person directly or indirectly controlling, controlled by, or under common
control with such Person, (ii) any Person owning or controlling ten percent
(10%) or more of the outstanding voting interests of such Person, (iii) any
member, manager, officer, director or general partner of such Person, or (iv)
any Person who is a member, manager, officer, director, general partner,
trustee, or a holder of ten percent (10%) or more of the voting interests of any
Person described in clauses (i) through (iii) of this sentence. For purposes of
this definition, the term "controls," "is controlled by" or "is under common
control with" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management policies of a person or entity,
whether through the ownership of voting securities, by contract or otherwise.
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Section 1.6 "Appraiser" means an unaffiliated and unrelated business
consultant or independent certified public accountant who is familiar with the
type of business in which the Company is involved and would qualify as an
"expert" for business appraisals in a court of law.
Section 1.7 "Articles" shall mean the Articles of Organization of the
Company, as amended from time to time.
Section 1.8 "Assignee" shall mean a transferee of an Economic Interest who
has not been admitted as a Substitute Member. Such transferee of a Membership
Unit shall be entitled to merely an Economic Interest in the Company until and
unless such Assignee is admitted as a Substitute Member in accordance with this
Operating Agreement.
Section 1.9 "Capital Account" shall mean the account maintained with
respect to a Member or Assignee determined in accordance with Article IX.
Section 1.10 "Capital Contribution" shall mean the amount of money and the
Gross Asset Value of Property (other than money) contributed to the Company by
or on behalf of a Member or Assignee.
Section 1.11 "Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor thereto.
Section 1.12 "Company" shall mean the Oak Mountain Energy, L.L.C., an
Alabama limited liability company, and any successor limited liability company.
Section 1.13 "Company Minimum Gain" shall mean an amount determined by
first computing for each Company Nonrecourse Liability any gain the Company
would realize if it disposed of the Company Property subject to that liability
for no consideration other than full satisfaction of the liability, and then
aggregating the separately computed gains. The amount of Company Minimum Gain
includes such minimum gain arising from a conversion, refinancing, or other
change to a debt instrument, only to the extent a Member is allocated a share of
that minimum gain. For any Fiscal Year, the net increase or decrease in Company
Minimum Gain is determined by comparing the Company Minimum Gain on the last day
of the immediately preceding Fiscal Year with the Minimum Gain on the last day
of the current Fiscal Year. Notwithstanding any provision to the contrary
contained herein, Company Minimum Gain, and increases and decreases in Company
Minimum Gain, are intended to be computed in accordance with ss. 704 of the Code
and the Regulations issued thereunder, as the same may be issued and interpreted
from time to time.
Section 1.14 "Company Nonrecourse Liability" shall mean any debt or
obligation of the Company to the extent that no Member or Related Person bears
the economic risk of loss (as defined in ss. 1.752-2 of the Regulations) with
respect to the liability.
Section 1.15 "Company Property" shall mean any Property owned by the
Company.
Section 1.16 "Controlling Member" shall mean Shelby Energy Group or its
Assignees and their respective successors and assigns.
Section 1.17 "Depreciation" means, for each Fiscal Year, an amount equal
to the depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such Fiscal Year, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Fiscal Year, Depreciation shall be an amount
which bears the same ratio to such beginning Gross Asset Value as the federal
income tax depreciation, amortization, or other cost recovery deduction for such
Fiscal Year bears to such beginning adjusted tax basis; provided, however, that
if the adjusted basis for federal income tax purposes of an asset at the
beginning of such Fiscal Year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the Managers.
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Section 1.18 "Disability" shall mean, with regard to Terry Charcandy or
Rodney Camp, as the case may be, a disability which would allow the Company to
terminate such employee under the employment agreement between such employee and
the Company when such employee first becomes an employee of the Company.
Section 1.19 "Disposition" ("Dispose") shall mean any sale, assignment,
transfer, exchange, mortgage, pledge, grant, hypothecation, or other transfer,
absolute or as security or encumbrance (including dispositions by operation of
law) of an Economic Interest or Membership Unit in the Company.
Section 1.20 "Dissociation (Dissociate)" shall mean any action or event
which causes a Person to cease to be Member of the Company as described in
Article XIV hereof.
Section 1.21 "Dissociation Event" shall mean an event, the occurrence of
which will result in the dissolution of the Company under Article XIV unless the
Members agree to the contrary.
Section 1.22 "Distribution" shall mean a transfer of Property made by the
Company to a Member or an Assignee on account of such Member's or Assignee's
Economic Interest or Membership Unit as described in Article X.
Section 1.23 "Economic Interest" shall mean a Member's or Assignee's share
of the Company's Net Profits, Net Losses, and Distributions of the Company's
Property pursuant to this Operating Agreement and the Act, but shall not include
any right to participate in the operation, management or affairs of the Company,
including the right to vote on, consent to, or otherwise participate in any
decision of the Members.
Section 1.24 "Effective Date" shall mean February ____, 1997.
Section 1.25 "Failure to Produce Event" shall mean either or both of the
following events: (i) the Company shuts down or closes all or substantially all
of its mines for a period exceeding one (1) year, or (ii) a Majority of the
Managers reasonably determines that the Company cannot operate its coal mining
operations with a reasonable level of profit.
Section 1.26 "Fiscal Year" shall mean (i) the period commencing on the
Effective Date of this Agreement and ending on December 31, 1997, (ii) any
subsequent twelve (12) month period commencing on January 1 and ending on
December 31, and (iii) any portion of the period described in clause (ii) for
which the Company is required to allocate Profits, Losses and other items of
Company income, gain, loss or deduction pursuant to Article X hereof.
Section 1.27 "Gross Asset Value" shall mean, with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset, as
determined by the Managers, provided that the initial Gross Asset Values of the
assets contributed to the Company pursuant to Sections 9.1 and 9.2 hereof shall
be as set forth and determined in such sections;
(b) The Gross Asset Values of all Company assets shall be adjusted
to equal their respective gross fair market values, as determined by the
Managers, as of the following times: (i) the acquisition of an additional
Membership Interest or Membership Unit by any new or existing Member in exchange
for more than a de minimis Capital Contribution; (ii) the distribution by the
Company to a Member of more than a de minimis amount of Property as
consideration for a Membership Interest or Membership Unit; and (iii) the
liquidation of the Company within the meaning of Regulations ss.
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses
(i) and (ii) above shall be made only if the Managers reasonably determine that
such adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the Company;
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(c) The Gross Asset Value of any Company asset distributed to any
Member shall be adjusted to equal the gross fair market value of such asset on
the date of distribution as determined by the Managers; and
(d) The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code ss. 734(b) or Code ss. 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Regulation ss. 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values
shall not be adjusted pursuant to this Section 1.27(d) to the extent the
Managers determine that an adjustment pursuant to Section 1.27(b) hereof is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this Section 1.27(d).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
Section 1.27(a), Section 1.27(b), or Section 1.27(d) hereof, such Gross Asset
Value shall thereafter be adjusted by the Depreciation taken into account with
respect to such asset for purposes of computing Net Profits and Net Losses.
Section 1.28 "Initial Capital Contribution" shall mean the Capital
Contribution agreed to be made by the Members as described in Section 9.1 and
set forth on Exhibit A attached hereto.
Section 1.29 "Initial Delayed Contribution" shall mean the Initial Delayed
Contribution agreed to be made by the Initial Members as described in Section
9.1 and set forth on Exhibit B attached hereto.
Section 1.30 "Initial Members" shall mean those persons identified on
Exhibit A attached hereto who have executed this Operating Agreement as of the
Effective Date.
Section 1.31 "Judge of Probate" shall mean the Judge of Probate of
Montgomery County, Alabama.
Section 1.32 "Majority" shall mean those Members owning more than Fifty
Percent (50%) of the Membership Units in the Company; similarly, any reference
in this Agreement to any other specified percentage of the Members shall refer
to those Members holding, in the aggregate, the specified percentage of
Membership Units or Membership Interests in the Company and, for this purpose,
Assignees, transferees and other holders of Economic Interests who have not been
admitted as Members pursuant to Section 13.2 hereof shall be deemed to hold zero
Membership Units or Membership Interests.
Section 1.33 "Managers" shall mean the Person or other Persons designated
by the Members to manage the affairs of the Company under Article IV hereof.
Section 1.34 "Member" shall mean an Initial Member, Substitute Member or
Additional Member of the Company who has not ceased to be a Member.
Section 1.35 "Member Minimum Gain" shall mean an amount determined in
accordance with Regulations ss. 1.704-2(i) by first computing for each Member
Nonrecourse Liability any gain the Company would realize if it disposed of the
Company Property subject to that liability for no consideration other than full
satisfaction of the liability, and then aggregating the separately computed
gains. The amount of Member Minimum Gain includes such minimum gain arising from
a conversion, refinancing, or other change to a debt instrument, only to the
extent a Member is allocated a share of that minimum gain. For any Fiscal Year,
the net increase or decrease in Member Minimum Gain is determined by comparing
the Member Minimum Gain on the last day of the immediately preceding Fiscal Year
with the Member Minimum Gain on the last day of the current Fiscal Year.
Notwithstanding any provision to the contrary contained herein, Member Minimum
Gain and increases and decreases in Member Minimum Gain are intended to be
computed in accordance with ss. 704 of the Code and the Regulations issued
thereunder, as the same may be issued and interpreted from time to time.
Section 1.36 "Member Nonrecourse Deductions" shall mean the net increase
during the Fiscal Year, if any, in Member Minimum Gain, reduced (but not below
zero) by any distribution of proceeds that are attributable to a Member
Nonrecourse Liability and allocable to an increase in such Member Minimum Gain
under ss. 1.704-2(i) of the Regulations.
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Section 1.37 "Member Nonrecourse Liability" shall mean any debt or
obligation of the Company to the extent the liability is nonrecourse under state
law, and on which a Member or Related Person bears the economic risk of loss
under ss. 1.752-2 of the Regulations because, for example, the Member or Related
Person is the creditor or a guarantor.
Section 1.38 "Membership Interest" shall mean a Member's entire interest
in the Company including such Member's Economic Interest and the right of the
Member to participate in the management and operation of the business and
affairs of the Company, including, but not limited to, the right to vote on,
consent to, or otherwise participate in any decision, vote or action of or by
the Members granted pursuant to this Operating Agreement and the Act. In the
case of an Assignee, the term "Membership Interest" shall mean only the
Assignee's Economic Interest in the Company. A Member's Membership Interest
shall be equal to the number of Membership Units held by such Member, divided by
the total number of Membership Units outstanding.
Section 1.39 "Membership Unit" shall mean the numerical measure of the
size of a Membership Interest in the Company. In the case of an Assignee, the
term "Membership Unit" shall encompass only the Assignee's Economic Interest in
the Company with respect to such Membership Unit.
Section 1.40 "Net Profits" and "Net Losses" means, for each Fiscal Year,
an amount equal to the Company's taxable income or loss for such Fiscal Year,
determined in accordance with Code ss. 703(a) (for this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
Code ss. 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Profits or Net Losses
pursuant to this Section 1.40 shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Code ss.
705(a)(2)(B) or treated as Code ss. 705(a)(2)(B) expenditures pursuant to
Regulations ss. 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Net Profits or Net Losses pursuant to this Section 1.40, shall be
subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to Section 1.27(b) or Section 1.27(c) hereof, the amount of
such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Net Profits or Net Losses;
(d) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the Property disposed
of, notwithstanding that the adjusted tax basis of such Property differs from
its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year, computed in
accordance with Section 1.17 hereof;
(f) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code ss. 734(b) or Code ss. 743(b) is required
pursuant to Regulations ss.ss. 1.704-1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts
as a result of a distribution other than in liquidation of a Member's Membership
Interest, the amount of such adjustment shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the asset and shall be
taken into account for purposes of computing Net Profits or Net Losses; and
(g) Notwithstanding any other provision of this Section 1.40, any
items which are specially allocated pursuant to Sections 10.3 through 10.9
hereof shall not be taken into account in computing Net Profits or Net Losses.
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The amounts of the items of Company income, gain, loss, or deduction available
to be specially allocated pursuant to Sections 10.3 through 10.9 hereof shall be
determined by applying rules analogous to those set forth in Sections 1.40 (a)
through 1.40(f) above.
Section 1.41 "Notice" shall be in writing. Notice shall be considered
given (a) on the date when delivered personally, (b) when transmitted by
telecopy (receipt confirmed), provided that a copy is mailed at the end of the
following business day by first class mail, postage prepaid, (c) on the third
day after mailing by first class mail postage prepaid, or (d) on the next
business day following deposit within a nationally recognized overnight delivery
service for next day delivery addressed to the Managers in care of the Company
at the address of the Company's Principal Place of Business, and if to a Member
at that Member's address as reflected in the Operating Agreement, unless the
Member has given the Company a Notice of a different address.
Section 1.42 "Offsettable Decrease" shall mean any allocation that
unexpectedly causes or increases an Adjusted Deficit in a Member's or Assignee's
Capital Account as of the end of the Fiscal Year to which the allocation relates
attributable to depletion allowances under ss. 1.704(b)(2)(iv)(k) of the
Regulations, allocations of loss and deductions under ss.ss. 704(e)(2) or 706 of
the Code or ss. 1.751-1 of the Regulations, or distributions that, as of the end
of the Fiscal Year, are reasonably expected to be made to the extent they exceed
the offsetting increases to such Member's or Assignee's Capital Account that
reasonably are expected to occur during or (prior to) the Fiscal Years in which
such distributions are expected to be made (other than increases pursuant to a
minimum gain chargeback pursuant to sections 10.3 and 10.6 hereof).
Section 1.43 "Operating Agreement" shall mean this Operating Agreement
including all amendments hereto adopted in accordance with Section 15.2 and the
Act.
Section 1.44 "Organization" shall mean any entity permitted to be a Member
of a limited liability company under the Act. The term "Organization" includes,
without limitation, corporations (both non-profit and other corporations),
partnerships (both limited and general), joint ventures, limited liability
companies, and unincorporated associations, but does not include joint tenancies
and tenancies by the entirety.
Section 1.45 "Person" shall include an individual, trust, estate, or any
Organization.
Section 1.46 "Principal Place of Business" shall mean the principal office
of the Company designated in Section 2.3, or any other place or places as the
Managers may from time to time deem advisable.
Section 1.47 "Property" shall mean any property real, personal or mixed,
tangible or intangible, including money and any legal or equitable interest in
such property, but excluding services and promises to perform services in the
future.
Section 1.48 "Regulations" shall mean the permanent, temporary, proposed,
or proposed and temporary regulations issued by the of Department of the
Treasury that are promulgated under the Code as amended.
Section 1.49 "Related Person" shall mean a Person having a relationship to
a Member that is described in ss. 1.752-4(b) of the Regulations.
Section 1.50 "Shelby Energy Group" shall mean Shelby Energy Group, L.L.C.,
a Delaware limited liability company.
Section 1.51 "Substitute Member" shall mean an Assignee who has been
admitted as a Member of the Company in accordance with Section 13.2. Upon
becoming a Member of the Company, such Assignee shall have all the rights of a
Member as are described more fully in Section 13.2 hereof.
Section 1.52 "Termination For Cause" shall mean, with regard to Terry
Charcandy or Rodney Camp, as the case may, the termination of employment with
the Company upon any of the following events: (i) conviction of a felony under
any state or federal law, (ii) failure of such person to perform his duties
under any employment
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agreement with the Company in any material respect or the material breach by
such person of any of the terms of any such employment agreement, and such
person fails to cure such failure or breach within ten (10) days of receipt of
written notice to cure from the Company, and (iii) such person engages in
conduct which materially injures the Company's business or reputation or
materially and adversely affects the Company's interests.
Section 1.53 "Termination Without Cause" shall mean, with regard to Terry
Charcandy or Rodney Camp, as the case may, the termination of employment by the
Company for any reason other than because of his Termination For Cause,
Disability or death.
Section 1.54 "Taxing Jurisdiction" shall mean the taxing jurisdiction of
the Federal Government and of any state, local, or foreign government that
collects tax, interest or penalties, however designated, on any Member's share
of the income or gain attributable to the Company.
ARTICLE II
FORMATION OF COMPANY
Section 2.1 Organization. On October 9, 1996, the initial Members
organized the Company pursuant to the provisions of the Act by executing and
filing the Articles with the Judge of Probate.
Section 2.2 Registered Agent and Office. The registered agent for the
service of process and the registered office shall be that person and location
reflected in the Articles. The Managers may, from time to time, change the
registered agent or office through appropriate filings with the Secretary of
State. In the event the registered agent ceases to act as such for any reason or
the location of the registered office shall change, the Managers shall promptly
designate a replacement registered agent or file a notice of change of address
as the case may be.
Section 2.3 Principal Place of Business. The Principal Place of Business
of the Company is located at 1051 Oak Mountain Drive, Pelham, Alabama 35214. The
Company may locate its principal places of business at any other place or places
as the Managers may from time to time deem advisable.
Section 2.4 Permitted Businesses. The business of the Company shall be:
(a) To perform any and all business for which a limited liability
company may be organized under the Act, including, without limitation, mining,
processing, marketing and selling coal and related products.
(b) To accomplish any lawful business whatsoever or which shall at
any time appear conducive to or expedient for the protection or benefit of the
Company and its Property.
(c) To exercise all other powers necessary to or reasonably
connected with the Company's business which may be legally exercised by limited
liability companies under the Act or under the laws of any jurisdiction in which
the Company may conduct its business.
(d) To engage in all activities necessary, customary, convenient, or
incident to any of the foregoing.
ARTICLE III
NAMES AND ADDRESSES OF MEMBERS
The name and address of each Member and Assignee, and the Membership Units
of each such Member shall be listed on Exhibit A attached hereto. The Managers
shall update Exhibit A from time to time as necessary to accurately reflect the
information therein. Any amendment or revision to Exhibit A made in accordance
with this Agreement shall not be deemed an amendment to this Agreement for
purposes of requiring Member approval. Any reference in this Agreement to
Exhibit A shall be deemed to be a reference to Exhibit A as may be in effect
from time to time.
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ARTICLE IV
RIGHTS AND DUTIES OF MANAGERS
Section 4.1 Management. The management of the business and affairs of the
Company shall be vested in its Managers. Except for situations in which the
approval of the Members is expressly required by this Operating Agreement, or by
nonwaivable provisions of applicable law, the Managers shall have full and
complete authority, power and discretion to manage and control the business,
affairs and Properties of the Company, to make all decisions regarding those
matters and to perform any and all other acts or activities customary or
incident to the management of the Company's business.
Section 4.2 Number, Tenure, and Qualifications. The Company shall
initially have one (1) Manager. The number of Managers of the Company shall be
fixed from time to time by the affirmative vote or action of Members holding at
least a Majority of the Membership Units of the Company. Each Manager shall hold
office until such Manager's successor shall have been elected or designated and
qualified. A Manager need not be a resident of the State of Alabama or a Member
of the Company. The name and address of the initial Manager of the Company, are
as follows:
NAME ADDRESS
Shelby Energy Group, L.L.C. 2708 Cranberry Square
Morgantown, West Virginia 26505
Section 4.3 Managing Voting. With respect to all matters requiring the
vote of, action by, approval of or consent by "the Managers," the approval,
consent, vote or action by all of the Managers shall be required to take such
action, unless such other number of Managers is expressly required pursuant to
this Operating Agreement or nonwaivable provisions of the Act.
Section 4.4 Certain Powers of Managers. Except as otherwise required
pursuant to this Operating Agreement or by nonwaivable provisions of the Act,
including, without limitation, the provisions of Section 4.5 hereof, the
Managers shall have the power and authority, on behalf of the Company:
(a) To acquire Property from any Person and to hold and own Property
in the name of the Company;
(b) To invest any Company funds temporarily (by way of example but
not limitation) in time deposits, short-term governmental obligations,
commercial paper or other investments;
(c) To dispose of the Company's Property in the ordinary course of
the Company's business;
(d) To borrow money for the Company from banks, other lending
institutions, Managers, Members, or any Affiliate of the Managers or Members on
such terms as the Managers deem appropriate, and in connection therewith, to
hypothecate, encumber and grant security interests in the Property of the
Company to secure repayment of the borrowed sums. No debt shall be contracted or
liability incurred by or on behalf of the Company except as authorized by the
Managers, or to the extent permitted under the Act, by agents or employees of
the Company expressly authorized to contract such debt or incur such liability
by the Managers;
(e) To execute on behalf of the Company all instruments and
documents, including, without limitation, checks, drafts, notes and other
negotiable instruments, mortgages or deeds of trust, security agreements,
financing statements, documents providing for the acquisition, mortgage or
disposition of the Company's Property, assignments, bills of sale, leases,
partnership agreements, operating agreements of other limited liability
companies, and any other instruments or documents necessary to the business of
the Company;
(f) To purchase liability and other insurance to protect the
Company's Property and business;
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(g) To employ accountants, legal counsel, managing agents or other
experts to perform services for the Company and to compensate them from Company
funds;
(h) To enter into any and all other agreements on behalf of the
Company with any other Person for any purpose; and
(i) To do and perform any and all other acts as may be necessary or
appropriate to the conduct of the Company's business.
Unless authorized to do so by this Operating Agreement or by the Managers
of the Company, no attorney-in-fact, employee or other agent of the Company
shall have any power or authority to bind the Company in any way, to pledge its
credit or to render it liable pecuniarily for any purpose. No Member or Manager
shall have any power or authority to bind the Company unless the Member or
Manager has been authorized by the Managers to act as an agent of the Company in
accordance with the previous sentence.
Section 4.5 Limitation on Powers of Managers. Notwithstanding anything to
the contrary in this Article IV or elsewhere in the Operating Agreement or the
Articles, the Managers shall not have the power or authority to do any of the
following without the consent of the requisite number of Members or those
Members holding the requisite Membership Units in the Company:
(a) amend the Operating Agreement except in accordance with Article
III or Section 15.2 of this Operating Agreement;
(b) admit Assignees as Substitute Members except in accordance with
Section 13.2 of this Operating Agreement;
(c) admit Additional Members except in accordance with Section 13.3
of this Operating Agreement;
(d) continue the Company after a Dissociation Event except in
accordance with Section 14.3 of this Operating Agreement;
(e) Dispose of all or substantially all of the Company Property
except in accordance with Section 6.3 of this Operating Agreement;
(f) merge or consolidate the Company with or into one or more
limited liability companies or other entities except in accordance with Section
6.4 of this Operating Agreement;
(g) waive the requirement of the Members to make an Additional
Capital Contribution or Initial Delayed Capital Contribution except in
accordance with Sections 9.1 and 9.2 of this Operating Agreement;
(h) require the Members to make Additional Capital Contributions,
except in accordance with Section 9.2 of this Operating Agreement; or
(i) take any other action which requires the vote, approval or
consent of the Members under this Operating Agreement.
Section 4.6 Liability for Certain Acts. Each Manager shall perform its
duties as Manager in good faith, in a manner he reasonably believes to be in the
best interests of the Company, and with such care as an ordinarily prudent
person in a like position would use under similar circumstances. A Manager who
so performs the duties of Manager shall not have any liability by reason of
being or having been a Member of the Company. The Managers do not, in any way,
guarantee the return of the Members' Capital Contributions or a profit for the
Members from the operations of the Company. The Managers shall not be liable to
the Company or to any Member for any
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loss or damage sustained by the Company or any Member, unless the loss or damage
shall have been the result of fraud, deceit, gross negligence, willful
misconduct or a wrongful taking by the Manager.
Section 4.7 Committees of the Managers. The Managers may create one or
more committees. Any such committee, to the extent specified by the Managers,
may exercise the authority of the Managers in supervising the management of the
business affairs of the Company, except that a committee may not (i) authorize
distributions, except in accordance with a formula or method described by the
Managers; (ii) approve or propose to Members actions required by law to be
approved by the Members; (iii) fill vacancies of the Managers or any of its
committees; (iv) amend the Articles or the Operating Agreement or propose
amendments to the Articles or the Operating Agreement; (v) authorize any
Additional Capital Contributions; (vi) take any other actions which require the
approval of the Members under the Articles, the Operating Agreement or the Act;
or (vii) authorize the expenditure, or undertaking of an obligation, in excess
of $50,000.00.
Section 4.8 Officers. The officers of the corporation shall be elected by
the Managers and shall consist of a president and such other officers and
assistant officers as may be deemed necessary by the Managers. Any two or more
offices may be held by the same person. Each officer shall hold office at the
pleasure of the Managers or until such officer's death or such officer shall
resign or shall have been removed in the manner hereinafter provided. A vacancy
in any office may be filled by the Managers. The Managers may remove any officer
at any time with or without cause. The compensation of the officers shall be
fixed from time to time by the Managers, and no officer shall be prevented from
receiving such compensation by reason of the fact that such officer is also a
Manager of the Company. Officers and other employees of the Company need not be
Members or Managers of the Company. The officers of the Company, if and when
elected by the Managers of the Company, shall have the following duties:
(a) PRESIDENT. The president shall be the chief executive officer of
the Company and, subject to the direction of the Managers, shall have the
general and active management, supervision and control of the business and all
operations of the Company. The president may sign deeds, mortgages, bonds,
contracts, or other instruments on behalf of the Company, except where required
by law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Managers to some other
officer or agent of the Company. In general, the president shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the Managers from time to time. If there is no secretary, the
president shall assume the authority and duties of the secretary.
(b) VICE-PRESIDENTS. In the absence of the president or in the event
of the president's death or inability to act, the vice-president (or in the
event there be more than one vice-president, the vice-presidents in the order
determined by the Managers) shall perform the duties of the president, and when
so acting, shall have all the powers of and be subject to all the restrictions
upon the president. Any vice-president shall perform such other duties as from
time to time may be assigned to the vice-president by the president or by the
Managers.
(c) SECRETARY. The secretary shall prepare and keep the minutes of
the proceedings of the Members and of the Managers in one or more books provided
for that purpose; have responsibility for authenticating records of the Company;
see that all notices are duly given in accordance with the provisions of the
Operating Agreement or as required by law; be custodian of the corporate records
and of the seal of the Company; see that the seal of the Company is affixed to
all documents, the execution of which on behalf of the Company under its seal is
duly authorized; keep a register of the post office address of each Member which
shall be furnished to the secretary by such Member; and in general perform all
duties incident to the office of secretary and such other duties as from time to
time may be assigned to the secretary by the president, any vice president or
the Managers. If there is no treasurer of the Company, the secretary shall
assume the authority and duties of treasurer.
(d) TREASURER. The treasurer shall have charge and custody of and be
responsible for all funds and securities of the Company, receive and give
receipts for moneys due and payable to the Company from any source whatsoever,
and deposit all such moneys in the name of the Company in such banks, trust
companies or other depositaries as may be designated by the Managers, and in
general perform all of the duties incident to the office of treasurer and such
other duties as from time to time may be assigned to the treasurer by the
president, any vice-
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president or the Managers. If required by the Managers, the treasurer shall give
a bond for the faithful discharge of such treasurer's duties in such sum and
with such surety or sureties as the Managers shall determine.
Section 4.9 Managers Have No Exclusive Duty to Company. No Manager shall
be required to manage the Company as such Manager's sole and exclusive function,
and any Manager may have other business interests and may engage in other
activities in addition to those relating to the Company. Neither the Company nor
any Member shall have any right, by virtue of this Operating Agreement, to share
or participate in such other investments or activities of a Manager or to the
income or proceeds derived therefrom. A Manager shall incur no liability to the
Company or to any of the Members as a result of engaging in any other business
or venture.
Section 4.10 Property. Any and all Company Property shall be held in the
name of the Company.
Section 4.11 Bank Accounts. The Managers may from time to time open bank
accounts in the name of the Company.
Section 4.12 Records, Audits and Reports to be Maintained. At the expense
of the Company, the Managers or the appropriate officer of the Company shall
maintain the records and accounts of all operations and expenditures of the
Company. The Company shall maintain the following records at the Principal Place
of Business:
(a) A current list of the full name and last known business or
residence address of each Member;
(b) A copy of the Articles and all amendments thereto, together with
executed copies of any powers of attorney pursuant to which any documents have
been executed;
(c) Copies of the Company's Federal, foreign, state and local income
tax returns and reports, if any;
(d) A copy of the Operating Agreement including all amendments
thereto;
(e) Copies of any financial statements of the Company for the three
(3) most recent years; and
(f) Any other records and accounts as the Members shall require the
Company to maintain.
Section 4.13 Access to Records. The records required to be maintained by
the Company in this Article IV, and any other books and records of the Company,
wherever situated, are subject to inspection and copying at the reasonable
request of, and at the expense of, any Member or the Member's agent or attorney
during regular business hours of the Company.
Section 4.14 Reports to Members. The Managers shall provide reports at
least annually to the Members, other than Assignees, at such time and in such
manner as the Managers may determine reasonable. The Managers shall also provide
all Members with those information returns required by the Code and the laws of
all applicable local and foreign governments.
Section 4.15 Accounts. The Managers shall maintain a record of Capital
Account for each Member and Assignee in accordance with Article IX.
Section 4.16 Records of Membership Units. The Managers shall maintain a
record of the Membership Units held by each Member, as such Membership Units
shall be increased or decreased from time to time in accordance with this
Operating Agreement.
Section 4.17 Resignation. Any Manager of the Company may resign at any
time by giving prior written notice to the Members of the Company. The
resignation of any Manager shall take effect upon the receipt
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of the notice or at such later time as shall be specified in the notice, and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective. The resignation of a Manager who is also a
Member shall not affect the Manager's rights as a Member and shall not
constitute the Dissociation of such Manager as a Member.
Section 4.18 Removal. Any Manager may be removed, with or without cause,
by any Member or Members holding at least a Majority of the Membership Units of
the Company. The removal of a Manager who is also a Member shall not affect the
Manager's rights as a Member and shall not constitute a Dissociation of such
Manager as a Member.
Section 4.19 Vacancies. Any vacancy occurring for any reason among the
Managers of the Company may be filled by any Member or Members holding at least
a Majority of the Membership Units of the Company.
Section 4.20 Salaries. The salaries and other compensation of the
Managers, in their capacities as Managers of the Company, shall be fixed from
time to time by an affirmative vote or action of a Member or Members holding at
least Majority of the Membership Units of the Company, and no Manager shall be
prevented from receiving such salary by reason of the fact that the Manager is
also a Member of the Company.
ARTICLE V
MEETINGS OF MANAGERS
Section 5.1 Application of Article. The following provisions of this
Article V shall apply only at times during which there is more than one Manager
of the Company. When there is only a single Manager, there shall be no
requirements or procedures for regular or special meetings of the Managers, nor
shall a meeting or any other form of consent be required for the Manager to
exercise the authority granted under this Agreement.
Section 5.2 Meetings. Meetings of the Managers, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by any Manager
or any Member. Except as provided in Section 5.3, 5.4, 5.6 or 5.7 of this
Article V, Notice of the place, day and hour of a meeting of the Managers and
the purpose or purposes for which the meeting is called shall be given not less
than seven (7) nor more than thirty (30) days before the date of the meeting by
or at the direction of the Manager or Member calling the meeting to each Manager
entitled to vote or act at such meeting. The Managers may designate any place,
either within or outside the State of Alabama, as the place of meeting for any
meeting of the Managers. If no designation is made, or if a special meeting is
called, the place of meeting shall be the Principal Office of Business of the
Company in the State of Alabama.
Section 5.3 Regularly Scheduled Meeting. On an annual or more frequent
basis, the Managers may adopt a schedule of regularly scheduled meetings setting
forth the date, time and location of such meetings and, upon approval, such
schedule shall be provided to each Manager in writing. Notice of the place, day,
hour or purpose of any such regularly scheduled meeting shall not be required.
Section 5.4 Meeting of All Managers. If all of the Managers shall meet at
any time and place, either within or outside of the State of Alabama, and
consent to the holding of a meeting at such time and place, such meeting shall
be valid without call or Notice and at such meeting any lawful action may be
taken.
Section 5.5 Record Date. For purposes of (i) determining those Managers
entitled to Notice of or to vote at any meeting of Managers, or any adjournment
thereof, or (ii) in order to make a determination of Managers for any other
purpose, the date on which Notice of the meeting is mailed shall be the record
date for such determinations with respect to the Managers. When a determination
of those Managers entitled to vote at any meeting of the Managers has been made
as provided in this Section 5.5, such determination shall apply to any
adjournment thereof.
Section 5.6 Action by Managers Without a Meeting. Action required or
permitted to be taken at a meeting of Managers may be taken without a meeting if
the action is evidenced by one or more written consents
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describing the action taken, signed by the requisite number of Managers required
to approve such action and delivered to the Company for inclusion in the minutes
or for filing with the Company records. Action taken under this section is
effective when the requisite number of Managers have signed the consent, unless
the consent specifies a different effective date. The record date for
determining Managers entitled to take action without a meeting shall be the date
the first Manager signs a written consent. If an action by Managers is taken
without a meeting under this Section 5.6, Notice to the Managers shall be
considered waived, provided however, that if action is taken hereunder by less
than all of the Managers, Notice of such action shall be provided to the
nonparticipating Managers. Failure to provide the Notice described in the
preceding sentence shall not invalidate or otherwise affect the validity of any
action properly taken by the requisite number of Managers.
Section 5.7 Waiver of Notice. When any Notice is required to be given to
any Manager, a waiver thereof in writing signed by the person entitled to such
Notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such Notice.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
Section 6.1 Member Management Rights. Unless otherwise provided in this
Operating Agreement or by nonwaivable provisions of the Act, all Members (other
than Assignees) who have not Dissociated shall be entitled to vote on any matter
submitted to a vote of the Members. Each Member shall be entitled to the number
of votes equal to the number of Membership Units held by such Member.
Section 6.2 Liability of Members to Third Parties. Unless otherwise
provided by the Act, no Member shall be liable under any judgment, decree, or
order of a court, or in any other manner, for any debt, obligation or liability
of the Company, whether arising in contract, tort or otherwise, or for the acts
or omissions of any Member, Manager, officer, agent or employee of the Company.
Section 6.3 Approval of Sale of All of the Company's Property. The
affirmative vote or action of a Member or Members holding at least a Majority of
the Membership Units of the Company shall be required to approve the sale,
exchange or other disposition of all, or substantially all, of the Company's
Property.
Section 6.4 Approval of Merger or Consolidation. The affirmative vote or
action of a Member or Members holding at least a Majority of the Membership
Units of the Company shall be required to approve the merger or consolidation of
the Company with or into one or more limited liability companies or other
entities formed or organized under the laws of the State of Alabama, any other
state, the United States or any foreign jurisdiction, with the Company or the
other business entity being the surviving entity.
Section 6.5 Right of Withdrawal. Except as otherwise provided herein, no
Member shall have the right to withdraw as a Member of the Company or otherwise
seek the partition of the Company's Property, without the prior written consent
of the other Members.
Section 6.6 Conflicts of Interest:
(a) Except as provided in a separate written agreement between a
Member and the Company or any other Member, any Member shall be entitled to
enter into transactions that may be considered to be competitive with, or a
business opportunity that would be beneficial to, the Company, it being
expressly understood that the Members may enter into transactions that are
similar to the transactions into which the Company may enter.
(b) No Member shall be deemed to have violated a duty or obligation
to the Company merely because the Member's conduct furthers such Member's own
interest. Any Member may lend money to and transact other business with the
Company. The rights and obligations of a Member who lends money to or transacts
business with the Company are the same as those of a person who is not a Member,
subject to the Act or other applicable law. No transaction with the Company
shall be voidable solely because a Member or an Affiliate of the Member has a
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direct or indirect interest in the transaction if (i) either the transaction is
fair to the Company or (ii) the disinterested Members, in either case knowing
the material facts of the transaction and the Member's interest, authorize,
approve, or ratify the transaction.
ARTICLE VII
MEETINGS OF MEMBERS
Section 7.1 Meetings. Meetings of the Members may be called by the
Managers or by any Member of the Company upon not less that seven (7) days nor
more than thirty (30) days prior written Notice to each Member of the Company.
Such notice shall set forth the time and place of the meeting and the purpose
for which it is called. If no place for the meeting is designated, the place of
meeting shall be the Principal Place of Business of the Company.
Section 7.2 Manner of Acting. The affirmative vote or action of a Member
or Members holding at least a Majority of the Membership Units of the Company
shall be the vote or action of the Members, unless the vote or action of a
greater or lesser proportion or number of the Members is otherwise required by
the Act, by the Articles or by this Operating Agreement. Unless otherwise
expressly provided herein or required under applicable law, Members who have an
interest (economic or otherwise) in the outcome of any particular matter upon
which the Members vote may vote upon any such matter and their vote shall be
counted in the determination of whether the requisite matter was approved by the
Members. Any Member may participate in any meeting of the Members by means of a
conference telephone or similar communications equipment by means of which all
persons participating in such meeting can hear each other, and participation in
a meeting pursuant to this Section 7.2 shall constitute presence in person at
such meeting.
Section 7.3 Action by Members Without a Meeting. Action required or
permitted to be taken at a meeting of Members may be taken without a meeting and
without Notice if the action is evidenced by one or more written consents
describing the action taken, signed by those Members or that Member having the
requisite number of Membership Units required to take such action at a meeting
of the Members and delivered to the Managers of the Company for inclusion in the
minutes or for filing with the Company records. Action taken under this section
is effective when the requisite number of Members entitled to vote have signed
the consent, unless the consent specifies a different effective date. If an
action by Members is taken without a meeting under this Section 7.3, Notice to
the Members shall be considered waived, provided however, that if action is
taken hereunder by less than all of the Members, Notice of such action shall be
provided to the nonparticipating Members. Failure to provide the Notice
described in the preceding sentence shall not invalidate or otherwise affect the
validity of any action properly taken by the requisite number of Members.
Section 7.4 Waiver of Notice. When any Notice is required to be given to
any Member, a waiver thereof in writing signed by the person entitled to such
Notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such Notice.
ARTICLE VIII
INDEMNIFICATION
The Company shall indemnify any Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed claim,
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including appeals (including an action by or in the right of the
Company), by reason of the fact that such Person is or was a Member, Manager,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a member, manager, director, officer, partner, employee or
agent of another limited liability company, corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such Person in connection with such claim, action, suit or
proceeding if such Person acted in good faith and in a manner such Person
reasonably believed to be in or not opposed to the best
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interests of the Company, and, with respect to any criminal action or proceeding
had no reasonable cause to believe such Person's conduct was unlawful. The
termination of any claim, action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Person did not act in good
faith and in a manner which such Person reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that such Person's conduct
was unlawful.
Section 8.2 Determination of Meeting Applicable Standard. Any person
entitled to indemnification under Section 8.1 of this Article VIII shall be
deemed to have acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Company until such
person shall have been finally adjudged to have acted in bad faith and in a
manner such person reasonably believed to be against and not in the best
interests of the Company.
Section 8.3 Payment of Expenses in Advance of Disposition of Action.
Expenses (including attorneys' fees) incurred in defending a civil or criminal
claim, action, suit or proceeding shall be paid by the Company in advance of the
final disposition of such claim, action, suit or proceeding upon receipt of an
undertaking by or on behalf of the Member, Manager, officer, employee or agent
to repay such amount if and to the extent that it shall be ultimately determined
that such Person is not entitled to be indemnified by the Company as authorized
in this Article VIII.
Section 8.4 Non-Exclusivity of Article. The indemnification authorized in
and provided by this Article VIII shall not be deemed exclusive of and shall be
in addition to any other right to which those indemnified may be entitled under
any statute, rule of law, provision of articles of organization, operating
agreement, other agreement, vote or action of Members or by a Majority of the
Managers, or otherwise, both as to actions in such Person's official capacity
and as to actions in another capacity while holding such office, and shall
continue as to a Person who has ceased to be a Member, Manager, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a Person.
