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EXHIBIT 10.16
EXECUTION VERSION
ANKER COAL GROUP, INC.
$6,000,000 aggregate principal amount of
14.25% Series A Second Priority Senior Secured Notes due 2007
(PIK through April 1, 2000)
JJF GROUP EXCHANGE AGREEMENT
October 26, 1999
TO JJF GROUP LIMITED LIABILITY COMPANY,
a West Virginia limited liability
company ("JJF Group" or the "Purchaser").
Ladies & Gentlemen:
Anker Coal Group, Inc., a Delaware corporation (the "Company"), and each of
the entities listed on Schedule I hereto (each a "Guarantor" and collectively,
the "Guarantors") agrees with you as follows:
1. Certain Definitions.
"Agreement" means this JJF Group Exchange and Purchase Agreement.
"Closing Date" means the date on which the JJF Private Exchange,
the Private Exchange, and the Private Placement are consummated.
"Closing Price" of any Notes means, on any date of determination,
(i) the average of the closing bid prices in the over the counter market,
as quoted to the Company for such date by such of the following investment
banking firms as are quoting closing bid prices for Notes on such date:
Goldman, Sachs & Co., Bear Steans & Co., Donaldson Lufkin & Jenrette
Securities Corporation or Jeffries & Company, or (ii) if no such quotes are
available, the market value of the Notes on such date as determined by
Donaldson Lufkin & Jenrette Securities Corporation retained for this
purpose by and at the sole expense of the Company.
"Market Price" means an amount equal to the average of the Closing
Prices of the Notes for the 20 trading days ending 5 trading days prior to
October 1, 2000.
"Maximum Optional Notes Amount" means the principal amount of
Optional Secured Notes required to be purchased by RRF pursuant to the
Purchase Agreement which would be sufficient to provide cash proceeds to
the Company at a purchase price of 95% of the Market Price in an amount
equal to the lesser of (i) $6.3 million or (ii) the amount of interest due
on all outstanding Notes on October 1, 2000; provided, however, that the
foregoing $6.3 million limitation may be waived by RRF in its sole
discretion.
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"Notes" means, as of any date, all of the Company's 14.25% Second
Priority Senior Secured Notes issued and outstanding under the Secured Note
Indenture.
"Operative Documents" means the JJF Notes, the Guarantees, the
Secured Note Indenture, the Security Documents, and the Registration Rights
Agreement.
"Private Placement Memorandum" means the Private Exchange and
Private Placement Memorandum dated October 26, 1999. The Private Placement
Memorandum incorporates by reference the Company's Annual Report on Form
10-K for the year ended December 31, 1998, Quarterly Reports on Form 10-Q
for the quarters ended March 31 and June 30, 1999 and Current Reports on
Form 8-K filed April 1, 1999, April 16, 1999, May 3, 1999, May 28, 1999,
June 4, 1999, August 27, 1999, September 8, 1999, October 1, 1999, October
5, 1999 and October 22, 1999 as well as any documents filed by the Company
under the Securities Exchange Act of 1934 prior to the Closing Date
(collectively, the "Exchange Act Documents"); the Exchange Act Documents
are delivered with or as a supplement to the Private Placement Memorandum.
As used herein, the term "Private Placement Memorandum" includes the
Exchange Act Documents.
"Purchase Agreement" means the Exchange and Purchase Agreement by
and among the Company, the Guarantors, RRF, and the Exchanging Noteholders
listed in Schedule II to the Purchase Agreement.
"RRF" means Rothschild Recovery Fund, L.P.
"Secured Note Indenture" means an Indenture to be dated as of
October 1, 1999 between the Company and the Guarantors named therein and
Bank of New York, as trustee.
"Secured Note Trustee" means Bank of New York, as trustee under the
Secured Note Indenture, or any successor trustee.
"Secured Notes" means all Notes issued pursuant to the Secured Note
Indenture, and includes the Exchange Notes and the New Money Notes issued
pursuant to the Purchase Agreement, the JJF Notes issued pursuant to this
Agreement, the Series B Notes to be issued pursuant to the Registered
Exchange Offer, the Public Notes to be issued in any Public Exchange Offer,
the Optional Secured Notes, and Secondary Notes issued in lieu of payment
of cash interest due on April 1, 2000. The Exchange Notes, the JJF Notes
and the New Money Notes are sometimes hereinafter referred to as the
Privately Placed Notes. As used herein, unless the context clearly requires
otherwise, the term "Securities" shall include the Secured Notes, the
Guarantees thereof, the Warrants and the Warrant Shares.
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Secured Note Indenture.
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2. JJF Group Exchange. The Company proposes to issue and sell to JJF
Group in a private exchange transaction (the "JJF Group Exchange"), upon the
terms and subject to the conditions set forth in the Private Placement
Memorandum and this Agreement, $6.0 million aggregate principal amount of the
Company's 14.25% Series A Second Priority Senior Secured Notes due 2007 (PIK
through April 1, 2000) (the "JJF Notes") in exchange for cancellation of all of
JJF Group's stock in the Company and in full satisfaction of its rights under
the Put Option Agreement dated as of August 25, 1998 (the "Put Agreement") to
require the Company to purchase that stock in installments over time for $10.0
million plus interest. The JJF Notes, together with the other Secured Notes,
will be issued pursuant to the Secured Note Indenture and will be guaranteed
(the "Guarantees") on a senior secured basis by each of the Guarantors. The
Secured Notes will be secured by a lien on substantially all of the assets of
the Company and the GUARANTORS, subject to the prior security interest of the
Credit Facilities (as defined in the Secured Note Indenture) and to Permitted
Liens but excluding the Excluded Assets (as defined in the Secured Note
Indenture) and real property located in Maryland. (If and when the Company or
any Guarantor grants a lien on the Maryland real property to secure the
Company's credit facilities, it will grant a junior lien on the same real
property to secure the Secured Notes.) The Secured Notes will also have the
benefit of the Security Documents (as defined in the Secured Note Indenture). In
connection with the Public Exchange Offer and the Registered Exchange Offer, the
Company will file an application for qualification of the Secured Note Indenture
on under the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). Related Transactions. The Company also proposes to consummate,
contemporaneously with the JJF Group Exchange, the following additional
transactions:
(a) Private Exchange. The Company proposes to engage in a private
exchange transaction (the "Private Exchange") upon the terms and subject to
the conditions set forth in the Private Placement Memorandum and the
Purchase Agreement. In the Private Exchange, the Company will issue, in
exchange for each $1,000 principal amount of its outstanding 9 3/4% Series
B Senior Notes due 2007 (the "Old Notes") and outstanding interest thereon,
$800 principal amount of its 14.25% Series A Second Priority Senior Secured
Notes due 2007 (PIK through April 1, 2000) (the "Exchange Notes") and
warrants (the "Exchange Warrants") to purchase a pro rata share (based upon
the principal amount of Old Notes exchanged) of 20% of the Company's Common
Stock (the "Exchange Warrant Shares").
(b) Private Placement. The Company also proposes to issue and sell
to RRF, pursuant to the terms of the Private Placement Memorandum and the
Purchase Agreement, an aggregate of $13.2 million principal amount of
additional 14.25% Series A Second Priority Senior Secured Notes due 2007
(PIK through April 1, 2000) (the "New Money Notes"), and warrants (the "New
Money Warrants," and together with the Exchange Warrants, collectively, the
"Warrants") to purchase an aggregate of 10% of the Company's Common Stock
(the "New Money Warrant Shares," and together with the Exchange Warrant
Shares, collectively, the "Warrant Shares").
(c) Amendment of Old Notes. The Old Notes were issued pursuant to
an Indenture (the "Old Note Indenture")dated as of September 25, 1997 among
the Company, the Guarantors named therein (the "Old Note Guarantors") and
HSBC USA (formerly known as Marine Midland Bank), as Trustee (the "Old Note
Indenture
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Trustee"). The Company has proposed to make and each Exchanging Noteholder
has consented to or will consent to certain amendments and modifications
(the "Old Note Indenture Modifications") described in the Private Placement
Memorandum pursuant to a Supplemental Indenture to be dated as of October
1, 1999 among the Company, the Old Note Guarantors and the Old Note
Indenture Trustee (the "Supplemental Indenture") in the form attached to
the Purchase Agreement as Exhibit C. Old Notes as amended by the Old Note
Indenture Modifications are hereinafter sometimes referred to as the
"Amended Old Notes" and the Old Note Indenture as amended by the Old Note
Indenture Modifications is sometimes referred to as the "Amended Old Note
Indenture." Each Exchanging Noteholder will agree to waive all interest due
on the Old Notes exchanged for Exchange Notes in the Private Exchange.
(d) Public Exchange Offer. Following the completion of the Private
Exchange and the Old Note Indenture Modifications, the Company currently
plans (but shall not be obligated) to make a further exchange offer under
Section 3(a)(9) of the Securities Act of 1933 (the "Act") or other
applicable exemption or pursuant to a registration statement under the Act
(the "Public Exchange Offer") to exchange New Secured Notes ("Public
Notes") for Old Notes that remain outstanding following completion of the
Private Exchange.
(e) Optional Secured Notes. RRF also has committed, at the option
of the Company and subject to satisfaction of certain conditions, to
purchase additional Series B Secured Notes (the "Optional Secured Notes")
on or about October 1, 2000 for cash in an amount not to exceed the Maximum
Optional Notes at a purchase price equal to 95% of the Market Price. The
proceeds of the Optional Secured Notes are to be used to pay interest on
the New Secured Notes due October 1, 2000. The Optional Secured Notes shall
be issued in a private placement and shall be registered for resale as
provided in Section 4(c) of the Registration Rights Agreement.
4. Registration Status. The Privately Placed Notes (including the JJF
Notes) are being issued and sold pursuant to an exemption from the registration
requirements of the Act provided by Section 4(2) thereof and Regulation D
thereunder. As such, they will not be registered under the Act. The Series B
Secured Notes to be issued in the Registered Exchange Offer (the "Registered
Notes") will each be registered under the Act. The Public Notes to be issued in
the Public Exchange Offer will each be issued pursuant to the exemption from the
registration requirements of the Act provided by Section 3(a)(9) of the Act or
any other exemption or otherwise offered and sold in compliance with the
registration requirements of the Act. The Optional Secured Notes will be issued
and sold pursuant to an exemption from the registration requirements of the Act
provided by Section 4(2) thereof and Regulation D thereunder, but will be
registered for resale under the Act as provided in Section 4(c) of the
Registration Rights Agreement.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Series A
Secured Notes (and all securities issued in exchange therefor or in substitution
thereof other than Registered Notes) shall bear the following legend:
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"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION
HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) (A "QIB") OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D
UNDER THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT
IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k) UNDER THE
SECURITIES ACT AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE WITH
RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A)
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) INSIDE THE UNITED STATES TO
A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE SECURED
NOTE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM THE SECURED NOTE TRUSTEE) AND IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF THE NOTES AT THE
TIME OF TRANSFER OF LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT,
(D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (E) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (F) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR ANY INTEREST
HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON
THE CERTIFICATE OF TRANSFER (THE FORM OF WHICH CAN BE OBTAINED
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FROM THE SECURED NOTE TRUSTEE) RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE SECURED NOTE TRUSTEE. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR PURCHASING PURSUANT TO
CLAUSE 2(C) ABOVE, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
SECURED NOTE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR
OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTIONS," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S
UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
SECURED NOTE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING. THE LIENS AND SECURITY INTERESTS IN THE
COLLATERAL SECURING THE INDEBTEDNESS EVIDENCED BY THIS NOTE ARE SUBORDINATE
TO THE LIENS AND SECURITY INTERESTS SECURING THE SENIOR SECURED
INDEBTEDNESS (AS DEFINED IN THE INDENTURE), AS MORE FULLY SET FORTH IN THE
INTERCREDITOR AGREEMENT (AS DEFINED IN THE INDENTURE). ANY HOLDER OF THIS
INSTRUMENT SHALL BE DEEMED TO BE BOUND BY, AND SUBJECT TO, THE TERMS AND
CONDITIONS OF THE INTERCREDITOR AGREEMENT."
