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PROXY AND OPTION AGREEMENT
AMONG
XXXXXXXX HOLDINGS, LTD.
AND
XXXXX RIVER COAL COMPANY
DATED AS OF DECEMBER 15, 1997
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PROXY AND OPTION AGREEMENT
THIS PROXY AND OPTION AGREEMENT, dated as of December 15, 1997 (this
"Agreement"), by and between Xxxxxxxx Holdings, Ltd., a Kentucky limited
partnership ("Stockholder"), and Xxxxx River Coal Company, a Virginia
corporation ("JRCC"), recites and provides as follows.
WHEREAS, the Stockholder collectively owns of record and beneficially
470,240 shares of common stock, par value $.01 per share (the "Company Common
Stock"), of Blue Diamond Coal Company, a Delaware corporation (the "Company")
(such Stockholder's shares, together with any other voting or equity securities
of the Company hereafter acquired by Stockholder prior to the termination of
this Agreement, being referred to collectively as the "Shares");
WHEREAS, JRCC and Stockholder have discussed the desire of JRCC to (a)
negotiate, execute and consummate an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which the Company will merge with and into JRCC or one
of its subsidiaries or (b) make a cash tender offer pursuant to a Merger
Agreement, or otherwise, for all outstanding shares of Company Common Stock (the
"Tender Offer") followed by a merger of the Company with and into JRCC or one of
its subsidiaries, in either such case for a price per share of Company Common
Stock equal to the Purchase Price, as defined herein (in either such case, the
"Merger"); and
WHEREAS, as a condition to the willingness of JRCC to pursue the
Merger, JRCC has requested that Stockholder agree, and in order to induce
JRCC to take certain actions and incur substantial expenses in pursuit
thereof, Stockholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:
1. VOTING OF SHARES; IRREVOCABLE PROXY.
(a) During the term of this Agreement, Stockholder in its capacity as
such, hereby agrees to vote all of its Shares at any annual, special or
adjourned meeting of the stockholders of the Company (1) in favor of the Merger,
the execution and delivery by the Company of the Merger Agreement and the
approval and adoption of the terms thereof and hereof; and (2) except as
otherwise agreed to in writing in advance by JRCC, against the following actions
(other than the Merger and the other transactions contemplated by the Merger
Agreement): (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or its
subsidiaries with any person, other than JRCC; (ii) a sale, lease or transfer of
a material amount of assets of the Company or one of its subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its subsidiaries; or (iii) (A) any change in a majority of the persons who
constitute the Board of Directors of the Company as of the date hereof; (B) any
change in the present capitalization of the Company or any amendment of the
Company's certificate of incorporation or bylaws, as amended to date; (C) any
other
material change in the Company's corporate structure or business; or (D) any
action that is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, or adversely affect the Merger and the other
transactions contemplated by this Agreement and the Merger Agreement.
(b) Stockholder hereby irrevocably constitutes and appoints JRCC
as its sole and exclusive and true and lawful agent and attorney-in-fact,
with full power of substitution, to vote all Company Common Stock that the
holder is entitled to vote as indicated in Paragraph 1(a) above in favor of
the Merger, to the same extent and with the same effect as the Stockholder
might or could do under any applicable laws or regulations governing the
rights and powers of stockholders of a Delaware corporation. This proxy
shall become effective as of the date hereof and shall expire upon
termination of this Agreement. This proxy is coupled with an interest and
shall be irrevocable and binding upon any and all transferees of the Shares
so long as it remains in effect pursuant to the terms hereof. Stockholder
will take such further action as may be necessary to effect the foregoing and
hereby revokes any proxy previously granted by Stockholder with respect to
the Shares.
2. TENDER OF SHARES.
(a) During the term of this Agreement, and in the event JRCC
commences a Tender Offer pursuant to a Merger Agreement or otherwise,
Stockholder hereby agrees to validly tender and sell (and not withdraw)
pursuant to and in accordance with the terms of the Tender Offer all of such
Stockholder's Shares, provided such Shares are purchased and paid for on or
before the Option Expiration Date (as defined below). Notwithstanding the
provisions of this Section 2(a), in the event Stockholder withdraws its
Shares from the Tender Offer for any reason or any such Shares are not
purchased pursuant to the Tender Offer, such Shares shall remain subject to
the terms of this Agreement. Stockholder acknowledges that JRCC's obligation
to accept for payment and pay for the Shares in the Tender Offer is subject
to all the terms and conditions of the Tender Offer.
