SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 1, 1997
Arch Coal, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-13105 43-0921172
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
CityPlace One, Suite 300, Creve Coeur, Missouri 63141
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:(314) 994-2700
<PAGE>
Item 1. Changes in Control of Registrant
--------------------------------
Reference is made to the responses set forth in Items 2 and 5 of
this Current Report on Form 8-K, which are incorporated by reference herein. In
addition, pursuant to the Merger Agreement referred to in the response to Item
2, immediately prior to the effective time of the Merger referred to in the
response to Item 2, the Board of Directors of Arch Coal, Inc. (the "Company")
became comprised of Messrs. John R. Hall (Chairman), James R. Boyd, Robert A.
Charpie, Paul W. Chellgren, Thomas L. Feazell, Juan Antonio Ferrando, Robert L.
Hintz, Douglas H. Hunt, Steven F. Leer, Thomas Marshall, James L. Parker, J.
Marvin Quin and Ronald Eugene Samples. Messrs. Hall, Boyd, Hunt, Leer, Parker
and Samples were members of the Board of Directors of the Company prior to the
Merger and Messrs. Charpie, Chellgren, Feazell, Ferrando, Hintz, Marshall and
Quin were members of the Board of Directors of Ashland Coal, Inc. ("Ashland
Coal") prior to the Merger. Messrs. Hall, Boyd, Chellgren, Feazell and Quin are
current or former executive officers of Ashland Inc. Mr. Hunt is a beneficiary
of one of the trusts included among various trusts for the benefit of
descendants of H. L. and Lyda Hunt and various corporations owned by trusts for
the benefit of descendants of H. L. and Lyda Hunt (collectively, the "Hunt
Entities") and Mr. Parker is a trustee of certain trusts, and an officer and
director of a corporation, included among the Hunt Entities. Mr. Ferrando is an
executive officer of Carboex International, Ltd. ("Carboex").
Item 2. Acquisition or Disposition of Assets.
------------------------------------
On July 1, 1997, pursuant to an Agreement and Plan of Merger dated
as of April 4, 1997 (the "Merger Agreement") among the Company, AMC Merger
Corporation and Ashland Coal, AMC Merger Corporation was merged with and into
Ashland Coal, whereupon Ashland Coal became a wholly-owned subsidiary of the
Company (the "Merger").
Pursuant to the Merger Agreement, at the effective time of the
Merger, each outstanding share of Common Stock, par value $.01 per share, of
Ashland Coal was converted into the right to receive one share of Common Stock,
par value $.01 per share, of the Company ("Company Common Stock"), and each
share of Class B Preferred Stock and Class C Preferred Stock, par value $100 per
share, of Ashland Coal
2
<PAGE>
was converted into the right to receive 20,500 shares of Company Common Stock.
The foregoing conversion ratios were determined on the basis of arms' length
negotiations.
The Company is engaged in mining, processing, marketing and
transporting bituminous coal in the domestic steam market. Prior to the Merger,
the Company operated 17 surface, underground and auger mines in the Appalachian,
Midwestern and Western coal fields from which it produced 26.9 million tons of
coal in 1996. At December 31, 1996, the Company controlled approximately one
billion tons of proven and probable low-sulfur coal reserves, 865 million tons
of which were located in the Appalachian coal fields in the eastern United
States.
Prior to the Merger, Ashland Coal was engaged in the mining,
processing and marketing of low-sulfur bituminous coal primarily in the eastern
United States. Its independent operating subsidiaries included Coal-Mac, Inc.,
Hobet Mining, Inc., Mingo Logan Coal Company and Tri-State Terminals, Inc.
Ashland Coal produced 20.5 million tons of coal in 1996 and at December 31, 1996
controlled approximately 615 million tons of proven and probable low-sulfur coal
reserves in southern West Virginia and eastern Kentucky.
Item 5. Other Events.
------------
Subject to certain conditions, the Private Securities Litigation
Reform Act of 1995 provides a safe harbor from liability in any private action
that is based on an alleged untrue statement of a material fact or alleged
omission of a material fact necessary to make the statement not misleading. To
the extent that the Company or its representatives make oral forward-looking
statements, following are important factors that could cause actual results to
differ materially from those in such forward-looking statements.
Competition
The coal industry is highly competitive and is affected by many factors
beyond the Company's control. Demand for coal and the prices that the Company
will be able to obtain for its coal are closely linked to coal consumption
patterns of the domestic electric utility industry, which has accounted for
approximately 90% of domestic coal consumption in recent years. These coal
consumption patterns are influenced by the demand for electricity, governmental
regulation, technological developments and the location, availability and price
of competing sources of coal, alternative fuels such as natural gas, oil and
nuclear, and alternative energy sources such as hydroelectric power. In recent
years there has been excess coal production capacity in the United States as a
result of increased development of large surface mining operations, particularly
in the western United States, and more efficient mining equipment and
techniques. Competition resulting from excess capacity encourages producers to
reduce prices and to pass productivity gains through to customers. Demand for
the Company's low-sulfur coal and the prices that the Company will be able to
obtain for it will also be affected by the price and availability of high-sulfur
coal, which can be marketed in tandem with emissions allowances in order to meet
federal Clean Air Act requirements.
Electric utility deregulation is expected to provide incentives to
utilities to minimize their fuel costs and is believed to have caused electric
utilities to be more aggressive in negotiating prices with coal suppliers. To
the extent utility deregulation affects the Company's customers, some aspects of
deregulation may adversely affect the Company's business and operating results.
3
<PAGE>
Potential Fluctuations in Operating Results
The Company may experience fluctuations in operating results in the
future, both on an annual and quarterly basis, as a result of one or more
factors, including expiration or termination of or sales price redeterminations
or suspensions of deliveries under coal supply agreements, disruption of
transportation services, changes in mine operating conditions, changes in laws
or regulations, work stoppages or other labor difficulties, competitive and
overall coal market conditions, and general economic conditions. Such
fluctuations could be significant.
The Company's mining operations are subject to factors beyond its control
that can negatively or positively affect the level of production and hence the
cost of mining at particular mines for varying lengths of time. These factors
include weather conditions, equipment repair requirements, variations in coal
seam thickness, amount of overburden, rock and other natural materials, and
other surface or subsurface conditions. Such production factors frequently
result in significant fluctuations in operating results.
Environmental and Regulatory Matters
Governmental authorities regulate the coal mining industry on matters as
diverse as employee health and safety, air quality standards, water pollution,
groundwater quality and availability, plant and wildlife protection, the
reclamation and restoration of mining properties, the discharge of materials
into the environment and surface subsidence from underground mining. These
regulations have had and will continue to have a significant effect on the
Company's mining costs and, thus, its competitive position vis a vis other coal
producers and providers of alternative energy sources. Mining operations also
require numerous governmental permits or approvals, the availability and timing
of which can affect the efficiency of operations and mining costs. In addition,
significant legislation mandates certain benefits for certain retired coal
miners represented by the United Mine Workers of America ("UMWA").
New legislation, regulations or orders may be adopted or become effective
which may adversely affect the Company's mining operations or cost structure or
the ability of the Company's customers to use coal. New legislation, regulations
or orders may also require the Company or its customers to incur increased costs
or to change operations significantly. These factors could have a material
adverse effect on the Company's business and results of operations.
4
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Reliance on and Terms of Long-Term Coal Supply Contracts
The Company sells a substantial portion of its coal production pursuant to
long-term supply contracts, which will significantly affect the stability and
profitability of operations. Most of the long-term supply contracts currently in
effect allow the Company to sell coal at a higher price than the price at which
such coal could be sold in the spot market. The loss of long-term contracts,
whether as a result of expiration, termination, suspension of performance or
otherwise, could have a material adverse effect on the Company's results of
operations and business. Such effect would be particularly adverse with respect
to the loss of long-term contracts that permit the Company to sell coal at
prices significantly higher than current market prices. The Company or
its operating subsidiaries are currently party to two such contracts, one of
which expires in 2012 and provides for the delivery of approximately 1.3 million
tons of compliance coal annually, and the other of which expires in 2003 and
provides for the delivery of approximately 400,000 tons of low-sulfur coal
annually.
The Company's long-term coal supply contracts contain price adjustment
provisions which permit a periodic increase or decrease in the contract price
to reflect increases and decreases in production costs, changes in specified
price indices or items such as taxes or royalties, and contain price reopener
provisions, which provide for an upward or downward adjustment in the contract
price based on market factors. The contracts also typically include stringent
minimum and maximum coal quality specifications and penalty or termination
provisions for failure to meet such specifications, as well as force majeure
provisions allowing suspension of performance or termination by the parties
during the duration of certain events beyond the control of the affected party,
including changes in or the effectiveness of legislation or regulations
affecting such party. If the parties to any long-term contracts with the Company
were to modify, suspend or terminate those contracts, the Company could be
adversely affected to the extent that it is unable to find alternative customers
for the affected coal production at the same level of profitability.
From time to time, disputes with customers may arise under long-term
contracts relating to, among other things, coal quality, pricing and quantity
and applicability of certain contract terms. The Company may thus become
involved in arbitration and legal proceedings regarding its long-term contracts.
There can be no assurance that the Company will be able to resolve such disputes
in a satisfactory manner.
5
<PAGE>
Dependence on Certain Customers
During 1996, combined coal sales by the Company and Ashland Coal to
affiliates of The Southern Company and affiliates of American Electric Power
accounted for approximately 14.6% and 13.1%, respectively, of pro forma combined
revenues from coal sales for such period. The loss of such customers would have
a material adverse effect on the Company.
Reserve Degradation and Depletion
The Company's profitability will be substantially dependent upon its
ability to replace depleted reserves with new reserves that can be mined at
competitive costs. There can be no assurance that replacement reserves will be
available when required or whether such replacement reserves can be mined at
costs comparable to those characteristic of the depleting mines. Exhaustion of
reserves at particular mines can also have an adverse effect on operating
results that is disproportionate to the percentage of overall production
represented by the production of such mines.
The reserves at the Company's Arch of Kentucky Mine No. 37 capable of
being mined by its longwall operation are expected to be depleted in the third
quarter of 1997. For the year ended December 31, 1996, Mine No. 37 produced 4.5
million tons of coal (from both longwall and continuous miner sections) which
accounted for $20.8 million or 37.1% of the Company's operating income and sales
from the mine accounted for 16.4% of the revenues of the Company in 1996. After
exhaustion of the longwall reserves, the decrease in operating profit will be
mitigated to some degree by the continued operation of two continuous miner
sections and by the potential development of an underground mine in the Darby
seam that is in close proximity to the Cave Branch Preparation Plant currently
used to process Mine No. 37 coal.
Transportation
The coal industry depends on rail, trucking and barge transportation to
deliver shipments of coal to customers. Disruption of these transportation
services could temporarily impair the Company's ability to supply coal to its
customers and thus adversely affect the Company's business and operating
results. In addition, transportation costs are a significant component of the
total cost of supplying coal to customers and can affect significantly a coal
producer's competitive position and profitability. Increases in the Company's
transportation costs, or changes in such costs relative to transportation costs
incurred by providers of competing coal or of other fuels, could have an adverse
effect on the Company's business and operating results.
6
<PAGE>
Reliance on UMWA-Represented Labor
UMWA operations accounted for approximately 56% of the total coal produced
by the Company and Ashland Coal in 1996. Certain competitors of the Company
employ non-union laborers. Due to higher labor costs and the increased risk of
strikes and other work stoppages which may be associated with union operations
in the coal industry, non-union competitors may have a competitive advantage
where they compete with union operations. The seven-month UMWA strike in 1993
adversely affected the operations of the Company. If any current non-union
operations of the Company were to unionize, the Company would incur increased
risk of work stoppages, and possibly higher labor costs.
The Bituminous Coal Operators Association ("BCOA") negotiates with the
UMWA on behalf of its members. The Company's Apogee Coal Company and Hobet
Mining, Inc. subsidiaries are members of the BCOA. The current National
Bituminous Coal Wage Agreement (the "1993 NBCWA"), which applies to all of the
Company's employees represented by the UMWA, became effective on December 16,
1993 and will expire on August 1, 1998. Wage rates and certain benefits were
renegotiated in 1996 for the remainder of the contract. When the 1993 NBCWA
expires, no assurance can be given that it will be successfully renegotiated
without a work stoppage. In addition to work stoppages which may occur upon
termination of a collective bargaining agreement, union operations may
experience unauthorized work stoppages or wildcat strikes from time to time.
Control of the Company by Certain Stockholders
Ashland Inc., the Hunt Entities collectively and Carboex currently own
approximately 54%, an aggregate of 25%, and 5%, respectively, of the outstanding
shares of Company Common Stock. The Restated Certificate of Incorporation of the
Company (the "Company Certificate") provides for cumulative voting in the
election of directors of the Company. As a result of such provision, and
assuming an election of 13 directors and ownership of the percentages of
outstanding Company Common Stock referred to above, Ashland Inc. and the Hunt
Entities (if the Hunt Entities were to vote their respective shares together)
have the power to elect six and three directors of the Company, respectively.
Pursuant to a Stockholders Agreement among the Company, Ashland Inc. and
Carboex, the Company has agreed to nominate for election as a director of the
Company a person designated by
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<PAGE>
Carboex, and Ashland Inc. has agreed to vote its shares of Company Common Stock
in a manner sufficient to cause the election of such nominee, in each case for
so long (subject to earlier termination in certain circumstances) as shares of
Company Common Stock owned by Carboex represent at least 63% of the shares of
Company Common Stock acquired by Carboex in the Merger. In addition, the
Company, for so long as the Hunt Entities have the collective voting power to
elect by cumulative voting one or more persons to serve on the Board, has agreed
to nominate for election as directors of the Company that number of persons
designated by certain of the Hunt Entities that could be elected to the Board by
the Hunt Entities by exercise of such cumulative voting power.
The Company Certificate requires the affirmative vote of the holders
of at least two-thirds of outstanding Company Common Stock voting thereon to
approve a merger or consolidation and certain other fundamental actions
involving or affecting control of the Company. The Company Bylaws require the
affirmative vote of at least two-thirds of the members of the Board of Directors
of the Company in order to declare dividends and to authorize certain other
actions. As a consequence of the foregoing ownership structure, Ashland Inc.,
the Hunt Entities and Carboex, acting together, have the power to direct the
affairs of the Company and to control or limit these actions as well.
Inherent Uncertainties Relating to Certain Effects of the Merger
The success of the Merger in enhancing long-term stockholder value will
depend, in part, on achieving cost savings and other benefits that could be
expected to be realized as a result of the Merger. As in every business
combination, achieving such benefits depends on factors that may not be
within the control of the Company and require the dedication of management
resources, which may temporarily divert full attention from the day-to-day
business of the Company. There can be no assurance that the Company will be able
to realize such cost savings and other benefits, or do so within any particular
period.
Writedowns Related to Duplicate Facilities
The Company believes that significant cost savings and other synergies can
be achieved from the Merger. However, realizing these cost savings and synergies
may result in the idling or closing of duplicate offices, distribution and
production facilities by the Company. Idling or closing facilities of the
Company may require significant charges to expense in order to write down the
applicable assets to their fair value, less selling costs, if any. Idling or
closing facilities of Ashland Coal related to the Merger that require writedown
to fair value will be adjusted in the purchase price allocation of
8
<PAGE>
Ashland Coal.
Uncertainty as to Market Price of Company Common Stock
In light of the considerations set forth above, the Company's status as a
new public company with a short trading history, and the inherent uncertainty of
future market prices of the stock of any public company, there can be no
assurance as to the prices at which Company Common Stock will trade in the
future. Moreover, factors such as fluctuations in the Company's operating
results, general trends affecting the coal industry, broad market fluctuations
and general economic and political conditions may have a significant effect on
market prices for Company Common Stock.
Shares Eligible for Future Sale
Immediately following the consummation of the Merger, the Company had
outstanding 39,591,454 shares of Company Common Stock. A significant number of
such shares, including shares held by certain holders of Company Common Stock
prior to the Merger, are eligible for sale without restriction under the
Securities Act of 1933, as amended (the "Securities Act") in the public market
by persons other than affiliates of the Company. Sales of shares by affiliates
of Ashland Coal are subject to Rule 145 of the Securities Act (or Rule 144 in
the case of such persons who become affiliates of the Company) or as otherwise
permitted under the Securities Act. In addition, certain stockholders of the
Company have rights to require the Company to register the sale of such holders'
shares of Company Common Stock under the Securities Act or, in some cases, to
register the sale of shares in other registration statements filed by the
Company in respect of sales of shares by it or by others.
Effects of Authorized but Unissued Preferred Stock
Pursuant to the Company Certificate, the Company's authorized capital
stock includes 10,000,000 shares of preferred stock, which the Board of
Directors (by action of at least two-thirds of its members), without further
approval of the stockholders of the Company, is authorized to issue and to
determine the rights and preferences of the preferred stock. These rights and
preferences could be superior to those of the Company Common Stock. The rights
of the holders of Company Common Stock will be subject to, and may be adversely
affected by, any future issuance of preferred stock. The issuance of preferred
stock could also have the effect of delaying, deferring or preventing a change
in control of the Company. The Company has no present plans to issue any shares
of preferred stock.
9
<PAGE>
Certain Provisions of the Company Certificate and Company Bylaws
The Company Certificate provides that the Company shall not amend certain
provisions of the Company Certificate, nor adopt an agreement or plan of merger
or consolidation, authorize the sale, lease or exchange of all or substantially
all of property and assets of the Company, or authorize the dissolution of the
Company or the distribution of all or substantially all of the assets of the
Company, except upon the approval of not less than two-thirds of the outstanding
shares of Company Common Stock voting thereon. The Restated and Amended Bylaws
of the Company (the "Company Bylaws") provide that there be an affirmative vote
of not less than two-thirds of the members of the Board of Directors to amend
the supermajority provisions of the Company Bylaws. The Company Bylaws otherwise
permit the amendment or repeal of the Company Bylaws upon the affirmative vote
of a majority of the Company's Board of Directors.
The Company Bylaws provide that there be an affirmative vote of not less
than two-thirds of the members of the Board of Directors to authorize the
issuance of more than 1,000,000 shares of Company Common Stock or any shares of
preferred stock in any one transaction or series of transactions, to declare a
dividend or distribution on any Company stock, to approve the Company's annual
budget or operating plan (including any unbudgeted capital expenditure in excess
of $10,000,000), to elect the Company's President, Chief Executive Officer,
Chief Financial Officer (if any) or Chief Operating Officer (if any), to adopt a
share purchase plan of a nature commonly referred to as a "poison pill," to
repurchase or redeem any capital stock of the Company, to appoint members to or
dissolve the Executive Committee or to amend the supermajority provisions of the
Company Bylaws. The Company Bylaws further provide that in order for nominations
or other business to be properly brought before a stockholders' meeting by a
stockholder, the stockholder must give timely notice thereof in writing to the
Secretary.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
-----------------------------------------------------
(a) The following consolidated financial statements of Ashland Coal,
Inc. and Subsidiaries are filed as part of this Current Report on Form 8-K:
Report of Ernst & Young LLP, Independent
Auditors
Consolidated Statements of Income for
the years ended December 31, 1996,
1995 and 1994
10
<PAGE>
Consolidated Balance Sheets at December 31,
1996 and 1995
Consolidated Statements of Stockholders'
Equity for the years ended December 31,
1996, 1995 and 1994
Consolidated Statements of Cash Flows for
the years ended December 31, 1996,
1995 and 1994
Notes to Consolidated Financial Statements
Consolidated Statements of Income for
the three month periods ended March 31,
1997 and 1996
Consolidated Balance Sheet at March 31, 1997
Consolidated Statements of Cash Flows for
the three month periods ended March 31,
1997 and 1996
Notes to Consolidated Financial Statements
(b) The following unaudited pro forma financial information is filed as
part of this Current Report on Form 8-K:
Unaudited Pro Forma Financial Information
Unaudited Pro Forma Combined Balance
Sheet as of March 31, 1997
Notes to Unaudited Pro Forma Combined
Balance Sheet as of March 31, 1997
Unaudited Pro Forma Combined Statement
of Operations for the year ended
December 31, 1996
Notes to Unaudited Pro Forma Combined
Statement of Operations for the
year ended December 31, 1996
Unaudited Pro Forma Combined Statement of
Operations for the three months ended
March 31, 1997
11
<PAGE>
Notes to Unaudited Pro Forma Combined
Statement of Operations for the three
months ended March 31, 1997
(c) The following Exhibits are filed with or incorporated by reference as
part of this Current Report on Form 8-K:
Exhibit No. Description
----------- -----------
2.1 Agreement and Plan of Merger dated April
4, 1997 among Arch Mineral Corporation,
AMC Merger Corporation and Ashland Coal,
Inc. (incorporated by reference to
Exhibit 2.1 to the Registration Statement
of Arch Mineral Corporation on Form S-4,
Registration No. 333-28149)
4.1 Credit Agreement dated as of July 1, 1997 by
and among Arch Coal, Inc., the banks party
thereto, PNC Bank, National Association, as
Administrative and Syndication Agent and
Morgan Guaranty Trust Company of New York,
as Documentation and Syndication Agent.
23.1 Consent of Ernst & Young LLP
12
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Report of Ernst & Young LLP, Independent Auditors
To the Stockholders and Board of Directors
Ashland Coal, Inc.
We have audited the accompanying consolidated balance sheets of Ashland Coal,
Inc. and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ashland Coal, Inc.
and subsidiaries at December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Louisville, Kentucky
January 22, 1997
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CONSOLIDATED STATEMENTS OF INCOME
Ashland Coal, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1996 1995 1994
---- ---- ----
(In thousands except earnings per share)
<S> <C> <C> <C>
Revenues:
Coal sales $565,174 $618,886 $589,141
Operating revenues 12,030 17,075 21,003
---------- --------- ----------
577,204 635,961 610,144
Costs and expenses:
Cost of coal sold 508,960 529,618 510,125
Operating expenses 9,559 10,995 11,543
Selling, general,
and administrative 26,864 27,901 33,756
expenses ---------- ---------- ----------
545,383 568,514 555,424
---------- ---------- ----------
Operating income 31,821 67,447 54,720
Other income (expense):
Interest income 417 89 366
Interest expense (17,905) (20,724) (22,238)
---------- ----------- ----------
Income before income
taxes 14,333 46,812 32,848
Income tax expense
(benefit) (2,180) 5,401 628
---------- ----------- ----------
Net income 16,513 41,411 32,220
Less preferred stock
dividends 2,810 2,810 2,603
---------- ---------- ----------
Income applicable to $ 13,703 $ 38,601 $ 29,617
common stock ========== ========== ==========
Earnings per common
share:
Primary $ .87 $ 2.22 $ 1.72
Fully diluted $ .86 $ 2.16 $ 1.68
</TABLE>
See notes to consolidated financial statements.
14
<PAGE>
CONSOLIDATED BALANCE SHEETS
Ashland Coal, Inc. and Subsidiaries
<TABLE>
<CAPTION>
December 31,
------------
(In thousands) 1996 1995
---- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 834 $ 1,752
Trade accounts receivable 56,743 76,442
Other receivables 6,260 6,890
Inventories 41,394 26,038
Prepaid royalties 17,525 16,622
Deferred income taxes 2,187 3,512
Other 2,177 3,349
------- -------
Total current assets 127,120 134,605
Other assets:
Prepaid royalties 61,040 61,979
Coal supply agreements 27,712 31,498
Other 14,355 18,924
------- -------
Total other assets 103,107 112,401
Property, plant, and equipment, net 574,850 588,396
------- -------
Total assets $805,077 $835,402
======= =======
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable $37,544 $30,595
Accrued expenses 30,599 37,279
Income taxes payable 761 --
Current portion of debt 41,000 42,000
-------- --------
Total current liabilities 109,904 109,874
Long-term debt 135,339 172,975
Accrued postretirement benefits 82,464 78,951
other than pension
Other long-term liabilities 55,221 50,493
Deferred income taxes 17,857 25,230
Stockholders' equity:
Convertible preferred stock 67,841 67,841
Common stock, $.01 par value,
44,000,000 shares authorized,
13,775,074 issued and 13,518,008
outstanding in 1996 and
13,754,224 issued and 13,567,858
15
<PAGE>
December 31,
------------
1996 1995
---- ----
(In thousands)
<S> <C> <C>
outstanding in 1995 138 138
Paid-in capital 109,689 109,257
Retained earnings 232,060 224,574
Less treasury common stock at
cost (257,066 shares in 1996
and 186,366 shares in 1995) (5,436) (3,931)
------ -------
Total stockholders' equity 404,292 397,879
------- -------
Total liabilities and stockholders'
equity $805,077 $835,402
======= =======
</TABLE>
See notes to consolidated financial statements.
16
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Ashland Coal, Inc. and Subsidiaries
Three years ended December 31, 1996
<TABLE>
<CAPTION>
Convertible
Preferred Common Paid-In
Stock Stock Capital
---------- ------- --------
(In thousands)
<S> <C> <C> <C>
Balance at January 1, 1994 $67,841 $136 $107,087
Net income Cash dividends paid:
Common--$.415 per share
Preferred--$10,414 (including
$2,800 preference dividend) per
share
Issuance of 35,655 shares of
common stock under dividend
reinvestment and stock purchase 1 980
plan
Issuance of 28,825 shares of
common stock under stock
incentive plan 644
------ --- -------
Balance at December 31, 1994 67,841 137 108,711
Net income
Cash dividends paid:
Common--$.46 per share
Preferred--$11,239 (including
$2,800 preference dividend) per
share
Purchase of 185,300 shares of
common stock
Issuance of 31,240 shares of
common stock under stock
incentive plan 1 546
------ --- -------
Balance at December 31, 1995 67,841 138 109,257
Net income
Cash dividends paid:
Common--$.46 per share
Preferred--$11,239 (including
$2,800 preference dividend)
per share
Purchase of 70,700 shares of
common stock
Issuance of 20,850 shares of
common stock under stock
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<PAGE>
Convertible
Preferred Common Paid-In
Stock Stock Capital
---------- ------- --------
(In thousands)
<S> <C> <C> <C>
incentive plan 432
------ --- -------
Balance at December 31, 1996 $67,841 $138 $109,689
====== === =======
</TABLE>
See notes to consolidated financial statements.
18
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Continued from prior page)
Ashland Coal, Inc. and Subsidiaries
Three years ended December 31, 1996
<TABLE>
<CAPTION>
Retained Treasury
Earnings Stock Total
-------- -------- -----
(In thousands)
<S> <C> <C> <C>
Balance at January 1, 1994 $168,363 $ $343,427
Net income 32,220 32,220
Cash dividends paid:
Common--$.415 per share (5,686) (5,686)
Preferred--$10,414 (including
$2,800 preference dividend)
per share (2,603) (2,603)
Issuance of 35,655 shares of
common stock under dividend
reinvestment and stock purchase 981
plan
Issuance of 28,825 shares of
common stock under stock
incentive plan 644
-------- --------
Balance at December 31, 1994 192,294 368,983
Net income 41,411 41,411
Cash dividends paid:
Common--$.46 per share (6,321) (6,321)
Preferred--$11,239 (including
$2,800 preference dividend) per
share (2,810) (2,810)
Purchase of 185,300 shares of
common stock (3,902) (3,902)
Issuance of 31,240 shares of
common stock under stock
incentive plan (29) 518
-------- ------- --------
Balance at December 31, 1995 224,574 (3,931) 397,879
Net income 16,513 16,513
Cash dividends paid:
Common--$.46 per share (6,217) (6,217)
Preferred--$11,239 (including
$2,800 preference dividend)
per share (2,810) (2,810)
Purchase of 70,700 shares of
common stock (1,505) (1,505)
19
<PAGE>
Retained Treasury
Earnings Stock Total
-------- -------- -----
(In thousands)
<S> <C> <C> <C>
Issuance of 20,850 shares of
common stock under stock
incentive plan 432
-------- ------- --------
Balance at December 31, 1996 $232,060 $(5,436) $404,292
======== ======= ========
</TABLE>
See notes to consolidated financial statements.
20
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Ashland Coal, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Operating activities:
Net income $16,513 $41,411 $32,220
Adjustments to reconcile
to cash provided by
operating activities:
Depreciation and amortiza-
tion of property, plant,
and equipment 64,699 65,127 58,344
Other amortization 5,480 5,766 13,451
Prepaid royalties expensed 23,738 21,286 19,868
Deferred income taxes (6,048) (7,511) (11,238)
(Gain) loss on disposition
of assets 3 (477) (1,214)
Partnership costs in
excess of cash advances 500 689 436
Changes in operating assets
and liabilities:
Trade accounts receivable 19,699 (14,080) (16,849)
Other receivables 630 2,234 (4,657)
Inventories (15,356) 4,173 (7,907)
Prepaid royalties (3,358) (4,527) (5,070)
Other current assets 327 1,200 (1,522)
Other assets 3,037 2,336 3,178
Accounts payable and (1,280) (902) 12,816
accrued expenses
Income taxes 1,347 (764) 2,381
Accrued postretirement
benefits other than
pension 3,513 3,755 7,351
Other long-term
liabilities 4,587 2,159 3,159
------- ------- -------
Cash provided by
operating activities 118,031 121,875 104,747
Investing activities:
Property, plant, and
equipment:
Purchases (52,628) (58,245) (43,501)
Proceeds from sales 3,324 2,249 4,280
Advances on prepaid
royalties (20,698) (21,013) (20,490)
-------- --------- ---------
21
<PAGE>
Year Ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Cash used in investing
activities (70,002) (77,009) (59,711)
Financing activities:
Proceeds from borrowings 904,080 1,007,754 1,315,931
Payments on borrowings (942,870) (1,039,402) (1,353,570)
Dividends paid (9,027) (9,131) (8,289)
Proceeds from sale of
common stock 375 447 1,456
Purchase of common stock (1,505) (3,902) --
------- -------- ---------
Cash used in financing
activities (48,947) (44,234) (44,472)
-------- --------- ---------
Increase (decrease) in
cash and cash equivalents (918) 632 564
Balance at beginning of year 1,752 1,120 556
------- --------- ---------
Cash and cash equivalents
at end of year $ 834 $ 1,752 $ 1,120
======= ========= =========
Supplemental cash flow
information:
Cash paid during the year
for income taxes, net of
refunds $ 2,521 $ 13,470 $ 9,218
Cash paid during the year
for interest, net of
amounts capitalized $ 17,746 $ 20,281 $ 22,126
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ashland Coal, Inc. and Subsidiaries
1. Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Ashland Coal,
Inc. and its subsidiaries (the Company or Ashland Coal), which operate in the
coal mining industry. The Company's mining operations are conducted in eastern
Kentucky and West Virginia, and the coal is marketed primarily in the eastern
United States. All subsidiaries are wholly owned. Significant intercompany
transactions and accounts have been eliminated in consolidation.
Ashland Coal's 17.5% partnership interest in Dominion Terminal Associates is
accounted for on the equity method in the consolidated balance sheets. Allocable
costs of the partnership for coal loading and storage are included in costs and
expenses in the consolidated statements of income.
Inventories
Inventories are comprised of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
(In thousands)
<S> <C> <C>
Coal $22,320 $ 8,536
Supplies 19,074 17,502
------ ------
$41,394 $26,038
====== ======
</TABLE>
Coal inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market. Supplies inventories are valued at the lower of
average cost or market.
Coal Acquisition Costs and Prepaid Royalties
Coal lease rights obtained through acquisition of other companies are
capitalized and amortized primarily by the units-of-production method over the
estimated recoverable reserves.
Rights to leased coal lands are often acquired through royalty
23
<PAGE>
payments. Where royalty payments represent prepayments recoupable against future
production, they are capitalized, and amounts expected to be recouped within one
year are classified as a current asset. As mining occurs on these leases, the
prepayment is offset against earned royalties and is included in the cost of
coal mined. The Company provides a valuation allowance for royalties estimated
to be nonrecoupable. The valuation allowance for prepaid royalties was
$6,327,000 and $7,865,000 at December 31, 1996 and 1995, respectively.
Coal Supply Agreements
Acquisition costs allocated to coal supply agreements (sales contracts) are
capitalized and amortized to selling expense on the basis of coal to be shipped
over the term of the contract. Accumulated amortization for sales contracts was
$37,933,000 and $34,147,000 at December 31, 1996 and 1995, respectively.
Exploration Costs
Costs related to locating coal deposits and determining the economic
mineability of such deposits are expensed as incurred.
Property, Plant, and Equipment
Property, plant, and equipment are recorded at cost. Costs of purchasing
rights to coal reserves and of developing new mines or significantly expanding
the capacity of existing mines are amortized using the units-of-production
method. Plant and equipment are depreciated principally on the straight-line
method over the estimated useful lives of the assets, which range from three to
33 years. Interest costs on borrowed funds are capitalized for significant asset
construction projects. Capitalized interest costs were $382,000 in 1996,
$311,000 in 1995, and $176,000 in 1994.
Asset Impairment
If facts and circumstances suggest that a long-lived asset may be impaired,
the carrying value is reviewed. If this review indicates that the value of the
asset will not be recoverable, as determined based on projected undiscounted
cash flows related to the asset over its remaining life, then the carrying value
of the asset is reduced to its estimated fair value.
Income Taxes
Deferred income taxes are based on temporary differences between the
financial statement and tax bases of assets and liabilities existing at each
balance sheet date using enacted tax rates for years during which taxes are
expected to be paid or
24
<PAGE>
recovered.
Revenue Recognition
Coal sales revenues include sales to customers of coal produced at Company
operations and purchased from other companies. The Company recognizes revenue
from coal sales at the time title passes to the customer. Revenues other than
from coal sales are included in operating revenues and are recognized in income
as services are performed or otherwise earned.
Other
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash equivalents (none at December 31, 1996 and 1995) represent highly liquid
investments with a maturity of three months or less when purchased. Cash
equivalents are recorded at cost, plus accrued interest, which approximates
market.
The Company accrues amounts to be paid or received under interest-rate swap
and cap agreements over the lives of the agreements. Such amounts are recognized
as adjustments to interest expense over the lives of agreements, thereby
adjusting the effective interest rate on the Company's debt.
Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform with the classifications in the 1996 financial
statements.
2. Related Parties
The financial statements include transactions with Ashland Inc. (Ashland),
Saarbergwerke AG (Saarberg), and Carboex International, Ltd. (Carboex) and their
affiliates. Ashland owns 7,481,290 shares of the issued and outstanding common
stock and the issued and outstanding convertible Class B preferred stock of
Ashland Coal, and Carboex owns the issued and outstanding convertible Class C
preferred stock of Ashland Coal. Prior to February 8, 1995, Saarberg owned the
issued and outstanding convertible Class B preferred stock. On February 8, 1995,
Ashland purchased Saarberg's Class B preferred stock for $110,076,000. Ashland
now has approximately 57% of the voting power of Ashland Coal in matters other
than the election of directors and could elect six members of the 10-member
Board of Directors.
25
<PAGE>
Revenues include sales of coal to Saarberg and miscellaneous items of income
resulting from transactions with Ashland. In addition, Ashland Coal receives
certain services from and provides certain services to Ashland for which fees
are charged between the companies. Ashland Coal purchases fuel, oil, and other
products from Ashland for use in its mining operations.
Saarberg and Carboex are the Company's exclusive agents for the purpose of
selling metallurgical coal to the steel industry in Europe. Under the terms of
the agreement, Ashland Coal pays a 2% commission on all such sales.
Transactions with related parties (which include Saarberg prior to February 8,
1995) are summarized below.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Revenues:
Saarberg $ -- $ -- $4,124
Ashland and affiliates 7 2,390 1
Service fees:
Charges from Ashland 429 428 392
Charges to Ashland 1 5 1
Commissions paid on European
sales of metallurgical coal:
Carboex 100 125 108
Saarberg and affiliates -- -- 108
Purchases of fuel, oil, and
other products from Ashland 5,525 5,996 5,881
</TABLE>
Management believes that charges between Ashland Coal and Ashland for
services were reasonable and that the other transactions summarized above were
concluded on terms equivalent to those prevailing among unaffiliated parties.
3. Dominion Terminal Associates
Ashland Coal holds a 17.5% general partnership interest in Dominion Terminal
Associates (DTA), which operates a ground storage-to-vessel coal transloading
facility in Newport News, Virginia. DTA leases the facility from Peninsula Ports
Authority of Virginia (PPAV) for amounts sufficient to meet debt-service
requirements. Financing is provided through $132,800,000 of tax-exempt bonds
issued by PPAV which mature July 1, 2016.
26
<PAGE>
Under the terms of a throughput and handling agreement with DTA, each partner
is charged its share of cash operating and debt-service costs in exchange for
the right to use its share of the facility's loading capacity and is required to
make periodic cash advances to DTA to fund such costs. On a cumulative basis,
costs exceeded cash advances by $8,122,000 and $7,622,000 at December 31, 1996
and 1995, respectively (included in other long-term liabilities). Costs and cash
advances for the last three years follow:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating and debt service costs
charged to costs and expenses $4,031 $3,898 $3,316
Cash advances 3,531 3,209 2,880
</TABLE>
Future payments for fixed operating costs and debt service are estimated to
approximate $3,300,000 annually through 2015 and $26,000,000 in 2016.
27
<PAGE>
4. Income Taxes
Significant components of the provision for income tax expense (benefit) are
as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $3,702 $11,793 $11,037
State 166 1,119 829
----- ------ ------
Total current 3,868 12,912 11,866
----- ------ ------
Deferred:
Federal (5,638) (6,894) (10,253)
State (410) (617) (985)
----- ------ ------
Total deferred (6,048) (7,511) (11,238)
----- ------ ------
$(2,180) $ 5,401 $ 628
====== ====== ======
</TABLE>
A reconciliation of the normal statutory federal income tax on Ashland Coal's
pretax income with the Company's actual income tax expense (benefit) follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income tax expense at U.S. $ 5,017 $16,384 $11,497
statutory rate
Increase (decrease) in taxes
resulting from:
Percentage depletion allowance (6,552) (10,431) (10,685)
State income taxes, net of
effect of federal taxes (302) 110 (446)
Nontaxable income, net of
nondeductible expenses (414) (590) (53)
Other items 71 (72) 315
------ ------ ------
$ (2,180) $ 5,40 $ 628
====== ====== ======
</TABLE>
Significant components of the Company's deferred tax liabilities and assets
that result from carryforwards and
28
<PAGE>
temporary differences between the financial statement basis and tax basis of
assets and liabilities are summarized as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
---- ----
<S> <C> <C>
Deferred tax liabilities:
Acquisition costs allocated to mineral $ 83,908 $ 87,301
reserves
Property, plant, and equipment,
principally due to differences in
lives and methods of depreciation
and amortization 26,873 27,613
Prepaid royalties capitalized for
financial reporting purposes 19,619 19,537
Acquisition costs allocated to coal
supply agreements 2,261 3,110
Other 2,822 3,432
------- -------
Total deferred tax liabilities 135,483 140,993
------- -------
Deferred tax assets:
Goodwill for tax purposes 34,503 37,586
Postretirement benefits other than
pension 32,707 31,228
Alternative minimum tax credit
carryforward 29,529 26,971
Costs not deductible until paid or
realized 17,722 17,719
Net operating loss carryforwards 557 500
Deferred gains not deferred for tax
purposes 2,075 2,141
Other 2,720 3,130
------- -------
Total deferred tax assets 119,813 119,275
------- -------
Net deferred tax liability 15,670 21,718
Less current assets (2,187) (3,512)
------- -------
Long-term deferred tax liability $ 17,857 $ 25,230
======= =======
</TABLE>
At December 31, 1996, the Company had $459,000 of federal net operating loss
carryforwards, which expire in 2004, and $7,362,000 of state net operating loss
carryforwards, which expire from 2001 through 2011, which may be applied against
future taxable income.