5. Registration Rights. Holders (including subsequent transferees) of
the Privately Placed Notes will have the registration rights set forth in the
registration rights agreement relating thereto (the "Registration Rights
Agreement"), to be dated the Closing Date, in substantially the form of Exhibit
A hereto, for so long as such Privately Placed Notes constitute "Transfer
Restricted Securities" (as defined in the Registration Rights Agreement).
Pursuant to the Registration Rights Agreement, the Company and the Guarantors
will agree to file with the Securities and Exchange Commission (the
"Commission"), under the circumstances set forth therein, (i) a registration
statement under the Act (the "Exchange Offer Registration Statement") relating
to the Registered Notes to be offered in exchange for the Privately Placed Notes
(the "Registered Exchange Offer"), and (ii) under certain circumstances, a shelf
registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement") relating to the resale by certain holders of the
Privately Placed Notes, and to use their reasonable best efforts to cause such
Registration Statement to be declared effective. In connection therewith, the
Company will file a statement of eligibility and qualification of the Secured
Note Trustee on Form T-1 with the Securities and Exchange Commission to qualify
the Secured Note Indenture under the Trust Indenture Act. Agreement to Sell,
Purchase and Exchange. On the basis of the representations, warranties and
agreements contained in this Agreement, and subject to its terms and conditions,
the Company agrees to issue and sell to JJF Group, and JJF Group agrees to
purchase from the Company, JJF Notes in the principal amount of $6,000,000 in
exchange for cancellation of all shares of stock in the Company owned by JJF
Group and release of all rights of JJF Group (including any amounts owed to JJF
Group) under the Put Agreement.
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7. Closing; Delivery of Notes, Cancellation of Shares and Release of
Rights. Delivery to JJF Group of the JJF Notes, cancellation of the shares of
stock in the Company owned by JJF Group and release of all rights of JJF Group
(including any amounts owed to JJF Group) under the Put Agreement shall occur at
a closing at 9:30 A.M., New York time on the Closing Date at the offices of
Coudert Brothers, 1114 Avenue of the Americas, New York, New York 10036, or such
other time or place as the parties shall designate (the "Closing"). At the
Closing, the parties shall execute and deliver a Termination and Cancellation
Agreement in substantially the form attached hereto as Exhibit B, and JJF Group
shall deliver to the Company original stock certificates, duly endorsed in
blank, representing all shares of stock in the Company owned by JJF Group.
8. Agreements of the Company and the Guarantors. The Company and each
of the Guarantors, jointly and severally, agrees with JJF Group as follows:
(a) To advise you promptly and, if requested by you, confirm such
advice in writing, (i) of the issuance by any state securities commission
of any stop order suspending the qualification or exemption from
qualification of any of the Secured Notes for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by any
state securities commission or other regulatory authority, and (ii) of the
happening of any event that makes any statement of a material fact made in
the Private Placement Memorandum untrue or that requires the making of any
additions to or changes in the Private Placement Memorandum (as amended or
supplemented from time to time) in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading.
The Company and the Guarantors shall use their reasonable best efforts to
prevent the issuance of any stop order or order suspending the
qualification or exemption of any of the Secured Notes under any state
securities or Blue Sky laws, and if at any time any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption of any of the Secured Notes, the Company and
the Guarantors shall use their reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) To furnish you without charge, one copy of the Private
Placement Memorandum, and any amendments or supplements thereto, and any
additional copies as you may reasonably request. The Company and the
Guarantors consent to the use of the Private Placement Memorandum, and any
amendments and supplements thereto, by you in connection with resales by
you permitted by Section 10.
(c) Not to amend or supplement the Private Placement Memorandum or
the terms of the JJF Group Exchange prior to the Closing Date unless you
shall previously have been advised thereof, been furnished a copy thereof
and shall not have objected thereto after being given a reasonable period
to review the same.
(d) If, after the date hereof and prior to the date 90 days after
the Closing Date, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of your counsel, the
Private Placement Memorandum as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
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circumstances under which they were made, not misleading, or it shall
otherwise become necessary to amend or supplement the Private Placement
Memorandum to comply with applicable law, forthwith to prepare an
appropriate amendment or supplement to the Private Placement Memorandum to
correct such untrue statement or omission or so that the Private Placement
Memorandum, as so amended or supplemented, will comply with applicable law.
(e) To cooperate with you and your counsel in connection with the
qualification of the Secured Notes under the securities or Blue Sky laws of
such jurisdictions as you may reasonably request and to continue such
qualification in effect for a period of two years after the Closing Date;
provided, however, that neither the Company nor any of the Guarantors shall
be required in connection therewith to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to service of process in suits or taxation in any
jurisdiction where it is not now so subject.
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement is terminated, to pay all costs,
expenses, fees and taxes incident to and in connection with: (i) the
preparation, printing, filing and distribution of the Private Placement
Memorandum (including, without limitation, financial statements and
exhibits) and all amendments and supplements thereto, (ii) the preparation
(including, without limitation, word processing and duplication costs) and
delivery of this Agreement and the other Operative Documents, (iii) the
issuance and delivery by the Company and the Guarantors of the Securities,
(iv) the qualification of the Securities for offer and sale under the
securities or Blue Sky laws of the several states (including, without
limitation, the reasonable fees and disbursements of one counsel relating
to such registration or qualification), (v) furnishing such copies of the
Private Placement Memorandum, and all amendments and supplements thereto,
as may be reasonably requested for use in connection with resales permitted
by Section 10, (vi) the preparation of certificates for the Securities
(including, without limitation, printing and engraving thereof), (vii) the
reasonable fees, disbursements and expenses of Coudert Brothers and Steptoe
& Johnson, counsel to RRF and the Exchanging Noteholders, of the Company's
and the Guarantors' counsel and accountants, and of counsel for JJF Group
(not to exceed $5,000 in the case of counsel for JJF Group), (viii) all
expenses and listing fees in connection with the application for quotation
of the Privately Placed Notes in the National Association of Securities
Dealers, Inc. ("NASD") Automated Quotation System - PORTAL ("PORTAL"), (ix)
all fees and expenses (including fees and expenses of counsel) of the
Company and the Guarantors in connection with approval of the Securities by
DTC for "book-entry" transfer, (x) the reasonable fees and expenses of the
Secured Note Trustee and the Secured Note Trustee's counsel in connection
with the Secured Note Indenture and the Securities and the Company's
Registrar and Transfer Agent in connection with the Warrants and Warrant
Shares and (xi) the performance by the Company and the Guarantors of their
other obligations under this Agreement and the other Operative Documents.
(g) Not to voluntarily claim, and to resist actively any attempts
to claim, the benefit of any usury laws against the holders of any
Securities.
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(h) To do and perform all things required to be done and performed
under this Agreement by them prior to or after the Closing Date and to use
their reasonable best efforts to satisfy all conditions precedent on their
part to the delivery of the Securities.
(i) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the JJF Notes in a manner that would
require the registration under the Act of the sale or issuance to you of
the JJF Notes.
(j) For so long as it is required to do so under the Secured Note
Indenture, and during any period in which the Company is not subject to
Section 13 or 15(d) of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), to make available to you in connection with any sale
of the JJF Notes and any prospective purchaser of such Privately Placed
Notes from such Holder, upon their request, the information required by
Rule 144A(d)(4) under the Act.
(k) So long as permitted under applicable law, to cause the
Registered Exchange Offer to be made in the appropriate form to permit
registration of the Registered Notes to be offered in exchange for the JJF
Notes and to comply with all applicable federal and state securities laws
in connection with the Registered Exchange Offer.
(l) To comply with the Registration Rights Agreement, and all
agreements set forth in the representation letter of the Company to DTC
relating to the approval of the Secured Notes and the Guarantees by DTC for
"book-entry" transfer.
(m) To use their reasonable best efforts to effect the inclusion of
the Privately Placed Notes in PORTAL.
(n) Not to effect any Public Exchange Offer unless the notes issued
pursuant to such public exchange (i) are of a different series from all
then outstanding Secured Notes or (ii) are entitled to the benefits of the
Security Documents to the same extent and with the same priority as all
other outstanding Secured Notes of the same series subject to no
intervening Liens that secure liabilities of the Company or a Guarantor or
other material intervening Liens.
9. Representations and Warranties of the Company and Guarantors. The
Company and each of the Guarantors, jointly and severally, represent and warrant
to you that:
(a) The Private Placement Memorandum, as of its date, did not, and
at the Closing Date, the Private Placement Memorandum and any amendment or
supplement thereto will not, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties
contained in this paragraph (a) shall not apply to statements in or
omissions from the Private Placement Memorandum (or any supplement or
amendment thereto) made in reliance upon or in conformity with information
relating
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to you furnished to the Company and the Guarantors in writing by you or on
your behalf expressly for use therein. No stop order preventing the use of
the Private Placement Memorandum, or any amendment or supplement thereto,
or any order asserting that any of the transactions contemplated by this
Agreement are subject to the registration requirements of the Act, has been
issued. The Private Placement Memorandum, as of its date, and each
amendment or supplement thereto, as of its date, contains all the
information specified in, and meeting the requirements of, Rule 144A(d)(4)
under the Act.
(b) The Company or the Guarantors, as applicable, have good and
indefeasible title to the Collateral, free and clear of any Liens, except
for the lien of the Senior Secured Indebtedness and Permitted Liens.
(c) The representations and warranties contained in the Security
Documents are true and correct in all material respects.
(d) When the JJF Notes are issued and delivered pursuant to this
Agreement, none of the Secured Notes will be of the same class (within the
meaning of Rule 144A under the Act) as securities of the Company or the
Guarantors that are listed on a national securities exchange registered
under Section 6 of the Exchange Act or that are quoted in a United States
automated interdealer quotation system.
