<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 12, 1998
REGISTRATION NO. 333-39643
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
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>
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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.
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<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
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 12, 1998
PRELIMINARY PROSPECTUS
, 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
, 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 September 30, 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 $1.7 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
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. In addition, as of September 30, 1997, the Company's
subsidiaries had trade liabilities aggregating $28.6 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. 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 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. 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 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. 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.
2
<PAGE> 6
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."
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. Specifically, the majority of the
increased production in 1997 has resulted and will result from the operations
acquired in Shelby County, Alabama (0.2 million tons) and Grant County, West
Virginia (0.4 million tons) and from the operations recently developed in
Harrision 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 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. 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 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. As of January 1, 1998,
the seat on the Board of Directors held by Mr. Faltis was vacant. 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
3
<PAGE> 7
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.
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.
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.
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 , 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."
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)
-------------------------------------------------------------
PRO FORMA(1)
THE PREDECESSOR ADJUSTED THE COMPANY ----------------------------
------------------- 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 21,853 15,515 19,695 26,119 20,263
Operating income........ 6,304 9,007 8,723 5,799 3,603 6,908 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 $135.9 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 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
which would effectively rank prior to the Senior Notes and the Subsidiary
Guarantees. See "Description of Certain Indebtedness."
As of September 30, 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 $1.7 million. In addition, as of September 30, 1997, the Company's
subsidiaries had trade liabilities aggregating $28.6 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. 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 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
16
<PAGE> 20
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 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
17
<PAGE> 21
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. As of January 1, 1998,
the seat on the Board of Directors held by Mr. Faltis was vacant. 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 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
18
<PAGE> 22
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 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 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 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. 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
-------- -------- ------- ------- -------- ------- --------
Operating income........... 2,856 5,867 (1,219) (864) 6,640 268 6,908
Non-cash stock compensation
and non-recurring related
expenses................... -- 2,969 -- 2,969 2,969
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
-------- -------- -------- -------- -------- -------
Operating income (expense)............. 8,266 6,043 6,304 9,007 5,867 2,856
Interest expense........................ 2,824 2,718 3,523 6,612 2,796 2,090
Non-cash stock compensation and non-
recurring related expenses............. -- -- -- -- 2,969 --
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
-------- -------- --------
Operating income (expense)............. 8,723 5,799 3,603
Interest expense........................ 4,886 3,702 6,646
Non-cash stock compensation and non-
recurring related expenses............. 2,969 2,969 --
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 -- --
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. For the nine months ended September 30, 1997, earnings were
insufficient to cover fixed charges in the amount of $2.0 million.
(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.
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
-------- -------- -------- -------- -------
Operating income....................... 6,304 9,007 8,723 5,799 3,603
Interest expense....................... 3,523 6,612 4,886 3,702 6,646
Non-cash stock compensation and non-
recurring related expenses........... -- -- 2,969 2,969 --
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.
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<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.
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.
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.
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").
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.
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.
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
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<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 $135.9 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
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<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 September
30, 1997 it had approximately $4.6 million of outstanding indebtedness and
additional undrawn availability of approximately $20.4 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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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 Shelby County, Alabama (0.2 million tons) and 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
with an average of 10% ash, 0.7% sulfur, 32 vol and 12,500 Btu per pound to
serve the Southern Company's Plant Gaston, which is situated in close proximity
to the mine, and other regional Southern Company power plants as well as local
industrial customers. The Company plans to increase the current production of
800,000 tons per year to 2.2 million tons per year to serve this market.
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. Consequently, the Company is currently
shipping 960,000 tons annually into Harrison Power under its 1996/1997 contract
and is negotiating a new contract with APS for the future, the terms of which
have not yet been determined. 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 during 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, premium quality met coal
constitutes approximately 132 million tons, or 19%, of the Company's reserves.
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
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<PAGE> 47
Company's coal reserves as of June 1, 1997 and is 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
<S> <C> <C> <C> <C>
Barbour, West Virginia.......................... UG 39.73 5.58 45.31
Braxton, West Virginia.......................... S/UG 5.87 19.18 25.05
Grant, West Virginia............................ S/UG 21.28 19.07 40.35
Harrison, West Virginia......................... UG 15.64 14.70 30.34
Monongalia, West Virginia....................... S 6.89 2.11 9.00
Preston, West Virginia.......................... UG 34.10 11.98 46.08
Raleigh, West Virginia.......................... UG 21.86 17.01 38.87
Taylor, West Virginia........................... UG 42.83 167.99 210.82
Upshur, West Virginia........................... UG 30.78 39.60 70.38
Webster, West Virginia.......................... S/UG 10.85 6.20 17.05
Allegany, Maryland.............................. S 4.45 1.20 5.65
Garrett, Maryland............................... S/UG 19.30 6.52 25.82
Muhlenberg, Kentucky............................ S/UG 3.08 5.02 8.10
Tazewell, Virginia.............................. S/UG 23.56 16.18 39.74
Shelby, Alabama................................. UG 40.55 11.30 51.85
Greene, Pennsylvania............................ S 0.08 -- 0.08
------ ------ ------
Totals................................ 320.85 343.64 664.49
====== ====== ======
</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.
(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 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.
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.
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<PAGE> 48
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. 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.
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. 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.
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<PAGE> 49
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.
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 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.
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.
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<PAGE> 50
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.
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 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.
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.
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
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<PAGE> 51
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.
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 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.
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<PAGE> 52
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.
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
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(2)
Salt City-Hydraco Plant............... 5 2007 13 385(2)
MEA-Beechurst Plant................... 6 2007 15 120(2)
AES-Shady Point Plant................. 7 2007 18 600(2)
Logan Generating-Keystone Plant....... 3 2014 21 400(2)
AES-Beaver Valley Plant............... 12 2016 20 576(2)
AES-Warrior Run Plant(3).............. 0 2019 20 650(2)
</TABLE>
- ------------------------------
(1) Reflects stated term of contract and does not assume the exercise by the
Company of unilateral options to extend.
(2) 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.
(3) Contract commences in 1999 and the tonnage shown is expected from such date.
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<PAGE> 53
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.
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
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<PAGE> 54
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
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
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<PAGE> 55
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 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 is currently pending in Congress on black lung reform. A bill
is currently pending in Congress that 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
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<PAGE> 56
$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 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
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<PAGE> 57
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 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. 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
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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.
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
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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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MANAGEMENT
Set forth below are the names, ages (as of November 1, 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
</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.
As of January 1, 1998, the seat on the Board of Directors held by Mr. Faltis was
vacant. 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 industrial gas and industrial gas supplies), BetzDearborn, Inc. (a
manufacturer of performance chemicals),
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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).
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 year ended December 31, 1996 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, 1996
(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........ 1996 $ 311,371 $ 138,257 $4,116 -- -- -- --
President and Chief
Executive Officer(1)
P. Bruce Sparks....... 1996 $ 210,005 $ 157,757 $1,600 -- -- -- $2,885,000(2)
Executive Vice
President, Chief
Financial Officer and
Secretary
Terrence J. Jackson... 1996 $ 61,250 $ 22,500 $ 268 -- -- -- --
Senior Vice
President(3)
Kim A. Burke.......... 1996 $ 136,615 $ 35,000 $4,841 -- -- -- --
Senior Vice President
Richard A. Bolen...... 1996 $ 152,000 $ 20,000 $3,036 -- -- -- --
Senior Vice President
</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.
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 November 1, 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 November 1, 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
Michael M. Matesic............................................... -- --
B. Judd Hartman.................................................. -- --
James A. Walls................................................... -- --
Terence J. Jackson............................................... -- --
Kim A Burke...................................................... -- --
Richard A. Bolen................................................. -- --
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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<PAGE> 66
(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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<PAGE> 67
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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<PAGE> 68
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 , 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
, 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 are estimated in the aggregate to be
approximately $ , which includes 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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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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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) any 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 Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is 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
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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
foregoing conditions 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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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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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.
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 certain provisions of the Exchange Act. 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
------------ -----------
Operating income............................................ 2,856 5,867
Stock compensation and related expenses............................... -- 2,969
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
-------- ------- --------
Operating income............................ 3,603 (68) 5,867
Interest.............................................. 6,646 906 2,796
Stock compensation and related expenses............... -- -- 2,969
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.
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 , 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.
, 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 January 12, 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 12th day of January,
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
* 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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 January 12, 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 12th day of January,
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 Certificate of Incorporation of 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 Articles of Incorporation of Anker West Virginia Mining 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 Articles of Incorporation of 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.
* 3.23 Articles of Incorporation of Melrose Coal Company, Inc.
* 3.24 Bylaws of Melrose Coal Company, Inc.
* 3.25 Certificate of Incorporation of 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 Articles of Incorporation of Patriot Mining Company, Inc.
* 3.36 Bylaws of Patriot Mining Company, Inc.
* 3.37 Articles of Incorporation of Vindex Energy Corporation.
</TABLE>
<PAGE> 185
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- ----------------------------------------------------------------------------------
<C> <S>
* 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.
* 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. and 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 1997.
* 10.10.1 Operating Agreement of Oak Mountain Energy, L.L.C.
* 10.10.2 Amendment No. 1 to Operating Agreement of Oak Mountain Energy, L.L.C.
* 10.11.1 Operating Agreement of Shelby Energy, L.L.C.
* 10.11.2 Amendment No. 1 to Operating Agreement of Shelby Energy, L.L.C.
* 12 Computation of ratio of earnings to fixed charges.
**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).
</TABLE>
<PAGE> 186
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- ----------------------------------------------------------------------------------
<C> <S>
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 1
$125,000,000
ANKER COAL GROUP, INC.
9 3/4% Series A Senior Notes due 2007
PURCHASE AGREEMENT
September 22, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CHASE SECURITIES INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
227 Park Avenue
New York, New York 10172
Ladies & Gentlemen:
Anker Coal Group, Inc., a Delaware corporation (the "Company"), and each
of the entities listed on Schedule II hereto (each a "Guarantor" and
collectively, the "Guarantors") agrees with you as follows:
1. Issuance of Securities. Subject to the terms and conditions set forth
herein, the Company proposes to issue and sell to Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") and Chase Securities Inc. (each, an "Initial
Purchaser" and collectively, the "Initial Purchasers") an aggregate of
$125,000,000 principal amount of 9 3/4% Series A Senior Notes due 2007 (the
"Series A Notes"). The Series A Notes are to be issued pursuant to an indenture
(the "Note Indenture") to be dated as of September 25, 1997 among the Company,
the Guarantors and Marine Midland Bank, as trustee (the "Trustee"). The Series A
Notes and the Series B Notes (as defined below) (the Series A Notes and the
Series B Notes being collectively referred to as the "Securities") will be
guaranteed (the "Guarantees") on a senior unsecured basis by each of the
Guarantors. As used herein, the term "Securities" shall include the Guarantees
thereof whenever the context permits.
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Note Indenture.
<PAGE> 2
The Series A Notes will be offered and sold to you pursuant to an
exemption from the registration requirements under the Securities Act of 1933,
as amended (the "Act"). The Company and the Guarantors have prepared a
preliminary offering memorandum, dated September 5, 1997 (the "Preliminary
Offering Memorandum"), and a final offering memorandum, dated September 22, 1997
(the "Offering Memorandum"), relating to the Company and the Guarantors and the
Series A Notes.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Series A Notes
(and all securities issued in exchange therefor or in substitution thereof)
shall bear the following legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN
THE THIRD SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST
HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS
ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO
A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE OR ANY INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTIONS" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
You have advised the Company that you will make offers (the "Exempt
Resales") of the Series A Notes purchased hereunder on the terms set forth in
the Offering Memorandum, as amended or supplemented, solely to persons whom you
reasonably believe to be "qualified institutional
2
<PAGE> 3
buyers," as defined in Rule 144A under the Act ("QIBs"), and to non-U.S. persons
outside the United States in reliance upon Regulation S under the Act (each, a
"Regulation S Purchaser"). The QIBs and the Regulation S Purchasers are referred
to herein as the "Eligible Initial Purchasers". You will offer the Series A
Notes to such QIBs and Regulation S Purchasers initially at a price equal to
100% of the principal amount thereof. Such price may be changed at any time
without notice.
Holders (including subsequent transferees) of the Series A Notes will have
the registration rights set forth in the registration rights agreement relating
thereto (the "Registration Rights Agreement"), to be dated the Closing Date (as
defined in Section 3 below), in substantially the form of Exhibit A hereto, for
so long as such Series A Notes constitute "Transfer Restricted Securities" (as
defined in the Registration Rights Agreement). Pursuant to the Registration
Rights Agreement, the Company and the Guarantors will agree to file with the
Securities and Exchange Commission (the "Commission"), under the circumstances
set forth therein, (i) a registration statement under the Act (the "Exchange
Offer Registration Statement") relating to the 9 3/4% Series B Senior Notes due
2007 (the "Series B Notes") to be offered in exchange for the Series A Notes
(the "Exchange Offer"), and (ii) under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement") relating to the resale by certain holders of the Series
A Notes, and to use their reasonable best efforts to cause such Registration
Statement to be declared effective. This Purchase Agreement (the "Agreement"),
the Securities, the Guarantees, the Note Indenture and the Registration Rights
Agreement are hereinafter sometimes referred to collectively as the "Operative
Documents".
2. Agreements to Sell and Purchase. On the basis of the representations,
warranties and agreements contained in this Agreement, and subject to its terms
and conditions, the Company agrees to issue and sell to you, and each of the
Initial Purchasers, severally but not jointly, agrees to purchase from the
Company, Series A Notes in the respective principal amount set forth opposite
its name on Schedule I hereto. The purchase price for the Series A Notes shall
be 97% of their principal amount. The Company shall not be obligated to deliver
any of the Series A Notes except upon payment for all of the Series A Notes to
be purchased as provided below.
3. Delivery and Payment. Delivery to the Initial Purchasers of and payment
for the Series A Notes shall be made at 9:00 a.m., New York City time, on
September 25, 1997 (the "Closing Date") at the offices of Andrews & Kurth
L.L.P., 425 Lexington Avenue, New York, New York 10017, or such other time or
place as you and the Company shall designate.
One or more of the Series A Notes in definitive form, registered in the
name of Cede & Co., as nominee of the Depository Trust Company ("DTC"), having
an aggregate principal amount corresponding to the aggregate principal amount of
the Series A Notes sold pursuant to Exempt Resales to QIBs (collectively, the
"Global Note") and one or more Series A Notes in definitive form registered in
the names of the nominees of the Euroclear System and Cedel, S.A., having an
aggregate principal amount corresponding to the aggregate principal amount of
the Series A Notes sold pursuant to Exempt Resales to Regulation S Purchasers
(collectively, the "Regulation S Note"), shall be delivered by or on behalf of
the Company to you (or as you direct), against payment by you
3
<PAGE> 4
of the purchase price therefor by wire transfer of same day funds to the Company
or as the Company may direct. The Global Note and Regulation S Note shall be
made available to you for inspection not later than 9:30 a.m. on the business
day immediately preceding the Closing Date.
4. Agreements of the Company and the Guarantors. The Company and each of
the Guarantors, jointly and severally, agrees with each of you as follows:
(a) To advise you promptly and, if requested by the Initial
Purchasers, confirm such advice in writing, (i) of the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of any of the Series A Notes for offering or sale
in any jurisdiction, or the initiation of any proceeding for such purpose by any
state securities commission or other regulatory authority, and (ii) of the
happening of any event that makes any statement of a material fact made in the
Offering Memorandum untrue or that requires the making of any additions to or
changes in the Offering Memorandum (as amended or supplemented from time to
time) in order to make the statements therein, in the light of the circumstances
under which they are made, not misleading. The Company and the Guarantors shall
use their reasonable best efforts to prevent the issuance of any stop order or
order suspending the qualification or exemption of any of the Series A Notes
under any state securities or Blue Sky laws, and if at any time any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption of any of the Series A Notes under any
state securities or Blue Sky laws, the Company and the Guarantors shall use
their reasonable best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time.
(b) To furnish you, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any amendments
or supplements thereto, as you may reasonably request. The Company and the
Guarantors consent to the use of the Preliminary Offering Memorandum and the
Offering Memorandum, and any amendments and supplements thereto, by you in
connection with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering Memorandum
or the Offering Memorandum prior to the Closing Date unless you shall previously
have been advised thereof, been furnished a copy thereof and shall not have
objected thereto after being given a reasonable period to review.
(d) If, after the date hereof and prior to consummation of any
Exempt Resales, any event shall occur as a result of which, in the judgment of
the Company or in the reasonable opinion of your counsel, the Offering
Memorandum as then amended or supplemented would include an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or to amend or supplement the Offering Memorandum to
comply with applicable law, forthwith to prepare an appropriate amendment or
supplement to the Offering Memorandum to correct such untrue statement or
omission or so that the Offering Memorandum, as so amended or supplemented, will
comply with applicable law.
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<PAGE> 5
(e) To cooperate with you and your counsel in connection with the
qualification of the Series A Notes under the securities or Blue Sky laws of
such jurisdictions as you may reasonably request and to continue such
qualification in effect so long as required for the Exempt Resales; provided,
however, that neither the Company nor any of the Guarantors shall be required in
connection therewith to register or qualify as a foreign corporation where it is
not now so qualified or to take any action that would subject it to the service
of process in suits or taxation in any jurisdiction where it is not now so
subject.
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement is terminated, to pay all costs, expenses,
fees and taxes incident to and in connection with: (i) the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum and the
Offering Memorandum (including, without limitation, financial statements and
exhibits) and all amendments and supplements thereto, (ii) the preparation
(including, without limitation, word processing and duplication costs) and
delivery of this Agreement and the other Operative Documents and all preliminary
and final Blue Sky memoranda, (iii) the issuance and delivery by the Company and
the Guarantors of the Securities, (iv) the qualification of the Securities for
offer and sale under the securities or Blue Sky laws of the several states
(including, without limitation, the reasonable fees and disbursements of your
counsel relating to such registration or qualification), (v) furnishing such
copies of the Preliminary Offering Memorandum and the Offering Memorandum, and
all amendments and supplements thereto, as may be reasonably requested for use
in connection with Exempt Resales, (vi) the preparation of certificates for the
Securities (including, without limitation, printing and engraving thereof),
(vii) the fees, disbursements and expenses of the Company's and the Guarantors'
counsel and accountants, (viii) all expenses and listing fees in connection with
the application for quotation of the Series A Notes in the National Association
of Securities Dealers, Inc. ("NASD") Automated Quotation System - PORTAL
("PORTAL"), (ix) all fees and expenses (including fees and expenses of counsel)
of the Company and the Guarantors in connection with approval of the Securities
by DTC for "book-entry" transfer, (x) the rating of the Securities by investment
rating agencies, (xi) the fees and expenses of the Trustee and the Trustee's
counsel in connection with the Note Indenture and the Securities and (xii) the
performance by the Company and the Guarantors of their other obligations under
this Agreement and the other Operative Documents. Except as otherwise provided
in this Agreement, the Initial Purchasers shall pay their own costs and
expenses, including the costs and expenses of their counsel and the expenses of
advertising any offering of the Series A Notes made by the Initial Purchasers.
(g) To use the proceeds from the sale of the Series A Notes in the
manner described in the Offering Memorandum under the caption "Use of Proceeds."
(h) Not to voluntarily claim, and to resist actively any attempts to
claim, the benefit of any usury laws against the holders of any Securities.
(i) To do and perform all things required to be done and performed
under this Agreement by them prior to or after the Closing Date and to use their
best efforts to satisfy all conditions precedent on their part to the delivery
of the Series A Notes.
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<PAGE> 6
(j) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Series A Notes in a manner that would
require the registration under the Act of the sale to you or Eligible Initial
Purchasers of the Series A Notes.
(k) For so long as it is required to do so under the Indenture, and
during any period in which the Company is not subject to Section 13 or 15(d) of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), to
make available to any Holder of Series A Notes in connection with any sale
thereof and any prospective purchaser of such Series A Notes from such Holder,
upon their request, the information required by Rule 144A(d)(4) under the Act.
(l) So long as permitted under applicable law, to cause the Exchange
Offer to be made in the appropriate form to permit registration of the Series B
Notes to be offered in exchange for the Series A Notes and to comply with all
applicable federal and state securities laws in connection with the Exchange
Offer.
(m) To comply with the Registration Rights Agreement, and all
agreements set forth in the representation letter of the Company to DTC relating
to the approval of the Securities by DTC for "book-entry" transfer.
(n) To use their best efforts to effect the inclusion of the Series
A Notes in PORTAL.
(o) During a period of three years following the date of this
Agreement, to deliver to each of you promptly upon their becoming available,
copies of all current, regular and periodic reports filed by the Company and the
Guarantors with the Commission or any securities exchange or with any
governmental authority succeeding to any of the Commission's functions.
5. Representations and Warranties.
(a) The Company and each of the Guarantors, jointly and severally,
represent and warrant to each of you that:
(i) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, did not, and at the
Closing Date, the Offering Memorandum and any amendment or supplement
thereto will not, contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties contained in
this paragraph (i) shall not apply to statements in or omissions from the
Preliminary Offering Memorandum and the Offering Memorandum (or any
supplement or amendment thereto) made in reliance upon in conformity with
information relating to you furnished to the Company and the Guarantors in
writing by you expressly for use therein. No stop order preventing the use
of
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<PAGE> 7
the Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued. Each of the
Preliminary Offering Memorandum and the Offering Memorandum, as of its
date, and each amendment or supplement thereto, as of its date, contains
all the information specified in, and meeting the requirements of, Rule
144A(d)(4) under the Act.
(ii) When the Series A Notes are issued and delivered pursuant
to this Agreement, none of the Series A Notes will be of the same class
(within the meaning of Rule 144A under the Act) as securities of the
Company or the Guarantors that are listed on a national securities
exchange registered under Section 6 of the Exchange Act or that are quoted
in a United States automated interdealer quotation system.
(iii) The Company and each the Guarantors has been duly
incorporated or formed, is validly existing and in good standing under the
laws of its respective jurisdiction of incorporation, has all requisite
corporate power and authority to carry on its business as it is currently
being conducted and as described in the Offering Memorandum and to own,
lease and operate its properties, and is duly qualified and in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure
to so qualify or have such power or authority would not, individually or
in the aggregate, reasonably be expected to have a material adverse effect
on the financial condition, results of operations, business, properties or
prospects of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Effect").
(iv) The entities listed on Schedule II hereto are all the
subsidiaries, direct or indirect, of the Company which are Guarantors. The
Company owns, directly or indirectly through other subsidiaries, 100% of
the outstanding capital stock or other securities evidencing equity
ownership of such subsidiaries, free and clear of any security interest,
claim, lien, limitation on voting rights or encumbrance (except pursuant
to the Credit Agreement referred to in Section 7(n) hereof); and all of
such securities have been duly authorized, validly issued, are fully paid
and nonassessable and were not issued in violation of any preemptive or
similar rights. There are no outstanding subscriptions, rights, warrants,
calls, commitments of sale or options to acquire, or instruments
convertible into or exchangeable for, any such shares of capital stock or
other equity interest of such subsidiaries.
(v) The Company and each of the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement, the Note Indenture, the Registration
Rights Agreement and the other Operative Documents to which it is a party
and to consummate the transactions contemplated hereby and thereby,
including, without limitation, with respect to the Company, the corporate
power and authority to issue, sell and deliver the Securities as provided
herein and therein.
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<PAGE> 8
(vi) This Agreement has been duly authorized, executed and
delivered by the Company and each of the Guarantors and, assuming due
authorization, execution and delivery by the Initial Purchasers is a valid
and binding agreement of each such person, enforceable against each such
person in accordance with its terms, except to the extent that (A) the
enforcement thereof may be subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to
or affecting creditors' rights generally and an implied covenant of good
faith and fair dealing, and general equitable principles (whether
considered in a proceeding in equity or at law) and (B) any rights to
indemnity or contribution hereunder may be limited by federal or state
securities laws or public policy considerations.
(vii) The Note Indenture has been duly authorized by the
Company and each of the Guarantors and, assuming the due authorization,
execution and delivery of the Note Indenture by the Trustee, the Note
Indenture when duly executed and delivered by each such person, will be
the valid and binding obligation of each such person, enforceable against
each such person in accordance with its terms, except to the extent that
(A) the enforcement thereof may be subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally and an implied
covenant of good faith and fair dealing, and general equitable principles
(whether considered in a proceeding in equity or at law) and (B) any
rights to indemnity or contribution thereunder may be limited by federal
and state securities laws or public policy considerations. The Note
Indenture, when executed and delivered, will conform in all material
respects to the description thereof in the Offering Memorandum.
(viii) The Series A Notes have been duly authorized for
issuance and sale to you by the Company pursuant to this Agreement and,
assuming due authorization, execution and delivery of the Note Indenture
by the Trustee and due authentication of the Series A Notes by the
Trustee, the Series A Notes, when issued and authenticated in accordance
with the terms of the Note Indenture and delivered against payment
therefor in accordance with the terms hereof, will be the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the Note
Indenture, except to the extent that the enforcement thereof may be
subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws relating to or affecting creditors'
rights generally and an implied covenant of good faith and fair dealing,
and general equitable principles (whether considered in a proceeding in
equity or at law). The Series A Notes, when issued, authenticated and
delivered, will conform in all material respects to the description
thereof in the Offering Memorandum.
(ix) The Series B Notes have been duly authorized for issuance
by the Company, assuming due authorization, execution and delivery of the
Note Indenture by the Trustee and due authentication of the Series B Notes
by the Trustee, the Series B Notes, and when issued and authenticated in
accordance with the terms of the Note Indenture, the Registration Rights
Agreement and the Exchange Offer, will be the legally valid and binding
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<PAGE> 9
obligations of the Company, enforceable against the Company in accordance
with their terms and entitled to the benefits of the Note Indenture,
except to the extent that the enforcement thereof may be subject to
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
or other similar laws relating to or affecting creditors' rights generally
and an implied covenant of good faith and fair dealing, and general
equitable principles (whether considered in a proceeding in equity or at
law).
(x) The Registration Rights Agreement has been duly authorized
by the Company and each of the Guarantors and, assuming due authorization,
execution and delivery of the Registration Rights Agreement by the Initial
Purchasers, the Registration Rights Agreement, when duly executed and
delivered by the Company and the Guarantors will be the legally valid and
binding obligation of each such person, enforceable against each such
person in accordance with its terms , except to the extent that (A) the
enforcement thereof may be subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to
or affecting creditors' rights generally and an implied covenant of good
faith and fair dealing, and general equitable principles (whether
considered in a proceeding in equity or at law) and (B) any rights to
indemnity or contribution thereunder may be limited by federal or state
securities laws or public policy considerations. The Registration Rights
Agreement, when executed and delivered, will conform in all material
respects to the description thereof in the Offering Memorandum.
(xi) Neither the Company nor any of the Guarantors is (A) in
violation of its respective charter or bylaws or (B) in default in the
performance of (and there exists no condition that, with notice, the
passage of time (other than the expiration on October 15, 1997 of the
waiver period set forth in the waiver letter, dated August 19, 1997, with
the lenders under the Company's existing credit facility, relating to a
default thereunder which will be extinguished and be of no further force
or effect whatsoever upon the repayment of all amounts outstanding
thereunder out of the proceeds of the offering of the Series A Notes) or
otherwise, would constitute a default under) any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to
which it is a party or by which it is bound or to which any of its
properties is subject, or (C) in violation of any law, statute, rule,
regulation, judgment or court decree applicable to the Company, any of its
subsidiaries or their assets or properties, except, in the case of (B) or
(C), for such violations or defaults that would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(xii) The execution, delivery and performance by the Company
and each of the Guarantors of this Agreement and the other Operative
Documents to which it is a party, the issuance and sale of the Securities,
will not violate or constitute a breach of any of the terms or provisions
of, or a default under (or an event that with notice or the lapse of time,
or both, would constitute a default, or require consent under, or result
in the imposition of a lien or encumbrance on any properties of the
Company or any of its subsidiaries, or an acceleration of indebtedness
pursuant to, (A) the charter or bylaws of the Company or any
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<PAGE> 10
of its subsidiaries, (B) any bond, debenture, note, indenture, mortgage,
deed of trust or other agreement or instrument to which the Company or any
of its subsidiaries is a party or by which any of them or their property
is or may be bound, (C) any statute, rule or regulation applicable to the
Company, any of its subsidiaries or any of their assets or properties, or
(D) any judgment, order or decree of any court or governmental agency or
authority having jurisdiction over the Company, any of its subsidiaries or
their assets or properties. No consent, approval, authorization or order
of, or filing, registration, qualification, license or permit of or with,
any court or governmental agency, body or administrative agency is
required for the execution, delivery and performance of this Agreement and
the other Operative Documents by the Company and the Guarantors and the
consummation of the transactions contemplated hereby and thereby, except
such as have been obtained and made (or, in the case of the Registration
Rights Agreement, will be obtained and made) under the Act, the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act") and state
securities or Blue Sky laws and regulations or such as may be required by
the NASD.
(xiii) There is (A) no action, suit or proceeding before or by
any court, arbitrator or governmental agency, body or official, domestic
or foreign, now pending or, to the Company's knowledge, threatened or
contemplated to which the Company or any of its subsidiaries is or may be
a party or to which the business or property of the Company or any of its
subsidiaries is or may be subject, (B) except as disclosed in the Offering
Memorandum (with respect to clause (I) below), no statute, rule,
regulation or order that has been enacted, adopted or issued by any
governmental agency and (C) no injunction, restraining order or order of
any nature by a federal or state court or foreign court of competent
jurisdiction to which the Company or any of its subsidiaries is or may be
subject issued that, in the case of clauses (A), (B) and (C) above, (I)
would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect or (II) would reasonably be expected to interfere
with or adversely affect the issuance of the Securities or question the
validity of this Agreement, the Note Indenture, the Registration Rights
Agreement or any other Operative Document.
(xiv) There is (A) no unfair labor practice complaint pending
against the Company or any of its subsidiaries nor, to the best knowledge
of the Company and its subsidiaries, threatened against any of them,
before the National Labor Relations Board, any state or local labor
relations board or any foreign labor relations board which would,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, (B) no strike, labor dispute, slowdown or
stoppage pending against the Company or any of its subsidiaries nor, to
the best knowledge of the Company and its subsidiaries, threatened against
the Company or any of its subsidiaries which would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect and
(C) to the best knowledge of the Company and its subsidiaries, no union
representation question existing with respect to the employees of the
Company and its subsidiaries and, to the best knowledge of the Company and
its subsidiaries, no union organizing activities are taking place. Neither
the Company nor any of its subsidiaries has violated any federal, state or
local law relating to
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<PAGE> 11
discrimination in hiring, promotion or pay of employees, nor any
applicable wage or hour laws, nor any provision of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or the rules and
regulations thereunder, which violation would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(xv) In the ordinary course of its business, each of the
Company and its subsidiaries conducts periodic reviews of the effect of
Environmental Laws (as defined herein) and the disposal of hazardous or
toxic substances, wastes, pollutants and contaminants on the business,
operations and properties of the Company and its subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, all capital and operating
expenditures required for clean-up, closure of properties and compliance
with Environmental Laws, all permits, licenses and approvals, all related
constraints on operating activities and all potential liabilities to third
parties). On the basis of such reviews, the Company has reasonably
concluded that such associated costs and liabilities, individually or in
the aggregate, would not have a Material Adverse Effect. Neither the
Company nor any of its subsidiaries (A) has violated any environmental,
safety or similar law or regulation applicable to it or its business or
property relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants, including, without limitation, the Clean Air Act, as
amended, the Clean Water Act, as amended, the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, the Federal Water
Pollution Control Act, as amended, the Resource Conservation and Recovery
Act, as amended, the Federal Water Pollution Control Act, as amended, the
Resource Conservation and Recovery Act, as amended, the Toxic Substances
Control Act, as amended, the Surface Mining Control and Reclamation Act,
as amended (the "Surface Mining Act"), the Occupational Safety and Health
Act, as amended, and comparable state and local laws and other safety,
health and environmental conservation or protection laws ("Environmental
Laws"), the effect of which would be to cause, individually or in the
aggregate, a Material Adverse Effect, or (B) lacks any notices, permits,
licenses of other approvals required of them under applicable
Environmental Laws or is violating any terms and conditions of any such
notice, permit, license or approval, the effect of which would be to
cause, individually or in the aggregate, a Material Adverse Effect.
Without limitation of the foregoing, there is as of the date hereof no
litigation or action pending or, to the best knowledge of the Company,
threatened against the Company or any of the Guarantors relating to any
violation of any Environmental Laws with respect to the assets or business
of the Company or any of the Guarantors which is required to be disclosed
in the Offering Memorandum, or which would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(xvi) Each of the Company and its subsidiaries is in
compliance with all of the current permits ("Surface Mining Permits") held
by it issued pursuant to the Surface Mining Act, or pursuant to an
equivalent state regulatory program granted primacy under the provisions
of 30 U.S.C. Section 1253 (collectively, "Surface Mining Laws"), including
the mining plans as respects reclamation, coal processing and related
activities as submitted to
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the Office of Surface Mining or any state equivalent agency having
jurisdiction over a state program granted primacy under the provisions of
30 U.S.C. Section 1253 ("Surface Mining Enforcement Agency") to obtain the
Surface Mining Permits, the failure to be in compliance with which would,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any of its subsidiaries
has been subjected to or is as of the date hereof subject to any bond
forfeiture, permit suspension or revocation proceedings instituted by any
Surface Mining Enforcement Agency and neither the Company nor any of its
subsidiaries is presently "permit-blocked" in any state or under the
federal Applicant Violator System which would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(xvii) Each of the Company and its subsidiaries has (A) good
and marketable title to all of the properties and assets described in the
Offering Memorandum as owned by it, free and clear of all liens, charges,
encumbrances and restrictions, and good title to all leasehold estates
described in the Offering Memorandum as being leased by it, except (i)
such as are described in the Offering Memorandum, (ii) for liens for taxes
not yet due and payable, (iii) for liens and encumbrances pursuant to the
Credit Facility (as defined in the Offering Memorandum) and as
contemplated by the Amended and Restated Credit Facility (as defined in
the Offering Memorandum) or (iv) as would not, individually or in the
aggregate, have a Material Adverse Effect (it being understood that liens,
charges, encumbrances and restrictions that do not materially interfere
with the use made or proposed to be made of such property would not have a
Material Adverse Effect), (B) all licenses, certificates, permits,
authorizations, approvals, franchises and other rights from, and has made
all declarations and filings with, all federal, state and local
authorities, all self-regulatory authorities and all courts and other
tribunals (each an "Authorization") necessary to engage in the business
currently conducted by it in the manner described in the Offering
Memorandum, except where failure to hold such Authorizations would have
not have a Material Adverse Effect and (C) no reason to believe that any
governmental body or agency is considering limiting, suspending or
revoking any such Authorization. The Company and its subsidiaries are in
compliance in all material respects with the terms and conditions of all
such Authorizations and with the rules and regulations of the regulatory
authorities having jurisdiction with respect thereto, except where the
failure to comply would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect. All leases to which
the Company or any of its subsidiaries is a party are valid and binding
and no default by the Company or any of its subsidiaries has occurred and
is continuing thereunder, except where such default or defaults, would
not, individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect. Except to the extent described in the Offering
Memorandum, the leases, options to lease or other arrangements held by the
Company and the Guarantors reflect in all material respects the rights of
the Company and the Guarantors to explore the unexplored and undeveloped
acreage described in the Offering Memorandum. The Company and the
Guarantors have exercised reasonable diligence with respect to acquiring
or otherwise procuring such leases, options to lease and other
arrangements,
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although the investigation of record title made by the Company and the
Guarantors generally involved no more than a preliminary review of local
records, as is customary in the industry.
(xviii) Each of the Company and its subsidiaries owns or
possesses all patents, patent right, licenses, inventions, copyright,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, the "Intellectual
Property") presently employed by it in connection with the businesses now
operated by them, except where the failure to own or possess or have the
ability to acquire any of the Intellectual Property would not reasonably
be expected to have a Material Adverse Effect, and neither the Company nor
any of its subsidiaries has received any notice of infringement of or
conflict with asserted rights of others with respect to any of the
foregoing, which if such assertion were sustained, would reasonably be
expected to have a Material Adverse Effect.
(xix) All tax returns required to be filed by the Company or
any of its subsidiaries, in all jurisdictions, have been so filed. All
taxes, including withholding taxes, penalties and interest, assessments,
fees and other charges due or claimed to be due from such entities or that
are due and payable have been paid, other than those being contested in
good faith and for which adequate reserves have been provided, those
currently payable without penalty or interest or those the failure to pay
would not, individually or in the aggregate, be reasonably expected to
have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries knows of any material proposed additional tax assessments
against it or any of its subsidiaries.
(xx) Neither the Company nor any of the Guarantors (A) is, or
after giving effect to the offering and sale of the Series A Notes and the
application of the proceeds thereof as described in the Offering
Memorandum will be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
or (B) is a "holding company" or a "subsidiary company" or an "affiliate"
or a holding company within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
(xxi) Other than pursuant to the Registration Rights Agreement
and the Stockholders Agreement (as defined in the Offering Memorandum),
there are no holders of securities of the Company or any of the Guarantors
who, by reason of the execution by the Company and each of the Guarantors
of this Agreement or any other Operative Document to which it is a party
or the consummation of the transactions contemplated hereby and thereby,
have the right to request or demand that the Company or any Guarantor
register under the Act securities held by them.
(xxii) The authorized, issued and outstanding capital stock of
the Company has been duly and validly authorized and issued, is fully paid
and nonassessable and was not issued in violation of or subject to any
preemptive or similar rights. The Company had at
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June 30, 1997, an authorized and outstanding capitalization as set forth
in the Offering Memorandum.
(xxiii) Each certificate signed by any officer of the Company
or any of the Guarantors and delivered to the Initial Purchasers or
counsel for the Initial Purchasers shall be deemed to be a representation
and warranty by the Company or Guarantors to each Initial Purchaser as to
the matter covered thereby.
(xxiv) The Company and each of its subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that: (A) transactions are executed in accordance with
management's general or specific authorizations; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; and (C) access to assets is permitted only in
accordance with management's general or specific authorization.
(xxv) In accordance with customary industry practices, the
Company and each of its subsidiaries maintains insurance covering their
properties, operations, personnel and businesses. Such insurance insures
against such losses and risks as are adequate in accordance with customary
industry practice to protect the Company and its subsidiaries and their
businesses. Neither the Company nor any of its subsidiaries has received
notice from any insurer or agent of such insurer that substantial capital
improvements or other expenditures will have to be made in order to
continue such insurance. All such insurance is outstanding and duly in
force on the date hereof and will be outstanding and duly in force on the
Closing Date.
(xxvi) Neither the Company nor any of it subsidiaries has (A)
taken, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company or any of its
subsidiaries to facilitate the sale or resale of the Securities or (B)
except as permitted by Regulation M under the Exchange Act or pursuant to
this Agreement, since the date of the Preliminary Offering Memorandum (i)
sold, bid for, purchased or paid any person any compensation for
soliciting purchases of, the Securities or (ii) paid or agreed to pay to
any person any compensation for soliciting another to purchaser any other
securities of the Company or any of its subsidiaries.
(xxvii) No registration under the Act of the Series A Notes is
required for the sale of the Series A Notes to the Initial Purchasers or
the Exempt Resales as contemplated hereby and in the Offering Memorandum
assuming (A) that the purchasers who buy the Series A Senior Notes in the
Exempt Resales are either QIBs or Regulation S Purchasers and (B) the
accuracy of the Initial Purchasers' representations contained herein and
their compliance with the agreements set forth herein. No form of general
solicitation or general advertising was used by the Company or the
Guarantors or any of their
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<PAGE> 15
representatives in connection with the offer and sale of any of the Series
A Notes or in connection with Exempt Resales, including, but not limited
to, articles, notices or other communications published in any newspaper,
magazine, or similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. No securities of the same class as
the Series A Notes have been issued and sold by the Company or the
Guarantors within the six-month period immediately prior to the date
hereof.
(xxviii) The execution and delivery of this Agreement, the
other Operative Documents and the sale of the Series A Notes to be
purchased by the Eligible Initial Purchasers will not involve any
prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986. The representation made
by the Company and the Guarantors in the preceding sentence is made in
reliance upon and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by the Eligible Initial
Purchasers as set forth in the Offering Memorandum under the Section
entitled "Notice to Investors."
(xxix) Subsequent to the respective dates as of which
information is given in the Offering Memorandum and up to the Closing
Date, except as set forth in the Offering Memorandum, neither the Company
nor any of its subsidiaries has incurred any liabilities or obligations,
direct or contingent, which are material to the Company and its
subsidiaries taken as a whole, nor entered into any material transaction
not in the ordinary course of business, individually or in the aggregate,
nor has there occurred any material adverse change, or any development
which may reasonably be expected to involve a material adverse change, in
the properties, business, results of operations, financial condition or
prospects of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Change") and there have not been dividends or
distributions of any kind declared, paid or made by the Company or any of
its subsidiaries (other than on a pro rata basis to the Company) on any
class of its capital stock.
(xxx) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Series A Notes, the application of
the proceeds from the issuance and sale of the Series A Notes and the
consummation of the transactions contemplated thereby as set forth in the
Offering Memorandum, will violate Regulation G (12 C.F.R. Part 207),
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of the Federal
Reserve System.
(xxxi) The accountants, Coopers & Lybrand L.L.P. and Ernst &
Young LLP, who have certified or shall certify the financial statements
and supporting schedules included or to be included as part of the
Offering Memorandum are independent accountants within the meaning of the
Act and the rules and regulations promulgated thereunder. The consolidated
historical statements fairly present in all material respects the
consolidated financial condition and results of operations of the Company
and its subsidiaries at the
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<PAGE> 16
respective dates and for the respective periods indicated, subject in the
case of unaudited combined financial statements to normal year-end
adjustments, in accordance with generally accepted accounting principles
consistently applied throughout such periods, except as stated therein.
The pro forma financial statements contained in the Offering Memorandum
have been prepared on a basis consistent with such historical statements,
except for the pro forma adjustments specified therein, and give effect to
assumptions made on a reasonable basis and present fairly the historical
and proposed transactions contemplated by the Agreement and the other
Operative Documents. Other financial and statistical information and data
(including, without limitation, with respect to production) included in
the Offering Memorandum, historical and pro forma, are fairly presented in
all material respects and prepared on a basis consistent with such
financial statements and the books and records of the Company and its
subsidiaries.
(xxxii) Other than as contemplated by this Agreement, there
are no contracts, agreement or understandings between the Company or any
of its subsidiaries and any person that would give rise to a valid claim
against the Company, its subsidiaries or any Initial Purchaser for a
brokerage commission, finder's fee or like payment in connection with the
issuance, purchase and sale of the Series A Notes.
(xxxiii) The information which was supplied by the Company to
John T. Boyd Company ("Boyd"), independent coal engineers, for purposes of
evaluating the coal reserves of the Company and its subsidiaries as of
June 1, 1997, including, without limitation, production, costs of
operation and development, current prices for production, agreements
relating to current and future operations and sales of production, was
true and correct in all material respects on the dates such estimates were
made and such information was supplied and was prepared in accordance with
customary industry practices, as indicated in the letter of Boyd included
in the Offering Memorandum at Annex A-2 (the "Boyd Letter"); Boyd was, as
of the date of the Boyd Letter, and is, as of the date hereof, independent
with respect to the Company and the Guarantors; other than normal
production of the reserves, the Company is not aware of any facts or value
of future net cash flows therefrom, as described in the Offering
Memorandum and as reflected in the Boyd Letter and the reserve report
referenced therein; estimates of such reserves as described in the
Definitive Memorandum and reflected in the Boyd Letter and the reserve
report referenced therein comply in all material respects to the
applicable requirements of Regulation S-X and Industry Guide 7 under the
Act.
(xxxiv) The Series A Notes offered and sold in reliance on
Regulation S have been and will be offered and sold only in offshore
transactions and such securities have been and will be represented upon
issuance by a global security that may not be exchanged for definitive
securities until the expiration of the Restricted Period (as defined in
Regulation S) and only upon certification of beneficial ownership of the
Securities by a non-U.S. person or a U.S. person who purchased such
securities in a transaction that was exempt from the
16
<PAGE> 17
registration requirements of the Act, which U.S. person will acquire an
interest in a Transfer Restricted Security (as defined in the Registration
Rights Agreement).
(xxxv) None of the Company or any of its affiliates or any
person acting on its or their behalf has engaged or will engage in any
directed selling efforts within the meaning of Regulation S with respect
to the Series A Notes, and the Company and its affiliates and all persons
acting on their behalf have complied with and will comply with the
offering restrictions requirements of Regulation S in connection with the
offering of the Series A Notes outside the United States.
The Company and the Guarantors acknowledge that the Initial Purchasers
and, for purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Section 7 hereof, counsel to the Company and the Guarantors and
counsel to the Initial Purchasers will rely upon the accuracy and truth of the
foregoing representations and hereby consent to such reliance.
(b) Each Initial Purchaser represents and warrants to the Company,
the Guarantors and the other Initial Purchaser and agrees that:
(i) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Series A Notes.
(ii) Such Initial Purchaser (A) is not acquiring the Series A
Notes with a view to any distribution thereof that would violate the Act
or the securities laws of any state of the United States or any other
applicable jurisdiction and (B) will be reoffering and reselling the
Series A Notes only to QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A and to non-U.S.
persons outside the United States in offshore transactions in reliance
upon Regulation S under the Act.
(iii) No form of general solicitation or general advertising
has been or will be used by such Initial Purchaser or any of its
representatives in connection with the offer and sale of any of the Series
A Notes, including, but not limited to, articles, notices or other
communication published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
(iv) Such Initial Purchaser agrees that, in connection with
the Exempt Resales, (A) it will offer to sell the Series A Notes only to,
and will solicit offers to buy the Series A Notes only from (1) QIBs who
in purchasing such Series A Notes will be deemed to have represented and
agreed that they are purchasing the Series A Notes for their own accounts
or accounts with respect to which they exercise sole investment discretion
and that they or such accounts are QIBs and (2) Regulation S Purchasers
and (B) it will take reasonable steps to inform persons acquiring Series A
Notes from such Initial Purchaser or
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<PAGE> 18
its affiliates that such Series A Notes will not have been registered
under the Act and may be resold, pledged or otherwise transferred only
(I)(w) to a person who the seller reasonably believes is a QIB in a
transaction meeting the requirements of Rule 144A, (x) in a transaction
meeting the requirements of Rule 144, (y) to a foreign person in a
transaction meeting the requirements of Rule 904 under the Act or (z) in
accordance with another exemption from the registration requirements of
the Act (and based upon an opinion of counsel if the Company so requests),
(II) to the Company, (III) pursuant to an effective registration statement
under the Act and, in each case, in accordance with any applicable
securities laws of any state of the United States or any other applicable
jurisdiction and (C) that the holder will, and each subsequent holder is
required to, notify any purchaser from it of the security evidenced
thereby of the resale restrictions set forth in (B) above.
(v) Such Initial Purchaser agrees that it has offered the
Series A Notes and will offer and sell the Series A Notes (i) as part of
their distribution at any time and (ii) otherwise until 40 days after the
later of the commencement of the offering of the Series A Notes and the
Closing Date, only in accordance with Rule 144A, Regulation S or another
exemption from the registration requirements of the Securities Act.
Accordingly, neither such Initial Purchaser, its affiliates nor any
persons acting on its or their behalf has engaged or will engage in any
directed selling efforts within the meaning of Rule 901(b) of Regulation S
with respect to the Series A Notes, and such Initial Purchaser, its
affiliates and all persons acting on its or their behalf have complied and
will comply with the offering restrictions requirements of Regulation S.
(vi) Such Initial Purchaser agrees that the Series A Notes
offered and sold in reliance on Regulation S have been and will be offered
and sold only in offshore transactions and that such securities have been
and will be represented upon issuance by a global security that may not be
exchanged for definitive securities until the expiration of the Restricted
Period (as defined in Regulation S) and only upon certification of
beneficial ownership of the securities by a non-U.S. person or a U.S.
person who purchased such securities in a transaction that was exempt from
the registration requirements of the Securities Act, which U.S. person
will acquire an interest in a Transfer Restricted Security (as defined in
the Registration Rights Agreement).
(vii) Such Initial Purchaser agrees that, at or prior to
confirmation of a sale of Series A Notes, it will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Series A Notes from it during the Restricted
Period (as defined in Regulation S) a confirmation or notice to
substantially the following effect:
"The Series A Notes covered hereby have not been registered under
the U.S. Securities Act of 1933, as amended (the "Securities Act"),
and may not be offered and sold within the United States or to, or
for the account or benefit of, U.S. persons (i) as part of their
distribution
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<PAGE> 19
at any time or (ii) otherwise until 40 days after the later of the
commencement of the Offering and the Closing Date, except in either
case in accordance with Regulation S (or Rule 144A or in
transactions that are exempt from the registration requirements of
the Securities Act) under the Securities Act. Terms used above have
the meanings assigned to them in Regulation S."
Such Initial Purchaser further agrees that it has not entered and will not
enter into any contractual arrangement with respect to the distribution or
delivery of the Series A Notes, except with its affiliates or with the prior
written consent of the Company.
(viii) Such Initial Purchaser further represents and agrees
that (i) it has not offered or sold and will not offer or sell any Series
A Notes to persons in the United Kingdom prior to the expiry of the period
of six months from the issue date of the Series A Notes, except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
business or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995, (ii) it has
complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Series A Notes in, from or otherwise involving the United Kingdom and
(iii) it has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with the
issuance of the Series A Notes to a person who is of a kind described in
Article 11(3) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom the
document may otherwise lawfully be issued or passed on.
(ix) Such Initial Purchaser agrees that it will not offer,
sell or deliver any of the Series A Notes in any jurisdiction outside the
United States except under circumstances that will result in compliance
with the applicable laws thereof, and that it will take at its own expense
whatever action is required to permit its purchase and resale of the
Series A Notes in such jurisdictions. Such Initial Purchaser understands
that no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required for
such purpose.
(x) Such Initial Purchaser agrees not to cause any
advertisement of the Series A Notes to be published in any newspaper or
periodical or posted in any public place and not to issue any circular
relating to the Series A Notes, except such advertisements as include the
statements required by Regulation S.
(xi) Such Initial Purchaser has not taken and will not take,
directly or indirectly, any action prohibited by Regulation M of the
Exchange Act in connection with the offering of the Series A Notes, to the
extent applicable.
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<PAGE> 20
Terms used in this Section 7 that have the meanings assigned to them in
Regulation S are used herein as so defined.
Such Initial Purchaser also understands that the Company, the Guarantors
and, for purposes of the opinions to be delivered to you pursuant to Section 7
hereof, counsel to the Company and the Guarantors and counsel to the Initial
Purchaser will rely upon the accuracy and truth of the foregoing representations
and hereby consents to such reliance.
6. Indemnification.
(a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless (i) each of the Initial Purchasers and (ii) each
person, if any, who controls (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) either of the Initial Purchasers (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"controlling person"), and (iii) the respective officers, directors, partners,
employees, representatives and agents and affiliates of either of the Initial
Purchasers or any controlling person (any person referred to in clause (i), (ii)
or (iii) may hereinafter be referred to as an "Indemnified Person") to the
fullest extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including, without limitation, and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Person) directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum or the Offering Memorandum (or
any amendment or supplement thereto), or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in light of the circumstances under which they were
made) not misleading, except (i) insofar as such losses, claims, damages,
liabilities or expenses are based upon an untrue statement or omission or
alleged untrue statement or omission that is made in reliance upon and in
conformity with information relating to such Initial Purchaser furnished in
writing to the Company and the Guarantors by such Initial Purchaser expressly
for use therein or (ii) the indemnity agreement contained in this Section 6(a)
shall not inure to the benefit of any such Initial Purchaser to the extent that
the sale to the person asserting any such loss, claim, damage, liability or
action was an initial resale by such Initial Purchaser and any such loss, claim,
damage, liability or action of or with respect to such Initial Purchaser results
from the fact that (A) a copy of the Offering Memorandum was not sent or given
to such person at or prior to the written confirmation of the sale of such
Securities to such person, (B) the untrue statement in or omission from the
Preliminary Offering Memorandum was corrected in the Offering Memorandum (as
amended or supplemented) and such statement or omission formed the basis for the
claim giving rise to such loss, and (C) sufficient quantities of the Offering
Memorandum were delivered to the Initial Purchasers on a timely basis. The
Company and each Guarantor also agree, jointly and severally, to reimburse each
Indemnified Person for the reasonable fees and expenses (including, without
limitation, the reasonable fees and expenses of counsel) promptly after receipt
of a bill therefor in connection with enforcing such
20
<PAGE> 21
Indemnified Person's rights under this Agreement (including, without limitation,
its rights under this Section 6). The Company and the Guarantors shall notify
you promptly of the institution, threat or assertion of any claim, proceeding
(including any governmental investigation) or litigation in connection with the
matters addressed by this Agreement which involves the Company or the Guarantors
or an Indemnified Person.
(b) In case any action or proceeding (including any governmental
investigation) shall be brought or asserted against any of the Indemnified
Persons with respect to which indemnity may be sought against the Company or the
Guarantors, such Indemnified Person shall promptly notify the Company and the
Guarantors in writing (provided, that the failure to give such notice shall not
relieve the Company or the Guarantors of their obligations pursuant to this
Agreement, to the extent it is not materially prejudiced as a result thereof)
and the Company and the Guarantors shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Person and
payment of all fees and expenses (regardless of whether it is ultimately
determined that an Indemnified Person is not entitled to indemnification
hereunder). Such Indemnified Person shall have the right to employ its own
counsel in any such action and the fees and expenses of such counsel shall be
paid by such Indemnified Person unless (i) the employment of such counsel shall
have been specifically authorized in writing by the Company, (ii) the Company or
the Guarantors shall have failed to assume the defense and employ counsel or
(iii) the named parties to any such action (including any impleaded parties)
include both such Indemnified Person and the Company or the Guarantors and such
Indemnified Person shall have been advised by such counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the Company or the Guarantors (in which case the Company and
the Guarantors shall not have the right to assume the defense of such action on
behalf of such Indemnified Person, it being understood, however, that the
Company and the Guarantors shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for all such Indemnified Persons, which firm shall be
designated in writing by DLJ and that all such fees and expenses shall be
reimbursed promptly after receipt of a bill therefor). The Company and the
Guarantors shall not be liable for any settlement of any such action or
proceeding settled without the Company's prior written consent, but if settled
with the Company's written consent, which consent will not be unreasonably
withheld, the Company and the Guarantors agree to indemnify and hold harmless
any Indemnified Person from and against any loss, claim, damage, liability or
expense by reason of any such settlement. Notwithstanding the immediately
preceding sentence, if at any time an Indemnified Person shall have requested an
indemnifying party to reimburse the Indemnified Person for fees and expenses of
counsel as contemplated by the second sentence of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than twenty (20) business days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the Indemnified Person in accordance with such request
prior to the date of such settlement. The Company and the Guarantors shall not,
without the prior written consent of an Indemnified Person, settle or compromise
or consent to the entry of judgment in or otherwise
21
<PAGE> 22
seek to terminate any pending or threatened action, claim, litigation or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Person is a party thereto), unless
such settlement, compromise, consent or termination includes an unconditional
release of such Indemnified Person from all liability arising out of such
action, claim, litigation or proceeding.
(c) Each of the Initial Purchasers agrees, severally and not
jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors, officers and any person controlling (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company
or the Guarantors, and the respective officers, directors, partners, employees,
representatives and agents and affiliates of the Company, the Guarantors and
each such controlling person, to the same extent as the foregoing indemnity from
the Company and the Guarantors to each of the Indemnified Persons, but only with
respect to claims and actions based on information relating to such Initial
Purchaser furnished in writing by such Initial Purchaser to the Company and the
Guarantors expressly for use in the Offering Memorandum. In case any action or
proceeding shall be brought against the Company, the Guarantors, or any such
other indemnified person referred to in this Section 6(c) based on the Offering
Memorandum or any amendment thereof or supplement thereto and in respect of
which indemnity may be sought against an Initial Purchaser, such Initial
Purchaser shall have the same rights and duties as are given to the Company and
the Guarantors by Section 6(b) hereof (except that if the Company and the
Guarantors shall have assumed the defense thereof, such Initial Purchaser shall
not be required to do so, and in such case such Initial Purchaser may employ
separate counsel therein and participate in the defense thereof but the fees and
expenses of such counsel shall be at such Initial Purchaser's expense), and the
Company, the Guarantors and each other indemnified person referred to in this
Section 6(c) shall have the same rights and duties as are given to such Initial
Purchaser by Section 6(b) hereof.
(d) If the indemnification provided for in this Section 6 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and the indemnified party on the other hand from the offering of the Series A
Notes or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party and the indemnified party, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors, on the one hand, and either of the Initial Purchasers, on the other
hand, shall be deemed to be in the same proportion as the total proceeds from
the offering of the Series A Notes (net of commissions but before deducting
expenses) received by the Company and the total commissions received by such
Initial Purchaser bear to the total price of the Series A Notes paid in the
Exempt Resales, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company and the Guarantors, on
the one hand, and the Initial Purchasers, on the other hand, shall be determined
by reference to, among other
22
<PAGE> 23
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact related to information
supplied by the Company or any Guarantor, on the one hand, and the Initial
Purchasers, on the other hand, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The indemnity set forth herein shall be in addition to any liability
or obligation the indemnifying party may otherwise have to any indemnified
party.
The Company, the Guarantors and the Initial Purchasers agree that it would
not be just and equitable if contribution pursuant to this Section 6(d) were
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or expenses referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 6, neither of
the Initial Purchasers (nor the related Indemnified Persons) shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
total discounts and commissions received by such Initial Purchaser with respect
to the Series A Notes, exceeds the amount of any damages which such Initial
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations to contribute pursuant to
this Section 6(d) are several in proportion to the respective principal amount
of Series A Notes purchased by each of the Initial Purchasers hereunder and not
joint.
7. Conditions of Initial Purchasers' Obligations. The several obligations
of the Initial Purchasers under this Agreement are subject to the satisfaction
of each of the following conditions:
(a) All of the representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct on the date
hereof and on the Closing Date with the same force and effect as if made on and
as of the date hereof and the Closing Date, respectively. The Company and the
Guarantors shall have performed or complied with all of the agreements herein
contained and required to be performed or complied with by them at or prior to
the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers as promptly as practicable, on the date of
this Agreement or at such later date and time as to which you may agree, and no
stop order suspending the qualification or exemption from qualification of any
of the Series A Notes in any jurisdiction referred to in Section 4(e) shall have
been issued and no proceeding for that purpose shall have been commenced or
shall be pending or threatened.
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<PAGE> 24
(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance of any of the Series A
Notes; no action, suit or proceeding shall be pending against or affecting or,
to the knowledge of either of the Company or any Guarantor, threatened against,
the Company or any Guarantor or any of their respective subsidiaries before any
court or arbitrator or any governmental body, agency or official that, if
adversely determined, would prohibit, interfere with or adversely affect the
issuance of the Series A Notes or would have a Material Adverse Effect, or in
any manner question the validity of this Agreement, the Note Indenture, the
Securities or the Registration Rights Agreement; and no stop order preventing
the use of the Offering Memorandum, or any amendment or supplement thereto, or
any order asserting that any of the transactions contemplated by this Agreement
are subject to the registration requirements of the Act shall have been issued.
(d) Since the dates as of which information is given in the Offering
Memorandum, (i) there shall not have been any material change, or any
development that is reasonably likely to result in a material change, in the
capital stock or the long-term debt, or material increase in the short-term
debt, of the Company or any of its subsidiaries from that set forth in the
Offering Memorandum, (ii) no dividend or distribution of any kind shall have
been declared, paid or made by the Company or any if its subsidiaries on any
class of its capital stock (other than on a pro rata basis to the Company), and
(iii) neither the Company nor any of its subsidiaries shall have incurred any
liabilities or obligations, direct or contingent, that are material,
individually or in the aggregate, to the Company and its subsidiaries, taken as
a whole, and that are required to be disclosed on a balance sheet in accordance
with generally accepted accounting principles and are not disclosed on the
latest balance sheet included in the Offering Memorandum. Since the date hereof
and since the dates as of which information is given in the Offering Memorandum,
there shall not have been any Material Adverse Change.
(e) You shall have received certificates, dated the Closing Date,
signed by (i) the President or any Vice President and (ii) a principal financial
or accounting officer of the Company and each of the Guarantors confirming, as
of the Closing Date, the matters set forth in paragraphs (a), (b), (c) and (d)
of this Section 7.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and your counsel), dated the Closing Date, of Simpson
Thacher & Bartlett, counsel for the Company and the Guarantors to the effect
that:
(i) The Company has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of the State
of Delaware, and has full corporate power and authority to conduct its
business as described in the Offering Memorandum.
(ii) Each of the Guarantors listed on Schedule II hereto which
is identified thereon as incorporated in the State of Delaware (the
"Delaware Guarantors") has
24
<PAGE> 25
been duly incorporated and is validly existing and in good standing as a
corporation under the laws of the State of Delaware and each such
Guarantor has full corporate power and authority to conduct its business
as described in the Offering Memorandum.
(iii) The Company and each of the Delaware Guarantors has duly
authorized, executed and delivered this Agreement; and each of the
Guarantors listed on Schedule II hereto which is identified thereon as
incorporated in a state other than the State of Delaware (the
"Non-Delaware Guarantors") has duly executed and delivered this Agreement.
(iv) The Company and each of the Delaware Guarantors has duly
authorized, executed and delivered the Note Indenture and each of the
Non-Delaware Guarantors has duly executed and delivered the Note
Indenture. Assuming that the Note Indenture is the valid and legal binding
obligation of the Trustee and that the Non-Delaware Guarantors have duly
authorized the Note Indenture, the Note Indenture constitutes a valid and
legally binding obligation of the Company and the Guarantors enforceable
against each such person in accordance with its terms.
(v) The Series A Notes have been duly authorized, executed and
issued by the Company and, assuming due authentication thereof by the
Trustee and upon payment and delivery in accordance with this Agreement,
will constitute the valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms and
entitled to the benefits of the Note Indenture.
(vi) The Guarantees to be endorsed on the Senior A Notes have
been duly authorized by each Delaware Guarantor and, assuming the due
authorization of the Guarantees by the Non-Delaware Guarantors and the due
authentication of the Series A Notes by the Trustee and upon payment and
delivery in accordance with this Agreement of the Series A Notes, will
constitute a valid and legally binding obligation of each Guarantor,
enforceable against such Guarantor in accordance with its terms.
(vii) The Registration Rights Agreement has been duly
authorized by the Company and each of the Delaware Guarantors. Assuming
the due authorization of the Registration Rights Agreement by the
Non-Delaware Guarantors, when the Registration Rights Agreement is duly
executed and delivered by each such person, it will constitute a valid and
legally binding obligation of each such person, enforceable against the
Company and the Guarantors in accordance with its terms.
(viii) No registration under the Act of any of the Series A
Notes, and no qualification of the Indenture under the Trust Indenture Act
is required for the sale of the Series A Notes by the Company to the
Initial Purchasers or the sale of the Notes by the Initial Purchasers or
the initial purchasers therefrom solely in the manner contemplated by this
Agreement, the Note Indenture and the Offering Memorandum.
25
<PAGE> 26
(ix) The issue and sale of the Series A Notes by the Company
and the compliance by the Company and the Delaware Guarantors with all of
the provisions of this Agreement, the Note Indenture, the Registration
Rights Agreement, the Guarantees and the Series A Notes, will not breach
or result in a default under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument identified on an annexed
Schedule furnished to such counsel by the Company and which the Company
has represented lists all material agreements and instruments to which the
Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries is bound or to which any of the property or assets
of the Company or any of its Subsidiaries is subject, nor will such action
violate the Certificate of Incorporation or By-laws of the Company or any
Federal or New York statute or the Delaware General Corporation Law or any
order known to such counsel issued pursuant to any Federal or New York
statute or the Delaware General Corporation Law by any court or
governmental agency or body that has jurisdiction over the Company or any
of the Delaware Guarantors or any of their respective properties.
(x) The statements made in the Offering Memorandum under the
caption "Description of Senior Notes," "Description of Capital Stock" and
"Description of Certain Indebtedness," insofar as they purport to
constitute summaries of certain terms of documents referred to therein,
constitute accurate summaries of the terms of such documents in all
material respects.
(xi) The Company and each of the Delaware Guarantors has all
requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement, the Note Indenture, the Registration
Rights Agreement, the Series A Notes and the Guarantees to which it is a
party, including, without limitation, with respect to the Company, the
corporate power and authority to issue, sell and deliver the Series A
Notes as provided herein.
(xii) The Note Indenture complies as to form in all material
respects with the requirements of the Trust Indenture Act applicable to an
indenture which is qualified thereunder.
(xiii) Neither the Company nor any Guarantor is or, after
giving effect to the offering and sale of the Series A Notes and the
application of the proceeds thereof as described in the Offering
Memorandum will be, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
Such counsel shall also state that (A) their opinions in paragraphs (iv),
(v), (vi) and (vii) are subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing and (B) their opinion in
paragraph (vii) is further subject to the qualification that the enforceability
of the Company's obligations under the Registration Rights Agreement may be
26
<PAGE> 27
limited by considerations of public policy. Such counsel shall not express any
opinion as to the validity, legally binding effect or enforceability of (A) any
provision of the Registration Rights Agreement or any related provisions of the
Note Indenture that requires or relates to payment of any interest at a rate or
in an amount which a court would determine in the circumstances under applicable
law to be commercially unreasonable or a penalty or a forfeiture and (B) of the
waiver of rights and defenses provision contained in Section 4.6 of the Note
Indenture or the specific performance provisions contained in the Registration
Rights Agreement.
In addition, such counsel shall state that such counsel has not
independently verified the accuracy, completeness or fairness of the statements
made or included in the Offering Memorandum and takes no responsibility
therefor, except as and to the extent set forth in paragraph (x) above. In the
course of the preparation by the Company of the Offering Memorandum, such
counsel participated in conferences with certain officers and employees of the
Company, with representatives of Coopers & Lybrand L.L.P. and Ernst & Young LLP
and with counsel to the Company. Based upon such counsel's examination of the
Offering Memorandum, such counsel's investigations made in connection with the
preparation of the Offering Memorandum and such counsel's participation in the
conferences referred to above, such counsel has no reason to believe that the
Offering Memorandum contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
except that such counsel need not express any belief with respect to (i) the
statements made in the Offering Memorandum under the captions entitled "Risk
Factors--Government Regulation of the Mining Industry," "Risk Factors--Impact of
Clean Air Act Amendments on Coal Consumption" and "Business--Regulation and
Laws" and (ii) the financial statements or other financial or statistical data
contained in the Offering Memorandum, including, without limitation, the Boyd
Report (as defined in the Offering Memorandum).
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the federal laws of the United States of America,
the laws of the State of New York, and the General Corporation Law of Delaware
and may rely as to matters of fact, to the extent such counsel deems proper, on
certificates of responsible officers of the Company and public officials which
are furnished to the Initial Purchasers.
The opinions of such counsel described in this paragraph shall be rendered
to you at the request of the Company and the Guarantors and shall so state
therein.
(g) You shall have received on the Closing Date an opinion
(satisfactory to you and your counsel), dated the Closing Date, of Spilman,
Thomas & Battle, counsel to the Company and the Guarantors, to the effect that:
(i) Each of the Non-Delaware Guarantors is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and has the corporate power to
conduct its business as described in the Offering Memorandum.
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<PAGE> 28
(ii) All of the outstanding capital stock or other securities
evidencing equity ownership of the Non-Delaware Guarantors are owned of
record by Anker Group, Inc. To the extent of such counsel's knowledge, the
ownership of such capital stock or other securities evidencing such equity
ownership is free and clear of any security interest, adverse claim of
ownership, lien or limitation on dispositive or voting rights, except (A)
as otherwise disclosed in an annexed schedule and (B) for such liens and
encumbrances as are contemplated by the Credit Agreement. All of such
securities have been duly authorized, validly issued, are fully paid and
nonassessable and, to the extent of such counsel's knowledge, were not
issued in violation of any preemptive or similar rights. To the extent of
such counsel's knowledge, there are no outstanding subscriptions, rights,
warrants, calls, commitments of sale or options to acquire, or instruments
convertible into or exchangeable for, any such shares of capital stock or
other equity interest of any Non-Delaware Guarantor.
(iii) All necessary corporate action has been taken to duly
authorize each of the Non-Delaware Guarantors to enter into and perform
its obligations under the Purchase Agreement, the Note Indenture, the
Registration Rights Agreement and the other Operative Documents to which
it is a party.
(iv) The execution, delivery and performance of the Operative
Documents to which each Non-Delaware Guarantor is a party (A) does not
violate its respective charter or bylaws, (B) to the extent of such
counsel's knowledge, does not constitute a default in the performance of
any bond, debenture, note, other evidence of indebtedness, indenture,
mortgage, deed of trust or other material agreement to which it is a party
or by which it is bound or to which any of its properties is subject, or
(C) does not violate any applicable law, statute, rule, regulation, or, to
the extent of such counsel's knowledge, any judgment or court decree,
applicable to any of the Non-Delaware Guarantors; except for, in the case
of (B) and (C), any violation or default that would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(v) To the extent of such counsel's knowledge, except as
disclosed on an annexed schedule, there are no actions, suits or
proceedings, including arbitration proceedings pending against or
affecting any of the Non-Delaware Guarantors before any West Virginia
court or Federal District Court sitting in West Virginia or any West
Virginia governmental department or agency, or threatened against any of
them, which, if adversely determined against them, would have a Material
Adverse Effect.
(vi) The statements in the Offering Memorandum under the
captions "Risk Factors--Government Regulation of the Mining Industry,"
"Risk Factors--Impact of Clean Air Act Amendments on Coal Consumption" and
"Business--Regulation and Laws," insofar as such statements constitute a
summary of the legal matters, documents or proceedings referred to
therein, fairly and accurately summarize in all material respects the
information set forth therein with respect to such legal matters,
documents or proceedings.
28
<PAGE> 29
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the federal laws of the United States of America,
the laws of the States of West Virginia and Virginia, and may rely as to matters
of fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and any of the Non-Delaware Guarantors and public
officials which are furnished to the Initial Purchasers.
The opinions of such counsel described in this paragraph shall be rendered
to you at the request of the Company and the Guarantors and shall so state
therein.
(h) You shall have received on the Closing Date an opinion
(satisfactory to you and your counsel), dated the Closing Date, of a counsel to
the Company and the Guarantors (satisfactory to you and your counsel)
substantially to the effect set forth in Section 7(g)(ii), as applicable, with
respect to the Delaware Guarantors.
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the General Corporation Law of Delaware and may
rely as to matters of fact, to the extent such counsel deems proper, on
certificates of responsible officers of the Company and any of the Delaware
Guarantors and public officials which are furnished to the Initial Purchasers.
The opinions of such counsel described in this paragraph shall be rendered
to you at the request of the Company and the Guarantors and shall so state
therein.
(i) You shall have received an opinion, dated the Closing Date, of
Andrews & Kurth L.L.P., your counsel, in form and substance reasonably
satisfactory to you, covering such matters as are customarily covered in such
opinions.
(j) At the time this Agreement is executed and delivered by the
Company and the Guarantors and on the Closing Date, you shall have received
letters, substantially in the forms previously approved by you, from each of
Coopers & Lybrand L.L.P. and Ernst & Young LLP, independent public accountants,
with respect to the financial statements and certain financial information
contained in the Offering Memorandum.
(k) The Initial Purchasers and Andrews & Kurth L.L.P. shall have
been furnished with such documents and opinions, in addition to those set forth
above, as they may reasonably require for the purpose of enabling them to review
or pass upon the matters referred to in this Section 7 and in order to evidence
the accuracy, completeness or satisfaction in all material respects of any of
the representations, warranties or conditions herein contained.
(l) Prior to the Closing Date, the Company and the Guarantors shall
have furnished to you such further information, certificates and documents as
you may reasonably request.
(m) The Company, the Guarantors and the Trustee shall have entered
into the Note Indenture and you shall have received counterparts, conformed as
executed, thereof.
29
<PAGE> 30
(n) The Company and the Guarantors shall have entered into the
Amended and Restated Credit Facility (the "Credit Agreement") and you shall have
received counterparts, conformed as executed, thereof.
(o) The Company and the Guarantors shall have entered into the
Registration Rights Agreement and you shall have received counterparts,
conformed as executed, thereof.
All opinions, certificates, letters and other documents required by this
Section 7 to be delivered by the Company and the Guarantors will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you. The Company and the Guarantors will furnish the
Initial Purchasers with such conformed copies of such opinions, certificates,
letters and other documents as they shall reasonably request.
8. Defaults. If, on the Closing Date, either of the Initial Purchasers
shall fail or refuse to purchase Series A Notes that it has agreed to purchase
hereunder on such date, and the aggregate principal amount of such Series A
Notes that such defaulting Initial Purchaser agreed but failed or refused to
purchase does not exceed 10% of the total principal amount of such Series A
Notes that both of the Initial Purchasers are obligated to purchase on such
Closing Date, the non-defaulting Initial Purchaser shall be obligated to
purchase the amount of such Series A Notes that such defaulting Initial
Purchaser agreed but failed or refused to purchase. If, on the Closing Date,
either of the Initial Purchasers shall fail or refuse to purchase Securities in
an aggregate principal amount that exceeds 10% of such total principal amount
and arrangements satisfactory to the other Initial Purchaser and the Company for
the purchase of such Series A Notes are not made within 48 hours after such
default, this Agreement shall terminate without liability on the part of the
non-defaulting Initial Purchaser or the Company and the Guarantors, except as
otherwise provided in Section 9. In any such case that does not result in
termination of this Agreement, the Initial Purchasers or the Company may
postpone the Closing Date for not longer than seven (7) days in order that the
required changes, if any, in the Offering Memorandum or any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve a defaulting Initial Purchaser from liability in respect of any default
by any such Initial Purchaser under this Agreement.
9. Effective Date of Agreement and Termination. This Agreement shall
become effective upon the execution hereof.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company if any of the following has
occurred: (i) subsequent to the date information is provided in the Offering
Memorandum, any Material Adverse Change which, in your judgment, materially
impairs the investment quality of any of the Series A Notes, (ii) any outbreak
or escalation of hostilities or other national or international calamity or
crisis or material adverse change in the financial markets of the United States
or elsewhere, or any other substantial national or international calamity or
emergency if the effect of such outbreak, escalation, calamity, crisis, material
adverse change or emergency would, in your judgment, make it impracticable or
inadvisable to market any of the Series A Notes or to enforce contracts for the
sale of any of the Series A Notes,
30
<PAGE> 31
(iii) any suspension or limitation of trading generally in securities on the New
York Stock Exchange or in the over-the-counter markets or any setting of minimum
prices for trading on such exchange or market, (iv) any declaration of a general
banking moratorium by either federal or New York authorities, (v) the taking of
any action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs that in your judgment has a material adverse effect
on the financial markets in the United States, and would, in your judgment, make
it impracticable or inadvisable to market any of the Series A Notes or to
enforce contracts for the sale of any of the Series A Notes, (vi) the enactment,
publication, decree, or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which, in
your judgment, would have a Material Adverse Effect, or (vii) any securities of
the Company or any of its subsidiaries shall have been downgraded or placed on
any "watch list" for possible downgrading by any nationally recognized
statistical rating organization.
The indemnities and contribution provisions and the other agreements,
representations and warranties of the Company and the Guarantors, their
respective officers and directors and of the Initial Purchasers set forth in or
made pursuant to this Agreement shall remain operative and in full force and
effect, and will survive delivery of and payment for the Series A Notes,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of either of the Initial Purchasers or by or on behalf of
the Company and the Guarantors, the officers or directors of the Company or the
Guarantors or controlling person of the Company or the Guarantors, (ii)
acceptance of the Series A Notes and payment for them hereunder and (iii)
termination of this Agreement.
If this Agreement shall be terminated by the Initial Purchasers pursuant
to clauses (i) or (vii) of the second paragraph of this Section 9 or because of
the failure or refusal on the part of the Company or any Guarantor to comply
with the terms or to fulfill any of the conditions of this Agreement, the
Company and the Guarantors agree to reimburse you for all out-of-pocket expenses
(including the reasonable fees and disbursements of counsel) incurred by you.
Notwithstanding any termination of this Agreement, the Company and the
Guarantors shall be liable for all expenses which it has agreed to pay pursuant
to Section 4(f) hereof.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Guarantors, the
Initial Purchasers, any indemnified party referred to in Section 6 hereof and
their respective successors and assigns, all as and to the extent provided in
this Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The terms "successors and assigns" shall not include a
purchaser of any of the Series A Notes from any of the Initial Purchasers merely
because of such purchase.
10. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company or any Guarantor,
2708 Cranberry Square, Morgantown, West Virginia 26505, Attention: P. Bruce
Sparks, with a copy to Simpson Thacher & Bartlett, 425 Lexington Avenue, New
York, New York 10017, Attention: John Tehan, Esq., and (b) if to the Initial
Purchasers, c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park
Avenue, New York, New York 10127, Attention: Michael Johnson, with a copy to
Andrews & Kurth L.L.P., 425
31
<PAGE> 32
Lexington Avenue, New York, New York 10017, Attention: Allan Reiss, Esq., or in
any case to such other address as the person to be notified may have requested
in writing.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York. This Agreement may be signed in various
counterparts which together shall constitute one and the same instrument.
32
<PAGE> 33
Please confirm that the foregoing correctly sets forth the Agreement among
the Company, the Guarantors and the Initial Purchasers.
Very truly yours,
ANKER COAL GROUP, INC.
By: /s/ BRUCE SPARKS
----------------------------------
Name: Bruce Sparks
Title: Executive Vice President
ANKER GROUP, INC.
By: /s/ BRUCE SPARKS
----------------------------------
Name: Bruce Sparks
Title: Executive Vice President
EACH OTHER ENTITY LISTED ON
SCHEDULE II HERETO
By: /s/ MICHAEL M. MATESIC
----------------------------------
Name: Michael M. Matesic
Title: Treasurer
Accepted and agreed to as of
the date first above written:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ WILLIAM J. R. WILSON
- ----------------------------------
Name: William J. R. Wilson
Title: Vice President
CHASE SECURITIES INC.