5. Prepaid Royalties
29
<PAGE>
Ashland Coal has entered into various noncancellable royalty lease agreements
under which future minimum payments are approximately $23,000,000 in 1997, 1998,
and 1999, $22,000,000 in 2000 and 2001, and $190,000,000 in the aggregate
thereafter.
Coal lands and mineral rights with a carrying value of $1,600,000, prepaid
royalties with a carrying value of $25,100,000 (net of the valuation allowance),
and future royalty commitments of $2,250,000 at December 31, 1996, represent
amounts attributable to coal properties for which there are no immediate plans
for significant production. Geological surveys performed by outside consultants
indicate that there are sufficient reserves relative to these properties to
permit recovery of Ashland Coal's investment.
6. Property, Plant, and Equipment
Property, plant, and equipment consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
---- ----
<S> <C> <C>
Cost:
Land $ 11,361 $ 9,126
Coal lands and mineral rights 439,564 462,465
Buildings and improvements 38,836 38,381
Equipment and processing facilities 410,798 386,624
Other 6,930 7,502
Construction in progress 9,934 5,184
------- -------
917,423 909,282
Less accumulated depreciation and
amortization 342,573 320,886
------- -------
$574,850 $588,396
======= =======
</TABLE>
7. Debt and Financing Arrangements
Debt consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
---- ----
<S> <C> <C>
9.78% senior unsecured notes, payable in
four equal annual installments beginning
September 15, 1997 $100,000 $100,000
30
<PAGE>
(In thousands) 1996 1995
---- ----
<S> <C> <C>
9.66% senior unsecured notes, payable in
six equal annual installments beginning
May 15, 2001 52,900 52,900
8.92% senior unsecured notes,
due May 15, 1996 -- 22,100
Indebtedness to banks under revolving
credit agreement (rate at December 31,
1996--5.91%; 1995--6.22%) 15,000 30,000
Indebtedness to banks under lines of
credit (weighted average rate at
at December 31, 1996--7.25%;
1995--6.09%) 6,261 7,315
Other 2,178 2,660
------- -------
176,339 214,975
Less current portion 41,000 42,000
------- -------
Long-term debt $135,339 $172,975
======= =======
</TABLE>
Ashland Coal has a revolving credit agreement, which terminates in 1999, with
a group of banks providing for borrowings of up to $500,000,000. The rate of
interest on borrowings under this agreement is, at Ashland Coal's option, a
money-market rate determined by a competitive bid process, the National
Westminster Bank PLC reference rate, a rate based on LIBOR, or a rate based on
an average market certificate-of-deposit rate. The provisions of the revolving
credit agreement require a facility fee, which is currently computed at the rate
of 0.1875% per annum on the amount of the commitment. The rate used to compute
the facility fee is redetermined quarterly based upon the Company's ratio of
debt to equity and may vary from 0.15% to 0.35% per annum. Certain amounts
borrowed under the revolving credit agreement ($6,000,000 in 1996 and
$18,200,000 in 1995) are classified as long-term as the Company has the intent
and ability to maintain these borrowings on a long-term basis.
Ashland Coal periodically establishes uncommitted lines of credit with banks.
These agreements generally provide for short-term borrowings at market rates. At
December 31, 1996, there were $170,000,000 of such agreements in effect.
Aggregate maturities of debt at December 31, 1996, are $41,000,000 in 1997,
$31,785,000 in 1998, $25,630,000 in 1999, $25,025,000 in 2000, $8,817,000 in
2001, and $44,082,000 thereafter. Included in these maturities are expected
discretionary prepayments of $9,000,000 in 1997 and $6,000,000 in 1998.
31
<PAGE>
The credit agreements contain, among other covenants, provisions setting
forth certain requirements for current ratio and consolidated net worth and
restrictions on the payment of dividends and the creation of additional debt. At
December 31, 1996, retained earnings of $73,375,000 were available for
dividends.
The Company enters into interest-rate swap agreements to modify the interest
characteristics of its outstanding debt. At December 31, 1996, the Company had
entered into interest-rate swap agreements having a total notional value of
$65,000,000. Of this total notional amount, $40,000,000 was used to convert
fixed-rate debt to a variable rate. Under these agreements, the Company receives
a weighted average fixed rate of 6.59% and was paying a weighted average
variable rate at December 31, 1996, of 5.78%. The average remaining life on
these swaps at December 31, 1996, was approximately 52 months. During the fourth
quarter of 1996 interest rates declined, and the Company chose to reduce its
exposure to variable interest rates by entering into $25,000,000 of reverse swap
agreements. At December 31, 1996, the Company was obligated to pay a weighted
average fixed rate of 6.26% under these agreements and will receive a weighted
average variable rate which was 5.78% at that date. The terms and amounts of
these swaps coincide with the stated maturities of the fixed-rate debt
obligations being converted. The variable rates are adjusted using six month
LIBOR. Interest expense for 1996 was reduced by $210,000 under these agreements
based on a net average notional position for the year of $24,800,000. The
Company's exposure to large interest-rate fluctuations on its variable-rate debt
has been mitigated through the purchase of short-term interest-rate caps
totaling $35,000,000 as of December 31, 1996.
8. Accrued Black Lung Benefits
Ashland Coal is liable under the federal Mine Safety and Health Act of 1977,
as amended, to provide for pneumoconiosis (black lung) benefits to eligible
employees, former employees, and dependents with respect to claims filed by such
persons on or after July 1, 1973. Ashland Coal is also liable under various
states' statutes for black lung benefits. Ashland Coal currently provides for
federal and state claims through a self-insurance program. Charges are being
made to current operations in amounts sufficient to amortize the actuarially
computed liability for black lung benefits over three to 16 years (five to 22
years in 1995 and 1994) at an assumed 7% (8% in 1995 and 1994) after-tax
investment return. The accrual for black lung benefits (included in other
long-term liabilities and in accrued expenses) was $16,222,000 and $15,841,000
at December 31, 1996 and 1995, respectively.
32
<PAGE>
9. Accrued Postmining Reclamation and Mine Closing Costs
Under the 1977 Surface Mining Control and Reclamation Act, a mine operator is
responsible for postmining reclamation on every mine for at least five years
after the mine is closed. Ashland Coal performs a substantial amount of
reclamation of disturbed acreage as an integral part of its normal mining
process. All such costs are expensed as incurred. The remaining costs of
reclamation are estimated and accrued as mining progresses.
The accrual for such reclamation (included in other long-term liabilities and
in accrued expenses) was $2,749,000 and $2,599,000 at December 31, 1996 and
1995, respectively. In addition, the Company accrues the costs of removal at the
conclusion of mining of roads, preparation plants, and other facilities and
other costs (collectively, closing costs) over the lives of the various mines.
Closing costs, in the aggregate, are estimated to be approximately $38,000,000.
At December 31, 1996 and 1995, the accrual for closing costs (included in other
long-term liabilities and in accrued expenses) was $10,501,000 and $9,418,000,
respectively.
10. Accrued Expenses
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
---- ----
<S> <C> <C>
Accrued compensation $12,148 $17,800
Accrued taxes 11,206 10,743
Accrued interest 3,928 4,313
Accrued reclamation and mine closing costs 1,025 960
Other 2,292 3,463
------ ------
$30,599 $37,279
======= ======
</TABLE>
33
<PAGE>
11. Capital Stock
Convertible preferred stock consists of the following:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Class A, $100 par value, 500 shares authorized,
none outstanding $ --
Class B, $100 par value, 250 shares authorized,
150 shares issued and outstanding 33,050
Class C, $100 par value, 250 shares authorized,
100 shares issued and outstanding 34,791
-------
$ 67,841
=======
</TABLE>
Holders of shares of Class A, B, and C preferred stock are entitled to
receive dividends at such times and in such amounts as shall be equal to the
dividends payable on the number of shares of common stock into which each such
share of preferred stock is convertible. In addition, holders of Class B and C
preferred stock are entitled to receive cumulative dividends in preference to
common stock. Such preference dividend is currently $2,800 per share per annum,
decreases to $1,400 per share per annum in 1999, and will be zero after 2003.
Each share of Class A preferred stock (if issued) is convertible into 13,846
shares of common stock.
Each share of Class B and C preferred stock is convertible into shares of
common stock as follows:
<TABLE>
<S> <C>
Through August 17, 1998 18,346 shares
August 18, 1998--August 17, 2003 19,596 shares
Thereafter 20,846 shares
</TABLE>
Holders of Class B and C preferred stock, voting cumulatively and together as
a class, have the right to elect one director for each 63 shares of such Class B
and C preferred stock held by them, up to a maximum of three directors.
In 1995 Ashland Coal's Board of Directors authorized the purchase, from time
to time, of up to one million shares of the
34
<PAGE>
Company's common stock. At December 31, 1996, 256,000 shares had been purchased
under this authorization. Shares acquired may be used for general corporate
purposes.
12. Earnings Per Share
Earnings per share of common stock are based on the weighted average number
of common and common equivalent shares outstanding during each year. Shares of
common stock issuable under the Company's stock incentive plans are treated as
common stock equivalents when dilutive. Fully diluted earnings per share are
based on conversion rights that become effective within 10 years of the
respective balance sheet date.
Computations of earnings per share, using the "two class" method, are as
follows:
<TABLE>
<CAPTION>
(In thousands except earnings 1996 1995 1994
per share) ---- ---- ----
<S> <C> <C> <C>
Net income $16,513 $41,411 $32,220
Less: Common stock dividends 6,217 6,321 5,686
Preferred stock dividends 2,810 2,810 2,603
------ ------ ------
Undistributed earnings $ 7,486 $32,280 $23,931
====== ====== ======
Earnings per common share:
Primary:
Undistributed earnings $ .41 $ 1.76 $ 1.30
Dividends (except preference .46 .46 .42
dividends) ------- -------- ---------
Net income $ .87 $ 2.22 $ 1.72
======= ======== =========
Fully diluted:
Undistributed earnings $ .40 $ 1.70 $ 1.26
Dividends (except preference .46 .46 .42
dividends) ------- -------- ---------
Net income $ .86 $ 2.16 $ 1.68
======= ======== =========
</TABLE>
35
<PAGE>
Weighted average shares for computing earnings per share were as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Primary 18,142 18,374 18,338
Fully diluted 18,782 19,002 18,965
</TABLE>
13. Stock Incentive Plans
On August 8, 1988, the stockholders approved a stock incentive plan (1988
Plan) reserving 750,000 shares of Ashland Coal common stock, and on April 28,
1995, the stockholders approved a new stock incentive plan (1995 Plan) reserving
1,000,000 shares of Ashland Coal common stock, in each case for awards to
officers and key employees. The 1988 Plan provides for the granting of incentive
stock options (qualified stock options), nonqualified stock options, stock
appreciation rights (SARs), and restricted stock awards, and the 1995 Plan
provides for granting of those same incentives, as well as merit awards,
performance share awards, and phantom stock awards. Stock options generally
become exercisable in full or in part one year from date of grant and are
granted at a price equal to 100% of the fair market value of the stock on the
date of grant. SARs entitle employees to surrender stock options and receive
cash or stock in an amount equal to the excess of the market value of the
optioned shares over their option price. Unexercised options and any
accompanying SARs lapse 10 years after the date of grant. Restricted stock
awards may entitle employees to purchase shares at a nominal cost. Such awards
entitle employees to vote shares acquired and to receive any dividends thereon,
but such shares cannot be sold or transferred and are subject to forfeiture if
employees terminate their employment prior to the prescribed period, which can
be from one to five years. As of December 31, 1996, no SARs or restricted stock
awards have been granted. Merit awards under the 1995 Plan are grants of Ashland
Coal stock without restriction and at a nominal cost. Performance share awards
are awards which can be earned by the recipient if Ashland Coal meets certain
pre-established performance measures. Until earned, the performance shares are
nontransferable, and when earned, performance shares are payable in cash, stock,
or restricted stock. Phantom stock awards under the 1995 Plan are based on the
appreciation of hypothetical underlying shares or the earnings performance of
such shares and may be paid in cash or in shares. As of December 31, 1996, no
merit, performance share, or phantom stock awards have been granted.
36
<PAGE>
Information regarding stock options under these plans is as follows:
<TABLE>
<CAPTION>
1996
----
(In thousands except per share data) Weighted
Common Average
Shares Price
------ --------
<S> <C> <C>
Options outstanding at January 1 578 $ 24.14
Granted 181 22.25
Exercised (21) 17.99
Forfeited (38) 29.09
-----
Options outstanding at December 31
700 23.56
===
Options exercisable at December 31
454 23.59
Options available for grant at
December 31 857
</TABLE>
<TABLE>
<CAPTION>
1995
----
(In thousands except per share data) Weighted
Common Average
Shares Price
------ --------
<S> <C> <C>
Options outstanding at January 1 514 $ 23.23
Granted 95 26.13
Exercised (31) 15.24
Forfeited -- --
----
Options outstanding at December 31
578 24.14
===
Options exercisable at December 31
410 23.10
Options available for grant at
December 31
1,000
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
1994
----
(In thousands except per share data) Weighted
Common Average
Shares Price
------ --------
<S> <C> <C>
Options outstanding at January 468 $ 21.75
Granted 96 28.45
Exercised (29) 16.49
Forfeited (21) 23.29
---
Options outstanding at December 31
514 23.23
===
Options exercisable at December 31
351 21.11
Options available for grant at
December 31 95
</TABLE>
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, encourages, but does not require, companies to
recognize compensation expense related to the grants of stock or stock options
to employees under plans such as the Company's 1988 and 1995 Plans. Companies
choosing not to adopt SFAS No. 123 continue to account for such grants using the
accounting prescribed by Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB25), but are required to make certain
disclosures about their plans, including pro forma net income and earnings per
share under the new method. The Company has elected to continue to follow APB25
for expense recognition and to make the disclosures required by SFAS No. 123.
38
<PAGE>
Under SFAS No. 123's transition rules, Ashland Coal has determined the
following pro forma amounts:
<TABLE>
<CAPTION>
(In thousands except earnings per share) 1996 1995
---- ----
<S> <C> <C>
Pro forma net income $16,066 $41,169
Pro forma earnings per share:
Primary .85 2.20
Fully diluted .83 2.15
</TABLE>
For purposes of these pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting periods. The effect of
compensation expense from stock options on 1995 pro forma net income reflects
only the first year of vesting of 1995 awards. The 1996 pro forma net income
reflects the second year of vesting of 1995 awards and the first year of vesting
of 1996 awards. Because the Company's option awards are generally not fully
vested until after three years from the date of grant, the full effect of
recognizing compensation expense in pro forma net income will not be apparent
until 1997.
The fair values of options granted in 1996 and 1995 were determined to be
$862,000 and $642,000, respectively, using the Black-Scholes option pricing
model and the following weighted-average assumptions:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Risk-free interest rate 5.44% 7.34%
Dividend yield 2% 2%
Volatility of the expected market price of
the Company's common stock .22 .24
Expected life of options (in years) 4 4
</TABLE>
The fair value per option granted was $4.76 in 1996 and $6.72 in 1995.
Exercise prices for options outstanding as of December 31, 1996, range from $11
to $34.375, and the weighted-average remaining contractual life at that date was
6.3 years. The table below shows pertinent information on options outstanding at
December 31, 1996, priced below $25 per share and priced at $25 per share or
more.
39
<PAGE>
<TABLE>
<CAPTION>
Option Exercise Price
----------------------
Below $25 $25 or More
--------- -----------
<S> <C> <C>
Options outstanding (in thousands) 406 294
Weighted-average exercise price $ 20.30 $ 28.06
Weighted-average remaining
contractual life (in years) 6.0 6.8
Options currently exercisable
(in thousands) 225 229
Weighted-average exercise price of
options currently exercisable $ 18.74 $ 28.36
</TABLE>
14. Employee Benefit Plans
Defined Benefit Pension Plan
The Company has a noncontributory defined benefit pension plan covering
certain of its salaried and nonunion hourly employees. Benefits for salaried
employees generally are based on years of service and the employee's
compensation during the three years prior to retirement. For hourly employees,
the plan provides for a stated benefit for each year of service. Ashland Coal
funds the plan in an amount not less than the minimum statutory funding
requirements nor more than the maximum amount that can be deducted for federal
income tax purposes. Plan assets consist primarily of equity securities and
fixed income securities.
The net pension cost of the plan includes the following components:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost of benefits earned $1,508 $1,185 $1,433
Interest cost on projected benefit 1,290 1,032 863
obligation
Actual (return) loss on plan assets (1,111) (1,872) 787
Net amortization 212 1,148 (1,428)
----- ----- -----
Net periodic pension cost $1,899 $1,493 $1,655
===== ===== =====
</TABLE>
The following table sets forth the plan's funded status and amounts
recognized in the consolidated balance sheets at December
40
<PAGE>
31, 1996 and 1995:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
---- ----
<S> <C> <C>
Actuarial present value of benefit
obligation:
Vested benefits $ 9,428 $ 9,450
Nonvested benefits 1,227 1,246
------ ------
Accumulated benefit obligation 10,655 10,696
Effect of projected compensation increases 7,826 7,857
------ ------
Projected benefit obligation 18,481 18,553
Plan assets at fair value 12,644 8,957
------ ------
Projected benefit obligation in excess
of plan assets 5,837 9,596
Unrecognized transition credit 297 397
Unrecognized prior service cost (7) (8)
Unrecognized net loss (1,476) (4,439)
------ ------
Accrued pension liability 4,651 5,546
Less amount included in accrued expenses 63 2,331
------ ------
Amount included in other long-term
liabilities $ 4,588 $ 3,215
====== ======
</TABLE>
The assumptions used in computing the information above were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Discount rate 7.75% 7.0% 8.5%
Expected long-term rate of return on 9.00% 9.0% 9.0%
plan assets
Future compensation growth rate 5.00% 5.0% 5.0%
</TABLE>
Multiemployer Pension and Benefit Plans
Under the labor contract with the United Mine Workers of America (UMWA),
Ashland Coal made payments of $1,076,000 in 1996, $1,348,000 in 1995, and
$1,293,000 in 1994 into a multiemployer defined benefit pension plan trust
established for the benefit of
41
<PAGE>
union employees. Payments are based on hours worked. Under the Multiemployer
Pension Plan Amendments Act of 1980, a contributor to a multiemployer pension
plan may be liable, under certain circumstances, for its proportionate share of
the plan's unfunded vested benefits (withdrawal liability). Ashland Coal has
estimated its share of such amount to be $15,200,000 at December 31, 1996.
Ashland Coal is not aware of any circumstances which would require it to reflect
its share of unfunded vested pension benefits in its financial statements.
The Coal Industry Retiree Health Benefit Act of 1992 (Benefit Act) provides
for the funding of medical and death benefits for certain retired members of the
UMWA through premiums to be paid by assigned operators (former employers),
transfers of monies in 1993 and 1994 from an overfunded pension trust
established for the benefit of retired UMWA members, and transfers from the
Abandoned Mine Lands Fund (funded by a federal tax on coal production)
commencing in 1995. Ashland Coal treats its obligation under the Benefit Act as
a participation in a multiemployer plan and recognizes expense as premiums are
paid. Ashland Coal recognized $651,000 in 1996, $347,000 in 1995, and $296,000
in 1994 in expense relative to premiums paid pursuant to the Benefit Act. The
Company believes that the amount of its obligation under the Benefit Act is not
significant.
Other Postretirement Benefit Plans
Ashland Coal and its subsidiaries currently provide certain postretirement
health and life insurance coverage for eligible employees. Generally, covered
employees who terminate employment after meeting the eligibility requirements
for pension benefits are also eligible for postretirement coverage for
themselves and their dependents. The salaried employee postretirement medical
and dental plans are contributory, with retiree contributions adjusted
periodically, and contain other cost-sharing features such as deductibles and
coinsurance. The postretirement medical plan for retirees who were members of
the UMWA is not contributory. The Company's current funding policy is to fund
the cost of all postretirement health and life insurance benefits as they are
paid.
The net periodic postretirement benefit cost of these plans includes the
following components:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost $2,628 $2,138 $4,522
Interest cost 3,878 3,859 4,591
42
<PAGE>
Amortization of gains (1,193) (1,607) (213)
----- ----- -----
Net periodic postretirement
benefit cost $5,313 $4,390 $8,900
===== ===== =====
</TABLE>
Net periodic postretirement benefit cost decreased approximately $4,500,000
(an increase in net income of $2,750,000, or $.15 per share on a primary basis
and $.14 per share on a fully diluted basis) in 1995 due to changes in certain
actuarial assumptions, including an increase in the discount rate, a decrease in
the per capita claims cost, and a decrease in the health care cost trend rate.
The following table sets forth the amounts recognized in the consolidated
balance sheets at December 31, 1996 and 1995, none of which have been funded:
<TABLE>
<CAPTION>
(In thousands) 1996 1995
---- ----
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $19,041 $22,961
Fully eligible active plan participants 5,590 7,114
Other active plan participants 30,667 31,993
------ ------
55,298 62,068
Unrecognized net gain 26,678 15,740
Unrecognized gain related to prior service 1,889 2,102
------ ------
Accrued postretirement obligation 83,865 79,910
Less amount included in accrued expenses 1,401 959
------ ------
Amount included in accrued
postretirement benefits other than
pension $82,464 $78,951
====== ======
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.75% and 7% at December 31, 1996 and 1995, respectively. That
change and a decrease in the actuarial assumption regarding per capita claims
cost were responsible for the reduction in the accumulated postretirement
benefit obligation from December 31, 1995, to December 31, 1996. The assumed
health care cost trend rate for 1997 is 8.5%, decreasing to 5% in the year 2004.
The health care cost trend
43
<PAGE>
rate assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care cost trend rate by one percentage point in
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1996, by $8,386,000, or 15.2%, and the net periodic postretirement
benefit cost for 1996 by $1,024,000, or 19.3%.
Other Plans
Ashland Coal sponsors three savings plans which were established to assist
eligible employees in providing for their future retirement needs. Ashland
Coal's contributions to the plans were $2,107,000 in 1996, $1,928,000 in 1995,
and $1,621,000 in 1994.
Restructuring Charges
In the first quarter of 1996, the Company began restructuring support
functions at its West Virginia operations and at its corporate headquarters. The
charge to operations for severance pay and other costs related to the
restructuring amounted to approximately $4,200,000 during 1996.
Changes in Assumptions
The assumptions, including discount rates, used in determining the
accumulated benefit obligations for pensions and for other postretirement
benefits have changed in the past, and it is reasonably possible that changes in
those assumptions will occur in the future. Such changes affect not only the
accumulated benefit obligations, but also the amount of expense recognized each
year.
15. Concentration of Credit Risk and Major Customers
Ashland Coal places its cash equivalents in investment-grade short-term
investments and limits the amount of credit exposure to any one commercial
issuer.
Ashland Coal markets its coal principally to electric utilities in the United
States and Europe. As of December 31, 1996 and 1995, accounts receivable from
electric utilities located in the United States totaled $42,341,000 and
$53,836,000, respectively. Accounts receivable from electric utilities located
in Europe totaled $7,328,000 as of December 31, 1995. There were no accounts
receivable from European electric utilities at the end of 1996. Generally,
credit is extended based on an evaluation of the customer's financial condition,
and collateral is not required. Credit losses are provided for in the financial
statements and historically have been minimal.
44
<PAGE>
Ashland Coal is committed under long-term contracts to supply coal that meets
certain quality requirements at specified prices. These prices are generally
adjusted based on indices. Quantities sold under some of these contracts may
vary from year to year within certain limits at the option of the customer.
Sales (including spot sales) to major customers were as follows:
<TABLE>
<CAPTION>
(In thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Customer A $86,076 $88,191 $128,978
Customer B 64,403 60,767 60,928
Customer C 4,073 83,938 82,005
</TABLE>
In 1996, 1995, and 1994, Ashland Coal had export sales, principally to European
customers, of $55,280,000, $78,679,000, and $40,608,000, respectively.
16. Fair Values of Financial Instruments
The following methods and assumptions were used by Ashland Coal in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the consolidated
balance sheets for cash and cash equivalents approximates their fair value.
Debt: The carrying amounts of Ashland Coal's borrowings under its revolving
credit agreement and under lines of credit approximate their fair value. The
fair values of Ashland Coal's senior notes are estimated using discounted cash
flow analyses, based on Ashland Coal's current incremental borrowing rates for
similar types of borrowing arrangements.
Interest-rate caps and swaps: The fair values of interest-rate caps and swaps
are based on quoted market prices, which reflect the present value of the
difference between estimated future amounts paid (none for caps) and received.
The carrying amounts and fair values of Ashland Coal's financial instruments
at December 31, 1996 and 1995, are as follows:
45
<PAGE>
<TABLE>
<CAPTION>
1996 1995
---- ----
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 834 $ 834 $ 1,752 $ 1,752
Lines of credit 6,261 6,261 7,315 7,315
Revolving credit agreement 15,000 15,000 30,000 30,000
Senior notes 152,900 173,000 175,000 201,000
Interest-rate caps and swaps -- 572 -- 125
</TABLE>
17. Sale and Leaseback
On January 29, 1993, Ashland Coal sold mining equipment valued at
approximately $64,000,000 and leased back the equipment under an operating lease
with a term of three years. In May 1995, the lease was amended to extend the
term for two years for most of the equipment. The Company purchased the
equipment not included in the extension in January 1996 for approximately
$4,000,000. The lease provides for annual rental payments of approximately
$9,600,000 in 1997 and $2,300,000 in 1998. At the end of the lease term, the
Company has the option to purchase the equipment for approximately $28,300,000.
Alternatively, the equipment may be sold by the lessor to a third party. In the
event of such a sale, the Company will be required to make payment to the lessor
in the event, and to the extent, that the proceeds are below $23,700,000.
18. Subsequent Event
Ashland Coal and Arch Mineral Corporation (Arch) have reached an agreement in
principle calling for the combination of the two companies. The exchange ratio
to be used for the transaction will result in the former Ashland Coal and Arch
stockholders holding approximately 48 percent and 52 percent of the combined
company, respectively. Further terms and conditions of the transaction are
continuing to be negotiated. Consummation of the transaction is conditioned upon
the negotiation and execution of definitive agreements between the parties,
receipt of all necessary governmental and regulatory consents, and approval by
the stockholders of both corporations.
19. Commitments and Contingencies
Ashland Coal leases mining equipment, land, and various other properties
under noncancellable long-term leases, expiring at various dates. Rental expense
related to these operating leases
46
<PAGE>
amounted to $11,332,000 in 1996, $13,737,000 in 1995, and $14,088,000 in 1994.
Minimum annual rentals due in future years under lease agreements in effect at
January 1, 1997, are approximately $11,648,000 in 1997, $5,651,000 in 1998,
$3,067,000 in 1999, $3,168,000 in 2000, $3,242,000 in 2001, and additional
amounts thereafter aggregating $6,639,000 through 2011.
Ashland Coal is a party to numerous claims and lawsuits with respect to
various matters. The Company provides for costs related to contingencies when a
loss is probable and the amount is reasonably determinable. The Company
estimates that its probable aggregate loss as a result of such claims is
$2,100,000 (included in other long-term liabilities) and believes that probable
insurance recoveries of $610,000 (included in other assets) related to these
claims will be realized. The Company estimates that its reasonably possible
aggregate losses from all currently pending litigation could be as much as
$4,300,000 (before tax) in excess of the probable loss previously recognized.
However, the Company believes it is probable that substantially all of such
losses, if any occur, will be insured. After conferring with counsel, it is the
opinion of management that the ultimate resolution of these claims, to the
extent not previously provided for, will not have a material adverse effect on
the consolidated financial condition, results of operations, or liquidity of the
Company.
20. Quarterly Financial Information (Unaudited)
Quarterly financial data for 1996 and 1995 are summarized below.
<TABLE>
<CAPTION>
Three
Months
(In thousands except Ended
earnings per share) March 31 June 30
-------- -------
<S> <C> <C>
1996:
Sales and operating revenues $143,324(2) $138,800
Operating income 6,216(3) 7,640
Net income 1,515 3,090
Earnings per common share:(6)
Primary .07 .16
Fully diluted .07 .16
1995:
Sales and operating revenues $156,624 $151,614
Operating income 15,175 18,215
Net income 9,041 11,566
Earnings per common share:(6)
Primary .49 .62
47
<PAGE>
Three
Months
(In thousands except Ended
earnings per share) March 31 June 30
-------- -------
<S> <C> <C>
Fully diluted .48 .60
</TABLE>
<TABLE>
<CAPTION>
(In thousands except
earnings per share) Sept. 30(1) Dec. 31
----------- -------
<S> <C> <C>
1996:
Sales and operating revenues $142,991(2) $152,089
Operating income 6,272 11,693
Net income 2,501 9,407
Earnings per common share:(6)
Primary .13 .51
Fully diluted .13 .50
1995:
Sales and operating revenues $158,566 $169,157(5)
Operating income 15,641(4) 18,416(4)
Net income 9,215 11,589
Earnings per common share:(6)
Primary .49 .62
Fully diluted .48 .61
</TABLE>
- ----------------
(1) The results of the third quarter of each year are frequently adversely
affected by lower production and resultant higher costs because of
scheduled vacation periods at the Company's large mines in West Virginia.
In addition, costs are typically somewhat higher during vacation periods
because of maintenance activity carried on during those periods. These
adverse effects on the third quarter may make the third quarter not
comparable to the other quarters and not indicative of results to be
expected for the full year.
(2) In the first and third quarters of 1996, the Company and a customer agreed
to reduce the tonnage to be delivered in 1996 under a coal supply
agreement. As part of these agreed reductions, the customer agreed to make
payments to the Company which increased operating revenues in the first
and third quarters by $1.1 million and $.8 million, respectively. These
agreements increased net income for the first quarter by $.7 million, or
$.04 per share on a primary
48
<PAGE>
and on a fully diluted basis, and increased net income for the third
quarter by $.5 million, or $.03 per share on a primary and on a fully
diluted basis.
(3) In the first quarter of 1996, the Company provided for a restructuring
charge of $3.8 million related to restructuring certain support functions
at its West Virginia operations and at corporate. The charge reduced net
income for the quarter by $2.6 million, or $.14 per share on a primary and
on a fully diluted basis.
(4) In the third quarter of 1995, the actuarial estimate of the Company's
accumulated obligation for postretirement health and life insurance
benefits was revised. As a result of that revision, postretirement benefit
expense was reduced $2.3 million in the third quarter and $2.2 million in
the fourth quarter. Those changes increased net income for the third
quarter by $1.4 million, or $.08 per share on a primary basis and $.07 on
a fully diluted basis, and increased net income for the fourth quarter by
$1.3 million, or $.07 per share on a primary and on a fully diluted basis.
(5) In the fourth quarter of 1995, Ashland Coal and a customer agreed to
terminate a coal supply agreement. As part of this termination agreement,
the customer agreed to make a payment to the Company, increasing operating
revenues by $.9 million and increasing net income for the quarter by $.5
million, or $.03 per share on a primary and on a fully diluted basis.
(6) The sum of the quarterly earnings per share amounts may not equal earnings
per share for the full year, because per share amounts are computed
independently for each quarter and for the year based on the weighted
average number of common and common equivalent shares outstanding during
each period.
49
<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months ended March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
REVENUES:
Coal sales $163,104 $139,193
Operating revenues 3,504 4,131
-------- --------
166,608 143,324
COSTS AND EXPENSES:
Cost of coal sold 136,627 126,731
Operating expenses 3,952 2,397
Selling, general and
administrative expenses 7,303 7,980
-------- --------
147,882 137,108
OPERATING INCOME 18,726 6,216
OTHER INCOME (EXPENSE):
Interest income 72 14
Interest expense (4,034) (4,798)
-------- --------
INCOME BEFORE INCOME TAXES 14,764 1,432
Income tax expense (benefit) 2,480 (83)
-------- --------
NET INCOME $ 12,284 $ 1,515
Earnings per common share:
Primary $ .67 $ .07
Fully diluted $ .65 $ .07
Dividends declared per
common share $ .115 $ .115
</TABLE>
See notes to condensed consolidated financial statements.
50
<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
(Unaudited)
<S> <C> <C>
Assets:
Current Assets:
Cash and cash equivalents $ 11,396 $ 834
Trade accounts receivable 68,676 56,743
Other receivables 6,447 6,260
Inventories 40,366 41,394
Prepaid royalties 16,826 17,525
Deferred income taxes 2,161 2,187
Other 2,666 2,177
-------- --------
148,541 127,120
OTHER ASSETS:
Prepaid royalties 73,393 61,040
Coal supply agreements 26,675 27,712
Other 13,316 14,355
-------- --------
113,384 103,107
PROPERTY, PLANT AND EQUIPMENT
Cost 915,346 917,423
Less accumulated deprecia-
tion and amortization 352,597 342,573
-------- --------
$824,674 $805,077
======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 52,202 $ 37,544
Accrued expenses 29,670 30,599
Income taxes payable 4,305 761
Current portion of debt 40,762 41,000
------- -------
126,939 109,904
LONG-TERM DEBT 128,609 135,339
ACCURED POSTRETIREMENT
BENEFITS 83,503 82,464
OTHER LONG-TERM LIABILITIES 55,206 55,221
DEFERRED INCOME TAXES 15,923 17,857
51
<PAGE>
March 31, December 31,
1997 1996
--------- ------------
(Unaudited)
<S> <C> <C>
STOCKHOLDERS' EQUITY:
Convertible preferred stock 67,841 67,841
Common stock 138 138
Paid-in capital 109,689 109,689
Retained earnings 242,262 232,060
Treasury stock, at cost (5,436) (5,436)
------- -------
414,494 404,292
------- -------
$824,674 $805,077
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
52
<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 12,284 $ 1,515
Adjustments to reconcile
to cash provided by
operating activities:
Depreciation and amortiza-
tion of property, plant
and equipment 18,060 16,910
Other amortization 1,453 1,353
Prepaid royalties expensed 6,162 5,070
Deferred income taxes (1,910) (2,023)
(Gain) loss on disposition
of assets 2,018 (636)
Partnership costs in
excess of cash advances 165 157
Changes in operating
assets and liabilities (7,570) 3,593
CASH PROVIDED BY
OPERATING ACTIVITIES 30,752 25,939
INVESTING ACTIVITIES:
Property, plant and
equipment:
Purchases (10,853) (14,445)
Proceeds from sales 260 920
Advances on prepaid
royalties (518) (2,446)
CASH USED IN INVESTING
ACTIVITIES (11,111) (15,971)
FINANCING ACTIVITIES:
Proceeds from borrowings 36,891 287,405
Payments on borrowings (43,888) (294,949)
Dividends paid (2,082) (2,080)
Proceeds from sale of
common stock - 338
Purchase of common stock - (1,935)
CASH USED IN FINANCING
ACTIVITIES (9,079) (10,681)
53
<PAGE>
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Increase (decrease) in cash
and cash equivalents 10,562 (713)
Cash and cash equivalents at
beginning of year 834 1,752
Cash and cash equivalents at
end of period $11,396 $1,039
</TABLE>
See notes to condensed consolidated financial statements.
54
<PAGE>
ASHLAND COAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
NOTE A - GENERAL
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and Securities and Exchange Commission regulations, but are
subject to any year-end audit adjustments which may be necessary. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. These financial
statements should be read in conjunction with the Annual Report of Ashland Coal,
Inc. ("Ashland Coal" or the "Company") on Form 10-K for the year ended December
31, 1996. Results of operations for the period ended March 31, 1997 are not
necessarily indicative of results to be expected for the year ending December
31, 1997.
NOTE B - PROPOSED MERGER
Ashland Coal and Arch Mineral Corporation ("Arch") have signed a definitive
agreement to merge the two companies in a tax-free reorganization, which will be
accounted for as a purchase by Arch. After the merger, Ashland coal and Arch
stockholders will hold approximately 48 percent and 52 percent of the combined
company, respectively. Consummation of the merger, which is subject to approval
by Ashland coal's stockholders, is expected to occur about June 30, 1997.
NOTE C - INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
(In thousands)
<S> <C> <C>
Coal $21,821 $22,320
Supplies 18,545 19,074
------ ------
$40,366 $41,394
</TABLE>
NOTE D - DEBT
55
<PAGE>
Debt consists of the following:
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
(In thousands)
<S> <C> <C>
9.78% senior unsecured notes,
payable in four equal annual
installments beginning
September 15, 1997
$100,000 $100,000
9.66% senior unsecured notes,
payable in six equal annual
installments beginning May
15, 2001
52,900 52,900
Indebtedness to banks under
revolving credit agreement
15,000 15,000
Indebtedness to banks under
lines of credit - 6,261
Other 1,471 2,178
------- -------
169,371 176,339
Less current portion 40,762 41,000
------- -------
Long-term debt $128,609 $135,339
======= =======
</TABLE>
NOTE E - CHANGE IN ESTIMATE AND NONRECURRING REVENUES AND
EXPENSES
Cost of coal sold in 1997 was reduced by $1.4 million by a change in the
estimate of the Company's liability for postmining reclamation and mine closure.
Operating expenses in 1997 include a charge of $2.1 million related to an idled
processing facility. A payment of $1.1 million was received from a customer in
the quarter ended March 31, 1996 for an agreed reduction of 1996 deliveries
under a sales contract and is included in operating revenues. Costs and expenses
in 1996 include a charge of $3.8 million for restructuring.
NOTE F - COMPUTATION OF EARNINGS PER SHARE
56
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1997 1996
---- ----
(In thousands, except per share data)
<S> <C> <C>
Net income $12,284 $ 1,515
Less: Common stock
dividends 1,555 1,553
Preferred stock
dividends 699 701
------ ------
Undistributed earnings
(loss) 10,030 $ (739)
Primary:
Average shares and equivalents
outstanding:
Shares outstanding 13,518 13,522
Shares issuable upon
conversion of
Preferred Stock 4,587 4,587
Exercise of stock
options 57 23
-------- --------
Total 18,162 18,132
Per share amounts:
Undistributed earnings
(loss) $ .55 $ (.05)
Dividends (except pre-
ference dividends) .12 .12
-------- -------
Net income $ .67 $ .07
Fully Diluted:
Average shares and equivalents
outstanding:
Shares outstanding 13,518 13,522
Shares issuable upon
conversion of pre-
ferred stock 5,212 5,212
-------- --------
Total 18,787 18,764
Per share amounts:
Undistributed earnings
(loss) $ .53 $ (.05)
Dividends (except pre-
ference dividends) .12 .12
Net income $ .65 <F1> $ .07
<FN>
<F1> Because the calculation of primary earnings per share yields
57
<PAGE>
a more dilutive result, that amount is shown here.
</FN>
</TABLE>
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128"). The
Company is required to adopt SFAS 128 on December 31,1997, and at that time will
present recomputed earnings per share ("EPS") for all prior periods using the
methodology specified by SFAS 128. Although the Company has not yet determined
the full effect of SFAS 128, it believes that basic EPS as computed under SFAS
128 will be somewhat greater than primary EPS as computed under the prior
accounting rules. Basic EPS excludes the dilutive effect of common stock
equivalents (such as stock options awarded to the Company's employees), but
primary EPS includes that effect. In addition, the Company's convertible
preferred stock will be less dilutive under SFAS 128 than under the prior rules.
The Company also believes that diluted EPS computed in accordance with SFAS 128
will be slightly higher than fully diluted EPS as computed under the prior
accounting rules.
