Exhibit 4.2
LODESTAR HOLDINGS, INC.,
the GUARANTORS named herein
$150,000,000
11 1/2% Senior Notes due 2005
Purchase Agreement
May 12, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
and
BT ALEX. BROWN INCORPORATED
as Initial Purchasers
PURCHASE AGREEMENT
$150,000,000
11 1/2% Senior Notes due 2005
LODESTAR HOLDINGS, INC.
May 12, 1998
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BT ALEX. BROWN INCORPORATED
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
LODESTAR HOLDINGS, INC., a Delaware corporation (the "Company"),
proposes to issue and sell to Donaldson, Lufkin & Jenrette Securities
Corporation and BT Alex. Brown Incorporated (the "Initial Purchasers") an
aggregate of $150,000,000 in principal amount of its 11 1/2% Senior Notes due
2005, Series A (the "Series A Notes"), subject to the terms and conditions
set forth herein. The Series A Notes are to be issued pursuant to the
provisions of an indenture (the "Indenture"), to be dated as of the Closing
Date (as defined below), by and among the Company, the Guarantors (as defined
below) and State Street Bank and Trust Company, as trustee (the "Trustee").
The Series A Notes and the Series B Notes (as defined below) issuable in
exchange therefor are collectively referred to herein as the "Notes." The
Notes will be guaranteed (the "Subsidiary Guarantees") by the entities listed
on Schedule A hereto (the "Guarantors"). Capitalized terms used but not
defined herein shall have the meanings given to such terms in the Indenture.
1. Offering Memorandum. The Series A Notes will be offered and
sold to the Initial Purchasers pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"Securities Act"). The Company and the Guarantors have prepared a
preliminary offering memorandum, dated April 24, 1998 (the "Preliminary
Offering Memorandum") and a final offering memorandum, dated May 12, 1998
(the "Offering Memorandum"), relating to the Series A Notes and the
Subsidiary Guarantees.
Upon original issuance thereof, and until such time as the same is
no longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
THE SENIOR NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF
OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER: (A) REPRESENTS THAT (1) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) (A "QIB") OR (2) IT HAS ACQUIRED THIS SENIOR NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT; (B) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SENIOR
NOTE EXCEPT (1) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (2) 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, (3) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR
904 OF THE SECURITIES ACT, (4) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (5) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D
UNDER THE SECURITIES ACT THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE TRANSFER OF THIS SENIOR NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT
OF SENIOR NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (6) 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 (7) 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 (C) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE
MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS SENIOR NOTE IN VIOLATION OF THE FOREGOING.
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2. Agreements to Sell and Purchase. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers agree,
severally, to purchase from the Company, the respective principal amount of
Series A Notes set forth opposite their name on Schedule B hereto at a
purchase price equal to 97.25% of the principal amount thereof.
3. Terms of Offering. The Initial Purchasers have advised
the Company that the Initial Purchasers will make offers (the "Exempt
Resales") of the Series A Notes purchased hereunder on the terms set forth in
the Offering Memorandum, as amended or supplemented, solely to (i) persons
whom the Initial Purchasers reasonably believe to be "qualified institutional
buyers" as defined in Rule 144A under the Securities Act ("QIBs") and (ii) to
persons permitted to purchase the Series A Notes in offshore transactions in
reliance upon Regulation S under the Securities Act (each, a "Regulation S
Purchaser") (such persons specified in clauses (i) and (ii) being referred to
herein as the "Eligible Purchasers"). The Initial Purchasers will offer the
Series A Notes to Eligible Purchasers initially at a price equal to 100.00%
of the principal amount thereof. Such price may be changed at any time
without notice.
Holders (including subsequent transferees) of the Series A
Notes will have the registration rights set forth in the registration rights
agreement (the "Registration Rights Agreement"), to be dated the Closing
Date, in substantially the form of Exhibit A hereto, for so long as such
Series A Notes constitute "Transfer Restricted Securities" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights
Agreement, the Company and the Guarantors will agree to file with the
Securities and Exchange Commission (the "Commission") under the circumstances
set forth therein, (i) a registration statement under the Securities Act (the
"Exchange Offer Registration Statement") relating to the Company's 11 1/2%
Senior Notes due 2005, Series B (the "Series B Notes") to be guaranteed by
the Guarantors, to be offered in exchange for the Series A Notes (such offer
to exchange being referred to as the "Exchange Offer") and the Subsidiary
Guarantees thereof and/or (ii) a shelf registration statement pursuant to
Rule 415 under the Securities Act (the "Shelf Registration Statement" and,
together with the Exchange Offer Registration Statement, the "Registration
Statements") relating to the resale by certain holders of the Series A Notes
and to use its reasonable efforts to cause such Registration Statements to be
declared and remain effective and usable for the periods specified in the
Registration Rights Agreement and to consummate the Exchange Offer. This
Agreement, the Indenture, the Notes, the Subsidiary Guarantees and the
Registration Rights Agreement are hereinafter sometimes referred to
collectively as the "Operative Documents."
4. Delivery and Payment.4.Delivery and Payment.
(a) Delivery of, and payment of the Purchase Price for, the
Series A Notes shall be made at the offices of Cahill Gordon & Reindel or
such other location as may be mutually acceptable. Such delivery and payment
shall be made at 9:00 a.m. New York City time, on May 15, 1998 or at such
other time on the same date or such other date as shall be agreed upon by the
Initial
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Purchasers and the Company in writing. The time and date of such delivery
and the payment for the Series A Notes are herein called the "Closing Date."
(b) One or more of the Series A Notes in definitive global
form, registered in the name of Cede & Co., as nominee of The Depository
Trust Company ("DTC"), having an aggregate principal amount corresponding to
the aggregate principal amount of the Series A Notes (collectively, the
"Global Note"), shall be delivered by the Company to the Initial Purchasers
(or as the Initial Purchasers direct) in each case with any transfer taxes
thereon duly paid by the Company against payment by the Initial Purchasers of
the Purchase Price thereof by wire transfer in same day funds to the order of
the Company. The Global Note shall be made available to the Initial
Purchasers for inspection not later than 9:30 a.m., New York City time, on
the business day immediately preceding the Closing Date.
5. Agreements of the Company and the Guarantors. Each of
the Company and the Guarantors hereby agrees with the Initial Purchasers as
follows:
(a) To advise you promptly and, if requested by the Initial
Purchasers, confirm such advice in writing, (i) of the issuance by any
state securities commission of any stop order suspending the
qualification or exemption from qualification of any of the Series A
Notes for offering or sale in any jurisdiction, or the initiation of
any proceeding for such purpose by any state securities commission or
other regulatory authority, and (ii) of the happening of any event
that makes any statement of a material fact made in the Offering
Memorandum untrue or that requires the making of any additions to or
changes in the Offering Memorandum 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 efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any of the Series A Notes
under any state securities or Blue Sky laws, and if at any time any
state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption of any of the
Series A Notes under any state securities or Blue Sky laws, the
Company and the Guarantors shall use their reasonable efforts to
obtain the withdrawal or lifting of such order at the earliest
possible time.
(b) To furnish you, without charge, as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as you may reasonably request. The
Company consents to the lawful use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and
supplements thereto, by you in connection with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering
Memorandum or the Offering Memorandum prior to the Closing Date unless
you shall previously have been advised thereof and shall not have
objected thereto after being furnished a copy thereof. The Company
shall promptly prepare, upon your request, any amendment or supplement
to the Preliminary Offering Memorandum or the Offering Memorandum that
may be reasonably necessary or advisable in connection with Exempt
Resales.