(e) When executed, the Secured Note Indenture and the Secured Notes
will (i) constitute direct, unconditional and secured general obligations
of the Company, (ii) rank in priority of payment at least pari passu with
all other present and future unsecured Senior Indebtedness of the Company,
and (iii) rank in priority of security, with respect to the property of the
Company covered by the Security Documents, prior to all other present and
future Indebtedness of the Company (other than the Senior Secured
Indebtedness and Indebtedness secured by Permitted Liens).
(f) The guarantee of each Guarantor under the Secured Note
Indenture and the Secured Notes will (i) constitute the direct,
unconditional and secured general obligations of such Guarantor, (ii) rank
in priority of payment at least pari passu with all other present and
future unsecured Indebtedness of such Guarantor, and (iii) rank in right of
security, with respect to the property covered by the Security Documents,
if any, executed by such Guarantor, prior to all other present and future
Indebtedness of such Guarantor (other than the Senior Secured Indebtedness
and Indebtedness secured by Permitted Liens).
(g) Each of the Security Documents to which the Company or any
Guarantor is party when executed and delivered will constitute a perfected
security interest in and Lien on the Collateral covered by such Security
Document, securing payment of all principal, interest and other amounts
payable under the Secured Note Indenture and the Secured Notes, which Lien
and security interest will rank senior to all other Liens and security
interests on such collateral (other than the Senior Secured Indebtedness
and Permitted Liens), and neither the Company nor any Guarantor is a party
to any other security agreement or instrument creating or purporting to
create a security
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interest in and Lien on such collateral, other than the Senior Secured
Indebtedness and Permitted Liens.
(h) The Company and each of the Guarantors has been duly
incorporated or formed, is validly existing and in good standing under the
laws of its respective jurisdiction of incorporation, has all requisite
corporate power and authority to carry on its business as it is currently
being conducted and as described in the Private Placement Memorandum and to
own, lease and operate its properties, and is duly qualified and in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or
leasing of property requires such qualification, except where the failure
to so qualify or have such power or authority would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on
the financial condition, results of operations, business, properties or
prospects of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Effect").
(i) The entities listed on Schedule I hereto are all the
subsidiaries, direct or indirect, of the Company which are Guarantors. The
Company owns, directly or indirectly through other subsidiaries, 100% of
the outstanding capital stock or other securities evidencing equity
ownership of such subsidiaries, free and clear of any security interest,
claim, lien, limitation on voting rights or encumbrance (except pursuant to
the Security Documents and the Senior Secured Indebtedness); and all of
such securities have been duly authorized, validly issued, are fully paid
and nonassessable and were not issued in violation of any preemptive or
similar rights. There are no outstanding subscriptions, rights, warrants,
calls, commitments of sale or options to acquire, or instruments
convertible into or exchangeable for, any such shares of capital stock or
other equity interest of such subsidiaries.
(j) The Company and each of the Guarantors has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement, the Secured Note Indenture, the Security
Documents, the Registration Rights Agreement and the other Operative
Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby, including, without limitation, with
respect to the Company, the corporate power and authority to issue, sell
and deliver the Securities as provided herein and therein.
(k) This Agreement has been duly authorized, executed and delivered
by the Company and each of the Guarantors and, assuming due authorization,
execution and delivery by you is a valid and binding agreement of the
Company and each of the Guarantors, enforceable against each of them in
accordance with its terms, except to the extent that (A) the enforcement
thereof may be subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally and an implied covenant of good faith and fair
dealing, and general equitable principles (whether considered in a
proceeding in equity or at law) and (B) any rights to indemnity or
contribution hereunder may be limited by federal or state securities laws
or public policy considerations.
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(l) The Secured Note Indenture has been duly authorized by the
Company and each of the Guarantors and, assuming the due authorization,
execution and delivery of the Secured Note Indenture by the Secured Note
Trustee, the Secured Note Indenture when duly executed and delivered by
each such person, will be the valid and binding obligation of the Company
and each of the Guarantors, enforceable against each of them in accordance
with its terms, except to the extent that (i) the enforcement thereof may
be subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally and an implied covenant of good faith and fair
dealing, and general equitable principles (whether considered in a
proceeding in equity or at law) and (ii) any rights to indemnity or
contribution thereunder may be limited by federal and state securities laws
or public policy considerations. The Secured Note Indenture, when executed
and delivered, will conform in all material respects to the description
thereof in the Private Placement Memorandum.
(m) The Secured Notes have been duly authorized for issuance by the
Company, and assuming due authorization, execution and delivery of the
Secured Note Indenture by the Secured Note Trustee and due authentication
of the Secured Notes by the Secured Note Trustee, the Secured Notes, and
when issued, authenticated and delivered in accordance with the terms of
the Secured Note Indenture, this Agreement, the Registration Rights
Agreement, the Registered Exchange Offer, and the Public Exchange Offer
will be the legally valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms and entitled
to the benefits of the Secured Note Indenture, except to the extent that
the enforcement thereof may be subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally and an implied
covenant of good faith and fair dealing, and general equitable principles
(whether considered in a proceeding in equity or at law). The Secured
Notes, when issued, authenticated and delivered, will conform in all
material respects to the description thereof in the Private Placement
Memorandum.
(n) The Security Documents have been duly authorized by the Company
and each of the Guarantors and, assuming due authorization, execution and
delivery of the Security Documents by the Secured Note Trustee and the
Collateral Agent, the Security Documents, when duly executed and delivered
by the Company and the Guarantors, will be the legally valid and binding
obligation of the Company and the Guarantors enforceable against each of
them in accordance with its terms, except to the extent that (i) the
enforcement thereof may be subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally and an implied covenant of good faith
and fair dealing, and general equitable principles (whether considered in a
proceeding in equity or at law) and (ii) any rights to indemnity or
contribution thereunder may be limited by federal or state securities laws
or public policy considerations. The Security Documents, when executed and
delivered, will conform in all material respects to the description thereof
in the Private Placement Memorandum.
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(o) The Registration Rights Agreement has been duly authorized by
the Company and each of the Guarantors and, assuming due authorization,
execution and delivery of the Registration Rights Agreement by RRF, the
Exchanging Noteholders and you, as applicable, the Registration Rights
Agreement, when duly executed and delivered by the Company and the
Guarantors will be the legally valid and binding obligations of the Company
and the Guarantors, enforceable against each of them in accordance with its
terms, except to the extent that (i) the enforcement thereof may be subject
to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally and an implied covenant of good faith and fair dealing, and
general equitable principles (whether considered in a proceeding in equity
or at law) and (ii) any rights to indemnity or contribution thereunder may
be limited by federal or state securities laws or public policy
considerations. The Registration Rights Agreement, when executed and
delivered, will conform in all material respects to the description thereof
in the Private Placement Memorandum.
(p) Except as set forth in Schedule 9(p), neither the Company nor
any of the Guarantors is (i) in violation of its respective charter or
bylaws or (ii) in default in the performance of (and there exists no
condition that, with notice, the passage of time, or otherwise, would
constitute a default under) the Old Note Indenture, the Senior Secured
Indebtedness or any bond, debenture, note, indenture, mortgage, deed of
trust or other agreement or instrument to which it is a party or by which
it is bound or to which any of its properties is subject, or (iii) in
violation of any law, statute, rule, regulation, judgment or court decree
applicable to the Company, any of its subsidiaries or their assets or
properties, except, in the case of (ii) or (iii), for such violations or
defaults that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(q) The execution, delivery and performance by the Company and each
of the Guarantors of this Agreement and the other Operative Documents to
which it is a party, the issuance and sale of the JJF Notes, and the
completion of the JJF Group Exchange will not violate or constitute a
breach of any of the terms or provisions of, or a default under (or an
event that with notice or the lapse of time, or both, would constitute a
default), or require consent under, or result in the imposition of a lien
or encumbrance on any properties of the Company or any of its subsidiaries,
or an acceleration of indebtedness pursuant to, (i) the charter or bylaws
of the Company or any of its subsidiaries, (ii) any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which any of
them or their property is or may be bound, (iii) any statute, rule or
regulation applicable to the Company, any of its subsidiaries or any of
their assets or properties, or (iv) any judgment, order or decree of any
court or governmental agency or authority having jurisdiction over the
Company, any of its subsidiaries or their assets or properties, except, in
the case of (iii) or (iv), for such violations that would not, individually
or in the aggregate reasonably be expected to have a Material Adverse
Effect. No consent, approval, authorization or order of, or filing,
registration, qualification, license or permit of or with, any court or
governmental agency, body or administrative agency is required for the
execution, delivery and performance of this Agreement and the other
Operative Documents by the Company and the Guarantors, and
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the completion of the transactions contemplated hereby and thereby, except
such as have been obtained and made (or, in the case of the Registration
Rights Agreement, will be obtained and made) under the Act, the Trust
Indenture Act and state securities or Blue Sky laws and regulations or such
as may be required by the NASD.
(r) The Company had at June 30, 1999, an authorized and outstanding
capitalization as set forth in the Private Placement Memorandum. The
authorized, issued and outstanding capital stock of the Company is duly
authorized, validly issued, fully paid and non-assessable and free of
preemptive rights, other than those set forth in the Stockholders Agreement
(as defined in the Private Placement Memorandum), which have been duly and
validly waived in writing by each party thereto with respect to the
transactions contemplated by the Private Placement Memorandum. Except as
set forth in Schedule 9(r), there are no outstanding rights, plans,
options, warrants, calls, conversion rights or any agreements, arrangements
or commitments of any character (either firm or conditional) obligating the
Company or any of its subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, any shares of capital stock, or any
securities exchangeable for or convertible into shares of capital stock of
the Company or any of the subsidiaries or obligating the Company or any of
the subsidiaries to grant, extend or enter into any such agreement,
arrangement, requirement or commitment nor are there any rights to receive
any dividends or other distributions in respect of such securities, other
than the right of the Company to receive dividends and distributions from
any subsidiary. Schedule 9(r) sets forth the names of the holders of all
options, warrants and other securities convertible into Common Stock, the
dates granted/issued, the number of shares of Common Stock subject to such
option, warrant or conversion, the expiration date and the exercise or
conversion price (in the case of the Class A Convertible Preferred Stock,
setting forth the formula and the maximum percentage into which such Class
A Convertible Preferred Stock would be convertible based on an assumed
initial public offering price selected by the Company). Schedule 9(r) sets
forth all Existing Indebtedness (as defined in the Indenture) of the
Company and its subsidiaries as of the most recent available date prior to
the date of this Agreement.