Section 8.5 Insurance. The Company may purchase and maintain insurance on
behalf of any Person who is or was a Member, Manager, officer, employee or agent
of the Company, or is or was serving at the request of the Company as a member,
manager, director, officer, partner, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such Person incurred by such
Person in any such capacity arising out of such Person's status as such, whether
or not the Company is required or permitted to indemnify such Person against
such liability under the provisions of this Article VIII or any statute.
ARTICLE IX
CONTRIBUTIONS AND CAPITAL ACCOUNTS
Section 9.1 Initial Capital Contributions. The Initial Capital
Contribution of (and Membership Units allocated to) each Member, as of the date
of this Agreement, is set forth on Exhibit A hereto. The Initial Capital
Contribution (to the extent not previously paid) shall be paid by each Member
upon execution of this Agreement in cash or its equivalent. The Initial Delayed
Contribution of each Member (if any) is set forth on Exhibit B hereto and shall
be paid by such Members contemporaneously with the closing of the transactions
contemplated by that certain Asset Purchase Agreement to be executed by and
among the Company, Oak Mountain Energy Corporation and certain other parties. If
no Closing occurs under the foregoing Asset Purchase Agreement, no Member shall
have any obligation to make any Initial Delayed Contribution.
Section 9.2 Additional Capital Contributions. In addition to the Initial
Capital Contributions and the Initial Delayed Contributions of the Members, in
the event a Member or Members holding at least a Majority of the Membership
Units of the Company or the Managers determine that Additional Capital
Contributions are reasonably necessary to facilitate the business needs of the
Company, including, without limitation, to meet the Company's operating
expenses, to fund the expansion of the Company's business, to acquire other
businesses or
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business entities and to purchase any Property reasonably necessary for the
operation of the Company, each Member shall be entitled, but not required, to
make such Additional Capital Contribution on a basis pro rata to such Member's
Membership Interest in the Company. Upon making such a determination, the
Company shall give Notice to each Member in writing at least fifteen (15) days
prior to the date on which the Additional Capital Contributions are due (the
"Company Contribution Notice"). Such Company Contribution Notice shall set forth
the amount of Additional Capital Contribution needed, the purpose for which the
contribution is needed, and the date by which the Member must contribute such
Additional Capital Contribution. Each Member who desires to make such Additional
Contribution shall provide Notice (the "Member Contribution Notice") to the
Company within fifteen (15) days of its receipt of the Company Contribution
Notice. In the event that one or more of the Members fails to provide the Member
Contribution Notice, the contributing Member or Members shall be entitled to
make such Additional Capital Contribution on a basis pro rata to such Members'
Membership Interest in the Company (calculated without taking into account the
Membership Units of the non-contributing Members). Contributing Members shall be
issued one additional Membership Unit for each $10 of Additional Capital
contributed by such Member. In the event that Terry Charcandy or Rodney Camp
provides the Member Contribution Notice to the Company, Terry Charcandy and/or
Rodney Camp, as the case may be, shall have sixty (60) days from receipt of the
Company Contribution Notice to obtain financing for their respective Additional
Capital Contribution and, if such person (i.e., Terry Charcandy or Rodney Camp)
fails to obtain such financing or otherwise fails to contribute Additional
Capital Contribution within such sixty (60) day period, no Membership Units
shall be issued to such person in connection with such Additional Capital
Contribution and the Contributing Members shall be permitted to make such
Additional Capital Contribution pursuant to the procedure specified above. The
Company shall not be entitled to issue Membership Units to an affiliate of a
Member in order to avoid the rights of the other Members to make Additional
Capital Contributions in order to maintain such Member's Membership Interest in
the Company; provided, however, that nothing contained in this Section 9.2 shall
prevent or otherwise restrict the Company from issuing additional Membership
Units to any unaffiliated third party in return for capital contributions from
such unaffiliated third party on such terms and conditions as determined by the
Managers; provided further that the admission of any such unaffiliated third
party as a Member of the Company shall be subject to the requirements set forth
in Section 13.3 hereof.
Section 9.3 Maintenance of Capital Accounts. The Company shall establish
and maintain Capital Accounts for each Member and Assignee.
(a) To each Member's Capital Account there shall be credited: (i)
such Member's Capital Contributions (provided, however, that in the case of a
Capital Contribution made in the form of a promissory note of which the
contributing Member is the maker, such Member's Capital Account shall be
increased with respect to such promissory note only when there is a taxable
disposition of such note by the Company or when, and to the extent that, the
contributing Member makes principal payments on such note); (ii) such Member's
distributive share of Net Profits and any items in the nature of income or gain
which are specially allocated pursuant to Sections 10.3 through 10.7 hereof, and
(iii) the amount of any Company liabilities assumed by such Member or which are
secured by any Property distributed to such Member.
(b) To each Member's Capital Account there shall be debited: (i) the
amount of cash and the Gross Asset Value of any Property distributed to such
Member pursuant to any provision of this Agreement; (ii) such Member's
distributive share of Net Losses and any items in the nature of expenses or
losses which are specially allocated pursuant to Sections 10.3 through 10.7
hereof, and (iii) the amount of any liabilities of such Member assumed by the
Company or which are secured by any property contributed by such Member to the
Company.
(c) In the event all or a portion of a Membership Interest is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred Membership Interest. This Section 9.3(c) shall not be interpreted as
permitting the transfer of any Economic Interest, Membership Interest or
Membership Unit that is otherwise prohibited under Article XII hereof.
(d) In determining the amount of any liability for purposes of this
Section 9.3, there shall be taken into account Code ss. 752(c) and any other
applicable provisions of the Code and Regulations.
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The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulations ss.
1.704-1(b), and shall be interpreted and applied in a manner consistent with
such Regulations. In the event the Managers shall determine that it is prudent
to modify the manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Company or any Member), are computed in order to comply with
such Regulations, the Managers may make such modification, provided that it is
not likely to have a material effect on the amounts distributable to any Member
pursuant to Section 14.4 hereof upon the dissolution of the Company. The
Managers also shall (i) make any adjustments that are necessary or appropriate
to maintain equality between the Capital Accounts of the Members and the amount
of Company capital reflected on the Company's balance sheet, as computed for
book purposes, in accordance with Regulations ss. 1.704-1(b)(2)(iv)(q), and (ii)
make any appropriate modifications in the event unanticipated events (for
example, the acquisition by the Company of oil or gas properties) might
otherwise cause this Agreement not to comply with Regulations ss. 1.704-1(b).
Section 9.4 Sale or Exchange of Interest. In the event of a sale or
exchange of some or all of a Member's or Assignee's Economic Interest in the
Company, the Capital Account of the transferring Member or Assignee shall become
the Capital Account of the Assignee acquiring such Interest, to the extent it
relates to the portion of the Economic Interest transferred.
Section 9.5 Compliance with ss. 704(b) of the Code. The provisions of this
Article IX as they relate to the maintenance of Capital Amounts are intended,
and shall be construed, and, if necessary, modified to cause the allocations of
profits, losses, income, gain and credit pursuant to Article X to have
substantial economic effect under the Regulations promulgated under ss. 704(b)
of the Code, in light of the Distributions made pursuant to Articles X and XIV
the Capital Contributions made pursuant to this Article IX. Notwithstanding
anything herein to the contrary, this Operating Agreement shall not be construed
as creating a deficit restoration obligation or otherwise personally obligate
any Member to make a Capital Contribution in excess of the Initial Capital
Contribution made by that Member.
ARTICLE X
ALLOCATIONS AND DISTRIBUTIONS
Section 10.1 Net Profits. Except as may be required by Sections 10.3
through 10.7 of this Article X, Net Profits shall be apportioned among the
Members in the following order and amounts:
(a) First, to and among the Members in amounts equal to the excess,
if any, of (i) the cumulative Net Losses allocated to the Members pursuant
to Section 10.2(c) hereof for all prior Fiscal Years, over (ii) the
cumulative Net Profits allocated to the Members pursuant to this Section
10.1(a) for all prior Fiscal Years; and
(b) The balance, if any, to and among the Members in proportion to
the Membership Units each Member holds as of the first day of the Fiscal
Year;
Section 10.2 Net Losses:
(a) Except as may be required by Sections 10.3 through 10.7 of this
Article X, Net Losses shall be apportioned to and among the Members in
proportion to the Membership Units each Member holds as of the first day
of the Fiscal Year;
(b) provided, however, that Net Losses shall not be allocated to any
Member pursuant to Section 10.2(a) to the extent that such allocation
would cause any Member to have an Adjusted Deficit at the end of such
Fiscal Year, and
(c) In the event some but not all of the Members would have Adjusted
Deficits as a consequence of an allocation of Net Losses pursuant to
Section 10.2(a), the limitation set forth in Section
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10.2(b) shall be applied on a Member-by-Member basis so as to allocate the
maximum permissible amount of Net Losses to each Member; and
(d) provided further that the limitation set forth in Section
10.2(b) shall cease to apply at the point at which all Members' Capital
Accounts (adjusted in accordance with Section 1.4 hereof) have been
reduced to zero, and thenceforth Net Losses shall be allocated in
accordance with Section 10.2(a) hereof.
(e) Notwithstanding any other provisions of this Section 10.2, if
the number of Membership Units held by any Member changes during the
Fiscal Year, or if any Members are admitted during the Fiscal Year, the
Net Profits and Net Losses otherwise to be allocated shall be consistent
with Section 13.3.
Section 10.3 Company Minimum Gain Chargeback. If there is a net decrease
in Company Minimum Gain for a Fiscal Year, each Member must be allocated items
of income and gain for that Fiscal Year (and, if necessary, subsequent Fiscal
Years) equal to that Member's share of the net decrease in Company Minimum Gain.
A Member's share of the net decrease in Company Minimum Gain is the amount of
the total net decrease multiplied by the Member's percentage share of the
Company Minimum Gain at the end of the immediately preceding Fiscal Year. A
Member's share of any decrease in Company Minimum Gain resulting from a
revaluation of Company Property equals the increase in the Member's Capital
Account attributable to the revaluation to the extent the reduction in Company
Minimum Gain is caused by the revaluation. A Member is not subject to this
Company Minimum Gain chargeback requirement to the extent the Member's share of
the net decrease in Company Minimum Gain is caused by a guarantee, refinancing,
or other change in the debt instrument causing it to become partially or wholly
a recourse liability or a Member Nonrecourse Liability, and the Member bears the
economic risk of loss (within the meaning of ss. 1.752-2 of the Regulations) for
the newly guaranteed, refinanced, or otherwise changed liability.
Section 10.4 Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal
Year shall be specially allocated to the Members in proportion to the number of
Membership Units held by each Member.
Section 10.5 Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year shall be allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Liability to which
such Member Nonrecourse Deductions are attributable in accordance with ss.
1.704-2(i) of the Regulations.
Section 10.6 Member Minimum Gain Chargeback. If during a Fiscal Year there
is a net decrease in Member Minimum Gain, any Member with a share of that Member
Minimum Gain (as determined under ss. 1.704-2(i)(5) of the Regulations) as of
the beginning of that Fiscal Year must be allocated items of income and gain for
that Fiscal Year (and, if necessary, for succeeding Fiscal Years) equal to that
Member's share of the net decrease in the Member Minimum Gain. A Member's share
of the net decrease in Member Minimum Gain is determined in a manner consistent
with the provisions of ss. 1.704-2(g)(2) of the Regulations. A Member is not
subject to this Member Minimum Gain chargeback, however, to the extent the net
decrease in Member Minimum Gain arises because the liability ceases to be Member
Nonrecourse Liability due to a conversion, refinancing, or other change in the
debt instrument that causes it to become partially or wholly a Company
Nonrecourse Liability. The amount that would otherwise be subject to the Member
Minimum Gain chargeback is added to the Member's share of Company Minimum Gain.
In addition, rules consistent with those applicable to Company Minimum Gain and
Company Minimum Gain chargeback shall be applied to determine the shares of
Member Minimum Gain and Member Minimum Gain chargeback to the extent provided
under the Regulations issued pursuant to ss. 704(b) of the Code.
Section 10.7 Qualified Income Offset. In the event any Member, in such
capacity, unexpectedly receives an Offsettable Decrease, such Member will be
allocated items of income and gain (consisting of a pro rata portion of each
item of income and gain of the Company for the Fiscal Year) in an amount and
manner sufficient to offset such Offsettable Decrease as quickly as possible.
This Section 10.7 is intended to be in accordance with ss.
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
Section 10.8 Curative Allocations. The allocations set forth in Sections
10.3 through 10.7 hereof (the "Regulatory Allocations") are intended to comply
with certain requirements of the Regulations. To the extent
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possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Company
income, gain, loss or deduction pursuant to this Section 10.8. Therefore,
notwithstanding any other allocation provision (other than the Regulatory
Allocations), the Managers shall make such offsetting special allocations of
Company income, gain, loss or deduction in whatever manner they may deem
appropriate so that each Member's Capital Account balance shall be, to the
maximum extent possible, equal to the Capital Account balance that each such
Member would have had if the Regulatory Allocations had not been part of this
Agreement, and all Company items were allocated pursuant to Sections 10.1 and
10.2 hereof. In exercising their discretion under this Section 10.8, the
Managers shall consider future Regulatory Allocations under Section 10.3 that,
although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 10.4 and 10.5.
Section 10.9 Tax Allocations: ss. 704(c) of the Code. In accordance with
Code ss. 704(c) and the Regulations thereunder, income, gain, loss, and
deduction with respect to any property contributed to the capital of the Company
shall, solely for tax purposes, be allocated among the Members so as to take
account of any variation between the adjusted basis of such property to the
Company for federal income tax purposes and its initial Gross Asset Value
(computed in accordance with Section 1.27(a) hereof). In the event the Gross
Asset Value of any Company asset is adjusted pursuant to Section 1.27(b) hereof,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code ss. 704(c) and the Regulations thereunder. Any elections or
other decisions relating to such allocations shall be made by the Managers in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 10.9 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Member's Capital Account or share of Net Profits, Net Losses,
other items, or distributions pursuant to any provision of this Agreement.
Section 10.10 Interim Distributions. From time to time, and subject to
Section 10.11 hereof, the Managers shall determine in their reasonable judgment
to what extent, if any, the Company's cash on hand exceeds the current and
anticipated needs for such moneys, including, without limitation, needs for
operating expenses, debt service, acquisitions, reserves, and mandatory
distributions, if any. To the extent such excess exists, a Majority of the
Managers may make Distributions to the Members in proportion to each Member's
Membership Units in the Company as of the date of such Distribution. An Interim
Distribution shall be in cash or Property (which need not be distributed
proportionately) or partly in both, as determined by the Managers. The Company
shall distribute cash to the Members, to the extent not previously distributed
during or with respect to a fiscal year, on or before ninety (90) days after the
end of each fiscal year, in an amount equal to the federal and state taxes
payable by the Members with respect to the income of the Company for the
preceding fiscal year, for the foregoing purpose, the members shall all be
assumed to be subject to the highest federal and the highest Alabama state
income tax rates for single individuals for the prior fiscal year.
Section 10.11 Limitations on Distributions.
(a) No Distribution shall be declared and paid unless, after the
Distribution is made, the Property of the Company is in excess of all
liabilities of the Company and the Company has sufficient working capital as
determined by the Managers, except liabilities to Members on account of their
Capital Accounts.
(b) No Distribution shall be made to a Member to the extent that
such Distribution would cause such Member to have an Adjusted Deficit at the end
of such Fiscal Year, provided that in the event some but not all of the Members
would have Adjusted Deficits as a consequence of a Distribution, the limitation
set forth in this Section 10.11(b) shall be applied on a Member-by-Member basis
so as to permit the maximum permissible amount of Distributions to be made to
each Member; and provided further that the limitation set forth in this Section
10.11(b) shall cease to apply at the point at which all Members' Capital
Accounts (adjusted in accordance with Section 1.4 hereof) have been reduced to
zero, and thenceforth Distributions may be made in accordance with Section
10.10.
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ARTICLE XI
CERTAIN TAX MATTERS
Section 11.1 Elections. The Managers may make any tax elections for the
Company allowed under the Code or the tax laws of any Taxing Jurisdiction.
Section 11.2 Taxes of Taxing Jurisdictions. To the extent that the laws of
any Taxing Jurisdiction so require, each Member requested to do so by the
Managers will submit an agreement indicating that the Member will make timely
income tax payments to the Taxing Jurisdiction and that the Member accepts
personal jurisdiction of the Taxing Jurisdiction with regard to the collection
of income taxes attributable to the Member's income, and interest and penalties
assessed on such income. If the Member fails to provide such agreement, the
Company may withhold and pay over to such Taxing Jurisdiction the amount of tax
penalties and interest determined under the laws of the Taxing Jurisdiction with
respect to such income. Any such payments with respect to the income of a Member
shall be treated as a distribution for purposes of Article X. The Managers may,
where permitted by the rules of any Taxing Jurisdiction, file a composite,
combined or aggregate tax return reflecting the income of the Company and pay
the tax, interest and penalties of some or all of the Members on such income to
the Taxing Jurisdiction, in which case the Company shall inform the Members of
the amount of such tax interest and penalties so paid.
Section 11.3 Tax Matters Partner. Shelby Energy Group is hereby designated
as the "Tax Matters Partner" of the Company, as such term is defined by ss.
6231(a)(7) of the Code. The Tax Matters Partner shall: (i) notify each Member of
all administrative and judicial proceedings for the adjustment of Company items
and shall periodically report to the Members on the status of such proceedings;
(ii) cause to be prepared and filed Company tax returns and tax elections and
determinations as are necessary, appropriate or desirable; (iii) use its best
efforts to deliver to each Person who was a Member of the Company at any time
during a Fiscal Year a copy of the Company's proposed federal income tax return
for such Fiscal Year at least 30 days prior to the due date (with extensions)
for filing such return; (iv) provide each Member with a copy of such return and
Schedule K-1 as filed. Each Member shall notify the Tax Matters Partner of its
intention to file a federal income tax return that is inconsistent with the
information or amounts included on the Member's Form K-1 or other forms or
attachments to the Company's U.S. Partnership Return of Income (Form 1065). The
Members shall provide the Tax Matters Partner with a copy of any Form 8082 filed
by the Member with respect to the Company's items. The Tax Matters Partner shall
take such action as may be necessary to cause each Member (other than a Member
who acts as the Tax Matters Partner) to become a notice partner within the
meaning of ss. 6223 of the Code. No Member who is designated Tax Matters Partner
may take any action contemplated by ss.ss. 6222 through 6232 of the Code without
the consent of a Member or Members holding at least a Majority of the Membership
Units of the Company.
Section 11.4 Method of Accounting. The records of the Company shall be
maintained on the method of accounting chosen by the Managers.
ARTICLE XII
DISPOSITION OF MEMBERSHIP UNITS
Section 12.1 Limitations. An Assignee of a Membership Unit under this
Article XII shall have only those rights of an Assignee as described more fully
in Section 13.1 hereof and shall have no right to become a Member of the Company
or to participate in the management of the business and affairs of the Company
unless such Assignee is admitted as a Substitute Member in accordance with
Section 13.2 of this Operating Agreement.
Section 12.2 Consent, Etc. No Member or Assignee may Dispose of all or a
portion of such Member's or Assignee's Membership Units, unless:
(a) Prior to the Disposition, the Company receives, unless waived by
the Members in writing, an opinion of counsel satisfactory to Members holding at
least a Majority of the Membership Units of the Company (which determination of
a Majority shall include the Membership Units held by, and the consent or vote
of, the transferring Member) that: (i) such Disposition is not subject to an
effective registration under, or exempt from the
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registration requirements of, the applicable state and federal securities laws,
and (ii) such Disposition, alone or when combined with other transactions, would
not result in a termination of the Company within the meaning of ss. 708 of the
Code (unless the Member disposing of its Membership Units agrees to indemnify
the Company and the other Members for any adverse consequences of such
termination);
(b) Prior to the Disposition, the Company receives from the
transferee the information and agreements that the Members may reasonably
require, including, but not limited to, any taxpayer identification number and
any agreement that may be required by the Taxing Jurisdiction; and
(c) The transferring Member or Assignee shall either:
(i) First obtain the written consent to such Disposition of a
Member or Members holding at least a Majority of the Membership Units of the
Company (which determination of a Majority shall include the Membership Units
held by, and the consent or vote of, the transferring Member); or
(ii) Comply with the provisions of Section 12.3 below.
Section 12.3 Permitted Sales. In the event a Member or Assignee (other
than the Controlling Member) shall have received and wishes to accept a bona
fide offer to sell or assign of all or any portion of such Member's or
Assignee's Membership Unit, but has not received the prior written consent
referred to in Section 12.2 above, such Member or Assignee may sell the same
only after offering it to the Company and the other Members in the following
manner:
(a) Such Member or Assignee (other than the Controlling Member)
desiring to sell all or part of such Membership Units shall serve Notice upon
the Company and the other Members (including the Controlling Member), stating
that the transferring Member or Assignee has received a bona fide offer for the
sale of such Member's or Assignee's Membership Units and setting forth the
following information:
(i) the portion of the transferring Member's or Assignee's
Membership Units proposed to be sold,
(ii) the name and address and business or occupation of the
Person offering to purchase such Membership Unit, and
(iii) the sales price and terms and conditions of such sale.
Such Notice shall also contain an offer by the transferring Member or Assignee
to sell such Membership Units to the Company and to the other Members at the
price and under the terms offered by such bona fide offeror.
(b) For a period of fifteen (15) days after the receipt of such
Notice, the Company shall have the option to purchase all of the Membership
Units so offered. If the Company fails to exercise said option, the Members, or
any one or more of them, on a basis pro rata to their respective Membership
Units in the Company (calculated without including the Membership Interest of
the Member or Assignee desiring to sell its Membership Units) or on such other
basis as the Members shall agree to, shall have the option to purchase for a
period of thirty (30) days after the termination of the Company's option, all of
such Membership Units offered for sale.
(c) In the event the Company or the Members, or any one or more of
the Members, shall exercise their option to purchase all of the Membership Units
offered in the Company under this Section 12.3, the Company or the Members
exercising such option to purchase, as the case may be, shall designate the
time, date and place of closing; provided, however, that the date of closing
shall be within sixty (60) days of the date that the Company or Members, as the
case may be, provide Notice to the transferring Member or Assignee of their
election to purchase such transferring Member's or Assignee's Membership Units.
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(d) In the event that neither the Company nor the Members shall
exercise their option to purchase, as provided herein, the transferring Member
or Assignee shall be free to transfer such Member's or Assignee's Membership
Units to the Person named in the aforesaid Notice at the price and upon the
terms and conditions set forth in such Notice, subject to the limitations
contained in Article XIII; provided, however, that such Disposition shall be
made within sixty (60) days following the termination of the last option of the
Members to purchase such Membership Units, subject to the limitations contained
in Article XIII. If such Disposition is not consummated within said sixty (60)
day period, the provisions of this Section 12.3 shall again be applicable to the
Member's or Assignee's Membership Units with respect to which the Member or
Assignee had received a bona fide offer.
Section 12.4 Transfer Upon Dissociation of a Member (Other Than Death or
Incompetency). In the event a Member shall Dissociate as a Member of the Company
for any reason (other than as a result of a Member's death or incompetency),
then the Company shall have the option to purchase (exercisable within twelve
months after such event of Dissociation), and the Dissociated Member shall be
obligated to sell to the Company, all of such Member's Membership Units in the
Company. The purchase price to be paid by the Company for such Membership Units
shall be determined and paid in accordance with the provisions of Section 12.8
below.
Section 12.5 Transfer Upon Dissociation of a Member Due to Death or
Incompetency. In the event a Member shall Dissociate as a Member of the Company
as a result of the death or incompetency of such Member, then the Company shall
have the obligation to purchase, and the Dissociated Member or the estate of the
Dissociated Member, as the case may be, shall be obligated to sell to the
Company, all of such Member's Units in the Company. The purchase price to be
paid by the Company for such Membership Units shall be determined and paid in
accordance with the provisions of Section 12.8 below. In the event of the death
or incompetency of a Member, any insurance proceeds payable to the Company as a
result of the death or incompetency of such Member shall not be included within
the determination of purchase price.
Section 12.6 Company Redemption Right. In addition to any other right of
purchase set forth in this Operating Agreement, the Company shall have the right
to purchase the Membership Units of Terry Charcandy and Rodney Camp under the
following circumstances and under the following terms:
(a) Termination Without Cause, Disability. In the event of the
Termination Without Cause or the Disability of Terry Charcandy or Rodney Camp,
then the Company shall have the obligation to purchase, and Terry Charcandy or
Rodney Camp, as the case may be, shall be obligated to sell to the Company, all
of his Membership Units in the Company. The purchase price to be paid by the
Company for such Membership Units shall be determined and paid in accordance
with the provisions of Section 12.8 below.
(b) Termination For Cause. In the event of the Termination For Cause
of Terry Charcandy or Rodney Camp, then the Company shall have the option to
purchase (exercisable within twelve months after the date of such Termination
For Cause), and Terry Charcandy or Rodney Camp, as the case may be, shall be
obligated to sell to the Company, all of his Membership Units in the Company.
The purchase price to be paid by the Company for such Membership Units shall be
determined and paid in accordance with the provisions of Section 12.8 below.
(c) Failure to Produce. Upon the occurrence of any Failure to
Produce Event, then the Company shall have the obligation to purchase, and Terry
Charcandy and Rodney Camp shall be obligated to sell to the Company, all of
their Membership Units in the Company. The purchase price to be paid by the
Company for such Membership Units shall be determined and paid in accordance
with the provisions of Section 12.8 below.
Section 12.7 Put Rights. At any time after attaining the age of fifty-five
(55) years, Terry Charcandy and Rodney Camp shall each have the right to require
the Company to purchase all, but not less than all, of the Membership Units then
held by such Person, by delivering a Notice ("Put Notice") to the Company. Upon
receipt of the Put Notice, the Company will become obligated to purchase all,
but not less than all, of the Membership Units then held by the Person. The
Purchase price to be paid by the Company for such Membership Units shall be
determined and paid in accordance with the provisions of Section 12.8 below.
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Section 12.8 Purchase Price. The purchase price of a Membership Unit to be
purchased in accordance with the provisions of Sections 12.4, 12.5, 12.6, and
12.7 above shall be determined as follows:
(a) The purchase price of each Membership Unit purchased pursuant to
Sections 12.4, 12.5, 12.6 and 12.7 shall be determined as of the last day of the
month preceding the month during which the event giving rise to the purchase
obligation, and shall be the amount that would have been distributed to such
Member with respect to the Membership Interest to be purchased hereunder, in
liquidation of the Company pursuant to Section 14.4 hereof as if (i) all of the
Property of the Company had been sold for its fair market value (as determined
in accordance with Section 12.8(b) below), (ii) the Company paid its accrued but
unpaid liabilities and established reserves pursuant to Article XIV hereof for
the payment of reasonably anticipated contingent or unknown liabilities,
including amounts payable pursuant to Terry Charcandy's and Rodney Camp's
employment agreements with the Company, (iii) all allocations and distributions
called for by this Agreement through the date of such determination were taken
into account, and (iv) the Company distributed the remaining proceeds to the
Members in liquidation, all as of such day.
(b) The determination of the purchase price under this Section 12.8
shall be determined as follows: (1) for the first thirty (30) days following the
exercise of an option to purchase or following the date of that the obligation
to purchase arises, the Company and the transferring Member shall negotiate in
good faith regarding the purchase price for the Membership Units being
transferred; (2) in the event that the Company and the transferring Member are
unable to agree on a purchase price within such thirty (30) day period, the
transferring Member and the Company shall, within fifteen (15) days after
expiration of such thirty (30) day period, select and agree upon an Appraiser to
determine such purchase price, and the appraisal of such Appraiser shall be
binding on the parties; and (3) in the event that the Company and the
transferring Member are unable to agree upon an Appraiser, (i) the Company and
the transferring Member shall each appoint within ten (10) days after the
expiration of the aforementioned thirty (30) and fifteen (15) day periods, an
Appraiser, and such Appraisers shall promptly appoint a third Appraiser, (ii)
each of such three Appraisers shall perform a separate written appraisal of the
Company, and (iii) the average of the two closest appraisals from such three
Appraisers shall be the purchase price and shall be binding upon the parties.
(c) The aggregate purchase price due under this Section 12.8 shall
be paid in the following manner:
(i) There shall first be credited against such purchase price
the amount of any indebtedness due and payable to the Company by such Member,
other than any indebtedness due under the promissory notes referred to in
Section 9.1.
(ii) There shall next be credited the amount of any expenses
or damages incurred by the Company as a result of Dissociation (other than
pursuant to Dissociation because of death or incompetency).
(iii) The balance of the purchase price shall be payable at
closing which shall occur within thirty (30) days following the latter of the
final determination of the purchase price or the exercise of the Company's
option to purchase; provided, however, upon the election of the Company, the
balance of the purchase price shall be payable in three (3) equal annual
installments, with interest at the then current prime rate quoted in the Wall
Street Journal plus two (2) percentage points, the first installment of which
shall be due within thirty (30) days following the latter of the final
determination of the purchase price or the exercise of the Company's option to
purchase. Such installment obligation shall be evidenced by a negotiable
promissory note of the Company, and shall be secured by a pledge of such
Membership Units transferred to the Company.
Section 12.9 Certain Additional Permitted Transfers. Notwithstanding
the provisions of Article XII or Article XIII, Controlling Member shall be
entitled to Dispose from time to time all or any portion of its Membership
Units, without giving rise to any rights of first refusals or options or
consent-requirement and, upon effectiveness of such Disposition, to the extent
set forth in the applicable instrument of Disposition, such transferee shall
become a Substitute Member and succeed to all of the rights and obligations
(including voting and other governance rights) of the Controlling Member with
regard to the Disposed Membership Units without any further action on the part
of the Members or the Company.
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ARTICLE XIII
ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS
Section 13.1 Rights of Assignees. Notwithstanding anything to the
contrary contained in this Operating Agreement (other than pursuant to Section
12.9 hereof), the only rights, if any, which an Assignee of a Member shall have
are those rights associated with the Economic Interest received and such
Assignee shall not receive any right to participate in the management of the
business and affairs of the Company or to become a Member; provided, however,
that in the event an Assignee is an existing Member of the Company, such
Assignee shall receive all rights to participate in the management of the
business and affairs of the Company incident to the transferred Membership or
Economic Interest. An Assignee is only entitled to receive the Distributions and
return of capital, and to be allocated the Net Profits and Net Losses
attributable to a transferred Membership Economic Interest.
Section 13.2 Admission of Substitute Members. An Assignee of a
Membership Unit shall be admitted as a Substitute Member and entitled to all the
rights of the Member who initially assigned the Membership Units only with the
written approval of Members holding at least Eighty Percent (80%) of the
Membership Units. The Members may grant or withhold the approval of such
admission in their sole and absolute discretion. If so admitted, the Substitute
Member has all the rights and powers and is subject to all the restrictions and
liabilities of the Member originally assigning the Membership Units. The
admission of a Substitute Member, without more, shall not release the Member
originally assigning the Membership Units from any liability to the Company that
may have existed prior to the approval.
Section 13.3 Admission of Additional Members. From the date of
formation of the Company, any Persons acceptable to a Member or Members holding
at least Eighty Percent (80%) of the Membership Units of the Company, as
reflected by the written approval of such Member or Members, may become
Additional Members of the Company for such consideration as such Members shall
determine, subject to the terms and conditions of this Operating Agreement. No
Additional Member shall be entitled to any retroactive allocation of income,
gain, loss, deduction or credit by the Company. The Members may, at their
option, at the time the Additional Member is admitted, close the Company's books
(as though the Company's Fiscal Year had ended) or make pro rata allocations of
income, gain, loss, deduction or credit to the Additional Member for that
portion of the Company's Fiscal Year in which the Member was admitted in
accordance with the provisions of ss. 706(d) of the Code and the Regulations
promulgated thereunder. Upon admission of an Additional Member, this Operating
Agreement shall be amended in order to reflect such additional Member's
Membership Units in the Company.
ARTICLE XIV
DISSOCIATION, DISSOLUTION AND WINDING UP
Section 14.1 Dissociation. A Person shall cease to be a Member upon the
happening of any of the following Dissociation Events:
(a) the withdrawal of a Member with the consent of the other Members
holding at least a Majority of the remaining Membership Units;
(b) upon the Managers' receipt of notice with respect to a Member
who:
(i) makes an assignment for the benefit of creditors;
(ii) files a voluntary petition in bankruptcy;
(iii) files a petition or answer seeking for the Member any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation:
(iv) files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against the Member in
any proceeding in the nature of the proceedings listed in (iii); or
24
<PAGE> 29
(v) seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of the Member of all or any substantial part of
the Member's properties:
(c) in the case of a Member who is a natural person, the death of
the Member or the entry of an order by a court of competent jurisdiction
adjudicating the Member incompetent to manage the Member's person or property.
Section 14.2 Rights of Dissociating Member. In the event a Member
Dissociates from the Company and such Dissociation causes a dissolution and
winding up of the Company under this Article, the Member shall be entitled to
participate in the winding up of the Company to the same extent as any other
Member except that any Distributions to which the Member would have been
entitled shall be reduced by damages sustained by the Company as a result of the
Dissolution and winding up.
Section 14.3 Dissolution. The Company shall be dissolved and its affairs
wound up prior to such date, upon the first to occur of the following events
(which, unless the Members agree to continue the business, shall constitute
Dissolution Events):
(a) the written consent of a Member or Members holding at least a
Majority of the Membership Units of the Company;
(b) the Dissociation of any Member as provided in Section 14.1 of
this Article, unless (i) there are at least two remaining Members or at least
one remaining Member and an Additional Member or Substitute Member is admitted
in accordance with Article XIII hereof and (ii) the legal existence and business
of the Company is continued with the consent of a Member or Members holding at
least Eighty Percent (80%) of the Membership Units within 90 days after such
Dissociation.
(c) the merger of the Company and the Company is not the successor
limited liability company in such merger or the consolidation of the Company
with one or more limited liability companies or other entities.
(d) The entry of a final decree of dissolution of the Company by a
court of competent jurisdiction.
(e) On October 9, 2026, unless the business of the Company is
continued with the vote, consent or action of a Member or Members holding at
least Eighty Percent (80%) of the Membership Units within ninety (90) days after
such date.
Section 14.4 Distribution of Assets on Dissolution. Upon the winding up of
the Company, Company Property shall be distributed in the following order:
(a) to creditors, including Members who are creditors, to the extent
permitted by law, in satisfaction of Company liabilities;
(b) to Members in accordance with positive Capital Account balances
taking into account all allocations, contributions, distributions, and Capital
Account adjustments for the Company's Fiscal Year in which the liquidation
occurs. Liquidation proceeds shall be paid within 60 days of the end of the
Company's Fiscal Year or, if later, within 90 days after the date of
liquidation. Such distributions shall be in cash or property (which need not be
distributed proportionately) or partly in both, as determined by a Majority of
the Managers.
Section 14.5 Winding Up and Articles of Dissolution. The winding up of the
Company shall be completed when all debts, liabilities, and obligations of the
Company have been paid and discharged or reasonably adequate provision therefor
has been made, and all of the remaining Property of the Company has been
distributed to the Members. Upon the completion of winding up of the Company,
articles of dissolution shall be delivered to the Judge of Probate. The articles
of dissolution shall set forth such information as is required by the Act.
25
<PAGE> 30
Section 14.6 Effect of Dissolution. Upon dissolution, the Company shall
cease carrying on, as distinguished from the winding up of, the Company
business, but the Company is not terminated, but continues until the winding up
of the affairs of the Company is completed and a certificate of dissolution with
respect to the Company, or the equivalent, has been issued by the Secretary of
State.
ARTICLE XV
AMENDMENT
Section 15.1 Operating Agreement May Be Modified. This Operating Agreement
may be modified as provided in this Article XV (as the same may from time to
time be amended). No Member or Manager shall have any vested rights in this
Operating Agreement.
Section 15.2 Amendment or Modification of Operating Agreement. This
Operating Agreement may be amended or modified from time to time only by a
written instrument adopted by a Member or Members holding at least a Majority of
the Membership Units of the Company; provided, however that the unanimous
consent or approval of the Members shall be required in order to make an
amendment affecting how distributions and allocations under Article X or Article
XIV will be made to the Members, an amendment affecting the rights or
obligations of the Members with respect to Additional Capital Contributions or
an amendment affecting the right of a member to transfer its Membership Units or
the purchase price payable for Membership Units under Article XII.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Entire Agreement. This Operating Agreement constitutes the
entire agreement among the parties. No party shall be bound by any terms,
conditions, statements or representations, oral or written, not herein
contained. Each party hereby acknowledges that in executing this Operating
Agreement, such party has not been induced, persuaded or motivated by any
promise or representation made by any other party, unless expressly set forth
herein. All previous negotiations, statements and preliminary instruments by the
parties or their representatives are merged in this Operating Agreement.
Section 16.2 Rights of Creditors and Third Parties. This Operating
Agreement is entered into by and among the Members for the exclusive benefit of
the Company, its Members, and their successors and assignees. This Operating
Agreement is expressly not intended for the benefit of any creditor of the
Company or any other Person. Except and only to the extent provided by the Act
or other applicable statute, no such creditor or third party shall have any
rights under this Operating Agreement or any agreement between the Company and
any Member with respect to any Capital Contribution or otherwise.
Section 16.3 Changes in Applicable Law. In the event that any covenant,
condition, or other provision contained in this Agreement, or any part of the
business of the Company (whether or not conducted by the Company) is determined
to be invalid, void or illegal, the Members shall amend this Agreement, any
other affected agreements, and/or the manner in which the business of the
Company is conducted to comply with such laws. For purposes of this Section
16.3, a good faith determination of illegality by a Member based on an opinion
of counsel shall be sufficient to trigger the application of this Section. Any
decisions regarding the manner in which such illegality will be addressed shall
require the agreement of all of the Members.
Section 16.4 Interpretation. For and in consideration of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Members executing
this Operating Agreement hereby agree to the terms and conditions contained
herein, as it may from time to time be amended according to its terms. It is the
express intention of the Members that this Operating Agreement and the Articles
shall be the sole source of agreement of the parties, and, except to the extent
a provision of the Operating Agreement expressly incorporates Federal income tax
rules by reference to sections (") of the Code or Regulations or is expressly
prohibited or ineffective under the Act, the Operating Agreement shall govern,
even
26
<PAGE> 31
when inconsistent with, or different than, the provisions of the Act or any
other law or rule. To the extent any provision of this Operating Agreement is
prohibited or ineffective under the Act, the Operating Agreement shall be
considered amended to the smallest degree possible in order to make the
agreement effective under the Act. In the event the Act is subsequently amended
or interpreted in such a way to make any provision of this Operating Agreement
that was formerly invalid valid, such provision shall be considered to be valid
from the effective date of such interpretation or amendment.
Section 16.5 Governing Law. This Operating Agreement, and the application
or interpretation hereof, shall be governed exclusively by its terms and by the
laws of the State of Alabama, and specifically the Act, applied without respect
to any conflicts-of-law principles.
Section 16.6 Execution of Additional Instruments. Each Member hereby
agrees to execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
Section 16.7 Construction of Terms. Whenever used in this Agreement and
when required by the context, the singular number shall include the plural and
the plural the singular. Pronouns of one gender shall include all genders.
Section 16.8 Captions. The captions as to contents of particular articles,
sections or paragraphs contained in this Operating Agreement and the table of
contents hereto are inserted for convenience and are in no way to be construed
as part of this Operating Agreement or as a limitation on the scope of the
particular articles, sections or paragraphs to which they refer.
Section 16.9 Waivers. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any agreement or
condition of this Operating Agreement shall not prevent a subsequent act, which
would have originally constituted a violation, from having the effect of an
original violation.
Section 16.10 Rights and Remedies Cumulative. The rights and remedies
provided by this Operating Agreement are cumulative and the use of any one right
or remedy by any party shall not preclude or waive the right to use any or all
other remedies. Said rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise.