By: /s/ DANIEL P. TREDWELL
- ----------------------------------
Name: Daniel P. Tredwell
Title: Managing Director
33
<PAGE> 34
SCHEDULE I
Principal Amount
Donaldson, Lufkin & Jenrette
Securities Corporation......................................... $ 68,750,000
Chase Securities Inc............................................. 56,250,000
------------
Total.................................................... $125,000,000
============
34
<PAGE> 35
SCHEDULE II
Company State of Incorporation
Anker Group, Inc. Delaware
Anker Energy Corporation Delaware
Bronco Mining Company, Inc. West Virginia
Anker Power Services, Inc. West Virginia
Anker West Virginia Mining Company, Inc. West Virginia
Juliana Mining Company, Inc. West Virginia
King Knob Coal Co., Inc. West Virginia
Vantrans, Inc. Delaware
Melrose Coal Company, Inc. West Virginia
Marine Coal Sales Company Delaware
Hawthorne Coal Company, Inc. West Virginia
Upshur Property, Inc. Delaware
Heather Glen Resources, Inc. West Virginia
New Allegheny Land Holding Company, Inc. West Virginia
Patriot Mining Company, Inc. West Virginia
Vindex Energy Corporation West Virginia
Anker Virginia Mining Company, Inc. Virginia
35
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF CLASS A PREFERRED STOCK OF
ANKER COAL GROUP, INC.
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
The undersigned, being the duly appointed President and Secretary of Anker
Coal Group, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation") in accordance with
the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation, the Board of Directors adopted
the following resolution creating a class of 10,000 shares of preferred stock
designated as Class A Preferred Stock.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority conferred
upon the Board of Directors of this Corporation in accordance with the
provisions of the Certificate of Incorporation, there is hereby established a
class of the preferred stock of the Corporation, $2,500 par value per share,
which class shall be designated as "CLASS A PREFERRED STOCK," and which shall
consist of 10,000 shares ("Class A Shares" or singularly a "Class A Share") and
which shall have the following dividend rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and other rights,
qualifications, limitations and restrictions.
1. Dividend Rights.
a. The holder of record of each Class A Share (a "Holder") shall be
entitled to receive, when, as and if declared by the Corporation's Board of
Directors or a duly authorized committee thereof, out of funds legally
available therefor, on December 31 of each year a cumulative cash dividend
equal to 5% on an annual basis of the sum of (i) the par value of such Share
plus (ii) accrued and unpaid dividends. To the extent permitted by applicable
law and not prohibited pursuant to the terms of that certain Credit Agreement
to be entered into on or about August 9, 1996 among the Corporation and a
consortium of banks led by The Chase Manhattan Bank or the Corporation's
Certificate of Incorporation, the Corporation's Board of Directors or a duly
authorized committee thereof shall declare such dividends on such date each
year (or, if such day is not a business day, on the next business day
thereafter), and such dividends shall be paid by the Corporation within 30 days
after such declaration.
b. Dividends on Class A Preferred shall accrue whether or not declared
or paid.
c. So long as any Class A Shares are outstanding, the Corporation shall
not declare, pay or set aside for payment any dividend or other distribution in
respect of any equity securities
<PAGE> 2
issued by the Corporation other than shares of Class C and Class D preferred
stock of the Corporation unless all dividends accumulated and unpaid with
respect to the Class A Shares are simultaneously declared and paid.
2. Rights on Liquidation and Ranking.
a. In the event of the liquidation, dissolution, winding-up or sale or
other disposition of all or substantially all of the assets of the Corporation,
whether voluntary or involuntary (a "Liquidation"), each Holder shall be
entitled to receive with respect to each Class A Share, before any distribution
is made to or set aside for the holders of common stock of the Corporation or
any other equity security of the Corporation other than the Class C and Class D
Preferred Stock of the Corporation, cash or any other assets of the Corporation
in an amount (or having a fair market value) equal to the sum of (i) $2,500
plus (ii) any accrued and unpaid dividends with respect to such share (such
sum, the "Liquidation Preference"). If the assets of the Corporation available
for distribution to Holders are insufficient to permit the payment in full of
the amount due to the Holders pursuant to this paragraph 2(a), the entire
assets of the Corporation available for distribution to Holders shall be
divided pro rata among the Holders. A merger or consolidation of the
Corporation with another corporation (or other business entity) or a voluntary
sale of all or substantially all of the assets of the Corporation principally
in exchange for stock and/or securities or another corporation (the foregoing
a "Merger") shall not be deemed a Liquidation if such transaction does not
occur as part of a proceeding under Title 11 of the United States Code or any
federal or state law for the protection or creditors or relief of debtors.
b. With regard to rights to receive distributions upon Liquidation of
the Corporation, Class A Shares shall rank (i) junior to the Corporation's
Class C and D Preferred Stock, (ii) senior to the Corporation's Class B
Preferred Stock and (iii) senior to the Corporation's Common Stock.
3. Voting Rights. Class A Shares generally shall have no voting rights;
provided, however, that the Corporation shall not take any of the following
actions without the affirmative vote of Holders holding at least fifty percent
(50%) of the Class A Shares then outstanding, given in person or by proxy,
either in writing or by a resolution adopted at a meeting called for such
purpose:
a. amend, alter or repeal any of the provisions of the Corporation's
Certificate of Incorporation or Bylaws or pass any shareholders' resolution,
including such action effected by merger or similar transaction, if such
amendment, alteration, repeal or resolution would affect adversely the
preferences, special rights or powers of the Class A Shares;
b. increase or decrease (other than by redemption or conversion) the
total number of authorized Class A Shares;
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<PAGE> 3
c. issue any capital stock which ranks senior to or on a parity with the
Class A Shares with respect to right to receive distributions upon Liquidation
or with respect to dividends.
4. Conversion Rights. Upon the offering by the Corporation of shares of its
common stock to the public pursuant to an effective registration statement
filed with the Securities and Exchange Commission other than on a Form S-4 or
S-8, each Holder shall have the right but not the obligation to convert each
Class A Share held by such Holder at the time of such offering into that number
of shares of the Corporation's common stock (of the series or class being
offered) determined pursuant to the following formula: CS = 1.5($2,500)/OP,
where CS represents the number of shares of common stock resulting from the
conversion of each Class A Share and OP represents the offering price per share
of common stock pursuant to such public offering; provided, however, that the
number of shares of the Corporation's common stock resulting from a conversion
pursuant to this Section 4 shall not exceed twenty percent (20%) of the number
of shares of common stock offered for sale by the Corporation for its own
account included in such public offering. Any Holder must give prior written
notice to the Corporation of its intent to convert Class A Shares pursuant to
this Section 4, such notice to be given (i) at least 30 days prior to a public
offering or (ii) within 10 days following receipt of notice by such Holder from
the Corporation as to the date of such public offering, whichever is later. For
the purposes of this Section 4, the offering price of any public offering shall
be deemed to be the midpoint of the range of expected selling prices as
determined by the underwriters of such offering immediately prior to the
effectiveness of the registration statement filed with respect to such offering.
5. Redemption.
a. Commencing on May 31, 2006, the Corporation shall redeem Class A Shares
for a price per share equal to the Liquidation Preference. Class A Shares shall
be redeemed pursuant to the following schedule: (i) ten percent (10%) of the
Class A Shares outstanding as of May 31, 2006 shall be redeemed on such date,
and (ii) the same number of Class A Shares shall be redeemed on each subsequent
May 31 until all of the outstanding Class A Shares shall have been redeemed.
b. Class A Shares shall be redeemable at the option of the Holders in the
event of the institution of bankruptcy proceedings against the Corporation
under Chapters 7 or 11 of the United States Code.
c. In the event of a Merger or the transfer of all of the Corporation's
common stock to a single person, the Corporation or the surviving entity in
such Merger as the case may be shall, within sixty (60) days after the
effective date of the Merger, redeem all of the outstanding Class A Shares at
the Liquidation Preference as of the last business day prior to the effective
date of the Merger.
3
<PAGE> 4
d. The Corporation shall have no obligation to redeem Class A Shares
pursuant to Sections 5(a), (b) or (c) to the extent that such redemption would
violate any provision of that certain Credit Agreement to be entered into on or
about August 9, 1996 among the Corporation and a consortium of banks led by The
Chase Manhattan Bank, to the extent that the Corporation has no funds legally
available for such redemption, or to the extent that there are at the time of
such redemption any accrued and unpaid dividends on the Corporation's Class C
or Class D Preferred Stock. In the event a redemption under Section 5(a) is
prevented by the application of the preceding sentence, such redemption shall
take place immediately following the cessation of the circumstances described
in the preceding sentence.
e. So long as any Class A Shares are outstanding, the Corporation shall
not declare, pay or set aside for payment any dividend or other distribution in
respect of any equity securities issued by the Corporation other than Class C
and Class D Preferred Stock, nor shall it redeem any equity securities of the
Corporation other than (i) Class C and D Preferred Stock of the Corporation or
(ii) Common Stock of the Corporation held by an executive officer of the
Corporation and redeemed with the proceeds of "key-man" life insurance policies
maintained by the Corporation with respect to such executive officer, unless
all redemptions required by this section have been effected or are effected
simultaneously.
RESOLVED FURTHER, that the President, the Executive Vice President, the
Secretary and the Assistant Secretary of the Corporation are each authorized to
do or cause to be done all such acts or things and to make, execute and deliver
or cause to be made, execute and delivered all such agreements, documents,
instruments and certificates in the name and on behalf of the Corporation or
otherwise as they deem necessary, desirable or appropriate to execute or carry
out the purpose and intent of the foregoing resolutions.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate as of
this 8th day of August, 1996.
/s/ John J. Faltis
-----------------------------------
John J. Faltis, President
/s/ Bruce Sparks
-----------------------------------
Bruce Sparks, Secretary
4
<PAGE> 1
EXHIBIT 3.4
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF CLASS B PREFERRED STOCK OF
ANKER COAL GROUP, INC.
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
The undersigned, being the duly appointed President and Secretary of Anker
Coal Group, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation") in accordance with
the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, the Board of Directors
adopted the following resolution creating a class of 10,000 shares of preferred
stock designated as Class B Preferred Stock.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority conferred
upon the Board of Directors of this Corporation in accordance with the
provisions of the Certificate of Incorporation, there is hereby established a
class of the preferred stock of the Corporation, $1,000 par value per share,
which class shall be designated as "CLASS B PREFERRED STOCK," and which shall
consist of 10,000 shares ("Class B Shares" or singularly a "Class B Share") and
which shall have the following dividend rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and other rights,
qualifications, limitations and restrictions.
1. Dividend Rights. No dividends shall be paid on Class B Shares.
2. Rights on Liquidation and Ranking.
a. In the event of the liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary (a "Liquidation"), each holder of
Class B Shares (a "Holder") shall be entitled to receive with respect to each
Class B Share, before any distribution is made to or set aside for the holders
of common stock of the Corporation or any other preferred stock of the
Corporation junior to Class B Shares, cash or any other assets of the
Corporation in an amount (or having a fair market value) equal to $1,000 (such
sum the "Liquidation Preference"). If the assets of the Corporation available
for distribution to Holders are insufficient to permit the payment in full of
the amount due to the Holders pursuant to this paragraph 2(a), the entire
assets of the Corporation available for distribution to Holders shall be
divided pro rata among the Holders. A merger or consolidation of the
Corporation with another corporation (or other business entity) or a voluntary
sale of all or substantially all of the assets of the Corporation shall not be
deemed a Liquidation if such transaction does not occur as part of a proceeding
with
<PAGE> 2
respect to the Company under Title 11 of the United States Code or any federal
or state law for the protection or creditors or relief of debtors.
b. With regard to rights to receive distributions upon Liquidation of
the Corporation, Class B Shares shall rank (i) junior to the Corporation's
Class A, C and D Preferred Stock, and (ii) senior to the Corporation's Common
Stock.
3. Voting Rights. Class B Shares generally shall have no voting rights;
provided, however, that the Corporation shall not take any of the following
actions without the affirmative vote of Holders holding at least fifty percent
(50%) of the Class B Shares then outstanding, given in person or by proxy,
either in writing or by a resolution adopted at a meeting called for such
purpose:
a. amend, alter or repeal any of the provisions of the Corporation's
Certificate of Incorporation or Bylaws or pass any shareholders' resolution,
including such action effected by merger or similar transaction, if such
amendment, alteration, repeal or resolution would affect adversely the
preferences, special rights or powers of the Class B Shares (in the event of a
merger, an adverse effect to the rights of the Class B Shares shall be presumed
if the surviving entity in such merger does not explicitly undertake to provide
the same preferences, rights and powers to the Class B Shares as are set forth
herein);
b. increase or decrease (other than by redemption) the total number of
authorized Class B Shares;
c. issue any capital stock, other than the Corporation's Class A
Preferred Stock, Class C Preferred Stock and Class D Preferred Stock, that
ranks senior to or on a parity with the Class B Shares with respect to right to
receive distributions upon Liquidation; or
d. enter into, authorize or permit any Sale of the Corporation (as
defined in Section 4) resulting from a transaction or transactions to which the
Corporation is a party unless the provisions of Sections 4 and 5 are complied
with.
4. Redemption.
a. Subject to paragraph 4(f), Class B Shares shall be redeemed at a cash
redemption price per share of $1,375 in the event of (i) the institution of
bankruptcy proceedings against the Corporation under Chapters 7 or 11 of the
United States Code or (ii) the Sale of the Corporation as defined below. In
such event, such redemption shall be effected as provided in Section 5. For
purposes hereof, a "Sale of the Corporation", shall be deemed to have occurred
at any time that (i) both (A) any Third Party (as defined below) acquires
beneficial ownership of a majority of the outstanding Common Stock of the
Corporation and (B) the Non-FRC Affiliated Investors (as defined below)
beneficially own in the aggregate less than 20% of the outstanding Common Stock
of the Corporation; (ii) any merger or consolidation of the Corporation with or
into any other entity is consummated if following such transaction both (x) any
Third Party beneficially
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<PAGE> 3
owns a majority of the outstanding common stock, partnership interests or other
comparable securities of the resulting or surviving entity and (y) the Non-FRC
Affiliated Investors beneficially own in the aggregate less than 20% of the
outstanding common stock, partnership interests or other comparable securities
of the resulting or surviving entity; or (iii) the sale, transfer or other
disposition to one or more Third Parties in a transaction or series of
transactions of more than 75% of the assets (by value on a consolidated basis
prior to such transaction or series of transactions) of the Corporation and its
direct or indirect subsidiaries. For the purposes hereof, (1) the term "Non-FRC
Affiliated Investors" means JJF Group Limited Liability Company, PPK Group
Limited Liability Company, Anker Holding B.V. and their respective "Permitted
Transferees" (as such term is defined in the Stockholders Agreement of the
Corporation to be entered into on or about August 9, 1996, as amended,
supplemented or otherwise modified form time to time (the "Stockholders
Agreement")); (2) "Third Party" means any person, entity or group (as such term
is used in Rule 13d promulgated under the Securities Exchange Act of 1934, as
amended) other than (I) the Funds (as defined in the Stockholders Agreement),
(ii) the Permitted Transferees of the Funds, (III) First Reserve Corporation
("FRC") and (IV) any Affiliate (as defined in the Stockholders Agreement) of
any of the entities specified in clause (I), (II) and (III).
b. Subject to paragraph 4(f), in the event of a public offering of shares
of the Corporation registered under the Securities Act of 1933, as amended,
other than on Securities and Exchange Commission Form S-4 or Form S-8 (a "Public
Offering"), the Class B Shares shall be redeemable in whole but not in part at
the option of the Corporation as provided in this clause (b) at a redemption
price per share of $1,375 payable by the Corporation in shares of the
Corporation's common stock, par value $.01 per share ("Common Stock"). The
number of shares of Common Stock to be issued per Class B Share in satisfaction
of the redemption price pursuant to this paragraph 4(b) or paragraph 4(c) will
equal the quotient obtained by dividing $1,375 by the Average Closing Sale Price
(as defined below). The "Average Closing Sale Price" shall be the average
closing sale price for the Common Stock on the principal securities exchange
where such stock is traded during the twenty consecutive trading days
immediately preceding the fifth trading day prior to the redemption date (as
determined pursuant to Section 5). The Corporation's right to redeem the Class B
Shares pursuant to this paragraph 4(b) shall terminate if the Corporation has
not delivered a Paragraph 4(b) Redemption Notice (as defined below) to the
registered holders of the Class B Shares on or prior to the expiration of the
Paragraph 4(b) Redemption Option Period (as defined below). The right of the
Corporation to redeem Class B Shares pursuant to this paragraph 4(b) shall also
terminate upon any exercise of the Corporation's right to redeem Class B Shares
pursuant to paragraph 4(e) below. "Paragraph 4(b) Redemption Option Period"
means the period commencing on the date of the closing of the initial sale of
shares pursuant to a Public Offering (the "Public Offering Closing Date") and
ending on (x) the one year anniversary of the Public Offering Closing Date if
the Public Offering Closing Date is on or prior to the five year anniversary of
the initial issuance of Class B Shares or (y) the 45th day after the Public
Offering Closing Date if the Public Offering Closing Date is after the five year
anniversary of the initial issuance of Class B Shares.
3
<PAGE> 4
c. Subject to paragraph 4(f), if the Corporation has completed a Public
Offering and the Corporation's right to redeem the Class B Shares pursuant to
paragraph 4(b) has terminated pursuant to the penultimate sentence of such
paragraph, then the Class B Shares shall be redeemable at the option of the
Holders at a redemption price per share of $1,375 payable by the Corporation in
shares of Common Stock. The number of shares of Common Stock to be issued per
Class B Share in satisfaction of the redemption price under this paragraph
4(c) shall be determined pursuant to paragraph 4(b). The right of the Holders
to require the redemption of the Class B Shares pursuant to this paragraph 4(c)
shall terminate upon any exercise of the Corporation's right to redeem Class B
Shares pursuant to paragraph 4(e).
d. The Corporation shall have no obligation to redeem Class B Shares
pursuant to Section 4(a) to the extent that (i) such redemption would violate
any provision of that certain Credit Agreement to be entered into on or about
August 9, 1996 among the Corporation and a consortium of banks led by The Chase
Manhattan Bank; (ii) all redemptions of the Corporation's Class A or D Preferred
Stock required of the Corporation at such time pursuant to the respective terms
of such Class A or D Preferred Stock have not been effected or are not effected
simultaneously with such redemption of Class B Shares; (iii) there exist accrued
but unpaid dividends with respect to the Corporation's Class A, C or D Preferred
Stock or (iv) the Corporation has no funds legally available therefor. In the
event a redemption under Section 4(a) is prevented by the application of the
preceding sentence, such redemption shall take place immediately following the
cessation of all of the circumstances described in the preceding sentence.
e. Subject to paragraph 4(f), Class B Shares shall be redeemable in
whole but not in part at any time by the Corporation upon irrevocable prior
written notice to the Holders as set forth in paragraph 5(d). In such event,
each Class B Share shall be redeemed by the Corporation at a cash price per
share equal to $1,375. The right of the Corporation to redeem the Class B
Shares pursuant to this paragraph 4(e) shall terminate upon any exercise of the
Corporation's redemption option pursuant to paragraph 4(b) or the Holders'
redemption option pursuant to paragraph 4(c).
f. Anything in this Section 4 to the contrary notwithstanding, at any
time when the Funds in the aggregate have the right to designate a majority of
the Board of Directors of the Corporation pursuant to the Stockholders
Agreement, (i) the Class B Shares shall not be redeemed upon any Sale of the
Corporation unless such Sale of the Corporation was approved by a majority of
the directors of the Corporation who were not designated by the Funds pursuant
to the Stockholders Agreement, (ii) the Corporation shall not exercise its
right to redeem the Class B Shares pursuant to paragraph 4(b) or paragraph 4(e)
unless such redemption is approved by a majority of the directors of the
Corporation who were not designated by the Funds pursuant to the Stockholders
Agreement and (iii) the occurrence of a Public Offering shall not give rise to
any rights of the Holders to cause the redemption of the Class B Shares
pursuant to paragraph 4(c) unless such Public Offering was approved by a
majority of the directors of the Corporation who were not designated by the
Funds pursuant to the Stockholders Agreement.
4
<PAGE> 5
g. So long as any Class B Shares are outstanding, the Corporation shall
not declare, pay or set aside for payment any dividend or other distribution in
respect of any equity securities issued by the Corporation, other than the
Corporation's Class A, C or D preferred stock, nor shall it directly or
indirectly redeem, repurchase or otherwise acquire any shares of the
Corporation's Common Stock other than pursuant to Section 4.1(b)(i) of the
Stockholders Agreement unless all redemptions required at such time pursuant to
paragraph 4(a) and 4(c) have been effected or are effected concurrently.
5. REDEMPTION MECHANICS.
a. The Corporation shall deliver written notice (a "Paragraph 4(a)
Redemption Notice") to each Holder: (i) no later than ten business days prior to
the occurrence of any Sale of the Corporation specified in clause (ii) or (iii)
of paragraph 4(a) or any Sale of the Corporation specified in said clause (i) of
paragraph 4(a) to the extent the Corporation is a party to the transaction
specified in said clause (i); (ii) no later than two business days after the
Company becomes aware of the occurrence of an event specified in clause (i) of
paragraph 4(a) if the Corporation was not a party to such transaction; and (iii)
no later than two business days after the institution of bankruptcy proceedings
against the Corporation under Chapters 7 or 11 of the United States Code. Each
Paragraph 4(a) Redemption Notice shall identify the relevant event to which it
relates and, to the extent knowable at the time of the notice, the date of
redemption for the Class B Shares. The redemption of the Class B Shares shall
occur (x) concurrently with the closing of any transaction specified in clause
(i) of this paragraph 5(a), (y) on the tenth business day following the date of
any Paragraph 4(a) Redemption Notice pursuant to clause (ii) of this paragraph
5(a) and (z) in accordance with the terms of Chapters 7 or 11 of the United
States Code, as the case may be, after the date of any Paragraph 4(a) Redemption
Notice pursuant to clause (iii) of this paragraph 5(a).
b. The Corporation may redeem the Class B Shares in whole but not in part
pursuant to paragraph 4(b) by delivering irrevocable written notice (a
"Paragraph 4(b) Redemption Notice") to each of the Holders on or prior to the
expiration of the Redemption Option Period. Each Paragraph 4(b) Redemption
Notice shall specify the date of redemption, which will be the 45th day after
the date of the Paragraph 4(b) Redemption Notice or, if such 45th day is not a
business day, the immediately succeeding business day.
c. The Holders may elect to have the Class B Shares redeemed in whole but
not in part pursuant to paragraph 4(c) by delivering irrevocable written notice
(a "Paragraph 4(c) Redemption Notice") to the Company. The Paragraph 4(c)
Redemption Notice shall specify the date of redemption, which will be the 45th
day after the date of the Paragraph 4(c) Redemption Notice or, if such 45th day
is not a business day, the immediately succeeding business day.
d. The Corporation may redeem the Class B Shares in whole but not in part
pursuant to paragraph 4(e) by delivering irrevocable written notice (a
"Paragraph 4(e) Redemption Notice") to each of the Holders. Each Paragraph 4(e)
Redemption Notice shall specify the date
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<PAGE> 6
of redemption, which will be (at the Company's option) no earlier than the fifth
business day nor later than the 45th day after the date of the Paragraph 4(e)
Redemption Notice.
e. Unless otherwise agreed by the Corporation and the Holders, the
closing of the redemption of the Class B Shares shall take place at the
principal executive offices of the Corporation. At the closing of any such
redemption (i) the Holders shall deliver to the Corporation the certificates
representing the Class B Shares against the payment of the redemption price and
(ii) the Corporation shall deliver to the Holders the redemption price against
deliver of the certificates representing the Class B Shares. Unless otherwise
agreed by the Holders, any cash redemption price shall be payable in immediately
available funds. If the redemption price is payable in shares of Common Stock,
at the closing of the redemption the Corporation shall deliver to the holders
duly executed certificates representing such shares of Common Stock together
with a certificate of the chief financial officer setting forth the calculation
of the Average Closing Sale Price. Any shares of Common Stock issued by the
Corporation pursuant hereto shall be duly authorized and validly issued free of
any pre-emptive rights or other liens, charges or other encumbrances other than
those resulting from the actions of the Holders or resulting from the terms of
the Stockholders Agreement. The Corporation will use its best effects to cause
any shares of Common Stock issued upon redemption of the Class B Shares,
immediately upon such issuance, to be listed on any domestic securities exchange
upon which shares of Common stock are listed at such time.
RESOLVED FURTHER, that the President, the Executive Vice President, the
Secretary and the Assistant Secretary of the Corporation are each authorized to
do or cause to be done all such acts or things and to make, execute and deliver
or cause to be made, execute and delivered all such agreements, documents,
instruments and certificates in the name and on behalf of the Corporation or
otherwise as they deem necessary, desirable or appropriate or execute or carry
out the purpose and intent of the foregoing resolutions.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate as of
this 8th day of August, 1996.
/s/ John J. Faltis
-----------------------------
John J. Faltis, President
/s/ Bruce Sparks
-----------------------------
Bruce Sparks, Secretary
6
<PAGE> 1
EXHIBIT 3.5
CERTIFICATE OF DESIGNATION,PREFERENCES AND
RIGHTS OF CLASS C PREFERRED STOCK OF
ANKER COAL GROUP, INC.
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
The undersigned, being the duly appointed President and Secretary of Anker
Coal Group, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation") in accordance with
the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, the Board of Directors
adopted the following resolution creating a class of 1,000 shares of preferred
stock designated as Class C Preferred Stock.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority conferred
upon the Board of Directors of this Corporation in accordance with the
provisions of the Certificate of Incorporation, there is hereby established a
class of the preferred stock of the Corporation, $13,000 par value per share,
which class shall be designated as "CLASS C PREFERRED STOCK," and which shall
consist of 1,000 shares and which shall have the following dividend rights,
voting rights, terms of redemption, redemption prices, liquidation preferences
and other rights, qualifications, limitations and restrictions.
1. Dividend Rights.
a. 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: cumulative preferential 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 later 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 any equity securities issued by the Corporation other than the
Corporation's Class D Preferred Stock, nor shall any equity securities of the
Corporation be redeemed, 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.
<PAGE> 2
b. As used in this Section 1, the following terms shall have the following
meanings: Excess Gross Realization from Area A Coal during the 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
has 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 Anker
Group, Inc. 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 available without charge to any stockholder of
record of the Corporation upon request. All references in the Area A
Designation Agreement to Exhibit A thereto shall be deemed to apply to this
Section 1. As used in this Section 1, Subsidiary means a corporation, limited
liability company, partnership or other entity which is, directly or
indirectly, majority owned by the Corporation.
c. As used in this Section 1, 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.
d. 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
Section 1(d), 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 Section 1(d),
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
(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 Section
1(d), Sales Price means the consideration
2
<PAGE> 3
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 Section 1(d), 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 any equity securities issued by the
Corporation other than the Corporation's Class D Preferred Stock, nor shall any
equity securities of the Corporation be redeemed, 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.
2. Rights on Liquidation and Ranking.
a. 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 foregoing, a
"Liquidation"), 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 Section 1(d)
(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 Section 1(d). 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
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<PAGE> 4
Class C Preferred stock then outstanding shall share ratably in any amounts
available for such payments.
b. With regard to rights to receive distributions upon liquidation of the
Corporation, Class C Preferred Stock shall rank (i) junior to the Class D
Preferred Stock of the Corporation, (ii) senior to the Class A and B Preferred
Stock of the Corporation and (iii) senior to the Common Stock of the
Corporation.
3. Voting Rights.
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.
4. 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 Section 1(d). 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.
RESOLVED FURTHER, that the President, the Executive Vice President, the
Secretary and the Assistant Secretary of the Corporation are each authorized to
do or cause to be done all such acts or things and to make, execute and deliver
or cause to be made, execute and delivered all such agreements, documents,
instruments and certificates in the name and on behalf of the Corporation or
otherwise as they deem necessary, desirable or appropriate to execute or carry
out the purpose and intent of the foregoing resolutions.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate as of
this 9th day of August, 1996.
/s/ JOHN J. FALTIS
---------------------------------------
John J. Faltis, President
/s/ BRUCE SPARKS
---------------------------------------
Bruce Sparks, Secretary
4
<PAGE> 1
EXHIBIT 3.6
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF CLASS D PREFERRED STOCK OF
ANKER COAL GROUP, INC.
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
The undersigned, being the duly appointed President and Secretary of Anker
Coal Group, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation") in accordance with
the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation, the Board of Directors adopted
the following resolution creating a class of 1,000 shares of preferred stock
designated as Class D Preferred Stock.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority conferred
upon the Board of Directors of this Corporation in accordance with the
provisions of the Certificate of Incorporation, there is hereby established a
class of the preferred stock of the Corporation, $7,000 par value per share,
which class shall be designated as "CLASS D PREFERRED STOCK," and which shall
consist of 1,000 shares and which shall have the following dividend rights,
voting rights, terms of redemption, redemption prices, liquidation preferences
and other rights, qualifications, limitations and restrictions.
1. Dividend Rights.
a. 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 any equity security of the Corporation, nor shall any
equity securities of the Corporation be redeemed, 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.
<PAGE> 2
b. As used in this Section 1, 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 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 Anker Group, Inc. 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. All references in the Area F
Designation Agreement to Exhibit A thereto shall be deemed to apply to this
Section 1. 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. As used in this Section
1, Subsidiary means a corporation, limited liability company, partnership or
other entity which is, directly or indirectly, majority owned by the
Corporation.
2. Rights on Liquidation and Ranking.
a. 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 foregoing, a
"Liquidation"), 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 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.
b. With regard to rights to receive distributions upon Liquidation of
the Corporation, Class D Preferred Stock shall rank (i) senior to the Class A,
B and C Preferred Stock of the Corporation, and (ii) senior to the Common Stock
of the Corporation.
2
<PAGE> 3
3. Voting Rights.
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.
4. Redemption.
a. 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).
b. 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 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
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 Section 4(b), 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.
c. 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
3
<PAGE> 4
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 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 Section 4(c), 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.
d. 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 Sections 4(b) and 4(c).
RESOLVED FURTHER, that the President, the Executive Vice President, the
Secretary and the Assistant Secretary of the Corporation are each authorized to
do or cause to be done all such acts or things and to make, execute and deliver
or cause to be made, execute and delivered all such agreements, documents,
instruments and certificates in the name and on behalf of the Corporation or
otherwise as they deem necessary, desirable or appropriate to execute or carry
out the purpose and intent of the foregoing resolutions.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate as
of this 9th day of August, 1996.
/s/ John J. Faltis
-----------------------------
John J. Faltis, President
/s/ Bruce Sparks
-----------------------------
Bruce Sparks, Secretary
4
<PAGE> 1
EXHIBIT 4.1
================================================================================
ANKER COAL GROUP, INC.,
as Issuer
and
THE GUARANTORS SIGNATORY HERETO
------------------
9 3/4% SENIOR NOTES DUE 2007
------------------
INDENTURE
Dated as of September 25, 1997
------------------
MARINE MIDLAND BANK,
as Trustee
------------------
================================================================================
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CROSS-REFERENCE TABLE*
Trust Indenture Indenture Section
Act Section
310 (a)(1)................................................... 7.10
(a)(2)................................................... 7.10
(a)(3)................................................... N.A.
(a)(4)................................................... N.A.
(a)(5)................................................... 7.10
(b)...................................................... 7.10
(c)...................................................... N.A.
311 (a)...................................................... 7.11
(b)...................................................... 7.11
(c)...................................................... N.A.
312 (a)...................................................... 2.5
(b)...................................................... 11.3
(c)...................................................... 11.3
313 (a)...................................................... 7.6
(b)(1)................................................... N.A.
(b)(2)................................................... 7.7
(c)...................................................... 7.6; 11.2
(d)...................................................... 7.6
314 (a)...................................................... 403; 11.2
(b)...................................................... N.A.
(c)(1)................................................... 11.4
(c)(2)................................................... 11.4
(c)(3)................................................... N.A.
(d)...................................................... N.A.
(e)...................................................... 11.5
(f)...................................................... N.A.
315 (a)...................................................... 7.1
(b)...................................................... 7.5; 11.2
(c)...................................................... 7.1
(d)...................................................... 7.1
(e)...................................................... 6.11
316 (a)(last sentence)....................................... 2.9
(a)(1)(A)................................................ 6.5
(a)(1)(B)................................................ 6.4
(a)(2)................................................... N.A.
(b)...................................................... 6.7
(c)...................................................... 2.12
317 (a)(1)................................................... 6.8
(a)(2)................................................... 6.9
(b)...................................................... 2.4
318 (a)...................................................... 11.1
(b)...................................................... N.A.
(c)...................................................... 11.1
N.A. means not applicable
*This Cross-Reference Table is not part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.....................................................1
SECTION 1.2 Other Definitions..............................................18
SECTION 1.3 Incorporation by Reference of Trust Indenture Act..............18
SECTION 1.4 Rules of Construction..........................................19
ARTICLE II
THE NOTES
SECTION 2.1 Form and Dating................................................19
SECTION 2.2 Execution and Authentication...................................21
SECTION 2.3 Registrar and Paying Agent.....................................22
SECTION 2.4 Agent to Hold Money in Trust...................................22
SECTION 2.5 Holder Lists...................................................22
SECTION 2.6 Transfer and Exchange..........................................23
SECTION 2.7 Replacement Notes..............................................37
SECTION 2.8 Outstanding Notes..............................................37
SECTION 2.9 Treasury Notes.................................................37
SECTION 2.10 Temporary Notes................................................38
SECTION 2.11 Cancellation...................................................38
SECTION 2.12 Defaulted Interest.............................................38
SECTION 2.13 CUSIP Numbers..................................................39
SECTION 2.14 Record Date....................................................39
ARTICLE III
REDEMPTION AND PREPAYMENT
SECTION 3.1 Notices to Trustee.............................................39
SECTION 3.2 Selection of Notes to be Redeemed..............................39
SECTION 3.3 Notice of Redemption...........................................40
SECTION 3.4 Effect of Notice of Redemption.................................41
SECTION 3.5 Deposit of Redemption Price....................................41
SECTION 3.6 Notes Redeemed in Part.........................................41
SECTION 3.7 Optional Redemption............................................42
SECTION 3.8 Mandatory Redemption...........................................42
SECTION 3.9 Offer to Purchase by Application of Excess Proceeds............42
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ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Notes...............................................44
SECTION 4.2 Maintenance of Office or Agency................................45
SECTION 4.3 Reports........................................................45
SECTION 4.4 Compliance Certificate.........................................46
SECTION 4.5 Taxes..........................................................46
SECTION 4.6 Stay, Extension and Usury Laws.................................46
SECTION 4.7 Limitation on Restricted Payments..............................47
SECTION 4.8 Dividend and Other Payment Restrictions Affecting
Subsidiaries.................................................50
SECTION 4.9 Incurrence of Indebtedness and Issuance of Disqualified
Stock........................................................51
SECTION 4.10 Asset Sales....................................................53
SECTION 4.11 Transactions with Affiliates...................................54
SECTION 4.12 Liens..........................................................55
SECTION 4.13 Business Activities............................................55
SECTION 4.14 Corporate Existence............................................55
SECTION 4.15 Offer to Repurchase upon Change of Control.....................55
SECTION 4.16 Payments for Consent...........................................56
SECTION 4.17 Additional Subsidiary Guarantees...............................56
ARTICLE V
SUCCESSORS
SECTION 5.1 Merger, Consolidation, or Sale of Assets.......................57
SECTION 5.2 Successor Corporation Substituted..............................57
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1 Events of Default..............................................58
SECTION 6.2 Acceleration...................................................60
SECTION 6.3 Other Remedies.................................................60
SECTION 6.4 Waiver of Past Defaults........................................60
SECTION 6.5 Control by Majority............................................61
SECTION 6.6 Limitation on Suits............................................61
SECTION 6.7 Rights of Holders of Notes to Receive Payment..................61
SECTION 6.8 Collection Suit by Trustee.....................................61
SECTION 6.9 Trustee May File Proofs of Claim...............................62
SECTION 6.10 Priorities.....................................................62
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<PAGE> 5
SECTION 6.11 Undertaking for Costs..........................................63
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee..............................................63
SECTION 7.2 Rights of Trustee..............................................64
SECTION 7.3 Individual Rights of Trustee...................................65
SECTION 7.4 Trustee's Disclaimer...........................................65
SECTION 7.5 Notice of Defaults.............................................66
SECTION 7.6 Reports by Trustee to Holders of the Notes.....................66
SECTION 7.7 Compensation and Indemnity.....................................66
SECTION 7.8 Replacement of Trustee.........................................67
SECTION 7.9 Successor Trustee by Merger, Etc...............................68
SECTION 7.10 Eligibility; Disqualification..................................68
SECTION 7.11 Preferential Collection of Claims against Company..............68
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1 Option to Effect Legal Defeasance or Covenant Defeasance.......69
SECTION 8.2 Legal Defeasance and Discharge.................................69
SECTION 8.3 Covenant Defeasance............................................69
SECTION 8.4 Conditions to Legal or Covenant Defeasance.....................70
SECTION 8.5 Deposited Money and Government Securities to be Held
in Trust; Other Miscellaneous Provisions.....................71
SECTION 8.6 Repayment to Company...........................................72
SECTION 8.7 Reinstatement..................................................72
ARTICLE IX
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1 Without Consent of Holders of Notes............................73
SECTION 9.2 With Consent of Holders of Notes...............................73
SECTION 9.3 Compliance with Trust Indenture Act............................75
SECTION 9.4 Revocation and Effect of Consents..............................75
SECTION 9.5 Notation or Exchange of Notes..................................75
SECTION 9.6 Trustee to Sign Amendments, Etc................................76
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ARTICLE X
SUBSIDIARY GUARANTEES
SECTION 10.1 Guarantees.....................................................76
SECTION 10.2 Limitation of Guarantor's Liability............................77
SECTION 10.3 Execution and Delivery of Subsidiary Guarantees................77
SECTION 10.4 Guarantors May Consolidate, Etc, on Certain Terms..............78
SECTION 10.5 Releases Following Sale of Assets..............................79
SECTION 10.6 "Trustee" to Include Paying Agent..............................80
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Trust Indenture Act Controls...................................80
SECTION 11.2 Notices........................................................80
SECTION 11.3 Communication by Holders of Notes with Other Holders
of Notes.....................................................81
SECTION 11.4 Certificate and Opinion as to Conditions Precedent.............81
SECTION 11.5 Statements Required in Certificate or Opinion..................82
SECTION 11.6 Rules by Trustee and Agents....................................82
SECTION 11.7 No Personal Liability of Directors, Officers, Employees and
Stockholders...................................................82
SECTION 11.8 Governing Law..................................................83
SECTION 11.9 No Adverse Interpretation of Other Agreements..................83
SECTION 11.10 Successors.....................................................83
SECTION 11.11 Severability...................................................83
SECTION 11.12 Counterpart Originals..........................................83
SECTION 11.13 Table of Contents, Headings, Etc...............................83
SCHEDULES
Schedule A GUARANTORS
EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF SUBSIDIARY GUARANTY
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<PAGE> 7
INDENTURE dated as of September 25, 1997 among Anker Coal Group, Inc., a
Delaware corporation (the "Company"), the entities listed on Schedule A hereto
(each a "Guarantor" and collectively, the "Guarantors"), and Marine Midland
Bank, a New York banking corporation and trust company, as trustee (the
"Trustee").
The Company, the Guarantors, and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 9 3/4% Series A Senior Notes due 2007 (the "Series A Notes") and the 9 3/4%
Series B Senior Notes due 2007 (the "Series B Notes" and, together with the
Series A Notes, the "Notes"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
"144A Global Note" means the Global Note in the form of Exhibit A-1 hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with and registered in the name of the Depositary or its nominee that will be
issued in a denomination equal to the outstanding principal amount of the Notes
sold in reliance on Rule 144A.
"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.
"Agent" means any Registrar, Paying Agent or co-registrar.
"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
<PAGE> 8
documents, instruments, agreements executed in connection therewith, and in each
case as amended, extended, modified, renewed, refunded, replaced or refinanced
from time to time.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel Bank that apply to such transfer or exchange.
"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 Section 4.15 hereof and/or the
provisions of Article V hereof and not by Section 4.10 hereof, 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 Section 4.7 hereof,
(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.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"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.
2
<PAGE> 9
"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.
"Cedel Bank" means Cedel Bank, societe anonyme.
"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 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).
"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
3
<PAGE> 10
dividends in an 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 this
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.
"Company" means Anker Coal Group, Inc., a Delaware corporation, and any
and all successors thereto.
"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.
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<PAGE> 11
"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.
"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 this 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.
"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.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.2 hereof or such other address as to which the
Trustee may give notice to the Company.
"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 institution
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.
"Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.6 hereof, in the form of
Exhibit A-1 hereto except that such Note shall not bear the Global Note Legend
and shall not have the "Schedule of Exchanges of Interests in the Global Note"
attached thereto.
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<PAGE> 12
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.3 hereof as the
Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"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 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.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant to
Section 2.6(f).
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"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 this 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
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<PAGE> 13
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 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
7
<PAGE> 14
Accountants 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.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A-1 hereto issued in accordance with Section 2.1, 2.6(b), 2.6(d) or
2.6(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.6(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"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.
"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.
"Guarantors" means each of the Subsidiaries of the Company that executes a
Subsidiary Guarantee in accordance with the provisions of this Indenture, and
their respective successors and assigns.
"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 this 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.
"Holder" means a Person in whose name a Note is registered.
"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
8
<PAGE> 15
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.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"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.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"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 Section 4.7 hereof.
"Issue Date" means the date on which the Series A Notes are originally
issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
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<PAGE> 16
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"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).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"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 Section 4.7 hereof 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
Notes being offered hereby) of the Company or any of its Restricted Subsidiaries
to declare
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<PAGE> 17
a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"Non-U.S. Person" means a person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Notes" has the meaning assigned to it in the preamble to this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the Offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person, or any Guarantor, as
applicable.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer or the principal accounting
officer of the Company, that meets the requirements of Section 11.5 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 11.5 hereof.
The counsel may be an employee of or counsel to the Company (or any Guarantor,
if applicable), any Subsidiary of the Company or the Trustee.
"Participant" means, with respect to DTC, Euroclear or Cedel Bank, a
Person who has an account with DTC, Euroclear or Cedel Bank, respectively (and,
with respect to DTC, shall include Euroclear and Cedel Bank).
"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 Holders" means First Reserve Corporation, Anker Holding B.V.,
John J. Faltis, P. Bruce Sparks and any of their respective Affiliates.
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<PAGE> 18
"Permitted Investments" means (i) any Investment in the Company or in a
Guarantor; (ii) any Investment in Cash Equivalents; (iii) any Investment by the
Company or any Guarantor in a Person, if as a result of such Investment (a) such
Person becomes a Guarantor or (b) 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; (iv) 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 Section 4.10 hereof;
(v) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company; (vi) any Investment
existing on the Issue Date; (vii) 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; (viii) Hedging
Obligations permitted under Section 4.9 hereof; (ix) 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; (x) any guarantees permitted to be made pursuant to Section
4.9 hereof; and (xi) 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 (xi) 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
this 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
Section 4.9 hereof covering only the assets acquired with such Indebtedness;
(vii) Liens existing on the date of this 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
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<PAGE> 19
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 this
Indenture to be incurred.
"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 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 Notes on terms at least as
favorable to the Holders of 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.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or agency or political subdivision thereof (including
any subdivision or ongoing business of any such entity or substantially all of
the assets of any such entity, subdivision or business).
"Private Placement Legend" means the legend set forth in Section 2.6(g)(i)
to be placed on all Notes issued under this Indenture except where otherwise
permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"RSTD Global Note" means the Global Note in the form of Exhibit A-1 hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with and registered in the name of the Depositary or its nominee that will be
issued in a denomination equal to the outstanding principal amount of the Notes
transferred or exchanged by the Company or any of its Subsidiaries, pursuant to
an effective registration statement under the Securities Act or pursuant to Rule
144 under the Securities Act.
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<PAGE> 20
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of September 25, 1997, by and among the Company, the Guarantors and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note or
Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in the
form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in the
form of Exhibit A-2 hereto bearing the Global Note Legend, the Private Placement
Legend and the legend set forth in Section 2.6(g)(iii) hereto, and deposited
with or on behalf of and registered in the name of the Depositary or its
nominee, issued in a denomination equal to the outstanding principal amount of
the Notes initially sold in reliance on Rule 903 of Regulation S.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the corporate trust department of the Trustee (or any successor
group of the Trustee) or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"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
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covenant entitled "Additional Subsidiary Guarantees" until such time as it
satisfies the first sentence of this definition of "Restricted Subsidiary."
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means all Indebtedness of the Company other than
Subordinated Indebtedness.
"Series A Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Series B Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"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 Securities 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 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
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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 Article X hereof, including a
notation in the Notes substantially in the form attached hereto as Exhibit D.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA, except as provided in Section 9.3 hereof.
"Trustee" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent Global Note in the form of
Exhibit A-1 attached hereto that bears the Global Note Legend and that has the
"Schedule of Exchanges of Interests in the Global Note" attached thereto, and
that is deposited with or on behalf of and registered in the name of the
Depositary, but does not bear the Private Placement Legend.
"Unrestricted Subsidiary" means (i) any 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 Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is 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 Section 4.7 hereof. If, at any time,
any Unrestricted Subsidiary would fail to meet the foregoing conditions as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this 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 Section 4.9 hereof, 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
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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 Section 4.9 hereof, 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.
"U.S. Person" means (i) any individual resident in the United States, (ii)
any partnership or corporation organized or incorporated under the laws of the
United States, (iii) any estate of which an executor or administrator is a U.S.
Person (other than an estate governed by foreign law and of which at least one
executor or administrator is a non-U.S. Person who has sole or shared investment
discretion with respect to its assets), (iv) any trust of which any trustee is a
U.S. Person (other than a trust of which at least one trustee is a non-U.S.
Person who has sole or shared investment discretion with respect to its assets
and no beneficiary of the trust (and no settler, if the trust is revocable) is a
U.S. Person), (v) any agency or branch of a foreign entity located in the United
States, (vi) any non-discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a U.S.
Person, (vii) any discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated or (if an
individual) resident in the United States (other than such an account held for
the benefit or account of a non-U.S. Person), (viii) any partnership or
corporation organized or incorporated under the laws of a foreign jurisdiction
and formed by a U.S. Person principally for the purpose of investing in
securities not registered under the Securities Act (unless it is organized or
incorporated and owned, by "accredited investors" within the meaning of Rule
501(a) under the Securities Act who are not natural persons, estates or trusts);
provided, however, that the term "U.S. Person" shall not include (A) a branch or
agency of a U.S. Person that is located and operating outside the United States
for valid business purposes as a locally regulated branch or agency engaged in
the banking or insurance business, (B) any employee benefit plan established and
administered in accordance with the law, customary practices and documentation
of a foreign country and (C) the international organizations set forth in
Section 902(o)(7) of Regulation S under the Securities Act and any other similar
international organizations, and their agencies, affiliates and pension plans.
"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
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<PAGE> 24
Owned Restricted Subsidiaries of such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
"Wholly Owned Subsidiary" of any Person means a 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 Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.2 Other Definitions.
Term Defined In
Section
"Affiliate Transaction".................................. 4.11
"Asset Sale Offer"....................................... 3.9
"Change of Control Offer"................................ 4.15
"Change of Control Payment".............................. 4.15
"Change of Control Payment Date"......................... 4.15
"Class A Preferred Stock"................................ 4.7
"Covenant Defeasance".................................... 8.3
"DTC".................................................... 2.3
"Event of Default"....................................... 6.1
"Excess Proceeds"........................................ 4.10
"incur".................................................. 4.9
"Legal Defeasance"....................................... 8.2
"Offer Amount"........................................... 3.9
"Offer Period"........................................... 3.9
"Paying Agent"........................................... 2.3
"Payment Default"........................................ 6.1
"Permitted Debt"......................................... 4.9
"Purchase Date".......................................... 3.9
"Registrar".............................................. 2.3
"Restricted Payments".................................... 4.7
"Registrar".............................................. 2.3
SECTION 1.3 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes and the Subsidiary Guarantees;
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"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company or any Guarantor and any
successor obligor upon Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.4 Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular;
(e) provisions apply to successive events and transactions; and
(f) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement or successor sections or
rules adopted by the SEC from time to time.
ARTICLE II
THE NOTES
SECTION 2.1 Form and Dating.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A-1 or Exhibit A-2 hereto. The notation on
each Note relating to the Subsidiary Guarantees shall be substantially in the
form set forth on Exhibit D, which is a part of this Indenture. The Notes may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, or usage, as designated by the
Company. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
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The terms and provisions contained in the Notes (including the Subsidiary
Guarantees) shall constitute, and are hereby expressly made, a part of this
Indenture and the Company, the Guarantors, and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby. However, to the extent any provision of any Note conflicts
with the express provisions of this Indenture, the provisions of this Indenture
shall govern and be controlling.
Notes issued in global form shall be substantially in the form of Exhibits
A-1 or A-2 attached hereto (including the Global Note Legend and the "Schedule
of Exchanges in the Global Note" attached thereto). Notes issued in definitive
form shall be substantially in the form of Exhibit A-1 attached hereto (but
without the Global Note Legend and without the "Schedule of Exchanges of
Interests in the Global Note" attached thereto). Each Global Note shall
represent such of the outstanding Notes as shall be specified therein and each
shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the aggregate principal amount of outstanding Notes represented
thereby shall be made by the Trustee or the Note Custodian, at the direction of
the Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.6 hereof. Notes offered and sold to QIBs shall be issued
initially in the form of one or more Global Notes, which shall be deposited with
the Trustee, as custodian for DTC, in New York, New York, and registered in the
name of DTC or its nominee, in each case for credit to the accounts of DTC's
participants.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note (accompanied by
a notation of the Subsidiary Guarantees duly endorsed by the Guarantors), which
shall be deposited on behalf of the purchasers of the Notes represented thereby
with the Trustee, at its New York office, as custodian for the Depositary, and
registered in the name of the Depositary or the nominee of the Depositary for
the accounts of designated agents holding on behalf of Euroclear or Cedel Bank,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. Within a reasonable time after expiration of the Restricted Period the
Regulation S Temporary Global Notes will be exchanged for the Regulation S
Permanent Global Notes upon the receipt by the Trustee of (i) a written
certificate from the Depositary, together with copies of certificates from
Euroclear and Cedel Bank certifying that they have received certification of
non-United States beneficial ownership of 100% of the aggregate principal amount
of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein during the Restricted
Period pursuant to another exemption from registration under the Securities Act
and who will take delivery of a beneficial ownership interest in a 144A Global
Note or a RSTD Global Note bearing a Private Placement Legend, all as
contemplated by Section 2.6(a)(ii) hereof), and (ii) an Officers' Certificate
from the Company. Following such period, beneficial interests in the Regulation
S Temporary Global Note shall be exchanged for beneficial interests in
Regulation S Permanent Global Notes pursuant to the Applicable Procedures.
Simultaneously with the authentication of Regulation S Permanent Global Notes,
the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate
principal
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amount of the Regulation S Temporary Global Note and the Regulation S Permanent
Global Notes may from time to time be increased or decreased by adjustments made
on the records of the Trustee and the Depositary or its nominee, as the case may
be, in connection with transfers of interest as hereinafter provided.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes that are held by the
agent members through Euroclear or Cedel Bank.
SECTION 2.2 Execution and Authentication.
One Officer shall sign the Notes for the Company by manual or facsimile
signature, which signature shall be attested to by the secretary or an assistant
secretary of the Company. The Company's seal shall be reproduced on the Notes
and may be in facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time such Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate the Series A Notes, with the Subsidiary Guarantees
endorsed thereon, for original issue up to $125,000,000 in aggregate principal
amount and shall authenticate the Series B Notes for original issue up to
$125,000,000; provided that the Series B Notes shall be issuable only upon the
valid surrender for cancellation of Series A Notes of a like aggregate principal
amount. The aggregate principal amount of Notes outstanding at any time may not
exceed $125,000,000 except as provided in Section 2.7 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Company.
Securities shall be issuable only in fully registered form, without
coupons, in denominations of $1,000 and integral multiples thereof.
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SECTION 2.3 Registrar and Paying Agent.
The Company and the Guarantors shall maintain an office or agency where
Notes may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Notes are to be presented for
payment ("Paying Agent"). The Registrar shall keep a register of the Notes and
of their transfer and exchange. The Company may appoint one or more
co-registrars and one or more additional Paying Agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company shall notify the Trustee in writing of the
name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such. The Company or any of the Guarantors may act as
Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes, and
by its signature hereto, the Trustee agrees to so act.
The Trustee is authorized to enter into a letter of representations with
DTC in the form provided to the Trustee by the Company and to act in accordance
with such letter.
SECTION 2.4 Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company or the Guarantors in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company or a Guarantor) shall have no further liability for the money. If the
Company or a Guarantor acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.5 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company and/or the Guarantors shall furnish to the
Trustee at least three Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably
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require of the names and addresses of the Holders of Notes and the Company and
the Guarantors shall otherwise comply with TIA ss. 312(a).
SECTION 2.6 Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. All Global Notes will be exchanged by the Company for
Definitive Notes if (i) the Company delivers to the Trustee notice from the
Depositary that it is unwilling or unable to continue to act as Depositary or
that it is no longer a clearing agency registered under the Exchange Act and, in
either case, a successor Depositary is not appointed by the Company within 90
days after the date of such notice from the Depositary, (ii) the Company in its
sole discretion determines that the Global Notes (in whole but not in part)
should be exchanged for Definitive Notes and delivers a written notice to such
effect to the Trustee or (iii) there shall have occurred and be continuing a
Default or an Event of Default with respect to the Notes; provided that in no
event shall the Regulation S Temporary Global Note be exchanged by the Company
for Definitive Notes prior to (x) the expiration of the Restricted Period and
(y) the receipt by the Registrar of any certificates determined by the Company
to be required pursuant to Rule 903 under the Securities Act. Upon the
occurrence of either of the preceding events in (i) or (ii) above, the Company
will notify the Trustee in writing that Definitive Notes (accompanied by a
notation of the Subsidiary Guarantees duly endorsed by the Guarantors) shall be
issued in such names as the Depositary and the participants shall instruct the
Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as
provided in Sections 2.7 and 2.11 hereof. Every Note authenticated and delivered
in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant
to Section 2.7 or 2.11 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.6(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.6(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Notes. The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
subparagraph (iii) or (iv), as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period transfers of
beneficial interests in the Regulation S Temporary Global Note may not be
made to a U.S. Person or for the account
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or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred only to
Persons who take delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers
described in this Section 2.6(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests (other than a transfer of a beneficial interest in a
Global Note to a Person who takes delivery thereof in the form of a
beneficial interest in the same Global Note), the transferor of such
beneficial interest must deliver to the Registrar either (A) (1) a written
order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from
a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
cause to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar
of any certificates determined by the Company to be required pursuant to
Rule 903 under the Securities Act; provided, further, that in no event
shall an Indirect Participant who holds a beneficial interest in the
Regulation S Temporary Global Note transfer or exchange such interest to a
U. S. Person who takes delivery in the form of an interest in U. S. Global
Notes prior to the satisfaction of clauses (x) and (y) in the immediately
preceding proviso. Upon an Exchange Offer by the Company in accordance
with Section 2.6(f) hereof, the requirements of this Section 2.6(b)(ii)
shall be deemed to have been satisfied upon receipt by the Registrar of
the instructions contained in the Letter of Transmittal delivered by the
Holder of such beneficial interests in the Restricted Global Notes. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture, the
Notes and otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount of the relevant Global Note(s) pursuant to
Section 2.6(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of clause (ii) above and the Registrar
receives the following:
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(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item 1 thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the
Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item 2 thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the RSTD Global Note, then the transferor
must deliver (x) a certificate in the form of Exhibit B hereto,
including the certifications and certificates and Opinion of Counsel
required by item 3 thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted Global
Note. A beneficial interest in any Restricted Global Note may be exchanged
by any holder thereof for a beneficial interest in an Unrestricted Global
Note or transferred to a Person who takes delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of clause (ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item 1(a) thereof;
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take
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delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in
the form of Exhibit B hereto, including the certifications in
item 4 thereof; and
(3) in each such case set forth in this subparagraph
(D), an Opinion of Counsel in form reasonably acceptable to
the Registrar to the effect that such exchange or transfer is
in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are not required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an authentication order in accordance with
Section 2.2 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes (accompanied by a notation of the Subsidiary Guarantees duly
endorsed by the Guarantors) in an aggregate principal amount equal to the
principal amount of beneficial interests transferred pursuant to subparagraph
(B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Definitive Note, then, upon receipt by
the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange, such beneficial interest for a
Definitive Note, a certificate from such holder in the form of
Exhibit C hereto, including the certifications in item 2(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item 1 thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item 2 thereof;
(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the Securities
Act in accordance
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with Rule 144 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
3(a) thereof;
(E) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item 3(b)
thereof; or
(F) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item 3(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.6(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note (accompanied by a
notation of the Subsidiary Guarantees duly endorsed by the Guarantors) in the
appropriate principal amount. Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this Section 2.6(c)
shall be registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive Note issued
in exchange for a beneficial interest in a Restricted Global Note pursuant to
this Section 2.6(c)(i) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.6(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
(A) exchanged for a Definitive Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any certificates
determined by the Company to be required pursuant to Rule 903(c)(3)(B)
under the Securities Act or (B) transferred to a Person who takes delivery
thereof in the form of a Definitive Note prior to the conditions set forth
in clause (A) above or unless the transfer is pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
(iii) Notwithstanding 2.6(c)(i) hereof, a holder of a
beneficial interest in a Restricted Global Note may exchange such
beneficial interest for an Unrestricted Definitive Note or may transfer
such beneficial interest to a Person who takes delivery thereof in the
form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
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(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item 1(b)
thereof;
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the
form of a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in item 4
thereof; and
(3) in each such case set forth in this subparagraph
(D), an Opinion of Counsel in form reasonably acceptable to
the Company, to the effect that such exchange or transfer is
in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are not required in order to maintain
compliance with the Securities Act.
(iv) If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Definitive Note, then, upon satisfaction
of the conditions set forth in Section 2.6(b)(ii) hereof, the Trustee
shall cause the aggregate principal amount of the applicable Global Note
to be reduced accordingly pursuant to Section 2.6(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to
the Person designated in the instructions a Definitive Note (accompanied
by a notation of the Subsidiary Guarantees duly endorsed by the
Guarantors) in the appropriate principal amount. Any Definitive Note
issued in exchange for a beneficial interest pursuant to this Section
2.6(c)(iv) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.6(c)(iv) shall not bear the Private
Placement Legend. A beneficial interest in an Unrestricted Global Note
cannot be
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exchanged for a Definitive Note bearing the Private Placement Legend or
transferred to a Person who takes delivery thereof in the form of a
Definitive Note bearing the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) if any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note
or to transfer such Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item 2(b) thereof;
(B) if such Definitive Note is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item 1 thereof;
(C) if such Definitive Note is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item 2
thereof;
(D) if such Definitive Note is being transferred pursuant to
an exemption from the registration requirements of the Securities
Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item 3(a) thereof;
(E) if such Definitive Note is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item 3(b)
thereof; or
(F) if such Definitive Note is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item 3(c) thereof,
the Trustee shall cancel the Definitive Note, increase or cause to be increased
the aggregate principal amount of, in the case of clause (A) above, the
appropriate Restricted Global Note, in the case of clause (B) above, the 144A
Global Note, in the case of clause (C) above, the Regulation S Global Note, and
in all other cases, the RSTD Global Note.
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(ii) A Holder of a Restricted Definitive Note may exchange
such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in
the case of a transfer, is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications in
Item 1(c) thereof;
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery
thereof in the form of a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in
the form of Exhibit B hereto, including the certifications in
item 4 thereof, and
(3) in each such case set forth in this subparagraph
(D), an Opinion of Counsel in form reasonably acceptable to
the Company to the effect that such exchange or transfer is in
compliance with the Securities Act, that the restrictions on
transfer contained herein and in the Private Placement Legend
are not required in order to maintain compliance with the
Securities Act, and such Definitive Notes are being exchanged
or transferred in compliance with any applicable blue sky
securities laws of any State of the United States.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.6(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
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(iii) A Holder of an Unrestricted Definitive Note may exchange
such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an authentication order in accordance with
Section 2.2 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes (accompanied by a notation of the Subsidiary Guarantees duly
endorsed by the Guarantors) in an aggregate principal amount equal to the
principal amount of beneficial interests transferred pursuant to subparagraphs
(ii)(B), (ii)(D) or (iii) above.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.6(e), the Registrar shall register the transfer
or exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present on surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, pursuant to the provisions of this Section 2.6(e).
(i) Restricted Definitive Notes may be transferred to and
registered in the name of Persons who take delivery thereof if the
Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under
the Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications in
item 1 thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item 2 thereof;
and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item 3 thereof, if applicable.
(ii) Any Restricted Definitive Note may be exchanged by the
Holder thereof for an Unrestricted Definitive Note or transferred to a
Person or Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
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(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in
the case of a transfer, is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item 1(a) thereof,
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item 4 thereof, and
(3) in each such case set forth in this subparagraph
(D), an Opinion of Counsel in form reasonably acceptable to
the Company to the effect that such exchange or transfer is in
compliance with the Securities Act, that the restrictions on
transfer contained herein and in the Private Placement Legend
are not required in order to maintain compliance with the
Securities Act, and such Restricted Definitive Note is being
exchanged or transferred in compliance with any applicable
blue sky securities laws of any State of the United States.
(iii) A Holder of Unrestricted Definitive Notes may transfer
such Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request for such a
transfer, the Registrar shall register the Unrestricted Definitive Notes
pursuant to the instructions from the Holder thereof. Unrestricted
Definitive Notes cannot be exchanged for or transferred to Persons who
take delivery thereof in the form of a Restricted Definitive Note.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an authentication order in accordance with Section 2.2 and
Officers' Certificate, the Trustee shall
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authenticate (i) one or more Unrestricted Global Notes (accompanied by a
notation of the Subsidiary Guarantees duly endorsed by the Guarantors) in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by persons that
are not (x) broker-dealers, (y) Persons participating in the distribution of the
Series B Notes or (z) Persons who are affiliates (as defined in Rule 144) of the
Company and accepted for exchange in the Exchange Offer and (ii) Definitive
Notes (accompanied by a notation of the Subsidiary Guarantees duly endorsed by
the Guarantors) in an aggregate principal amount equal to the principal amount
of the Restricted Definitive Notes tendered for acceptance by persons that are
not (x) broker-dealers, (y) persons participating in the distribution of the
Series B Notes or (z) Persons who are affiliates (as defined in Rule 144) of the
Company and accepted for exchange in the Exchange Offer. Concurrent with the
issuance of such Notes, the Trustee shall cause the aggregate principal amount
of the applicable Restricted Global Notes to be reduced accordingly, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each
Global Note and each Definitive Note (and all Notes issued in
exchange therefor or substitution thereof) shall bear the
legend in substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE THIRD SENTENCE HEREOF. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, RESELL OR OTHERWISE TRANSFER
THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
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ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS NOTE OR ANY INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTIONS" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE
902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A
PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
NOTE IN VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f)
to this Section 2.6 (and all Notes issued in exchange therefor
or substitution thereof) shall not bear the Private Placement
Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend
in substantially the following form:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A NOTE IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY
THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER
STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
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(iii) Regulation S Temporary Global Note Legend. The
Regulation S Temporary Global Note shall bear a legend in substantially
the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL
BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note, by the
Trustee or by the Depositary at the direction of the Trustee, to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note, by the Trustee or by the
Depositary at the direction of the Trustee, to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes (in each case, accompanied by a notation of the
Subsidiary Guarantees duly endorsed by the Guarantors) upon the Company's
order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive Note
for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchange or
transfer pursuant to Sections 2.10, 3.6, 4.10, 4.15 and 9.5 hereof).
(iii) The Registrar shall not be required (A) to register the
transfer of or exchange Notes during a period beginning at the opening of
business 15 days before the day of mailing of notice of redemption and
ending at the close of business on the day of such mailing, (B) to
register the transfer of or to exchange any Note so selected for
redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part or (C)
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to register the transfer of or to exchange a Note between a record date
and the next succeeding Interest Payment Date.
(iv) All Global Notes and Definitive Notes (in each case,
accompanied by a notation of the Subsidiary Guarantees duly endorsed by
the Guarantors) issued upon any registration of transfer or exchange of
Global Notes or Definitive Notes shall be the valid obligations of the
Company and the Guarantors, evidencing the same debt, and entitled to the
same benefits under this Indenture, as the Global Notes or Definitive
Notes surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to
register the transfer of or to exchange Notes during a period beginning at
the opening of business 15 days before the day of mailing of notice of
redemption and ending at the close of business on the day of such mailing,
(B) to register the transfer of or to exchange any Note so selected for
redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part or (C) to register the transfer of or to exchange a
Note between a record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem and
treat the Person in whose name any Note is registered as the absolute
owner of such Note for the purpose of receiving payment of principal of,
Liquidated Damages, if any, and interest on such Notes and for all other
purposes, and none of the Trustee, any Agent or the Company shall be
affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes (in each case, accompanied by a notation of the
Subsidiary Guarantees duly endorsed by the Guarantors) in accordance with
the provisions of Section 2.2 hereof.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this Section
2.6 to effect a transfer or exchange may be submitted by facsimile,
provided original copies are promptly sent to the Registrar.
(ix) Each Holder of a Note agrees to indemnify the Company and
the Trustee against any liability that may result from the transfer,
exchange or assignment of such Holder's Note in violation of any provision
of this Indenture and/or applicable United States federal or state
securities law.
(x) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Note (including any transfers between or
among Depositary participants or beneficial owners of interests in any
Global Note) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if
and when expressly required by the
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terms of, this Indenture, and to examine the same to determine substantial
compliance as to form with the express requirements hereof.
SECTION 2.7 Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the Company, shall authenticate a
replacement Note (accompanied by a notation of the Subsidiary Guarantees duly
endorsed by the Guarantors) if the Trustee's requirements are met. An indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Guarantors, the Trustee, any
Agent and any authenticating agent from any loss that any of them may suffer if
a Note is replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and the
Guarantors and shall be entitled to all of the benefits of this Indenture
equally and proportionately with all other Notes duly issued hereunder.
SECTION 2.8 Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.9 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds such Note.
If a Note is replaced pursuant to Section 2.7 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.1
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate,
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay all of the principal, Liquidated Damages, if any, and interest and
premium, if any, due on the Notes payable on that date, then on and after that
date such Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
SECTION 2.9 Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, by any Guarantor or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control
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with the Company or any Guarantor, shall be considered as though not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that a Responsible Officer of the Trustee actually knows are so owned
shall be so disregarded.
SECTION 2.10 Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes (accompanied by a notation of the
Subsidiary Guarantees duly endorsed by the Guarantors) upon a written order of
the Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes (accompanied by a notation
of the Subsidiary Guarantees duly endorsed by the Guarantors) in exchange for
temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11 Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirements of the Exchange
Act). Certification of the destruction of all Notes shall be delivered to the
Company. Subject to Section 2.7 hereof, the Company may not issue new Notes to
replace Notes that it has paid or that have been delivered to the Trustee for
cancellation.
SECTION 2.12 Defaulted Interest.
If either the Company or any Guarantor defaults in a payment of interest
on the Notes, it or they (to the extent of their obligations under the
Subsidiary Guarantees) shall pay the defaulted interest in any lawful manner
plus, to the extent lawful, interest payable on the defaulted interest, to the
Persons who are Holders on a subsequent special record date, in each case at the
rate provided in the Notes and in Section 4.1 hereof. Such defaulted interest,
and the interest thereon, may be paid by the Company, at its election in each
case, as provided in clause (i) or (ii) below.
(i) The Company shall notify the Trustee in writing of the
amount of defaulted interest, plus interest payable thereon, proposed to
be paid on each Note and the date of the proposed payment. The Company
shall fix or cause to be fixed each such special record date and payment
date, provided that no such special record date shall be less than 10 days
prior to the related payment date for such defaulted interest. At least 15
days before the special record date, the Company (or, upon the written
request of the Company, the Trustee
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in the name and at the expense of the Company) shall mail or cause to be
mailed to Holders a notice that states the special record date, the
related payment date and the amount of such interest to be paid; or
(ii) The Company may make payment on any defaulted interest
and on the interest thereon in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed payment
pursuant to this clause, such manner shall be deemed practicable by the
Trustee.
SECTION 2.13 CUSIP Numbers.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of a redemption and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee of any
change in the "CUSIP" numbers.
SECTION 2.14 Record Date.
The record date for purposes of determining the identity of Holders of
Notes entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA ss.
316(c).
ARTICLE III
REDEMPTION AND PREPAYMENT
SECTION 3.1 Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.7 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
SECTION 3.2 Selection of Notes to be Redeemed.
If less than all of the Notes are to be redeemed at any time, the Trustee
shall select the Notes to be redeemed among the Holders of the Notes in
compliance with the requirements of the principal
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national securities exchange, if any, on which the Notes are listed or, if the
Notes are not so listed, on a pro rata basis.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.3 Notice of Redemption.
Subject to the provisions of Section 3.9 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed (including CUSIP
numbers) and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
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At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
SECTION 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.3 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. If a redemption date is not a Business Day,
payment shall be made on the next succeeding Business Day and no interest shall
accrue for the period from such redemption date to the next succeeding Business
Day.
SECTION 3.5 Deposit of Redemption Price.
On or prior to the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price
of, Liquidated Damages, if any, and accrued interest on all Notes to be redeemed
on that date. The Trustee or the Paying Agent shall promptly return to the
Company any money deposited with the Trustee or the Paying Agent by the Company
in excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph and
payment of the Notes called for redemption is not otherwise prohibited or
prevented, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.1 hereof
SECTION 3.6 Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note (accompanied by a notation of
the Subsidiary Guarantees duly endorsed by the Guarantors) equal in principal
amount to the unredeemed portion of the Note surrendered.
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SECTION 3.7 Optional Redemption.
(a) The Notes will not be redeemable at the Company's option prior
to October 1, 2002. Thereafter, the 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:
Year Percentage
2002.............................................. 104.875%
2003.............................................. 103.250%
2004.............................................. 101.625%
2005 and thereafter............................... 100.000%
(b) 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 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 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.
(c) Any redemption pursuant to this Section 3.7 shall be made
pursuant to the provisions of Section 3.1 through 3.6 hereof.
SECTION 3.8 Mandatory Redemption.
Except as set forth below under Sections 4.10 and 4.15, the Company is not
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
SECTION 3.9 Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
Offer"), it shall follow the procedures specified below.
The Asset Sale offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount
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has been tendered, all Notes tendered in response to the Asset Sale Offer.
Payment for any Notes so purchased shall be made in the same manner as interest
payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale offer is being made pursuant to this Section
3.9 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest on or after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the Note
the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis
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(with such adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000, or integral multiples thereof, shall be
purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes (accompanied by a notation of the Subsidiary Guarantees duly
endorsed by the Guarantors) equal in principal amount to the unpurchased portion
of the Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.9. The Company, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Note (in each
case, accompanied by a notation of the Subsidiary Guarantees duly endorsed by
the Guarantors), and the Trustee, upon written request from the Company shall
authenticate and mail or deliver such new Note to such Holder, in a principal
amount equal to any unpurchased portion of the Note surrendered. Any Note not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale Offer
on the Purchase Date.
Other than as specifically provided in this Section 3.9, any purchase
pursuant to this Section 3.9 shall be made pursuant to the provisions of Section
3.1 through 3.6 hereof.
ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or any Guarantor
thereof, holds as of 10:00 a.m. Eastern Time on the due date money deposited by
the Company in immediately available funds and designated for and sufficient to
pay all principal, premium, if any, and interest then due. The Company shall pay
all Liquidated Damages, if any, in the same manner on the dates and in the
amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate borne by
the Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue
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installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the same rate to the extent lawful.
SECTION 4.2 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company or the Guarantors in respect of the Notes and this Indenture
may be served. The Company shall give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.3.
SECTION 4.3 Reports.
Whether or not required by the rules and regulations of the SEC, so long
as any Notes are outstanding, the Company shall furnish to the Holders of Notes
(i) all quarterly and annual financial information that would be required to be
contained in a filing with the SEC 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 SEC on Form 8-K if the Company were
required to file such reports, in each case within the time periods set forth in
the SEC's rules and regulations. In addition, whether or not required by the
rules and regulations of the SEC, at any time after the effectiveness of the
Exchange Offer contemplated by the Registration Rights Agreement, the Company
shall file a copy of such information and report with the SEC for public
availability within the time periods set forth in the SEC's rules and
regulations (unless the SEC will not accept such a filing). In addition, until
the effectiveness of the registration statement relating to the Exchange Offer
pursuant to the Registration Rights Agreement, the Company and the Guarantors
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shall 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.
SECTION 4.4 Compliance Certificate.
(a) The Company and the Guarantors shall deliver to the Trustee,
within 120 days after the end of each fiscal year, an Officers' Certificate
stating that a review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether the Company or such
Guarantor, as the case may be, has kept, observed, performed and fulfilled its
obligations under this Indenture and the Subsidiary Guarantees, respectively,
and further stating, as to each such Officer signing such certificate, that to
the best of his or her knowledge the Company or such Guarantor, as the case may
be, is not in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company or such
Guarantor, as the case may be, is taking or proposes to take with respect
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of
or interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company or such Guarantor, as the
case may be, is taking or proposes to take with respect thereto.
(b) The year-end financial statements delivered pursuant to Section
4.3(a) above shall be accompanied by a written report of the Company's
independent public accountants (who shall be a firm of established national
reputation) that shall not be qualified by any reference to any violation by the
Company of any provisions of Article IV or Article V hereof.
(c) Each of the Company and the Guarantors shall, so long as any of
the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer of
the Company or any Guarantor becoming aware of any Default or Event of Default,
an Officers' Certificate specifying such Default or Event of Default and what
action the Company is taking or proposes to take with respect thereto.
SECTION 4.5 Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
SECTION 4.6 Stay, Extension and Usury Laws.
Each of the Company and the Guarantors covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that would
prohibit or forgive the Company or any Guarantor from paying all or any portion
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of the principal of, Liquidated Damages, if any, premium, if any, or interest on
the Notes or any amounts due under the Guarantees as contemplated herein; and
each of the Company and the Guarantors (to the extent that it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it shall not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 4.7 Limitation on Restricted Payments.
The Company shall not, and shall 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 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 Section 4.9 hereof; 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 this 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 this
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
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the date of this 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 this
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 Subsidiaries, 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 this Indenture that
was treated as a Restricted Payment under this 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 shall 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 this
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
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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 in
Control under this 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 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 Section 4.9 hereof; (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 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 this
Section 4.7. 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
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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 this Section 4.7 were computed.
SECTION 4.8 Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall 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 this Indenture, (b) the Amended and
Restated Revolving Credit Facility as in effect as of the date of this
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 this
Indenture, (c) this Indenture and the 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 this 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
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amendment, modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing.
SECTION 4.9 Incurrence of Indebtedness and Issuance of Disqualified Stock.
The Company shall not, and shall 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 shall not, and shall 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.
Neither the Company nor any Guarantor shall 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 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 shall 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 all Net Proceeds of Asset
Sales applied to repay any such Indebtedness (or any such Permitted
Refinancing Indebtedness) pursuant to Section 4.10 hereof;
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(ii) the incurrence by the Company and the Guarantors of
Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness
represented by the 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 this 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 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
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(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 of this Section 4.9. 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 Section 4.9.
SECTION 4.10 Asset Sales.
The Company shall not, and shall 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 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 this 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
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constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company shall be required to make an offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of 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 this Indenture. To
the extent that the aggregate amount of 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
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
SECTION 4.11 Transactions with Affiliates.
The Company shall not, and shall 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 shall 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 Section
4.7 hereof; (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 or
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 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
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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 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 Notes in any material respect than the
original agreement as in effect on the Issue Date; and (xi) 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 this Indenture which
comply with the requirements of clause (i) of the preceding paragraph.
SECTION 4.12 Liens.
The Company shall not, and shall 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 Notes are
secured equally and ratably with (or prior to in the case of Subordinated
Indebtedness) the obligation or liability secured by such Lien.
SECTION 4.13 Business Activities.
The Company shall not, and shall 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.
SECTION 4.14 Corporate Existence.
Subject to Article V and Article X hereof, the Company shall do or cause
to be done all things necessary to preserve and keep in full force and effect
(i) its corporate existence, and the corporate, partnership or other existence
of each of its Restricted Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of the
Company or any such Restricted Subsidiary and (ii) the rights (charter and
statutory), licenses and franchises of the Company and its Restricted
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of its Restricted Subsidiaries, if the Board of Directors
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of such entity.
SECTION 4.15 Offer to Repurchase upon Change of Control.
Upon the occurrence of a Change of Control, each Holder of Notes shall
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 Notes pursuant to the
offer described below (the "Change of Control Offer") at an
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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 shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase 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 such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by this Indenture and described in such notice. The Company shall
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 Notes as a
result of a Change of Control.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (1) accept for payment all 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 Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to the unpurchased portion of
the 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
shall publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.
The Company shall 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 this Indenture applicable to a Change of Control Offer made by the Company
and purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
SECTION 4.16 Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the 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.
SECTION 4.17 Additional Subsidiary Guarantees.
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 this Indenture, then such newly acquired or created Restricted
Subsidiary (other than a Foreign Subsidiary) shall execute a
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Subsidiary Guarantee and deliver an Opinion of Counsel, in accordance with the
terms of this Indenture.
ARTICLE V
SUCCESSORS
SECTION 5.1 Merger, Consolidation, or Sale of Assets.
The Company shall 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
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 Notes
and this 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 Section 4.9 hereof.
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.