(s) There is (i), except as set forth in Schedule 9(s), and except
as disclosed in the Private Placement Memorandum, no action, suit or
proceeding before or by any court, arbitrator or governmental agency, body
or official, domestic or foreign, now pending or, to the Company's
knowledge, threatened or contemplated to which the Company or any of its
subsidiaries is or may be a party or to which the business or property of
the Company or any of its subsidiaries is or may be subject, (ii) except as
disclosed in the Private Placement Memorandum (with respect to clause (A)
below), no statute, rule, regulation or order that has been enacted,
adopted or issued by any governmental agency and (iii) no injunction,
restraining order or order of any nature by a federal or state court or
foreign court of competent jurisdiction to which the Company or any of its
subsidiaries is or may be subject, issued that, in the case of clauses (i),
(ii) and (iii) above, (A) would reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect or (B) would reasonably be
expected to interfere with or adversely affect the issuance of the JJF
Notes, or the validity of this Agreement, the Secured Note Indenture, the
Registration Rights Agreement or any other Operative Document.
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(t) Except as set forth in Schedule 9(t), there is (i) no unfair
labor practice complaint pending against the Company or any of its
subsidiaries nor, to the best knowledge of the Company and its
subsidiaries, threatened against any of them, before the National Labor
Relations Board, any state or local labor relations board or any foreign
labor relations board which would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, (ii) no strike,
labor dispute, slowdown or stoppage pending against the Company or any of
its subsidiaries nor, to the best knowledge of the Company and its
subsidiaries, threatened against the Company or any of its subsidiaries
which would, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect and (iii) to the best knowledge of the
Company and its subsidiaries, no union representation question existing
with respect to the employees of the Company and its subsidiaries and, to
the best knowledge of the Company and its subsidiaries, no union organizing
activities are taking place. Neither the Company nor any of its
subsidiaries has violated any federal, state or local law relating to
discrimination in hiring, promotion or pay of employees, nor any applicable
wage or hour laws, which violation would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(u) The Company and each Controlled Group Member (as defined below)
has operated and administered each employee benefit plan covering their
employees which is subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") ("Plan") in compliance with all applicable
laws except for such instances of noncompliance as have not resulted in and
could not reasonably be expected to result in a Material Adverse Effect.
Neither the Company nor any Controlled Group Member has incurred any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
relating to Plans, and no event, transaction or condition has occurred or
exists which could result in the incurrence of any such liability by the
Company or any Controlled Group Member, or in the imposition of any
encumbrance on any of the rights, properties or assets of the Company or
any Controlled Group Member, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Sections 401(a)(29)
or 412 of the Code, other than such liabilities or encumbrances as would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The term "Controlled Group Member" means the
Company, each of its subsidiaries and each of their respective predecessors
and (a) each corporation that is or was at any time a member of the same
controlled group of corporations (within the meaning of Section 414(b) of
the Code) as the Company or any of its subsidiaries, or any of their
respective predecessors, (b) each trade or business, whether or not
incorporated, that is or was at any time under common control (within the
meaning of Section 414(c) of the Code) with the Company or any of its
subsidiaries, or any of their respective predecessors, and (c) each trade
or business, whether or not incorporated, that is or was at any time a
member of the same affiliated service group (within the meaning of Section
414(m) of the Code).
(v) The present value of the aggregate benefit liabilities under
each of the Plans (other than Multiemployer Plans), determined as of the
end of such Plan's most recently ended plan year on the basis of the
actuarial assumptions specified for funding
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purposes in such Plan's most recent actuarial valuation report, did not
exceed the aggregate current value of the assets of such Plan allocable to
such benefit liabilities by more than a Material amount in the case of any
single Plan and by more than an amount which, with respect to an individual
Plan or in the aggregate for all Plans would reasonably be expected to have
a Material Adverse Effect. The term "benefit liabilities" has the meaning
specified in Section 4001 of ERISA and the terms "current value" and
"present value" have the meanings specified in Section 3 of ERISA.
(w) Neither the Company nor any Controlled Group Member has
incurred withdrawal liabilities (and are not subject to contingent
withdrawal liabilities) under Sections 4201 or 4204 of ERISA in respect of
any "Multiemployer" Plans (as that term is defined by Section 4001 (a)(3)of
ERISA) that individually or in the aggregate would reasonably be expected
to have a Material Adverse Effect.
(x) The expected post-retirement benefit obligation (determined as
of the last day of the Company's most recently ended fiscal year in
accordance with Financial Accounting Standards Board Statement No. 106,
without regard to liabilities attributable to continuation coverage
mandated by Section 4980B of the Code) of the Company and its subsidiaries
would not reasonably be expected to have a Material Adverse Effect.
(y) Except as set forth in Schedule 9(y) or as otherwise reflected
in the Company's financial statements, the expected liability of the
Company and its subsidiaries for retiree health care benefits under the
Retiree Health Care Benefit Act of 1992 would not reasonably be expected to
have a Material Adverse Effect.
(z) In the ordinary course of its business, each of the Company and
its subsidiaries conducts periodic reviews of the effect of Environmental
Laws (as defined herein) and the disposal of hazardous or toxic substances,
wastes, pollutants and contaminants on the business, operations and
properties of the Company and its subsidiaries, in the course of which it
identifies and evaluates associated costs and liabilities (including,
without limitation, all capital and operating expenditures required for
clean-up, closure of properties and compliance with Environmental Laws, all
permits, licenses and approvals, all related constraints on operating
activities and all potential liabilities to third parties). On the basis of
such reviews, the Company has reasonably concluded that, except as
disclosed on Schedule 9(z), such associated costs and liabilities,
individually or in the aggregate, would not have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries (i) has violated any
environmental, safety or similar law or regulation applicable to it or its
business or property relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants or
contaminants, including, without limitation, the Clean Air Act, as amended,
the Clean Water Act, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, the Federal Water Pollution
Control Act, as amended, the Resource Conservation and Recovery Act, as
amended, the Federal Water Pollution Control Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Toxic Substances Control
Act, as amended, the Surface Mining Control and Reclamation Act, as amended
(the "Surface Mining Act"), the Occupational Safety
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and Health Act, as amended, and comparable state and local laws and other
safety, health and environmental conservation or protection laws
("Environmental Laws"), the effect of which would be to cause, individually
or in the aggregate, a Material Adverse Effect, or (ii) except as disclosed
on Schedule 9(bb), lacks any notices, permits, licenses of other approvals
required of them under applicable Environmental Laws or is violating any
terms and conditions of any such notice, permit, license or approval, the
effect of which would be to cause, individually or in the aggregate, a
Material Adverse Effect. Without limitation of the foregoing, there is as
of the date hereof no litigation or action pending or, to the best
knowledge of the Company, threatened against the Company or any of the
Guarantors relating to any violation of any Environmental Laws with respect
to the assets or business of the Company or any of the Guarantors which is
required to be disclosed in the Private Placement Memorandum and is not so
disclosed, or which would reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(aa) Each of the Company and its subsidiaries is in compliance with
all of the current permits ("Surface Mining Permits") held by it issued
pursuant to the Surface Mining Act, or pursuant to an equivalent state
regulatory program granted primacy under the provisions of 30 U.S.C.
Section 1253 (collectively, "Surface Mining Laws"), including the mining
plans as respects reclamation, coal processing and related activities as
submitted to the Office of Surface Mining or any state equivalent agency
having jurisdiction over a state program granted primacy under the
provisions of 30 U.S.C. Section 1253 ("Surface Mining Enforcement Agency")
to obtain the Surface Mining Permits, except where the failure to be in
compliance with such laws would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Neither the
Company nor any of its subsidiaries has been subjected to or is as of the
date hereof subject to any bond forfeiture, permit suspension or revocation
proceedings instituted by any Surface Mining Enforcement Agency and neither
the Company nor any of its subsidiaries is presently "permit-blocked" in
any state or under the federal Applicant Violator System which would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(bb) Except as set forth on Schedule 9(bb), each of the Company and
its subsidiaries has (i) all licenses, certificates, permits,
authorizations, approvals, franchises and other rights from, and has made
all declarations and filings with, all federal, state and local
authorities, all self-regulatory authorities and all courts and other
tribunals (each an "Authorization") necessary to engage in the business
currently conducted by it in the manner described in the Private Placement
Memorandum, except where failure to have or obtain such Authorizations
would not have a Material Adverse Effect and (ii) no reason to believe that
any governmental body or agency is considering limiting, suspending or
revoking any such Authorization. The Company and its subsidiaries are in
compliance in all material respects with the terms and conditions of all
such Authorizations and with the rules and regulations of the regulatory
authorities having jurisdiction with respect thereto, except where the
failure to comply would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect.
(cc) Except as set forth on Schedule 9(cc), all leases to which the
Company or any of its subsidiaries is a party are valid and binding and no
default by the
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Company or any of its subsidiaries has occurred and is continuing
thereunder, except where such default or defaults, would not, individually
or in the aggregate, be reasonably expected to have a Material Adverse
Effect. Except to the extent described in the Private Placement Memorandum,
the leases, options to lease, deeds, instruments or other agreements,
contracts or arrangements held by the Company and the Guarantors reflect in
all material respects the rights of the Company and the Guarantors to
explore the unexplored and undeveloped acreage described in the Private
Placement Memorandum. The Company and the Guarantors have exercised
reasonable diligence with respect to acquiring or otherwise procuring such
leases, options to lease, deeds, instruments and other agreements,
contracts or arrangements, although the investigation of record title made
by the Company and the Guarantors generally involved no more than a
preliminary review of local records, as is customary in the industry.
(dd) Each of the Company and its subsidiaries owns or possesses all
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names (collectively, the "Intellectual
Property") presently employed by it in connection with the businesses now
operated by it, except where the failure to own or possess or have the
ability to acquire any of the Intellectual Property would not reasonably be
expected to have a Material Adverse Effect, and neither the Company nor any
of its subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to any of the foregoing, which
if such assertion were sustained, would reasonably be expected to have a
Material Adverse Effect.
(ee) All tax returns required to be filed by the Company or any of
its subsidiaries, in all jurisdictions, have been so filed. All taxes,
including withholding taxes, penalties and interest, assessments, fees and
other charges due or claimed to be due from such entities or that are due
and payable have been paid, other than those being contested in good faith
and for which adequate reserves have been provided, those currently payable
without penalty or interest or those which the failure to pay would not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect. Except as set forth on Schedule 9(ee) or disclosed in the
Private Placement Memorandum, neither the Company nor any of its
subsidiaries knows of any material proposed additional tax assessments
against the Company or any of its subsidiaries.
(ff) Neither the Company nor any of the Guarantors (i) is, or after
giving effect to the issuance and sale of the Privately Placed Notes and
the Warrants and the application of the proceeds thereof in the manner
described in the Private Placement Memorandum will be, an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), or (ii) is a "holding company" or a
"subsidiary company" or an "affiliate" or a holding company within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(gg) Other than pursuant to the Registration Rights Agreement, the
Stockholders Agreement (as defined in the Private Placement Memorandum),
and the Registration Rights Agreement, dated as of August 12, 1996, by and
among the parties to
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the Stockholders Agreement, there are no holders of securities of the
Company or any of the Guarantors who, by reason of the execution by the
Company and each of the Guarantors of this Agreement or any other Operative
Documents to which it is a party or the consummation of the transactions
contemplated hereby and thereby, have the right to request or demand that
the Company or any Guarantor register under the Act securities held by
them.