Section 16.11 Heirs, Successors and Assigns. Each and all of the
covenants, terms, provisions and agreements herein contained shall be binding
upon and inure to the benefit of the parties hereto and, to the extent permitted
by this Operating Agreement, their respective heirs, legal representatives,
successors and assigns.
Section 16.12 Counterparts. This Operating Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
[The Remainder Of This Page Was Left Blank Intentionally]
27
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have executed this Operating
Agreement as of the 20th day of February, 1997.
MEMBERS:
SHELBY ENERGY GROUP, L.L.C.
By: /s/ John J. Faltis
-------------------------------
As Its: Manager
/s/ Rodney Camp
----------------------------------
Rodney Camp
/s/ Terry Charcandy
----------------------------------
Terry Charcandy
28
<PAGE> 33
EXHIBIT A
Name, Address and Capital Contributions
Members Member Capital Contribution Initial Membership
- ------- and Value as of Effective Time Units
------------------------------ ------------------
Shelby Energy Group, Inc. $940.00 94
2708 Cranberry Square
Morgantown West Virginia 26505
Rodney Camp $50.00 5
1051 Oak Mountain Drive
P.O. Box 1057
Pelham, Alabama 35214
Terry Charcandy $10.00 1
1051 Oak Mountain Drive
P.O. Box 1057
Pelham, Alabama 35214
<PAGE> 34
EXHIBIT B
Name, Address and Initial Delayed Contribution
Additional
Member Initial Delayed Membership
Members Contribution and Value Units
- ------- ---------------------- -----
Shelby Energy Group, L.L.C. $20,000,000, consisting of (i) 2,000,000
2708 Cranberry Square the assignment of the Third
Morgantown, West Virginia 26505 Amended and Restated Negotiable
time Promissory Note dated
January 21, 1997, of Oak
Mountain Energy Corporation to
Zither Mining to Company, Inc.
in the principal amount of
$8,000,000, as the same may be
hereafter increased from time
(the "Note"), and (ii) an amount
of cash equal to $20,000,000
less (A) the principal amount of
the Note assigned to the Company
under (i) above, (B) accrued but
unpaid interest under the Note,
and (C) all expenses incurred by
Oak Mountain Group, Inc., Shelby
Energy Group, Inc., their
respective parent corporations
and Affiliates in connection
with the Asset Purchase
Agreement executed
contemporaneously herewith, up
to a maximum of $439,000.
Rodney Camp Promissory Note in the form of 106,383
1051 Oak Mountain Drive Exhibit C to the Operating
P.O. Box 1057 Agreement in the principal
Pelham, Alabama 35214 amount of $1,063,830.
Terry Charcandy Promissory Note in the form of 21,276
1051 Oak Mountain Drive Exhibit C to the Operating
P.O. Box 1057 Agreement in the principal
Pelham, Alabama 35214 amount of $212,760.
<PAGE> 35
EXHIBIT C
Form of Promissory Note
PROMISSORY NOTE
$_______________ Pelham, Alabama
_____________, 1997
FOR VALUE RECEIVED, ____________________________, an Alabama resident
("Maker"), promises to pay to the order of Oak Mountain Energy, L.L.C., an
Alabama limited liability company ("Holder"), the principal sum of
_________________ and No/100 Dollars ($___________________), together with
accrued interest thereon at the annual rate of __________ percent (__%) on or
before ___________, 19___. Interest shall be calculated on the basis of a
360-day year and the actual number of days elapsed.
Optional Prepayment. The Maker, at its option may prepay this Note in
whole or in part without premium or penalty at any time. Any partial prepayment
shall be applied against the principal amount outstanding and shall not postpone
the due date of any subsequent monthly installment or change the amount of such
installment, unless the Holder shall otherwise agree in writing.
Events of Default. Each of the following shall constitute a default (an
"Event of Default") hereunder: (a) Maker shall fail to make any payment(s) of
principal and/or interest as and when due hereunder, or shall fail to perform or
observe any other covenant or agreement of Maker set forth herein; (b) Maker
shall fail to pay any other sum owed to Holder under any other agreement or
instrument as and when due; (c) any breach by Maker of the terms and provision
of any bank loan agreement to which Maker is party; (d) Maker shall have an
order for relief entered with respect to it or commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case, under any
such law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or any part of its property; (e)
Maker shall make an assignment for the benefit of creditors or the Board of
Directors of Maker (or any committee thereof) shall adopt any resolution or
otherwise authorizes any action to approve any of the foregoing; or (f) an
involuntary case shall be commenced against Maker and the petition shall not be
dismissed within sixty (60) days after commencement of the case, or a court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of Maker in an involuntary case, under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or any similar
relief shall be granted under any applicable federal or state law; or a decree
or order of a court having jurisdiction in the premises for the appointment of a
receiver, liquidator, sequestrator, trustee, custodian or other officer having
similar powers over Maker, or over all or any part of the property of Maker,
shall be entered; or an interim receiver, trustee or custodian of Maker or of
all or any part of the property of Maker shall be appointed or a warrant of
attachment, execution or similar process against all or any part of the property
of Maker shall be issued and any such event shall not be stayed, dismissed,
bonded or discharged within sixty (60) days of entry, appointment or issuance.
Upon the occurrence of any one or more of the foregoing Events of Default,
the entire unpaid principal sum of this Note and all accrued but unpaid interest
and other charges thereon, shall become immediately due and payable without
notice to or demand upon the undersigned.
Late Penalty. Without in any way limiting (and in addition to) any other
rights or remedies of the Holder under this Note, if any scheduled payment or
installment under this Note is in default ten (10) days or more, Maker agrees to
pay a late charge equal to five percent (5%) of the amount of the payment which
is in default.
Waivers. The undersigned hereby waives as to this Note, and any renewal or
extension hereof, all rights of exemption hereof, all rights of exemption under
the Constitution and laws of Alabama, and of any other state, as to personal
property, and agrees to pay all costs of collecting or securing or attempting to
collect or secure this Note, including reasonable attorneys' fees. Each maker,
endorser, surety and guarantor of this Note severally waives
<PAGE> 36
notice, demand, dishonor, notice of dishonor, presentment, protest, suit and all
other requirements necessary to hold it or any of them obligated hereon, and
each of them severally agrees that the time of payment may be extended or a
renewal note taken or other indulgence granted without requirement of notice of,
or consent to, such action, and without affecting the obligations of any such
party hereon.
The Holder may accept late payments and partial payments without affecting
the existence of an Event of Default hereunder or its right to insist upon
strict compliance with the terms of this Note with respect to any other or
future payment. The Holder shall not by any act, delay, failure to act or
otherwise be deemed to have waived any of its rights or remedies, and no waiver
of any kind shall be valid unless in writing and signed by the Holder.
Setoff. The Maker shall have the right to setoff against any amounts owed
to the Holder under this Note any amounts for which the Holder is liable to the
Maker under the employment agreement between the Holder and Maker of even date
herewith.
Choice of Law; Severability; Parties Bound. This Note shall be governed by
and construed in accordance with the laws of the State of Alabama without regard
to principles of conflict of laws. Any provision of this Note which may be
unenforceable or invalid under any applicable law shall be void to the extent of
such unenforceability or invalidity without affecting the enforceability or
validity of any other provision hereof. The provisions of this Note are binding
on Maker, his heirs, legal or personal representatives, designees and assigns
and shall inure to the benefit of Holder, his heirs, legal or personal
representatives, designees and assigns.
IN WITNESS WHEREOF, the undersigned has executed this document on the date
first above written.
___________________________________
Name: ___________________
32
<PAGE> 1
EXHIBIT 10.10.2
AMENDMENT NO. 1 TO THE
OPERATING AGREEMENT
OF
OAK MOUNTAIN ENERGY, L.L.C.
This Amendment No. 1 to the Operating Agreement of Oak Mountain
Energy, L.L.C., is made as of the 9th day of April, 1997, by and among the
undersigned who constitute all of the Members of Oak Mountain Energy, L.L.C., an
Alabama limited liability company (the "Company").
W I T N E S S E T H:
WHEREAS, the Members of the Company are parties to that certain
Operating Agreement of the Company effective as of the 18th day of February,
1997 (the AOperating Agreement");
WHEREAS, the Members of the Company believe it to be desirable and
in the best interests of the Company to amend the Operating Agreement of the
Company in order (i) to permit the Company to certificate the Membership Units
of the Company, (ii) to replace Exhibit B of the Operating Agreement, (iii) to
change the provisions regarding the rights of Substitute Members and (iv) to
permit the Members to vote by proxy;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree to amend the Operating Agreement as follows:
1. Definitions. Terms used herein but not otherwise defined shall
have the same meaning as ascribed to them in the Operating Agreement.
2. Exhibit B. The undersigned, constituting all of the Members of
the Company, hereby agree that Exhibit B to the Operating Agreement, which sets
forth the names and the addresses of the Members, Initial Delayed Capital
Contributions to be made by the Members and the number of Membership Units to be
issued to the Members in connection with the Initial Delayed Capital
Contribution, shall be amended by and replaced with Exhibit B attached hereto.
3. Certificates. The undersigned, constituting all of the Members of
the Company, hereby agree that a new Section 4.21 shall be added to the
Operating Agreement of the Company, which Section 4.21 shall read in its
entirety as follows:
"Section 4.21-- Certificates for Membership Units. The Company
shall issue to each Member a certificate in the form of the specimen
certificate attached hereto as Exhibit D which shall evidence
1
<PAGE> 2
the Membership Units of the Company. The following provisions shall apply
with respect to the certificates representing the Membership Units:
(A) All certificates shall be consecutively numbered. The name
of the Person owning the Membership Units, and the date of issue, shall be
entered upon the Company=s books. Each certificate shall be signed by at
least one Manager of the Company. A record of such certificates shall be
kept with the Company=s books and records.
(B) All certificates surrendered to the Company shall be
canceled, and no new certificates shall be issued until the former
certificates for an equal number of Membership Units shall have been
surrendered and canceled except in cases of a lost or destroyed
certificate. Any Person claiming a certificate to be lost or destroyed
shall make an affidavit of that fact, and advertise the same as the
Managers may require, whereupon the new certificate may be issued of the
same tenor and for the same number of Membership Units as the one alleged
to be lost or destroyed, but always subject to the approval of the
Managers.
(C) Subject to the restrictions on transfer contained in this
Operating Agreement, Membership Units of the Company shall be transferable
by the holder thereof or by its duly authorized agent or attorney, upon
surrender of the certificate properly endorsed or together with a properly
signed power of transfer.
(D) Subject to the restrictions on transfer contained in this
Operating Agreement, the Managers shall have the power and authority to
make all such rules and regulations as they may deem expedient concerning
the issue, transfer and regulation of the certificates for the Membership
Units of the Company.
(E) The certificates representing the Membership Units of the
Company shall bear the following legend:
THE MEMBERSHIP UNITS REPRESENTED BY THIS CERTIFICATE, AND THE SALE,
ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR ANY OTHER DISPOSITION
OR ENCUMBRANCE THEREOF ARE SUBJECT TO THE TERMS, CONDITIONS,
RESTRICTIONS AND LIMITATIONS CONTAINED IN THE OPERATING AGREEMENT OF
THE COMPANY AMONG THE MEMBERS OF THE COMPANY EFFECTIVE AS OF
FEBRUARY 18, 1997, AS THE SAME SHALL BE AMENDED FROM TIME TO TIME."
4. Rights of Substitute Members. The undersigned, constituting all
of the Members of the Company, hereby agree that Section 13.2 be, and it hereby
is, amended and restated in its entirety as follows:
"Section 13.2 Admission of Substitute Members. Except as provided in
this Section 13.2, an Assignee of a Membership Unit shall be admitted as a
Substitute Member and entitled to all the rights of the Member who
assigned the Membership Units only with the written approval of Members
holding at least Eighty Percent (80%) of the Membership Units. The Members
may grant or withhold the approval of such admission in their sole and
absolute discretion. If so admitted, the Substitute Member has all the
rights and powers and is subject to all the restrictions and liabilities
of the Member assigning the Membership Units. The admission of a
Substitute Member, without more, shall not release the Member assigning
the
2
<PAGE> 3
Membership Units from any liability to the Company that may have existed
prior to the approval. Notwithstanding anything to the contrary in this
Operating Agreement, any Assignee of a Membership Unit by or under any
pledge thereof in favor of Mellon Bank, N.A., or its successors or
assigns, (i) shall be admitted as a Substitute Member and entitled to all
the rights of the Member who assigned the Membership Unit without any
further action, approval or consent by any Member, Manager or other
Person, and (ii) shall not, to the extent permitted under the Act, be
subject to any of the known or unknown liabilities of the assigning Member
(including any obligations to make a contribution to the Company)."
5. Proxies. The undersigned, constituting all of the Members of the
Company, hereby agree that Section 6.1 be, and it hereby is, amended and
restated in its entirety as follows:
"Section 6.1 Member Management Rights. Unless otherwise provided in
this Operating Agreement or by nonwaivable provisions of the Act, all
Members (other than Assignees) who have not Dissociated shall be entitled
to vote on any matter submitted to a vote of the Members. Each Member
shall be entitled to the number of votes equal to the number of Membership
Units held by such Member, and may vote such Membership Units either in
person or by written proxy. No proxy shall be valid after six (6) months
from the date of its execution, unless otherwise provided in the proxy."
6. No other Amendments. Except as otherwise amended, revised or
changed in this Amendment to the Operating Agreement, the Operating Agreement
shall remain in full force and effect and shall be binding on the parties in
accordance with its terms.
7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument.
[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY]
3
<PAGE> 4
IN WITNESS WHEREOF, all of the Members of the Company have caused
this Amendment to the Operating Agreement to be executed as of the day and year
first above written.
THE MEMBERS:
SHELBY ENERGY GROUP, L.L.C.
/s/ John J. Faltis
---------------------------------
John J. Faltis
As Its Manager
/s/ Bruce Sparks
---------------------------------
Bruce Sparks
As Its Manager
/s/ Christopher J. Murphy
---------------------------------
Christopher J. Murphy
As Its Manager
/s/ Bruce E. Grewcock
---------------------------------
Bruce E. Grewcock
As Its Manager
/s/ Terry Charcandy
---------------------------------
Terry Charcandy
/s/ Rodney Camp
---------------------------------
Rodney Camp
4
<PAGE> 5
EXHIBIT B
Name, Address and Initial Delayed Contribution
Additional
Member Initial Delayed Membership
Members Contribution and Value Units
- ------- ---------------------- -----
Shelby Energy Group, L.L.C. $30,000,000, consisting of (i) 3,000,000
2708 Cranberry Square the assignment of the Fifth
Morgantown, West Virginia 26505 Amended and Restated Negotiable
Promissory Note dated April 1,
1997, of Oak Mountain Energy
Corporation to Zither Mining
Company, Inc. in the principal
amount of $9,500,000, as the same
may be hereafter increased from
time to time (the "Note"), and
(ii) an amount of cash equal to
$30,000,000 less (A) the
principal amount of the Note
assigned to the Company under (i)
above, (B) accrued but unpaid
interest under the Note, and (C)
all expenses incurred by Oak
Mountain Group, Inc., Shelby
Energy Group, Inc.,
Anker-Alabama, L.L.C., their
respective parent corporations
and Affiliates in connection with
the Asset Purchase Agreement
executed contemporaneously
herewith, up to a maximum of
$439,000.
Rodney Camp Promissory Note in the form of 106,383
1051 Oak Mountain Drive Exhibit C to the Operating
P.O. Box 1057 Agreement in the principal
Pelham, Alabama 35214 amount of $1,063,830.
Terry Charcandy Promissory Note in the form of 21,276
1051 Oak Mountain Drive Exhibit C to the Operating
P.O. Box 1057 Agreement in the principal
Pelham, Alabama 35214 amount of $212,760.
<PAGE> 6
EXHIBIT 10.11.1
OPERATING AGREEMENT
OF
SHELBY ENERGY GROUP, L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY
<PAGE> 7
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
FORMATION OF COMPANY
Section 2.1 Organization........................................... 7
Section 2.2 Registered Agent and Office............................ 7
Section 2.3 Principal Place of Business............................ 7
Section 2.4 Permitted Businesses................................... 7
ARTICLE III
NAMES AND ADDRESSES OF MEMBERS
ARTICLE IV
RIGHTS AND DUTIES OF MANAGERS
Section 4.1 Management............................................. 7
Section 4.2 Number, Tenure and Qualifications...................... 8
Section 4.3 Manager Voting......................................... 8
Section 4.4 Certain Powers of Managers............................. 8
Section 4.5 Limitation on Powers of Managers....................... 9
Section 4.6 Liability for Certain Acts............................. 10
Section 4.7 Committees of the Managers............................. 10
Section 4.8 Intentionally omitted.................................. 10
Section 4.9 Managers Have No Exclusive Duty to Company............. 10
Section 4.10 Property............................................... 10
Section 4.11 Bank Accounts.......................................... 10
Section 4.12 Records, Audits and Reports to be Maintained........... 10
Section 4.13 Access to Records...................................... 11
Section 4.14 Reports to Members..................................... 11
Section 4.15 Accounts............................................... 11
Section 4.16 Records of Membership Units............................ 11
Section 4.17 Resignation............................................ 11
Section 4.18 Removal................................................ 11
Section 4.19 Vacancies.............................................. 12
ARTICLE V
MEETINGS OF MANAGERS
Section 5.1 Meetings............................................... 12
Section 5.2 Regularly Scheduled Meeting............................ 12
Section 5.3 Meeting of All Managers................................ 12
Section 5.4 Record Date............................................ 12
Section 5.5 Action by Managers Without a Meeting................... 12
Section 5.6 Waiver of Notice....................................... 12
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
Section 6.1 Member Management Rights............................... 12
i
<PAGE> 8
Section 6.2 Liability of Members to Third Parties.................. 13
Section 6.3 Approval of Sale of All of the Company's Property...... 13
Section 6.4 Approval of Merger or Consolidation.................... 13
Section 6.5 Right of Withdrawal.................................... 13
Section 6.6 Conflicts of Interest.................................. 13
ARTICLE VII
MEETINGS OF MEMBERS
Section 7.1 Meetings............................................... 13
Section 7.2 Manner of Acting....................................... 13
Section 7.3 Action by Members Without a Meeting.................... 14
Section 7.4 Waiver of Notice....................................... 14
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification of Members, Managers, Etc.............. 14
Section 8.2 Determination of Meeting Applicable Standard........... 14
Section 8.3 Payment of Expenses in Advance of Disposition of Action 14
Section 8.4 Non-Exclusivity of Article............................. 15
Section 8.5 Insurance.............................................. 15
ARTICLE IX
CONTRIBUTIONS AND CAPITAL ACCOUNTS
Section 9.1 Initial Capital Contributions.......................... 15
Section 9.2 Additional Capital Contributions....................... 15
Section 9.3 Maintenance of Capital Accounts........................ 16
Section 9.4 Sale or Exchange of Interest........................... 16
Section 9.5 Compliance withss.704(b) of the Code................... 16
ARTICLE X
ALLOCATIONS AND DISTRIBUTIONS
Section 10.3 Company Minimum Gain Chargeback........................ 17
Section 10.5 Member Nonrecourse Deductions.......................... 18
Section 10.6 Member Minimum Gain Chargeback......................... 18
Section 10.7 Qualified Income Offset................................ 18
Section 10.9 Tax Allocations: ss. 704(c) of the Code.................. 18
Section 10.10 Interim Distributions.................................. 19
Section 10.11 Limitations on Distributions........................... 19
ARTICLE XI
CERTAIN TAX MATTERS
Section 11.1 Elections.............................................. 19
Section 11.2 Taxes of Taxing Jurisdictions.......................... 19
Section 11.3 Tax Matters Partner.................................... 19
Section 11.4 Method of Accounting................................... 20
ARTICLE XII
DISPOSITION OF MEMBERSHIP UNITS
Section 12.1 Limitations............................................ 20
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Section 12.2 Consent, Etc........................................... 20
Section 12.3 Permitted Sales by the Member.......................... 20
Section 12.4 Transfer Upon Dissociation of a Member................. 21
Section 12.5 Purchase Price......................................... 21
Section 12.6 Certain Additional Permitted Transfers of
Membership Units by Members ........................... 22
Section 12.7 Certain Limitations on Transfers of Capital Stock...... 23
ARTICLE XIII
ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS
Section 13.1 Rights of Assignees.................................... 23
Section 13.2 Admission of Substitute Members........................ 23
Section 13.3 Admission of Additional Members........................ 23
ARTICLE XIV
DISSOCIATION, DISSOLUTION AND WINDING UP
Section 14.1 Dissociation........................................... 24
Section 14.2 Rights of Dissociating Member.......................... 24
Section 14.3 Dissolution............................................ 24
Section 14.4 Distribution of Assets on Dissolution.................. 25
Section 14.5 Winding Up and Certificate of Cancellation............. 25
Section 14.6 Effect of Dissolution.................................. 25
ARTICLE XV
AMENDMENT
Section 15.1 Operating Agreement May Be Modified.................... 25
Section 15.2 Amendment or Modification of Operating Agreement....... 25
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Entire Agreement....................................... 26
Section 16.2 Rights of Creditors and Third Parties.................. 26
Section 16.3 Changes in Applicable Law.............................. 26
Section 16.4 Interpretation......................................... 26
Section 16.5 Governing Law.......................................... 26
Section 16.6 Execution of Additional Instruments.................... 26
Section 16.7 Construction of Terms.................................. 26
Section 16.8 Captions............................................... 26
Section 16.9 Waivers................................................ 27
Section 16.10 Rights and Remedies Cumulative......................... 27
Section 16.11 Heirs, Successors and Assigns.......................... 27
Section 16.12 Counterparts........................................... 27
Section 16.13 Certain Disputes Between Kiewit Alabama and
Simba Group ........................................... 27
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Operating Agreement
Of
Shelby Energy Group, L.L.C.,
A Delaware Limited Liability Company
This Operating Agreement of Shelby Energy Group, L.L.C., a limited
liability company organized pursuant to the Delaware Limited Liability Company
Act, shall be effective as of the Effective Date (as defined herein), by and
among the Persons executing this Operating Agreement as Members.
ARTICLE I
DEFINITIONS
The following terms used in this Operating Agreement shall have the
following meanings unless otherwise expressly provided herein:
Section 1.1 "Act" shall mean the Delaware Limited Liability Company Act,
as amended from time to time, and any successor thereto.
Section 1.2 "Additional Capital Contribution" shall mean any Capital
Contribution other than an Initial Capital Contribution and the Initial Delayed
Capital Contribution that a Member is obligated to make in accordance with
Section 9.2.
Section 1.3 "Additional Member" shall mean a Member, other than an Initial
Member or a Substitute Member, who has acquired a Membership Unit of the Company
and has become a Member in accordance with Section 13.3.
Section 1.4 "Adjusted Deficit" shall mean with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentences of
Regulation ss.ss. 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in ss.ss.
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Deficit is intended to comply with the
provisions of ss. 1.704-1(b)(2)(ii)(d) of the Regulations and shall be so
construed.
Section 1.5 "Affiliate" shall mean, with respect to any Person, (i) any
Person directly or indirectly controlling, controlled by, or under common
control with such Person, (ii) any Person owning or controlling ten percent
(10%) or more of the outstanding voting interests of such Person, (iii) any
member, manager, officer, director or general partner of such Person, or (iv)
any Person who is a member, manager, officer, director, general partner,
trustee, or a holder of ten percent (10%) or more of the voting interests of any
Person described in clauses (i) through (iii) of this sentence. For purposes of
this definition, the term "controls," "is controlled by" or "is under common
control with" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management policies of a person or entity,
whether through the ownership of voting securities, by contract or otherwise.
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Section 1.6 "Appraiser" means an unaffiliated and unrelated business
consultant or independent Investment Banker who is familiar with the type of
business in which the Company is involved and would qualify as an "expert" for
business appraisals in a court of law.
Section 1.7 "Assignee" shall mean a transferee of an Economic Interest who
has not been admitted as a Substitute Member. Such transferee of a Membership
Unit shall be entitled to merely an Economic Interest in the Company until and
unless such Assignee is admitted as a Substitute Member in accordance with this
Operating Agreement.
Section 1.8 "Capital Account" shall mean the account maintained with
respect to a Member or Assignee determined in accordance with Article IX.
Section 1.9 "Capital Contribution" shall mean the amount of money and the
Gross Asset Value of Property (other than money) contributed to the Company by
or on behalf of a Member or Assignee.
Section 1.10 "Certificate" shall mean the Certificate of Formation of the
Company, as amended from time to time.
Section 1.11 "Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor thereto.
Section 1.12 "Company" shall mean Shelby Energy Group, L.L.C., a Delaware
limited liability company, and any successor limited liability company.
Section 1.13 "Company Minimum Gain" shall mean an amount determined by
first computing for each Company Nonrecourse Liability any gain the Company
would realize if it disposed of the Company Property subject to that liability
for no consideration other than full satisfaction of the liability, and then
aggregating the separately computed gains. The amount of Company Minimum Gain
includes such minimum gain arising from a conversion, refinancing, or other
change to a debt instrument, only to the extent a Member is allocated a share of
that minimum gain. For any Fiscal Year, the net increase or decrease in Company
Minimum Gain is determined by comparing the Company Minimum Gain on the last day
of the immediately preceding Fiscal Year with the Minimum Gain on the last day
of the current Fiscal Year. Notwithstanding any provision to the contrary
contained herein, Company Minimum Gain, and increases and decreases in Company
Minimum Gain, are intended to be computed in accordance with ss. 704 of the Code
and the Regulations issued thereunder, as the same may be issued and interpreted
from time to time.
Section 1.14 "Company Nonrecourse Liability" shall mean any debt or
obligation of the Company to the extent that no Member or Related Person bears
the economic risk of loss (as defined in ss. 1.752-2 of the Regulations) with
respect to the liability.
Section 1.15 "Company Property" shall mean any Property owned by the
Company.
Section 1.16 "Depreciation" means, for each Fiscal Year, an amount equal
to the depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such Fiscal Year, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Fiscal Year, Depreciation shall be an amount
which bears the same ratio to such beginning Gross Asset Value as the federal
income tax depreciation, amortization, or other cost recovery deduction for such
Fiscal Year bears to such beginning adjusted tax basis; provided, however, that
if the adjusted basis for federal income tax purposes of an asset at the
beginning of such Fiscal Year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the Managers.
Section 1.17 "Disposition" ("Dispose") shall mean any sale, assignment,
transfer, exchange, mortgage, pledge, grant, hypothecation, or other transfer,
absolute or as security or encumbrance (including dispositions by operation of
law) of an Economic Interest or Membership Unit in the Company.
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Section 1.18 "Dissociation (Dissociate)" shall mean any action or event
which causes a Person to cease to be Member of the Company as described in
Article XIV hereof.
Section 1.19 "Dissociation Event" shall mean an event, the occurrence of
which will result in the dissolution of the Company under Article XIV unless the
Members agree to the contrary.
Section 1.20 "Distribution" shall mean a transfer of Property made by the
Company to a Member or an Assignee on account of such Member's or Assignee's
Economic Interest or Membership Unit as
described in Article X.
Section 1.21 "Economic Interest" shall mean a Member's or Assignee's share
of the Company's Net Profits, Net Losses, and Distributions of the Company's
Property pursuant to this Operating Agreement and the Act, but shall not include
any right to participate in the operation, management or affairs of the Company,
including the right to vote on, consent to, or otherwise participate in any
decision of the Members.
Section 1.22 "Effective Date" shall mean February 18, 1997.
Section 1.23 "Fiscal Year" shall mean (i) the period commencing on the
Effective Date of this Agreement and ending on December 31, 1997, (ii) any
subsequent twelve (12) month period commencing on January 1 and ending on
December 31, and (iii) any portion of the period described in clause (ii) for
which the Company is required to allocate Profits, Losses and other items of
Company income, gain, loss or deduction pursuant to Article X hereof.
Section 1.24 "Gross Asset Value" shall mean, with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset, as
determined by the Managers, provided that the initial Gross Asset Values of the
assets contributed to the Company pursuant to Sections 9.1 and 9.2 hereof shall
be as set forth and determined in such sections;
(b) The Gross Asset Values of all Company assets shall be adjusted
to equal their respective gross fair market values, as determined by the
Managers, as of the following times: (i) the acquisition of an additional
Membership Interest or Membership Unit by any new or existing Member in exchange
for more than a de minimis Capital Contribution; (ii) the distribution by the
Company to a Member of more than a de minimis amount of Property as
consideration for a Membership Interest or Membership Unit; and (iii) the
liquidation of the Company within the meaning of Regulations ss.
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses
(i) and (ii) above shall be made only if the Managers reasonably determine that
such adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the Company;
(c) The Gross Asset Value of any Company asset distributed to any
Member shall be adjusted to equal the gross fair market value of such asset on
the date of distribution as determined by the Managers; and
(d) The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code ss. 734(b) or Code ss. 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Regulation ss. 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values
shall not be adjusted pursuant to this Section 1.24(d) to the extent the
Managers determine that an adjustment pursuant to Section 1.24(b) hereof is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this Section 1.24(d). If the Gross Asset
Value of an asset has been determined or adjusted pursuant to Section 1.24(a),
Section 1.24(b), or Section 1.24(d) hereof, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Net Profits and Net Losses.
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Section 1.25 "Initial Capital Contribution" shall mean the Capital
Contribution agreed to be made by the Members as described in Section 9.1 and
set forth on Exhibit A attached hereto.
Section 1.26 "Initial Delayed Contribution" shall mean the Initial Delayed
Contribution agreed to be made by the Initial Members as described in Section
9.1 and set forth on Exhibit B attached hereto.
Section 1.27 "Initial Members" shall mean those persons identified on
Exhibit A attached hereto who have executed this Operating Agreement as of the
Effective Date.
Section 1.28 "Kiewit Alabama" shall mean Kiewit Alabama Mining Company, a
Delaware corporation.
Section 1.29 "Majority" with respect to Members, shall mean those Members
owning more than Fifty Percent (50%) of the Membership Units in the Company;
similarly, any reference in this Agreement to any other specified percentage of
the Members shall refer to those Members holding, in the aggregate, the
specified percentage of Membership Units in the Company and, for this purpose,
Assignees, transferees and other holders of Economic Interests who have not been
admitted as Members pursuant to Section 13.2 hereof shall be deemed to hold zero
Membership Units.
Section 1.30 "Managers" shall mean the Persons designated by the Members
to manage the affairs of the Company under Article IV hereof.
Section 1.31 "Member" shall mean an Initial Member, Substitute Member or
Additional Member of the Company who has not ceased to be a Member.
Section 1.32 "Member Minimum Gain" shall mean an amount determined in
accordance with Regulations ss. 1.704-2(i) by first computing for each Member
Nonrecourse Liability any gain the Company would realize if it disposed of the
Company Property subject to that liability for no consideration other than full
satisfaction of the liability, and then aggregating the separately computed
gains. The amount of Member Minimum Gain includes such minimum gain arising from
a conversion, refinancing, or other change to a debt instrument, only to the
extent a Member is allocated a share of that minimum gain. For any Fiscal Year,
the net increase or decrease in Member Minimum Gain is determined by comparing
the Member Minimum Gain on the last day of the immediately preceding Fiscal Year
with the Member Minimum Gain on the last day of the current Fiscal Year.
Notwithstanding any provision to the contrary contained herein, Member Minimum
Gain and increases and decreases in Member Minimum Gain are intended to be
computed in accordance with ss. 704 of the Code and the Regulations issued
thereunder, as the same may be issued and interpreted from time to time.
Section 1.33 "Member Nonrecourse Deductions" shall mean the net increase
during the Fiscal Year, if any, in Member Minimum Gain, reduced (but not below
zero) by any distribution of proceeds that are attributable to a Member
Nonrecourse Liability and allocable to an increase in such Member Minimum Gain
under ss. 1.704-2(i) of the Regulations.
Section 1.34 "Member Nonrecourse Liability" shall mean any debt or
obligation of the Company to the extent the liability is nonrecourse under state
law, and on which a Member or Related Person bears the economic risk of loss
under ss. 1.752-2 of the Regulations because, for example, the Member or Related
Person is the creditor or a guarantor.
Section 1.35 "Membership Interest" shall mean a Member's entire interest
in the Company including such Member's Economic Interest and the right of the
Member to participate in the management and operation of the business and
affairs of the Company, including, but not limited to, the right to vote on,
consent to, or otherwise participate in any decision, vote or action of or by
the Members granted pursuant to this Operating Agreement and the Act. In the
case of an Assignee, the term "Membership Interest" shall mean only the
Assignee's Economic Interest in the Company. A Member's Membership Interest
shall be equal to the
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number of Membership Units held by such Member, divided by the total number of
Membership Units outstanding.
Section 1.36 "Membership Unit" shall mean the numerical measure of the
size of a Membership Interest in the Company. In the case of an Assignee, the
term "Membership Unit" shall encompass only the Assignee's Economic Interest in
the Company with respect to such Membership Unit.
Section 1.37 "Net Profits" and "Net Losses" means, for each Fiscal Year,
an amount equal to the Company's taxable income or loss for such Fiscal Year,
determined in accordance with Code ss. 703(a) (for this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
Code ss. 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Profits or Net Losses
pursuant to this Section 1.37 shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Code ss.
705(a)(2)(B) or treated as Code ss. 705(a)(2)(B) expenditures pursuant to
Regulations ss. 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Net Profits or Net Losses pursuant to this Section 1.37, shall be
subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to Section 1.24(b) or Section 1.24(c) hereof, the amount of
such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Net Profits or Net Losses;
(d) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the Property disposed
of, notwithstanding that the adjusted tax basis of such Property differs from
its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year, computed in
accordance with Section 1.16 hereof;
(f) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code ss. 734(b) or Code ss. 743(b) is required
pursuant to Regulations ss.ss. 1.704-1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts
as a result of a distribution other than in liquidation of a Member's Membership
Interest, the amount of such adjustment shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the asset and shall be
taken into account for purposes of computing Net Profits or Net Losses; and
(g) Notwithstanding any other provision of this Section 1.37, any
items which are specially allocated pursuant to Sections 10.3 through 10.9
hereof shall not be taken into account in computing Net Profits or Net Losses.
The amounts of the items of Company income, gain, loss, or deduction available
to be specially allocated pursuant to Sections 10.3 through 10.9 hereof shall be
determined by applying rules analogous to those set forth in Sections 1.37(a)
through 1.37(f) above.
Section 1.38 "Notice" shall be in writing. Notice shall be considered
given (a) on the date when delivered personally, (b) when transmitted by
telecopy (receipt confirmed), provided that a copy is mailed at the end of the
following business day by first class mail, postage prepaid, (c) on the third
day after mailing by first class mail postage prepaid addressed to the Managers
in care of the Company at the address of the Company's
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Principal Place of Business, or (d) on the next business day following deposit
within a nationally recognized overnight delivery service for next day delivery,
at that Member's address as reflected in the Operating Agreement unless the
Member has given the Company a Notice of a different address.
Section 1.39 "Offsettable Decrease" shall mean any allocation that
unexpectedly causes or increases an Adjusted Deficit in a Member's or Assignee's
Capital Account as of the end of the Fiscal Year to which the allocation relates
attributable to depletion allowances under ss. 1.704(b)(2)(iv)(k) of the
Regulations, allocations of loss and deductions under ss.ss. 704(e)(2) or 706 of
the Code or ss. 1.751-1 of the Regulations, or distributions that, as of the end
of the Fiscal Year, are reasonably expected to be made to the extent they exceed
the offsetting increases to such Member's or Assignee's Capital Account that
reasonably are expected to occur during or (prior to) the Fiscal Years in which
such distributions are expected to be made (other than increases pursuant to a
minimum gain chargeback pursuant to sections 10.3 and 10.6 hereof).
Section 1.40 "Operating Agreement" shall mean this Operating Agreement
including all amendments hereto adopted in accordance with Section 15.2 and the
Act.
Section 1.41 "Organization" shall mean any entity permitted to be a Member
of a limited liability company under the Act. The term "Organization" includes,
without limitation, corporations (both non-profit and other corporations),
partnerships (both limited and general), joint ventures, limited liability
companies, and unincorporated associations, but does not include joint tenancies
and tenancies by the entirety.
Section 1.42 "Person" shall include an individual, trust, estate, or any
Organization.
Section 1.43 "Principal Place of Business" shall mean the principal office
of the Company designated in Section 2.3, or any other place or places as the
Managers may from time to time deem advisable.
Section 1.44 "Property" shall mean any property real, personal or mixed,
tangible or intangible, including money and any legal or equitable interest in
such property, but excluding services and promises to perform services in the
future.
Section 1.45 "Regulations" shall mean the permanent, temporary, proposed,
or proposed and temporary regulations issued by the of Department of the
Treasury that are promulgated under the Code as amended.
Section 1.46 "Related Person" shall mean a Person having a relationship to
a Member that is described in ss. 1.752-4(b) of the Regulations.
Section 1.47 "Secretary of State" shall mean the Delaware Secretary of
State.
Section 1.48 "Simba Group" shall mean Simba Group, Inc., a Delaware
corporation.
Section 1.49 "Substitute Member" shall mean an Assignee who has been
admitted as a Member of the Company in accordance with Section 13.2. Upon
becoming a Member of the Company, such Assignee shall have all the rights of a
Member as are described more fully in Section 13.2 hereof.
Section 1.50 "Taxing Jurisdiction" shall mean the taxing jurisdiction of
the Federal Government and of any state, local, or foreign government that
collects tax, interest or penalties, however designated, on any Member's share
of the income or gain attributable to the Company.
ARTICLE II
FORMATION OF COMPANY
Section 2.1 Organization. On February 18, 1997, the initial Members
organized the Company pursuant to the provisions of the Act by executing and
filing the Certificate with the Secretary of State.
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Section 2.2 Registered Agent and Office. The registered agent for the
service of process and the registered office shall be that person and location
reflected in the Certificate. The Managers may, from time to time, change the
registered agent or office through appropriate filings with the Secretary of
State. In the event the registered agent ceases to act as such for any reason or
the location of the registered office shall change, the Managers shall promptly
designate a replacement registered agent or file a notice of change of address
as the case may be.
Section 2.3 Principal Place of Business. The Principal Place of Business
of the Company is located at 2708 Cranberry Square, Morgantown, West Virginia
26505. The Company may locate its principal places of business at any other
place or places as the Managers may from time to time deem advisable.
Section 2.4 Permitted Businesses. The business of the Company shall be:
(a) To perform any and all business for which a limited liability
company may be organized under the Act, including, without limitation, the
formation of Oak Mountain Energy L.L.C., a separate limited liability company,
whose purpose shall include, without limitation, the mining, processing,
marketing and selling of coal and related products in and throughout the State
of Alabama.
(b) To accomplish any lawful business whatsoever or which shall at
any time appear conducive to or expedient for the protection or benefit of the
Company and its Property.
(c) To exercise all other powers necessary to or reasonably
connected with the Company's business which may be legally exercised by limited
liability companies under the Act or under the laws of any jurisdiction in which
the Company may conduct its business.
(d) To engage in all activities necessary, customary, convenient, or
incident to any of the foregoing.
ARTICLE III
NAMES AND ADDRESSES OF MEMBERS
The name and address of each Member and Assignee, and the Membership Units
of each such Member shall be listed on Exhibit A attached hereto. The Managers
shall update Exhibit A from time to time as necessary to accurately reflect the
information therein. Any amendment or revision to Exhibit A made in accordance
with this Agreement shall not be deemed an amendment to this Agreement for
purposes of requiring Member approval. Any reference in this Agreement to
Exhibit A shall be deemed to be a reference to Exhibit A as may be in effect
from time to time.