NOTE G - CONTINGENCIES
Ashland Coal is a party to numerous claims and lawsuits with respect to various
matters. The Company provides for costs related to contingencies when a loss is
probable and the amount is reasonably determinable. The Company estimates that
its probable aggregate loss as a result of such claims is $1.8 million (included
in other long-term liabilities) and believes that probable insurance recoveries
of $.5 million (included in other assets) related to these claims will be
realized. The Company estimates that its reasonably possible aggregate losses
from all currently pending litigation could be as much as $3.5 million (before
tax) in excess of the probable loss previously recognized. However, the Company
believes it is probable that substantially all of such losses, if any occur,
will be insured. After conferring with counsel, it is the opinion of management
that the ultimate resolution of these claims, to the extent not previously
provided for, will not have a material adverse effect on the consolidated
financial condition, results of operations or liquidity of the Company.
58
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements give effect to the
Merger, the issuance of shares of Company Common Stock to the stockholders of
Ashland Coal and the substitution of options to purchase Company Common Stock
for Ashland Coal Options pursuant to the Company Incentive Plan. The unaudited
pro forma balance sheet is based on the respective balance sheets of the Company
and Ashland Coal and has been prepared to reflect the Merger as of March 31,
1997. The unaudited pro forma statements of operations are based upon the
respective statements of operations of the Company and Ashland Coal and combine
the results of operations of the Company and Ashland Coal for the year ended
December 31, 1996 and for the three months ended March 31, 1997, as if the
Merger had been consummated on January 1, 1996 and January 1, 1997,
respectively. The unaudited pro forma financial statements do not reflect any
cost savings or other synergies that may result from the Merger. In the opinion
of the management of the Company, all adjustments necessary to present pro forma
financial statements have been made.
The unaudited pro forma financial statements do not purport to be
indicative of the results of operations or financial position that would have
occurred had the Merger occurred as of the beginning of the period or as of the
date indicated or of the financial position or results of operations that may be
obtained in the future.
The Merger will be accounted for under the purchase method of accounting.
Accordingly, the cost to acquire Ashland Coal will be allocated to the assets
acquired and liabilities assumed according to their respective fair values. The
final allocation of such cost is dependent upon certain valuations that have not
progressed to a stage where there is sufficient information to make a final
allocation in the accompanying pro forma financial statements. Accordingly, the
cost allocation adjustments are preliminary and have been made solely for the
purpose of preparing such pro forma financial statements.
Adjustments to the preliminary allocation likely would result in changes
to amounts assigned to coal reserves, plant and equipment and coal supply
agreements and accordingly could impact depreciation, depletion and amortization
charged to future periods. Although not expected to be material, the likely
impact of the final allocation is not reasonably known.
59
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
March 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Ashland Purchase
Company Coal Accounting
Historical Historical Adjustments Pro Forma
---------- ---------- ------------ ----------
Assets
<S> <C> <C> <C> <C>
Current assets:
Cash and cash
equivalents $ 13,660 $ 11,396 $ $ 25,056
Trade accounts
receivable 82,246 68,676 -- 150,922
Other receivables 3,744 6,447 -- 10,191
Inventories 37,422 40,366 -- 77,788
Prepaid royalties 3,897 16,829 -- 20,726
Deferred income
taxes 14,500 2,161 -- 16,661
Prepaid expenses
and other assets 5,581 2,666 -- 8,247
------- ------- ------ -------
Total current
assets 161,050 148,541 -- 309,591
------- ------- ------ -------
Property, plant
and equipment, net
552,056 562,749 49,821 (1) 1,164,626
------- ------- ------- ---------
Other assets:
Prepaid royalties 3,723 73,393 (59,008)(1) 18,108
Coal supply
agreements less
accumulated
amortization 81,254 26,675 96,325 (1) 204,254
Deferred income 64,639 -- (49,655)(2) 14,984
taxes
Receivables and 9,885 13,316 (10,046)(1) 13,155
other assets ------- ------- ------- ---------
159,501 113,384 (22,384) 250,501
------- ------- ------- ---------
Total assets $872,607 $824,674 $ 27,437 $1,724,718
======= ======= ======== =========
60
<PAGE>
Ashland Purchase
Company Coal Accounting
Historical Historical Adjustments Pro Forma
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Liabilities and
Stockholders' Equity:
Current liabilities:
Accounts payable $ 41,728 $ 52,202 $ -- $ 93,930
Accrued expenses 76,309 33,975 4,500 (3) 114,784
Current portion of
long-term debt -- 40,762 -- 40,762
------- ------- ------ --------
Total current
liabilities 118,037 126,939 4,500 249,476
Long-term debt 190,537 128,609 20,100 (4) 339,246
Accrued post-
retirement
benefits 230,114 83,503 (28,567)(5) 285,050
Accrued
reclamation and
mine closure 95,552 11,720 -- 107,272
Accrued workers'
compensation 69,448 22,696 -- 92,144
Deferred income
taxes -- 15,923 (15,923)(2) --
Other noncurrent
liabilities 27,873 20,790 (933)(6) 47,730
------- ------- ------- ---------
731,561 410,180 (20,823) 1,120,918
------- ------- ------- ---------
Stockholders' equity:
Convertible
preferred stock -- 67,841 (67,841)(7) --
Common stock 209 138 49 (8) 396
Paid-in capital 8,392 109,689 352,878 (9) 470,959
Retained earnings 132,445 242,262 (242,262)(10) 132,445
Less: treasury
common stock at
cost -- (5,436) 5,436 (11) --
------ ------- ------- ---------
Total stock-
holders' equity 141,046 414,494 48,260 603,800
------ ------- ------ ---------
Total liabilities
and stockholders'
equity $872,607 $824,674 $27,437 $1,724,718
======= ======= ====== =========
</TABLE>
61
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
March 31, 1997
(in thousands, except per share data)
The purchase price of Ashland Coal and allocation of purchase price are as
follows:
<TABLE>
<S> <C>
Ashland Coal Common Stock outstanding at
March 31, 1997 (including Ashland Coal
preferred stock, as if converted in the Merge 18,643
Purchase price per share. $ 24.50(12)
Purchase price of Ashland Coal $456,754
Fair value of options 6,000
Transaction related fees 4,500
-------
Total purchase price $467,254
=======
Historical net book value of Ashland Coal
at March 31, 1997 $414,494
Adjustments for valuing Ashland Coal assets and liabilities:
Prepaid royalties (59,008)
Deferred income taxes (40,254)
Other assets (10,046)
Coal supply agreements 96,325
Property, plant and equipment 56,343
Long-term debt (current and noncurrent) (20,100)
Accrued postretirement benefits other 28,567
than pensions
Other long-term liabilities 933
-------
Total purchase price $467,254
=======
</TABLE>
- ---------------
(1) To adjust prepaid royalties, property, plant and equipment, coal supply
agreements and other long-term assets, including interest rate swap
agreements, to their estimated fair value. A substantial portion of the
excess purchase price has been allocated to coal reserves principally
because of higher productivities and technological advances that occurred
since the acquisition of the coal reserves combined with the expectation of
increased values of compliance and low-sulfur coal due to the Clean Air Act
Amendments. The value assigned to coal supply agreements is associated with
contracts signed in earlier years when spot market prices were higher
versus the current spot market prices.
62
<PAGE>
(2) To record deferred income taxes for the book and tax differences of the
purchase accounting adjustments, and to reflect the reclassification of
deferred income tax liability to deferred income tax asset.
(3) To record transaction related fees.
(4) To adjust long-term debt to estimated fair value based on current
interest rates.
(5) To adjust the liability for postretirement benefits other than pensions
to equal the accumulated projected benefit obligation.
(6) To eliminate the deferred gain on sale and leaseback of assets ($2,119)
and to increase the pension liability ($1,186) to equal the projected
benefit obligation in excess of plan assets.
(7) To reflect the conversion of preferred stock to common stock.
(8) To reflect the elimination of $138 of Ashland Coal common stock and the
addition of common stock issued by the Company (18,643 shares at $.01 per
share).
(9) To reflect the elimination of $109,689 of Ashland Coal paid-in capital
and the addition of paid-in capital resulting from the common stock and
options issued by the Company totaling $462,567.
(10) To eliminate retained earnings.
(11) To eliminate treasury stock.
(12) Represents the average market price of Ashland Coal common stock for
several days before and after March 25, 1997, the date the parties agreed
to the purchase price.
63
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 1996
(in thousands, except per share data)
<TABLE>
<CAPTION>
Ashland
Company Coal Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ------------ ---------
<C> <C> <C> <C> <C>
Revenues:
Coal sales $750,123 $565,174 $ -- $1,315,297
Other revenues 25,682 12,030 -- 37,712
------- ------- ------ ---------
775,805 577,204 -- 1,353,009
Costs and Expenses:
Cost of coal 667,878 508,960 2,346(1) 1,179,184
sales
Selling, general
and administra-
tive expenses 20,435 23,078 -- 43,513
Amortization of
coal supply
agreements 12,604 3,786 13,933(2) 30,323
Other expenses 18,776 9,559 -- 28,335
------- ------- ------
Income from
operations 56,112 31,821 (16,279) 71,654
Interest Expense,
Net:
Interest expense (18,783) (17,905) 4,957(3) (31,731)
Interest income 1,191 417 -- 1,608
----- ------ ----- ------
Income before income 38,520 14,333 (11,322) 41,531
taxes
Provision (benefit)
for income taxes 5,500 (2,180) (4,415)(4) (1,095)(5)
------ ------- ------ --------
Net income 33,020 16,513 (6,907) 42,626
Dividends on
preferred stock -- (2,810) 2,810(6) --
------ ------- ------- --------
Income applicable to
common stock $ 33,020 $ 13,703 $ (4,097) $ 42,626
====== ====== ======= ========
64
<PAGE>
Ashland
Company Coal Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ----------- ------------- ---------
<C> <C> <C> <C> <C>
Earnings per common
share:
Primary $ 1.58 $ .87 $ 1.07
========= ========= =========
Fully diluted $ 1.58 $ .86 $ 1.07
========= ========= =========
Average shares
outstanding 20,948 18,105(7) 39,660 (8)
</TABLE>
65
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(1) To record net charges associated with adjusting the fair value of
prepaid royalties, property, plant and equipment, and other assets. Additions to
property, plant and equipment, including coal reserves, is assumed to be
depreciated or depleted over 15 years.
(2) To record net charges associated with adjusting the fair value of coal
supply agreements with an average life of approximately seven years.
(3) To record the reduction in interest expense on $152.9 million of fixed
rate long-term debt to reflect current market interest rates (6.75% current rate
versus average 9.75% stated rate) and a reduction in amortization of deferred
debt issuance cost.
(4) To record the tax effect of 39% of the pro forma adjustments. The tax
rate of 39% represents the combined federal and state statutory rates.
(5) The effective tax rate is substantially less than 39% primarily due to
benefits derived from percentage depletion. The purchase price adjustments will
not affect percentage depletion.
(6) To eliminate dividends related to the Ashland Coal preferred
stock.
(7) Assumes conversion of preferred stock at a rate of 18,346 per
share.
(8) Shares outstanding include 20,948 of Company shares outstanding as
adjusted for the stock split, 18,643 shares issued to acquire Ashland Coal
assuming conversion of preferred stock at a rate of 20,500 per share, and 69
shares related to stock options that are dilutive.
66
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Three Months Ended March 31, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
Ashland
Company Coal Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Coal Sales $ 192,328 $ 163,104 $ -- $ 355,432
Other revenues 5,091 3,504 -- 8,595
------- -------- -------- -------
197,419 166,608 -- 364,027
Costs and Expenses:
Cost of coal
sales 171,623 136,627 587 308,837
Selling, general
and administra-
tive expenses 4,897 2,915 -- 7,812
Amortization of
coal supply
agreements 2,116 1,037 3,483 6,636
Other expenses 2,470 7,303 -- 9,773
------- -------- ------- -------
Income from operations 16,313 18,726 (4,070) 30,969
Interest Expense, Net:
Interest expense (3,553) (4,034) 1,239 (6,348)
Interest income 260 72 -- 332
------- -------- ------- -------
Income before income
taxes 13,020 14,764 (2,831) 24,953
Provision for income
taxes 2,600 2,480 (1,104)(4) 3,976(5)
------- -------- ------- -------
Net income 10,420 12,284 (1,727) 20,977
Dividends on preferred
stock -- (699) 699 --
------- -------- ------- -------
Income applicable to
common stock $ 10,420 $ 11,585 $ (1,028) $ 20,977
======== ======== ======== =======
Earnings per common
share:
67
<PAGE>
Primary $ .50 $ .67 $ 0.53
========== ========== ============
Fully diluted $ .50 $ .65 $ 0.53
========== ========== ============
Average shares
outstanding 20,948 18,105(7) 39,660(8)
========== ========== ===========
</TABLE>
68
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(1) To record net charges associated with adjusting the fair value of
prepaid royalties, property, plant and equipment, and other assets. Additions to
property, plant and equipment, including coal reserves, is assumed to be
depreciated or depleted over 15 years.
(2) To record net charges associated with adjusting the fair value of coal
supply agreements with an average life of approximately seven years.
(3) To record the reduction in interest expense on $152.9 million of fixed
rate long-term debt to reflect current market interest rates (6.75% current rate
versus average 9.75% stated rate) and a reduction in amortization of deferred
debt issuance cost.
(4) To record the tax effect of 39% of the pro forma adjustments. The tax
rate of 39% represents the combined federal and state statutory rates.
(5) The effective tax rate is substantially less than 39% primarily due to
benefits derived from percentage depletion.
(6) To eliminate dividends related to the Ashland Coal preferred
stock.
(7) Assumes conversion of preferred stock at a rate of 18,346 per
share.
(8) Shares outstanding include 20,948 of Company shares outstanding as
adjusted for the stock split, 18,643 shares issued to acquire Ashland Coal
assuming conversion of preferred stock at a rate of 20,500 per share and 69
shares related to stock options that are dilutive.
69
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 15, 1997 ARCH COAL, INC.
By: /s/ Jeffry N. Quinn
------------------------------
Jeffry N. Quinn
Senior Vice President - Law
& Human Resources
70
<PAGE>
EXHIBIT INDEX
-------------
Sequential
Exhibit No. Description Page No.
- ----------- ----------- ----------
4.1 Credit Agreement dated as of July 1, 1997 by
and among Arch Coal, Inc., the banks party
thereto, PNC Bank, National Association, as
Administrative and Syndication Agent and
Morgan Guaranty Trust Company of New York,
as Documentation and Syndication Agent.
23.1 Consent of Ernst & Young LLP
71
Exhibit 4.1
$500,000,000 REVOLVING CREDIT FACILITY
CREDIT AGREEMENT
by and among
ARCH COAL, INC.
and
THE BANKS PARTY HERETO
and
PNC BANK, NATIONAL ASSOCIATION, as Administrative and Syndication Agent
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as
Documentation and Syndication Agent
Dated as of July 1, 1997
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
1. CERTAIN DEFINITIONS....................................................1
1.1 Certain Definitions..............................................1
1.2 Construction....................................................20
1.2.1 Number; Inclusion.......................................20
1.2.2 Determination...........................................20
1.2.3 Administrative Agent's Discretion and Consent...........21
1.2.4 Documents Taken as a Whole..............................21
1.2.5 Headings................................................21
1.2.6 Implied References to This Agreement....................21
1.2.7 Persons.................................................21
1.2.8 Modifications to Documents..............................21
1.2.9 From, To and Through....................................21
1.2.10 Shall; Will.............................................22
1.3 Accounting Principles...........................................22
2. REVOLVING CREDIT AND SWING LOAN FACILITIES............................22
2.1 Revolving Credit Commitments....................................22
2.1.1 Revolving Credit Loans..................................22
2.1.2 Swing Loan Commitment...................................23
2.2 Nature of Banks' Obligations With Respect to Revolving
Credit Loans....................................................23
2.3 Revolving Credit Facility Fee...................................23
2.4 Revolving Credit Loan Requests; Swing Loan Requests.............23
2.4.1 Revolving Credit Loan Requests..........................23
2.4.2 Swing Loan Requests.....................................24
2.5 Making Revolving Credit Loans and Swing Loans and Swing
Notes...........................................................24
2.5.1 Making Swing Loans......................................25
2.6 Swing Loan Note.................................................25
2.7 Use of Proceeds.................................................25
2.8 Borrowings to Repay Swing Loans.................................25
2.9 Bid Loan Facility...............................................26
2.9.1 Bid Loan Requests.......................................26
2.9.2 Bidding.................................................27
2.9.3 Accepting Bids..........................................27
2.9.4 Funding Bid Loans.......................................28
2.9.5 Several Obligations.....................................29
2.9.6 Bid Notes...............................................29
2.9.7 Payments and Prepayments................................29
2.10 Letter of Credit Subfacility....................................29
2.10.1 Issuance of Letters of Credit...........................29
2.10.2 Letter of Credit Fees...................................29
2.10.3 Disbursements, Reimbursement............................30
2.10.4 Repayment of Participation Advances.....................31
2.10.5 Documentation...........................................32
i
<PAGE>
2.10.6 Determinations to Honor Drawing Requests................32
2.10.7 Nature of Participation and Reimbursement
Obligations.............................................32
2.10.8 Indemnity...............................................34
2.10.9 Liability for Acts and Omissions........................34
2.11 Extension by Banks of the Expiration Date.......................35
2.11.1 Requests; Approval by All Banks.........................35
2.11.2 Approval by Required Banks..............................35
3. INTEREST RATES........................................................36
3.1 Interest Rate Options...........................................36
3.1.1 Revolving Credit Interest Rate Options..................37
3.1.2 Rate Quotations.........................................37
3.1.3 Change in Fees or Interest Rates........................37
3.2 Revolving Credit Loans Interest Periods.........................38
3.2.1 Ending Date and Business Day............................38
3.2.2 Amount of Borrowing Tranche.............................38
3.2.3 Termination Before Expiration Date......................38
3.2.4 Renewals................................................38
3.3 Interest After Default..........................................38
3.3.1 Letter of Credit Fees, Interest Rate....................39
3.3.2 Other Obligations.......................................39
3.3.3 Acknowledgment..........................................39
3.4 Euro-Rate Unascertainable; Illegality; Increased Costs;
Deposits Not Available..........................................39
3.4.1 Unascertainable.........................................39
3.4.2 Illegality; Increased Costs; Deposits Not Available.....39
3.4.3 Administrative Agent's and Bank's Rights................40
3.5 Selection of Interest Rate Options..............................41
4. PAYMENTS..............................................................41
4.1 Payments........................................................41
4.2 Pro Rata Treatment of Banks.....................................41
4.3 Interest Payment Dates..........................................42
4.4 Voluntary Prepayments...........................................42
4.4.1 Right to Prepay.........................................42
4.4.2 Replacement of a Bank...................................43
4.4.3 Change of Lending Office................................44
4.4.4 Voluntary Reduction of Commitments......................44
4.5 Additional Compensation in Certain Circumstances................44
4.5.1 Increased Costs or Reduced Return Resulting From
Taxes, Reserves, Capital Adequacy Requirements,
Expenses, Etc...........................................44
4.5.2 Indemnity...............................................45
4.6 Notes...........................................................46
4.7 Settlement Date Procedures......................................46
ii
<PAGE>
5. REPRESENTATIONS AND WARRANTIES........................................47
5.1 Representations and Warranties..................................47
5.1.1 Organization and Qualification..........................47
5.1.2 Shares of Borrower; Subsidiaries; and Subsidiary
Shares..................................................47
5.1.3 Power and Authority.....................................48
5.1.4 Validity and Binding Effect.............................48
5.1.5 No Conflict.............................................48
5.1.6 Litigation..............................................49
5.1.7 Financial Statements....................................49
5.1.8 Use of Proceeds; Margin Stock; Section 20
Subsidiaries............................................49
5.1.9 Full Disclosure.........................................50
5.1.10 Taxes...................................................50
5.1.11 Consents and Approvals..................................51
5.1.12 No Event of Default; Compliance With Instruments........51
5.1.13 Insurance...............................................51
5.1.14 Compliance With Laws....................................51
5.1.15 Investment Companies; Regulated Entities................52
5.1.16 Plans and Benefit Arrangements..........................52
5.1.17 Employment Matters......................................53
5.1.18 Environmental Matters...................................53
5.1.19 Senior Debt Status......................................53
5.2 Continuation of Representations.................................53
6. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT...............54
6.1 First Loans and Letters of Credit...............................54
6.1.1 Officer's Certificate...................................54
6.1.2 Secretary's Certificate.................................54
6.1.3 Delivery of Guaranty Agreements.........................55
6.1.4 Opinion of Counsel......................................55
6.1.5 Legal Details...........................................55
6.1.6 Payment of Fees.........................................55
6.1.7 Consents................................................55
6.1.8 Officer's Certificate Regarding MACs....................56
6.1.9 No Violation of Laws....................................56
6.1.10 No Actions or Proceedings...............................56
6.1.11 Merger..................................................56
6.1.12 Financial Projections; Closing Date Balance Sheet.......56
6.1.13 Payoff of Existing Indebtedness.........................57
6.2 Each Additional Loan or Letter of Credit........................57
6.3 Syndication.....................................................57
6.3.1 Syndication Date Representations and Warranties.........57
6.3.2 Syndication Cooperation.................................58
7. COVENANTS.............................................................58
7.1 Affirmative Covenants...........................................58
7.1.1 Preservation of Existence, Etc..........................58
7.1.2 Payment of Liabilities, Including Taxes, Etc............58
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7.1.3 Maintenance of Insurance................................59
7.1.4 Maintenance of Properties and Leases....................59
7.1.5 Visitation Rights.......................................59
7.1.6 Keeping of Records and Books of Account.................59
7.1.7 Plans and Benefit Arrangements..........................59
7.1.8 Compliance With Laws....................................60
7.1.9 Use of Proceeds.........................................60
7.1.10 Operation of Mines......................................60
7.1.11 Repayment of Certain Indebtedness.......................60
7.2 Negative Covenants..............................................61
7.2.1 Indebtedness............................................61
7.2.2 Liens...................................................61
7.2.3 Liquidations, Mergers, Consolidations, Acquisitions.....62
7.2.4 Dispositions of Assets or Subsidiaries..................62
7.2.5 Affiliate Transactions..................................63
7.2.6 Subsidiaries, Partnerships and Joint Ventures...........63
7.2.7 Continuation of or Change in Business...................64
7.2.8 Plans and Benefit Arrangements..........................64
7.2.9 Off-Balance Sheet Financing.............................64
7.2.10 Maximum Leverage Ratio..................................64
7.2.11 Minimum Interest Coverage Ratio.........................65
7.2.12 No Restriction on Dividends.............................65
7.3 Reporting Requirements..........................................65
7.3.1 Quarterly Financial Statements..........................65
7.3.2 Annual Financial Statements.............................65
7.3.3 Certificate of the Borrower.............................66
7.3.4 Notice of Default.......................................66
7.3.5 Notice of Litigation....................................66
7.3.6 Notice of Change in Debt Rating.........................67
7.3.7 Notices Regarding Plans and Benefit Arrangements........67
8. DEFAULT...............................................................68
8.1 Events of Default...............................................68
8.1.1 Payments Under Loan Documents...........................68
8.1.2 Breach of Warranty......................................69
8.1.3 Breach of Negative Covenants or Visitation Rights.......69
8.1.4 Breach of Other Covenants...............................69
8.1.5 Defaults in Other Agreements or Indebtedness............69
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8.1.6 Judgments or Orders.....................................69
8.1.7 Loan Document Unenforceable.............................70
8.1.8 Uninsured Losses; Proceedings Against Assets............70
8.1.9 Notice of Lien or Assessment............................70
8.1.10 Insolvency..............................................70
8.1.11 Events Relating to Plans and Benefit Arrangements.......70
8.1.12 Cessation of Business...................................71
8.1.13 Change of Control.......................................71
8.1.14 Involuntary Proceedings.................................71
8.1.15 Voluntary Proceedings...................................72
8.2 Consequences of Event of Default................................72
8.2.1 Events of Default Other Than Bankruptcy, Insolvency
or Reorganization Proceedings...........................72
8.2.2 Bankruptcy, Insolvency or Reorganization
Proceedings.............................................73
8.2.3 Set-off.................................................73
8.2.4 Suits, Actions, Proceedings.............................73
8.2.5 Application of Proceeds.................................73
8.2.6 Other Rights and Remedies...............................74
8.3 Right of Competitive Bid Loan Banks.............................74
9. THE AGENTS............................................................75
9.1 Appointment.....................................................75
9.2 Delegation of Duties............................................75
9.3 Nature of Duties; Independent Credit Investigation..............75
9.4 Actions in Discretion of Agents; Instructions From the
Banks...........................................................76
9.5 Reimbursement and Indemnification of Agents by the Borrower.....76
9.6 Exculpatory Provisions; Limitation of Liability.................77
9.7 Reimbursement and Indemnification of Agents by the Banks........78
9.8 Reliance by Agents..............................................78
9.9 Notice of Default...............................................79
9.10 Notices.........................................................79
9.11 Banks in Their Individual Capacities............................79
9.12 Holders of Notes................................................79
9.13 Equalization of Banks...........................................80
9.14 Successor Agents................................................80
9.15 Administrative Agent's Fee......................................81
9.16 Availability of Funds...........................................81
9.17 Calculations....................................................82
9.18 Beneficiaries...................................................82
10. MISCELLANEOUS.........................................................82
10.1 Modifications, Amendments or Waivers............................82
10.1.1 Increase of Revolving Credit Commitment; Extension
of Expiration Date......................................82
10.1.2 Extension of Payment; Reduction of Principal
Interest or Fees; Modification of Terms of Payment......83
10.1.3 Release of Guarantor....................................83
10.1.4 Miscellaneous...........................................83
10.2 No Implied Waivers; Cumulative Remedies; Writing Required.......83
10.3 Reimbursement and Indemnification of Banks by the Borrower;
Taxes...........................................................84
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10.4 Holidays........................................................85
10.5 Funding by Branch, Subsidiary or Affiliate......................85
10.5.1 Notional Funding........................................85
10.5.2 Actual Funding..........................................85
10.6 Notices.........................................................86
10.7 Severability....................................................86
10.8 Governing Law...................................................86
10.9 Prior Understanding.............................................87
10.10 Duration; Survival..............................................87
10.11 Successors and Assigns..........................................87
10.11.1 Binding Effect; Assignments by Borrower.................87
10.11.2 Assignments and Participations by Banks Other Than
Assignments of Bid Loans Among Designating Banks
and Designated Lenders..................................87
10.11.3 Assignments of Bid Loans Among Designating Banks
and Designated Lenders..................................89
10.11.4 Foreign Assignees and Participants......................90
10.11.5 Assignments by Banks to Federal Reserve Banks...........90
10.12 Confidentiality.................................................90
10.12.1 General.................................................90
10.12.2 Sharing Information With Affiliates of the Banks........91
10.13 Counterparts....................................................91
10.14 Agent's or Bank's Consent.......................................91
10.15 Exceptions......................................................91
10.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL..........................92
10.17 Tax Withholding Clause..........................................92
10.18 Joinder of Guarantors...........................................93
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LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE 1.1(A) - PRICING GRID
SCHEDULE 1.1(B) - COMMITMENTS OF REVOLVING CREDIT BANKS AND
ADDRESSES FOR NOTICES
SCHEDULE 5.1.2 - CERTAIN INFORMATION REGARDING CAPITALIZATION OF
BORROWER AND ITS SUBSIDIARIES
SCHEDULE 5.1.11 - CONSENTS AND APPROVALS
EXHIBITS
EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(B) - BID NOTE
EXHIBIT 1.1(D) - DESIGNATION AGREEMENT
EXHIBIT 1.1(G)(1) - GUARANTOR JOINDER AND ASSUMPTION
EXHIBIT 1.1(G)(2) - GUARANTY AGREEMENT
EXHIBIT 1.1(R) - REVOLVING CREDIT NOTE
EXHIBIT 1.1(S) - SWING LOAN NOTE
EXHIBIT 2.4.1 - COMMITTED LOAN REQUEST
EXHIBIT 2.4.2 - SWING LOAN REQUEST
EXHIBIT 2.9.1 - BID LOAN REQUEST
EXHIBIT 4.4.4 - COMMITMENT REDUCTION NOTICE
EXHIBIT 6.1.4 - OPINION OF COUNSEL
EXHIBIT 7.3.3 - QUARTERLY COMPLIANCE CERTIFICATE
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of July 1, 1997, and is made by and
among ARCH COAL, INC., a Delaware corporation (the "Borrower"), the BANKS (as
hereinafter defined), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, in its capacity
as documentation and syndication agent, and PNC BANK, NATIONAL ASSOCIATION, in
its capacity as administrative and syndication agent for the Banks under this
Agreement.
WITNESSETH:
WHEREAS, the Borrower has requested the Banks to provide a revolving
credit facility to the Borrower in an aggregate principal amount not to exceed
$500,000,000;
WHEREAS, the revolving credit facility shall be used to refinance certain
indebtedness under the Existing Credit Facilities, as hereinafter provided, and
for general corporate purposes; and
WHEREAS, the Banks are willing to provide such credit upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1. CERTAIN DEFINITIONS.
In addition to words and terms defined elsewhere in this Agreement,
the following words and terms shall have the following meanings, respectively,
unless the context hereof clearly requires otherwise:
ADMINISTRATIVE AGENT shall mean PNC Bank, National
Association, and its successors and assigns.
ADMINISTRATIVE AGENT'S FEE shall have the meaning assigned to
that term in Section 9.15.
ADMINISTRATIVE AGENT'S LETTER shall have the meaning assigned
to that term in Section 9.15.
AFFILIATE as to any Person shall mean any other Person (i)
which directly or indirectly controls, is controlled by, or is under common
control with such Person, (ii) which beneficially owns or holds 5% or more of
any class of the voting or other equity interests of such
<PAGE>
Person, or (iii) 5% or more of any class of voting interests or other equity
interests of which is beneficially owned or held, directly or indirectly, by
such Person. Control, as used in this definition, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, including the power to elect a majority of
the directors or trustees of a corporation or trust, as the case may be.
AGENTS shall mean collectively the Administrative Agent and
Morgan Guaranty Trust Company of New York, and its successors and assigns and
AGENT shall mean either of the Agents, individually.
AGREEMENT shall mean this Credit Agreement, as the same may be
supplemented or amended from time to time, including all schedules and exhibits.
ANNUAL STATEMENTS shall have the meaning assigned to that term
in Section 5.1.7(i).
APPLICABLE FACILITY FEE RATE shall mean the percentage rate
per annum at the indicated level (i) of Leverage Ratio for any period during
which a Debt Rating is not in effect; or (ii) of Debt Rating, for any period a
Debt Rating is in effect, in either case as set forth in the pricing grid on
SCHEDULE 1.1(A) below the heading "Facility Fee." The Applicable Facility Fee
Rate shall be computed in accordance with the parameters set forth on SCHEDULE
1.1(A).
APPLICABLE LETTER OF CREDIT FEE RATE shall mean the rate per
annum at the indicated level of (i) of Leverage Ratio for any period during
which a Debt Rating is not in effect, or (ii) Debt Rating, for any period a Debt
Rating is in effect, in either case as set forth in the pricing grid on Schedule
1.1(A) below the heading "Letter of Credit Fee." The Applicable Letter of Credit
Fee Rate shall be computed in accordance with the parameters set forth on
Schedule 1.1(A).
APPLICABLE MARGIN shall mean, as applicable, the percentage
spread to be added to Euro-Rate under the Revolving Credit Euro-Rate Option at
the indicated level (i) of Leverage Ratio for any period during which a Debt
Rating is not in effect; or (ii) of Debt Rating, for any period a Debt Rating is
in effect, in either case as set forth in the pricing grid on SCHEDULE 1.1(A)
below the heading "Revolving Credit Euro-Rate Spread."
ASSIGNEE BANK shall have the meaning assigned to such term in
Section 2.11.2.
ASSIGNMENT AND ASSUMPTION AGREEMENT shall mean an Assignment
and Assumption Agreement by and among a Purchasing Bank, a Transferor Bank and
the Administrative Agent, as agent and on behalf of the remaining Banks,
substantially in the form of EXHIBIT 1.1(A).
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AUTHORIZED OFFICER shall mean those individuals, designated by
written notice to the Administrative Agent from the Borrower, authorized to
execute notices, reports and other documents on behalf of the Loan Parties
required hereunder. The Borrower may amend such list of individuals from time to
time by giving written notice of such amendment to the Administrative Agent.
BANK TO BE TERMINATED shall have the meaning assigned to such
term in Section 2.11.2.
BANKS shall mean each of the Revolving Credit Banks and each
of the Designated Lenders.
BASE RATE shall mean the greater of (i) the interest rate per
annum announced from time to time by the Administrative Agent at its Principal
Office as its then prime rate, which rate may not be the lowest rate then being
charged commercial borrowers by the Administrative Agent, or (ii) the Federal
Funds Effective Rate plus 1/2% per annum.
BENEFIT ARRANGEMENT shall mean at any time an "employee
benefit plan," within the meaning of Section 3(3) of ERISA, which is neither a
Plan nor a Multiemployer Plan and which is maintained, sponsored or otherwise
contributed to by any member of the ERISA Group.
BID shall have the meaning assigned to such term in Section
2.9.2.
BID LOAN BORROWING DATE shall mean, with respect to any Bid
Loan, the date for the making thereof which shall be a Business Day.
BID LOAN EURO-RATE RATE OPTION shall mean the option of the
Borrower to request that the Banks submit Bids to make Bid Loans bearing
interest at a rate per annum quoted by such Banks at the Euro-Rate in effect two
Business Days before the Borrowing Date of such Bid Loan plus a Euro-Rate Bid
Loan Spread.
BID LOAN FIXED RATE OPTION shall mean the option of the
Borrower to request that the Revolving Credit Banks submit Bids to make Bid
Loans bearing interest at a fixed rate per annum quoted by such Revolving Credit
Banks as a numerical percentage (and not as a spread over another rate such as
the Euro-Rate).
BID LOAN INTEREST PERIOD shall have the meaning assigned to
such term in Section 2.9.1.
BID LOAN PROCESSING FEE shall have the meaning assigned to
such term in Section 9.15.
BID LOAN REQUEST shall have the meaning assigned to such term
in Section 2.9.1.
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BID LOANS shall mean collectively and BID LOAN shall mean
separately all of the Bid Loans or any Bid Loan made by any of the Revolving
Credit Banks to the Borrower pursuant to Sections 2.9.
BID NOTES shall mean collectively and BID NOTE shall mean
separately all of the Bid Notes of the Borrower in the form of EXHIBIT 1.1(B)
evidencing the Bid Loans together with all amendments, extensions, renewals,
replacements, refinancings or refunds thereof in whole or in part.
BORROWER shall mean Arch Coal, Inc., a corporation organized
and existing under the laws of the State of Delaware. The Borrower was
originally incorporated under the name of Arch Mineral Corporation, a Delaware
corporation and prior to the consummation of the Merger changed its name to Arch
Coal, Inc..
BORROWER SHARES shall have the meaning set forth in Section
5.1.2.
BORROWING DATE shall mean, with respect to any Loan, the date
for the making thereof or the renewal or conversion thereof at or to the same or
a different Interest Rate Option, which shall be a Business Day.
BORROWING TRANCHE shall mean specified portions of Loans
outstanding as follows: (i) any Loans to which either a Euro-Rate Option or a
Bid Loan Fixed Rate Option applies which become subject to the same Interest
Rate Option under the same Loan Request by the Borrower and which have the same
Interest Period shall constitute one Borrowing Tranche, and (ii) all Loans to
which a Base Rate applies shall constitute one Borrowing Tranche.
BUSINESS DAY shall mean any day other than a Saturday or
Sunday or a legal holiday on which commercial banks are authorized or required
to be closed for business in Pittsburgh, Pennsylvania and New York, New York;
and if the applicable Business Day relates to any Loan to which the Euro-Rate
Option applies, such day must also be a day on which dealings are carried on in
the London interbank market.
CLOSING DATE shall mean the Business Day on which the first
Loan shall be made, which shall be July 1, 1997.
COMMERCIAL LETTER OF CREDIT shall mean any Letter of Credit
which is a commercial letter of credit issued in respect of the purchase of
goods or services by one or more of the Loan Parties in the ordinary course of
their business.
COMMITMENT shall mean as to any Revolving Credit Bank its
Revolving Credit Commitment and, in the case of PNC Bank, its Swing Loan
Commitment, and COMMITMENTS shall mean the aggregate of the Revolving Credit
Commitments and Swing Loan Commitment of all of the Revolving Credit Banks.
4
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COMMITTED LOAN shall mean either a Revolving Credit Loan or a
Swing Loan.
COMMITTED LOAN INTEREST PERIOD shall have the meaning set
forth in Section 3.2.
COMMITTED LOAN REQUEST shall mean a request for a Revolving
Credit Loan or a Swing Loan or a request to select, convert to or renew a
Revolving Credit Base Rate Option or Revolving Credit Euro-Rate Option with
respect to an outstanding Revolving Credit Loan in accordance with Sections 2.4,
3.1 and 3.2.
COMMITMENT REDUCTION NOTICE shall have the meaning set forth
in Section 4.4.4.
CONSOLIDATED CAPITALIZATION shall mean as of any date of
determination, for the Borrower and its Subsidiaries as of such date, determined
and consolidated in accordance with GAAP, the sum of (i) total stockholders'
equity, and (ii) Consolidated Debt.
CONSOLIDATED DEBT shall mean as of any date of determination
the aggregate of the following for the Borrower and its Subsidiaries, as of such
date, determined and consolidated in accordance with GAAP: (i) all indebtedness
for borrowed money (including, without limitation, all subordinated
indebtedness), (ii) all amounts raised under or liabilities in respect of any
note purchase or acceptance credit facility, (iii) all indebtedness in respect
of any other transaction (including production payments (excluding royalties),
installment purchase agreements, forward sale or purchase agreements,
capitalized leases and conditional sales agreements) having the commercial
effect of a borrowing of money entered into by such Person to finance its
operations or capital requirements, and (iv) the amount of all indebtedness
(whether matured or unmatured, liquidated or unliquidated, direct or indirect,
absolute or contingent, or joint or several) in respect of all Guarantees of
indebtedness for borrowed money. It is expressly agreed that the amount of the
indebtedness in respect of the Guaranty by the Borrower of the Port Bond shall
be excluded from the amount determined under clause (iv) of the previous
sentence. Further, it is expressly agreed that the difference between actual
funded indebtedness and the fair market value of funded indebtedness recorded as
required by Accounting Principles Board Opinion No. 16 (as in effect on the
Closing Date) will be excluded from Indebtedness in the determination of
Consolidated Debt.
CONSOLIDATED EBITDA for any period of determination shall mean
the sum of income from operations before the effect of changes in accounting
principles and extraordinary items, depreciation, amortization, depletion, net
interest expense and income taxes, in each case of the Borrower and its
Subsidiaries for such period determined and consolidated in accordance with
GAAP.
DEBT RATING shall mean the rating of the Borrower's senior
unsecured long-term debt by either of Standard & Poor's or Moody's.
5
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DELIVERY DATE shall mean the earlier of (i) the date on which
the Borrower delivers its consolidated financial statements pursuant to Sections
7.3.1 and 7.3.2, or (ii) one Business Day following the date on which such
financial statements are due to be delivered pursuant to such Sections.
DESIGNATED LENDER shall mean any Person who has been
designated by a Bank to fund Bid Loans and has executed a Designation Agreement
and thereby becomes a party to this Agreement pursuant to Section 10.11.3.1.