(hh) Each certificate signed by any officer of the Company or any
of the Guarantors and delivered to you or your counsel shall be deemed to
be a representation and warranty by the Company or Guarantors to you as to
the matters covered thereby.
(ii) The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
and (iii) access to assets is permitted only in accordance with
management's general or specific authorization.
(jj) In accordance with customary industry practices, the Company
and each of its subsidiaries maintains insurance covering their properties,
operations, personnel and businesses. Such insurance insures against such
losses and risks as is adequate in accordance with customary industry
practice to protect the Company and its subsidiaries and their businesses.
Neither the Company nor any of its subsidiaries has received notice from
any insurer or agent of such insurer that substantial capital improvements
or other expenditures will have to be made in order to continue such
insurance. All such insurance is outstanding and duly in force on the date
hereof and will be outstanding and duly in force on the Closing Date.
(kk) Neither the Company nor any of its subsidiaries has (i) taken,
directly or indirectly, any action designed to, or that might reasonably be
expected to, cause or result in stabilization or manipulation of the price
of any security of the Company or any of its subsidiaries to facilitate the
sale or resale of the Securities or (ii) except as permitted by Regulation
M under the Exchange Act or pursuant to this Agreement, since the date of
the Private Placement Memorandum (A) sold, bid for, purchased or paid any
person any compensation for soliciting purchases of, the Securities or (B)
paid or agreed to pay to any person any compensation for soliciting another
to purchase any other securities of the Company or any of its subsidiaries.
(ll) No registration under the Act of the JJF Notes is required for
the issuance or sale of the JJF Notes to you or the resale by you as
contemplated hereby and in the Private Placement Memorandum, assuming (A)
that you are an Institutional Accredited Investor and (B) the accuracy of
the your representations contained herein and your compliance with the
agreements set forth herein. No form of general solicitation or general
advertising was used by the Company or the Guarantors or any of their
representatives in connection with the offer and sale of any of the
Privately Placed Notes, including, but not limited to, articles, notices or
other communications published in any
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newspaper, magazine, or similar medium or broadcast over television or
radio, or any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising. Other than the Registered
Notes to be issued in the Registered Exchange Offer and the Public Exchange
Offer, no securities of the same class as the Secured Notes have been
issued or will be sold by the Company or the Guarantors within a six-month
period before or after the date hereof.
(mm) The execution and delivery of this Agreement, the other
Operative Documents and the sale of the securities to be purchased by you
will not involve any prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Internal Revenue Code of 1986. The
representation made by the Company and the Guarantors in the preceding
sentence is made in reliance upon and subject to the accuracy of, and
compliance with, the representations and covenants made or deemed made by
you as set forth in the Private Placement Memorandum under the Section
entitled "Notice to Investors" and Section 9(h) herein.
(nn) Except as set forth in Schedule 9(nn), subsequent to the
respective dates as of which information is given in the Private Placement
Memorandum and up to the Closing Date, except as set forth in the Private
Placement Memorandum, neither the Company nor any of its subsidiaries has
incurred any liabilities or obligations, direct or contingent, which are
material to the Company and its subsidiaries taken as a whole; nor entered
into any transaction not in the ordinary course of business that is
material to the Company and its subsidiaries taken as a whole; nor has
there occurred any Material Adverse Effect, or any development which may
reasonably be expected to involve a Material Adverse Effect, in the
properties, business, results of operations, financial condition or
prospects of the Company and its subsidiaries, taken as a whole; and there
have not been any dividends or distributions of any kind declared, paid or
made by the Company or any of its subsidiaries (other than on a pro rata
basis to the Company) on any class of its capital stock.
(oo) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the JJF Notes and the consummation of
the transactions contemplated thereby as set forth in the Private Placement
Memorandum, will violate Regulation G (12 C.F.R. Part 207), Regulation T
(12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12
C.F.R. Part 224) of the Board of Governors of the Federal Reserve System.
(pp) The accountants, PricewaterhouseCoopers, who have certified
the financial statements and supporting schedules for the three fiscal
years ended December 31, 1998, included or to be included as part of the
Private Placement Memorandum are independent accountants within the meaning
of the Act and the rules and regulations promulgated thereunder. The
consolidated historical statements fairly present in all material respects
the consolidated financial condition and results of operations of the
Company and its subsidiaries at the respective dates and for the respective
periods indicated, subject in the case of unaudited combined financial
statements to normal year-end adjustments, in accordance with generally
accepted accounting principles consistently applied throughout such
periods, except as stated
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therein. Other financial and statistical information and data (including,
without limitation, with respect to production) included in the Private
Placement Memorandum, are fairly presented in all material respects and
prepared on a basis consistent with such financial statements and the books
and records of the Company and its subsidiaries.
(qq) Other than as contemplated by this Agreement, there are no
contracts, agreements or understandings between the Company or any of its
subsidiaries and any person that would give rise to a valid claim against
the Company or its subsidiaries or JJF Group for a brokerage commission,
finder's fee or like payment in connection with the issuance, purchase and
sale of the Privately Placed Notes.
(rr) Any Privately Placed Notes offered and sold in reliance on
Regulation S have been and will be offered and sold only in offshore
transactions and such securities have been and will be represented upon
issuance by a global security that may not be exchanged for definitive
securities until the expiration of the "distribution compliance period" (as
defined in Regulation S) and only upon certification of beneficial
ownership of the Securities by a non-U.S. person or a U.S. person who
purchased such securities in a transaction that was exempt from the
registration requirements of the Act, which U.S. person will acquire an
interest in a Transfer Restricted Security (as defined in the Registration
Rights Agreement).
(ss) None of the Company or any of its affiliates or any person
acting on its or their behalf has engaged or will engage in any directed
selling efforts within the meaning of Regulation S with respect to the
Privately Placed Notes, and the Company and its affiliates and all persons
acting on their behalf have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the offering,
if any, of the Privately Placed Notes outside the United States.
The Company and the Guarantors acknowledge that JJF Group and, for purposes
of the opinions to be delivered to JJF Group pursuant to Section 11 hereof,
counsel to the Company and the Guarantors will rely upon the accuracy and truth
of the foregoing representations and hereby consent to such reliance.
10.Representations, Warranties and Covenants of JJF Group. JJF Group
represents and warrants to the Company and the Guarantors and agrees that:
(a) JJF Group is an Institutional Accredited Investor within the
meaning of Regulation D under the Act, with such knowledge and experience
in financial and business matters as are necessary in order to evaluate the
merits and risks of an investment in the JJF Notes.
(b) JJF Group (i) is not acquiring the JJF Notes with a view to any
distribution thereof that would violate the Act or the securities laws of
any state of the United States or any other applicable jurisdiction and
(ii) will reoffer and resell the JJF Notes only pursuant to an exemption
from the registration requirements of the Act.
(c) No form of general solicitation or general advertising within
the meaning of Rule 502(c) of Regulation D under the Act has been or will
be used by JJF
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Group or any of its representatives in connection with any offer to resell
any of the JJF Notes, including, but not limited to, articles, notices or
other communication published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
(d) JJF Group agrees that, in connection with any resales of JJF
Notes, (i) it will offer to sell the JJF Notes only to, and will solicit
offers to buy the JJF Notes only from (A) QIBs who in purchasing such JJF
Notes will be deemed to have represented and agreed that they are
purchasing the JJF Notes for their own accounts or accounts with respect to
which they exercise sole investment discretion and that they or such
accounts are QIBs, that they are aware that the sale to them is being made
in reliance on Rule 144A, and that they are acquiring such JJF Notes for
investment and not with a view to, or for offer or sale in connection with,
any distribution (within the meaning of the Act) or fractionalization
thereof or with any intention of reselling the JJF Notes or any part
thereof, subject to any requirement of law that the disposition of their
property or the property of such investor account or accounts be at all
times within their control and subject to their ability to resell such
Privately Placed Notes pursuant to Rule 144, 144A, Regulation S or other
exemption from registration available under the Act and (B) Regulation S
purchasers who in purchasing the JJF Notes will be deemed to have
represented and agreed that their purchase of JJF Notes pursuant to
Regulation S is not part of a plan or scheme to evade the registration
provisions of the Act; and (ii) it will take reasonable steps to inform
persons acquiring JJF Notes from JJF Group or its affiliates that such JJF
Notes will not have been registered under the Act and may be resold,
pledged or otherwise transferred prior to the second anniversary of the
later of the original issuance of the JJF Notes or the sale thereof by any
affiliate (within the meaning of Rule 144 under the Act or any successor
rule thereto, an "Affiliate") of the Company (computed in accordance with
paragraph (d) of Rule 144 under the Act) or if they were at the date of
such transfer or during the three months preceding such date of transfer an
Affiliate of the Company, they would do so only in compliance with any
applicable state securities or "Blue Sky" laws and only (I)(v) to a person
whom the seller reasonably believes is a QIB in a transaction meeting the
requirements of Rule 144A, (w) in a transaction meeting the requirements of
Rule 144, (x) to a foreign person in a transaction meeting the requirements
of Rules 903 and 904 under the Act, (y) to an Institutional Accredited
Investor, or (z) in accordance with another exemption from the registration
requirements of the Act (and based upon an opinion of counsel if the
Company so requests), (II) to the Company, or (III) pursuant to an
effective registration statement under the Act and, in each case, in
accordance with any applicable securities laws of any state of the United
States or any other applicable jurisdiction and (iii) that the holder will,
and each subsequent holder is required to, notify any purchaser from it of
the security evidenced thereby of the resale restrictions set forth in (ii)
above.
(e) JJF Group agrees that, if it has offered for sale the JJF
Notes, it has offered the JJF Notes and will offer and sell the JJF Notes
(i) as part of their distribution at any time and (ii) otherwise until 40
days after the later of the commencement of the offering of the JJF Notes
and the Closing Date and only in accordance with an exemption from the
registration requirements of the Act. Neither JJF Group nor its affiliates
nor any
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persons acting on its or their behalf has engaged or will engage in any
directed selling efforts within the meaning of Rule 901(b) of Regulation S
with respect to the JJF Notes, and JJF Group, its affiliates and all
persons acting on its or their behalf have complied and will comply with
the offering restrictions requirements of Regulation S.
(f) JJF Group agrees that any JJF Notes offered and sold in
reliance on Regulation S have been and will be offered and sold only in
offshore transactions and that such securities have been and will be
represented upon issuance by a global security that may not be exchanged
for definitive securities until the expiration of the applicable
distribution compliance period set forth in Regulation S and only upon
certification of beneficial ownership of the securities by a non-U.S.
person or a U.S. person who purchased such securities in a transaction that
was exempt from the registration requirements of the Act, which U.S. person
will acquire an interest in a Transfer Restricted Security (as defined in
the Registration Rights Agreement).