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(d) If, after the date hereof and prior to consummation of
any Exempt Resales, any event shall occur as a result of which, in the
judgment of the Company or in the reasonable opinion of your counsel,
it becomes necessary to amend or supplement the Offering Memorandum in
order to make the statements therein, in the light of the
circumstances when the Offering Memorandum is delivered to an Eligible
Purchaser which is a prospective purchaser, not misleading, or if it
is necessary to amend or supplement the Offering Memorandum to comply
with applicable law, forthwith to prepare an appropriate amendment or
supplement to the Offering Memorandum so that statements therein as so
amended or supplemented will not, in the light of the circumstances
when it is so delivered, be misleading, or so that the Offering
Memorandum will comply with applicable law.
(e) To cooperate with you and your counsel in connection with
the qualification of the Series A Notes under the securities or Blue
Sky laws of such jurisdictions as you may request and to continue such
qualification in effect so long as required for the Exempt Resales;
provided, however, that neither the Company nor any of the Guarantors
shall be required in connection therewith to register or qualify as a
foreign corporation where it is not now so qualified or to take any
action that would subject it to the service of process in suits or
taxation, other than as to matters and transactions relating to the
Exempt Resales, 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 becomes effective or is
terminated, to pay all costs, expenses, fees and taxes incident to and
in connection with: (i) the preparation, printing, filing and
distribution of the Preliminary Offering Memorandum and the Offering
Memorandum (including, without limitation, financial statements and
exhibits) and all amendments and supplements thereto, (ii) the
preparation (including, without limitation, word processing and
duplication costs) and delivery of this Agreement and the other
Operative Documents and all preliminary and final Blue Sky memoranda
and all other agreements, memoranda, correspondence and other
documents prepared and delivered in connection herewith and with the
Exempt Resales, (iii) the issuance and delivery by the Company of the
Notes, (iv) the qualification of the Notes for offer and sale under
the securities or Blue Sky laws of the several states (including,
without limitation, the reasonable fees and disbursements of your
counsel relating to such registration or qualification),
(v) furnishing such copies of the Preliminary Offering Memorandum and
the Offering Memorandum, and all amendments and supplements thereto,
as may be reasonably requested for use in connection with Exempt
Resales, (vi) the preparation of certificates for the Notes
(including, without limitation, printing and engraving thereof), (vii)
the fees, disbursements and expenses of the Company's counsel and
accountants, (viii) all expenses and listing fees in connection with
the application for quotation of the Series A Notes in the National
Association of Securities Dealers, Inc. ("NASD") Automated Quotation
System - PORTAL ("PORTAL"), (ix) all fees and expenses (including fees
and expenses of counsel) of the Company in connection with approval of
the Notes by DTC, Euroclear or CEDEL for "book-entry" transfer and (x)
the performance by the Company of its other obligations under this
Agreement and the other Operative Documents.
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(g) To use the proceeds from the sale of the Series A Notes in
the manner described in the Offering Memorandum under the caption "Use
of Proceeds."
(h) Not to voluntarily claim, and to resist actively any
attempts to claim , the benef it of any usury laws again st the
holders of any Notes .
(i) To do and perform all things required to be done and
performed under this Agreement by it prior to or after the Closing
Date and to satisfy all conditions precedent on its part to the
delivery of the Series A Notes.
(j) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the
Securities Act) that would be integrated with the sale of the
Series A Notes in a manner that would require the registration
under the Securities Act of the sale to you or Eligible Purchasers
of the Series A Notes.
(k) For so long as any of the Notes remain outstanding and
during any period in which the Company and the Guarantors are not
subject to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), to make available to any QIB or
beneficial owner of Series A Notes in connection with any sale thereof
and any prospective purchaser of such Series A Notes from such QIB or
beneficial owner, the information required by Rule 144A(d)(4) under
the Securities Act.
(l) To cause the Exchange Offer to be made in the appropriate
form to permit registration of the Series B Notes and the guarantees
thereof by the Guarantors to be offered in exchange for the Series A
Notes and the Subsidiary Guarantees and to comply in all material
respects with all applicable federal and state securities laws in
connection with the Exchange Offer.
(m) To comply in all material respects with all of its
agreements set forth in the Registration Rights Agreement, and all
agreements set forth in the representation letter of the Company and
the Guarantors to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer and any similar such letter, if any, with
Euroclear or CEDEL.
(n) To use reasonable efforts to effect the inclusion of the
Series A Notes in PORTAL.
(o) During a period of five years following the date of this
Agreement, to deliver to you promptly upon their becoming available,
copies of all current, regular and periodic reports filed by the
Company or the Guarantors with the Commission or any securities
exchange or with any governmental authority succeeding to any of the
Commission's functions.
6. Representations and Warranties. Each of the Company and
the Guarantors represents and warrants to you that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum have been prepared in connection with the Exempt Resales.
The Preliminary Offering
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Memorandum as of its date did not, and the Offering Memorandum does
not, and any supplement or amendment to them will not, contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties contained in this paragraph (i)
shall not apply to statements in or omissions from the Preliminary
Offering Memorandum and the Offering Memorandum (or any supplement or
amendment thereto) made in reliance upon and in conformity with
information relating to you furnished to the Company in writing by you
expressly for use therein. No stop order preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of
the transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act, has been issued.
Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in,
and meeting the requirements of, Rule 144A(d)(4) under the Securities
Act.
(b) When the Series A Notes are issued and delivered pursuant to
this Agreement, none of the Series A Notes will be of the same class
(within the meaning of Rule 144A under the Securities Act) as
securities of the Company 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 inter-dealer quotation system.
(c) The Company and each of its subsidiaries has been duly
organized, is validly existing as a corporation in good standing under
the laws of its respective jurisdiction of incorporation has all
requisite power and authority to carry on its business as it is
currently being conducted and as described in the Offering Memorandum
and to own, lease and operate its properties, and is duly qualified
and in good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such qualification.
(d) The entities listed on Schedule A hereto are the only
subsidiaries, direct or indirect, of the Company. The Company owns,
directly or indirectly through other subsidiaries, 100% of the
outstanding capital stock of such subsidiaries, free and clear of any
security interest, claim, lien, limitation on voting rights or other
encumbrances, except for such encumbrances contemplated in the
Offering Memorandum; and all of such capital stock 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 of such
subsidiaries.
(e) The Company and the Guarantors have all requisite corporate
power and authority to execute, deliver and perform their obligations
under this Agreement, the Registration Rights Agreement and the other
Operative Documents to which they are parties 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
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and deliver the Notes, and, with respect to the Guarantors, the
corporate power and authority to deliver the Subsidiary Guarantees, as
provided herein and therein.
(f) This Agreement has been duly and validly authorized,
executed and delivered by the Company and the Guarantors and is the
legally valid and binding agreement of the Company and the Guarantors,
enforceable against the Company and the Guarantors in accordance with
its terms, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights and remedies generally, (ii) as to general
principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in equity, (iii) to the extent that a waiver of
rights under any usury laws may be unenforceable and (iv) as rights to
indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws.
(g) The Indenture has been duly and validly authorized by each
of the Company and the Guarantors and, when duly executed and
delivered by the Company and the Guarantors, will be the legally valid
and binding obligation of the Company and each of the Guarantors,
enforceable against the Company and the Guarantors in accordance with
its terms, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights and remedies generally, (ii) as to general
principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in equity, (iii) to the extent that a waiver of
rights under any usury laws may be unenforceable and (iv) as rights to
indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws. The
Indenture, when executed and delivered, will conform to the
description thereof in the Offering Memorandum.