DESIGNATING BANK shall have the meaning assigned to such term
in Section 10.11.3.1.
DESIGNATION AGREEMENT means a designation agreement entered
into by a Bank and a Designated Lender and accepted by the Administrative Agent,
in substantially the form of EXHIBIT 1.1(D).
DOLLAR, DOLLARS, U.S. DOLLARS and the symbol $ shall mean
lawful money of the United States of America.
DRAWING DATE shall have the meaning assigned to that term in
Section 2.10.3.2.
ENVIRONMENTAL CLAIM shall mean any administrative, regulatory
or judicial action, suit, claim, notice of non-compliance or violation, notice
of liability or potential liability, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, Environmental Permit,
Regulated Substances or Hazardous Substances or arising from alleged injury or
threat of injury to health, safety or the environment.
ENVIRONMENTAL LAW shall mean any federal, state, local or
foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree
or judicial or agency interpretation, policy or guidance relating to the
environment, health, safety or any release or disposal of or contamination by
Hazardous Substances.
ENVIRONMENTAL PERMIT shall mean any permit, approval, license
or other authorization required under any Environmental Law.
ERISA shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
ERISA GROUP shall mean, at any time, the Borrower and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control and all other entities which,
together with the Borrower, are treated as a single employer under Section 414
of the Internal Revenue Code.
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EURO-RATE shall mean, with respect to the Loans comprising any
Borrowing Tranche to which the Euro-Rate Option applies for any Interest Period,
the interest rate per annum determined by the Administrative Agent by dividing
(the resulting quotient rounded upward to the nearest 1/100th of 1% per annum)
(i) the rate of interest determined by the Administrative Agent in accordance
with its usual procedures (which determination shall be conclusive absent
manifest error) to be the average of the London interbank offered rates of
interest per annum for U.S. Dollars set forth on Telerate display page 3750 or
such other display page on the Telerate System as may replace such page to
evidence the average of rates quoted by banks designated by the British Bankers'
Association (or appropriate successor or, if the British Bankers' Association or
its successor ceases to provide such quotes, a comparable replacement determined
by the Administrative Agent) two (2) Business Days prior to the first day of
such Interest Period for an amount comparable to such Borrowing Tranche and
having a borrowing date and a maturity comparable to such Interest Period by
(ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. The
Euro-Rate may also be expressed by the following formula:
Telerate page 3750 quoted by British Bankers'
Euro-Rate = Association or appropriate successor
------------------------------------
1.00 - Euro-Rate Reserve Percentage
The Euro-Rate shall be adjusted with respect to any Euro-Rate Option outstanding
on the effective date of any change in the Euro-Rate Reserve Percentage as of
such effective date. The Administrative Agent shall give prompt notice to the
Borrower and the Banks of the Euro-Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive absent manifest error.
EURO-RATE BID LOAN shall mean any Bid Loan that bears interest
under the Bid Loan Euro-Rate Option.
EURO-RATE BID LOAN SPREAD shall mean the spread quoted by a
Revolving Credit Bank in its Bid to apply to such Revolving Credit Bank's Bid
Loan if such Revolving Credit Bank's Bid is accepted. The Euro-Rate Bid Loan
Spread shall be quoted as a percentage rate per annum and expressed in multiples
of 1/1000th of one percentage point to be either added to (if it is positive) or
subtracted from (if it is negative) the Euro-Rate in effect two (2) Business
Days before the Borrowing Date with respect to such Bid Loan. Interest on
Euro-Rate Bid Loans shall be computed based on a year of 360 days and actual
days elapsed.
EURO-RATE INTEREST PERIOD shall mean the Interest Period
applicable to a Euro-Rate Loan.
EURO-RATE OPTION shall mean either the Revolving Credit
Euro-Rate Option or the Bid Loan Euro-Rate Option.
EURO-RATE RESERVE PERCENTAGE shall mean the maximum percentage
(expressed as a decimal rounded upward to the nearest 1/100 of 1%) as determined
by the Administrative Agent which is in effect during any relevant period, as
prescribed by the Board
7
<PAGE>
of Governors of the Federal Reserve System (or any successor) for determining
the reserve requirements (including supplemental, marginal and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
"Eurocurrency Liabilities") of a member bank in such System.
EVENT OF DEFAULT shall mean any of the events described in
Section 8.1 and referred to therein as an "Event of Default."
EXISTING CREDIT FACILITIES shall mean: (i) that certain Credit
Agreement among Arch Mineral Corporation, as borrower, the banks named therein,
and PNC Bank as agent, dated as of November 21, 1994, as amended, providing for
a $200,000,000 credit facility, and (ii) that certain Amended and Restated
Credit Agreement among Ashland Coal, Inc., the banks named therein, and National
Westminster Bank PLC, as coordinating and administrative agent, dated as of
November 15, 1994, as amended, providing for a $500,000,000 credit facility.
EXPIRATION DATE shall mean, with respect to the Commitments,
June 30, 2002.
EXTENDING BANK shall have the meaning assigned to such term in
Section 2.11.2.
FACILITY FEE shall mean the fee referred to in Section 2.3.
FEDERAL FUNDS EFFECTIVE RATE for any day shall mean the rate
per annum (based on a year of 360 days and actual days elapsed and rounded
upward to the nearest 1/100 of 1%) announced by the Federal Reserve Bank of New
York (or any successor) on such day as being the weighted average of the rates
on overnight federal funds transactions arranged by federal funds brokers on the
previous trading day, as computed and announced by such Federal Reserve Bank (or
any successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; PROVIDED, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
FIXED RATE shall mean a fixed interest rate quoted by a
Revolving Credit Bank in its Bid to apply to such Revolving Credit Bank's Bid
Loan over the term of such Bid Loan if such Revolving Credit Bank's Bid is
accepted.
FIXED RATE BID LOAN shall mean a Bid Loan that bears interest
under the Bid Loan Fixed Rate Option.
FRONTING FEE shall have the meaning assigned to that term in
Section 2.10.2.
8
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GAAP shall mean Generally Accepted Accounting Principles as
are in effect from time to time, subject to the provisions of Section 1.3, and
applied on a consistent basis both as to classification of items and amounts.
GOVERNMENTAL ACTS shall have the meaning assigned to that term
in Section 2.10.8.
GUARANTOR shall mean at any time each of the Significant
Subsidiaries of the Borrower.
GUARANTOR JOINDER shall mean a joinder by a Person as a
Guarantor under the Guaranty Agreement in the form of EXHIBIT 1.1(G)(1).
GUARANTY of any Person shall mean any obligation of such
Person guaranteeing or in effect guaranteeing any liability or obligation of any
other Person in any manner, whether directly or indirectly, including any such
liability arising by virtue of partnership agreements, including any agreement
to indemnify or hold harmless any other Person, any performance bond or other
suretyship arrangement and any other form of assurance against loss, except
endorsement of negotiable or other instruments for deposit or collection in the
ordinary course of business.
GUARANTY AGREEMENT shall mean the Guaranty and Suretyship
Agreement in substantially the form of EXHIBIT 1.1(G)(2) executed and delivered
by each of the Guarantors to the Administrative Agent for the benefit of the
Banks.
HAZARDOUS SUBSTANCES shall mean petroleum and petroleum
products, byproducts or breakdown products, radioactive materials,
asbestos-containing materials, radon gas and any hazardous or solid waste,
hazardous substance or chemical substance, as such terms are defined under the
Resource Conservation and Recovery Act (42 U.S.C. Sections 4901 ET SEQ.), the
comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Sections 9601 ET SEQ.), the Toxic Substances Control Act (15 U.S.C.
Sections 2601 ET SEQ.) or any similar state law.
HISTORICAL STATEMENTS shall have the meaning assigned to that
term in Section 5.1.7(i).
INDEBTEDNESS shall mean, as to any Person at any time, any and
all indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations (contingent or
otherwise) under any letter of credit, currency swap agreement, interest rate
swap, cap, collar or floor agreement or other interest rate management device,
(iv) any other transaction (including production payments (excluding royalties),
installment purchase agreements, forward sale or purchase agreements,
capitalized leases and conditional sales agreements) having the commercial
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effect of a borrowing of money entered into by such Person to finance its
operations or capital requirements (but not including trade payables and accrued
expenses incurred in the ordinary course of business which are not represented
by a promissory note or other evidence of indebtedness and which are not more
than thirty (30) days past due), or (v) any Guaranty of any such Indebtedness.
INELIGIBLE SECURITY shall mean any security which may not be
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as
amended.
INSOLVENCY PROCEEDING shall mean, with respect to any Person,
(a) a case, action or proceeding with respect to such Person (i) before any
court or any other Official Body under any bankruptcy, insolvency,
reorganization or other similar Law now or hereafter in effect, or (ii) for the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator (or similar official) of any Loan Party or otherwise
relating to the liquidation, dissolution, winding-up or relief of such Person,
or (b) any general assignment for the benefit of creditors, composition,
marshaling of assets for creditors, or other, similar arrangement in respect of
such Person's creditors generally or any substantial portion of its creditors;
undertaken under any Law.
INTEREST PERIOD shall mean either a Committed Loan Interest
Period or a Bid Loan Interest Period.
INTEREST RATE OPTION shall mean any Revolving Credit Euro-Rate
Option, Bid Loan Euro-Rate Option, Bid Loan Fixed Rate Option or Revolving
Credit Base Rate Option.
INTERIM STATEMENTS shall have the meaning assigned to that
term in Section 5.1.7(i).
INTERNAL REVENUE CODE shall mean the Internal Revenue Code of
1986, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
ISSUING BANK shall mean, with respect to a Letter of Credit,
including any replacements therefor or extensions thereof, the Revolving Credit
Bank which is the issuer thereof.
INVESTMENTS shall mean collectively all of the following with
respect to any person: (i) investments or contributions by any of the Loan
Paries or their Subsidiaries directly or indirectly in or to the capital of or
other payments to (except in connection with transactions for the sale of goods
or services for fair value in the ordinary course of business) such person, (ii)
loans by any of the Loan Parties or their Subsidiaries to such person, (iii)
guaranties by any Loan Party or any Subsidiary of any Loan Party directly or
indirectly of the obligations of such person, or (iv) other obligations,
contingent or otherwise, of any Loan Party or any Subsidiary of any Loan Party
to or for the benefit of such person. If the nature of an
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Investment is tangible property then the amount of such Investment shall be
determined by valuing such property at fair value in accordance with the past
practice of the Loan Parties and such fair values shall be satisfactory to the
Administrative Agent, in its sole discretion.
LABOR CONTRACTS shall mean all employment agreements,
employment contracts, collective bargaining agreements and other agreements
among any Loan Party or Subsidiary of a Loan Party and its employees.
LAW shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order,
injunction, writ, decree or award of any Official Body.
LETTER OF CREDIT shall have the meaning assigned to that term
in Section 2.10.1.
LETTER OF CREDIT BORROWING shall mean an extension of credit
resulting from a drawing under any Letter of Credit which shall not have been
reimbursed on the date when made and shall not have been converted into a
Revolving Credit Loan under Section 2.10.3.2.
LETTER OF CREDIT FEE shall have the meaning assigned to that
term in Section 2.10.2.
LETTERS OF CREDIT OUTSTANDING shall mean at any time the sum
of (i) the aggregate undrawn face amount of outstanding Letters of Credit and
(ii) the aggregate amount of all unpaid and outstanding Reimbursement
Obligations.
LEVERAGE RATIO shall mean the ratio of Consolidated Debt (as
the numerator) to Consolidated Capitalization (as the denominator), expressed as
a percentage.
LIEN shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, whether voluntarily or involuntarily given, including any
conditional sale or title retention arrangement, and any assignment, deposit
arrangement or lease intended as, or having the effect of, security and any
filed financing statement or other notice of any of the foregoing (whether or
not a lien or other encumbrance is created or exists at the time of the filing).
LLC INTERESTS shall have the meaning given to such term in
Section 5.1.2.
LOAN DOCUMENTS shall mean this Agreement, the Administrative
Agent's Letter, the Guaranty Agreement, and any other instruments, certificates
or documents delivered or contemplated to be delivered hereunder or thereunder
or in connection herewith or therewith, as the same may be supplemented or
amended from time to time in accordance herewith or therewith, and LOAN DOCUMENT
shall mean any of the Loan Documents.
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LOAN PARTIES shall mean the Borrower and the Guarantors.
LOAN REQUEST shall mean either a Bid Loan Request or a
Committed Loan Request.
LOANS shall mean collectively and LOAN shall mean separately
all Revolving Credit Loans, Swing Loans and Bid Loans or any Revolving Credit
Loan, Swing Loan or Bid Loan.
MATERIAL ADVERSE CHANGE shall mean any set of circumstances or
events which (a) has or could reasonably be expected to have any material
adverse effect whatsoever upon the validity or enforceability of this Agreement
or any other Loan Document, (b) is or could reasonably be expected to be
materially adverse to the business, financial condition or results of operations
of the Loan Parties taken as a whole, (c) impairs materially or could reasonably
be expected to impair materially the ability of the Loan Parties taken as a
whole to duly and punctually pay or perform its Indebtedness, or (d) impairs
materially or could reasonably be expected to impair materially the ability of
any Agent or any of the Banks, to the extent permitted, to enforce their legal
remedies pursuant to this Agreement or any other Loan Document.
MERGER shall mean the merger of Ashland Coal, Inc., a Delaware
corporation, with and into AMC Merger Corporation, a Delaware corporation and a
wholly-owned Subsidiary of the Borrower, with Ashland Coal, Inc. as the
surviving entity of such transaction, all in accordance with the Merger
Agreement and the other Merger Documents.
MERGER AGREEMENT shall mean that certain Agreement and Plan of
Merger, dated as of April 4, 1997, by and among Ashland Coal, Inc., Arch Mineral
Corporation and AMC Merger Corporation.
MERGER DOCUMENTS shall mean the Merger Agreement and all other
agreements, consents, articles of merger, resolutions, approvals, licenses,
assignments, certificates, deeds, assumption agreements, instruments,
registrations or filings with the SEC and other documents in connection with or
relating to the Merger, as the same may hereafter be amended from time to time.
MONTH, with respect to an Interest Period under the Euro-Rate
Option, shall mean the interval between the days in consecutive calendar months
numerically corresponding to the first day of such Interest Period. If any
Euro-Rate Interest Period begins on a day of a calendar month for which there is
no numerically corresponding day in the month in which such Interest Period is
to end, the final month of such Interest Period shall be deemed to end on the
last Business Day of such final month.
MOODY'S shall mean Moody's Investors Service, Inc. and its
successors.
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MORGAN shall mean Morgan Guaranty Trust Company of New York,
its successors and assigns.
MULTIEMPLOYER PLAN shall mean any employee benefit plan which
is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and
to which the Borrower or any member of the ERISA Group is then making or
accruing an obligation to make contributions or, within the preceding five Plan
years, has made or had an obligation to make such contributions.
MULTIPLE EMPLOYER PLAN shall mean a Plan which has two or more
contributing sponsors (including the Borrower or any member of the ERISA Group)
at least two of whom are not under common control, as such a plan is described
in Sections 4063 and 4064 of ERISA.
NOTES shall mean the Revolving Credit Notes, Swing Loan Notes
and Bid Notes, if any.
NOTICES shall have the meaning assigned to that term in
Section 10.6.
OBLIGATION shall mean any obligation or liability of any of
the Loan Parties to any Agent or any of the Banks, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due, under or in connection with this Agreement,
any Notes, the Letters of Credit, the Administrative Agent's Letter or any other
Loan Document.
OFFERED AMOUNT shall have the meaning assigned to such term in
Section 2.9.2.
OFFICIAL BODY shall mean any national, federal, state, local
or other government or political subdivision or any agency, authority, bureau,
central bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
PARTICIPATION ADVANCE shall mean, with respect to any Bank,
such Bank's payment in respect of its participation in a Letter of Credit
Borrowing according to its Ratable Share pursuant to Section 2.10.4.
PARTNERSHIP INTERESTS shall have the meaning given to such
term in Section 5.1.2.
PBGC shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any successor.
PERMITTED ACQUISITIONS shall have the meaning assigned to such
term in Section 7.2.3.
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PERMITTED LIENS shall mean:
(i) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business and which are not yet due and
payable;
(ii) Pledges or deposits made in the ordinary course of
business to secure payment of reclamation liabilities, worker's compensation, or
to participate in any fund in connection with worker's compensation,
unemployment insurance, old-age pensions or other social security programs;
(iii) Liens of mechanics, materialmen, warehousemen,
carriers, or other like Liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable and Liens of landlords
securing obligations to pay lease payments that are not yet due and payable or
in default;
(iv) Good-faith pledges or deposits made in the ordinary
course of business to secure performance of bids, tenders, contracts (other than
for the repayment of borrowed money) or leases, not in excess of the aggregate
amount due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the ordinary course of
business (it being understood that any appeal or similar bond (other than such a
bond required pursuant to applicable Law to secure in the ordinary course
payment of worker's compensation or reclamation liabilities) in an amount
exceeding $50,000,000 shall not be in the ordinary course of business);
(v) Encumbrances consisting of zoning restrictions,
easements or other restrictions on the use of real property, none of which
materially impairs the use of such property or the value thereof, and none of
which is violated in any material respect by existing or proposed structures or
land use;
(vi) Liens on property leased by any Loan Party or
Subsidiary of a Loan Party under capital or operating leases (in either case, as
the nature of such lease is determined in accordance with GAAP) securing
obligations of such Loan Party or Subsidiary to the lessor under such leases;
(vii) Purchase Money Security Interests; and
(viii) The following, (A) if the validity or amount thereof
is being contested in good faith by appropriate and lawful proceedings
diligently conducted so long as levy and execution thereon have been stayed and
continue to be stayed or (B) if a final judgment is entered and such judgment is
discharged within thirty (30) days of entry, and they do not in the aggregate
materially impair the ability of any Loan Party to perform its Obligations
hereunder or under the other Loan Documents:
(1) Claims or Liens for taxes, assessments or charges
due and payable and subject to interest or penalty, PROVIDED that
the applicable Loan Party
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maintains such reserves or other appropriate provisions as shall be
required by GAAP and pays all such taxes, assessments or charges
forthwith upon the commencement of proceedings to foreclose any such
Lien;
(2) Claims, Liens or encumbrances upon, and defects of
title to, real or personal property, including any attachment of
personal or real property or other legal process prior to
adjudication of a dispute on the merits;
(3) Claims or Liens of mechanics, materialmen,
warehousemen, carriers, or other statutory nonconsensual Liens; or
(4) Liens resulting from judgments or orders described
in Section 8.1.6.
PERSON shall mean any individual, corporation, partnership,
limited liability company, association, joint-stock company, trust,
unincorporated organization, joint venture, government or political subdivision
or agency thereof, or any other entity.
PLAN shall mean at any time an employee pension benefit plan
(including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and either (i) is maintained by
any member of the ERISA Group for employees of any member of the ERISA Group or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the ERISA Group for employees of any
entity which was at such time a member of the ERISA Group.
PNC BANK shall mean PNC Bank, National Association, its
successors and assigns.
PORT BOND shall mean collectively, those certain Coal Terminal
Revenue Refunding Bonds (Dominion Terminal Associates Project), Series 1987-A,
B, C and D Bonds issued by Peninsula Ports Authority of Virginia, a political
subdivision of the Commonwealth of Virginia, in the face amount of $89,600,000,
together with any renewals thereof or replacements therefor so long as the face
amount thereof is not in excess of $89,600,000.
POTENTIAL DEFAULT shall mean any event or condition which with
notice, passage of time or a determination by the Administrative Agent or the
Required Banks, or any combination of the foregoing, would constitute an Event
of Default.
PRINCIPAL OFFICE shall mean the main banking office of the
Administrative Agent in Pittsburgh, Pennsylvania.
PRIVATE PLACEMENT AGREEMENTS shall mean collectively, (a) that
certain Note Agreement for $50,000,000 of 7.79% Senior Notes of Arch Mineral
Corporation, due January 31, 2003, as amended, (b) that certain Note Agreement
for $52,900,000 of 9.66% Senior
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Notes of Ashland Coal, Inc., due May 15, 2006, as amended, and (c) that certain
Note Agreement for $100,000,000 of 9.78% Senior Notes of Ashland Coal, Inc., due
September 15, 2000, as amended.
PROHIBITED TRANSACTION shall mean any prohibited transaction
as defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA
for which neither an individual nor a class exemption has been issued by the
United States Department of Labor.
PROPERTY shall mean all real property, both owned and leased,
of any Loan Party or Subsidiary of a Loan Party.
PURCHASE MONEY SECURITY INTEREST shall mean Liens upon
tangible personal property securing loans to any Loan Party or Subsidiary of a
Loan Party or deferred payments by such Loan Party or Subsidiary for the
purchase of such tangible personal property.
PURCHASING BANK shall mean a Revolving Credit Bank which
becomes a party to this Agreement by executing an Assignment and Assumption
Agreement.
RATABLE SHARE shall mean the proportion that a Revolving
Credit Bank's Commitment (excluding the Swing Loan Commitment) bears to the
Commitments (excluding the Swing Loan Commitments) of all of the Revolving
Credit Banks.
REGULATED SUBSTANCES shall mean any substance, the generation,
manufacture, extraction, processing, distribution, treatment, storage, disposal,
transport, recycling, reclamation, use, reuse, spilling, leaking, dumping,
injection, pumping, leaching, emptying, discharge, escape, release or other
management or mismanagement of which is regulated by the Environmental Laws.
REGULATION U shall mean Regulation U, T, G or X as promulgated
by the Board of Governors of the Federal Reserve System, as amended from time to
time.
REIMBURSEMENT OBLIGATION shall have the meaning assigned to
such term in Section 2.10.3.2.
REPORTABLE EVENT shall mean a reportable event described in
Section 4043 of ERISA and regulations thereunder with respect to a Plan or
Multiemployer Plan.
REQUESTED AMOUNT shall have the meaning assigned to such term
in Section 2.9.1.
REQUIRED BANKS shall mean
(A) if there are no Revolving Credit Loans, Reimbursement
Obligations or Letter of Credit Borrowings outstanding, Required Banks shall
mean Revolving Credit Banks whose Commitments (excluding the Swing Loan
Commitments) aggregate at least 51% of the Commitments (excluding the Swing Loan
Commitments) of all of the Banks, or
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(B) if there are Revolving Credit Loans, Reimbursement
Obligations, or Letter of Credit Borrowings outstanding, Required Banks shall
mean:
(i) prior to a termination of the Commitments
hereunder pursuant to Section 8.2.1 or 8.2.2, any Revolving Credit Bank or group
of Revolving Credit Banks if the sum of the Committed Loans (excluding the Swing
Loans), Reimbursement Obligations and Letter of Credit Borrowings of such
Revolving Credit Banks then outstanding aggregates at least 51% of the total
principal amount of all of the Committed Loans (excluding the Swing Loans),
Reimbursement Obligations and Letter of Credit Borrowings then outstanding; and
(ii) after the earlier of the date on which the
Commitments are terminated hereunder pursuant to Section 8.2.1 or 8.2.2 or the
date on which Revolving Credit Loans or any other Indebtedness of the Borrower
to the Revolving Credit Banks shall have become due and payable pursuant to such
Sections, "Required Banks" shall mean Banks whose outstanding Revolving Credit
Loans and Ratable Share in the face amount of outstanding Letters of Credit and
Reimbursement Obligations aggregate at least 51% of the total principal amount
of all of the Revolving Credit Loans, Reimbursement Obligations and Letter of
Credit Borrowings then outstanding.
Reimbursement Obligations and Letter of Credit Borrowings shall be deemed, for
purposes of this definition, to be in favor of the Issuing Bank and not a
participating Revolving Credit Bank if such Revolving Credit Bank has not made
its Participation Advance in respect thereof and shall be deemed to be in favor
of such Revolving Credit Bank to the extent of its Participation Advance if it
has made its Participation Advance in respect thereof.
REQUIRED SHARE shall have the meaning assigned to such term in
Section 4.7.
REVOLVING CREDIT BANKS shall mean the financial institutions
named on SCHEDULE 1.1(B) and their respective successors and assigns as
permitted hereunder, each of which is referred to herein as a "Revolving Credit
Bank."
REVOLVING CREDIT BASE RATE OPTION shall mean the option of the
Borrower to have Revolving Credit Loans bear interest at the rate and under the
terms and conditions set forth in Section 3.1.1(i).
REVOLVING CREDIT COMMITMENT shall mean, as to any Revolving
Credit Bank at any time, the amount initially set forth opposite its name on
SCHEDULE 1.1(B) in the column labeled "Amount of Commitment for Revolving Credit
Loans," and thereafter on Schedule I to the most recent Assignment and
Assumption Agreement, and REVOLVING CREDIT COMMITMENTS shall mean the aggregate
Revolving Credit Commitments of all of the Revolving Credit Banks.
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REVOLVING CREDIT EURO-RATE OPTION shall mean the option of the
Borrower to have Revolving Credit Loans bear interest at the rate and under the
terms and conditions set forth in Section 3.1.1(ii).
REVOLVING CREDIT LOANS shall mean collectively and REVOLVING
CREDIT LOAN shall mean separately all Revolving Credit Loans or any Revolving
Credit Loan made by the Revolving Credit Banks or one of the Revolving Credit
Banks to the Borrower pursuant to Section 2.1 or 2.10.3. A Bid Loan is not a
Revolving Credit Loan, except that it will be treated as a Revolving Credit Loan
following a termination of the Commitments hereunder pursuant to Section 8.2.1
or 8.2.2 as provided in Section 8.3.
REVOLVING CREDIT NOTE shall mean any Revolving Credit Note of
the Borrower in the form of EXHIBIT 1.1(R) issued by the Borrower at the request
of a Bank pursuant to Section 4.6 evidencing the Revolving Credit Loans to such
Bank, together with all amendments, extensions, renewals, replacements,
refinancings or refundings thereof in whole or in part.
REVOLVING FACILITY USAGE shall mean at any time the sum of the
Revolving Credit Loans outstanding, the Bid Loans outstanding, the Swing Loans
outstanding and the Letters of Credit Outstanding.
SEC shall mean the Securities and Exchange Commission or any
governmental agencies substituted therefor.
SECTION 20 SUBSIDIARY shall mean the Subsidiary of the bank
holding company controlling any Bank, which Subsidiary has been granted
authority by the Federal Reserve Board to underwrite and deal in certain
Ineligible Securities.
SETTLEMENT DATE shall mean each Business Day on which the
Administrative Agent effects settlement pursuant to Section 4.7.
SIGNIFICANT SUBSIDIARY shall mean any Subsidiary of Borrower
which at any time (i) has gross revenues equal to or in excess of five percent
(5%) of the gross revenues of the Borrower and its Subsidiaries on a
consolidated basis, or (ii) has total assets equal to or in excess of five
percent (5%) of the total assets of the Borrower and its Subsidiaries, in either
case, as determined and consolidated in accordance with GAAP.
STANDARD & POOR'S shall mean Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc., and its successors.
STANDBY LETTER OF CREDIT shall mean a Letter of Credit issued
to support obligations of one or more of the Loan Parties, contingent or
otherwise, which finance the working capital and business needs of the Loan
Parties incurred in the ordinary course of business.
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SUBSIDIARY of any Person at any time shall mean (i) any
corporation or trust of which 50% or more (by number of shares or number of
votes) of the outstanding capital stock or shares of beneficial interest
normally entitled to vote for the election of one or more directors or trustees
(regardless of any contingency which does or may suspend or dilute the voting
rights) is at such time owned directly or indirectly by such Person or one or
more of such Person's Subsidiaries, (ii) any partnership of which such Person is
a general partner or of which 50% or more of the partnership interests is at the
time directly or indirectly owned by such Person or one or more of such Person's
Subsidiaries, (iii) any limited liability company of which such Person is a
member or of which 50% or more of the limited liability company interests is at
the time directly or indirectly owned by such Person or one or more of such
Person's Subsidiaries or (iv) any corporation, trust, partnership, limited
liability company or other entity which is controlled or capable of being
controlled by such Person or one or more of such Person's Subsidiaries.
SUBSIDIARY SHARES shall have the meaning assigned to that term
in Section 5.1.2.
SUPERMAJORITY REQUIRED BANKS shall mean:
(A) if there are no Revolving Credit Loans, Reimbursement
Obligations or Letter of Credit Borrowings outstanding, Supermajority Required
Banks shall mean Revolving Credit Banks whose Commitments (excluding the Swing
Loan Commitments) aggregate at least 80% of the Commitments (excluding the Swing
Loan Commitments) of all of the Banks, or
(B) if there are Revolving Credit Loans, Reimbursement
Obligations, or Letter of Credit Borrowings outstanding, Supermajority Required
Banks shall mean:
(i) prior to a termination of the Commitments
hereunder pursuant to Section 8.2.1 or 8.2.2, any Revolving Credit Bank or group
of Revolving Credit Banks if the sum of the Committed Loans (excluding the Swing
Loans), Reimbursement Obligations and Letter of Credit Borrowings of such
Revolving Credit Banks then outstanding aggregates at least 80 % of the total
principal amount of all of the Committed Loans (excluding the Swing Loans),
Reimbursement Obligations and Letter of Credit Borrowings then outstanding; and
(ii) after the earlier of the date on which the
Commitments are terminated hereunder pursuant to Section 8.2.1 or 8.2.2 or the
date on which Revolving Credit Loans or any other Indebtedness of the Borrower
to the Revolving Credit Banks shall have become due and payable pursuant to such
Sections, "Supermajority Required Banks" shall mean Banks whose outstanding
Revolving Credit Loans and Ratable Share in the face amount of outstanding
Letters of Credit and Reimbursement Obligations aggregate at least 80% of the
total principal amount of all of the Revolving Credit Loans, Reimbursement
Obligations and Letter of Credit Borrowings then outstanding.
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Reimbursement Obligations and Letter of Credit Borrowings shall be deemed, for
purposes of this definition, to be in favor of the Issuing Bank and not a
participating Revolving Credit Bank if such Revolving Credit Bank has not made
its Participation Advance in respect thereof and shall be deemed to be in favor
of such Revolving Credit Bank to the extent of its Participation Advance if it
has made its Participation Advance in respect thereof.
SWING LOAN COMMITMENT shall mean PNC Bank's commitment to make
Swing Loans to the Borrower pursuant to Section 2.4 hereof, in an aggregate
principal amount up to $ 25,000,000.
SWING LOAN NOTE shall mean the Swing Loan Note of the Borrower
in the form of EXHIBIT 1.1(S) evidencing the Swing Loans, together with all
amendments, extensions, renewals, replacements, refinancings or refundings
thereof in whole or in part.
SWING LOAN REQUEST shall mean a request for Swing Loans made
in accordance with Section 2.4.2 hereof.
SWING LOANS shall mean collectively and SWING LOAN shall mean
separately all Swing Loans or any Swing Loan made by PNC Bank to the Borrower
pursuant to Section 2.5.
SYNDICATION DATE shall mean a date after the Closing Date
which is selected by the Administrative Agent and notice of which is given by
the Administrative Agent to the Borrower at least five (5) Business Days prior
thereto.
TRANSFEROR BANK shall mean the selling Revolving Credit Bank
pursuant to an Assignment and Assumption Agreement.
1.2. CONSTRUCTION.
Unless the context of this Agreement otherwise clearly requires, the
following rules of construction shall apply to this Agreement and each of the
other Loan Documents:
1.2.1 NUMBER; INCLUSION.
references to the plural include the singular, the
plural, the part and the whole; "or" has the inclusive meaning represented by
the phrase "and/or," and "including" has the meaning represented by the phrase
"including without limitation";
1.2.2 DETERMINATION.
references to "determination" of or by the
Administrative Agent or the Banks shall be deemed to include good-faith
estimates by the Administrative Agent or the Banks (in the case of quantitative
determinations) and good-faith beliefs by the Administrative Agent or the Banks
(in the case of qualitative determinations) and such determination shall be
conclusive absent manifest error;
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1.2.3 ADMINISTRATIVE AGENT'S DISCRETION AND CONSENT.
whenever the Administrative Agent or the Banks are
granted the right herein to act in its or their sole discretion or to grant or
withhold consent such right shall be exercised in good faith;
1.2.4 DOCUMENTS TAKEN AS A WHOLE.
the words "hereof," "herein," "hereunder," "hereto" and
similar terms in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document as a whole and not to any particular
provision of this Agreement or such other Loan Document;
1.2.5 HEADINGS.
the section and other headings contained in this
Agreement or such other Loan Document and the Table of Contents (if any),
preceding this Agreement or such other Loan Document are for reference purposes
only and shall not control or affect the construction of this Agreement or such
other Loan Document or the interpretation thereof in any respect;
1.2.6 IMPLIED REFERENCES TO THIS AGREEMENT.
article, section, subsection, clause, schedule and
exhibit references are to this Agreement or other Loan Document, as the case may
be, unless otherwise specified;
1.2.7 PERSONS.
reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and assigns
are permitted by this Agreement or such other Loan Document, as the case may be,
and reference to a Person in a particular capacity excludes such Person in any
other capacity;
1.2.8 MODIFICATIONS TO DOCUMENTS.
reference to any agreement (including this Agreement and
any other Loan Document together with the schedules and exhibits hereto or
thereto), document or instrument means such agreement, document or instrument as
amended, modified, replaced, substituted for, superseded or restated;
1.2.9 FROM, TO AND THROUGH.
relative to the determination of any period of time,
"from" means "from and including," "to" means "to but excluding," and "through"
means "through and including"; and
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1.2.10 SHALL; WILL.
references to "shall" and "will" are intended to have
the same meaning.
1.3. ACCOUNTING PRINCIPLES.
Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP; PROVIDED, HOWEVER, that all accounting terms
used in Section 7.2 [Negative Covenants] (and all defined terms used in the
definition of any accounting term used in Section 7.2 shall have the meaning
given to such terms (and defined terms) under GAAP as in effect on the date
hereof applied on a basis consistent with those used in preparing the Annual
Statements referred to in Section 5.1.7(i) [Historical Statements]. In the event
of any change after the date hereof in GAAP, and if such change would result in
the inability to determine compliance with the financial covenants set forth in
Section 7.2 based upon the Borrower's regularly prepared financial statements by
reason of the preceding sentence, then the parties hereto agree to endeavor, in
good faith, to agree upon an amendment to this Agreement that would adjust such
financial covenants in a manner that would not affect the substance thereof, but
would allow compliance therewith to be determined in accordance with the
Borrower's financial statements at that time.
2. REVOLVING CREDIT AND SWING LOAN FACILITIES
2.1. REVOLVING CREDIT COMMITMENTS.
2.1.1 REVOLVING CREDIT LOANS.
Subject to the terms and conditions hereof and relying
upon the representations and warranties herein set forth, each Revolving Credit
Bank severally agrees to make Revolving Credit Loans to the Borrower at any time
or from time to time on or after the date hereof to the Expiration Date provided
that (subject to Section 2.9.1 with respect to taking into account outstanding
Bid Loans) after giving effect to such Revolving Credit Loan the aggregate
amount of Revolving Credit Loans from such Revolving Credit Bank shall not
exceed such Revolving Credit Bank's Revolving Credit Commitment minus such
Revolving Credit Bank's Ratable Share of the Letters of Credit Outstanding.
Within such limits of time and amount and subject to the other provisions of
this Agreement, the Borrower may borrow, repay and reborrow pursuant to this
Section 2.1.
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2.1.2 SWING LOAN COMMITMENT.
Subject to the terms and conditions hereof and relying
upon the representations and warranties herein set forth, PNC Bank agrees to
make Swing Loans (the "Swing Loans") to the Borrower at any time or from time to
time after the date hereof to, but not including, the Expiration Date, in an
aggregate principal amount of up to but not in excess of $25,000,000 (the "Swing
Loan Commitment"), provided that the Revolving Facility Usage, at any time,
shall not exceed the Revolving Credit Commitments of all the Revolving Credit
Banks. Within such limits of time and amount and subject to the other provisions
of this Agreement, the Borrower may borrow, repay and reborrow pursuant to this
Section 2.1.2.
2.2. NATURE OF BANKS' OBLIGATIONS WITH RESPECT TO REVOLVING
CREDIT LOANS.
Each Revolving Credit Bank shall be obligated to participate in each
request for Revolving Credit Loans pursuant to Section 2.4 [Revolving Credit
Loan Requests, Etc.] in accordance with its Ratable Share. The aggregate of each
Revolving Credit Bank's Revolving Credit Loans outstanding hereunder to the
Borrower at any time shall never exceed its Revolving Credit Commitment minus
its Ratable Share of the Letters of Credit Outstanding. The obligations of each
Revolving Credit Bank hereunder are several. The failure of any Revolving Credit
Bank to perform its obligations hereunder shall not affect the Obligations of
the Borrower to any other party nor shall any other party be liable for the
failure of such Revolving Credit Bank to perform its obligations hereunder. The
Revolving Credit Banks shall have no obligation to make Revolving Credit Loans
hereunder on or after the Expiration Date.
2.3. REVOLVING CREDIT FACILITY FEE.
Accruing from the date hereof until the Expiration Date, the
Borrower agrees to pay to the Administrative Agent for the account of each
Revolving Credit Bank, as consideration for such Bank's Revolving Credit
Commitment hereunder, a nonrefundable facility fee (the "Facility Fee") equal to
the Applicable Facility Fee Rate computed (on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed) on the amount of such
Revolving Credit Bank's Revolving Credit Commitment as the same may be
constituted from time to time. All Facility Fees shall be payable in arrears on
the first Business Day of each July, October, January and April after the date
hereof and on the Expiration Date or upon acceleration of the Loans.
2.4. REVOLVING CREDIT LOAN REQUESTS; SWING LOAN REQUESTS.
2.4.1 REVOLVING CREDIT LOAN REQUESTS.
Except as otherwise provided herein, the Borrower may
from time to time prior to the Expiration Date request the Revolving Credit
Banks to make Revolving Credit Loans, or renew or convert the Interest Rate
Option applicable to existing Revolving Credit Loans pursuant to Section 3.2
[Interest Periods], by delivering to the Administrative Agent, not later than
10:00 a.m., Pittsburgh time, (i) three (3) Business Days prior to the
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proposed Borrowing Date with respect to the making of Revolving Credit Loans to
which the Euro-Rate Option applies or the conversion to or the renewal of the
Euro-Rate Option for any Revolving Credit Loans; and (ii) one (1) Business Day
prior to either the proposed Borrowing Date with respect to the making of a
Revolving Credit Loan to which the Revolving Credit Base Rate Option applies or
the last day of the preceding Committed Loan Interest Period with respect to the
conversion to the Revolving Credit Base Rate Option for any Revolving Credit
Loan, of a duly completed Committed Loan Request therefor substantially in the
form of EXHIBIT 2.4.1 or a Committed Loan Request by telephone immediately
confirmed in writing by letter, facsimile or telex in the form of such Exhibit,
it being understood that the Administrative Agent may rely on the authority of
any individual making such a telephonic request without the necessity of receipt
of such written confirmation. Each Committed Loan Request shall be irrevocable
and shall specify (i) the proposed Borrowing Date; (ii) the aggregate amount of
the proposed Revolving Credit Loans comprising each Borrowing Tranche, which
shall be in integral multiples of $1,000,000 and not less than $5,000,000 for
each Borrowing Tranche to which the Euro-Rate Option applies and in integral
multiples of $500,000 and not less than the lesser of $5,000,000 or the maximum
amount available for Borrowing Tranches to which the Revolving Credit Base Rate
Option applies; (iii) whether Revolving Credit Euro-Rate Option or Revolving
Credit Base Rate Option shall apply to the proposed Revolving Credit Loans
comprising the applicable Borrowing Tranche; and (iv) in the case of a Borrowing
Tranche to which the Revolving Credit Euro-Rate Option applies, an appropriate
Committed Loan Interest Period for the Loans comprising such Borrowing Tranche.