JJF Group further agrees that it has not entered and will not enter into
any contractual arrangement with respect to the distribution or delivery of
the JJF Notes except with its affiliates or with the prior written consent
of the Company.
(g) JJF Group has not taken and will not take, directly or
indirectly, any action prohibited by Regulation M of the Exchange Act in
connection with the sale of the JJF Notes, to the extent applicable.
(h) JJF Group represents that it is not acquiring the JJF Notes
with the assets of any employee benefit plan that is subject to Title I of
ERISA or any "plan" that is subject to Section 4975 of the Internal Revenue
Code of 1986, as amended (the "Code") (any such employee benefit plan and
plan being referred to herein as a "Benefit Plan").
(i) Terms used in this Section 10 that are defined in Regulation S
are used herein as so defined.
(j) JJF Group, and each subsequent holder of the JJF Notes,
covenants that it will not dispose of the JJF Notes to be acquired by it or
any interest therein (including, without limitation, any transfer by a
change in the capacity in which JJF Group or such subsequent holder holds
its investment in such Notes) to any person unless such person (i) makes
all warranties and representations of JJF Group contained in Section 11 and
(ii) assumes all covenants of such JJF Group contained in this Agreement.
(k) JJF Group also understands that the Company, the Guarantors
and, for purposes of the opinions to be delivered to you pursuant to
Section 11 hereof, counsel to the Company and the Guarantors will rely upon
the accuracy and truth of the foregoing representations and hereby consents
to such reliance.
(l) JJF Group represents that (i) it has been duly formed, is
validly existing and in good standing under the laws of its jurisdiction of
formation; (ii) it has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement and the
Registration Rights Agreement and the other Operative Documents to
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which it is a party and to consummate the transactions contemplated hereby
and thereby; (iii) this Agreement has been duly authorized, executed and
delivered by JJF Group and, assuming due authorization, execution and
delivery by the Company and each of the Guarantors, is a valid and binding
obligation of JJF Group, enforceable against JJF Group in accordance with
its terms, except to the extent that (A) the enforcement thereof may be
subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally and an implied covenant of good faith and fair dealing, and
general equitable principles (whether considered in a proceeding in equity
or at law) and (B) any rights to indemnity or contribution hereunder may be
limited by federal or state securities laws or public policy
considerations; and (iv) the execution, delivery and performance by JJF
Group of this Agreement and the other Operative Documents to which it is a
party and the completion of the JJF Group Exchange will not violate or
constitute a breach of any of the terms or provisions of, or a default
under (or an event that with notice or the lapse of time, or both, would
constitute a default), or require consent under, any agreement or other
obligation that is binding upon JJF Group or its property, except for such
consents as have been obtained prior to the date hereof.
11. Conditions of JJF Group's Obligations. The obligations of JJF
Group under this Agreement are subject to the satisfaction of each of the
following conditions:
(a) All of the representations and warranties of the Company and
the Guarantors contained in this Agreement shall be true and correct on the
date hereof and on the Closing Date with the same force and effect as if
made on and as of the date hereof and the Closing Date, respectively. The
Company and the Guarantors shall have performed or complied with all of the
agreements herein contained and required to be performed or complied with
by them at or prior to the Closing Date.
(b) Copies of the Private Placement Memorandum shall have been
distributed to JJF Group as promptly as practicable, on the date of this
Agreement or at such later date and time as to which JJF Group may agree,
and no stop order suspending the qualification or exemption from
qualification of any of the JJF Notes in any jurisdiction referred to in
Section 9(e) shall have been issued and no proceeding for that purpose
shall have been commenced or shall be pending or threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the
issuance of any of the JJF Notes; no action, suit or proceeding shall be
pending against or affecting or, to the knowledge of either of the Company
or any Guarantor, threatened against, the Company or any Guarantor or any
of its subsidiaries before any court or arbitrator or any governmental
body, agency or official that, if adversely determined, would prohibit,
interfere with or adversely affect the issuance of the JJF Notes, or would
have a Material Adverse Effect, or in any manner question the validity of
this Agreement, the Secured Note Indenture, the Security Documents, the
Securities, the Registration Rights Agreement or the other Operative
Documents; and no stop order preventing the use of the Private Placement
Memorandum, or any amendment or supplement thereto, or any order asserting
that any of the
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transactions contemplated by this Agreement are subject to the registration
requirements of the Act shall have been issued.
(d) Since the dates as of which information is given in the Private
Placement Memorandum, (i) there shall not have been any material adverse
change, or any development that is reasonably likely to result in a
material adverse change, in the capital stock or the long-term debt, or
material increase in the short-term debt, of the Company or any of its
subsidiaries from that set forth in the Private Placement Memorandum, (ii)
no dividend or distribution of any kind shall have been declared, paid or
made by the Company or any of its subsidiaries on any class of its capital
stock (other than on a pro rata basis to the Company), and (iii) other than
liabilities incurred in the ordinary course of business since the date of
the latest balance sheet included in the Private Placement Memorandum
which, individually and in the aggregate would not have a Material Adverse
Effect, neither the Company nor any of its subsidiaries shall have incurred
any liabilities or obligations, direct or contingent, that are material,
individually or in the aggregate, to the Company and its subsidiaries,
taken as a whole, and that are required to be disclosed on a balance sheet
in accordance with generally accepted accounting principles and are not
disclosed on the latest balance sheet included in the Private Placement
Memorandum. Since the date hereof and since the dates as of which
information is given in the Private Placement Memorandum, there shall not
have been any Material Adverse Effect.
(e) You shall have received certificates, dated the Closing Date,
signed by (i) the President or any Vice President and (ii) a principal
financial or accounting officer of the Company and each of the Guarantors
confirming, as of the Closing Date, the matters set forth in paragraphs
(a), (b), (c) and (d) of this Section 11.
(f) You shall have received on the Closing Date the opinion
(satisfactory in form and substance to you and your counsel), dated the
Closing Date, of either Klett Lieber Rooney & Schorling, a Professional
Corporation, counsel for the Company and the Guarantors, or Wilmer, Cutler
& Pickering, special counsel to the Company and the Guarantors, subject to
the customary exclusions, to the effect of each of the following:
(i) The Company has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of the
State of Delaware, and has full corporate power and authority to
conduct its business as described in the Private Placement Memorandum.
(ii) Each of the Guarantors listed on Schedule I hereto which
is identified thereon as incorporated in the State of Delaware (the
"Delaware Guarantors") has been duly incorporated and is validly
existing and in good standing as a corporation under the laws of the
State of Delaware and each such Guarantor has full corporate power and
authority to conduct its business as described in the Private
Placement Memorandum.
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(iii) The Company and each of the Delaware Guarantors has duly
authorized, executed and delivered this Agreement; and each of the
Guarantors listed on Schedule I hereto which is identified thereon as
incorporated in a state other than the State of Delaware (the
"Non-Delaware Guarantors") has duly executed and delivered this
Agreement.
(iv) The Company and each of the Delaware Guarantors has duly
authorized, executed and delivered the Secured Note Indenture and each
of the Non-Delaware Guarantors has duly executed and delivered the
Secured Note Indenture. Assuming that the Secured Note Indenture is
the valid and legal binding obligation of the Secured Note Trustee and
that the Non-Delaware Guarantors have duly authorized the Secured Note
Indenture, the Secured Note Indenture constitutes a valid and legally
binding obligation of the Company and the Guarantors enforceable
against each such person in accordance with its terms.
(v) The Secured Notes have been duly authorized, executed and
issued by the Company and, assuming due authentication thereof by the
Secured Note Trustee and upon payment and delivery in accordance with
this Agreement, will constitute the valid and legally binding
obligations of the Company, enforceable against the Company in
accordance with their terms and entitled to the benefits of the
Secured Note Indenture and the security provided by the Security
Documents.
(vi) The Guarantees to be endorsed on the Secured Notes have
been duly authorized by each Delaware Guarantor and, assuming the due
authorization of the Guarantees by the Non-Delaware Guarantors and the
due authentication of the Secured Notes by the Secured Note Trustee
and upon payment and delivery in accordance with this Agreement of the
Secured Notes, will constitute a valid and legally binding obligation
of each Guarantor, enforceable against such Guarantor in accordance
with its terms.
(vii) The Company and each of the Delaware Guarantors has duly
authorized, executed and delivered the Security Documents to which it
is a party and each of the Non-Delaware Guarantors has duly executed
and delivered the Security Documents to which it is a party. Assuming
that the Security Documents are the valid and legal binding
obligations of the Secured Note Trustee and that each of the
Non-Delaware Guarantors has duly authorized the Security Documents to
which it is a party, the Security Documents constitute a valid and
legally binding obligation of the Company and the Guarantors
enforceable against each such person in accordance with its terms.
(viii) No authorization, approval or consent of, and no filing
or registration with, any governmental or regulatory authority or
agency of the United States of America, the State of Delaware or the
State of New York is required on the part of the Company or Guarantors
for the execution, delivery or performance by any Guarantor of any of
this agreement, the Secured Note Indenture, the Secured Notes or the
Security Documents, except for those that
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have been obtained or effected and that are in full force and effect
and in respect of which all applicable waiting periods have expired.
(ix) The Company has an authorized capitalization as set forth
in the Private Placement Memorandum, and all of the issued shares of
capital stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable.
(x) All of the outstanding shares of capital stock evidencing
equity ownership of the Delaware Guarantors (the "Stock") are owned of
record by the entities named in such opinion.
(xi) To the knowledge of such counsel, none of the Stock was
issued in violation of any preemptive or similar rights.
(xii) To the knowledge of such counsel, there are no
outstanding subscriptions, rights, warrants, calls, commitments of
sale or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock or other equity interest
of any Delaware Guarantor except that the holders of shares of a class
of common stock of the Company have the right to convert such shares
into another class of common stock of the Company, as provided in the
Restated Certificate of Incorporation of the Company.
(xiii) Upon registration of the pledge of the Pledged
Securities (as defined in the Pledge Agreements) of the Subsidiaries
and filing of financing statements in the appropriate filing offices
pursuant to Articles 8 and 9 of the Uniform Commercial Code (the
"UCC"), the Agent, for the benefit of the holders of the Secured
Notes, will have a perfected security interest in the Pledged
Securities of the Subsidiaries.
(xiv) Under the UCC, the Secured Note Indenture and the
Security Documents will create a valid security interest in the right,
title and interest in, to and under any Collateral (as defined in the
Indenture and the Security Documents) of the Company and the
Guarantors as to which creation of a security interest is governed by
the UCC, in favor of the Secured Note Trustee, for the benefit of
holders of the Secured Notes, including any Optional Secured Notes
that may be issued in the future.
(xv) The Registration Rights Agreement has been duly authorized
by the Company and each of the Delaware Guarantors that are parties
thereto. Assuming the due authorization of the Registration Rights
Agreement by the Non-Delaware Guarantors, when the Registration Rights
Agreement is duly executed and delivered by each such person, it will
constitute a valid and legally binding obligation of the Company and
the Guarantors, enforceable against each such person that is a party
thereto in accordance with its terms.
