1
Exhibit 4.2
PAYMENT AND GUARANTEE AGREEMENT
THIS PAYMENT AND GUARANTEE AGREEMENT (the "Guarantee"), dated as of April
12th, 2001, is executed and delivered by each of the entities listed on the
signature pages hereof (collectively, the "Guarantor") for the benefit of the
Holders (as defined below) from time to time of the Class E Preferred Shares (as
defined below) of Anker Coal Group, Inc., a Delaware corporation (the "Issuer").
WHEREAS, each Guarantor is a direct or indirect wholly-owned subsidiary of
the Issuer;
WHEREAS, the Issuer is issuing on the date hereof, and has the right to
issue in the future, up to a total of 200,000 shares of its Class E Convertible
Preferred Stock (the "Class E Preferred Shares"), and each Guarantor desires to
issue this Guarantee for the benefit of the Holders, as provided herein; and
WHEREAS, Guarantor had guaranteed the Notes which are being exchanged on
the date hereof for Class E Preferred Shares and this Guarantee is being issued
at the same time as the Class E Preferred Shares;
WHEREAS, each Guarantor desires hereby irrevocably and unconditionally to
agree to the extent set forth herein to pay to the Holders the Guarantee
Payments (as defined below) and to make certain other payments on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of the
Class E Preferred Shares and the Guarantee, which purchase each Guarantor hereby
agrees shall benefit the Guarantor, each Guarantor executes and delivers this
Guarantee for the benefit of the Holders, and hereby covenants and agrees as
follows.
ARTICLE I
As used in this Guarantee, the following terms shall, unless the context
otherwise requires, have the following meanings. Capitalized terms used but not
otherwise defined herein shall have the meanings assigned to such terms in the
Certificate of Designation of Preferences and Rights of Class E Convertible
Preferred Stock of Anker Coal Group, Inc. adopted as of April 12th, 2001.
"Guarantee Payments" shall mean the following payments, without
duplication, to the extent not paid by the Issuer: (i) any accumulated arrears
and accruals of unpaid cash dividends which have been theretofore declared on
the Class E Preferred Shares of any series from moneys legally available for the
payment thereof, (ii) the redemption price (including all accumulated arrears
and accruals of unpaid dividends) payable with respect to any Class E Preferred
Shares of any series called for redemption by the Issuer as an optional
redemption and (iii) the lesser of (a) the aggregate of the liquidation
preference and all accumulated arrears and accruals of unpaid dividends (whether
or not declared) to the date of payment and (b) the amount of remaining assets
of the Issuer upon liquidation of the Issuer.
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"Holder" shall mean any holder from time to time of any Class E Preferred
Shares of the Issuer; provided, however, that in determining whether the Holders
of the requisite percentage of Class E Preferred Shares have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Issuer,
Guarantor or any other Subsidiary or any entity owned 20% or more by the Issuer,
Guarantor or any other Subsidiary, either directly or indirectly.
ARTICLE II
SECTION 2.01. (A) The Guarantor irrevocably and unconditionally agrees to
pay in full to the Holders the Guarantee Payments, as and when due (except to
the extent paid by the Issuer), regardless of any defense, right of set-off or
counterclaim which the Issuer may have or assert. This Guarantee is continuing,
irrevocable, unconditional and absolute. The Guarantor's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
the Guarantor to the Holders or by causing the Issuer to pay such amounts to the
Holders.