(h) The Series A Notes have been duly and validly authorized for
issuance and sale to you by the Company pursuant to this Agreement
and, when issued and authenticated in accordance with the terms of the
Indenture and delivered against payment therefor in accordance with
the terms hereof, 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 Indenture, except (i) as
such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
and remedies generally, (ii) as to general principles of equity,
regardless of whether enforcement is sought in a proceeding at law or
in equity, (iii) to the extent that a waiver of rights under any usury
laws may be unenforceable and (iv) as rights to indemnity and
contribution may be limited by federal or state securities laws or the
public policy underlying such laws. The Series A Notes, when issued,
authenticated and delivered, will conform to the description thereof
in the Offering Memorandum.
(i) The Series B Notes have been duly and validly authorized for
issuance by the Company, and when issued and authenticated in
accordance with the terms of the Indenture, the Registration Rights
Agreement and the 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
Indenture, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting
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creditors' rights and remedies generally, (ii) as to general
principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in equity, (iii) to the extent that a waiver of
rights under any usury laws may be unenforceable and (iv) as rights to
indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws.
(j) The Subsidiary Guarantees to be endorsed on the Series A
Notes by each Guarantor have been duly authorized by the Guarantors
and, on the Closing Date, will have been duly executed and delivered
by each Guarantor. When the Series A Notes have been issued, executed
and authenticated in accordance with the Indenture and delivered to
and paid for by the Initial Purchasers in accordance with the terms of
this Agreement, the Subsidiary Guarantees will be entitled to the
benefits of the Indenture and will be the valid and binding obligation
of each Guarantor, enforceable against the Guarantors in accordance
with its terms, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights and remedies generally, (ii) as to general
principles of equity, regardless of whether enforcement is sought in a
proceeding at law or in equity, (iii) to the extent that a waiver of
rights under any usury laws may be unenforceable and (iv) as rights to
indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws. On the
Closing Date, the Subsidiary Guarantees to be endorsed on the Series A
Notes will conform to the description thereof contained in the
Offering Memorandum.
(k) The Subsidiary Guarantees to be endorsed on the Series B
Notes by each Guarantor has been duly authorized by the Guarantors
and, when the Series B Notes are issued, will have been duly executed
and delivered by the Guarantors. When the Series B Notes have been
issued, executed and authenticated in accordance with the terms of the
Exchange Offer and the Indenture, the Subsidiary Guarantees will be
entitled to the benefits of the Indenture and will be the valid and
binding obligation of the Guarantors, enforceable against the
Guarantors in accordance with its terms, except (i) as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and remedies
generally, (ii) as to general principles of equity, regardless of
whether enforcement is sought in a proceeding at law or in equity,
(iii) to the extent that a waiver of rights under any usury laws may
be unenforceable and (iv) as rights to indemnity and contribution may
be limited by federal or state securities laws or the public policy
underlying such laws. When the Series B Notes are issued,
authenticated and delivered, the Subsidiary Guarantees to be endorsed
on the Series B Notes will conform to the description thereof in the
Offering Memorandum.
(l) The Registration Rights Agreement has been duly and validly
authorized by the Company and each of the Guarantors and, when duly
executed and delivered by the Company and each of the Guarantors, will
be the legally valid and binding obligation of the Company and each of
the Guarantors, enforceable against the Company and each of the
Guarantors in accordance with its terms, except (i) as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and remedies
generally, (ii) as to general principles of equity, regardless of
whether enforcement is sought in a proceeding at law or in equity,
(iii) to the extent that a waiver of
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rights under any usury laws may be unenforceable and (iv) as rights to
indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws. The
Registration Rights Agreement, when executed and delivered, will
conform to the description thereof in the Offering Memorandum.
(m) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or bylaws, is in default in the
performance of 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,
other than as disclosed in the Offering Memorandum or as would not
result in a material adverse effect on the properties, business,
results of operations, condition (financial or otherwise), affairs or
prospects of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Effect"), is 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. There exists no
condition that, with notice, the passage of time or otherwise, would
constitute a default under any such document or instrument.
(n) 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 Notes,
the issuance of the Subsidiary Guarantees, and the consummation of the
transactions contemplated hereby and thereby will not violate,
conflict with 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, except as contemplated in the Offering Memorandum, 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. 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 and the consummation of the transactions contemplated hereby
and thereby, except such as have been obtained and made (or, in the
case of the Registration Rights Agreement, will be obtained and made)
under the Securities Act, the Trust Indenture Act, and state
securities or Blue Sky laws and regulations or such as may be required
by the NASD. No consents or waivers from any other person are
required for the execution, delivery and performance of this Agreement
and the other Operative Documents and the consummation of the
transactions contemplated hereby and thereby, other than such consents
and waivers as have been obtained (or, in the case of the Registration
Rights Agreement, will be obtained).
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(o) Other than as disclosed in the Offering Memorandum, there is
(i) no action, suit or proceeding before or by any court, arbitrator
or governmental agency, body or official, domestic or foreign, now
pending or 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) no statute, rule, regulation, or order that has been
enacted, adopted or issued by any governmental agency or that has been
proposed by any governmental body, (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, (x) might, singly or in the aggregate,
result in a Material Adverse Effect, (y) would interfere with or
adversely affect the issuance of the Notes and the Subsidiary
Guarantees or (z) in any manner draw into question the validity of
this Agreement, the Indenture, the Registration Rights Agreement or
any other Operative Document.
(p) No action has been taken and no statute, rule or regulation
or order has been enacted, adopted or issued by any governmental
agency that prevents the issuance of the Notes and the Subsidiary
Guarantees; no injunction, restraining order or order of any nature by
a federal or state court of competent jurisdiction has been issued
that prevents the issuance of the Notes and the Subsidiary Guarantees
or suspends the sale of the Notes and the Subsidiary Guarantees in any
jurisdiction referred to in Section 5(e) hereof; and no action, suit
or proceeding is pending against or affecting or, to the best
knowledge of the Company and any of its subsidiaries, threatened
against, the Company or any of its subsidiaries before any court or
arbitrator or any governmental body, agency or official which, if
adversely determined, would prohibit, interfere with or adversely
affect the issuance or marketability of the Notes and the Subsidiary
Guarantees or in any manner draw into question the validity of any
Operative Document; and every request of any securities authority or
agency of any jurisdiction for additional information has been
complied with in all material respects.
(q) Other than as disclosed in the Offering Memorandum, there is
(i) no significant 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, and no significant
grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is so pending against the
Company or any or its subsidiaries or, to the best knowledge of the
Company and its subsidiaries, threatened against any of them, (ii) no
significant 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 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 or
foreign law relating to discrimination in hiring, promotion or pay of
employees, nor any applicable wage or hour laws, nor any provision of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules and regulations thereunder, which might result
in a Material Adverse Effect.