ARTICLE IV
RIGHTS AND DUTIES OF MANAGERS
Section 4.1 Management. The management of the business and affairs of the
Company shall be vested in its Managers. Except for situations in which the
approval of the Members is expressly required by this Operating Agreement, or by
nonwaivable provisions of applicable law, the Managers shall have full and
complete authority, power and discretion to manage and control the business,
affairs and Properties of the Company, to make all decisions regarding those
matters and to perform any and all other acts or activities customary or
incident to the management of the Company's business.
Section 4.2 Number, Tenure and Qualifications. The Company shall have four
(4) Managers. Simba Group shall be entitled to designate two (2) Managers and
Kiewit Alabama shall be entitled to designate two (2) Managers. No other Member
shall be entitled to elect, designate, appoint or otherwise participate in an
election, designation or approval of any Managers. Each Manager shall hold
office until such Manager's successor shall have been elected or designated and
qualified, or until the Member responsible for designating such Manager shall
have Dissociated from the Company, whichever occurs first. A Manager need not be
a
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resident of the State of Delaware or a Member of the Company. The names and
addresses of the Managers of the Company appointed or designated by each Member,
as of the date of execution of this Agreement, are as follows:
NAME ADDRESS
Managers appointed by Simba Group (the "Simba Group Managers")
John J. Faltis 2708 Cranberry Square
Morgantown, West Virginia 26505
Bruce Sparks 2708 Cranberry Square
Morgantown, West Virginia 26505
Managers appointed by Kiewit Alabama (the "Kiewit Alabama Managers")
Christopher J. Murphy 1000 Kiewit Plaza
Omaha, Nebraska 68131
Bruce E. Grewcock 1000 Kiewit Plaza
Omaha, Nebraska 68131
Section 4.3 Manager Voting. With respect to all matters requiring the vote
of, action by, approval of or consent by "the Managers," the approval, consent,
vote or action by all of the Managers shall be required to take such action,
unless such other number of Managers is expressly required pursuant to this
Operating Agreement or nonwaivable provisions of the Act.
Section 4.4 Certain Powers of Managers. Except as otherwise required
pursuant to this Operating Agreement or by nonwaivable provisions of the Act,
including, without limitation, the provisions of Section 4.5 hereof, the
Managers shall have the power and authority, on behalf of the Company:
(a) To acquire Property from any Person and to hold and own Property
in the name of the Company;
(b) To invest any Company funds temporarily (by way of example but
not limitation) in time deposits, short-term governmental obligations,
commercial paper or other investments;
(c) To dispose of the Company's Property in the ordinary course of
the Company's business;
(d) To borrow money for the Company from banks, other lending
institutions, Managers, Members, or any Affiliate of the Managers or Members on
such terms as the Managers deem appropriate, and in connection therewith, to
hypothecate, encumber and grant security interests in the Property of the
Company to secure repayment of the borrowed sums. No debt shall be contracted or
liability incurred by or on behalf of the Company except as authorized by the
Managers, or to the extent permitted under the Act, by agents or employees of
the Company expressly authorized to contract such debt or incur such liability
by the Managers;
(e) To execute on behalf of the Company all instruments and
documents, including, without limitation, checks, drafts, notes and other
negotiable instruments, mortgages or deeds of trust, security agreements,
financing statements, documents providing for the acquisition, mortgage or
disposition of the
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Company's Property, assignments, bills of sale, leases, partnership agreements,
operating agreements of other limited liability companies, and any other
instruments or documents necessary to the business of the Company;
(f) To purchase liability and other insurance to protect the
Company's Property and business;
(g) To employ accountants, legal counsel, managing agents or other
experts to perform services for the Company and to compensate them from Company
funds;
(h) To enter into any and all other agreements on behalf of the
Company with any other Person for any purpose;
(i) To exercise the Company's rights in connection with any
investment in any Organization, including, without limitation, to exercise any
voting rights arising from such an investment; and
(j) To do and perform any and all other acts as may be necessary or
appropriate to the conduct of the Company's business.
Unless authorized to do so by this Operating Agreement or by the
Managers of the Company, no attorney-in-fact, employee or other agent of the
Company shall have any power or authority to bind the Company in any way, to
pledge its credit or to render it liable pecuniarily for any purpose. No Member
or Manager shall have any power or authority to bind the Company unless the
Member or Manager has been authorized by the Managers to act as an agent of the
Company in accordance with the previous sentence.
Section 4.5 Limitation on Powers of Managers. Notwithstanding anything to
the contrary in this Article IV or elsewhere in the Operating Agreement or the
Certificate, the Managers shall not have the power or authority to do any of the
following without the consent of the requisite number of Members or those
Members holding the requisite Membership Units in the Company:
(a) amend the Operating Agreement except in accordance with Article
III or Section 15.2 of this Operating Agreement;
(b) admit Assignees as Substitute Members except in accordance with
Section 13.2 of this Operating Agreement;
(c) admit Additional Members except in accordance with Section 13.3
of this Operating Agreement;
(d) continue the Company after a Dissociation Event except in
accordance with Section 14.3 of this Operating Agreement;
(e) Dispose of all or substantially all of the Company Property
except in accordance with Section 6.3 of this Operating Agreement;
(f) merge or consolidate the Company with or into one or more
limited liability companies or other entities except in accordance with Section
6.4 of this Operating Agreement;
(g) waive the requirement of the Members to make an Additional
Capital Contribution or Initial Delayed Capital Contribution except in
accordance with Sections 9.1 and 9.2 of this
Operating Agreement;
(h) require the Members to make Additional Capital Contributions,
except in accordance with Section 9.2 of this Operating Agreement; or
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(i) take any other action which requires the vote, approval or
consent of the Members under this Operating Agreement.
Section 4.6 Liability for Certain Acts. Each Manager shall perform his
duties as Manager in good faith, in a manner he reasonably believes to be in the
best interests of the Company, and with such care as an ordinarily prudent
person in a like position would use under similar circumstances. A Manager who
so performs the duties of Manager shall not have any liability by reason of
being or having been a Member of the Company. The Managers do not, in any way,
guarantee the return of the Members' Capital Contributions or a profit for the
Members from the operations of the Company. The Managers shall not be liable to
the Company or to any Member for any loss or damage sustained by the Company or
any Member, unless the loss or damage shall have been the result of fraud,
deceit, gross negligence, willful misconduct or a wrongful taking by the
Manager.
Section 4.7 Committees of the Managers. The Managers may create one or
more committees. Any such committee shall consist of at least one (1) Simba
Group Manager and one (1) Kiewit Alabama Manager. Any such committee, to the
extent specified by the Managers, may exercise the authority of the Managers in
supervising the management of the business affairs of the Company, except that a
committee may not (i) authorize distributions, except in accordance with a
formula or method described by the Managers; (ii) approve or propose to Members
actions required by law to be approved by the Members; (iii) fill vacancies of
the Managers or any of its committees; (iv) amend the Certificate or the
Operating Agreement or propose amendments to the Certificate or the Operating
Agreement; (v) authorize any Additional Capital Contributions; (vi) take any
other actions which require the approval of the Members under the Certificate,
the Operating Agreement or the Act; or (vii) authorize the expenditure, or
undertaking of an obligation, in excess of $50,000.00.
Section 4.8 Intentionally omitted.
Section 4.9 Managers Have No Exclusive Duty to Company. No Manager shall
be required to manage the Company as such Manager's sole and exclusive function,
and any Manager may have other business interests and may engage in other
activities in addition to those relating to the Company. Neither the Company nor
any Member shall have any right, by virtue of this Operating Agreement, to share
or participate in such other investments or activities of a Manager or to the
income or proceeds derived therefrom. A Manager shall incur no liability to the
Company or to any of the Members as a result of engaging in any other business
or venture.
Section 4.10 Property. Any and all Company Property shall be held in the
name of the Company.
Section 4.11 Bank Accounts. The Managers may from time to time open bank
accounts in the name of the Company.
Section 4.12 Records, Audits and Reports to be Maintained. At the expense
of the Company, the Managers or the appropriate officer of the Company shall
maintain the records and accounts of all operations and expenditures of the
Company. The Company shall maintain the following records at the Principal Place
of Business:
(a) A current list of the full name and last known business or
residence address of each Member;
(b) A copy of the Certificate and all amendments thereto, together
with executed copies of any powers of attorney pursuant to which any documents
have been executed;
(c) Copies of the Company's Federal, foreign, state and local income
tax returns and reports, if any;
(d) A copy of the Operating Agreement including all amendments
thereto;
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(e) Copies of any financial statements of the Company for the three
(3) most recent years; and
(f) Any other records and accounts as the Members shall require the
Company to maintain.
Section 4.13 Access to Records. The records required to be maintained by
the Company in this Article IV, and any other books and records of the Company,
wherever situated, are subject to inspection and copying at the reasonable
request of, and at the expense of, any Member or the Member's agent or attorney
during regular business hours of the Company.
Section 4.14 Reports to Members. The Managers shall provide reports at
least annually to the Members, other than Assignees, at such time and in such
manner as the Managers may determine reasonable. The Managers shall also provide
all Members with those information returns required by the Code and the laws of
all applicable local and foreign governments.
Section 4.15 Accounts. The Managers shall maintain a record of Capital
Account for each Member and Assignee in accordance with Article IX.
Section 4.16 Records of Membership Units. The Managers shall maintain a
record of the Membership Units held by each Member, as such Membership Units
shall be increased or decreased from time to time in accordance with this
Operating Agreement.
Section 4.17 Resignation. Any Manager of the Company may resign at any
time by giving prior written notice to the Members of the Company. The
resignation of any Manager shall take effect upon the receipt of the notice or
at such later time as shall be specified in the notice, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective. The resignation of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute the
Dissociation of such Manager as a Member.
Section 4.18 Removal. Any Manager may be removed, with or without cause,
by the Member who designated or appointed such person as Manager (i.e., either
Simba Group or Kiewit Alabama) in accordance with Section 4.2, and such Member
shall promptly provide Notice to the Company of such removal. The removal of a
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a Dissociation of such Manager as a Member. In the
event of the Dissociation of a Member, all of the Managers appointed by such
Dissociated Member shall be immediately and automatically removed as a Manager
of the Company, without any further action on the part of the Members or
Managers of the Company.
Section 4.19 Vacancies. Any vacancy occurring for any reason among the
Managers of the Company may be filled by the Member (i.e., either Simba Group or
Kiewit Alabama) entitled to designate the Manager in accordance with Section
4.2.
ARTICLE V
MEETINGS OF MANAGERS
Section 5.1 Meetings. Meetings of the Managers, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by any Manager
or any Member. Except as provided in Section 5.2, 5.3, 5.5 or 5.6 of this
Article V, Notice of the place, day and hour of a meeting of the Managers and
the purpose or purposes for which the meeting is called shall be given not less
than seven (7) nor more than thirty (30) days before the date of the meeting by
or at the direction of the Manager or Member calling the meeting to each Manager
entitled to vote or act at such meeting. The Managers may designate any place,
either within or outside the State of Delaware, as the place of meeting for any
meeting of the Managers. If no designation is made, or if a special meeting is
called, the place of meeting shall be the Principal Office of Business of the
Company.
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Section 5.2 Regularly Scheduled Meeting. The Managers shall meet on at
least a quarterly basis.
Section 5.3 Meeting of All Managers. If all of the Managers shall meet at
any time and place, either within or outside of the State of Delaware, and
consent to the holding of a meeting at such time and place, such meeting shall
be valid without call or Notice and at such meeting any lawful action may be
taken.
Section 5.4 Record Date. For purposes of (i) determining those Managers
entitled to Notice of or to vote at any meeting of Managers, or any adjournment
thereof, or (ii) in order to make a determination of Managers for any other
purpose, the date on which Notice of the meeting is mailed shall be the record
date for such determinations with respect to the Managers. When a determination
of those Managers entitled to vote at any meeting of the Managers has been made
as provided in this Section 5.4, such determination shall apply to any
adjournment thereof.
Section 5.5 Action by Managers Without a Meeting. Action required or
permitted to be taken at a meeting of Managers may be taken without a meeting if
the action is evidenced by one or more written consents describing the action
taken, signed by the requisite number of Managers required to approve such
action and delivered to the Company for inclusion in the minutes or for filing
with the Company records. Action taken under this section is effective when the
requisite number of Managers have signed the consent, unless the consent
specifies a different effective date. The record date for determining Managers
entitled to take action without a meeting shall be the date the first Manager
signs a written consent. If an action by Managers is taken without a meeting
under this Section 5.5, Notice to the Managers shall be considered waived,
provided however, that if action is taken hereunder by less than all of the
Managers, Notice of such action shall be provided to the nonparticipating
Managers. Failure to provide the Notice described in the preceding sentence
shall not invalidate or otherwise affect the validity of any action properly
taken by the requisite number of Managers.
Section 5.6 Waiver of Notice. When any Notice is required to be given to
any Manager, a waiver thereof in writing signed by the person entitled to such
Notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such Notice.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
Section 6.1 Member Management Rights. Unless otherwise provided in this
Operating Agreement or by nonwaivable provisions of the Act, all Members (other
than Assignees) who have not Dissociated shall be entitled to vote on any matter
submitted to a vote of the Members, other than with regard to the appointment,
designation, election or removal of the Managers in accordance with Article V.
Each Member shall be entitled to the number of votes equal to the number of
Membership Units held by such Member.
Section 6.2 Liability of Members to Third Parties. Unless otherwise
provided by the Act, no Member shall be liable under any judgment, decree, or
order of a court, or in any other manner, for any debt, obligation or liability
of the Company, whether arising in contract, tort or otherwise, or for the acts
or omissions of any Member, Manager, officer, agent or employee of the Company.
Section 6.3 Approval of Sale of All of the Company's Property. The
affirmative vote or action of a Member or Members holding at least a Majority of
the Membership Units of the Company shall be required to approve the sale,
exchange or other disposition of all, or substantially all, of the Company's
Property.
Section 6.4 Approval of Merger or Consolidation. The affirmative vote or
action of a Member or Members holding at least a Majority of the Membership
Units of the Company shall be required to approve the merger or consolidation of
the Company with or into one or more limited liability companies or other
entities formed or organized under the laws of the State of Delaware, any other
state, the United States or any foreign jurisdiction, with the Company or the
other business entity being the surviving entity.
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Section 6.5 Right of Withdrawal. Except as otherwise provided herein, no
Member shall have the right to withdraw as a Member of the Company or otherwise
seek the partition of the Company's Property, without the prior written consent
of the other Members.
Section 6.6 Conflicts of Interest:
(a) Except as provided in a separate written agreement between a
Member and the Company or any other Member, any Member shall be entitled to
enter into transactions that may be considered to be competitive with, or a
business opportunity that would be beneficial to, the Company, it being
expressly understood that the Members may enter into transactions that are
similar to the transactions into which the Company may enter.
(b) No Member shall be deemed to have violated a duty or obligation
to the Company merely because the Member's conduct furthers such Member's own
interest. Any Member may lend money to and transact other business with the
Company. The rights and obligations of a Member who lends money to or transacts
business with the Company are the same as those of a person who is not a Member,
subject to the Act or other applicable law. No transaction with the Company
shall be voidable solely because a Member or an Affiliate of the Member has a
direct or indirect interest in the transaction if (i) either the transaction is
fair to the Company or (ii) the disinterested Members, in either case knowing
the material facts of the transaction and the Member's interest, authorize,
approve, or ratify the transaction.
ARTICLE VII
MEETINGS OF MEMBERS
Section 7.1 Meetings. Meetings of the Members may be called by the
Managers or by any Member of the Company upon not less that seven (7) days nor
more than thirty (30) days prior written Notice to each Member of the Company.
Such notice shall set forth the time and place of the meeting and the purpose
for which it is called. If no place for the meeting is designated, the place of
meeting shall be the Principal Place of Business of the Company in the State of
Delaware.
Section 7.2 Manner of Acting. The affirmative vote or action of a Member
or Members holding at least a Majority of the Membership Units of the Company
shall be the vote or action of the Members, unless the vote or action of a
greater or lesser proportion or number of the Members is otherwise required by
the Act, by the Certificate or by this Operating Agreement. Unless otherwise
expressly provided herein or required under applicable law, Members who have an
interest (economic or otherwise) in the outcome of any particular matter upon
which the Members vote may vote upon any such matter and their vote shall be
counted in the determination of whether the requisite matter was approved by the
Members. Any Member may participate in any meeting of the Members by means of a
conference telephone or similar communications equipment by means of which all
persons participating in such meeting can hear each other, and participation in
a meeting pursuant to this Section 7.2 shall constitute presence in person at
such meeting.
Section 7.3 Action by Members Without a Meeting. Action required or
permitted to be taken at a meeting of Members may be taken without a meeting and
without Notice if the action is evidenced by one or more written consents
describing the action taken, signed by those Members or that Member having the
requisite number of Membership Units required to take such action at a meeting
of the Members and delivered to the Managers of the Company for inclusion in the
minutes or for filing with the Company records. Action taken under this section
is effective when the requisite number of Members entitled to vote have signed
the consent, unless the consent specifies a different effective date. If an
action by Members is taken without a meeting under this Section 7.3, Notice to
the Members shall be considered waived, provided however, that if action is
taken hereunder by less than all of the Members, Notice of such action shall be
provided to the nonparticipating Members. Failure to provide the Notice
described in the preceding sentence shall not invalidate or otherwise affect the
validity of any action properly taken by the requisite number of Members.
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Section 7.4 Waiver of Notice. When any Notice is required to be given to
any Member, a waiver thereof in writing signed by the person entitled to such
Notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such Notice.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification of Members, Managers, Etc. The Company shall
indemnify any Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative, including appeals
(including an action by or in the right of the Company), by reason of the fact
that such Person is or was a Member, Manager, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a member,
manager, director, officer, partner, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such Person in
connection with such claim, action, suit or proceeding if such Person acted in
good faith and in a manner such Person reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding had no reasonable cause to believe such Person's conduct
was unlawful. The termination of any claim, action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the Person did
not act in good faith and in a manner which such Person reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
Person's conduct was unlawful.
Section 8.2 Determination of Meeting Applicable Standard. Any Person
entitled to indemnification under Section 8.1 of this Article VIII shall be
deemed to have acted in good faith and in a manner such Person reasonably
believed to be in or not opposed to the best interests of the Company until such
Person shall have been finally adjudged to have acted in bad faith and in a
manner such Person reasonably believed to be against and not in the best
interests of the Company.
Section 8.3 Payment of Expenses in Advance of Disposition of Action.
Expenses (including attorneys' fees) incurred in defending a civil or criminal
claim, action, suit or proceeding shall be paid by the Company in advance of the
final disposition of such claim, action, suit or proceeding upon receipt of an
undertaking by or on behalf of the Member, Manager, officer, employee or agent
to repay such amount if and to the extent that it shall be ultimately determined
that such Person is not entitled to be indemnified by the Company as authorized
in this Article VIII.
Section 8.4 Non-Exclusivity of Article. The indemnification authorized in
and provided by this Article VIII shall not be deemed exclusive of and shall be
in addition to any other right to which those indemnified may be entitled under
any statute, rule of law, provision of the certificate of formation, operating
agreement, other agreement, vote or action of Members or by a Majority of the
Managers, or otherwise, both as to actions in such Person's official capacity
and as to actions in another capacity while holding such office, and shall
continue as to a Person who has ceased to be a Member, Manager, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a Person.
Section 8.5 Insurance. The Company may purchase and maintain insurance on
behalf of any Person who is or was a Member, Manager, officer, employee or agent
of the Company, or is or was serving at the request of the Company as a member,
manager, director, officer, partner, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such Person incurred by such
Person in any such capacity arising out of such Person's status as such, whether
or not the Company is required or permitted to indemnify such Person against
such liability under the provisions of this Article VIII or any statute.
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ARTICLE IX
CONTRIBUTIONS AND CAPITAL ACCOUNTS
Section 9.1 Initial Capital Contributions. The Initial Capital
Contribution of (and Membership Units allocated to) each Member, as of the date
of this Agreement, is set forth on Exhibit A hereto. The Initial Capital
Contribution (to the extent not previously paid) shall be paid by each Member
upon execution of this Agreement in cash or its equivalent. The Initial Delayed
Contribution of each Member (if any) is set forth on Exhibit B hereto and shall
be paid by such Members contemporaneously with the closing of the transactions
contemplated by that certain Asset Purchase Agreement to be executed by and
among Oak Mountain Energy, L.L.C., Oak Mountain Energy Corporation and certain
other parties. If no Closing occurs under the foregoing Asset Purchase
Agreement, no Member shall have any obligation to make any Initial Delayed
Contribution.
Section 9.2 Additional Capital Contributions. In addition to the Initial
Capital Contributions and the Initial Delayed Contributions of the Members, in
the event a Member or Members holding at least a Majority of the Membership
Units of the Company or the Managers determine that Additional Capital
Contributions are reasonably necessary to facilitate the business needs of the
Company, including, without limitation, to meet the Company's operating
expenses, to fund the expansion of the Company's business, to acquire other
businesses or business entities and to purchase any Property reasonably
necessary for the operation of the Company, each Member shall be entitled, but
not required, to make such Additional Capital Contribution on a basis pro rata
to such Member's Membership Interest in the Company. Upon making such a
determination, the Company shall give Notice to each Member in writing at least
fifteen (15) days prior to the date on which the Additional Capital
Contributions are due (the "Company Contribution Notice"). Such Company
Contribution Notice shall set forth the amount of Additional Capital
Contribution needed, the purpose for which the contribution is needed, and the
date by which the Member must contribute such Additional Capital Contribution.
Each Member who desires to make such Additional Contribution shall provide
Notice (the "Member Contribution Notice") to the Company within fifteen (15)
days of its receipt of the Company Contribution Notice. In the event that one or
more of the Members fails to provide the Member Contribution Notice, the
contributing Member or Members shall be entitled to make such Additional Capital
Contribution on a basis pro rata to such Members' Membership Interest in the
Company (calculated without taking into account the Membership Units of the
non-contributing Members). Contributing Members shall be issued one additional
Membership Unit for each $10.00 of Additional Capital contributed by such
Member.
Section 9.3 Maintenance of Capital Accounts. The Company shall establish
and maintain Capital Accounts for each Member and Assignee.
(a) To each Member's Capital Account there shall be credited: (i)
such Member's Capital Contributions; (ii) such Member's distributive share of
Net Profits and any items in the nature of income or gain which are specially
allocated pursuant to Sections 10.3 through 10.7 hereof, and (iii) the amount of
any Company liabilities assumed by such Member or which are secured by any
Property distributed to such Member.
(b) To each Member's Capital Account there shall be debited: (i) the
amount of cash and the Gross Asset Value of any Property distributed to such
Member pursuant to any provision of this Agreement; (ii) such Member's
distributive share of Net Losses and any items in the nature of expenses or
losses which are specially allocated pursuant to Sections 10.3 through 10.7
hereof, and (iii) the amount of any liabilities of such Member assumed by the
Company or which are secured by any property contributed by such Member to the
Company.
(c) In the event all or a portion of a Membership Interest is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred Membership Interest. This Section 9.3(c) shall not be interpreted as
permitting the transfer of any Economic Interest, Membership Interest or
Membership Unit that is otherwise prohibited under Article XII hereof.
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(d) In determining the amount of any liability for purposes of this
Section 9.3, there shall be taken into account Code ss. 752(c) and any other
applicable provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulations ss.
1.704-1(b), and shall be interpreted and applied in a manner consistent with
such Regulations. In the event the Managers shall determine that it is prudent
to modify the manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Company or any Member), are computed in order to comply with
such Regulations, the Managers may make such modification, provided that it is
not likely to have a material effect on the amounts distributable to any Member
pursuant to Section 14.4 hereof upon the dissolution of the Company. The
Managers also shall (i) make any adjustments that are necessary or appropriate
to maintain equality between the Capital Accounts of the Members and the amount
of Company capital reflected on the Company's balance sheet, as computed for
book purposes, in accordance with Regulations ss. 1.704-1(b)(2)(iv)(q), and (ii)
make any appropriate modifications in the event unanticipated events (for
example, the acquisition by the Company of oil or gas properties) might
otherwise cause this Agreement not to comply with Regulations ss. 1.704-1(b).
Section 9.4 Sale or Exchange of Interest. In the event of a sale or
exchange of some or all of a Member's or Assignee's Economic Interest in the
Company, the Capital Account of the transferring Member or Assignee shall become
the Capital Account of the Assignee acquiring such Interest, to the extent it
relates to the portion of the Economic Interest transferred.
Section 9.5 Compliance with ss. 704(b) of the Code. The provisions of this
Article IX as they relate to the maintenance of Capital Amounts are intended,
and shall be construed, and, if necessary, modified to cause the allocations of
profits, losses, income, gain and credit pursuant to Article X to have
substantial economic effect under the Regulations promulgated under ss. 704(b)
of the Code, in light of the Distributions made pursuant to Articles X and XIV
the Capital Contributions made pursuant to this Article IX. Notwithstanding
anything herein to the contrary, this Operating Agreement shall not be construed
as creating a deficit restoration obligation or otherwise personally obligate
any Member to make a Capital Contribution in excess of the Initial Capital
Contribution made by that Member.
ARTICLE X
ALLOCATIONS AND DISTRIBUTIONS
Section 10.1 Net Profits. Except as may be required by Sections 10.3
through 10.7 of this Article X, Net Profits shall be apportioned among the
Members in the following order and amounts:
(a) First, to and among the Members in amounts equal to the excess,
if any, of (i) the cumulative Net Losses allocated to the Members pursuant
to Section 10.2(c) hereof for all prior Fiscal Years, over (ii) the
cumulative Net Profits allocated to the Members pursuant to this Section
10.1(a) for all prior Fiscal Years; and
(b) The balance, if any, to and among the Members in proportion to
the Membership Units each Member holds as of the first day of the Fiscal
Year.
Section 10.2 Net Losses.
(a) Except as may be required by Sections 10.3 through 10.7 of this
Article X, Net Losses shall be apportioned to and among the Members in
proportion to the Membership Units each Member holds as of the first day
of the Fiscal Year;
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(b) provided, however, that Net Losses shall not be allocated to any
Member pursuant to Section 10.2(a) to the extent that such allocation
would cause any Member to have an Adjusted Deficit at the end of such
Fiscal Year, and
(c) In the event some but not all of the Members would have Adjusted
Deficits as a consequence of an allocation of Net Losses pursuant to
Section 10.2(a), the limitation set forth in Section 10.2(b) shall be
applied on a Member-by-Member basis so as to allocate the maximum
permissible amount of Net Losses to each Member; and
(d) provided further that the limitation set forth in Section
10.2(b) shall cease to apply at the point at which all Members' Capital
Accounts (adjusted in accordance with Section 1.4 hereof) have been
reduced to zero, and thenceforth Net Losses shall be allocated in
accordance with Section 10.2(a) hereof.
(e) Notwithstanding any other provisions of this Section 10.2, if
the number of Membership Units held by any Member changes during the
Fiscal Year, or if any Members are admitted during the Fiscal Year, the
Net Profits and Net Losses otherwise to be allocated shall be consistent
with Section 13.3.
Section 10.3 Company Minimum Gain Chargeback. If there is a net decrease
in Company Minimum Gain for a Fiscal Year, each Member must be allocated items
of income and gain for that Fiscal Year (and, if necessary, subsequent Fiscal
Years) equal to that Member's share of the net decrease in Company Minimum Gain.
A Member's share of the net decrease in Company Minimum Gain is the amount of
the total net decrease multiplied by the Member's percentage share of the
Company Minimum Gain at the end of the immediately preceding Fiscal Year. A
Member's share of any decrease in Company Minimum Gain resulting from a
revaluation of Company Property equals the increase in the Member's Capital
Account attributable to the revaluation to the extent the reduction in Company
Minimum Gain is caused by the revaluation. A Member is not subject to this
Company Minimum Gain chargeback requirement to the extent the Member's share of
the net decrease in Company Minimum Gain is caused by a guarantee, refinancing,
or other change in the debt instrument causing it to become partially or wholly
a recourse liability or a Member Nonrecourse Liability, and the Member bears the
economic risk of loss (within the meaning of ss. 1.752-2 of the Regulations) for
the newly guaranteed, refinanced, or otherwise changed liability.
Section 10.4 Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal
Year shall be specially allocated to the Members in proportion to the number of
Membership Units held by each Member.
Section 10.5 Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year shall be allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Liability to which
such Member Nonrecourse Deductions are attributable in accordance with ss.
1.704-2(i) of the Regulations.
Section 10.6 Member Minimum Gain Chargeback. If during a Fiscal Year there
is a net decrease in Member Minimum Gain, any Member with a share of that Member
Minimum Gain (as determined under ss. 1.704-2(i)(5) of the Regulations) as of
the beginning of that Fiscal Year must be allocated items of income and gain for
that Fiscal Year (and, if necessary, for succeeding Fiscal Years) equal to that
Member's share of the net decrease in the Member Minimum Gain. A Member's share
of the net decrease in Member Minimum Gain is determined in a manner consistent
with the provisions of ss. 1.704-2(g)(2) of the Regulations. A Member is not
subject to this Member Minimum Gain chargeback, however, to the extent the net
decrease in Member Minimum Gain arises because the liability ceases to be Member
Nonrecourse Liability due to a conversion, refinancing, or other change in the
debt instrument that causes it to become partially or wholly a Company
Nonrecourse Liability. The amount that would otherwise be subject to the Member
Minimum Gain chargeback is added to the Member's share of Company Minimum Gain.
In addition, rules consistent with those applicable to Company Minimum Gain and
Company Minimum Gain chargeback shall be applied to determine the shares of
Member Minimum Gain and
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Member Minimum Gain chargeback to the extent provided under the Regulations
issued pursuant to ss. 704(b) of the Code.
Section 10.7 Qualified Income Offset. In the event any Member, in such
capacity, unexpectedly receives an Offsettable Decrease, such Member will be
allocated items of income and gain (consisting of a pro rata portion of each
item of income and gain of the Company for the Fiscal Year) in an amount and
manner sufficient to offset such Offsettable Decrease as quickly as possible.
This Section 10.7 is intended to be in accordance with ss.
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
Section 10.8 Curative Allocations. The allocations set forth in Sections
10.3 through 10.7 hereof (the "Regulatory Allocations") are intended to comply
with certain requirements of the Regulations. To the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of Company income, gain, loss or
deduction pursuant to this Section 10.8. Therefore, notwithstanding any other
allocation provision (other than the Regulatory Allocations), the Managers shall
make such offsetting special allocations of Company income, gain, loss or
deduction in whatever manner they may deem appropriate so that each Member's
Capital Account balance shall be, to the maximum extent possible, equal to the
Capital Account balance that each such Member would have had if the Regulatory
Allocations had not been part of this Agreement, and all Company items were
allocated pursuant to Sections 10.1 and 10.2 hereof. In exercising their
discretion under this Section 10.8, the Managers shall consider future
Regulatory Allocations under Section 10.3 that, although not yet made, are
likely to offset other Regulatory Allocations previously made under Sections
10.4 and 10.5.
Section 10.9 Tax Allocations: ss. 704(c) of the Code. In accordance with
Code ss. 704(c) and the Regulations thereunder, income, gain, loss, and
deduction with respect to any property contributed to the capital of the Company
shall, solely for tax purposes, be allocated among the Members so as to take
account of any variation between the adjusted basis of such property to the
Company for federal income tax purposes and its initial Gross Asset Value
(computed in accordance with Section 1.24(a) hereof). In the event the Gross
Asset Value of any Company asset is adjusted pursuant to Section 1.24(b) hereof,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code ss. 704(c) and the Regulations thereunder. Any elections or
other decisions relating to such allocations shall be made by the Managers in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 10.9 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Member's Capital Account or share of Net Profits, Net Losses,
other items, or distributions pursuant to any provision of this Agreement.
Section 10.10 Interim Distributions. From time to time, and subject to
Section 10.11 hereof, the Managers shall determine in their reasonable judgment
to what extent, if any, the Company's cash on hand exceeds the current and
anticipated needs for such moneys, including, without limitation, needs for
operating expenses, debt service, acquisitions, reserves, and mandatory
distributions, if any. To the extent such excess exists, a Majority of the
Managers may make Distributions to the Members in proportion to each Member's
Membership Units in the Company as of the date of such Distribution. An Interim
Distribution shall be in cash or Property (which need not be distributed
proportionately) or partly in both, as determined by the Managers. The Company
shall distribute cash to the Members, to the extent not previously distributed
during or with respect to a fiscal year, on or before ninety (90) days after the
end of each fiscal year, in an amount equal to the federal and state taxes
payable by the Members with respect to the income of the Company for the
preceding fiscal year; for the foregoing purpose, the Members shall all be
assumed to be subject to federal and state income tax at a combined effective
rate of Thirty Four Percent (34%).
Section 10.11 Limitations on Distributions.
(a) No Distribution shall be declared and paid unless, after the
Distribution is made, the Property of the Company is in excess of all
liabilities of the Company and the Company has sufficient working capital as
determined by the Managers, except liabilities to Members on account of their
Capital Accounts.
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(b) No Distribution shall be made to a Member to the extent that
such Distribution would cause such Member to have an Adjusted Deficit at the end
of such Fiscal Year, provided that in the event some but not all of the Members
would have Adjusted Deficits as a consequence of a Distribution, the limitation
set forth in this Section 10.11(b) shall be applied on a Member-by-Member basis
so as to permit the maximum permissible amount of Distributions to be made to
each Member; and provided further that the limitation set forth in this Section
10.11(b) shall cease to apply at the point at which all Members' Capital
Accounts (adjusted in accordance with Section 1.4 hereof) have been reduced to
zero, and thenceforth Distributions may be made in accordance with Section
10.10.
ARTICLE XI
CERTAIN TAX MATTERS
Section 11.1 Elections. The Managers may make any tax elections for the
Company allowed under the Code or the tax laws of any Taxing Jurisdiction.
Section 11.2 Taxes of Taxing Jurisdictions. To the extent that the laws of
any Taxing Jurisdiction so require, each Member requested to do so by the
Managers will submit an agreement indicating that the Member will make timely
income tax payments to the Taxing Jurisdiction and that the Member accepts
personal jurisdiction of the Taxing Jurisdiction with regard to the collection
of income taxes attributable to the Member's income, and interest and penalties
assessed on such income. If the Member fails to provide such agreement, the
Company may withhold and pay over to such Taxing Jurisdiction the amount of tax
penalties and interest determined under the laws of the Taxing Jurisdiction with
respect to such income. Any such payments with respect to the income of a Member
shall be treated as a distribution for purposes of Article X. The Managers may,
where permitted by the rules of any Taxing Jurisdiction, file a composite,
combined or aggregate tax return reflecting the income of the Company and pay
the tax, interest and penalties of some or all of the Members on such income to
the Taxing Jurisdiction, in which case the Company shall inform the Members of
the amount of such tax interest and penalties so paid.
Section 11.3 Tax Matters Partner. Simba Group is hereby designated as the
"Tax Matters Partner" of the Company, as such term is defined by ss. 6231(a)(7)
of the Code. The Tax Matters Partner shall: (i) notify each Member of all
administrative and judicial proceedings for the adjustment of Company items and
shall periodically report to the Members on the status of such proceedings; (ii)
cause to be prepared and filed Company tax returns and tax elections and
determinations as are necessary, appropriate or desirable; (iii) use its best
efforts to deliver to each Person who was a Member of the Company at any time
during a Fiscal Year a copy of the Company's proposed federal income tax return
for such Fiscal Year at least 30 days prior to the due date (with extensions)
for filing such return; (iv) provide each Member with a copy of such return and
Schedule K-1 as filed. Each Member shall notify the Tax Matters Partner of its
intention to file a federal income tax return that is inconsistent with the
information or amounts included on the Member's Form K-1 or other forms or
attachments to the Company's U.S. Partnership Return of Income (Form 1065). The
Members shall provide the Tax Matters Partner with a copy of any Form 8082 filed
by the Member with respect to the Company's items. The Tax Matters Partner shall
take such action as may be necessary to cause each Member (other than a Member
who acts as the Tax Matters Partner) to become a notice partner within the
meaning of ss. 6223 of the Code. No Member who is designated Tax Matters Partner
may take any action contemplated by ss.ss. 6222 through 6232 of the Code without
the consent of a Member or Members holding at least a Majority of the Membership
Units of the Company.
Section 11.4 Method of Accounting. The records of the Company shall be
maintained on the method of accounting chosen by a Majority of the Managers.
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ARTICLE XII
DISPOSITION OF MEMBERSHIP UNITS
Section 12.1 Limitations. An Assignee of a Membership Unit under this
Article XII shall have only those rights of an Assignee as described more fully
in Section 13.1 hereof and shall have no right to become a Member of the Company
or to participate in the management of the business and affairs of the Company
unless such Assignee is admitted as a Substitute Member in accordance with
Section 12.3(c) or Section 13.2 of this Operating Agreement.
Section 12.2 Consent, Etc. No Member or Assignee may Dispose of all or a
portion of such Member's or Assignee's Membership Units, unless:
(a) Prior to the Disposition, the Company receives, unless waived by
the Members in writing, an opinion of counsel satisfactory to Members holding at
least a Majority of the Membership Units of the Company (which determination of
a majority shall include the Membership Units held by, and the consent or vote
of, the transferring Member) that: (i) such Disposition is not subject to an
effective registration under, or exempt from the registration requirements of,
the applicable state and federal securities laws, and (ii) such Disposition,
alone or when combined with other transactions, would not result in a
termination of the Company within the meaning of ss. 708 of the Code (unless the
Member disposing of its Membership Units agrees to indemnify the Company and the
other Members for any adverse consequences of such termination);
(b) Prior to the Disposition, the Company receives from the
transferee the information and agreements that the Members may reasonably
require, including, but not limited to, any taxpayer identification number and
any agreement that may be required by the Taxing Jurisdiction; and
(c) The transferring Member or Assignee shall either:
(i) First obtain the written consent to such Disposition of
a Member or Members holding at least a Majority of the Membership Units of the
Company (which determination of a majority shall include the Membership Units
held by, and the consent or vote of, the transferring Member); or
(ii) Comply with the provisions of Section 12.3 below.
Section 12.3 Permitted Sales by the Member. (a) In the event a Member
shall have received and wishes to accept a bona fide offer to sell or assign all
or any portion of its Membership Units, but has not received the prior written
consent referred to in Section 12.2 above (other than a transfer to an Affiliate
of such Member under Section 12.6, or, subject to subsection (b) below, as
collateral under a financing arrangement), such Member may sell the same only
after offering it to the other Member in the following manner:
(i) The Member desiring to sell shall serve Notice to the
other, stating that it has received a bona fide offer for the sale of its
Membership Units, and setting forth the following information:
(A) the portion of its Membership Units to be sold,
(B) the name and address and business or occupation of
the Person offering to purchase such Membership Units, and
(C) the sales price and terms and conditions of such
sale.
Such Notice shall also contain an offer by the transferring Member to sell such
Membership Units to the other Member at the price and under the terms offered by
such bona fide offeror.
(ii) For a period of thirty (30) days after the receipt of
such Notice, the non-transferring Member shall have the option to purchase all
of the Membership Units so offered.
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(iii) In the event the non-transferring Member shall
exercise its option to purchase all of the Membership Units offered in the
Company under this Section 12.3(a), the Member exercising such option to
purchase shall designate the time, date and place of closing; provided, however,
that the date of closing shall be within ninety (90) days of the date that the
Member provides Notice to the transferring Member of is election to purchase
such transferring Member's Membership Units.
(b) Any assignment of a Membership Unit as Collateral as
contemplated in Section 12.3(a) above shall first require the party to whom such
Membership Unit is pledged to agree that the foreclosure or other seizure of
such Membership Unit shall constitute a transfer giving rise to the right of
first refusal described in Section 12.3(a), and the foreclosing party shall give
the Member entitled to such right the opportunity to exercise the right of first
refusal immediately following the foreclosure or other seizure in accordance
with the time frames set forth in Section 12.3(a), with the time frames
beginning on the date such Member received written notice of the foreclosure
from the foreclosing party.