(xvi) No registration under the Act of any of the JJF Notes is
required for the consummation of the JJF Group Exchange or the sale of
the JJF
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Notes by JJF Group solely in the manner contemplated by this
Agreement, the Secured Note Indenture and the Private Placement
Memorandum.
(xvii) The issue and sale of the JJF Notes by the Company and
the compliance by the Company and the Delaware Guarantors with all of
the provisions of this Agreement, the Secured Note Indenture, the
Security Documents, the Registration Rights Agreement, the Guarantees
and the JJF Notes, will not breach or result in a default under any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument identified on an annexed schedule furnished to such
counsel by the Company and which the Company has represented lists all
material agreements and instruments to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action
violate the Restated Certificate of Incorporation or By-laws of the
Company or any Federal or New York statute or the Delaware General
Corporation Law or any order known to such counsel issued pursuant to
any Federal or New York statute or the Delaware General Corporation
Law by any court or governmental agency or body that has jurisdiction
over the Company or any of the Delaware Guarantors or any of their
respective properties.
(xviii) The statements made in the Private Placement Memorandum
under the captions "Description of the Company's Indebtedness,"
"Comparison of Indentures," and "Description of New Secured Notes,"
insofar as they purport to constitute summaries of certain terms of
documents referred to therein, constitute accurate summaries of the
terms of such documents in all material respects, subject to such
qualifications as may be set forth in such summaries.
(xix) Each of the Company and the Delaware Guarantors has all
requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement, the Secured Note
Indenture, the Security Documents, the Registration Rights Agreement,
the Secured Notes and the Guarantees to which it is a party,
including, without limitation, with respect to the Company, the
corporate power and authority to issue, sell and deliver the JJF Notes
as provided herein and in the JJF Group Exchange.
(xx) Neither the Company nor any Guarantor is or, after giving
effect to the issuance and sale of the Securities as described in the
Private Placement Memorandum will be, an "investment company," or a
company controlled by an "investment company," within the meaning of
the Investment Company Act of 1940, as amended.
Such counsel shall also state that (A) their opinions in paragraphs
(iv), (v), (vi) and (vii) are subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether
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considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing and (B) their opinion in
paragraph (vii) is further subject to the qualification that the
enforceability of the Company's obligations under the Registration
Rights Agreement may be limited by considerations of public policy.
Such counsel shall not express any opinion as to the validity, legally
binding effect or enforceability of (A) any provision of the
Registration Rights Agreement or any related provisions of the Secured
Note Indenture that requires or relates to payment of any interest at
a rate or in an amount which a court would determine in the
circumstances under applicable law to be commercially unreasonable or
a penalty or a forfeiture and (B) of the waiver of rights and defenses
provision contained in Section 4.6 of the Secured Note Indenture and
the or the specific performance provisions contained in the
Registration Rights Agreement.
In addition, such counsel shall state that such counsel has not
independently verified the accuracy, completeness or fairness of the
statements made or included in the Private Placement Memorandum and
takes no responsibility therefor, except as and to the extent set
forth in paragraph (xviii) above. In the course of the preparation by
the Company of the Private Placement Memorandum, such counsel
participated in conferences with certain officers and employees of the
Company, and with counsel to the Company. Based upon such counsel's
examination of the Private Placement Memorandum, such counsel's
investigations made in connection with the preparation of the Private
Placement Memorandum and such counsel's participation in the
conferences referred to above, such counsel has no reason to believe
that the Private Placement Memorandum contains any untrue statement of
a material fact or omits to state any material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that such counsel
need not express any belief with respect to (i) the statements made in
the Private Placement Memorandum under the caption entitled "Risk
Factors- Risks Related to the Company--Government regulations increase
our costs of doing business and may discourage our customers from
buying our coal" and (ii) the financial statements or other financial
or statistical data contained in the Private Placement Memorandum.
In rendering such opinion, such counsel may state that its opinion
is limited to matters governed by the federal laws of the United
States of America, the laws of the State of New York, and the General
Corporation Law of Delaware and may rely as to matters of fact, to the
extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials which are furnished to
you.
The opinions of such counsel described in this paragraph shall be
rendered to you at the request of the Company and the Guarantors and
shall so state therein.
(g) You shall have received on the Closing Date an opinion
(satisfactory in form and substance to you and your counsel), dated the Closing
Date, of Spilman Thomas & Battle, PLLC, subject to the customary exclusions and
to such
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exceptions, assumptions, conditions, qualifications and other exclusions as are
appropriate under the circumstances, to the effect that:
(i) Each of the Non-Delaware Guarantors is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and has the corporate power to
conduct its business as described in the Private Placement Memorandum.
(ii) The issued and outstanding shares of capital stock or other
securities evidencing equity ownership of each Non-Delaware Guarantor
consist of the type and number of shares described in a schedule attached
to such opinion. All of the issued and outstanding capital stock or other
securities evidencing equity ownership of the Non-Delaware Guarantors are
owned of record by Anker Coal Group, Inc. or one of its wholly owned,
direct or indirect, subsidiaries. To the extent of such counsel's
knowledge, the ownership of such capital stock or other securities
evidencing such equity ownership is free and clear of any security
interest, adverse claim of ownership, lien or limitation on disposition or
voting rights, except (A) as otherwise disclosed in a schedule attached to
such opinion and (B) for such liens and encumbrances as are contemplated by
the Security Documents. All of such securities have been duly authorized,
validly issued, and, to the extent of such counsel's knowledge, are fully
paid and nonassessable and were not issued in violation of any preemptive
or similar rights. To the extent of such counsel's knowledge, there are no
outstanding subscriptions, rights, warrants, calls, commitments of sale or
options to acquire, or instruments convertible into or exchangeable for,
any such shares of capital stock or other equity interests of any
Non-Delaware Guarantor.
(iii) All necessary corporate action has been taken to duly
authorize each of the Non-Delaware Guarantors to enter into and perform its
obligations under this Agreement, the Secured Note Indenture, the Security
Documents, the Registration Rights Agreement and the other Operative
Documents to which it is a party.
(iv) Each of the Non-Delaware Guarantors has duly executed and
delivered the Mortgages and the Financing Statements to which it is a
party.
(v) No authorization, approval, or consent of, and no filing or
registration with, any governmental or regulatory authority or agency of
the State of West Virginia is required on the part of the Company or any
Guarantor for the execution, delivery or performance by the Company or any
Guarantor of the Secured Note Indenture, the Security Documents, Financing
Statements or the Secured Notes or the other Operative Documents to which
it is a party, except for (A) those that have been obtained or effected and
are in full force and effect and in respect of which all applicable waiting
periods have expired, and (B) the filings as contemplated by a schedule to
such opinion.
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(vi) A court of the State of West Virginia or a Federal District
Court sitting in the State of West Virginia would give effect to the choice
of laws agreement by the parties agreeing that the law of the State of New
York is to govern the Secured Note Indenture, the Security Documents, and
the other Operative Documents; provided, however, said choice of law
agreement will be ineffective as to (A) the perfection provisions of
Article 9 of the West Virginia Uniform Commercial Code (the "WV Code"),
which Article specifies the applicable law, and (B) as to matters relating
to West Virginia real property, including but not limited to, recordation
of and pursuit of remedies under and/or related to the Mortgages.
(vii) The Mortgages grant to the trustees named therein for the
benefit of the Secured Note Trustee, the Collateral Agent and holders of
the Secured Notes (including any Optional Secured Notes that may be issued
in the future) and constitute a valid and enforceable mortgage lien against
the real estate (including mineral interests) described therein to the full
extent of the interest of grantor, and, upon due recordation thereof as
described in paragraph (ix) below and subject to the limitations and
qualifications set forth in such opinion, will be enforceable as mortgage
liens against the real estate (including mineral interests) described
therein in accordance with their terms. The Mortgages grant to the Secured
Note Trustee for the benefit of the holders of the Secured Notes (including
any Optional Secured Notes that may be issued in the future) and constitute
a valid and enforceable security interest under the WV Code in the property
in the State of West Virginia described in said Mortgages in which a
security interest may be granted under Article 9 of the WV Code, including,
but not limited to, fixtures, to the full extent of the interest of the
grantor, and, upon such recordation and subject to the limitations and
qualifications set forth in such opinion, will be enforceable as liens
against such property described therein in accordance with their terms.
(viii) The Financing Statements are in appropriate form to
constitute financing statements under the WV Code. The Mortgages are in
appropriate form to constitute fixture filings under the WV Code.
(ix) The Mortgages will be recorded by such counsel in the Offices
of the Clerks of the County Commissions of the various counties noted in an
attached schedule to such opinion, and the various mortgage interests
granted thereby in real property, subject to the limitations and
qualifications set forth therein, will by reason of such recordings be
validly perfected and made enforceable against the interest in real
property granted thereby by the grantor, and said mortgage interests, shall
not be subject to any liens of record that are prior thereto, except for
(A) the liens reported on a schedule to such opinion, (B) the matters
reported to you in the record search reports attached as a schedule to such
opinion (C) those additional items identified by such counsel in its
searches (just prior to recording the Mortgages and for the period
beginning on May 1, 1999, to the date and time of said recordings) and to
be listed in a letter by such
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counsel after such recordings are made, and (C) ad valorem taxes and
mechanics' liens as noted in a schedule attached to such opinion.
(x) Insofar as perfection can be accomplished by the filing of
financing statements and fixture filings under the WV Code, all such action
has been taken as will be necessary in West Virginia to perfect the
security interests granted to the Collateral Agent for the benefit of
holders of the Secured Notes (including any Optional Secured Notes that may
be issued in the future) in the personal properties identified in the
Financing Statements and in the extracted minerals and fixtures identified
in the Mortgages to the full extent of the interests of the grantor of such
interests, to create priority in the Collateral Agent for the benefit of
the holders of Secured Notes, as secured party as to said personalty,
extracted minerals and fixtures, over all other security interests which
are perfected by the filing of financing statements, other than the lien of
the Senior Secured Indebtedness, Permitted Liens and with such other
exceptions as may be noted therein. The filing of the Financing Statements
as noted above constitutes all such action as will be necessary in West
Virginia to perfect a security interest in the Inventory and Equipment
described therein which is situated in West Virginia.
(xi) In the event that the Secured Note Indenture and the Security
Documents executed by the Company and the Guarantors were governed by West
Virginia law (notwithstanding the agreement by the parties thereto as to
the application of New York law), then one of said documents, specifically,
the General Security Agreement, grants to the Collateral Agent for the
benefit of the holders of the Secured Notes (including any Optional Secured
Notes that may be issued in the future) a valid and enforceable security
interest under the WV Code in the property in the State of West Virginia
described in said document in which a security interest may be granted
under Article 9 of the WV Code (and as limited by Sections 9-306 and 9-307
of the WV Code) to the full extent of the interests of the grantors.