11
(r) 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 handling, storage,
transport, treatment and disposal of Hazardous Materials (as defined
herein) 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 response and
corrective actions, closure of properties and compliance with
Environmental Laws, all permits, licenses and approvals, all related
constraints on operating activities and all potential liabilities to
third parties). On the basis of such reviews, the Company has
reasonably concluded that such associated costs and liabilities would
not have a Material Adverse Effect other than as disclosed in the
Offering Memorandum. Neither the Company nor any of its subsidiaries
has violated any Environmental Law applicable to it or its business or
property, or is subject to any liability under any Environmental Law,
lacks any permit, license or other approval required of them under
applicable Environmental Laws or is violating any Environmental Law or
term or condition of such permit, license or approval which might have
a Material Adverse Effect, in each case, other than as disclosed in
the Offering Memorandum. For the purposes of this Agreement,
"Environmental Laws" shall mean any federal, state and local laws,
rules or regulations, any orders, decrees, judgments or injunctions
and the common law relating to pollution or protection of human
health, safety or the environment, including, without limitation,
ambient air, indoor air, soil, surface water, ground water, wetlands,
land or subsurface strata, including, without limitation, those
relating to releases or threatened releases of Hazardous Materials
into the environment, or otherwise relating to the manufacture,
processing, generation, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials. For the
purposes of this Agreement, "Hazardous Material" shall mean any
pollutant, contaminant, toxic, hazardous or extremely hazardous
substance, constituent or waste, or any other constituent, waste,
material, compound or substance, including, without limitation,
petroleum including crude oil and any fraction thereof, or any
petroleum product, subject to regulation under any Environmental Law.
(s) Each of the Company and its subsidiaries has (i) good and
marketable title to all of the properties and assets described in the
Offering Memorandum as owned by it, free and clear of all liens,
charges, encumbrances and restrictions, except such as are described
in the Offering Memorandum or as would not have a Material Adverse
Effect, (ii) peaceful and undisturbed possession under all leases to
which it is party as lessee, (iii) all licenses, certificates,
permits, authorizations, approvals, franchises and other rights from,
and has made all declarations and filings with, all federal, state and
local authorities, all self-regulatory authorities and all courts and
other tribunals (each an "Authorization") necessary to engage in the
business currently conducted by it in the manner described in the
Offering Memorandum, except where failure to hold such Authorizations
would not have a Material Adverse Effect and (iv) other than as
disclosed in the Offering Memorandum, no reason to believe that any
governmental body or agency is considering limiting, suspending or
revoking any such Authorization. All such Authorizations are valid
and in full force and effect and 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. All
leases to which the Company or any
12
of its subsidiaries is a party are valid and binding and no default by
the Company or any of its subsidiaries has occurred and is continuing
thereunder, and no material defaults by the landlord are existing
under any such lease.
(t) 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 or those currently payable without penalty or interest.
Neither the Company nor any of its subsidiaries knows of any material
proposed additional tax assessments against it or any of its
subsidiaries.
(u) Neither the Company nor any of its subsidiaries is (i) an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), or (ii) a "holding company" or
a "subsidiary company" or an "affiliate" of a holding company within
the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(v) There are no holders of securities of the Company or the
Guarantors who, by reason of the execution by the Company and the
Guarantors of this Agreement or any other Operative Document to which
they are a party or the consummation of the transactions contemplated
hereby and thereby, have the right to request or demand that the
Company or the Guarantors register under the Securities Act or
analogous foreign laws and regulations securities held by them.
(w) The authorized, issued and outstanding capital stock of the
Company has been duly and validly authorized and issued, is fully paid
and nonassessable and was not issued in violation of or subject to any
preemptive or similar rights. The Company and its subsidiaries had at
January 31, 1998, an authorized and outstanding capitalization as set
forth in the Offering Memorandum.
(x) Each certificate signed by any officer of the Company or the
Guarantors and delivered to the Initial Purchasers or counsel for the
Initial Purchasers shall be deemed to be a representation and warranty
by the Company or the Guarantors to the Initial Purchasers as to the
matters covered thereby.
(y) 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; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect thereto.
13
(z) The Company and each of its subsidiaries maintains insurance
covering their properties, operations, personnel and businesses. Such
insurance insures against such losses and risks as are adequate in
accordance with customary industry practice to protect the Company and
its subsidiaries and their businesses. Neither the Company nor any of
its subsidiaries has received notice from any insurer or agent of such
insurer that substantial capital improvements or other expenditures
will have to be made in order to continue such insurance. All such
insurance is outstanding and duly in force on the date hereof and will
be outstanding and duly in force on the Closing Date.
(aa) 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 Notes or the
Subsidiary Guarantees or (ii) since the date of the Preliminary
Offering Memorandum (A) sold, bid for, purchased or paid any person
any compensation for soliciting purchases of, the Notes or the
Subsidiary Guarantees 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.
(bb) No registration under the Securities Act of the Series A
Notes is required for the sale of the Series A Notes to the Initial
Purchasers as contemplated hereby or for the Exempt Resales assuming
(i) that the purchasers who buy the Series A Notes in the Exempt
Resales are either QIBs or Regulation S Purchasers and (ii) the
accuracy of the Initial Purchasers' representations regarding the
absence of general solicitation in connection with the sale of
Series A Notes to the Initial Purchasers and the Exempt Resales
contained herein. No form of general solicitation or general
advertising was used by the Company or any of its representatives in
connection with the offer and sale of any of the Series A Notes or in
connection with Exempt Resales, including, but not limited to,
articles, notices or other communications published in any newspaper,
magazine, or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any
general solicitation or general advertising. No securities of the
same class as the Series A Notes have been issued and sold by the
Company within the six-month period immediately prior to the date
hereof.
(cc) Set forth on Exhibit B hereto is a list of each employee
pension or benefit plan maintained by the Company or any of its
subsidiaries. The execution and delivery of this Agreement, the other
Operative Documents and the sale of the Series A Notes to be purchased
by the Eligible Purchasers will not involve any prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the
Internal Revenue Code of 1986, as amended. The representation made by
the Company in the preceding sentence is made in reliance upon and
subject to the accuracy of, and compliance with, the representations
and covenants made or deemed made by the Eligible Purchasers as set
forth in the Offering Memorandum under the Section entitled "Notice to
Investors."
(dd) Subsequent to the respective dates as of which information
is given in the Offering Memorandum and up to the Closing Date, except
as set forth in the Offering Memorandum, neither the Company nor any
of its subsidiaries has incurred any liabilities
14
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, there has not
been, singly or in the aggregate, any material adverse change, or any
development which may reasonably be expected to involve a material
adverse change, in the properties, business, results of operations,
condition (financial or otherwise), affairs or prospects of the
Company and its subsidiaries, taken as a whole (a "Material Adverse
Change") and there have not been dividends or distributions of any
kind declared, paid or made by the Company or any of its subsidiaries
on any class of its capital stock.
(ee) Neither the Company nor any agent thereof acting on the
behalf of the Company has taken, and the Company will not take, any
action that might cause this Agreement or the issuance or sale of the
Notes to violate 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 or analogous foreign laws and
regulations.
(ff) The accountants who have certified or shall certify the
financial statements and supporting schedules included or to be
included as part of the Offering Memorandum are independent
accountants. The consolidated financial statements of the Company
and its subsidiaries and Costain Coal Inc. (the "Predecessor Company")
and its subsidiaries fairly present the consolidated financial
condition and results of operations of the Company and its
subsidiaries and the Predecessor Company and its subsidiaries, at the
respective dates and for the respective periods indicated, in
accordance with generally accepted accounting principles consistently
applied throughout such periods, except as stated therein. The pro
forma data has been prepared on a basis consistent with such
historical statements, except for the pro forma adjustments specified
therein, and give effect to assumptions made on a reasonable basis and
present fairly the historical and proposed transactions contemplated
by this Agreement and the other Operative Documents. Other financial
and statistical information and data included in the Offering
Memorandum, historical and pro forma, are accurately presented and
prepared on a basis consistent with such financial statements and the
books and records of the Company and its subsidiaries.
(gg) The present fair saleable value of the Company's assets
exceeds the Company's stated liabilities and contingent liabilities,
and the Company can pay its debts as they become absolute and mature.