(c) In the event that the Member does not exercise its option made
under Section 12.3(a) to purchase, as provided herein, the transferring Member
shall be free to transfer such Member's Membership Units to the Person named in
the aforesaid Notice at the price and upon the terms and conditions set forth in
such Notice, and such Person shall be deemed to have been admitted as a
Substitute Member in accordance with Article XIII; provided, however, that such
Disposition shall be made within ninety (90) days following the termination of
the Member's option to purchase such Membership Units. If such Disposition is
not consummated within said ninety (90) day period, the provisions of this
Section 12.3 shall again be applicable to the Member's Membership Units with
respect to which the Member had received a bona fide offer.
Section 12.4 Transfer Upon Dissociation of a Member. In the event a Member
shall Dissociate as a Member of the Company for any reason, then the Company
shall have the option to purchase (exercisable within twelve months after such
event of Dissociation), and the Dissociated Member shall be obligated to sell to
the Company, all of such Member's Membership Units in the Company. The purchase
price to be paid by the Company for such Membership Units shall be determined
and paid in accordance with the provisions of Section 12.5 below.
Section 12.5 Purchase Price. The purchase price of a Membership Unit to be
purchased in accordance with the provisions of Sections 12.4 above shall be
determined as follows:
(a) The purchase price of each Membership Unit purchased pursuant to
Section 12.4 shall be determined as of the last day of the month preceding the
month during which the event giving rise to the purchase obligation, and shall
be the amount that would have been distributed to such Member with respect to
the Membership Interest to be purchased hereunder, in liquidation of the Company
pursuant to Section 14.4 hereof as if (i) all of the Property of the Company had
been sold for its fair market value (as determined in accordance with Section
12.5(b) below), (ii) the Company paid its accrued but unpaid liabilities and
established reserves pursuant to Article XIV hereof for the payment of
reasonably anticipated contingent or unknown liabilities, (iii) all allocations
and distributions called for by this Agreement through the date of such
determination were taken into account, and (iv) the Company distributed the
remaining proceeds to the Members in liquidation, all as of such day.
(b) The determination of the purchase price under this Section 12.5
shall be determined as follows: (1) for the first thirty (30) days following the
exercise of an option to purchase or following the date of that the obligation
to purchase arises, the Company (acting without any input from any Managers
appointed by a transferring Member) and the transferring Member shall negotiate
in good faith regarding the purchase price for the Membership Units being
transferred; (2) in the event that the Company and the transferring Member are
unable to agree on a purchase price within such thirty (30) day period, the
transferring Member and the Company shall, within fifteen (15) days after
expiration of such thirty (30) day period, select and agree upon an Appraiser to
determine such purchase price, and the appraisal of such Appraiser shall be
binding on the parties; and (3) in the event that the Company and the
transferring Member are unable to agree upon an Appraiser, (i) the Company and
the transferring Member shall each appoint within ten (10) days after the
expiration of the aforementioned
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thirty (30) and fifteen (15) day periods an Appraiser, and such Appraisers shall
promptly appoint a third Appraiser, (ii) each of such three Appraisers shall
perform a separate appraisal of the Company, and (iii) the average of the two
closest appraisals from such three Appraisers shall be the purchase price and
shall be binding upon the parties.
(c) The purchase price due under this Section 12.5 shall be paid in
the following manner:
(i) There shall first be credited against such purchase
price the amount of any indebtedness due and payable to the Company by such
Member.
(ii) There shall next be credited the amount of any expenses
or damages incurred by the Company as a result of Dissociation.
(iii) The balance of the purchase price shall be payable at
closing which shall occur within thirty (30) days following the latter of the
final determination of the purchase price or the exercise of the Company's
option to purchase; provided, however, upon the election of the Company, the
balance of the purchase price shall be payable in three (3) equal annual
installments, with interest at the then current prime rate quoted in the Wall
Street Journal plus two (2) percentage points, the first installment of which
shall be due within thirty (30) days following the latter of the final
determination of the purchase price or the exercise of the Company's option to
purchase and the second and third installments shall be due within one year and
two years, respectively, following the due date of the first installment. Such
installment obligation shall be evidenced by a negotiable promissory note of the
Company, and shall be secured by a pledge of such Membership Units transferred
to the Company.
Section 12.6 Certain Additional Permitted Transfers of Membership Units by
Members. Notwithstanding the provisions of Article XII and Article XIII, each
Member shall be entitled to Dispose all of its Membership Units to an Affiliate
of such Member, without giving rise to any rights of first refusals, options or
consent-requirements, and, upon effectiveness of such transfer, such Affiliated
transferee of a Member shall succeed to all of the rights and obligations
(including voting and other governance rights) of the transferring Member and
shall be admitted as a Substitute Member of the Company, without any further
action on the part of the Members or the Company and all references to such
transferring Member contained in this Operating Agreement shall automatically
apply to the Member's Affiliated transferee; provided, however, that if any such
transfer or assignment shall result in a termination of the Company within the
meaning of ss. 708 of the Code, the Member shall indemnify the Company and the
other Members for any adverse consequences of such termination.
Section 12.7 Certain Limitations on Transfers of Capital Stock. Each
member hereby agrees that it shall not permit any transfer or issuance of its
capital stock or the transfer or issuance of the capital stock of any direct or
indirect parent corporation of such Member (other than to an Affiliate of either
Member, and with respect to Simba Group and its Affiliates, the entities listed
on Exhibit "C" attached hereto), without the prior written consent of the other
Member; provided, however, such consent shall not be required if the fair market
value of the Membership Units in the Company owned by such Member does not
directly or indirectly make up greater than Ninety Percent (90%) of the fair
market value of the total assets of such Member or direct or indirect parent
corporation. The fair market value of such Membership Units and total assets
shall be determined by an Appraiser or Appraisers selected by the Members using
a procedure similar to that procedure for selecting Appraisers set forth in
Section 12.5(b)(2) and (3).
ARTICLE XIII
ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS
Section 13.1 Rights of Assignees. Notwithstanding anything to the contrary
contained in this Operating Agreement (other than pursuant to Section 12.6
hereof), the only rights, if any, which an Assignee of a Member shall have are
those rights associated with the Economic Interest received and such Assignee
shall not receive any right to participate in the management of the business and
affairs of the Company or to become a Member; provided, however, that in the
event an Assignee is an existing Member of the Company, such Assignee
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shall receive all rights to participate in the management of the business and
affairs of the Company incident to the transferred Membership or Economic
Interest. An Assignee is only entitled to receive the Distributions and return
of capital, and to be allocated the Net Profits and Net Losses attributable to a
transferred Membership Economic Interest.
Section 13.2 Admission of Substitute Members. Except as set forth in
Section 12.3(c), an Assignee of a Membership Unit shall be admitted as a
Substitute Member and entitled to all the rights of the Member who initially
assigned the Membership Units only with the written approval of the other
Members (i.e., the non-transferring Members) holding at least a Majority of the
remaining Membership Units. The Members may grant or withhold the approval of
such admission in their sole and absolute discretion. If so admitted, the
Substitute Member has all the rights and powers and is subject to all the
restrictions and liabilities of the Member originally assigning the Membership
Units. The admission of a Substitute Member, without more, shall not release the
Member originally assigning the Membership Units from any liability to the
Company that may have existed prior to the approval.
Section 13.3 Admission of Additional Members. From the date of formation
of the Company, any Person acceptable to a Member or Members holding at least a
Majority of the Membership Units of the Company, as reflected by the written
approval of such Member or Members, may become Additional Members of the Company
for such consideration as such Members shall determine, subject to the terms and
conditions of this Operating Agreement. No Additional Member shall be entitled
to any retroactive allocation of income, gain, loss, deduction or credit by the
Company. The Members may, at their option, at the time the Additional Member is
admitted, close the Company's books (as though the Company's Fiscal Year had
ended) or make pro rata allocations of income, gain, loss, deduction or credit
to the Additional Member for that portion of the Company's Fiscal Year in which
the Member was admitted in accordance with the provisions of ss. 706(d) of the
Code and the Regulations promulgated thereunder. Upon admission of an Additional
Member, this Operating Agreement shall be amended in order to reflect such
additional Member's Membership Units in the Company.
ARTICLE XIV
DISSOCIATION, DISSOLUTION AND WINDING UP
Section 14.1 Dissociation. A Person shall cease to be a Member upon the
happening of any of the following Dissociation Events:
(a) the withdrawal of a Member with the consent of the other Members
holding at least a Majority of the remaining Membership Units;
(b) upon the Managers' receipt of notice with respect to a Member
who:
(i) makes an assignment for the benefit of creditors;
(ii) files a voluntary petition in bankruptcy;
(iii) files a petition or answer seeking for the Member any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation:
(iv) files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against the Member in
any proceeding in the nature of the proceedings listed in (iii); or
(v) seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of the Member of all or any substantial part of
the Member's properties:
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(c) in the case of a Member who is a natural person, the death of
the Member or the entry of an order by a court of competent jurisdiction
adjudicating the Member incompetent to manage the Member's person or property.
Section 14.2 Rights of Dissociating Member. In the event a Member
Dissociates from the Company and such Dissociation causes a dissolution and
winding up of the Company under this Article, the Member shall be entitled to
participate in the winding up of the Company to the same extent as any other
Member except that any Distributions to which the Member would have been
entitled shall be reduced by damages sustained by the Company as a result of the
Dissolution and winding up.
Section 14.3 Dissolution. The Company shall be dissolved and its affairs
wound up prior to such date, upon the first to occur of the following events
(which, unless the Members agree to continue the business, shall constitute
Dissolution Events):
(a) the written consent of a Member or Members holding at least a
Majority of the Super-Membership Units of the Company;
(b) the Dissociation of any Member as provided in Section 14.1 of
this Article, unless (i) there are at least two remaining Members or at least
one remaining Member and an Additional Member or Substitute Member is admitted
in accordance with Article XIII hereof and (ii) the legal existence and business
of the Company is continued with the consent of a Member or Members holding at a
Majority of the Membership Units within 90 days after such Dissociation.
(c) the merger of the Company and the Company is not the successor
limited liability company in such merger or the consolidation of the Company
with one or more limited liability companies or other entities.
(d) The entry of a final decree of dissolution of the Company by a
court of competent jurisdiction.
(e) On February 18, 2027, unless the business of the Company is
continued with the vote, consent or action of a Member or Members holding at
least a Majority of the Membership Units within ninety (90) days after such
date.
Section 14.4 Distribution of Assets on Dissolution. Upon the winding up of
the Company, Company Property shall be distributed in the following order:
(a) to creditors, including Members who are creditors, to the extent
permitted by law, in satisfaction of Company liabilities;
(b) to Members in accordance with positive Capital Account balances
taking into account all allocations, contributions, distributions, and Capital
Account adjustments for the Company's Fiscal Year in which the liquidation
occurs. Liquidation proceeds shall be paid within 60 days of the end of the
Company's Fiscal Year or, if later, within 90 days after the date of
liquidation. Such distributions shall be in cash or property (which need not be
distributed proportionately) or partly in both, as determined by a Majority of
the Managers.
Section 14.5 Winding Up and Certificate of Cancellation. The winding up of
the Company shall be completed when all debts, liabilities, and obligations of
the Company have been paid and discharged or reasonably adequate provision
therefor has been made, and all of the remaining Property of the Company has
been distributed to the Members. Upon the completion of winding up of the
Company, certificate of cancellation shall be delivered to the Secretary of
State. The certificate of cancellation shall set forth such information as is
required by the Act.
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Section 14.6 Effect of Dissolution. Upon dissolution, the Company shall
cease carrying on, as distinguished from the winding up of, the Company
business, but the Company is not terminated, but continues until the winding up
of the affairs of the Company is completed and a certificate of dissolution with
respect to the Company, or the equivalent, has been issued by the Secretary of
State.
ARTICLE XV
AMENDMENT
Section 15.1 Operating Agreement May Be Modified. This Operating Agreement
may be modified as provided in this Article XV (as the same may from time to
time be amended). No Member or Manager shall have any vested rights in this
Operating Agreement.
Section 15.2 Amendment or Modification of Operating Agreement. This
Operating Agreement may be amended or modified from time to time only by a
written instrument adopted by a Member or Members holding at least a Majority of
the Membership Units of the Company; provided, however that the unanimous
consent or approval of the Members shall be required in order to make an
amendment affecting how distributions and allocations under Article X or Article
XIV will be made to the Members, an amendment affecting the rights or
obligations of the Members with respect to Additional Capital Contributions or
an amendment affecting the right of a member to transfer its Membership Units or
the purchase price payable for Membership Units under Article XII.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Entire Agreement. This Operating Agreement constitutes the
entire agreement among the parties. No party shall be bound by any terms,
conditions, statements or representations, oral or written, not herein
contained. Each party hereby acknowledges that in executing this Operating
Agreement, such party has not been induced, persuaded or motivated by any
promise or representation made by any other party, unless expressly set forth
herein. All previous negotiations, statements and preliminary instruments by the
parties or their representatives are merged in this Operating Agreement.
Section 16.2 Rights of Creditors and Third Parties. This Operating
Agreement is entered into by and among the Members for the exclusive benefit of
the Company, its Members, and their successors and assignees. This Operating
Agreement is expressly not intended for the benefit of any creditor of the
Company or any other Person. Except and only to the extent provided by the Act
or other applicable statute, no such creditor or third party shall have any
rights under this Operating Agreement or any agreement between the Company and
any Member with respect to any Capital Contribution or otherwise.
Section 16.3 Changes in Applicable Law. In the event that any covenant,
condition, or other provision contained in this Agreement, or any part of the
business of the Company (whether or not conducted by the Company) is determined
to be invalid, void or illegal, the Members shall amend this Agreement, any
other affected agreements, and/or the manner in which the business of the
Company is conducted to comply with such laws. For purposes of this Section
16.3, a good faith determination of illegality by a Member based on an opinion
of counsel shall be sufficient to trigger the application of this Section. Any
decisions regarding the manner in which such illegality will be addressed shall
require the agreement of all of the Members.
Section 16.4 Interpretation. For and in consideration of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Members executing
this Operating Agreement hereby agree to the terms and conditions contained
herein, as it may from time to time be amended according to its terms. It is the
express intention of the Members that this Operating Agreement and the
Certificate shall be the sole source of agreement of the parties, and, except to
the extent a provision of the Operating Agreement expressly incorporates Federal
income tax rules by reference to
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sections (ss.ss.) of the Code or Regulations or is expressly prohibited or
ineffective under the Act, the Operating Agreement shall govern, even when
inconsistent with, or different than, the provisions of the Act or any other law
or rule. To the extent any provision of this Operating Agreement is prohibited
or ineffective under the Act, the Operating Agreement shall be considered
amended to the smallest degree possible in order to make the agreement effective
under the Act. In the event the Act is subsequently amended or interpreted in
such a way to make any provision of this Operating Agreement that was formerly
invalid valid, such provision shall be considered to be valid from the effective
date of such interpretation or amendment.
Section 16.5 Governing Law. This Operating Agreement, and the application
or interpretation hereof, shall be governed exclusively by its terms and by the
laws of the State of Delaware, and specifically the Act, applied without respect
to any conflicts-of-law principles.
Section 16.6 Execution of Additional Instruments. Each Member hereby
agrees to execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
Section 16.7 Construction of Terms. Whenever used in this Agreement and
when required by the context, the singular number shall include the plural and
the plural the singular. Pronouns of one gender shall include all genders.
Section 16.8 Captions. The captions as to contents of particular articles,
sections or paragraphs contained in this Operating Agreement and the table of
contents hereto are inserted for convenience and are in no way to be construed
as part of this Operating Agreement or as a limitation on the scope of the
particular articles, sections or paragraphs to which they refer.
Section 16.9 Waivers. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any agreement or
condition of this Operating Agreement shall not prevent a subsequent act, which
would have originally constituted a violation, from having the effect of an
original violation.
Section 16.10 Rights and Remedies Cumulative. The rights and remedies
provided by this Operating Agreement are cumulative and the use of any one right
or remedy by any party shall not preclude or waive the right to use any or all
other remedies. Said rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise.
Section 16.11 Heirs, Successors and Assigns. Each and all of the
covenants, terms, provisions and agreements herein contained shall be binding
upon and inure to the benefit of the parties hereto and, to the extent permitted
by this Operating Agreement, their respective heirs, legal representatives,
successors and assigns.
Section 16.12 Counterparts. This Operating Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
Section 16.13 Certain Disputes Between Kiewit Alabama and Simba Group.
(a) In any matter requiring the agreement or action of the Managers, or a
vote of Kiewit Alabama and Simba Group as Members of the Company, Kiewit Alabama
and Simba Group shall, and shall cause their respectively appointed Managers to
use their best efforts, in good faith, to resolve any dispute or disagreement
with respect thereto.
(b) In the event the Managers in good faith are unable to reach such
agreement on any matter requiring their approval under this Agreement, or (ii)
Kiewit Alabama and Simba Group are unable to reach agreement on any matter
requiring their vote as Members of the Company, in either instance, upon notice
by either party to the other, the matter shall be referred to resolution by the
President of Kiewit Construction Group, Inc. and the President of Anker Coal
Group, Inc.
26
<PAGE> 36
(c) In the event that the President of Kiewit Construction Group, Inc. and
the President of Anker Coal Group, Inc. are unable to resolve such dispute in
good faith within thirty (30) days after the same has been referred to them for
resolution, either Kiewit Alabama or Simba Group (the "Offeror") may deliver an
offer (the "Purchase/Sell Offer") to the other party (the "Offeree"), which
irrevocably offers to either (i) sell to the Offeree all of the Offeror's
Membership Units, or (ii) purchase from the Offeree all of the Offeree"s
Membership Units, in each case for a per Membership Unit price selected by the
Offeror and set forth in the Purchase/Sale Offer.
(d) An Offeree must accept one of the offers set forth in the
Purchase/Sale Offer by delivering a written acceptance ("Acceptance") to the
Offeror within thirty (30) days after receipt of the Purchase/Sale Offer. An
Acceptance must irrevocably elect to either (i) purchase from the Offeror all of
the Membership Units held by the Offeror, or (ii) sell to the Offeror all of the
Membership Units held by the Offeree, in each case, at the per Membership Unit
purchase price set forth in the Purchase/Sale Offer. Failure to deliver an
Acceptance within such thirty (30) day period shall be deemed an election by the
Offeree to sell its Membership Units to the Offeror at the per Membership Unit
purchase price set forth in the Purchase/Sale Offer. Upon delivery of the
Acceptance, or expiration of the thirty (30) day period without delivery of the
Acceptance, as the case may be, Kiewit Alabama and Simba Group will become
obligated to purchase and sell, as the case may be, the Membership Units at the
per Membership Unit purchase price specified in the Purchase/Sale Offer. The
closing date for the purchase and sale of Membership Units shall be as specified
in the Acceptance; provided, however, that such closing date shall not be less
than sixty (60) nor more than one hundred twenty (120) days after the delivery
to the Offeror of the Acceptance. If no such closing date is specified in the
Acceptance or if no Acceptance is delivered within the thirty (30) day period,
the closing date shall be ninety (90) days after the date of delivery of the
Purchase/Sale Notice.
(e) The purchase price payable pursuant to paragraph (d) above shall be
paid by the purchasing party in cash on the specified closing date.
[The Remainder Of This Page Was Left Blank Intentionally]
27
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have executed this Operating
Agreement as of the 20th day of February, 1997.
MEMBERS:
SIMBA GROUP, INC.
By: /s/ John J. Faltis
--------------------------------
As Its: President
----------------------------
KIEWIT ALABAMA MINING COMPANY
By: /s/ Bruce Grewcock
--------------------------------
As Its: President
----------------------------
28
<PAGE> 38
EXHIBIT A
Name, Address and Capital Contributions
<TABLE>
<CAPTION>
Members Member Capital Contribution Initial Membership Units
- ------- and Value as of Effective Time ------------------------
------------------------------
<S> <C> <C>
Simba Group, Inc. $500.00 50
2708 Cranberry Square
Morgantown West Virginia 26505
Kiewit Alabama Mining Company $500.00 50
1000 Kiewit Plaza
Omaha, Nebraska 68131
</TABLE>
<PAGE> 39
EXHIBIT B
Name, Address and Initial Delayed Contribution
Additional
Member Initial Delayed Membership
Members Contribution and Value Units
- ------- ---------------------- -----
Simba Group, Inc. $10,000,000.00, consisting of 1,000,000
2708 Cranberry Square (i) the assignment of Simba
Morgantown, West Virginia 26505 Group's interests in the Third
Amended and Restated Negotiable
Promissory Note, dated January
21, 1997, of Oak Mountain
Energy Corporation to Zither
Mining Company, Inc. in the
principal amount of $8,000,000,
as the same may be hereafter
increased from time to time
(the "Note") and (ii) an amount
of cash equal to $10,000,000
less (A) the principal amount
of Simba Group's interest in
the Note assigned to the
Company under (i) above, (B)
accrued but unpaid interest
attributable to Simba Group's
interest in the Note and (C)
all expenses incurred by Oak
Mountain Group, Inc., Simba
Group, Inc., their respective
parent corporations and their
respective Affiliates in
connection with the
transactions contemplated by
the Asset Purchase Agreement
being executed
contemporaneously herewith, up
to a maximum of $439,000.
Kiewit Alabama Mining Company $10,000,000.00, consisting of 1,000,000
1000 Kiewit Plaza (i) the assignment of Kiewit
Omaha, Nebraska 60131 Alabama's interests in the Note
and (ii) an amount of cash
equal to $10,000,000 less (A)
the principal amount of Kiewit
Alabama's interest in the Note
assigned to the Company under
(i) above and (B) accrued but
unpaid interest attributable to
Kiewit Alabama's interest in
the Note.
<PAGE> 40
EXHIBIT C
JJF Group Limited Liability Company
PPK Group Limited Liability Company
Anker Holding B.V.
First Reserve Corporation
American Oil & Gas Investors, Limited Partnership
AMGO II, Limited Partnership
First Reserve Fund V, Limited Partnership
First Reserve Fund V-2, Limited Partnership
First Reserve Fund VI, Limited Partnership
First Reserve Fund VII, Limited Partnership
31
<PAGE> 1
EXHIBIT 10.11.1
OPERATING AGREEMENT
OF
SHELBY ENERGY GROUP, L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
FORMATION OF COMPANY
Section 2.1 Organization........................................... 7
Section 2.2 Registered Agent and Office............................ 7
Section 2.3 Principal Place of Business............................ 7
Section 2.4 Permitted Businesses................................... 7
ARTICLE III
NAMES AND ADDRESSES OF MEMBERS
ARTICLE IV
RIGHTS AND DUTIES OF MANAGERS
Section 4.1 Management............................................. 7
Section 4.2 Number, Tenure and Qualifications...................... 8
Section 4.3 Manager Voting......................................... 8
Section 4.4 Certain Powers of Managers............................. 8
Section 4.5 Limitation on Powers of Managers....................... 9
Section 4.6 Liability for Certain Acts............................. 10
Section 4.7 Committees of the Managers............................. 10
Section 4.8 Intentionally omitted.................................. 10
Section 4.9 Managers Have No Exclusive Duty to Company............. 10
Section 4.10 Property............................................... 10
Section 4.11 Bank Accounts.......................................... 10
Section 4.12 Records, Audits and Reports to be Maintained........... 10
Section 4.13 Access to Records...................................... 11
Section 4.14 Reports to Members..................................... 11
Section 4.15 Accounts............................................... 11
Section 4.16 Records of Membership Units............................ 11
Section 4.17 Resignation............................................ 11
Section 4.18 Removal................................................ 11
Section 4.19 Vacancies.............................................. 12
ARTICLE V
MEETINGS OF MANAGERS
Section 5.1 Meetings............................................... 12
Section 5.2 Regularly Scheduled Meeting............................ 12
Section 5.3 Meeting of All Managers................................ 12
Section 5.4 Record Date............................................ 12
Section 5.5 Action by Managers Without a Meeting................... 12
Section 5.6 Waiver of Notice....................................... 12
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
Section 6.1 Member Management Rights............................... 12
i
<PAGE> 3
Section 6.2 Liability of Members to Third Parties.................. 13
Section 6.3 Approval of Sale of All of the Company's Property...... 13
Section 6.4 Approval of Merger or Consolidation.................... 13
Section 6.5 Right of Withdrawal.................................... 13
Section 6.6 Conflicts of Interest.................................. 13
ARTICLE VII
MEETINGS OF MEMBERS
Section 7.1 Meetings............................................... 13
Section 7.2 Manner of Acting....................................... 13
Section 7.3 Action by Members Without a Meeting.................... 14
Section 7.4 Waiver of Notice....................................... 14
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification of Members, Managers, Etc.............. 14
Section 8.2 Determination of Meeting Applicable Standard........... 14
Section 8.3 Payment of Expenses in Advance of Disposition of Action 14
Section 8.4 Non-Exclusivity of Article............................. 15
Section 8.5 Insurance.............................................. 15
ARTICLE IX
CONTRIBUTIONS AND CAPITAL ACCOUNTS
Section 9.1 Initial Capital Contributions.......................... 15
Section 9.2 Additional Capital Contributions....................... 15
Section 9.3 Maintenance of Capital Accounts........................ 16
Section 9.4 Sale or Exchange of Interest........................... 16
Section 9.5 Compliance withss.704(b) of the Code................... 16
ARTICLE X
ALLOCATIONS AND DISTRIBUTIONS
Section 10.3 Company Minimum Gain Chargeback........................ 17
Section 10.5 Member Nonrecourse Deductions.......................... 18
Section 10.6 Member Minimum Gain Chargeback......................... 18
Section 10.7 Qualified Income Offset................................ 18
Section 10.9 Tax Allocations: ss. 704(c) of the Code.................. 18
Section 10.10 Interim Distributions.................................. 19
Section 10.11 Limitations on Distributions........................... 19
ARTICLE XI
CERTAIN TAX MATTERS
Section 11.1 Elections.............................................. 19
Section 11.2 Taxes of Taxing Jurisdictions.......................... 19
Section 11.3 Tax Matters Partner.................................... 19
Section 11.4 Method of Accounting................................... 20
ARTICLE XII
DISPOSITION OF MEMBERSHIP UNITS
Section 12.1 Limitations............................................ 20
ii
<PAGE> 4
Section 12.2 Consent, Etc........................................... 20
Section 12.3 Permitted Sales by the Member.......................... 20
Section 12.4 Transfer Upon Dissociation of a Member................. 21
Section 12.5 Purchase Price......................................... 21
Section 12.6 Certain Additional Permitted Transfers of
Membership Units by Members ........................... 22
Section 12.7 Certain Limitations on Transfers of Capital Stock...... 23
ARTICLE XIII
ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS
Section 13.1 Rights of Assignees.................................... 23
Section 13.2 Admission of Substitute Members........................ 23
Section 13.3 Admission of Additional Members........................ 23
ARTICLE XIV
DISSOCIATION, DISSOLUTION AND WINDING UP
Section 14.1 Dissociation........................................... 24
Section 14.2 Rights of Dissociating Member.......................... 24
Section 14.3 Dissolution............................................ 24
Section 14.4 Distribution of Assets on Dissolution.................. 25
Section 14.5 Winding Up and Certificate of Cancellation............. 25
Section 14.6 Effect of Dissolution.................................. 25
ARTICLE XV
AMENDMENT
Section 15.1 Operating Agreement May Be Modified.................... 25
Section 15.2 Amendment or Modification of Operating Agreement....... 25
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Entire Agreement....................................... 26
Section 16.2 Rights of Creditors and Third Parties.................. 26
Section 16.3 Changes in Applicable Law.............................. 26
Section 16.4 Interpretation......................................... 26
Section 16.5 Governing Law.......................................... 26
Section 16.6 Execution of Additional Instruments.................... 26
Section 16.7 Construction of Terms.................................. 26
Section 16.8 Captions............................................... 26
Section 16.9 Waivers................................................ 27
Section 16.10 Rights and Remedies Cumulative......................... 27
Section 16.11 Heirs, Successors and Assigns.......................... 27
Section 16.12 Counterparts........................................... 27
Section 16.13 Certain Disputes Between Kiewit Alabama and
Simba Group ........................................... 27
iii
<PAGE> 5
Operating Agreement
Of
Shelby Energy Group, L.L.C.,
A Delaware Limited Liability Company
This Operating Agreement of Shelby Energy Group, L.L.C., a limited
liability company organized pursuant to the Delaware Limited Liability Company
Act, shall be effective as of the Effective Date (as defined herein), by and
among the Persons executing this Operating Agreement as Members.
ARTICLE I
DEFINITIONS
The following terms used in this Operating Agreement shall have the
following meanings unless otherwise expressly provided herein:
Section 1.1 "Act" shall mean the Delaware Limited Liability Company Act,
as amended from time to time, and any successor thereto.
Section 1.2 "Additional Capital Contribution" shall mean any Capital
Contribution other than an Initial Capital Contribution and the Initial Delayed
Capital Contribution that a Member is obligated to make in accordance with
Section 9.2.
Section 1.3 "Additional Member" shall mean a Member, other than an Initial
Member or a Substitute Member, who has acquired a Membership Unit of the Company
and has become a Member in accordance with Section 13.3.
Section 1.4 "Adjusted Deficit" shall mean with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentences of
Regulation ss.ss. 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in ss.ss.
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Deficit is intended to comply with the
provisions of ss. 1.704-1(b)(2)(ii)(d) of the Regulations and shall be so
construed.
Section 1.5 "Affiliate" shall mean, with respect to any Person, (i) any
Person directly or indirectly controlling, controlled by, or under common
control with such Person, (ii) any Person owning or controlling ten percent
(10%) or more of the outstanding voting interests of such Person, (iii) any
member, manager, officer, director or general partner of such Person, or (iv)
any Person who is a member, manager, officer, director, general partner,
trustee, or a holder of ten percent (10%) or more of the voting interests of any
Person described in clauses (i) through (iii) of this sentence. For purposes of
this definition, the term "controls," "is controlled by" or "is under common
control with" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management policies of a person or entity,
whether through the ownership of voting securities, by contract or otherwise.
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<PAGE> 6
Section 1.6 "Appraiser" means an unaffiliated and unrelated business
consultant or independent Investment Banker who is familiar with the type of
business in which the Company is involved and would qualify as an "expert" for
business appraisals in a court of law.
Section 1.7 "Assignee" shall mean a transferee of an Economic Interest who
has not been admitted as a Substitute Member. Such transferee of a Membership
Unit shall be entitled to merely an Economic Interest in the Company until and
unless such Assignee is admitted as a Substitute Member in accordance with this
Operating Agreement.
Section 1.8 "Capital Account" shall mean the account maintained with
respect to a Member or Assignee determined in accordance with Article IX.
Section 1.9 "Capital Contribution" shall mean the amount of money and the
Gross Asset Value of Property (other than money) contributed to the Company by
or on behalf of a Member or Assignee.
Section 1.10 "Certificate" shall mean the Certificate of Formation of the
Company, as amended from time to time.
Section 1.11 "Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor thereto.
Section 1.12 "Company" shall mean Shelby Energy Group, L.L.C., a Delaware
limited liability company, and any successor limited liability company.
Section 1.13 "Company Minimum Gain" shall mean an amount determined by
first computing for each Company Nonrecourse Liability any gain the Company
would realize if it disposed of the Company Property subject to that liability
for no consideration other than full satisfaction of the liability, and then
aggregating the separately computed gains. The amount of Company Minimum Gain
includes such minimum gain arising from a conversion, refinancing, or other
change to a debt instrument, only to the extent a Member is allocated a share of
that minimum gain. For any Fiscal Year, the net increase or decrease in Company
Minimum Gain is determined by comparing the Company Minimum Gain on the last day
of the immediately preceding Fiscal Year with the Minimum Gain on the last day
of the current Fiscal Year. Notwithstanding any provision to the contrary
contained herein, Company Minimum Gain, and increases and decreases in Company
Minimum Gain, are intended to be computed in accordance with ss. 704 of the Code
and the Regulations issued thereunder, as the same may be issued and interpreted
from time to time.
Section 1.14 "Company Nonrecourse Liability" shall mean any debt or
obligation of the Company to the extent that no Member or Related Person bears
the economic risk of loss (as defined in ss. 1.752-2 of the Regulations) with
respect to the liability.
Section 1.15 "Company Property" shall mean any Property owned by the
Company.
Section 1.16 "Depreciation" means, for each Fiscal Year, an amount equal
to the depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such Fiscal Year, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Fiscal Year, Depreciation shall be an amount
which bears the same ratio to such beginning Gross Asset Value as the federal
income tax depreciation, amortization, or other cost recovery deduction for such
Fiscal Year bears to such beginning adjusted tax basis; provided, however, that
if the adjusted basis for federal income tax purposes of an asset at the
beginning of such Fiscal Year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the Managers.
Section 1.17 "Disposition" ("Dispose") shall mean any sale, assignment,
transfer, exchange, mortgage, pledge, grant, hypothecation, or other transfer,
absolute or as security or encumbrance (including dispositions by operation of
law) of an Economic Interest or Membership Unit in the Company.
2
<PAGE> 7
Section 1.18 "Dissociation (Dissociate)" shall mean any action or event
which causes a Person to cease to be Member of the Company as described in
Article XIV hereof.
Section 1.19 "Dissociation Event" shall mean an event, the occurrence of
which will result in the dissolution of the Company under Article XIV unless the
Members agree to the contrary.
Section 1.20 "Distribution" shall mean a transfer of Property made by the
Company to a Member or an Assignee on account of such Member's or Assignee's
Economic Interest or Membership Unit as
described in Article X.
Section 1.21 "Economic Interest" shall mean a Member's or Assignee's share
of the Company's Net Profits, Net Losses, and Distributions of the Company's
Property pursuant to this Operating Agreement and the Act, but shall not include
any right to participate in the operation, management or affairs of the Company,
including the right to vote on, consent to, or otherwise participate in any
decision of the Members.
Section 1.22 "Effective Date" shall mean February 18, 1997.
Section 1.23 "Fiscal Year" shall mean (i) the period commencing on the
Effective Date of this Agreement and ending on December 31, 1997, (ii) any
subsequent twelve (12) month period commencing on January 1 and ending on
December 31, and (iii) any portion of the period described in clause (ii) for
which the Company is required to allocate Profits, Losses and other items of
Company income, gain, loss or deduction pursuant to Article X hereof.
Section 1.24 "Gross Asset Value" shall mean, with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset, as
determined by the Managers, provided that the initial Gross Asset Values of the
assets contributed to the Company pursuant to Sections 9.1 and 9.2 hereof shall
be as set forth and determined in such sections;
(b) The Gross Asset Values of all Company assets shall be adjusted
to equal their respective gross fair market values, as determined by the
Managers, as of the following times: (i) the acquisition of an additional
Membership Interest or Membership Unit by any new or existing Member in exchange
for more than a de minimis Capital Contribution; (ii) the distribution by the
Company to a Member of more than a de minimis amount of Property as
consideration for a Membership Interest or Membership Unit; and (iii) the
liquidation of the Company within the meaning of Regulations ss.
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses
(i) and (ii) above shall be made only if the Managers reasonably determine that
such adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the Company;
(c) The Gross Asset Value of any Company asset distributed to any
Member shall be adjusted to equal the gross fair market value of such asset on
the date of distribution as determined by the Managers; and
(d) The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code ss. 734(b) or Code ss. 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Regulation ss. 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values
shall not be adjusted pursuant to this Section 1.24(d) to the extent the
Managers determine that an adjustment pursuant to Section 1.24(b) hereof is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this Section 1.24(d). If the Gross Asset
Value of an asset has been determined or adjusted pursuant to Section 1.24(a),
Section 1.24(b), or Section 1.24(d) hereof, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Net Profits and Net Losses.
3
<PAGE> 8
Section 1.25 "Initial Capital Contribution" shall mean the Capital
Contribution agreed to be made by the Members as described in Section 9.1 and
set forth on Exhibit A attached hereto.
Section 1.26 "Initial Delayed Contribution" shall mean the Initial Delayed
Contribution agreed to be made by the Initial Members as described in Section
9.1 and set forth on Exhibit B attached hereto.
Section 1.27 "Initial Members" shall mean those persons identified on
Exhibit A attached hereto who have executed this Operating Agreement as of the
Effective Date.
Section 1.28 "Kiewit Alabama" shall mean Kiewit Alabama Mining Company, a
Delaware corporation.
Section 1.29 "Majority" with respect to Members, shall mean those Members
owning more than Fifty Percent (50%) of the Membership Units in the Company;
similarly, any reference in this Agreement to any other specified percentage of
the Members shall refer to those Members holding, in the aggregate, the
specified percentage of Membership Units in the Company and, for this purpose,
Assignees, transferees and other holders of Economic Interests who have not been
admitted as Members pursuant to Section 13.2 hereof shall be deemed to hold zero
Membership Units.
Section 1.30 "Managers" shall mean the Persons designated by the Members
to manage the affairs of the Company under Article IV hereof.
Section 1.31 "Member" shall mean an Initial Member, Substitute Member or
Additional Member of the Company who has not ceased to be a Member.
Section 1.32 "Member Minimum Gain" shall mean an amount determined in
accordance with Regulations ss. 1.704-2(i) by first computing for each Member
Nonrecourse Liability any gain the Company would realize if it disposed of the
Company Property subject to that liability for no consideration other than full
satisfaction of the liability, and then aggregating the separately computed
gains. The amount of Member Minimum Gain includes such minimum gain arising from
a conversion, refinancing, or other change to a debt instrument, only to the
extent a Member is allocated a share of that minimum gain. For any Fiscal Year,
the net increase or decrease in Member Minimum Gain is determined by comparing
the Member Minimum Gain on the last day of the immediately preceding Fiscal Year
with the Member Minimum Gain on the last day of the current Fiscal Year.
Notwithstanding any provision to the contrary contained herein, Member Minimum
Gain and increases and decreases in Member Minimum Gain are intended to be
computed in accordance with ss. 704 of the Code and the Regulations issued
thereunder, as the same may be issued and interpreted from time to time.
Section 1.33 "Member Nonrecourse Deductions" shall mean the net increase
during the Fiscal Year, if any, in Member Minimum Gain, reduced (but not below
zero) by any distribution of proceeds that are attributable to a Member
Nonrecourse Liability and allocable to an increase in such Member Minimum Gain
under ss. 1.704-2(i) of the Regulations.
Section 1.34 "Member Nonrecourse Liability" shall mean any debt or
obligation of the Company to the extent the liability is nonrecourse under state
law, and on which a Member or Related Person bears the economic risk of loss
under ss. 1.752-2 of the Regulations because, for example, the Member or Related
Person is the creditor or a guarantor.
Section 1.35 "Membership Interest" shall mean a Member's entire interest
in the Company including such Member's Economic Interest and the right of the
Member to participate in the management and operation of the business and
affairs of the Company, including, but not limited to, the right to vote on,
consent to, or otherwise participate in any decision, vote or action of or by
the Members granted pursuant to this Operating Agreement and the Act. In the
case of an Assignee, the term "Membership Interest" shall mean only the
Assignee's Economic Interest in the Company. A Member's Membership Interest
shall be equal to the
4
<PAGE> 9
number of Membership Units held by such Member, divided by the total number of
Membership Units outstanding.
Section 1.36 "Membership Unit" shall mean the numerical measure of the
size of a Membership Interest in the Company. In the case of an Assignee, the
term "Membership Unit" shall encompass only the Assignee's Economic Interest in
the Company with respect to such Membership Unit.