2.4.2 SWING LOAN REQUESTS.
Except as otherwise provided herein, the Borrower may
from time to time prior to the Expiration Date request PNC Bank, to make a Swing
Loan by delivery to PNC Bank, not later than 2:00 p.m. Pittsburgh time, on the
proposed Borrowing Date of a duly completed request therefor substantially in
the form of EXHIBIT 2.4.2 hereto or a request by telephone immediately confirmed
in writing by letter, facsimile or telex (each, a "Swing Loan Request"), it
being understood that PNC Bank may rely on the authority of any individual
making such a telephonic request without the necessity of receipt of such
written confirmation. Each Swing Loan Request shall be irrevocable and shall
specify (i) the proposed Borrowing Date, (ii) the term of the proposed Swing
Loan, which shall be no less than one day and no longer than three days, and
(iii) the principal amount of such Swing Loan, which shall be not less than
$1,000,000 and shall be an integral multiple of $100,000.
2.5. MAKING REVOLVING CREDIT LOANS AND SWING LOANS AND SWING
NOTES.
The Administrative Agent shall, promptly after receipt by it of a
Loan Request pursuant to Section 2.4 [Revolving Credit Loan Requests, Etc.],
notify the Revolving Credit Banks of its receipt of such Loan Request
specifying: (i) the proposed Borrowing Date and the time and method of
disbursement of the Revolving Credit Loans requested thereby; (ii) the amount
and type of each such Revolving Credit Loan and the applicable Interest Period
(if any); and (iii) the apportionment among the Revolving Credit Banks of such
Revolving Credit Loans
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as determined by the Administrative Agent in accordance with Section 2.2 [Nature
of Banks' Obligations, Etc.]. Each Revolving Credit Bank shall remit the
principal amount of each Revolving Credit Loan to the Administrative Agent such
that the Administrative Agent is able to, and the Administrative Agent shall, to
the extent the Revolving Credit Banks have made funds available to it for such
purpose and subject to Section 6.2 [Each Additional Loan or Letter of Credit],
fund such Revolving Credit Loans to the Borrower in U.S. Dollars and immediately
available funds at the Principal Office prior to 2:00 p.m., Pittsburgh time, on
the applicable Borrowing Date, PROVIDED that if any Revolving Credit Bank fails
to remit such funds to the Administrative Agent in a timely manner, the
Administrative Agent may elect in its sole discretion to fund with its own funds
the Revolving Credit Loans of such Revolving Credit Bank on such Borrowing Date,
and such Revolving Credit Bank shall be subject to the repayment obligation in
Section 9.16 [Availability of Funds].
2.5.1 MAKING SWING LOANS.
PNC Bank shall, after receipt by it of a Swing Loan
Request pursuant to Section 2.4.2, fund such Swing Loan to the Borrower in U.S.
Dollars and immediately available funds at the Principal Office prior to 3:00
p.m., Pittsburgh time, on the Borrowing Date.
2.6. SWING LOAN NOTE.
The obligation of the Borrower to repay the unpaid principal amount
of the Swing Loans made to it by PNC Bank together with interest thereon shall
be evidenced by a demand promissory note of the Borrower dated the Closing Date
in substantially the form attached hereto as EXHIBIT 1.1(S) payable to the order
of PNC Bank in a face amount equal to the Swing Loan Commitment of PNC Bank.
2.7. USE OF PROCEEDS.
The proceeds of the Loans shall be used to refinance all principal,
interest, fees, obligations and other amounts outstanding under the Existing
Credit Facilities, for general corporate purposes and in accordance with Section
7.1.9 [Use of Proceeds]. Notwithstanding any provision of this Agreement to the
contrary, no proceeds of any Loan shall be used by nor shall any Letter of
Credit be issued for the benefit or the use of, directly or indirectly, any
Significant Subsidiary or any Subsidiary of any Significant Subsidiary which
Significant Subsidiary is not a party to the Guaranty Agreement until such time
as such Significant Subsidiary has joined the Guaranty Agreement in accordance
with Section 10.18 [Joinder of Guarantors].
2.8. BORROWINGS TO REPAY SWING LOANS.
PNC Bank may, at its option, exercisable at any time for any reason
whatsoever, demand repayment of the Swing Loans, and each Revolving Credit Bank
shall make available to the Administrative Agent, on behalf of PNC Bank, an
amount equal to such Bank's Ratable Share
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of the aggregate principal amount of the outstanding Swing Loans, plus, if PNC
Bank so requests, accrued interest thereon, PROVIDED that no Revolving Credit
Bank shall be obligated in any event to make Revolving Credit Loans in excess of
its Revolving Credit Commitment. Revolving Credit Loans made pursuant to the
preceding sentence shall bear interest at the Base Rate and shall be deemed to
have been properly requested in accordance with Section 2.4.1 without regard to
any of the requirements of that provision. PNC Bank shall provide notice to all
of the Revolving Credit Banks (which may be telephonic or written notice by
letter, facsimile or telex) of the amount of such Bank's Ratable Share of the
aggregate principal amount of the outstanding Swing Loans, plus accrued interest
thereon, to be made available to the Administrative Agent on behalf of PNC Bank
under this Section 2.8. The Administrative Agent shall promptly provide to each
Revolving Credit Bank notice of the apportionment thereof among the Revolving
Credit Banks, and the Revolving Credit Banks shall be unconditionally obligated
to fund such amount (whether or not the conditions specified in Section 2.4.1
are then satisfied) by the time PNC Bank so requests, which shall not be earlier
than 3:00 p.m., Pittsburgh time, on the Business Day next after the date the
Revolving Credit Banks receive such notice of apportionment from the
Administrative Agent.
2.9. BID LOAN FACILITY.
2.9.1 BID LOAN REQUESTS.
Except as otherwise provided herein, the Borrower may
from time to time prior to the Expiration Date request that the Revolving Credit
Banks make Bid Loans by delivery to the Administrative Agent not later than
10:00 a.m., Pittsburgh time, of a duly completed request therefor substantially
in the form of EXHIBIT 2.9.1 hereto or a request by telephone immediately
confirmed in writing by letter, facsimile or telex (each, a "Bid Loan Request")
at least one (1) Business Days prior to the proposed Bid Loan Borrowing Date if
Borrower is requesting Fixed Rate Bid Loans and four (4) Business Days prior to
the proposed Bid Loan Borrowing Date if Borrower is requesting Euro-Rate Bid
Loans. The Administrative Agent may rely on the authority of any individual
making a telephonic request referred to in the preceding sentence without the
necessity of receipt of written confirmation. Each Bid Loan Request shall be
irrevocable and shall specify (i) the proposed Bid Loan Borrowing Date, (ii)
whether Borrower is electing the Bid Loan Fixed Rate Option or the Bid Loan
Euro-Rate Option, (iii) the term of the proposed Bid Loan (the "Bid Loan
Interest Period"), which may be no less than 7 day(s) and no longer than 270
days if Borrower is requesting a Fixed Rate Bid Loan and one, two, three or six
months (or nine months, if available) if Borrower is requesting a Euro-Rate Bid
Loan, and (iv) the maximum principal amount (the "Requested Amount") of such Bid
Loan, which shall be not less than $5,000,000 and shall be an integral multiple
of $1,000,000. After giving effect to such Bid Loan and any other Loan made on
or before the Bid Loan Borrowing Date, the aggregate amount of all Revolving
Credit Loans, Swing Loans and Bid Loans outstanding plus the Letter of Credit
Outstandings shall not exceed the aggregate amount of the Revolving Credit
Commitments of the Revolving Credit Banks. There shall be at least one Business
Day between each Bid Loan Borrowing Date. There shall be no requests for Bid
Loans nor any Bid Loans made until the Business Day following the Syndication
Date.
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2.9.2 BIDDING.
The Administrative Agent shall promptly after receipt
by it of a Bid Loan Request pursuant to Section 2.9.1 notify the Revolving
Credit Banks of its receipt of such Bid Loan Request specifying (i) the proposed
Bid Loan Borrowing Date, (ii) whether the proposed Bid Loan shall be a Fixed
Rate Bid Loan or a Euro-Rate Bid Loan, (iii) the Bid Loan Interest Period and
(iv) the principal amount of the proposed Bid Loan. Each Revolving Credit Bank
may submit a bid (a "Bid") to the Administrative Agent not later than 10:00
a.m., Pittsburgh time, on the proposed Bid Loan Borrowing Date if Borrower is
requesting a Fixed Rate Bid Loan or three (3) Business Days before the proposed
Bid Loan Borrowing Date if Borrower is requesting a Euro-Rate Bid Loan by
telephone (immediately confirmed in writing by letter, facsimile or telex). Each
Bid shall specify: (A) the principal amount of proposed Bid Loans offered by
such Revolving Credit Bank (the "Offered Amount") (such Bid Loans may be funded
by such Revolving Credit Bank's Designated Lender as provided in Section 2.9.4;
however, such Revolving Credit Bank shall not be required to specify in its Bid
whether such Bid Loans will be funded by such Designated Lender) which (i) may
be less than, but shall not exceed, the Requested Amount, (ii) shall be at least
$5,000,000 and shall be an integral multiple of $1,000,000 and (iii) may exceed
such Revolving Credit Bank's Revolving Credit Commitment, and (B) the Fixed Rate
which shall apply to such proposed Bid Loan if Borrower has requested a Fixed
Rate Bid Loan or the Euro-Rate Bid Loan Spread which shall apply to such
proposed Bid Loan if Borrower has requested a Euro-Rate Bid Loan. If any Bid
omits information required hereunder, the Administrative Agent may in its sole
discretion attempt to notify the Revolving Credit Bank submitting such Bid. If
the Administrative Agent so notifies a Revolving Credit Bank, such Revolving
Credit Bank may resubmit its Bid provided that it does so prior to time set
forth in this Section 2.9.2 above by which such Revolving Credit Bank is
required to submit its Bid to the Administrative Agent. The Administrative Agent
shall promptly notify the Borrower of the Bids which it timely received from the
Revolving Credit Banks. If the Administrative Agent in its capacity as a
Revolving Credit Bank shall, in its sole discretion, make a Bid, it shall notify
the Borrower of such Bid before 9:00 a.m., Pittsburgh time, on the proposed Bid
Loan Borrowing Date if Borrower is requesting a Fixed Rate Bid Loan on three (3)
Business Days before the proposed Borrowing Date if Borrower is requesting a
Euro-Rate Bid Loan.
2.9.3 ACCEPTING BIDS.
The Borrower shall irrevocably accept or reject Bids
by notifying the Administrative Agent of such acceptance or rejection by
telephone (immediately confirmed in writing by letter, facsimile or telex) not
later than 11:00 a.m., Pittsburgh time, on the proposed Bid Loan Borrowing Date
if Borrower is requesting a Fixed Rate Bid Loan and three (3) Business Days
before the proposed Borrowing Date if Borrower is requesting a Euro-Rate Bid
Loan. If the Borrower elects to accept any Bids, its acceptance must meet the
following conditions: (1) the total amount which Borrower accepts from all
Revolving Credit Banks must exceed $5,000,000 and be in integral multiples of
$1,000,000 and may not exceed the aggregate Requested Amount; (2) the Borrower
must accept Bids based solely on the amount of the Fixed
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Rates or Euro-Rate Bid Loan Spreads, as the case may be, which each of the
Revolving Credit Banks quoted in their Bids in ascending order of the amount of
Fixed Rates or Euro-Rate Bid Loan Spreads; (3) the Borrower may not borrow Bid
Loans from any Revolving Credit Bank (or such Revolving Credit Bank's Designated
Lender) on the Bid Loan Borrowing Date in an amount exceeding such Bank's
Offered Amount; (4) if two or more Banks make Bids at the same Fixed Rate (if
Borrower Requested a Fixed Rate Bid Loan) or Euro-Rate Bid Loan Spread (if
Borrower Requested a Euro-Rate Bid Loan) and the Borrower desires to accept a
portion but not all of the Bids at such Fixed Rate or Euro-Rate Bid Loan Spread,
as the case may be, the Borrower shall accept a portion of each Bid equal to the
product of the Offered Amount of such Bid times the fraction obtained by
dividing the total amount of Bids which Borrower is accepting at such Fixed Rate
or Euro-Rate Bid Loan Spread, as the case may be, by the sum of the Offered
Amounts of the Bids at such Fixed Rate or Euro-Rate Bid Loan Spread, PROVIDED
that the Borrower shall round the Bid Loans allocated to each such Bank upward
or downward as the Borrower may select to integral Multiples of $1,000,000. The
Administrative Agent shall (i) promptly notify a Revolving Credit Bank that has
made a Bid of the amount of its Bid that was accepted or rejected by the
Borrower and (ii) as promptly as practical notify all of the Revolving Credit
Banks which submitted Bids of all Bids submitted and those which have been
accepted.
2.9.4 FUNDING BID LOANS.
Each Revolving Credit Bank whose Bid or portion thereof
is accepted shall, or at its option shall cause its Designated Lender to, remit
the principal amount of its Bid Loan to the Administrative Agent by 12:00 noon,
Pittsburgh time, on the Borrowing Date. The Administrative Agent shall make such
funds available to the Borrower on or before 1:00 p.m., Pittsburgh time, on the
Borrowing Date provided that the conditions precedent to the making of such Bid
Loan set forth in Section 6.2 have been satisfied not later than 10:00 a.m.,
Pittsburgh time, on the proposed Borrowing Date. If such conditions precedent
have not been satisfied prior to such time, then (i) the Administrative Agent
shall not make such funds available to the Borrower, (ii) the Bid Loan Request
shall be deemed to be canceled and (iii) the Administrative Agent shall return
the amount previously funded to the Administrative Agent by each applicable Bank
no later than the next following Business Day. The Borrower shall immediately
notify the Administrative Agent of any failure to satisfy the conditions
precedent to the making of Bid Loans under Section 6.2. The Administrative Agent
may assume that Borrower has satisfied such conditions precedent if the Borrower
(i) has delivered to the Administrative Agent the documents required to be
delivered under Section 6.2, (ii) the Borrower has not notified the
Administrative Agent that the Loan Parties have not satisfied any other
conditions precedent, and (iii) the Administrative Agent has no actual notice of
such a failure. Any Designated Lender which funds a Bid Loan shall on and after
the time of such funding become the obligee under such Bid Loan and be entitled
to receive payment thereof when due. A Revolving Credit Bank shall be relieved
of its obligation to fund a Bid Loan upon the funding of such Bid Loan by its
Designated Lender and not prior to such time.
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2.9.5 SEVERAL OBLIGATIONS.
The obligations of the Revolving Credit Banks to make
Bid Loans after their Bids have been accepted are several. No Revolving Credit
Bank shall be responsible for the failure of any other Bank to make any Bid Loan
which another Revolving Credit Bank has agreed to make.
2.9.6 BID NOTES.
The obligation of the Borrower to repay the aggregate
unpaid principal amount of the Bid Loans made to it by each Revolving Credit
Bank or its Designated Lender, as the case may be, together with interest
thereon, shall be evidenced by a Bid Note dated as of the Closing Date payable
to the order of such Revolving Credit Bank and a Bid Note dated as of the date
of the applicable Designation Agreement in favor of the Designated Lender named
in such Designation Agreement in a face amount equal to the aggregate Revolving
Credit Commitments of all of the Banks.
2.9.7 PAYMENTS AND PREPAYMENTS.
The Borrower shall repay each Bid Loan on the last day
of the Interest Period with respect to such Bid Loan. The Borrower may not
prepay the Bid Loans.
2.10. LETTER OF CREDIT SUBFACILITY.
2.10.1 ISSUANCE OF LETTERS OF CREDIT.
Borrower may request the issuance of a letter of credit
(each a "Letter of Credit") on behalf of itself or another Loan Party by
delivering to the Issuing Bank selected by the Borrower (with a copy to the
Administrative Agent) a completed application and agreement for letters of
credit in such form as the Issuing Bank may specify from time to time by no
later than 10:00 a.m., Pittsburgh time, at least three (3) Business Days, or
such shorter period as may be agreed to by the Issuing Bank, in advance of the
proposed date of issuance. Each Letter of Credit shall be either a Standby
Letter of Credit or a Commercial Letter of Credit. Subject to the terms and
conditions hereof and in reliance on the agreements of the other Revolving
Credit Banks set forth in this Section 2.8, the Issuing Bank will issue a Letter
of Credit provided that each Letter of Credit shall (A) have a maximum maturity
of twelve (12) months from the date of issuance, and (B) in no event expire
later than ten (10) Business Days prior to the Expiration Date and provided that
in no event shall (i) the Letters of Credit Outstanding exceed, at any one time,
$500,000,000 or (ii) the Revolving Facility Usage exceed, at any one time, the
Revolving Credit Commitments.
2.10.2 LETTER OF CREDIT FEES.
Subject to the terms and conditions of this Agreement,
any Issuing Bank selected by the Borrower shall issue the requested Letter of
Credit, provided that the
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Borrower and such Issuing Bank agree in writing as to the letter of credit
fronting fee (the "Fronting Fee") to be paid by the Borrower to such Issuing
Bank with respect to each such Letter of Credit. The Borrower shall also pay to
the Issuing Bank for the Issuing Bank's sole account the Issuing Bank's
then-in-effect customary fees and administrative expenses payable with respect
to the Letters of Credit as the Issuing Bank may generally charge or incur from
time to time in connection with the issuance, maintenance, modification (if
any), assignment or transfer (if any), negotiation, and administration of
Letters of Credit. The Borrower shall pay to the Administrative Agent for the
ratable account of the Revolving Credit Banks a fee (the "Letter of Credit Fee")
equal to the Applicable Letter of Credit Fee Rate then in effect (computed on
the basis of a year of 360 days and actual days elapsed), which fee shall be
computed on the daily average Letters of Credit Outstanding and shall be payable
quarterly in arrears commencing with the first Business Day of each January,
April, July and October following issuance of each Letter of Credit and on the
Expiration Date.
2.10.3 DISBURSEMENTS, REIMBURSEMENT.
2.10.3.1 Immediately upon the Issuance of
each Letter of Credit, each Revolving Credit Bank shall be deemed to, and hereby
irrevocably and unconditionally agrees to, purchase from the Issuing Bank a
participation in such Letter of Credit and each drawing thereunder in an amount
equal to such Revolving Credit Bank's Ratable Share of the maximum amount
available to be drawn under such Letter of Credit and the amount of such
drawing, respectively.
2.10.3.2 In the event of any request for a
drawing under a Letter of Credit by the beneficiary or transferee thereof, the
Issuing Bank will promptly notify the Borrower and the Administrative Agent.
Provided that it shall have received such notice, the Borrower shall reimburse
(such obligation to reimburse the Issuing Bank shall sometimes be referred to as
a "Reimbursement Obligation") the Administrative Agent on behalf of the Issuing
Bank prior to 12:00 noon, Pittsburgh time, on each date that an amount is paid
by the Issuing Bank under any Letter of Credit (each such date, a "Drawing
Date") in an amount equal to the amount so paid by the Issuing Bank. In the
event the Borrower fails to reimburse the Administrative Agent on behalf of the
Issuing Bank for the full amount of any drawing under any Letter of Credit by
12:00 noon, Pittsburgh time, on the Drawing Date, the Issuing Bank will promptly
notify the Administrative Agent and each Revolving Credit Bank thereof, and the
Borrower shall be deemed to have requested that Revolving Credit Loans be made
by the Revolving Credit Banks under the Revolving Credit Base Rate Option to be
disbursed on the Drawing Date under such Letter of Credit, subject to the amount
of the unutilized portion of the Revolving Credit Commitment and subject to the
conditions set forth in Section 6.2 [Each Additional Loan or Letter of Credit]
other than any notice requirements. Any notice given by the Administrative Agent
or the Issuing Bank pursuant to this Section 2.10.3.2 may be oral if immediately
confirmed in writing; provided that the lack of such an immediate confirmation
shall not affect the conclusiveness or binding effect of such notice.
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2.10.3.3 Each Revolving Credit Bank shall upon
any notice pursuant to Section 2.10.3.2 make available to the Administrative
Agent, on behalf of the Issuing Bank, an amount in immediately available funds
equal to its Ratable Share of the amount of the drawing, whereupon the
participating Revolving Credit Banks shall (subject to Section 2.10.3.4) each be
deemed to have made a Revolving Credit Loan under the Revolving Credit Base Rate
Option to the Borrower in that amount. If any Revolving Credit Bank so notified
fails to make available to the Administrative Agent for the account of the
Issuing Bank the amount of such Revolving Credit Bank's Ratable Share of such
amount by no later than 2:00 p.m., Pittsburgh time, on the Drawing Date, then
interest shall accrue on such Revolving Credit Bank's obligation to make such
payment, from the Drawing Date to the date on which such Revolving Credit Bank
makes such payment (i) at a rate per annum equal to the Federal Funds Effective
Rate during the first three days following the Drawing Date and (ii) at a rate
per annum equal to the rate applicable to Revolving Credit Loans under the
Revolving Credit Base Rate Option on and after the fourth day following the
Drawing Date; provided, however, that in the event that a Revolving Credit Bank
does not timely receive notice in order to so fund its Ratable Share to the
Administrative Agent prior to 2:00 p.m., Pittsburgh time, on the Drawing Date,
interest, with respect to the Drawing Date only, shall not accrue as previously
described in this sentence. The Issuing Bank will promptly give notice to the
Administrative Agent and each other Revolving Credit Bank of the occurrence of
the Drawing Date, but failure of the Issuing Bank to give any such notice on the
Drawing Date or in sufficient time to enable any Revolving Credit Bank to effect
such payment on such date shall not relieve such Revolving Credit Bank from its
obligation under this Section 2.10.3.3.
2.10.3.4 With respect to any unreimbursed
drawing that is not converted into Revolving Credit Loans under the Revolving
Credit Base Rate Option to the Borrower in whole or in part as contemplated by
Section 2.10.3.2, because of the Borrower's failure to satisfy the conditions
set forth in Section 6.2 [Each Additional Loan or Letter of Credit] other than
any notice requirements or for any other reason, the Borrower shall be deemed to
have incurred from the Issuing Bank a Letter of Credit Borrowing in the amount
of such drawing. Such Letter of Credit Borrowing shall be due and payable on
demand (together with interest) and shall bear interest at the rate per annum
applicable to the Revolving Credit Loans under the Revolving Credit Base Rate
Option. Each Revolving Credit Bank's payment to the Administrative Agent on
behalf of the Issuing Bank pursuant to Section 2.10.3.3 shall be deemed to be a
payment in respect of its participation in such Letter of Credit Borrowing and
shall constitute a Participation Advance from such Revolving Credit Bank in
satisfaction of its participation obligation under this Section 2.10.3.
2.10.4 REPAYMENT OF PARTICIPATION ADVANCES.
2.10.4.1 Upon (and only upon) receipt by
the Administrative Agent for the account of the Issuing Bank of immediately
available funds from the Borrower (i) in reimbursement of any payment made by
the Issuing Bank under the Letter of Credit with respect to which any Revolving
Credit Bank has made a Participation Advance to the Administrative Agent, or
(ii) in payment of interest on such a payment made by the Issuing Bank
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under such a Letter of Credit, the Administrative Agent on behalf of the Issuing
Bank will pay to each Revolving Credit Bank, in the same funds as those received
by the Administrative Agent on behalf of the Issuing Bank, the amount of such
Revolving Credit Bank's Ratable Share of such funds, except the Administrative
Agent shall retain the amount of the Ratable Share of such funds of any
Revolving Credit Bank that did not make a Participation Advance in respect of
such payment by the Issuing Bank.
2.10.4.2 If any Issuing Bank (or the
Administrative Agent on behalf of any Issuing Bank) is required at any time to
return to any Loan Party, or to a trustee, receiver, liquidator, custodian, or
any official in any Insolvency Proceeding, any portion of the payments made by
any Loan Party to the Issuing Bank or to the Administrative Agent on behalf of
any Issuing Bank pursuant to Section 2.10.4.1 in reimbursement of a payment made
under the Letter of Credit or interest or fee thereon, each Revolving Credit
Bank shall, on demand of the Administrative Agent, on behalf of the Issuing Bank
forthwith return to the Administrative Agent, on behalf of the Issuing Bank, the
amount of its Ratable Share of any amounts so returned by Issuing Bank or by the
Administrative Agent on behalf of the Issuing Bank plus interest thereon from
the date such demand is made to the date such amounts are returned by such
Revolving Credit Bank to the Issuing Bank or to the Administrative Agent on
behalf of the Issuing Bank, at a rate per annum equal to the Federal Funds
Effective Rate in effect from time to time.
2.10.5 DOCUMENTATION.
Each Loan Party agrees to be bound by the terms of the
Issuing Bank's application and agreement for letters of credit and the Issuing
Bank's written regulations and customary practices relating to letters of
credit, though such interpretation may be different from such Loan Party's own.
In the event of a conflict between such application or agreement and this
Agreement, this Agreement shall govern. It is understood and agreed that, except
in the case of gross negligence or willful misconduct, neither the Agents nor
any Issuing Bank shall be liable for any error, negligence and/or mistakes,
whether of omission or commission, in following any Loan Party's instructions or
those contained in the Letters of Credit or any modifications, amendments or
supplements thereto.
2.10.6 DETERMINATIONS TO HONOR DRAWING REQUESTS.
In determining whether to honor any request for drawing
under any Letter of Credit by the beneficiary thereof, the Issuing Bank shall be
responsible only to determine that the documents and certificates required to be
delivered under such Letter of Credit have been delivered and that they comply
on their face with the requirements of such Letter of Credit.
2.10.7 NATURE OF PARTICIPATION AND REIMBURSEMENT
OBLIGATIONS.
Each Revolving Credit Bank's obligation in accordance
with this Agreement to make the Revolving Credit Loans or Participation
Advances, as contemplated
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by Section 2.10.3, as a result of a drawing under a Letter of Credit, and the
Obligations of the Borrower to reimburse the Issuing Bank upon a draw under a
Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Section 2.10.7 under all
circumstances, including the following circumstances:
(i) any set-off, counterclaim, recoupment, defense
or other right which such Revolving Credit Bank may have against the Issuing
Bank, either Agent, the Borrower or any other Person for any reason whatsoever;
(ii) the failure of any Loan Party or any other
Person to comply, in connection with a Letter of Credit Borrowing, with the
conditions set forth in Section 2.1 [Revolving Credit Commitments], 2.4
[Revolving Credit Loan Requests, Etc.], 2.4.2 [Making Revolving Credit Loans] or
6.2 [Each Additional Loan or Letter of Credit] or as otherwise set forth in this
Agreement for the making of a Revolving Credit Loan, it being acknowledged that
such conditions are not required for the making of a Letter of Credit Borrowing
and the obligation of the Revolving Credit Banks to make Participation Advances
under Section 2.10.3;
(iii) any lack of validity or enforceability of
any Letter of Credit;
(iv) the existence of any claim, set-off, defense
or other right which any Loan Party or any Revolving Credit Bank may have at any
time against a beneficiary or any transferee of any Letter of Credit (or any
Persons for whom any such transferee may be acting), either Agent, any Issuing
Bank, or any Revolving Credit Bank or any other Person or, whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between any Loan Party or
Subsidiaries of a Loan Party and the beneficiary for which any Letter of Credit
was procured);
(v) any draft, demand, certificate or other
document presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect even if the Issuing Bank has been notified thereof;
(vi) payment by the Issuing Bank under any Letter
of Credit against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter of Credit;
(vii) any adverse change in the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of any Loan Party or Subsidiaries of a Loan Party;
(viii) any breach of this Agreement or any other
Loan Document by any party thereto;
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(ix) the occurrence or continuance of an
Insolvency Proceeding with respect to any Loan Party;
(x) the fact that an Event of Default or a
Potential Default shall have occurred and be continuing;
(xi) the fact that the Expiration Date shall
have passed or this Agreement or the Commitments hereunder shall have been
terminated; and
(xii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing.
2.10.8 INDEMNITY.
In addition to amounts payable as provided in Section
9.5 [Reimbursement and Indemnification of Agents by the Borrower], the Borrower
hereby agrees to protect, indemnify, pay and save harmless the Agents and each
Issuing Bank from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable fees, expenses and
disbursements of counsel) which any Agent or any Issuing Bank may incur or be
subject to as a consequence, direct or indirect, of (i) the issuance of any
Letter of Credit, other than as a result of (A) the gross negligence or willful
misconduct of any Agent or an Issuing Bank as determined by a final judgment of
a court of competent jurisdiction or (B) subject to the following clause (ii),
the wrongful dishonor by an Issuing Bank of a proper demand for payment made
under any Letter of Credit, or (ii) the failure of an Issuing Bank to honor a
drawing under any such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or governmental authority (all such acts or omissions herein called
"Governmental Acts").
2.10.9 LIABILITY FOR ACTS AND OMISSIONS.
As between any Loan Party, each Issuing Bank and the
Agents, such Loan Party assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit by, the respective beneficiaries of such Letters
of Credit. In furtherance and not in limitation of the foregoing, neither any
Agent nor any Issuing Bank shall be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any party in connection with the application for an issuance of any such Letter
of Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged (even if the Issuing Bank shall
have been notified thereof); (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (iii) the
failure of the beneficiary of any such Letter of Credit, or any other party to
which such Letter of Credit may be transferred, to comply fully with any
conditions required in order to draw upon such Letter of Credit or any other
claim of any Loan Party against any beneficiary of such Letter of Credit, or any
such transferee, or any dispute between or among any Loan Party and any
beneficiary of any Letter of Credit or any
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such transferee; (iv) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (v) errors in interpretation of technical
terms; (vi) any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any such Letter of Credit or of the
proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter
of Credit of the proceeds of any drawing under such Letter of Credit; or (viii)
any consequences arising from causes beyond the control of any Issuing Bank or
any Agent, including any Governmental Acts, and none of the above shall affect
or impair, or prevent the vesting of, any of the Agents' rights or powers
hereunder or of any of the rights or powers hereunder of any Issuing Bank.
Nothing in the preceding sentence shall: (x) relieve any Agent from liability
for such Agent's gross negligence or willful misconduct in connection with
actions or omissions described in such clauses (i) through (viii) of such
sentence, or (y) relieve any Issuing Bank from liability for such Issuing Bank's
gross negligence or willful misconduct in connection with actions or omissions
described in such clauses (i) through (viii) of such sentence.
In furtherance and extension and not in limitation of
the specific provisions set forth above, any action taken or omitted by any
Agent or any Issuing Bank under or in connection with the Letters of Credit
issued by it or any documents and certificates delivered thereunder, if taken or
omitted in good faith, shall not put any Agent or any Issuing Bank under any
resulting liability to the Borrower or any other Bank.
2.11. EXTENSION BY BANKS OF THE EXPIRATION DATE.
2.11.1 REQUESTS; APPROVAL BY ALL BANKS.
Upon or promptly after delivery by the Borrower of the
annual financial statements to be provided under Section 7.3.2 [Annual Financial
Statements] for the fiscal year ending December 31, 1997 or any subsequent
fiscal year, the Borrower may request a one-year extension of the Expiration
Date by written notice to the Administrative Agent, (and the Administrative
Agent shall promptly so notify the Revolving Credit Banks), and the Revolving
Credit Banks agree to respond to the Borrower's request for an extension within
sixty (60) days following receipt of the request ( each such sixty day period,
an "Approval Period"); provided, however, that the failure of any Revolving
Credit Bank to respond within such time period shall not in any manner
constitute an agreement by such Revolving Credit Bank to extend the Expiration
Date. If all Revolving Credit Banks elect to extend, the Expiration Date shall
be extended for a period of one year. If one or more Revolving Credit Banks
decline to extend or do not respond to Borrower's request, the provisions of
Section 2.11.2 shall apply.
2.11.2 APPROVAL BY REQUIRED BANKS.
In the event that one or more Revolving Credit Banks do
not agree to extend the Expiration Date or do not respond to Borrower's request
for an extension within the Approval Period (each a "Bank to be Terminated"),
but the Supermajority Required Banks agree to such extension within the Approval
Period then, on or before the last day of the applicable Approval Period, the
Revolving Credit Banks which have agreed to such extension within the
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applicable Approval Period (each an "Extending Bank") may, with the prior
written approval of the Borrower and the Administrative Agent, either (x)
arrange to reduce the Commitments to the aggregate of the Commitments of the
Extending Banks or (y) arrange to have one or more other banks (each an
"Assignee Bank") purchase all of the outstanding Loans, if any, of each Bank to
be Terminated and succeed to and assume the Commitments and all other rights,
interests and obligations of each Bank to be Terminated under this Agreement and
the other Loan Documents. Any such reduction of the Commitments to the aggregate
of the Commitments of the Extending Banks shall be by an amendment to this
Agreement and the other Loan Documents satisfactory to the Administrative Agent
and each of the Extending Banks. Any such purchase and assumption shall be (1)
pursuant to an Assignment and Assumption Agreement, (2) subject to and in
accordance with Section 10.11 [Successors and Assigns], and (3) if any Committed
Loans are outstanding under the Revolving Credit Euro-Rate Option or if any Bid
Loans are outstanding to such Bank to be Terminated (or the Designated Lender of
such Bank to be Terminated), then effective on the last day of the Interest
Period with respect to such Loans. The Borrower shall pay all amounts due and
payable to each Bank to be Terminated on the effective date of such Assignment
and Assumption Agreement. In the event that any Agent shall become a Bank to be
Terminated, the provisions of this Section 2.11 shall be subject to Section 9.14
[Successor Agent]. In the event that either (x) the aggregate Commitments have
not been reduced to the aggregate of the Commitments of the Extending Banks or
(y) the Loans and Commitments of each Bank to be Terminated are not fully
assigned and assumed pursuant to Section 2.11.2 on or before the last day of the
applicable Approval Period, then the Expiration Date shall not be extended for
any Bank.
3. INTEREST RATES
3.1. INTEREST RATE OPTIONS.
The Borrower shall pay interest in respect of the outstanding unpaid
principal amount of the Revolving Credit Loans as selected by it from the
Revolving Credit Base Rate Option or Revolving Credit Euro-Rate Option set forth
below applicable to the Revolving Credit Loans, it being understood that,
subject to the provisions of this Agreement, the Borrower may select different
Interest Rate Options and different Interest Periods to apply simultaneously to
the Revolving Credit Loans comprising different Borrowing Tranches and may
convert to or renew one or more Interest Rate Options with respect to all or any
portion of the Revolving Credit Loans comprising any Borrowing Tranche, PROVIDED
that there shall not be at any one time outstanding more than six (6) Borrowing
Tranches in the aggregate among all of the Revolving Credit Loans accruing
interest at a Revolving Credit Euro-Rate Option, and provided further that only
the Revolving Credit Base Rate Option shall apply to the Swing Loans. The
Borrower shall pay interest in respect of the outstanding unpaid principal
amount of each Bid Loan at the rate specified in the related Bid accepted by the
Borrower with respect to which a Bid Loan is made. If at any time the designated
rate applicable to any Loan exceeds such Bank's highest lawful rate, the rate of
interest on such Loan shall be limited to such Bank's highest lawful rate.
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3.1.1 REVOLVING CREDIT INTEREST RATE OPTIONS.
The Borrower shall have the right to select from the
following Interest Rate Options applicable to the Revolving Credit Loans
(subject to the provisions above regarding Swing Loans):
(i) REVOLVING CREDIT BASE RATE OPTION: A
fluctuating rate per annum (computed on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed) equal to the Base Rate, such
interest rate to change automatically from time to time effective as of the
effective date of each change in the Base Rate; or
(ii) REVOLVING CREDIT EURO-RATE OPTION: A rate
per annum (computed on the basis of a year of 360 days and actual days elapsed)
equal to the Euro-Rate plus the Applicable Margin.
3.1.2 RATE QUOTATIONS.
The Borrower may call the Administrative Agent on or
before the date on which a Revolving Credit Loan Request is to be delivered to
receive an indication of the rates then in effect as to Revolving Credit Loans,
but it is acknowledged that such projection shall not be binding on the
Administrative Agent or the Revolving Credit Banks nor affect the rate of
interest which thereafter is actually in effect when the election is made.
3.1.3 CHANGE IN FEES OR INTEREST RATES.
If the Applicable Margin or Applicable Facility Fee Rate
is increased or reduced with respect to any period for which the Borrower has
already paid interest or Facility Fees, the Administrative Agent shall
recalculate the additional interest or Facility Fees due from or to the Borrower
and shall, within fifteen (15) Business Days after the Borrower notifies the
Administrative Agent of such increase or decrease, give the Borrower and the
Revolving Credit Banks notice of such recalculation.
3.1.3.1 Any additional interest or Facility
Fees due from the Borrower shall be paid to the Administrative Agent for the
account of the Revolving Credit Banks on the next date on which an interest or
fee payment is due; PROVIDED, HOWEVER, that if there are no Loans outstanding or
if the Loans are due and payable, such additional interest or Facility Fees
shall be paid promptly after receipt of written request for payment from the
Administrative Agent.
3.1.3.2 Any interest or Facility Fees refund
due to the Borrower shall be credited against payments otherwise due from the
Borrower on the next interest or fee payment due date or, if the Loans have been
repaid and the Revolving Credit Banks are no longer committed to lend under this
Agreement, the Revolving Credit Banks shall pay the Administrative Agent for the
account of the Borrower such interest or Facility Fee refund
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not later than five Business Days after written notice from the Administrative
Agent to the Banks.
3.2. REVOLVING CREDIT LOANS INTEREST PERIODS.
At any time when the Borrower shall select, convert to or renew a
Revolving Credit Euro-Rate Option, the Borrower shall notify the Administrative
Agent thereof at least three (3) Business Days prior to the effective date of
such Euro-Rate Option by delivering a Loan Request. The notice shall specify an
interest period (the "Committed Loan Interest Period") during which such
Interest Rate Option shall apply, such Committed Loan Interest Period to be one,
two, three or six Months (or nine months, if available to all Banks); provided,
however, that prior to the date which is the Business Day following the
Syndication Date, all Revolving Credit Loans made shall be at the Revolving
Credit Base Rate Option only. Notwithstanding the preceding sentence, the
following provisions shall apply to any selection of, renewal of, or conversion
to a Revolving Credit Euro-Rate Option:
3.2.1 ENDING DATE AND BUSINESS DAY.
any Interest Period which would otherwise end on a date
which is not a Business Day shall be extended to the next succeeding Business
Day unless such Business Day falls in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day;
3.2.2 AMOUNT OF BORROWING TRANCHE.
each Borrowing Tranche of Revolving Credit Loans to
which the Euro-Rate Option applies shall be in integral multiples of $1,000,000
and not less than $5,000,000;
3.2.3 TERMINATION BEFORE EXPIRATION DATE.
the Borrower shall not select, convert to or renew an
Interest Period for any portion of the Loans that would end after the Expiration
Date; and
3.2.4 RENEWALS.
in the case of the renewal of a Revolving Credit
Euro-Rate Option at the end of an Interest Period, the first day of the new
Interest Period shall be the last day of the preceding Interest Period, without
duplication in payment of interest for such day.