(xii) (A) Under the law of the State of West Virginia, a foreign
corporation is not required, solely as a lender making loans or extending
credit secured by real and personal property in the State of West Virginia,
to procure a certificate of authority to transact business or otherwise
qualify to do business in the State of West Virginia. As such, neither the
Secured Note Trustee, the Collateral Agent nor any Holder of Secured Notes
shall, solely by reason of the making of the loans under the Security
Documents and the execution and delivery by the Guarantors of the Mortgages
listed in a schedule attached to such opinion and the Financing Statements
listed or described in schedules attached to such opinion (and/or the
filing or recording of the same), be required (1) to qualify to do business
in the State of West Virginia or to comply with the requirements of any
foreign registration or qualification statute of the State of West
Virginia, (2) be subject to taxation by the State of West Virginia or any
political subdivision of said State except as noted on a schedule attached
to such opinion, or (3) be required to make any filing with any court or
other judicial or administrative body
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of the State of West Virginia preceding enforcement in order to avail
itself of any of the remedies provided by the Mortgage. (B) No recording,
filing, privilege, documentary stamp or other tax must be paid in
connection with the execution, delivery, recordation or enforcement of the
Mortgages or the Financing Statements except for the payment of filing fees
to be paid to (i) the Clerks of the County Commissions of the various
counties where the Mortgages and Financing Statements are to be recorded,
and (ii) the office of the West Virginia Secretary of State.
(xiii) The execution, delivery and performance of the Operative
Documents to which each Non-Delaware Guarantor is a party (A) does not
violate its respective charter or bylaws, (B) to the extent of such
counsel's knowledge, does not constitute a default in the performance of
any bond, debenture, note, other evidence of indebtedness, indenture,
mortgage, deed of trust or other material agreement to which it is a party
or by which it is bound or to which any of its properties is subject, (C)
does not violate any applicable law, statute, rule, regulation, or, to the
extent of such counsel's knowledge, any judgment or court decree,
applicable to any of the Non-Delaware Guarantors or (D) (except for the
lien created pursuant to any of the Security Documents) result in the
creation or imposition of any Lien upon any property of any Non-Delaware
Guarantor; except for, in the case of (B) and (C), any violation or default
that would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(xiv) To the extent of such counsel's knowledge, except as
disclosed on an annexed schedule, there are no actions, suits or
proceedings, including arbitration proceedings pending against or affecting
any of the Company or Non-Delaware Guarantors before any West Virginia
court or Federal District Court sitting in West Virginia or any West
Virginia governmental department or agency, or threatened against any of
them, which, if adversely determined against them, would have a Material
Adverse Effect. Additionally, to the extent of such counsel's knowledge and
except as disclosed in a schedule to such opinion, there are no actions,
suits or proceedings, including arbitration proceedings, pending against
any of Company or the Non-Delaware Guarantors, or any of their respective
property in any other jurisdiction, or threatened against any of them,
which, if adversely determined against them, would have a Material Adverse
Effect.
(xv) The statements in the Private Placement Memorandum under the
captions "Risk Factors--Risks Related to the Company -- Government
regulations could increase our costs of doing business and may discourage
our customers from buying our coal," insofar as such statements constitute
a summary of the legal matters, documents or proceedings referred to
therein, fairly and accurately summarize in all material respects the
information set forth therein with respect to such legal matters, documents
or proceedings.
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In rendering such opinion, such counsel may state that its opinion
is limited to matters governed by the federal laws of the United
States of America, the laws of the States of West Virginia and
Virginia, and may rely as to matters of fact, to the extent such
counsel deems proper, on certificates of responsible officers of the
Company and any of the Non-Delaware Guarantors and public officials
which are furnished to JJF Group.
The opinions of such counsel described in this paragraph shall be
rendered to you at the request of the Company and the Guarantors and
shall so state therein.
(h) You shall have been furnished with such documents and opinions,
in addition to those forth above, as you may reasonably require for the
purpose of enabling you to review or pass upon the matters referred to in
this Section 11.
(i) Prior to the Closing Date, the Company and the Guarantors shall
have furnished to you such further information, certificates and documents
as you may reasonably request.
(j) The Company, the Guarantors and the Secured Note Trustee shall
have entered into the Secured Note Indenture and you shall have received
counterparts, conformed as executed, thereof.
(k) The Company and the Guarantors shall have entered into the
Security Documents and you shall have received counterparts, conformed as
executed, thereof.
(l) The Company and the Guarantors shall have entered into the
Registration Rights Agreement and you shall have received an executed
counterpart thereof.
(m) No default or Event of Default shall be continuing under the
Old Note Indenture or the Senior Secured Indebtedness.
(n) The Company shall have obtained any necessary consents to the
transactions contemplated by this Agreement, including the consent of the
holders of the Senior Secured Indebtedness and the parties to the
Stockholder Agreement.
(o) The Company and the Guarantors shall have made all filings and
taken all steps necessary to perfect the Lien of the Security Documents.
All opinions, certificates, letters and other documents required by this
Section 11 to be delivered by the Company and the Guarantors will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you. The Company and the Guarantors will furnish you
with such conformed copies of such opinions, certificates, letters and other
documents as you shall reasonably request.
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12. Conditions of the Company's and the Guarantors' Obligations. The
several obligations of the Company and the Guarantors under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) There shall have been no failure for any reason to consummate
both the Private Placement and the Private Exchange.
(b) There is no law, statute, rule or regulation or applicable
interpretation of the staff of the SEC issued or promulgated which, in the
good faith determination of the Company, does not permit the Company to
complete the JJF Group Exchange.
(c) There is no action or proceeding instituted or threatened in
any court or by or before any governmental agency or regulatory authority
or any injunction order or decree issued with respect to the JJF Group
Exchange which, in the sole judgment of the Company, would prohibit the
Company from proceeding with or consummating the JJF Group Exchange.
13. Effective Date of Agreement and Termination. This Agreement shall
become effective upon the execution hereof by all parties.
This Agreement may be terminated at any time on or prior to the Closing
Date by JJF Group by written notice to the Company if any of the following has
occurred: (i) subsequent to the date information is provided in the Private
Placement Memorandum, any Material Adverse Effect which, in your judgment,
materially impairs the investment quality of the JJF Notes, (ii) any outbreak or
escalation of hostilities or other national or international calamity or crisis
or material adverse change in the financial markets of the United States or
elsewhere, or any other substantial national or international calamity or
emergency the effect of which on financial markets is such as to make it, in
your judgment, impractical or inadvisable to proceed with the transactions
contemplated by the Private Placement Memorandum, (iii) any suspension or
limitation of trading generally in securities on the New York Stock Exchange or
in the over-the-counter markets or any setting of minimum prices for trading on
such exchange or market, (iv) any declaration of a general banking moratorium by
either federal or New York authorities, (v) the taking of any action by any
federal, state or local government or agency in respect of its monetary or
fiscal affairs that in your judgment has a material adverse effect on the
financial markets in the United States, or (vi) the enactment, publication,
decree, or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority which in your judgment
would have a Material Adverse Effect.
The agreements, representations and warranties of the Company and the
Guarantors, their respective officers and directors and of JJF Group set forth
in or made pursuant to this Agreement shall remain operative and in full force
and effect, and will survive delivery of and payment for the JJF Notes,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of JJF Group or by or on behalf of the Company and the
Guarantors, the officers or directors of the Company or the Guarantors or
controlling person of the Company or the Guarantors, (ii) acceptance of the JJF
Notes and payment for them hereunder and (iii) termination of this Agreement.
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If this Agreement shall be terminated by JJF Group pursuant to clause (i)
of the second paragraph of this Section 13 or because of the failure or refusal
on the part of the Company or any Guarantor to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company and the Guarantors
agree to reimburse JJF Group for all reasonable out-of-pocket expenses incurred
by it. Notwithstanding any termination of this Agreement, the Company and the
Guarantors shall be liable for all expenses which it has agreed to pay pursuant
to Section 9(f) hereof.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Guarantors, JJF
Group and their respective successors and assigns, all as and to the extent
provided in this Agreement, and no other person shall acquire or have any right
under or by virtue of this Agreement. The terms "successors and assigns" shall
not include a purchaser of any of the JJF Notes from JJF Group merely because of
such purchase.
14. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company or any Guarantor,
2708 Cranberry Square, Morgantown, West Virginia 26505, Attention: P. Bruce
Sparks, with a copy to Klett, Lieber, Rooney & Schorling, One Oxford Center,
40th Floor, Pittsburgh, Pennsylvania 15219-6498, Attention: Craig S. Heryford,
and (b) if to JJF Group, at its address set forth in Schedule II, with a copy to
Rose, Schmidt, Hasley & DiSalle, P.C., 900 Oliver Bldg., Pittsburgh,
Pennsylvania 15222-2310, Attention: Charles L. Potter, Jr., or in any case to
such other address as the person to be notified may have requested in writing.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York. This Agreement may be signed in various
counterparts which together shall constitute one and the same instrument.
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Please confirm that the foregoing correctly sets forth the Agreement among
the Company, the Guarantors, and JJF Group.
Very truly yours,
ANKER COAL GROUP, INC.
By: /s/ B. Judd Hartman
----------------------------
Name: B. Judd Hartman
Title: Secretary
EACH OTHER ENTITY LISTED ON
SCHEDULE I HERETO
By: /s/ B. Judd Hartman
----------------------------
Name: B. Judd Hartman
Title: Secretary
Accepted and agreed to as of
the date first above written:
JJF Group Limited Liability Company
By: /s/ James Boyd
-------------------------------------
Name: James Boyd
Title: General Manager
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SCHEDULE I
Company State of Incorporation
Anker Group, Inc. Delaware
Anker Energy Corporation Delaware
Bronco Mining Company,Inc. West Virginia
Anker Power Services, Inc. West Virginia
Anker West Virginia Mining Company, Inc. West Virginia
Juliana Mining Company, Inc. West Virginia
King Knob Coal Co., Inc. West Virginia
Vantrans, Inc. Delaware
Melrose Coal Company, Inc. West Virginia
Marine Coal Sales Company Delaware
Hawthorne Coal Company, Inc. West Virginia
Upshur Property, Inc. Delaware
Heather Glen Resources, Inc. West Virginia
New Allegheny Land Holding Company, Inc. West Virginia
Patriot Mining Company, Inc. West Virginia
Vindex Energy Corporation West Virginia
Anker Virginia Mining Company, Inc. Virginia
Simba Group, Inc. Delaware
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SCHEDULE II
JJF Group Limited Liability Company
c/o James W. Boyd
John T. Boyd Company
4 Gateway Center
444 Liberty Avenue, Suite 1900
Pittsburgh, PA 15222-1212
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EXHIBIT A
Form of Registration Rights Agreement
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EXHIBIT B
Form of Termination and Cancellation Agreement
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