(b) Stockholder hereby agrees to permit JRCC to publish and
disclose in the Offer to Purchase and all other related offering materials
filed by JRCC with the Securities and Exchange Commission (the "SEC") or
otherwise by JRCC in connection with the Tender Offer and, if approval of the
stockholders of the Company is required under applicable law in connection
with the Merger, in the proxy statement sent to the stockholders of the
Company, including all documents and schedules filed with the SEC, its
identity and ownership of Company Common Stock and the nature of its
commitments, arrangements and understandings under this Agreement.
(c) The terms of this Agreement shall apply to all Shares issued
pursuant to the exercise of stock options issued by the Company to
Stockholder, and Stockholder agrees to tender all Shares issued upon the
exercise of such stock options. Notwithstanding anything in this Agreement
to the contrary, (i) until the exercise of any such stock options, the term
"Shares" as used herein shall be deemed not to include any such stock
options, and (ii) nothing contained herein shall be deemed to require
Stockholder to exercise such stock options in order to tender the Shares
issued upon such exercise.
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3. NONREFUNDABLE PAYMENT.
(a) In consideration for Stockholder (i) agreeing to vote its
shares and granting to JRCC the irrevocable proxy provided for in Paragraph 1
above; (ii) agreeing to tender its Shares as provided in Paragraph 2 above;
and (iii) granting the Option provided for in Paragraph 4, JRCC shall pay to
Stockholder $1,000,000 on the date hereof. Such amount shall, subject to
Paragraphs 3(b) and (c) below, be nonrefundable, but shall be credited in
full against the amount Stockholder would otherwise be entitled to receive
upon conversion of its Shares in the Merger, pursuant to any Tender Offer or
pursuant to the exercise of the Option provided in Paragraph 4 below.
(b) If the Shares, on a fully diluted basis, do not represent a
majority of the issued and outstanding shares of Company Common Stock on the
date established for the purchase of the Shares by JRCC, whether in
accordance with the Merger or upon exercise of the Option, the $1,000,000 to
be paid by JRCC pursuant to Paragraph 3(a) above shall be fully refundable to
JRCC.
(c) If Stockholder's representations and warranties set forth in
paragraph 10 are not true and correct, if Stockholder breaches any covenant
or agreement set forth herein or if the Company is not exempt from Section
203 of the Delaware General Corporation Laws, the $1,000,000 to be paid by
JRCC pursuant to Paragraph 3(a) above shall be fully refundable to JRCC.
4. OPTION TO PURCHASE SHARES.
(a) Stockholder hereby grants to JRCC an option (the "Option") to
purchase on or before February 13, 1998 (the "Option Expiration Date") all of
the Shares at a purchase price per Share (the "Purchase Price") equal to the
sum of (i) $60.413 in cash plus (ii) the right to receive after the Closing
Date (as defined below) the Contingency Amount, if any, as defined below,
divided by the number of shares of Common Stock issued and outstanding on the
date the Shares are purchased pursuant to the Option or the Merger, as
applicable. JRCC may give Stockholder written notice (the "Notice") of its
intent to exercise the Option at any time during the term of this Agreement.
The Notice shall specify the date (the "Closing Date") established for
purchasing the Shares which shall be no later than 2 business days following
the date of the Notice. On the Closing Date, JRCC shall wire transfer to an
account designated by Stockholder an amount equal to the difference between
(i) the product of the Purchase Price multiplied by the number of Shares and
(ii) $1,000,000. Upon receipt of payment Stockholder shall deliver to JRCC
stock certificates evidencing the Shares endorsed in blank or accompanied by
applicable stock powers, plus such other documents of conveyance as JRCC may
reasonably request.
(b) The Contingency Amount shall mean an amount equal to 50% of
any reduction (net of any applicable federal and state income taxes) between
the date hereof and the fifth anniversary of the date hereof in the Company's
liability under the Coal Industry Retiree Health Benefit Act of 1992 (the
"Act"), such reduction arising solely as a result of federal legislation
enacted after the date hereof or a non-appealable judicial determination
which in either case reduces the amount required to be paid by the Company to
retirees or their beneficiaries or reduces the number of retirees that the
Company is required to compensate. Such amount shall be determined by
Xxxxxxx X. Xxxxxx, Inc., or another firm mutually acceptable to JRCC and
Stockholder, with the expenses of engaging such firm borne by JRCC.
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5. TRANSFER OF THE SHARES.
During the term of this Agreement, except as otherwise provided
herein, Stockholder shall not (a) offer to sell, pledge or otherwise dispose
of or transfer any interest in or encumber with any lien, any of the Shares,
(b) deposit the Shares into a voting trust, enter into a voting agreement or
arrangement with respect to such Shares or grant any proxy or power of
attorney with respect to such Shares, or (c) enter into any contract, option
or other arrangement or undertaking with respect to the direct or indirect
acquisition or sale, assignment or other disposition of or transfer of any
interest in or the voting of any shares of Company Common Stock or any other
securities of the Company.