3.3. INTEREST AFTER DEFAULT.
To the extent permitted by Law, upon the occurrence of an Event of
Default and until such time such Event of Default shall have been cured or
waived:
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3.3.1 LETTER OF CREDIT FEES, INTEREST RATE.
the Letter of Credit Fees and the rate of interest for
each Loan otherwise applicable pursuant to Section 2.10.2 [Letter of Credit
Fees] or Section 3.1 [Interest Rate Options], respectively, shall be increased
by 2.0% per annum; and
3.3.2 OTHER OBLIGATIONS.
each other Obligation hereunder if not paid when due
shall bear interest at a rate per annum equal to the sum of the rate of interest
applicable under the Revolving Credit Base Rate Option plus an additional 2.0%
per annum from the time such Obligation becomes due and payable and until it is
paid in full.
3.3.3 ACKNOWLEDGMENT.
The Borrower acknowledges that the increase in rates
referred to in this Section 3.3 reflects, among other things, the fact that such
Loans or other amounts have become a substantially greater risk given their
default status and that the Banks are entitled to additional compensation for
such risk; and all such interest shall be payable by Borrower upon demand by
Administrative Agent. Upon the occurrence of an Event of Default, no Loan may be
made, converted to or renewed under the Euro-Rate Option.
3.4. EURO-RATE UNASCERTAINABLE; ILLEGALITY; INCREASED COSTS;
DEPOSITS NOT AVAILABLE.
3.4.1 UNASCERTAINABLE.
If, on any date on which a Euro-Rate would otherwise
be determined with respect to Committed Loans or Bid Loans, the Administrative
Agent shall have determined that:
(i) adequate and reasonable means do not
exist for ascertaining such Euro-Rate, or
(ii) a contingency has occurred which
materially and adversely affects the London interbank eurodollar market relating
to the Euro-Rate,
then the Administrative Agent shall have the rights specified in Section 3.4.3.
3.4.2 ILLEGALITY; INCREASED COSTS; DEPOSITS NOT
AVAILABLE.
If at any time any Bank shall have determined that:
(i) the making, maintenance or funding of
any Loan to which a Euro-Rate Option applies has been made impracticable or
unlawful by compliance by such Bank in good faith with any Law or any
interpretation or application thereof by any Official
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Body or with any request or directive of any such Official Body (whether or not
having the force of Law), or
(ii) such Euro-Rate Option will not adequately
and fairly reflect the cost to such Bank of the establishment or maintenance of
any such Loan, or
(iii) after making all reasonable efforts,
deposits of the relevant amount in Dollars for the relevant Interest Period for
a Loan to which a Euro-Rate Option applies, respectively, are not available to
such Bank with respect to such Loan, in the London interbank market,
then the Administrative Agent and the Banks shall have the rights specified in
Section 3.4.3.
3.4.3 ADMINISTRATIVE AGENT'S AND BANK'S RIGHTS.
In the case of any event specified in Section 3.4.1
above, the Administrative Agent shall promptly so notify the Banks and the
Borrower thereof, and in the case of an event specified in Section 3.4.2 above,
such Bank shall promptly so notify the Administrative Agent and endorse a
certificate to such notice as to the specific circumstances of such notice, and
the Administrative Agent shall promptly send copies of such notice and
certificate to the other Banks and the Borrower. Upon such date as shall be
specified in such notice (which shall not be earlier than the date such notice
is given), the obligation of (A) the Banks, in the case of such notice given by
the Administrative Agent, or (B) such Bank, in the case of such notice given by
such Bank, to allow the Borrower to select, convert to or renew a Euro-Rate
Option shall be suspended until the Administrative Agent shall have later
notified the Borrower, or such Bank shall have later notified the Administrative
Agent, of the Administrative Agent's or such Bank's, as the case may be,
determination that the circumstances giving rise to such previous determination
no longer exist. If at any time the Administrative Agent makes a determination
under Section 3.4.1 and the Borrower has previously notified the Administrative
Agent of its selection of, conversion to or renewal of a Euro-Rate Option and
such Interest Rate Option has not yet gone into effect, such notification shall
be deemed to provide for the termination of Borrower's Bid Loan Request (without
penalty) for such Loans if the Borrower has requested Bid Loans under the Bid
Loan Euro-Rate Option and such notification shall be deemed to provide for the
selection of, conversion to or renewal of the Revolving Credit Base Rate Option
otherwise available with respect to such Loans if the Borrower has requested the
Committed Loan Euro-Rate Option. If any Bank notifies the Administrative Agent
of a determination under Section 3.4.2, the Borrower shall, subject to the
Borrower's indemnification Obligations under Section 4.5.2 [Indemnity], as to
any Loan of the Bank to which a Euro-Rate Option applies, on the date specified
in such notice either convert such Loan to the Revolving Credit Base Rate Option
otherwise available with respect to such Loan or prepay such Loan in accordance
with Section 4.4 [Voluntary Prepayments]. Absent due notice from the Borrower of
conversion or prepayment, such Loan shall automatically be converted to the
Revolving Credit Base Rate Option otherwise available with respect to such Loan
upon such specified date.
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3.5. SELECTION OF INTEREST RATE OPTIONS.
If the Borrower fails to select a new Interest Period to apply to
any Borrowing Tranche of Revolving Credit Loans under the Revolving Credit
Euro-Rate Option at the expiration of an existing Interest Period applicable to
such Borrowing Tranche in accordance with the provisions of Section 3.2
[Interest Periods], the Borrower shall be deemed to have converted such
Borrowing Tranche to the Revolving Credit Base Rate Option commencing upon the
last day of the existing Interest Period.
4. PAYMENTS
4.1. PAYMENTS.
All payments and prepayments to be made in respect of principal,
interest, Facility Fees, Letter of Credit Fees, Administrative Agent's Fee or
other fees or amounts due from the Borrower hereunder shall be payable prior to
11:00 a.m., Pittsburgh time, on the date when due without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived by the
Borrower, and without set-off, counterclaim or other deduction of any nature,
and an action therefor shall immediately accrue. Such payments shall be made to
the Administrative Agent at the Principal Office for the account of PNC Bank
with respect to the Swing Loans and for the ratable accounts of the Revolving
Credit Banks with respect to the Revolving Credit Loans and for the account of
the lending Bank with respect to the Bid Loans, in U.S. Dollars and in
immediately available funds, and the Administrative Agent shall promptly
distribute such amounts to the Banks in immediately available funds, PROVIDED
that in the event payments are received by 11:00 a.m., Pittsburgh time, by the
Administrative Agent with respect to the Loans and such payments are not
distributed to the Banks (or applicable Bank, as the case may be) on the same
day received by the Administrative Agent, the Administrative Agent shall pay the
Banks (or applicable Bank, as the case may be) the Federal Funds Effective Rate
with respect to the amount of such payments for each day held by the
Administrative Agent and not distributed to the Banks (or applicable Bank, as
the case may be). The Administrative Agent's and each Bank's statement of
account, ledger or other relevant record shall, in the absence of manifest
error, be conclusive as the statement of the amount of principal of and interest
on the Loans and other amounts owing under this Agreement and shall be deemed an
"account stated."
4.2. PRO RATA TREATMENT OF BANKS.
Each borrowing of Revolving Credit Loans shall be allocated to each
Revolving Credit Bank according to its Ratable Share (irrespective of the amount
of Bid Loans outstanding), and each selection of, conversion to or renewal of
any Interest Rate Option applicable to Revolving Credit Loans and each payment
or prepayment by the Borrower with respect to principal or interest on the
Revolving Credit Loans or Facility Fees, Letter of Credit Fees, or other fees
(except for the Administrative Agent's Fee) or amounts due from the Borrower
hereunder to the Revolving Credit Banks with respect to the Revolving Credit
Loans, shall (except as provided in Section 3.4.3 [Agents' and Bank's Rights] in
the case of an event
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specified in Section 3.4 [Euro-Rate Unascertainable, Etc.], 4.4 [Voluntary
Prepayments] or 4.5 [Additional Compensation in Certain Circumstances]) be made
in proportion to the applicable Revolving Credit Loans outstanding from each
Revolving Credit Bank and, if no such Loans are then outstanding, in proportion
to the Ratable Share of each Revolving Credit Bank. Each borrowing of a Bid Loan
shall be made according to the provisions in Section 2.9 hereof and each payment
or prepayment by the Borrower of principal, interest, fees or other amounts from
the Borrower with respect to Bid Loans shall be made to the Banks in proportion
to the amounts of such items due to such Banks. Notwithstanding any of the
foregoing, each borrowing or payment or prepayment by the Borrower of principal,
interest or other amounts from the Borrower with respect to Swing Loans shall be
made by or to PNC Bank according to Section 2.
4.3. INTEREST PAYMENT DATES.
Interest on Committed Loans to which the Revolving Credit Base Rate
applies shall be due and payable in arrears on the first Business Day of each
July, October, January and April after the date hereof and on the Expiration
Date or upon acceleration of the Loans. Interest on Committed Loans (other than
Swing Loans) and Bid Loans to which the Euro-Rate Option applies and Bid Loans
to which the Bid Loan Fixed Rate Option applies shall be due and payable on the
last day of each Interest Period for those Loans and, if such Interest Period is
longer than three (3) Months, also on the 90th day (and if applicable, the 180th
day) of such Interest Period. Interest on the principal amount of each Loan or
other monetary Obligation shall be due and payable on demand after such
principal amount or other monetary Obligation becomes due and payable (whether
on the stated maturity date, upon acceleration or otherwise).
4.4. VOLUNTARY PREPAYMENTS.
4.4.1 RIGHT TO PREPAY.
The Borrower shall have the right at its option from
time to time to prepay the Revolving Credit Loans in whole or part without
premium or penalty (except as provided in Section 4.4.2 below or in Section 4.5
[Additional Compensation in Certain Circumstances]):
(i) at any time with respect to any
Revolving Credit Loan to which the Revolving Credit Base Rate Option applies,
(ii) on the last day of the applicable
Interest Period with respect to Revolving Credit Loans to which a Euro-Rate
Option applies,
(iii) on the date specified in a notice by any
Revolving Credit Bank pursuant to Section 3.4 [Euro-Rate Unascertainable, Etc.]
with respect to any Revolving Credit Loan to which a Euro-Rate Option applies.
Whenever the Borrower desires to prepay any part of the
Revolving Credit Loans or Swing Loans, it shall provide a prepayment notice to
the
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Administrative Agent by 1:00 p.m. at least one (1) Business Day prior to the
date of prepayment of the Revolving Credit Loans or no later than 1:00 p.m.,
Pittsburgh time, on the date of prepayment of Swing Loans setting forth the
following information:
(x) the date, which shall be a Business Day, on which the
proposed prepayment is to be made;
(y) the application of the prepayment between the Swing
Loans and the Revolving Credit Loans; and
(z) the total principal amount of such prepayment, which
shall not be less than $5,000,000 for any Revolving Credit Loan, and
in increments of $1,000,000 above $5,000,000 and not less than
$1,000,000 for Swing Loans, and in increments of $100,000 above
$1,000,000.
All prepayment notices shall be irrevocable. The principal
amount of the Revolving Credit Loans or Swing Loans for which a prepayment
notice is given, together with interest on such principal amount except with
respect to Revolving Credit Loans to which the Revolving Credit Base Rate Option
applies, shall be due and payable on the date specified in such prepayment
notice as the date on which the proposed prepayment is to be made. Except as
provided in Section 3.4.3 [Agents' and Bank's Rights], if the Borrower prepays a
Revolving Credit Loan but fails to specify the applicable Borrowing Tranche
which the Borrower is prepaying, the prepayment shall be applied (i) first to
Revolving Credit Loans to which the Revolving Credit Base Rate Option applies,
then to Revolving Credit Loans to which the Revolving Credit Euro-Rate Option
applies. Any prepayment hereunder shall be subject to the Borrower's Obligation
to indemnify the Revolving Credit Banks under Section 4.5.2 [Indemnity]. Bid
Loans can not be prepaid by the Borrower.
4.4.2 REPLACEMENT OF A BANK.
In the event any Bank (i) gives notice under Section 3.4
[Euro-Rate Unascertainable, Etc.] or Section 4.5.1 [Increased Costs, Etc.], (ii)
does not fund Revolving Credit Loans or Bid Loans because the making of such
Loans would contravene any Law applicable to such Bank, or (iii) becomes subject
to the control of an Official Body (other than normal and customary
supervision), then the Borrower shall have the right at its option, with the
consent of the Administrative Agent, which shall not be unreasonably withheld,
to prepay the Loans of such Bank in whole, together with all interest accrued
thereon, and terminate such Bank's Commitment within ninety (90) days after (w)
receipt of such Bank's notice under Section 3.4 [Euro-Rate Unascertainable,
Etc.] or 4.5.1 [Increased Costs, Etc.], (x) the date such Bank has failed to
fund Revolving Credit Loans or Bid Loans because the making of such Loans would
contravene Law applicable to such Bank, (y) the date of obtaining the consent
which such Bank has not approved, or (z) the date such Bank became subject to
the control of an Official Body, as applicable; PROVIDED that the Borrower shall
also pay to such Bank at the time of such prepayment any amounts required under
Section 4.5 [Additional Compensation in Certain Circumstances] and any accrued
interest due on such amount and any related fees; PROVIDED,
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however, that the Commitment and any Bid Loan of such Bank shall be provided by
one or more of the remaining Banks or a replacement bank acceptable to the
Administrative Agent and the Issuing Banks; PROVIDED, further, the remaining
Banks shall have no obligation hereunder to increase their Commitments or
provide the Bid Loan of such Bank. Notwithstanding the foregoing, the
Administrative Agent may only be replaced subject to the requirements of Section
9.14 [Successor Agent] and an Issuing Bank may only be replaced if all Letters
of Credit issued by such Issuing Bank have expired or been terminated or
replaced.
4.4.3 CHANGE OF LENDING OFFICE.
Each Bank agrees that upon the occurrence of any event
giving rise to increased costs or other special payments under Section 3.4.2
[Illegality, Etc.] or 4.5.1 [Increased Costs, Etc.] with respect to such Bank,
it will if requested by the Borrower, use reasonable efforts (subject to overall
policy considerations of such Bank) to designate another lending office for any
Loans or Letters of Credit affected by such event, PROVIDED that such
designation is made on such terms that such Bank and its lending office suffer
no economic, legal or regulatory disadvantage, with the object of avoiding the
consequence of the event giving rise to the operation of such Section. Nothing
in this Section 4.4.3 shall affect or postpone any of the Obligations of the
Borrower or any other Loan Party or the rights of any Agent or any Bank provided
in this Agreement.
4.4.4 VOLUNTARY REDUCTION OF COMMITMENTS.
The Borrower shall have the right, upon not less than
five Business Days' written irrevocable notice to the Administrative Agent, to
terminate the Commitments or, from time to time, to reduce the amount of the
Commitments, which notice shall specify the date and amount of any such
reduction and otherwise be substantially in the form of EXHIBIT 4.4.4 (a
"Commitment Reduction Notice"). Any such reduction shall be in a minimum amount
equal to $5,000,000 or an integral multiple of $1,000,000 in excess thereof,
provided, that the Commitment may not be reduced below the sum of the aggregate
principal amount of all Revolving Facility Usage. Each reduction of Commitments
shall ratably reduce the Commitments of the Revolving Credit Banks.
4.5. ADDITIONAL COMPENSATION IN CERTAIN CIRCUMSTANCES.
4.5.1 INCREASED COSTS OR REDUCED RETURN RESULTING FROM
TAXES, RESERVES, CAPITAL ADEQUACY REQUIREMENTS,
EXPENSES, ETC.
If any Law, guideline or interpretation or any change in
any Law, guideline or interpretation or application thereof by any Official Body
charged with the interpretation or administration thereof or compliance with any
request or directive (whether or not having the force of Law) of any central
bank or other Official Body:
(i) subjects any Bank to any tax or changes
the basis of taxation with respect to this Agreement, the Committed Loans or the
Bid Loans or payments by
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the Borrower of principal, interest, Facility Fees, or other amounts due from
the Borrower hereunder (except for taxes on the overall net income of such
Bank),
(ii) imposes, modifies or deems applicable
any reserve, special deposit or similar requirement against credits or
commitments to extend credit extended by, or assets (funded or contingent) of,
deposits with or for the account of, or other acquisitions of funds by, any
Bank, or
(iii) imposes, modifies or deems applicable any
capital adequacy or similar requirement (A) against assets (funded or
contingent) of, or letters of credit, other credits or commitments to extend
credit extended by, any Bank, or (B) otherwise applicable to the obligations of
any Bank under this Agreement,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Bank with respect to this Agreement, or the making, maintenance or funding of
any part of the Committed Loans or the Bid Loans (or, in the case of any capital
adequacy or similar requirement, to have the effect of reducing the rate of
return on any Bank's capital, taking into consideration such Bank's customary
policies with respect to capital adequacy) by an amount which such Bank in its
sole discretion deems to be material, such Bank shall from time to time notify
the Borrower and the Administrative Agent of the amount determined in good faith
(using any averaging and attribution methods employed in good faith) by such
Bank to be necessary to compensate such Bank for such increase in cost,
reduction of income, additional expense or reduced rate of return. Such notice
shall set forth in reasonable detail the basis for such determination. Such
amount shall be due and payable by the Borrower to such Bank ten (10) Business
Days after such notice is given.
4.5.2 INDEMNITY.
In addition to the compensation required by Section
4.5.1 [Increased Costs, Etc.], the Borrower shall indemnify each Bank against
all liabilities, losses or expenses (including loss of margin, any loss or
expense incurred in liquidating or employing deposits from third parties and any
loss or expense incurred in connection with funds acquired by a Bank to fund or
maintain Loans subject to a Euro-Rate Option or the Bid Loan Fixed Rate Option)
which such Bank sustains or incurs as a consequence of any
(i) payment, prepayment, conversion or renewal
of any Loan to which a Euro-Rate Option or the Bid Loan Fixed Rate Option
applies on a day other than the last day of the corresponding Interest Period
(whether or not such payment or prepayment is mandatory, voluntary or automatic
and whether or not such payment or prepayment is then due),
(ii) attempt by the Borrower to revoke
(expressly, by later inconsistent notices or otherwise) in whole or part any
Loan Requests under Section 2.4 [Revolving Credit Loan Requests, Etc.], Section
2.4.2 [Swing Loan Requests], Section 2.9 [Bid
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Loan Facility] or Section 3.1.3 [Interest Periods] or notice relating to
prepayments under Section 4.4 [Voluntary Prepayments], or
(iii) default by the Borrower in the performance
or observance of any covenant or condition contained in this Agreement or any
other Loan Document, including any failure of the Borrower to pay when due (by
acceleration or otherwise) any principal of or interest on the Committed Loans
or the Bid Loans, Facility Fees or any other amount due hereunder; or
(iv) payment or prepayment of any Bid Loan on
a day other than the maturity date thereof (whether or not such payment or
prepayment is mandatory or voluntary).
If any Bank sustains or incurs any such loss or expense,
it shall from time to time notify the Borrower of the amount determined in good
faith by such Bank (which determination may include such assumptions,
allocations of costs and expenses and averaging or attribution methods as such
Bank shall deem reasonable) to be necessary to indemnify such Bank for such loss
or expense. Such notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by the Borrower to such Bank
ten (10) Business Days after such notice is given.
4.6. NOTES.
Upon the request of any Bank, the Revolving Credit Loans made by
such Bank may be evidenced by a Revolving Credit Note in the form of EXHIBIT
1.1(R).
4.7. SETTLEMENT DATE PROCEDURES.
In order to minimize the transfer of funds between the Revolving
Credit Banks and the Administrative Agent, the Borrower may borrow, repay and
reborrow Swing Loans and PNC Bank may make Swing Loans as provided in Section
2.4 hereof during the period between Settlement Dates. Not later than 11:00
a.m., on each Settlement Date, the Administrative Agent shall notify each
Revolving Credit Bank of its Ratable Share of the total of the Revolving Credit
Loans and the Swing Loans (each a "Required Share"). Prior to 2:00 p.m.,
Pittsburgh time, on such Settlement Date, each Revolving Credit Bank shall pay
to the Administrative Agent the amount equal to the difference between its
Required Share and its Revolving Credit Loans, and the Administrative Agent
shall pay to each Revolving Credit Bank its Ratable Share of all payments made
by the Borrower to the Administrative Agent with respect to the Revolving Credit
Loans. The Administrative Agent shall also effect settlement in accordance with
the foregoing sentence on the proposed Borrowing Dates for Revolving Credit
Loans and may at its option effect settlement on any other Business Day. These
settlement procedures are established solely as a matter of administrative
convenience, and nothing contained in this Section 4.7 shall relieve the
Revolving Credit Banks of their obligations to fund Revolving Credit Loans on
dates other than a Settlement Date pursuant to Section 2.1.2. The Administrative
Agent may at any time for any reason whatsoever require each Revolving Credit
Bank to pay immediately to the
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Administrative Agent such Bank's Ratable Share of the outstanding Revolving
Credit Loans, and each Revolving Credit Bank may at any time require the
Administrative Agent to pay immediately to such Revolving Credit Bank its
Ratable Share of all payments made by the Borrower to the Administrative Agent
with respect to the Revolving Credit Loans.
5. REPRESENTATIONS AND WARRANTIES
5.1. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Agents and each of the
Banks as follows:
5.1.1 ORGANIZATION AND QUALIFICATION.
Each Loan Party and each Subsidiary of each Loan Party
is a corporation, partnership or limited liability company duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization. Each Loan Party and each Subsidiary of each Loan Party has the
lawful power to own or lease its properties and to engage in the business it
presently conducts or proposes to conduct. Each Loan Party and each Subsidiary
of each Loan Party is duly licensed or qualified and in good standing in each
jurisdiction where the property owned or leased by it or the nature of the
business transacted by it or both makes such licensing or qualification
necessary.
5.1.2 SHARES OF BORROWER; SUBSIDIARIES; AND
SUBSIDIARY SHARES.
SCHEDULE 5.1.2 states the name of each of the Borrower's
Subsidiaries, its jurisdiction of incorporation, its authorized capital stock,
the issued and outstanding shares (referred to herein as the "Subsidiary
Shares") and the owners thereof if it is a corporation, its outstanding
partnership interests (the "Partnership Interests") if it is a partnership and
its outstanding limited liability company interests, interests assigned to
managers thereof and the voting rights associated therewith (the "LLC
Interests") if it is a limited liability company. SCHEDULE 5.1.2 also sets forth
the jurisdiction of incorporation of the Borrower, its authorized capital stock
(the "Borrower Shares") and the voting rights associated therewith. The Borrower
and each Subsidiary of the Borrower has good and marketable title to all of the
Subsidiary Shares, Partnership Interests and LLC Interests it purports to own,
free and clear in each case of any Lien. All Borrower Shares, Subsidiary Shares,
Partnership Interests and LLC Interests have been validly issued, and all
Borrower Shares, Subsidiary Shares are fully paid and nonassessable. All capital
contributions and other consideration required to be made or paid in connection
with the issuance of the Partnership Interests and LLC Interests have been made
or paid, as the case may be. There are no options, warrants or other rights
outstanding to purchase any such Borrower Shares, Subsidiary Shares, Partnership
Interests or LLC Interests except as indicated on SCHEDULE 5.1.2.
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5.1.3 POWER AND AUTHORITY.
Each Loan Party has full power to enter into, execute,
deliver and carry out this Agreement and the other Loan Documents to which it is
a party, to incur the Indebtedness contemplated by the Loan Documents and to
perform its Obligations under the Loan Documents to which it is a party, and all
such actions have been duly authorized by all necessary proceedings on its part.
Each person party to the Merger Agreement has full power to enter into, execute,
deliver and perform the Merger Agreement to which it is a party, and all such
actions have been duly authorized by all necessary proceedings on its part.
5.1.4 VALIDITY AND BINDING EFFECT.
This Agreement has been duly and validly executed and
delivered by each Loan Party, and each other Loan Document which any Loan Party
is required to execute and deliver on or after the date hereof will have been
duly executed and delivered by such Loan Party on the required date of delivery
of such Loan Document. This Agreement and each other Loan Document constitutes,
or will constitute, legal, valid and binding obligations of each Loan Party
which is or will be a party thereto on and after its date of delivery thereof,
enforceable against such Loan Party in accordance with its terms, except to the
extent that enforceability of any of such Loan Document may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditors' rights generally or limiting the
right of specific performance. The Merger Agreement has been duly and validly
executed and delivered by each person party thereto. The Merger has been
consummated in accordance with the terms of the Merger Agreement. The Merger
Agreement constitutes the legal, valid and binding obligation of each person
party thereto, enforceable against each such person in accordance with the terms
thereof, except to the extent that enforceability of the Merger Agreement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
law, affecting the enforceability of creditors' rights generally or limiting the
right of specific performance.
5.1.5 NO CONFLICT.
Neither the execution and delivery of this Agreement or
the other Loan Documents by any Loan Party or the Merger Agreement by any person
party thereto, nor the consummation of the transactions herein or therein
contemplated or compliance with the terms and provisions hereof or thereof by
any of them will conflict with, constitute a default under or result in any
breach of (i) the terms and conditions of the certificate of incorporation,
bylaws, certificate of limited partnership, partnership agreement, certificate
of formation, limited liability company agreement or other organizational
documents of any Loan Party or in the case of the Merger Agreement, of any
person party thereto or (ii) any Law or any material agreement or instrument or
order, writ, judgment, injunction or decree to which any person party to the
Merger Agreement or any Loan Party or any Subsidiary of any Loan Party is a
party or by which any of the foregoing persons is bound or to which any of the
foregoing persons is subject, or result in the creation or enforcement of any
Lien, charge or encumbrance whatsoever upon any
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property (now or hereafter acquired) of any person party to the Merger Agreement
or of any Loan Party or any Subsidiary of any Loan Party (other than Liens
granted under the Loan Documents).
5.1.6 LITIGATION.
There are no actions, suits, proceedings or
investigations pending or, to the knowledge of any Loan Party, threatened
against such Loan Party or any Subsidiary of such Loan Party at law or equity
before any Official Body which individually or in the aggregate could reasonably
be expected to result in any Material Adverse Change. None of the Loan Parties
or any Subsidiaries of any Loan Party is in violation of any order, writ,
injunction or any decree of any Official Body which could reasonably be expected
to result in any Material Adverse Change.
5.1.7 FINANCIAL STATEMENTS.
(i) HISTORICAL STATEMENTS. The Borrower has
delivered to the Administrative Agent copies of its audited consolidated
year-end financial statements for and as of the end of the fiscal year ended
December 31, 1996 (the "Annual Statements"). In addition, the Borrower has
delivered to the Administrative Agent copies of its unaudited consolidated
interim financial statements for the fiscal year to date and as of the end of
the fiscal quarter ended March 31, 1997 (the "Interim Statements") (the Annual
and Interim Statements being collectively referred to as the "Historical
Statements"). The Historical Statements were compiled from the books and records
maintained by the Borrower's management, are correct and complete and fairly
represent the consolidated financial condition of the Borrower and its
Subsidiaries as of their dates and the results of operations for the fiscal
periods then ended and have been prepared in accordance with GAAP consistently
applied, subject (in the case of the Interim Statements) to normal year-end
audit adjustments.
(ii) ACCURACY OF FINANCIAL STATEMENTS. Neither
the Borrower nor any Subsidiary of the Borrower has any liabilities, contingent
or otherwise, or forward or long-term commitments that are not disclosed in the
Historical Statements or in the notes thereto, and except as disclosed therein
there are no unrealized or anticipated losses from any commitments of the
Borrower or any Subsidiary of the Borrower which could reasonably be expected to
cause a Material Adverse Change. Since December 31, 1996, no Material Adverse
Change has occurred.
5.1.8 USE OF PROCEEDS; MARGIN STOCK; SECTION 20
SUBSIDIARIES.
5.1.8.1 GENERAL.
The Loan Parties intend to use the proceeds of the
Loans in accordance with Sections 2.7 and 7.1.9.
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5.1.8.2 MARGIN STOCK.
None of the Loan Parties nor any Subsidiaries of any
Loan Party engages or intends to engage principally, or as one of its important
activities, in the business of extending credit for the purpose, immediately,
incidentally or ultimately, of purchasing or carrying margin stock (within the
meaning of Regulation U). No part of the proceeds of any Loan has been or will
be used, immediately, incidentally or ultimately, to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock or to refund Indebtedness originally incurred for such
purpose, or for any purpose which entails a violation of or which is
inconsistent with the provisions of the regulations of the Board of Governors of
the Federal Reserve System. None of the Loan Parties nor any Subsidiary of any
Loan Party holds or intends to hold margin stock in such amounts that more than
25% of the reasonable value of the assets of any Loan Party or Subsidiary of any
Loan Party are or will be represented by margin stock.
5.1.8.3 SECTION 20 SUBSIDIARIES.
The Loan Parties do not intend to use and shall not
use any portion of the proceeds of the Loans, directly or indirectly (i)
knowingly to purchase any Ineligible Securities from a Section 20 Subsidiary
during any period in which such Section 20 Subsidiary makes a market in such
Ineligible Securities, (ii) knowingly to purchase during the underwriting or
placement period Ineligible Securities being underwritten or privately placed by
a Section 20 Subsidiary, or (iii) to make payments of principal or interest on
Ineligible Securities underwritten or privately placed by a Section 20
Subsidiary and issued by or for the benefit of any Loan Party or any Affiliate
of any Loan Party.
5.1.9 FULL DISCLOSURE.
Neither this Agreement nor any other Loan Document,
nor the Merger Agreement nor any certificate, statement, agreement or other
documents furnished to the Administrative Agent or any Bank in connection
herewith or therewith, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein and therein, in light of the circumstances under which they were made,
not misleading. There is no fact known to any Loan Party which materially
adversely affects the business, financial condition or results of operations of
any Loan Party or Subsidiary of any Loan Party which has not been set forth in
this Agreement or in the certificates, statements, agreements or other documents
furnished in writing to the Administrative Agent and the Banks prior to or at
the date hereof in connection with the transactions contemplated hereby.
5.1.10 TAXES.
All federal, state, local and other tax returns
required to have been filed with respect to each Loan Party and each Subsidiary
of each Loan Party have been filed, and payment or adequate provision has been
made for the payment of all taxes, fees, assessments and other governmental
charges which have or may become due pursuant to said returns or to
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assessments received, except to the extent that such taxes, fees, assessments
and other charges are being contested in good faith by appropriate proceedings
diligently conducted and for which such reserves or other appropriate
provisions, if any, as shall be required by GAAP shall have been made. There are
no agreements or waivers extending the statutory period of limitations
applicable to any federal income tax return of any Loan Party or Subsidiary of
any Loan Party for any period.
5.1.11 CONSENTS AND APPROVALS.
No consent, approval, exemption, order or
authorization of, or a registration or filing with, any Official Body or any
other Person is required by any Law or any agreement in connection with the
execution, delivery and carrying out of this Agreement and the other Loan
Documents by any Loan Party, except as listed on SCHEDULE 5.1.11, all of which
shall have been obtained or made on or prior to the Closing Date except as
otherwise indicated on SCHEDULE 5.1.11. All consents, approvals, exemptions,
orders or authorization of, or registration or filing with, any Official Body or
any other Person as required by any Law or any agreement in connection with the
execution, delivery and carrying out of the Merger in accordance with the Merger
Agreement and the other Merger Documents have been obtained or made on or prior
to the Closing Date, except as otherwise indicated on SCHEDULE 5.1.11.
5.1.12 NO EVENT OF DEFAULT; COMPLIANCE WITH
INSTRUMENTS.
No event has occurred and is continuing and no
condition exists or will exist after giving effect to the borrowings or other
extensions of credit to be made on the Closing Date under or pursuant to the
Loan Documents which constitutes an Event of Default or Potential Default. None
of the Loan Parties or any Subsidiaries of any Loan Party is in violation of (i)
any term of its certificate of incorporation, bylaws, certificate of limited
partnership, partnership agreement, certificate of formation, limited liability
company agreement or other organizational documents or (ii) any material
agreement or instrument to which it is a party or by which it or any of its
properties may be subject or bound where such violation would constitute a
Material Adverse Change.
5.1.13 INSURANCE.
No notice has been given or claim made and no grounds
exist to cancel or avoid any of such policies or bonds or to reduce the coverage
provided thereby. Such policies and bonds provide adequate coverage from
reputable and financially sound insurers in amounts sufficient to insure the
assets and risks of each Loan Party and each Subsidiary of each Loan Party in
accordance with prudent business practice in the industry of the Loan Parties
and their Subsidiaries.
5.1.14 COMPLIANCE WITH LAWS.
The Loan Parties and their Subsidiaries are in
compliance in all material respects with all applicable Laws (other than
Environmental Laws which are specifically
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addressed in Section 5.1.18 [Environmental Matters]) in all jurisdictions in
which any Loan Party or Subsidiary of any Loan Party is doing business except
where the failure to do so would not constitute a Material Adverse Change.
5.1.15 INVESTMENT COMPANIES; REGULATED ENTITIES.
None of the Loan Parties or any Subsidiaries of any
Loan Party is an "investment company" registered or required to be registered
under the Investment Company Act of 1940 or under the "control" of an
"investment company" as such terms are defined in the Investment Company Act of
1940 and shall not become such an "investment company" or under such "control."
None of the Loan Parties or any Subsidiaries of any Loan Party is subject to any
other Federal or state statute or regulation limiting its ability to incur
Indebtedness for borrowed money.
5.1.16 PLANS AND BENEFIT ARRANGEMENTS.
(i) The Borrower and each other member of the
ERISA Group are in compliance in all material respects with any applicable
provisions of ERISA with respect to all Benefit Arrangements, Plans and
Multiemployer Plans. There has been no Prohibited Transaction with respect to
any Benefit Arrangement or any Plan or, to the best knowledge of the Borrower,
with respect to any Multiemployer Plan or Multiple Employer Plan, which could
result in any material liability of the Borrower or any other member of the
ERISA Group. The Borrower and all other members of the ERISA Group have made
when due any and all payments required to be made under any agreement relating
to a Multiemployer Plan or a Multiple Employer Plan or any Law pertaining
thereto. With respect to each Plan and Multiemployer Plan, the Borrower and each
other member of the ERISA Group (i) have fulfilled in all material respects
their obligations under the minimum funding standards of ERISA, (ii) have not
incurred any liability to the PBGC, and (iii) have not had asserted against them
any penalty for failure to fulfill the minimum funding requirements of ERISA.
All Plans, Benefit Arrangements and Multiemployer Plans have been administered
in accordance with their terms and applicable Law.
(ii) No event requiring notice to the PBGC
under Section 302(f)(4)(A) of ERISA has occurred or is reasonably expected to
occur with respect to any Plan, and no amendment with respect to which security
is required under Section 307 of ERISA has been made or is reasonably expected
to be made to any Plan.
(iii) Neither the Borrower nor any other member
of the ERISA Group has incurred or reasonably expects to incur any material
withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer
Plan. Neither the Borrower nor any other member of the ERISA Group has been
notified by any Multiemployer Plan or Multiple Employer Plan that such
Multiemployer Plan or Multiple Employer Plan has been terminated within the
meaning of Title IV of ERISA and, to the best knowledge of the Borrower, no
Multiemployer Plan or Multiple Employer Plan is reasonably expected to be
reorganized or terminated, within the meaning of Title IV of ERISA.
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5.1.17 EMPLOYMENT MATTERS.
Each of the Loan Parties and each of their Subsidiaries
is in substantial compliance with the Labor Contracts and all applicable
federal, state and local labor and employment Laws including those related to
equal employment opportunity and affirmative action, labor relations, minimum
wage, overtime, child labor, medical insurance continuation, worker adjustment
and relocation notices, immigration controls and worker and unemployment
compensation, where the failure to comply would constitute a Material Adverse
Change. There are no outstanding grievances, arbitration awards or appeals
therefrom arising out of the Labor Contracts or current or threatened strikes,
picketing, handbilling or other work stoppages or slowdowns at facilities of any
of the Loan Parties or any of their Subsidiaries which in any case would
constitute a Material Adverse Change.
5.1.18 ENVIRONMENTAL MATTERS.
The Loan Parties and their Subsidiaries are and have been
in substantial compliance with all Environmental Laws, except where the failure
to so comply could not reasonably be expected to result in a Material Adverse
Change. Neither any property of any Loan Party or any Subsidiary of any Loan
Party nor their respective operations conducted thereon violates any order of
any court of governmental authority made pursuant to Environmental Laws except
for noncompliance with respect thereto which could not reasonably be expected to
result in a Material Adverse Change . There are no threatened or pending
Environmental Claims against any Loan Party or any Subsidiary of any Loan Party
which could reasonably be expected to result in a Material Adverse Change.
Neither any Loan Party nor any Subsidiary of any Loan Party has received any
notice from any governmental or regulatory authority regarding actual or
contingent liability in connection with any release or threatened release of any
Hazardous Substance into the environment which actual or contingent liability
could reasonably be expected to result in a Material Adverse Change.
5.1.19 SENIOR DEBT STATUS.
The Obligations of each Loan Party under this Agreement,
the Guaranty Agreement and each of the other Loan Documents to which it is a
party do rank and will rank at least PARI PASSU in priority of payment with all
other Indebtedness of such Loan Party except Indebtedness of such Loan Party to
the extent secured by Permitted Liens. There is no Lien upon or with respect to
any of the properties or income of any Loan Party or Subsidiary of any Loan
Party which secures indebtedness or other obligations of any Person except for
Permitted Liens.
5.2. CONTINUATION OF REPRESENTATIONS.
The Borrower makes the representations and warranties in this
Section 5 on the date hereof and on the Closing Date and each date thereafter on
which a Loan is made or a Letter of Credit is issued as provided in and subject
to Sections 6.1 and 6.2.
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6. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT
The obligation of each Bank to make Loans and of the Issuing Bank to issue
Letters of Credit hereunder is subject to the performance by the Borrower of its
Obligations to be performed hereunder at or prior to the making of any such
Loans or issuance of such Letters of Credit and to the satisfaction of the
following further conditions:
6.1. FIRST LOANS AND LETTERS OF CREDIT.
On the Closing Date:
6.1.1 OFFICER'S CERTIFICATE.
The representations and warranties of the Borrower
contained in Section 5 and of each Loan Party in each of the other Loan
Documents shall be true and accurate on and as of the Closing Date (with each
such representation and warranty to be made after giving effect to the
consummation of the Merger) with the same effect as though such representations
and warranties had been made on and as of such date (except representations and
warranties which relate solely to an earlier date or time, which representations
and warranties shall be true and correct on and as of the specific dates or
times referred to therein), and each of the Loan Parties shall have performed
and complied with all covenants and conditions hereof and thereof, no Event of
Default or Potential Default shall have occurred and be continuing or shall
exist; and there shall be delivered to the Administrative Agent for the benefit
of each Bank a certificate of the Borrower dated the Closing Date and signed by
the Chief Executive Officer, President or Chief Financial Officer of the
Borrower to each such effect.
6.1.2 SECRETARY'S CERTIFICATE.
There shall be delivered to the Administrative Agent for
the benefit of each Bank a certificate dated the Closing Date and signed by the
Secretary or an Assistant Secretary of each of the Loan Parties, certifying as
appropriate as to:
(i) all action taken by each Loan Party in
connection with this Agreement and the other Loan Documents;
(ii) the names of the officer or officers
authorized to sign this Agreement and the other Loan Documents and the true
signatures of such officer or officers and specifying the Authorized Officers
permitted to act on behalf of each Loan Party for purposes of this Agreement and
the true signatures of such officers, on which the Administrative Agent and each
Bank may conclusively rely; and
(iii) in the case of the Borrower, copies of its
organizational documents, including its certificate of incorporation and bylaws
as in effect on the Closing Date and in the case of the certificate of
incorporation certified by the appropriate state official where such documents
are filed in a state office together with certificates from the
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appropriate state officials as to the continued existence and good standing of
the Borrower in the state of its formation and the state of its principal place
of business.