The capital of the Company is not unreasonably small for the business
in which the Company is engaged, as it is now conducted and is
proposed to be conducted. The Company does not intend to, nor does it
believe that it will, incur debts beyond its ability to pay such debts
as they mature. Upon the issuance of the Series A Notes, the present
fair saleable value of the Company's assets will exceed the Company's
stated liabilities and contingent liabilities, and the Company will be
able to pay its debts as they become absolute and mature. The
capital of the Company, upon the issuance of the Series A Notes, will
not be unreasonably small for the business in which the Company is
engaged, as it is now conducted and is proposed to be conducted.
(hh) 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
15
Company, its subsidiaries or the Initial Purchasers for a brokerage
commission, finder's fee or like payment in connection with the
issuance, purchase and sale of the Notes.
The Company acknowledges that the Initial Purchasers and, for the
purposes of the opinions to be delivered to the Initial Purchasers pursuant to
Section 9 hereof, counsel to the Company and counsel to the Initial Purchasers
will rely upon the accuracy and truth of the foregoing representations and
hereby consent to such reliance.
7. Initial Purchasers' Representations and Warranties. The
Initial Purchasers represent and warrant to, and agree with, the Company and the
Guarantors that:
(a) The Initial Purchasers are QIBs, with such knowledge and
experience in financial and business matters as are necessary in order
to evaluate the merits and risks of an investment in the Series A
Notes.
(b) The Initial Purchasers (A) are not acquiring the Series A
Notes with a view to any distribution thereof that would violate the
Securities Act or the securities laws of any state of the United
States or any other applicable jurisdiction and (B) will be reoffering
and reselling the Series A Notes only to QIBs in reliance on the
exemption from the registration requirements of the Securities Act
provided by Rule 144A and in offshore transactions in compliance with
Regulation S under the Securities Act.
(c) No form of general solicitation or general advertising has
been or will be used by it or any of its representatives in connection
with the offer and sale of any of the Series A Notes, including, but
not limited to, articles, notices or other communications published in
any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have
been invited by any general solicitation or general advertising.
(d) The Initial Purchasers agree that, in connection with the
Exempt Resales, they will solicit offers to buy the Series A Notes
only from, and will offer to sell the Series A Notes only to, QIBs and
Regulation S Purchasers in offshore transactions in compliance with
Regulation S under the Securities Act. The Initial Purchasers further
agree (A) that they will offer to sell the Series A Notes only to, and
will solicit offers to buy the Series A Notes only from, (1) QIBs who
in purchasing such Series A Notes will be deemed to have represented
and agreed that they are purchasing the Series A Notes for their own
account or accounts with respect to which they exercise sole
investment discretion and that they or such accounts are QIBs and (2)
Regulation S Purchasers in offshore transactions in compliance with
Regulation S under the Securities Act and (B) that, in the case of
such QIBs and Regulation S Purchasers, acknowledges and agrees that
such Series A Notes will not have been registered under the Securities
Act and may be resold, pledged or otherwise transferred only (x)(I) to
a person who the seller reasonably believes is a QIB in a transaction
meeting the requirements of Rule 144A, (II) in a transaction meeting
the requirements of Rule 144, (III) to a foreign person in a
transaction meeting the requirements of Rule 904 under the Securities
Act or (IV) in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of
counsel if the Company so requests), (y) to the Company and (z)
16
pursuant to an effective registration statement under the Securities
Act and, in each case, in accordance with any applicable securities
laws of any state of the United States or any other applicable
jurisdiction and (C) that the holder will, and each subsequent holder
is required to, notify any purchaser from it of the security evidenced
thereby of the resale restrictions set forth in (B) above.
(e) The Initial Purchasers will comply with the applicable
provisions of Rule 144A under the Securities Act and Regulation S
under the Securities Act.
(f) The Initial Purchasers also understand that the Company and
the Guarantors and, for purposes of the opinions to be delivered to
you pursuant to Section 9 hereof, counsel to the Company and the
Guarantors and counsel to the Initial Purchasers will rely upon the
accuracy and truth of the foregoing representations and hereby
consents to such reliance.
8. Indemnification.8.Indemnification.
(a) The Company and each Guarantor agree, jointly and severally,
to indemnify and hold harmless the Initial Purchasers and its
directors and its officers and each person, if any, who controls
(within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) the Initial Purchasers, from and against any and
all losses, claims, damages, liabilities and judgments (including,
without limitation, any legal or other expenses incurred in connection
with investigating or defending any matter, including any action, that
could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto) or the Preliminary Offering
Memorandum or any information provided by the Company or the
Guarantors to any prospective purchaser of Series A Notes pursuant to
Section 5(k) or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or judgments are caused by any
such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Initial Purchasers
furnished in writing to the Company by the Initial Purchasers;
provided, however, that the foregoing indemnity agreement with respect
to any Preliminary Offering Memorandum shall not inure to the benefit
of the Initial Purchasers if they failed to deliver a Final Offering
Memorandum (as then amended or supplemented, provided by the Company
to the Initial Purchasers in the requisite quantity and on a timely
basis to permit proper delivery on or prior to the Closing Date) to
the person asserting any losses, claims, damages, liabilities and
judgments caused by any untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Offering Memorandum,
or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such untrue statement or
omission or alleged untrue statement or omission was cured in the
Final Offering Memorandum.
(b) The Initial Purchasers agree, severally and not jointly, to
indemnify and hold harmless the Company, and the Guarantors, and their
respective directors and officers and each person, if any, who
controls (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) the Company or the Guarantors, to the
same extent as the foregoing
17
indemnity from the Company and the Guarantors to the Initial
Purchasers but only with reference to information relating to the
Initial Purchasers furnished in writing to the Company by the Initial
Purchasers expressly for use in the Preliminary Offering Memorandum or
the Offering Memorandum.
(c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 8(a)
or 8(b) (the "indemnified party"), the indemnified party shall
promptly notify the person against whom such indemnity may be sought
(the "indemnifying party") in writing and the indemnifying party shall
assume the defense of such action, including the employment of counsel
reasonably satisfactory to the indemnified party and the payment of
all fees and expenses of such counsel, as incurred (except that in the
case of any action in respect of which indemnity may be sought
pursuant to both Sections 8(a) and 8(b), the Initial Purchasers shall
not be required to assume the defense of such action pursuant to this
Section 8(c), but may employ separate counsel and participate in the
defense thereof, but the fees and expenses of such counsel, except as
provided below, shall be at the expense of the Initial Purchasers).
Any indemnified party shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the
indemnified party unless (i) the employment of such counsel shall have
been specifically authorized in writing by the indemnifying party,
(ii) the indemnifying party shall have failed to assume the defense of
such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action
(including any impleaded parties) include both the indemnified party
and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying
party shall not have the right to assume the defense of such action on
behalf of the indemnified party). In any such case, the indemnifying
party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) for all indemnified
parties and all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Donaldson,
Lufkin & Jenrette Securities Corporation as representative of the
Initial Purchasers, in the case of the parties indemnified pursuant to
Section 8(a), and by the Company, in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall indemnify and
hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with the indemnifying party's
written consent or (ii) effected without the indemnifying party's
written consent if the settlement is entered into more than twenty
business days after the indemnifying party shall have received a
request from the indemnified party for reimbursement for the fees and
expenses of counsel (in any case where such fees and expenses are at
the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement
or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the
indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the
indemnified party, unless such
18
settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability on claims that are
or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a
failure to act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this
Section 8 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages, liabilities or judgments
referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities and judgments (i) in such proportion as
is appropriate to reflect the relative benefits received by the
Company and the Guarantors, on the one hand, and the Initial
Purchasers, on the other hand, from the offering of the Series A Notes
or (ii) if the allocation provided by clause 8(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause 8(d)(i)
above but also the relative fault of the Company and the Guarantors,
on the one hand, and the Initial Purchasers, on the other hand, in
connection with the untrue statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any
other relevant equitable considerations. The relative benefits
received by the Company and the Guarantors, on the one hand, and the
Initial Purchasers, on the other hand, shall be deemed to be in the
same proportion as the total net proceeds from the offering of the
Series A Notes (after underwriting discounts and commissions, but
before deducting expenses) received by the Company, and the total
discounts and commissions received by the Initial Purchasers bear to
the total price to investors of the Series A Notes, in each case as
set forth in the table on the cover page of the Offering Memorandum.