Section 1.37 "Net Profits" and "Net Losses" means, for each Fiscal Year,
an amount equal to the Company's taxable income or loss for such Fiscal Year,
determined in accordance with Code ss. 703(a) (for this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
Code ss. 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Profits or Net Losses
pursuant to this Section 1.37 shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Code ss.
705(a)(2)(B) or treated as Code ss. 705(a)(2)(B) expenditures pursuant to
Regulations ss. 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Net Profits or Net Losses pursuant to this Section 1.37, shall be
subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to Section 1.24(b) or Section 1.24(c) hereof, the amount of
such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Net Profits or Net Losses;
(d) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the Property disposed
of, notwithstanding that the adjusted tax basis of such Property differs from
its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year, computed in
accordance with Section 1.16 hereof;
(f) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code ss. 734(b) or Code ss. 743(b) is required
pursuant to Regulations ss.ss. 1.704-1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts
as a result of a distribution other than in liquidation of a Member's Membership
Interest, the amount of such adjustment shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the asset and shall be
taken into account for purposes of computing Net Profits or Net Losses; and
(g) Notwithstanding any other provision of this Section 1.37, any
items which are specially allocated pursuant to Sections 10.3 through 10.9
hereof shall not be taken into account in computing Net Profits or Net Losses.
The amounts of the items of Company income, gain, loss, or deduction available
to be specially allocated pursuant to Sections 10.3 through 10.9 hereof shall be
determined by applying rules analogous to those set forth in Sections 1.37(a)
through 1.37(f) above.
Section 1.38 "Notice" shall be in writing. Notice shall be considered
given (a) on the date when delivered personally, (b) when transmitted by
telecopy (receipt confirmed), provided that a copy is mailed at the end of the
following business day by first class mail, postage prepaid, (c) on the third
day after mailing by first class mail postage prepaid addressed to the Managers
in care of the Company at the address of the Company's
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Principal Place of Business, or (d) on the next business day following deposit
within a nationally recognized overnight delivery service for next day delivery,
at that Member's address as reflected in the Operating Agreement unless the
Member has given the Company a Notice of a different address.
Section 1.39 "Offsettable Decrease" shall mean any allocation that
unexpectedly causes or increases an Adjusted Deficit in a Member's or Assignee's
Capital Account as of the end of the Fiscal Year to which the allocation relates
attributable to depletion allowances under ss. 1.704(b)(2)(iv)(k) of the
Regulations, allocations of loss and deductions under ss.ss. 704(e)(2) or 706 of
the Code or ss. 1.751-1 of the Regulations, or distributions that, as of the end
of the Fiscal Year, are reasonably expected to be made to the extent they exceed
the offsetting increases to such Member's or Assignee's Capital Account that
reasonably are expected to occur during or (prior to) the Fiscal Years in which
such distributions are expected to be made (other than increases pursuant to a
minimum gain chargeback pursuant to sections 10.3 and 10.6 hereof).
Section 1.40 "Operating Agreement" shall mean this Operating Agreement
including all amendments hereto adopted in accordance with Section 15.2 and the
Act.
Section 1.41 "Organization" shall mean any entity permitted to be a Member
of a limited liability company under the Act. The term "Organization" includes,
without limitation, corporations (both non-profit and other corporations),
partnerships (both limited and general), joint ventures, limited liability
companies, and unincorporated associations, but does not include joint tenancies
and tenancies by the entirety.
Section 1.42 "Person" shall include an individual, trust, estate, or any
Organization.
Section 1.43 "Principal Place of Business" shall mean the principal office
of the Company designated in Section 2.3, or any other place or places as the
Managers may from time to time deem advisable.
Section 1.44 "Property" shall mean any property real, personal or mixed,
tangible or intangible, including money and any legal or equitable interest in
such property, but excluding services and promises to perform services in the
future.
Section 1.45 "Regulations" shall mean the permanent, temporary, proposed,
or proposed and temporary regulations issued by the of Department of the
Treasury that are promulgated under the Code as amended.
Section 1.46 "Related Person" shall mean a Person having a relationship to
a Member that is described in ss. 1.752-4(b) of the Regulations.
Section 1.47 "Secretary of State" shall mean the Delaware Secretary of
State.
Section 1.48 "Simba Group" shall mean Simba Group, Inc., a Delaware
corporation.
Section 1.49 "Substitute Member" shall mean an Assignee who has been
admitted as a Member of the Company in accordance with Section 13.2. Upon
becoming a Member of the Company, such Assignee shall have all the rights of a
Member as are described more fully in Section 13.2 hereof.
Section 1.50 "Taxing Jurisdiction" shall mean the taxing jurisdiction of
the Federal Government and of any state, local, or foreign government that
collects tax, interest or penalties, however designated, on any Member's share
of the income or gain attributable to the Company.
ARTICLE II
FORMATION OF COMPANY
Section 2.1 Organization. On February 18, 1997, the initial Members
organized the Company pursuant to the provisions of the Act by executing and
filing the Certificate with the Secretary of State.
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Section 2.2 Registered Agent and Office. The registered agent for the
service of process and the registered office shall be that person and location
reflected in the Certificate. The Managers may, from time to time, change the
registered agent or office through appropriate filings with the Secretary of
State. In the event the registered agent ceases to act as such for any reason or
the location of the registered office shall change, the Managers shall promptly
designate a replacement registered agent or file a notice of change of address
as the case may be.
Section 2.3 Principal Place of Business. The Principal Place of Business
of the Company is located at 2708 Cranberry Square, Morgantown, West Virginia
26505. The Company may locate its principal places of business at any other
place or places as the Managers may from time to time deem advisable.
Section 2.4 Permitted Businesses. The business of the Company shall be:
(a) To perform any and all business for which a limited liability
company may be organized under the Act, including, without limitation, the
formation of Oak Mountain Energy L.L.C., a separate limited liability company,
whose purpose shall include, without limitation, the mining, processing,
marketing and selling of coal and related products in and throughout the State
of Alabama.
(b) To accomplish any lawful business whatsoever or which shall at
any time appear conducive to or expedient for the protection or benefit of the
Company and its Property.
(c) To exercise all other powers necessary to or reasonably
connected with the Company's business which may be legally exercised by limited
liability companies under the Act or under the laws of any jurisdiction in which
the Company may conduct its business.
(d) To engage in all activities necessary, customary, convenient, or
incident to any of the foregoing.
ARTICLE III
NAMES AND ADDRESSES OF MEMBERS
The name and address of each Member and Assignee, and the Membership Units
of each such Member shall be listed on Exhibit A attached hereto. The Managers
shall update Exhibit A from time to time as necessary to accurately reflect the
information therein. Any amendment or revision to Exhibit A made in accordance
with this Agreement shall not be deemed an amendment to this Agreement for
purposes of requiring Member approval. Any reference in this Agreement to
Exhibit A shall be deemed to be a reference to Exhibit A as may be in effect
from time to time.
ARTICLE IV
RIGHTS AND DUTIES OF MANAGERS
Section 4.1 Management. The management of the business and affairs of the
Company shall be vested in its Managers. Except for situations in which the
approval of the Members is expressly required by this Operating Agreement, or by
nonwaivable provisions of applicable law, the Managers shall have full and
complete authority, power and discretion to manage and control the business,
affairs and Properties of the Company, to make all decisions regarding those
matters and to perform any and all other acts or activities customary or
incident to the management of the Company's business.
Section 4.2 Number, Tenure and Qualifications. The Company shall have four
(4) Managers. Simba Group shall be entitled to designate two (2) Managers and
Kiewit Alabama shall be entitled to designate two (2) Managers. No other Member
shall be entitled to elect, designate, appoint or otherwise participate in an
election, designation or approval of any Managers. Each Manager shall hold
office until such Manager's successor shall have been elected or designated and
qualified, or until the Member responsible for designating such Manager shall
have Dissociated from the Company, whichever occurs first. A Manager need not be
a
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resident of the State of Delaware or a Member of the Company. The names and
addresses of the Managers of the Company appointed or designated by each Member,
as of the date of execution of this Agreement, are as follows:
NAME ADDRESS
Managers appointed by Simba Group (the "Simba Group Managers")
John J. Faltis 2708 Cranberry Square
Morgantown, West Virginia 26505
Bruce Sparks 2708 Cranberry Square
Morgantown, West Virginia 26505
Managers appointed by Kiewit Alabama (the "Kiewit Alabama Managers")
Christopher J. Murphy 1000 Kiewit Plaza
Omaha, Nebraska 68131
Bruce E. Grewcock 1000 Kiewit Plaza
Omaha, Nebraska 68131
Section 4.3 Manager Voting. With respect to all matters requiring the vote
of, action by, approval of or consent by "the Managers," the approval, consent,
vote or action by all of the Managers shall be required to take such action,
unless such other number of Managers is expressly required pursuant to this
Operating Agreement or nonwaivable provisions of the Act.
Section 4.4 Certain Powers of Managers. Except as otherwise required
pursuant to this Operating Agreement or by nonwaivable provisions of the Act,
including, without limitation, the provisions of Section 4.5 hereof, the
Managers shall have the power and authority, on behalf of the Company:
(a) To acquire Property from any Person and to hold and own Property
in the name of the Company;
(b) To invest any Company funds temporarily (by way of example but
not limitation) in time deposits, short-term governmental obligations,
commercial paper or other investments;
(c) To dispose of the Company's Property in the ordinary course of
the Company's business;
(d) To borrow money for the Company from banks, other lending
institutions, Managers, Members, or any Affiliate of the Managers or Members on
such terms as the Managers deem appropriate, and in connection therewith, to
hypothecate, encumber and grant security interests in the Property of the
Company to secure repayment of the borrowed sums. No debt shall be contracted or
liability incurred by or on behalf of the Company except as authorized by the
Managers, or to the extent permitted under the Act, by agents or employees of
the Company expressly authorized to contract such debt or incur such liability
by the Managers;
(e) To execute on behalf of the Company all instruments and
documents, including, without limitation, checks, drafts, notes and other
negotiable instruments, mortgages or deeds of trust, security agreements,
financing statements, documents providing for the acquisition, mortgage or
disposition of the
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Company's Property, assignments, bills of sale, leases, partnership agreements,
operating agreements of other limited liability companies, and any other
instruments or documents necessary to the business of the Company;
(f) To purchase liability and other insurance to protect the
Company's Property and business;
(g) To employ accountants, legal counsel, managing agents or other
experts to perform services for the Company and to compensate them from Company
funds;
(h) To enter into any and all other agreements on behalf of the
Company with any other Person for any purpose;
(i) To exercise the Company's rights in connection with any
investment in any Organization, including, without limitation, to exercise any
voting rights arising from such an investment; and
(j) To do and perform any and all other acts as may be necessary or
appropriate to the conduct of the Company's business.
Unless authorized to do so by this Operating Agreement or by the
Managers of the Company, no attorney-in-fact, employee or other agent of the
Company shall have any power or authority to bind the Company in any way, to
pledge its credit or to render it liable pecuniarily for any purpose. No Member
or Manager shall have any power or authority to bind the Company unless the
Member or Manager has been authorized by the Managers to act as an agent of the
Company in accordance with the previous sentence.
Section 4.5 Limitation on Powers of Managers. Notwithstanding anything to
the contrary in this Article IV or elsewhere in the Operating Agreement or the
Certificate, the Managers shall not have the power or authority to do any of the
following without the consent of the requisite number of Members or those
Members holding the requisite Membership Units in the Company:
(a) amend the Operating Agreement except in accordance with Article
III or Section 15.2 of this Operating Agreement;
(b) admit Assignees as Substitute Members except in accordance with
Section 13.2 of this Operating Agreement;
(c) admit Additional Members except in accordance with Section 13.3
of this Operating Agreement;
(d) continue the Company after a Dissociation Event except in
accordance with Section 14.3 of this Operating Agreement;
(e) Dispose of all or substantially all of the Company Property
except in accordance with Section 6.3 of this Operating Agreement;
(f) merge or consolidate the Company with or into one or more
limited liability companies or other entities except in accordance with Section
6.4 of this Operating Agreement;
(g) waive the requirement of the Members to make an Additional
Capital Contribution or Initial Delayed Capital Contribution except in
accordance with Sections 9.1 and 9.2 of this
Operating Agreement;
(h) require the Members to make Additional Capital Contributions,
except in accordance with Section 9.2 of this Operating Agreement; or
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(i) take any other action which requires the vote, approval or
consent of the Members under this Operating Agreement.
Section 4.6 Liability for Certain Acts. Each Manager shall perform his
duties as Manager in good faith, in a manner he reasonably believes to be in the
best interests of the Company, and with such care as an ordinarily prudent
person in a like position would use under similar circumstances. A Manager who
so performs the duties of Manager shall not have any liability by reason of
being or having been a Member of the Company. The Managers do not, in any way,
guarantee the return of the Members' Capital Contributions or a profit for the
Members from the operations of the Company. The Managers shall not be liable to
the Company or to any Member for any loss or damage sustained by the Company or
any Member, unless the loss or damage shall have been the result of fraud,
deceit, gross negligence, willful misconduct or a wrongful taking by the
Manager.
Section 4.7 Committees of the Managers. The Managers may create one or
more committees. Any such committee shall consist of at least one (1) Simba
Group Manager and one (1) Kiewit Alabama Manager. Any such committee, to the
extent specified by the Managers, may exercise the authority of the Managers in
supervising the management of the business affairs of the Company, except that a
committee may not (i) authorize distributions, except in accordance with a
formula or method described by the Managers; (ii) approve or propose to Members
actions required by law to be approved by the Members; (iii) fill vacancies of
the Managers or any of its committees; (iv) amend the Certificate or the
Operating Agreement or propose amendments to the Certificate or the Operating
Agreement; (v) authorize any Additional Capital Contributions; (vi) take any
other actions which require the approval of the Members under the Certificate,
the Operating Agreement or the Act; or (vii) authorize the expenditure, or
undertaking of an obligation, in excess of $50,000.00.
Section 4.8 Intentionally omitted.
Section 4.9 Managers Have No Exclusive Duty to Company. No Manager shall
be required to manage the Company as such Manager's sole and exclusive function,
and any Manager may have other business interests and may engage in other
activities in addition to those relating to the Company. Neither the Company nor
any Member shall have any right, by virtue of this Operating Agreement, to share
or participate in such other investments or activities of a Manager or to the
income or proceeds derived therefrom. A Manager shall incur no liability to the
Company or to any of the Members as a result of engaging in any other business
or venture.
Section 4.10 Property. Any and all Company Property shall be held in the
name of the Company.
Section 4.11 Bank Accounts. The Managers may from time to time open bank
accounts in the name of the Company.
Section 4.12 Records, Audits and Reports to be Maintained. At the expense
of the Company, the Managers or the appropriate officer of the Company shall
maintain the records and accounts of all operations and expenditures of the
Company. The Company shall maintain the following records at the Principal Place
of Business:
(a) A current list of the full name and last known business or
residence address of each Member;
(b) A copy of the Certificate and all amendments thereto, together
with executed copies of any powers of attorney pursuant to which any documents
have been executed;
(c) Copies of the Company's Federal, foreign, state and local income
tax returns and reports, if any;
(d) A copy of the Operating Agreement including all amendments
thereto;
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(e) Copies of any financial statements of the Company for the three
(3) most recent years; and
(f) Any other records and accounts as the Members shall require the
Company to maintain.
Section 4.13 Access to Records. The records required to be maintained by
the Company in this Article IV, and any other books and records of the Company,
wherever situated, are subject to inspection and copying at the reasonable
request of, and at the expense of, any Member or the Member's agent or attorney
during regular business hours of the Company.
Section 4.14 Reports to Members. The Managers shall provide reports at
least annually to the Members, other than Assignees, at such time and in such
manner as the Managers may determine reasonable. The Managers shall also provide
all Members with those information returns required by the Code and the laws of
all applicable local and foreign governments.
Section 4.15 Accounts. The Managers shall maintain a record of Capital
Account for each Member and Assignee in accordance with Article IX.
Section 4.16 Records of Membership Units. The Managers shall maintain a
record of the Membership Units held by each Member, as such Membership Units
shall be increased or decreased from time to time in accordance with this
Operating Agreement.
Section 4.17 Resignation. Any Manager of the Company may resign at any
time by giving prior written notice to the Members of the Company. The
resignation of any Manager shall take effect upon the receipt of the notice or
at such later time as shall be specified in the notice, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective. The resignation of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute the
Dissociation of such Manager as a Member.
Section 4.18 Removal. Any Manager may be removed, with or without cause,
by the Member who designated or appointed such person as Manager (i.e., either
Simba Group or Kiewit Alabama) in accordance with Section 4.2, and such Member
shall promptly provide Notice to the Company of such removal. The removal of a
Manager who is also a Member shall not affect the Manager's rights as a Member
and shall not constitute a Dissociation of such Manager as a Member. In the
event of the Dissociation of a Member, all of the Managers appointed by such
Dissociated Member shall be immediately and automatically removed as a Manager
of the Company, without any further action on the part of the Members or
Managers of the Company.
Section 4.19 Vacancies. Any vacancy occurring for any reason among the
Managers of the Company may be filled by the Member (i.e., either Simba Group or
Kiewit Alabama) entitled to designate the Manager in accordance with Section
4.2.
ARTICLE V
MEETINGS OF MANAGERS
Section 5.1 Meetings. Meetings of the Managers, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by any Manager
or any Member. Except as provided in Section 5.2, 5.3, 5.5 or 5.6 of this
Article V, Notice of the place, day and hour of a meeting of the Managers and
the purpose or purposes for which the meeting is called shall be given not less
than seven (7) nor more than thirty (30) days before the date of the meeting by
or at the direction of the Manager or Member calling the meeting to each Manager
entitled to vote or act at such meeting. The Managers may designate any place,
either within or outside the State of Delaware, as the place of meeting for any
meeting of the Managers. If no designation is made, or if a special meeting is
called, the place of meeting shall be the Principal Office of Business of the
Company.
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Section 5.2 Regularly Scheduled Meeting. The Managers shall meet on at
least a quarterly basis.
Section 5.3 Meeting of All Managers. If all of the Managers shall meet at
any time and place, either within or outside of the State of Delaware, and
consent to the holding of a meeting at such time and place, such meeting shall
be valid without call or Notice and at such meeting any lawful action may be
taken.
Section 5.4 Record Date. For purposes of (i) determining those Managers
entitled to Notice of or to vote at any meeting of Managers, or any adjournment
thereof, or (ii) in order to make a determination of Managers for any other
purpose, the date on which Notice of the meeting is mailed shall be the record
date for such determinations with respect to the Managers. When a determination
of those Managers entitled to vote at any meeting of the Managers has been made
as provided in this Section 5.4, such determination shall apply to any
adjournment thereof.
Section 5.5 Action by Managers Without a Meeting. Action required or
permitted to be taken at a meeting of Managers may be taken without a meeting if
the action is evidenced by one or more written consents describing the action
taken, signed by the requisite number of Managers required to approve such
action and delivered to the Company for inclusion in the minutes or for filing
with the Company records. Action taken under this section is effective when the
requisite number of Managers have signed the consent, unless the consent
specifies a different effective date. The record date for determining Managers
entitled to take action without a meeting shall be the date the first Manager
signs a written consent. If an action by Managers is taken without a meeting
under this Section 5.5, Notice to the Managers shall be considered waived,
provided however, that if action is taken hereunder by less than all of the
Managers, Notice of such action shall be provided to the nonparticipating
Managers. Failure to provide the Notice described in the preceding sentence
shall not invalidate or otherwise affect the validity of any action properly
taken by the requisite number of Managers.
Section 5.6 Waiver of Notice. When any Notice is required to be given to
any Manager, a waiver thereof in writing signed by the person entitled to such
Notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such Notice.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
Section 6.1 Member Management Rights. Unless otherwise provided in this
Operating Agreement or by nonwaivable provisions of the Act, all Members (other
than Assignees) who have not Dissociated shall be entitled to vote on any matter
submitted to a vote of the Members, other than with regard to the appointment,
designation, election or removal of the Managers in accordance with Article V.
Each Member shall be entitled to the number of votes equal to the number of
Membership Units held by such Member.
Section 6.2 Liability of Members to Third Parties. Unless otherwise
provided by the Act, no Member shall be liable under any judgment, decree, or
order of a court, or in any other manner, for any debt, obligation or liability
of the Company, whether arising in contract, tort or otherwise, or for the acts
or omissions of any Member, Manager, officer, agent or employee of the Company.
Section 6.3 Approval of Sale of All of the Company's Property. The
affirmative vote or action of a Member or Members holding at least a Majority of
the Membership Units of the Company shall be required to approve the sale,
exchange or other disposition of all, or substantially all, of the Company's
Property.
Section 6.4 Approval of Merger or Consolidation. The affirmative vote or
action of a Member or Members holding at least a Majority of the Membership
Units of the Company shall be required to approve the merger or consolidation of
the Company with or into one or more limited liability companies or other
entities formed or organized under the laws of the State of Delaware, any other
state, the United States or any foreign jurisdiction, with the Company or the
other business entity being the surviving entity.
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Section 6.5 Right of Withdrawal. Except as otherwise provided herein, no
Member shall have the right to withdraw as a Member of the Company or otherwise
seek the partition of the Company's Property, without the prior written consent
of the other Members.
Section 6.6 Conflicts of Interest:
(a) Except as provided in a separate written agreement between a
Member and the Company or any other Member, any Member shall be entitled to
enter into transactions that may be considered to be competitive with, or a
business opportunity that would be beneficial to, the Company, it being
expressly understood that the Members may enter into transactions that are
similar to the transactions into which the Company may enter.
(b) No Member shall be deemed to have violated a duty or obligation
to the Company merely because the Member's conduct furthers such Member's own
interest. Any Member may lend money to and transact other business with the
Company. The rights and obligations of a Member who lends money to or transacts
business with the Company are the same as those of a person who is not a Member,
subject to the Act or other applicable law. No transaction with the Company
shall be voidable solely because a Member or an Affiliate of the Member has a
direct or indirect interest in the transaction if (i) either the transaction is
fair to the Company or (ii) the disinterested Members, in either case knowing
the material facts of the transaction and the Member's interest, authorize,
approve, or ratify the transaction.
ARTICLE VII
MEETINGS OF MEMBERS
Section 7.1 Meetings. Meetings of the Members may be called by the
Managers or by any Member of the Company upon not less that seven (7) days nor
more than thirty (30) days prior written Notice to each Member of the Company.
Such notice shall set forth the time and place of the meeting and the purpose
for which it is called. If no place for the meeting is designated, the place of
meeting shall be the Principal Place of Business of the Company in the State of
Delaware.
Section 7.2 Manner of Acting. The affirmative vote or action of a Member
or Members holding at least a Majority of the Membership Units of the Company
shall be the vote or action of the Members, unless the vote or action of a
greater or lesser proportion or number of the Members is otherwise required by
the Act, by the Certificate or by this Operating Agreement. Unless otherwise
expressly provided herein or required under applicable law, Members who have an
interest (economic or otherwise) in the outcome of any particular matter upon
which the Members vote may vote upon any such matter and their vote shall be
counted in the determination of whether the requisite matter was approved by the
Members. Any Member may participate in any meeting of the Members by means of a
conference telephone or similar communications equipment by means of which all
persons participating in such meeting can hear each other, and participation in
a meeting pursuant to this Section 7.2 shall constitute presence in person at
such meeting.
Section 7.3 Action by Members Without a Meeting. Action required or
permitted to be taken at a meeting of Members may be taken without a meeting and
without Notice if the action is evidenced by one or more written consents
describing the action taken, signed by those Members or that Member having the
requisite number of Membership Units required to take such action at a meeting
of the Members and delivered to the Managers of the Company for inclusion in the
minutes or for filing with the Company records. Action taken under this section
is effective when the requisite number of Members entitled to vote have signed
the consent, unless the consent specifies a different effective date. If an
action by Members is taken without a meeting under this Section 7.3, Notice to
the Members shall be considered waived, provided however, that if action is
taken hereunder by less than all of the Members, Notice of such action shall be
provided to the nonparticipating Members. Failure to provide the Notice
described in the preceding sentence shall not invalidate or otherwise affect the
validity of any action properly taken by the requisite number of Members.
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Section 7.4 Waiver of Notice. When any Notice is required to be given to
any Member, a waiver thereof in writing signed by the person entitled to such
Notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such Notice.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification of Members, Managers, Etc. The Company shall
indemnify any Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed claim, action, suit or proceeding,
whether civil, criminal, administrative or investigative, including appeals
(including an action by or in the right of the Company), by reason of the fact
that such Person is or was a Member, Manager, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a member,
manager, director, officer, partner, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such Person in
connection with such claim, action, suit or proceeding if such Person acted in
good faith and in a manner such Person reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding had no reasonable cause to believe such Person's conduct
was unlawful. The termination of any claim, action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the Person did
not act in good faith and in a manner which such Person reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
Person's conduct was unlawful.
Section 8.2 Determination of Meeting Applicable Standard. Any Person
entitled to indemnification under Section 8.1 of this Article VIII shall be
deemed to have acted in good faith and in a manner such Person reasonably
believed to be in or not opposed to the best interests of the Company until such
Person shall have been finally adjudged to have acted in bad faith and in a
manner such Person reasonably believed to be against and not in the best
interests of the Company.
Section 8.3 Payment of Expenses in Advance of Disposition of Action.
Expenses (including attorneys' fees) incurred in defending a civil or criminal
claim, action, suit or proceeding shall be paid by the Company in advance of the
final disposition of such claim, action, suit or proceeding upon receipt of an
undertaking by or on behalf of the Member, Manager, officer, employee or agent
to repay such amount if and to the extent that it shall be ultimately determined
that such Person is not entitled to be indemnified by the Company as authorized
in this Article VIII.
Section 8.4 Non-Exclusivity of Article. The indemnification authorized in
and provided by this Article VIII shall not be deemed exclusive of and shall be
in addition to any other right to which those indemnified may be entitled under
any statute, rule of law, provision of the certificate of formation, operating
agreement, other agreement, vote or action of Members or by a Majority of the
Managers, or otherwise, both as to actions in such Person's official capacity
and as to actions in another capacity while holding such office, and shall
continue as to a Person who has ceased to be a Member, Manager, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a Person.
Section 8.5 Insurance. The Company may purchase and maintain insurance on
behalf of any Person who is or was a Member, Manager, officer, employee or agent
of the Company, or is or was serving at the request of the Company as a member,
manager, director, officer, partner, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such Person incurred by such
Person in any such capacity arising out of such Person's status as such, whether
or not the Company is required or permitted to indemnify such Person against
such liability under the provisions of this Article VIII or any statute.
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ARTICLE IX
CONTRIBUTIONS AND CAPITAL ACCOUNTS
Section 9.1 Initial Capital Contributions. The Initial Capital
Contribution of (and Membership Units allocated to) each Member, as of the date
of this Agreement, is set forth on Exhibit A hereto. The Initial Capital
Contribution (to the extent not previously paid) shall be paid by each Member
upon execution of this Agreement in cash or its equivalent. The Initial Delayed
Contribution of each Member (if any) is set forth on Exhibit B hereto and shall
be paid by such Members contemporaneously with the closing of the transactions
contemplated by that certain Asset Purchase Agreement to be executed by and
among Oak Mountain Energy, L.L.C., Oak Mountain Energy Corporation and certain
other parties. If no Closing occurs under the foregoing Asset Purchase
Agreement, no Member shall have any obligation to make any Initial Delayed
Contribution.
Section 9.2 Additional Capital Contributions. In addition to the Initial
Capital Contributions and the Initial Delayed Contributions of the Members, in
the event a Member or Members holding at least a Majority of the Membership
Units of the Company or the Managers determine that Additional Capital
Contributions are reasonably necessary to facilitate the business needs of the
Company, including, without limitation, to meet the Company's operating
expenses, to fund the expansion of the Company's business, to acquire other
businesses or business entities and to purchase any Property reasonably
necessary for the operation of the Company, each Member shall be entitled, but
not required, to make such Additional Capital Contribution on a basis pro rata
to such Member's Membership Interest in the Company. Upon making such a
determination, the Company shall give Notice to each Member in writing at least
fifteen (15) days prior to the date on which the Additional Capital
Contributions are due (the "Company Contribution Notice"). Such Company
Contribution Notice shall set forth the amount of Additional Capital
Contribution needed, the purpose for which the contribution is needed, and the
date by which the Member must contribute such Additional Capital Contribution.
Each Member who desires to make such Additional Contribution shall provide
Notice (the "Member Contribution Notice") to the Company within fifteen (15)
days of its receipt of the Company Contribution Notice. In the event that one or
more of the Members fails to provide the Member Contribution Notice, the
contributing Member or Members shall be entitled to make such Additional Capital
Contribution on a basis pro rata to such Members' Membership Interest in the
Company (calculated without taking into account the Membership Units of the
non-contributing Members). Contributing Members shall be issued one additional
Membership Unit for each $10.00 of Additional Capital contributed by such
Member.
Section 9.3 Maintenance of Capital Accounts. The Company shall establish
and maintain Capital Accounts for each Member and Assignee.
(a) To each Member's Capital Account there shall be credited: (i)
such Member's Capital Contributions; (ii) such Member's distributive share of
Net Profits and any items in the nature of income or gain which are specially
allocated pursuant to Sections 10.3 through 10.7 hereof, and (iii) the amount of
any Company liabilities assumed by such Member or which are secured by any
Property distributed to such Member.
(b) To each Member's Capital Account there shall be debited: (i) the
amount of cash and the Gross Asset Value of any Property distributed to such
Member pursuant to any provision of this Agreement; (ii) such Member's
distributive share of Net Losses and any items in the nature of expenses or
losses which are specially allocated pursuant to Sections 10.3 through 10.7
hereof, and (iii) the amount of any liabilities of such Member assumed by the
Company or which are secured by any property contributed by such Member to the
Company.
(c) In the event all or a portion of a Membership Interest is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred Membership Interest. This Section 9.3(c) shall not be interpreted as
permitting the transfer of any Economic Interest, Membership Interest or
Membership Unit that is otherwise prohibited under Article XII hereof.
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(d) In determining the amount of any liability for purposes of this
Section 9.3, there shall be taken into account Code ss. 752(c) and any other
applicable provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulations ss.
1.704-1(b), and shall be interpreted and applied in a manner consistent with
such Regulations. In the event the Managers shall determine that it is prudent
to modify the manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Company or any Member), are computed in order to comply with
such Regulations, the Managers may make such modification, provided that it is
not likely to have a material effect on the amounts distributable to any Member
pursuant to Section 14.4 hereof upon the dissolution of the Company. The
Managers also shall (i) make any adjustments that are necessary or appropriate
to maintain equality between the Capital Accounts of the Members and the amount
of Company capital reflected on the Company's balance sheet, as computed for
book purposes, in accordance with Regulations ss. 1.704-1(b)(2)(iv)(q), and (ii)
make any appropriate modifications in the event unanticipated events (for
example, the acquisition by the Company of oil or gas properties) might
otherwise cause this Agreement not to comply with Regulations ss. 1.704-1(b).
Section 9.4 Sale or Exchange of Interest. In the event of a sale or
exchange of some or all of a Member's or Assignee's Economic Interest in the
Company, the Capital Account of the transferring Member or Assignee shall become
the Capital Account of the Assignee acquiring such Interest, to the extent it
relates to the portion of the Economic Interest transferred.
Section 9.5 Compliance with ss. 704(b) of the Code. The provisions of this
Article IX as they relate to the maintenance of Capital Amounts are intended,
and shall be construed, and, if necessary, modified to cause the allocations of
profits, losses, income, gain and credit pursuant to Article X to have
substantial economic effect under the Regulations promulgated under ss. 704(b)
of the Code, in light of the Distributions made pursuant to Articles X and XIV
the Capital Contributions made pursuant to this Article IX. Notwithstanding
anything herein to the contrary, this Operating Agreement shall not be construed
as creating a deficit restoration obligation or otherwise personally obligate
any Member to make a Capital Contribution in excess of the Initial Capital
Contribution made by that Member.
ARTICLE X
ALLOCATIONS AND DISTRIBUTIONS
Section 10.1 Net Profits. Except as may be required by Sections 10.3
through 10.7 of this Article X, Net Profits shall be apportioned among the
Members in the following order and amounts:
(a) First, to and among the Members in amounts equal to the excess,
if any, of (i) the cumulative Net Losses allocated to the Members pursuant
to Section 10.2(c) hereof for all prior Fiscal Years, over (ii) the
cumulative Net Profits allocated to the Members pursuant to this Section
10.1(a) for all prior Fiscal Years; and
(b) The balance, if any, to and among the Members in proportion to
the Membership Units each Member holds as of the first day of the Fiscal
Year.
Section 10.2 Net Losses.
(a) Except as may be required by Sections 10.3 through 10.7 of this
Article X, Net Losses shall be apportioned to and among the Members in
proportion to the Membership Units each Member holds as of the first day
of the Fiscal Year;
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(b) provided, however, that Net Losses shall not be allocated to any
Member pursuant to Section 10.2(a) to the extent that such allocation
would cause any Member to have an Adjusted Deficit at the end of such
Fiscal Year, and
(c) In the event some but not all of the Members would have Adjusted
Deficits as a consequence of an allocation of Net Losses pursuant to
Section 10.2(a), the limitation set forth in Section 10.2(b) shall be
applied on a Member-by-Member basis so as to allocate the maximum
permissible amount of Net Losses to each Member; and
(d) provided further that the limitation set forth in Section
10.2(b) shall cease to apply at the point at which all Members' Capital
Accounts (adjusted in accordance with Section 1.4 hereof) have been
reduced to zero, and thenceforth Net Losses shall be allocated in
accordance with Section 10.2(a) hereof.
(e) Notwithstanding any other provisions of this Section 10.2, if
the number of Membership Units held by any Member changes during the
Fiscal Year, or if any Members are admitted during the Fiscal Year, the
Net Profits and Net Losses otherwise to be allocated shall be consistent
with Section 13.3.
Section 10.3 Company Minimum Gain Chargeback. If there is a net decrease
in Company Minimum Gain for a Fiscal Year, each Member must be allocated items
of income and gain for that Fiscal Year (and, if necessary, subsequent Fiscal
Years) equal to that Member's share of the net decrease in Company Minimum Gain.
A Member's share of the net decrease in Company Minimum Gain is the amount of
the total net decrease multiplied by the Member's percentage share of the
Company Minimum Gain at the end of the immediately preceding Fiscal Year. A
Member's share of any decrease in Company Minimum Gain resulting from a
revaluation of Company Property equals the increase in the Member's Capital
Account attributable to the revaluation to the extent the reduction in Company
Minimum Gain is caused by the revaluation. A Member is not subject to this
Company Minimum Gain chargeback requirement to the extent the Member's share of
the net decrease in Company Minimum Gain is caused by a guarantee, refinancing,
or other change in the debt instrument causing it to become partially or wholly
a recourse liability or a Member Nonrecourse Liability, and the Member bears the
economic risk of loss (within the meaning of ss. 1.752-2 of the Regulations) for
the newly guaranteed, refinanced, or otherwise changed liability.
Section 10.4 Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal
Year shall be specially allocated to the Members in proportion to the number of
Membership Units held by each Member.
Section 10.5 Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year shall be allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Liability to which
such Member Nonrecourse Deductions are attributable in accordance with ss.
1.704-2(i) of the Regulations.
Section 10.6 Member Minimum Gain Chargeback. If during a Fiscal Year there
is a net decrease in Member Minimum Gain, any Member with a share of that Member
Minimum Gain (as determined under ss. 1.704-2(i)(5) of the Regulations) as of
the beginning of that Fiscal Year must be allocated items of income and gain for
that Fiscal Year (and, if necessary, for succeeding Fiscal Years) equal to that
Member's share of the net decrease in the Member Minimum Gain. A Member's share
of the net decrease in Member Minimum Gain is determined in a manner consistent
with the provisions of ss. 1.704-2(g)(2) of the Regulations. A Member is not
subject to this Member Minimum Gain chargeback, however, to the extent the net
decrease in Member Minimum Gain arises because the liability ceases to be Member
Nonrecourse Liability due to a conversion, refinancing, or other change in the
debt instrument that causes it to become partially or wholly a Company
Nonrecourse Liability. The amount that would otherwise be subject to the Member
Minimum Gain chargeback is added to the Member's share of Company Minimum Gain.
In addition, rules consistent with those applicable to Company Minimum Gain and
Company Minimum Gain chargeback shall be applied to determine the shares of
Member Minimum Gain and
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Member Minimum Gain chargeback to the extent provided under the Regulations
issued pursuant to ss. 704(b) of the Code.
Section 10.7 Qualified Income Offset. In the event any Member, in such
capacity, unexpectedly receives an Offsettable Decrease, such Member will be
allocated items of income and gain (consisting of a pro rata portion of each
item of income and gain of the Company for the Fiscal Year) in an amount and
manner sufficient to offset such Offsettable Decrease as quickly as possible.
This Section 10.7 is intended to be in accordance with ss.
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
Section 10.8 Curative Allocations. The allocations set forth in Sections
10.3 through 10.7 hereof (the "Regulatory Allocations") are intended to comply
with certain requirements of the Regulations. To the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of Company income, gain, loss or
deduction pursuant to this Section 10.8. Therefore, notwithstanding any other
allocation provision (other than the Regulatory Allocations), the Managers shall
make such offsetting special allocations of Company income, gain, loss or
deduction in whatever manner they may deem appropriate so that each Member's
Capital Account balance shall be, to the maximum extent possible, equal to the
Capital Account balance that each such Member would have had if the Regulatory
Allocations had not been part of this Agreement, and all Company items were
allocated pursuant to Sections 10.1 and 10.2 hereof. In exercising their
discretion under this Section 10.8, the Managers shall consider future
Regulatory Allocations under Section 10.3 that, although not yet made, are
likely to offset other Regulatory Allocations previously made under Sections
10.4 and 10.5.
Section 10.9 Tax Allocations: ss. 704(c) of the Code. In accordance with
Code ss. 704(c) and the Regulations thereunder, income, gain, loss, and
deduction with respect to any property contributed to the capital of the Company
shall, solely for tax purposes, be allocated among the Members so as to take
account of any variation between the adjusted basis of such property to the
Company for federal income tax purposes and its initial Gross Asset Value
(computed in accordance with Section 1.24(a) hereof). In the event the Gross
Asset Value of any Company asset is adjusted pursuant to Section 1.24(b) hereof,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code ss. 704(c) and the Regulations thereunder. Any elections or
other decisions relating to such allocations shall be made by the Managers in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 10.9 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Member's Capital Account or share of Net Profits, Net Losses,
other items, or distributions pursuant to any provision of this Agreement.
Section 10.10 Interim Distributions. From time to time, and subject to
Section 10.11 hereof, the Managers shall determine in their reasonable judgment
to what extent, if any, the Company's cash on hand exceeds the current and
anticipated needs for such moneys, including, without limitation, needs for
operating expenses, debt service, acquisitions, reserves, and mandatory
distributions, if any. To the extent such excess exists, a Majority of the
Managers may make Distributions to the Members in proportion to each Member's
Membership Units in the Company as of the date of such Distribution. An Interim
Distribution shall be in cash or Property (which need not be distributed
proportionately) or partly in both, as determined by the Managers. The Company
shall distribute cash to the Members, to the extent not previously distributed
during or with respect to a fiscal year, on or before ninety (90) days after the
end of each fiscal year, in an amount equal to the federal and state taxes
payable by the Members with respect to the income of the Company for the
preceding fiscal year; for the foregoing purpose, the Members shall all be
assumed to be subject to federal and state income tax at a combined effective
rate of Thirty Four Percent (34%).
Section 10.11 Limitations on Distributions.
(a) No Distribution shall be declared and paid unless, after the
Distribution is made, the Property of the Company is in excess of all
liabilities of the Company and the Company has sufficient working capital as
determined by the Managers, except liabilities to Members on account of their
Capital Accounts.