SECTION 5.2 Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.1 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" or the Guarantor, as the
case may be, shall refer instead to the successor corporation and not to the
Company or applicable Guarantor, as the case may be), and may exercise
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every right and power of the Company or the applicable Guarantor, as the case
may be, under this Indenture with the same effect as if such successor Person
had been named as the Company herein; provided, however, that the predecessor
Company and predecessor Subsidiaries that are Guarantors shall not be relieved
from the obligation to pay the principal of, Liquidated Damages, if any, and
interest on the Notes except in the case of a sale of all of the Company's
assets that meets the requirements of Section 5.1 hereof.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1 Events of Default.
Each of the following constitutes an "Event of Default":
(a) a default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes;
(b) a default in payment when due of the principal of or premium, if
any, on the Notes;
(c) the Company or any of its Restricted Subsidiaries fail to comply
with any of the provisions of 3.9, 4.10, 4.15 or 5.1 hereof;
(d) 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 Notes
then outstanding to comply with any of its other agreements in this Indenture or
the Notes;
(e) a 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 hereafter, 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 such other Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more;
(f) 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);
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(g) except as permitted by this 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;
(h) the Company, any Guarantor, or any of the Company's Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary pursuant to or within the meaning of
Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a custodian of it or for
all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(i) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company, any Guarantor, or any
of the Company's Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary in an
involuntary case;
(ii) appoints a custodian of the Company, any Guarantor, or
any of the Company's Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary or for
all or substantially all of the property of the Company, any Guarantor, or
any of the Company's Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company, any Guarantor, or
any of the Company's Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
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SECTION 6.2 Acceleration.
If any Event of Default (other than an Event of Default specified in
clause (h) or (i) of Section 6.1 hereof with respect to the Company, any
Guarantor, any Significant Subsidiary or any group of Significant Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Upon any such declaration, the Notes shall become due and payable
immediately. Notwithstanding the foregoing, if an Event of Default specified in
clause (h) or (i) of Section 6.1 hereof occurs 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 Notes
shall be due and payable immediately without further action or notice. The
Holders of a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may on behalf of all of the Holders
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
SECTION 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.4 Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
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SECTION 6.5 Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, and place of conducting any proceeding for exercising any
remedy available to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture that the Trustee determines may be unduly prejudicial to
the rights of other Holders of Notes or that may involve the Trustee in personal
liability.
SECTION 6.6 Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.7 Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and
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interest remaining unpaid on the Notes and, to the extent lawful, interest on
overdue principal and interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.9 Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
or any of the Guarantors (or any other obligor upon the Notes), its creditors or
its property and shall be entitled and empowered to participate as a member,
voting or otherwise, of any official committee of creditors appointed in such
matter and to collect, receive and distribute any money or other property
payable or deliverable on any such claims and any custodian in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.7 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money, upon presentation of the Notes and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid, in the
following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.7 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any, and
interest, respectively; and
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Third: to the Company or to such party as may be lawfully entitled
thereto.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.7 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need perform
only those duties that are specifically set forth in this Indenture and
no others, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements
of this Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein or otherwise
verify the contents thereof).
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(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b) and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request or direction of any Holders, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense including reasonable attorneys' fees that might be incurred
by it in compliance with such request or direction.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.2 Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document. The
Trustee shall receive and retain financial reports and statements of the Company
as provided herein, but it shall have no duty to review or analyze such reports
or statements to determine compliance with covenants or other obligations of the
Company.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel of its selection and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
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(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent or attorney
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company or any Guarantor shall be
sufficient if signed by an Officer of the Company or any Guarantor.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses (including
reasonable attorneys' fees) and liabilities that might be incurred by it in
compliance with such request or direction.
(g) The Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact such a
default is received by the Trustee at the Corporate Trust Office of the Trustee,
and such notice references the Notes and this Indenture.
SECTION 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company, any Guarantors or
any Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.4 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture, the Notes or the Subsidiary
Guarantees, it shall not be accountable for the Company's use of the proceeds
from the Notes or any money paid to the Company or upon the Company's direction
under any provision of this Indenture, it shall not be responsible for the use
or application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
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SECTION 7.5 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
actually known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after it occurs. Except
in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.6 Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA Section 313(a) (but if no event described in TIA
Section 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
Section 313(b)(2). The Trustee shall also transmit by mail all reports as
required by TIA Section 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA Section 313(d). The Company
shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.7 Compensation and Indemnity.
The Company and the Guarantors shall pay to the Trustee from time to time
such reasonable compensation as shall be agreed upon in writing between the
Company and the Trustee for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company and the Guarantors
shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company and the Guarantors shall indemnify each of the Trustee or any
predecessor Trustee against any and all losses, damages, claims, liabilities or
expenses (including taxes (other than taxes based on the income of the Trustee))
incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Company and the Guarantors
(including this Section 7.7) and defending itself against any claim (whether
asserted by the Company, any Guarantor, or any Holder or any other person) or
liability in connection with the exercise or performance of any of its powers or
duties hereunder, except to the extent any such loss, liability or expense may
be attributable to its negligence or bad faith. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify the Company shall not relieve the Company
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and the Guarantors of their obligations hereunder. The Company and the
Guarantors shall defend the claim and the Trustee shall cooperate in the
defense. The Trustee may have separate counsel and the Company and the
Guarantors shall pay the reasonable fees and expenses of such counsel. The
Company and the Guarantors need not pay for any settlement made without their
consent, which consent shall not be unreasonably withheld.
The obligations of the Company and the Guarantors under this Section 7.7
shall survive the satisfaction and discharge of this Indenture.
To secure the Company's and the Guarantors' payment obligations in this
Section, the Trustee shall have a Lien prior to the Notes on all money or
property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section 313(b)(2) to
the extent applicable.
SECTION 7.8 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof,
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
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If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, any
Guarantor or the Holders of Notes of at least 10% in principal amount of the
then outstanding Notes may petition, at the expense of the Company, any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.7 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's and the Guarantors' obligations under Section 7.7 hereof
shall continue for the benefit of the retiring Trustee.
SECTION 7.9 Successor Trustee by Merger, Etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall, if such successor
corporation is otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section
310(b).
SECTION 7.11 Preferential Collection of Claims against Company.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
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ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1 Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at its option and at any time, elect to have either
Section 8.2 or 8.3 hereof be applied to all outstanding Notes upon compliance
with the conditions set forth below in this Article VIII.
SECTION 8.2 Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Company and the Guarantors shall, subject to
the satisfaction of the conditions set forth in Section 8.4 hereof, be deemed to
have been discharged from their respective obligations with respect to all
outstanding Notes and Subsidiary Guarantees, as applicable, on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, Legal Defeasance means that the Company and the Guarantors shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.5 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section 8.4
hereof, and as more fully set forth in such Section, payments in respect of the
principal of, premium, if any, and interest and Liquidated Damages on such Notes
when such payments are due, (b) the Company's and the Guarantors' obligations
with respect to such Notes under Article II and Section 4.2 hereof, concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and money
for security payments held in trust, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and the Company's and the Guarantors'
obligations in connection therewith and (d) this Article VIII. Subject to
compliance with this Article VIII, the Company may exercise its option under
this Section 8.2 notwithstanding the prior exercise of its option under Section
8.3 hereof.
SECTION 8.3 Covenant Defeasance.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, the Company and the Guarantors shall, subject to
the satisfaction of the conditions set forth in Section 8.4 hereof, be released
from their obligations under the covenants contained in Sections 4.3, 4.4, 4.5,
4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.15, 5.1(iii) and 5.1(iv) hereof with
respect to the outstanding Notes on and after the date the conditions set forth
below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "Outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the
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consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.1
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.1 hereof of the option applicable to this Section 8.3 hereof,
subject to the satisfaction of the conditions set forth in Section 8.4 hereof,
Sections 6.1 (d) through 6.1(f) hereof shall not constitute Events of Default.
SECTION 8.4 Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.2 or 8.3 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of 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
Liquidated Damages, and interest on the outstanding Notes on the Stated Maturity
or on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date;
(b) in the case of an election under Section 8.2 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date of this Indenture, there has been a change in the
applicable federal income tax laws, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding 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;
(c) in the case of an election under Section 8.3 hereof, 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 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;
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(d) 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 Sections 6.1(h) or 6.1(i) hereof are concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) 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 this 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;
(f) the Company shall 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;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors the Company or the Guarantors
or with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or the Guarantors; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.5 Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions.
Subject to Section 8.6 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.5, the
"Trustee") pursuant to Section 8.4 hereof in respect of the outstanding Notes
shall be in trust and applied by the Trustee, in accordance with the provisions
of such Notes and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as Paying Agent) as the Trustee may
determine, to the Holders of such Notes of all sums due and to become due
thereon in respect of principal, premium, if any, Liquidated Damages and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company and the Guarantors shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.4 hereof or
the principal and interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the Holders of the
outstanding Notes.
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Anything in this Article VIII to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.4 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.4(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.6 Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any,
Liquidated Damages or interest on any Note and remaining unclaimed for two years
after such principal, and premium, if any, Liquidated Damages or interest has
become due and payable shall be paid to the Company on its request or (if then
held by the Company) shall be discharged from such trust; and the Holder of such
Note shall thereafter, as a secured creditor, look only to the Company or
Guarantors for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
SECTION 8.7 Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.2 or
8.3 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's and the Guarantors' obligations under this
Indenture, the Notes and the Subsidiary Guarantees, as applicable, shall be
revived and reinstated as though no deposit had occurred pursuant to Section 8.2
or 8.3 hereof until such time as the Trustee or Paying Agent is permitted to
apply all such money in accordance with Section 8.2 or 8.3 hereof, as the case
may be, provided, however, that, if the Company or the Guarantors make any
payment of principal of, premium, if any, Liquidated Damages or interest on any
Note following the reinstatement of its obligations, the Company and the
Guarantors shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
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ARTICLE IX
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1 Without Consent of Holders of Notes.
Notwithstanding Section 9.2 of this Indenture, the Company and the
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees, or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes or to alter the provisions of Article II hereof (including
the related definitions) in a manner that does not materially adversely affect
any Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes in the case of a merger or consolidation
pursuant to Article V hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of the Board
of Directors of the Company and each of the Guarantors authorizing the execution
of any such amended or supplemental Indenture, and upon receipt by the Trustee
of the documents described in Section 7.2 hereof, the Trustee shall join with
the Company and each of the Guarantors in the execution of any amended or
supplemental Indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.2 With Consent of Holders of Notes.
Except as provided below in this Section 9.2, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture (including Sections 3.9,
4.10 and 4.15 hereof), the Subsidiary Guarantees, and the Notes with the consent
of the Holders of at least a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, the Notes), and, subject
to Sections 6.4 and 6.7 hereof, any existing Default or Event of Default (other
than a Default or Event of Default in the payment of the principal of, premium,
if any, or interest on the Notes, except a
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payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture, the Subsidiary Guarantees or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including consents obtained in
connection with a tender offer or exchange offer for the Notes).
Upon the request of the Company accompanied by a resolution of the Board
of Directors of the Company and each of the Guarantors authorizing the execution
of any such amended or supplemental Indenture, and upon the filing with the
Trustee of evidence satisfactory to the Trustee of the consent of the Holders of
Notes as aforesaid, and upon receipt by the Trustee of the documents described
in Section 9.6 hereof, the Trustee shall join with the Company and each of the
Guarantors in the execution of such amended or supplemental Indenture unless
such amended or supplemental Indenture affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise, in which case the Trustee may
in its discretion, but shall not be obligated to, enter into such amended or
supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.2 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a non-consenting
Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption of the
Notes, except as provided above with respect to Sections 3.9, 4.10 and 4.15
hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes and a waiver of the payment
default that resulted from such acceleration);
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(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than
a payment required by the covenants contained in Sections 3.9, 4.10 or 4.15
hereof);
(h) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or this Indenture, or amend the provisions of this
Indenture relating to the release of Guarantors; or
(i) make any change in Section 6.4 or 6.7 hereof or in the foregoing
amendment and waiver provisions.
SECTION 9.3 Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture, the Subsidiary
Guarantees, or the Notes shall be set forth in an amended or supplemental
Indenture that complies with the TIA as then in effect.
SECTION 9.4 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.5 Notation or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
(accompanied by a notation of the Subsidiary Guarantees duly endorsed by the
Guarantors) that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
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SECTION 9.6 Trustee to Sign Amendments, Etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article IX if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Company
and the Guarantors may not sign an amendment or supplemental Indenture until the
Board of Directors approves it. In executing any amended or supplemental
indenture, the Trustee shall be entitled to receive and (subject to Section 7.1)
shall be fully protected in relying upon, an Officers' Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture is authorized or permitted by this Indenture.
ARTICLE X
SUBSIDIARY GUARANTEES
SECTION 10.1 Guarantees.
Subject to the provisions of this Article X, each of the Guarantors
hereby, jointly and severally, unconditionally guarantees to each Holder of a
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Notes or the obligations of the Company hereunder or thereunder,
that: (a) the principal of, premium and Liquidated Damages, if any, and interest
on the Notes will be promptly paid in full when due, whether at the maturity or
interest payment or mandatory redemption date, by acceleration, redemption or
otherwise, and interest on the overdue principal of, premium and Liquidated
Damages, if any, and interest on the Notes, if any, and all other obligations of
the Company to the Holders or the Trustee under this Indenture and the Notes
will be promptly paid in full or performed, all in accordance with the terms of
this Indenture and the Notes, to the extent lawful; and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at Stated
Maturity, by acceleration or otherwise. Failing payment when due (after giving
effect to any applicable grace period) of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors will be jointly
and severally obligated to pay the same immediately. The Guarantors hereby agree
that their obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Notes or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
of the Notes with respect to any provisions of this Indenture and the Notes, the
recovery of any judgment against the Company, any action to enforce the same or
any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a Guarantor. Each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenant
that the Subsidiary Guarantees will not be discharged except by complete
performance of the obligations contained in the Notes and this Indenture.
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If any Holder or the Trustee is required by any court or otherwise to
return to the Company or Guarantors, or any custodian, Trustee, liquidator or
other similar official acting in relation to either the Company or Guarantors,
any amount paid by either to the Trustee or such Holder, these Subsidiary
Guarantees, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor agrees that it shall not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the one
hand, and the Holders and the Trustee, on the other hand, (x) the maturity of
the obligations guaranteed hereby may be accelerated as provided in Article VI
hereof for the purposes of these Subsidiary Guarantees, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article VI hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of these Subsidiary Guarantees. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under these Subsidiary Guarantees.
SECTION 10.2 Limitation of Guarantor's Liability.
Each Guarantor and, by its acceptance hereof, each Holder hereof, hereby
confirm that it is their intention that the Subsidiary Guarantee by such
Guarantor not constitute a fraudulent transfer or conveyance for purposes of the
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to the
Subsidiary Guarantees. To effectuate the foregoing intention, each such person
hereby irrevocably agrees that the obligation of such Guarantor under its
Subsidiary Guarantee under this Article X shall be limited to the maximum amount
as will, after giving effect to such maximum amount and all other (contingent or
otherwise) liabilities of such Guarantor that are relevant under such laws, and
after giving effect to any rights to contribution of such Guarantor pursuant to
any agreement providing for an equitable contribution among such Guarantor and
other Affiliates of the Company of payments made by guarantees by such parties,
result in the obligations of such Guarantor in respect of such maximum amount
not constituting a fraudulent conveyance. Each Holder, by accepting the benefits
hereof, confirms its intention that, in the event of bankruptcy, reorganization
or other similar proceeding of the Company or any Guarantor in which concurrent
claims are made upon such Guarantor hereunder, to the extent such claims will
not be fully satisfied, each such claimant with a valid claim against the
Company shall be entitled to a ratable share of all payments by such Guarantor
in respect of such concurrent claims.
SECTION 10.3 Execution and Delivery of Subsidiary Guarantees.
(a) To evidence the Subsidiary Guarantees set forth in Section 10.1
hereof, each Guarantor hereby agrees that a notation of the Subsidiary
Guarantees substantially in the form of Exhibit D shall be endorsed by an
officer of such Guarantor on each Note authenticated and
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delivered by the Trustee and that this Indenture shall be executed on behalf of
such Guarantor by its President or one of its Vice Presidents and attested to by
an Officer.
Each Guarantor hereby agrees that the Subsidiary Guarantees set forth in
Section 10.1 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of the Subsidiary Guarantees.
If an officer or Officer whose signature is on this Indenture or on the
Subsidiary Guarantees no longer holds that office at the time the Trustee
authenticates the Note on which the Subsidiary Guarantees are endorsed, the
Subsidiary Guarantees shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Subsidiary Guarantees set forth
in this Indenture on behalf of the Guarantors.
(b) Any Person that was not a Guarantor on the Issue Date may become
a Guarantor by executing and delivering to the Trustee (i) a supplemental
indenture in form and substance satisfactory to the Trustee, which subjects such
Person to the provisions (including the representations and warranties) of this
Indenture as a Guarantor and (ii) an Opinion of Counsel and Officers'
Certificate to the effect that such supplemental indenture has been duly
authorized and executed by such Person and constitutes the legal, valid, binding
and enforceable obligation of such Person (subject to such customary exceptions
concerning creditors' rights and equitable principles as may be acceptable to
the Trustee in its discretion and provided that no opinion need be rendered
concerning the enforceability of the Guarantee).
SECTION 10.4 Guarantors May Consolidate, Etc, on Certain Terms.
(a) Except as set forth in Articles IV and V hereof, nothing
contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or shall prevent
any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety, to the Company.
(b) Except as set forth in Articles IV and V hereof, nothing
contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into a corporation or
corporations other than the Company (whether or not affiliated with the
Guarantor), or successive consolidations or mergers in which a Guarantor or its
successor or successors shall be a party or parties, or shall prevent any sale
or conveyance of the property of a Guarantor as an entirety or substantially as
an entirety, to a corporation other than the Company (whether or not affiliated
with the Guarantor) authorized to acquire and operate the same; provided,
however, that such transaction meets all of the following requirements: (i) each
Guarantor hereby covenants and agrees that, upon any such consolidation, merger,
sale or conveyance, the Subsidiary Guarantee endorsed on the Notes, and the due
and punctual performance and observance of all of the covenants and conditions
of this Indenture and the Registration Rights Agreement to be performed by such
Guarantor, shall be expressly assumed (in the event that the Guarantor is not
the
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surviving corporation in the merger), by supplemental indenture satisfactory in
form to the Trustee, executed and delivered to the Trustee, by the corporation
formed by such consolidation, or into which the Guarantor shall have been
merged, or by the corporation which shall have acquired such property; (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 Section 4.9 hereof. In case
of any such consolidation, merger, sale or conveyance and upon the assumption by
the successor corporation, by supplemental indenture, executed and delivered to
the Trustee and satisfactory in form to the Trustee, of the Subsidiary
Guarantees endorsed upon the Notes and the due and punctual performance of all
of the covenants and conditions of this Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and be substituted for
the Guarantor with the same effect as if it had been named herein as a
Guarantor. Such successor corporation thereupon may cause to be signed any or
all of the Subsidiary Guaranties to be endorsed upon all of the Notes issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee. All the Subsidiary Guaranties so issued shall in all
respects have the same legal rank and benefit under this Indenture as the
Subsidiary Guaranties theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guaranties had been
issued at the date of the execution hereof.
SECTION 10.5 Releases Following Sale of Assets.
Concurrently with any sale or disposition of assets (including, if
applicable, all of the Capital Stock of any Guarantor) by way of merger,
consolidation or otherwise, any Liens in favor of the Trustee in the assets sold
thereby shall be released; provided that in the event of an Asset Sale, the Net
Proceeds from such sale or other disposition are treated in accordance with the
provisions of Section 4.10 hereof. If the assets sold in such sale or other
disposition include all or substantially all of the assets of any Guarantor or
all of the Capital Stock of any Guarantor, then such Guarantor (in the event of
a sale or other disposition of all of the Capital Stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition by way of merger, consolidation or otherwise of all or substantially
all of the assets of a Guarantor) shall be released and relieved of its
obligations under its Subsidiary Guarantee and this Indenture or Section 10.4
hereof, as the case may be; provided that the Net Proceeds from such sale or
other disposition are treated in accordance with the provisions of Section 4.10
hereof. Upon delivery by the Company to the Trustee of an Officers' Certificate
and an Opinion of Counsel to the effect that such sale or other disposition was
made by the Company in accordance with the provisions of this Indenture,
including, without limitation, Section 4.10 hereof, the Trustee shall execute
any documents reasonably required in order to evidence the release of any
Guarantor from its obligations under its Subsidiary Guarantees and this
Indenture. Any Guarantor not released from its obligations under its Subsidiary
Guarantee and this Indenture shall remain liable for the full amount of
principal of and interest on the Notes and for the other obligations of any
Guarantor under this Indenture as provided in this Article X.
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SECTION 10.6 "Trustee" to Include Paying Agent.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article X shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully and for all intents and purposes as if such Paying Agent were
named in this Article X in place of the Trustee.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA Section 318(c), the imposed duties shall control.
SECTION 11.2 Notices.
Any notice or communication by the Company or the Trustee to the others is
duly given if in writing and delivered in person or mailed by first class mail
(registered or certified, return receipt requested), telecopier or overnight air
courier guaranteeing next day delivery, to the other party's address:
If to the Company or any Guarantor:
Anker Coal Group, Inc.
2708 Cranberry Square
Morgantown, West Virginia 26505
Telecopier No.: (304) 594-1685
Attention: P. Bruce Sparks
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopier No.: (212) 455-2502
Attention: John Tehan, Esq.
If to the Trustee:
Marine Midland Bank
140 Broadway
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12th Floor
New York, New York 10005
Telecopier No.: (212) 658-6425
Attention: Corporate Trust Administration -- Anker Coal
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to the Trustee or to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to the Trustee shall be deemed to have been
duly given to the Trustee when received at the Corporate Trust Office of the
Trustee.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
SECTION 11.3 Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Guarantors, the Trustee, the Registrar and anyone else shall have the protection
of TIA Section 312(c).
SECTION 11.4 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or any Guarantor to the
Trustee to take any action under this Indenture, the Company or such Guarantors
shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.5 hereof) stating that, in the
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opinion of the signers, all conditions precedent and covenants, if any, provided
for in this Indenture relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.5 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 11.5 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA
Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied; provided, however, that with
respect to matters of fact an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.
SECTION 11.6 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.7 No Personal Liability of Directors, Officers, Employees and
Stockholders.
No director, officer, employee, incorporator or stockholder of the Company
or the Guarantors, as such, shall have any liability for any obligations of the
Company or the Guarantors under the Notes, this 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 Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
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<PAGE> 89
SECTION 11.8 Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
SECTION 11.9 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture or the Subsidiary Guarantees.
SECTION 11.10 Successors.
All agreements of the Company and the Guarantors in this Indenture, the
Notes and the Subsidiary Guarantees shall bind their successors. All agreements
of the Trustee in this Indenture shall bind its successors.
SECTION 11.11 Severability.
In case any provision in this Indenture, the Notes or the Subsidiary
Guarantees shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.12 Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.13 Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
83
<PAGE> 90
SIGNATURES
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ANKER COAL GROUP, INC.
By: /s/ BRUCE SPARKS
-------------------------------------
Name: Bruce Sparks
Title: Executive Vice President
ANKER GROUP, INC.
By: /s/ BRUCE SPARKS
-------------------------------------
Name: Bruce Sparks
Title: Executive Vice President
EACH OTHER ENTITY LISTED ON
SCHEDULE A HERETO, as Guarantors
By: /s/ MICHAEL M. MATESIC
-------------------------------------
Name: Michael M. Matesic
Title: Treasurer
MARINE MIDLAND BANK, as Trustee
By: /s/ FRANK GODINO
-------------------------------------
Name: Frank Godino
Title: Assistant Vice President
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<PAGE> 91
SCHEDULE A
GUARANTORS
Company State of Incorporation
Anker Group, Inc. Delaware
Anker Energy Corporation Delaware
Bronco Mining Company, Inc. West Virginia
Anker Power Services, Inc. West Virginia
Anker West Virginia Mining Company West Virginia
Juliana Mining Company, Inc. West Virginia
King Knob Coal Co., Inc. West Virginia
Vantrans, Inc. Delaware
Melrose Coal Company, Inc. West Virginia
Marine Coal Sales Company Delaware
Hawthorne Coal Company, Inc. West Virginia
Upshur Property, Inc. Delaware
Heather Glen Resources, Inc. West Virginia
New Allegheny Land Holding Company, Inc. West Virginia
Patriot Mining Company, Inc. West Virginia
Vindex Energy Corporation West Virginia
Anker Virginia Mining Company, Inc. Virginia
S-1
<PAGE> 92
ANKER COAL GROUP, INC.
9 3/4% Series A Senior Notes due 2007
CUSIP ____________
No. ________ $__________________
Anker Coal Group, Inc., a Delaware corporation (the "Company"), promises
to pay to Cede & Co. or registered assigns, the principal sum of
___________________________________ Dollars on October 1, 2007.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A NOTE IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK ("DTC")), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE THIRD
SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS ACQUIRING
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER
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THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, RESELL OR OTHERWISE TRANSFER
THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF
THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR ANY INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTIONS" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
(SEAL) ANKER COAL GROUP, INC.
By:______________________________________
Name:
Title:
Attest:
By:____________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Marine Midland Bank, as Trustee, certifies that this is one of the 9 3/4%
Series A Senior Notes due 2007 referred to in the within-mentioned Indenture.
Marine Midland Bank,
as Trustee
By: ___________________________ Dated:____________________________
Authorized Signatory
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<PAGE> 95
1. Interest. The Company promises to pay interest on the principal amount
of this Note at 9 3/4% per annum from the date hereof until the principal hereof
is duly provided for and shall pay the Liquidated Damages payable pursuant to
Section 5 of the Registration Rights Agreement referred to below. The Company
will pay interest and Liquidated Damages semi-annually on April 1 and October 1
of each year (each an "Interest Payment Date"), or if any such day is not a
Business Day, on the next succeeding Business Day. Interest on the Notes will
accrue from the most recent date to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for, from the
date of issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided further, that
the first Interest Payment Date shall be April 1, 1998. The Company shall pay
interest, to the extent lawful, (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at the rate borne by the Notes it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. If, pursuant to Section 3.4 of the Indenture, a notice of
redemption is mailed and the redemption date is not a Business Day, payment
shall be made on the next succeeding Business Day and no interest shall accrue
for the period from such redemption date to the next succeeding Business Day.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on March 15 or September 15, next
preceding the Interest Payment Date. The Notes will be payable as to principal,
premium and Liquidated Damages, if any, and interest at the office or agency of
the Company maintained for such purpose within or without the City and State of
New York, or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the Holders at their addresses set forth
in the register of Holders, and provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium and Liquidated Damages on, all Global Notes and all other
Notes the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts. The payment of principal on the Notes shall
be payable only upon presentation and surrender of the Notes at the office of
the Paying Agent.
3. Paying Agent and Registrar. Initially, Marine Midland Bank, the Trustee
under the Indenture, will act as Paying Agent and Registrar. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
or any of the Guarantors may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as of
September 25, 1997 ("Indenture") among the Company, the Guarantors and the
Trustee. The terms of the Notes
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<PAGE> 96
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the Indenture shall govern and be controlling. The Notes are
obligations of the Company limited to $125,000,000 in aggregate principal
amount.
5. Optional Redemption.
The Notes will not be redeemable at the Company's option prior to October
1, 2002. Thereafter, the 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:
Year Percentage
2002.............................................. 104.875%
2003.............................................. 103.250%
2004.............................................. 101.625%
2005 and thereafter............................... 100.000%
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 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 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.
Any such redemption will comply with Article III of the Indenture.
6. Mandatory Redemption. Except as set forth in paragraph 7 below, the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
7. Repurchase at the Option of Holders.
(a) Upon the occurrence of a Change of Control, each Holder of 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 Notes 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. Within 30 days following any Change of Control, the Company will
mail a notice to
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<PAGE> 97
each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase 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 such notice is mailed, pursuant to the procedures required by the
Indenture and described in such notice.
(b) When the aggregate amount of Excess Proceeds from Asset Sales
exceeds $10.0 million, the Company will be required to make an offer to all
Holders of Notes to purchase the maximum principal amount of 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 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 Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
8. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
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 need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before
the mailing of a notice of redemption or during the period between a record date
and the corresponding Interest Payment Date.
9. Persons Deemed Owners. The registered Holder of a Note may be treated
as its owner for all purposes.
10. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture, the Subsidiary Guarantees, or the Notes may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Notes. Without the consent of any Holder of a Note, the Indenture, the
Subsidiary Guarantees, or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes or to alter the provisions of
Article II of the Indenture in a manner that does not materially adversely
affect any Holder, to provide for the assumption of the Company's or a
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder,
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<PAGE> 98
or to comply with the requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
11. Events of Default and Remedies.
Events of Default include: (i) default for 30 days in the payment when due
of interest on, or Liquidated Damages, if any, with respect to, the Notes; (ii)
default in payment when due of the principal of or premium, if any, on the
Notes; (iii) failure by the Company or any of its Restricted Subsidiaries to
comply with Sections 3.9, 4.10, 4.15 or 5.1 of the Indenture; (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 Notes then outstanding to
comply with any of its other agreements in the Indenture or the 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 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 or
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 Guarantor, 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 Notes may
declare all the 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 Notes will
become due and payable without further action or notice. Holders of the Notes
may not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event
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<PAGE> 99
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 Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
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 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.
12. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
13. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder of the Company or the Guarantors, as such, shall not
have any liability for any obligations of the Company or the Guarantors under
the Notes, the Indenture or the Subsidiary Guarantees, or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Notes.
14. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
15. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
16. Additional Rights of Holders of Restricted Global Notes and Restricted
Definitive Notes. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the Registration Rights Agreement
dated as of September 25, 1997, among the Company, the Guarantors and the
parties named on the signature pages thereof (the "Registration Rights
Agreement").
17. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
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The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Anker Coal Group, Inc.
2708 Cranberry Square
Morgantown, West Virginia 26505
Attention: Secretary
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ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:____________________
Your Signature:____________________________
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee:_______________________
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Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10 or 4.15 of the Indenture, check the box below:
|_| Section 4.10 |_| Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$_______________
Date:____________________ Your Signature:____________________________
(Sign exactly as your name appears on
the face of this Note)
Tax Identification No.:____________________
Signature Guarantee:_______________________
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SCHEDULE OF EXCHANGES OF INTERESTS IN THE
GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Principal Amount of
this Global Note Signature of
Amount of decrease Amount of increase following such authorized signatory
in Principal Amount in Principal Amount decrease (or of Trustee or Note
Date of Exchange of this Global Note of this Global Note increase) Custodian
- ---------------- ------------------- ------------------- --------- ---------
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE> 104
ANKER COAL GROUP, INC.
9 3/4% Series A Senior Notes due 2007
CINS ______________
No. ______ $__________________
Anker Coal Group, Inc., a Delaware corporation (the "Company"), promises
to pay to Cede & Co. or registered assigns, the principal sum of
__________________________________ Dollars on October 1, 2007.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A NOTE IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK ("DTC")), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
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ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE THIRD SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL
NOT, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF
ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (F) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS NOTE OR ANY INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTIONS" AND
"UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S
UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE
FOREGOING.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
(SEAL) ANKER COAL GROUP, INC.
By:______________________________________
Name:
Title:
Attest:
By:____________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
Marine Midland Bank, as Trustee, certifies that this is one of the 9 3/4%
Series A Senior Notes due 2007 referred to in the within-mentioned Indenture.
Marine Midland Bank,
as Trustee
By: ___________________________ Dated:____________________________
Authorized Signatory
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<PAGE> 107
1. Interest. The Company promises to pay interest on the principal amount
of this Note at 9 3/4% per annum from the date hereof until the principal hereof
is duly provided for and shall pay the Liquidated Damages payable pursuant to
Section 5 of the Registration Rights Agreement referred to below. The Company
will pay interest and Liquidated Damages semi-annually on April 1 and October 1
of each year (each an "Interest Payment Date"), or if any such day is not a
Business Day, on the next succeeding Business Day. Interest on the Notes will
accrue from the most recent date to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for, from the
date of issuance; provided that if there is no existing Default in the payment
of Interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided further, that
the first Interest Payment Date shall be April 1, 1998. The Company shall pay
interest, to the extent lawful, (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at the rate borne by the Notes; it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. If, pursuant to Section 3.4 of the
Indenture, a notice of redemption is mailed and the redemption date is not a
Business Day, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such redemption date to the next
succeeding Business Day. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on March 15 or September 15, next
preceding the Interest Payment Date. The Notes will be payable as to principal,
premium and Liquidated Damages, if any, and interest at the office or agency of
the Company maintained for such purpose within or without the City and State of
New York, or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the Holders at their addresses set forth
in the register of Holders, and provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium and Liquidated Damages on, all Global Notes and all other
Notes the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts. The payment of principal on the Notes shall
be payable only upon presentation and surrender of the Notes at the office of
the Paying Agent.
3. Paying Agent and Registrar. Initially, Marine Midland Bank, the Trustee
under the Indenture, will act as Paying Agent and Registrar. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
or any of the Guarantors may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as of
September 25, 1997 ("Indenture") among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust
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<PAGE> 108
Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. To the extent any provision of this Note
conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are obligations of the
Company limited to $125,000,000 in aggregate principal amount.
5. Optional Redemption.
The Notes will not be redeemable at the Company's option prior to October
1, 2002. Thereafter, the 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:
Year Percentage
2002................................................. 104.875%
2003................................................. 103.250%
2004................................................. 101.625%
2005 and thereafter.................................. 100.000%
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 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 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.
Any such redemption will comply with Article III of the Indenture.
6. Mandatory Redemption. Except as set forth in paragraph 7 below, the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
7. Repurchase at the Option of Holders.
(a) Upon the occurrence of a Change of Control, each Holder of 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 Notes 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. 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
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<PAGE> 109
offering to repurchase 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 such
notice is mailed, pursuant to the procedures required by the Indenture and
described in such notice.
(b) When the aggregate amount of Excess Proceeds from Asset Sales
exceeds $10.0 million, the Company will be required to make an offer to all
Holders of Notes to purchase the maximum principal amount of 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 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 Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
8. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
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 need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before
the mailing of a notice of redemption or during the period between a record date
and the corresponding Interest Payment Date.
9. Persons Deemed Owners. The registered Holder of a Note may be treated
as its owner for all purposes.
10. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture, the Subsidiary Guarantees, or the Notes may be waived with the
consent of the Holders of a majority in principal amount of the then outstanding
Notes. Without the consent of any Holder of a Note, the Indenture, the
Subsidiary Guarantees, or the Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes or to alter the provisions of
Article II of the Indenture in a manner that does not materially adversely
affect any Holder, to provide for the assumption of the Company's or a
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
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<PAGE> 110
11. Events of Defaults and Remedies.
Events of Default include: (i) default for 30 days in the payment when due
of interest on, or Liquidated Damages, if any, with respect to, the Notes; (ii)
default in payment when due of the principal of or premium, if any, on the
Notes; (iii) failure by the Company or any of its Restricted Subsidiaries to
comply with Sections 3.9, 4.10, 4.15 or 5.1 of the Indenture; (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 Notes then outstanding to
comply with any of its other agreements in the Indenture or the 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 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 or
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 Guarantor, 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 Notes may
declare all the 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 Notes will
become due and payable without further action or notice. Holders of the Notes
may not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the 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.
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<PAGE> 111
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
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 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.
12. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
13. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder of the Company or the Guarantors, as such, shall not
have any liability for any obligations of the Company or the Guarantors under
the Notes, the Indenture or the Subsidiary Guarantees, or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of the Notes.
14. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
15. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
16. Additional Rights of Holders of Restricted Global Notes and Restricted
Definitive Notes. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the Registration Rights Agreement
dated as of September 25, 1997, among the Company, the Guarantors and the
parties named on the signature pages thereof (the "Registration Rights
Agreement").
17. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
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<PAGE> 112
Anker Coal Group, Inc.
2708 Cranberry Square
Morgantown, West Virginia 26505
Attention: Secretary
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<PAGE> 113
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:____________________
Your Signature:____________________________
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee:_______________________
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<PAGE> 114
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10 or 4.15 of the Indenture, check the box below:
|_| Section 4.10 |_| Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$_______________
Date:____________________ Your Signature:____________________________
(Sign exactly as your name appears on
the face of this Note)
Tax Identification No.:____________________
Signature Guarantee:_______________________
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<PAGE> 115
SCHEDULE OF EXCHANGES OF INTERESTS IN THE
GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary Global
Note for an interest in another Global Note or of other Restricted Global Notes,
for an interest in this Regulation S Temporary Note, have been made:
<TABLE>
<CAPTION>
Principal Amount of
this Global Note Signature of
Amount of decrease Amount of increase following such authorized signatory
in Principal Amount in Principal Amount decrease (or of Trustee or Note
Date of Exchange of this Global Note of this Global Note increase) Custodian
- ---------------- ------------------- ------------------- --------- ---------
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE> 116
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Anker Coal Group, Inc.
2708 Cranberry Square
Morgantown, West Virginia 26505
Marine Midland Bank
140 Broadway
12th Floor
New York, New York 10005
Attention: Corporate Trust Department -- Anker Coal
Re: 9 3/4% Series A Senior Notes due 2007 of Anker Coal Group, Inc.
Reference is hereby made to the Indenture, dated as of September 25, 1997
(the "Indenture"), between Anker Coal Group, Inc., as issuer (the "Company"),
and Marine Midland Bank, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
__________________________ (the "Transferor") owns and proposes to
transfer the Note[s] or interest in such Note[s) specified in Annex A hereto, in
the principal amount of $_______ in such Note[s] or interests (the "Transfer"),
to ____________ (the "Transferee") as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. |_| Check if Transferee will take delivery of a beneficial interest in
the 144A Global Note or a Definitive Note pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
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<PAGE> 117
2. |_| Check if Transferee will take delivery of a beneficial interest in
the Regulation S Temporary Global Note, the Regulation S Global Note or a
Definitive Note pursuant to Regulation S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act
and, accordingly, the Transferor hereby further certifies that (i) the Transfer
is not being made to a person in the United States and (x) at the time the buy
order was originated, the Transferee was outside the United States or such
Transferor and any Person acting on its behalf reasonably believed and believes
that the Transferee was outside the United States or (y) the transaction was
executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows
that the transaction was prearranged with a buyer in the United States, (ii) no
directed selling efforts have been made in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act, and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note, the
Temporary Regulation S Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
3. |_| Check and complete of Transferee will take delivery of a beneficial
interest in the RSTD Global Note or a Definitive Note pursuant to any provision
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) |_| such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act; or
(b) |_| such Transfer is being effected to the Company or a
subsidiary thereof; or
(c) |_| such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act.
4. |_| Check if Transferee will take delivery of a beneficial interest in
an Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) |_| Check if Transfer is pursuant to Rule 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and
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<PAGE> 118
the Private Placement Legend are not required in order to maintain compliance
with the Securities Act. Upon consummation of the proposed Transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) |_| Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) |_| Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Trustee and the Company.
_________________________________________
[Insert Name of Transferor]
By:______________________________________
Name:
Title:
Dated: ______________, _____
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<PAGE> 119
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP _______), or
(ii) |_| Regulation S Global Note (CUSIP _____), or
(iii) |_| RSTD Global Note (CUSIP ______); or
(b) |_| a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP _____), or
(ii) |_| Regulation S Global Note (CUSIP _____), or
(iii) |_| RSTD Global Note (CUSIP _____), or
(iv) (CUSIP _____), or Unrestricted Global Note (CUSIP _____); or
(b) |_| Restricted Definitive Note; or
(c) |_| an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
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<PAGE> 120
EXHIBIT C
FORM OF CERTIFICATE OF TRANSFER
Anker Coal Group, Inc.
2708 Cranberry Square
Morgantown, West Virginia 26505
Marine Midland Bank
140 Broadway
12th Floor
New York, New York 10005
Attention: Corporate Trust Department -- Anker Coal
Re: 9 3/4% Series A Senior Notes due 2007 of Anker Coal Group, Inc.
Reference is hereby made to the Indenture, dated as of September 25, 1997
(the "Indenture"), between Anker Coal Group, Inc., as issuer (the "Company"),
and Marine Midland Bank, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
____________ (the "Owner") owns and proposes to exchange the Note[s] or
interest in such Note[s] specified herein, in the principal amount of
$_____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) |_| Check if Exchange is from beneficial interest in a
Restricted Global Note to beneficial interest in an Unrestricted Global Note. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) |_| Check if Exchange is from beneficial interest in a
Restricted Global Note to Unrestricted Definitive Note. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the
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Definitive Note is being acquired for the Owner's own account without transfer,
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Notes and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on transfer contained
in the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Definitive Note is
being acquired in compliance with any applicable blue sky securities laws of any
state of the United States.
(c) |_| Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) |_| Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes
(a) |_| Check if Exchange is from beneficial interest in a
Restricted Global Note to Restricted Definitive Note. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) |_| Check if Exchange is from Restricted Definitive Note to
beneficial interest on a Restricted Global Note. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] |_| 144A Global Note, |_| Regulation S Global Note, |_| RSTD Global
Note, with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii)
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such Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Trustee and the Company.
_________________________________________
[Insert Name of Owner]
By:______________________________________
Name:
Title:
Dated: _____________, ____
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EXHIBIT D
FORM OF SUBSIDIARY GUARANTEE
Each of the corporations listed on Schedule I hereto (hereinafter referred
to as the "Guarantors", which term includes any successor or additional
Guarantor under the Indenture (the "Indenture") referred to in the Note upon
which this notation is endorsed), has unconditionally guaranteed (a) the due and
punctual payment of the principal of, premium, Liquidated Damages, if any, and
interest on the Notes, whether at maturity or on an Interest Payment Date, by
acceleration, call for redemption or otherwise, (b) the due and punctual payment
of interest on the overdue principal of, premium and Liquidated Damages, if any,
and interest on the Notes, to the extent lawful, (c) the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee, all in accordance with the terms set forth in the Indenture, and (d) in
case of any extension of time of payment or renewal of any Notes or any of such
other obligations, the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.
No stockholder, officer, director or incorporator, as such, past, present
or future, of the Guarantors shall have any personal liability under this
Subsidiary Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This Subsidiary Guarantee shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which this Subsidiary
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
ANKER GROUP, INC.
By:______________________________________
Name:
Title:
EACH OTHER ENTITY LISTED ON
SCHEDULE I HERETO
By:______________________________________
Name:
Title:
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Exhibit 4.4
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of September 25, 1997
by and among
ANKER COAL GROUP, INC.
GUARANTORS LISTED ON SCHEDULE A
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
CHASE SECURITIES INC.
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and entered
into as of September 25, 1997 by and among Anker Coal Group, Inc., a Delaware
corporation (the "Company"), each of the entities listed on Schedule A (each a
"Guarantor" and collectively, the "Guarantors"), and Donaldson, Lufkin &
Jenrette Securities Corporation and Chase Securities Inc. (each an "Initial
Purchaser" and, collectively, the "Initial Purchasers"), each of whom has agreed
to purchase the Company's 9 3/4% Series A Senior Notes due 2007 (the "Series A
Senior Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated September
22, 1997 (the "Purchase Agreement"), by and among the Company, the Guarantors
and the Initial Purchasers. To induce the Initial Purchasers to purchase the
Series A Senior Notes, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 7 of
the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. Definitions.
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Broker-Dealer Transfer Restricted Securities: Series B Senior Notes that
are acquired by a Broker-Dealer in the Exchange Offer in exchange for Series A
Senior Notes that such Broker-Dealer acquired for its own account as a result of
market making activities or other trading activities (other than Series A Senior
Notes acquired directly from the Company or any of its affiliates).
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: A registered Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Senior Notes to be issued in the Exchange Offer, (ii)
the maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Registrar under the Indenture of Series B Senior Notes in the same
aggregate principal amount as the aggregate principal amount of Series A Senior
Notes that were tendered by Holders thereof pursuant to the Exchange Offer.
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Damages Payment Date: With respect to the Series A Senior Notes, each
Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Act of the
Series B Senior Notes pursuant to a Registration Statement pursuant to which the
Company offers the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such Holders for Series B Senior Notes in an aggregate principal amount equal
to the aggregate principal amount of the Transfer Restricted Securities tendered
in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement on Form
S-4 (or, if applicable, another appropriate form) relating to the Exchange Offer
and all amendments and supplements to such Registration Statement, in each case,
including the related prospectus and all exhibits thereto and all material
incorporated by reference therein.
Exempt Resales: The transactions in which the Initial Purchasers propose
to sell the Series A Senior Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act, and to certain non-U.S.
persons outside the United States in reliance upon Regulation S under the Act.
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of September 25, 1997, among the
Company, Marine Midland Bank, as trustee (the "Trustee"), and the Guarantors,
pursuant to which the Senior Notes are to be issued, as such Indenture is
amended or supplemented from time to time in accordance with the terms thereof.
Initial Purchasers: As defined in the preamble hereto.
Interest Payment Date: As defined in the Indenture and the Senior Notes.
Majority Holders: The Holders (including Restricted Broker-Dealers) of a
majority of the aggregate principal amount of outstanding Transfer Restricted
Securities; provided that whenever the consent or approval of Holders of a
specified percentage of Transfer Restricted Securities is required hereunder,
Transfer Restricted Securities held by the Company or the Guarantors or any of
their affiliates (as such term is defined under Rule 405 of the Act) (other than
the Initial Purchasers or subsequent holders of Transfer Restricted Securities
if such subsequent holders are deemed to be
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such affiliates solely by reason of their holding of such Transfer Restricted
Securities) shall be disregarded in determining whether such consent or approval
was given by the Holders of such required percentage or amount.
NASD: National Association of Securities Dealers, Inc.
Person: An individual, partnership, limited liability company,
corporation, trust or unincorporated organization, or a government or agency or
political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date relating to Senior
Notes, each Person who is a Holder of Senior Notes on the record date with
respect to the Interest Payment Date on which such Damages Payment Date shall
occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company relating
to (a) an offering of Series B Senior Notes pursuant to an Exchange Offer or (b)
the registration for resale of Transfer Restricted Securities pursuant to the
Shelf Registration Statement, which is filed pursuant to the provisions of this
Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Restricted Broker-Dealers: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.
Senior Notes: The Series A Senior Notes and the Series B Senior Notes.
Series B Senior Notes: The Company's 9 3/4% Series B Senior Notes due 2007
to be issued pursuant to the Indenture in the Exchange Offer.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Senior Note, until the earliest to
occur of (a) the date on which such Senior Note is exchanged by a person other
than a Broker-Dealer for a Series B
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Senior Note in the Exchange Offer, (b) following the exchange by a Broker-Dealer
in the Exchange Offer of a Senior Note for a Series B Senior Note, the date on
which such Series B Senior Note is sold to a purchaser who receives from such
Broker-Dealer on or prior to the date of such sale a copy of the Prospectus
contained in the Exchange Offer Registration Statement, (c) the date on which
such Senior Note has been effectively registered under the Act and disposed of
in accordance with a Shelf Registration Statement and (d) the date on which such
Senior Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. Securities Subject to this Agreement.
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to
be a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
SECTION 3. Registered Exchange Offer.
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with), the Company and the Guarantors shall (i)
cause to be filed with the Commission as soon as practicable after the Closing
Date, but in no event later than 45 days after the Closing Date, an Exchange
Offer Registration Statement under the Act relating to the Series B Senior Notes
and the Exchange Offer, (ii) use their reasonable best efforts to cause such
Registration Statement to become effective at the earliest possible time, but in
no event later than 180 days after the Closing Date, (iii) in connection with
the foregoing, file (A) all pre-effective amendments to such Registration
Statement as may be necessary in order to cause such Registration Statement to
become effective, (B) if applicable, a post-effective amendment to such
Registration Statement pursuant to Rule 430A under the Act and (C) cause all
necessary filings in connection with the registration and qualification of the
Series B Senior Notes to be made under the Blue Sky laws of such jurisdictions
as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Registration Statement, commence the Exchange Offer. The
Exchange Offer Registration Statement shall be on the appropriate form
permitting registration of the Series B Senior Notes to be offered in exchange
for the Transfer Restricted Securities and to permit sales of Broker-Dealer
Transfer Restricted Securities held by Restricted Broker-Dealers as contemplated
by Section 3(c) below.
(b) The Company and the Guarantors shall use their reasonable best
efforts to cause the Exchange Offer Registration Statement to be effective
continuously and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable
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federal and state securities laws to Consummate the Exchange Offer; provided,
however, that in no event shall such period be less than 20 business days. The
Company shall cause the Exchange Offer to comply with all applicable federal and
state securities laws. No securities other than the Senior Notes shall be
included in the Exchange Offer Registration Statement. The Company shall use its
reasonable best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 30 business days thereafter.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Series A Senior Notes that are
Transfer Restricted Securities and that were acquired for its own account as a
result of market-making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the Company), may exchange
such Series A Senior Notes pursuant to the Exchange Offer; however, such
Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act
and must, therefore, deliver a prospectus meeting the requirements of the Act in
connection with any sales of the Broker-Dealer Transfer Restricted Securities
received by such Broker-Dealer in the Exchange Offer, which prospectus delivery
requirement may be satisfied by the delivery by such Broker-Dealer of the
Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers that the Commission may require in order to permit such resales
pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Senior Notes held by any such
Broker-Dealer except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
The Company and the Guarantors shall use their best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented and
amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for sales of Transfer Restricted
Securities acquired by Restricted Broker-Dealers, and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, 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 Restricted Broker-Dealers have sold all Broker-Dealer Transfer
Restricted Securities held by them.
The Company shall provide sufficient copies of the latest version of such
Prospectus to Restricted Broker-Dealers promptly upon request at any time during
such period in order to facilitate such sales.
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SECTION 4. Shelf Registration.
(a) Shelf Registration. If (i) the Company is not required to file
an Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been complied
with) or (ii) if any Holder of Transfer Restricted Securities shall notify the
Company within 20 days of the Consummation of the Exchange Offer (A) that such
Holder is prohibited by applicable law or Commission policy from participating
in the Exchange Offer, or (B) that such Holder may not resell the Series B
Senior Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) that such Holder is a Broker-Dealer and holds Series A Senior
Notes acquired directly from the Company or one of its affiliates, then the
Company and the Guarantors shall
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration
Statement"), on or prior to the earlier to occur of (1) the 45th day after
the date on which the Company determines that it is not required to file
the Exchange Offer Registration Statement and (2) the 45th day after the
date on which the Company receives notice from a Holder of Transfer
Restricted Securities as contemplated by clause (ii) above, which Shelf
Registration Statement shall provide for resales of all Transfer
Restricted Securities the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof; and
(y) use their reasonable best efforts to cause such Shelf
Registration Statement to be declared effective by the Commission on or
before the 180th day after the obligation to file the Shelf Registration
Statement arises.
The Company and the Guarantors shall use their best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Senior Notes by the
Holders of Transfer Restricted Securities entitled to the benefit of this
Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of two years following the Closing
Date (as extended pursuant to Section 6(c)(i)) or such shorter period (i) as may
be set forth in any amendment to Rule 144(k) of the Act, or any amendment
thereto, when such amendment becomes effective, or (ii) that will terminate when
all the Transfer Restricted Securities covered by the Registration Statement
have been sold pursuant to such Registration Statement; provided, that the
Company and the Guarantors shall be deemed not to have used their best efforts
to keep the Registration Statement effective during the requisite period if they
voluntarily take any action that would result in holders of the Transfer
Restricted Securities covered thereby not being able to offer and sell such
Transfer Restricted Securities during that period, unless such action is
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required by applicable law, and provided, further, that the foregoing shall not
apply if the Company determines, in its reasonable judgment, upon advice of
counsel, as authorized by a resolution of its Board of Directors, that the
continued effectiveness and usability of such Registration Statement would (i)
require the disclosure of material information, which the Company has a bona
fide business reason for preserving as confidential, or (ii) interfere with any
financing, acquisition, corporate reorganization or other material transaction
involving the Company or any of its Affiliates (as defined in the rules and
regulations adopted under the Exchange Act); provided, however, that the failure
to keep the Registration Statement effective and usable for offers and sales of
Transfer Restricted Securities for such reasons shall last no longer than 30
days in any 12-month period (whereafter liquidated damages (pursuant to Section
5) shall accrue and be payable), so long as the Company promptly thereafter
complies with the requirements of Section 6(c)(xvi) hereof, if applicable. Any
such period during which the Company and the Guarantors fail to keep the
Registration Statement effective and usable for offers and sales of Transfer
Restricted Securities is referred to as a "Suspension Period." A Suspension
Period shall commence on and include the date that the Company gives notice that
the Registration Statement is no longer effective or the Prospectus included
therein is no longer usable for offers and sales of Transfer Restricted
Securities and shall end on the earlier to occur of (i) date when each seller of
Transfer Restricted Securities covered by such Registration Statement either
receives the copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xvi) hereof or is advised in writing by the Company that use of the
Prospectus may be resumed and (ii) the expiration of the 30 days in any 12-month
period during which one or more Suspension Periods has been in effect.
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 business days after receipt of a request
therefor, such information specified in item 507 of Regulation S-K under the Act
for use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to liquidated damages pursuant to Section 5 hereof
unless and until such Holder shall have used its best efforts to provide all
such reasonably requested information. Each Holder as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
SECTION 5. Liquidated Damages.
If (i) any of the Registration Statements required by this Agreement is
not filed with the Commission on or prior to the date specified for such filing
in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement
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required by this Agreement is filed and declared effective but shall thereafter
cease to be effective or fail to be usable for its intended purpose without
being succeeded immediately by a post-effective amendment to such Registration
Statement that cures such failure and that is itself immediately declared
effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company and the Guarantors hereby jointly and
severally agree to pay liquidated damages to each Holder of Transfer Restricted
Securities with respect to the first 90-day period immediately following the
occurrence of such Registration Default, in an amount equal to $.05 per week per
$1,000 principal amount of Transfer Restricted Securities held by such Holder
for each week or portion thereof that the Registration Default continues. The
amount of the liquidated damages shall increase by an additional $.05 per week
per $1,000 in principal amount of Transfer Restricted Securities with respect to
each subsequent 90-day period until all Registration Defaults have been cured,
up to a maximum amount of liquidated damages of $.50 per week per $1,000
principal amount of Transfer Restricted Securities. All accrued liquidated
damages shall be paid to Record Holders by the Company by wire transfer of
immediately available funds or by federal funds check on each Damages Payment
Date, as provided in the Indenture. Following the cure of all Registration
Defaults relating to any particular Transfer Restricted Securities, the accrual
of liquidated damages with respect to such Transfer Restricted Securities will
cease.
All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Security shall have been satisfied in full.
SECTION 6. Registration Procedures.
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors shall comply with all of the
applicable provisions of Section 6(c) below, shall use their best efforts to
effect such exchange to permit the sale of Transfer Restricted Securities, and
shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the Company
there is a question as to whether the Exchange Offer is permitted by
applicable law, the Company and the Guarantors hereby agree to seek a
no-action letter or other favorable decision from the Commission allowing
the Company and the Guarantors to Consummate an Exchange Offer for such
Series A Senior Notes. The Company and each of the Guarantors each hereby
agrees to pursue the issuance of such a decision to the Commission staff
level but shall not be required to take commercially unreasonable action
to effect a change of Commission policy. The Company and each of the
Guarantors each hereby agrees, however, to (A) participate in telephonic
conferences with the Commission, (B) deliver to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal bases,
if any, upon which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursue a resolution (which need not
be favorable) by the Commission staff of such submission.
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(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation thereof, a written representation to the Company
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate (as defined in Rule 405 under the Act) of the Company, (B) it is
not engaged in, and does not intend to engage in, and has no arrangement
or understanding with any person to participate in, a distribution of the
Series B Senior Notes to be issued in the Exchange Offer, (C) it is
acquiring the Series B Senior Notes in its ordinary course of business,
(D) if such Holder is a Broker-Dealer, that it will receive Series B
Senior Notes for its own account in exchange for Senior Notes that were
acquired as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any
resale of such Series B Senior Notes and (E) to the knowledge of such
Holder, it is not acting on behalf of any person who could not make the
representations in clauses (A) - (D). In addition, all such Holders of
Transfer Restricted Securities shall otherwise cooperate in the Company's
preparations of the Exchange Offer. Each Holder hereby acknowledges and
agrees that any Broker-Dealer and any such Holder using the Exchange Offer
to participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated
in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters (including any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction should be
covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K if the resales are of Series B Senior Notes obtained by
such Holder in exchange for Series A Senior Notes acquired by such Holder
directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, if requested by the Commission, the Company and
the Guarantors shall provide a supplemental letter to the Commission (A)
stating that the Company and the Guarantors are registering the Exchange
Offer in reliance on the position of the Commission enunciated in Exxon
Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and
Co., Inc. (available June 5, 1991) and, if applicable, any no-action
letter obtained pursuant to clause (i) above and (B) including a
representation that neither the Company nor any of the Guarantors has
entered into any arrangement or understanding with any Person to
distribute the Series B Senior Notes to be received in the Exchange Offer
and that, to the best of the Company's information and belief, each Holder
participating in the Exchange Offer is acquiring the Series B Senior Notes
in its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Series B Senior
Notes received in the Exchange Offer.
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<PAGE> 11
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities, and
pursuant thereto the Company will as expeditiously as possible prepare and file
with the Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof.
(c) General Provisions. In connection with any Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit sales of
Broker-Dealer Transfer Restricted Securities), the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Act or any regulation thereunder, financial
statements of the Guarantors) for the period specified in Section 3 or 4
of this Agreement, as applicable; upon the occurrence of any event that
would cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not to
be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company shall file
promptly an appropriate amendment or supplement to such Registration
Statement or Prospectus, in the case of clause (A), correcting any such
misstatement or omission, and, in the case of either clause (A) or (B),
use its reasonable best efforts to cause such amendment to be declared
effective and such Registration Statement and the related Prospectus to
become usable for their intended purpose(s) as soon as practicable
thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as applicable, or such shorter
period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) in the case of (x) a Shelf Registration Statement,
pursuant to Section 4 or (y) an Exchange Offer Registration Statement
pursuant to Section 3 to permit sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, advise the underwriter(s), if
any, and selling Holders or Restricted Broker-Dealers, as the case may be,
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<PAGE> 12
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company
and the Guarantors shall use their reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) in the case of (x) a Shelf Registration Statement,
pursuant to Section 4 or (y) an Exchange Offer Registration Statement
pursuant to Section 3 to permit sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, furnish to each of the selling
Holders or Restricted Broker-Dealers, as the case may be, and each of the
underwriter(s), if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or Prospectus
(including all documents incorporated by reference after the initial
filing of such Registration Statement), which documents will be subject to
the review of such Holders and underwriter(s), if any, for a period of at
least five business days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which any selling Holder or Restricted
Broker-Dealer, as the case may be, or the underwriter(s), if any, shall
reasonably object within five business days after the receipt thereof. A
selling Holder or underwriter, if any, shall be deemed to have reasonably
objected to such filing if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed, contains
a material misstatement or omission;
(v) in the case of (x) a Shelf Registration Statement,
pursuant to Section 4 or (y) an Exchange Offer Registration Statement
pursuant to Section 3 to permit sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, promptly prior to the filing of
any document that is to be incorporated by reference into a Registration
11
<PAGE> 13
Statement or Prospectus, provide copies of such document at their request
to the selling Holders or Restricted Broker-Dealers, as the case may be,
and to the underwriter(s), if any, make the Company's representatives (and
representatives of the Guarantors) available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as the Majority
Holders or underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by
representatives appointed by the Majority Holders, any underwriter
participating in any disposition pursuant to such Registration Statement,
and any attorney or accountant retained by such Majority Holders or any of
the underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and the Guarantors and cause the
Company's and the Guarantors' officers, directors and employees to supply
all information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with such Registration Statement
subsequent to the filing thereof and prior to its effectiveness; provided,
however, that any information that is designated in writing by the
Company, in good faith, as confidential at the time of delivery of such
information shall be kept confidential by the Holders or any such
underwriter, attorney, accountant or agent, unless such disclosure is made
in connection with a court proceeding or required by law, or such
information becomes available to the public generally through a third
party without an accompanying obligation of confidentiality;
(vii) in the case of (x) a Shelf Registration Statement,
pursuant to Section 4 or (y) an Exchange Offer Registration Statement
pursuant to Section 3 to permit sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, if requested by a representative
of the selling Majority Holders or a Restricted Broker-Dealer, as the case
may be, or the underwriter(s), if any, promptly incorporate in any
Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such Majority
Holders and underwriter(s), if any, may reasonably request to have
included therein, including, without limitation, information relating to
the "Plan of Distribution" of the Transfer Restricted Securities,
information with respect to the principal amount of Transfer Restricted
Securities being sold to such underwriter(s), the purchase price being
paid therefor and any other terms of the offering of the Transfer
Restricted Securities to be sold in such offering; and make all required
filings of such Prospectus supplement or post-effective amendment as soon
as practicable after the Company is notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
(viii) use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be rated
with the appropriate rating agencies, if so requested by the Majority
Holders or the underwriter(s), if any, unless the Transfer Restricted
Securities are already so rated;
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<PAGE> 14
(ix) furnish (x) each Restricted Broker-Dealer selling
pursuant to an Exchange Offer Registration Statement and each other
selling Holder thereunder that so requests, and (y) each Holder selling
pursuant to a Shelf Registration Statement, and each of the
underwriter(s), if any, without charge, at least one conformed copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including, if requested, all documents incorporated by
reference therein and all exhibits (including exhibits incorporated
therein by reference);
(x) deliver to (x) each Restricted Broker-Dealer selling
pursuant to an Exchange Offer Registration Statement and each other
selling Holder thereunder that is required to deliver a prospectus
following the Exchange Offer, and (y) each Holder selling pursuant to a
Shelf Registration Statement, and each of the underwriter(s), if any,
without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company and the Guarantors hereby
consent to the use of the Prospectus and any amendment or supplement
thereto by each of the Restricted Broker-Dealers or selling Holders, as
the case may be, and each of the underwriter(s), if any, in connection
with the offering and the sale of the Transfer Restricted Securities
covered by the Prospectus or any amendment or supplement thereto;
(xi) in the case of (x) a Shelf Registration Statement
pursuant to Section 4 or (y) an Exchange Offer Registration Statement
pursuant to Section 3 to permit sales of Broker-Dealer Restricted
Securities by Restricted Broker-Dealers, enter into, and cause the
Guarantors to enter into, such agreements (including an underwriting
agreement), and make, and cause the Guarantors to make, such
representations and warranties, and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to such Registration
Statement, all to such extent as may be requested by any Initial Purchaser
or by the selling Majority Holders or any Restricted Broker-Dealer, as the
case may be, or underwriter in connection with any sale or resale pursuant
to any Registration Statement contemplated by this Agreement; and whether
or not an underwriting agreement is entered into and whether or not such
registration is an Underwritten Registration, the Company and the
Guarantors shall:
(A) obtain for each Initial Purchaser, each selling Holder or
any Restricted Broker-Dealer, as the case may be, and each
underwriter, if any, upon the effectiveness of the Shelf
Registration Statement and to each Restricted Broker-Dealer upon
Consummation of the Exchange Offer:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by the President,
any Vice President or a principal financial or accounting officer of
each of the Company and the Guarantors, confirming, as of the date
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<PAGE> 15
thereof, the matters set forth in paragraphs (a), (b), (c) and (d)
of Section 7 of the Purchase Agreement and such other matters as
such parties may reasonably request;
(2) an opinion or opinions, dated the date of
Consummation of the Exchange Offer on the date of effectiveness of
the Shelf Registration Statement, as the case may be, of counsel for
the Company and the Guarantors, covering the matters set forth in
paragraphs (f), (g) and (h) of Section 7 of the Purchase Agreement
and such other matters as such parties may reasonably request; and
(3) customary comfort letters, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness of
the Shelf Registration Statement, as the case may be, from the
Company's independent accountants, and addressed to the
underwriters, if any (and use their best efforts to have such
letters addressed to the Holders of Transfer Restricted Securities),
such letters in the customary form and covering matters of the type
customarily covered in comfort letters by underwriters in connection
with primary underwritten offerings;
(B) set forth in the underwriting agreement, if any,
indemnification provisions and procedures no less favorable from
those set forth in Section 8 hereof with respect to all parties to
be indemnified pursuant to said Section (or other provisions and
procedures acceptable to the Majority Holders or the underwriters,
if any); and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company and
the Guarantors contemplated in clause (A)(1) above cease to be true and
correct, the Company or the Guarantors shall so advise the Initial
Purchasers and the underwriter(s), if any, and each selling Holder
promptly and, if requested by such Persons, shall confirm such advice in
writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with, and cause the Guarantors to cooperate with,
the selling Holders, the underwriter(s), if any, and their respective
counsel in connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s) may reasonably
request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the Shelf Registration Statement; provided, however,
that neither the Company nor the Guarantors shall be required to register
or qualify as a foreign corporation where it is not now so qualified or to
take any
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<PAGE> 16
action that would subject it to the service of process in suits or to
taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xiii) in the case of (x) a Shelf Registration Statement,
pursuant to Section 4 or (y) an Exchange Offer Registration Statement
pursuant to Section 3 to permit sales of Broker-Dealer Restricted
Securities by Restricted Broker-Dealers, cooperate with, and cause the
Guarantors to cooperate with, the selling Holders and the underwriter(s),
if any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be
in such denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to
any sale of Transfer Restricted Securities made by such underwriter(s);
(xiv) use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
the underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities;
(xv) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration Statement
and provide the Trustee under the Indenture with printed certificates for
the Transfer Restricted Securities which are in a form eligible for
deposit with the Depositary Trust Company;
(xvi) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter") that
is required to be retained in accordance with the rules and regulations of
the NASD, and use its reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies
or authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
(xvii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm or best efforts Underwritten Offering or (B) if not
sold to underwriters in such an offering, beginning with the first month
of the Company's first fiscal quarter commencing after the effective date
of the Registration Statement;
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<PAGE> 17
(xviii) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement required
by this Agreement, and, in connection therewith, cooperate, and cause the
Guarantors to cooperate, with the Trustee and the Holders of Senior Notes
to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute, and cause the Guarantors to execute, and use its best efforts to
cause the Trustee to execute, all documents that may be required to effect
such changes and all other forms and documents required to be filed with
the Commission to enable such Indenture to be so qualified in a timely
manner; and
(xix) use their reasonable best efforts to cause all Transfer
Restricted Securities covered by the Registration Statement to be listed
on each securities exchange on which similar securities issued by the
Company are then listed if requested by the Holders of a majority in
aggregate principal amount of Series A Senior Notes or the managing
underwriter(s), if any.
Each Holder agrees by acquisition of a Transfer Restricted Security that,
upon receipt of any notice from the Company of the existence of any fact of the
kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c) hereof, or
until it is advised in writing (the "Advice") by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Company, each 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 Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or
shall have received the Advice.
SECTION 7. Registration Expenses.
(a) All expenses incident to the Company's or the Guarantors'
performance of or compliance with this Agreement will be borne by the Company or
the Guarantors, regardless of whether a Registration Statement becomes
effective, including without limitation: (i) all registration and filing fees
and expenses (including filings made by any Initial Purchaser or Holder with the
NASD (and, if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel that may be required by the rules and regulations
of the NASD)); (ii) all fees and expenses of compliance with federal securities
and state Blue Sky or securities laws; (iii) all expenses of printing (including
printing certificates for the Series B Senior Notes to be issued in the Exchange
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<PAGE> 18
Offer and printing of Prospectuses), messenger and delivery services and
telephone; (iv) in the case of a Shelf Registration Statement, all fees and
disbursements of counsel for the Company, the Guarantors and, subject to Section
7(b) below, the Holders of Transfer Restricted Securities; (v) all application
and filing fees in connection with listing Senior Notes on a national securities
exchange or automated quotation system pursuant to the requirements hereof; (vi)
all fees and disbursements of independent certified public accountants of the
Company and the Guarantors (including the expenses of any special audit and
comfort letters required by or incident to such performance) and (vii) the
reasonable fees of the Trustee and the exchange agent under the Exchange Offer
and the reasonable fees and expenses of their counsel.
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company.
(b) In connection with any Shelf Registration Statement, the Company
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities for the reasonable fees and disbursements of not more than one
counsel, who shall be Andrews & Kurth L.L.P. or such other counsel as may be
chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Shelf Registration Statement is
being prepared.
SECTION 8. Indemnification.
(a) The Company and the Guarantors, jointly and severally, agree to
indemnify and hold harmless (i) each Holder and (ii) each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), to the
fullest extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including without limitation and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Holder) directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus (or any amendment or
supplement thereto), or 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, except insofar as such losses, claims, damages,
liabilities or expenses are caused by an untrue statement or omission or alleged
untrue statement or omission that is made in reliance upon and in conformity
with information relating to any of the Holders furnished in writing to the
Company by any of the Holders expressly for use therein; provided, that with
respect to any such untrue statement in or omission from the preliminary
prospectus, the indemnity
17
<PAGE> 19
agreement contained in this Section 8 shall not inure to the benefit of any such
Holder to the extent that the sale to the person asserting any such loss, claim,
damage, liability or action was an initial resale by such Holder and any such
loss, claim, damage, liability or action of or with respect to such Holder
results from the fact that (A) a copy of the Prospectus was not sent or given to
such person at or prior to the written confirmation of the sale of such Transfer
Restricted Securities to such person, (B) the untrue statement in or omission
from the preliminary prospectus was corrected in the Prospectus and such
statement or omission formed the basis for the claim giving rise to such loss,
and (C) sufficient quantities of the Prospectus were delivered to the Holder on
a timely basis.
In case any action or proceeding (including any governmental or regulatory
investigation or proceeding) shall be brought or asserted against any of the
Indemnified Holders with respect to which indemnity may be sought against the
Company or the Guarantors, such Indemnified Holder (or the Indemnified Holder
controlled by such controlling person) shall promptly notify the Company and the
Guarantors in writing; provided, that the failure to give such notice shall not
relieve the Company or the Guarantors of their obligations pursuant to this
Agreement, unless such failure materially prejudices the Company or the
Guarantors. Such Indemnified Holder shall have the right to employ its own
counsel in any such action and the fees and expenses of such counsel shall be
paid, as incurred, by the Company and the Guarantors (regardless of whether it
is ultimately determined that an Indemnified Holder is not entitled to
indemnification hereunder). The Company and the Guarantors shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Holders, which firm shall be
designated by the Holders. The Company shall be liable for any settlement of any
such action or proceeding effected with the Company's prior written consent,
which consent shall not be withheld unreasonably, and the Company agrees to
indemnify and hold harmless any Indemnified Holder from and against any loss,
claim, damage, liability or expense by reason of any settlement of any action
effected with the written consent of the Company. The Company shall not, without
the prior written consent of each Indemnified Holder, settle or compromise or
consent to the entry of judgment in or otherwise seek to terminate any pending
or threatened action, claim, litigation or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not any
Indemnified Holder is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of each Indemnified
Holder from all liability arising out of such action, claim, litigation or
proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Company and the Guarantors,
and their respective directors, officers, and any person controlling (within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company,
and the respective officers, directors, partners, employees, representatives and
agents of each such person, to the same extent as the foregoing indemnity from
the Company and the Guarantors to each of the Indemnified Holders, but only with
respect to claims and actions based on information relating to such Holder
furnished in writing by such Holder expressly for use in any Registration
Statement. In case any action or proceeding shall be brought
18
<PAGE> 20
against the Company or its directors or officers or any such controlling person
in respect of which indemnity may be sought against a Holder of Transfer
Restricted Securities, such Holder shall have the rights and duties given the
Company and the Company or its directors or officers or such controlling person
shall have the rights and duties given to each Holder by the preceding
paragraph. In no event shall the liability of any selling Holder hereunder be in
excess of (i) the amount of the proceeds received by such Holder upon the sale
of the Transfer Restricted Securities giving rise to such indemnification
obligation and (ii) the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Holders on the other hand from their sale of
Transfer Restricted Securities or if such allocation is not permitted by
applicable law, the relative fault of the Company on the one hand and of the
Indemnified Holder on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of the
Company and the Guarantors on the one hand and of the Indemnified Holder on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Guarantors or by the Indemnified Holder and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in the second paragraph
of Section 8(a), any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim.
The Company, the Guarantors and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 8(c) were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or expenses referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, none of the Holders (and its related Indemnified
Holders) shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the total discount received by such Holder with respect
to the Series A Senior Notes exceeds the amount of any damages which such Holder
has otherwise
19
<PAGE> 21
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(c) are several in proportion to the respective principal amount of
Series A Senior Notes held by each of the Holders hereunder and not joint.
SECTION 9. Rule 144A.
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding, to make available to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
from such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 10. Participation in Underwritten Registrations.
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
SECTION 11. Selection of Underwriters.
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. Miscellaneous.
(a) Remedies. The Company and the Guarantors agree that monetary
damages (including the liquidated damages contemplated hereby) would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agree to waive the defense in any action
for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not, and will cause
the Guarantors not to, on or after the date of this Agreement enter into any
agreement with respect to its
20
<PAGE> 22
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. Neither the Company
nor any of the Guarantors has previously entered into any agreement granting any
registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Senior Notes. The Company will not
take any action with respect to the Senior Notes that would materially and
adversely affect the ability of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 8
hereof and this Section 12(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of the Majority Holders. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Majority Holders.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
Anker Coal Group, Inc.
2708 Cranberry Square
Morgantown, West Virginia 26505
Telecopier No.: (304) 594-1685
Attention: P. Bruce Sparks
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopier No.: (212) 455-2502
21
<PAGE> 23
Attention: John Tehan, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and on the
next business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
22
<PAGE> 24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
ANKER COAL GROUP, INC.
By: /s/ BRUCE SPARKS
-----------------------------------
Name: Bruce Sparks
Title: Executive Vice President
ANKER GROUP, INC.
By: /s/ BRUCE SPARKS
-----------------------------------
Name: Bruce Sparks
Title: Executive Vice President
EACH OTHER ENTITY LISTED ON
SCHEDULE A HERETO
By: /s/ MICHAEL M. MATESIC
-----------------------------------
Name: Michael M. Matesic
Title: Treasurer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ WILLIAM J.R. WILSON
-----------------------------------
Name: William J.R. Wilson
Title: Vice President
CHASE SECURITIES INC.
By: /s/ DANIEL P. TREDWELL
-----------------------------------
Name: Daniel P. Tredwell
Title: Managing Director
23
<PAGE> 25
SCHEDULE A
Company State of Incorporation
Anker Group, Inc. Delaware
Anker Energy Corporation Delaware
Bronco Mining Company, Inc. West Virginia
Anker Power Services, Inc. West Virginia
Anker West Virginia Mining Corporation, Inc. West Virginia
Juliana Mining Company, Inc. West Virginia
King Knob Coal Co., Inc. West Virginia
Vantrans, Inc. Delaware
Melrose Coal Company, Inc. West Virginia
Marine Coal Sales Company Delaware
Hawthorne Coal Company, Inc. West Virginia
Upshur Property, Inc. Delaware
Heather Glen Resources, Inc. West Virginia
New Allegheny Land Holding Company, Inc. West Virginia
Patriot Mining Company, Inc. West Virginia
Vindex Energy Corporation West Virginia
Anker Virginia Mining Company, Inc. Virginia
<PAGE> 1
EXHIBIT 5.1
January 12, 1998
Anker Coal Group, Inc.
2708 Cranberry Square
Morgantown, West Virginia 26505
Ladies and Gentlemen:
We have acted as special counsel for Anker Coal Group, Inc., a Delaware
corporation (the "Company"), in connection with the Registration Statement on
Form S-4 (the "Registration Statement") filed by the Company with the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), relating to the issuance by the Company of
$125,000,000 aggregate principal amount of its 9 3/4% Series B Senior Notes due
2007 (the "Exchange Notes"), guaranteed (the "Guarantees") on a senior basis by
the entities listed on Schedule A hereto (collectively, the "Guarantors"). The
Exchange Notes are to be offered by the Company in exchange for (the "Exchange")
$125,000,000 aggregate principal amount of its outstanding 9 3/4% Senior Notes
due 2007 (the "Notes"). The Notes have been, and the Exchange Notes will be,
issued under an Indenture dated as of September 25, 1997 (the "Indenture")
between the Company, the Guarantors and Marine Midland Bank, as Trustee (the
"Trustee").
We have examined the Registration Statement and the Indenture, which has
been filed with the Commission as an Exhibit to the Registration Statement. In
addition, we have examined, and have relied as to matters of fact upon, the
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, agreements, documents and other instruments and such
certificates or comparable documents of public officials and of officers and
representatives of the Company, and have made such other and further
investigations, as we have deemed relevant and necessary as a basis for the
opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals and the conformity to original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity of the
originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and limitations
stated herein, we are of the opinion that:
(i) assuming the Indenture has been duly authorized and validly
executed and delivered by the parties thereto, when the Exchange Notes have
been duly executed, authenticated, issued and delivered in accordance with
the provisions of the Indenture upon the Exchange, the Exchange Notes will
constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms; and
(ii) assuming the Indenture has been duly authorized and validly
executed and delivered by the parties thereto, when (1) the Board of
Directors of each Guarantor, a duly constituted and acting committee
thereof or duly authorized officers thereof have taken all necessary
corporate action to approve the issuance and terms of such Guarantor's
Guarantee and (2) the Exchange Notes and the Guarantees endorsed thereon
have been duly executed, authenticated, issued and delivered in accordance
with the provisions of the Indenture upon the Exchange, each Guarantor's
Guarantee will constitute a valid and legally binding obligation of such
Guarantor, enforceable against such Guarantor in accordance with its terms.
Our opinions set forth in paragraphs (i) and (ii) are subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing. We
note that the Indenture is governed by the law of the State of New York.
<PAGE> 2
We are members of the Bar of the State of New York and we do not express
any opinion herein concerning any law other than the law of the State of New
York and the federal law of the United States.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus included therein.
