Exhibit 3
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PROXY AND OPTION AGREEMENT
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PROXY AND OPTION AGREEMENT
AMONG
▇▇▇▇▇▇▇▇ HOLDINGS, LTD.
AND
▇▇▇▇▇ RIVER COAL COMPANY
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DATED AS OF DECEMBER 15, 1997
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PROXY AND OPTION AGREEMENT
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THIS PROXY AND OPTION AGREEMENT, dated as of December 15, 1997 (this
"Agreement"), by and between ▇▇▇▇▇▇▇▇ Holdings, Ltd., a Kentucky limited
partnership ("Stockholder"), and ▇▇▇▇▇ 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
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be determined by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Inc., or another firm mutually acceptable to
JRCC and Stockholder, with the expenses of engaging such firm borne by JRCC.
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 ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ Enterprises, Inc. and the Company (the "▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Agreements")
prior to the effective time of the
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Merger, JRCC and Stockholder agree to cause the parties to the ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Agreements to 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 ▇▇▇ ▇▇▇▇▇▇▇▇.
(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 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ 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:
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(a) JRCC is (i) duly organized and validly existing and in good standing
under the laws of 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
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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.
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:
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▇▇▇▇▇ River Coal Company
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chairman and Chief Executive Officer
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy (which will not constitute notice to JRCC) to:
Hunton & ▇▇▇▇▇▇▇▇
Riverfront Plaza, East Tower
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: T. ▇▇▇▇▇▇ ▇▇▇▇▇, III Esq.
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Notices to Stockholder:
-----------------------
▇▇▇▇▇▇▇▇ Holdings, Ltd.
P. O. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (which will not constitute notice to Stockholder) to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
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.
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(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.
(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.
▇▇▇▇▇▇▇▇ HOLDINGS, LTD.
By: TYE FORK COAL COMPANY,
General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
▇▇▇▇▇ RIVER COAL COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman of the Board
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