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(b) No Distribution shall be made to a Member to the extent that
such Distribution would cause such Member to have an Adjusted Deficit at the end
of such Fiscal Year, provided that in the event some but not all of the Members
would have Adjusted Deficits as a consequence of a Distribution, the limitation
set forth in this Section 10.11(b) shall be applied on a Member-by-Member basis
so as to permit the maximum permissible amount of Distributions to be made to
each Member; and provided further that the limitation set forth in this Section
10.11(b) shall cease to apply at the point at which all Members' Capital
Accounts (adjusted in accordance with Section 1.4 hereof) have been reduced to
zero, and thenceforth Distributions may be made in accordance with Section
10.10.
ARTICLE XI
CERTAIN TAX MATTERS
Section 11.1 Elections. The Managers may make any tax elections for the
Company allowed under the Code or the tax laws of any Taxing Jurisdiction.
Section 11.2 Taxes of Taxing Jurisdictions. To the extent that the laws of
any Taxing Jurisdiction so require, each Member requested to do so by the
Managers will submit an agreement indicating that the Member will make timely
income tax payments to the Taxing Jurisdiction and that the Member accepts
personal jurisdiction of the Taxing Jurisdiction with regard to the collection
of income taxes attributable to the Member's income, and interest and penalties
assessed on such income. If the Member fails to provide such agreement, the
Company may withhold and pay over to such Taxing Jurisdiction the amount of tax
penalties and interest determined under the laws of the Taxing Jurisdiction with
respect to such income. Any such payments with respect to the income of a Member
shall be treated as a distribution for purposes of Article X. The Managers may,
where permitted by the rules of any Taxing Jurisdiction, file a composite,
combined or aggregate tax return reflecting the income of the Company and pay
the tax, interest and penalties of some or all of the Members on such income to
the Taxing Jurisdiction, in which case the Company shall inform the Members of
the amount of such tax interest and penalties so paid.
Section 11.3 Tax Matters Partner. Simba Group is hereby designated as the
"Tax Matters Partner" of the Company, as such term is defined by ss. 6231(a)(7)
of the Code. The Tax Matters Partner shall: (i) notify each Member of all
administrative and judicial proceedings for the adjustment of Company items and
shall periodically report to the Members on the status of such proceedings; (ii)
cause to be prepared and filed Company tax returns and tax elections and
determinations as are necessary, appropriate or desirable; (iii) use its best
efforts to deliver to each Person who was a Member of the Company at any time
during a Fiscal Year a copy of the Company's proposed federal income tax return
for such Fiscal Year at least 30 days prior to the due date (with extensions)
for filing such return; (iv) provide each Member with a copy of such return and
Schedule K-1 as filed. Each Member shall notify the Tax Matters Partner of its
intention to file a federal income tax return that is inconsistent with the
information or amounts included on the Member's Form K-1 or other forms or
attachments to the Company's U.S. Partnership Return of Income (Form 1065). The
Members shall provide the Tax Matters Partner with a copy of any Form 8082 filed
by the Member with respect to the Company's items. The Tax Matters Partner shall
take such action as may be necessary to cause each Member (other than a Member
who acts as the Tax Matters Partner) to become a notice partner within the
meaning of ss. 6223 of the Code. No Member who is designated Tax Matters Partner
may take any action contemplated by ss.ss. 6222 through 6232 of the Code without
the consent of a Member or Members holding at least a Majority of the Membership
Units of the Company.
Section 11.4 Method of Accounting. The records of the Company shall be
maintained on the method of accounting chosen by a Majority of the Managers.
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ARTICLE XII
DISPOSITION OF MEMBERSHIP UNITS
Section 12.1 Limitations. An Assignee of a Membership Unit under this
Article XII shall have only those rights of an Assignee as described more fully
in Section 13.1 hereof and shall have no right to become a Member of the Company
or to participate in the management of the business and affairs of the Company
unless such Assignee is admitted as a Substitute Member in accordance with
Section 12.3(c) or Section 13.2 of this Operating Agreement.
Section 12.2 Consent, Etc. No Member or Assignee may Dispose of all or a
portion of such Member's or Assignee's Membership Units, unless:
(a) Prior to the Disposition, the Company receives, unless waived by
the Members in writing, an opinion of counsel satisfactory to Members holding at
least a Majority of the Membership Units of the Company (which determination of
a majority shall include the Membership Units held by, and the consent or vote
of, the transferring Member) that: (i) such Disposition is not subject to an
effective registration under, or exempt from the registration requirements of,
the applicable state and federal securities laws, and (ii) such Disposition,
alone or when combined with other transactions, would not result in a
termination of the Company within the meaning of ss. 708 of the Code (unless the
Member disposing of its Membership Units agrees to indemnify the Company and the
other Members for any adverse consequences of such termination);
(b) Prior to the Disposition, the Company receives from the
transferee the information and agreements that the Members may reasonably
require, including, but not limited to, any taxpayer identification number and
any agreement that may be required by the Taxing Jurisdiction; and
(c) The transferring Member or Assignee shall either:
(i) First obtain the written consent to such Disposition of
a Member or Members holding at least a Majority of the Membership Units of the
Company (which determination of a majority shall include the Membership Units
held by, and the consent or vote of, the transferring Member); or
(ii) Comply with the provisions of Section 12.3 below.
Section 12.3 Permitted Sales by the Member. (a) In the event a Member
shall have received and wishes to accept a bona fide offer to sell or assign all
or any portion of its Membership Units, but has not received the prior written
consent referred to in Section 12.2 above (other than a transfer to an Affiliate
of such Member under Section 12.6, or, subject to subsection (b) below, as
collateral under a financing arrangement), such Member may sell the same only
after offering it to the other Member in the following manner:
(i) The Member desiring to sell shall serve Notice to the
other, stating that it has received a bona fide offer for the sale of its
Membership Units, and setting forth the following information:
(A) the portion of its Membership Units to be sold,
(B) the name and address and business or occupation of
the Person offering to purchase such Membership Units, and
(C) the sales price and terms and conditions of such
sale.
Such Notice shall also contain an offer by the transferring Member to sell such
Membership Units to the other Member at the price and under the terms offered by
such bona fide offeror.
(ii) For a period of thirty (30) days after the receipt of
such Notice, the non-transferring Member shall have the option to purchase all
of the Membership Units so offered.
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(iii) In the event the non-transferring Member shall
exercise its option to purchase all of the Membership Units offered in the
Company under this Section 12.3(a), the Member exercising such option to
purchase shall designate the time, date and place of closing; provided, however,
that the date of closing shall be within ninety (90) days of the date that the
Member provides Notice to the transferring Member of is election to purchase
such transferring Member's Membership Units.
(b) Any assignment of a Membership Unit as Collateral as
contemplated in Section 12.3(a) above shall first require the party to whom such
Membership Unit is pledged to agree that the foreclosure or other seizure of
such Membership Unit shall constitute a transfer giving rise to the right of
first refusal described in Section 12.3(a), and the foreclosing party shall give
the Member entitled to such right the opportunity to exercise the right of first
refusal immediately following the foreclosure or other seizure in accordance
with the time frames set forth in Section 12.3(a), with the time frames
beginning on the date such Member received written notice of the foreclosure
from the foreclosing party.
(c) In the event that the Member does not exercise its option made
under Section 12.3(a) to purchase, as provided herein, the transferring Member
shall be free to transfer such Member's Membership Units to the Person named in
the aforesaid Notice at the price and upon the terms and conditions set forth in
such Notice, and such Person shall be deemed to have been admitted as a
Substitute Member in accordance with Article XIII; provided, however, that such
Disposition shall be made within ninety (90) days following the termination of
the Member's option to purchase such Membership Units. If such Disposition is
not consummated within said ninety (90) day period, the provisions of this
Section 12.3 shall again be applicable to the Member's Membership Units with
respect to which the Member had received a bona fide offer.
Section 12.4 Transfer Upon Dissociation of a Member. In the event a Member
shall Dissociate as a Member of the Company for any reason, then the Company
shall have the option to purchase (exercisable within twelve months after such
event of Dissociation), and the Dissociated Member shall be obligated to sell to
the Company, all of such Member's Membership Units in the Company. The purchase
price to be paid by the Company for such Membership Units shall be determined
and paid in accordance with the provisions of Section 12.5 below.
Section 12.5 Purchase Price. The purchase price of a Membership Unit to be
purchased in accordance with the provisions of Sections 12.4 above shall be
determined as follows:
(a) The purchase price of each Membership Unit purchased pursuant to
Section 12.4 shall be determined as of the last day of the month preceding the
month during which the event giving rise to the purchase obligation, and shall
be the amount that would have been distributed to such Member with respect to
the Membership Interest to be purchased hereunder, in liquidation of the Company
pursuant to Section 14.4 hereof as if (i) all of the Property of the Company had
been sold for its fair market value (as determined in accordance with Section
12.5(b) below), (ii) the Company paid its accrued but unpaid liabilities and
established reserves pursuant to Article XIV hereof for the payment of
reasonably anticipated contingent or unknown liabilities, (iii) all allocations
and distributions called for by this Agreement through the date of such
determination were taken into account, and (iv) the Company distributed the
remaining proceeds to the Members in liquidation, all as of such day.
(b) The determination of the purchase price under this Section 12.5
shall be determined as follows: (1) for the first thirty (30) days following the
exercise of an option to purchase or following the date of that the obligation
to purchase arises, the Company (acting without any input from any Managers
appointed by a transferring Member) and the transferring Member shall negotiate
in good faith regarding the purchase price for the Membership Units being
transferred; (2) in the event that the Company and the transferring Member are
unable to agree on a purchase price within such thirty (30) day period, the
transferring Member and the Company shall, within fifteen (15) days after
expiration of such thirty (30) day period, select and agree upon an Appraiser to
determine such purchase price, and the appraisal of such Appraiser shall be
binding on the parties; and (3) in the event that the Company and the
transferring Member are unable to agree upon an Appraiser, (i) the Company and
the transferring Member shall each appoint within ten (10) days after the
expiration of the aforementioned
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thirty (30) and fifteen (15) day periods an Appraiser, and such Appraisers shall
promptly appoint a third Appraiser, (ii) each of such three Appraisers shall
perform a separate appraisal of the Company, and (iii) the average of the two
closest appraisals from such three Appraisers shall be the purchase price and
shall be binding upon the parties.
(c) The purchase price due under this Section 12.5 shall be paid in
the following manner:
(i) There shall first be credited against such purchase
price the amount of any indebtedness due and payable to the Company by such
Member.
(ii) There shall next be credited the amount of any expenses
or damages incurred by the Company as a result of Dissociation.
(iii) The balance of the purchase price shall be payable at
closing which shall occur within thirty (30) days following the latter of the
final determination of the purchase price or the exercise of the Company's
option to purchase; provided, however, upon the election of the Company, the
balance of the purchase price shall be payable in three (3) equal annual
installments, with interest at the then current prime rate quoted in the Wall
Street Journal plus two (2) percentage points, the first installment of which
shall be due within thirty (30) days following the latter of the final
determination of the purchase price or the exercise of the Company's option to
purchase and the second and third installments shall be due within one year and
two years, respectively, following the due date of the first installment. Such
installment obligation shall be evidenced by a negotiable promissory note of the
Company, and shall be secured by a pledge of such Membership Units transferred
to the Company.
Section 12.6 Certain Additional Permitted Transfers of Membership Units by
Members. Notwithstanding the provisions of Article XII and Article XIII, each
Member shall be entitled to Dispose all of its Membership Units to an Affiliate
of such Member, without giving rise to any rights of first refusals, options or
consent-requirements, and, upon effectiveness of such transfer, such Affiliated
transferee of a Member shall succeed to all of the rights and obligations
(including voting and other governance rights) of the transferring Member and
shall be admitted as a Substitute Member of the Company, without any further
action on the part of the Members or the Company and all references to such
transferring Member contained in this Operating Agreement shall automatically
apply to the Member's Affiliated transferee; provided, however, that if any such
transfer or assignment shall result in a termination of the Company within the
meaning of ss. 708 of the Code, the Member shall indemnify the Company and the
other Members for any adverse consequences of such termination.
Section 12.7 Certain Limitations on Transfers of Capital Stock. Each
member hereby agrees that it shall not permit any transfer or issuance of its
capital stock or the transfer or issuance of the capital stock of any direct or
indirect parent corporation of such Member (other than to an Affiliate of either
Member, and with respect to Simba Group and its Affiliates, the entities listed
on Exhibit "C" attached hereto), without the prior written consent of the other
Member; provided, however, such consent shall not be required if the fair market
value of the Membership Units in the Company owned by such Member does not
directly or indirectly make up greater than Ninety Percent (90%) of the fair
market value of the total assets of such Member or direct or indirect parent
corporation. The fair market value of such Membership Units and total assets
shall be determined by an Appraiser or Appraisers selected by the Members using
a procedure similar to that procedure for selecting Appraisers set forth in
Section 12.5(b)(2) and (3).
ARTICLE XIII
ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS
Section 13.1 Rights of Assignees. Notwithstanding anything to the contrary
contained in this Operating Agreement (other than pursuant to Section 12.6
hereof), the only rights, if any, which an Assignee of a Member shall have are
those rights associated with the Economic Interest received and such Assignee
shall not receive any right to participate in the management of the business and
affairs of the Company or to become a Member; provided, however, that in the
event an Assignee is an existing Member of the Company, such Assignee
22
<PAGE> 27
shall receive all rights to participate in the management of the business and
affairs of the Company incident to the transferred Membership or Economic
Interest. An Assignee is only entitled to receive the Distributions and return
of capital, and to be allocated the Net Profits and Net Losses attributable to a
transferred Membership Economic Interest.
Section 13.2 Admission of Substitute Members. Except as set forth in
Section 12.3(c), an Assignee of a Membership Unit shall be admitted as a
Substitute Member and entitled to all the rights of the Member who initially
assigned the Membership Units only with the written approval of the other
Members (i.e., the non-transferring Members) holding at least a Majority of the
remaining Membership Units. The Members may grant or withhold the approval of
such admission in their sole and absolute discretion. If so admitted, the
Substitute Member has all the rights and powers and is subject to all the
restrictions and liabilities of the Member originally assigning the Membership
Units. The admission of a Substitute Member, without more, shall not release the
Member originally assigning the Membership Units from any liability to the
Company that may have existed prior to the approval.
Section 13.3 Admission of Additional Members. From the date of formation
of the Company, any Person acceptable to a Member or Members holding at least a
Majority of the Membership Units of the Company, as reflected by the written
approval of such Member or Members, may become Additional Members of the Company
for such consideration as such Members shall determine, subject to the terms and
conditions of this Operating Agreement. No Additional Member shall be entitled
to any retroactive allocation of income, gain, loss, deduction or credit by the
Company. The Members may, at their option, at the time the Additional Member is
admitted, close the Company's books (as though the Company's Fiscal Year had
ended) or make pro rata allocations of income, gain, loss, deduction or credit
to the Additional Member for that portion of the Company's Fiscal Year in which
the Member was admitted in accordance with the provisions of ss. 706(d) of the
Code and the Regulations promulgated thereunder. Upon admission of an Additional
Member, this Operating Agreement shall be amended in order to reflect such
additional Member's Membership Units in the Company.
ARTICLE XIV
DISSOCIATION, DISSOLUTION AND WINDING UP
Section 14.1 Dissociation. A Person shall cease to be a Member upon the
happening of any of the following Dissociation Events:
(a) the withdrawal of a Member with the consent of the other Members
holding at least a Majority of the remaining Membership Units;
(b) upon the Managers' receipt of notice with respect to a Member
who:
(i) makes an assignment for the benefit of creditors;
(ii) files a voluntary petition in bankruptcy;
(iii) files a petition or answer seeking for the Member any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation:
(iv) files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against the Member in
any proceeding in the nature of the proceedings listed in (iii); or
(v) seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of the Member of all or any substantial part of
the Member's properties:
23
<PAGE> 28
(c) in the case of a Member who is a natural person, the death of
the Member or the entry of an order by a court of competent jurisdiction
adjudicating the Member incompetent to manage the Member's person or property.
Section 14.2 Rights of Dissociating Member. In the event a Member
Dissociates from the Company and such Dissociation causes a dissolution and
winding up of the Company under this Article, the Member shall be entitled to
participate in the winding up of the Company to the same extent as any other
Member except that any Distributions to which the Member would have been
entitled shall be reduced by damages sustained by the Company as a result of the
Dissolution and winding up.
Section 14.3 Dissolution. The Company shall be dissolved and its affairs
wound up prior to such date, upon the first to occur of the following events
(which, unless the Members agree to continue the business, shall constitute
Dissolution Events):
(a) the written consent of a Member or Members holding at least a
Majority of the Super-Membership Units of the Company;
(b) the Dissociation of any Member as provided in Section 14.1 of
this Article, unless (i) there are at least two remaining Members or at least
one remaining Member and an Additional Member or Substitute Member is admitted
in accordance with Article XIII hereof and (ii) the legal existence and business
of the Company is continued with the consent of a Member or Members holding at a
Majority of the Membership Units within 90 days after such Dissociation.
(c) the merger of the Company and the Company is not the successor
limited liability company in such merger or the consolidation of the Company
with one or more limited liability companies or other entities.
(d) The entry of a final decree of dissolution of the Company by a
court of competent jurisdiction.
(e) On February 18, 2027, unless the business of the Company is
continued with the vote, consent or action of a Member or Members holding at
least a Majority of the Membership Units within ninety (90) days after such
date.
Section 14.4 Distribution of Assets on Dissolution. Upon the winding up of
the Company, Company Property shall be distributed in the following order:
(a) to creditors, including Members who are creditors, to the extent
permitted by law, in satisfaction of Company liabilities;
(b) to Members in accordance with positive Capital Account balances
taking into account all allocations, contributions, distributions, and Capital
Account adjustments for the Company's Fiscal Year in which the liquidation
occurs. Liquidation proceeds shall be paid within 60 days of the end of the
Company's Fiscal Year or, if later, within 90 days after the date of
liquidation. Such distributions shall be in cash or property (which need not be
distributed proportionately) or partly in both, as determined by a Majority of
the Managers.
Section 14.5 Winding Up and Certificate of Cancellation. The winding up of
the Company shall be completed when all debts, liabilities, and obligations of
the Company have been paid and discharged or reasonably adequate provision
therefor has been made, and all of the remaining Property of the Company has
been distributed to the Members. Upon the completion of winding up of the
Company, certificate of cancellation shall be delivered to the Secretary of
State. The certificate of cancellation shall set forth such information as is
required by the Act.
24
<PAGE> 29
Section 14.6 Effect of Dissolution. Upon dissolution, the Company shall
cease carrying on, as distinguished from the winding up of, the Company
business, but the Company is not terminated, but continues until the winding up
of the affairs of the Company is completed and a certificate of dissolution with
respect to the Company, or the equivalent, has been issued by the Secretary of
State.
ARTICLE XV
AMENDMENT
Section 15.1 Operating Agreement May Be Modified. This Operating Agreement
may be modified as provided in this Article XV (as the same may from time to
time be amended). No Member or Manager shall have any vested rights in this
Operating Agreement.
Section 15.2 Amendment or Modification of Operating Agreement. This
Operating Agreement may be amended or modified from time to time only by a
written instrument adopted by a Member or Members holding at least a Majority of
the Membership Units of the Company; provided, however that the unanimous
consent or approval of the Members shall be required in order to make an
amendment affecting how distributions and allocations under Article X or Article
XIV will be made to the Members, an amendment affecting the rights or
obligations of the Members with respect to Additional Capital Contributions or
an amendment affecting the right of a member to transfer its Membership Units or
the purchase price payable for Membership Units under Article XII.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Entire Agreement. This Operating Agreement constitutes the
entire agreement among the parties. No party shall be bound by any terms,
conditions, statements or representations, oral or written, not herein
contained. Each party hereby acknowledges that in executing this Operating
Agreement, such party has not been induced, persuaded or motivated by any
promise or representation made by any other party, unless expressly set forth
herein. All previous negotiations, statements and preliminary instruments by the
parties or their representatives are merged in this Operating Agreement.
Section 16.2 Rights of Creditors and Third Parties. This Operating
Agreement is entered into by and among the Members for the exclusive benefit of
the Company, its Members, and their successors and assignees. This Operating
Agreement is expressly not intended for the benefit of any creditor of the
Company or any other Person. Except and only to the extent provided by the Act
or other applicable statute, no such creditor or third party shall have any
rights under this Operating Agreement or any agreement between the Company and
any Member with respect to any Capital Contribution or otherwise.
Section 16.3 Changes in Applicable Law. In the event that any covenant,
condition, or other provision contained in this Agreement, or any part of the
business of the Company (whether or not conducted by the Company) is determined
to be invalid, void or illegal, the Members shall amend this Agreement, any
other affected agreements, and/or the manner in which the business of the
Company is conducted to comply with such laws. For purposes of this Section
16.3, a good faith determination of illegality by a Member based on an opinion
of counsel shall be sufficient to trigger the application of this Section. Any
decisions regarding the manner in which such illegality will be addressed shall
require the agreement of all of the Members.
Section 16.4 Interpretation. For and in consideration of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Members executing
this Operating Agreement hereby agree to the terms and conditions contained
herein, as it may from time to time be amended according to its terms. It is the
express intention of the Members that this Operating Agreement and the
Certificate shall be the sole source of agreement of the parties, and, except to
the extent a provision of the Operating Agreement expressly incorporates Federal
income tax rules by reference to
25
<PAGE> 30
sections (ss.ss.) of the Code or Regulations or is expressly prohibited or
ineffective under the Act, the Operating Agreement shall govern, even when
inconsistent with, or different than, the provisions of the Act or any other law
or rule. To the extent any provision of this Operating Agreement is prohibited
or ineffective under the Act, the Operating Agreement shall be considered
amended to the smallest degree possible in order to make the agreement effective
under the Act. In the event the Act is subsequently amended or interpreted in
such a way to make any provision of this Operating Agreement that was formerly
invalid valid, such provision shall be considered to be valid from the effective
date of such interpretation or amendment.
Section 16.5 Governing Law. This Operating Agreement, and the application
or interpretation hereof, shall be governed exclusively by its terms and by the
laws of the State of Delaware, and specifically the Act, applied without respect
to any conflicts-of-law principles.
Section 16.6 Execution of Additional Instruments. Each Member hereby
agrees to execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
Section 16.7 Construction of Terms. Whenever used in this Agreement and
when required by the context, the singular number shall include the plural and
the plural the singular. Pronouns of one gender shall include all genders.
Section 16.8 Captions. The captions as to contents of particular articles,
sections or paragraphs contained in this Operating Agreement and the table of
contents hereto are inserted for convenience and are in no way to be construed
as part of this Operating Agreement or as a limitation on the scope of the
particular articles, sections or paragraphs to which they refer.
Section 16.9 Waivers. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any agreement or
condition of this Operating Agreement shall not prevent a subsequent act, which
would have originally constituted a violation, from having the effect of an
original violation.
Section 16.10 Rights and Remedies Cumulative. The rights and remedies
provided by this Operating Agreement are cumulative and the use of any one right
or remedy by any party shall not preclude or waive the right to use any or all
other remedies. Said rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise.
Section 16.11 Heirs, Successors and Assigns. Each and all of the
covenants, terms, provisions and agreements herein contained shall be binding
upon and inure to the benefit of the parties hereto and, to the extent permitted
by this Operating Agreement, their respective heirs, legal representatives,
successors and assigns.
Section 16.12 Counterparts. This Operating Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
Section 16.13 Certain Disputes Between Kiewit Alabama and Simba Group.
(a) In any matter requiring the agreement or action of the Managers, or a
vote of Kiewit Alabama and Simba Group as Members of the Company, Kiewit Alabama
and Simba Group shall, and shall cause their respectively appointed Managers to
use their best efforts, in good faith, to resolve any dispute or disagreement
with respect thereto.
(b) In the event the Managers in good faith are unable to reach such
agreement on any matter requiring their approval under this Agreement, or (ii)
Kiewit Alabama and Simba Group are unable to reach agreement on any matter
requiring their vote as Members of the Company, in either instance, upon notice
by either party to the other, the matter shall be referred to resolution by the
President of Kiewit Construction Group, Inc. and the President of Anker Coal
Group, Inc.
26
<PAGE> 31
(c) In the event that the President of Kiewit Construction Group, Inc. and
the President of Anker Coal Group, Inc. are unable to resolve such dispute in
good faith within thirty (30) days after the same has been referred to them for
resolution, either Kiewit Alabama or Simba Group (the "Offeror") may deliver an
offer (the "Purchase/Sell Offer") to the other party (the "Offeree"), which
irrevocably offers to either (i) sell to the Offeree all of the Offeror's
Membership Units, or (ii) purchase from the Offeree all of the Offeree"s
Membership Units, in each case for a per Membership Unit price selected by the
Offeror and set forth in the Purchase/Sale Offer.
(d) An Offeree must accept one of the offers set forth in the
Purchase/Sale Offer by delivering a written acceptance ("Acceptance") to the
Offeror within thirty (30) days after receipt of the Purchase/Sale Offer. An
Acceptance must irrevocably elect to either (i) purchase from the Offeror all of
the Membership Units held by the Offeror, or (ii) sell to the Offeror all of the
Membership Units held by the Offeree, in each case, at the per Membership Unit
purchase price set forth in the Purchase/Sale Offer. Failure to deliver an
Acceptance within such thirty (30) day period shall be deemed an election by the
Offeree to sell its Membership Units to the Offeror at the per Membership Unit
purchase price set forth in the Purchase/Sale Offer. Upon delivery of the
Acceptance, or expiration of the thirty (30) day period without delivery of the
Acceptance, as the case may be, Kiewit Alabama and Simba Group will become
obligated to purchase and sell, as the case may be, the Membership Units at the
per Membership Unit purchase price specified in the Purchase/Sale Offer. The
closing date for the purchase and sale of Membership Units shall be as specified
in the Acceptance; provided, however, that such closing date shall not be less
than sixty (60) nor more than one hundred twenty (120) days after the delivery
to the Offeror of the Acceptance. If no such closing date is specified in the
Acceptance or if no Acceptance is delivered within the thirty (30) day period,
the closing date shall be ninety (90) days after the date of delivery of the
Purchase/Sale Notice.
(e) The purchase price payable pursuant to paragraph (d) above shall be
paid by the purchasing party in cash on the specified closing date.
[The Remainder Of This Page Was Left Blank Intentionally]
27
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have executed this Operating
Agreement as of the 20th day of February, 1997.
MEMBERS:
SIMBA GROUP, INC.
By: /s/ John J. Faltis
--------------------------------
As Its: President
----------------------------
KIEWIT ALABAMA MINING COMPANY
By: /s/ Bruce Grewcock
--------------------------------
As Its: President
----------------------------
28
<PAGE> 33
EXHIBIT A
Name, Address and Capital Contributions
<TABLE>
<CAPTION>
Members Member Capital Contribution Initial Membership Units
- ------- and Value as of Effective Time ------------------------
------------------------------
<S> <C> <C>
Simba Group, Inc. $500.00 50
2708 Cranberry Square
Morgantown West Virginia 26505
Kiewit Alabama Mining Company $500.00 50
1000 Kiewit Plaza
Omaha, Nebraska 68131
</TABLE>
<PAGE> 34
EXHIBIT B
Name, Address and Initial Delayed Contribution
Additional
Member Initial Delayed Membership
Members Contribution and Value Units
- ------- ---------------------- -----
Simba Group, Inc. $10,000,000.00, consisting of 1,000,000
2708 Cranberry Square (i) the assignment of Simba
Morgantown, West Virginia 26505 Group's interests in the Third
Amended and Restated Negotiable
Promissory Note, dated January
21, 1997, of Oak Mountain
Energy Corporation to Zither
Mining Company, Inc. in the
principal amount of $8,000,000,
as the same may be hereafter
increased from time to time
(the "Note") and (ii) an amount
of cash equal to $10,000,000
less (A) the principal amount
of Simba Group's interest in
the Note assigned to the
Company under (i) above, (B)
accrued but unpaid interest
attributable to Simba Group's
interest in the Note and (C)
all expenses incurred by Oak
Mountain Group, Inc., Simba
Group, Inc., their respective
parent corporations and their
respective Affiliates in
connection with the
transactions contemplated by
the Asset Purchase Agreement
being executed
contemporaneously herewith, up
to a maximum of $439,000.
Kiewit Alabama Mining Company $10,000,000.00, consisting of 1,000,000
1000 Kiewit Plaza (i) the assignment of Kiewit
Omaha, Nebraska 60131 Alabama's interests in the Note
and (ii) an amount of cash
equal to $10,000,000 less (A)
the principal amount of Kiewit
Alabama's interest in the Note
assigned to the Company under
(i) above and (B) accrued but
unpaid interest attributable to
Kiewit Alabama's interest in
the Note.
<PAGE> 35
EXHIBIT C
JJF Group Limited Liability Company
PPK Group Limited Liability Company
Anker Holding B.V.
First Reserve Corporation
American Oil & Gas Investors, Limited Partnership
AMGO II, Limited Partnership
First Reserve Fund V, Limited Partnership
First Reserve Fund V-2, Limited Partnership
First Reserve Fund VI, Limited Partnership
First Reserve Fund VII, Limited Partnership
31
<PAGE> 1
EXHIBIT 10.11.2
AMENDMENT NO. 1 TO THE
OPERATING AGREEMENT
OF
SHELBY ENERGY GROUP, L.L.C.
This Amendment No. 1 to the Operating Agreement of Shelby Energy
Group, L.L.C., is made as of the 9th day of April, 1997, by and among the
undersigned who constitute all of the Members of Shelby Energy Group, L.L.C., a
Delaware limited liability company (the "Company").
W I T N E S S E T H:
WHEREAS, the Members of the Company are parties to that certain
Operating Agreement of the Company effective as of the 18th day of February,
1997 (the "Operating Agreement");
WHEREAS, contemporaneously herewith, Simba Group, Inc., a Delaware
corporation, has transferred and assigned its fifty percent (50%) Membership
Interest (and all Membership Units issued in connection therewith) to
Anker-Alabama, L.L.C., a Delaware limited liability company;
WHEREAS, in connection with the aforesaid transfer and assignment,
the Members of the Company believe it to be desirable and in the best interests
of the Company to amend the Operating Agreement of the Company in order to
replace Exhibit A and Exhibit B of the Operating Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree to amend the Operating Agreement as follows:
1. Definitions. Terms used herein but not otherwise defined shall
have the same meaning as ascribed to them in the Operating Agreement.
2. Exhibit A. The undersigned, constituting all of the Members of
the Company, hereby agree that Exhibit A to the Operating Agreement, which sets
forth the names and addresses of the Members and the number of Membership Units
held by the Members, shall be amended by and replaced with Exhibit A attached
hereto.
3. Exhibit B. The undersigned, constituting all of the Members of
the Company, hereby agree that Exhibit B to the Operating Agreement, which sets
forth the names and addresses of the Members, the Initial Delayed Capital
Contributions to be made by the
1
<PAGE> 2
Members and the number of Membership Units to be issued to the Members in
connection with the Initial Delayed Capital Contributions, shall be amended by
and replaced with Exhibit B attached hereto.
4. Simba Group References. The undersigned, constituting all of the
Members of the Company, hereby agree that all references in the Operating
Agreement to "Simba Group, Inc." shall be replaced with references to
"Anker-Alabama, L.L.C.," all references in the Operating Agreement to "Simba
Group" shall be replaced with references to "Anker-Alabama" and all references
in the Operating Agreement to "Simba Group Managers" shall be replaced with
references to "Anker-Alabama Managers."
5. No other Amendments. Except as otherwise amended, revised or
changed in this Amendment No. 1 to the Operating Agreement, the Operating
Agreement shall remain in full force and effect and shall be binding on the
parties in accordance with its terms.
IN WITNESS WHEREOF, all of the Members of the Company have caused
this Amendment to the Operating Agreement to be executed as of the day and year
first above written.
THE TRANSFERRING MEMBER:
SIMBA GROUP, INC.
By /s/ John J. Faltis
---------------------------
As Its President
REMAINING AND NEW MEMBERS:
KIEWIT ALABAMA MINING COMPANY
By /s/ Bruce Grewcock
---------------------------
As Its President
ANKER-ALABAMA, L.L.C.
By /s/ John J. Faltis
---------------------------
As Its Manager
<PAGE> 3
EXHIBIT A
Name, Address and Capital Contributions
<TABLE>
<CAPTION>
G2
GMembers Member Capital Contribution Initial Membership Units
- -------- and Value as of Effective Time ------------------------
------------------------------
<S> <C> <C>
Anker-Alabama, L.L.C. $500.00 50
2708 Cranberry Square
Morgantown West Virginia 26505
Kiewit Alabama Mining Company $500.00 50
1000 Kiewit Plaza
Omaha, Nebraska 68131
</TABLE>
<PAGE> 4
EXHIBIT B
Name, Address and Initial Delayed Contribution
Additional
Member Initial Delayed Membership
Members Contribution and Value Units
- ------- ---------------------- -----
Anker-Alabama, L.L.C.. $15,000,000.00, consisting of (i) 1,500,000
2708 Cranberry Square the assignment of Anker-Alabama's
Morgantown, West Virginia 26505 interests in the Fifth Amended and
Restated Negotiable Promissory
Note, dated April 1, 1997, of Oak
Mountain Energy Corporation to
Zither Mining Company, Inc. in
the principal amount of
$9,500,000, as the same may be
hereafter increased from time to
time (the "Note") and (ii) an
amount of cash equal to
$15,000,000 less (A) the
principal amount of
Anker-Alabama's interest in the
Note assigned to the Company
under (i) above, (B) accrued but
unpaid interest attributable to
Anker-Alabama's interest in the
Note and (C) all expenses
incurred by Oak Mountain Group,
Inc., Simba Group, Inc.,
Anker-Alabama, L.LC., their
respective parent corporations
and their respective Affiliates
in connection with the
transactions contemplated by the
Asset Purchase Agreement being
executed contemporaneously
herewith, up to a maximum of
$439,000.
Kiewit Alabama Mining Company $15,000,000.00, consisting of (i) 1,500,000
1000 Kiewit Plaza the assignment of Kiewit
Omaha, Nebraska 60131 Alabama's interests in the Note
and (ii) an amount of cash equal
to $15,000,000 less (A) the
principal amount of Kiewit
Alabama's interest in the Note
assigned to the Company under (i)
above and (B) accrued but unpaid
interest attributable to Kiewit
Alabama's interest in the Note.
<PAGE> 1
EXHIBIT 10.12
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (the "Agreement"), dated as of August 12,
1996, by and among Anker Coal Group, Inc., a Delaware corporation (the
"Company); JJF Group Limited Liability Company, a limited liability company
organized and existing under the laws of West Virginia ("JJF Group"); PPK Group
Limited Liability Company, a limited liability company organized and existing
under the laws of West Virginia ("PPK Group"); Anker Holding B.V., a corporation
organized and existing under the laws of the Netherlands ("Anker Holding"); and
the following parties sometimes hereinafter referred to as the "Funds": American
Oil & Gas Investors, Limited Partnership, a limited partnership organized and
existing under the laws of New York, AMGO II, Limited Partnership, a limited
partnership organized and existing under the laws of New York, First Reserve
Fund V, Limited Partnership, a limited partnership organized and existing under
the laws of Delaware, First Reserve Fund V-2, Limited Partnership, a limited
partnership organized and existing under the laws of Delaware, First Reserve
Fund VI, Limited Partnership, a limited partnership organized and existing under
the laws of Delaware, and First Reserve Fund VII, Limited Partnership a limited
partnership organized and existing under the laws of Delaware.
In consideration of the following premises and conditions, the parties
hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following respective meanings:
The term "Common Stock" shall mean the Common Stock, par value $.01
per share of the Company.
The term "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute then in effect, and a reference
to a particular section thereof shall be deemed to include a reference to the
comparable section, if any, of any such similar federal statute.
The term "Holders" shall mean JJF Group, PPK Group, Anker Holding,
the Funds and persons or entities (other than the Company) to whom Common Stock
is transferred by any of the foregoing, other than any transfer in violation of
the Stockholders Agreement (the "Stockholders Agreement") entered into among the
parties hereto on or about the date hereof (such transferees hereinafter
"Permitted Transferees"), and any combination of them, and the term "Holder"
shall mean any such person.
The term "person" shall mean an individual, partnership,
corporation, limited liability company, trust, unincorporated organization or
government or political department or agency thereof or other entity.
<PAGE> 2
The term "Registrable Securities" shall mean shares of Common Stock
outstanding as of the date hereof or acquired by any of the Holders after the
date hereof (and excluding any warrants or other securities convertible into
Common Stock). As to any Registrable Securities, such securities shall cease to
be Registrable Securities when (i) such securities shall have been registered
under the Securities Act, the registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and such
securities shall have been disposed of pursuant to such effective registration
statement, (ii) such securities shall have been distributed pursuant to Rule
144, Rule 144A, or any similar provision then in force, under the Securities
Act, (iii) such securities shall have been otherwise transferred, new
certificates or other evidences of ownership for them not bearing a legend
restricting further transfer and not subject to any stop transfer order or other
restrictions on transfer shall have been delivered by the Company and subsequent
disposition of such securities shall not require registration or qualification
of such securities under the Securities Act or any state securities laws then in
force or (iv) such securities shall cease to be outstanding.
The term "Registration Expenses" shall mean all expenses incident to
the Company's performance of or compliance with this Agreement, including
without limitation, all SEC and stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees and expenses, fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel for the underwriters in connection with blue
sky qualifications of the Registrable Securities), printing expenses, messenger
and delivery expenses, internal expenses (including without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the fees and expenses incurred in connection with the
listing of the securities to be registered on each securities exchange on which
such securities are listed, fees and disbursements of counsel for the Company
and all independent certified public accountants (including the expenses of any
annual audit or "cold comfort" letters required by or incident to such
performance and compliance), the fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, the reasonable fees of one
counsel retained in connection with each such registration by the Holders of a
majority of the Registrable Securities being registered in an amount for each
such registration of up to a maximum of $25,000, the reasonable fees of counsel
retained by a Holder of Registrable Securities being registered not voting in
favor of the retention of the counsel referred to in the preceding clause up to
a maximum amount of $10,000 per such Holder and only to the extent that such
fees relate to the performance of legal services required by the Company or an
underwriter to be performed by counsel to such Holder, the reasonable fees and
expenses of any special experts retained by the Company in connection with such
registration and fees and expenses of other persons retained by the Company (but
not including (i) any underwriting discounts or commissions attributable to the
sale of Registrable Securities by the Holders of such Registrable Securities and
(ii) any transfer taxes payable by the Holders of Registrable Securities in
connection with the sale of Registrable Securities).
The term "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute then in effect, and a reference to a
particular section thereof shall be
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deemed to include a reference to the comparable section, if any, of any such
similar federal statute.
The term "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act or the
Exchange Act.