Very truly yours,
SIMPSON THACHER & BARTLETT
<PAGE> 3
SCHEDULE A
<TABLE>
<CAPTION>
STATE OF
COMPANY INCORPORATION
- ------------------------------------------------------------------------------ --------------
<S> <C>
Anker Group, Inc. Delaware
Anker Energy Corporation Delaware
Bronco Mining Company, Inc. West Virginia
Anker Power Services, Inc. West Virginia
Anker West Virginia Mining Company, Inc. West Virginia
Juliana Mining Company, Inc. West Virginia
King Knob Coal Co., Inc. West Virginia
Vantrans, Inc. Delaware
Melrose Coal Company, Inc. West Virginia
Marine Coal Sales Company Delaware
Hawthorne Coal Company, Inc. West Virginia
Upshur Property, Inc. Delaware
Heather Glen Resources, Inc. West Virginia
New Allegheny Land Holding Company, Inc. West Virginia
Patriot Mining Company, Inc. West Virginia
Vindex Energy Corporation West Virginia
Anker Virginia Mining Company, Inc. Virginia
</TABLE>
<PAGE> 1
Exhibit 10.1
Execution Counterpart
************************************************************
ANKER COAL GROUP, INC.
-----------------------------
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of September 22, 1997
------------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
CHASE SECURITIES INC.,
as Arranger
************************************************************
<PAGE> 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
Page
Section 1. Definitions and Accounting Matters............................. 2
1.01 Certain Defined Terms.......................................... 2
1.02 Accounting Terms and Determinations............................ 33
1.03 Types of Loans................................................. 35
Section 2. Commitments, Loans, Notes and Prepayments...................... 35
2.01 Loans.......................................................... 35
2.02 Borrowings..................................................... 36
2.03 Limit on Eurodollar Loans...................................... 36
2.04 Changes of Commitments......................................... 37
2.05 Commitment Fee................................................. 38
2.06 Lending Offices................................................ 39
2.07 Several Obligations; Remedies Independent...................... 39
2.08 Notes.......................................................... 39
2.09 Optional Prepayments and Conversions or
Continuations of Loans...................................... 40
2.10 Mandatory Prepayments and Reductions of
Commitments................................................. 40
Section 3. Payments of Principal and Interest............................. 46
3.01 Repayment of Loans............................................. 46
3.02 Interest....................................................... 46
Section 4. Payments; Pro Rata Treatment; Computations;
Etc......................................................... 47
4.01 Payments....................................................... 47
4.02 Pro Rata Treatment............................................. 48
4.03 Computations................................................... 49
4.04 Minimum Amounts................................................ 49
4.05 Certain Notices................................................ 49
4.06 Non-Receipt of Funds by the Administrative Agent............... 50
4.07 Sharing of Payments, Etc....................................... 52
Section 5. Yield Protection, Etc.......................................... 53
5.01 Additional Costs............................................... 53
5.02 Limitation on Types of Loans................................... 55
5.03 Illegality..................................................... 56
5.04 Treatment of Affected Loans.................................... 56
5.05 Compensation................................................... 57
5.06 U.S. Taxes..................................................... 58
5.07 Replacement of Banks........................................... 59
Section 6. Guarantee...................................................... 60
(i)
<PAGE> 3
Page
6.01 The Guarantee.................................................. 60
6.02 Obligations Unconditional...................................... 61
6.03 Reinstatement.................................................. 62
6.04 Subrogation.................................................... 62
6.05 Remedies....................................................... 63
6.06 Instrument for the Payment of Money............................ 63
6.07 Continuing Guarantee........................................... 63
6.08 Rights of Contribution......................................... 63
6.09 General Limitation on Guarantee Obligations.................... 64
Section 7. Conditions Precedent........................................... 65
7.01 Effectiveness.................................................. 65
7.02 Initial and Subsequent Extensions of Credit.................... 68
Section 8. Representations and Warranties................................. 68
8.01 Corporate Existence............................................ 68
8.02 Financial Condition............................................ 69
8.03 Litigation..................................................... 69
8.04 No Breach...................................................... 70
8.05 Action......................................................... 70
8.06 Approvals...................................................... 71
8.07 ERISA.......................................................... 71
8.08 Taxes.......................................................... 71
8.09 Investment Company Act......................................... 71
8.10 Public Utility Holding Company Act............................. 71
8.11 Material Agreements and Liens.................................. 72
8.12 Environmental Matters.......................................... 72
8.13 Capitalization................................................. 75
8.14 Subsidiaries, Etc.............................................. 77
8.15 True and Complete Disclosure................................... 77
8.16 Real Property.................................................. 78
8.17 Solvency Analyses.............................................. 78
8.18 Use of Credit.................................................. 78
8.19 Solvency....................................................... 78
8.20 Mobile Equipment............................................... 79
Section 9. Covenants of the Company....................................... 79
9.01 Financial Statements Etc....................................... 79
9.02 Litigation..................................................... 84
9.03 Existence, Etc................................................. 84
9.04 Insurance...................................................... 85
9.05 Prohibition of Fundamental Changes............................. 86
9.06 Limitation on Liens............................................ 88
9.07 Indebtedness................................................... 89
9.08 Investments.................................................... 91
9.09 Dividend Payments.............................................. 92
9.10 Certain Financial Covenants.................................... 93
9.11 Capital Expenditures........................................... 94
9.12 Interest Rate Protection Agreements............................ 94
9.13 Operating Leases............................................... 94
9.14 Lines of Business.............................................. 94
(ii)
<PAGE> 4
9.15 Transactions with Affiliates................................... 95
9.16 Use of Proceeds................................................ 95
9.17 Certain Obligations Respecting Restricted
Subsidiaries................................................ 95
9.18 Modifications of Certain Documents............................. 97
9.19 Holding Company................................................ 97
9.20 Newly-Acquired Real Property................................... 97
9.21 Certain Consents............................................... 98
9.22 Senior Notes................................................... 98
9.23 Certain Obligations Under Acquisition Documents................ 99
Section 10. Events of Default............................................. 99
Section 11. The Administrative Agent......................................102
11.01 Appointment, Powers and Immunities............................103
11.02 Reliance by Administrative Agent..............................104
11.03 Defaults......................................................104
11.04 Rights as a Bank..............................................104
11.05 Indemnification...............................................105
11.06 Non-Reliance on Administrative Agent and Other
Banks.......................................................105
11.07 Failure to Act................................................106
11.08 Resignation or Removal of Administrative Agent................106
Section 12. Miscellaneous.................................................106
12.01 Waiver........................................................107
12.02 Notices.......................................................107
12.03 Expenses, Etc.................................................107
12.04 Amendments, Etc...............................................109
12.05 Successors and Assigns........................................111
12.06 Assignments and Participations................................111
12.07 Survival......................................................113
12.08 Captions......................................................113
12.09 Counterparts..................................................113
12.10 Governing Law; Submission to Jurisdiction.....................113
12.11 Waiver of Jury Trial..........................................114
12.12 Treatment of Certain Information;
Confidentiality.............................................114
SCHEDULE I - Material Agreements and Liens
SCHEDULE II - Environmental Matters
SCHEDULE III - Subsidiaries
SCHEDULE IV - Eligible Properties
(iii)
<PAGE> 5
EXHIBIT A - Form of Revolving Credit Note
EXHIBIT B - Form of Borrowing Base Certificate
EXHIBIT C - Form of Leverage Certificate
EXHIBIT D - Form of Amendment to Security Agreement
EXHIBIT E - [Intentionally Omitted]
EXHIBIT F - [Intentionally Omitted]
EXHIBIT G - [Intentionally Omitted]
EXHIBIT H - Form of Opinion of Special New York Counsel
to Chase
EXHIBIT I - Form of Confidentiality Agreement
EXHIBIT J - Form of Assignment and Acceptance
EXHIBIT K - Form of Intercompany Note
EXHIBIT L - Form of Joinder Agreement
(iv)
<PAGE> 6
AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 22,
1997, among: ANKER COAL GROUP, INC., a corporation duly organized and validly
existing under the laws of the State of Delaware (the "Company"); each Person
listed on the signature pages hereto under the caption "Subsidiary Guarantor"
and each Person that becomes a "Subsidiary Guarantor" pursuant to Section
9.17(a) hereof (individually, a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors" and, together with the Company, the "Obligors"); each of
the lenders that is a signatory hereto identified under the caption "BANKS" on
the signature pages hereto and each lender that becomes a "Bank" after the date
hereof pursuant to Section 12.06(b) hereof (individually, a "Bank" and,
collectively, the "Banks"); and THE CHASE MANHATTAN BANK, a New York State
banking corporation, as agent for the Banks (in such capacity, together with its
successors in such capacity, the "Administrative Agent"). Capitalized terms used
and not otherwise defined in the caption and recitals of this Agreement have the
respective meanings assigned to them in Section 1.01 of this Agreement.
The Company, the Subsidiary Guarantors, certain of the Banks (the
"Existing Banks") and the Administrative Agent are party to a Credit Agreement
dated as of August 12, 1996 (as heretofore modified and supplemented and in
effect on the date hereof immediately before giving effect to the amendment and
restatement contemplated hereby, the "Existing Credit Agreement"). Pursuant to
the Existing Credit Agreement (a) certain of the Existing Banks committed to
make Revolving Credit Loans (as defined in the Existing Credit Agreement and
referred to herein as "Existing Revolving Credit Loans") in an original
aggregate principal amount not exceeding $25,000,000 at any one time outstanding
(the "Existing Revolving Credit Commitments") and (b) certain of the Existing
Banks committed to make Tranche A Term Loans and Tranche B Term Loans (as
defined in the Existing Credit Agreement and referred to herein as "Existing
Term Loans") to the Company in an original aggregate principal amount not
exceeding $110,000,000 (the "Existing Term Loan Commitments").
The Company intends to issue senior, unsecured notes due 2007 in an
aggregate principal amount equal to $125,000,000 (the "Senior Notes") on the
terms and conditions described in the Senior Note Preliminary Offering
Memorandum, the proceeds of which will be used to prepay in full the Existing
Term Loans and for general corporate purposes.
The Company has requested that the Existing Credit Agreement be
amended and restated in order to, among other things, (a) increase the aggregate
amount of the Existing Revolving Credit Commitments to $75,000,000 and (b)
terminate the Existing Term Loan Commitments.
<PAGE> 7
- 2 -
NOW, THEREFORE, the parties hereto hereby agree that the Existing
Credit Agreement shall be amended and restated as of the date hereof (but
subject to Section 7.01) to read in its entirety as follows:
Accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.01 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"ACGI Class A Preferred Stock" shall mean the Class A Preferred
Stock of the Company with a par value of $2,500 per share.
"ACGI Class B Preferred Stock" shall mean the Class B Preferred
Stock of the Company with a par value of $1,000 per share.
"ACGI Class C Preferred Stock" shall mean the Class C Preferred
Stock of the Company with a par value of $13,000 per share.
"ACGI Class D Preferred Stock" shall mean the Class D Preferred
Stock of the Company with a par value of $7,000 per share.
"Acquisition" shall mean the consummation of the following
transactions in accordance with the Acquisition Documents: (i) the exchange by
JJF Group Limited Liability Company of (A) 25 shares of the Class A common stock
of AGI and (B) $30.39 in cash for (C) 3,039 newly issued shares of the Company's
common stock; (ii) the exchange by PPK Group Limited Liability Company of (A)
4.23 shares of the Class A common stock of AGI and (B) $5.14 in cash for (C) 514
newly issued shares of the Company's common stock; (iii) the exchange by Anker
Holding of (A) 8.56 shares of the Class A common stock of AGI and (B) $10.40 in
cash for (C) 1,040 newly issued shares of the Company's common stock; (iv) the
exchange by Glenn Springs Holdings, Inc. of (A) 1,000 shares of AGI Class C
Preferred Stock for (B) 1,000 newly issued shares of ACGI Class C Preferred
Stock; (v) the exchange by Glenn Springs Holdings, Inc. of (A) 1,000 shares of
AGI Class D Preferred Stock for (B) 1,000 newly issued shares of ACGI Class D
Preferred Stock; (vi) the acquisition by the Company
<PAGE> 8
- 3 -
from Anker Holding of 466.44 shares of the common stock of AGI in exchange for
(A) consideration in cash and/or notes (the principal of which and interest on
which will be paid on the Closing Date) equal to the sum of (1) $62,000,000 and
(2) the product of (I) $15,725 multiplied by (II) the number of days by which
the consummation of the Acquisition follows May 31, 1996 and (B) 10,000 shares
of ACGI Class A Preferred Stock having an aggregate liquidation preference
(excluding accumulated dividends) equal to $25,000,000; (vii) the redemption by
AGI of all of the issued and outstanding AGI Class A Preferred Stock and AGI
Class B Preferred Stock for cash consideration to Anker Holding in the amount of
approximately $2,854,000, and the subsequent cancellation of such shares; (viii)
the issuance by the Company to one or more funds managed by First Reserve of (A)
5,407 shares of the Company's common stock and (B) a Stock Purchase Warrant
exercisable for shares of the Company's common stock in certain instances upon a
registered public offering of the Company's common stock in exchange for
consideration of $40,000,000 consisting of cash; and (ix) the issuance by the
Company to one or more funds managed by First Reserve of 10,000 shares of ACGI
Class B Preferred having an aggregate liquidation preference of $10,000,000 in
exchange for consideration of $10,000,000 consisting of cash.
"Acquisition Documents" shall mean (i) the Registration Rights
Agreement dated as of August 12, 1996 by and among the Company, JJF Group
Limited Liability Company, PPK Group Limited Liability Company, Anker Holding
and the Funds referred to therein; (ii) the Stockholders Agreement and (iii) the
Stock Purchase Warrant referred to in clause (viii)(B) of the definition of
"acquisition" in this Section 1.01, in each of the cases referred to in the
preceding clauses (i) through (iii) as the same shall, subject to Section 9.18
hereof, be modified and supplemented and in effect from time to time.
"Administrative Agent" shall have the meaning assigned thereto in
the caption of this Agreement.
"Affiliate" shall mean any Person that directly or indirectly
controls, or is under common control with, or is controlled by, the Company and,
if such Person is an individual, any member of the immediate family (including
parents, spouse, children and siblings) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean possession, directly
or
<PAGE> 9
- 4 -
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise), provided that, in any event, any Person
that owns directly or indirectly securities having 10% or more of the voting
power for the election of directors or other governing body of a corporation or
10% or more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person, and in all events
excluding securities and partnership and other ownership interests owned by
Anker Capital) will be deemed to control such corporation or other Person.
Notwithstanding the foregoing, (a) no individual shall be an Affiliate solely by
reason of his or her being a director, officer or employee of the Company or any
of its Restricted Subsidiaries, (b) none of the Restricted Subsidiaries shall be
Affiliates, (c) neither the Administrative Agent, any Bank, Anker Holding, First
Reserve or any fund managed by First Reserve shall be an Affiliate.
"Agent's Account" shall mean Anker Coal Group, Inc. Clearing Account
number 323221831 maintained by the Administrative Agent at One Chase Manhattan
Plaza, 8th Floor, New York, NY 10081, Attention: Linda Hill, or such other bank
account as the Administrative Agent may specify from time to time by notice to
the other parties hereto as the account to which certain payments to the
Administrative Agent hereunder are to be made.
"AGI" shall mean Anker Group, Inc., a Delaware corporation.
this "Agreement" (and references such as "hereto" and "hereby" and
to similar effect) shall mean (or refer to) this Amended and Restated Credit
Agreement as renewed, replaced, extended or otherwise modified and supplemented
and in effect from time to time.
"Anker Capital" shall mean Anker Capital Corporation, a West
Virginia corporation.
"Anker Group, Inc. Subordinated Guaranty" shall mean a subordinated
guaranty of AGI, in form and substance satisfactory to the Administrative Agent
and the Banks, of all obligations, including advanced minimum production royalty
payments of approximately $1,600,000 per year, of Patriot Mining Company, Inc.
in favor of Mount Storm Company and Bakerstown Mining Limited Liability Company
with respect to the Stony River Project.
<PAGE> 10
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"Anker Holding" shall mean Anker Holding B.V., a Netherlands
corporation.
"Applicable Lending Office" shall mean, for each Bank and for each
Type of Loan, the "Lending Office" of such Bank (or of an affiliate of such
Bank) designated for such Type of Loan on the signature pages hereof or such
other office of such Bank (or of an affiliate of such Bank) as such Bank may
from time to time specify to the Administrative Agent and the Company as the
office by which its Loans of such Type are to be made and maintained.
"Applicable Percentage" shall mean: (a) with respect to Base Rate
Loans, (i) 1-1/2% per annum; and (b) with respect to Eurodollar Loans, (i)
2-1/2% per annum and (c) with respect to commitment fees, 1/2 of 1% per annum;
provided that (i) during the period commencing on the Effective Date and ending
on the first Rate Reset Date (as defined below), the Applicable Percentage for
Base Rate Loans, Eurodollar Loans and commitment fees shall be 3/4 of 1%, 1-3/4%
and 3/8 of 1%, respectively and (ii) subject to the foregoing clause (i), if the
Net Leverage Ratio as at the last day of any fiscal quarter of the Company shall
fall within any of the ranges set forth below then, upon the delivery to the
Administrative Agent of a certificate (a "Leverage Certificate") of a
Responsible Officer substantially in the form of Exhibit C hereto demonstrating
such fact prior to the end of the next succeeding fiscal quarter, the
"Applicable Percentage" for Revolving Credit Loans and commitment fees shall be
reduced to the rate for the respective Type of Loan and commitment fees set
forth below opposite such range during the period commencing on the third
Business Day after the date of receipt of such Leverage Certificate to but not
including the first Rate Reset Date thereafter (except that, notwithstanding the
foregoing, the Applicable Percentage for any such Loan or commitment fee shall
not as a consequence of this proviso be so reduced for any period during which
an Event of Default shall have occurred and be continuing following notice by
the Administrative Agent to the Company upon the instruction of the Majority
Banks that such reduction shall not be made):
<PAGE> 11
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Range Applicable Percentage
of Base Rate Eurodollar Commitment
Net Leverage Ratio Loans Loans Fee
Greater than 5.50 to 1 1-1/2% 2-1/2% 1/2 of 1%
Greater than or
equal to 5.00 to 1 1-1/4% 2-1/4% 1/2 of 1%
but less than or
equal to 5.50 to 1
Greater than or
equal to 4.50 to 1 1% 2% 1/2 of 1%
but less than 5.00
to 1
Greater than or
equal to 3.75 to 1 3/4 of 1% 1-3/4% 3/8 of 1%
but less than 4.50
to 1
Greater than or
equal to 3.00 to 1 1/2 of 1% 1-1/2% 3/8 of 1%
but less than 3.75
to 1
Greater than or
equal to 1.50 to 1 1/4 of 1% 1-1/4% 3/10 of 1%
but less than 3.00
to 1
Less than 1.50 to 1 0% 1% 1/4 of 1%
For purposes hereof, (a) the first "Rate Reset Date" shall mean the earlier of
(i) the third Business Day after the date on which the Administrative Agent
receives a Leverage Certificate as at December 31, 1997, and (ii) March 31,
1998; and (b) each subsequent Rate Reset Date shall mean the earlier of (i) the
third Business Day after the date on which the Administrative Agent receives a
Leverage Certificate as at the last day of the fiscal quarter of the Company
then most recently ended, and (ii) the date falling 45 days after such last day.
"Appraisal" shall have the meaning assigned to such term in Section
9.01(h)(ii) hereof.
<PAGE> 12
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"Ash" shall mean combustion by-product ash and by- products of flue
gas desulfurization.
"Available Supplemental Amount" shall mean, at any time, the sum of
(i) $17,750,000 plus (ii) the aggregate amount of cash theretofore received by
the Company in consideration for the issuance by the Company of its capital
stock after the Closing Date (a) to any Person that is a shareholder of the
Company on the Closing Date after giving effect to the Acquisition or (b) to any
fund managed by First Reserve plus (iii) the Net Available Proceeds of any
Equity Issuance in respect of which the Supermajority Banks have agreed not to
require a prepayment or reduction of Commitments under Section 2.10 hereof plus
(iv) the aggregate amount of Net Available Proceeds received in cash by the
Company or any of its Restricted Subsidiaries from the Permitted Joint Venture
in consideration for the sale by the Company or any of its Restricted
Subsidiaries to the Permitted Joint Venture of Eligible Properties in excess of
the respective Stipulated Values for such Eligible Properties minus (v)
Investments theretofore made by the Company or any of its Restricted
Subsidiaries out of the Available Supplemental Amount as permitted by Section
9.08(g) hereof.
"Bank" shall have the meaning assigned thereto in the caption of
this Agreement.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
"Base Rate" shall mean, for any day, a rate per annum equal to the
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
"Basic Documents" shall mean, collectively, the Loan Documents and
the Intercompany Notes.
"Basle Accord" shall mean the proposals for risk-based capital
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as amended, modified
and supplemented and in effect from time to time or any replacement thereof.
<PAGE> 13
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"Big Creek" shall mean the reserves leased from Southern Regional
Development Company in Buchanan and Tazewell Counties, Virginia as of the
Effective Date.
"Borrowing Base" shall mean, as at any date, the sum of (a) 85% of
the aggregate amount of Eligible Receivables at the date (the "Base Date") of
the Borrowing Base Certificate received by the Administrative Agent on or most
recently prior to such date plus (b) the Eligible Inventory Amount (as defined
below) on the Base Date plus (c) 50% of the PP&E Value (such amount not to
exceed the lesser of such value or $50,000,000). For purposes of the preceding
sentence, "Eligible Inventory Amount" shall mean, on any date, the lesser of (i)
50% of the aggregate value of Eligible Inventory (calculated at the lower of
average cost or fair market value) on such date or (ii) 85% of the aggregate
amount of Eligible Receivables on such date.
"Borrowing Base Certificate" shall mean a certificate of a
Responsible Officer, substantially in the form of Exhibit B hereto and
appropriately completed.
"Business Day" shall mean any day (a) on which commercial banks are
not authorized or required to close in New York City and (b) if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
by the Company with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, that is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"Capital Expenditures" shall mean, for any period, expenditures
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made by the Company or any of its
Restricted Subsidiaries to acquire or construct fixed assets, plant and
equipment (including improvements and replacements, but excluding repairs and
maintenance in the ordinary course of business) during such period computed in
accordance with GAAP.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP;
<PAGE> 14
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provided that the term "Capital Lease Obligations" shall not include leases for
coal reserves or Dividend Payments.
"Casualty Event" shall mean, with respect to any tangible Property
of the Company or any Restricted Subsidiary, any loss of or damage to, or any
condemnation or other taking of, such Property for which the Company or any of
its Restricted Subsidiaries receives insurance proceeds, or proceeds of a
condemnation award or other compensation.
"Change of Control" shall mean any of the following events:
(i) the failure by the Controlling Shareholders to own, directly or
indirectly, capital stock of the Company carrying at least 70% of the
Voting Power of all of the capital stock of the Company, other than in
connection with the liquidation of any one or more of funds managed by
First Reserve;
(ii) the failure by the Controlling Shareholders to own, directly or
indirectly, capital stock of the Company carrying at least 25% of the
Voting Power of all of the capital stock of the Company; and
(iii) any Person or group of related Persons (within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, as amended) (other
than the Controlling Shareholders and Persons that, on the Closing Date,
are investors in funds managed by First Reserve which funds are
shareholders of the Company) shall own capital stock of the Company
carrying at least 25% of the Voting Power of all of the capital stock of
the Company.
"Chase" shall mean The Chase Manhattan Bank and its successors.
"Closing Date" shall mean August 12, 1996.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral Account" shall have the meaning assigned to such term in
Section 4.01 of the Security Agreement.
"Commitments" shall mean the Revolving Credit Commitments.
<PAGE> 15
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"Company" shall have the meaning assigned thereto in the caption of
this Agreement.
"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to Section 2.09 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
"Controlling Shareholders" shall mean John J. Faltis; P. Bruce
Sparks; any Person created and controlled by John J. Faltis of which the sole
beneficiaries, shareholders, members, partners or other equity holders are any
one or more of John J. Faltis, his family, his heirs and his legatees; any
Person created and controlled by P. Bruce Sparks of which the sole
beneficiaries, shareholders, members, partners or other equity holders are any
one or more of P. Bruce Sparks, his family, his heirs and his legatees; and
funds managed by First Reserve.
"Convert", "Conversion" and "Converted" shall refer to a conversion
pursuant to Section 2.09 hereof of one Type of Loans into another Type of Loans,
which may be accompanied by the transfer by a Bank (at its sole discretion) of a
Loan from one Applicable Lending Office to another.
"Credit Exposure" shall mean, with respect to any Bank, the
aggregate unutilized amount of the Commitments of such Bank and the aggregate
outstanding principal amount of all Loans made by such Bank.
"Debt Issuance" shall mean the creation, issuance or incurrence by
the Company or any of its Restricted Subsidiaries after the Closing Date of
obligations for borrowed money (whether by loan, the issuance and sale of debt
securities or the sale of Property to another Person subject to an understanding
or agreement, contingent or otherwise, to repurchase such Property from such
Person), other than (i) Indebtedness hereunder, (ii) Indebtedness of Restricted
Subsidiaries of the Company to the Company or to other Restricted Subsidiaries
of the Company, (iii) Capital Lease Obligations incurred as part of the Hillman
Sale-Leaseback, (iv) the Senior Notes and (v) Indebtedness permitted under
Sections 9.07(f), 9.07(g) and 9.07(j) hereof.
"Debt Service" shall mean, for any period, the sum, for the Company
and its Restricted Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all regularly
scheduled payments or prepayments of principal of Indebtedness (including,
without limitation, the principal component of any payments in respect of
<PAGE> 16
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Capital Lease Obligations) made during such period plus (b) all Interest Expense
for such period.
"Deeds of Trust" shall mean one or more Credit Line Deeds of Trust,
Credit Line Leasehold Deeds of Trust, Assignments of Rents, Security Agreements
and Fixture Filings executed by the Obligors for the benefit of the
Administrative Agent and the Banks, executed and delivered prior to the date
hereof and covering the respective Properties and leasehold interests identified
therein, as the same shall be renewed, replaced, extended or otherwise modified
and supplemented and in effect from time to time (including without limitation
(in the case of a Deed of Trust executed and delivered pursuant to the Existing
Credit Agreement) by operation of the Deed of Trust Amendments) and any
mortgages, deeds of trust, or similar instruments executed and delivered after
the date hereof pursuant to Section 9.20 hereof.
"Deed of Trust Amendments" shall mean instruments satisfactory in
form and substance to the Administrative Agent amending those Deeds of Trust
that were executed and delivered to the Administrative Agent prior to the date
hereof pursuant to the Existing Credit Agreement.
"Default" shall mean an Event of Default or an event that with
notice or lapse of time or both (to the extent referred to in Section 10 hereof)
would become an Event of Default.
"Designated Officer" shall mean any of John J. Faltis, P. Bruce
Sparks, James Walls, Richard Bolen, Kim Burke or Michael Matesic.
"Disposition" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Company or any of its Restricted Subsidiaries to any Person, excluding (i) any
sale, assignment, transfer, exchanges or other disposition of any Inventory sold
or disposed of in the ordinary course of business and on ordinary business
terms, (ii) the trade-in or other disposition of machinery or equipment in
connection with the acquisition or lease of other similar machinery or
equipment, (iii) the sale or other disposition of obsolete, worn-out or other
non-productive Properties to the extent that such Properties have a value not
exceeding $1,500,000 in the aggregate in any fiscal year of the Company (any
sale or other disposition of such Properties that have an aggregate value in
excess of said amount being deemed to be a Disposition to the extent of such
excess), (iv) the exchange of interests in real property (including coal
reserves) to the
<PAGE> 17
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extent that such interests have a value not exceeding $1,000,000 in the
aggregate in any fiscal year of the Company (any exchange of such interests that
have an aggregate value in excess of said amount being deemed to be a
Disposition hereunder), (v) the sale or other disposition to any Unrestricted
Subsidiary of capital stock of or other equity interests in any other
Unrestricted Subsidiary, (vi) the Hillman Sale-Leaseback, provided that the
Hillman Sale-Leaseback occurs prior to December 31, 1998, and (vii) the sale or
other disposition of Mobile Equipment the fair market value of which does not
exceed $100,000 per item (any sale or other disposition of any item of Mobile
Equipment that has a fair market value in excess of said amount being deemed to
be a Disposition to the extent of its full value).
"Dividend Payment" shall mean dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Company or of any warrants, options or other rights to
acquire the same (or to make any payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market or equity value of the Company or any of its Restricted Subsidiaries),
but excluding (i) dividends payable solely in shares of common stock of the
Company and (ii) the issuance by the Company of Subordinated Notes. Any such
dividends or other payments or distributions may cumulate or accrete, and such
cumulation or accretion shall not constitute a Dividend Payment so long as the
Company's obligation to pay the amount so cumulated or accreted continues to be
subject to declaration by the Board of Directors of the Company.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any period, the sum, for the Company and
its Restricted Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) net operating income
(calculated before taxes, Interest Expense, extraordinary items and (except to
the extent actually received in cash) income or loss attributable to equity in
Unrestricted Subsidiaries and other Affiliates) for such period plus (b)
depletion, depreciation and amortization (to the extent deducted in determining
net operating income) for such period, plus (c) transaction costs and expenses
incurred in connection with the Acquisition and the closing of the other
transactions contemplated hereby (to the extent deducted in determining net
operating income) for such period.
<PAGE> 18
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"Effective Date" shall mean the date on which the conditions
specified in Section 7.01 are satisfied (or waived in accordance with Section
12.04 hereof).
"Eligible Inventory" shall mean, as at any date, all Inventory (i)
that is owned by (and in the possession or under the control of) the Company or
any Subsidiary Guarantor as at such date, (ii) that is located in a jurisdiction
in the United States of America, and (iii) as to which appropriate Uniform
Commercial Code financing statements have been filed naming such Obligor as
"debtor" and the Administrative Agent as "secured party" (excluding, however,
(x) coal purchased and not yet paid for by the Company or any Restricted
Subsidiary if the seller thereof has a Lien (whether or not perfected or covered
by a Uniform Commercial Code financing statement) on such coal and (y) except to
the extent that the Majority Banks otherwise agree with respect to any specific
customer, any such Inventory that has been shipped to a customer of such
Obligor, including processors referred to below, even if on a consignment or
"sale or return" basis); provided that the Majority Banks (through the
Administrative Agent) may at any time exclude from Eligible Inventory any
Inventory remaining unsold for one year or longer that the Majority Banks (in
their sole discretion) determine to be unmarketable.
"Eligible Properties" shall mean the Properties described on
Schedule IV hereto.
"Eligible Receivables" shall mean, as at any date, the aggregate
amount of all Receivables at such date payable to any Obligor other than the
following (determined without duplication):
(a) any Receivable not payable in Dollars,
(b) any Receivable owing from a Subsidiary or Affiliate of such
Obligor (other than, except in the case of Receivables owing by
Unrestricted Subsidiaries, Receivables owing by Affiliates arising from
transactions permitted by 9.15 hereof),
(c) any Receivable owing from an account debtor (other than Anker
Holding or an Affiliate of Anker Holding) whose principal place of
business is located outside of the United States of America, except to the
extent that the payment of such Receivable is supported by an Acceptable
LOC (as defined in the last sentence of this definition),
<PAGE> 19
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(d) any Receivable owing from an account debtor that the Majority
Banks (through the Administrative Agent) have notified the Company does
not have a satisfactory credit standing (as determined in the sole
discretion of the Majority Banks), except to the extent that the payment
of such Receivable is supported by an Acceptable LOC (as defined in the
last sentence of this definition),
(e) any Receivable that remains unpaid for more than 90 days after
the date of the issuance of the original invoice therefor,
(f) all Receivables of any account debtor (except to the extent that
the payment of such Receivables is supported by an Acceptable LOC (as
defined in the last sentence of this definition)) if more than 25% of the
aggregate amount of the Receivables owing from such account debtor
(excluding Receivables as to which there are unresolved disputes) shall at
the time have remained unpaid for more than 90 days after the date of the
issuance of the original invoices therefor,
(g) the amount, if any, of Receivables owing from any account debtor
(other than independent power projects) as may be necessary such that the
Receivables owing from such account debtor and all other Persons whose
financial statements are consolidated with such account debtor's financial
statement in accordance with GAAP at the time would not exceed 20% of the
aggregate amount of all Eligible Receivables then payable to any or all of
the Obligors,
(h) any Receivable as to which there is any unresolved dispute with
the respective account debtor (but only to the extent of the amount
thereof in dispute),
(i) any Receivable evidenced by an Instrument (as defined in the
Security Agreement) not in the possession of the Administrative Agent, and
(j) any Receivable representing an obligation for goods sold on
consignment, approval or a sale-or-return basis or subject to any other
repurchase or return arrangement, until such time as such sale becomes
final.
As used in this definition, "Acceptable LOC" shall mean a documentary or standby
letter of credit payable in Dollars and issued or confirmed by a bank or trust
company, or by a branch or an agency of any foreign bank, organized or licensed
under the laws of the United States of America or any state thereof and
<PAGE> 20
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having capital, surplus and undivided profits of at least $500,000,000.
"Employment Agreements" shall mean (i) the Employment Agreement
dated as of August 1, 1996 by and among John J. Faltis, Anker Energy Corporation
and the Company and (ii) the Employment Agreement dated as of August 1, 1996 by
and among P. Bruce Sparks, Anker Energy Corporation and the Company, in each of
the cases referred to in the foregoing clauses (i) and (ii) as the same shall,
subject to Section 9.18 hereof, be renewed, replaced, extended or otherwise
modified and supplemented and in effect from time to time.
"Environmental Laws" shall mean any and all present and future
Federal, state and local laws, rules or regulations, and any orders or decrees,
in each case as now or hereafter in effect, relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"Environmental Report" shall mean the July, 1996 Modified
Environmental Site Assessment and the August, 1997 Update thereto prepared by
Marshall, Miller & Associates, Inc.
"Equity Issuance" shall mean (a) any issuance or sale by the Company
or any of its Restricted Subsidiaries of (i) any capital stock, (ii) any
warrants or options exercisable in respect of capital stock or (iii) any other
security or instrument representing an equity interest (or the right to obtain
any equity interest) in the Company or any of its Restricted Subsidiaries or (b)
the receipt by the Company or any of its Restricted Subsidiaries after the
Closing Date of any capital contribution (whether or not evidenced by any equity
security issued by the recipient of such contribution); provided that Equity
Issuance shall not include (v) any such issuance or sale by the Company to any
of its employees in the ordinary course of business as compensation pursuant to
an employee equity incentive plan to be adopted by the Company after the Closing
Date so long as the aggregate amount of equity interests represented thereby
does not at any time exceed 3% of the equity interests in the Company calculated
on a fully-diluted basis,
<PAGE> 21
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(w) any such issuance or sale by the Company (1) to any Person that is a
shareholder of the Company on the Closing Date after giving effect to the
Acquisition or (2) to any fund managed by First Reserve, (x) any such issuance
or sale by any Restricted Subsidiary of the Company to the Company or any
Restricted Subsidiary, (y) any capital contribution by the Company or any
Restricted Subsidiary to any Restricted Subsidiary of the Company or (z) any
such issuance or sale referred to in the definition of "Acquisition" in this
Section 1.01.
"Equity Rights" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business
that is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Code of which the Company or AGI is a member and (ii) solely for
purposes of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and
Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of
which the Company is a member.
"Eurodollar Base Rate" shall mean, with respect to any Eurodollar
Loan for any Interest Period therefor, the arithmetic mean (rounded upwards, if
necessary, to the nearest 1/16 of 1%), as determined by the Administrative
Agent, of the rates per annum quoted by the respective Reference Banks at
approximately 11:00 a.m. London time (or as soon thereafter as practicable) on
the date two Business Days prior to the first day of such Interest Period for
the offering by the respective Reference Banks to leading banks in the London
interbank market of Dollar deposits having a term comparable to such Interest
Period and in an amount comparable to the principal amount of the Eurodollar
Loan to be made by the respective Reference Banks for such Interest Period. If
any Reference Bank is not participating in any Eurodollar Loans during any
Interest Period therefor, the Eurodollar Base Rate for such Loans for such
Interest Period shall be determined without reference to such Reference Bank.
<PAGE> 22
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"Eurodollar Loans" shall mean Loans that bear interest at rates
based on rates referred to in the definition of "Eurodollar Base Rate" in this
Section 1.01.
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any
Interest Period therefor, a rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to
the Eurodollar Base Rate for such Loan for such Interest Period divided by 1
minus the Reserve Requirement (if any) for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in
Section 10 hereof.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to Chase on such Business Day on such
transactions as determined by the Administrative Agent in good faith.
"First Amendment Effective Date" shall have the meaning assigned to
such term in Amendment No. 1 to the Existing Credit Agreement.
"First Reserve" shall mean First Reserve Corporation, a Delaware
corporation, and its successors and replacements as managers of the funds for
which it acts as manager on the date of determination.
"Fixed Charges Ratio" shall mean, as at any date, the ratio of (a)
EBITDA for the Relevant Period for such date to (b) the sum for such Relevant
Period (without duplication) of (i) Debt Service plus (ii) Capital Expenditures
(other than a Permitted Capital Expenditure) plus (iii) Dividend Payments paid
in cash.
<PAGE> 23
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"GAAP" shall mean generally accepted accounting principles in the
United States of America applied on a basis consistent with those that, in
accordance with the last sentence of Section 1.02(a) hereof, are to be used in
making the calculations for purposes of determining compliance with this
Agreement.
"Guarantee" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business and excluding guarantees by the Company of obligations of
Restricted Subsidiaries and by Restricted Subsidiaries of obligations of the
Company and other Restricted Subsidiaries entered into in the ordinary course of
business. The terms "Guarantee" and "Guaranteed" used as a verb shall have a
correlative meaning.
"Hillman Acquisition" shall mean the acquisition of approximately
210,000,000 tons of coal reserves located in Taylor County, West Virginia, from
the Hillman Coal Company.
"Hillman Sale-Leaseback" shall mean the sale and leaseback of the
approximately 210,000,000 tons of coal reserves acquired in the Hillman
Acquisition.
"Hazardous Material" shall mean, collectively, (a) any petroleum or
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other equipment
that contain polychlorinated biphenyls ("PCBs"), (b) any chemicals or other
materials or substances that are now or hereafter become defined as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (c) any other
<PAGE> 24
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chemical or other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated under any Environmental Law.
"Inactive Subsidiary" shall mean, as at any date, any Subsidiary of
the Company that, as at the end of and for the quarterly accounting period
ending on or most recently ended prior to such date, shall have less than
$100,000 in assets and less than $25,000 in gross revenues.
"Indebtedness" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d) obligations of such
Person in respect of letters of credit or similar instruments issued or accepted
by banks and other financial institutions for account of such Person; (e)
Capital Lease Obligations of such Person; (f) Indebtedness of others Guaranteed
by such Person and (g) preferred stock issued by such Person; provided that the
term "Indebtedness" shall not include (x) preferred stock of such Person
(including, without limitation, the Preferred Stock) to the extent that (i)
there are no outstanding obligations of the Company or any of its Restricted
Subsidiaries to repurchase, redeem, or otherwise acquire any shares of such
preferred stock (including, without limitation, the Preferred Stock) prior to
the date falling six months after the Revolving Credit Commitment Termination
Date and (ii) except in the case of the ACGI Class C Preferred Stock and the
ACGI Class D Preferred Stock (each as in effect on the date hereof), there are
no outstanding Guarantees by the Company or any of its Restricted Subsidiaries
to pay any dividends on such preferred stock (including, without limitation, the
Preferred Stock) or (y) advance and periodic royalties and rents payable under
leases of coal reserves or surface rights entered into in the ordinary course of
business. In calculating the amount of Indebtedness for any purpose hereunder
(A) there shall be no double-counting of obligations of the Company and its
Restricted Subsidiaries and Guarantees of such obligations by the
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Company and/or any of its Restricted Subsidiaries and (B) the amount of any
Indebtedness comprised of preferred stock shall be the highest amount that such
Person is required to pay for the repurchase or redemption of such shares of
preferred stock prior to the date falling six months after the Revolving Credit
Commitment Termination Date.
"Intercompany Note" shall mean a promissory note substantially in
the form of Exhibit K hereto executed and delivered by a Restricted Subsidiary
to evidence loans made to it by the Company or by another Restricted Subsidiary,
as the same shall, subject to Section 9.18 hereof, be renewed, replaced,
extended or otherwise modified and supplemented and in effect from time to time.
"Interest Expense" shall mean, for any period, the sum, for the
Company and its Restricted Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP), of the following: (a) all interest
in respect of Indebtedness (including, without limitation, the interest
component of any payments in respect of Capital Lease Obligations and dividends
on preferred stock that constitutes Indebtedness) accrued, capitalized or
accumulated during such period (whether or not actually paid during such
period), excluding interest on Subordinated Notes paid by the issuance of
additional Subordinated Notes in accordance with the terms thereof, plus (b) the
net amount payable (or minus the net amount receivable) under Interest Rate
Protection Agreements during such period (whether or not actually paid or
received during such period).
"Interest Period" shall mean, with respect to any Eurodollar Loan,
each period commencing on the date such Eurodollar Loan is made or Converted
from a Base Rate Loan or (in the event of a Continuation) the last day of the
next preceding Interest Period for such Loan and (subject to the provisions of
Section 2.03 hereof) ending on the numerically corresponding day in the first,
second, third or sixth (or, with the consent of all the affected Banks at the
time of such request, ninth or twelfth) calendar month thereafter, as the
Company may select as provided in Section 4.05 hereof, except that each Interest
Period that commences on the last Business Day of a calendar month (or on any
day for which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month.
Notwithstanding the foregoing: (i) if any Interest Period for any
Revolving Credit Loan would otherwise end after the Revolving Credit Commitment
Termination Date, such Interest
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Period shall end on the Revolving Credit Commitment Termination Date; (ii) no
Interest Period for any Revolving Credit Loan may commence before and end after
any Revolving Credit Commitment Reduction Date unless, after giving effect to
the reduction of the Revolving Credit Commitment to occur on such Revolving
Credit Commitment Reduction Date, the aggregate principal amount of the
Revolving Credit Loans having Interest Periods that end after the Revolving
Credit Commitment Reduction Date shall be equal to or less than the aggregate
amount of the Revolving Credit Commitments scheduled to be outstanding after
such Revolving Credit Commitment Reduction Date; (iii) each Interest Period that
would otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); and (iv)
notwithstanding clause (i) and (ii) above, no Interest Period shall have a
duration of less than one month and, if the Interest Period for any Eurodollar
Loan would otherwise be a shorter period, such Loan shall not be available
hereunder for such period.
"Interest Rate Protection Agreement" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
"Inventory" shall mean severed coal mined or purchased by the
Company or any Subsidiary Guarantor in the ordinary course of business.
"Investment" shall mean, for any Person: (a) the acquisition
(whether for cash, Property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of any
securities at a time when such securities are not owned by the Person entering
into such sale); (b) the making of any deposit with, or advance, loan or other
extension of credit to, any other Person (including the purchase of Property
from another Person subject to an understanding or agreement, contingent or
otherwise, to resell such Property to such Person), but excluding any such
advance, loan or extension of credit having a term not exceeding 90 days arising
in connection with the sale of inventory or supplies by such Person in the
ordinary course of business; (c) the entering into of any Guarantee of, or other
contingent obligation with respect to, Indebtedness or other liability of any
other Person and (without duplication) any
<PAGE> 27
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amount committed to be advanced, lent or extended to such Person; or (d) the
entering into of any Interest Rate Protection Agreement.
"Joinder Agreement" shall mean an agreement in the form of Exhibit L
hereto.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Loan Documents, a Person
shall be deemed to own subject to a Lien any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.
"Loan Documents" shall mean, collectively, this Agreement, the
Notes, the Security Documents and the Joinder Agreements.
"Loans" shall mean the Revolving Credit Loans.
"Majority Banks" shall mean Banks holding at least 66- 2/3% of the
Credit Exposures of all of the Banks, as calculated at the time of
determination.
"Margin Stock" shall mean "margin stock" within the meaning of
Regulations G, T, U and X.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Company and its Restricted Subsidiaries
taken as a whole, (b) the ability of the Obligors to perform their respective
obligations under the respective Loan Documents to which they are parties, (c)
the validity or enforceability of any material provision contained in any of the
Loan Documents, (d) any of the material rights and remedies of the Banks and the
Administrative Agent under any of the Loan Documents or (e) the timely payment
of the principal of or interest on the Loans or other amounts payable in
connection therewith.
"Material Properties" shall mean (a) those tracts or parcels of land
containing coal reserves which are either owned by or leased to any of the
following Restricted Subsidiaries (the "Relevant Companies") and which are
either currently being actively mined (and for which active mining is not
expected by
<PAGE> 28
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the Company to be completed before December 31, 1997) or are part of AGI's
five-year or ten-year mining plans for AGI and its Restricted Subsidiaries:
Anker Energy Corporation, Juliana Mining Company, Inc., Patriot Mining Company,
Inc., Anker West Virginia Mining Company, Inc. and Vindex Energy Corporation;
and (b) those tracts or parcels of land either owned by or leased to any
Relevant Company and upon which are located loading facilities, preparation
plants, tipples, mine openings, or other surface operations of any Relevant
Company which are material to either the current or planned future mining
operations of the Relevant Companies as reflected in the five-year and ten-year
mining plans for AGI and its Restricted Subsidiaries.
"Mobile Equipment" shall mean all equipment which is (a) mobile, (b)
of a type normally used in more than one jurisdiction, and (c) which is used or
useful in connection with the coal mining, extraction, development, construction
or environmental remediation activities of any Obligor, and shall in any event
include any of the following, whether such equipment is on wheels, is track
mounted or is skid mounted: bulldozers, drills, pans, augers, high wall miners,
continuous miners, shuttle cars, roof bolters, mobile roof supporters, rock
dusters, man trips, scoops, backhoes, shovels, front end loaders, continuous
haulage units, underground locomotives, loaders, trailers, trucks, other motor
vehicles and other mining equipment of a similar nature.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been made by the Company,
AGI or any ERISA Affiliate and that is covered by Title IV of ERISA.
"Net Available Proceeds" shall mean:
(a) in the case of any Disposition, an amount (not less than zero)
equal to the amount of Net Cash Payments received by the Company and its
Restricted Subsidiaries in connection with such Disposition; provided that
if the subject of such Disposition is Eligible Property and such
Disposition is made to a Permitted Joint Venture, the Net Available
Proceeds of such Disposition shall be the Stipulated Amount for such
Eligible Property;
(b) in the case of any Casualty Event, an amount (not less than
zero) equal to (i) the aggregate amount of proceeds of insurance,
condemnation awards and other compensation received by the Company and its
Restricted Subsidiaries in respect of such Casualty Event minus
<PAGE> 29
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(ii) reasonable expenses incurred by the Company and its Restricted
Subsidiaries in connection therewith minus (iii) contractually required
repayments of Indebtedness to the extent secured by a Lien on the Property
to which such Casualty Event relates and any income and transfer taxes
payable by the Company or any of its Restricted Subsidiaries in respect of
such Casualty Event minus (iv) $10,000 (provided that the aggregate amount
subtracted pursuant to this clause (iv) in any fiscal year of the Company
shall not exceed $50,000); and
(c) in the case of any Debt Issuance or Equity Issuance, the
aggregate amount of all cash received by the Company and its Restricted
Subsidiaries in respect of such Debt Issuance or Equity Issuance, as the
case may be, net of reasonable expenses (including, without limitation,
underwriting spreads, commissions and discounts) incurred by the Company
and its Restricted Subsidiaries in connection therewith.
"Net Cash Payments" shall mean, with respect to any Disposition, the
aggregate amount of all cash payments (including, without limitation, all cash
payments received by way of deferred payment of principal pursuant to a note or
installment receivable or otherwise, but only as and when received), and the
fair market value of any non-cash consideration, received by the Company or its
Restricted Subsidiaries directly or indirectly in connection with such
Disposition; provided that (a) Net Cash Payments shall be net of (i) the amount
of any legal, title and recording tax expenses, commissions and other customary
fees and expenses paid by the Company and its Restricted Subsidiaries in
connection with such Disposition and (ii) any Federal, state and local income or
other taxes estimated to be payable by the Company and its Restricted
Subsidiaries as a result of such Disposition (but only to the extent that such
estimated taxes are in fact paid to the relevant governmental authority not
later than three months (in the case of Federal taxes) or nine months (in the
case of other taxes) after the date of such Disposition) and (b) Net Cash
Payments shall be net of any repayments by the Company or any of its Restricted
Subsidiaries of Indebtedness to the extent that such Indebtedness is secured by
a Lien on the Property that is the subject of such Disposition.
"Net Interest Coverage Ratio" shall mean, as at any date, the ratio
of (a) EBITDA for the Relevant Period for such date to (b) Interest Expense for
such Relevant Period minus
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interest income of the Company and its Restricted Subsidiaries for such Relevant
Period.
"Net Leverage Ratio" shall mean, as at any date, the ratio of (a) an
amount equal to Total Indebtedness on such date minus the aggregate amount of
cash and Permitted Investments of the Company and its Restricted Subsidiaries on
such date to (b) EBITDA for the Relevant Period for such date.
"New Allegheny Property" shall mean, collectively, approximately
40,350,000 tons of minable coal reserves, cleaning plant and coal blending
facility in Grant and Mineral Counties, West Virginia, together with a six-year
long term coal sales contract to deliver 456,000 tons of coal per year.
"Notes" shall mean the Revolving Credit Notes.
"Obligor" shall have the meaning assigned thereto in
the caption of this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Capital Expenditure" shall have the meaning assigned to
such term in Section 9.11 hereof.
"Permitted Investments" shall mean: (a) direct obligations of the
United States of America, or of any agency thereof, or obligations guaranteed as
to principal and interest by the United States of America, or of any agency
thereof, in either case maturing not more than 90 days from the date of
acquisition thereof; (b) certificates of deposit issued by any bank or trust
company, or by a branch or an agency of any foreign bank, organized or licensed
under the laws of the United States of America or any state thereof and having
capital, surplus and undivided profits of at least $500,000,000, maturing not
more than 90 days from the date of acquisition thereof; (c) eurodollar time
deposits with any bank or trust company organized under the laws of the United
States of America or any state thereof and having capital, surplus and undivided
profits of at least $500,000,000, maturing not more than 90 days from the date
made; (d) commercial paper rated A-1 or better or P-1 by Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"), or
Moody's Investors Services, Inc. ("Moody's"), respectively, maturing not more
than 90 days from the date of acquisition thereof; in each case so long as the
same (x) provide for the payment of principal and interest (and not principal
<PAGE> 31
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alone or interest alone) and (y) are not subject to any contingency regarding
the payment of principal or interest; (e) investments in repurchase agreements
(or reverse repurchase agreements) covering other Permitted Investments with
financial institutions who are elected primary government securities dealers by
the Federal Reserve Board or whose securities are rated AA- or better by S&P or
Aa or better by Moody's; and (f) money-market funds or money-market mutual funds
which (i) seek to maintain a constant net asset value, (ii) maintain fund assets
under management having an aggregate market value of at least $500,000,000, and
(iii) invest primarily in Investments referred to in clauses (a) through (e)
above.
"Permitted Joint Venture" shall mean a joint venture formed by the
Company or any of its Subsidiaries with a Person that is not an Affiliate for
the purpose of mining, processing, distributing and selling coal and related
products, where (i) the Company and its Subsidiaries own in the aggregate less
than a majority of the economic interests in such joint venture, (ii) the
Company or any of its Subsidiaries manages or actively participates in the
management of such joint venture and (iii) if such joint venture is a
partnership, neither the Company nor any of its Restricted Subsidiaries is a
general partner in such joint venture.
"Permitted Purpose" shall mean leases of coal reserves and surface
entry rights in the ordinary course of business, Investments permitted by
Section 9.08 (f) or (g) hereof and Capital Expenditures not prohibited by
Section 9.11 hereof.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or
maintained by the Company, AGI or any ERISA Affiliate and that is covered by
Title IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean a rate per annum equal to 2% plus the
Base Rate as in effect from time to time plus the Applicable Percentage for Base
Rate Loans, provided that, with respect to principal of a Eurodollar Loan that
shall become due (whether at stated maturity, by acceleration, by optional or
mandatory prepayment or otherwise) on a day other than the last day of the
Interest Period therefor, the "Post-Default Rate"
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shall be, for the period from and including such due date to but excluding the
last day of such Interest Period, 2% plus the interest rate for such Loan as
provided in Section 3.02(b) hereof and, thereafter, the rate provided for above
in this definition.
"PP&E Value" shall mean, at any time, the value at which the
property, plant and equipment (excluding Mobile Equipment) is carried on the
consolidated balance sheet of the Company and its Restricted Subsidiaries;
provided that, in the event that an Appraisal of any Property included in such
property, plant and equipment has been performed, the "PP&E Value" of such
Property for the period commencing on the date of such Appraisal through and
including the first anniversary thereof shall be the fair market value of such
Property as determined by such Appraisal.
"Preferred Stock" shall mean the ACGI Class A Preferred Stock, the
ACGI Class B Preferred Stock, the ACGI Class C Preferred Stock and the ACGI
Class D Preferred Stock.
"Prime Rate" shall mean the rate of interest from time to time
announced by Chase at its principal office as its prime commercial lending rate.
"Property" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Quarterly Dates" shall mean the last Business Day of March, June,
September and December in each year, the first of which shall be the first such
day after the date hereof.
"Receivables" shall mean, as at any date, the unpaid portion of the
obligation, as stated on the respective invoice, of a customer of the Company or
any Subsidiary Guarantor in respect of Inventory sold and shipped by such
Obligor to such customer or Ash disposal services, net of any credits, rebates
or offsets owed to such customer and also net of any commissions payable to
third parties (and for purposes hereof, a credit or rebate paid by check or
draft of the Company or any Subsidiary Guarantor shall be deemed to be
outstanding until such check or draft shall have been debited to the account of
such Obligor on which such check or draft was drawn).
"Reference Banks" shall mean Chase, The First National
Bank of Chicago and Mellon Bank, N.A. (or their respective
Applicable Lending Offices, as the case may be).
<PAGE> 33
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"Regulations A, D, G, T, U and X" shall mean, respectively,
Regulations A, D, G, T, U and X of the Board of Governors of the Federal Reserve
System (or any successor), as the same may be renewed, replaced, extended or
otherwise modified and supplemented and in effect from time to time.
"Regulatory Change" shall mean, with respect to any Bank, any change
after the date hereof in Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks including such Bank of or under any Federal, state or foreign law or
regulations (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment of any Hazardous Materials, including the
movement thereof through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Relevant Period" shall mean, with respect to any date, the period
of four fiscal quarters of the Company ending on or most recently ended prior to
such date, excluding any portion of such period falling before July 1, 1996.
"Reserve Requirement" shall mean, for any Interest Period for any
Eurodollar Loan, the average maximum rate at which reserves (including, without
limitation, any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change with respect to (i) any category of liabilities
that includes deposits by reference to which the Eurodollar Base Rate is to be
determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.01 or (ii) any category of extensions of credit or other assets that
includes Eurodollar Loans.
"Reserved Commitment Amount" shall have the meaning assigned to such
term in Section 2.01 of this Agreement.
<PAGE> 34
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"Responsible Officer" shall mean the President, the Executive Vice
President, the Treasurer or a Controller of the Company.
"Restricted Subsidiary" shall mean, with respect to any Person, each
Subsidiary of such Person that is not an Unrestricted Subsidiary. References
herein to any Restricted Subsidiary that do not state the Person of which such
Restricted Subsidiary is a Subsidiary shall be deemed to mean a Restricted
Subsidiary of the Company.
"Revolving Credit Commitment" shall mean, as to each Bank, the
obligation of such Bank to make Revolving Credit Loans in an aggregate principal
amount at any one time outstanding up to but not exceeding the amount set
opposite the name of such Bank on the signature pages hereof under the caption
"Revolving Credit Commitment" or, in the case of a Person that becomes a Bank
pursuant to an assignment permitted under Section 12.06(b) hereof, as specified
in the respective instrument of assignment pursuant to which such assignment is
effected (as the same may be increased or reduced from time to time pursuant to
Section 2.04 or 2.10 hereof). The aggregate amount of the Revolving Credit
Commitments on the Effective Date is $75,000,000.
"Revolving Credit Commitment Percentage" shall mean, with respect to
any Bank, the ratio of (a) the amount of the Revolving Credit Commitment of such
Bank to (b) the aggregate amount of the Revolving Credit Commitments of all of
the Banks.
"Revolving Credit Commitment Reduction Date" shall mean the three
Business Days falling on or nearest to the dates specified in the table set
forth in Section 2.04(a) hereof.
"Revolving Credit Commitment Termination Date" shall mean the
Quarterly Date falling on or nearest to September 22, 2003.
"Revolving Credit Loans" shall mean the loans provided for in
Section 2.01(a) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Revolving Credit Notes" shall mean the promissory notes provided
for by Section 2.08(a) hereof and all promissory notes delivered in substitution
or exchange therefor, in each case as the same shall be renewed, replaced,
extended or otherwise modified and supplemented and in effect from time to time.
<PAGE> 35
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"Security Agreement" shall mean the Security Agreement dated as of
August 12, 1996 between the Company, the Subsidiary Guarantors and the
Administrative Agent (as heretofore modified and supplemented and in effect on
the date hereof and as the same shall be renewed, replaced, extended or
otherwise modified and supplemented and in effect from time to time).
"Security Documents" shall mean the Security Agreement, the Deeds of
Trust, the Deed of Trust Amendments and all Uniform Commercial Code financing
statements required by the Security Agreement, any Deed of Trust or any Deed of
Trust Amendment to be filed with respect to the security interests in personal
Property and fixtures created pursuant to the Security Agreement, any Deed of
Trust or any Deed of Trust Amendment.
"Senior Notes" shall have the meaning assigned thereto in the
caption of this Agreement.
"Senior Note Documents" shall mean, the Senior Notes
and the Senior Note Indenture.
"Senior Note Indenture" shall mean the Indenture under which the
Senior Notes shall be issued, which shall be on substantially the same terms as
those set forth in the Senior Note Preliminary Offering Memorandum.
"Senior Note Preliminary Offering Memorandum" shall mean the draft
dated as of September 5, 1997 of the Preliminary Offering Memorandum of the
Company in respect of its [ ]% Senior Notes due 2007, a copy of which has been
furnished to the Banks prior to the date hereof.
"Shareholders' Equity" shall mean, on any date, the sum for the
Company and its Restricted Subsidiaries as at such date (determined on a
consolidated basis in accordance with GAAP) of common and preferred stock (other
than preferred stock that constitutes Indebtedness) of the Company, but
excluding treasury shares plus surplus and retained earnings.
"Spruce Fork Development" shall mean the acquisition of
approximately 8,700,000 tons of low sulfur coal reserves (the "Spruce Fork
Reserves") and approximately 19,000,000 tons of low sulfur coal reserves (the
"Hawthorne Coal Company, Inc. Reserves") in Upshur County, West Virginia and the
refurbishment of the Hawthorne Coal Company, Inc. preparation plant in Upshur
County, West Virginia, for an aggregate acquisition and refurbishment cost of
approximately $16,200,000 during the period
<PAGE> 36
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from the First Amendment Effective Date through December 31,
1999.
"Stipulated Amount" shall mean with respect to any Eligible
Property, the amount set forth in Schedule IV hereto opposite the description
that includes such Eligible Property.
"Stockholders Agreement" shall mean the Stockholders Agreement dated
August 12, 1996 among the Company, First Reserve, John J. Faltis, Bruce Sparks
and the Stockholders referred to therein, as the same shall, subject to Section
9.18 hereof, be modified and supplemented and in effect from time to time.
"Stony River Project" shall mean the lease of approximately
31,100,000 tons of low sulfur coal in Grant County, West Virginia and the
development of an underground mine to mine those reserves.
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person; provided that the term "Subsidiary" shall
not include the Permitted Joint Venture or Subsidiary of the Permitted Joint
Venture.
"Subsidiary Guarantor" shall have the meaning assigned thereto in
the caption of this Agreement.
"Supermajority Banks" shall mean Banks holding at least 80% of the
Credit Exposures, as calculated at the time of determination.
"Summit" shall have the meaning assigned thereto in
Section 9.08(j) hereof.
"Sycamore" shall have the meaning assigned thereto in
Section 9.08(k) hereof.
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"Sycamore Partner" shall have the meaning assigned thereto in
Section 9.17(b) hereof.
"Total Indebtedness" shall mean, as at any date, all Indebtedness on
such date of the Company and its Restricted Subsidiaries (determined on a
consolidated basis without duplication in accordance with GAAP).
"Type" shall have the meaning assigned to such term in
Section 1.03 hereof.
"Unrestricted Subsidiaries" shall mean Anker Capital, Simba Group,
Inc., and U.S. Coal Sales Company, LLC, and their respective Subsidiaries
created or acquired after the Closing Date.
"U.S. Person" shall mean a citizen or resident of the United States
of America, a corporation, partnership or other entity created or organized in
or under any laws of the United States of America or any State thereof, or any
estate or trust that is subject to Federal income taxation regardless of the
source of its income.
"U.S. Taxes" shall mean any present or future tax, assessment or
other charge or levy imposed by or on behalf of the United States of America or
any taxing authority thereof.
"Vindex Project" shall mean the acquisition and development of the
New Allegheny Property and the Stony River Project for an aggregate acquisition
and development cost of approximately $15,300,000 during the period from the
First Amendment Effective Date through December 31, 1999.
"Voting Power" shall mean, with respect to any Person, the
percentage of voting power (excluding any such power arising by reason of an
unfulfilled contingency) possessed by the holders of capital stock of such
Person, to vote for the election of members of the board of directors of such
Person.
"Wholly Owned Subsidiary" shall mean, with respect to any Person,
any corporation, partnership or other entity of which all of the equity
securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are directly or indirectly owned or
controlled by such Person or one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
<PAGE> 38
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1.02 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Administrative Agent or the Banks hereunder shall (unless otherwise disclosed to
the Banks in writing at the time of delivery thereof in the manner described in
subsection (b) below) be prepared, in accordance with generally accepted
accounting principles applied on a basis consistent with those used in the
preparation of the latest financial statements furnished to the Administrative
Agent hereunder (which, prior to the delivery of the first financial statements
under Section 9.01 hereof, shall mean the financial statements as at June 30,
1997 referred to in Section 8.02 hereof. All calculations made for the purposes
of determining compliance with this Agreement shall (except as otherwise
expressly provided herein) be made by application of generally accepted
accounting principles applied on a basis consistent with those used in the
preparation of the latest annual or quarterly financial statements furnished to
the Administrative Agent pursuant to Section 9.01 hereof (or, prior to the
delivery of the first financial statements under Section 9.01 hereof, used in
the preparation of the financial statements as at June 30, 1997 referred to in
Section 8.02 hereof) unless (i) the Company shall have objected to determining
such compliance on such basis at the time of delivery of such financial
statements or (ii) the Majority Banks shall so object in writing within 30 days
after delivery of such financial statements, in either of which events such
calculations shall be made on a basis consistent with those used in the
preparation of the latest financial statements as to which such objection shall
not have been made (which, if objection is made in respect of the first
financial statements delivered under Section 9.01 hereof, shall mean the
financial statements as at June 30, 1997 referred to in Section 8.02 hereof);
provided, that if calculations made on such basis would result in obligations
theretofore required to be classified and accounted for as an operating lease on
the consolidated balance sheet of the Company and its Restricted Subsidiaries
being required instead to be classified and accounted for as a capital lease on
such balance sheet, such calculations shall be made on a basis consistent with
those used in the preparation of the latest financial statements as to which
both (x) such objection shall not have been made and (y) such reclassification
shall not be required; provided, further, that in no event shall a lease of coal
reserves be classified and accounted for as a capital lease.
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(b) The Company shall deliver to the Administrative Agent (which
shall promptly deliver a copy thereof to each Bank) at the same time as the
delivery of any annual or quarterly financial statement under Section 9.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 9 hereof, the Company will not change
the last day of its fiscal year from December 31, or the last days of the first
three fiscal quarters in each of its fiscal years from March 31, June 30 and
September 30 of each year, respectively.
(d) Except as otherwise expressly provided herein, all financial
statements and certificates and reports as to financial matters required to be
delivered to the Administrative Agent or the Banks hereunder shall be prepared,
and all calculations made for purposes of determining compliance with the terms
hereof shall be made, as if the Unrestricted Subsidiaries were carried as equity
investments by the Company and its Restricted Subsidiaries; provided that:
(i) earnings and other increases in the value of Unrestricted
Subsidiaries shall not increase earnings of the Company and its
Restricted Subsidiaries for purposes of determining EBITDA until
received by the Company or a Restricted Subsidiary in cash;
(ii) earnings and other increases in the value of the
Unrestricted Subsidiaries (other than those that reflect the book
value of any assets subsequently contributed thereto by the Company
and its Restricted Subsidiaries, such book value in the case of any
asset to be determined as of the date of its contribution) shall not
increase the value of equity investments in Unrestricted
Subsidiaries except to the extent such increases offset losses and
other decreases of value of the respective Unrestricted Subsidiaries
that have occurred on or prior to the date of determination; and
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(iii) losses and other decreases of value of Unrestricted
Subsidiaries, when recognized by the respective Unrestricted
Subsidiaries, shall, at the time of such recognition (but subject to
the preceding clause (ii)), decrease the value of equity investments
in Unrestricted Subsidiaries held by the Company and its Restricted
Subsidiaries, but shall not decrease the earnings of the Company and
its Restricted Subsidiaries for purposes of determining EBITDA.
1.03 Types of Loans. Loans hereunder are distinguished by "Type".
The "Type" of a Loan refers to whether such Loan is a Base Rate Loan or a
Eurodollar Loan, each of which constitutes a Type.
1.04 References to Date. All references herein to "the date hereof"
and "the date of this Agreement", and similar references, shall mean September
22, 1997.
Section 2. Commitments, Loans, Notes and Prepayments.
2.01 Loans.
Revolving Credit Loans. Each Bank severally agrees, on the terms and
conditions of this Agreement, to make loans to the Company in Dollars during the
period from and including the August 12, 1996 to but not including the Revolving
Credit Commitment Termination Date in an aggregate principal amount at any one
time outstanding up to but not exceeding the amount of the Revolving Credit
Commitment of such Bank as in effect from time to time, provided that in no
event shall the aggregate principal amount of all Revolving Credit Loans at any
time exceed the lesser of (i) the Borrowing Base at such time and (ii) the
aggregate amount of the Revolving Credit Commitments as in effect at such time.
Subject to the terms and conditions of this Agreement, during such period the
Company may borrow, repay and reborrow the amount of the Revolving Credit
Commitments by means of Base Rate Loans and Eurodollar Loans and may Convert
Revolving Credit Loans of one Type into Revolving Credit Loans of another Type
(as provided in Section 2.09 hereof) or Continue Eurodollar Loans from one
Interest Period to the next Interest Period.
Proceeds of Revolving Credit Loans shall be available for any use
permitted under the applicable provisions of Section 9.16 hereof, provided that,
in the event that, as contemplated by Section 2.10(d) hereof, the Company shall
prepay Revolving Credit Loans from the proceeds of a Disposition hereunder, then
an amount of Revolving Credit Commitments, as specified by the
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Company pursuant to the next sentence, equal to the amount of such prepayment
(herein the "Reserved Commitment Amount") shall be reserved and shall not be
available for borrowings hereunder except and to the extent that the proceeds of
such borrowings are used for a Permitted Purpose, or to make prepayments of
Loans under Section 2.10(d)(y)(B). The Company agrees, upon the occasion of any
borrowing of Revolving Credit Loans hereunder that is to constitute a
utilization of any Reserved Commitment Amount, to advise the Administrative
Agent in writing of such fact at the time of such borrowing, identifying the
amount of such borrowing that is to constitute such utilization, the Permitted
Purpose in respect of which the proceeds of such borrowing are to be applied and
the reduced Reserved Commitment Amount to be in effect after giving effect to
such borrowing.
2.02 Borrowings. The Company shall give the Administrative Agent
notice of each borrowing hereunder as provided in Section 4.05 hereof. Not later
than 1:00 p.m. New York time on the date specified for each borrowing hereunder,
each Bank shall make available the amount of the Loan or Loans to be made by it
on such date to the Administrative Agent, at the Agent's Account, in immediately
available funds, for account of the Company. The amount so received by the
Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company on the date of the requested
borrowing by depositing the same, in immediately available funds, in an account
of the Company designated by the Company and maintained with Chase at its
principal office.
2.03 Limit on Eurodollar Loans. No more than five separate
Interest Periods in respect of Eurodollar Loans may be outstanding at any one
time.
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2.04 Changes of Commitments.
(a) The aggregate amount of the Revolving Credit Commitments shall
be automatically reduced to zero on the Revolving Credit Commitment Termination
Date. In addition, the aggregate amount of the Revolving Credit Commitments
shall, subject to the proviso below, be automatically reduced at the close of
business on each Revolving Credit Commitment Reduction Date set forth in column
(A) below by the amount set forth in column (B) below opposite such Revolving
Credit Commitment Reduction Date:
(A) (B)
Revolving Credit Amount of Revolving
Commitment Reduction Credit Commitment
Date Falling on or Reduction:
Nearest to:
third Anniversary of the
Effective Date $ 7,500,000
fourth Anniversary of the
Effective Date $ 7,500,000
fifth Anniversary of the
Effective Date $10,000,000;
provided that, the Company may, by notice to each Bank not less than 30 and not
more than 60 days prior to any Revolving Credit Commitment Reduction Date
request that each Bank not require its pro rata share of any such reduction for
such Revolving Credit Commitment Reduction Date. Each Bank shall, by notice to
the Administrative Agent (which shall as promptly as practicable notify the
Company) given on the date not later than 7 days following its receipt of such
request advise the Administrative Agent whether such Bank (i) elects not to
require its pro rata share of any such reduction (an "Electing Bank") or (ii)
elects to require its pro rata share of any such reduction (a "Non-Electing
Bank")(and any Bank that fails to respond to such request shall be a
Non-Electing Bank). The Company and any Electing Bank may agree, prior to such
Revolving Credit Commitment Reduction Date, that the amount of such Electing
Bank's Revolving Credit Commitment shall be increased by an amount equal to all
or a portion of the aggregate amount of the reduction of the Revolving Credit
Commitment of the Non-Electing Banks to occur on such Revolving Credit
Commitment Reduction Date, such agreement to be set forth in a writing in form
and substance satisfactory to the Company, such Electing Bank and the
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Administrative Agent and delivered to the Administrative Agent not later than 5
Business days prior to such Revolving Credit Commitment Reduction Date.
Notwithstanding the first sentence of this Section 2.04(a), the
Revolving Credit Commitments shall not be reduced if and to the extent that any
Electing Bank elects not to require its pro rata share of such reduction and/or
increases its Revolving Credit Commitment by the amount of all or any portion of
the aggregate amount of the Revolving Credit Commitments of the Non-Electing
Banks that are so reduced.
(b) The Company shall have the right at any time or from time to
time (i) so long as no Revolving Credit Loans are outstanding, to terminate the
Revolving Credit Commitments and (ii) to reduce the aggregate unused amount of
the Revolving Credit Commitments; provided that (x) the Company shall give
notice of each such termination or reduction as provided in Section 4.05 hereof
and (y) each partial reduction shall be in an aggregate amount at least equal to
$1,000,000 (or a larger multiple of $1,000,000).
(c) Each reduction in the aggregate amount of the Revolving Credit
Commitments pursuant to paragraph (b) above on any date shall result in an
automatic and simultaneous reduction of the amounts set forth in Column (B) at
the end of paragraph (a) above for each Revolving Credit Commitment Reduction
Date after the date of such reduction (ratably in accordance with the respective
remaining amounts thereof, after giving effect to any prior reductions pursuant
to this paragraph (c)).
(d) The Commitments once terminated or reduced may not be
reinstated.
(e) Each Bank shall maintain in its records each reduction of its
Commitment(s) hereunder.
2.05 Commitment Fee. The Company shall pay to the Administrative
Agent for account of each Bank a commitment fee which shall accrue at a rate per
annum equal to the Applicable Percentage on the daily average unused amount of
such Bank's Revolving Credit Commitment, for the period from and including the
date hereof to but not including the earlier of the date such Commitment is
terminated and the Revolving Credit Commitment Termination Date. Accrued
commitment fee shall be payable on each Quarterly Date and on the earlier of the
date such Commitment is terminated and the Revolving Credit Commitment
Termination Date.
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2.06 Lending Offices. The Loans of each Type made by each Bank
shall be made and maintained at such Bank's Applicable Lending Office for Loans
of such Type.
2.07 Several Obligations; Remedies Independent. The failure of any
Bank to make any Loan to be made by it on the date specified therefor shall not
relieve any other Bank of its obligation to make its Loan on such date, but
neither any Bank nor the Administrative Agent shall be responsible for the
failure of any other Bank to make a Loan to be made by such other Bank, and
(except as otherwise provided in Section 4.06 hereof) no Bank shall have any
obligation to the Administrative Agent or any other Bank for the failure by such
Bank to make any Loan required to be made by such Bank. Without prejudice to any
provisions hereof that expressly require any action to be taken only by all of
the Banks or the Majority Banks, the amounts payable by the Company at any time
hereunder and under the Notes to each Bank shall be a separate and independent
debt and each Bank shall be entitled to protect and enforce its rights arising
out of this Agreement and the Notes, and it shall not be necessary for any other
Bank or the Administrative Agent to consent to, or be joined as an additional
party in, any proceedings for such purposes.
2.08 Notes.
(a) The Revolving Credit Loans made by each Bank shall be evidenced
by a single promissory note of the Company substantially in the form of Exhibit
A hereto, dated the date hereof, payable to such Bank in a principal amount
equal to the amount of its Revolving Credit Commitment as originally in effect
and otherwise duly completed.
(b) The date, amount, Type, interest rate and duration of Interest
Period (if applicable) of each Loan made by each Bank to the Company, and each
payment made on account of the principal thereof, shall be recorded by such Bank
on its books and, prior to any transfer of any Note evidencing the Loans held by
it, endorsed by such Bank on the schedule attached to such Note or any
continuation thereof; provided that the failure of such Bank to make any such
recordation or endorsement shall not affect the obligations of the Company to
make a payment when due of any amount owing hereunder or under such Note in
respect of such Loans in accordance with the terms hereof.
(c) No Bank shall be entitled to have its Notes substituted or
exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except in connection
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with a permitted assignment of all or any portion of such Bank's relevant
Commitment, Loans and Notes pursuant to Section 12.06 hereof and except as
provided in clause (f) below (and, if requested by any Bank, the Company agrees
to so exchange any Note).
2.09 Optional Prepayments and Conversions or Continuations of Loans.
Subject to Section 4.04 hereof, the Company shall have the right to prepay
Loans, or to Convert Loans of one Type into Loans of another Type or Continue
Loans of one Type as Loans of the same Type, at any time or from time to time,
provided that: (a) the Company shall give the Administrative Agent notice (a
copy of which the Administrative shall promptly furnish to each Bank) of each
such prepayment, Conversion or Continuation as provided in Section 4.05 hereof
(and, upon the date specified in any such notice of prepayment, the amount to be
prepaid shall become due and payable hereunder); (b) if any Eurodollar Loan is
prepaid or Converted on any day other than the last day of the Interest Period
for such Loan, the Company shall pay any amount owing under Section 5.05 in
respect thereof on the date of such prepayment or Conversion; and (c) any
Conversion or Continuation of Eurodollar Loans shall be subject to the
provisions of Section 2.03 hereof. Notwithstanding the foregoing, and without
limiting the rights and remedies of the Banks under Section 10 hereof, in the
event that any Event of Default shall have occurred and be continuing, the
Administrative Agent may (and at the request of the Majority Banks shall)
suspend the right of the Company to Convert any Loan into a Eurodollar Loan, or
to Continue any Loan as a Eurodollar Loan, in which event all Loans shall be
Converted (on the last day(s) of the respective Interest Periods therefor) or
Continued, as the case may be, as Base Rate Loans.
2.10 Mandatory Prepayments and Reductions of Commitments.
(a) Casualty Events. Subject to clause (h) of this Section 2.10, not
less than 30 days following the receipt by the Company of proceeds in excess of
$1,000,000 in the aggregate after the date hereof of insurance, condemnation
award or other compensation in respect of any Casualty Event affecting any
tangible Property of the Company or any of its Restricted Subsidiaries (or upon
such earlier date as the Company or such Restricted Subsidiary, as the case may
be, shall have determined not to repair or replace the Property affected by such
Casualty Event), the Company shall prepay the Loans, and the Commitments shall
be subject to automatic reduction, in an aggregate amount, if any, equal to 100%
of the Net Available Proceeds of such
<PAGE> 46
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Casualty Event not theretofore applied to the repair or replacement of such
Property, such prepayment and reduction to be effected in each case in the
manner and to the extent specified in clause (g) of this Section 2.10; provided
that if, on or before the 30th day following such receipt, the Company furnishes
to the Administrative Agent a plan for the repair or replacement of the Property
affected by such Casualty Event that the Administrative Agent approves in the
reasonable exercise of its discretion as appropriate in light of the nature of
such Property, the time by which such prepayment and reduction must occur shall
be extended to such later date as shall be set forth in such plan with respect
to the amount of the Net Available Proceeds referred to in such plan as will be
expended for such repair or replacement. Notwithstanding the foregoing, in the
event that a Casualty Event shall occur with respect to Property covered by the
Deeds of Trust or Deed of Trust Amendments, the Company shall prepay the Loans,
and the Commitments shall be subject to automatic reduction, on the dates, and
in the amounts of the required prepayments, specified in the Deeds of Trust or
Deed of Trust Amendments. Nothing in this clause (a) shall be deemed to limit
any obligation of the Company or any of its Restricted Subsidiaries pursuant to
any of the Security Documents to remit to a collateral or similar account
(including, without limitation, the Collateral Account) maintained by the
Administrative Agent pursuant to any of the Security Documents the proceeds of
insurance, condemnation award or other compensation received in respect of any
Casualty Event.
(b) Debt Issuance or Equity Issuance. Subject to clause (h) of this
Section 2.10, and without limiting the obligation of the Company to obtain the
consent of the Majority Banks to any Debt Issuance or Equity Issuance prohibited
hereby, upon any Debt Issuance or Equity Issuance after the Closing Date, the
Company shall prepay the Loans, and the Commitments shall be subject to
automatic reduction, in an aggregate amount equal to 100% of the Net Available
Proceeds thereof, such prepayment and reduction to be effected in each case in
the manner and to the extent specified in clause (g) of this Section 2.10;
provided that no such prepayment or reduction shall be required by reason of any
Equity Issuance if, before giving effect thereto, the Net Leverage Ratio is not
greater than 3.00 to 1.