(B) All Guarantee Payments shall be made without withholding or deduction
for or on account of any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed or levied upon or as a result of
such payment by or on behalf of the United States, any State thereof or any
other jurisdiction through which or from which such payment is made, or any
authority therein or thereof having power to tax, unless the withholding or
deduction of such taxes, duties, assessments or governmental charges is required
by law. In that event, the Guarantor shall pay such additional amounts as may be
necessary in order that the net amounts received by the Holders after such
withholding or deduction will equal the amount which would have been receivable
in respect of the Class E Preferred Shares in the absence of such withholding or
deduction, except that no such additional amounts will be payable to any Holder
(or a third party on his behalf):
(I) if such Holder is liable for such taxes, duties, assessments or
governmental charges in respect of the Class E Preferred Shares
by reason of such Holder's having some connection with the United
States, any State thereof or any other jurisdiction through which
or from which such payment is made, other than being a Holder, or
(II) if the Issuer or the Guarantor has notified such Holder of the
obligation to withhold taxes and requested but not received from
such Holder a declaration of non-residence or other similar claim
for exemption, and such withholding or deduction would not have
been required had such declaration or similar claim been
received.
SECTION 2.02. The Guarantor hereby waives notice of acceptance of this
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 2.03. The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:
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(A) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Class E
Preferred Shares to be performed or observed by the Issuer;
(B) the extension of time for the payment by the Issuer of all or any
portion of the dividends, redemption price, liquidation
distributions or any other sums payable under the terms of the
Class E Preferred Shares or the extension of time for the
performance of any other obligation under, arising out of, or in
connection with, the Class E Preferred Shares;
(C) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege,
power or remedy conferred on the Holders pursuant to the term of
the Class E Preferred Shares, or any action on the part of the
Issuer granting indulgence or extension of any kind;
(D) the voluntary or involuntary liquidation, dissolution, sale of
any collateral, receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement,
composition or readjustment of debt of, or other similar
proceedings affecting, the Issuer or any of the assets of the
Issuer;
(E) any invalidity of, or defect or deficiency in, any of the Class E
Preferred Shares; or
(F) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 2.04. This is a guarantee of payment and not of collection. A
Holder may enforce this Guarantee directly against the Guarantor, and the
Guarantor waives any right or remedy to require that any action be brought
against the Issuer or any other person or entity before proceeding against the
Guarantor. Subject to Section 2.05, all waivers herein contained shall be
without prejudice to the Holders' right at the Holders' option to proceed
against the Issuer or Guarantor, whether by separate action or by joinder. The
Guarantor agrees that this Guarantee shall not be discharged except by payment
of the Guarantee Payments in full and by complete performance of all obligations
of the Guarantor contained in this Guarantee.
SECTION 2.05. The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Issuer in respect of any amounts paid to the Holders by
the Guarantor under this Guarantee and shall have the right to waive payment of
any amount of dividends in respect of which payment has been made to the Holders
by the Guarantor pursuant to Section 2.01; provided, however, that the Guarantor
shall not (except to the extent required by mandatory provisions of law)
exercise any rights which it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of a payment under
this Guarantee, if, at the time of any such payment, any amounts are due and
unpaid
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under this Guarantee. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to pay over such amount to the
Holders.
SECTION 2.06. The Guarantor acknowledges that its obligations hereunder are
several and independent of the obligations of the Issuer with respect to its
Class E Preferred Shares and that the Guarantor shall be liable as principal and
debtor hereunder to make Guarantee Payments pursuant to the terms of this
Guarantee notwithstanding the occurrence of any event referred to in subsections
(a) through (f), inclusive, of Section 2.03 hereof. Each Guarantor shall be
jointly and severably liable for obligations under this Guarantee.
SECTION 2.07. The Guarantor represents and warrants that its obligations
hereunder rank, and covenants that such obligations will at all times rank, (a)
junior to all liabilities of the Guarantor, (b) senior to the most senior
preferred or preference stock issued by the Guarantor, if any, and with any
guarantee entered into by the Guarantor in respect of any preferred or
preference stock of any affiliate of the Guarantor and (c) senior to the common
shares of the Guarantor.
ARTICLE III
SECTION 3.01. The Guarantor shall not issue any preferred or preference
stock ranking senior to its obligations under this Guarantee or enter into any
guarantee in respect of any preferred or preference stock of any affiliate of
the Guarantor, which guarantee would rank senior to this Guarantee in any
respect, without the prior written approval of Holders of a majority of the
outstanding Class E Preferred Shares, voting as a single class.