6.1.3 DELIVERY OF GUARANTY AGREEMENTS.
The Guaranty Agreement shall have been duly executed and
delivered to the Administrative Agent for the benefit of the Banks.
6.1.4 OPINION OF COUNSEL.
There shall be delivered to the Administrative Agent for
the benefit of each Bank a written opinion of Jeffry N. Quinn, the General
Counsel for the Loan Parties (who may rely on the opinions of such other counsel
as may be acceptable to the Administrative Agent), dated the Closing Date and in
form and substance satisfactory to the Administrative Agent and its counsel:
(i) as to the matters set forth in EXHIBIT
6.1.4; and
(ii) as to such other matters incident to the
transactions contemplated herein as the Administrative Agent may reasonably
request.
6.1.5 LEGAL DETAILS.
All legal details and proceedings in connection with the
transactions contemplated by this Agreement and the other Loan Documents and the
Merger Agreement and the Merger Documents shall be in form and substance
satisfactory to the Administrative Agent and counsel for the Administrative
Agent, and the Administrative Agent shall have received all such other
counterpart originals or certified or other copies of such documents and
proceedings in connection with such transactions, in form and substance
satisfactory to the Administrative Agent and said counsel, as the Administrative
Agent or said counsel may reasonably request.
6.1.6 PAYMENT OF FEES.
The Borrower shall have paid or caused to be paid to the
Administrative Agent for itself and for the account of the Banks to the extent
not previously paid the Facility Fees, all other commitment and other fees
accrued through the Closing Date and the costs and expenses for which the Agents
and the Banks are entitled to be reimbursed.
6.1.7 CONSENTS.
All material consents required to effectuate the
transactions contemplated by the Loan Documents and by the Merger Agreement and
the other Merger Documents shall have been obtained, except for those consents
disclosed on Schedule 5.1.11.
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6.1.8 OFFICER'S CERTIFICATE REGARDING MACS.
Since December 31, 1996, no Material Adverse Change
shall have occurred; prior to the Closing Date, there shall have been no
material change in the management of the Borrower (other than those changes in
management of the Borrower in connection with the Merger as described in the
Form S-4 of Arch Mineral Corporation, dated May 30, 1997, as filed with the
SEC); and there shall have been delivered to the Administrative Agent for the
benefit of each Bank a certificate dated the Closing Date and signed by the
Chief Executive Officer, President or Chief Financial Officer of the Borrower to
each such effect.
6.1.9 NO VIOLATION OF LAWS.
The making of the Loans, the issuance of the Letters of
Credit and the consummation of the Merger and of the transactions contemplated
by the Merger Documents shall not contravene any Law applicable to any Loan
Party or any of the Banks.
6.1.10 NO ACTIONS OR PROCEEDINGS.
No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, this Agreement, the other Loan Documents, the
Merger, the Merger Documents or the consummation of the transactions
contemplated hereby or thereby or which, in the Administrative Agent's sole
discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement or any of the other Loan Documents.
6.1.11 MERGER.
The Merger shall have been consummated in accordance
with the terms of the Merger Agreement, and an Authorized Officer of the
Borrower shall certify the foregoing to the Administrative Agent for the benefit
of each Bank. The Borrower shall have delivered to the Administrative Agent the
Certificate of Merger as filed by the Borrower with the Secretary of State of
the State of Delaware as certified by the Secretary of State of the State of
Delaware, evidencing the consummation of the Merger.
6.1.12 FINANCIAL PROJECTIONS; CLOSING DATE BALANCE
SHEET.
The Borrower shall have provided to the Banks pro-forma
financial projections (the "Financial Projections") for the five year period
following the Closing Date, including a balance sheet and statement of income,
with all such Financial Projections to be satisfactory in form and substance to
the Required Banks.
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6.1.13 PAYOFF OF EXISTING INDEBTEDNESS.
On or before the Closing Date, the Borrower shall have:
(x) repaid all Indebtedness, obligations, fees, interest, principal, and all
other amounts owing under the Existing Credit Facilities, (y) obtained releases
and shall have terminated of record all Liens with respect to the Existing
Credit Facilities, and (z) terminated the Existing Credit Facilities and all
commitments to make loans or issue Letters of Credit thereunder, and the
Borrower shall have provided evidence of all of the foregoing to the Required
Banks to the satisfaction of the Required Banks in their sole discretion.
6.2. EACH ADDITIONAL LOAN OR LETTER OF CREDIT.
At the time of making any Loans or issuing any Letters of Credit
other than Loans made or Letters of Credit issued on the Closing Date and after
giving effect to the proposed extensions of credit: the representations and
warranties of the Borrower contained in Section 5 and of the Loan Parties in the
other Loan Documents shall be true on and as of the date of such additional Loan
or Letter of Credit with the same effect as though such representations and
warranties had been made on and as of such date (except representations and
warranties which expressly relate solely to an earlier date or time, which
representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein) and the Borrower shall have
performed and complied with all covenants and conditions hereof; no Event of
Default or Potential Default shall have occurred and be continuing or shall
exist; the making of the Loans or issuance of such Letter of Credit shall not
contravene any Law applicable to the Borrower or any Subsidiary of the Borrower
or any of the Banks; and the Borrower shall have delivered to the Administrative
Agent, (and either each Issuing Bank, in the case of or request for a Letter of
Credit, and PNC Bank in the case of a request for a Swing Loan) a duly executed
and completed Loan Request or application for a Letter of Credit as the case may
be.
6.3. SYNDICATION.
6.3.1 SYNDICATION DATE REPRESENTATIONS AND
WARRANTIES.
(a) On the Syndication Date, the representations and
warranties of the Borrower contained in Article 5 and in the other Loan
Documents shall be true with the same effect as though such representations and
warranties had been made on such date (except representations and warranties
which expressly relate solely to an earlier date or time, which representations
and warranties shall be true and correct on and as of the specific dates or
times referred to therein) and the Borrower shall have performed and complied
with all covenants and conditions hereof, and no Event of Default or Potential
Default shall have occurred and be continuing or shall exist.
(b) On the Syndication Date, the Loan Parties shall deliver to
the Administrative Agent for the benefit of the Banks (a) an Officer's
Certificate dated as of the Syndication Date with respect to the matters set
forth in Sections 6.3.1(a), (b) a Secretary's Certificate dated as of the
Syndication Date with respect to the matters set forth in Section 6.1.2 and
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stating that there have been no changes in the charter documents or bylaws of
the Borrower or any other Loan Party since the Closing Date, (c) Revolving
Credit Notes and Bid Notes dated as of the Syndication Date which give effect to
the syndication on the Syndication Date of the Revolving Credit Commitments of
the Revolving Credit Banks which originally executed the Credit Agreement in
exchange for the original Revolving Credit Notes and Bid Notes issued to such
Banks, (d) written opinions of the counsel to the Loan Parties identified in
Section 6.1.4 with respect to such matters as the Administrative Agent may
request, and (e) acknowledgments dated as of the Syndication Date to the Loan
Documents in form and substance satisfactory to the Administrative Agent.
6.3.2 SYNDICATION COOPERATION.
The Borrower will use all reasonable efforts to assist
the Agents in syndicating the credit facilities, including participating in
meetings with potential syndicate members.
7. COVENANTS
7.1. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that until payment in full of the
Loans, Reimbursement Obligations and Letter of Credit Borrowings, and interest
thereon, expiration or termination of all Letters of Credit, satisfaction of all
of the Loan Parties' other Obligations under the Loan Documents and termination
of the Commitments, the Borrower shall and shall cause each of its Subsidiaries
to comply at all times with the following affirmative covenants:
7.1.1 PRESERVATION OF EXISTENCE, ETC.
The Borrower shall and shall cause each of its
Subsidiaries to, maintain its legal existence as a corporation, limited
partnership or limited liability company and its license or qualification and
good standing in each jurisdiction in which its ownership or lease of property
or the nature of its business makes such license or qualification necessary,
except as otherwise expressly permitted in Section 7.2.3 [Liquidations, Mergers,
Etc.].
7.1.2 PAYMENT OF LIABILITIES, INCLUDING TAXES, ETC.
The Borrower shall and shall cause each of its
Subsidiaries to, duly pay and discharge, all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits, or upon any
properties belonging to it, prior to the date on which penalties attach thereto,
and all lawful claims which, if unpaid, might become a lien or charge upon any
properties of the Borrower or any Subsidiary of the Borrower, PROVIDED that
neither the Borrower nor any Subsidiary of the Borrower shall be required to pay
any such tax, assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings.
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7.1.3 MAINTENANCE OF INSURANCE.
The Borrower shall and shall cause each of its
Subsidiaries to, insure its properties and assets against loss or damage by fire
and such other insurable hazards as such assets are commonly insured (including
fire, extended coverage, property damage, workers' compensation, public
liability and business interruption insurance) and against other risks
(including errors and omissions) in such amounts as similar properties and
assets are insured by prudent companies in similar circumstances carrying on
similar businesses, and with reputable and financially sound insurers, including
self-insurance to the extent customary.
7.1.4 MAINTENANCE OF PROPERTIES AND LEASES.
The Borrower shall and shall cause each of its
Subsidiaries to, maintain and preserve all of its respective properties,
necessary or useful in the proper conduct of the business of the Borrower or
such Subsidiary of the Borrower, in good working order and condition, ordinary
wear and tear excepted.
7.1.5 VISITATION RIGHTS.
The Borrower shall and shall cause each of its
Subsidiaries to, permit any of the officers or authorized employees or
representatives of the Administrative Agent or any of the Revolving Credit Banks
to visit and inspect during normal business hours any of its properties and to
examine and make excerpts from its books and records and discuss its business
affairs, finances and accounts with its officers, all in such detail and at such
times and as often as any of the Revolving Credit Banks may reasonably request,
PROVIDED that each Revolving Credit Bank shall provide the Borrower and the
Administrative Agent with reasonable notice prior to any visit or inspection. In
the event any Revolving Credit Bank desires to conduct an audit of the Borrower
or any Subsidiary of the Borrower, such Revolving Credit Bank shall make a
reasonable effort to conduct such audit contemporaneously with any audit to be
performed by the Administrative Agent.
7.1.6 KEEPING OF RECORDS AND BOOKS OF ACCOUNT.
The Borrower shall, and shall cause each Subsidiary of
the Borrower to, maintain and keep proper books of record and account which
enable the Borrower and its Subsidiaries to issue financial statements in
accordance with GAAP and as otherwise required by applicable Laws of any
Official Body having jurisdiction over the Borrower or any Subsidiary of the
Borrower, and in which full, true and correct entries shall be made in all
material respects of all its dealings and business and financial affairs.
7.1.7 PLANS AND BENEFIT ARRANGEMENTS.
The Borrower shall, and shall cause each other member of
the ERISA Group to, comply with ERISA, the Internal Revenue Code and other
applicable Laws applicable to Plans and Benefit Arrangements except where such
failure, alone or in conjunction
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with any other failure, would not result in a Material Adverse Change. Without
limiting the generality of the foregoing, the Borrower shall cause all of its
Plans and all Plans maintained by any member of the ERISA Group to be funded in
accordance with the minimum funding requirements of ERISA and shall make, and
cause each member of the ERISA Group to make, in a timely manner, all
contributions due to Plans, Benefit Arrangements and Multiemployer Plans.
7.1.8 COMPLIANCE WITH LAWS.
The Borrower shall and shall cause each of its
Subsidiaries to, comply with all applicable Laws, including all Environmental
Laws, in all respects, PROVIDED that it shall not be deemed to be a violation of
this Section 7.1.8 if any failure to comply with any Law would not result in
fines, penalties, remediation costs, other similar liabilities or injunctive
relief which in the aggregate would constitute a Material Adverse Change.
Without limiting the generality of the foregoing, the Borrower shall and shall
cause each of its Subsidiaries to comply with all Environmental Permits
applicable to their respective operations and properties; obtain and renew all
Environmental Permits necessary for their respective operations and properties;
and manage, use and handle all Hazardous Substances in compliance with all
applicable Environmental Laws, in each case, except for such non-compliance
which would not or could not reasonably be expected to have a Material Adverse
Change.
7.1.9 USE OF PROCEEDS.
The Borrower will use the Letters of Credit and the
proceeds of the Loans only for (i) general corporate purposes and for working
capital, or (ii) to repay all Indebtedness (including, without limitation, all
interest, principal, fees, all obligations and other amounts due and owing) and
terminate all commitments under the Existing Credit Facilities. The Borrower's
use of the Letters of Credit and the proceeds of the Loans shall not be for any
purpose which contravenes any applicable Law or any provision hereof.
7.1.10 OPERATION OF MINES.
The Borrower shall and shall cause each of its
Subsidiaries to operate their mines in all material respects in accordance with
sound coal mining practices and all applicable Federal, state and local laws,
rules and regulations, including, without limitation, laws and regulations
relating to land reclamation, pollution control and mine safety.
7.1.11 REPAYMENT OF CERTAIN INDEBTEDNESS.
The Borrower shall cause all outstanding principal,
interest, fees, and all other amounts due and owing under that certain Note
Agreement for $52,900,000 of 9.66% Senior Notes of Ashland Coal, Inc., due May
15, 2006, as amended and under that certain Note Agreement for $100,000,000
9.78% Senior Notes of Ashland Coal, Inc., due September 15, 2000, as amended, to
be repaid in the event the lenders thereunder required to consent to the "Change
of Control", as defined in such note agreements, shall have not granted such
consent in accordance with the terms of such note agreements on or before
September 1, 1997.
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7.2. NEGATIVE COVENANTS.
The Borrower covenants and agrees that until payment in full of the
Loans, Reimbursement Obligations and Letter of Credit Borrowings and interest
thereon, expiration or termination of all Letters of Credit, satisfaction of all
of the Loan Parties' other Obligations hereunder and termination of the
Commitments, the Borrower shall and shall cause each of its Subsidiaries to
comply with the following negative covenants:
7.2.1 INDEBTEDNESS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any
Indebtedness, except:
(i) Indebtedness under the Loan Documents; and
(ii) additional Indebtedness of the Borrower or
any Loan Party so long as, both before and after giving effect to any proposed
additional Indebtedness:
(y) the Borrower and its Subsidiaries shall
be in compliance with Section 7.2.10 [Maximum Leverage Ratio] and Section 7.2.11
[Minimum Interest Coverage Ratio], determined on a pro forma basis (in the case
of the Interest Coverage Ratio, as of the end of the calendar quarter most
recently ended and in the case of both the Interest Coverage Ratio and the
Leverage Ratio, as if such proposed additional Indebtedness were then
outstanding), and
(z) the covenants and defaults applicable
in respect of such proposed additional Indebtedness (other than the financial
covenants included in the Private Placement Agreements on the Closing Date,
without any further amendment thereto to make such covenants more restrictive,
which amendment is expressly prohibited) are not, taken as a whole, materially
more restrictive with respect to the Borrower and its Subsidiaries than the
covenants and defaults under this Agreement;
7.2.2 LIENS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien
on any of its property or assets, tangible or intangible, now owned or hereafter
acquired, or agree or become liable to do so, except Permitted Liens so long as
the aggregate amount of all payments by any such person in respect of all
operating leases which subject the assets of the Borrower or any of its
Subsidiaries to any Permitted Lien (as the type of such lease and the amount of
such payments would be determined under GAAP) and all Indebtedness secured by
such Permitted Liens does not at any time exceed the greater of (i)
$125,000,000, or (ii) the amount equal to five percent (5%) of the total assets
of the Borrower and its Subsidiaries, as determined and consolidated in
accordance with GAAP.
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7.2.3 LIQUIDATIONS, MERGERS, CONSOLIDATIONS,
ACQUISITIONS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, dissolve, liquidate or wind-up its affairs, or become a party
to any merger or consolidation, or acquire by purchase, lease or otherwise all
or substantially all of the assets or capital stock of any other Person,
PROVIDED that
(1) any Subsidiary of the Borrower may consolidate or
merge into any other Subsidiary of the Borrower, and
(2) any Loan Party may acquire, whether by purchase
or by merger, (A) all of the ownership interests of another Person or (B)
substantially all of assets of another Person or of a business or division of
another Person (each a "Permitted Acquisition"), PROVIDED that each of the
following requirements is met:
(i) the board of directors or other equivalent
governing body of such Person shall have approved such Permitted Acquisition;
(ii) the business acquired, or the business
conducted by the Person whose ownership interests are being acquired, as
applicable, shall be substantially the same as one or more line or lines of
business conducted by the Loan Parties and shall comply with Section 7.2.7
[Continuation of or Change in Business];
(iii) no Potential Default or Event of Default
shall exist immediately prior to and after giving effect to such Permitted
Acquisition;
(iv) the Borrower and its Subsidiaries shall be
in compliance with the covenants contained in Sections 7.2.10 [Maximum Leverage
Ratio] and 7.2.11 [Minimum Interest Coverage Ratio] determined on a pro forma
basis after giving effect to such Permitted Acquisition (including in such
computation Indebtedness or other liabilities assumed or incurred in connection
with such Permitted Acquisition).
7.2.4 DISPOSITIONS OF ASSETS OR SUBSIDIARIES.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or
dispose of, voluntarily or involuntarily, any of its properties or assets,
tangible or intangible (including sale, assignment, discount or other
disposition of accounts, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares of beneficial
interest, partnership interests or limited liability company interests of a
Subsidiary of the Borrower), except:
(i) transactions involving the sale of
inventory in the ordinary course of business;
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(ii) any sale, transfer or lease of assets in
the ordinary course of business which are no longer necessary or required in the
conduct of the Borrower's or such Subsidiary's business;
(iii) any sale, transfer or lease of assets by
any wholly-owned Subsidiary of the Borrower to the Borrower or to any other
wholly-owned Subsidiary of the Borrower;
(iv) any sale, transfer or lease of assets in
the ordinary course of business which are replaced by substitute assets
(acquired or leased); or
(v) any sale, transfer or lease (including
any lease transaction under Section 7.2.9) of assets, other than those
specifically excepted pursuant to clauses (i) through (iv) above, provided that
(i) at the time of any disposition, no Event of Default shall exist or shall
result from such disposition, and (ii) the aggregate net book value of all
assets so sold by the Borrower and its Subsidiaries shall not exceed in any
calendar year the greater of (x) $100,000,000 or (y) 5% of the total assets of
the Borrower and its Subsidiaries (as of the last day of such calendar year),
determined and consolidated in accordance with GAAP.
7.2.5 AFFILIATE TRANSACTIONS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, enter into or carry out any transaction (including purchasing
property or services from or selling property or services to any Affiliate of
the Borrower or any Subsidiary of the Borrower or other Person) unless such
transaction is not otherwise prohibited by this Agreement and is entered into in
the ordinary course of business upon fair and reasonable arm's length terms and
conditions.
7.2.6 SUBSIDIARIES, PARTNERSHIPS AND JOINT VENTURES.
The Borrower shall not, and shall not permit any of
its Subsidiaries to, own or create directly or indirectly any Subsidiaries other
than (i) any Significant Subsidiary which has joined this Agreement as Guarantor
on the Closing Date; (ii) any Significant Subsidiary formed or acquired after
the Closing Date which becomes a Guarantor in accordance with Section 10.18
[Joinder of Guarantors]; (iii) any Subsidiary which after the Closing Date
becomes a Significant Subsidiary and which upon becoming a Significant
Subsidiary becomes a Guarantor in accordance with Section 10.18 [Joinder of
Guarantors] and (iv) any Subsidiary which is not a Significant Subsidiary. The
Borrower shall cause any of its Subsidiaries which at any time becomes a
Significant Subsidiary to become a Guarantor in accordance with Section 10.18
[Joinder of Guarantors]. Notwithstanding the foregoing provisions of this
Section 7.2.7, with respect to those Significant Subsidiaries of Ashland Coal ,
Inc., as of the Closing Date, the Borrower shall cause such Significant
Subsidiaries to join the Guaranty Agreement in accordance with Section 10.18
within thirty (30) days following the Closing Date. Neither the Borrower nor any
Subsidiary of the Borrower shall become or agree to (1) become a general or
limited partner in any general or limited partnership, except that the Loan
Parties may be general
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or limited partners in other Loan Parties or may make Investments in joint
ventures (so as long as the joint venture is engaged in a line of business
permitted by Section 7.2.7 [Continuation of or Change in Business] and such
joint venture interests are acquired in an arms-length transaction); provided,
however, that the aggregate permitted Investments in all joint ventures shall
not at any time exceed, for all Loan Parties and their Subsidiaries, $30
million, or (2) become a member or manager of, or hold a limited liability
company interest in, a limited liability company, except that the Loan Parties
may be members or managers of, or hold limited liability company interests in,
other Loan Parties.
7.2.7 CONTINUATION OF OR CHANGE IN BUSINESS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, engage in any business other than the business substantially as
conducted and operated by the Borrower or such Subsidiary as of the date of
consummation of the Merger and any business substantially related thereto, and
neither the Borrower nor any Subsidiary of the Borrower shall permit any
material change in such business.
7.2.8 PLANS AND BENEFIT ARRANGEMENTS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, engage in a Prohibited Transaction with any Plan, Benefit
Arrangement or Multiemployer Plan which, alone or in conjunction with any other
circumstances or set of circumstances resulting in liability under ERISA or
otherwise violate ERISA:
7.2.9 OFF-BALANCE SHEET FINANCING.
The Borrower shall not, and shall not permit any of
its Subsidiaries to, engage in any off-balance sheet transaction (i.e., the
liabilities in respect of which do not appear on the liability side of the
balance sheet) providing the functional equivalent of borrowed money (including
asset securitizations, sale/leasebacks, Synthetic Leases or other non-capital
leases), in excess in the aggregate for the Borrower and its Subsidiaries, as of
any date of determination of the greater of (x) $100,000,000, or (y) 5% of total
assets of the Borrower and its Subsidiaries, determined and consolidated in
accordance with GAAP as of the date of determination. For purposes of this
Section 7.2.9, a "Synthetic Lease" shall mean any lease transaction under which
the parties intend that (i) the lease will be treated as an "operating lease" by
the lessee pursuant to Statement of Financial Accounting Standards No. 13, as
amended, and (ii) the lessee will be entitled to various tax benefits ordinarily
available to owners (as opposed to lessees) of like property.
7.2.10 MAXIMUM LEVERAGE RATIO.
The Borrower shall not at any time permit Consolidated
Debt to exceed sixty percent (60%) of Consolidated Capitalization.
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7.2.11 MINIMUM INTEREST COVERAGE RATIO.
The Borrower shall not permit the ratio of Consolidated
EBITDA to consolidated net interest expense of the Borrower and its
Subsidiaries, calculated as of the last day of each calendar quarter for the
four calendar quarters then ended, to be less than 3.0 to 1.0.
7.2.12 NO RESTRICTION ON DIVIDENDS.
The Borrower shall not, and shall not permit any of its
Subsidiaries to, enter into or be bound by any agreement which prohibits or
restricts, in any manner, the payment of dividends (whether in cash, securities,
property or otherwise).
7.3. REPORTING REQUIREMENTS.
The Borrower covenants and agrees that until payment in full of the
Loans, Reimbursement Obligations and Letter of Credit Borrowings and interest
thereon, expiration or termination of all Letters of Credit, satisfaction of all
of the Loan Parties' other Obligations hereunder and under the other Loan
Documents and termination of the Commitments, the Borrower will furnish or cause
to be furnished to the Administrative Agent and each of the Revolving Credit
Banks:
7.3.1 QUARTERLY FINANCIAL STATEMENTS.
As soon as available and in any event within forty-five
(45) calendar days after the end of each of the first three fiscal quarters in
each fiscal year, financial statements of the Borrower, consisting of a
consolidated balance sheet as of the end of such fiscal quarter and related
consolidated statements of income, stockholders' equity and cash flows for the
fiscal quarter then ended and the fiscal year through that date, all in
reasonable detail and certified (subject to normal year-end audit adjustments)
by the Chief Executive Officer, President or Chief Financial Officer of the
Borrower as having been prepared in accordance with GAAP, consistently applied,
and setting forth in comparative form the respective financial statements for
the corresponding date and period in the previous fiscal year. The Borrower will
be deemed to have complied with the delivery requirements of this Section 7.3.1
if within forty-five (45) days after the end of its fiscal quarter, the Borrower
delivers to the Administrative Agents and each of the Banks a copy of the
Borrower's Form 10-Q as filed with the SEC and the financial statements
contained therein meets the requirements described in this Section.
7.3.2 ANNUAL FINANCIAL STATEMENTS.
As soon as available and in any event within ninety (90)
days after the end of each fiscal year of the Borrower, financial statements of
the Borrower consisting of a consolidated balance sheet as of the end of such
fiscal year, and related consolidated statements of income, stockholders' equity
and cash flows for the fiscal year then ended, all in reasonable detail and
setting forth in comparative form the financial statements as of the end of and
for the preceding fiscal year, and certified by independent certified public
accountants of nationally
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recognized standing satisfactory to the Administrative Agent. The certificate or
report of accountants shall be free of qualifications (other than any
consistency qualification that may result from a change in the method used to
prepare the financial statements as to which such accountants concur) and shall
not indicate the occurrence or existence of any event, condition or contingency
which would materially impair the prospect of payment or performance of any
covenant, agreement or duty of any Loan Party under any of the Loan Documents.
The Borrower will be deemed to have complied with the delivery requirements of
this Section 7.3.2 if within ninety (90) days after the end of its fiscal year,
the Borrower delivers to the Administrative Agent and each of the Banks a copy
of the Borrower's Annual Report and Form 10-K as filed with the SEC and the
financial statements and certification of public accountants contained therein
meets the requirements described in this Section.
7.3.3 CERTIFICATE OF THE BORROWER.
Concurrently with the financial statements of the
Borrower furnished to the Administrative Agent and to the Revolving Credit Banks
pursuant to Sections 7.3.1 [Quarterly Financial Statements] and 7.3.2 [Annual
Financial Statements], a certificate of the Borrower signed by the Chief
Executive Officer, President or Chief Financial Officer of the Borrower, in the
form of EXHIBIT 7.3.3, to the effect that, except as described pursuant to
Section 7.3.4 [Notice of Default], (i) the representations and warranties of the
Borrower contained in Section 5 and in the other Loan Documents are true on and
as of the date of such certificate with the same effect as though such
representations and warranties had been made on and as of such date (except
representations and warranties which expressly relate solely to an earlier date
or time which shall be true and correct on and as of the specific dates or times
referred to therein) and the Loan Parties have performed and complied with all
covenants and conditions hereof, (ii) no Event of Default or Potential Default
exists and is continuing on the date of such certificate and (iii) containing
calculations in sufficient detail to demonstrate compliance as of the date of
such financial statements with all financial covenants contained in Section 7.2
[Negative Covenants].
7.3.4 NOTICE OF DEFAULT.
Promptly after any officer of the Borrower has learned
of the occurrence of an Event of Default or Potential Default, a certificate
signed by the Chief Executive Officer, President or Chief Financial Officer of
the Borrower setting forth the details of such Event of Default or Potential
Default and the action which the Borrower proposes to take with respect thereto.
7.3.5 NOTICE OF LITIGATION.
Promptly after the commencement thereof or promptly
after the determination thereof, notice of all actions, suits, proceedings or
investigations before or by any Official Body or any other Person against any
Loan Party or any Subsidiary of any Loan Party, which (x) involve or could be
reasonably expected to involve assessments against any Loan Party or any
Subsidiary of any Loan Party in excess of $10,000,000, individually or in the
aggregate,
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or (y) involve a claim or series of claims which if adversely determined would
constitute a Material Adverse Change.
7.3.6 NOTICE OF CHANGE IN DEBT RATING.
Within two (2) Business Days after Standard & Poor's or
Moody's announces a change in the Borrower's Debt Rating, notice of such change.
Borrower will deliver together with such notice a copy of any written
notification which Borrower received from the applicable rating agency regarding
such change of Debt Rating.
7.3.7 NOTICES REGARDING PLANS AND BENEFIT
ARRANGEMENTS.
7.3.7.1 CERTAIN EVENTS.
Promptly upon becoming aware of the occurrence
thereof, notice (including the nature of the event and, when known, any action
taken or threatened by the Internal Revenue Service or the PBGC with respect
thereto) of:
(i) any Reportable Event with respect to the
Borrower or any other member of the ERISA Group (regardless of whether the
obligation to report said Reportable Event to the PBGC has been waived),
(ii) any Prohibited Transaction which could
subject the Borrower or any other member of the ERISA Group to a civil penalty
assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of
the Internal Revenue Code in connection with any Plan, any Benefit Arrangement
or any trust created thereunder,
(iii) any assertion of material withdrawal
liability with respect to any Multiemployer Plan,
(iv) any partial or complete withdrawal from
a Multiemployer Plan by the Borrower or any other member of the ERISA Group
under Title IV of ERISA (or assertion thereof), where such withdrawal is likely
to result in material withdrawal liability,
(v) any cessation of operations (by the
Borrower or any other member of the ERISA Group) at a facility in the
circumstances described in Section 4062(e) of ERISA,
(vi) withdrawal by the Borrower or any other
member of the ERISA Group from a Multiple Employer Plan,
(vii) a failure by the Borrower or any other
member of the ERISA Group to make a payment to a Plan required to avoid
imposition of a Lien under Section 302(f) of ERISA,
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(viii) the adoption of an amendment to a Plan
requiring the provision of security to such Plan pursuant to Section 307 of
ERISA, or
(ix) any change in the actuarial assumptions or
funding methods used for any Plan, where the effect of such change is to
materially increase or materially reduce the unfunded benefit liability or
obligation to make periodic contributions.
7.3.7.2 NOTICES OF INVOLUNTARY TERMINATION
AND ANNUAL REPORTS.
As soon as available or within thirty (30) days
after receipt thereof, copies of (a) all notices received by the Borrower or any
other member of the ERISA Group of the PBGC's intent to terminate any Plan
administered or maintained by the Borrower or any member of the ERISA Group, or
to have a trustee appointed to administer any such Plan; and (b) at the request
of the Administrative Agent or any Bank each annual report (IRS Form 5500
series) and all accompanying schedules, the most recent actuarial reports, the
most recent financial information concerning the financial status of each Plan
administered or maintained by the Borrower or any other member of the ERISA
Group, and schedules showing the amounts contributed to each such Plan by or on
behalf of the Borrower or any other member of the ERISA Group in which any of
their personnel participate or from which such personnel may derive a benefit,
and each Schedule B (Actuarial Information) to the annual report filed by the
Borrower or any other member of the ERISA Group with the Internal Revenue
Service with respect to each such Plan.
7.3.7.3 NOTICE OF VOLUNTARY TERMINATION.
Promptly upon the filing thereof, copies of any
Form 5310, or any successor or equivalent form to Form 5310, filed with the PBGC
in connection with the termination of any Plan.
8. DEFAULT
8.1. EVENTS OF DEFAULT.
An Event of Default shall mean the occurrence or existence of any
one or more of the following events or conditions (whatever the reason therefor
and whether voluntary, involuntary or effected by operation of Law):
8.1.1 PAYMENTS UNDER LOAN DOCUMENTS.
The Borrower shall fail to pay (i) any principal of any
Loan (including scheduled installments, mandatory prepayments or the payment due
at maturity), Reimbursement Obligation or Letter of Credit Borrowing when such
principal is due hereunder or (ii) any interest on any Loan, Reimbursement
Obligation or Letter of Credit Borrowing or any
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other amount owing hereunder or under the other Loan Documents within three (3)
Business Days after such interest or other amount becomes due in accordance with
the terms hereof or thereof;
8.1.2 BREACH OF WARRANTY.
Any representation or warranty made at any time by the
Borrower herein or by any of the Loan Parties in any other Loan Document, or in
any certificate, other instrument or statement furnished pursuant to the
provisions hereof or thereof, shall prove to have been false or misleading in
any material respect as of the time it was made or furnished;
8.1.3 BREACH OF NEGATIVE COVENANTS OR VISITATION
RIGHTS.
Any of the Loan Parties shall default in the observance
or performance of any covenant contained in Section 7.1.5 [Visitation Rights] or
Section 7.2 [Negative Covenants];
8.1.4 BREACH OF OTHER COVENANTS.
Any of the Loan Parties shall default in the observance
or performance of any other covenant, condition or provision hereof or of any
other Loan Document and such default shall continue unremedied for a period of
thirty (30) Business Days after any officer of any Loan Party becomes aware of
the occurrence thereof (such grace period to be applicable only in the event
such default can be remedied by corrective action of the Loan Parties as
determined by the Administrative Agent in its sole discretion);
8.1.5 DEFAULTS IN OTHER AGREEMENTS OR INDEBTEDNESS.
A default or event of default shall occur at any time
under the terms of any other agreement involving borrowed money or the extension
of credit or any other Indebtedness under which any Loan Party or Subsidiary of
any Loan Party may be obligated as a borrower or guarantor in excess of
$10,000,000 in the aggregate, and such breach, default or event of default
consists of the failure to pay (beyond any period of grace permitted with
respect thereto, whether waived or not) any indebtedness when due (whether at
stated maturity, by acceleration or otherwise) or if such breach or default
permits or causes the acceleration of any indebtedness (whether or not such
right shall have been waived) or the termination of any commitment to lend;
8.1.6 JUDGMENTS OR ORDERS.
Any judgments or orders for the payment of money in
excess of $10,000,000 in the aggregate shall be entered against any Loan Party
by a court having jurisdiction in the premises, which judgment is not
discharged, vacated, bonded or stayed pending appeal within a period of thirty
(30) days from the date of entry; PROVIDED, HOWEVER, that any such judgment or
order shall not be an Event of Default under this Section 8.1.6 [Judgments
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or Orders] if and for so long as (i) the amount of such judgment or order in
excess of $10,000,000 is covered by a valid and binding policy of insurance
between the defendant and the insurer covering payment thereof and (ii) such
insurer, which shall be rated at least "A" by A.M. Best Company, has been
notified of, and has not disputed the claim made for payment of, the amount of
such judgment or order.
8.1.7 LOAN DOCUMENT UNENFORCEABLE.
Any of the Loan Documents shall cease to be legal, valid
and binding agreements enforceable against the party executing the same or such
party's successors and assigns (as permitted under the Loan Documents) in
accordance with the respective terms thereof or shall in any way be terminated
(except in accordance with its terms) or become or be declared ineffective or
inoperative or shall in any way be challenged or contested or cease to give or
provide the respective Liens, security interests, rights, titles, interests,
remedies, powers or privileges intended to be created thereby;
8.1.8 UNINSURED LOSSES; PROCEEDINGS AGAINST ASSETS.
Any of the Loan Parties' or any of their Subsidiaries'
assets are attached, seized, levied upon or subjected to a writ or distress
warrant; or such come within the possession of any receiver, trustee, custodian
or assignee for the benefit of creditors and the same is not cured within thirty
(30) days thereafter;
8.1.9 NOTICE OF LIEN OR ASSESSMENT.
A notice of Lien or assessment in excess of $10,000,000
which is not a Permitted Lien is filed of record with respect to all or any part
of any of the Loan Parties' or any of their Subsidiaries' assets by the United
States, or any department, agency or instrumentality thereof, or by any state,
county, municipal or other governmental agency, including the PBGC, or any taxes
or debts owing at any time or times hereafter to any one of these becomes
payable and the same is not paid within thirty (30) days after the same becomes
payable;
8.1.10 INSOLVENCY.
Any Loan Party or any Subsidiary of a Loan Party ceases
to be solvent or admits in writing its inability to pay its debts as they
mature;
8.1.11 EVENTS RELATING TO PLANS AND BENEFIT
ARRANGEMENTS.
Any of the following occurs: (i) any Reportable Event,
which the Administrative Agent determines in good faith constitutes grounds for
the termination of any Plan by the PBGC or the appointment of a trustee to
administer or liquidate any Plan, shall have occurred and be continuing; (ii)
proceedings shall have been instituted or other action taken to terminate any
Plan, or a termination notice shall have been filed with respect to any Plan;
(iii) a
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trustee shall be appointed to administer or liquidate any Plan; (iv) the PBGC
shall give notice of its intent to institute proceedings to terminate any Plan
or Plans or to appoint a trustee to administer or liquidate any Plan; and, in
the case of the occurrence of (i), (ii), (iii) or (iv) above, the Administrative
Agent determines in good faith that the amount of the Borrower's liability is
likely to exceed 10% of its Consolidated Tangible Net Worth; (v) the Borrower or
any member of the ERISA Group shall fail to make any contributions when due to a
Plan or a Multiemployer Plan; (vi) the Borrower or any other member of the ERISA
Group shall make any amendment to a Plan with respect to which security is
required under Section 307 of ERISA; (vii) the Borrower or any other member of
the ERISA Group shall withdraw completely or partially from a Multiemployer
Plan; (viii) the Borrower or any other member of the ERISA Group shall withdraw
(or shall be deemed under Section 4062(e) of ERISA to withdraw) from a Multiple
Employer Plan; or (ix) any applicable Law is adopted, changed or interpreted by
any Official Body with respect to or otherwise affecting one or more Plans,
Multiemployer Plans or Benefit Arrangements and, with respect to any of the
events specified in (v), (vi), (vii), (viii) or (ix), the Administrative Agent
determines in good faith that any such occurrence would be reasonably likely to
materially and adversely affect the total enterprise represented by the Borrower
and the other members of the ERISA Group;
8.1.12 CESSATION OF BUSINESS.
The Loan Parties, taken as a whole, cease to conduct
their business as contemplated, except as expressly permitted under Section
7.2.3 [Liquidations, Mergers, Etc.] or 7.2.4 [Dispositions of Assets and
Subsidiaries], or are enjoined, restrained or in any way prevented by court
order from conducting all or any material part of their business and such
injunction, restraint or other preventive order is not dismissed within thirty
(30) days after the entry thereof;
8.1.13 CHANGE OF CONTROL.
(i) Following the Merger, any person or
group of persons (within the meaning of Sections 13(d) or 14(a) of the
Securities Exchange Act of 1934, as amended) other than Ashland Inc. shall have
acquired beneficial ownership of (within the meaning of Rule 13d-3 promulgated
by the SEC under said Act) 35% or more of the voting capital stock of the
Borrower; or (ii) within a period of twelve (12) consecutive calendar months,
individuals who were directors of the Borrower on the first day of such period
shall cease to constitute a majority of the board of directors of the Borrower;
8.1.14 INVOLUNTARY PROCEEDINGS.
A proceeding shall have been instituted in a court
having jurisdiction in the premises seeking a decree or order for relief in
respect of any Loan Party or Subsidiary of a Loan Party in an involuntary case
under any applicable bankruptcy, insolvency, reorganization or other similar law
now or hereafter in effect, or for the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator, conservator (or similar official) of
any Loan Party or Subsidiary of a Loan Party for any substantial part of its
property, or for the
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winding-up or liquidation of its affairs, and such proceeding shall remain
undisguised or unseated and in effect for a period of thirty (30) consecutive
days or such court shall enter a decree or order granting any of the relief
sought in such proceeding; or
8.1.15 VOLUNTARY PROCEEDINGS.
Any Loan Party or Subsidiary of a Loan Party shall
commence a voluntary case under any applicable bankruptcy, insolvency,
reorganization or other similar law now or hereafter in effect, shall consent to
the entry of an order for relief in an involuntary case under any such law, or
shall consent to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator, conservator (or other similar
official) of itself or for any substantial part of its property or shall make a
general assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any action in furtherance of any of
the foregoing.