(c) Excess Cash Flow. [Intentionally omitted].
(d) Sale of Assets. Subject to clause (h) of this Section 2.10, and
without limiting the obligation of the Company to obtain the consent of the
Majority Banks to any Disposition not otherwise permitted hereunder, in the
event that the Net
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Available Proceeds of any Disposition (herein, the "Current Disposition"), and
of all prior Dispositions as to which a prepayment has not yet been made under
this Section 2.10(d), shall exceed $5,000,000 then, no later than five Business
Days prior to the occurrence of the Current Disposition, the Company will
deliver to the Administrative Agent a statement (which shall promptly forward a
copy thereof to each Bank), certified by a Responsible Officer, in form and
detail satisfactory to the Administrative Agent, of the amount of the Net
Available Proceeds of the Current Disposition and of all such prior Dispositions
and, upon the consummation of such Disposition, the Company will prepay the
Loans, and the Commitments shall be subject to automatic reduction, in an
aggregate amount equal to 100% of the Net Available Proceeds of the Current
Disposition and such prior Dispositions, such prepayment and reduction to be
effected in each case in the manner and to the extent specified in clause (g) of
this Section 2.10; provided that no prepayment of the Loans shall be required,
and the Commitments shall not be reduced by, any amount calculated by reference
to the first $7,000,000 of Net Available Proceeds from Dispositions of Mobile
Equipment except to the extent that the Company would otherwise be required to
make an offer to the holders of the Senior Notes to apply such Net Available
Proceeds to the purchase of Senior Notes.
Notwithstanding the foregoing, the Company shall not be required to
make a prepayment pursuant to this Section 2.10(d) with respect to the Net
Available Proceeds from any Disposition in the event that the Company advises
the Administrative Agent at the time a prepayment is otherwise required to be
made that it intends to use such Net Available Proceeds for a Permitted Purpose,
so long as:
(x) such Net Available Proceeds are either (A) placed by the Company
into a segregated deposit account with the Administrative Agent pending
such reinvestment or (B) applied by the Company to the prepayment of
Revolving Credit Loans hereunder (in which event the Company agrees to
advise the Administrative Agent in writing at the time of such prepayment
of Revolving Credit Loans that such prepayment is being made from the
proceeds of a Disposition and that, as contemplated by the second
paragraph of Section 2.01, a portion of the Revolving Credit Commitments
equal to the amount of such prepayment gives rise to a Reserved Commitment
Amount that shall be available hereunder only for a Permitted Purpose or
to make prepayments of Loans under clause 2.10(d)(y)(B) below),
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(y) the Net Available Proceeds from any Disposition are in fact used
for a Permitted Purpose within 269 days of such Disposition (it being
understood that, in the event Net Available Proceeds from more than one
Disposition are deposited into a segregated deposit account with the
Administrative Agent or applied to the prepayment of Revolving Credit
Loans as provided in clause (x) above, such Net Available Proceeds shall
be deemed to be applied (or, as the case may be, Revolving Credit Loans
utilizing the Reserved Commitment Amount shall be deemed to be made) in
the same order in which such Dispositions occurred and, accordingly, (A)
any such Net Available Proceeds so held for more than 269 days shall be
forthwith applied to the prepayment of Loans and reductions of Commitments
as provided in clause (g) of this Section 2.10 and (B) any Reserved
Commitment Amount that remains so unutilized for 269 days shall
automatically terminate; and
(z) at the time the Net Available Proceeds (or the borrowing of the
Reserved Commitment Amount) shall be used for a Permitted Purpose the
Administrative Agent shall have received financial projections prepared in
good faith and based on reasonable assumptions by a Responsible Officer,
satisfactory in scope and substance to the Banks, that on a pro forma
basis after giving effect to the use of such Net Available proceed for a
Permitted Purpose the Net Leverage Ratio shall not exceed 4.00 to 1 for
the period from such date through the Revolving Credit Commitment
Termination Date.
(e) Pension Fund Reversions. Subject to clause (h) of this Section
2.10, in the event that the Company or any of its Restricted Subsidiaries
receives any reversion from any pension fund and the amount of such reversion
(herein, the "Current Reversion"), and of all prior reversions from pension
funds as to which a prepayment has not yet been made under this Section 2.10(e)
(excluding in the case of the Current Reversion and all such prior reversions,
the first $100,000 in each fiscal year of the Company ("Excluded Reversions"),
shall exceed $1,000,000 then, no later than the date falling 30 days after the
Current Reversion, the Company will prepay the Loans, and the Commitments shall
be subject to automatic reduction, in an aggregate amount equal to 100% of the
amounts received from the Current Reversion and such prior reversions (other
than Excluded Reversions), such prepayment and reduction to be effected in each
case in the manner and to the extent specified in clause (g) of this Section
2.10.
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(f) Contract Settlements. Subject to clause (h) of this Section
2.10, in the event that the Company or any of its Restricted Subsidiaries
receives any cash consideration for the termination (direct or indirect, in one
transaction or a series of transactions), of any agreement under which the
Company or any of its Subsidiaries is to sell coal, then, no later than the date
falling 30 days after such receipt, the Company will prepay the Loans, and the
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to 65% of the aggregate amount of all cash payments, (including, without
limitation, all cash payments received by way of deferred payment pursuant to a
note or installment receivable or otherwise, but only as and when received) but
excluding (i) the amount of any legal expenses, commissions and other customary
fees and expenses paid by the Company and its Restricted Subsidiaries in
connection therewith and (ii) any Federal, state and local income or other taxes
estimated to be payable by the Company and its Restricted Subsidiaries as a
result thereof (but only to the extent that such estimated taxes are in fact
paid to the relevant governmental authority not later than three months (in the
case of Federal taxes) or nine months (in the case of other taxes) after receipt
of such cash payments), such prepayment and reduction to be effected in each
case in the manner and to the extent specified in clause (g) of this Section
2.10.
(g) Application. Prepayments and reductions of Commitments described
in the above clauses of this Section 2.10 shall be applied to reduce the
Revolving Credit Commitments (and to the extent that, after giving effect to
such reduction, the aggregate principal amount of Revolving Credit Loans would
exceed the Revolving Credit Commitments, the Company shall prepay Revolving
Credit Loans in an amount equal to such excess).
(h) Waiver. At the request of the Company prior to the last date on
which the Company is required to make a prepayment or any Commitment is required
to be reduced by reason of any event described in any of the foregoing clauses
(a) through (f) of this Section 2.10, the Supermajority Banks may waive such
requirement with respect to all or any portion of the amount to be prepaid or to
reduce the Commitments.
(i) Escrow Account.
(i) Notwithstanding the foregoing provisions of this Section 2.10,
if all or any portion of any Loan held by any Bank could not be prepaid as
required by Section 2.10 except as would result in an obligation of the
Company to make any payment to such Bank under Section 5.05 hereof, the
Company
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may deposit the amount of such portion in an account (the "Escrow
Account") with the Administrative Agent to be held by the Administrative
Agent for the benefit of such Bank until such time or times as such
prepayment may be made without resulting in such obligation (or, if
earlier upon the occurrence of an Event of Default), at which time such
amount shall be withdrawn and applied to make such prepayment.
(ii) As collateral security for the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the
principal amount required to have been prepaid and interest thereon, the
Company hereby pledges and grants to the Administrative Agent, for the
benefit of the Bank to whom such amounts are owing, a security interest in
all of its right, title and interest in and to amounts deposited into the
Escrow Account for the benefit of such Bank, together with the earnings
thereon as provided herein. The balances from time to time in the Escrow
Account shall not constitute payment of any principal of or interest on
any Loans until applied by the Administrative Agent as provided herein.
Funds held in the Escrow Account shall be subject to withdrawal only as
provided in this Section 2.10(i).
(iii) Amounts on deposit in the Escrow Account shall be invested and
reinvested by the Administrative Agent in such Permitted Investments as
the Company shall determine in its sole discretion, provided that (i)
failing receipt by the Administrative Agent of instructions from the
Company, the Administrative Agent may invest and reinvest such amounts as
the Administrative Agent shall determine in its sole discretion and (ii)
the approval of the Administrative Agent shall be required for the
investments and reinvestments to be made during any period while a Default
has occurred and is continuing. All such investments and reinvestments
shall be held in the name and be under the control of the Administrative
Agent.
(iv) On the earlier to occur of (x) the last day of the Interest
Period for the Loan in respect of which a deposit was made by the Company
into the Escrow Account, (y) if an Event of Default shall have occurred
and be continuing, the date, if any, specified by the Bank for whose
benefit such deposit was made to the Administrative Agent by not less than
one Business Day's prior notice or (z) the date, if any, specified by the
Company to the Administrative Agent by not less than one Business Day's
prior notice, the
<PAGE> 51
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Administrative Agent shall liquidate any such investments and
reinvestments and apply the proceeds thereof to the prepayment of the
principal of and interest on the Loans in respect of which such amount
was deposited into the Escrow Account.
(v) When the principal of and interest on the Loan in respect
of which a deposit was made by the Company into the Escrow Account have
been paid in full, the Administrative Agent shall deliver to the
Company, against receipt but without any recourse, warranty or
representation whatsoever, such of the balances in the Escrow Account
in respect of such deposit as remain.
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans.
(a) The Company hereby promises to pay to the Administrative
Agent for account of each Bank the entire outstanding principal amount of such
Bank's Revolving Credit Loans, and each Revolving Credit Loan shall mature, on
the Revolving Credit Commitment Termination Date. In addition, (i) in the event
that the aggregate principal amount of all Revolving Credit Loans on any date
exceeds the Borrowing Base on such date, the Company shall (x) immediately
prepay Revolving Credit Loans in an amount equal to such excess or (y) not later
than three Business Days after such date, furnish to the Administrative Agent a
new Borrowing Base Certificate as at such date (or a later date) demonstrating
that such excess did not exist or no longer exists and (ii) if following any
Revolving Credit Commitment Reduction Date (x) the aggregate principal amount of
the Revolving Credit Loans then outstanding shall exceed the Revolving Credit
Commitments in effect after the applicable reduction, the Company shall
immediately prepay Revolving Credit Loans in an amount equal to such excess and
(y) as a result of any Bank making the election referred to in the proviso of
the last sentence of Section 2.04(a) hereof, the aggregate principal amount of
the Loans held by the Banks is not held by them pro rata in accordance with
their respective Commitments, the Company shall immediately prepay Loans in such
amounts, of such Types and held by such Banks so that, after giving effect
thereto, the Loans shall be held by the Banks pro rata (as to principal amount,
Type and Interest Period) in accordance with their respective Commitments.
3.02 Interest. The Company hereby promises to pay to
the Administrative Agent for account of each Bank interest on the
<PAGE> 52
- 47 -
unpaid principal amount of each Loan made by such Bank for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the
Base Rate (as in effect from time to time) plus the Applicable
Percentage and
(b) during such periods as such Loan is a Eurodollar Loan, for
each Interest Period relating thereto, the Eurodollar Rate for such
Loan for such Interest Period plus the Applicable Percentage.
Notwithstanding the foregoing, the Company hereby promises to pay to the
Administrative Agent for account of each Bank interest at the applicable
Post-Default Rate on any principal of any Loan made by such Bank and on any
other amount payable by the Company hereunder or under the Notes held by such
Bank to or for account of such Bank, that shall not be paid in full when due
(whether at stated maturity, by acceleration, by mandatory prepayment or
otherwise), for the period from and including the due date thereof to but
excluding the date the same is paid in full. Accrued interest on each Loan shall
be payable (i) in the case of a Base Rate Loan, quarterly on the Quarterly
Dates, (ii) in the case of a Eurodollar Loan, on the last day of each Interest
Period therefor and, if such Interest Period is longer than three months, at
three-month intervals following the first day of such Interest Period, and (iii)
in the case of any Loan, upon the payment or prepayment thereof or the
Conversion of such Loan to a Loan of another Type (but only on the principal
amount so paid, prepaid or Converted), except that interest payable at the
Post-Default Rate shall be payable from time to time on demand. Promptly after
the determination of any interest rate provided for herein or any change
therein, the Administrative Agent shall give notice thereof to the Banks to
which such interest is payable and to the Company.
Section 4. Payments; Pro Rata Treatment; Computations;
Etc.
4.01 Payments.
(a) Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Company
under this Agreement and the Notes, and, except to the extent otherwise provided
therein, all payments to be made by the Obligors under any other Loan Document,
shall be made in
<PAGE> 53
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Dollars, in immediately available funds, without deduction, set-off or
counterclaim, to the Administrative Agent at the Agent's Account, not later than
1:00 p.m. New York time on the date on which such payment shall become due (each
such payment made after such time on such due date to be deemed to have been
made on the next succeeding Business Day).
(b) Any Bank for whose account any such payment is to be made
may (but shall not be obligated to) debit the amount of any such payment that is
not made by such time to any ordinary deposit account of the Company with such
Bank (with notice to the Company and the Administrative Agent), provided that
such Bank's failure to give such notice shall not affect the validity thereof.
(c) The Company shall, at the time of making each payment
under this Agreement or any Note for account of any Bank, specify to the
Administrative Agent (which shall so notify the intended recipient(s) thereof)
the Loans or other amounts payable by the Company hereunder to which such
payment is to be applied (and in the event that the Company fails to so specify,
or if an Event of Default has occurred and is continuing, the Administrative
Agent may distribute such payment to the Banks for application in such manner as
it or the Majority Banks, subject to Section 4.02 or 2.10(g) hereof, may
determine to be appropriate).
(d) Each payment received by the Administrative Agent under
this Agreement or any Note for account of any Bank shall be paid by the
Administrative Agent promptly to such Bank, in immediately available funds, for
account of such Bank's Applicable Lending Office for the Loan or other
obligation in respect of which such payment is made.
(e) If the due date of any payment under this Agreement or any
Note would otherwise fall on a day that is not a Business Day, such date shall
be extended to the next succeeding Business Day, and interest shall be payable
for any principal so extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise
provided herein: (a) each borrowing of Loans from the Banks under Section 2.01
hereof shall be made from the Banks, each payment of commitment fee under
Section 2.05 hereof shall be made for account of the Banks, and each termination
or reduction of the amount of the Commitments under Section 2.04 hereof shall be
applied to the respective Commitments of the Banks, pro rata according to the
amounts of their respective Commitments;
<PAGE> 54
- 49 -
(b) except as otherwise provided in Section 5.04 hereof, Eurodollar Loans having
the same Interest Period shall be allocated pro rata among the Banks according
to the amounts of their respective Commitments to make Loans (in the case of the
making of Loans) or their respective Loans (in the case of Conversions and
Continuations of Loans); (c) each payment or prepayment of principal of Loans by
the Company shall be made for account of the Banks pro rata in accordance with
the respective unpaid principal amounts of the Loans held by them; and (d) each
payment of interest on Loans by the Company shall be made for account of the
Banks pro rata in accordance with the amounts of interest on such Loans then due
and payable to the Banks.
4.03 Computations. Interest on Eurodollar Loans shall be
computed on the basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last day) occurring in the period for which
payable, and commitment fee and interest on Base Rate Loans shall be computed on
the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which payable. Notwithstanding the foregoing, for each day that the
Base Rate is calculated by reference to the Federal Funds Rate any interest on
Base Rate Loans shall be computed on the basis of a year of 360 days and actual
days elapsed.
4.04 Minimum Amounts. Except for mandatory prepayments made
pursuant to Section 2.10 hereof and Conversions or prepayments made pursuant to
Section 5.04 hereof, each borrowing, Conversion and partial prepayment of
principal of Loans shall be in an aggregate amount at least equal to $100,000 or
a larger multiple of $100,000 (borrowings, Conversions or prepayments of or into
Loans of different Types or, in the case of Eurodollar Loans, having different
Interest Periods at the same time hereunder to be deemed separate borrowings,
Conversions and prepayments for purposes of the foregoing, one for each Type or
Interest Period), provided that the aggregate principal amount of Eurodollar
Loans having the same Interest Period shall be in an amount at least equal to
$1,000,000 or a larger multiple of $100,000 and, if any Eurodollar Loans would
otherwise be in a lesser principal amount for any period, such Loans shall be
Base Rate Loans during such period.
4.05 Certain Notices. Notices by the Company to the
Administrative Agent of terminations or reductions of the Commitments, of
borrowings, Conversions, Continuations and optional prepayments of Loans, of
Types of Loans and of the duration of Interest Periods shall be irrevocable
and shall be
<PAGE> 55
- 50 -
effective only if received by the Administrative Agent not later than 11:00 a.m.
New York time on the number of Business Days prior to the date of the relevant
termination, reduction, borrowing, Conversion, Continuation or prepayment or the
first day of such Interest Period specified below:
<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
------ ----------
<S> <C>
Termination or reduction
of Commitments 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans same day
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
</TABLE>
Each such notice of termination or reduction shall specify the amount of the
Commitments to be terminated or reduced. Each such notice of borrowing,
Conversion, Continuation or optional prepayment shall specify the Type of each
Loan to be borrowed, Converted, Continued or prepaid and the date of borrowing,
Conversion, Continuation or optional prepayment (which shall be a Business Day).
Each such notice of the duration of an Interest Period shall specify the Loans
to which such Interest Period is to relate. The Administrative Agent shall
promptly notify the Banks of the contents of each such notice. In the event that
the Company fails to select the Type of Loan, or the duration of any Interest
Period for any Eurodollar Loan, within the time period and otherwise as provided
in this Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate Loan.
4.06 Non-Receipt of Funds by the Administrative Agent. Unless
the Administrative Agent shall have been notified by a Bank or the Company (the
"Payor") prior to the date on which the Payor is to make payment to the
Administrative Agent of (in the case of a Bank) the proceeds of a Loan to be
made by such Bank hereunder or (in the case of the Company) a payment to the
Administrative Agent for account of one or more of the Banks
<PAGE> 56
- 51 -
hereunder (such payment being herein called the "Required Payment"), which
notice shall be effective upon receipt, that the Payor does not intend to make
the Required Payment to the Administrative Agent, the Administrative Agent may
assume that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available to
the intended recipient(s) on such date; and, if the Payor has not in fact made
the Required Payment to the Administrative Agent, the recipient(s) of such
payment shall, on demand, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date (the "Advance Date") such amount was so made
available by the Administrative Agent until the date the Administrative Agent
recovers such amount at a rate per annum equal to the Federal Funds Rate for
such day and, if such recipient(s) shall fail promptly to make such payment, the
Administrative Agent shall be entitled to recover such amount, on demand, from
the Payor, together with interest as aforesaid, provided that if neither the
recipient(s) nor the Payor shall return the Required Payment to the
Administrative Agent within three Business Days of the Advance Date, then,
retroactively to the Advance Date, the Payor and the recipient(s) shall each be
obligated to pay interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment
to be made by the Company to the Banks, the Company and the
recipient(s) shall each be obligated retroactively to the Advance Date
to pay interest in respect of the Required Payment at the Post-Default
Rate (without duplication of the obligation of the Company under
Section 3.02 hereof to pay interest on the Required Payment at the
Post-Default Rate), it being understood that the return by the
recipient(s) of the Required Payment to the Administrative Agent shall
not limit such obligation of the Company under said Section 3.02 to pay
interest at the Post-Default Rate in respect of the Required Payment,
and
(ii) if the Required Payment shall represent proceeds of
a Loan to be made by the Banks to the Company, the Payor and the
Company shall each be obligated retroactively to the Advance Date to
pay interest (without duplication of the obligation of the Company
under Section 3.02 hereof to pay interest on the Required Payment), in
respect of the Required Payment pursuant to whichever of the rates
specified in Section 3.02 hereof is applicable to the Type of such
Loan, it being understood that the return by the Company of the
Required Payment to the Administrative
<PAGE> 57
- 52 -
Agent shall not limit any claim the Company may have against the Payor
in respect of such Required Payment.
4.07 Sharing of Payments, Etc.
(a) Each Obligor agrees that, in addition to (and without
limitation of) any right of set-off, banker's lien or counterclaim a Bank may
otherwise have, each Bank shall be entitled, at its option (to the fullest
extent permitted by law), to set off and apply any deposit (general or special,
time or demand, provisional or final), or other indebtedness, held by it for the
credit or account of such Obligor at any of its offices, in Dollars or in any
other currency, against any principal of or interest on any of such Bank's Loans
or any other amount payable to such Bank hereunder, that is not paid when due
(regardless of whether such deposit or other indebtedness are then due to such
Obligor), in which case it shall promptly notify such Obligor and the
Administrative Agent thereof, provided that such Bank's failure to give such
notice shall not affect the validity thereof.
(b) If any Bank shall obtain from any Obligor payment of any
principal of or interest on any Loan owing to it or payment of any other amount
under this Agreement or any other Loan Document through the exercise of any
right of set-off, banker's lien or counterclaim or similar right or otherwise
(other than from the Administrative Agent as provided herein), and, as a result
of such payment, such Bank shall have received a greater percentage of the
principal of or interest on the Loans or such other amounts then due hereunder
or thereunder by such Obligor to such Bank than the percentage received by any
other Bank, it shall promptly purchase from such other Banks participations in
(or, if and to the extent specified by such Bank, direct interests in) the Loans
or such other amounts, respectively, owing to such other Banks (or in interest
due thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all the
Banks shall share the benefit of such excess payment (net of any expenses that
may be incurred by such Bank in obtaining or preserving such excess payment) pro
rata in accordance with the unpaid principal of and/or interest on the Loans or
such other amounts, respectively, owing to each of the Banks. To such end all
the Banks shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored.
<PAGE> 58
- 53 -
(c) The Company agrees that any Bank so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Bank were a direct holder of Loans or other amounts (as the case may
be) owing to such Bank in the amount of such participation.
(d) Nothing contained herein shall require any Bank to
exercise any such right or shall affect the right of any Bank to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of any Obligor. If, under any applicable bankruptcy,
insolvency or other similar law, any Bank receives a secured claim in lieu of a
set-off to which this Section 4.07 applies, such Bank shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Banks entitled under this Section 4.07 to
share in the benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
5.01 Additional Costs.
(a) The Company shall pay directly to each Bank from time to
time such amounts as such Bank may determine to be necessary to compensate such
Bank for any costs that such Bank determines are attributable to its making or
maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder, or any reduction in any amount receivable by such Bank
hereunder in respect of any of such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called "Additional
Costs"), resulting from any Regulatory Change that:
(i) shall subject any Bank (or its Applicable Lending
Office for any of such Loans) to any tax, duty or other charge in
respect of such Loans or its Notes or changes the basis of taxation of
any amounts payable to such Bank under this Agreement or its Notes in
respect of any of such Loans (excluding changes in the rate of tax on
the overall net income of such Bank or of such Applicable Lending
Office by the jurisdiction in which such Bank has its principal office
or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or
similar requirements (other than the Reserve Requirement utilized in
the determination of the Eurodollar Rate for such Loan) relating to any
extensions of credit or
<PAGE> 59
- 54 -
other assets of, or any deposits with or other liabilities of, such
Bank (including, without limitation, any of such Loans or any deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof), or any commitment of such Bank (including, without limitation,
the Commitments of such Bank hereunder); or
(iii) imposes any other condition affecting this
Agreement or its Notes (or any of such extensions of credit or
liabilities) or its Commitments.
If any Bank requests compensation from the Company under this Section 5.01(a),
the Company may, by notice to such Bank (with a copy to the Administrative
Agent), suspend the obligation of such Bank thereafter to make or Continue
Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar Loans, until the
Regulatory Change giving rise to such request ceases to be in effect (in which
case the provisions of Section 5.04 hereof shall be applicable), provided that
such suspension shall not affect the right of such Bank to receive the
compensation so requested.
(b) Without limiting the effect of the foregoing provisions of
this Section 5.01 (but without duplication), the Company shall pay directly to
each Bank from time to time on request such amounts as such Bank may determine
to be necessary to compensate such Bank (or, without duplication, the bank
holding company of which such Bank is a subsidiary) for any costs that it
determines are attributable to the maintenance by such Bank (or any Applicable
Lending Office or such bank holding company), pursuant to any law or regulation
or any interpretation, directive or request (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful) of any
court or governmental or monetary authority (i) following any Regulatory Change
or (ii) implementing any risk-based capital guideline or other requirement
(whether or not having the force of law and whether or not the failure to comply
therewith would be unlawful) hereafter issued by any government or governmental
or supervisory authority implementing at the national level the Basle Accord, of
capital in respect of its Commitments or Loans (such compensation to include,
without limitation, an amount equal to any reduction of the rate of return on
assets or equity of such Bank (or any Applicable Lending Office or such bank
holding company) to a level below that which such Bank (or any Applicable
Lending Office or such bank holding company) could have achieved but for such
law, regulation, interpretation, directive or request).
<PAGE> 60
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(c) Each Bank shall notify the Company of any event occurring
after the date hereof entitling such Bank to compensation under paragraph (a) or
(b) of this Section 5.01 as promptly as practicable, but in any event within 180
days, after such Bank obtains actual knowledge thereof; provided that (i) if any
Bank fails to give such notice within 180 days after it obtains actual knowledge
of such an event, such Bank shall, with respect to compensation payable pursuant
to this Section 5.01 in respect of any costs resulting from such event, only be
entitled to payment under this Section 5.01 for costs incurred from and after
the date 180 days prior to the date that such Bank does give such notice and
(ii) each Bank will designate a different Applicable Lending Office for the
Loans of such Bank affected by such event if such designation will avoid the
need for, or reduce the amount of, such compensation and will not, in the sole
opinion of such Bank, be disadvantageous to such Bank, except that such Bank
shall have no obligation to designate an Applicable Lending Office located in
the United States of America. Each Bank will furnish to the Company a
certificate setting forth in reasonable detail the basis and amount of each
request by such Bank signed by two officers of such Bank for compensation under
paragraph (a) or (b) of this Section 5.01. Determinations and allocations by any
Bank for purposes of this Section 5.01 of the effect of any Regulatory Change
pursuant to paragraph (a) of this Section 5.01, or of the effect of capital
maintained pursuant to paragraph (b) of this Section 5.01, on its costs or rate
of return of maintaining Loans or its obligation to make Loans, or on amounts
receivable by it in respect of Loans, and of the amounts required to compensate
such Bank under this Section 5.01, shall be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
5.02 Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Eurodollar
Base Rate for any Interest Period:
(a) the Administrative Agent reasonably determines, which
determination shall be conclusive, that quotations of interest rates
for the relevant deposits referred to in the definition of "Eurodollar
Base Rate" in Section 1.01 hereof are not being provided in the
relevant amounts or for the relevant maturities for purposes of
determining rates of interest for Eurodollar Loans as provided herein;
or
(b) the Majority Banks reasonably determine, which
determination shall be conclusive, and notify the Administrative Agent
that the relevant rates of interest
<PAGE> 61
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referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof upon the basis of which the rate of interest for Eurodollar
Loans for such Interest Period is to be determined are not likely
adequately to cover the cost to such Banks of making or maintaining
Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Company and each Bank prompt notice
thereof and, so long as such condition remains in effect, the Banks shall be
under no obligation to make additional Eurodollar Loans, to Continue Eurodollar
Loans or to Convert Base Rate Loans into Eurodollar Loans, and the Company
shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans
into Base Rate Loans in accordance with Section 2.09 hereof.
5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain Eurodollar Loans
hereunder (and, in the sole opinion of such Bank, the designation of a different
Applicable Lending Office would either not avoid such unlawfulness or would be
disadvantageous to such Bank), then such Bank shall promptly notify the Company
thereof (with a copy to the Administrative Agent), by a certificate signed by
two officers of such Bank describing such event in reasonable detail, and such
Bank's obligation to make or Continue, or to Convert Loans of any other Type
into, Eurodollar Loans shall be suspended until such time as such Bank may again
make and maintain Eurodollar Loans (in which case the provisions of Section 5.04
hereof shall be applicable).
5.04 Treatment of Affected Loans. If the obligation of any
Bank to make Eurodollar Loans or to Continue, or to Convert Base Rate Loans
into, Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03
hereof, such Bank's Eurodollar Loans shall be automatically Converted into Base
Rate Loans on the last day(s) of the then current Interest Period(s) for
Eurodollar Loans (or, in the case of a Conversion resulting from a circumstance
described in Section 5.03 hereof, on such earlier date as such Bank may specify
to the Company with a copy to the Administrative Agent) and, unless and until
such Bank gives notice as provided below that the circumstances specified in
Section 5.01 or 5.03 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Bank's Eurodollar Loans
have been so Converted, all payments and prepayments of
<PAGE> 62
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principal that would otherwise be applied to such Bank's Eurodollar
Loans shall be applied instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by
such Bank as Eurodollar Loans shall be made or Continued instead as
Base Rate Loans, and all Base Rate Loans of such Bank that would
otherwise be Converted into Eurodollar Loans shall remain as Base Rate
Loans.
If such Bank gives notice to the Company with a copy to the Administrative Agent
that the circumstances specified in Section 5.01 or 5.03 hereof that gave rise
to the Conversion of such Bank's Eurodollar Loans pursuant to this Section 5.04
no longer exist (which such Bank agrees to do promptly upon such circumstances
ceasing to exist) at a time when Eurodollar Loans made by other Banks are
outstanding, such Bank's Base Rate Loans shall be automatically Converted, on
the first day(s) of the next succeeding Interest Period(s) for such outstanding
Eurodollar Loans, to the extent necessary so that, after giving effect thereto,
all Base Rate and Eurodollar Loans are allocated among the Banks ratably (as to
principal amounts, Types and Interest Periods) in accordance with their
respective Commitments.
5.05 Compensation. The Company shall pay to the Administrative
Agent for account of each Bank, upon the request of such Bank through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Bank) to compensate it for any loss, cost or expense
that such Bank determines is attributable to:
(a) any payment, mandatory or optional prepayment or
Conversion of a Eurodollar Loan made by such Bank for any reason
(including, without limitation, the acceleration of the Loans pursuant
to Section 10 hereof) on a date other than the last day of the Interest
Period for such Loan; or
(b) any failure by the Company for any reason (including,
without limitation, the failure of any of the conditions precedent
specified in Section 7 hereof to be satisfied) to borrow a Eurodollar
Loan from such Bank on the date for such borrowing specified in the
relevant notice of borrowing given pursuant to Section 2.02 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not
<PAGE> 63
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borrowed for the period from the date of such payment, prepayment, Conversion or
failure to borrow to the last day of the then current Interest Period for such
Loan (or, in the case of a failure to borrow, the Interest Period for such Loan
that would have commenced on the date specified for such borrowing) at the
applicable rate of interest for such Loan provided for herein over (ii) the
amount of interest that otherwise would have accrued on such principal amount at
a rate per annum equal to the interest component of the amount such Bank would
have bid in the London interbank market for Dollar deposits of leading banks in
amounts comparable to such principal amount and with maturities comparable to
such period (as reasonably determined by such Bank).
5.06 U.S. Taxes.
(a) The Company agrees to pay to each Bank that is not a U.S.
Person such additional amounts as are necessary in order that the net payment of
any amount due to such non-U.S. Person hereunder after deduction for or
withholding in respect of any U.S. Taxes imposed with respect to such payment
(or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person), will
not be less than the amount stated herein to be then due and payable, provided
that the foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to any Bank hereunder (x) unless such Bank
is, on the date hereof (or on the date it becomes a Bank hereunder as
provided in Section 12.06(b) hereof) and on the date of any change in
the Applicable Lending Office of such Bank, either entitled to submit a
Form 1001 (relating to such Bank and entitling it to a complete
exemption from withholding on all interest to be received by it
hereunder in respect of the Loans) or Form 4224 (relating to all
interest to be received by such Bank hereunder in respect of the
Loans), or (y) if such Bank has taken any voluntary action (or
undergone any merger, acquisition or similar transaction) resulting in
the loss of its entitlement, or that of any successor-in-interest or
assign, to submit either of such Forms 1001 or 4224,
(ii) [Intentionally omitted].
(iii) to any U.S. Taxes imposed solely by reason of the
failure by such non-U.S. Person (or, if such non-U.S. Person is not the
beneficial owner of the relevant Loan, such beneficial owner) to comply
with applicable certification, information, documentation or other
reporting
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requirements concerning the nationality, residence, identity or
connections with the United States of America of such non-U.S. Person
(or beneficial owner, as the case may be) if such compliance is
required by statute or regulation of the United States of America as a
precondition to relief or exemption from such U.S. Taxes, or
(iv) with respect to any U.S. Taxes which are imposed on net
income of the Bank and are payable otherwise than by withholding from a
payment on a Loan.
For the purposes of this Section 5.06(a), (A) "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (B) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates) and (C) "Form W-8" shall mean Form W-8 (Certificate
of Foreign Status of the Department of Treasury of the United States of
America). Each of the Forms referred to in the foregoing clauses (A), (B) and
(C) shall include such successor and related forms as may from time to time be
adopted by the relevant taxing authorities of the United States of America to
document a claim to which such Form relates.
(b) Within 30 days after paying any amount to the
Administrative Agent or any Bank from which it is required by law to make any
deduction or withholding, and within 30 days after it is required by law to
remit such deduction or withholding to any relevant taxing or other authority,
the Company shall deliver to the Administrative Agent for delivery to such
non-U.S. Person evidence satisfactory to such Person of such deduction,
withholding or payment (as the case may be).
5.07 Replacement of Banks. If any Bank requests compensation
pursuant to Section 5.01 or 5.06 hereof, or any Bank's obligation to make or
Continue, or to Convert Loans of any Type into, the other Type of Loan shall be
suspended pursuant to Section 5.01 or 5.03 hereof (any such Bank requesting such
compensation, or whose obligations are so suspended, being herein called a
"Requesting Bank"), and if no Event of Default shall have occurred and be
continuing, the Company, upon three Business Days notice, may (a) prepay in full
all outstanding Loans and all other amounts payable hereunder to such Requesting
Bank and
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terminate all outstanding Commitments of such Requesting Bank, or (b) require
that such Requesting Bank transfer all of its right, title and interest under
this Agreement and such Requesting Bank's Notes, if any, to any bank or other
financial institution (a "Proposed Bank") identified by the Company that is
satisfactory to the Administrative Agent (i) if such Proposed Bank agrees to
assume all of the obligations of such Requesting Bank hereunder, and to purchase
all of such Requesting Bank's Loans hereunder for consideration equal to the
aggregate outstanding principal amount of such Requesting Bank's Loans, together
with interest thereon to the date of such purchase, and satisfactory
arrangements are made for payment to such Requesting Bank of all other amounts
payable hereunder to such Requesting Bank on or prior to the date of such
transfer (including any fees accrued hereunder and any amounts that would be
payable under Section 5.05 hereof as if all of such Requesting Bank's Loans were
being prepaid in full on such date) and (ii) if such Requesting Bank has
requested compensation pursuant to Section 5.01 or 5.06 hereof, such Proposed
Bank's aggregate requested compensation, if any, pursuant to said Section 5.01
or 5.06 with respect to such Requesting Bank's Loans is lower than that of the
Requesting Bank. Subject to the provisions of Section 12.06(b) hereof, such
Proposed Bank shall be a "Bank" for all purposes hereunder. Without prejudice to
the survival of any other agreement of the Company hereunder the agreements of
the Company contained in Sections 5.01, 5.06 and 12.03 hereof (without
duplication of any payments made to such Requesting Bank by the Company or the
Proposed Bank) shall survive for the benefit of such Requesting Bank under this
Section 5.07 with respect to the time prior to such replacement.
Section 6. Guarantee.
6.01 The Guarantee. The Subsidiary Guarantors hereby jointly
and severally guarantee to each Bank and the Administrative Agent and their
respective successors and permitted assigns the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the principal of
and interest (including, without limitation, interest accruing after the Company
becomes the subject of a case under the Bankruptcy Code) on the Loans made by
the Banks to, and the Notes held by each Bank of, the Company and all other
amounts from time to time owing to the Banks or the Administrative Agent by the
Company under this Agreement and under the Notes and by any Obligor under any of
the other Loan Documents, and all obligations of the Company or any of its
Restricted Subsidiaries to any Bank in respect of any Interest Rate Protection
Agreement, in each case strictly in accordance with the terms thereof (such
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obligations being herein collectively called the "Guaranteed Obligations"). The
Subsidiary Guarantors hereby further jointly and severally agree that if the
Company shall fail to pay in full when due (whether at stated maturity, by
acceleration or otherwise) any of the Guaranteed Obligations, the Subsidiary
Guarantors will promptly pay the same, without any demand or notice whatsoever,
and that in the case of any extension of time of payment or renewal of any of
the Guaranteed Obligations, the same will be promptly paid in full when due
(whether at extended maturity, by acceleration or otherwise) in accordance with
the terms of such extension or renewal.
6.02 Obligations Unconditional. The obligations of the
Subsidiary Guarantors under Section 6.01 hereof are absolute and unconditional,
joint and several, irrespective of the value, genuineness, validity, regularity
or enforceability of the obligations of the Company under this Agreement, the
Notes or any other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 6.02 that the obligations of the
Subsidiary Guarantors hereunder shall be absolute and unconditional, joint and
several, under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not alter or impair the liability of the Subsidiary Guarantors hereunder
which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to
the Subsidiary Guarantors, the time for any performance of or
compliance with any of the Guaranteed Obligations shall be extended, or
such performance or compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions
of this Agreement or the Notes or any other agreement or instrument
referred to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations
shall be accelerated, or any of the Guaranteed Obligations shall be
renewed, replaced, extended or otherwise modified, supplemented or
amended in any respect, or any right under this Agreement or the Notes
or any other
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agreement or instrument referred to herein or therein shall be waived
or any other guarantee of any of the Guaranteed Obligations or any
security therefor shall be released or exchanged in whole or in part or
otherwise dealt with; or
(iv) any lien or security interest granted to, or in
favor of, the Administrative Agent or any Bank or Banks as security for
any of the Guaranteed Obligations shall fail to be perfected.
The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand
of payment, protest and all notices whatsoever, and any requirement that the
Administrative Agent or any Bank exhaust any right, power or remedy or proceed
against the Company under this Agreement or the Notes or any other agreement or
instrument referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.
6.03 Reinstatement. The obligations of the Subsidiary
Guarantors under this Section 6 shall be automatically reinstated if and to the
extent that for any reason any payment by or on behalf of the Company in respect
of the Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise and the Subsidiary
Guarantors jointly and severally agree that they will indemnify the
Administrative Agent and each Bank on demand for all reasonable costs and
expenses (including, without limitation, fees of counsel) incurred by the
Administrative Agent or such Bank in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
6.04 Subrogation. The Subsidiary Guarantors hereby jointly and
severally agree that until the payment and satisfaction in full of all
Guaranteed Obligations and the expiration and termination of the Commitments of
the Banks under this Agreement they shall not exercise any right or remedy
arising by reason of any performance by them of their guarantee in Section 6.01
hereof, whether by subrogation or otherwise, against the Company or any other
guarantor of any of the Guaranteed Obligations or any security for any of the
Guaranteed Obligations.
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6.05 Remedies. The Subsidiary Guarantors jointly and severally
agree that, as between the Subsidiary Guarantors and the Banks, the obligations
of the Company under this Agreement and the Notes may be declared to be
forthwith due and payable as provided in Section 10 hereof (and shall be deemed
to have become automatically due and payable in the circumstances provided in
said Section 10) for purposes of Section 6.01 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such obligations
from becoming automatically due and payable) as against the Company and that, in
the event of such declaration (or such obligations being deemed to have become
automatically due and payable), such obligations (whether or not due and payable
by the Company) shall forthwith become due and payable by the Subsidiary
Guarantors for purposes of said Section 6.01.
6.06 Instrument for the Payment of Money. Each Subsidiary
Guarantor hereby acknowledges that the guarantee in this Section 6 constitutes
an instrument for the payment of money, and consents and agrees that any Bank or
the Administrative Agent, at its sole option, in the event of a dispute by such
Subsidiary Guarantor in the payment of any moneys due hereunder, shall have the
right to bring motion-action under New York CPLR Section 3213.
6.07 Continuing Guarantee. The guarantee in this Section 6
is a continuing guarantee, and shall apply to all Guaranteed Obligations
whenever arising.
6.08 Rights of Contribution. The Subsidiary Guarantors hereby
agree, as between themselves, that if any Subsidiary Guarantor shall become an
Excess Funding Guarantor (as defined below) by reason of the payment by such
Subsidiary Guarantor of any Guaranteed Obligations, each other Subsidiary
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
next sentence), pay to such Excess Funding Guarantor an amount equal to such
Subsidiary Guarantor's Pro Rata Share (as defined below and determined, for this
purpose, without reference to the Properties, debts and liabilities of such
Excess Funding Guarantor) of the Excess Payment (as defined below) in respect of
such Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to
any Excess Funding Guarantor under this Section 6.08 shall be subordinate and
subject in right of payment to the prior payment in full of the obligations of
such Subsidiary Guarantor under the other provisions of this Section 6 and such
Excess Funding Guarantor shall not exercise any right or remedy with respect to
such excess until payment and satisfaction in full of all of such obligations.
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For purposes of this Section 6.08, (i) "Excess Funding
Guarantor" shall mean, in respect of any Guaranteed Obligations, a Subsidiary
Guarantor that has paid an amount in excess of its Pro Rata Share of such
Guaranteed Obligations, (ii) "Excess Payment" shall mean, in respect of any
Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess
of its Pro Rata Share of such Guaranteed Obligations and (iii) "Pro Rata Share"
shall mean, for any Subsidiary Guarantor, the ratio (expressed as a percentage)
of (x) the Adjusted Net Worth (as defined in Section 6.09 hereof) of such
Subsidiary Guarantor to (y) an amount equal to the sum of the Adjusted Net
Worths of all of the Subsidiary Guarantors, determined as at the date of
determination of the Maximum Guaranty Liability of such Subsidiary Guarantor
pursuant to Section 6.09 hereof.
6.09 General Limitation on Guarantee Obligations. In any
action or proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Subsidiary Guarantor under
Section 6.01 hereof would otherwise, taking into account the provisions of
Section 6.08 hereof, be held or determined to be void, invalid or unenforceable,
or subordinated to the claims of any other creditors, on account of the amount
of its liability under said Section 6.01, then, notwithstanding any other
provision hereof to the contrary, the maximum liability of any Subsidiary
Guarantor under said Section 6.01 as of any date shall in no event exceed the
Maximum Guaranty Liability (as such term is hereinafter defined) of such
Subsidiary Guarantor as of such date. As used herein, the term "Maximum Guaranty
Liability" shall be that amount from time to time equal to the greatest of (a)
the Adjusted Net Worth (as such term is defined below) of such Subsidiary
Guarantor as of the end of the most recently concluded fiscal quarter of such
Subsidiary Guarantor ended on or prior to the date hereof, (b) the highest
Adjusted Net Worth (as such term is defined below) of such Subsidiary Guarantor
at the end of any fiscal quarter ending subsequent to the date hereof and prior
to the earlier of the date of the commencement of a case under the Bankruptcy
Code involving such Subsidiary Guarantor or the date enforcement of Section 6.01
is sought, (c) the Adjusted Net Worth (as such term is defined below) of such
Subsidiary Guarantor at the earlier of the date of the commencement of a case
under the Bankruptcy Code involving such Subsidiary Guarantor or the date
enforcement of Section 6.01 is sought, (d) the sum of any and all loans,
advances or capital contributions made by the Company to such Subsidiary
Guarantor, and all payments made by the Company to such Subsidiary Guarantor in
satisfaction of intercompany payables or other liabilities of the Company to
such Subsidiary
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Guarantor, in each case with the proceeds of any Loans made to the Company under
the Credit Agreement, and (e) the fair market value of any and all property
acquired with proceeds of any Loans made to the Company under the Credit
Agreement and transferred to such Subsidiary Guarantor. As used herein, the term
"Adjusted Net Worth" of any Subsidiary Guarantor as of any particular date shall
mean the excess of (i) the amount of the fair saleable value of the assets of
such Subsidiary Guarantor (including the value of any and all rights of
subrogation or contribution resulting from any payments by such Subsidiary
Guarantor under any other guaranty) as of such date determined in accordance
with applicable Federal and state laws affecting creditors' rights and governing
determinations of the insolvency of debtors, over (ii) the amount of all
liabilities of such Subsidiary Guarantor (including all liabilities of such
Subsidiary Guarantor under Section 6.01), contingent or otherwise, as of such
date, determined in accordance with the laws described in clause (i) above,
minus $1.00.
Section 7. Conditions Precedent.
7.01 Effectiveness. The effectiveness of the amendment and
restatement of the Existing Credit Agreement contemplated hereby is subject to
the conditions precedent that (i) this Amended and Restated Credit Agreement be
duly executed and delivered by the Company, the Subsidiary Guarantors and each
of the Banks; (ii) such conditions precedent shall be satisfied by September 30,
1997; and (iii) the Administrative Agent shall have received the following
documents (with, in the case of clauses (a), (b), (c) and (d) below, sufficient
copies for each Bank), each of which shall be satisfactory to the Administrative
Agent (and to the extent specified below, to each Bank) in form and substance:
(a) Corporate Documents. Certified copies of the charter and
by-laws (or equivalent documents) of each Obligor and of all corporate
authority for each Obligor (including, without limitation, board of
director resolutions and evidence of the incumbency, including specimen
signatures, of officers) with respect to the execution, delivery and
performance of such of the Basic Documents to which such Obligor is
intended to be a party and each other document to be delivered by such
Obligor from time to time in connection herewith and the extensions of
credit hereunder (and the Administrative Agent and each Bank may
conclusively rely on such certificate until it receives notice in
writing from such Obligor to the contrary).
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(b) Officer's Certificate. A certificate of a Responsible
Officer, dated the Effective Date, to the effect set forth in the first
sentence of Section 7.02 hereof.
(c) Opinions of Counsel to the Obligors. Opinions, dated the
Effective Date, of (i) Klett Lieber Rooney & Schorling, a Professional
Corporation, in form and substance satisfactory to the Banks and the
Administrative Agent (and each Obligor hereby instructs such counsel to
deliver such opinions to the Banks and the Administrative Agent) and
(ii) Spilman, Thomas & Battle, special West Virginia counsel to the
Obligors, in form and substance satisfactory to the Banks and the
Administrative Agent (and each Obligor hereby instructs such counsel to
deliver such opinions to the Banks and the Administrative Agent).
(d) Opinion of Special New York Counsel to Chase. An opinion,
dated the Effective Date, of Milbank, Tweed, Hadley & McCloy, special
New York counsel to Chase, substantially in the form of Exhibit H
hereto (and Chase hereby instructs such counsel to deliver such opinion
to the Banks).
(e) Notes. The Notes, duly completed and executed for each
Bank.
(f) Amendment to Security Agreement. An amendment to the
Security Agreement, substantially in the form of Exhibit D hereto, duly
executed and delivered by each Obligor and the Administrative Agent.
(g) Senior Notes. Evidence that the Senior Note Documents
shall have been duly authorized, executed and delivered, and that the
Senior Notes shall have been issued for cash in an aggregate amount not
less than 96% of the aggregate stated principal amount thereof, in each
case containing terms in form and substance satisfactory to the
Administrative Agent. In addition, the Administrative Agent shall have
received a certificate of a Responsible Officer to that effect (and
attaching thereto true and complete copies of the Senior Note
Documents, which shall be reasonably satisfactory to the Administrative
Agent in form and substance.
(h) Repayment of Existing Term Loans. Evidence that the
principal of and interest on, and all other amounts owing in respect
of, the Existing Term Loans shall have been (or shall be
simultaneously) paid in full.
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(i) Compliance Certificate. A Certificate of a Responsible
Officer of the Company evidencing, effective as of the Effective Date,
(i) pro forma compliance with the financial covenants (after giving
effect to the amendment and restatement contemplated hereby) and (ii)
financial projections prepared in good faith and based on reasonable
assumptions by a Responsible Officer, satisfactory in scope and
substance to the Banks, as to the consolidated EBITDA of the Company
and its Restricted Subsidiaries for the period from and including the
Effective Date through December 31, 2003.
(j) Financial Statements and Other Information. Consolidated
and consolidating balance sheets of the Company and its Restricted
Subsidiaries as at December 31, 1996 and the related consolidated and
consolidating statements of income, retained earnings and cash flows of
the Company and its Restricted Subsidiaries for the fiscal year ended
on said date, with the opinion thereon (in the case of said
consolidated balance sheet and statements) of Coopers & Lybrand L.L.P.,
and the unaudited consolidated and consolidating balance sheets of the
Company and its Restricted Subsidiaries as at June 30, 1997 and the
related consolidated and consolidating statements of income, retained
earnings and cash flows of the Company and its Restricted Subsidiaries
for the six-month period ended on such date.
(k) Deed of Trust Amendments. The Deed of Trust Amendments,
duly executed and delivered by the parties thereto.
(l) Consent of Existing Banks. Each of the parties to the
Existing Credit Agreement that is not a party to this Agreement shall
have consented to the amendment and restatement of the Existing Credit
Agreement that is contemplated hereby.
(m) Other Documents. Such other documents as the
Administrative Agent or any Bank or special New York counsel
to Chase may reasonably request.
The effectiveness of the amendment and restatement of the Existing Credit
Agreement contemplated hereby is also subject to the payment or delivery by the
Company of such fees as the Company shall have agreed to pay or deliver to any
Bank or an affiliate thereof or the Administrative Agent in connection herewith,
including, without limitation, the reasonable fees and
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expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to Chase,
in connection with the negotiation, preparation, execution and delivery of this
Agreement and the Notes and the other Loan Documents and the extensions of
credit hereunder (to the extent that statements for such fees and expenses have
been delivered to the Company).
7.02 Initial and Subsequent Extensions of Credit. The
obligation of the Banks to make any Loan or otherwise extend any credit to the
Company upon the occasion of each borrowing or other extension of credit
hereunder is subject to the further conditions precedent that, both immediately
prior to the making of such Loan or other extension of credit and also after
giving effect thereto and to the intended use thereof:
(a) no Default shall have occurred and be continuing;
(b) the representations and warranties made by the Company in
Section 8 hereof, and by each Obligor in each of the other Loan
Documents to which it is a party, shall be true and complete on and as
of the date of the making of such Loan or other extension of credit
with the same force and effect as if made on and as of such date (or,
if any such representation or warranty is expressly stated to have been
made as of a specific date, as of such specific date); and
(c) the aggregate principal amount of the Revolving Credit
Loans shall not exceed the Borrowing Base reflected on the most recent
Borrowing Base Certificate delivered pursuant to Section 9.01(g)
hereof.
Each notice of borrowing by the Company hereunder shall constitute a
certification by the Company to the effect set forth in the preceding sentence
(both as of the date of such notice and, unless the Company otherwise notifies
the Administrative Agent prior to the date of such borrowing, as of the date of
such borrowing).
Section 8. Representations and Warranties. The Company
represents and warrants to the Administrative Agent and the Banks that:
8.01 Corporate Existence. Each of the Company and its
respective Restricted Subsidiaries: (a) is a corporation, partnership or other
entity duly organized, validly existing and (to the extent such concept applies
to such entity) in good standing under the laws of the jurisdiction of its
organization;
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(b) has all requisite corporate or other power, and has all material
governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could (either
individually or in the aggregate) have a Material Adverse Effect.
8.02 Financial Condition. The Company has heretofore furnished
to each of the Banks consolidated and consolidating balance sheets of the
Company and its Restricted Subsidiaries as at December 31, 1996 and the related
consolidated and consolidating statements of income, retained earnings and cash
flows of the Company and its Restricted Subsidiaries for the fiscal year ended
on said date, with the opinion thereon (in the case of said consolidated balance
sheet and statements) of Coopers & Lybrand L.L.P., and the unaudited
consolidated and consolidating balance sheets of the Company and its Restricted
Subsidiaries as at June 30, 1997 and the related consolidated and consolidating
statements of income, retained earnings and cash flows of the Company and its
Restricted Subsidiaries for the six-month period ended on such date. All such
financial statements are complete and correct and fairly present the
consolidated financial condition of the Company and its Restricted Subsidiaries
and (in the case of said consolidating financial statements) the respective
unconsolidated financial condition of each of the Company and its Restricted
Subsidiaries, as at said dates and the consolidated and unconsolidated results
of their operations for the fiscal year and six-month period ended on said dates
(subject, in the case of such financial statements as at March 31, 1997, to
normal year-end audit adjustments), all in accordance with generally accepted
accounting principles and practices applied on a consistent basis. None of the
Company and its Restricted Subsidiaries has on the date hereof any material
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in said balance
sheet as at said dates. Since December 31, 1996, there has been no material
adverse change in the consolidated financial condition, operations, business or
prospects taken as a whole of the Company and its Restricted Subsidiaries from
that set forth in said financial statements as at said date.
8.03 Litigation. There are no legal or arbitral
proceedings, or any proceedings by or before any governmental or
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regulatory authority or agency, now pending or (to the knowledge of the Company)
threatened against the Company or any of its Restricted Subsidiaries that, if
adversely determined could (either individually or in the aggregate) have a
Material Adverse Effect.
8.04 No Breach. None of the execution and delivery of this
Agreement and the Notes and the other Basic Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the charter or by-laws of the Company or any of its
Restricted Subsidiaries, or any applicable law or regulation, or any order,
writ, injunction or decree of any court or governmental authority or agency, or
any material agreement or instrument to which the Company or any of its
Restricted Subsidiaries is a party or by which any of them or any of their
Property is bound or to which any of them is subject, or constitute a default
under any such agreement or instrument, or (except for the Liens created
pursuant to the Loan Documents) result in the creation or imposition of any Lien
upon any Property of the Company or any of its Restricted Subsidiaries pursuant
to the terms of any such agreement or instrument.
8.05 Action. Each Obligor has all necessary corporate or other
power, authority and legal right to execute, deliver and perform its obligations
under each of the Basic Documents to which it is a party; the execution,
delivery and performance by each Obligor of each of the Basic Documents to which
it is a party have been duly authorized by all necessary corporate action on its
part (including, without limitation, any required shareholder approvals); and
this Agreement has been duly and validly executed and delivered by the Company
and constitutes, and each of the Notes and the other Basic Documents to which it
is a party when executed and delivered by the Company will constitute, and each
of the Basic Documents to which any other Obligor becomes a party will then
constitute, the legal, valid and binding obligation of the Company or such other
Obligor, as the case may be, enforceable against the Company or such other
Obligor, as the case may be, in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
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8.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any governmental or regulatory authority
or agency, or any securities exchange, are necessary for the execution, delivery
or performance by the Company or any of its Subsidiaries of this Agreement, or
any of the other Basic Documents to which it is a party or for the legality,
validity or enforceability hereof or thereof, except for filings and recordings
in respect of the Liens created pursuant to the Loan Documents.
8.07 ERISA. Each Plan, and, to the knowledge of the Company,
each Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which the Company would be
under an obligation to furnish a report to the Administrative Agent under
Section 9.01(f) hereof.
8.08 Taxes. The Company and its Subsidiaries are members of an
affiliated group of Persons filing consolidated returns for Federal income tax
purposes, of which the Company is, on the date hereof, the "common parent"
(within the meaning of Section 1504 of the Code) of such group. The Company and
its Subsidiaries have filed all Federal income tax returns and all other
material tax returns that are required to be filed by them and have paid all
taxes due pursuant to such returns or pursuant to any final determination of
additional taxes owed by the Company or any of its Subsidiaries. The charges,
accruals and reserves on the books of the Company and its Subsidiaries in
respect of taxes and other governmental charges are, in the opinion of the
Company, adequate. The Company has not given nor been requested to give a waiver
of the statute of limitations relating to the payment of any Federal, state,
local and foreign taxes or other impositions.
8.09 Investment Company Act. Neither the Company nor
any of its Restricted Subsidiaries is an "investment company", or
a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
8.10 Public Utility Holding Company Act. Neither the Company
nor any of its Subsidiaries is a "holding company", or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company", within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
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8.11 Material Agreements and Liens.
(a) Part A of Schedule I hereto is a complete and correct list
of (i) each credit agreement, loan agreement, indenture, note purchase
agreement, guarantee, letter of credit or other arrangement providing for or
otherwise relating to any Indebtedness (or commitment for any extension of
credit constituting Indebtedness) of the Company and each Restricted Subsidiary
outstanding on the date hereof the aggregate principal or face amount of which
equals or exceeds (or may equal or exceed) $1,000,000, and the aggregate
principal or face amount outstanding or that may become outstanding under each
such arrangement is correctly described in Part A of said Schedule I and (ii)
each Interest Rate Protection Agreement to which the Company or its Restricted
Subsidiaries is a party on the date hereof.
(b) Part B of Schedule I hereto is a complete and correct list
of each Lien (other than Liens that will be discharged on the Effective Date)
created by the Company or its Restricted Subsidiaries and securing Indebtedness
of any Person outstanding on the date hereof the aggregate principal or face
amount of which equals or exceeds (or may equal or exceed) $1,000,000 and
covering any Property of the Company or its Restricted Subsidiaries, and the
aggregate Indebtedness secured (or that may be secured) by each such Lien and
the Property covered by each such Lien is correctly described in Part B of said
Schedule I. Except for the Liens listed in Part B of said Schedule I, the
Company has no notice or knowledge of the existence of any Lien securing
Indebtedness of any Person outstanding on the date hereof the aggregate
principal or face amount of which equals or exceeds (or may equal or exceed)
$1,000,000 and covering any Property of the Company or its Restricted
Subsidiaries.
8.12 Environmental Matters. Each of the Company and its
Restricted Subsidiaries has obtained all environmental, health and safety
permits, licenses and other authorizations required under all Environmental Laws
to carry on its business, except to the extent failure to have any such permit,
license or authorization would not (either individually or in the aggregate)
have a Material Adverse Effect. Each of such permits, licenses and
authorizations is in full force and effect and each of the Company and its
Restricted Subsidiaries is in compliance with the terms and conditions thereof,
and is also in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law or in any
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regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except to the extent
failure to comply therewith would not (either individually or in the aggregate)
have a Material Adverse Effect.
In addition, except as set forth in Schedule II hereto or in
the Environmental Report, and except where the relevant underlying events or
circumstances could not be reasonably expected to result in (x) claims,
liabilities, costs or expenses exceeding $2,000,000 (excluding labor costs
relating to the treatment of AMD (as defined below)) in the aggregate for all
such events or circumstances or (y) any fine or penalty individually exceeding
$50,000:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is
pending or, to the knowledge of the Company, threatened by any
governmental or other entity with respect to any alleged failure by the
Company or its Restricted Subsidiaries to have any environmental,
health or safety permit, license or other authorization required under,
or to otherwise comply in any material respect with, any Environmental
Law in connection with the conduct of the business of the Company or
its Restricted Subsidiaries or with respect to any generation,
treatment, storage, recycling, transportation, discharge or disposal,
or any Release of any Hazardous Materials generated by the Company or
its Restricted Subsidiaries.
(b) Neither the Company nor its Restricted Subsidiaries owns,
operates or leases a treatment, storage or disposal facility that, on
the date of this Agreement, requires a permit under the Resource
Conservation and Recovery Act of 1976, as amended, or under any
comparable state or local statute; and
(i) no polychlorinated biphenyls (PCBs) is or has been
present at any site or facility now or previously owned,
operated or leased by the Company or its Restricted
Subsidiaries;
(ii) no asbestos or asbestos-containing materials is or
has been present at any site or facility now or previously
owned, operated or leased by the Company or its Restricted
Subsidiaries;
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(iii) there are no underground storage tanks or surface
impoundments for Hazardous Materials (except for ponds or
sediment control structures used to treat mine drainage
pursuant to, and in compliance with, NPDES permits), active or
abandoned, at any site or facility now or previously owned,
operated or leased by the Company or its Restricted
Subsidiaries;
(iv) no Hazardous Materials have been Released at, on or
under any site or facility now or previously owned, operated
or leased by the Company or its Restricted Subsidiaries in a
reportable quantity established by statute, ordinance, rule,
regulation or order; and
(v) no Hazardous Materials have been otherwise Released
at, on or under any site or facility now or previously owned,
operated or leased by the Company or its Restricted
Subsidiaries that would (either individually or in the
aggregate) have a Material Adverse Effect.
(c) Neither the Company nor any of its Restricted Subsidiaries
has transported or arranged for the transportation of any Hazardous
Material to any location that, on the date of this Agreement, is listed
on the National Priorities List ("NPL") under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), listed for possible inclusion on the NPL by the
Environmental Protection Agency in the Comprehensive Environmental
Response and Liability Information System, as provided for by 40 C.F.R.
Section 300.5 ("CERCLIS"), or on any similar state or local list or
that is the subject of Federal, state or local enforcement actions or
other investigations that may lead to Environmental Claims against the
Company, AGI or any of their respective Restricted Subsidiaries.
(d) Except for acid mine drainage ("AMD"), and the treatment
thereof, that is discharged pursuant to, and in compliance with, a
NPDES permit, no Hazardous Material generated by the Company or any of
its Restricted Subsidiaries has been recycled, treated, stored,
disposed of or Released by the Company or any of its Restricted
Subsidiaries at any location other than those listed in Schedule II
hereto or in the Environmental Report, and, to the knowledge of the
Company (and except as set forth on Schedule II hereto), any Hazardous
Material described on
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Schedule II hereto has been recycled, treated, stored, disposed of or
Released in accordance with all applicable Environmental Laws.
(e) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of the Company or any
of its Restricted Subsidiaries and no site or facility now or
previously owned, operated or leased by the Company or any of its
Restricted Subsidiaries is listed or proposed for listing on the NPL,
CERCLIS or any similar state list of sites requiring investigation or
clean-up.
(f) No Liens have arisen under or pursuant to any
Environmental Laws on any site or facility owned, operated or leased by
the Company or any of its Restricted Subsidiaries, and no government
action has been taken or is in process that could subject any such site
or facility to such Liens and neither the Company nor any of its
Restricted Subsidiaries would be required to place any notice or
restriction relating to the presence of Hazardous Materials at any site
or facility owned by it in any deed to the real property on which such
site or facility is located.
Prior to the date hereof, the AGI Companies cooperated fully with
representatives of the environmental consultant, Marshall Miller & Associates,
for the purpose of enabling said consultant to prepare the Environmental Report.
The documents provided, and the other statements made, to said consultant by
officers and employees of the AGI Companies in the course of the investigations
by said consultant resulting in such Environmental Report did not, to the
knowledge of the Company, include any untrue statements of material fact or omit
to state any material fact necessary to make the statements contained in such
documents, or such other statements, in light of the circumstances under which
they were made, not misleading at the time so furnished or made.
8.13 Capitalization. On the Effective Date:
(i) the authorized capital stock of the Company will consist
of an aggregate of 122,000 shares consisting of (v) 100,000 shares of
common stock, par value $.01 per share, of which 10,000 shares will be
duly and validly issued and outstanding, each of which issued and
outstanding shares will be fully paid and nonassessable, (w) 10,000
shares of ACGI Class A Preferred Stock, of which 10,000 shares will be
duly and validly issued and outstanding, each of which issued and
outstanding shares
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will be fully paid and nonassessable, (x) 10,000 shares of ACGI Class B
Preferred Stock, of which 10,000 shares will be duly and validly issued
and outstanding, each of which issued and outstanding shares will be
fully paid and nonassessable, (y) 1,000 shares of ACGI Class C
Preferred Stock, of which 1,000 shares will be duly and validly issued
and outstanding, each of which issued and outstanding shares will be
fully paid and nonassessable and (z) 1,000 shares of ACGI Class D
Preferred Stock, of which 1,000 shares will be duly and validly issued
and outstanding, each of which issued and outstanding shares will be
fully paid and nonassessable;
(ii) 54.07% of such issued and outstanding shares of common stock
of the Company will be owned beneficially and of record by funds
managed by First Reserve, 30.39% of such issued and outstanding shares
of common stock will be owned beneficially and of record by JJF Group
Limited Liability Company, 10.40% of such issued and outstanding shares
of common stock will be owned beneficially and of record by Anker
Holding, 5.14% of such issued and outstanding shares of common stock
will be owned beneficially and of record by PPK Group Limited Liability
Company, all of such issued and outstanding shares of ACGI Class A
Preferred Stock will be owned beneficially and of record by Anker
Holding, all of such issued and outstanding shares of ACGI Class B
Preferred Stock will be owned beneficially and of record by First
Reserve, all of such issued and outstanding shares of ACGI Class C
Preferred Stock will be owned beneficially and of record by Glenn
Springs Holdings, Inc., and all of such issued and outstanding shares
of ACGI Class D Preferred Stock will be owned beneficially and of
record by Glenn Springs Holdings, Inc.; and
(iii) (x) except for (1) the rights of the holders of the Company's
common stock as set forth in the Company's Certificate of Incorporation
and in the Stockholders Agreement, (2) the rights of the holders of
shares of ACGI's Class A Preferred Stock to convert such shares into
shares of the Company's common stock as set forth in the Certificate of
Designation and Preferences of such ACGI Class A Preferred Stock and in
the Stockholders Agreement, (3) rights to receive common stock of the
Company pursuant to the exercise of the Stock Purchase Warrant referred
to in clause (viii)(B) of the definition of "Acquisition" in Section
1.01 hereof and (4) rights of holders of the Company's common stock to
have such stock registered under the Securities Act of 1933, as
amended, pursuant to the
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Registration Rights Agreement referred to in clause (viii) of the
definition of "Acquisition Documents" in Section 1.01 hereof, there
will be no outstanding Equity Rights with respect to the Company and
(y) except for the obligations of the Company to redeem shares of ACGI
Class A Preferred Stock, ACGI Class B Preferred Stock and ACGI Class D
Preferred Stock, pursuant to the Certificate of Designation and
Preferences of each such class of preferred stock respectively and
pursuant to the Stockholders Agreement, there will be no outstanding
obligations of the Company or any of its Restricted Subsidiaries to
repurchase, redeem, or otherwise acquire any shares of capital stock of
the Company nor will there be any outstanding obligations of the
Company or any of its Restricted Subsidiaries to make payments to any
Person, such as "phantom stock" payments, where the amount thereof is
calculated with reference to the fair market value or equity value of
the Company or any of its Restricted Subsidiaries.
8.14 Subsidiaries, Etc.
(a) Set forth in Schedule III hereto is a complete and correct
list of all of the Subsidiaries of the Company as of the date hereof together
with, for each such Subsidiary, (i) the jurisdiction of organization of such
Subsidiary, (ii) each Person holding ownership interests in such Subsidiary and
(iii) the nature of the ownership interests held by each such Person and the
percentage of ownership of such Subsidiary represented by such ownership
interests. Except as disclosed in Schedule III hereto, (x) each of the Company
and its Subsidiaries owns, free and clear of Liens (other than Liens created
pursuant to the Security Documents), and has the unencumbered right to vote, all
outstanding ownership interests in each Person shown to be held by it in
Schedule III hereto, (y) all of the issued and outstanding capital stock of each
such Person organized as a corporation is validly issued, fully paid and
nonassessable and (z) there are no outstanding Equity Rights with respect to
such Person.
(b) None of the Restricted Subsidiaries of the Company is, on
the date hereof, subject to any indenture, agreement, instrument or other
arrangement of the type described in Section 9.17(c) hereof.
8.15 True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Company to the Administrative Agent or any Bank in connection with
the negotiation, preparation
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or delivery of this Agreement and the other Loan Documents or included herein or
therein or delivered pursuant hereto or thereto, when taken as a whole do not
contain any statement of material fact that is materially untrue or omit to
state any material fact necessary to make the statements herein or therein, in
light of the circumstances under which they were made, not materially
misleading. All written information furnished after the date hereof by the
Company and its Subsidiaries to the Administrative Agent and the Banks in
connection with this Agreement and the other Loan Documents and the transactions
contemplated hereby and thereby will be true, complete and accurate in every
material respect, or (in the case of projections) based on reasonable estimates,
on the date as of which such information is stated or certified. There is no
event or circumstance known to any Designated Officer the result of which could
be reasonably expected to have a Material Adverse Effect that has not been
disclosed herein, in the other Loan Documents or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to
the Banks for use in connection with the transactions contemplated hereby or
thereby.
8.16 Real Property. Schedules I and II of the Deeds of Trust
include legal descriptions of, or references to, all fee (Schedule I) and
leasehold (Schedule II) interests in real property located in the State of West
Virginia held by the Restricted Subsidiaries. The Company does not hereby
warrant, however, the adequacy of the legal descriptions of the fee and
leasehold interests set forth on Schedules I and II which are not included among
the Material Properties.
8.17 Solvency Analyses. The financial projections and
underlying assumptions contained in the analyses of Valuation Research
Corporation referred to in Section 7.01(l) of the Existing Credit Agreement were
at the time made, and on the Closing Date, fair and reasonable and accurately
computed.
8.18 Use of Credit. None of the Company nor any of its
Restricted Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying Margin Stock, and no
part of the proceeds of the Loans hereunder will be used to buy or carry any
Margin Stock.
8.19 Solvency. As of the date hereof (and after giving effect
thereto and to the other transactions contemplated hereby), (i) the aggregate
value of all Properties of the Company and its Restricted Subsidiaries at their
present fair saleable
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value (i.e., the amount that may be realized within a reasonable time,
considered to be six months to one year, either through collection or sale at
the regular market value, conceiving the latter as the amount that could be
obtained for the Property in question within such period by a capable and
diligent businessman from an interested buyer who is willing to purchase under
ordinary selling conditions), exceeds the amount of all the debts and
liabilities (including contingent, subordinated, unmatured and unliquidated
liabilities) of the Company and its Restricted Subsidiaries, (ii) the Company
and its Restricted Subsidiaries do not, on a consolidated basis, have
unreasonably small capital with which to conduct their business operations as
heretofore conducted and (iii) the Company and its Restricted Subsidiaries have,
on a consolidated basis, sufficient cash flow to enable them to pay their debts
as they mature.
8.20 Mobile Equipment. The value at which Mobile
Equipment is carried on the consolidated balance sheet of the
Company and its Restricted Subsidiaries as at the Effective Date
is approximately $7,600,000.
Section 9. Covenants of the Company. The Company covenants and
agrees with the Banks and the Administrative Agent that, so long as any
Commitment or Loan is outstanding and until payment in full of all amounts
payable by the Company hereunder, and except to the extent that the Majority
Banks otherwise consent:
9.01 Financial Statements Etc. The Company shall
deliver to the Administrative Agent (which the Administrative
Agent shall promptly deliver to each of the Banks):
(a) as soon as available and in any event within 30 days after
the end of each calendar month, consolidated statements of income,
retained earnings and cash flows of the Company and its Restricted
Subsidiaries for such month and for the period from the beginning of
the respective fiscal year to the end of such month, and the related
consolidated balance sheet of the Company and its Restricted
Subsidiaries as at the end of such month, setting forth in each case in
comparative form the corresponding consolidated figures for the
corresponding months in the Company's budget for such fiscal year,
accompanied by a certificate of a Responsible Officer, which
certificate shall state that said consolidated financial statements
fairly present the consolidated financial condition and results of
operations of the Company and its Restricted Subsidiaries in accordance
with generally accepted accounting principles, consistently
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applied, as at the end of, and for, such month (subject to
normal year-end audit adjustments);
(b) as soon as available and in any event within 45 days after
the end of each quarterly fiscal period of each fiscal year of the
Company, (i) a certificate of a Responsible Officer (x) to the effect
that no Default has occurred and is continuing (or, if any Default has
occurred and is continuing, describing the same in reasonable detail
and describing the action that the Company has taken or proposes to
take with respect thereto) and (y) setting forth in reasonable detail
the computations necessary to determine whether the Company is in
compliance with Sections 9.07(d), 9.08(h), 9.08(i), 9.09, 9.10, 9.11
and 9.13 hereof as of the end of the respective quarterly fiscal period
and (ii) a report as to the material changes to each coal sales
agreement, contract mining agreement and coal purchase agreement to
which the Company or any Restricted Subsidiary is a party, that has an
original term of at least three years and relates to at least 200,000
tons of coal per year;
(c) as soon as available and in any event within 120 days
after the end of each fiscal year of the Company, consolidated
statements of income, retained earnings and cash flows of the Company
and its Restricted Subsidiaries for such fiscal year and the related
consolidated balance sheet of the Company and its Restricted
Subsidiaries as at the end of such fiscal year, setting forth in each
case in comparative form the corresponding consolidated figures for the
Company's budget for such fiscal year, and accompanied by an opinion
thereon of independent certified public accountants of recognized
national standing, which opinion shall state that said consolidated
financial statements fairly present the consolidated financial
condition and results of operations of the Company and its Restricted
Subsidiaries as at the end of, and for, such fiscal year in accordance
with generally accepted accounting principles;
(d) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that the
Company shall have filed with the Securities and Exchange Commission
(or any governmental agency substituted therefor) or any national
securities exchange;
(e) at the request of each Bank through the Administrative
Agent (which in the cases of each of the following paragraphs (ii) and
(iii) may not be made more than once in any fiscal year of the
Company):
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(i) promptly upon the mailing thereof to the
shareholders of the Company generally, copies of all
financial statements, reports and proxy statements so
mailed;
(ii) promptly, a report in reasonable detail of the
measured recoverable coal reserves of the mines of the Company
and its Restricted Subsidiaries as at the last day of the most
recently ended fiscal quarter of the Company; and
(iii) promptly, a plan for each mine of the Company and its
Restricted Subsidiaries for each of the then next following
five years (or, the then remaining life of such mine, if
shorter);
(f) as soon as possible, and in any event within ten days
after the Company knows or has reason to believe that any of the events
or conditions specified below with respect to any Plan or Multiemployer
Plan has occurred or exists, a statement signed by a Responsible
Officer setting forth details respecting such event or condition and
the action, if any, that the Company or its ERISA Affiliate proposes to
take with respect thereto (and a copy of any report or notice required
to be filed with or given to the PBGC by the Company or an ERISA
Affiliate with respect to such event or condition):
(i) any reportable event, as defined in
Section 4043(c) of ERISA and the regulations issued
thereunder, with respect to a Plan, as to which the PBGC has
not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within 30 days of the occurrence of
such event (provided that a failure to meet the minimum
funding standard of Section 412 of the Code or Section 302 of
ERISA, including, without limitation, the failure to make on
or before its due date a required installment under Section
412(m) of the Code or Section 302(e) of ERISA, shall be a
reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code); and any request
for a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of
ERISA of a notice of intent to terminate any Plan or any
action taken by the Company or an ERISA Affiliate to terminate
any Plan;
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(iii) the institution by the PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by the Company or any ERISA Affiliate that
results in liability under Section 4201 or 4204 of ERISA
(including the obligation to satisfy secondary liability as a
result of a purchaser default) or the receipt by the Company
or any ERISA Affiliate of notice from a Multiemployer Plan
that it is in reorganization or insolvency pursuant to Section
4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a
fiduciary of any Multiemployer Plan against the Company or any
ERISA Affiliate to enforce Section 515 of ERISA, which
proceeding is not dismissed within 30 days; and
(vi) the adoption of an amendment to any Plan
that, pursuant to Section 401(a)(29) of the Code or Section
307 of ERISA, would result in the loss of tax-exempt status of
the trust of which such Plan is a part if the Company or an
ERISA Affiliate fails to timely provide security to the Plan
in accordance with the provisions of said Sections;
(g) as soon as available and in any event within 15 Business
Days after the end of each monthly accounting period (ending on the
last day of each calendar month), a Borrowing Base Certificate as at
the last day of such accounting period (it being understood and agreed
that the Company may from time to time at its option furnish Borrowing
Base Certificates more frequently for purposes of the last sentence of
Section 3.01(a) hereof and clause (c) of the first sentence of Section
7.02 hereof);
(h) (i) periodically at the request of the Majority Banks
(which may not be made more than once in any fiscal year of the
Company), a report of an independent collateral auditor (which may be,
or be affiliated with, one of the Banks) with respect to the
Receivables and Inventory components included in the Borrowing Base as
at the end of
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any monthly accounting period which report shall indicate that, based
upon a review by such auditors of the Receivables (including, without
limitation, verification with respect to the amount, aging, identity
and credit of the respective account debtors and the billing practices
of the Company and its Restricted Subsidiaries) and Inventory
(including, without limitation, verification as to the value, location
and respective types), the information set forth in the Borrowing Base
Certificate delivered by the Company as at the end of such accounting
period is accurate and complete in all material respects and (ii) at
the request of the Majority Banks (which may not be made more than
twice during the life of this Agreement, and not more than once during
any twenty-four month period), a report prepared at the expense of the
Company (the "Appraisal"), of an independent appraiser (which appraiser
shall be mutually acceptable to the Company and the Administrative
Agent) as to the aggregate value of all material portions of the
property, plant and equipment of the Company and its Restricted
Subsidiaries at their present fair saleable value as at such date.
(i) (i) promptly after the Company knows or has reason to
believe that any Default has occurred, a notice of such Default
describing the same in reasonable detail and, together with such notice
or as soon thereafter as possible, a description of the action that the
Company has taken or proposes to take with respect thereto; and (ii)
promptly after the Company knows or has reason to believe that any
representation, warranty or certification made or deemed made herein or
in any other Loan Document (or in any modification or supplement hereto
or thereto) by any Obligor, or any certificate furnished to any Bank or
the Administrative Agent pursuant to the provisions hereof or thereof,
was false or misleading as of the time made or furnished in any
material respect, a notice thereof describing the same in reasonable
detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Company has taken or
proposes to take with respect thereto;
(j) not later than 45 days prior to the first day of each
fiscal year of the Company, a draft budget for such fiscal year; and
(k) from time to time such other information regarding the
financial condition, operations, business or prospects of the Company
or any of its Subsidiaries (including,
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without limitation, any Plan or Multiemployer Plan and any reports or
other information required to be filed under ERISA) as any Bank may
reasonably request through the Administrative Agent.
9.02 Litigation. The Company will promptly give to the
Administrative Agent (which shall promptly furnish a copy thereof to each Bank)
notice of all legal or arbitral proceedings, and of all proceedings by or before
any governmental or regulatory authority or agency, and any material development
in respect of such legal or other proceedings, affecting the Company or any of
its Restricted Subsidiaries, except proceedings that, if adversely determined,
would not (either individually or in the aggregate) have a Material Adverse
Effect. Without limiting the generality of the foregoing, the Company will give
to the Administrative Agent (which shall promptly furnish a copy thereof to each
Bank) notice of the assertion of any environmental matter by any Person against,
or with respect to the activities of, the Company or any of its Restricted
Subsidiaries and notice of any alleged violation of or non-compliance with any
Environmental Laws or any permits, licenses or authorizations, other than any
environmental matter or alleged violation that, if adversely determined, would
not (either individually or in the aggregate) have a Material Adverse Effect.