6. NO SOLICITATION.
During the term of this Agreement, neither Stockholder nor any
partner, director, officer, employee, affiliate or representative of
Stockholder or any representative of such person or entity, shall institute,
pursue, encourage or continue any discussions, negotiations or agreements
(whether preliminary or definitive), including providing any information,
with any person or entity other than JRCC contemplating or providing for any
public or private offering of equity, merger, share exchange, acquisition,
purchase or sale of a significant amount of shares or assets or other
business combination or change in control of the Company. Stockholder shall
not furnish any non-public information to any party other than JRCC with
respect to such a proposed transaction. Stockholder shall promptly notify
JRCC to the extent that it receives any inquiry relating to any such
transaction.
Notwithstanding the foregoing, any partner of the Stockholder who
is also a director of the Company may furnish information to, and participate
in discussions or negotiations with, any third party if he determines in good
faith, based upon the written advice of outside legal counsel, that the
failure to take such action would be reasonably likely to constitute a breach
of his fiduciary duties under applicable law as a director of the Company.
7. AGREEMENT TO SUPPORT MERGER.
Stockholder, in its capacity as such, hereby agrees to support the
efforts of JRCC to consummate the Merger.
8. WAIVER OF APPRAISAL RIGHTS.
Stockholder hereby irrevocably waives any rights of appraisal or
rights to dissent from the Merger that Stockholder may have.
9. AGREEMENT TO EXTEND XXXXX & XXXXXXXX AGREEMENTS
In the event the Company has not previously extended the Coal
Supply Agreement and the Indenture of Sublease, each dated March 31, 1993
between Xxxxx & Xxxxxxxx Enterprises, Inc. and the Company (the "Xxxxx &
Xxxxxxxx Agreements") prior to the effective time of the Merger, JRCC and
Stockholder agree to cause the parties to the Xxxxx & Xxxxxxxx Agreements to
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extend such agreements on terms identical to those currently in effect for a
period beginning on the date of the effective time of the Merger and ending
on the date three years thereafter.
10. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.
Stockholder represents and warrants to JRCC, as to the Company,
itself and with respect to its Shares, as follows:
(a) Stockholder's Shares constitute all of the shares of Company
Common Stock beneficially owned (as defined in Section 13(d)(3) of the
Securities Act of 1934, as amended), directly or indirectly, by Stockholder,
other than 2,200 shares of Common Stock owned by Xxx Xxxxxxxx.
(b) The execution and delivery of this Agreement by Stockholder
does not, and the performance by Stockholder of its obligations hereunder
will not, constitute a violation of, conflict with, result in a default (or
an event which, with notice or lapse of time or both, would result in a
default) under, or result in the creation of any lien on any of Stockholder's
Shares under (i) any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which Stockholder is a party or by
which Stockholder is bound, (ii) any judgment, writ, decree, order or ruling
applicable to Stockholder, or (iii) the organizational documents of such
Stockholder, if applicable.
(c) Stockholder has full power and authority to execute, deliver
and perform this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized and except for the notices and filings referenced in
paragraph (d) below, no other actions on the part of Stockholder are required
in order to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Stockholder and, assuming
due authorization, execution and delivery by JRCC, constitutes a valid and
binding agreement of Stockholder, enforceable against Stockholder in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, organization, insolvency, moratorium or
other laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(d) Neither the execution and delivery of this Agreement nor the
performance by Stockholder of its obligations hereunder will (i) violate any
order, writ, injunction or judgment applicable to Stockholder or (ii) violate
any law, decree, statute, rule or regulation applicable to Stockholder or
require any consent, authorization or approval of, filing with or notice to,
any court, administrative agency or other governmental body or authority,
other than any required notices or filings pursuant to the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act") or the federal securities laws.
11. REPRESENTATIONS AND WARRANTIES OF JRCC.
JRCC represents and warrants to Stockholder as follows:
(a) JRCC is (i) duly organized and validly existing and in good
standing under the laws of
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Virginia, (ii) has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby, and (iii) has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement. This Agreement has
been duly and validly executed and delivered by JRCC and constitutes the
legal, valid and binding obligation of JRCC, enforceable against JRCC in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, organization, insolvency, moratorium or
other laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement by JRCC does not,
and the performance by JRCC of its obligations hereunder will not, constitute
a violation of, conflict with, or result in a default (or an event which,
with notice or lapse of time or both, would result in a default) under, its
charter or bylaws or any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which JRCC is a party or by which
JRCC is bound or any judgment, writ, decree, order or ruling applicable to
JRCC.
