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
2
TABLE OF CONTENTS
Page
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
-i-
3
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
-ii-
4
INDEX OF DEFINED TERMS
TERM SECTION
- ---- -------
"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
-iii-
5
"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
-iv-
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-
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-
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-
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-
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:
-5-
11
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
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
-6-
12
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
-7-
13
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
-8-
14
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
-9-
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
-10-
16
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
-11-
17
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.
-12-
18
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
-13-
19
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,
-14-
20
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
-15-
21
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
-16-
22
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
-17-
23
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;
-18-
24
(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
-19-
25
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.
-20-
26
(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.
-21-
27
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
-22-
28
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.
-23-
29
(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
-24-
30
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.
-25-
31
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
-26-
32
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;
-27-
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.
-28-
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
-29-
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-
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:
-31-
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-
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
-33-
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.
-34-
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:
-35-
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.
-36-
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.
-37-
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
-38-
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
-39-
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
-40-
46
Schedule I
Number of Shares of Number of Shares of
Name of Fund Common Stock Preferred Stock
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