9.03 Existence, Etc. The Company will, and will cause each of
its Restricted Subsidiaries to:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (provided that
nothing in this Section 9.03 shall prohibit any transaction expressly
permitted under Section 9.05 hereof);
(b) comply with the requirements of all applicable laws,
rules, regulations and orders of governmental or regulatory authorities
if failure to comply with such requirements could (either individually
or in the aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any
of its Property prior to the date on which penalties attach thereto,
except for any such tax, assessment, charge or levy the payment of
which is being contested in good faith and by proper proceedings or
against which adequate reserves are being maintained;
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provided that the Company shall maintain such reserves if and to the
extent required by GAAP and in accordance with prudent and customary
practices in the coal industry;
(d) maintain all of its Properties used or useful in
its business in good working order and condition, ordinary
wear and tear excepted;
(e) keep adequate records and books of account, in which
complete entries will be made in accordance with generally accepted
accounting principles consistently applied; and
(f) permit representatives of any Bank or the Administrative
Agent, upon not less than two Business Days' prior notice, during
normal business hours, to examine, copy and make extracts from its
books and records, to inspect any of its Properties, and to discuss its
business and affairs with its officers, all to the extent reasonably
requested by such Bank or the Administrative Agent (as the case may
be).
9.04 Insurance. The Company will, and will cause each of its
Restricted Subsidiaries to, maintain insurance with financially sound and
reputable insurance companies, and with respect to Property and risks of a
character usually maintained by corporations engaged in the same or similar
business similarly situated, against loss, damage and liability of the kinds and
in the amounts customarily maintained by such corporations.
Such insurance shall be written by financially responsible
companies selected by the Company and having an A. M. Best rating of "A" or
better and being in a financial size category of XIV or larger, or by other
companies acceptable to the Majority Banks, and (to the extent covering risk of
loss or damage to tangible property that constitutes collateral under any
Security Document) shall name the Administrative Agent as loss payee or as an
additional named insured as its interests may appear for the benefit of itself
and the Banks. Each policy referred to in this Section 9.04 shall provide that
it will not be canceled or reduced, or allowed to lapse without renewal, except
after not less than 30 days' notice to the Administrative Agent and shall also
provide that the interests of the Administrative Agent and the Banks shall not
be invalidated by any act or negligence of the Company or any Person having an
interest in any Property covered by a Deed of Trust or Deed of Trust Amendment
nor by occupancy or use of any such Property for purposes more hazardous than
permitted by such policy nor by any foreclosure or other proceedings relating to
such Property. The
<PAGE> 91
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Company will advise the Administrative Agent promptly of any policy
cancellation, reduction or amendment.
On or before the Effective Date, the Company will deliver to
the Administrative Agent certificates of insurance satisfactory to the
Administrative Agent evidencing the existence of all insurance required to be
maintained by the Company hereunder setting forth the respective coverages,
limits of liability, carrier, policy number and period of coverage (and
attaching copies of any policies or binders with respect to casualty insurance).
Thereafter, the Company will deliver to the Administrative Agent prompt notice
of the entering into of any binder for any new or renewal insurance policy. In
addition, the Company will not make any material modification to any of the
provisions of any policy with respect to casualty insurance without delivering
the original copy of the endorsement reflecting such modification to the
Administrative Agent. The Company will not obtain or carry separate insurance
concurrent in form or contributing in the event of loss with that required by
this Section 9.04 unless the Administrative Agent is the named insured
thereunder or the loss payee as provided herein. The Company will immediately
notify the Administrative Agent whenever any such separate insurance is obtained
and shall deliver to the Administrative Agent the certificates evidencing the
same.
Without limiting the obligations of the Company under the
foregoing provisions of this Section 9.04, in the event the Company shall fail
to maintain in full force and effect insurance as required by the foregoing
provisions of this Section 9.04, then the Administrative Agent may, but shall
have no obligation so to do, after not less than five Business Days' prior
notice to the Company procure insurance covering the interests of the Banks and
the Administrative Agent in such amounts and against such risks as the
Administrative Agent (or the Majority Banks) shall deem appropriate, and the
Company shall reimburse the Administrative Agent in respect of any premiums paid
by the Administrative Agent in respect thereof.
9.05 Prohibition of Fundamental Changes. The Company will not,
nor will it permit any of its Restricted Subsidiaries to, consummate any
transaction of merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution).
The Company will not, nor will it permit any of its Restricted
Subsidiaries to, acquire any business or Property from, or capital stock of, or
be a party to any acquisition of, any Person except for purchases of inventory
and other Property
<PAGE> 92
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to be sold or used in the ordinary course of business, leases of coal reserves
and surface entry rights in the ordinary course of business, Investments
permitted under Section 9.08 hereof and Capital Expenditures not prohibited
under Section 9.11 hereof and a Permitted Capital Expenditure.
The Company will not, nor will it permit any of its Restricted
Subsidiaries to, convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, any part of its business or Property,
whether now owned or hereafter acquired (including, without limitation,
receivables and leasehold interests, but excluding any transaction referred to
in any of clauses (i), (ii), (iii), (iv), (v) and (vi) of the definition of
"Disposition" in Section 1.01 hereof. Notwithstanding the foregoing provisions
of this Section 9.05:
(a) any Restricted Subsidiary of the Company may be merged or
consolidated with or into: (i) the Company if the Company shall be the
continuing or surviving corporation or (ii) any other such Restricted
Subsidiary; provided that (x) if any such transaction shall be between
a Restricted Subsidiary and a Wholly Owned Subsidiary that is a
Restricted Subsidiary, the Wholly Owned Subsidiary shall be the
continuing or surviving corporation and (y) if any such transaction
shall be between a Subsidiary Guarantor and a Subsidiary not a
Subsidiary Guarantor, and such Subsidiary Guarantor is not the
continuing or surviving corporation, then the continuing or surviving
corporation shall have assumed all of the obligations of such
Subsidiary Guarantor hereunder and under the other Loan Documents;
(b) any Restricted Subsidiary of the Company may sell, lease,
transfer or otherwise dispose of any or all of its Property (upon
voluntary liquidation or otherwise) to the Company or a Wholly Owned
Subsidiary of the Company that is a Restricted Subsidiary; provided
that if any such sale is by a Subsidiary Guarantor to a Restricted
Subsidiary of the Company not a Subsidiary Guarantor, then such
Restricted Subsidiary shall have assumed all of the obligations of such
Subsidiary Guarantor hereunder and under the other Loan Documents;
(c) the Company or any of its Restricted Subsidiaries may
transfer Eligible Properties to the Permitted Joint Venture; provided
that:
<PAGE> 93
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(i) such transfer is made before the first
anniversary of the Effective Date;
(ii) simultaneous with such transfer, the Company will
make the prepayments (and the Commitments will be reduced) as
provided by Section 2.10(d) hereof; and
(iii) no Event of Default exists at the time of
such transfer or would result therefrom; and
(d) the Company or any of its Restricted Subsidiaries may
consummate (i) the Hillman Acquisition, (ii) the Spruce Fork
Development and (iii) the Vindex Project.
9.06 Limitation on Liens. The Company will not, nor will it
permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to
exist any Lien upon any of its Property, whether now owned or hereafter
acquired, except:
(a) Liens created pursuant to the Loan Documents;
(b) Liens in existence on the date hereof and listed
in Part B of Schedule I hereto;
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings or against which adequate reserves
are being maintained on the books of the Company or the affected
Restricted Subsidiaries; provided that the Company shall, and, if
applicable, shall cause such Restricted Subsidiaries to, maintain such
reserves if and to the extent required by GAAP and in accordance with
prudent and customary practices in the coal industry;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business that are not overdue for a period of more than 30 days or that
are being contested in good faith and by appropriate proceedings or
against which adequate reserves are being maintained on the books of
the Company or the affected Restricted Subsidiaries; provided that the
Company shall, and, if applicable, shall cause such Restricted
Subsidiaries to, maintain such reserves if and to the extent required
by GAAP and in accordance with prudent and customary practices in the
coal industry; and Liens securing judgments but only to the extent for
an amount and
<PAGE> 94
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for a period not resulting in an Event of Default under Section 10(h)
hereof;
(e) pledges or deposits into the West Virginia Pneumoconiosis
Fund or under worker's compensation, unemployment insurance and other
social security legislation;
(f) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a
like nature incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of Property or minor imperfections in title
thereto that, in the aggregate, are not material in amount, and that do
not in any case materially detract from the value of the Property
subject thereto or interfere with the ordinary conduct of the business
of the Company or any of its Restricted Subsidiaries;
(h) Liens on Property of any corporation that becomes a
Restricted Subsidiary of the Company after the Closing Date, provided
that such Liens are in existence at the time such corporation becomes a
Restricted Subsidiary of the Company and were not created in
anticipation thereof; and
(i) Liens upon real and/or tangible personal Property acquired
after the Closing Date (by purchase, construction, lease or otherwise)
by the Company or any of its Restricted Subsidiaries, each of which
Liens was created solely for the purpose of securing Indebtedness or
royalty obligations representing, or incurred to finance, refinance or
refund, the cost (including the cost of construction or lease) of such
Property.
9.07 Indebtedness. The Company will not, nor will it permit
any of its Restricted Subsidiaries to, create, incur or suffer to exist any
Indebtedness except:
(a) Indebtedness to the Banks hereunder;
(b) Indebtedness outstanding on the date hereof and
listed in Part A of Schedule I hereto (excluding, however,
<PAGE> 95
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following the making of the initial Loans hereunder, the Indebtedness
to be repaid with the proceeds of such Loans, as indicated on said
Schedule I);
(c) obligations of the Company, contingent or otherwise, to
make reimbursements under letters of credit in an aggregate principal
or face amount not exceeding $1,000,000 at any time;
(d) Indebtedness of Restricted Subsidiaries of the Company to
the Company or to other Restricted Subsidiaries of the Company
evidenced by Intercompany Notes pledged to the Administrative Agent for
the benefit of the Banks under the Security Agreement (provided that
the aggregate principal amount of such Indebtedness owing by any one
Restricted Subsidiary shall not exceed $200,000,000 at any one time
outstanding, and the face amount of each Intercompany Note shall be
equal to $200,000,000);
(e) loans made by Restricted Subsidiaries of the Company to
the Company in the ordinary course of business that are short-term
advances that arise incidental to the cash management operations of the
Company and the Restricted Subsidiaries in the ordinary course of
business substantially as heretofore conducted;
(f) Indebtedness of the Company and its Restricted
Subsidiaries incurred solely in order to finance the acquisition of any
fixed or capital assets and any Indebtedness assumed in connection with
the acquisition of any such assets or secured by a Lien on such assets
prior to the acquisition thereof, and any extensions, renewals and
replacements of such indebtedness that do not increase the outstanding
principal amount thereof, in an amount not exceeding, as to the Company
and its Restricted Subsidiaries taken as a whole, $10,000,000 at any
one time outstanding; provided that the recourse of the holder of such
Indebtedness shall be expressly limited solely to the assets financed
with such Indebtedness and the holder of such Indebtedness shall have
expressly waived the benefit of Section 1111(b) of the Bankruptcy Code
in respect of such Indebtedness;
(g) Indebtedness of Spruce Fork Coal Company, Inc. to
Elkay Mining Co. outstanding on the First Amendment
Effective Date in the amount of approximately $1,900,000
incurred as a result of the acquisition of the Spruce Fork
Reserves;
<PAGE> 96
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(h) the Senior Notes;
(i) the Anker Group, Inc. Subordinated Guaranty; and
(j) additional Indebtedness not exceeding $1,000,000 at any
one time outstanding.
9.08 Investments. The Company will not, nor will it permit any
of its Restricted Subsidiaries to, make or permit to remain outstanding any
Investments except:
(a) Investments outstanding on the Closing Date;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by the Company and its Restricted Subsidiaries
in the Company and its Restricted Subsidiaries, except that neither the
Company nor any of its Restricted Subsidiaries may make Investments in
Anker Capital after the date hereof (it being understood and agreed
that nothing contained in this Section 9.08 shall be deemed to limit
Anker Capital from using its capital in its business operations);
(e) Interest Rate Protection Agreements entered into as bona
fide hedges against fluctuations in interest rates applicable to
Indebtedness of the Company and its Restricted Subsidiaries and not for
speculative purposes;
(f) an equity interest in the Permitted Joint Venture
in exchange for a transfer of some or all of the Eligible
Properties permitted by Section 9.05(c) hereof;
(g) Investments made in cash in Unrestricted Subsidiaries and
in the Permitted Joint Venture, provided that the amount thereof made
at any time may not exceed the Available Supplemental Amount at such
time;
(h) loans made in the ordinary course of business in
an aggregate amount not exceeding $3,000,000 at any one time
outstanding;
(i) Guarantees constituting agreements to perform reclamation
obligations of Unrestricted Subsidiaries and to reimburse or indemnify
the issuers of reclamation bonds covering reclamation obligations of
Unrestricted
<PAGE> 97
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Subsidiaries for expenditures thereunder; provided that the aggregate
amount payable under all such Guarantees may not at any one time exceed
$2,500,000;
(j) a contribution to Summit Energy Group, LLC ("Summit") of
$500,000 made by Patriot Mining Company, Inc. prior to September 1,
1997 in the form of a prepaid advance minimum royalty on a lease that
was subleased to Summit, and loans to Summit in an aggregate principal
amount not exceeding $400,000 at any one time outstanding; and
(k) after such time, if any, that The Sycamore Group, LLC
("Sycamore") ceases to be a Subsidiary of the Company by reason of its
issuance of equity to the Sycamore Partner as permitted by Section
9.17(b) hereof, Investments in Sycamore in an aggregate amount
(including all Investments made prior to such time, but excluding
Sycamore Creek reserves held by Sycamore at such time) not exceeding
$2,500,000 to enable Sycamore to develop the Sycamore Creek reserves.
9.09 Dividend Payments. The Company will not, nor will it
permit any of its Restricted Subsidiaries to, declare or make any Dividend
Payment at any time, except for (i) Dividend Payments paid in cash on ACGI Class
C Preferred Stock and ACGI Class D Preferred Stock in accordance with the terms
thereof as in effect on the Effective Date; (ii) redemptions for cash of equity
interests of the Company referred to in clause (v) of the proviso contained in
the definition of "Equity Issuance" in Section 1.01 hereof made in connection
with the termination (for any reason) of employment by the Company of the
respective employees holding the same, provided that the aggregate amount of
Dividend Payments made pursuant to this clause (ii) shall not exceed $1,000,000
in any fiscal year of the Company; (iii) in the event of death of John J. Faltis
or P. Bruce Sparks, the repurchase or redemption of the decedent's capital stock
in the Company from the decedent's estate, heirs or legatees or any Person
controlled by the decedent immediately prior to his death and included in the
definition of "Controlling Shareholder" in Section 1.01 above provided that the
same is paid for solely with the proceeds of life insurance in excess of the
cash surrender value thereof immediately prior to his death and the premiums for
which were funded in the ordinary course of business; (iv) if no Event of
Default exists or would result therefrom, dividends paid in cash on the ACGI
Class A Preferred Stock after the fifth anniversary of the Closing Date in
accordance with the terms thereof as in effect on the Closing Date, provided
that the Fixed Charges Ratio (calculated as at the last day of the fiscal
<PAGE> 98
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quarter of the Company ending on or most recently ended prior to the date of the
respective dividend on a pro forma basis taking into account the payment of such
dividend) shall be greater than 1.25 to 1 and (v) if no Event of Default exists
or would result therefrom, the purchase by the Company, in an amount not to
exceed $3,000,000 in the aggregate after the Effective Date, of its common stock
issued by the Company to employees of the Company pursuant to the Anker Coal
Group, Inc. 1997 Omnibus Stock Incentive Plan in accordance with the call and
right of first refusal rights set forth in (x) Article XI of the Anker Coal
Group, Inc. 1997 Omnibus Stock Incentive Plan, (y) Article 5 of the Anker Coal
Group, Inc. Stock Option Grant Agreement and (z) Section 5 and Section 6 of the
Anker Coal Group, Inc. Restricted Stock Award Agreement. Nothing herein shall be
deemed to prohibit the payment of dividends by any Restricted Subsidiary of the
Company to the Company or to any other Restricted Subsidiary of the Company.
9.10 Certain Financial Covenants.
(a) Net Leverage Ratio. The Company will not permit the Net
Leverage Ratio on any date to exceed the ratio set forth below opposite the
period during which such date falls:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Effective Date
through September 30, 1998 5.90 to 1
From October 1, 1998
through December 31, 1998 5.75 to 1
From January 1, 1999
through December 31, 1999 5.50 to 1
From January 1, 2000
through December 31, 2000 4.75 to 1
From January 1, 2001
through December 31, 2001 4.50 to 1
From January 1, 2002
through December 31, 2002 4.25 to 1
Thereafter 4.00 to 1
</TABLE>
<PAGE> 99
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(b) Net Interest Coverage Ratio. The Company will not permit
the Net Interest Coverage Ratio on any date to be less than the ratio set forth
below opposite the period during which such date falls:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Effective Date
through September 30, 1999 2.00 to 1
From October 1, 1999
through September 30, 2000 2.35 to 1
From October 1, 2000
through September 30, 2001 2.50 to 1
From October 1, 2001
through December 31, 2001 2.75 to 1
Thereafter 3.00 to 1
</TABLE>
(c) Shareholders' Equity. The Company shall not permit
Shareholders' Equity on any date falling on or after the Effective Date to be
less than the sum of $70,000,000 plus 50% of consolidated net income for the
Company and its Restricted Subsidiaries (calculated on a consolidated basis in
accordance with GAAP) for each Relevant Quarter (as defined below) ending on or
most recently prior to such date. For purposes hereof, a "Relevant Quarter"
shall mean a fiscal quarter of the Company ending after the Closing Date for
which the consolidated net income for the Company and its Restricted
Subsidiaries (calculated on a consolidated basis in accordance with GAAP) is
greater than zero.
9.11 Capital Expenditures. The Company will not permit Capital
Expenditures for the purchase and development of any reserves acquired after the
Effective Date to exceed $15,000,000 in the aggregate for any single project
(other than Big Creek (a "Permitted Capital Expenditure")).
9.12 Interest Rate Protection Agreements.
[Intentionally omitted].
9.13 Operating Leases. [Intentionally omitted].
9.14 Lines of Business. The Company will not, nor
will it permit any of its Restricted Subsidiaries to, engage to
any substantial extent in any line or lines of business activity
<PAGE> 100
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other than (i) coal producing, coal mining, coal brokering or mine development,
or (ii) any business that is reasonably similar thereto or a reasonable
extension, development or expansion thereof or ancillary thereto (including Ash
disposal, gas and power marketing, and/or environmental remediation), provided
that the businesses referred to in this clause (ii) shall not constitute a
material portion of the business of the Company and its Restricted Subsidiaries.
9.15 Transactions with Affiliates. Except as expressly permitted by
this Agreement, the Company will not, nor will it permit any of its Restricted
Subsidiaries to, directly or indirectly: (a) make any Investment in an
Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
Property to an Affiliate; (c) merge into or consolidate with or purchase or
acquire Property from an Affiliate; or (d) enter into any other transaction
directly or indirectly with or for the benefit of an Affiliate (including,
without limitation, Guarantees and assumptions of obligations of an Affiliate);
provided that (x) any Affiliate who is an individual may serve as a director,
officer or employee of the Company or any of its Restricted Subsidiaries and
receive reasonable compensation for his or her services in such capacity, (y)
the Company and its Restricted Subsidiaries may enter into transactions (other
than extensions of credit by the Company or any of its Restricted Subsidiaries
to an Affiliate) providing for the leasing of Property, the rendering or receipt
of services or the purchase or sale of inventory and other Property in the
ordinary course of business if the monetary or business consideration arising
therefrom would be substantially as advantageous to the Company and its
Restricted Subsidiaries as the monetary or business consideration that would
obtain in a comparable transaction with a Person not an Affiliate and (z) the
Company and its Restricted Subsidiaries may enter into or consummate any
transaction with an Affiliate to the extent expressly contemplated by the
Acquisition Documents.
9.16 Use of Proceeds. The Company will use the proceeds of the Loans
hereunder solely for working capital and for other general corporate purposes
(in compliance with all applicable legal and regulatory requirements); provided
that neither the Administrative Agent nor any Bank shall have any responsibility
as to the use of any of such proceeds.
9.17 Certain Obligations Respecting Restricted Subsidiaries.
<PAGE> 101
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(a) Subsidiary Guarantors. In the event that the Company or any of
its Restricted Subsidiaries shall form or acquire any new Restricted Subsidiary
that the Company or the respective Restricted Subsidiary anticipates will not be
an Inactive Subsidiary (or, in the event that any Inactive Subsidiary shall
cease to be an Inactive Subsidiary), the Company will cause such new Restricted
Subsidiary (or such Inactive Subsidiary that ceases to be an Inactive
Subsidiary) to become a "Subsidiary Guarantor" (and, thereby, an "Obligor")
hereunder, and to pledge and grant a security interest in its Property to the
Administrative Agent for the benefit of the Banks pursuant to a Joinder
Agreement and to deliver such proof of corporate action, incumbency of officers,
opinions of counsel and other documents as is consistent with those delivered by
each "Obligor" pursuant to Section 7.01 of the Existing Credit Agreement upon
the Closing Date or as the Administrative Agent shall have requested.
(b) Ownership of Restricted Subsidiaries. The Company will, and will
cause each of its Restricted Subsidiaries to, take such action from time to time
as shall be necessary to ensure that the Company and each of its Restricted
Subsidiaries at all times owns (subject only to the Lien of the Security
Agreement) at least the same percentage of the issued and outstanding shares of
each class of stock of each of its Restricted Subsidiaries as is owned on the
date hereof, except that Sycamore may issue up to 50% of its equity to Emily
Gibson Coal Company, Inc. or an Affiliate of David Maynard (the "Sycamore
Partner"), provided that, at the time of such issuance, (i) such Sycamore
Partner agrees to pay or contribute at least 50% of the development costs for
the Sycamore Creek reserves, including, without limitation, the provision of
mining equipment necessary to mine the Sycamore Creek reserves, (ii) the sole
Properties of Sycamore are a portion of the Sycamore Creek reserves containing
approximately 6,000,000 tons of Pittsburgh seam coal reserves, and improvements,
machinery and equipment incidental to the development and mining of such
reserves, and (iii) Investments in Sycamore made by the Company and its
Restricted Subsidiaries (excluding such reserves) do not exceed $2,500,000. In
the event that any additional shares of stock shall be issued by any Restricted
Subsidiary to any Obligor, the respective Obligor agrees forthwith to deliver to
the Administrative Agent pursuant to the Security Agreement the certificates
evidencing such shares of stock, accompanied by undated stock powers executed in
blank and to take such other action as the Administrative Agent shall request to
perfect the security interest created therein pursuant to the Security
Agreement.
(c) Certain Restrictions. The Company will not permit any of its
Restricted Subsidiaries to enter into, after the date hereof, any indenture,
agreement, instrument or other arrangement
<PAGE> 102
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that, directly or indirectly, prohibits or restrains, or has the effect of
prohibiting or restraining, or imposes materially adverse conditions upon, the
incurrence or payment of Indebtedness, the granting of Liens, the declaration or
payment of dividends, the making of loans, advances or Investments or the sale,
assignment, transfer or other disposition of Property, except for any
prohibition or restraint as to the granting of Liens on, or sales, assignments,
transfers or other dispositions of, Property that is covered by a Lien in favor
of any other Person (except for the Company or any of its Subsidiaries or
Affiliates) permitted by Section 9.06 hereof or that is the subject of or
evidenced by a lease with any Person (except for the Company or any of its
Subsidiaries).
9.18 Modifications of Certain Documents. The Company will not, and
will not permit any of its Restricted Subsidiaries to, consent to any
modification, supplement or waiver of any of the provisions of any Employment
Agreement, the Acquisition Documents, the Senior Note Documents, the Preferred
Stock, the certificate of incorporation of the Company or its Restricted
Subsidiaries or any Intercompany Note without the prior consent of the
Administrative Agent (with the approval of the Majority Banks); provided, that
no such consent shall be required for modifications or supplements of a
technical or conforming nature so long as the Company gives the Administrative
Agent prior notice thereof.
9.19 Holding Company. Notwithstanding anything contained herein to
the contrary, the Company will conduct the material business of the Company and
its Restricted Subsidiaries through its Restricted Subsidiaries, will not itself
own any material Properties other than the capital stock of Unrestricted
Subsidiaries, and will not itself be a party to any material contract (other
than the Basic Documents, the Senior Note Documents, guarantees of obligations
of the Restricted Subsidiaries and indemnities on behalf of the Restricted
Subsidiaries) that is necessary or desirable for the operation of such business
or for the ownership by its Restricted Subsidiaries of their respective
Properties.
9.20 Newly-Acquired Real Property. The Company shall (i) notify the
Administrative Agent (which shall promptly notify each Bank) with respect to any
interest acquired by the Company or any of its Restricted Subsidiaries in any
real estate after the date hereof (including, without limitation, by the
acquisition of a Restricted Subsidiary that owns any such interest but excluding
the acquisition of any interest in coal reserves where the consideration paid or
delivered in exchange therefor is or has a value less than $250,000) not less
than three Business Days after such acquisition and (ii) not later
<PAGE> 103
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than 60 days after any request by the Administrative Agent or the Majority
Banks:
(w) cause such interest to be mortgaged to the Administrative Agent
by the owner thereof (as security for their respective obligations under
the Loan Documents) pursuant to a mortgage, deed of trust or similar
instrument in form and substance satisfactory to the Administrative Agent
in its reasonable judgment, provided that any such interest consisting of
a leasehold shall not be required to be so mortgaged if such mortgage
would be prohibited by the terms of the relevant lease and the landlord
shall not have consented to such mortgage;
(x) in the case of leases under which such owner is lessee, use its
commercially reasonable efforts to cause the respective landlords to
execute such estoppel agreements, cause memoranda of such leases to be
recorded in the appropriate county land offices and take such other action
as the Administrative Agent may reasonably request to ensure that such
leases are "mortgageable", as determined by the Administrative Agent in
its reasonable judgment, but excluding in all cases actions that would be
inconsistent with customary practices in the coal industry;
(y) cause to be prepared, and issued to the Administrative Agent, a
title report (which may be prepared by employees of the Company or any of
its Subsidiaries) as to such interest if and to the extent consistent with
prudent and customary industry standards; and
(z) cause to be executed and delivered to the Administrative Agent
such other documentation as the Administrative Agent may reasonably
request in connection therewith, including, without limitation, Uniform
Commercial Code financing statements, environmental assessments (which may
be prepared by employees of the Company or any of its Subsidiaries),
certified corporate resolutions and other corporate documents of the
mortgagor and favorable opinions of counsel to the mortgagor (which may be
rendered by in-house counsel of the Company and shall cover, among other
things, the legality, validity, binding effect and enforceability of such
mortgage, subject to customary exceptions) reasonably satisfactory to the
Administrative Agent.
9.21 Certain Consents. [Intentionally omitted].
9.22 Senior Notes. The Company will not, and will not permit any of
its Subsidiaries to pay, prepay, purchase or redeem any principal of or interest
on the Senior Notes except that the
<PAGE> 104
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Company may make any required payment or required prepayment of the Senior
Notes.
9.23 Certain Obligations Under Acquisition Documents. The Company
will not pay in cash (or by the delivery of other Property or obligations, other
than common stock of the Company) any obligation under any Acquisition Document
if such obligation may be satisfied by the issuance by the Company of common
stock.
Section 10. Events of Default. If one or more of the following
events (herein called "Events of Default") shall occur and be continuing:
(a) The Company shall: (i) default in the payment of any principal
of any Loan when due (whether at stated maturity or at mandatory or
optional prepayment); or (ii) default in the payment of any interest on
any Loan, any fee or any other amount payable by it hereunder or under any
other Loan Document when due and such default shall have continued
unremedied for three Business Days; or
(b) Any Obligor shall default in the payment when due of any
principal of or interest on any of its other Indebtedness aggregating
$1,000,000 or more, and any grace period with respect thereto (as
originally in effect, with regard to any extension thereof) shall have
expired; or any event specified in any note, agreement, indenture or other
document evidencing or relating to any such Indebtedness (including,
without limitation, a "Change of Control" under and as defined in the
Senior Note Indenture) shall occur if the effect of such event is to
cause, or to permit the holder or holders of such Indebtedness (or a
trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise), prior to its stated
maturity, and any grace period with respect thereto (as originally in
effect, with regard to any extension thereof) shall have expired; or any
Obligor shall default in the payment when due of any amount aggregating
$100,000 or more under any Interest Rate Protection Agreement, and any
grace period with respect thereto (as originally in effect, with regard to
any extension thereof) shall have expired; or any event specified in any
Interest Rate Protection Agreement shall occur if the effect of such event
is to cause, or to permit, termination or liquidation payment or payments
aggregating $1,000,000 or more to become due, and any grace period with
respect thereto (as originally in effect, with regard to any extension
thereof) shall have expired; or
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(c) Any representation, warranty or certification made or deemed
made herein or in any other Loan Document (or in any modification or
supplement hereto or thereto) by any Obligor, or any certificate furnished
to any Bank or the Administrative Agent pursuant to the provisions hereof
or thereof, shall prove to have been false or misleading as of the time
made or furnished in any material respect, and the underlying event or
circumstances causing such representation, warranty, certification or
certificate to be so false or misleading shall continue unremedied for a
period of thirty or more days after notice thereof to the Company by the
Administrative Agent or any Bank (through the Administrative Agent) (it
being understood and agreed that the correction of such representation,
warranty, certification or certificate, or the correction of any
misstatement or omission made in connection with Section 8.15 hereof shall
not be deemed to constitute a remedy of such underlying event or
circumstances); or
(d) The Company shall default in the performance of its obligations
under Section 9.01(i); or any Obligor shall default in the performance of
any of its other obligations in this Agreement or any other Loan Document
and such default shall continue unremedied for a period of thirty or more
days after notice thereof to the Company by the Administrative Agent or
any Bank (through the Administrative Agent); or
(e) Any Obligor shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) Any Obligor shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of itself or of all or a substantial part of its
Property, (ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the Bankruptcy Code, (iv) file a
petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement or winding-up, or composition or readjustment of debts, (v)
fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the
Bankruptcy Code or (vi) take any corporate action for the purpose of
effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of any Obligor, in any court of competent jurisdiction, seeking
(i) its reorganization, liquidation, dissolution, arrangement or
winding-up, or the
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composition or readjustment of its debts, (ii) the appointment of a
receiver, custodian, trustee, examiner, liquidator or the like of such
Obligor or of all or any substantial part of its Property or (iii) similar
relief in respect of such Obligor under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed, or an
order, judgment or decree approving or ordering any of the foregoing shall
be entered and continue unstayed and in effect, for a period of 60 or more
days; or an order for relief against such Obligor shall be entered in an
involuntary case under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money of
$1,000,000 or more in the aggregate shall be rendered by one or more
courts, administrative tribunals or other bodies having jurisdiction
against any Obligor and the same shall not be discharged (or provision
shall not be made for such discharge), or a stay of execution thereof
shall not be procured, within 60 days from the date of entry thereof and
the relevant Obligor shall not, within said period of 60 days, or such
longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
(i) An event or condition specified in Section 9.01(f) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, any Obligor or any ERISA Affiliate shall incur or in the
opinion of the Majority Banks shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan or the PBGC (or any combination
of the foregoing) that, in the determination of the Majority Banks, would
(either individually or in the aggregate) have a Material Adverse Effect;
or
(j) An assertion shall be made by any Person in any court proceeding
or by any governmental authority or agency against any Obligor, or any
predecessor in interest of any Obligor or Affiliates, of (or there shall
have been asserted against any Obligor) any claims or liabilities, whether
accrued, absolute or contingent, based on or arising from the generation,
storage, transport, handling or disposal of Hazardous Materials by any
Obligor, Affiliates or predecessors that is reasonably likely to be
determined adversely to any Obligor, and the amount thereof (either
individually or in the aggregate) is reasonably likely to have a Material
Adverse Effect (insofar as such amount is
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payable by any Obligor but after deducting any portion thereof that is
reasonably expected to be paid by other creditworthy Persons jointly and
severally liable therefor); or
(k) A Change of Control shall occur and, if the same is the result
of the death or incapacity of John J. Faltis or P. Bruce Sparks, an
individual with equivalent knowledge, experience and reputation in the
coal industry is not appointed to replace him in his position with the
Company within 180 days; or
(l) The Liens created by the Security Documents shall at any time
not constitute a valid and perfected Lien on any material portion of the
collateral intended to be covered thereby (to the extent perfection by
filing, registration, recordation or possession is required herein or
therein) in favor of the Administrative Agent, free and clear of all other
Liens (other than Liens permitted under Section 9.06 hereof or under the
respective Security Documents), or, except for expiration in accordance
with its terms, any of the Security Documents, or the Guarantee by any
Subsidiary Guarantor set forth in Section 6 hereof, shall for whatever
reason be terminated or cease to be in full force and effect in any
material respect, or the enforceability thereof shall be contested by any
Obligor;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 10 with respect to any Obligor, the
Administrative Agent shall, if so requested by the Majority Banks, by notice to
the Company, terminate the Commitments and/or declare the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts
payable by the Obligors hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05 hereof) to be forthwith due
and payable, whereupon such amounts shall be immediately due and payable without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by each Obligor; and (2) in the case of the occurrence
of an Event of Default referred to in clause (f) or (g) of this Section 10 with
respect to any Obligor, the Commitments shall automatically be terminated and
the principal amount then outstanding of, and the accrued interest on, the Loans
and all other amounts payable by the Obligors hereunder and under the Notes
(including, without limitation, any amounts payable under Section 5.05 hereof)
shall automatically become immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by each Obligor.
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Section 11. The Administrative Agent.
11.01 Appointment, Powers and Immunities. Each Bank hereby appoints
and authorizes the Administrative Agent to act as its agent hereunder and under
the other Loan Documents with such powers as are specifically delegated to the
Administrative Agent by the terms of this Agreement and of the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent (which term as used in this sentence and in Section
11.05 and the first sentence of Section 11.06 hereof shall include reference to
its affiliates and its own and its affiliates' officers, directors, employees
and agents):
(a) shall have no duties or responsibilities except those expressly
set forth in this Agreement and in the other Loan Documents, and shall not
by reason of this Agreement or any other Loan Document be a trustee for
any Bank;
(b) shall not be responsible to the Banks for any recitals,
statements, representations or warranties contained in this Agreement or
in any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Note or any other Loan Document or any other document
referred to or provided for herein or therein or for any failure by the
Company or any other Person to perform any of its obligations hereunder or
thereunder;
(c) shall not, except to the extent expressly instructed by the
Majority Banks with respect to collateral security under the Security
Documents, be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Loan Document; and
(d) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other Loan Document or under any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or
willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Administrative Agent may
deem and treat the payee of a Note as the holder thereof for all purposes hereof
unless and until a notice of the assignment or transfer thereof shall have
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been filed with the Administrative Agent, together with the consent of the
Company to such assignment or transfer (to the extent required by Section
12.06(b) hereof).
11.02 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telegram or
cable) reasonably believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel, independent accountants and other experts
selected by the Administrative Agent. As to any matters not expressly provided
for by this Agreement or any other Loan Document, the Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by the Majority
Banks or all of the Banks as is required in such circumstance, and such
instructions of such Banks and any action taken or failure to act pursuant
thereto shall be binding on all of the Banks.
11.03 Defaults. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Bank or the Company specifying such Default and
stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Banks. The
Administrative Agent shall (subject to Section 11.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Banks,
provided that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interest of the Banks except to
the extent that this Agreement expressly requires that such action be taken, or
not be taken, only with the consent or upon the authorization of the Majority
Banks or all of the Banks.
11.04 Rights as a Bank. With respect to its Commitments and the
Loans made by it, Chase (and any successor acting as Administrative Agent) in
its capacity as a Bank hereunder shall have the same rights and powers hereunder
as any other Bank and may exercise the same as though it were not acting as the
Administrative Agent, and the term "Bank" or "Banks" shall, unless the context
otherwise indicates, include the Administrative Agent in its individual
capacity. Chase (and any successor acting as Administrative Agent) and its
affiliates may (without having to account therefor to any Bank) accept deposits
from, lend money to, make investments in and generally engage in
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any kind of banking, trust or other business with the Obligors (and any of their
Subsidiaries or Affiliates) as if it were not acting as the Administrative
Agent, and Chase (and any such successor) and its affiliates may accept fees and
other consideration from the Obligors for services in connection with this
Agreement or otherwise without having to account for the same to the Banks.
11.05 Indemnification. The Banks agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 12.03 hereof,
but without limiting the obligations of the Company under said Section 12.03)
ratably in accordance with the aggregate principal amount of the Loans held by
the Banks (or, if no Loans are at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be imposed on, incurred
by or asserted against the Administrative Agent in its capacity as such
(including by any Bank) arising out of or by reason of any investigation in or
in any way relating to or arising out of this Agreement or any other Loan
Document or any other documents contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby (including, without
limitation, the costs and expenses that the Company is obligated to pay under
Section 12.03 hereof, but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to the performance
of its agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided that no Bank shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified.
11.06 Non-Reliance on Administrative Agent and Other Banks. Each
Bank agrees that it has, independently and without reliance on the
Administrative Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Company and its Subsidiaries and decision to enter into this Agreement and that
it will, independently and without reliance upon the Administrative Agent or any
other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or under any other Loan
Document. The Administrative Agent shall not be required to keep itself informed
as to the performance or observance by any Obligor of this Agreement or any of
the other Loan Documents or any other document referred to or provided for
herein or therein or to inspect the Properties or books of the Company or any of
its Subsidiaries. Except for notices, reports and other documents and
information expressly
<PAGE> 111
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required to be furnished to the Banks by the Administrative Agent hereunder or
under the Security Documents, the Administrative Agent shall not have any duty
or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Company or any of
its Subsidiaries (or any of their affiliates) that may come into the possession
of the Administrative Agent or any of its affiliates.
11.07 Failure to Act. Except for action expressly required of the
Administrative Agent hereunder and under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Banks of their indemnification
obligations under Section 11.05 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
11.08 Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, (i) the Administrative Agent may resign at any time by giving not less
than thirty days' prior notice thereof to the Banks and the Company, (ii) the
Administrative Agent may be removed at any time with or without cause by the
Majority Banks and (iii) if the Person that serves as the Administrative Agent
is not, in its individual capacity a Bank, the Administrative Agent may be
removed by the Company. Upon any such resignation or removal, the Majority Banks
shall have the right to appoint a successor Administrative Agent; except that in
the case of clause (iii) of the preceding sentence, the Company shall have the
right to appoint a successor Administrative Agent that is acceptable to the
Majority Banks. If no successor Administrative Agent shall have been so
appointed and shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Banks' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent, that shall be a bank that has an office in New York, New
York. Upon the acceptance of any appointment as Administrative Agent hereunder
by a successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Section 11 shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Administrative Agent.
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Section 12. Miscellaneous.
12.01 Waiver. No failure on the part of the Administrative Agent or
any Bank to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Note preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
12.02 Notices. All notices, requests and other communications
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers, requests or consents under, this
Agreement) shall be given or made in writing (including, without limitation, by
telecopy) or (in the case of notices of borrowings of Revolving Credit Loans) by
telephone confirmed promptly by telecopy, and delivered to the intended
recipient at the "Address for Notices" specified below its name on the signature
pages hereof (below the name of the Company, in the case of any Subsidiary
Guarantor); or, as to any party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
12.03 Expenses, Etc. The Company agrees to pay or reimburse each of
the Banks and the Administrative Agent for: (a) all reasonable out-of-pocket
costs and expenses of the Administrative Agent (including, without limitation,
the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New
York counsel to Chase) in connection with (i) the negotiation, preparation,
execution and delivery of this Agreement and the other Loan Documents and the
extension of credit hereunder and any filing, registration, recording or
perfection of any security interest contemplated by any Security Document or any
other document referred to therein, (ii) the negotiation or preparation of any
modification, supplement or waiver of any of the terms of this Agreement or any
of the other Loan Documents (whether or not consummated) and (iii) the release
or termination of any filing, registration, recording or perfection of any
security interest contemplated by any Security Document or any other document
referred to therein; (b) all reasonable out-of-pocket costs and expenses of the
Banks and the Administrative Agent (including, without limitation, the fees and
expenses of legal counsel) in connection with (i) any Default and
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any enforcement or collection proceedings resulting therefrom, including,
without limitation, all manner of participation in or other involvement with (x)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 12.03; and (c) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority (other than any such authority outside the United States of
America if such taxes, assessments or changes are levied solely by reason of the
status of any Bank that is not a U.S. Person) in respect of this Agreement or
any of the other Loan Documents or any other document referred to herein or
therein and all costs, expenses, taxes, assessments and other charges incurred
in connection with any filing, registration, recording or perfection of any
security interest contemplated by any Security Document or any other document
referred to therein.
The Company hereby agrees to indemnify the Administrative Agent and
each Bank and their respective directors, officers, employees, attorneys and
agents from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by any of them (including,
without limitation, any and all losses, liabilities, claims, damages or expenses
incurred by the Administrative Agent to any Bank, whether or not the
Administrative Agent or any Bank is a party thereto) arising out of or by reason
of any investigation or litigation or other proceedings (including any
threatened investigation or litigation or other proceedings) relating to the
extensions of credit hereunder or any actual or proposed use by the Company or
any of its Subsidiaries of the proceeds of any of the extensions of credit
hereunder, including, without limitation, the reasonable fees and disbursements
of counsel incurred in connection with any such investigation or litigation or
other proceedings (but excluding any such losses, liabilities, claims, damages
or expenses incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified). Without limiting the generality of the foregoing,
the Company will indemnify the Administrative Agent and each Bank from, and hold
the Administrative Agent and each Bank harmless against, any losses,
liabilities, claims, damages or expenses described in the preceding sentence
(including any Lien filed against any Property covered by a Deed of Trust(s) or
Deed of Trust Amendment(s) in favor of any governmental entity, but excluding,
as provided in the preceding sentence, any loss, liability, claim, damage or
expense incurred by reason of the gross negligence or willful misconduct of the
Person to be indemnified) arising under any Environmental Law as a result of the
past, present or future operations of the Company or any of
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its Subsidiaries (or any predecessor in interest to the Company or any of its
Subsidiaries), or the past, present or future condition of any site or facility
owned, operated or leased at any time by the Company or any of its Subsidiaries
(or any such predecessor in interest), or any Release or threatened Release of
any Hazardous Materials at or from any such site or facility, excluding any such
Release or threatened Release that shall occur during any period when the
Administrative Agent or any Bank or its or their agent or agents shall be in
possession of any such site or facility following the exercise by the
Administrative Agent or any Bank of any of its rights and remedies hereunder or
under any of the Security Documents, but including any such Release or
threatened Release occurring during such period that is a continuation of
conditions previously in existence, or of practices employed by the Company and
its Subsidiaries, at such site or facility.
12.04 Amendments, Etc.
(a) Except as otherwise expressly provided in this Agreement, any
provision of this Agreement may be modified or supplemented only by an
instrument in writing signed by the Company and the Majority Banks, or by the
Company and the Administrative Agent acting with the consent of the Majority
Banks, and any provision of this Agreement may be waived by the Majority Banks
or by the Administrative Agent acting with the consent of the Majority Banks;
provided that: (i) no modification, supplement or waiver shall, unless by an
instrument signed by all of the Banks or by the Administrative Agent acting with
the consent of all of the Banks: (A) extend the time or waive any requirement
for the reduction or termination of any of the Commitments, (B) extend the date
fixed for the payment of principal of or interest on any Loan or any fee
hereunder, (C) forgive, reduce or defer the amount of any such payment of
principal, (D) reduce the rate at which interest is payable thereon or any fee
is payable hereunder, (E) alter the manner in which payments or prepayments of
principal, interest or other amounts hereunder shall be applied as between the
Banks or Types of Loans, (F) alter the terms of this Section 12.04, (G) modify
the definition of the term "Majority Banks" or "Supermajority Banks", or modify
in any other manner the number or percentage of the Banks required to make any
determinations or waive any rights hereunder or to modify any provision hereof,
(H) release any Subsidiary Guarantor from any of its guarantee obligations under
Section 6 hereof except as provided in Section 12.04(b) hereof, or (J) waive any
of the conditions precedent set forth in Section 7.01 hereof; (ii) any
modification or supplement of Section 11 hereof, or of any of the rights or
duties of the Administrative Agent hereunder, shall require the consent of the
Administrative Agent; (iii) any modification or supplement of Section 6 hereof
shall require the consent of each Subsidiary
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Guarantor; and (iv) no modification, supplement or waiver shall increase or
extend the term of any of the Commitments of any Bank without the consent of
such Bank.
(b) Except as otherwise provided in Section 12.04(a) hereof with
respect to this Agreement, the Administrative Agent may, with the prior consent
of the Majority Banks (but not otherwise), consent to any modification,
supplement or waiver under any of the Loan Documents, provided that, without the
prior consent of each Bank, the Administrative Agent shall not (except as
provided herein or in the Security Documents) release any collateral or
otherwise terminate any Lien under any Security Document providing for
collateral security, agree to additional obligations being secured by such
collateral security (unless the Lien for such additional obligations shall be
junior to the Lien in favor of the other obligations secured by such Security
Document, in which event the Administrative Agent may consent to such junior
Lien provided that it obtains the consent of the Majority Banks thereto), alter
the relative priorities of the obligations entitled to the benefits of the Liens
created under the Security Documents or release any guarantor under any Security
Document from its guarantee obligations thereunder, except that no such consent
shall be required, and the Administrative Agent is hereby authorized, (x) to
release any Collateral or otherwise terminate any Lien covering Property (and to
release any such guarantor) that is the subject of either a disposition of
Property permitted hereunder including, but not limited to, any dispositions
referred to in any of clauses (i) through (vii) of the definition of
"Disposition" in Section 1.01 hereof, or a disposition to which the Majority
Banks have consented and (y) to release any Collateral, and terminate any Lien
covering Property, provided by Sycamore (and to release Sycamore) at such time,
if any, that Sycamore ceases to be a Subsidiary of the Company by reason of its
issuance of equity to the Sycamore Partner as permitted by Section 9.17(b)
hereof.
(c) From time to time following reasonable prior notice by the
Company to the Administrative Agent, the Administrative shall execute and
deliver Uniform Commercial Code financing statement release forms and such other
documents as may be reasonably requested by the Company to evidence release of
any Lien covering Property that is the subject of either a disposition of
Property permitted hereunder or a disposition to which the Majority Banks have
consented, provided that, in connection therewith, the Administrative Agent
shall have received evidence reasonably satisfactory to it (i) that any
prepayment required by Section 2.10 hereof as a result of such prepayment shall
have been, or shall simultaneously be, made and (ii) that such disposition is
permitted hereunder or the Majority Banks have consented thereto.
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12.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
12.06 Assignments and Participations.
(a) No Obligor may assign any of its rights or obligations hereunder
or under the Notes without the prior consent of all of the Banks and the
Administrative Agent.
(b) Each Bank may assign any of its Loans, its Notes, its
Commitments (but only with the consent of the Company and the Administrative
Agent, which consents shall not be unreasonably withheld or delayed); provided
that
(i) no such consent by the Company or the Administrative Agent
shall be required in the case of any assignment to another Bank or an
affiliate of another Bank;
(ii) except to the extent the Company and the Administrative
Agent shall otherwise consent, any such partial assignment (other than to
another Bank) shall be in an amount at least equal to $10,000,000;
(iii) each such assignment by a Bank of its Revolving Credit
Loans, Revolving Credit Note or Revolving Credit Commitment shall be made
in such manner so that the same portion of its Revolving Credit Loans,
Revolving Credit Note and Revolving Credit Commitment is assigned to the
respective assignee;
(iv) each such assignment shall be effected pursuant to an
Assignment and Acceptance in substantially the form of Exhibit J hereto
and the assignor and assignee shall deliver to the Company and the
Administrative Agent a fully executed copy thereof.
Upon execution and delivery by the assignor and the assignee to the Company and
the Administrative Agent of such Assignment and Acceptance, and upon consent
thereto by the Company and the Administrative Agent to the extent required
above, the assignee shall have, to the extent of such assignment (unless
otherwise consented to by the Company and the Administrative Agent), the
obligations, rights and benefits of a Bank hereunder holding the Commitment(s)
and Loans (or portions thereof) assigned to it and specified in such Assignment
and Acceptance (in addition to the Commitment(s) and Loans theretofore held by
such assignee) and the assigning Bank shall, to the extent of such assignment,
be released from the Commitment(s) (or portion(s) thereof) so assigned. Upon
each such assignment the assigning Bank shall pay the Administrative Agent a
recordation fee of $3,000.
<PAGE> 117
- 112 -
(c) A Bank may sell or agree to sell to one or more other Persons
(each a "Participant") a participation in all or any part of any Loans held by
it, or in its Commitments, provided that such Participant shall not have any
rights or obligations under this Agreement or any Note or any other Loan
Document (the Participant's rights against such Bank in respect of such
participation to be those set forth in the agreements executed by such Bank in
favor of the Participant). All amounts payable by the Company to any Bank under
Section 5 hereof in respect of Loans held by it, and its Commitments, shall be
determined as if such Bank had not sold or agreed to sell any participations in
such Loans and Commitments, and as if such Bank were funding each of such Loan
and Commitments in the same way that it is funding the portion of such Loan and
Commitments in which no participations have been sold. In no event shall a Bank
that sells a participation agree with the Participant to take or refrain from
taking any action hereunder or under any other Loan Document except that such
Bank may agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term of such Bank's related
Commitment, (ii) extend the date fixed for the payment of principal of or
interest on the related Loan or Loans or any portion of any fee hereunder
payable to the Participant, (iii) reduce the amount of any such payment of
principal, (iv) reduce the rate at which interest is payable thereon, or any fee
hereunder payable to the Participant, to a level below the rate at which the
Participant is entitled to receive such interest or fee or (v) consent to any
modification, supplement or waiver hereof or of any of the other Loan Documents
to the extent that the same, under Section 12.04 hereof, requires the consent of
each Bank.
(d) In addition to the assignments and participations permitted
under the foregoing provisions of this Section 12.06, any Bank may (without
notice to the Company, the Administrative Agent or any other Bank and without
payment of any fee) (i) assign and pledge all or any portion of its Loans and
its Notes to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve Bank and
(ii) assign all or any portion of its rights under this Agreement and its Loans
and its Notes to an affiliate (provided that, in the case of this clause (ii),
any assignment of less than all of any Revolving Credit Loans and Revolving
Credit Note shall require the consent of the Company (which shall not be
unreasonably withheld). No such pledge or assignment referred to in the
preceding clause (i) shall release the assigning Bank from its obligations
hereunder.
(e) A Bank may furnish any information concerning the Company or any
of its Subsidiaries in the possession of such Bank from time to time to
assignees and participants (including
<PAGE> 118
- 113 -
prospective assignees and participants), subject, however, to the provisions of
Section 12.12(b) hereof.
(f) Anything in this Section 12.06 to the contrary notwithstanding,
no Bank may assign or participate any interest in any Loan held by it hereunder
to the Company or any of its Affiliates or Subsidiaries without the prior
consent of each Bank.
12.07 Survival. The obligations of the Company under Sections 5.01,
5.05, 5.06 and 12.03 hereof, the obligations of each Subsidiary Guarantor under
Section 6.03 hereof, the obligations of the Banks under Section 11.05 hereof,
and the obligations of the Administrative Agent and the Banks under Section
12.12(b) hereof, shall survive the repayment of the Loans and the termination of
the Commitments and, in the case of any Bank that may assign any interest in its
Commitments or Loans hereunder, shall survive the making of such assignment,
notwithstanding that such assigning Bank may cease to be a "Bank" hereunder. In
addition, each representation and warranty made, or deemed to be made by a
notice of any extension of credit herein or pursuant hereto shall survive the
making of such representation and warranty, and no Bank shall be deemed to have
waived, by reason of making any extension of credit hereunder, any Default that
may arise by reason of such representation or warranty proving to have been
false or misleading, notwithstanding that such Bank or the Administrative Agent
may have had notice or knowledge or reason to believe that such representation
or warranty was false or misleading at the time such extension of credit was
made.
12.08 Captions. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
12.09 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.10 Governing Law; Submission to Jurisdiction. This Agreement and
the Notes shall be governed by, and construed in accordance with, the law of the
State of New York. Each Obligor hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
the Supreme Court of the State of New York sitting in New York County (including
its Appellate Division), and of any other appellate court in the State of New
York, for the purposes of all legal proceedings arising out of or relating to
this Agreement or
<PAGE> 119
- 114 -
the transactions contemplated hereby. Each Obligor hereby irrevocably waives, to
the fullest extent permitted by applicable law, any objection that it may now or
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum.
12.11 Waiver of Jury Trial. EACH OF THE OBLIGORS, THE ADMINISTRATIVE
AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
12.12 Treatment of Certain Information; Confidentiality.
(a) The Company acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Company or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Bank or by one or more Subsidiaries or affiliates
of such Bank and the Company hereby authorizes each Bank to share any
information delivered to such Bank by the Company and its Subsidiaries pursuant
to this Agreement, or in connection with the decision of such Bank to enter into
this Agreement, to any such subsidiary or affiliate, it being understood that
any such subsidiary or affiliate receiving such information shall be bound by
the provisions of paragraph (b) below as if it were a Bank hereunder. Such
authorization shall survive the repayment of the Loans and the termination of
the Commitments.
(b) Each Bank and the Administrative Agent agrees (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Company pursuant to this Agreement
that is identified by the Company as being confidential at the time the same is
delivered to the Banks or the Administrative Agent, provided that nothing herein
shall limit the disclosure of any such information (i) after such information
shall have become public (other than through a violation of this Section 12.12),
(ii) to the extent required by statute, rule, regulation or judicial process,
(iii) to counsel for any of the Banks or the Administrative Agent, (iv) to bank
examiners (or any other regulatory authority having jurisdiction over any Bank
or the Administrative Agent), or to auditors or accountants, (v) to the
Administrative Agent or any other Bank (or to Chase Securities, Inc.), (vi) in
connection with any litigation to
<PAGE> 120
- 115 -
which any one or more of the Banks or the Administrative Agent is a party, or in
connection with the enforcement of rights or remedies hereunder or under any
other Loan Document, (vii) to a subsidiary or affiliate of such Bank as provided
in paragraph (a) above or (viii) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant (or prospective
assignee or participant) first executes and delivers to the respective Bank a
Confidentiality Agreement substantially in the form of Exhibit I hereto (or
executes and delivers to such Bank an acknowledgement to the effect that it is
bound by the provisions of this Section 12.12(b), which acknowledgement may be
included as part of the respective assignment or participation agreement
pursuant to which such assignee or participant acquires an interest in the Loans
hereunder); provided, further, that in no event shall any Bank or the
Administrative Agent be obligated or required to return any materials furnished
by the Company. The obligations of each Bank under this Section 12.12 shall
supersede and replace the obligations of such Bank under the confidentiality
letter in respect of this financing signed and delivered by such Bank to the
Company prior to the date hereof; in addition, the obligations of any assignee
that has executed a Confidentiality Agreement in the form of Exhibit I hereto
shall be superseded by this Section 12.12 upon the date upon which such assignee
becomes a Bank hereunder pursuant to Section 12.06(b) hereof.
<PAGE> 121
- 116 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
ANKER COAL GROUP, INC.
By /s/ BRUCE SPARKS
-------------------------------
Title: Executive Vice President
Address for Notices:
2708 Cranberry Square
Morgantown, West Virginia 26505
Attention: Bruce Sparks
Telecopier No.: (3 04) 594-1685
Telephone No.: (304) 594-4216
SUBSIDIARY GUARANTORS
ANKER ENERGY CORPORATION
By /s/ BRUCE SPARKS
-------------------------------
Title: Executive Vice President
ANKER GROUP, INC.
By /s/ BRUCE SPARKS
-------------------------------
Title: Executive Vice President
ANKER POWER SERVICES, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
ANKER WEST VIRGINIA MINING COMPANY,
INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
<PAGE> 122
- 117 -
BRONCO MINING COMPANY, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
HAWTHORNE COAL COMPANY, INC.
(formerly known as Anker
Development, Inc.)
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
HEATHER GLEN RESOURCES, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
JULIANA MINING COMPANY, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
KING KNOB COAL CO., INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
MARINE COAL SALES COMPANY
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
PATRIOT MINING COMPANY, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
<PAGE> 123
- 118 -
VANTRANS, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
MELROSE COAL COMPANY, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
NEW ALLEGHENY LAND HOLDING COMPANY,
INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
UPSHUR PROPERTY, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
VINDEX ENERGY CORPORATION
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
ANKER VIRGINIA MINING COMPANY, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
<PAGE> 124
- 119 -
BANKS
Revolving Credit Commitment THE CHASE MANHATTAN BANK
$15,000,000.00
By /s/ LAWRENCE PALUMBO, JR.
-------------------------------
Title: Vice President
Lending Office for all Loans:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Address for Notices:
The Chase Manhattan Bank
One Chase Manhattan Plaza
Fifth Floor
New York, New York 10081
Attention: Mining and Metals Group
Telecopier No.: (212) 552-7773
Telephone No.: (212) 552-2189
with a notice to:
The Loan and Agency Services Group
One Chase Manhattan Plaza
8th Floor
New York, NY 10081
Attention: Linda Hill
Telecopier No.: (212) 552-7490
Telephone No.: (212) 552-7935
<PAGE> 125
- 120 -
Revolving Credit Commitment BANK OF MONTREAL
$15,000,000.00
By /s/ MICHAEL P. SASSOS
-------------------------------
Title: Director
Lending Office for all Loans:
Bank of Montreal
115 South LaSalle Street
Chicago, Illinois 60603
Address for Notices:
Bank of Montreal
430 Park Avenue, 14th Floor
New York, New York 10022
Attention: Mr. Michael P. Sassos
Telecopier No.: (212) 605-1451
Telephone No.: (212) 605-1645
<PAGE> 126
- 121 -
Revolving Credit Commitment THE FIRST NATIONAL BANK OF CHICAGO
$15,000,000.00
By /s/ WILLIAM V. CLIFFORD
-------------------------------
Title: Vice President
Lending Office for all Loans:
The First National Bank of
Chicago
One First National Plaza
Chicago, Illinois 60670
Address for Notices:
The First National Bank of
Chicago
One First National Plaza
Chicago, Illinois 60670
Attention: Ms. Namita Solanki-Patel
Telecopier No.: (312) 732-3055
Telephone No.: (312) 732-7610
<PAGE> 127
- 122 -
Revolving Credit Commitment MELLON BANK, N.A.
$15,000,000.00
By /s/ ROBERT E. HEULER
-------------------------------
Title: Vice President
Lending Office for all Loans:
Mellon Bank, N.A.
Three Mellon Bank Center
23rd Floor, Loan Administration
Pittsburgh, Pennsylvania 15259
Address for Notices:
Mellon Bank, N.A.
Two Mellon Bank Center
Room 230, Middle Market
Banking Department
Pittsburgh, Pennsylvania 15259-0001
Attention: Robert E. Heuler
Telecopier No.: (412) 234-9010
Telephone No.: (412) 234-5927
<PAGE> 128
- 123 -
Revolving Credit Commitment THE BANK OF NOVA SCOTIA
$15,000,000.00
By /s/ J. ALAN EDWARDS
-------------------------------
Title: Authorized Signatory
Lending Office for all Loans:
The Bank of Nova Scotia
One Liberty Plaza
New York, New York 10006
Address for Notices:
The Bank of Nova Scotia
One Liberty Plaza
New York, New York 10006
Attention: Ms. Tilsa Cora
Telecopier No.: (212) 225-5145
Telephone No.: (212) 225-5044
<PAGE> 129
- 124 -
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ LAWRENCE PALUMBO, JR.
-------------------------------
Title: Vice President
<PAGE> 1
EXHIBIT 10.2
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of August 12, 1996 among ANKER COAL
GROUP, INC., a corporation duly organized and validly existing under the laws of
the State of Delaware (the "Company"); each Person listed on the signature pages
hereto under the caption "SUBSIDIARY GUARANTORS" or that becomes a "Subsidiary
Guarantor" pursuant to Section 9.17(a) of the Credit Agreement referred to below
(individually, a "Subsidiary Guarantor" and, collectively, the "Subsidiary
Guarantors" and, together with the Company, the "Obligors"); and THE CHASE
MANHATTAN BANK, as agent for the lenders or other financial institutions or
entities party, as lenders, to the Credit Agreement referred to below (in such
capacity, together with its successors in such capacity, the "Administrative
Agent").
The Company, the Subsidiary Guarantors, certain lenders and the
Administrative Agent are parties to a Credit Agreement dated as of August 12,
1996 (as modified and supplemented and in effect from time to time, the "Credit
Agreement"), providing, subject to the terms and conditions thereof, for loans
to be made by said lenders to the Company in an aggregate principal amount not
exceeding $115,000,000 at any one time outstanding. In addition, the Company may
from time to time be obligated to various of said lenders in respect of Interest
Rate Protection Agreements (such indebtedness being herein referred to as the
"Other Indebtedness").
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder, and to induce said lenders to enter into Interest Rate
Protection Agreements, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Obligor has
agreed to pledge and grant a security interest in the Collateral (as hereinafter
defined) as security for the Secured Obligations (as so defined). Accordingly,
the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit
Agreement are used herein as defined therein. In addition, as
used herein:
"Accounts" shall have the meaning ascribed thereto in
Section 3(d) hereof.
"Collateral" shall have the meaning ascribed thereto in
Section 3 hereof.
"Collateral Account" shall have the meaning ascribed
thereto in Section 4.01 hereof.
<PAGE> 2
-2-
"Documents" shall have the meaning ascribed thereto in
Section 3(j) hereof.
"Equipment" shall have the meaning ascribed thereto in
Section 3(h) hereof.
"Instruments" shall have the meaning ascribed thereto
in Section 3(e) hereof.
"Inventory" shall have the meaning ascribed thereto in
Section 3(f) hereof.
"Issuers" shall mean, collectively, the respective corporations
identified beneath the names of the Obligors on Annex 1 hereto under the
caption "Issuer".
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"Pledged Stock" shall have the meaning ascribed thereto
in Section 3(a) hereof.
"Secured Obligations" shall mean, collectively, (a) in the case of
the Company, the principal of and interest on the Loans made by the Banks
to, and the Note(s) held by each Bank of, the Company and all other
amounts from time to time owing to the Banks or the Administrative Agent
by the Company under the Loan Documents, and all obligations of the
Company constituting Other Indebtedness, (b) in the case of the Subsidiary
Guarantors, all obligations of the Subsidiary Guarantors under the Credit
Agreement and the other Loan Documents (including, without limitation, in
respect of their Guarantee under Section 6 of the Credit Agreement) and
(c) all obligations of the Obligors to the Banks and the Administrative
Agent hereunder.
"Specified Rights" shall mean, collectively, (a) all inventions,
processes, production methods, proprietary information, know-how and trade
secrets; (b) all licenses or user or other agreements granted to any
Obligor with respect to any of the foregoing, in each case whether now or
hereafter owned or used; (c) all information, customer lists,
identification of suppliers, data, plans, blueprints, specifications,
designs, drawings, recorded knowledge, surveys, engineering reports, test
reports, manuals, materials standards, processing standards, performance
standards, catalogs, computer and automatic machinery software and
programs; (d) all field repair data, sales data
<PAGE> 3
-3-
and other information relating to sales or service of products now or
hereafter manufactured; (e) all accounting information and all media in
which or on which any information or knowledge or data or records may be
recorded or stored and all computer programs used for the compilation or
printout of such information, knowledge, records or data; and (f) all
licenses, consents, permits, variances, certifications and approvals of
governmental agencies now or hereafter held by any Obligor.
"Stock Collateral" shall mean, collectively, the Collateral
described in clauses (a) through (c) of Section 3 hereof and the proceeds
of and to any such property and, to the extent related to any such
property or such proceeds, all books, correspondence, credit files,
records, invoices and other papers.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect from time to time in the State of New York.
Section 2. Representations and Warranties. Each Obligor represents
and warrants to the Banks and the Administrative Agent that:
(a) Such Obligor is the sole beneficial owner of the Collateral in
which it purports to grant a security interest pursuant to Section 3
hereof and no Lien exists or will exist upon such Collateral at any time
(and no right or option to acquire the same exists in favor of any other
Person), except for Liens permitted under Section 9.06 of the Credit
Agreement and except for the pledge and security interest in favor of the
Administrative Agent for the benefit of the Banks created or provided for
herein, which pledge and security interest constitute a first priority
perfected pledge and security interest in and to all of such Collateral
other than (i) Specified Rights registered or otherwise located outside of
the United States of America, (ii) any property comprising Collateral
excluded pursuant to Section 9-104 of the Uniform Commercial Code except
as to Section 9-104(j) to the extent the property is a certificated
security or an uncertificated security under Section 8-102 of the Uniform
Commercial Code, (iii) any contract or other agreement referred to in
Section 3(i) which contain prohibitions against transfer, assignment or
hypothecation, to the extent that any necessary consent to any such
transfer, assignment or hypothecation has not been obtained, (iv) any
Motor Vehicles comprising Collateral
<PAGE> 4
-4-
registered under any certificate of title statue, and (v) Specified Rights
described in clause (f) of its definition.
(b) The Pledged Stock represented by the certificates identified
under the name of such Obligor in Annex 1 hereto is, and all other Pledged
Stock in which such Obligor shall hereafter grant a security interest
pursuant to Section 3 hereof will be, duly authorized, validly existing,
fully paid and non-assessable and none of such Pledged Stock is or will be
subject to any contractual restriction, or any restriction under the
charter or by-laws of the respective Issuer of such Pledged Stock, upon
the transfer of such Pledged Stock (except for any such restriction
contained herein or in the Credit Agreement).
(c) The Pledged Stock represented by the certificates identified
under the name of such Obligor in Annex 1 hereto constitutes all of the
issued and outstanding shares of capital stock of any class of the Issuers
beneficially owned by such Obligor on the date hereof after giving effect
to the consummation of the Acquisition (whether or not registered in the
name of such Obligor) (other than, in the case of the Company, the
Remaining Preferred Stock) and said Annex 1 correctly identifies, as at
the date hereof, the respective Issuers of such Pledged Stock, the
respective class and par value of the shares comprising such Pledged Stock
and the respective number of shares (and registered owners thereof)
represented by each such certificate.
(d) Any goods now or hereafter produced by such Obligor or any of
its Subsidiaries included in the Collateral have been and will be produced
in compliance with the requirements of the Fair Labor Standards Act, as
amended.
Section 3. Collateral. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations, each Obligor hereby pledges and grants to the
Administrative Agent, for the benefit of the Banks as hereinafter provided, a
security interest in all of such Obligor's right, title and interest in the
following property, whether now owned by such Obligor or hereafter acquired and
whether now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
(a) the shares of capital stock of the Issuers represented by the
certificates identified in Annex 1 hereto
<PAGE> 5
-5-
under the name of such Obligor and all other shares of capital stock of
whatever class of the Issuers, now or hereafter owned by such Obligor, in
each case together with the certificates evidencing the same
(collectively, the "Pledged Stock");
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of such Obligor under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which an Issuer is not the
surviving corporation, all shares of each class of the capital stock of
the successor corporation (unless such successor corporation is such
Obligor itself) formed by or resulting from such consolidation or merger
(the Pledged Stock, together with all other certificates, shares,
securities, properties or moneys as may from time to time be pledged
hereunder pursuant to clause (a) or (b) above and this clause (c) being
herein collectively called the "Stock Collateral");
(d) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of such Obligor constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to such Obligor in respect of any loans or advances or for
Inventory or Equipment or other goods sold or leased or for services
rendered, all moneys due and to become due to such Obligor under any
guarantee (including a letter of credit) of the purchase price of
Inventory or Equipment sold by such Obligor and all tax refunds (such
accounts, general intangibles and moneys due and to become due being
herein called collectively "Accounts");
(e) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of such Obligor evidencing,
representing, arising from or existing in respect of, relating to,
securing or otherwise supporting the payment of, any of the Accounts,
including (but not limited to) promissory notes, drafts, bills of
<PAGE> 6
-6-
exchange and trade acceptances (herein collectively called
"Instruments");
(f) all inventory (as defined in the Uniform Commercial Code) of
such Obligor, including coal and other minerals, Ash, fuel, tires and
other spare parts, all goods obtained by such Obligor in exchange for such
inventory, any products made or processed from such inventory including
all substances, if any, commingled therewith or added thereto and shall
include all goods owned by such Obligor, whenever acquired and wherever
located, held for sale or lease or furnished or to be furnished under
contracts of service, including, without limitation, all coal inventories
and inventories of other minerals, and all raw materials, including, but
not limited to, raw coal, work in process and materials owned by such
Obligor and used or consumed in such Obligor's business (herein
collectively called "Inventory");
(g) all Specified Rights and all other accounts or general
intangibles not constituting Specified Rights or Accounts;
(h) all equipment (as defined in the Uniform Commercial Code) of
such Obligor, including all Motor Vehicles (herein collectively called
"Equipment");
(i) each contract and other agreement of such Obligor relating to
the sale or other disposition of Inventory or Equipment, and each contract
mining agreement and coal purchase agreement;
(j) all documents of title (as defined in the Uniform Commercial
Code) or other receipts of such Obligor covering, evidencing or
representing Inventory or Equipment (herein collectively called
"Documents");
(k) all rights, claims and benefits of such Obligor against any
Person arising out of, relating to or in connection with Inventory or
Equipment purchased by such Obligor, including, without limitation, any
such rights, claims or benefits against any Person storing or transporting
such Inventory or Equipment;
(l) the balance from time to time in the Collateral Account;
(m) all interests in any limited or general partnerships and
limited liability companies;
<PAGE> 7
-7-
(n) all Intercompany Notes; and
(o) all other tangible and intangible personal property and fixtures
of such Obligor, including, without limitation, all proceeds, products,
offspring, accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of such Obligor described in
the preceding clauses of this Section 3 (including, without limitation,
any proceeds of insurance thereon and all causes of action, claims and
warranties now or hereafter held by any Obligor in respect of any of the
items listed above) and, to the extent related to any property described
in said clauses or such proceeds, products and accessions, all books,
correspondence, credit files, records, invoices and other papers,
including without limitation all tapes, cards, computer runs and other
papers and documents in the possession or under the control of such
Obligor or any computer bureau or service company from time to time acting
for such Obligor.
Notwithstanding the foregoing, the Collateral does not and shall not
include the Remaining Preferred Stock or any shares of capital stock of or other
equity interests in any Unrestricted Subsidiary.
Section 4. Cash Proceeds of Collateral.
4.01 Collateral Account. There is hereby established with the
Administrative Agent a cash collateral account (the "Collateral Account") in the
name and under the control of the Administrative Agent into which there shall be
deposited from time to time the cash proceeds of any of the Collateral
(including proceeds of insurance thereon), but only to the extent required to be
delivered to the Administrative Agent pursuant hereto at a time when an Event of
Default exists, or into which the Obligors may from time to time deposit any
additional amounts that any of them wishes to pledge to the Administrative Agent
for the benefit of the Banks as additional collateral security hereunder. The
balance from time to time in the Collateral Account shall constitute part of the
Collateral hereunder and shall not constitute payment of the Secured Obligations
until applied as hereinafter provided. Except as expressly provided in the next
sentence, the Administrative Agent shall remit the collected balance outstanding
to the credit of the Collateral Account to or upon the order of the respective
Obligor as such Obligor through the Company shall from time to time instruct.
However, at any time following the occurrence and during the continuance of an
Event of Default, the Administrative Agent may
<PAGE> 8
-8-
(and, if instructed by the Banks as specified in Section 11.03 of the Credit
Agreement, shall) in its (or their) discretion apply or cause to be applied
(subject to collection) the balance from time to time outstanding to the credit
of the Collateral Account to the payment of the Secured Obligations in the
manner specified in Section 5.09 hereof. The balance from time to time in the
Collateral Account shall be subject to withdrawal only as provided herein.
4.02 Proceeds of Accounts. Each Obligor shall, upon the instruction
of the Administrative Agent given at any time that an Event of Default exists,
instruct all account debtors and other Persons obligated in respect of all
Accounts to make all payments in respect of the Accounts either (a) directly to
the Administrative Agent (by instructing that such payments be remitted to a
post office box which shall be in the name and under the control of the
Administrative Agent) or (b) to one or more other banks in the United States of
America (by instructing that such payments be remitted to a post office box
which shall be in the name and under the control of the Administrative Agent)
under arrangements, in form and substance satisfactory to the Administrative
Agent pursuant to which such Obligor shall have irrevocably instructed such
other bank (and such other bank shall have agreed) to remit all proceeds of such
payments directly to the Administrative Agent for deposit into the Collateral
Account. All payments made to the Administrative Agent, as provided in the
preceding sentence, shall be immediately deposited in the Collateral Account. In
addition to the foregoing, each Obligor agrees that if the proceeds of any
Collateral hereunder (including the payments made in respect of Accounts) shall
be received by it at any time after the Administrative Agent shall have provided
the instruction provided in the preceding sentence and while such instruction
shall continue to be in effect, such Obligor shall as promptly as possible
deposit such proceeds into the Collateral Account. Until so deposited, all such
proceeds shall be held in trust by such Obligor for and as the property of the
Administrative Agent and shall not be commingled with any other funds or
property of such Obligor.
4.03 Investment of Balance in Collateral Account. Amounts on deposit
in the Collateral Account shall be invested from time to time in such Permitted
Investments as the respective Obligor through the Company (or, after the
occurrence and during the continuance of an Event of Default, the Administrative
Agent) shall determine, which Permitted Investments shall be held in the name
and be under the control of the Administrative Agent, provided that at any time
after the occurrence and during the continuance of an Event of Default, the
Administrative Agent may (and, if instructed by the Banks as specified in
Section 11.03 of
<PAGE> 9
-9-
the Credit Agreement, shall) in its (or their) discretion at any time and from
time to time elect to liquidate any such Permitted Investments and to apply or
cause to be applied the proceeds thereof to the payment of the Secured
Obligations in the manner specified in Section 5.09 hereof.
Section 5. Further Assurances; Remedies. In furtherance of the grant
of the pledge and security interest pursuant to Section 3 hereof, the Obligors
hereby jointly and severally agree with each Bank and the Administrative Agent
as follows:
5.01 Delivery and Other Perfection. Each Obligor shall:
(a) if any of the shares, securities, moneys or property required to
be pledged by such Obligor under clauses (a), (b) and (c) of Section 3
hereof are received by such Obligor, forthwith either (x) transfer and
deliver to the Administrative Agent such shares or securities so received
by such Obligor (together with the certificates for any such shares and
securities duly endorsed in blank or accompanied by undated stock powers
duly executed in blank), all of which thereafter shall be held by the
Administrative Agent, pursuant to the terms of this Agreement, as part of
the Collateral or (y) take such other action as the Administrative Agent
shall deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, moneys or property in said clauses
(a), (b) and (c);
(b) deliver and pledge to the Administrative Agent any and all
Instruments, endorsed and/or accompanied by such instruments of assignment
and transfer in such form and substance as the Administrative Agent may
reasonably request; provided, that so long as no Event of Default shall
have occurred and be continuing, such Obligor may retain for collection in
the ordinary course any Instruments received by such Obligor in the
ordinary course of business and the Administrative Agent shall, promptly
upon request of such Obligor through the Company, make appropriate
arrangements for making any Instrument pledged by such Obligor available
to such Obligor for purposes of presentation, collection or renewal (any
such arrangement to be effected, to the extent deemed appropriate by the
Administrative Agent, against trust receipt or like document);
(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement
<PAGE> 10
-10-
or other papers that may be necessary or desirable (in the reasonable
judgment of the Administrative Agent) to create, preserve, perfect or
validate the security interest granted pursuant hereto or to enable the
Administrative Agent to exercise and enforce its rights hereunder with
respect to such pledge and security interest, including, without
limitation, causing any or all of the Stock Collateral to be transferred
of record into the name of the Administrative Agent or its nominee (and
the Administrative Agent agrees that if any Stock Collateral is
transferred into its name or the name of its nominee, the Administrative
Agent will thereafter promptly give to the respective Obligor copies of
any notices and communications received by it with respect to the Stock
Collateral pledged by such Obligor hereunder), provided that notices to
account debtors in respect of any Accounts or Instruments shall be subject
to the provisions of clause (i) below;
(d) without limiting the obligations of such Obligor under Section
5.04(c) hereof, upon the acquisition after the date hereof by such Obligor
of any Equipment (other than Motor Vehicles) covered by a certificate of
title or ownership, cause the Administrative Agent to be listed as the
lienholder on such certificate of title and within 120 days of the
acquisition thereof deliver evidence of the same to the Administrative
Agent;
(e) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Administrative Agent may reasonably require in order to
reflect the security interests granted by this Agreement;
(f) permit representatives of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect and
make abstracts from its books and records pertaining to the Collateral,
and permit representatives of the Administrative Agent to be present at
such Obligor's place of business to receive copies of all communications
and remittances relating to the Collateral, and forward copies of any
notices or communications received by such Obligor with respect to the
Collateral, all in such manner as the Administrative Agent may reasonably
require; and
(g) upon the occurrence and during the continuance of any Event of
Default, upon request of the Administrative Agent, promptly notify (and
such Obligor hereby authorizes the Administrative Agent so to notify) each
account debtor
<PAGE> 11
-11-
in respect of any Accounts or Instruments that such Collateral has been
assigned to the Administrative Agent hereunder, and that any payments due
or to become due in respect of such Collateral are to be made directly to
the Administrative Agent.