(c) Neither the execution and delivery of this Agreement nor the
performance by JRCC of its obligations hereunder will violate any order,
writ, injunction, judgment, law, decree, statute, rule or regulation
applicable to JRCC or require any consent, authorization or approval of,
filing with, or notice to, any court, administrative agency or other
governmental body or authority, other than any required notices or filings
pursuant to the HSR Act or the federal securities laws.
12. ENFORCEMENT OF THE AGREEMENT.
Stockholder acknowledges that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that JRCC will be entitled (i) to an injunction or
injunctions to prevent breaches of this Agreement and (ii) to specifically
enforce the terms and provisions hereof in any court of the United States or
any state having jurisdiction, this being in addition to any other remedy to
which it is entitled at law or in equity.
13. ADJUSTMENTS.
The number and type of securities subject to this Agreement will be
appropriately adjusted in the event of any stock dividends, stock splits,
recapitalizations, combinations, exchanges of shares or the like or any other
action that would have the effect of changing Stockholder's ownership of the
Company's capital stock or other securities.
14. TERMINATION.
(a) This Agreement will automatically terminate on the earlier of
(a) the effective time of the Merger and (b) 60 days following the date
hereof.
(b) Upon termination of this Agreement, all obligations of the
parties hereto shall terminate except to the extent that any such party has
committed a material breach of this Agreement prior to such termination and
except that the right to the Contingency Amount and JRCC's obligations under
Paragraph 9 shall survive the termination of this Agreement.
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15. EXPENSES.
All fees and expenses incurred by any of the parties hereto shall
be borne by the party incurring such fees and expenses.
16. MISCELLANEOUS.
(a) All representations and warranties contained herein shall
survive the termination hereof, but shall not survive the effective time of
the Merger.
(b) Any provision of this Agreement may be waived at any time by
the party that is entitled to the benefits thereof. No such waiver,
amendment or supplement shall be effective unless in writing signed by the
party or parties sought to be bound thereby. Any waiver by any party of a
breach of any provision of this Agreement shall not operate as or be
construed to be a waiver of any other breach of such provision or of any
breach of any other provision of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement or one or more
sections hereof shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other
term of this Agreement.
(c) This Agreement contains the entire agreement among JRCC and
Stockholder with respect to the subject matter hereof, and supersedes all
prior agreements among JRCC and Stockholder with respect to such matters.
This Agreement may not be amended, changed, supplemented, waived or otherwise
modified, except upon the delivery of a written agreement executed by the
parties hereto.
(d) The descriptive headings contained herein are for convenience
and reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(e) Any notice provided for in this Agreement will be in writing
and will be either personally delivered, sent by reliable overnight courier,
telecopied or mailed by first class mail, return receipt requested, to the
recipient at the address below indicated.
NOTICES TO JRCC:
Xxxxx River Coal Company
000 Xxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, Chairman and Chief Executive Officer
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
With a copy (which will not constitute notice to JRCC) to:
Hunton & Xxxxxxxx
Riverfront Plaza, East Tower
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: T. Xxxxxx Xxxxx, III Esq.
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
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NOTICES TO STOCKHOLDER:
Xxxxxxxx Holdings, Ltd.
P. O. Xxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Mr. Xxxxxx Xxxxxxxx
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
With a copy (which will not constitute notice to Stockholder) to:
Xxxxx X. Xxxxxx, Esq.
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Telephone Number: (000) 000-0000
Telecopy Number: (000) 000-0000
or to such other address or to the attention of such other party as any party
may have furnished to the other parties in writing in accordance herewith.
(f) This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one agreement.
(g) This Agreement is binding upon and is solely for the benefit
of the parties hereto and their respective successors, legal representatives
and assigns. Except as provided herein, neither this Agreement nor any of
the rights, interests or obligations under this Agreement may be assigned by
any of the parties hereto without the prior written consent of the other
parties, except that JRCC shall have the right to assign to any direct or
indirect wholly owned subsidiary of JRCC any and all rights and obligations
of JRCC under this Agreement, PROVIDED that any such assignment shall not
relieve JRCC from any of its obligations hereunder.
(h) All rights, powers and remedies provided under this Agreement
or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any thereof by either
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party.
(i) Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal, or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
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(j) All questions concerning the construction, validity and
interpretation of this Agreement will be governed by and construed in
accordance with the domestic laws of the State of Delaware, without giving
effect to any choice of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Delaware.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date first written above.
XXXXXXXX HOLDINGS, LTD.
By: TYE FORK COAL COMPANY,
General Partner
By: /S/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx, President
XXXXX RIVER COAL COMPANY
By: /S/ Xxxxx X. Xxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Chairman of the Board
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