The relative fault of the Company and the Guarantors, on the one hand,
and the Initial Purchasers, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company
or the Guarantors, on the one hand, or the Initial Purchasers, on the
other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
The Company, the Guarantors and the Initial Purchasers agree
that it would not be just and equitable if contribution pursuant to
this Section 8(d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or
other expenses incurred by such indemnified party in connection with
investigating or defending any matter, including any action that could
have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, the
Initial Purchasers shall not be required to contribute any amount in
excess of the amount by which the total discounts and commissions
received by the Initial Purchasers exceeds the amount of any damages
which the Initial Purchasers have otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent
19
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
(e) The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
9. Conditions of Initial Purchasers' Obligations. The
obligations of the Initial Purchasers to purchase the Series A Notes 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 it at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Eligible Purchasers to whom the Initial Purchasers
intend to resell in Exempt Resales the Series A Notes on the Closing
Date not later than 10:00 a.m., New York City time, on the date of
this Agreement or at such later date and time as to which you may
agree, and no stop order suspending the qualification or exemption
from qualification of any of the Series A Notes in any jurisdiction
referred to in Section 5(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 Series A Notes; no action, suit or proceeding
shall be pending against or affecting or, to the knowledge of the
Company, threatened against, the Company 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 Series A Notes or would have a
Material Adverse Effect, or in any manner draw into question the
validity of any of the Operative Documents; and no stop order
preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act shall have been
issued.
(d) Since the dates as of which information is given in the
Offering Memorandum and other than as contemplated in the Offering
Memorandum, (i) there shall not have been any material change, or any
development that is reasonably likely to result in a material change,
in the capital stock or the long-term debt, or material increase in
the short-term debt, of the Company or any of its subsidiaries from
that set forth in the Offering Memorandum, (ii) no dividend or
distribution of any kind shall have been declared, paid or made by the
Company or any of its subsidiaries on any class of its capital stock,
and (iii) neither the Company nor any of its subsidiaries shall have
incurred any liabilities or
20
obligations, direct or contingent, that are material, individually or
in the aggregate, to the Company and its subsidiaries, taken as a
whole, and that are required to be disclosed on a balance sheet in
accordance with generally accepted accounting principles and are not
disclosed on the latest balance sheet included in the Offering
Memorandum. Since the date hereof and since the dates as of which
information is given in the Offering Memorandum, there shall not have
been any Material Adverse Change.
(e) You shall have received certificates, dated the Closing
Date, signed by (i) the Chairman, Chief Executive Officer, President,
Chief Operating Officer 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 9.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and your counsel), dated the Closing Date, of
Cadwalader, Wickersham & Taft, counsel for the Company and the
Guarantors to the effect that:
(i) each of the Company and Lodestar is organized and
validly existing as a corporation in good standing under the
laws of its respective jurisdiction of incorporation, has all
requisite power and authority to own, lease and operate its
properties and to conduct its business as it is currently
being conducted and as described in the Offering Memorandum,
and is duly qualified and in good standing as a foreign
corporation authorized to do business in each jurisdiction in
which the ownership, leasing and operating of its property and
the conduct of its business requires such qualification,
except where the failure to be so qualified would not have a
Material Adverse Effect;
(ii) the entities listed on Schedule A hereto are the only
subsidiaries, direct or indirect, of the Company. The Company
owns, directly or indirectly through other subsidiaries, 100% of
the outstanding capital stock of such subsidiaries, to such
counsel's knowledge, free and clear of any security interest,
claim, lien, limitation on voting rights or other encumbrances,
except for such encumbrances contemplated in the Offering
Memorandum; and all of such capital stock has been duly
authorized, validly issued, is fully paid and nonassessable and
was not issued in violation of any preemptive or similar rights.
To 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 of such
subsidiaries;
(iii) each of the Company and Lodestar has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement, the Indenture, the Registration
Rights Agreement and the other Operative Documents to which it is
a party and to consummate the transactions contemplated hereby or
thereby, including, without limitation, with respect to the
Company, the corporate power and authority to issue, sell and
deliver the Notes and the Subsidiary Guarantees as provided
herein;
21
(iv) this Agreement has been duly and validly authorized,
executed and delivered by the Company and Lodestar;
(v) the Indenture has been duly and validly authorized,
executed and delivered by the Company and Lodestar and (assuming
the due authorization, execution and delivery thereof by Eastern
Resources, Inc. ("Eastern Resources"), Industrial Fuels Minerals
Company ("Industrial Fuels") and the Trustee) will be the legally
valid and binding obligation of the Company and the Guarantors,
enforceable against the Company and the Guarantors in accordance
with its terms, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights and remedies generally, (ii) as
to general principles of equity, regardless of whether
enforcement is sought in a proceeding at law or in equity, (iii)
to the extent that a waiver of rights under any usury laws may be
unenforceable and (iv) as rights to indemnity and contribution
may be limited by federal or state securities laws or the public
policy underlying such laws. The Indenture, when duly executed
and delivered, will conform to the description thereof in the
Offering Memorandum;
(vi) the Series A Notes have been duly and validly
authorized for issuance and sale to you by the Company pursuant
to this Agreement and, when issued and authenticated in
accordance with the terms of the Indenture and delivered against
payment therefor in accordance with the terms hereof, 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 Indenture, except (i) as such enforcement
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and
remedies generally, (ii) as to general principles of equity,
regardless of whether enforcement is sought in a proceeding at
law or in equity, (iii) to the extent that a waiver of rights
under any usury laws may be unenforceable and (iv) as rights to
indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws. The
Series A Notes, when issued, authenticated and delivered, will
conform to the description thereof in the Offering Memorandum;
(vii) the Series B Notes have been duly and validly
authorized for issuance by the Company and, when issued and
authenticated in accordance with the terms of the Indenture, the
Registration Rights Agreement and the 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 Indenture, except (i) as such enforcement
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and
remedies generally, (ii) as to general principles of equity,
regardless of whether enforcement is sought in a proceeding at
law or in equity, (iii) to the extent that a waiver of rights
under any usury laws may be unenforceable and (iv) as rights to
indemnity and contribution may be limited by federal or state
securities laws or the public policy underlying such laws;
22
(viii) the Subsidiary Guarantee of Lodestar has been duly
authorized by Lodestar and (assuming that the Subsidiary
Guarantees of Eastern Resources and Industrial Fuels have been
duly authorized, executed and delivered by Eastern Resources and
Industrial Fuels, respectively) when the Series A Notes are
executed and authenticated in accordance with the provisions of
the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the
Subsidiary Guarantees endorsed thereon will be entitled to the
benefits of the Indenture and will be valid and binding
obligations of the Guarantors, enforceable in accordance with
their terms except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights and remedies generally, (ii) as
to general principles of equity, regardless of whether
enforcement is sought in a proceeding at law or in equity, (iii)
to the extent that a waiver of rights under any usury laws may be
unenforceable and (iv) as rights to indemnity and contribution
may be limited by federal or state securities laws or the public
policy underlying such laws. The Subsidiary Guarantees, when