5.02 Other Financing Statements and Liens. Except as otherwise
permitted under Section 9.06 of the Credit Agreement, without the prior written
consent of the Administrative Agent (granted with the authorization of the Banks
as specified in Section 11.09 of the Credit Agreement), no Obligor shall file or
suffer to be on file, or authorize or permit to be filed or to be on file, in
any jurisdiction, any financing statement or like instrument with respect to the
Collateral in which the Administrative Agent is not named as the sole secured
party for the benefit of the Banks, other than financing statements filed for
precautionary purposes only covering equipment subject to an operating lease
under which an Obligor is the lessee.
5.03 Preservation of Rights. The Administrative Agent shall not be
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.
5.04 Special Provisions Relating to Certain Collateral.
(a) Stock Collateral.
(1) The Obligors will cause the Stock Collateral to constitute at
all times 100% of the total number of shares of each class of capital stock of
each Issuer then outstanding (other than, with respect to AGI as Issuer, the
Remaining Preferred Stock).
(2) So long as no Event of Default shall have occurred and be
continuing, the Obligors shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any other instrument or agreement referred to herein or
therein, provided that the Obligors jointly and severally agree that they will
not vote the Stock Collateral in any manner that is inconsistent with the terms
of this Agreement, the Credit Agreement, the Notes or any such other instrument
or agreement; and the Administrative Agent shall execute and deliver to the
Obligors or cause to be executed and delivered to the Obligors all such proxies,
powers of attorney, dividend and other orders, and all such instruments, without
recourse, as the Obligors may reasonably request for the purpose of enabling the
Obligors to
<PAGE> 12
-12-
exercise the rights and powers that they are entitled to exercise pursuant to
this Section 5.04(a)(2).
(3) Unless and until an Event of Default has occurred and is
continuing, the Obligors shall be entitled to receive and retain any dividends
on the Stock Collateral paid in cash out of earned surplus.
(4) If any Event of Default shall have occurred, then so long as
such Event of Default shall continue, and whether or not the Administrative
Agent or any Bank exercises any available right to declare any Secured
Obligation due and payable or seeks or pursues any other relief or remedy
available to it under applicable law or under this Agreement, the Credit
Agreement, the Notes or any other agreement relating to such Secured Obligation,
all dividends and other distributions on the Stock Collateral shall be paid
directly to the Administrative Agent and retained by it in the Collateral
Account as part of the Stock Collateral, subject to the terms of this Agreement,
and, if the Administrative Agent shall so request in writing, the Obligors
jointly and severally agree to execute and deliver to the Administrative Agent
appropriate additional dividend, distribution and other orders and documents to
that end, provided that if such Event of Default is cured, any such dividend or
distribution theretofore paid to the Administrative Agent shall, upon request of
the Obligors (except to the extent theretofore applied to the Secured
Obligations), be returned by the Administrative Agent to the Obligors.
(b) Intercompany Notes. The Company shall from time to time at the
request of the Administrative Agent notify the Administrative Agent as to the
information to be inserted referred to in the Schedule to each Intercompany Note
as of the last day of the month most recently ended, provided, that if the
Administrative Agent shall have made such request at a time when an Event of
Default has occurred and is continuing, the Company shall forthwith notify the
Administrative Agent as to such information as of the date of such request. The
Administrative Agent may, but shall not be required to, record such information
on such Schedule.
(c) Motor Vehicles. At any time after the occurrence and during the
continuance of an Event of Default, each Obligor shall, upon the request of the
Administrative Agent, deliver to the Administrative Agent originals of the
certificates of title or ownership for the Motor Vehicles owned by it and cause
the Administrative Agent to be listed as lienholder and take such other action
as the Administrative Agent shall deem appropriate
<PAGE> 13
-13-
to perfect the security interest created hereunder in all such Motor Vehicles.
5.05 Events of Default, Etc. During the period during which an
Event of Default shall have occurred and be continuing:
(a) each Obligor shall, at the request of the Administrative Agent,
assemble the Collateral owned by it at such place or places, reasonably
convenient to both the Administrative Agent and such Obligor, designated
in its request;
(b) the Administrative Agent may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or
otherwise modify the terms of, any of the Collateral;
(c) the Administrative Agent shall have all of the rights and
remedies with respect to the Collateral of a secured party under the
Uniform Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under
the laws in effect in any jurisdiction where any rights and remedies
hereunder may be asserted, including, without limitation, the right, to
the maximum extent permitted by law, to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral as if the
Administrative Agent were the sole and absolute owner thereof (and each
Obligor agrees to take all such action as may be appropriate to give
effect to such right);
(d) the Administrative Agent in its discretion may, in its name or
in the name of the Obligors or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on account
of or in exchange for any of the Collateral, but shall be under no
obligation to do so; and
(e) the Administrative Agent may, upon ten business days' prior
written notice to the Obligors of the time and place, with respect to the
Collateral or any part thereof that shall then be or shall thereafter come
into the possession, custody or control of the Administrative Agent, the
Banks or any of their respective agents, sell, lease, assign or otherwise
dispose of all or any part of such Collateral, at such place or places as
the Administrative Agent deems best, and for cash or for credit or for
future
<PAGE> 14
-14-
delivery (without thereby assuming any credit risk), at public or private
sale, without demand of performance or notice of intention to effect any
such disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and the
Administrative Agent or any Bank or anyone else may be the purchaser,
lessee, assignee or recipient of any or all of the Collateral so disposed
of at any public sale (or, to the extent permitted by law, at any private
sale) and thereafter hold the same absolutely, free from any claim or
right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Obligors, any such demand, notice and
right or equity being hereby expressly waived and released. The
Administrative Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time
by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05, including by virtue of the exercise of the license granted to the
Administrative Agent in Section 5.04(b) hereof, shall be applied in accordance
with Section 5.09 hereof.
The Obligors recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Administrative Agent may be compelled, with respect to any
sale of all or any part of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Obligors acknowledge that any such private sales may be at prices and on terms
less favorable to the Administrative Agent than those obtainable through a
public sale without such restrictions, and, notwithstanding such circumstances,
agree that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Administrative Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the respective Issuer or
issuer thereof to register it for public sale.
5.06 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral pursuant to Section 5.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the
<PAGE> 15
-15-
Secured Obligations, the Obligors shall remain liable for any deficiency.
5.07 Removals, Etc. Without at least 30 days' prior written notice
to the Administrative Agent, no Obligor shall (i) maintain any of its books and
records with respect to the Collateral at any office or maintain its principal
place of business at any place, or permit any Inventory or Equipment to be
located anywhere, other than at the address indicated beneath the signature of
the Company to the Credit Agreement or at one of the locations identified in
Annex 2 hereto under its name or in transit from one of such locations to
another such location or (in the case of Inventory or Equipment located in the
State of West Virginia) elsewhere in the State of West Virginia or (ii) change
its name, or the name under which it does business, from the name shown on the
signature pages hereto provided, that (x) no such notice shall be required upon
the removal from such address or any of such locations of Inventory pursuant to
a contract for the sale thereof and (y) any Restricted Subsidiary (the "Lendor")
may lend Equipment to another Restricted Subsidiary (the "Lendee") provided that
the Company shall give written notice to the Administrative Agent not later than
90 days after the date such Equipment was so lent (unless such Equipment shall
theretofore have been returned to the Lendor) specifying (A) the Lendor, (B) the
Lendee, (C) the location or locations at which such Equipment is being used by
the Lendee and (D) the date upon which such Equipment was so lent.
5.08 Private Sale. The Administrative Agent and the Banks shall
incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to Section 5.05 hereof conducted in a
commercially reasonable manner. Each Obligor hereby waives any claims against
the Administrative Agent or any Bank arising by reason of the fact that the
price at which the Collateral may have been sold at such a private sale was less
than the price that might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if the Administrative
Agent accepts the first offer received and does not offer the Collateral to more
than one offeree.
5.09 Application of Proceeds. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization of all or
any part of the Collateral pursuant hereto, and any other cash at the time held
by the Administrative Agent under Section 4 hereof or this Section 5, shall be
applied by the Administrative Agent:
<PAGE> 16
-16-
First, to the payment of the costs and expenses of such collection,
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Administrative Agent and the fees and expenses of its
agents and counsel, and all expenses incurred and advances made by the
Administrative Agent in connection therewith;
Next, to the payment in full of the Secured Obligations, in each
case equally and ratably in accordance with the respective amounts thereof
then due and owing or as the Banks holding the same may otherwise agree;
and
Finally, to the payment to the respective Obligor, or their
respective successors or assigns, or as a court of competent jurisdiction
may direct, of any surplus then remaining.
As used in this Section 5, "proceeds" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Obligors or any issuer of or obligor on
any of the Collateral.
5.10 Attorney-in-Fact. Without limiting any rights or powers granted
by this Agreement to the Administrative Agent while no Event of Default has
occurred and is continuing, upon the occurrence and during the continuance of
any Event of Default the Administrative Agent is hereby appointed the
attorney-in-fact of each Obligor for the purpose of carrying out the provisions
of this Section 5 and taking any action and executing any instruments that the
Administrative Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Administrative Agent shall be entitled under this Section 5 to make collections
in respect of the Collateral, the Administrative Agent shall have the right and
power to receive, endorse and collect all checks made payable to the order of
any Obligor representing any dividend, payment or other distribution in respect
of the Collateral or any part thereof and to give full discharge for the same.
5.11 Perfection. Prior to or concurrently with the execution and
delivery of this Agreement, each Obligor shall (i) file such financing
statements and other documents in such offices as the Administrative Agent may
request to perfect the security interests granted by Section 3 of this Agreement
and (ii) deliver to the Administrative Agent all certificates
<PAGE> 17
-17-
identified in Annex 1 hereto, accompanied by undated stock powers duly executed
in blank.
5.12 Termination. When all Secured Obligations shall have been paid
in full, the Commitments of the Banks under the Credit Agreement shall have
expired or been terminated, and all Interest Rate Protection Agreements between
the Company and any Bank the obligations of the Company under which constitute
Other Indebtedness shall have expired or terminated, this Agreement shall
terminate, and the Administrative Agent shall forthwith cause to be assigned,
transferred and delivered, against receipt but without any recourse, warranty or
representation whatsoever, any remaining Collateral and money received in
respect thereof, to or on the order of the respective Obligor and to be released
and canceled all licenses and rights referred to in Section 5.04(b) hereof. The
Administrative Agent shall also execute and deliver to the respective Obligor
upon such termination such Uniform Commercial Code termination statements,
certificates for terminating the Liens on the Motor Vehicles and such other
documentation as shall be reasonably requested by the respective Obligor to
effect the termination and release of the Liens on the Collateral. In addition
to the foregoing, the Administrative Agent shall comply with Section 12.04(c) of
the Credit Agreement.
5.13 Further Assurances. Each Obligor agrees that, from time to time
upon the written request of the Administrative Agent, such Obligor will execute
and deliver such further documents and do such other acts and things as the
Administrative Agent may reasonably request in order fully to effect the
purposes of this Agreement.
5.14 Release of Motor Vehicles. So long as no Event of Default shall
have occurred and be continuing, upon the request of any Obligor, the
Administrative Agent shall execute and deliver to such Obligor such instruments
as such Obligor shall reasonably request to remove the notation of the
Administrative Agent as lienholder on any certificate of title for any Motor
Vehicle if such notation has previously been made; provided that any such
instruments shall be delivered, and the release effective only upon receipt by
the Administrative Agent of a certificate from such Obligor stating that the
Motor Vehicle the lien on which is to be released is to be sold or has suffered
a casualty loss (with title thereto passing to the casualty insurance company
therefor in settlement of the claim for such loss).
5.15 Certain Releases. The parties hereto agree that upon the sale
of any Inventory in the ordinary course of business
<PAGE> 18
-18-
and on ordinary business terms, the Lien created hereunder on such Inventory
shall be automatically released; provided, that nothing in this Section 5.15
shall be construed to affect the Lien created hereunder on, or limit the rights
or remedies of the Administrative Agent hereunder with respect to, Collateral
(including, without limitation, the proceeds resulting from the sale of such
Inventory) other than the Inventory so sold.
Section 6. Miscellaneous.
6.01 No Waiver. No failure on the part of the Administrative Agent
or any Bank to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Administrative Agent or
any Bank of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided by
law.
6.02 Notices. All notices, requests, consents and demands hereunder
shall be in writing and telecopied or delivered to the intended recipient at its
"Address for Notices" specified pursuant to Section 12.02 of the Credit
Agreement and shall be deemed to have been given at the times specified in said
Section 12.02.
6.03 Expenses. The Obligors jointly and severally agree to reimburse
each of the Banks and the Administrative Agent for all reasonable costs and
expenses of the Banks and the Administrative Agent (including, without
limitation, the reasonable fees and expenses of legal counsel) in connection
with (i) any Default and any enforcement or collection proceeding resulting
therefrom, including, without limitation, all manner of participation in or
other involvement with (w) performance by the Administrative Agent of any
obligations of the Obligors in respect of the Collateral that the Obligors have
failed or refused to perform, (x) bankruptcy, insolvency, receivership,
foreclosure, winding up or liquidation proceedings, or any actual or attempted
sale, or any exchange, enforcement, collection, compromise or settlement in
respect of any of the Collateral, and for the care of the Collateral and
defending or asserting rights and claims of the Administrative Agent in respect
thereof, by litigation or otherwise, including expenses of insurance, (y)
judicial or regulatory proceedings and (z) workout, restructuring or other
negotiations or proceedings (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 6.03, and all such costs and expenses shall be Secured Obligations
entitled to the
<PAGE> 19
-19-
benefits of the collateral security provided pursuant to Section 3 hereof.
6.04 Amendments, Etc. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by each
Obligor and the Administrative Agent (with the consent of the Banks as specified
in Section 11.09 of the Credit Agreement). Any such amendment or waiver shall be
binding upon the Administrate Agent and each Bank, each holder of any of the
Secured Obligations and each Obligor.
6.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective successors and permitted assigns of
each Obligor, the Administrative Agent, the Banks and each permitted holder of
any of the Secured Obligations (provided, however, that no Obligor shall assign
or transfer its rights hereunder without the prior written consent of the
Administrative Agent).
6.06 Captions. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
6.07 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.08 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
6.09 Administrative Agents and Attorneys-in-Fact. The Administrative
Agent may employ agents and attorneys-in-fact in connection herewith and shall
not be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
6.10 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Banks in order to carry out the intentions of the parties hereto
as nearly as may be possible and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
<PAGE> 20
-20-
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered as of the day and year first above
written.
COMPANY
ANKER COAL GROUP, INC.
By /s/ John Faltis
----------------------------------
Name: John Faltis
Title: President
SUBSIDIARY GUARANTORS
ANKER GROUP, INC.
By /s/ John Faltis
----------------------------------
Name: John Faltis
Title: President
ANKER ENERGY CORPORATION
By /s/ John Faltis
----------------------------------
Name: John Faltis
Title: President
VANTRANS, INC.
By /s/ Bruce Sparks
----------------------------------
Name: Bruce Sparks
Title: Vice President
KING KNOB COAL CO., INC.
By /s/ Bruce Sparks
----------------------------------
Name: Bruce Sparks
Title: Vice President
BRONCO MINING COMPANY, INC.
By /s/ John Faltis
----------------------------------
Name: John Faltis
Title: President
<PAGE> 21
-21-
PATRIOT MINING COMPANY, INC.
By /s/ Bruce Sparks
----------------------------------
Name: Bruce Sparks
Title: Treasurer
JULIANA MINING COMPANY, INC.
By /s/ Bruce Sparks
----------------------------------
Name: Bruce Sparks
Title: Treasurer
PHILIPPI DEVELOPMENT, INC.
By /s/ Bruce Sparks
----------------------------------
Name: Bruce Sparks
Title: Treasurer
ANKER POWER SERVICES, INC.
By /s/ Bruce Sparks
----------------------------------
Name: Bruce Sparks
Title: Executive Vice President
ADVANTAGE ENERGY CORPORATION
By /s/ Bruce Sparks
----------------------------------
Name: Bruce Sparks
Title: Vice President
MARINE COAL SALES COMPANY
By /s/ Bruce Sparks
----------------------------------
Name: Bruce Sparks
Title: Treasurer
PINE VALLEY COAL COMPANY, INC.
By /s/ Bruce Sparks
----------------------------------
Name: Bruce Sparks
Title: Treasurer
<PAGE> 22
-22-
ANKER DEVELOPMENT, INC.
By /s/ Bruce Sparks
----------------------------------
Name: Bruce Sparks
Title: Vice President
HEATHER GLEN RESOURCES, INC.
By /s/ Bruce Sparks
----------------------------------
Name: Bruce Sparks
Title: Treasurer
BECKLEY SMOKELESS LIMITED LIABILITY
COMPANY
By /s/ Bruce Sparks
----------------------------------
Name: Bruce Sparks
Title: Manager
ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK,
as Administrative Agent
By /s/ Peter M. Ling
----------------------------------
Title: Vice President
<PAGE> 23
AMENDMENT NO. 1
AMENDMENT NO. 1 dated as of April 30, 1997, between ANKER COAL
GROUP, INC., a corporation duly organized and validly existing under the laws of
the State of Delaware (the "Company"); each Person listed on the signature pages
hereto under the caption "Subsidiary Guarantor" (individually, a "Subsidiary
Guarantor" and, collectively, the "Subsidiary Guarantors" and, together with the
Company, the "Obligors"); each of the lenders that is a party to the Credit
Agreement referred to below (individually, a "Bank" and, collectively, the
"Banks"); and THE CHASE MANHATTAN BANK, as agent for the Banks (in such
capacity, together with its successors in such capacity, the "Administrative
Agent").
The Company, the Subsidiary Guarantors, the Banks and the
Administrative Agent are parties to a Credit Agreement dated as of August 12,
1996 (the "Credit Agreement"), providing, subject to the terms and conditions
thereof, for loans to be made by said Banks to the Company in an aggregate
principal amount not exceeding $115,000,000. The Company and the Subsidiary
Guarantors have requested that the Credit Agreement be amended to increase the
aggregate amount of the Commitments thereunder from $115,000,000 to
$135,000,000, and in certain other respects, and the Banks and the
Administrative Agent have agreed so to amend the Credit Agreement as hereinafter
set forth. Accordingly, the parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this
Amendment No. 1, terms defined in the Credit Agreement (as amended hereby) are
used herein as defined therein.
Section 2. Amendments. Subject to the satisfaction of the conditions
precedent specified in Section 5 below, but effective as of the date hereof (the
"First Amendment Effective Date"), the Loan Documents shall be amended as
follows:
2.01. References in the Credit Agreement (including references to
the Credit Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed
to be references to the Credit Agreement as amended hereby. References in the
Security Agreement (including references to the Security Agreement as amended
hereby) to "this Agreement" (and indirect references such as "hereunder",
"hereby", "herein" and "hereof") shall be deemed to be references to the
Security Agreement as amended hereby. References in the Security Agreement to
the Credit Agreement shall be deemed to be references to the Credit Agreement as
amended hereby. References in the Security
<PAGE> 24
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Agreement to the Loan Documents (or any one of the Loan Documents) shall be
deemed to be references to the Loan Documents as amended hereby. References in
the Joinder Agreement to the Credit Agreement and to the Security Agreement
shall be deemed to be references to the Credit Agreement and Security Agreement
as amended hereby. References in the Deeds of Trust to the Credit Agreement
shall be deemed to be references to the Credit Agreement as amended hereby.
References in the Deeds of Trust to the Loan Documents (or any one of the Loan
Documents) shall be deemed to be references to the Loan Documents as amended
hereby. References in the Loan Documents to "the Notes" shall be deemed to
include reference to the New Notes under and as defined in Section 5.02 hereof.
2.02. The reference in the second paragraph of the preamble of the
Credit Agreement to "$115,000,000" is amended to read "$135,000,000".
2.03. Section 1.01 of the Credit Agreement shall be amended by
adding the following new definitions (to the extent not already included in said
Section 1.01) and inserting the same in the appropriate alphabetical locations
and amending the following definitions (to the extent already included in said
Section 1.01), as follows:
"First Amendment Effective Date" shall have the meaning
assigned to such term in Amendment No. 1 to this Agreement.
"Hillman Sale-Leaseback" shall mean the sale and leaseback of the
approximately 200,000,000 tons of coal reserves acquired in the Hillman
Acquisition.
"Hillman Acquisition" shall mean the acquisition of approximately
200,000,000 tons of coal reserves located in Taylor County, West Virginia,
from the Hillman Coal Company, for a purchase price of approximately
$6,700,000.
"Initial Tranche B Term Loan Commitment" shall mean, as to each
Tranche B Term Loan Bank, the obligation of such Tranche B Term Loan Bank
to make a single disbursement of a Tranche B Term Loan on the date that
the initial Tranche A Term Loans are made hereunder in a principal amount
up to but not exceeding the amount set opposite the name of such Tranche B
Term Loan Bank on the signature page of this Agreement (as the same may be
reduced from time to time pursuant to Section 2.04).
<PAGE> 25
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"New Allegheny Property" shall mean, collectively, approximately
23,000,000 million tons of minable coal reserves, cleaning plant and coal
blending facility in Grant and Mineral Counties, West Virginia, together
with a six-year long term coal sales contract to deliver 456,000 tons of
coal per year, and a five-year long term coal sales contract to deliver
300,000 tons of coal per year to the Mt. Storm Station.
"Spruce Fork Development" shall mean the acquisition of
approximately 10,000,000 tons of low sulfur coal reserves (the "Spruce
Fork Reserves") and approximately 21,000,000 tons of low sulfur coal
reserves (the "Hawthorne Coal Company, Inc. Reserves") in Upshur County,
West Virginia and the refurbishment of the Hawthorne Coal Company, Inc.
preparation plant in Upshur County, West Virginia, for an aggregate
acquisition and refurbishment cost of approximately $14,100,000 during the
period from the First Amendment Effective Date through December 31, 1999.
"Stony River Project" shall mean the lease of approximately
54,000,000 tons of low sulfur coal in Grant County, West Virginia and the
development of an underground mine to mine those reserves.
"Supplemental Tranche B Term Loan Commitment" shall mean, as to each
Tranche B Term Loan Bank, the obligation of such Tranche B Term Loan Bank
to make a single disbursement of a Tranche B Term Loan on the First
Amendment Effective Date in a principal amount up to but not exceeding the
amount set opposite the name of such Tranche B Term Loan Bank on Schedule
1 of Amendment No. 1 hereto (as the same may be reduced from time to time
pursuant to Section 2.04).
"Tranche A Term Loan Commitment" shall mean, as to each Tranche A
Term Loan Bank, the obligation of such Tranche A Term Loan Bank to make
Tranche A Term Loans, in an aggregate principal amount up to but not
exceeding the amount set opposite the name of such Tranche A Term Loan
Bank on Schedule 1 of Amendment No. 1 hereto (as the same may be reduced
from time to time pursuant to Section 2.04).
"Tranche A Term Loan Commitment Termination Date" shall
mean August 15, 1997.
"Tranche B Principal Payment Dates" shall mean (a) the twenty -nine
consecutive Quarterly Dates beginning on the Quarterly Date falling on or
nearest to June 30, 1997 and
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ending on the Quarterly Date falling on or nearest to June 30, 2004.
"Tranche B Term Loan Banks" shall mean, (a) the Banks having Initial
Tranche B Term Loan Commitments and Supplemental Tranche B Term Loan
Commitments and (b) thereafter, the Banks from time to time holding
Tranche B Term Loans after giving effect to any assignments thereof
permitted by Section 12.06(b) hereof.
"Tranche B Term Loan Commitment" shall mean, as to each Tranche B
Term Loan Bank, collectively, the Initial Tranche B Term Loan Commitment
of such Bank and the Supplemental Tranche B Term Loan Commitment of such
Bank.
"Unrestricted Subsidiaries" shall mean Anker Capital, Simba Group,
Inc., and U.S. Coal Sales Company, LLC, and their respective Subsidiaries
created or acquired after the Closing Date."
"Vindex Project" shall mean the acquisition and development of the
New Allegheny Property and the Stony River Project for an aggregate
acquisition and development cost of approximately $13,100,000 during the
period from the First Amendment Effective Date through December 31, 1999.
2.04. The definition of "Available Supplemental Amount" in Section
1.01 of the Credit Agreement is hereby amended by replacing "$20,000,000" with
"$17,750,000".
2.05. The definition of "Available Supplemental Amount" in Section
1.01 of the Credit Agreement is hereby amended by adding at the end thereof:
"plus (vii) in the event that the purchase by the Company or by any
Subsidiary of Simba Group, Inc. of Oak Mountain Energy LLC is not
consummated, the aggregate amount (not exceeding the lesser of
$5,000,000 or the amount theretofore deducted pursuant to the
preceding clause (v) in connection with the anticipated purchase of
Oak Mountain Energy LLC) received by the Company and its Restricted
Subsidiaries in cash by reason thereof"
2.06. The definition of "Debt Issuance" in Section 1.01 of the
Credit Agreement is hereby amended by deleting "and" at the end of clause (i)
thereof, inserting "and" at the end of
<PAGE> 27
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clause (ii) thereof and inserting a new clause (iii) thereto reading as
follows:
"(iii) Capital Lease Obligations incurred as part of the Hillman
Sale-Leaseback"
2.07. The definition of "Disposition" in Section 1.01 of the Credit
Agreement is hereby amended by inserting after clause (v) thereof "and (vi) the
Hillman Sale-Leaseback, provided that the Hillman Sale-Leaseback occurs prior to
December 31, 1998".
2.08. The definition of "Tranche B Term Loans" in Section 1.01 is
hereby amended by adding the following at the end thereof:
"The "Tranche B Term Loan" of each Bank shall mean, collectively,
both disbursements of the loan made by such Bank provided for by
Section 2.01(c) hereof."
2.09. Section 2.01(c) of the Credit Agreement is hereby amended to
read as follows:
"(c) Tranche B Term Loans. Each Tranche B Term Loan Bank
severally agrees, on the terms and conditions of this Agreement, to
make a term loan to the Company in Dollars in two disbursements, the
first of which shall be made on the date that the initial Tranche A
Term Loans are made hereunder in an amount equal to the Initial
Tranche B Term Loan Commitment of such Bank as then in effect and
the second of which shall be made on the First Amendment Effective
Date in an amount equal to the Supplemental Tranche B Term Loan
Commitment of such Bank as then in effect. Subject to the terms and
conditions of this Agreement, the Company may Convert Tranche B Term
Loans of one Type into Tranche B Term Loans of another Type (as
provided in Section 2.09 hereof) or Continue Tranche B Term Loans of
one Type as Tranche B Term Loans of the same Type (as provided in
Section 2.08 hereof). Tranche B Term Loans that are prepaid or
repaid may not be reborrowed.
2.10. Section 2.04(c) of the Credit Agreement is hereby amended by
deleting the first two sentences thereof.
2.11. Section 2.04(d) of the Credit Agreement is hereby amended to
read as follows:
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"(d) Any portion of the Initial Tranche B Term Loan Commitments not
used on the Closing Date shall be automatically terminated. Any
portion of the Supplemental Tranche B Term Loan Commitments not used
on the First Amendment Effective Date shall be automatically
terminated."
2.12. Section 3.01(b) of the Credit Agreement is hereby amended to
read as follows:
"(b) The Company hereby promises to pay to the Administrative Agent
for account of each Tranche A Term Loan Bank the principal of such Bank's
Tranche A Term Loans in twenty-four installments payable on the Tranche A
Principal Payment Dates as follows:
<TABLE>
<CAPTION>
Tranche A Principal Payment Date
falling on or nearest to: Amount of
------------------------- ---------
Installment ($)
---------------
<S> <C>
September 30, 1997 1,750,000
December 31, 1997 1,750,000
March 31, 1998 1,881,579
June 30, 1998 1,881,579
September 30, 1998 2,150,376
December 31, 1998 2,150,376
March 31, 1999 2,150,376
June 30, 1999 2,150,376
September 30, 1999 2,687,970
December 31, 1999 2,687,970
March 31, 2000 2,687,970
June 30, 2000 2,687,970
September 30, 2000 3,225,564
December 31, 2000 3,225,564
March 31, 2001 3,225,564
June 30, 2001 3,225,564
September 30, 2001 3,494,361
December 31, 2001 3,494,361
March 31, 2002 3,494,361
June 30, 2002 3,494,361
September 30, 2002 5,375,940
December 31, 2002 5,375,940
March 31, 2003 5,375,940
June 30, 2003 5,375,938
</TABLE>
If the aggregate principal amount of the Tranche A Term Loans outstanding
at the close of business on the Tranche A Term Loan Commitment Termination
Date is less than
<PAGE> 29
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$75,000,000, the shortfall shall be applied to reduce the foregoing
installments ratably."
2.13. Section 3.01(c) of the Credit Agreement is hereby amended to
read as follows:
"(c) The Company hereby promises to pay to the Administrative Agent
for account of each Tranche B Term Loan Bank the principal of such Bank's
Tranche B Term Loan in twenty-nine installments payable on the Tranche B
Principal Payment Dates as follows:
<TABLE>
<CAPTION>
Tranche B Principal Payment Date
falling on or nearest to: Amount of
------------------------- ---------
Installment ($)
---------------
<S> <C>
June 30, 1997 50,000
September 30, 1997 50,000
December 31, 1997 50,000
March 31, 1998 88,071
June 30, 1998 88,071
September 30, 1998 88,071
December 31, 1998 88,071
March 31, 1999 88,071
June 30, 1999 88,071
September 30, 1999 88,071
December 31, 1999 88,071
March 31, 2000 88,071
June 30, 2000 88,071
September 30, 2000 88,071
December 31, 2000 88,071
March 31, 2001 88,071
June 30, 2001 88,071
September 30, 2001 88,071
December 31, 2001 88,071
March 31, 2002 88,071
June 30, 2002 88,071
September 30, 2002 88,071
December 31, 2002 88,071
March 31, 2003 88,071
June 30, 2003 88,071
September 30, 2003 8,190,609
December 31, 2003 8,190,609
March 31, 2004 8,190,609
June 30, 2004 8,190,611
</TABLE>
If the aggregate principal amount of the Tranche B Term Loans on the First
Amendment Effective Date is less than
<PAGE> 30
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$35,000,000, the shortfall shall be applied to reduce the foregoing
installments ratably."
2.14. Section 4.04 of the Credit Agreement is hereby amended by
replacing "$2,000,000" with "$1,000,000" and by replacing "a larger multiple of
$1,000,000" with "a larger multiple of $100,000".
2.15. Section 9.05 of the Credit Agreement is hereby amended by
replacing "and (v)" in the third paragraph thereof with ", (v) and (vi)".
2.16. Section 9.05 of the Credit Agreement is hereby amended by (i)
deleting "and" at the end of clause 9.05(c)(iii) thereof, (ii) inserting "and"
at the end of clause (d) thereof and (iii) inserting a new clause (e) thereto
reading as follows:
"(e) the Company or any of its Restricted Subsidiaries may
consummate (i) the Hillman Acquisition, (ii) the Spruce Fork
Development and (iii) the Vindex Project."
2.17. Section 9.07 of the Credit Agreement is hereby amended by
deleting clauses (f) and (g) (said clause (g) having been erroneously designated
as clause (f)) thereof and inserting in place thereof the following:
"(f) Subordinated Notes of the Company;
(g) Indebtedness of Spruce Fork Coal Corporation, Inc. to Elkay
Mining Co. outstanding on the First Amendment Effective Date in the
amount of approximately $1,900,000 incurred as a result of the
acquisition of the Spruce Fork Reserves; and
(h) additional Indebtedness not exceeding $1,000,000 at any one time
outstanding."
2.18. Section 9.07(d) of the Credit Agreement is hereby amended by
replacing each occurrence of "$115,000,000" with "$135,000,000".
2.19. Section 9.08(i) of the Credit Agreement is hereby amended by
deleting each occurrence of "reclamation" therein and replacing "$4,500,000"
with "$2,500,000".
2.20. Section 9.10(a) of the Credit Agreement is hereby amended to
read as follows:
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"(a) Leverage Ratio. The Company will not permit the Leverage Ratio
on any date to exceed the ratio set forth below opposite the period during
which such date falls:
Period Ratio
------ -----
From March 31, 1997
through June 30, 1997 4.65 to 1
From July 1, 1997
through December 31, 1997 4.25 to 1
From January 1, 1998
through June 30, 1998 4.00 to 1
From July 1, 1998
through December 31, 1998 3.50 to 1
From January 1, 1999
through December 31, 1999 3.00 to 1
Thereafter 2.50 to 1"
2.21. Section 9.10(b) of the Credit Agreement is hereby amended to
read as follows:
"(b) Fixed Charges Ratio. The Company will not permit the Fixed
Charges Ratio on any date to be less than the ratio set forth below
opposite the period during which such date falls:
From the First Amendment Effective
Date through June 30, 1998 0.50 to 1
From July 1, 1998
through December 31, 1999 0.80 to 1
Thereafter 1.00 to 1
2.22. Section 9.10(c) of the Credit Agreement is hereby amended to
read as follows:
"(c) Interest Coverage Ratio. The Company will not permit the
Interest Coverage Ratio on any date to be less than the ratio set forth
below opposite the period during which such date falls:
From the First Amendment Effective
<PAGE> 32
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Date through June 30, 1998 2.50 to 1
From July 1, 1998
through December 31, 1998 3.00 to 1
Thereafter 3.50 to 1
2.23. Section 9.11 of the Credit Agreement is hereby amended by
amending the schedule therein to read as follows:
"Fiscal Year Ending Amount
------------------- ------
1996 $12,000,000
1997 $37,000,000
1998 $13,000,000
1999 $20,000,000
2000 and each $14,000,000
fiscal year thereafter"
2.24. Section 9.13 of the Credit Agreement is hereby amended by
replacing "$14,000,000" with "$20,000,000".
2.25. Section 9.16(b) of the Credit Agreement is hereby amended by
inserting "the Hillman Acquisition, the Spruce Fork Development and the Vindex
Project" after "Acquisition".
2.26. Section 9.12 of the Credit Agreement is hereby amended by
inserting "the lesser of $50,000,000 or" before "50%".
2.27. Section 12.04(a)(i)(A) of the Credit Agreement is hereby
amended to read as follows:
"extend the time or waive any requirement for the reduction or
termination of any of the Commitments,"
2.28. Section 12.04 of the Credit Agreement is hereby amended by (i)
deleting "and" at the end of clause (a)(ii) thereof and (ii) inserting after
clause (a)(iii) a new clause reading as follows:
"and (iv) no modification, supplement or waiver shall increase or
extend the term of any of the Commitments of any Bank without the
consent of such Bank."
2.29 Section 12.04(b) of the Credit Agreement is hereby amended by
inserting "including, but not limited to, any dispositions referred to in any of
clauses (i) through (vi) of
<PAGE> 33
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the definition of "Disposition" in Section 1.01 hereof," after "Property
permitted hereunder".
2.30. Exhibit K to the Credit Agreement is hereby amended by
replacing "$115,000,000" with "$135,000,000" and by replacing "One Hundred
Fifteen Million Dollars" with "One Hundred Thirty-Five Million Dollars".
2.31. The last paragraph of Section 3 of the Security Agreement is
hereby amended to read as follows:
"Notwithstanding the foregoing, the Collateral does not and shall
not include the Remaining Preferred Stock, any shares of capital
stock of or other equity interests in any Unrestricted Subsidiary or
the rights of any Obligor under any equipment lease.
Section 3. Joinder. Each Person listed on the signature pages hereto under
the caption "New Subsidiary Guarantors" (each a "New Subsidiary Guarantor")
hereby:
(a) becomes a party to the Credit Agreement and the Security
Agreement as a Subsidiary Guarantor fully and completely the same as if
its signature were affixed to the Credit Agreement and the Security
Agreement;
(b) becomes a Subsidiary Guarantor under the Credit Agreement and
the Security Agreement with all of the rights and obligations of a
Subsidiary Guarantor thereunder and, without limiting the generality of
the foregoing, guarantees payment of the Secured Obligations as provided
in Section 6 of the Credit Agreement and hereby grants, ratifies and
confirms the security interest provided for by Section 3 of the Security
Agreement in all of its right, title and interest in, to and under the
Collateral (as defined in the Security Agreement) to secure the Secured
Obligations (as defined in the Security Agreement) owing by it, and the
terms and conditions of the Credit Agreement and the Security Agreement
are hereby incorporated by reference herein;
(c) represents and warrants that the representations and warranties
set forth in Section 8 of the Credit Agreement and in Section 2 of the
Security Agreement, to the extent relating to such New Subsidiary
Guarantor, are correct on and as of the date hereof.
<PAGE> 34
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Section 4. Representations and Warranties. The Company represents
and warrants to the Banks that the representations and warranties set forth in
Section 8 of the Credit Agreement are true and complete on the First Amendment
Effective Date as if made on and as of the date hereof and as if each reference
in said Section 8 to "this Agreement" and "the Notes" includes reference to this
Amendment No. 1 and to the New Notes. The aggregate amount of Investments made
by the Company and its Restricted Subsidiaries on the date hereof referred to in
clause (v) of the definition of "Available Supplemental Amount" in Section 1.01
of the Credit Agreement is $17,250,000.
Section 5. Conditions Precedent. As provided in Section 2 above, the
amendments to the Credit Agreement set forth in said Section 2 shall become
effective, as of the date hereof (or in the case of the amendment set forth in
Section 2.20 hereof, as of March 31, 1997), upon the satisfaction of the
following conditions precedent:
5.01. Execution by All Parties. This Amendment No. 1 shall have been
executed and delivered by each of the parties hereto.
5.02. Notes and Loans. The Company shall have delivered to the
Administrative Agent for each Bank with a Commitment that is increasing as a
result hereof (an "Increasing Bank"), in exchange for the related Note
heretofore delivered to such Bank pursuant to Section 2.08 of the Credit
Agreement, a new promissory note of the Company in substantially the form of
Exhibits A-2 or A-3 to the Credit Agreement, dated the date of the Note being
exchanged, payable to such Bank in a principal amount equal to its relevant
Commitment (as increased hereby) and otherwise duly completed, and each of such
promissory notes (a "New Note") delivered to the Increasing Banks shall
constitute a "Note" under the Credit Agreement as amended hereby. In addition,
the Company shall have borrowed from, and each of the Increasing Banks shall
have made Loans to, the Company, and (notwithstanding the provisions of Section
2.09 of the Credit Agreement requiring that prepayments be made ratably in
accordance with the principal amounts of the Loans held by the Banks) the
Company shall have prepaid Loans made by the other Banks in such amounts as
shall be necessary, together with accrued interest and any amounts payable under
Section 5.05 of the Credit Agreement, so that after giving effect to such Loans
and prepayments, the Loans shall be held by the Banks pro rata (by reference to
Class, Type and (if applicable) Interest Periods) in accordance with the
respective amounts of their related Commitments (as increased hereby).
<PAGE> 35
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5.03 Intercompany Notes. Each Restricted Subsidiary shall have
delivered to the Company (and the Company shall have delivered to the
Administrative Agent in pledge under the Security Agreement), in exchange for
the Intercompany Note heretofore delivered by such Restricted Subsidiary to the
Company, a new Intercompany Note of such Restricted Subsidiary in substantially
the form of Exhibit K to the Credit Agreement as amended hereby, dated the date
of the Intercompany Note being exchanged, payable to the Company and otherwise
duly completed, and each such new Intercompany Note shall constitute an
"Intercompany Note" under the Loan Documents as amended hereby.
5.04 Documents. The Administrative Agent shall have received the
following items, each of which shall be satisfactory to the Administrative Agent
in form and substance:
(1) Corporate Documents. Certified copies of the charter and
by-laws (or equivalent documents) of each Obligor (or, in the alternative,
a certification to the effect that none of such documents has been
modified since delivery thereof on the Closing Date pursuant to the Credit
Agreement) and of all corporate authority for each Obligor (including,
without limitation, board of director resolutions and evidence of the
incumbency of officers for each Obligor) with respect to the execution,
delivery and performance of this Amendment No. 1 and the Credit Agreement
as amended hereby and the loans under the Credit Agreement as amended
hereby, the New Notes and each other document to be delivered by each
Obligor from time to time in connection with the Credit Agreement as
amended hereby (and the Administrative Agent and each Bank may
conclusively rely on such certificate until it receives notice in writing
from each Obligor to the contrary).
(2) Officer's Certificate. A certificate of a Responsible Officer,
dated the First Amendment Effective Date, to the effect that, after giving
effect to this Amendment No. 1, no defaults shall have occurred and be
continuing.
(3) Security. Each Obligor shall have taken such action
(including, without limitation, delivery to the Administrative Agent
appropriately completed and duly executed copies of amended Security
Documents) as the Administrative Agent shall have requested in order to
perfect the security interests (subject to obtaining required consents on
a best efforts basis) created pursuant
<PAGE> 36
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to the Security Documents after giving effect to the amendments
contemplated hereby.
(4) Opinion of Special Pennsylvania Counsel to the Obligors. An
opinion of Klett, Lieber, Rooney & Schorling, special Pennsylvania counsel
to the Obligors, substantially in the form of Exhibit A hereto (and each
Obligor hereby instructs such counsel to deliver such opinion to the Banks
and the Administrative Agent).
(5) Opinion of Special West Virginia Counsel to the Obligors. An
opinion of Spilman, Thomas & Battle, special West Virginia counsel to the
Obligors, substantially in the form of Exhibit B hereto (and each Obligor
hereby instructs such counsel to deliver such opinion to the Banks and the
Administrative Agent).
(6) Compliance Certificate. A certificate of a Responsible Officer
of the Company evidencing, effective as of March 31, 1997, pro forma
compliance with the financial covenants.
(7) Borrowing Base Certificate. A Borrowing Base certificate
evidencing, effective as of March 31, 1997, the Company's ability to
borrow under the Credit Agreement.
(8) Fees. Evidence of the payment or delivery by the Company of such
fees as the Company shall have agreed to pay or deliver to any Bank or an
affiliate thereof or the Administrative Agent in connection with this
Amendment No. 1 or the Loan Documents, including, without limitation, the
reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special
New York counsel to Chase, in connection with the negotiation,
preparation, execution and delivery of this Amendment No. 1 or the Loan
Documents and the extensions of credit thereunder (to the extent that
statements for such fees and expenses shall have been delivered to the
Company.)
(9) Assignment of Demand Note and Deed of Trust. Execution and
delivery of the Assignment of Demand Note and Deed of Trust dated as of
April 30, 1997 by the Company and the Administrative Agent; in addition
the Company and Simba Group, Inc. shall have taken such other action
(including delivery to the Agent of that certain Demand Note (the "Demand
Note") dated as of February 28, 1997, executed and delivered by Simba
Group, Inc. to the Company and that certain Deed of Trust dated April 30,
1997 executed and
<PAGE> 37
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delivered by Simba Group, Inc. to the Company to secure repayment of the
Demand Note) as the Agent shall reasonably request in order to perfect,
protect or continue such assignment.
(10) Other Documents. Such other documents as the Administrative
Agent or any Bank or special New York counsel to Chase may reasonably
request.
Section 6. Miscellaneous. Except as herein provided, the Credit
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 1 may be executed in any number of counterparts, all of which taken together
shall constitute one and the same amendatory instrument and any of the parties
hereto may execute this Amendment No. 1 by signing any such counterpart. This
Amendment No. 1 shall be governed by, and construed in accordance with, the law
of the State of New York.
<PAGE> 38
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to be duly executed and delivered as of the day and year first above
written.
ANKER COAL GROUP, INC.
By _________________________
Title:
SUBSIDIARY GUARANTORS
ADVANTAGE ENERGY CORPORATION
By _________________________
Title:
ANKER ENERGY CORPORATION
By _________________________
Title:
ANKER GROUP, INC.
By _________________________
Title:
ANKER POWER SERVICES, INC.
By _________________________
Title:
BECKLEY SMOKELESS LIMITED
LIABILITY COMPANY
By _________________________
Title:
<PAGE> 39
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BRONCO MINING COMPANY, INC.
By _________________________
Title:
HAWTHORNE COAL COMPANY, INC.
(formerly known as Anker
Development, Inc.)
By _________________________
Title:
HEATHER GLEN RESOURCES, INC.
By _________________________
Title:
JULIANA MINING COMPANY, INC.
By _________________________
Title:
KING KNOB COAL CO., INC.
By _________________________
Title:
MARINE COAL SALES COMPANY
By _________________________
Title:
<PAGE> 40
- 18 -
PATRIOT MINING COMPANY, INC.
By _________________________
Title:
PHILIPPI DEVELOPMENT, INC.
By _________________________
Title:
PINE VALLEY COAL COMPANY, INC.
By _________________________
Title:
VANTRANS, INC.
By _________________________
Title:
NEW SUBSIDIARY GUARANTORS
MELROSE COAL COMPANY, INC.
By _________________________
Title:
NEW ALLEGHENY LAND HOLDING COMPANY,
INC.
By _________________________
Title:
<PAGE> 41
- 19 -
SPRUCE FORK COAL COMPANY, INC.
By _________________________
Title:
UPSHUR PROPERTY, INC.
By _________________________
Title:
VINDEX ENERGY CORPORATION
By _________________________
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent and as
Lender
By ________________________
Title:
BANK OF MONTREAL
By _________________________
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By _________________________
Title:
<PAGE> 42
- 20 -
MELLON BANK, N.A.
By _________________________
Title:
THE BANK OF NOVA SCOTIA
By _________________________
Title:
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By _________________________
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By _________________________
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By _________________________
Title:
<PAGE> 43
Schedule 1
<TABLE>
<CAPTION>
Supplemental
Tranche A Term Initial Tranche Tranche B Term
Loan B Term Loan Loan
Lender Commitment Commitment Commitment
______ ______________ _______________ _______________
<S> <C> <C> <C>
The Chase
Manhattan Bank $20,921,052.62 $ 5,000,000.00 $11,500,000.00
Bank of Montreal $14,736,842.11 $0
The First National
Bank of Chicago $14,736,842.11 $0 $0
Mellon Bank, N.A. $14,736,842.11 $0 $0
The Bank of Nova
Scotia $ 9,868,421.05 $0 $0
Van Kampen American
Capital Prime Rate $ 3,500,000.00
Income Trust $0 $10,000,000.00
Merrill Lynch $0 $ 5,000,000.00 $0
Senior Floating
Rate Fund, Inc.
</TABLE>
<PAGE> 44
EXHIBIT A
[Form of Opinion of Special New York
Counsel to the Obligors]
<PAGE> 45
EXHIBIT B
[Form of Opinion of Special West Virginia
Counsel to the Obligors]
<PAGE> 46
AMENDMENT NO. 2 TO SECURITY AGREEMENT
AMENDMENT NO. 2 dated as of September 22, 1997 to the Security Agreement
dated as of August 12, 1996, as amended by Amendment No. 1 dated as of April
30, 1997 (the "Security Agreement"), between Anker Coal Group, Inc. (the
"Company"), each Person listed on the signature pages hereto under the caption
"Subsidiary Guarantors" (individually, a "Subsidiary Guarantor" and,
collectively the "Subsidiary Guarantors" and, together with the Company, the
"Obligors") and The Chase Manhattan Bank, as agent for the lenders party to the
"Credit Agreement" referred to below (the "Administrative Agent").
The Company, the Subsidiary Guarantors, certain lenders and the
Administrative Agent are parties to a Credit Agreement dated as of August 12,
1996, as amended and restated by operation of the Amended and Restated Credit
Agreement dated as of September 22, 1997 (as so amended and restated, and as
the same may be further supplemented and otherwise modified and in effect from
time to time, the "Credit Agreement").
The Company, the Subsidiary Guarantors and the Administrative Agent wish
to amend the Security Agreement in certain respects, and accordingly, the
parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this Amendment No.
2, terms defined in the Security Agreement (as amended hereby) are used herein
as defined therein.
Section 2. Amendments to the Security Agreement. Upon the execution and
delivery by each of the parties hereto the Security Agreement shall be amended
as follows:
(a) References in the Security Agreement (including references to the
Security Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein" and "hereof") shall be
deemed to be references to the Security Agreement as amended hereby.
(b) The definition of "Motor Vehicles" in Section 1 of the Security
Agreement is hereby amended by adding at the end thereof ", but excluding Mobile
Equipment".
(c) Section 3(h) of the Security Agreement is hereby amended to read as
follows:
<PAGE> 47
"(h) all equipment (as defined in the Uniform Commercial Code), other
than Mobile Equipment, of such Obligor, including all Motor Vehicles
(herein collectively called "Equipment");"
(d) The last paragraph of Section 3 of the Security Agreement is
hereby amended to read as follows:
"Notwithstanding the foregoing, the Collateral does not and shall not
include (a) any shares of capital stock of or other equity interests in any
Unrestricted Subsidiary, (b) the rights of any Obligor under any equipment
lease, (c) Mobile Equipment or (d) any rights (other than rights to
payment) under any contract or other agreement relating to the sale or
other disposition of Inventory or Equipment, or to any contract mining
agreement or coal purchase or sales agreement, if and to the extent that
their inclusion in the Collateral hereunder would permit any party thereto
(other than the Obligors or Affiliates of the Obligors) to terminate same."
Section 3. Representation and Warranties. Each Obligor represents and
warrants to the Banks and the Administrative Agent that the representations and
warranties set forth in Section 2 of the Security Agreement are true and
complete as if made on the date hereof (or, if any such representation and
warranty is expressly stated to have been made as of a specific date, as of
such specific date).
Section 4. Ratification. By its signature below, each Obligor hereby
grants, ratifies and confirms the security interest provided for by Section 3
of the Security Agreement (as amended hereby) in all of its right, title and
interest in, to and under the Collateral (as defined in the Security Agreement
after giving effect to the amendments thereto contemplated by Section 2 hereof)
to secure the Secured Obligations owing by it.
Section 5. Miscellaneous. Except as herein provided, the Security
Agreement shall remain unchanged and in full force and effect. This Amendment
No. 2 may be executed in any number of counterparts, all of which taken
together shall constitute one and the same amendatory instrument and any of the
parties hereto may execute this Amendment No. 2 by signing any such
counterpart. This Amendment No. 2 shall be governed by, and construed in
accordance with, the law of the State of New York.
<PAGE> 48
- 3 -
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
be duly executed and delivered as of the day and year first above written.
COMPANY
ANKER COAL GROUP, INC.
By /s/ BRUCE SPARKS
-------------------------------
Title: Executive Vice President
SUBSIDIARY GUARANTORS
ANKER ENERGY CORPORATION
By /s/ BRUCE SPARKS
----------------------------
Title: Executive Vice President
ANKER GROUP, INC.
By /s/ BRUCE SPARKS
----------------------------
Title: Executive Vice President
ANKER POWER SERVICES, INC.
By /s/ MICHAEL M. MATESIC
----------------------------
Title: Treasurer
ANKER WEST VIRGINIA MINING COMPANY,
INC.
By /s/ MICHAEL M. MATESIC
----------------------------
Title: Treasurer
<PAGE> 49
- 4 -
BRONCO MINING COMPANY, INC.
By /s/ MICHAEL M. MATESIC
----------------------------
Title: Treasurer
HAWTHORNE COAL COMPANY, INC.
(formerly known as Anker
Development, Inc.)
By /s/ MICHAEL M. MATESIC
----------------------------
Title: Treasurer
HEATHER GLEN RESOURCES, INC.
By /s/ MICHAEL M. MATESIC
----------------------------
Title: Treasurer
JULIANA MINING COMPANY, INC.
By /s/ MICHAEL M. MATESIC
----------------------------
Title: Treasurer
KING KNOB COAL CO., INC.
By /s/ MICHAEL M. MATESIC
----------------------------
Title: Treasurer
MARINE COAL SALES COMPANY
By /s/ MICHAEL M. MATESIC
----------------------------
Title: Treasurer
<PAGE> 50
-5-
PATRIOT MINING COMPANY, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
VANTRANS, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
MELROSE COAL COMPANY, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
NEW ALLEGHENY LAND HOLDING COMPANY
INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
UPSHUR PROPERTY, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
VINDEX ENERGY CORPORATION
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
ANKER VIRGINIA MINING COMPANY, INC.
By /s/ MICHAEL M. MATESIC
-------------------------------
Title: Treasurer
<PAGE> 51
THE CHASE MANHATTAN BANK, as
Administrative Agent
By /s/ LAWRENCE PALUMBO, JR.
-------------------------------
Name: Lawrence Palumbo, Jr.
Title: Vice President
6
<PAGE> 1
EXHIBIT 10.3
ANKER COAL GROUP, INC.
-----------------
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: August 12, 1996
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I
ORGANIZATION OF THE COMPANY......................................... 2
1.1 Corporate Purpose.................................................................... 2
1.2 Governing Instruments................................................................ 2
1.3 Board of Directors - Number and Nomination........................................... 2
1.4 Board of Directors - Election........................................................ 3
1.5 Board of Directors -- Indemnification and Compensation............................... 4
1.6 Board of Directors -- Committees..................................................... 4
1.7 Corporate Action..................................................................... 5
1.8 Board of Directors -- Removal and Replacement........................................ 5
1.9 Board of Directors -- Vacancies...................................................... 5
1.10 Officers............................................................................. 5
1.11 Fundamental Issues................................................................... 6
1.12 Annual Budget and Business Plan...................................................... 9
1.13 Non-Competition; Business Opportunities.............................................. 10
1.14 Financial Statements; Stockholder Review............................................. 11
1.15 Management of Subsidiaries........................................................... 12
1.16 Compliance with Credit Agreement..................................................... 12
ARTICLE II
CHANGES IN CAPITAL.............................................. 13
2.1 Additional Equity.................................................................... 13
2.2 Anti-Dilution........................................................................ 13
ARTICLE III
RESTRICTIONS ON DISPOSITION OF STOCK..................................... 14
3.1 Restrictions......................................................................... 14
3.2 Purpose.............................................................................. 15
3.3 Legend............................................................................... 15
3.4 Lock-Up Period....................................................................... 16
3.5 Permitted Transfers.................................................................. 16
3.6 Right of First Refusal............................................................... 17
3.7 Tag Along Rights..................................................................... 20
3.8 Accession to Agreement............................................................... 21
ARTICLE IV
SALE OF SHARES IN CERTAIN INSTANCES..................................... 22
4.1 Triggering Events for Individual Parties............................................. 22
4.2 Change of Control.................................................................... 24
4.3 Triggering Event Option Period....................................................... 26
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
4.4 Determination of Fair Market Value................................................... 27
4.5 Closing of Share Sales and Purchases................................................. 28
4.6 Applicant Violator System............................................................ 28
ARTICLE V
SALE OF THE COMPANY; REGISTRATION RIGHTS................................... 29
5.1 Sale of the Company.................................................................. 29
5.2 Registration Rights.................................................................. 30
ARTICLE VI
MISCELLANEOUS................................................ 30
6.1 No Waiver of Rights.................................................................. 30
6.2 Term of Agreement.................................................................... 31
6.3 Assignment........................................................................... 31
6.4 Integration.......................................................................... 31
6.5 Severability......................................................................... 31
6.6 Notice............................................................................... 31
6.7 Certain Representations, Warranties and Covenants.................................... 33
6.8 Agent of the Funds................................................................... 36
6.9 Necessary Measures................................................................... 37
6.10 Relationship of the Stockholders and the Company..................................... 37
6.11 Governing Law........................................................................ 37
6.12 Remedies............................................................................. 37
6.13 Counterpart Originals................................................................ 37
EXHIBITS
A - Certificate of Incorporation
B - By-Laws
C - Certificate of Designation and Preferences of Class A Preferred Stock
D - Certificate of Designation and Preferences of Class B Preferred Stock
E - Certificate of Designation and Preferences of Class C Preferred Stock
F - Certificate of Designation and Preferences of Class D Preferred Stock
G - List of Stockholders and Nominees
H - Form of Accession Agreement
I - Form of Subordinated Note
J - Form of Subordinated Note
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
INDEX OF DEFINED TERMS
TERM SECTION
- ---- -------
<S> <C>
"Affected Stockholder" ............................. 4.1
"Affiliate" ........................................ 1.11
"Alternative Offer" ................................ 5.1
"Anker Holding" .................................... Preamble
"Anti-Dilution Ratio" .............................. 2.2
"Anti-Dilution Portion" ............................ 2.2
"Auction Bank" ..................................... 5.1
"Available Shares" ................................. 3.6
"AVS" .............................................. 4.6
"Board of Directors" ............................... 1.1
"change of control" ................................ 4.2
"Class A Preferred" ................................ 3.7
"Common Stock" ..................................... Recitals
"Company Sale Notice" .............................. 5.1
"Company" .......................................... Preamble
"Competition" ...................................... 1.13
"Credit Agreement" ................................. 1.14
"Exercising Stockholder" ........................... 3.6
"Fair Market Value" ................................ 4.4
"Faltis" ........................................... Preamble
"FRC" .............................................. Preamble
"Fundamental Disagreement" ......................... 4.5
"Fundamental Issue" ................................ 1.11
"Funds" ............................................ Preamble
"Individual Party" ................................. 4.1
"Initial Public Offering" .......................... 6.2
"Initiating Stockholder" ........................... 3.7
"JJF Group" ........................................ Preamble
"Key Man Policy" ................................... 4.1
"New Anker Holding Entity" ......................... 3.5
"New Equity Notice" ................................ 2.2
"New Equity Securities" ............................ 2.2
"New JJF Entity" ................................... 3.5
"New PPK Entity" ................................... 3.5
"non-cash consideration" ........................... 3.6
"Non-Initiating Stockholders" ...................... 3.7
"Objection Notice" ................................. 3.5
"Option Period" .................................... 3.6
"Permit Blocked" ................................... 4.6
"Permits" .......................................... 4.6
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
"Permitted Issuances" ......................... 1.11
"Permitted Issuance" .......................... 1.11
"Permitted Recourse Debt" ..................... 3.1
"Permitted Transferee ......................... 3.5(a)
"PPK Group" ................................... Preamble
"Pro Rata Portion" ............................ 3.6
"Purchase Offer" .............................. 3.6
"Purchasing Stockholder" ...................... 2.2
"Remaining Stockholders" ...................... 3.6
"Sale of the Company" ......................... 5.1
"Sale Notice" ................................. 3.6
"Sale Shares" ................................. 3.6
"Securities Act" .............................. 3.1
"Selling Stockholder" ......................... 3.6
"Shares" ...................................... Recitals
"Sparks" ...................................... Preamble
"Stockholders" ................................ Preamble
"Stockholding Entity" ......................... 4.1
"Subsidiary" .................................. 1.1
"Tag-Along Notice" ............................ 3.7
"Tag-Along Portion" ........................... 3.7
"Third Party Purchaser" ....................... 5.1
"Transfer Notice" ............................. 3.5
"Transfer" .................................... 3.1
"Triggering Event" ............................ 4.1
"Triggering Event Option Period" .............. 4.3
"Triggering Group" ............................ 5.1
</TABLE>
-iv-
<PAGE> 6
STOCKHOLDERS AGREEMENT
AGREEMENT dated this 12th day of August, 1996 by and among Anker Coal Group,
Inc., a corporation organized and existing under the laws of Delaware (the
"Company"); John J. Faltis, an individual residing in Morgantown, West Virginia
("Faltis"); P. Bruce Sparks, an individual residing in Morgantown, West Virginia
("Sparks"); 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");
First Reserve Corporation, a corporation organized and existing under the laws
of Delaware ("FRC"); and the following entities sometimes hereinafter referred
to as the "Funds": American Oil & Gas Investors, Limited Partnership, a limited
partnership organized and existing under the laws of the State of New York, AmGO
II, Limited Partnership, a limited partnership organized and existing under the
laws of the State of New York, First Reserve Fund V, Limited Partnership, a
limited partnership organized and existing under the laws of the State of
Delaware, First Reserve Fund V-2, Limited Partnership, a limited partnership
organized and existing under the laws of the State of Delaware, First Reserve
Fund VI, Limited Partnership, a limited partnership organized and existing under
the laws of the State of Delaware, and First Reserve Fund VII, Limited
Partnership a limited partnership organized and existing under the laws of the
State of Delaware (JJF Group, PPK Group, Anker Holding, and the Funds are
sometimes referred to hereinafter as the "Stockholders").
RECITALS
The number of shares of the Company's common stock, par value $.01 per share
("Common Stock"), held by each of its stockholders is as follows: JJF Group
holds 3,039 shares of Common Stock, PPK Group holds 514 shares of Common Stock,
Anker Holding holds 1,040 shares of Common Stock and the Funds collectively hold
5,407 shares of Common Stock as more fully set forth in Schedule I hereto. Anker
Holding holds all of the issued and outstanding shares of the Company's Class A
Preferred Stock. The Funds collectively hold all of the issued and outstanding
shares of the Company's Class B Preferred Stock as more fully set forth in
Schedule I hereto. (Shares of the Company's capital stock now issued and
outstanding, together with any type of equity securities of the Company issued
in the future, including without limitation Common Stock and Class A and Class B
Preferred Stock of the Company, but excluding Class C and D Preferred Stock of
the Company, are sometimes referred to hereinafter as "Shares".) Faltis holds
80% of the ownership interests in, and has voting control over, JJF Group.
Sparks holds 66% of the ownership interests in, and has voting control over, PPK
Group. Willem Rottier directly or indirectly holds 100% of the shares of, and
has voting control over, Anker Holding. FRC is the sole general partner and
manager of each of the Funds. The Stockholders collectively hold all of the
Company's issued and outstanding Shares.
-1-
<PAGE> 7
The Stockholders, Faltis, Sparks and FRC desire to enter into this Agreement for
the purpose of governing their relations with one another and with the Company
in their capacity as Stockholders of the Company and as principal owners or
managers of Stockholders of the Company.
ARTICLE I
ORGANIZATION OF THE COMPANY
1.1 Corporate Purpose
The purpose of the Company shall be to engage in such activities as the
Board of Directors of the Company (the "Board of Directors") may from
time to time determine are in the best interests of the Company. The
Company may own, organize and acquire Subsidiaries, and invest in other
entities, engaged in such activities. For the purposes of this
Agreement, the term "Subsidiary" shall mean any entity of which the
Company owns directly or indirectly more than 50% of the equity or
voting power.
1.2 Governing Instruments
The Stockholders acknowledge that the Certificate of Incorporation of
the Company is in the form of Exhibit A hereto, that the By-Laws of the
Company are in the form of Exhibit B hereto and that the Certificates
of Designation and Preferences of each of the Company's Class A, B, C
and D Preferred Stock are in the form of Exhibits C, D, E and F hereto
respectively. The affairs of the Company shall be conducted by its
Stockholders, Board of Directors and officers in accordance with the
provisions of its Certificate of Incorporation and By-Laws, as the same
may from time to time be amended, and in accordance with the provisions
of this Agreement.
1.3 Board of Directors - Number and Nomination
(a) The Board of Directors shall consist of seven individuals.
Initially, four Directors in the aggregate shall be nominated by the
Funds as provided in Section 1.3(b), one Director shall be nominated by
JJF Group, one Director shall be nominated by PPK Group and one
Director shall be nominated by Anker Holding. The Funds will have
the right to nominate in the aggregate four Directors as long as the
Funds hold in the aggregate more than 50% of the issued and outstanding
Common Stock. The Funds will have the right to nominate three Directors
in the aggregate as long as the Funds hold in the aggregate at least
10% of the issued and outstanding Common Stock and to nominate one
Director in the aggregate as long as they hold in the aggregate at
least 2% of the issued and outstanding Common Stock. Each of (i) JJF
Group, (ii) PPK Group and (iii) Anker Holding will be entitled to
nominate at least one Director for so long as such Stockholder holds at
least 2% of the issued and outstanding Common Stock.
-2-
<PAGE> 8
(b) Each of the Directors that the Funds are entitled to nominate under
Section 1.3(a) will be nominated by a single Fund. Prior to the
election of any directors or slate of directors, FRC, as agent for the
Funds, shall provide the Company with a nomination notice containing
the following information: (i) the name of each Fund nominating a
Director; (ii) the name of the Director nominated by each such Fund and
(iii) the names of the individuals to serve as non-voting observers
(pursuant to Section 1.3(c)) for the Funds that have not nominated a
Director.
(c) Each of the Funds that has not nominated a current member of the
Board of Directors pursuant to Section 1.3(b) at any particular time
shall be entitled to designate one person as a non-voting observer to
attend meetings of the Board of Directors. A member of the Board of
Directors may be designated pursuant to this Section 1.3(c) to serve in
the additional capacity of non-voting observer for a Fund not entitled
to nominate a director. The Company shall provide each such observer
with the same notice of, and information regarding, meetings of the
Board of Directors as that provided to Directors. Each such observer
shall be provided reasonable access to the books, records and
properties of the Company and shall be provided with a reasonable
opportunity to discuss the business and affairs of the Company with the
officers of the Company, provided that the Funds shall cause all
information relating to the Company that is provided to such observers
to be held in confidence. The Company may require any such non-voting
observers to enter into confidentiality agreements reasonably
satisfactory to the Company prior to their attending any meeting of the
Board of Directors or before being given access to the books, records
and properties of the Company or to any other information concerning
the Company.
(d) If the number of directors which a Stockholder or group of
Stockholders is entitled to nominate is reduced pursuant to Section
1.3(a) following a change in ownership percentages, the Directors
nominated by such Stockholder or group of Stockholders shall
immediately resign or be removed, and there shall occur, within five
days after such change in ownership, a new election of Directors
pursuant to this Section 1.3 and Section 1.4.
1.4 Board of Directors - Election
Each of the Stockholders shall vote its Common Stock and any other
voting shares held by it now or in the future for the election of
Directors nominated in accordance with the provisions of Section 1.3,
and shall take all actions as may be necessary or appropriate to cause
such persons to be elected as the members of the Board of Directors
and, subject to Section 1.8, to be maintained in such positions at all
times. If the number of directors nominated pursuant to Section 1.3 is
less than seven, the remaining Directors will be elected by a vote of
75% of the issued and outstanding Common Stock, and such remaining
Directors shall be unrelated to any of the Stockholders and shall be
familiar with the coal industry in the United States. As soon as
practicable following the execution of this Agreement, the Stockholders
shall take all necessary action to elect a
-3-
<PAGE> 9
Board of Directors in accordance with the provisions of Section 1.3 and
this Section 1.4. A list of the Stockholders, their initial nominees
for election as Directors, and their initial designees for non-voting
observers, is attached hereto as Exhibit G.
1.5 Board of Directors -- Indemnification and Compensation
The Company shall indemnify its officers and directors to the full
extent permitted by law and will maintain directors' and officers'
liability insurance at least in such form and at least at such levels
of coverage as are in place as of the date hereof if it can, in the
opinion of the Board of Directors based upon the advice of the Chief
Financial Officer of the Company, continue to be obtained at reasonable
cost. Directors will be reimbursed their reasonable out-of-pocket costs
of attending meetings of the Board of Directors and Directors who are
not officers of the Company or any Subsidiary will receive an annual
fee of $12,000. Non-voting observers (other than those who are also
Directors) attending meetings of the Board of Directors shall do so at
their own expense and shall not be entitled to receive a fee.
1.6 Board of Directors -- Committees
(a) The Board of Directors shall establish an Audit Committee
consisting entirely of Directors who are not the chief financial
officer of the Company or any Subsidiary, and such committee shall have
the functions as set forth in the By-laws attached hereto as Exhibit B.
The Board of Directors shall at no time establish an Executive
Committee or any committee having functions similar to those
customarily performed by executive committees.
(b) Unless otherwise agreed by a Stockholder (and except as may result
from the operation of Section 1.6(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.
(c) The creation of any committee (other than the Audit Committee as
set forth in Section 1.6(a)) of the Board of Directors or the
appointment of any members thereof shall require the unanimous vote of
the full Board of Directors.
(d) No Director shall receive additional compensation for serving on a
committee of the Board of Directors.
(e) The Stockholders and the Company shall take all such actions as may
be necessary to effect the intent of the foregoing provisions of this
Section 1.6.
-4-
<PAGE> 10
1.7 Corporate Action
Action by the Board of Directors shall be required for all important
matters affecting the Company and its businesses and operations,
including without limitation, any actions set forth in Section 1.11(a)
or 1.11(b) (regardless of whether the requirements of Section 1.11(b)
are otherwise applicable at such time) and any material deviations from
the Company's Annual Budget and Business Plan, except to the extent
that the Stockholders, as a matter of law or pursuant to the provisions
of the Certificate of Incorporation and By-Laws of the Company,
exercise authority to authorize corporate action. In order to allow
them to properly discharge their duties and responsibilities hereunder,
the Board of Directors shall meet at least once during each calendar
quarter, and the Stockholders shall hold a meeting of stockholders at
least once during each calendar year, in Morgantown, West Virginia or
at such other place within or without the United States as the
directors and the Stockholders, respectively, may from time to time
agree upon.
1.8 Board of Directors -- Removal and Replacement
In the event that a Stockholder who nominated a Director pursuant to
Section 1.3 requests during such Director's term by written notice to
the other Stockholders that such Director be removed and that a
different nominee named in such notice be elected to succeed such
Director on the Board of Directors, then such Director shall be removed
and such successor nominee shall be elected upon the affirmative vote
of a majority of the outstanding shares of Common Stock, and each
Stockholder hereby agrees to vote all of its Common Stock and to take
all such other actions as may be necessary or appropriate to effect
such removal in accordance with such request and to elect as a Director
the successor designee of such Stockholders.
1.9 Board of Directors -- Vacancies
In the event that a vacancy is created on the Board of Directors at any
time by the death, disability, retirement, resignation or removal of
any Director or for any other reason there shall exist or occur any
vacancy on the Board of Directors, each Stockholder hereby agrees to
take such actions as will result in the election or appointment as a
Director of an individual nominated to fill such vacancy and serve as a
Director by the Stockholder that had nominated (pursuant to Section
1.3) the Director whose death, disability, retirement, resignation or
removal resulted in such vacancy on the Board of Directors.
1.10 Officers
The officers of the Company, who shall continue to serve until the
election next following the date of this Agreement, shall be as
follows:
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<TABLE>
<S> <C> <C>
John J. Faltis -- Chairman of the Board,
President and Chief Executive
Officer
P. Bruce Sparks -- Executive Vice-President,
Treasurer and Secretary
Charlene Gaston -- Assistant Secretary
Michael Matesic -- Assistant Treasurer
</TABLE>
1.11 Fundamental Issues
(a) Actions by the Stockholders or the Board of Directors shall be
taken as provided by law or the Company's Certificate of Incorporation
or By-Laws, provided that commencing on the date hereof, for so long as
either (A) the Funds in the aggregate own 10% or more of the issued and
outstanding Common Stock or (B) 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 shall
not permit to be taken, any of the following actions (each a
"Fundamental Issue") without the favorable vote or written consent of
at least five-sevenths of the whole number of Directors of the Company
and, in the event that Stockholder approval also is required by law
with respect to such Fundamental Issue, the favorable vote or written
consent of the holders of more than two thirds of the total number of
issued and outstanding shares of Common Stock:
(i) Any sale, lease or exchange of 50% or more of the assets of
the Company in a single transaction or a series of related
transactions, including but not limited to real property,
goodwill or franchises.
(ii) Any merger or consolidation of the Company with or
into another entity or the liquidation or dissolution
of the Company.
(iii) Any amendment to the Certificate of Incorporation of the
Company.
(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 Company, except (A) the issuance by the
Company of securities upon the conversion and in accordance
with the terms of any securities convertible into other
securities of the Company, or upon the exercise and in
accordance with the terms of any options, warrants or rights
to acquire securities of the Company, in each case issued by
the Company either on or prior to the date hereof or in
accordance with the provisions of this Section 1.11(a)(iii),
but only to the extent that such conversion or exercise
rights are mandatory to the Company and not at the Company's
option, and (B) the issuance by the Company to key members
of management of the Company and its Subsidiaries, pursuant
to a management stock purchase plan or in the
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alternative a stock option plan, stock appreciation rights
plan or similar type of management incentive plan approved
by a majority of the Board of Directors, of Common Stock,
options to purchase Common Stock or stock appreciation
rights, provided that at no time shall the aggregate number
of shares of Common Stock 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 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 Company. The issuances
described in clauses (A) and (B) of this Section
1.11(a)(iii) are hereinafter collectively referred to as
"Permitted Issuances".
(v) Subject to Section 1.11(b), any redemption, repurchase or
other acquisition of capital stock or other equity
securities of the Company (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 Company when such
purchase or redemption is required to be made by the Company
in accordance with the terms of such securities or the
agreements under which they were issued.
(vi) Entering into or engaging in business or entering into any
transactions with any Stockholder or any Affiliate of a
Stockholder (other than the Company and its Subsidiaries)
other than any transaction involving the sale, purchase,
exchange or trading of coal or coal-related products between
the Company and (1) Anker Holding, (2) any of the Funds, or
(3) any Affiliate of Anker Holding or any of the Funds, in
the ordinary course of business through an arm's length
transaction. For purposes of this Agreement 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 Company with respect to the redemption,
repurchase or other acquisition of capital stock or other equity
securities of the Company (or any option, warrant or other right to
acquire such capital stock or other equity securities) from any
Stockholder or any Affiliate thereof and any 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 Company when such purchase or redemption is required to
be made by the Company in accordance with the terms of such
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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 (or with
respect to any Permitted Transferee, the Stockholder that transferred
the Shares to such Permitted Transferee).
(c) In the event that the Funds in the aggregate own 50% or less of the
issued and outstanding Common Stock 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, each of the
following additional actions also shall be deemed a Fundamental Issue
for purposes of the restrictions set forth in Section 1.11(a) above:
(i) Any sale, lease, exchange, transfer or other
disposition by the Company, of (A) any of the
outstanding capital stock or other equity securities
of any Subsidiary (except to a wholly-owned
Subsidiary of the Company) 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 Company for a
consideration in excess of $2 million in a single
transaction or a series of related transactions.
(iii) Subject to Section 1.11(b), any financing,
refinancing or other incurrence of indebtedness by
the Company (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
Credit Agreement in the ordinary course of business.
(iv) Any capital expenditure by the Company not provided
for in an annual budget for the then-current fiscal
year of the Company approved by the Board of
Directors in accordance with Section 1.12 hereof
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 Company and its Subsidiaries
in such fiscal year of the Company, in excess of $2
million.
(v) Any amendment to or modification or repeal of any provision
of the By-Laws of the Company which would materially alter
the rights of any Stockholder.
(vi) Any amendment to the employment agreements of Faltis
or Sparks.
(vii) The dissolution of the Company; the adoption of a
plan of liquidation of the Company; any action by the
Company to commence any suit, case proceeding or
other action (I) under any existing or future law of
any jurisdiction relating
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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 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 Company (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 Company (other
than through Anker Capital Corporation).
(c) Anything contained in Sections 1.11(a) and 1.11(c) to the contrary
notwithstanding, the authorization of a sale of the Company pursuant to
Section 5.1 or any action necessary or appropriate in connection with
such a sale shall not constitute a "Fundamental Issue" subject to the
provisions of this Section 1.11.
1.12 Annual Budget and Business Plan
The management of the Company shall present to the Board of Directors a
budget and business plan for the Company and each of its Subsidiaries
for each fiscal year of the Company not later than 45 days before the
beginning of such fiscal year. Any matter included in such budget or
business plan approved by the Board of Directors shall not require
further approval pursuant to the provisions of Section 1.7; it being
understood that a matter will be deemed to be included in such budget
and business plan and approved for purposes hereof if the specific
expenditure is identified in the budget and business plan and is made
on terms that are not materially inconsistent with the terms of the
identified expenditure. To the extent any such matter constitutes a
Fundamental Issue, such matter shall require specific approval in
accordance with the provisions of Section 1.11 either at the time the
budget or business plan is approved or at some other time prior to the
implementation of such matter by the Company. If no budget and business
plan is approved by the beginning of such fiscal year, the management
will have the authority to continue in the ordinary course the business
in accordance with the last previously approved annual budget and
business plans as modified for changes in business circumstances and
changes in the general level of costs in the industry, the replacement
of equipment in the ordinary course of business, and the maintenance
through new acquisitions in the ordinary course of business of normal
reserves of unmined coal; provided that no action shall be taken by the
Company without the prior
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<PAGE> 15
approval of the Board of Directors (and any approval required pursuant
to Section 1.11) which either constitutes a Fundamental Issue as set
forth in Section 1.11(a) or is listed as a Fundamental Issue other than
in Section 1.11(c)(iv) (regardless of the percentage of Common Stock
held by the Funds at such time), whether or not such action or similar
actions were included in the last annual budget and business plan
approved by the Board of Directors.
1.13 Non-Competition; Business Opportunities
(a) Each Stockholder shall cause its Restricted Entities not to engage
in Competition. For the purposes of this Section 1.13, "Competition"
shall mean engaging in any business in the states of West Virginia,
Maryland or Alabama involving the purchase for resale, sale, operation
or maintenance for resale of coal, coal reserves, coal inventories,
coal mines, coal mining operations, coal processing operations,
processing or disposing of ash produced from the consumption of coal;
the conduct or performance of coal mining, coal loading, coal
processing or contract coal mining or coal processing; the employment
of independent contractors in connection with any of the foregoing; or
the conduct of coal trading. In addition, no Stockholder or any
Restricted Entity of any Stockholder shall make any investments of any
kind in any entity or business which at the time of such investment is
engaged in Competition or which, to such Stockholder's knowledge after
reasonable inquiry has the intention of engaging in Competition in the
future. For purposes of this Section 1.13, "Restricted Entities" shall
mean: (i) with respect to the Funds, FRC or any entity in which FRC or
one or more funds managed by FRC directly or indirectly in the
aggregate beneficially own more than 50% of the voting interests or
otherwise hold more than 50% of the voting power or (in the case of
limited partnership) owns more than 50% of the partnership interests;
(ii) with respect to JJF Group and its Permitted Transferees, Faltis
and any entity in which Faltis directly or indirectly beneficially owns
more than 50% of the voting interests or otherwise holds more than 50%
of the voting power or (in the case of limited partnerships) owns more
than 50% of the partnership interests; (iii) with respect to PPK Group
and its Permitted Transferees, Sparks and any entity in which Sparks
directly or indirectly beneficially owns more than 50% of the voting
interests or otherwise holds more than 50% of the voting power or (in
the case of limited partnerships) owns more than 50% of the partnership
interests; (iv) with respect to Anker Holding and its Permitted
Transferees, Willem Rottier and any entity in which Willem Rottier
directly or indirectly beneficially owns more than 50% of the voting
interests or otherwise holds more than 50% of the voting power or (in
the case of limited partnerships) owns more than 50% of the partnership
interests.