2. Registration on Request.
(a) Request for Registration. Upon the written request of (i) JJF
Group, (ii) PPK Group, (iii) Anker Holding or the (iv) the Funds acting
collectively (the "Requesting Holder" or the "Requesting Holders") requesting
that the Company effect the registration under the Securities Act of all or part
of such Holder's or Holders' Registrable Securities and specifying the intended
method of disposition thereof, the Company will promptly give written notice of
such requested registration to all other Holders of Registrable Securities, and
thereupon will, as expeditiously as possible, use its best efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by the Requesting Holder(s); and
(ii) all other Registrable Securities which the Company has
been requested to register by any other Holder thereof by written request
given to the Company within 20 days after the giving of such written
notice by the Company (which request shall specify the intended method of
disposition of such Registrable Securities)
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered; provided, that the Company shall only be obligated to register such
Registrable Securities pursuant to a request by: (i) the Funds on an aggregate
of three registration statements; (ii) (JJF Group on an aggregate of two
registration statements; (iii) PPK Group on one registration statement; and
((iv) Anker Holding on one registration statement, and provided further that (A)
the Company shall not be obligated to file a registration statement relating to
a registration request under this Section 2 at any time prior to the completion
of an initial public offering by the Company of Common Stock, (B) the Company
shall not be obligated to file a registration statement relating to a
registration request under this Section 2 (other than on Form S-3 or any similar
short-form registration statement) within a period of six months after the
effective date of any other registration statement of the Company which was not
effected on Form S-3 (or any similar short-form registration statement) and (C)
if the Requesting Holder(s) shall have requested the Company to effect a
registration under this Section 2 and prior to the effective date of the
registration statement relating to such registration such Holders shall have
revoked such request pursuant to the last sentence of this Section 2(a), then
the Company shall not be obligated to file a registration statement relating to
a registration request under this Section 2 within a period of six months after
the date of receipt by the Company of the registration request that was
subsequently revoked; provided, however, that a request which is revoked
pursuant to the last
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sentence of this Section 2(a) shall not be considered a request for these
purposes. Promptly after the expiration of the 20-day period referred to in
subsection (ii) above, the Company will notify all the Holders to be included in
the registration of the other Holders and the number of shares of Registrable
Securities requested to be included therein. All of the Requesting Holders
acting jointly may, at any time prior to the effective date of the registration
statement relating to such registration, revoke such request by providing a
written notice to the Company revoking such request.
The Company shall have the right to select the investment banker (or
investment bankers) that shall manage the offering (collectively, the "managing
underwriter"), provided, that such managing underwriter must be reasonably
satisfactory to the Requesting Holder(s).
(b) Registration Statement Form. If a registration requested
pursuant to this Section 2 which is proposed by the Company to be effected by
the filing of a registration statement on Form S-3 (or any successor or similar
short-form registration statement) shall be in connection with any underwritten
public offering and if the managing underwriter shall advise the Company in
writing that, in its opinion, the use of another form of registration statement
is of material importance to the success of such proposed offering, then such
registration shall be effected on such other form.
(c) Expenses. The Company will pay the Registration Expenses in
connection with a registration requested pursuant to this Section 2, whether or
not such registration becomes effective under the Securities Act.
(d) Effective Registration Statement. A registration requested
pursuant to this Section 2 will not be deemed to have been effected unless the
registration statement relating thereto has become effective under the
Securities Act and all or any portion of the Registrable Securities initially
requesting such registration have actually been sold thereunder; provided,
however, that if, after such registration statement has become effective,
registration is interfered with by any stop order, injunction or other order or
requirement of the SEC or other governmental agency or court, such registration
will be deemed not to have been effected.
(e) Pro Rata Participation in Requested Registration. If a requested
registration pursuant to this Section 2 involves an underwritten offering and
the managing underwriter shall advise the Company in writing that, in its
opinion, the number of securities requested to be included in such registration
(including securities of the Company which are not Registrable Securities)
exceeds the number which would have an adverse effect on such offering,
including the price at which such shares or securities can be sold, the Company
will include in such registration (i) first, all Registrable Securities
requested to be included in such registration by the Requesting Holders pursuant
to this Section 2 (provided that if the number of such Registrable Securities
exceeds the number which the Company has been advised can be sold in such
offering, without having the adverse effect referred to above, the number of
such Registrable Securities included in such registration shall be allocated pro
rata among the Requesting Holders on the basis of the relative number of shares
of Registrable Securities each
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<PAGE> 5
such Holder has requested to be included in such registration), and (ii) second,
to the extent that the Registrable Securities requested to be included in such
registration pursuant to this Section 2 are less than the number of securities
which the Company has been advised can be sold in such offering, without having
the adverse effect referred to above, the securities proposed to be sold by
other Holders, allocated pro rata among such other Holders on the basis of the
number of shares of Registrable Securities each such Holder has requested to be
included in such registration. If at least fifty percent of the Registrable
Securities requested to be registered pursuant to Section 2(a) by a Requesting
Holder are not included in such registration, the registration request of such
Requesting Holder shall not be counted toward the limit on registration requests
set forth in Section 2(a).
3. Incidental Registration.
(a) Right to Include Registrable Securities. If the Company at any
time proposes to register any of its securities under the Securities Act (other
than a registration on Form S-4 or S-8 or any successor or similar forms and
other than pursuant to a registration under Section 2 hereof), whether or not
for sale for its own account, it will each such time give prompt written notice
to all Holders of Registrable Securities of its intention to do so and of such
Holders' rights under this Section 3. Upon the written request of any such
Holder made within 20 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
Holder and the intended method of disposition thereof), the Company will use its
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the Holders thereof, to the extent requisite to permit the disposition (in
accordance with such intended methods thereof) of the Registrable Securities so
to be registered; provided, that (i) if, at any time after giving written notice
of its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities, the
Company may, at its election, give written notice of such determination to each
Holder that made a request as hereinabove provided and thereupon the Company
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration, and (ii) if such registration involves an
underwritten offering, all Holders of Registrable Securities requesting to be
included in the Company's registration must sell their Registrable Securities to
the underwriters selected by the Company on the same terms and conditions as
apply to the Company. If a registration requested pursuant to this Section 3(a)
involves an underwritten public offering, any Holder of Registrable Securities
requesting to be included in such registration may elect, in writing prior to
the effectiveness of the registration statement filed in connection with such
registration, not to register such securities in connection with such
registration. No registration effected under this Section 3 shall relieve the
Company of its obligations to effect registration upon request under Section 2.
The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 3.
(b) Priority in Incidental Registrations. If a registration pursuant
to this Section 3 involves an underwritten offering and the managing underwriter
advises the Company
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<PAGE> 6
in writing that, in its opinion, the number of securities which the Company, the
Holders and any other persons intend to include in such registration exceeds the
number which would have an adverse effect on such offering, including the price
at which such securities can be sold, the Company will include in such
registration (i) first, all the securities the Company proposes to sell for its
own account, and (ii) second, the number of Registrable Securities requested to
be included in such registration by the Holders, which number, in the opinion of
such underwriters, can be sold without having the adverse effect referred to
above, such amount to be allocated pro rata among all such requesting Holders on
the basis of the relative number of shares of Registrable Securities and other
securities each Holder has requested to be included in such registration, and
(iii) third, the number of Registrable Securities requested to be included in
such registration by other persons, which number, in the opinion of such
underwriters, can be sold without having the adverse effect referred to above,
such amount to be allocated pro rata among all such requesting other persons on
the basis of the relative number of shares of Registrable Securities and other
securities each such other person has requested to be included in such
registration.
4. Holdback Agreements.
If any registration shall be in connection with an underwritten
public offering, each Holder of Registrable Securities agrees not to effect any
public sale or distribution, including any sale pursuant to Rule 144 or Rule
144A under the Securities Act, of any Registrable Securities, and to use such
Holder's best efforts not to effect any such public sale or distribution of any
other equity security of the Company or of any security convertible into or
exchangeable or exercisable for any equity security, of the Company (in each
case, other than as part of such underwritten public offering) within 7 days
before or 90 days after the effective date of such registration, and the Company
hereby also so agrees and agrees to cause other holders of any equity security,
or of any security convertible into or exchangeable or exercisable for any
equity security, of the Company purchased from the Company (at any time other
than in a public offering) to so agree.
5. Registration Procedures.
If and whenever the Company is required to use its best efforts to
effect or cause the registration of any Registrable Securities under the
Securities Act as provided in this Agreement, the Company will, as expeditiously
as possible:
(a) prepare and file with the SEC within 90 days, and use its best
efforts to prepare and so file within 45 days, after receipt of a request for
registration with respect to such Registrable Securities, a registration
statement on any form for which the Company then qualifies or which counsel for
the Company shall deem appropriate, subject to 2(b) hereof, as the case may be,
and which form shall be available for the sale of the registrable Securities in
accordance with the intended methods of distribution thereof, and use its best
efforts to cause such registration statement to become effective; provided that
before filing with the SEC a registration statement or prospectus or any
amendments or supplements thereto, the Company
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<PAGE> 7
will (i) furnish to one counsel selected by the Holders of a majority of the
Registrable Securities covered by such registration statement copies of all such
documents proposed to be filed, which documents will be subject to the review of
such counsel, and the Company will give reasonable consideration to any comments
of such counsel, and (ii) notify each Holder of Registrable Securities covered
by such registration statement of any stop order issued or threatened by the SEC
and take all reasonable actions required to prevent the entry of such stop order
or to remove it if entered;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective for a period of
not less than 120 days or such shorter period which will terminate when all
Registrable Securities covered by such registration statement have been sold
(but not before the expiration of the 90-day period referred to in Section 4(3)
of the Securities Act and Rule 174 thereunder, if applicable), and comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such registration statement;
(c) furnish to each Holder of such Registrable Securities covered by
such registration statement such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such registration statement
(including each preliminary prospectus), in conformity with the requirements of
the Securities Act and such other documents as such Holder may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Holder;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions
within the United States as any Holder of Registrable Securities covered by such
registration statement reasonably requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable such Holder to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Holder; provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (d), (ii) subject itself
to taxation in any such jurisdiction or (iii) consent to general service of
process in any such jurisdiction;
(e) use its best efforts to cause the Registrable Securities covered
by such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the Holder or
Holders thereof to consummate the disposition of such Registrable Securities;
(f) immediately notify each Holder of such Registrable Securities at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits to state any material fact
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<PAGE> 8
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and will promptly
prepare and furnish to such Holder a reasonable number of copies of such
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(g) use its best efforts to cause all such Registrable Securities to
be listed on a national securities exchange and on each securities exchange on
which similar securities issued by the Company are then listed, if the
applicable listing requirements are satisfied, and to provide a transfer agent
and registrar for such Registrable Securities covered by such registration
statement no later than the effective date of such registration statement;
(h) enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as the Holders of a
majority of the registrable Securities being sold or the underwriters retained
by such Holders, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities, including customary
indemnification;
(i) make available for inspection by any Holder of Registrable
Securities covered by such registration statement, any underwriter participating
in any disposition pursuant to such registration statement, and any attorney,
accountant or other agent retained by any such Holder or underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "Records")
as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company officers, directors and employees to
supply all information reasonably requested by any such Inspector in connection
with such registration statement;
(j) use its best efforts to obtain a cold comfort letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by cold comfort letters as the Holders
of a majority of the Registrable Securities being sold reasonably request;
(k) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering a period of at
least twelve months, beginning with the first month after the effective date of
the registration statement (as the term "effective date" is defined in Rule
158(c) under the Securities Act), which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and
(l) obtain for delivery to the underwriter an opinion or opinions
from counsel for the Company in customary form and in form and scope reasonably
satisfactory to such underwriter and its counsel.
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The Company may require each Holder of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Securities as the
Company may from time to time reasonably request in writing.
Each Holder of Registrable Securities agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 5(f) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 5(f) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company shall
give any such notice, the period mentioned in Section 5(b) hereof shall be
extended by the greater of (i) three months or (ii) the number of days during
the period from and including the date of the giving of such notice pursuant to
Section 5(f) hereof to and including the date when each Holder of Registrable
Securities covered by such registration statement shall have received the copies
of the supplemented or amended prospectus contemplated by Section 5(f) hereof.
If a registration pursuant to Section 2 involves an underwritten offering,
the Company agrees, if so required by the managing underwriter, not to effect
any public sale or distribution of any of its securities (other than pursuant to
Form S-4 or S-8) during a period commencing seven calendar days before and
ending 90 calendar days after the effective date of such registration, except
for such underwritten offering.
6. Indemnification.
(a) Indemnification by the Company. In the event of any registration
of any securities of the Company under the Securities Act pursuant to Section 2
or 3 hereof, the Company will, and it hereby does, indemnify and hold harmless,
to the full extent permitted by law, each of the Holders of any Registrable
Securities covered by such registration statement, its directors and officers,
employees, agents, general partners, limited partners, managers and managing
directors thereof), each other person who participates as an underwriter in the
offering or sale of such securities and each other person, if any, who controls
such Holder or any such underwriter within the meaning of the Securities Act,
against any and all losses, claims, damages or liabilities, joint or several,
and expenses (including any amounts paid in any settlement effected with the
Company's consent) to which such Holder, any such director, officer, employee,
agent, general, limited partner, manager or managing director or any such
underwriter or controlling person may become subject under the Securities Act,
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) or expenses arise out of or are
based upon (a) any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
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<PAGE> 10
prospectus, or any amendment or supplement thereto, including all documents
incorporated therein by reference or (b) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will reimburse such
Holder and each such director, officer, employee, agent, general partner,
limited partner, manager, managing director or underwriter and controlling
person for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending such loss, claim, liability, action
or proceedings commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any alleged untrue statement or omission;
provided, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expenses arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement or amendment or supplement thereto or in any such
preliminary, final or summary prospectus in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such Holder or underwriter specifically stating that it is for use in the
preparation thereof; and provided, further, that the Company will not be liable
to any person who participates as an underwriter in the offering or sale of
Registrable Securities or any other person, if any, who controls such
underwriter within the meaning of the Securities Act, under the indemnity
agreement in this Section 6(a) with respect to any preliminary prospectus as
amended or supplemented as the case may be, to the extent that any such loss,
claim, damage or liability of such underwriter or controlling person results
from the fact that such underwriter sold Registrable Securities to a person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the final prospectus (including any documents incorporated
by reference therein), whichever is most recent, if the Company has previously
furnished copies thereof to such underwriter and such final prospectus, as then
amended or supplemented, has corrected any such misstatement or omission. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Holder or any such director, officer, employee,
agent, general partner, limited partner, manger, managing director, underwriter
or controlling person and shall survive the transfer of such securities by such
Holder.
(b) Indemnification by the Holders. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed in accordance with Sections 2 and 3 hereof, that the Company shall have
received an undertaking reasonably satisfactory to it from the Holders of such
Registrable Securities or any underwriter, to indemnify and hold harmless (in
the same manner and to the same extent as set forth in subdivision (a) of this
Section 6) the Company and its controlling persons and all other prospective
sellers and their respective controlling persons with respect to any statement
or alleged statement in or omission or alleged omission from such registration
statement, any preliminary, final or summary prospectus contained therein, or
any amendment or supplement, if such statement or alleged statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Holder or underwriter specially stating that it is for use in the preparation of
such registration statement, preliminary, final or summary prospectus or
amendment or
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supplement, or a document incorporated by reference into any of the foregoing.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any of the Holders or any
of their respective directors, officers and controlling persons and shall
survive the transfer of such securities by such Holder; provided, however, that
no such Holder shall be liable under this Section 6 for any amounts exceeding
the product of the purchase price per Registrable Security and the number of
Registrable Securities being sold pursuant to such registration statement or
prospectus by such Holder.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party hereunder of written notice of the commencement of any action or
proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 6, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 6, except to the extent that the indemnifying party is actually
materially prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgement a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying party
will be entitled to participate in and to assume the defense thereof, jointly
with any other indemnified party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof, unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties arises in respect of such claim after the assumption of the
defense thereof. No indemnifying party will consent to entry of any judgment or
enter into any settlement without the prior written consent of the indemnified
party (which consent shall not be unreasonably withheld) unless such settlement
requires no more than a monetary payment for which the indemnifying party agrees
to indemnify the indemnified party and includes a full, unconditional and
complete release of the indemnified party from all liability in respect to such
claim or litigation. The indemnified party shall be entitled to take control of
the defense of any claim as to which, in the reasonable judgment of the
indemnifying party's counsel, representation of both the indemnifying party and
the indemnified party would be inappropriate under the applicable standards of
professional conduct due to actual or potential differing interests between
them. An indemnifying party who is not entitled to, or elects not to, assume the
defense of a claim will not be obligated to pay the fees and expenses of more
than one counsel for all parties indemnified by such indemnifying party with
respect to such claim, unless in the reasonable judgment of any indemnified
party a conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
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7. Contribution
In order to provide for just and equitable contribution in circumstances
under which the indemnity contemplated by Section 6 is for any reason not
available or insufficient for any reason to hold harmless an indemnified party
in respect of any losses, claims, damages or liabilities referred to therein,
the parties required to indemnify by the terms thereof shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement incurred by the Company, any Holder of
Registrable Securities and one or more of the underwriters. In determining the
amounts which the respective parties shall contribute, there shall be considered
the relative benefits received by each party from the offering of the
Registrable Securities by taking into account the portion of the proceeds of the
offering realized by each, and the relative fault of each party by taking into
account the parties' relative knowledge and access to information concerning the
matter with respect to which the claim was asserted, the opportunity to correct
and prevent any statement or omission and any other equitable consideration
appropriate under the circumstances. The Company and each Holder selling
securities agree with each other that no seller of Registrable Securities shall
be required to contribute any amount in excess of the amount such Holder would
have been required to pay to an indemnified party if the indemnity under Section
6 were available. The Company and each such Holder agree with each other and the
underwriters of the Registrable Securities, if requested by such underwriters,
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation (even if the underwriters were
treated as one entity for such purpose) or for the underwriter's portion of such
contribution to exceed the percentage that the underwriters discount bears to
the initial public offering price of the Registrable Securities. For purposes of
this Section 7, each Person, if any, who controls an underwriter within the
meaning of Section 15 of the Securities Act shall have the same rights to
contribution as such underwriter, and each director and each officer of the
Company who signed the registration statement, and each person, if any, who
controls the Company or a seller of Registrable Securities within the meaning of
Section 15 of the Securities Act shall have the same rights to contribution as
the Company or a seller of Registrable Securities as the case may be.
8. Miscellaneous.
(a) The Company will not hereafter enter into any agreement with
respect to its securities which is inconsistent with the rights granted to the
Holders of Registrable Securities in this Agreement. The Company has not
previously entered into any agreement with respect to any of its debt or equity
securities granting any registration rights to any person.
(b) The Company acknowledges and agrees that in the event of any
breach of this Agreement by it, the Holders would be irreparably harmed and
could not be made whole by monetary damages. The Company accordingly agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate and that the Holders, in addition to any other remedy to which
they may be entitled at law or in equity, shall be entitled to compel specified
performance of this Agreement in any action instituted in the United States
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District Court for the Southern District of New York, or, in the event said
Court would not have jurisdiction for such action, in any court of the United
States or any state thereof having subject matter jurisdiction for such action.
The Company consents to personal jurisdiction in any such action brought in the
United States District Court for the District of Delaware or any such other
court and to service of process upon it or him in the manner set forth in
Section 8(d) hereof.
(c) This Agreement, together with the Stock Purchase Agreement dated
on or about the date hereof between the Company and the Funds (the "Stock
Purchase Agreement") and the Stockholders Agreement referred to herein in
Section 1 constitute the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein, and there are no
restrictions, promises, representations, warranties, covenants, or undertakings
with respect to the subject matter hereof, other than those expressly set forth
or referred to herein or therein. This Agreement, the Stock Purchase Agreement
and the Stockholders Agreement referred to herein supersede all prior agreements
and understandings between the parties hereto with respect to the subject matter
hereof.
(d) Any notice, request, instruction or other document to be given
hereunder by any party hereto to another party hereto shall be in writing, shall
be delivered personally or sent by registered mail, postage prepaid, return
receipt requested, to the address of the party set forth in Appendix I hereto
or, in the case of a Permitted Transferee, to the address set forth in the
written agreement executed pursuant to Section 8(g) hereof, or to such other
address as the party to whom notice is to be given may provide in a written
notice to the Company, a copy of which written notice shall be on file with the
Secretary. No notice shall be effective except upon actual delivery.
(e) The laws of the State of New York shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under applicable principles of
conflicts of laws.
(f) The invalidity or unenforceability of any provisions of this
Agreement in any jurisdiction shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the validity or
enforceability of this Agreement, including that provision, in any other
jurisdiction.
(g) Notwithstanding anything to the contrary contained in this
Agreement, no shares of Registrable Securities or any securities of the Company
convertible into, or exercisable or exchangeable for, Registrable Securities,
may be sold, transferred or otherwise disposed of to any Permitted Transferee,
unless such Permitted Transferee, prior to such sale, transfer or other
disposition, agrees in writing to be bound by the terms of this Agreement to the
same extent and in the same manner as the transferor of such shares or
securities, a copy of which agreement shall be on file with the Secretary of the
Company.
(h) Nothing contained in this Agreement shall be deemed to be a
waiver of, or release from, any obligations any party hereto may have under, or
any restrictions on the
13
<PAGE> 14
transfer of Registrable Securities or other securities of the Company imposed
by, any other agreement including, but not limited to, the Stock Purchase
Agreement and the Stockholders Agreement.
(i) Each of the Holders agrees that substantially the following
legend shall be placed on the certificates representing any shares of
Registrable Securities acquired by it:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
RESTRICTIONS CONTAINED IN A REGISTRATION RIGHTS AGREEMENT DATED AS
OF AUGUST 12, 1996, A COPY OF WHICH IS ON FILE AT THE OFFICE OF THE
SECRETARY OF THE COMPANY."
(j) The provisions of this Agreement shall be binding upon and
accrue to the benefit of the parties hereto and their respective heirs,
successors and assigns. Nothing expressed or mentioned in this Agreement is
intended to, or shall be construed to, give any person or entity, other than (i)
the parties hereto (ii) their respective successors and permitted assigns or
(iii) the persons and entities indemnified pursuant to Sections 6(a) and 6(b)
(and then only to the extent of such indemnification), any legal or equitable
right, remedy or claim under or in respect to this Agreement or any provision
contained herein. Notwithstanding the foregoing, neither this Agreement nor any
right, remedy, obligation or liability arising hereunder or by reason hereof
shall be assignable by the Company or any Holder without the prior written
consent of the Company and such Holder; provided, however, that a Holder may
assign his rights, remedies, obligations and liabilities hereunder concurrently
with a transfer of his shares of Registrable Securities to a Permitted
Transferee in accordance with Section 8(g) hereof without obtaining the prior
written consent of the Company or the Holders specified in this Section 8(j).
(k) A default by any party to the Agreement in such party's
compliance with any of the conditions or covenants hereof or performance of any
of the obligations of such party hereunder shall not constitute a default by any
other party.
(l) This Agreement may not be amended, modified or supplemented and
no waivers of or consents to departures from the provisions hereof may be given
unless consented to in writing by the Company and each of the Holders.
(m) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same Agreement.
(n) In any action or proceeding brought to enforce any provision of
this Agreement, or where any provision hereof is validly asserted as a defense,
the successful party shall be entitled to recover reasonable attorneys' fees in
addition to any other available remedy.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
14
<PAGE> 15
ANKER COAL GROUP, INC.
By: /s/ John J. Faltis
Name: John J. Faltis
Title: President
JJF GROUP LIMITED LIABILITY COMPANY
By: /s/ John J. Faltis
Name: John J. Faltis
Title: Manager
PPK GROUP LIMITED LIABILITY COMPANY
By: /s/ P. Bruce Sparks
Name: P. Bruce Sparks
Title: Manger
ANKER HOLDING B.V.
By: /s/ Willem G. Rottier
Name: Willem G. Rottier
Title: Managing Director
AMERICAN GAS & OIL INVESTORS,
LIMITED PARTNERSHIP
By First Reserve Corporation, its general partner
By: /s/ Bruce Rothstein
Name: Bruce Rothstein
Title: Vice-President
15
<PAGE> 16
AMGO II, LIMITED PARTNERSHIP
By First Reserve Corporation, its general partner
By: /s/ Bruce Rothstein
Name: Bruce Rothstein
Title: Vice-President
FIRST RESERVE FUND V, LIMITED PARTNERSHIP
By First Reserve Corporation, its general partner
By: /s/ Bruce Rothstein
Name: Bruce Rothstein
Title: Vice-President
FIRST RESERVE FUND V-2, LIMITED PARTNERSHIP
By First Reserve Corporation, its general partner
By: /s/ Bruce Rothstein
Name: Bruce Rothstein
Title: Vice-President
FIRST RESERVE FUND VI, LIMITED PARTNERSHIP
By First Reserve Corporation, its general partner
By: /s/ Bruce Rothstein
Name: Bruce Rothstein
Title: Vice-President
16
<PAGE> 17
FIRST RESERVE FUND VII, LIMITED PARTNERSHIP
By First Reserve Corporation, its general partner
By: /s/ Bruce Rothstein
Name: Bruce Rothstein
Title: Vice-President
17
<PAGE> 1
EXHIBIT 10.13
THIS WARRANT WAS ORIGINALLY ISSUED ON AUGUST 12, 1996 AND HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
WARRANT MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES
AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. THIS
WARRANT IS ALSO SUBJECT TO A STOCKHOLDERS AGREEMENT DATED AUGUST 12,
1996 AMONG ANKER COAL GROUP, INC., JOHN J. FALTIS, JJF GROUP LIMITED
LIABILITY COMPANY, P. BRUCE SPARKS, PPK GROUP LIMITED LIABILITY
COMPANY, ANKER HOLDING B.V., FIRST RESERVE CORPORATION, AMERICAN OIL
& GAS INVESTORS, LIMITED PARTNERSHIP, AMGO II, LIMITED PARTNERSHIP,
FIRST RESERVE FUND V, LIMITED PARTNERSHIP, FIRST RESERVE FUND V-2,
LIMITED PARTNERSHIP, FIRST RESERVE FUND VI, LIMITED PARTNERSHIP AND
FIRST RESERVE FUND VII, LIMITED PARTNERSHIP.
STOCK PURCHASE WARRANT
Date of Issuance: August 12, 1996
For value received, Anker Coal Group, Inc., a Delaware corporation
(the "Company"), hereby grants to each of American Oil & Gas Investors, Limited
Partnership, AmGO II, Limited Partnership, First Reserve Fund V, Limited
Partnership, First Reserve Fund V-2, Limited Partnership, First Reserve Fund VI,
Limited Partnership and First Reserve Fund VII, Limited Partnership
(collectively the "Funds"), and to their respective transferees and assigns, the
right to purchase from the Company the portions of the Warrant Shares (as
defined herein) set forth opposite each Fund's name on Schedule I at a price of
$.01 per share (the "Exercise Price"). Certain capitalized terms used herein are
defined in Section 2 hereof.
This Warrant is subject to the following provisions:
SECTION 1. Exercise of Warrant.
1A. Duration. Subject to the terms and conditions hereof, the
purchase rights represented by this Warrant may be exercised, in whole or in
part concurrently with each Class A Conversion (as defined in Section 1C). All
rights under this Warrant shall expire on the date when all of the Company's
Class A Preferred Stock (the "Class A Preferred Stock") ceases to be
outstanding.
1B. Warrant Shares. The number of shares of Common Stock that can be
purchased by the Funds on any particular occasion pursuant to this Warrant (the
"Warrant Shares") shall equal 8.333% of the total number of shares of Common
Stock issued
<PAGE> 2
2
to the holders of Class A Preferred Stock ("Class A Holders") upon their
conversion of Class A Preferred Stock into shares of Common Stock pursuant to
the conversion rights granted in the Class A Preferred Stock Certificate of
Designation in any public offering of the Company (a "Class A Conversion").
1C. Notification of Conversion. Within two business days following
the Company's receipt of notice from Class A Holders of a Class A Conversion,
the Company shall provide written notice to each holder of this Warrant (a
"Class A Conversion Notice") of such Class A Conversion, including (i) the names
of the Class A Holders making the Class A Conversion and (ii) the number of
shares of Class A Preferred Stock being converted by each such Class A Holder.
Upon receipt of a Class A Conversion Notice, a holder of this Warrant shall be
entitled to exercise this Warrant with respect to such Class A Conversion for a
period of ten (10) days following such receipt.
1D. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised by a
Registered Holder when all of the following items have been delivered to the
Company by or on behalf of such Registered Holder (the "Exercise Time"):
(a) a completed Exercise Agreement, substantially in the
form set forth in Exhibit I hereto, executed by each Registered Holder
exercising all or part of the purchase rights represented by this Warrant
(a "Purchaser");
(b) a copy of this Warrant certified as true and correct
by such Purchaser;
(c) a check payable to the Company in an amount equal to
the product of the Exercise Price multiplied by the number of Warrant
Shares being purchased by such Registered Holder upon such exercise (the
"Aggregate Exercise Price"); and
(d) an opinion of Purchaser's counsel in form and
substance reasonably satisfactory to the Company that the exercise of the
Warrant will not violate any of the provisions of the Securities Act of
1933, as amended.
(ii) Certificates for Warrant Shares purchased upon exercise
of this Warrant shall be delivered by the Company to each Purchaser within five
days after the date of the Exercise Time together with any cash payable in lieu
of a fraction of a share pursuant to Section 9 hereof.
(iii) The Warrant Shares issuable upon the exercise of this
Warrant shall be deemed to have been issued to a Purchaser at the Exercise Time,
and such Purchaser shall be
<PAGE> 3
3
deemed for all purposes to have become the record holder of such Warrant Shares
at the Exercise Time.
(iv) The issuance of certificates for Warrant Shares upon
exercise of this Warrant shall be made without charge to the Registered Holder
or the Purchaser for any issuance tax in respect thereof or other cost incurred
by the Company in connection with such exercise and the related issuance of
Warrant Shares.
(v) The Company shall assist and cooperate with the Registered
Holders or any other Purchaser required to make any governmental filings or
obtain any governmental approvals prior to or in connection with any exercise of
this Warrant.
(vi) All Warrant Shares which are issuable upon exercise of
this Warrant shall, when issued and upon the payment of the Exercise Price, be
duly and validly issued, fully paid and nonassessable and free from all taxes,
liens and charges. The Company shall take all such actions as may be necessary
to ensure that all such Warrant Shares may be so issued without violation by the
Company of any applicable law or governmental regulation or any requirements of
any domestic securities exchange upon which shares of Common Stock constituting
Warrant Shares may be listed (except for official notice of issuance which shall
be immediately delivered by the Company upon each such issuance); provided,
however, that the Company shall not be required to issue any Warrant Shares
unless and until it receives the opinion of counsel referred to in Section
1D(i)(d). The Company will use its best efforts to cause the Warrant Shares,
immediately upon such exercise, to be listed on any domestic securities exchange
upon which shares of Common Stock constituting Warrant Shares are listed at the
time of such exercise.
SECTION 2. Definitions. The following terms have the meanings set
forth below:
"Common Stock" means the Company's Common Stock, $.01 par value per
share, or any securities into which such Common Stock is hereafter converted or
exchanged.
"Registered Holder" means each holder of this Warrant as reflected
in the records of the Company. The Company shall promptly update its records
with respect to Registered Holders upon receipt of notice of a transfer of
rights hereunder in accordance with Section 4 hereof.
SECTION 3. No Voting Rights; Limitations of Liability. This Warrant
shall not entitle a holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision hereof, in the absence of affirmative
action by the Registered Holder to purchase Warrant Shares, and no enumeration
herein of the rights or privileges of a Registered Holder shall give rise to any
liability of a holder for the Exercise Price of
<PAGE> 4
4
Warrant Shares acquirable by exercise hereof or as a stockholder of the Company.
SECTION 4. Warrant Transferable. Subject to the provisions of the
Stockholders Agreement dated as of August 12, 1996 among the Company, the Funds
and certain other stockholders (the "Stockholders Agreement," which places
substantial restrictions on the transfer of this Warrant), this Warrant and all
rights hereunder are transferable, in whole or in part, without charge to the
holders hereof upon surrender of this Warrant with a properly executed
Assignment (in the form of Exhibit II hereto) at the principal office of the
Company; provided, however, that the parties to an Assignment shall be
responsible for the payment of any applicable transfer or other taxes.
SECTION 5. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holders at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
shall represent such portion of such rights as is designated by the Registered
Holders at the time of such surrender. All Warrants representing portions of the
rights hereunder are referred to herein as the "Warrants."
SECTION 6. Replacement. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of a Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing this Warrant, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the
Company, or, in the case of any such mutilation upon surrender of such
certificate, the Company shall (at the expense of such Registered Holder)
execute and deliver in lieu of such certificate a new certificate of like kind
representing the same rights represented by such lost, stolen, destroyed or
mutilated certificate and dated the date of such lost, stolen, destroyed or
mutilated certificate.
SECTION 7. Notices. Except as otherwise expressly provided herein,
all notices and deliveries referred to in this Warrant shall be in writing and
shall be delivered personally or sent by registered or certified mail, return
receipt requested, postage prepaid and shall be deemed to have been given when
so delivered (or when received, if delivered by any other method) if sent (i) to
the Company, at its principal executive offices and (ii) to a Registered Holder,
at such holder's address as it appears in the records of the Company (unless
otherwise indicated by any such holder).
SECTION 8. Amendment and Waiver. Except as otherwise provided
herein, the provisions of this Warrant may be amended and the Company may take
any action herein prohibited, or omit to
<PAGE> 5
5
perform any act herein required to be performed by it, only if the Company has
obtained the prior written consent of the Registered Holders.
SECTION 9. Fractions of Shares. The Company may, but shall not be
required to, issue a fraction of a Warrant Share upon the exercise of this
Warrant in whole or in part. As to any fraction of a share which the Company
elects not to issue, the Company shall make a cash payment in respect of such
fraction in an amount equal to the public trading price of a share of Common
Stock.
SECTION 10. Descriptive Headings; Governing Law. The descriptive
headings of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. This Warrant
shall be governed by and construed in accordance with the domestic laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of New York, except that, as to matters of corporate law, the Delaware
General Corporation Law shall govern.
<PAGE> 6
6
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by its duly authorized officers under its corporate seal and to be
dated the date hereof.
Anker Coal Group, Inc.
By: /s/ John J. Faltis
Name: John J. Faltis
Title: President
Corporate Seal
Attest:
/s/ Bruce Sparks
Secretary
<PAGE> 7
7
SCHEDULE I
Fund Portion of Warrant Shares
- ---- -------------------------
American Oil & Gas Investors, 14.0%
Limited Partnership
AMGO II, Limited Partnership 9.0%
First Reserve Fund V, 11.8%
Limited Partnership
First Reserve Fund V-2, 6.0%
Limited Partnership
First Reserve Fund VI, 29.6%
Limited Partnership
First Reserve Fund VII, 29.6%
Limited Partnership
<PAGE> 8
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant, hereby agrees to subscribe for the purchase of __ Warrant
Shares covered by such Warrant and makes payment herewith in full therefor at
the price per share provided by such Warrant.
Signature _______________________
Address _________________________
<PAGE> 9
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _________ hereby sells, assigns and transfers
all of the rights of the undersigned under the attached Warrant with respect to
the number of Warrant Shares covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
Dated: Signature _______________________
_______________________
Witness _______________________
<PAGE> 1
Exhibit 12
STATEMENT SETTING FORTH COMPUTATION OF RATIO OF
EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
The The
Predecessor Company
-------------------------------
Year Ended December 31, January 1, 1996 August 1, 1996
--------------------------------- to July 31, to December 31,
1992 1993 1994 1995 1996 1996
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Determination of Earnings:
Income (loss) from continuing operations before
income taxes and cumulative effect of
accounting changes and extraordinary item 6,810 4,157 4,402 5,503 1,209 1,139
Fixed charges expensed 4,213 4,730 5,562 8,706 4,027 2,970
---------------------------------------------------------------------------------
Earnings plus fixed charges 11,023 8,887 9,964 14,209 5,236 4,109
Determination of Fixed Charges:
Interest on indebtedness 2,824 2,718 3,523 6,612 2,796 2,090
Rental expense representative of an
interest factor 1,389 2,012 2,039 2,094 1,231 880
---------------------------------------------------------------------------------
Total fixed charges 4,213 4,730 5,562 8,706 4,027 2,970
Ratio of earnings to fixed charges 2.6 1.9 1.8 1.6 1.3 1.4
</TABLE>
<TABLE>
<CAPTION>
Adjusted
Adjusted Combined
Combined for the
for the Nine Months
Year Ended Ended
December 31, September 30, September 30,
1996 1996 1996
----------------------------------------------
<C> <C> <C>
Determination of Earnings:
Income (loss) from continuing operations before
income taxes and cumulative effect of
accounting changes and extraordinary item 2,348 168 (1,979)
Fixed charges expensed 6,997 5,285 8,406
----------------------------------------------
Earnings plus fixed charges 9,345 5,453 6,427
Determination of Fixed Charges:
Interest on indebtedness 4,886 3,702 6,646
Rental expense representative of an
interest factor 2,111 1,583 1,760
Total fixed charges 6,997 5,285 8,406
Ratio of earnings to fixed charges 1.3 1.0 0.8
</TABLE>
<PAGE> 1
EXHIBIT 16
[LETTERHEAD OF ERNST & YOUNG LLP]
February 10, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
In connection with the filing of Amendment No. 2 to Anker Coal Group, Inc.'s
(the "Company") Registration Statement on Form S-4 relating to the offer to
exchange up to $125,000,000 of its 9-3/4% Series B Senior Notes due 2007 (the
"Filing"), we have read and are in agreement with the language contained in the
"Experts" section of the Filing. We have no basis to agree or disagree with
other statements of the Company contained in the Filing.
Very truly yours,
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Amendment No. 2 on
Form S-4 for $125 million of 9.75% Series B Senior Notes of our reports dated
February 28, 1997, on our audits of the consolidated financial statements of
Anker Coal Group, Inc. and Subsidiaries and Anker Group, Inc. and Subsidiaries,
respectively, and our report dated August 8, 1997 on our audit of the combined
financial statements of Oak Mountain Energy Corporation and its Affiliates. We
also consent to the references to our firm under the caption "Experts", "Summary
Historical and Pro Forma Consolidated Financial Data" and "Selected Consolidated
Historical Financial Data."
COOPERS & LYBRAND LLP
Pittsburgh, Pennsylvania
February 9, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary
Historical and Pro Forma Consolidated Financial Data," "Selected Consolidated
Historical Financial Data" and "Experts," and to the use of our reports dated
March 18, 1996, with respect to the financial statements of Anker Group, Inc.
and subsidiaries included in the Registration Statement (Form S-4) and related
Prospectus for the registration of $125,000,000 of Anker Coal Group, Inc.'s,
Series B Senior Notes due 2007.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January , 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001022356
<NAME> ANKER COAL GROUP INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 5-MOS 7-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 AUG-01-1996 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 DEC-31-1996 JUL-31-1996 SEP-30-1997
<CASH> 556 0 0 228
<SECURITIES> 0 0 0 0
<RECEIVABLES> 28,526 0 0 32,523
<ALLOWANCES> 0 0 0 0
<INVENTORY> 6,085 0 0 15,213
<CURRENT-ASSETS> 39,149 0 0 54,057
<PP&E> 148,631 0 0 191,084
<DEPRECIATION> 5,685 0 0 14,879
<TOTAL-ASSETS> 259,683 0 0 312,383
<CURRENT-LIABILITIES> 31,739 0 0 44,630
<BONDS> 83,830 0 0 130,736
20,775 0 0 22,182
23,000 0 0 23,000
<COMMON> 0 0 0 0
<OTHER-SE> 57,779 0 0 51,098
<TOTAL-LIABILITY-AND-EQUITY> 259,683 0 0 312,383
<SALES> 0 123,246 166,909 240,818
<TOTAL-REVENUES> 0 123,246 166,909 240,818
<CGS> 0 110,215 149,364 217,520
<TOTAL-COSTS> 0 120,390 161,042 237,215
<OTHER-EXPENSES> 0 (373) 1,862 (1,064)
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 0 2,090 2,796 6,646
<INCOME-PRETAX> 0 1,139 1,209 (1,979)
<INCOME-TAX> 0 485 (134) (554)
<INCOME-CONTINUING> 0 654 1,343 (1,425)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 (3,849)
<CHANGES> 0 0 0 0
<NET-INCOME> 0 654 1,343 (5,274)
<EPS-PRIMARY> 0 0 0 0
<EPS-DILUTED> 0 0 0 0
</TABLE>