issued, authenticated and delivered, will conform to the
description thereof in the Offering Memorandum;
(ix) the Registration Rights Agreement has been duly and
validly authorized, executed and delivered by the Company and
Lodestar and (assuming the due authorization, execution and
delivery thereof by Eastern Resources, Industrial Fuels and the
Initial Purchasers) will be the legally valid and binding
obligation of the Company and the Guarantors , enforceable
against the Company and the Guarantors in accordance with its
terms, except (i) as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights and remedies generally (ii) as
to general principles of equity, regardless of whether
enforcement is sought in a proceeding at law or in equity and
(iii) as rights to indemnity and contribution may be limited by
federal or state securities laws or the public policy underlying
such laws. The Registration Rights Agreement, when duly executed
and delivered, will conform to the description thereof in the
Offering Memorandum;
(x) when the Series A Notes are issued and delivered
pursuant to this Agreement, none of the Series A Notes will be of
the same class (within the meaning of Rule 144A under the
Securities Act) as securities of the Company 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
inter-dealer quotation system;
(xi) no registration under the Securities Act of any of the
Series A Notes is required for the sale of the Series A Notes to
you as contemplated hereby or for the Exempt Resales assuming (i)
that each of the Eligible Purchasers is a QIB or a Regulation S
Purchaser and (ii) the accuracy of your representations regarding
the absence of general solicitation in connection with the sale
of the Series A Notes to you and the Exempt Resales contained
herein;
23
(xii) neither the Company nor Lodestar is in violation of
its respective charter or bylaws or, to such counsel's knowledge,
is in default in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other
evidence of indebtedness or in any other agreement, indenture,
mortgage or deed of trust or other material agreement to which it
is a party or by which it is bound or to which any of its
properties is subject or, other than as disclosed in the Offering
Memorandum or as would not result in a Material Adverse Effect,
is in violation of any law, statute, rule, regulation, judgment
or court decree applicable to the Company or its subsidiaries
and, to such counsel's knowledge, there exists no condition that,
with notice, the passage of time or otherwise, would constitute
such default under any such document or instrument, which any
such default or violation would result in a Material Adverse
Effect;
(xiii) the execution, delivery and performance by the
Company and Lodestar of this Agreement and the other Operative
Documents to which they are parties, the issuance and sale of the
Notes, and the consummation of the transactions contemplated
hereby and thereby will not violate, conflict with 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, except
as contemplated in the Offering Memorandum, 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) to such counsel's
knowledge, 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
their assets or properties (except (with respect to this clause
(iii)) such violations, conflicts, breaches or defaults as could
not reasonably be expected to have a Material Adverse Effect), or
(iv) to such counsel's knowledge, 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. To such counsel's knowledge, 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 and the consummation of the
transactions contemplated hereby and thereby, except such as have
been obtained and made (or, in the case of the Registration
Rights Agreement, will be obtained and made) under the Securities
Act, the Trust Indenture Act and state securities or Blue Sky
laws and regulations or such as may be required by NASD. To such
counsel's knowledge, no consents or waivers from any other person
are required for the execution, delivery and performance of this
Agreement and the other Operative Documents and the consummation
of the transactions contemplated hereby and thereby, other than
such consents and waivers as have been obtained (or, in the case
of the Registration Rights Agreement, will be obtained);
24
(xiv) to such counsel's knowledge, no action has been taken
and no statute, rule or regulation or order has been enacted,
adopted or issued by any governmental agency that prevents the
issuance of the Notes; no injunction, restraining order or order
of any nature by a federal or state court of competent
jurisdiction has been issued that prevents the issuance of the
Notes or suspends the sale of the Notes in any jurisdiction
referred to in Section 5(e) hereof; and no action, suit or
proceeding is pending against or affecting or, to such counsel's
knowledge, threatened against, the Company or any of its
subsidiaries before any court or arbitrator or any governmental
body, agency or official which, if adversely determined, would
prohibit, interfere with or adversely affect the issuance or
marketability of the Notes or in any manner draw into question
the validity of any Operative Document;
(xv) to such counsel's knowledge, the Company and each of
its subsidiaries has (i) good and marketable title to all of the
properties and assets described in the Offering Memorandum as
owned by it, free and clear of all liens, charges, encumbrances
and restrictions, except such as are described in the Offering
Memorandum or as would not have a Material Adverse Effect, (ii)
peaceful and undistributed possession under all leases to which
it is party as lessee, (iii) all Authorizations necessary to
engage in the business currently conducted by it in the manner
described in the Offering Memorandum, except where failure to
hold such Authorizations would not have a Material Adverse Effect
and (iv) other than as disclosed in the Offering Memorandum, no
reason to believe that any governmental body or agency is
considering limiting, suspending or revoking any such
Authorization. To such counsel's knowledge, other than as
described in the Offering Memorandum, all such Authorizations are
valid and in full force and effect and 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. To such counsel's knowledge,
all leases to which the Company or any of its subsidiaries is a
party are valid and binding and no default by the Company or any
of its subsidiaries has occurred and is continuing thereunder,
and no material defaults by the landlord are existing under any
such lease;
(xvi) to such counsel's knowledge, other than as disclosed
in the Offering Memorandum, neither the Company nor any of its
subsidiaries has violated any Environmental Laws, lacks any
permits, licenses or other approvals required of them under
applicable Environmental Laws or is violating any terms and
conditions of any such permit, license or approval, nor has the
Company or any of its subsidiaries violated any federal, state or
local law relating to discrimination in the hiring, promotion or
pay of employees nor any applicable wage or hourly laws, nor any
provisions of ERISA or the rules and regulations promulgated
thereunder, which in each case would result in a Material Adverse
Effect;
(xvii) neither the Company nor any of its subsidiaries is
(i) an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company
Act of 1940, or (ii) a "holding company" or a
25
"subsidiary company" or an "affiliate" of a holding company
within the meaning of the Public Utility Holding Company Act of
1935, as amended;
(xviii) prior to the consummation of the Exchange Offer or
the effectiveness of the Shelf Registration Statement, the
Indenture is not required to be qualified under the Trust
Indenture Act of 1939;
(xix) the Offering Memorandum, as of its date, and each
amendment or supplement thereto, as of its date (except for the
financial statements, including the notes thereto, and supporting
schedules and other financial, statistical and accounting data
included therein or omitted therefrom, as to which no opinion
need be expressed), contains all the information specified in,
and meeting the requirements of, Rule 144A(d)(4) under the
Securities Act;
In addition, such counsel shall state that it has participated
in conferences with officers and other representatives of the Company
and the Guarantors, representatives of the independent public
accountants for the Company and the Guarantors, your representatives
and your counsel in connection with the preparation of the Offering
Memorandum and has considered the matters required to be stated
therein and the statements contained therein and, although such
counsel has not independently verified the accuracy, completeness or
fairness of such statements (except as indicated above), such counsel
advises you that, on the basis of the foregoing, no facts came to its
attention that caused it to believe that the Offering Memorandum (as
amended or supplemented, if applicable), at the time such Offering
Memorandum was circulated or at the Closing Date, contained or
contains an untrue statement of a material fact or omitted or omits to
state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. Without limiting the foregoing,
such counsel may further state that they assume no responsibility for,
and have not independently verified, the accuracy, completeness or
fairness of the financial statements, notes and schedules and other
financial data included in the Offering Memorandum.