(b) Each Stockholder that becomes aware of an existing or potential
business opportunity in one of the businesses described in Section
1.13(a) located in the states of West Virginia, Maryland or Alabama
shall offer such opportunity on an exclusive basis to the Company by
informing the President, Executive Vice-President or Board of Directors
of such opportunity. The foregoing shall not apply to any opportunity
of which
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a Stockholder first becomes aware in the performance by such
Stockholder or an Affiliate of such Stockholder of a fiduciary capacity
(other than in a capacity as a fiduciary of the Company or such
Stockholder).
1.14 Financial Statements; Stockholder Review
(a) The Company shall deliver to each party hereto (or, in the case of
the Funds, to their agent appointed pursuant to Section 6.8) (i) on a
timely basis monthly internal financial statements prepared by the
management of the Company, annual forecasts and budgets and material
periodic updates of annual budgets and (ii) to the extent not already
provided under clause (i), (A) copies of all documents, other than the
officer's certificate referenced therein, required to be delivered to
the Administrative Agent pursuant to Section 9.01(a) (as in effect on
the date hereof) of the Credit Agreement dated on or about the date of
this Agreement among parties including The Chase Manhattan Bank, N.A.
as Administrative Agent for the banks named therein (the "Credit
Agreement") at the same time such materials are required to be
delivered to the Administrative Agent and (B) copies of all documents,
required to be delivered to such Administrative Agent pursuant to
Section 9.01(c) of the Credit Agreement.
(b) The Company will permit representatives of the Stockholders at
their expense to visit and inspect all properties, books and records of
the Company and its Subsidiaries and to discuss the affairs, finances
and accounts of the Company with the principal officers of the Company,
its attorneys and auditors, all at such reasonable times and as often
as may reasonably be requested in order to enable the Stockholders to
reasonably monitor their investments in the Company. All information
obtained by Stockholders or their representatives will be kept
confidential and used only to monitor investments in the Company, and
the Company shall require each Stockholder or representatives of a
Stockholder obtaining access to information pursuant to this Section
1.14(b) to enter into a confidentiality agreement prohibiting the
disclosure of any such information or the use of such information other
than for purposes of monitoring investments in the Company. Pursuant to
such confidentiality agreement, each Stockholder shall agree to
guaranty the obligations of its representative or representatives and
shall indemnify the Company for any losses or damages arising from a
breach of such confidentiality agreement by such Stockholder or such
Stockholder's representative or representatives. The Company shall not
be required to provide any information or access to information
pursuant to this Section 1.14(b) until such a confidentiality agreement
reasonably satisfactory to the Company has been signed by the
Stockholder or Stockholder's representative requesting such
information. All representatives of a Fund given access to the Company
pursuant to this Section 1.14 shall be selected by such Fund's agent
appointed pursuant to Section 6.8 of this Agreement, and in no event
shall the limited partners of any Fund be entitled to select
representatives given access to the Company pursuant to this Section
1.14 or to have any access pursuant to this Section 1.14. No
representative or agent of any Stockholder under this Section 1.14(b)
shall be engaged directly or indirectly in Competition (as defined in
Section 1.13) in the states of West Virginia, Maryland or
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Alabama, nor shall any such representative or agent be an Affiliate of
any person or entity engaged in Competition in such states.
1.15 Management of Subsidiaries
The management of each Subsidiary of the Company shall be conducted by
its officers and directors or managers in a manner consistent with this
Agreement. Without infringing upon the exercise of their fiduciary
responsibilities to the Subsidiaries they manage, the officers,
directors and managers of each Subsidiary shall be instructed to
provide the Company and its Board of Directors with information
regarding important matters affecting the business, operations and
future plans of such Subsidiary, and to seek the Company's guidance
insofar as such matters affect the Company's interests as the holder of
an ownership interest in such Subsidiary. The parties hereto agree that
such matters should be reviewed by the Board of Directors of the
Company and that the views of the Board of Directors should be conveyed
to the relevant Subsidiary. Any matter affecting a Subsidiary which
would be a Fundamental Issue within the meaning of Section 1.11 if it
affected the Company shall be submitted for consideration by the Board
of Directors pursuant to Section 1.11.
1.16 Compliance with Credit Agreement
(a) The Stockholders agree that, notwithstanding any other provision of
this Agreement, at no time shall any Stockholder Transfer (as defined
in Section 3.1(a) hereof) any Shares if such Transfer would result in a
Default or an Event of Default (as defined in the Credit Agreement)
under the Credit Agreement.
(b) The Stockholders and the Company agree that, notwithstanding any
other provision of this Agreement or the Certificate of Incorporation
of the Company to the contrary, at no time shall the Company purchase,
redeem or otherwise acquire any Shares if such purchase, redemption or
other acquisition would result in a Default or an Event of Default (as
defined in the Credit Agreement) under the Credit Agreement; provided
that, in the event the Company is prevented by the provisions of this
Section 1.16(b) from purchasing, redeeming or otherwise acquiring any
Shares that it would otherwise be required to purchase, redeem or
otherwise acquire, such purchase, redemption or other acquisition shall
not be permanently excused, but only deferred until such time as it
would no longer itself result in a Default or an Event of Default under
the Credit Agreement.
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ARTICLE II
CHANGES IN CAPITAL
2.1 Additional Equity
None of the Stockholders shall be required to increase its investment
in the stockholders' equity of the Company without the prior written
consent of such Stockholder.
2.2 Anti-Dilution
(a) The Company shall not issue any Shares 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 as is required
by Section 2.2(b). Each Stockholder shall have the right but not the
obligation to purchase such Shares pursuant to such offer in accordance
with the provisions of Section 2.2(b), except that (i) no Stockholder
shall have such right with respect to (a) any securities offered to the
public in an Initial Public Offering (as defined in Section 6.2), (b)
any Permitted Issuance, or (c) any issuance of securities in
consideration of the acquisition of an operating business or coal
reserves (whether pursuant to an asset purchase, a stock purchase or a
purchase of partnership interests) approved by the Board of Directors
in accordance with this Agreement, and (ii) no Stockholder other than
Anker Holding shall have such right with respect to any issuance of
Common Stock in satisfaction of the Company's indemnification
obligations under Article 7 of the Stock Purchase Agreement dated on or
about the date hereof (the "Stock Purchase Agreement") among the Funds
and the Company; provided that, for the purpose of the exercise by
Anker Holding of anti-dilution rights as provided under the exception
set forth in clause (ii) of this Section 2.2(a), the price for the
purchase of such Shares by Anker Holding shall be the fair market value
at the time of the satisfaction of such indemnification obligations as
determined pursuant to Article 7 of the Stock Purchase Agreement and
shall be paid in cash. Securities that are subject to a Stockholder's
anti-dilution rights pursuant to this Section 2.2 are hereinafter
referred to as "New Equity Securities".
(b) In the event that the Company determines to issue New Equity
Securities, the Company shall notify the Stockholders of the terms of
the offer in writing (hereinafter referred to as a "New Equity
Notice"). The New Equity Notice shall specify the number of New Equity
Securities to be sold and the terms of the offer, and shall describe in
reasonable detail the characteristics of the New Equity Securities.
Each Stockholder shall have an option for a period of thirty (30) days
from the date of the New Equity Notice to purchase such Stockholder's
Anti-Dilution Portion (as defined below) of the New Equity Securities
on the terms and conditions set forth in the New Equity Notice and in
this Section 2.2. If any Stockholder wishes to purchase all or any
portion of such Stockholder's Anti-Dilution Portion (as defined below)
of the New Equity Securities, such Stockholder (a "Purchasing
Stockholder") shall give irrevocable written notice of such desire to
the Company and the other Stockholders within thirty (30) days after
the
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date of the New Equity Notice. The New Equity Securities shall be sold
to the Purchasing Stockholders pursuant to the following criteria: (i)
in the event that the New Equity Securities are of a type, class or
series previously issued by the Company and still outstanding, each
Stockholder's "Anti-Dilution Ratio" with respect to such type, class or
series of New Equity Securities shall equal a fraction the numerator of
which is the number of shares (or other applicable units) of such type,
class or series of securities held by such Stockholder immediately
prior to the date of the New Equity Notice and the denominator of which
is the number of shares (or other applicable units) of such type, class
or series of securities issued and outstanding immediately prior to the
date of the New Equity Notice; in all other events, each Stockholder's
Anti-Dilution Ratio shall equal a fraction the numerator of which is
the number of shares of Common Stock held by such Stockholder
immediately prior to the date of the New Equity Notice and the
denominator of which is the number of shares of Common Stock issued and
outstanding immediately prior to the date of the New Equity Notice;
(ii) the number of New Equity Securities of a type, class or series
multiplied by each Purchasing Stockholder's Anti-Dilution Ratio for
such type, class or series shall be termed the "Anti-Dilution Portion"
of such Purchasing Stockholder; and (iii) if a Purchasing Stockholder
has given notice of a desire to purchase an absolute number of a type,
class or series of New Equity Securities which is less than such
Purchasing Stockholder's Anti-Dilution Portion of such type, class or
series, such absolute number of New Equity Securities shall be
allocated to such Purchasing Stockholder. The Company shall sell to the
Purchasing Stockholders, and the Purchasing Stockholders shall
purchase, New Equity Securities (as allocated among the Purchasing
Stockholders pursuant to the immediately preceding sentence) on the
terms and conditions set forth in the New Equity Notice, and such
purchase and sale shall be effected within sixty (60) days following
the date of the New Equity Notice, provided that the consummation of
such purchase and sale with respect to all Purchasing Stockholders
shall be delayed to the extent necessary to comply with any regulatory
filings or other regulatory requirements applicable to the purchase by
any Purchasing Stockholder. Unless each Stockholder and the Company
otherwise agree in writing, all purchases of New Equity Securities by
Purchasing Stockholders pursuant to this Section 2.2 shall be
exclusively for cash consideration payable in immediately available
funds on the closing date of such purchase. Each Stockholder may assign
its rights under this Section 2.2 to any other Stockholder and to any
person or entity that would be a Permitted Transferee of such
Stockholder under Section 3.5(a).
ARTICLE III
RESTRICTIONS ON DISPOSITION OF STOCK
3.1 Restrictions
(a) No Stockholder shall Transfer any Shares except as provided in this
Article III or in Article IV. For purposes of this Agreement, to
"Transfer" shall mean to sell,
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assign, transfer, pledge or hypothecate or otherwise dispose, and any
such action shall constitute a "Transfer".
(b) Notwithstanding Section 3.1(a), each Stockholder shall have the
right to pledge or hypothecate Shares (including Shares being
purchased) to secure a borrowing the proceeds of which shall be used
solely to purchase additional shares of Common Stock by such
Stockholder pursuant to this Agreement from the Company or any person
or entity other than an Affiliate of such Stockholder; provided,
however, that no Stockholder may pledge or hypothecate pursuant to this
Section 3.1(b) (i) a number of Shares in excess of one and one-half
times the number of additional shares of Shares so purchased, (ii)
unless the lender (other than a lender already a party to this
agreement and bound by all of its terms) shall agree in writing that
such lender shall become a party to this Agreement and bound by all of
the terms hereof in the event that such lender forecloses on the
pledged or hypothecated Common Stock or otherwise becomes the owner of
such Common Stock and (iii) if, at the time of such pledge or
hypothecation, the aggregate number of shares of Common Stock pledged
or hypothecated by such Stockholder would result, in and of itself, in
a Change of Control under the Credit Agreement if all such shares
instead were sold to a non-Affiliate.
(c) Anything in this Article III to the contrary notwithstanding, no
Stockholder shall Transfer any Shares at any time unless (i) such
Transfer is pursuant to an effective registration statement under the
Securities Act of 1933, as amended, and the rules and regulations in
effect thereunder (the "Securities Act") or (ii) no such registration
under the Securities Act is required because of the availability of an
exemption from registration under the Securities Act and (except for
any Transfer pursuant to Section 3.5(a)) the Stockholder delivers to
the Company an opinion of counsel reasonably satisfactory to the Board
of Directors that such registration is not required.
3.2 Purpose
Each Stockholder acknowledges and agrees that the restrictions herein
on transfer of Shares are reasonable in view of the purpose and intent
of the parties.
3.3 Legend
To assist in effectuating the provisions of this Article III, the
Stockholders agree to the placement of the following legend on all
certificates certifying ownership of Shares so long as this Agreement
shall remain in effect as to the holders thereof:
"The shares represented by this certificate have not
been registered under the United States Securities
Act of 1933 and have not been acquired with a view
to, or in connection with, the sale or distribution
thereof. No such sale or distribution may be
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effected without an effective registration statement
relating thereto or an opinion of counsel reasonably
satisfactory to the Board of Directors of the issuer
that such registration is not required. In addition,
said shares are subject to the provisions of an
Agreement dated August 12, 1996 among the
Stockholders of Anker Coal Group, Inc., and may not
be sold, transferred, pledged, hypothecated or
otherwise disposed of except in accordance therewith.
A copy of said Agreement is on file at the office of
the Secretary of Anker Coal Group, Inc."
3.4 Lock-Up Period
Prior to the fifth anniversary of the date hereof, except as set forth
in Section 3.1 (b), Section 3.5, or Article IV, no Stockholder shall
Transfer any Shares without the prior written approval of all of the
other Stockholders.
3.5 Permitted Transfers
(a) Notwithstanding anything else in this Article III save Sections
3.1(c), 3.5(b) and 3.8, the following Transfers shall be permitted
without restriction: (i) a Transfer by any Fund to any Fund or to any
other investment fund of which FRC is the managing general partner,
provided that the transferor and transferee each represents and
warrants to the Company and the other parties to this Agreement that it
is its own "ultimate parent entity" within the meaning of the coverage
rules promulgated under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, 15 U.S.C. Section 18a as in effect on the date hereof;
(ii) a Transfer by JJF Group to Faltis or for Faltis's estate planning
purposes, provided that any such Transfer for estate planning purposes
is to an entity controlled by Faltis that satisfies the requirements of
Section 6.7(a)(ii) (a "New JJF Entity"); (iii) a Transfer by PPK Group
to Sparks or for Sparks's estate planning purposes, provided that any
such Transfer for estate planning purposes is to an entity controlled
by Sparks that satisfies the requirements of Section 6.7(b)(ii) (a "New
PPK Entity"); (iv) a Transfer by Anker Holding to any other entity,
provided that such other entity is directly or indirectly controlled by
AnkerCoal Group N.V. and more than 50% of the outstanding voting
securities and other equity interests of such entity are beneficially
owned by AnkerCoal Group N.V. (a "New Anker Holding Entity"); (v) the
Transfer from either of JJF Group or PPK Group to any of JJF Group, PPK
Group, Anker Holding or the Funds of any Shares acquired by JJF Group
or PPK Group, as the case may be, pursuant to Article 2; (vi) the
Transfer of Shares by either of JJF Group or PPK Group to Anker Holding
in connection with (any only to the extent of) the payment by Anker
Holding on behalf of the Company of any indemnity claim arising under
Article 7 of the Stock Purchase Agreement; and (vii) a Transfer to the
Company. (The transferees, other than the
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Company and transferees described in clauses (v) and (vi) listed in
this Section 3.5(a) are sometimes hereinafter referred to as "Permitted
Transferees" or a "Permitted Transferee".)
(b) Any Stockholder wishing to Transfer any Shares pursuant to Section
3.5(a) shall give at least 10 days' prior written notice of such
Transfer to the Company and each other party hereto (a "Transfer
Notice"). Such Transfer Notice shall specify the date and relevant
details of the proposed Transfer and shall be accompanied by a writing
in which the transferee represents and warrants to the Company and the
other parties hereto that the transferee is not Permit Blocked (as
defined in Section 4.5). No Transfer will be permitted pursuant to
Section 3.5(a) if such Transfer and/or the transferee's ownership of
Shares will result in an additional significant regulatory burden or
restriction on the activities of the Company, its Subsidiaries, or any
Stockholder or would result in the Company or any of its Subsidiaries
or a Stockholder incurring any additional tax liability or any other
significant liability of any kind. If any party hereto believes that
such Transfer is prohibited by the immediately preceding sentence, such
party may object to the Transfer by sending written notice (an
"Objection Notice") to the Stockholder who sent the Transfer Notice
within ten (10) days following the date of the Transfer Notice. Such
Objection Notice shall include in reasonable detail the basis of such
party's objections to the Transfer and any proposed modification to the
terms of the Transfer that would satisfy such party's objections.
3.6 Right of First Refusal
(a) Commencing on the fifth anniversary of the date hereof, if a
Stockholder receives a bona fide offer (a "Purchase Offer") to purchase
any or all of its Shares (other than pursuant to Section 3.5) and
wishes to accept such offer, such Stockholder (the "Selling
Stockholder") shall notify the Company and the other Stockholders (the
"Remaining Stockholders") of the terms of the offer in writing
(hereinafter referred to as a "Sale Notice"). The Sale Notice shall be
dated the date it is mailed or otherwise transmitted and shall specify
the number of Shares of the Selling Stockholder to be sold (the "Sale
Shares"), the name and address of the prospective purchaser and the
terms of such bona fide offer. Once given, no Sale Notice shall be
withdrawn. The Company and then the Remaining Stockholders shall have
an option for a period of 30 days (the "Option Period") after the date
of the Sale Notice to purchase the Sale Shares on the terms and
conditions set forth in the Sale Notice and in this Section 3.6;
provided, that the Company and any Remaining Stockholder purchasing
Sale Shares shall purchase such shares exclusively for cash payable in
immediately available funds at the closing of such purchase, and, in
the event all or any part of the Third Party Offer consisted of
consideration other than immediately available cash ("non-cash
consideration"), the Selling Stockholder, the Company (if it desires to
purchase any of the Sale Shares) and any Remaining Stockholders
desiring to purchase any of the Sale Shares shall negotiate in good
faith during the initial 20 days following the date of the Sale Notice
to reach agreement regarding the fair market value per share of such
non-cash consideration, and
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the price per Sale Share payable by the Company and any Remaining
Stockholder purchasing Sale Shares shall be an amount per Sale Share in
immediately available cash equal to the aggregate of the immediately
available cash consideration per share plus the fair market value per
share of the non-cash consideration offered in the Purchase Offer. In
the event that the Selling Stockholder, the Company (if it desires to
purchase any of the Sale Shares) and each Remaining Stockholder
desiring to purchase any of the Sale Shares are unable to reach
agreement regarding the fair market value of any non-cash consideration
offered in the Purchase Offer within the initial 20 days following the
date of the Sale Notice, the Selling Stockholder, each Remaining
Stockholder desiring to purchase any of the Sale Shares and the Company
(if it desires to purchase any Sale Shares) as expeditiously as
possible shall jointly retain a nationally recognized investment
banking firm with no material relationship to the Company or any
Stockholder to determine in writing, as expeditiously as possible, the
fair market value of the non-cash consideration, and such determination
shall be binding on the Selling Stockholder, the Company (if it desires
to purchase any Sale Shares) and any Remaining Stockholder desiring to
purchase any Sale Shares. In such event, the expense of such investment
banking firm shall be borne by the party (or parties) whose last
determination of fair market value during such 20 day period is
furthest from that of the investment banker and the Option Period shall
be extended by the length of time that elapses from when the parties
commence their efforts to retain an investment banking firm until the
Company and the Stockholders receive the investment banking firm's
final written valuation of the non-cash consideration. If the Company
wishes to purchase all or part of the Sale Shares, it shall give
irrevocable written notice of such desire to the Selling Stockholder
and the Remaining Stockholders within the Option Period. If any of the
Remaining Stockholders wishes to purchase all or any of the Sale
Shares, such Remaining Stockholder (an "Exercising Stockholder") shall
give irrevocable written notice of such desire to the Selling
Stockholder, the Company and the other Remaining Stockholders within
the Option Period. If, within the Option Period, the Company gives
notice that it wishes to purchase all of the Sale Shares, the Selling
Stockholder shall sell all of the Sale Shares to the Company and the
Company shall purchase all of the Sale Shares on the terms and
conditions set forth in the Sale Notice, and such purchase and sale
shall be effected within 60 days after the date of the Sale Notice;
provided that the consummation of such purchase and sale shall be
delayed to the extent necessary to comply with any regulatory filings
or other regulatory requirements applicable to the purchase and sale.
If the Company does not give notice within the Option Period of its
desire to purchase the Sale Shares or if the Company gives notice that
it wishes to purchase less than all of the Sale Shares, the remaining
Sale Shares not purchased by the Company shall be sold to the
Exercising Stockholders pursuant to the following criteria: (i) the
number of Sale Shares not purchased by the Company pursuant to this
Section 3.5 shall be termed the "Available Shares"; (ii) the number of
Available Shares multiplied by the number of shares of Common Stock
held by any Exercising Stockholder immediately prior to the date of the
Sale Notice and divided by the number of shares of Common Stock held by
all Exercising Stockholders immediately prior to the date of the Sale
Notice shall be termed the "Pro Rata Portion" of each such Exercising
Stockholder;
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(iii) if an Exercising Stockholder has given notice of a desire to
purchase an absolute number of Shares which is less than the Pro Rata
Portion of such Exercising Stockholder, such absolute number of Shares
shall be allocated to such Exercising Stockholder; (iv) if an
Exercising Stockholder has given notice of a desire to purchase an
absolute number of Shares equal to such Exercising Stockholder's Pro
Rata Portion, such absolute number of Shares shall be allocated to such
Exercising Stockholder; (v) each Exercising Stockholder giving notice
of a desire to purchase a number of Shares greater than its respective
Pro Rata Portion shall be allocated a number of Shares equal to the sum
of (A) such Exercising Stockholder's Pro Rata Portion plus (B) such
Exercising Stockholder's pro rata share of any Available Shares not
previously allocated pursuant to clauses (iii) and (iv) or this clause
(v), such pro rata share being determined as the percentage of shares
of Common Stock held by such Exercising Stockholder immediately prior
to the Sale Notice out of the total number of shares of Common Stock
held at such point by all Exercising Stockholders giving notices
described in this clause (v) of Section 3.6(a). The Selling Stockholder
shall sell to the Exercising Stockholders, and the Exercising
Stockholders shall purchase, the Sale Shares (as allocated among the
Exercising Stockholders pursuant to the immediately preceding sentence)
on the terms and conditions set forth in the Sale Notice, and such
purchase and sale shall be effected within sixty (60) days following
the date of the Sale Notice, provided that the consummation of such
purchase and sale with respect to the Company (if purchasing any Sale
Shares) and each Exercising Stockholder shall be delayed to the extent
necessary to comply with any regulatory filings or other regulatory
requirements applicable to the purchase by the Company or any
Exercising Stockholder. An Exercising Stockholder may make its notice
of its desire to exercise the option under this Section 3.6(a)
contingent on its ability to purchase all of or a certain number of the
Sale Shares. Any such contingent notice shall be deemed to have been
withdrawn if the contingency is not satisfied. Notwithstanding the
foregoing, the Selling Stockholder shall have no obligation to sell any
of the Sale Shares to the Company or any of the Remaining Stockholders
unless the Company and the Remaining Stockholders in aggregate have
offered, pursuant to this Section 3.6(a), to purchase all of the Sale
Shares. Each Stockholder may assign its rights under this Section 3.6
to any other Stockholder and to any person or entity that would be a
Permitted Transferee of such Stockholder under Section 3.5(a).
(b) If the Selling Stockholder does not receive notices from any of the
Remaining Stockholders or from the Company during the Option Period as
set forth in Section 3.6(a), or if the total number of Shares which the
Company and the Remaining Stockholders have offered in aggregate to
purchase (not including for this purpose any offers which are deemed to
have been withdrawn pursuant to Section 3.6(a)) is less than the number
of Sale Shares, the Selling Stockholder shall be free (subject to the
provisions of Section 3.7) for a period of one hundred twenty (120)
days after the expiration of the Option Period to sell the Sale Shares
to the prospective purchaser set forth in the Sale Notice on terms and
conditions no less favorable to the Selling Stockholder than those set
forth in the Sale Notice. If the Selling Stockholder fails to complete
the sale of the
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Sale Shares within such one hundred twenty (120) day period, the Sale
Shares shall again become subject to the restrictions of this Section
3.6.
3.7 Tag Along Rights
(a) Other than with respect to Transfers permitted by Section 3.5
(including sales to the Company pursuant to Article 4) or made as part
of an Initial Public Offering, each Stockholder shall have the right to
participate in the sale of Common Stock by another Stockholder (the
"Initiating Stockholder") to any third party (including without
limitation any sales pursuant to Section 3.6) at the same price per
share and on the same terms and conditions as the Initiating
Stockholder and in accordance with the provisions of this Section 3.7.
Each Stockholder shall have the right to sell to such third party a
number of shares of Common Stock so that (i) the fraction with a
numerator equal to the number of Shares sold to such third party by
such Stockholder and a denominator equal to the total number of shares
of Common Stock sold to such third party in such transaction is equal
to (ii) the fraction with a numerator equal to the number of shares of
Common Stock held by such Stockholder immediately prior to such
transaction and with a denominator equal to the total number of shares
of Common Stock outstanding immediately prior to such transaction. Each
Stockholder's (other than the Initiating Stockholder) maximum portion
of the total shares of Common Stock sold to a third party in such a
transaction, as determined in accordance with the preceding sentence,
is hereinafter referred to as such Stockholder's "Tag-Along Portion".
(b) An Initiating Stockholder shall notify the Company and each of the
other Stockholders (the "Non-Initiating Stockholders") of the
Initiating Stockholder's intent to sell shares of Common Stock to a
third party in writing (hereinafter referred to as a "Tag-Along
Notice"). The Tag-Along Notice shall specify the total number of shares
of Common Stock to be sold and the terms of the proposed sale. Each
Non-Initiating Stockholder shall have the option for a period of thirty
(30) days from the date of the Tag-Along Notice to include in the sale
to the third party, on the terms and conditions set forth in the
Tag-Along Notice and in this Section 3.7, up to a number of shares
equal to that Non-Initiating Stockholder's Tag-Along Portion. If any
Non-Initiating Stockholder wishes to participate in the sale to the
third party, such Non-Initiating Stockholder shall give irrevocable
written notice of such desire to the Initiating Stockholder and the
other Non-Initiating Stockholders within thirty (30) days after the
date of the Tag-Along Notice, specifying the number of shares of Common
Stock such Non-Initiating Stockholder wishes to sell (which shall in no
event exceed such Non-Initiating Stockholder's Tag-Along Portion). The
Initiating Stockholder and each participating Non-Initiating
Stockholder shall sell to the third party, on the terms and conditions
set forth in the Tag-Along Notice, the respective numbers of shares of
Common Stock determined in accordance with Section 3.7(a) and the
preceding sentences. Each of the Funds may assign its rights under this
Section 3.7 to another of the Funds and any other investment fund of
which FRC is the managing general partner.
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(c) Other than with respect to Transfers permitted under Section 3.5
(including sales to the Company pursuant to Article 4) or made as part
of an Initial Public Offering, Anker Holding, in addition to any rights
it may have under Section 3.7(a) shall have the right to have included
in the sale of Common Stock by an Initiating Stockholder to any third
party (including without limitation any sales pursuant to Section 3.6)
that number of shares of the Company's Class A Preferred Stock ("Class
A Preferred") such that (i) the ratio which the number of shares of
Class A Preferred so sold bears to the number of shares of Class A
Preferred outstanding immediately prior to such sale equals (ii) the
ratio which the number of shares of Common Stock being sold to such
third party (including any shares included pursuant to Section 3.7(a))
bears to the total number of shares of Common Stock outstanding
immediately prior to such sale to such third party. Anker Holding shall
give irrevocable written notice to the Company and each of the other
Stockholders of its exercise of the rights set forth in this Section
3.7(c) within 30 days after the date of the Tag-Along Notice. Such
notice shall specify the number of shares of Class A Preferred to be
sold. The purchase price per share of Class A Preferred purchased
pursuant to this Section 3.7(c) shall be equal to the liquidation
preference of such share, as determined pursuant to the Company's
Certificate of Incorporation.
(d) If any third party refuses to accept the terms set forth in Section
3.7(a), 3.7(b) or 3.7(c), the Initiating Stockholder shall not be
permitted to complete any Transfer to such third party.
3.8 Accession to Agreement
Any Stockholder which Transfers any or all of its Shares to any person
or entity not already a party to this Agreement shall, as a written
condition of such Transfer, require the transferee to become a party to
this Agreement, and no such transfer shall be valid unless such third
party has in writing agreed to be bound by all of the provisions of
this Agreement in an accession agreement substantially in the form set
forth as Exhibit H hereto. The Company shall execute such accession
agreement on its own behalf and on behalf of the other parties hereto
in the event of any Transfer permitted hereunder, and each party hereto
hereby irrevocably consents to such execution on its behalf. Any
transferee which is an investment fund managed by FRC shall be
considered a "Fund" and a "Stockholder" for all purposes hereunder and
shall have all the rights, obligations and duties of a Fund and a
Stockholder hereunder. Any transferee other than an investment fund
managed by FRC shall be considered a "Stockholder" hereunder commencing
on the date of such Transfer and shall have all the rights, obligations
and duties resulting under the terms of this Agreement.
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ARTICLE IV
SALE OF SHARES IN CERTAIN INSTANCES
4.1 Triggering Events for Individual Parties
(a) For the purposes of this Article 4, each of Faltis and Sparks shall
be referred to as an "Individual Party", and JJF Group, PPK Group and
their respective Permitted Transferees to which Shares have been
transferred shall be referred to as a "Stockholding Entity" with
respect to Faltis and Sparks respectively.
(b) The Company shall use its reasonable best efforts to purchase, own
and maintain at all times a "key man" life insurance policy with
respect to Faltis in the amount of $15 million and with respect to
Sparks in the amount of $5 million (each a "Key Man Policy" and
collectively the "Key Man Policies"). Each Key Man Policy shall be
maintained with a nationally recognized insurance firm reasonably
acceptable to Faltis and Sparks respectively. The premiums on each Key
Man Policy shall be kept current at all times. In the event an
Individual Party shall die:
(i) All proceeds from the Key Man Policy maintained by the
Company with respect to such Individual Party shall be
applied by the Company towards the purchase of the Shares of
such Individual Party's Stockholding Entity at the Fair
Market Value (as defined below) of such Shares. The Company
shall have the obligation to purchase a number of Shares
from such Individual Party's Stockholding Entity equal to
(a) the total proceeds from such Key Man Policy divided by
(b) the Fair Market Value per Share, and such Individual
Party's Stockholding Entity shall have the obligation to
sell such number of Shares to the Company. If the number of
Shares determined pursuant to the preceding sentence is not
a whole number, the number of Shares to be sold and
purchased shall be rounded to the nearest hundredth of a
Share. If such Stockholding Entity holds more than one class
or series of Shares and the Company does not have the
obligation to purchase all of such Shares pursuant to this
Section 4.1(b)(i), such Stockholding Entity shall determine
(and shall inform the Company in writing) which such Shares
shall be purchased pursuant to this Section 4.1(b)(i). The
closing for any Shares purchased pursuant to this Section
4.1(b)(i) shall take place within 30 days after the
determination of Fair Market Value pursuant to Section 4.4.
At such closing, such Individual Party's Stockholding Entity
shall deliver to the Company certificates representing the
Shares to be sold, duly endorsed for transfer, and the
Company shall deliver to such Individual Party's
Stockholding Entity (1) cash consideration (by certified or
official bank check or wire transfer of immediately
available funds) equal to the product of (A) the number of
Shares to be purchased and (B) the Fair Market Value per
Share and (2) if not all Shares are purchased pursuant to
this
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paragraph (i), a certificate representing the Shares held by
such Individual Party's Stockholding Entity and not
purchased at such closing.
(ii) Notwithstanding anything in this Agreement to the
contrary, such Individual Party's Stockholding Entity shall
have the right to pledge any Shares held by it and not
purchased pursuant to paragraph (i) of this Section 4.1(b)
as security against any loan obtained by such Stockholding
Entity in order to assist directly or indirectly in the
payment of the estate taxes of such Individual Party.
(iii) During the eight month period following the death of
such Individual Party, the Company shall have the option,
subject to Section 4.3(d), to purchase all (but not some) of
the Shares of such Individual Party's Stockholding Entity
not purchased pursuant to paragraph (i) of this Section
4.1(b) for a cash consideration equal to Fair Market Value
and payable in full at the closing for any such purchase.
The Company shall give written notice to such Stockholding
Entity at least 30 days prior to the expiration of such
eight month period and the closing for any such purchase
shall take place within 30 days after the date of such
notice or such later time as Fair Market Value has been
determined. If such closing does not occur during such
period due to any reason other than the bad faith of such
Stockholding Entity, such Stockholding Entity shall have no
obligation to sell any Shares pursuant to this Section
4.1(b)(iii).
(iv) Subject to Section 1.16, during the 120 day period
following the expiration of the eight month period
referenced in Section 4.1(b)(iii), such Individual Party's
Stockholding Entity shall have the right to require the
Company to purchase any Shares held by such Stockholding
Entity (and not purchased by the Company pursuant to
paragraph (i) or (iii) of this Section 4.1(b)) at Fair
Market Value. The purchase price for any Shares purchased
pursuant to this Section 4.1(b)(iv) shall be paid at the
option of the Company either in (1) immediately available
funds or (2) pursuant to a subordinated note substantially
in the form of Exhibit I hereto.
(v) Commencing on the last day of the eight month period
referenced in Section 4.1(b)(iii), such Individual Party's
Stockholding Entity shall have the right to Transfer any
Shares still held by it to any transferee (including another
Stockholder or the Company) for whatever price may be agreed
upon free and clear of any of the restrictions set forth in
Article 3 (except for the provisions of Section 3.1(c)) of
this Agreement. Any such transferee that is not already a
party to this Agreement shall not be required to become a
party in writing with the parties hereto to this Agreement;
provided, however, that any such transferee shall agree to
be bound by the provisions of Section 5.1 as if such
purchaser were a Stockholder hereunder.
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(c) In the event that an Individual Party shall become totally
disabled, or retire after age 60, the provisions of Section 4.3 shall
apply to the Shares of such Individual Party's Stockholding Entity. In
case of disagreement, total disability shall be determined by a panel
of three physicians composed of one selected by the Company, one
selected by the Individual Party in question, and one selected by the
two so selected. A determination by at least two of the three
physicians that such Individual Party is, or is not, totally disabled
shall be final and binding upon the parties. The costs of such
determination shall be shared equally by the Company and such
Individual Party.
(d) In the event that an Individual Party is terminated for cause by
(i) the Company or (ii) by the Subsidiary which is such Individual
Party's primary employer ("cause" being determined pursuant to such
Individual Party's primary employment contract with the Company or with
such Subsidiary as the case may be), or if an Individual Party
terminates his employment with (x) the Company or (y) with the
Subsidiary that is his primary employer, the provisions of Section 4.3
shall apply to the Shares of such Individual Party's Stockholding
Entity and, if that Individual Party is Faltis, after such termination
the Funds shall have the right to unilaterally trigger a sale of the
Company in accordance with the provisions of Section 5.1 (regardless of
whether five years have elapsed from the date hereof).
(e) (i) In the event that Sparks's employment with (x) the
Company or (y) with the Subsidiary which is the primary
employer of Sparks is terminated other than as set forth in
Section 4.1(d), the provisions of Section 4.3 shall apply to
the Shares of such Individual Party's Stockholding Entity.
(ii) In the event that Faltis's employment with (x) the
Company or (y) with the Subsidiary which is the primary
employer of Faltis is terminated other than as set forth in
Section 4.1(d), JJF Group shall have the right for a period
of 60 days after such termination unilaterally to trigger a
sale of the Company in accordance with the provisions of
Section 5.1 (regardless of whether such termination occurs
before the fifth anniversary of the date of this Agreement
and without requiring unanimous action with PPK Group).
(f) In the event of an occurrence listed in Section 4.1 (a "Triggering
Event"), the Stockholder to which such event pertains (the "Affected
Stockholder") shall promptly give notice to the Company and to all of
the other Stockholders of the event which gives rise to such obligation
within 30 days after the occurrence of such event, but failure to give
such notice timely shall not deprive any party of its rights or relieve
any party of its obligations under this Section 4.
4.2 Change of Control
(a) In the event of a change of control of any Stockholder, the
Stockholder shall immediately notify the Company of such change and the
Company shall have the right
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but not the obligation, for a period of 60 days after the Company
receives notice or otherwise becomes aware of such change of control,
to purchase all of such Stockholder's Shares at Fair Market Value. The
Company shall notify the Stockholder subject to a change of control of
the Company's decision to purchase such Stockholder's Shares pursuant
to this Section 4.2 by written notice to such Stockholder prior to the
end of the 60 day period following such change of control. In such
case, Fair Market Value shall be determined pursuant to Section 4.4 and
the closing for such purchase and sale of Shares shall take place
within 30 days following the determination of Fair Market Value
pursuant to such section.
(b) For the purposes of this Section 4.2, a "change of control" with
respect to any Stockholder other than the Funds shall be deemed to have
occurred if a person who, as of the date of this Agreement (or as of
the date of such Stockholder's accession to this Agreement), holds
directly or indirectly more than 50% of the voting power of a
Stockholder ceases to hold directly or indirectly more than 50% of such
voting power. For the purposes of this Section 4.2, the death of an
Individual Party shall not be deemed a "change of control" with respect
to such Individual Party's Stockholding Entity.
(c) For so long as any of the Funds remains a Stockholder, a "change of
control" shall be deemed to have occurred with respect to all of the
Funds if (i) FRC ceases to be the managing general partner of any of
the Funds that is a Stockholder; or (ii) FRC is the managing general
partner of any of the Funds that is a Stockholder but each of William
E. Macaulay and John A. Hill has retired or ceased to devote
substantially all his business time to the operations of FRC and the
management of FRC is not reasonably acceptable in the judgment of
Faltis and Sparks.
(d) For the purposes of Section 3.7(c), any "change of control", as
defined in Section 4.2(b), of a Stockholder other than Anker Holding or
any of the Funds shall be treated as a sale of all of the shares of
Common Stock of the Stockholder subject to such "change of control" and
Anker Holding shall have the right to require the Stockholder
undergoing such change of control to purchase the number of shares of
Class A Preferred determined pursuant to Section 3.7(c) at the price
set forth in Section 3.7(c). Anker Holding shall inform such
Stockholder that the purchase of shares of Class A Preferred will be
required within 30 days following the date on which Anker Holding
becomes aware of such change of control (the knowledge of Willem
Rottier shall be imputed to Anker Holding for these purposes), and any
such purchase shall take place within 30 days after the date of such
notice.
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4.3 Triggering Event Option Period
(a) For the purposes of this Section 4.3, a "Triggering Event Option
Period" shall commence on the date of any Triggering Event and shall
continue for (i) eight months in the case of a Triggering Event
described in Section 4.1(b); (ii) nine months in the case of a
Triggering Event described in Section 4.1(c); (iii) three months in the
case of a Triggering Event described in Section 4.1(e)(i); and (iv) one
year in the event of a Triggering Event described in Section 4.1(d).
(b) During the applicable Triggering Event Option Period following the
occurrence of a Triggering Event (other than pursuant to Section 4.1(d)
or 4.1(e)(ii)), the Company shall have an option, subject to Section
4.3(d), to purchase all (but not some) of the Shares of the Affected
Stockholder at Fair Market Value. At least 30 days prior to the end of
the applicable Triggering Event Option Period, the Company shall give
30 days' notice to the Affected Stockholder of the exercise of such
option.
(c) During the Triggering Event Option Period following a Triggering
Event described in Section 4.1(d), the Company shall have an option,
subject to Section 4.3(d), to purchase all (but not some) of the shares
of Common Stock held by the Affected Stockholder. If such Triggering
Event occurs prior to the fifth anniversary of the date hereof, the
purchase price for Common Stock under such option shall be equal to the
lower of (1) the book value of such shares of Common Stock and (2) the
Fair Market Value of such shares of Common Stock, and the purchase
price for other Shares shall be the Fair Market Value of such Shares.
If such Triggering Event occurs on or after the fifth anniversary of
the date hereof, the purchase price for such Shares shall be equal to
the Fair Market Value of such Shares. The Company shall give the
Affected Stockholder 30 days' notice of the exercise of such option at
least 30 days prior to the end of the Triggering Event Option Period.
For the purposes of this Section 4.3(b), the book value of the
Company's Common Stock shall be equal to the sum of the paid in capital
plus surplus plus (or minus) any retained earnings with respect to the
relevant Shares as reported on the Company's latest audited year-end
financial statements, plus (or minus) any retained earnings with
respect to such Shares accrued since the date of such financial
statements; and book value per share shall be equal to the book value
so determined divided by the number of shares of Common Stock issued
and outstanding on the date of the relevant Triggering Event.
(d) Upon the occurrence of a Triggering Event occurring on or after the
fifth anniversary of the date hereof, the Affected Stockholder shall be
free to Transfer its Shares to any transferee (including the Company or
another Stockholder) free from the tag along rights of other
Stockholders provided in Section 3.7 and subject only to the rights of
first refusal of other Stockholders provided in Section 3.6. The option
of the Company to purchase the Shares of the Affected Stockholder
pursuant to Section 4.1(b)(iii), 4.3(b) or 4.3(c) as the case may be
shall be subject to the rights of the Affected Stockholder to dispose
of its Shares pursuant to this Section 4.3(d) and such
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option of the Company shall not be exercisable following the issuance
of a Sale Notice by the Affected Stockholder pursuant to Section 3.6
with respect to any Shares of such Affected Stockholder covered by such
Sale Notice; provided that, in the event the sale described in such
Sale Notice is not consummated for any reason, such option shall again
become exercisable and shall be extended for the length of time it was
not exercisable due to the issuance of such Sale Notice. A transferee
of such Shares that is not already a party to this Agreement shall not
be required to become a party to this Agreement; provided, however,
that such transferee (unless it is the Company) shall agree in writing
with the parties hereto to be bound by the provisions of Section 5.1 as
if such transferee were a Stockholder hereunder.
(e) Following the last day of a Triggering Event Option Period, the
Affected Stockholder shall no longer be bound by the transfer
restrictions of Article 3 (other than the restriction set forth in
Section 3.1(c)) and shall be free to Transfer any or all of its Shares
to any transferee (including another Stockholder or the Company) for
whatever consideration the Affected Stockholder may agree to. A
transferee of such Shares that is not already a party to this Agreement
shall not be required to become a party to this Agreement; provided,
however, that such transferee (unless it is the Company) shall agree in
writing with the parties hereto to be bound by the provisions of
Section 5.1 as if such transferee were a Stockholder hereunder.
4.4 Determination of Fair Market Value
For the purposes of this Article 4, Fair Market Value shall be
determined as set forth in this Section 4.4 and shall, in the first
instance, be determined by good faith negotiations between the Company
and the Affected Stockholder (including for the purposes of this
Section 4.4 a Stockholder with respect to which there has occurred a
change of control within the meaning of Section 4.2). If such parties
are unable to reach an agreement on Fair Market Value within 30 days
after the Company and the other Stockholders receive notice of the
event giving rise to the application of the provisions of this Article
4, the Company and the Affected Stockholder shall engage (a) a
nationally recognized investment banking firm or (b) a mining
engineering/evaluation firm, in both cases familiar with the coal
industry in the Eastern United States and as mutually agreed by the
parties, and such firm shall be instructed to determine, within 30 days
from the date of such engagement, a fair market value of the Company's
securities as if the entire Company were being sold in a private sale
to determine Fair Market Value. The investment banking or engineering
firm valuing the Company shall be instructed to determine a present
value of the liability of the Company with respect to the redemption of
Class A and Class B Preferred Stock of the Company based on the
estimated timing of such redemptions, and such present value shall be
included as the entire liability of the Company with respect to the
redemption of such Class A and Class B Preferred Stock for the purposes
of such valuation. In all cases other than following a Triggering Event
specified in Section 4.1(e)(ii), the fees of such investment banking or
engineering firm shall be divided equally between the Company and the
Affected Stockholder;
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<PAGE> 33
following a Triggering Event specified in Section 4.1(e)(ii), the
Company shall pay all the fees of such investment banking firm. Fair
Market Value shall be determined as of the last day of the month during
which the Triggering Event occurred.
4.5 Closing of Share Sales and Purchases
At the closing of any sale of Shares to the Company pursuant to this
Article 4, the selling Stockholder shall deliver any stock certificates
representing its Shares to be sold, duly endorsed for transfer and with
any stock transfer tax paid, and shall represent that such Shares are
free and clear of any liens or adverse claims other than those created
by the Company, and the Company shall deliver the purchase price by
certified or official bank check or wire transfer of immediately
available funds, or pursuant to a note in those instances specifically
contemplated pursuant to this Article 4. Any such closing shall take
place at the corporate offices of the Company unless the Company and
the selling Stockholder agree otherwise.
4.6 Applicant Violator System
(a) The parties hereto acknowledge that the Company and its
subsidiaries are subject to the Applicant Violator System and the
requirements for permits to conduct surface coal mining and reclamation
operations ("Permits") described in 30 C.F.R. Section 773 (together
with any successor statutory or regulatory provisions, "AVS"). As a
result of AVS, an applicant for Permits may be denied permits ("Permit
Blocked") because of ownership or control links to another entity.
(b) Each party hereto shall promptly notify the Company and the other
parties hereto of (i) any change in its ownership or other event which
would affect the determination of ownership or control links pursuant
to AVS and (ii) any determination that an entity to which it has
ownership or control links is Permit Blocked.
(c) In the event that the Company or a subsidiary becomes Permit
Blocked by reason of the stock ownership of a Stockholder, such
Stockholder shall use all commercially reasonable efforts to, within
180 days after notice from the Company or any other Stockholder, cure
the circumstances so that the Company and its subsidiaries are not
Permit Blocked by reason of such stock ownership. If such Stockholder
is unable to cause such circumstances within such 180 day period, the
Company shall have the option for a further 180 day period to purchase
the Shares of such Stockholder at Fair Market Value with payment to be
made by a subordinated note in the form attached hereto as Exhibit J.
The Company shall give 60 days' notice of the exercise of such option
(which 60 day period may extend beyond the 180 day cure period
referenced in this Section 4.6(c)) and the valuation procedure
described in Section 4.4 shall commence on the date of such notice.
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<PAGE> 34
(d) In the event that an entity to which a Stockholder has ownership or
control links becomes Permit Blocked by reason of its ownership or
control link to the Company or a Subsidiary, any Stockholder may notify
the Company of such circumstance and, if the Company or such Subsidiary
is unable to remedy such circumstances within 180 days after the giving
of such notice, any Stockholder whose investments are Permit Blocked as
a result of such circumstance shall have the right to dispose of its
shares without regard to the restrictions and requirements of Sections
3.1(a), 3.4, 3.6 or 3.7.
ARTICLE V
SALE OF THE COMPANY; REGISTRATION RIGHTS
5.1 Sale of the Company
(a) After the fifth anniversary of the date hereof, either of (i) the
Funds acting unanimously or (ii) Faltis and Sparks acting unanimously,
(a "Triggering Group") may compel all Stockholders to participate in
the sale of all of the outstanding Common Stock to a buyer or buyers
that is not an Affiliate or are not Affiliates of the Company or any of
the Stockholders (a "Third Party Purchaser") in accordance with the
provisions of this Section 5.1 (a "Sale of the Company"); provided that
all shares of Common Stock will be sold to such buyer or buyers at an
identical price and on identical terms. Pursuant to the terms of the
Company's Class A and B Preferred Stock, concurrently with such sale of
all of the Common Stock, the Company shall be required to redeem all of
the outstanding shares of the Company's Class A and Class B Preferred
Stock at the redemption value of such preferred stock, plus accrued and
unpaid dividends (if any) or alternatively, the Third Party Purchaser
shall purchase all of the outstanding shares of the Company's Class A
and Class B Preferred Stock at the redemption value of such preferred
stock plus accrued and unpaid dividends (if any). No Common Stock will
be sold pursuant to this Article 5 unless (1) the Company concurrently
redeems such Class A and Class B Preferred Stock respectively or (2)
the Third Party Purchaser concurrently purchases such Class A and Class
B Preferred Stock. The provisions of this Section 5.1 can also be
triggered as provided in Section 4.1(d) and 4.1(e)(ii).
(b) A Triggering Group may require that the Company and the other
Stockholders pursue a Sale of the Company by providing written notice
of such action to the Company and all other Stockholders (a "Company
Sale Notice"). Following receipt of a Company Sale Notice, the Company
and all Stockholders shall cooperate in good faith in connection with
such Sale of the Company and use their best efforts to assist in
maximizing the consideration per share of Common Stock received by the
Stockholders in such Sale of the Company. Promptly (and in any event
within 30 days) after receipt of such notice, the Company will retain a
nationally recognized investment banking firm with no material
relationship to the Company or any Stockholder to assist in such Sale
of the Company (the "Auction Bank"). The Auction Bank will then conduct
an auction in a commercially reasonable fashion among potential Third
Party Purchasers identified
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<PAGE> 35
by the Auction Bank, the Company and the Stockholders, and will be
instructed to obtain definitive bids for the Company as soon as
practical (and in any event within 180 days after it is retained by the
Company), which bids will be required to be for all of the outstanding
Common Stock and for consideration consisting entirely of cash.
Following the conclusion of the auction, the Company and the
Stockholders will use their reasonable best efforts to negotiate a Sale
of the Company at the highest cash price per share of Common Stock that
was offered (and to the party that made such offer) unless the Board of
Directors, by the affirmative vote of at least five Directors
determines that another offer (an "Alternative Offer") is in the best
interests of the Stockholders, in which case the Company and the
Stockholders will use their reasonable best efforts to negotiate a Sale
of the Company to the party making the Alternative Offer at the price
specified in such Alternative Offer. Each Stockholder shall sell to
such Third Party Purchaser all Common Stock then held by such
Stockholder on the terms and conditions contained in the definitive
agreements negotiated with such Third Party Purchaser, and such
purchase and sale shall be effected within 90 days following
identification of such Third Party Purchaser by the Auction Bank,
provided that the consummation of such purchase and sale with respect
to all Stockholders shall be delayed to the extent necessary to comply
with any regulatory filings or other regulatory requirements applicable
to the sale by any Stockholder.
(c) No sale of Common Stock may be triggered under this Section 5.1
unless the purchaser has agreed to purchase all of the then outstanding
shares of Common Stock and no Stockholder shall be required to sell
less than all of such Stockholder's shares of Common Stock.
5.2 Registration Rights
Each Stockholder shall have such registration rights as are set forth
in the Registration Rights Agreement dated as of the date hereof among
the parties hereto.
ARTICLE VI
MISCELLANEOUS
6.1 No Waiver of Rights
No failure or delay on the part of any party in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other
right, power or privilege. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
-30-
<PAGE> 36
6.2 Term of Agreement
This Agreement shall continue in full force and effect until the
earlier of (i) termination by mutual consent, (ii) dissolution of the
Company or (iii) an initial public offering of shares of the Company
registered under the Securities Act other than pursuant to Securities
and Exchange Commission Forms S-4 or S-8 (an "Initial Public
Offering").
6.3 Assignment
This Agreement shall be binding on the parties and the successors and
assigns of each of them. Neither this Agreement nor any right or
obligation hereunder is assignable in whole or in part by any party
without the prior written consent of the other parties except as
expressly permitted by Article III or IV.
6.4 Integration
This Agreement with its exhibits, which are hereby incorporated herein
and made a part hereof, sets forth the entire understanding between the
parties relating to the subject matter contained herein and merges all
prior discussions between them. No amendment to this Agreement shall be
effective unless in writing and executed by each of the parties hereto.
6.5 Severability
If any one or more of the provisions contained in this Agreement or any
document executed in connection herewith shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired, and in such case
the parties oblige themselves to reach the purpose of the invalid
provision by a new legally valid stipulation.
6.6 Notice
Any notice herein required or permitted to be given shall be in writing
and may be personally served or sent by first-class certified or
registered mail with return receipt requested, or by first-class
express mail, private overnight or next business day courier (or second
business day courier in the case of international communications), or
by telecopy with confirmation in writing mailed first class, in all
cases with charges prepaid, and any such properly given notice will be
deemed given (i) two days after having been mailed by certified or
registered mail with return receipt requested, (ii) two days after
having been delivered to a courier service providing the services
described above and (iii) upon confirmation of a telecopy transmission.
For the purposes hereof, the address of each party hereto (unless
notice of a change thereof is given by such party to each other party
as provided in this Section 6.6) shall be as follows:
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<PAGE> 37
If to Faltis or JJF Group:
John J. Faltis
36 Lakeview Drive
Morgantown, WV 26505
Tel: (304) 594-1846
Fax: (304) 594-2464
If to Sparks or PPK Group:
Bruce Sparks
2019 Ices Ferry Drive
Morgantown, WV 26505
Tel: (304) 594-1100
Fax: (304) 594-0305
If to Anker Holding:
Vasteland 4
3011 BK Rotterdam
The Netherlands
Tel: 31-10-411-2770
Fax: 31-10-411-4300
If to the Funds or any Fund:
Bruce M. Rothstein
First Reserve Corporation
475 Steamboat Road
Greenwich, CT 06830
Tel: (203) 661-6601
Fax: (203) 661-6729
-32-
<PAGE> 38
If to the Company:
Anker Coal Group, Inc.
2708 Cranberry Square
Morgantown, WV 26505
Attn: President
Tel: (304) 594-1616
Fax: (304) 594-1685
6.7 Certain Representations, Warranties and Covenants
(a) JJF Group and Faltis each represent, warrant and covenant to the
other parties hereto as follows:
(i) JJF Group is, and as long as JJF Group remains a party
to this Agreement and Faltis is living, will be, controlled
by Faltis and Faltis has and will have sole authority and
discretion to exercise all rights and remedies of JJF Group
under this Agreement and all voting rights of the Shares
owned by JJF Group. As of the date hereof, and for as long
as JJF Group remains a party to this Agreement, all members
or other equity holders of JJF Group are and will be one or
more of Faltis and his immediate family (including his
lineal descendants by blood or adoption and his
step-children).
(ii) At the time any New JJF Entity acquires any Shares, and
as long as such New JJF Entity remains a party to this
Agreement, (A) so long as Faltis is living, such New JJF
Entity will be controlled by Faltis and Faltis will have
sole authority and discretion to exercise all rights and
remedies of such New JJF Entity under this Agreement and all
voting rights of the Shares owned by such New JJF Entity and
(B) all beneficiaries, shareholders, members, partners or
other equity holders of such New JJF Entity will be one or
more of Faltis and his immediate family (including his
lineal descendants by blood or adoption and his
step-children).
(b) PPK Group and Sparks each represent, warrant and covenant to the
other parties hereto as follows:
(i) PPK Group is, and as long as PPK Group remains a party
to this Agreement and Sparks is living, will be, controlled
by Sparks and Sparks has and will have sole authority and
discretion to exercise all rights and remedies of PPK Group
under this Agreement and all voting rights of the Shares
owned by PPK Group. As of the date hereof, and for as long
as PPK Group remains a party to this Agreement, all members
or other equity holders of PPK Group
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<PAGE> 39
are and will be one or more of Sparks and his immediate
family (including his lineal descendants by blood or
adoption).
(ii) At the time any New PPK Entity acquires any Shares, and
as long as such New PPK Entity remains a party to this
Agreement, (A) so long as Sparks is living such New PPK
Entity will be controlled by Sparks and Sparks will have
sole authority and discretion to exercise all rights and
remedies of such New PPK Entity under this Agreement and all
voting rights of the Shares owned by such New PPK Entity and
(B) all beneficiaries, shareholders, members, partners or
other equity holders of such New PPK Entity will be one or
more of Sparks and his immediate family (including his
lineal descendants by blood or adoption).
(c) JJF Group and Faltis each represent, warrant and covenant to the
other parties hereto as follows:
(i) Schedules 6.7(c)-6, 6.7(c)-7, 6.7(c)-8, 6.7(c)-9 and
6.7(c)-10 correctly set forth as of the date hereof the
information requested with respect to JJF Group and Faltis
(except for the omission of information as to Anker Group,
Inc. and its subsidiaries).
(ii) JJF Group and Faltis will promptly notify the other
parties hereto of any change in the information set forth in
such schedules.
(d) PPK Group and Sparks each represent, warrant and covenant to the
other parties hereto as follows:
(i) Schedules 6.7(d)-6, 6.7(d)-7, 6.7(d)-8, 6.7(d)-9 and
6.7(d)-10 correctly set forth as of the date hereof the
information requested with respect to PPK Group and Sparks
(except for the omission of information as to Anker Group,
Inc. and its subsidiaries).
(ii) PPK Group and Sparks will promptly notify the other
parties hereto of any change in the information set forth in
such schedules.
(e) Anker Holding represents, warrants and covenants to the other
parties hereto as follows:
(i) Schedules 6.7(e)-6, 6.7(e)-7, 6.7(e)-8, 6.7(e)-9 and
6.7(e)-10 correctly set forth as of the date hereof the
information requested with respect to Anker Holding.
(ii) Anker Holding will promptly notify the other parties
hereto of any change in the information set forth in such
schedules.
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<PAGE> 40
(f) American Oil & Gas Investors, Limited Partnership represents,
warrants and covenants to the other parties hereto as follows:
(i) Schedules 6.7(f)-6, 6.7(f)-7, 6.7(e)-8, 6.7(f)-9 and
6.7(f)-10 correctly set forth as of the date hereof the
information requested with respect to American Oil & Gas
Investors, Limited Partnership.
(ii) American Oil & Gas Investors, Limited Partnership will
promptly notify the other parties hereto of any change in
the information set forth in such schedules.
(g) AmGO II, Limited Partnership represents, warrants and covenants to
the other parties hereto as follows:
(i) Schedules 6.7(g)-6, 6.7(g)-7, 6.7(g)-8, 6.7(g)-9 and
6.7(g)-10 correctly set forth as of the date hereof the
information requested with respect to AmGO II, Limited
Partnership.
(ii) AmGO II, Limited Partnership will promptly notify the
other parties hereto of any change in the information set
forth in such schedules.
(h) First Reserve Fund V, Limited Partnership represents, warrants and
covenants to the other parties hereto as follows:
(i) Schedules 6.7(h)-6, 6.7(h)-7, 6.7(h)-8, 6.7(h)-9 and
6.7(h)-10 correctly set forth as of the date hereof the
information requested with respect to First Reserve Fund V,
Limited Partnership.
(ii) First Reserve Fund V, Limited Partnership will promptly
notify the other parties hereto of any change in the
information set forth in such schedules.
(i) First Reserve Fund V-2, Limited Partnership represents, warrants
and covenants to the other parties hereto as follows:
(i) Schedules 6.7(i)-6, 6.7(i)-7, 6.7(i)-8, 6.7(i)-9 and
6.7(i)-10 correctly set forth as of the date hereof the
information requested with respect to First Reserve Fund
V-2, Limited Partnership.
(ii) First Reserve Fund V-2, Limited Partnership will
promptly notify the other parties hereto of any change in
the information set forth in such schedules.
(j) First Reserve Fund VI, Limited Partnership represents, warrants and
covenants to the other parties hereto as follows:
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<PAGE> 41
(i) Schedules 6.7(j)-6, 6.7(j)-7, 6.7(j)-8, 6.7(j)-9 and
6.7(j)-10 correctly set forth as of the date hereof the
information requested with respect to First Reserve Fund VI,
Limited Partnership.
(ii) First Reserve Fund VI, Limited Partnership will
promptly notify the other parties hereto of any change in
the information set forth in such schedules.
(k) First Reserve Fund VII, Limited Partnership represents, warrants
and covenants to the other parties hereto as follows:
(i) Schedules 6.7(k)-6, 6.7(k)-7, 6.7(k)-8, 6.7(k)-9 and
6.7(k)-10 correctly set forth as of the date hereof the
information requested with respect to First Reserve Fund
VII, Limited Partnership.
(ii) First Reserve Fund VII, Limited Partnership will
promptly notify the other parties hereto of any change in
the information set forth in such schedules.
(l) First Reserve represents, warrants and covenants to the other
parties hereto as follows:
(i) Schedules 6.7(l)-6, 6.7(l)-7, 6.7(l)-8, 6.7(l)-9 and
6.7(l)-10 correctly set forth as of the date hereof the
information requested with respect to First Reserve.
(ii) Set forth on Schedule 6.7(l)-1 hereto is a list of all
limited partners of any of the Funds that do not own a 10%
interest in any one Fund, but that, through ownership of
interests in two or more of the Funds have a beneficial
interest in 10% of more of the issued and outstanding Common
Stock.
(iii) First Reserve will promptly notify the other parties
hereto of any change in the information set forth in such
schedules.
6.8 Agent of the Funds
Each of the Funds hereby appoints FRC to serve as its agent for the
purposes of receiving or giving any notice contemplated to be given or
received by the Funds pursuant hereto, including without limitation the
communication of nominees for the Company's Board of Directors and all
notices regarding the sale or purchase of Shares, and FRC hereby
accepts such appointment. The Company and each of the other
Stockholders shall be entitled to rely on such agency until such
Stockholder has received written notice from a Fund stating that such
Fund has terminated the agency of FRC hereunder with respect to such
Fund and designating a substitute agent.
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<PAGE> 42
6.9 Necessary Measures
The Stockholders shall in a timely manner and as required from time to
time take all measures as may be necessary or appropriate to cause
their affiliates and the Company to implement the provisions of this
Agreement and the transactions contemplated hereby, and to ensure that
such corporations and entities take all such actions as may be
necessary to give full effect to the provisions of this Agreement and
to abstain from taking any actions which would contravene the intent of
the provisions of this Agreement.
6.10 Relationship of the Stockholders and the Company
This Agreement does not constitute a partnership or joint venture and
nothing contained herein is intended to constitute, nor shall it be
construed to constitute, the Stockholders as joint venturers or as
partners of each other or of the Company. Nothing contained herein
shall constitute, nor shall it be construed to constitute, any
Stockholder or the Company as an agent of any Stockholder or the
Company.
6.11 Governing Law
This Agreement and the rights and obligations of the Stockholders shall
be governed by and construed in accordance with the laws of the State
of Delaware.
6.12 Remedies
The remedies for breach of contract provided in this Agreement are
non-exclusive, and the Company and each of the Stockholders reserves
its regular remedies at law or in equity, including without limitation
specific performance, in the event of any breach of this Agreement by
any other Stockholder, or of the failure of any Stockholder to perform
its obligations hereunder.
6.13 Counterpart Originals
This Agreement may be executed simultaneously in any number of
counterparts each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
Dated as of the date first written above.
ANKER COAL GROUP, INC.
By: /s/ John J. Faltis
----------------------------------------
Name: John J. Faltis
Title: Pres.
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<PAGE> 43
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: Manager
ANKER HOLDING B.V.
By: /s/ Willem G. Rottier
----------------------------------------
Name: Willem G. Rottier
Title: Managing Director
FIRST RESERVE CORPORATION
By: /s/ Bruce Rothstein
----------------------------------------
Name: Bruce Rothstein
Title: Vice-President
AMERICAN GAS & OIL INVESTORS,
LIMITED PARTNERSHIP
By First Reserve Corporation, its general
partner
By: /s/ Bruce Rothstein
----------------------------------------
Name: Bruce Rothstein
Title: Vice-President
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<PAGE> 44
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
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<PAGE> 45
FIRST RESERVE FUND VII, LIMITED PARTNERSHIP
By First Reserve Corporation, its general
partner
By: /s/ BRUCE ROTHSTEIN
----------------------------------------
Name: BRUCE ROTHSTEIN
Title: VICE-PRESIDENT
/s/ JOHN J. FALTIS
---------------------------------------------
JOHN J. FALTIS
/s/ P. BRUCE SPARKS
---------------------------------------------
P. BRUCE SPARKS
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<PAGE> 46
Schedule I
<TABLE>
<CAPTION>
Number of Shares of Number of Shares of
Name of Fund Common Stock Preferred Stock
<S> <C> <C>
American Gas & Oil
Investors 758 1,400
AmGo II 487 900
First Reserve Fund V,
Limited Partnership 638 1,180
First Reserve Fund V-2,
Limited Partnership 324 600
First Reserve Fund VI,
Limited Partnership 1,600 2,960
First Reserve Fund VII,
Limited Partnership 1,600 2,960
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Amendment No. 1 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
January 12, 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 8, 1998
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
9 3/4% SENIOR NOTES
DUE 2007
OF
ANKER COAL GROUP, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 PM, NEW YORK CITY TIME, ON ,
1997 (THE "EXPIRATION DATE") UNLESS EXTENDED BY ANKER COAL GROUP, INC.
Exchange Agent:
MARINE MIDLAND BANK
<TABLE>
<S> <C>
By Hand: By Mail:
Marine Midland Bank Marine Midland Bank
Attn: Corporate Trust Services Attn: Corporate Trust Services
140 Broadway, Level A 140 Broadway, Level A
New York, New York 10005-1180 New York, New York 10005-1180
By Overnight Courier: By Facsimile:
Marine Midland Bank (212) 658-2292
Attn: Corporate Trust Services Attn: Corporate Trust Services
140 Broadway, Level A Telephone: (212) 658-5931
New York, New York 10005-1180
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated ,
1998 (the "Prospectus") of Anker Coal Group, Inc. (the "Company"), and this
Letter of Transmittal (the "Letter of Transmittal"), which together describe the
Company's offer (the "Exchange Offer") to exchange an aggregate principal amount
of its new 9 3/4% Series B Senior Notes due 2007 (the "Exchange Notes") equal to
the aggregate principal amount of outstanding 9 3/4% Senior Notes due 2007 (the
"Old Notes") held by the undersigned. 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
transferable by holders thereof (except as provided herein or in the Prospectus)
and are not subject to any covenant regarding registration under the Securities
Act of 1933, as amended (the "Securities Act").
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
<PAGE> 2
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
<TABLE>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL AMOUNT PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY AMOUNT
(PLEASE FILL IN) NUMBER(S)* OLD NOTES* TENDERED**
------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total
------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Old Notes. See
instruction 2.
- --------------------------------------------------------------------------------
This Letter of Transmittal is to be used either if certificates
representing Old Notes are to be forwarded herewith or if delivery of Old Notes
is to be made by book-entry transfer to an account maintained by the Exchange
Agent at The Depository Trust Company, pursuant to the procedures set forth in
"The Exchange Offer -- Procedures for Tendering Old Notes" in the Prospectus.
Delivery of documents to the book-entry transfer facility does not constitute
delivery to the Exchange Agent.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent on
or prior to the Expiration Date must tender their Old Notes according to the
guaranteed delivery procedure set forth in the Prospectus under the caption "The
Exchange Offer -- Procedures for Tendering Old Notes."
[ ]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
-------------------------------------------------------------------------------
[ ] The Depository Trust Company
Account Number
-----------------------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------------------------------
2
<PAGE> 3
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
-------------------------------------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------------------------------------------
If Delivered by Book-Entry Transfer:
Account Number
-----------------------------------------------------------------------------
[ ] CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN PERSON
SIGNING THE LETTER OF TRANSMITTAL:
Name
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Address
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
[ ] CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM
THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Address
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THIS PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name
-----------------------------------------------------------------------------
Address
-----------------------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. 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 under the Securities Act or any other available exemption under the
Securities Act must comply with the registration and prospectus delivery
requirements under the Securities Act.
3
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of the Old Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the Old Notes tendered herewith, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Old Notes. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Company, in connection with the Exchange
Offer) to cause the Old Notes to be assigned, transferred and exchanged. The
undersigned 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 Old 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 undersigned
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
the book-entry transfer facility. The undersigned further agrees that acceptance
of any and all validly tendered Old Notes by the Company and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full by the
Company of its obligations under the Registration Rights Agreement (as defined
in the Prospectus) and that the Company shall have no further obligations or
liabilities thereunder except as provided in Section 2 of said agreement.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer -- Certain Conditions to the
Exchange Offer." The undersigned recognizes that as a result of these conditions
(which may be waived, in whole or in part, by the Company), as more particularly
set forth in the Prospectus, the Company may not be required to exchange any of
the Old Notes tendered hereby and, in such event, the Old Notes not exchanged
will be returned to the undersigned at the address shown above. In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date if
any of the conditions set forth under "The Exchange Offer -- Certain Conditions
to the Exchange Offer" occur.
By tendering, each holder of Old Notes represents that the Exchange Notes
acquired in the exchange will be obtained in the ordinary course of such
holder's business, that such holder has no arrangement with any person to
participate in the distribution of such Exchange Notes, that such holder is not
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act and that such holder is not engaged in, and does not intend to
engage in, a distribution of the Exchange Notes. Any holder of Old Notes using
the Exchange Offer to participate in a distribution of the Exchange Notes (i)
cannot rely on the position of the staff of the Securities and Exchange
Commission (the "Commission") enunciated in its interpretive letter with respect
to Exxon Capital Holdings Corporation (available April 13, 1989) or similar
letters and (ii) must comply with the registration and prospectus requirements
of the Securities Act in connection with a secondary resale transaction.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Notes, however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tendered Old Notes may be withdrawn at any time
prior to the Expiration Date in accordance with the terms of this Letter of
Transmittal. See Instruction 2.
4
<PAGE> 5
Certificates for all Exchange Notes delivered in exchange for tendered Old
Notes and any Old Notes delivered herewith but not exchanged, and registered in
the name of the undersigned, shall be delivered to the undersigned at the
address shown below the signature of the undersigned.
TENDER HOLDER(S) SIGN HERE
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Dated
- --------------------------------- Area Code and Telephone Number
-------------------------
(MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON
CERTIFICATE(S) FOR OLD NOTES. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR,
ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER
PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH THE
FULL TITLE OF SUCH PERSON.) SEE INSTRUCTION 3.
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone No.
- --------------------------------------------------------------------------
Taxpayer Identification No.
- -----------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTION 3)
Authorized Signature
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Title
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
Name of Firm
- --------------------------------------------------------------------------------
Area Code and Telephone No.
- --------------------------------------------------------------------------
Dated
- --------------------------------------------------------------------------------
5
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
A holder of Old Notes may tender the same by (i) properly completing and
signing this Letter of Transmittal or a facsimile hereof (all references in the
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 document required by this Letter of Transmittal, to the Exchange
Agent at its address set forth above 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 THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ANY
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT
AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS
SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT 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 Securities Exchange Act of
1934, as amended. 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 on the Letter of Transmittal
must be guaranteed by an Eligible Institution.
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 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 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
6
<PAGE> 7
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). 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.
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.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Old Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Old Notes evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Old Notes submitted but not
tendered will be sent to such holder as soon as practicable after the Expiration
Date. All Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise clearly indicated.
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 Old 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
7
<PAGE> 8
one of the procedures described under the caption "Procedures for Tendering Old
Notes" in the Prospectus at any time on or prior to the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Old Notes) of Old Notes listed and tendered hereby, no endorsements
of certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holder of the Old Notes listed, such Old Notes must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to the Company and duly executed by the registered holder,
in either case signed exactly as the name or names of the registered holder or
holders appear(s) on the Old Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange 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 so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Notes are tendered: (i) by a registered
holder of such Old Notes, for the holder of such Old Notes; or (ii) for the
account of an Eligible Institution.
4. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the
transfer and exchange of Old Notes to it or its order 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
exception therefrom is not submitted herewith the amount of such transfer taxes
will be billed directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
8
<PAGE> 9
5. WAIVER OF CONDITIONS.
The Company reserves the right to waive in its reasonable judgment, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed,
should contact the Exchange Agent at the address indicated above for further
instructions.
7. SUBSTITUTE FORM W-9.
Each holder of Old Notes whose Old Notes are accepted for exchange (or
other payee) is required to provide a correct taxpayer identification number
("TIN"), generally the holder's Social Security or federal employer
identification number, and with certain other information, on Substitute Form
W-9, which is provided under "Important Tax Information" below, and to certify
that the holder (or other payee) is not subject to backup withholding. Failure
to provide the information on the Substitute Form W-9 may subject the holder (or
other payee) to a $50 penalty imposed by the Internal Revenue Service and 31%
federal income tax backup withholding on payments made in connection with the
Exchange Notes. The box in Part 3 of the Substitute Form W-9 may be checked if
the holder (or other payee) has not been issued a TIN and has applied for a TIN
or intends to apply for a TIN in the near future. If the box in Part 3 is
checked and a TIN is not provided by the time any payment is made in connection
with the Exchange Notes, 31% of all such payments will be withheld until a TIN
is provided.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to Anker Coal Group, Inc., 2708 Cranberry
Square, Morgantown, West Virginia 26505, attention: Corporate Secretary
(telephone: 304-594-1616).
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH
CERTIFICATES FOR OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a holder of Old Notes whose Old Notes
are accepted for exchange may be subject to backup withholding unless the holder
provides Marine Midland Bank (as payor) (the "Paying Agent"), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Old Notes is
awaiting a TIN) and that (A) the holder of Old Notes has not been notified by
the Internal Revenue Service that he or she is subject to backup withholding as
a result of a failure to report all interest or dividends or (B) the Internal
Revenue Service has notified the holder of Old Notes that he or she is no longer
subject to backup withholding; or (ii) an adequate basis for exemption from
backup withholding. If such holder of Old Notes is an individual, the TIN is
such holder's social security number. If the Paying Agent is not provided with
the correct taxpayer identification number, the holder of Old Notes may be
subject to certain penalties imposed by the Internal Revenue Service.
Certain holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. Exempt holders of Old Notes should indicate their exempt
status on Substitute Form W-9. In order for a foreign individual to qualify as
an exempt recipient, the holder must submit a Form W-8, signed under penalties
of perjury, attesting to that individual's
9
<PAGE> 10
exempt status. A Form W-8 can be obtained from the Paying Agent. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for more instructions.
If backup withholding applies, the Paying Agent is required to withhold 31%
of any such payments made to the holder of Old Notes or other payee. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
surrendering holder of Old Notes has not been issued a TIN and has applied for a
TIN or intends to apply for a TIN in the near future. If the box in Part 3 is
checked, the holder of Old Notes or other payee must also complete the
Certificate of Awaiting Taxpayer Identification Number below in order to avoid
backup withholding. Notwithstanding that the box in Part 3 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the Paying
Agent will withhold 31% of all payments made prior to the time a properly
certified TIN is provided to the Paying Agent.
The holder of Old Notes is required to give the Paying Agent the TIN (e.g.,
social security number or employer identification number) of the record owner of
the Old Notes. If the Old Notes are in more than one name or are not in the name
of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
10
<PAGE> 11
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
PAYOR'S NAME: MARINE MIDLAND BANK, AS PAYING AGENT
- ------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN Social Security number(s) or
THE BOX AT RIGHT AND CERTIFY BY Employer Identification
SIGNING AND DATING BELOW. Number(s)
------------------------------
------------------------------------------------------------------
FORM W-9 PART 2--CERTIFICATION--Under penalties of perjury, I certify
DEPARTMENT OF THE TREASURY that:
INTERNAL REVENUE SERVICE (1) The number shown on this form is my correct taxpayer
PAYOR'S REQUEST FOR TAXPAYER identification number (or I am waiting for a number to be
IDENTIFICATION NUMBER issued for me), and
("TIN") (2) I am not subject to backup withholding because: (a) I am
exempt from backup withholding, or (b) I have not been notified
by the Internal Revenue Service (IRS) that I am subject to
backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that
I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above
if you have been notified by the IRS that you are currently
subject to backup withholding because of underreporting
interest or dividends on your tax return.
----------------------------------------------------------------
Signature ----------------------------- PART 3--Awaiting TIN [ ]
Date---------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31% OF
ANY CASH PAYMENTS MADE TO YOU. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable cash payments made to me thereafter will be withheld until I
provide a taxpayer identification number.
- --------------------------------------
SIGNATURE
---------------------------------------
DATE
11
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
9 3/4% SENIOR NOTES
DUE 2007
IN EXCHANGE FOR NEW
9 3/4% SERIES B SENIOR NOTES DUE 2007
OF
ANKER COAL GROUP, INC.
Registered holders of outstanding 9 3/4% Senior Notes due 2007 (the "Old
Notes") who wish to tender their Old Notes in exchange for a like principal
amount of new 9 3/4% Series B Senior Notes due 2007 (the "Exchange Notes") and
whose Old Notes are not immediately available or who cannot deliver their Old
Notes and Letter of Transmittal (and any other documents required by the Letter
of Transmittal) to Marine Midland Bank (the "Exchange Agent") prior to the
Expiration Date, may use this Notice of Guaranteed Delivery or one substantially
equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand
or sent by facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) or mail to the Exchange
Agent. See "The Exchange Offer -- Procedure for Tendering Old Notes" in the
Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
MARINE MIDLAND BANK
<TABLE>
<S> <C>
By Hand: By Mail:
Marine Midland Bank Marine Midland Bank
Attn: Corporate Trust Services Attn: Corporate Trust Services
140 Broadway, Level A 140 Broadway, Level A
New York, New York 10005-1180 New York, New York 10005-1180
By Overnight Express: By Facsimile:
Marine Midland Bank (212) 658-2292
Attn: Corporate Trust Services Attn: Corporate Trust Services
140 Broadway, Level A Telephone: (212) 658-5931
New York, New York 10005-1180
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Old Notes indicated
below, upon the terms and subject to the conditions contained in the Prospectus
dated , 1997 of Anker Coal Group, Inc. (the "Prospectus"),
receipt of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
REGISTERED HOLDER AS
IT
APPEARS ON THE OLD CERTIFICATE NUMBER(S) PRINCIPAL AMOUNT
NAME OF TENDERING NOTES OF OLD NOTES OF OLD NOTES
HOLDER (PLEASE PRINT) TENDERED TENDERED
<S> <C> <C> <C>
====================== ====================== ====================== ======================
====================== ====================== ====================== ======================
- ---------------------- ---------------------- ---------------------- ----------------------
</TABLE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of
its addresses set forth above, the certificates representing 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), together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, and any other documents required by the Letter of
Transmittal within three business days after the Expiration Date (as defined in
the Prospectus and the Letter of Transmittal).
<TABLE>
<S> <C>
Name of Firm:
- ------------------------------------- ---------------------------------------------
(AUTHORIZED SIGNATURE)
Address:
- -------------------------------------------- Title:
---------------------------------------------
- ---------------------------------------------
Name:
---------------------------------------------
(ZIP CODE)
(PLEASE TYPE OR PRINT)
Area Code and Telephone No.:
- --------------------------------------------- Date:
---------------------------------------------
</TABLE>
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. OLD
NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