SECTION 3.02. If, in compliance with Section 3.01, the Guarantor issues,
following the date of the issuance of the Class E Preferred Shares, any
preferred or preference stock ranking senior to its obligations under this
Guarantee or enters into any guarantee in respect of any preferred or preference
stock of any affiliate of the Guarantor, which guarantee would rank junior to
all liabilities of the Guarantor but senior to this Guarantee as regards rights
in respect of dividends, liquidation preference and distributions, and rights
upon redemption, then this Guarantee will be deemed to give the Holders such
rights and entitlements as are contained in or attached to such other preferred
or preference stock or guarantee such that this Guarantee ranks pari passu as to
such rights and entitlements with any such preferred or preference stock or
other guarantee.
SECTION 3.03. The Guarantor shall not, and the Guarantor shall not permit
or cause any subsidiary of the Guarantor to; (a) declare or pay any cash
dividends on any shares of the Guarantor ranking junior to the Guarantor's
obligations under this Guarantee (except for cash dividends to the Issuer or
another Guarantor); (b) redeem, or purchase or otherwise acquire any shares of
the Guarantor ranking junior to the Guarantor's obligations under this Guarantee
(except for redemptions, purchases or other acquisitions of shares owned by the
Issuer or another Guarantor), or (c) make any payment on any shares of the
Guarantor ranking junior to the Guarantor's obligations under this Guarantee
(except payments with respect to shares owned by the Issuer or another
Guarantor).
SECTION 3.04. The Guarantor shall not, and the Guarantor shall not permit
or cause any subsidiary of the Guarantor to redeem, purchase or otherwise
acquire, or pay a liquidation preference with respect to, any preferred or
preference stock of the Guarantor ranking pari passu with this Guarantee, any
preferred or preference stock of affiliates of the Guarantor (including the
Issuer) entitled to the benefits of a guarantee ranking pari passu with
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this Guarantee or any preferred or preference stock of affiliates of the
Guarantor (including the Issuer) entitled to the benefits of a guarantee ranking
junior to this Guarantee as to participation in assets of the Guarantor upon
liquidation if at such time the Guarantor shall be in default with respect to
its obligations under this Guarantee.
SECTION 3.05. The Guarantor shall not, and the Guarantor shall not permit
or cause any subsidiary of the Guarantor to pay cash dividends, or make
guarantee payments with respect to dividends, on any preferred or preference
stock of any affiliates of the Guarantor entitled to the benefits of a guarantee
ranking junior to this Guarantee (except for cash dividends or guarantee
payments to the Issuer or other Guarantor).
SECTION 3.06. If as a result of a sale of stock, merger, consolidation or
other business combination transaction, a Guarantor (whether or not the
surviving or successor entity) is no longer a direct or indirect subsidiary of
the Issuer or any other Guarantor, then such Guarantor (and only such Guarantor)
shall be released from its obligations under this Guarantee; provided that all
of the consideration from such transaction is in cash or marketable securities
and has been paid to the Issuer or another Guarantor. In addition, a Guarantor
shall not sell its stock, merge or consolidate or otherwise enter into a
business combination transaction (whether or not the Guarantor is the surviving
or successor entity), unless immediately following such transaction, the
consolidated net worth of the surviving or successor entity is at least $1
greater than the net worth of such Guarantor immediately prior to such
transaction.
SECTION 3.07. The Guarantor shall take all actions necessary to ensure the
compliance of its subsidiaries with this Article III, which may include causing
such subsidiaries to incorporate appropriate restrictions in their respective
Certificates of Incorporation or similar constitutional documents.
ARTICLE IV
This Guarantee shall terminate and be of no further force and effect upon
(i) conversion of all Class E Preferred Shares into Conversion Shares, (ii) full
payment of the redemption price (including all accumulated arrears and accruals
of unpaid dividends) of all Class E Preferred Shares, or (iii) full payment of
the amounts payable to the Holders upon liquidation of the Issuer; provided,
however, that this Guarantee shall continue to be effective or shall be
reinstated, as the case may be, if at any time payment of any sums payable under
the Class E Preferred Shares or this Guarantee must be restored by a Holder for
any reason whatsoever. The Guarantor agrees to indemnify each Holder and hold it
harmless against any loss it may suffer in such circumstances.