The opinion of such counsel described in this paragraph shall be
rendered to you at the request of the Company and shall so state
therein.
(g) You shall have received an opinion, dated the Closing Date,
of Cahill Gordon & Reindel, your counsel, in form and substance
reasonably satisfactory to you, covering such matters as are
customarily covered in such opinions.
(h) At the time this Agreement is executed and delivered by the
Company and on the Closing Date, you shall have received letters,
substantially in the form previously approved by you, from KPMG Peat
Marwick LLP, independent certified public accountants, with respect to
the financial statements and certain financial information contained
in Offering Memorandum.
(i) The Company, the Guarantors and the Trustee shall have
entered into the Indenture and you shall have received counterparts,
conformed as executed, thereof.
26
(j) The Company and the Guarantors shall have entered into the
Registration Rights Agreement and you shall have received
counterparts, conformed as executed, thereof.
(k) On or before the Closing Date, the Initial Purchasers and
counsel for the Initial Purchasers shall have received an opinion from
Houlihan, Lokey, Howard & Zukin Financial Advisors, Inc., in form and
substance satisfactory to the Initial Purchasers and counsel for the
Initial Purchasers, with respect to the solvency of the Company upon
issuance of the Series A Notes and the Subsidiary Guarantees and the
consummation of the other transactions contemplated in this Agreement,
the other Operative Documents and the Offering Memorandum.
(l) The Company and the Guarantors shall not have failed on or
prior to the Closing Date to perform or comply with any of the
agreements herein contained and required to be performed or complied
with by the Company and the Guarantors on or prior to the Closing
Date.
(m) On or before the Closing Date, the Initial Purchasers and
counsel for the Initial Purchasers shall have received such further
certificates, documents or other information as they may have
reasonably requested from the Company and the Guarantors.
All opinions, certificates, letters and other documents required
by this Section 9 to be delivered by the Company and the Guarantors will be in
compliance with the provisions hereof only if they are reasonably satisfactory
in form and substance to you. The Company and the Guarantors will furnish the
Initial Purchasers with such conformed copies of such opinions, certificates,
letters and other documents as they shall reasonably request.
10. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by the Initial Purchasers by written notice to the Company if any
of the following has occurred: (i) any outbreak or escalation of hostilities or
other national or international calamity or crisis or change in economic
conditions or in the financial markets of the United States or elsewhere that,
in the Initial Purchasers' judgment, is material and adverse and, in the Initial
Purchasers' judgment, makes it impracticable to market the Series A Notes on the
terms and in the manner contemplated in the Offering Memorandum, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company or the Guarantors on any
exchange or in the over-the-counter market, (iv) 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 opinion
materially and adversely affects, or will materially and adversely affect, the
business, prospects, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole, (v) the declaration of a banking
moratorium by either federal or New York State authorities, (vi) the taking of
any action by any federal, state or local government or
27
agency in respect of its monetary or fiscal affairs which in your opinion has a
material adverse effect on the financial markets in the United States or (vii)
any securities of the Company or any of its subsidiaries shall have been
downgraded or placed on any "watch list" for possible downgrading by any
nationally recognized statistical rating organization.
11. Miscellaneous. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company or the
Guarantors, to Lodestar Holdings, Inc., 30 Rockefeller Plaza, Suite 4225, New
York, NY 10112, telephone number: (212) 541-6000, Attention: Ira Leon Rennert,
with copies to Lodestar Energy, Inc., 333 West Vine Street, Suite 1700,
Lexington, KY 40507, telephone number: (606) 255-4006, Attention: R. Eberley
Davis, Esq., and to Cadwalader, Wickersham & Taft, 100 Maiden Lane, New York,
New York 10038, Attention: Michael C. Ryan, Esq., and (ii) if to the Initial
Purchasers, c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park
Avenue, New York, New York 10172, Attention: Ramsey Frank, with a copy to
Cahill Gordon & Reindel, 80 Pine Street, New York, New York, 10005 Attention:
William M. Hartnett, Esq., or in any case to such other address as the person to
be notified may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, the Guarantors
and the Initial Purchasers set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Series A Notes, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of the Initial
Purchasers, the officers or directors of the Initial Purchasers, any person
controlling the Initial Purchasers, the Company, any Guarantor, the officers or
directors of the Company or any Guarantor, or any person controlling the Company
or the Guarantors, (ii) acceptance of the Series A Notes and payment for them
hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on
behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Company and the
Guarantors agree, jointly and severally, to reimburse the Initial Purchasers for
all out-of-pocket expenses (including the fees and disbursements of counsel)
incurred by them. Notwithstanding any termination of this Agreement, the
Company shall be liable for all expenses which it has agreed to pay pursuant to
Section 5(f) hereof.
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Guarantors, the Initial Purchasers, the Initial Purchasers' directors and
officers, any controlling persons referred to herein, the directors of the
Company and the Guarantors 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 term "successors
and assigns" shall not include a purchaser of any of the Series A Notes from the
Initial Purchasers merely because of such purchase.
This Agreement shall be governed and construed in accordance
with the laws of the State of New York.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
28
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Guarantors and the Initial Purchasers.
Very truly yours,
LODESTAR HOLDINGS, INC.
By: /s/ Michael E. Donohue
--------------------------
Michael E. Donohue
Chief Financial Officer
LODESTAR ENERGY, INC.
By: /s/ Michael E. Donohue
--------------------------
Michael E. Donohue
Vice President and
Chief Financial Officer
EASTERN RESOURCES, INC.
By: /s/ Michael E. Donohue
--------------------------
Michael E. Donohue
Vice President and
Chief Financial Officer
INDUSTRIAL FUELS MINERALS
COMPANY
By: /s/ Michael E. Donohue
--------------------------
Michael E. Donohue
Vice President and
Chief Financial Officer
29
Accepted and agreed:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ William J.R. Wilson
--------------------------
William J.R. Wilson
Vice President
BT ALEX. BROWN INCORPORATED
By: /s/ Terence Neafsey
--------------------------
Terence Neafsey
Principal
30
SCHEDULE A
Subsidiaries
Lodestar Energy, Inc.
Eastern Resources, Inc.
Industrial Fuels Minerals Company
S-1
SCHEDULE B
Principal Amount
of Notes to be
Initial Purchaser Purchased
- ---------------- ----------------
Donaldson, Lufkin & Jenrette Securities
Corporation.......................... $112,500,000
BT Alex. Brown Incorporated.............. 37,500,000
------------
Total................................... $150,000,000
------------
------------
S-2
EXHIBIT A
Form of Registration Rights Agreement
EXHIBIT B
Employee Pension or Benefit Plan
1. Lodestar Energy, Inc. 401(k) Plan - a defined contribution plan.
2. Pyro Mining Company Employees' Pension Plan - a defined benefit plan,
for those employees working at certain operations in Western Kentucky.
3. Group Life and Disability Plan of Lodestar Energy, Inc. - including
the following types of benefits: group term life insurance; dependent
life insurance; accidental death and dismemberment insurance;
long-term disability insurance; voluntary accidental death and
dismemberment insurance; and business travel accidental insurance.
4. Short-term Disability Benefits
5. Lodestar Energy, Inc. Health Care Plan - includes medical and dental
benefits.
6. Relocation Policy
7. Tuition Reimbursement Policies
8. Special Voluntary Incentive Program - an obligation to pay set monthly
amounts to certain retirees, intended as health care premium
reimbursement.
9. Severance pay policy - for the East Kentucky operations.