ARTICLE V
SECTION 5.01. All guarantees and agreements contained in this Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders. The Guarantor shall
not assign its obligations hereunder without the prior approval of the Holders
of a majority of all outstanding Class E Preferred Shares voting as a single
class, which consent shall be obtained in writing or by a vote at a separate
general meeting at which such Holders shall be present in person or by proxy.
SECTION 5.02. Except for those changes required by Section 3.02 hereof or
which do not adversely affect the rights of Holders (in any of which cases no
agreement will be
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required), this Guarantee shall be changed only by agreement in writing signed
by the Guarantor with the prior approval of the Holders of a majority of all
outstanding Class E Preferred Shares voting as a single class, which approval
shall be obtained in writing or by a vote at a separate general meeting at which
such Holders shall be present in person or by proxy.
SECTION 5.03. All notices, communications and distributions hereunder shall
be given or made to the intended recipient at the address specified for each
Guarantor on the signature pages hereof, or at such other address as the
addressee may hereafter specify for the purpose by written notice to the
Holders. Such notices and other communications (including, without limitation,
any modifications of, or waivers or consents under, this Agreement) shall be
given or made in writing and may be delivered by hand, by overnight courier, by
facsimile, or by first-class mail (return receipt requested). All such notices
and other communications shall be deemed to have been duly given (a) if
delivered by hand, overnight courier or first-class mail (return receipt
requested), on the date of delivery; and (b) if transmitted by facsimile (with
receipt confirmed by machine), on the date of transmission if the same is a
business day or, if not a business day, on the first business day after the date
of transmission. The address of the Guarantor may be changed at any time and
from time to time and shall be the most recent such address furnished in writing
by the Guarantor to the Holders. Any notice, request or other communication
required or permitted to be given hereunder to the Holders shall be given by the
Guarantor in the same manner as notices sent by the Issuer to the Holders.
SECTION 5.04. The masculine and neuter genders used herein shall include
the masculine, feminine and neuter genders.
SECTION 5.05. This Guarantee is solely for the benefit of the Holders and
is not separately transferable from the Class E Preferred Shares.
SECTION 5.06. This Guarantee shall be governed by and construed and
interpreted in accordance with the laws of the State of New York.
[Signatures appear on following pages]
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THIS GUARANTEE is executed as of the day and year first above written.
Anker Group, Inc., a Delaware corporation
Anker Energy Corporation, a Delaware corporation
Bronco Mining Company, Inc., a West Virginia corporation
Anker Power Services, Inc., a West Virginia corporation
Anker West Virginia Mining Company, Inc., a West Virginia corporation
Juliana Mining Company, Inc., a West Virginia corporation
King Knob Coal Co., Inc., a West Virginia corporation
Vantrans, Inc., Inc., a Delaware corporation
Melrose Coal Company, Inc., a West Virginia corporation
Marine Coal Sales Company, a Delaware corporation
Hawthorne Coal Company, Inc., a West Virginia corporation
Upshur Property, Inc., a Delaware corporation
Heather Glen Resources, Inc., a West Virginia corporation
New Allegheny Land Holding Company, Inc., a West Virginia corporation
Patriot Mining Company, Inc., a West Virginia corporation
Vindex Energy Corporation, a West Virginia corporation
Anker Virginia Mining Company, Inc., a Virginia corporation
Simba Group, Inc., a Delaware corporation
By: /s/ David D. Struth
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Name: David D. Struth
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Title: Treasurer
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Address for Notices to each of the Guarantors:
c/o Anker Coal Group, Inc.
2708 Cranberry Square
Morgantown, WV 26508
Attn: General Counsel