8.2. CONSEQUENCES OF EVENT OF DEFAULT.
8.2.1 EVENTS OF DEFAULT OTHER THAN BANKRUPTCY,
INSOLVENCY OR REORGANIZATION PROCEEDINGS.
If an Event of Default specified under Sections 8.1.1
through 8.1.13 shall occur and be continuing, the Banks and the Administrative
Agent shall be under no further obligation to make Revolving Credit Loans, Swing
Loans or Bid Loans or issue Letters of Credit, as the case may be, and the
Administrative Agent may, and upon the request of the Required Banks, shall by
written notice to the Borrower, take one or both of the following actions: (i)
terminate the Commitments and thereupon the Commitments shall be terminated and
of no further force and effect, or (ii) declare the unpaid principal amount of
the Revolving Credit Loans and Swing Loans then outstanding and all interest
accrued thereon, any unpaid fees and all other Indebtedness of the Borrower to
the Revolving Credit Banks hereunder and thereunder to be forthwith due and
payable, and the same shall thereupon become and be immediately due and payable
to the Administrative Agent for the benefit of each Revolving Credit Bank
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived, and (iii) require the Borrower to, and the
Borrower shall thereupon, deposit in a non-interest-bearing account with the
Administrative Agent, as cash collateral for its Obligations under the Loan
Documents, an amount equal to the maximum amount currently or at any time
thereafter available to be drawn on all outstanding Letters of Credit, and the
Borrower hereby pledges to the Administrative Agent and the Banks, and grants to
the Administrative Agent and the Banks a security interest in, all such cash as
security for such Obligations. Upon the curing of all existing Events of Default
to the satisfaction of the Required Banks, the Administrative Agent shall return
such cash collateral to the Borrower; and
8.2.2 BANKRUPTCY, INSOLVENCY OR REORGANIZATION
PROCEEDINGS.
If an Event of Default specified under Section 8.1.14
[Involuntary Proceedings] or 8.1.15 [Voluntary Proceedings] shall occur, the
Commitments shall
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automatically terminate and be of no further force and effect, the Banks shall
be under no further obligations to make Revolving Credit Loans, Swing Loans or
Bid Loans hereunder or to issue Letters of Credit and the unpaid principal
amount of the Loans then outstanding and all interest accrued thereon, any
unpaid fees and all other Indebtedness of the Borrower to the Banks hereunder
and thereunder shall be immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived;
and
8.2.3 SET-OFF.
If an Event of Default shall occur and be continuing,
any Bank to whom any Obligation is owed by any Loan Party hereunder or under any
other Loan Document or any participant of such Bank which has agreed in writing
to be bound by the provisions of Section 9.13 [Equalization of Banks] and any
branch, Subsidiary or Affiliate of such Bank or participant anywhere in the
world shall have the right, in addition to all other rights and remedies
available to it, without notice to such Loan Party, to set-off against and apply
to the then unpaid balance of all the Loans and all other Obligations of the
Borrower and the other Loan Parties hereunder or under any other Loan Document
any debt owing to, and any other funds held in any manner for the account of,
the Borrower or such other Loan Party by such Bank or participant or by such
branch, Subsidiary or Affiliate, including all funds in all deposit accounts
(whether time or demand, general or special, provisionally credited or finally
credited, or otherwise) now or hereafter maintained by the Borrower or such
other Loan Party for its own account (but not including funds held in custodian
or trust accounts) with such Bank or participant or such branch, Subsidiary or
Affiliate. Such right shall exist whether or not any Bank or the Administrative
Agent shall have made any demand under this Agreement or any other Loan
Document, whether or not such debt owing to or funds held for the account of the
Borrower or such other Loan Party is or are matured or unmatured and regardless
of the existence or adequacy of any Guaranty or any other security, right or
remedy available to any Bank or the Administrative Agent; and
8.2.4 SUITS, ACTIONS, PROCEEDINGS.
If an Event of Default shall occur and be continuing,
and whether or not the Administrative Agent shall have accelerated the maturity
of Committed Loans pursuant to any of the foregoing provisions of this Section
8.2, the Agents or any Bank, if owed any amount with respect to the Loans, may
proceed to protect and enforce its rights by suit in equity, action at law
and/or other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Agreement or the other Loan Documents,
including as permitted by applicable Law the obtaining of the EX PARTE
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of any Agent or such Bank; and
8.2.5 APPLICATION OF PROCEEDS.
From and after the date on which the Administrative
Agent shall have taken any action pursuant to this Section 8.2 and until all
Obligations of the Loan Parties
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have been paid in full, any and all proceeds received by the Administrative
Agent from the exercise of any remedy by the Administrative Agent, shall be
applied as follows:
(i) first, to reimburse the Administrative
Agent and the Banks for out-of-pocket costs, expenses and disbursements,
including reasonable attorneys' and paralegals' fees and legal expenses,
incurred by the Administrative Agent or the Banks in connection with collection
of any Obligations of any of the Loan Parties under any of the Loan Documents;
(ii) second, to the repayment of all
Indebtedness then due and unpaid of the Loan Parties to the Banks incurred under
this Agreement or any of the other Loan Documents, whether of principal,
interest, fees, expenses or otherwise, in such manner as the Administrative
Agent may determine in its discretion; and
(iii) the balance, if any, as required by Law.
8.2.6 OTHER RIGHTS AND REMEDIES.
In addition to all of the rights and remedies contained
in this Agreement or in any of the other Loan Documents, the Administrative
Agent shall have all of the rights and remedies under applicable Law, all of
which rights and remedies shall be cumulative and non-exclusive, to the extent
permitted by Law. The Administrative Agent may, and upon the request of the
Required Banks shall, exercise all post-default rights granted to the
Administrative Agent and the Banks under the Loan Documents or applicable Law.
8.3. RIGHT OF COMPETITIVE BID LOAN BANKS.
If any Event of Default shall occur and be continuing, the Banks
which have any Bid Loans then outstanding to the Borrower (the "Bid Loan Banks")
shall not be entitled to accelerate payment of the Bid Loans or to exercise any
right or remedy related to the collection of the Bid Loans until the Commitments
shall be terminated hereunder pursuant to Section 8.2. Upon such a termination
of the Commitments: (i) references to Revolving Credit Loans in Section 8.2
shall be deemed to apply also to the Bid Loans and the Bid Loan Banks shall be
entitled to all enforcement rights given to a holder of a Revolving Credit Loan
in Section 8.2, and (ii) the definition of Required Banks shall be changed as
provided in Section 1.1 so that each Bank shall have voting rights hereunder in
proportion to its share of the total Loans outstanding; provided that each
Designating Bank shall serve as the agent of its Designated Lender and as such
shall exercise all voting, approval and related rights on behalf of its
Designated Lender as more fully described in Section 10.11.3 and in the
Designation Agreement.
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9. THE AGENTS
9.1. APPOINTMENT.
Each Bank hereby irrevocably designates, appoints and authorizes:
(i) PNC Bank to act as Administrative Agent for such Bank under this Agreement
and the other Loan Documents for such Bank under this Agreement and to execute
and deliver or accept on behalf of each of the Banks the other Loan Documents,
and (ii) authorizes each of PNC Bank and Morgan to act as Agent for such Bank
under this Agreement. Each Bank hereby irrevocably authorizes, the
Administrative Agent to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and any other instruments and
agreements referred to herein, and to exercise such powers and to perform such
duties hereunder as are specifically delegated to or required of the Agents, the
Administrative Agent or any of them by the terms hereof, together with such
powers as are reasonably incidental thereto. PNC Bank agrees to act as the
Administrative Agent on behalf of the Banks to the extent provided in this
Agreement, and each of PNC Bank and Morgan agrees to act as Agent on behalf of
the Banks to the extent provided in this Agreement.
9.2. DELEGATION OF DUTIES.
The Agents and the Administrative Agent may perform any of their
respective duties hereunder by or through agents or employees (PROVIDED such
delegation does not constitute a relinquishment of their respective duties as
Agents or the Administrative Agent, as the case may be) and, subject to Sections
9.5 [Reimbursement and Indemnification of Agents by the Borrower, Etc.] and 9.6
[Exculpatory Provisions; Limitation of Liability], shall be entitled to engage
and pay for the advice or services of any attorneys, accountants or other
experts concerning all matters pertaining to its duties hereunder and to rely
upon any advice so obtained.
9.3. NATURE OF DUTIES; INDEPENDENT CREDIT INVESTIGATION.
Neither the Agents nor the Administrative Agent shall have any
duties or responsibilities except those expressly set forth in this Agreement
and no implied covenants, functions, responsibilities, duties, obligations, or
liabilities shall be read into this Agreement or otherwise exist. The duties of
the Administrative Agent and of the Agents shall be mechanical and
administrative in nature; neither the Administrative Agent nor the Agents shall
have by reason of this Agreement a fiduciary or trust relationship in respect of
any Bank; and nothing in this Agreement, expressed or implied, is intended to or
shall be so construed as to impose upon the Administrative Agent or any Agent
any obligations in respect of this Agreement except as expressly set forth
herein. Without limiting the generality of the foregoing, the use of the term
"Agents" in this Agreement with reference to the Agents or Administrative Agent,
as the case may be, is not intended to connote any fiduciary or other implied
(or express) obligations arising under agency doctrine of any applicable Law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties. Each Bank expressly acknowledges (i) that neither the
Administrative Agent nor any Agent has made any representations or warranties to
it and that no
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act by the Administrative Agent or any Agent hereafter taken, including any
review of the affairs of any of the Loan Parties, shall be deemed to constitute
any representation or warranty by the Administrative Agent or any Agent to any
Bank; (ii) that it has made and will continue to make, without reliance upon the
Administrative Agent or any Agent, its own independent investigation of the
financial condition and affairs and its own appraisal of the creditworthiness of
each of the Loan Parties in connection with this Agreement and the making and
continuance of the Loans hereunder; and (iii) except as expressly provided
herein, that neither the Administrative Agent nor any Agent shall have any duty
or responsibility, either initially or on a continuing basis, to provide any
Bank with any credit or other information with respect thereto, whether coming
into its possession before the making of any Loan, the issuance of any Letter of
Credit or at any time or times thereafter.
9.4. ACTIONS IN DISCRETION OF AGENTS; INSTRUCTIONS FROM THE BANKS.
The Administrative Agent and each Agent agrees, upon the written
request of the Required Banks, to take or refrain from taking any action of the
type specified as being within the Administrative Agent's or such Agent's
rights, powers or discretion herein, PROVIDED that neither the Administrative
Agent nor any Agent shall be required to take any action which exposes the
Administrative Agent or any Agent to personal liability or which is contrary to
this Agreement or any other Loan Document or applicable Law. In the absence of a
request by the Required Banks, the Administrative Agent and each Agent shall
have authority, in their sole discretion, to take or not to take any such
action, unless this Agreement specifically requires the consent of the Required
Banks or all of the Banks. Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Banks, subject to Section 9.6
[Exculpatory Provisions, Etc.]. Subject to the provisions of Section 9.6, no
Bank shall have any right of action whatsoever against the Administrative Agent
or any Agent as a result of the Administrative Agent or any Agent acting or
refraining from acting hereunder in accordance with the instructions of the
Required Banks, or in the absence of such instructions, in the absolute
discretion of the Administrative Agent or the Agents, as the case may be.
9.5. REIMBURSEMENT AND INDEMNIFICATION OF AGENTS BY THE BORROWER.
The Borrower unconditionally agrees to pay or reimburse the
Administrative Agent and each Agent and hold the Administrative Agent and each
Agent harmless against (a) liability for the payment of all reasonable
out-of-pocket costs, expenses and disbursements, including fees and expenses of
outside counsel, appraisers and environmental consultants, incurred by the
Administrative Agent or any Agent (i) in connection with the development,
negotiation, preparation, printing, execution, administration, syndication,
interpretation and performance of this Agreement and the other Loan Documents,
(ii) relating to any requested amendments, waivers or consents pursuant to the
provisions hereof, (iii) in connection with the enforcement of this Agreement or
any other Loan Document or collection of amounts due hereunder or thereunder or
the proof and allowability of any claim arising under this Agreement or any
other Loan Document, whether in bankruptcy or receivership proceedings or
otherwise, and (iv) in any workout or restructuring or in connection with the
protection, preservation,
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exercise or enforcement of any of the terms hereof or of any rights hereunder or
under any other Loan Document or in connection with any foreclosure, collection
or bankruptcy proceedings, and (b) all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against the Administrative Agent or any Agent, in its capacity as such,
in any way relating to or arising out of this Agreement or any other Loan
Documents or any action taken or omitted by the Administrative Agent or any
Agent hereunder or thereunder, PROVIDED that the Borrower shall not be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements if the same results
from the Administrative Agent's or any Agent's gross negligence or willful
misconduct, or if the Borrower was not given notice of the subject claim and the
opportunity to participate in the defense thereof, at its expense (except that
the Borrower shall remain liable to the extent such failure to give notice does
not result in a loss to the Borrower), or if the same results from a compromise
or settlement agreement entered into without the consent of the Borrower, which
shall not be unreasonably withheld.
9.6. EXCULPATORY PROVISIONS; LIMITATION OF LIABILITY.
Neither the Administrative Agent, any Agent nor any of their
respective directors, officers, employees, agents, attorneys or Affiliates shall
(a) be liable to any Bank for any action taken or omitted to be taken by it or
them hereunder, or in connection herewith including pursuant to any Loan
Document, unless caused by its or their own gross negligence or willful
misconduct, (b) be responsible in any manner to any of the Banks for the
effectiveness, enforceability, genuineness, validity or the due execution of
this Agreement or any other Loan Documents or for any recital, representation,
warranty, document, certificate, report or statement herein or made or furnished
under or in connection with this Agreement or any other Loan Documents, or (c)
be under any obligation to any of the Banks to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions hereof or
thereof on the part of the Loan Parties, or the financial condition of the Loan
Parties, or the existence or possible existence of any Event of Default or
Potential Default. No claim may be made by any of the Loan Parties, any Bank,
the Administrative Agent or any Agent or any of their respective Subsidiaries
against the Administrative Agent, any Agent, any Bank or any of their respective
directors, officers, employees, agents, attorneys or Affiliates, or any of them,
for any special, indirect or consequential damages or, to the fullest extent
permitted by Law, for any punitive damages in respect of any claim or cause of
action (whether based on contract, tort, statutory liability, or any other
ground) based on, arising out of or related to any Loan Document or the
transactions contemplated hereby or any act, omission or event occurring in
connection therewith, including the negotiation, documentation, administration
or collection of the Loans, and the Borrower (for itself and on behalf of each
of its Subsidiaries), the Administrative Agent, each Agent and each Bank hereby
waive, releases and agree never to sue upon any claim for any such damages,
whether such claim now exists or hereafter arises and whether or not it is now
known or suspected to exist in its favor. Each Bank agrees that, except for
notices, reports and other documents expressly required to be furnished to the
Banks by the Administrative Agent or any Agent hereunder or given to the
Administrative Agent or any Agent for the account of or
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with copies for the Banks, the Administrative Agent each Agent and each of their
respective directors, officers, employees, agents, attorneys or Affiliates shall
not have any duty or responsibility to provide any Bank with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Loan Parties which may come
into the possession of the Administrative Agent, any Agent or any of their
directors, officers, employees, agents, attorneys or Affiliates.
9.7. REIMBURSEMENT AND INDEMNIFICATION OF AGENTS BY THE BANKS.
Each Bank agrees to reimburse and indemnify the Administrative Agent
and each Agent (to the extent not reimbursed by the Borrower and without
limiting the Obligation of the Borrower to do so) in proportion to its Ratable
Share from and against all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements, including
attorneys' fees and disbursements (including the allocated costs of staff
counsel), and costs of appraisers and environmental consultants, of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Administrative Agent, the Agents, or any of them in their respective capacities
as such, in any way relating to or arising out of this Agreement or any other
Loan Documents or any action taken or omitted by the Administrative Agent or any
Agent hereunder or thereunder, PROVIDED that no Bank shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (a) if the same results from
the Administrative Agent's or any Agent's gross negligence or willful
misconduct, as the case may be, or (b) if such Bank was not given notice of the
subject claim and the opportunity to participate in the defense thereof, at its
expense (except that such Bank shall remain liable to the extent such failure to
give notice does not result in a loss to the Bank), or (c) if the same results
from a compromise and settlement agreement entered into without the consent of
such Bank, which shall not be unreasonably withheld. In addition, each Bank
agrees promptly upon demand to reimburse the Administrative Agent and each Agent
(to the extent not reimbursed by the Borrower and without limiting the
Obligation of the Borrower to do so) in proportion to its Ratable Share for all
amounts due and payable by the Borrower to the Administrative Agent or the
Agents, as the case may be in connection with the periodic audit of the Loan
Parties' books, records and business properties by the Administrative Agent or
the Agents.
9.8. RELIANCE BY AGENTS.
The Administrative Agent and each Agent shall be entitled to rely
upon any writing, telegram, telex or teletype message, resolution, notice,
consent, certificate, letter, cablegram, statement, order or other document or
conversation by telephone or otherwise believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons, and upon
the advice and opinions of counsel and other professional advisers selected by
the Administrative Agent or any Agent. The Administrative Agent and each Agent
shall be fully justified in failing or refusing to take any action hereunder
unless it shall first be indemnified to its satisfaction by the Banks against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action.
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9.9. NOTICE OF DEFAULT.
Neither the Administrative Agent nor any Agent shall be deemed to
have knowledge or notice of the occurrence of any Potential Default or Event of
Default unless such person has received written notice from a Revolving Credit
Bank or the Borrower referring to this Agreement, describing such Potential
Default or Event of Default and stating that such notice is a "notice of
default."
9.10. NOTICES.
Each of the Administrative Agent and each Agent agrees to promptly
send to each Revolving Credit Bank a copy of all notices received from the
Borrower pursuant to the provisions of this Agreement or the other Loan
Documents promptly upon receipt thereof. The Administrative Agent shall promptly
notify the Borrower and the other Revolving Credit Banks of each change in the
Base Rate and the effective date thereof.
9.11. BANKS IN THEIR INDIVIDUAL CAPACITIES.
With respect to its Revolving Credit Commitment, the Revolving
Credit Loans, the Swing Loans, the issuance of any Letter of Credit and any Bid
Loans made by it and any other rights and powers given to it as a Revolving
Credit Bank hereunder or under any of the other Loan Documents, the
Administrative Agent and each Agent shall have the same rights and powers
hereunder as any other Revolving Credit Bank and may exercise the same as though
it were not the Administrative Agent or an Agent, as the case may be, and the
term "Revolving Credit Banks" shall, unless the context otherwise indicates,
include the Administrative Agent and each Agent in its individual capacity. PNC
Bank and its Affiliates, Morgan and its Affiliates and each of the Banks and
their respective Affiliates may, without liability to account, except as
prohibited herein, make loans to, accept deposits from, discount drafts for, act
as trustee under indentures of, and generally engage in any kind of banking or
trust business with, the Loan Parties and their Affiliates, in the case of the
Administrative Agent or any Agent, as though it were not acting as
Administrative Agent or Agent, as the case may be, hereunder and in the case of
each Bank, as though such Bank were not a Bank hereunder. The Banks acknowledge
that, pursuant to such activities, the Administrative Agent or its Affiliates or
any Agent or its respective Affiliates may (i) receive information regarding the
Loan Parties (including information that may be subject to confidentiality
obligations in favor of the Loan Parties) and acknowledge that neither the
Administrative Agent nor any Agent shall be under any obligation to provide such
information to them, and (ii) accept fees and other consideration from the Loan
Parties for services in connection with this Agreement and otherwise without
having to account for the same to the Banks.
9.12. HOLDERS OF NOTES.
The Administrative Agent and each Agent may deem and treat any payee
of any Note as the owner thereof for all purposes hereof unless and until
written notice of the assignment or transfer thereof shall have been filed with
the Administrative Agent and the
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Agents. Any request, authority or consent of any Person who at the time of
making such request or giving such authority or consent is the holder of any
Note shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.
9.13. EQUALIZATION OF BANKS.
The Banks and the holders of any participations in any Commitments
or Loans or other rights or obligations of a Bank hereunder agree among
themselves that, with respect to all amounts received by any Bank or any such
holder for application on any Obligation hereunder or under any such
participation, whether received by voluntary payment, by realization upon
security, by the exercise of the right of set-off or banker's lien, by
counterclaim or by any other non-pro rata source, equitable adjustment will be
made in the manner stated in the following sentence so that, in effect, all such
excess amounts will be shared ratably among the Banks and such holders in
proportion to their interests in payments on the Loans, except as otherwise
provided in Section 3.4.3 [Agents' and Bank's Rights], 4.4.2 [Replacement of a
Bank] or 4.5 [Additional Compensation in Certain Circumstances]. The Banks or
any such holder receiving any such amount shall purchase for cash from each of
the other Banks an interest in such Bank's Loans in such amount as shall result
in a ratable participation by the Banks and each such holder in the aggregate
unpaid amount of the Loans, PROVIDED that if all or any portion of such excess
amount is thereafter recovered from the Bank or the holder making such purchase,
such purchase shall be rescinded and the purchase price restored to the extent
of such recovery, together with interest or other amounts, if any, required by
law (including court order) to be paid by the Bank or the holder making such
purchase.
9.14. SUCCESSOR AGENTS.
Any Agent or the Administrative Agent (i) may resign as Agent or
Administrative Agent, as the case may be or (ii) shall resign if such
resignation is requested by the Required Banks (if the Agent or Administrative
Agent is a Revolving Credit Bank, such Agent's or Administrative Agent's Loans
and Commitment shall be considered in determining whether the Required Banks
have requested such resignation) or required by Section 4.4.2 [Replacement of a
Bank], in either case of (i) or (ii) by giving not less than thirty (30) days'
prior written notice to the Borrower. If any Agent or the Administrative Agent
shall resign under this Agreement, then either (a) the Required Banks shall
appoint from among the Revolving Credit Banks a successor to such Agent or
Administrative Agent, as the case may be, for the Revolving Credit Banks,
subject to the consent of the Borrower, such consent not to be unreasonably
withheld, or (b) if a successor Agent or Administrative Agent shall not be so
appointed and approved within the thirty (30) day period following an Agent's or
the Administrative Agent's notice, as the case may be, to the Revolving Credit
Banks of its resignation, then the resigning Administrative Agent or resigning
Agent, as the case may be shall appoint, with the consent of the Borrower, such
consent not to be unreasonably withheld, a successor who shall serve as
Administrative Agent or Agent, as the case may be, until such time as the
Required Banks appoint and the Borrower consents to the appointment of a
successor to such resigning Administrative Agent or Agent.
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Upon its appointment pursuant to either clause (a) or (b) above, such successor
Administrative Agent or Agent shall succeed to the rights, powers and duties of
the resigning Administrative Agent or Agent, as the case may be, and the terms
"Agent" and "Administrative Agent" shall mean such successor Agent or
Administrative Agent, as the case may be, effective upon its appointment, and
the former Administrative Agent's or Agent's rights, powers and duties as an
Agent or Administrative Agent shall be terminated without any other or further
act or deed on the part of such former Agent or Administrative Agent or any of
the parties to this Agreement. After the resignation of the Administrative Agent
or any Agent hereunder, the provisions of this Section 9 shall inure to the
benefit of such former Administrative Agent and each former Agent and such
former Administrative Agent and each former Agent shall not by reason of such
resignation be deemed to be released from liability for any actions taken or not
taken by it while it was Administrative Agent or an Agent under this Agreement.
9.15. ADMINISTRATIVE AGENT'S FEE.
The Borrower shall pay to the Administrative Agent a nonrefundable
fee (the "Bid Loan Processing Fee") in connection with processing Bid Loans and
a nonrefundable fee (the "Administrative Agent's Fee") for the Administrative
Agent's services hereunder under the terms of a letter (the "Administrative
Agent's Letter") between the Borrower and the Administrative Agent, as amended
from time to time.
9.16. AVAILABILITY OF FUNDS.
The Administrative Agent may assume that each Bank has made or will
make the proceeds of a Loan available to the Administrative Agent unless the
Administrative Agent shall have been notified by such Bank on or before the
later of (1) the close of Business on the Business Day preceding the Borrowing
Date with respect to such Loan or two (2) hours before the time on which the
Administrative Agent actually funds the proceeds of such Loan to the Borrower
(whether using its own funds pursuant to this Section 9.16 or using proceeds
deposited with the Administrative Agent by the Banks and whether such funding
occurs before or after the time on which Banks are required to deposit the
proceeds of such Loan with the Administrative Agent). The Administrative Agent
may, in reliance upon such assumption (but shall not be required to), make
available to the Borrower a corresponding amount. If such corresponding amount
is not in fact made available to the Administrative Agent by such Bank, the
Administrative Agent shall be entitled to recover such amount on demand from
such Bank (or, if such Bank fails to pay such amount forthwith upon such demand
from the Borrower) together with interest thereon, in respect of each day during
the period commencing on the date such amount was made available to the Borrower
and ending on the date the Administrative Agent recovers such amount, at a rate
per annum equal to (i) the Federal Funds Effective Rate during the first three
(3) days after such interest shall begin to accrue and (ii) the applicable
interest rate in respect of such Loan after the end of such three-day period.
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9.17. CALCULATIONS.
In the absence of gross negligence or willful misconduct, the
Administrative Agent shall not be liable for any error in computing the amount
payable to any Bank whether in respect of the Loans, fees or any other amounts
due to the Banks under this Agreement. In the event an error in computing any
amount payable to any Bank is made, the Administrative Agent, the Borrower and
each affected Bank shall, forthwith upon discovery of such error, make such
adjustments as shall be required to correct such error, and any compensation
therefor will be calculated at the Federal Funds Effective Rate.
9.18. BENEFICIARIES.
Except as expressly provided herein, the provisions of this Section
9 are solely for the benefit of the Administrative Agent, each Agent and the
Banks, and the Loan Parties shall not have any rights to rely on or enforce any
of the provisions hereof. In performing its functions and duties under this
Agreement, the Administrative Agent and each Agent shall act solely as the
Administrative Agent or Agent, as the case may be, of the Banks and do not
assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any of the Loan Parties.
10. MISCELLANEOUS
10.1. MODIFICATIONS, AMENDMENTS OR WAIVERS.
With the written consent of the Required Banks, the Administrative
Agent, acting on behalf of all the Banks, and the Borrower, on behalf of the
Loan Parties, may from time to time enter into written agreements amending or
changing any provision of this Agreement or any other Loan Document or the
rights of the Banks or the Loan Parties hereunder or thereunder, or may grant
written waivers or consents to a departure from the due performance of the
Obligations of the Loan Parties hereunder or thereunder. Any such agreement,
waiver or consent made with such written consent shall be effective to bind all
the Banks and the Loan Parties; PROVIDED, that, without the written consent of
all the Banks, no such agreement, waiver or consent may be made which will:
10.1.1 INCREASE OF REVOLVING CREDIT COMMITMENT;
EXTENSION OF EXPIRATION DATE.
Increase the amount of the Revolving Credit Commitment
of any Bank hereunder or extend the Expiration Date;
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10.1.2 EXTENSION OF PAYMENT; REDUCTION OF PRINCIPAL
INTEREST OR FEES; MODIFICATION OF TERMS OF
PAYMENT.
Whether or not any Loans are outstanding, extend the
time for payment of principal or interest of any Loan, the Facility Fee or any
other fee payable to any Bank, or reduce the principal amount of or the rate of
interest borne by any Loan or reduce the Facility Fee or any other fee payable
to any Bank, or otherwise affect the terms of payment of the principal of or
interest of any Loan, the Facility Fee or any other fee payable to any Bank;
10.1.3 RELEASE OF GUARANTOR.
Release any Guarantor from its Obligations under the
Guaranty Agreement or any other security for any of the Loan Parties'
Obligations, other than, prior to an Event of Default upon the request by the
Borrower to the Administrative Agent of the release from the Guaranty Agreement
of any Subsidiary which is no longer a Significant Subsidiary (which request
shall be accompanied by evidence satisfactory to the Administrative Agent in its
sole discretion that the Subsidiary which the Borrower is requesting be so
released from the Guaranty Agreement is no longer a Significant Subsidiary),
which release from the Guaranty Agreement of a non Significant Subsidiary may be
granted solely by the Administrative Agent without the approval of any Revolving
Credit Bank; or
10.1.4 MISCELLANEOUS
Amend Section 4.2 [Pro Rata Treatment of Banks], 9.6
[Exculpatory Provisions, Etc.] or 9.13 [Equalization of Banks] or this Section
10.1, alter any provision regarding the pro rata treatment of the Banks, change
the definition of Required Banks, change the definition of Supermajority
Required Banks, or change any requirement providing for the Banks, the
Supermajority Required Banks or the Required Banks to authorize the taking of
any action hereunder; PROVIDED, further, that no agreement, waiver or consent
which would modify the interests, rights or obligations of any Agent in its
capacity shall be effective without the written consent of such Agent, no
agreement, waiver or consent which would modify the interests, rights or
obligations of the Administrative Agent in its capacity shall be effective
without the written consent of the Administrative Agent, and no agreement,
waiver or consent which would modify the interests, rights or obligations of any
Issuing Bank as the issuer of Letters of Credit shall be effective without the
written consent of such Issuing Bank.
10.2. NO IMPLIED WAIVERS; CUMULATIVE REMEDIES; WRITING REQUIRED.
No course of dealing and no delay or failure of the Administrative
Agent, any Agent or any Bank in exercising any right, power, remedy or privilege
under this Agreement or any other Loan Document shall affect any other or future
exercise thereof or operate as a waiver thereof, nor shall any single or partial
exercise thereof or any abandonment or discontinuance of steps to enforce such a
right, power, remedy or privilege preclude any further exercise thereof or of
any other right, power, remedy or privilege. The rights and remedies of the
Administrative Agent, each Agent and the Banks under this Agreement and any
other Loan Documents are
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cumulative and not exclusive of any rights or remedies which they would
otherwise have. Any waiver, permit, consent or approval of any kind or character
on the part of any Bank of any breach or default under this Agreement or any
such waiver of any provision or condition of this Agreement must be in writing
and shall be effective only to the extent specifically set forth in such
writing.
10.3. REIMBURSEMENT AND INDEMNIFICATION OF BANKS BY THE
BORROWER; TAXES.
The Borrower agrees unconditionally upon demand to pay or reimburse
to each Bank (other than the Administrative Agent and the Agents, as to which
the Borrower's Obligations are set forth in Section 9.5 [Reimbursement and
Indemnification of Agents by the Borrower]) and to save such Bank harmless
against (i) liability for the payment of all reasonable out-of-pocket costs,
expenses and disbursements (including fees and expenses of outside counsel) for
each Bank (except with respect to (a) and (b) below), incurred by such Bank (a)
in connection with the administration and interpretation of this Agreement, and
other instruments and documents to be delivered hereunder, (b) relating to any
amendments, waivers or consents pursuant to the provisions hereof, (c) in
connection with the enforcement of this Agreement or any other Loan Document, or
collection of amounts due hereunder or thereunder or the proof and allowability
of any claim arising under this Agreement or any other Loan Document, whether in
bankruptcy or receivership proceedings or otherwise, and (d) in any workout or
restructuring or in connection with the protection, preservation, exercise or
enforcement of any of the terms hereof or of any rights hereunder or under any
other Loan Document or in connection with any foreclosure, collection or
bankruptcy proceedings, or (ii) all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by or asserted
against such Bank, in its capacity as such, in any way relating to or arising
out of this Agreement or any other Loan Documents or any action taken or omitted
by such Bank hereunder or thereunder, PROVIDED that the Borrower shall not be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements (A) if
the same results from such Bank's gross negligence or willful misconduct, or (B)
if the Borrower was not given notice of the subject claim and the opportunity to
participate in the defense thereof, at its expense (except that the Borrower
shall remain liable to the extent such failure to give notice does not result in
a loss to the Borrower), or (C) if the same results from a compromise or
settlement agreement entered into without the consent of the Borrower, which
shall not be unreasonably withheld. The Banks will attempt to minimize the fees
and expenses of legal counsel for the Banks which are subject to reimbursement
by the Borrower hereunder by considering the usage of one law firm to represent
the Banks , the Administrative Agent, and the Agents if appropriate under the
circumstances. The Borrower agrees unconditionally to pay all stamp, document,
transfer, recording or filing taxes or fees and similar impositions now or
hereafter determined by the Administrative Agent, any Agent or any Bank to be
payable in connection with this Agreement or any other Loan Document, and the
Borrower agrees unconditionally to save the Administrative Agent, each Agent and
the Banks harmless from and against any and all present or future claims,
liabilities or losses with respect to or resulting from any omission to pay or
delay in paying any such taxes, fees or impositions.
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10.4. HOLIDAYS.
Whenever payment of a Loan to be made or taken hereunder shall be
due on a day which is not a Business Day such payment shall be due on the next
Business Day and such extension of time shall be included in computing interest
and fees, except that the Loans shall be due on the Business Day preceding the
Expiration Date if the Expiration Date is not a Business Day. Whenever any
payment or action to be made or taken hereunder (other than payment of the
Loans) shall be stated to be due on a day which is not a Business Day, such
payment or action shall be made or taken on the next following Business Day
(except as provided in Section 3.2 [Interest Periods] with respect to Interest
Periods under the Euro-Rate Option), and such extension of time shall not be
included in computing interest or fees, if any, in connection with such payment
or action.
10.5. FUNDING BY BRANCH, SUBSIDIARY OR AFFILIATE.
10.5.1 NOTIONAL FUNDING.
Each Bank shall have the right from time to time,
without notice to the Borrower, to deem any branch, Subsidiary or Affiliate
(which for the purposes of this Section 10.5 shall mean any corporation or
association which is directly or indirectly controlled by or is under direct or
indirect common control with any corporation or association which directly or
indirectly controls such Bank) of such Bank to have made, maintained or funded
any Loan to which the Euro-Rate Option applies at any time, PROVIDED that
immediately following (on the assumption that a payment were then due from the
Borrower to such other office), and as a result of such change, the Borrower
would not be under any greater financial obligation pursuant to Section 4.5
[Additional Compensation in Certain Circumstances] than it would have been in
the absence of such change. Notional funding offices may be selected by each
Bank without regard to such Bank's actual methods of making, maintaining or
funding the Loans or any sources of funding actually used by or available to
such Bank.
10.5.2 ACTUAL FUNDING.
Each Bank shall have the right from time to time to make
or maintain any Loan by arranging for a branch, Subsidiary or Affiliate of such
Bank to make or maintain such Loan subject to the last sentence of this Section
10.5.2. If any Bank causes a branch, Subsidiary or Affiliate to make or maintain
any part of the Loans hereunder, all terms and conditions of this Agreement
shall, except where the context clearly requires otherwise, be applicable to
such part of the Loans to the same extent as if such Loans were made or
maintained by such Bank, but in no event shall any Bank's use of such a branch,
Subsidiary or Affiliate to make or maintain any part of the Loans hereunder
cause such Bank or such branch, Subsidiary or Affiliate to incur any cost or
expenses payable by the Borrower hereunder or require the Borrower to pay any
other compensation to any Bank (including any expenses incurred or payable
pursuant to Section 4.5 [Additional Compensation in Certain Circumstances])
which would otherwise not be incurred.
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10.6. NOTICES.
All notices, requests, demands, directions and other communications
(as used in this Section 10.6, collectively referred to as "notices") given to
or made upon any party hereto under the provisions of this Agreement shall be by
telephone or in writing (including telex or facsimile communication) unless
otherwise expressly permitted hereunder and shall be delivered or sent by telex
or facsimile to the respective parties at the addresses and numbers set forth
under their respective names on SCHEDULE 1.1(B) hereof or in accordance with any
subsequent unrevoked written direction from any party to the others. All notices
shall, except as otherwise expressly herein provided, be effective (a) in the
case of telex or facsimile, when received, (b) in the case of hand-delivered
notice, when hand-delivered, (c) in the case of telephone, when telephoned,
PROVIDED, however, that in order to be effective, telephonic notices must be
confirmed in writing no later than the next day by letter, facsimile or telex,
(d) if given by mail, four (4) days after such communication is deposited in the
mail with first-class postage prepaid, return receipt requested, and (e) if
given by any other means (including by air courier), when delivered; provided,
that notices to the Agents or to the Administrative Agent shall not be effective
until received. Any Bank giving any notice to the Borrower shall simultaneously
send a copy thereof to the Administrative Agent, and the Administrative Agent
shall promptly notify the other Banks of the receipt by it of any such notice.
Each Designated Lender appoints its Designating Bank as its agent for the
purpose of delivering and receiving all notices hereunder as more fully set
forth in Section 10.11 and in its Designation Agreement with such Designating
Bank. Any notice delivered to the Borrower shall be deemed to be notice to the
Loan Parties and shall be binding upon all of the Loan Parties.
10.7. SEVERABILITY.
The provisions of this Agreement are intended to be severable. If
any provision of this Agreement shall be held invalid or unenforceable in whole
or in part in any jurisdiction, such provision shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without in
any manner affecting the validity or enforceability thereof in any other
jurisdiction or the remaining provisions hereof in any jurisdiction.
10.8. GOVERNING LAW.
Each Letter of Credit and Section 2.10 [Letter of Credit
Subfacility] shall be subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be revised or amended from time to time,
and to the extent not inconsistent therewith, the internal laws of the
Commonwealth of Pennsylvania without regard to its conflict of laws principles,
and the balance of this Agreement shall be deemed to be a contract under the
Laws of the Commonwealth of Pennsylvania and for all purposes shall be governed
by and construed and enforced in accordance with the internal laws of the
Commonwealth of Pennsylvania without regard to its conflict of laws principles.
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10.9. PRIOR UNDERSTANDING.
This Agreement and the other Loan Documents supersede all prior
understandings and agreements, whether written or oral, between the parties
hereto and thereto relating to the transactions provided for herein and therein,
including any prior confidentiality agreements and commitments.
10.10. DURATION; SURVIVAL.
All representations and warranties of the Borrower contained herein
or made by any Loan Party in connection herewith shall survive the making of
Loans and issuance of Letters of Credit and shall not be waived by the execution
and delivery of this Agreement, any investigation by the Administrative Agent,
any Agent or the Banks, the making of Loans, issuance of Letters of Credit, or
payment in full of the Loans. All covenants and agreements of the Borrower
contained in Sections 7.1 [Affirmative Covenants], 7.2 [Negative Covenants] and
7.3 [Reporting Requirements] herein shall continue in full force and effect from
and after the date hereof so long as the Borrower may borrow or request Letters
of Credit hereunder and until termination of the Commitments and payment in full
of the Loans and expiration or termination of all Letters of Credit. All
covenants and agreements of the Borrower contained herein relating to the
payment of principal, interest, premiums, additional compensation or expenses
and indemnification, including those set forth in Section 4 [Payments] and
Sections 9.5 [Reimbursement and Indemnification of Agents by the Borrower], 9.7
[Reimbursement and Indemnification of Agents by Banks] and 10.3 [Reimbursement
and Indemnification of Banks by the Borrower Etc.], shall survive payment in
full of the Loans, expiration or termination of the Letters of Credit and
termination of the Commitments.
10.11. SUCCESSORS AND ASSIGNS.
10.11.1 BINDING EFFECT; ASSIGNMENTS BY BORROWER.
This Agreement shall be binding upon and shall inure to
the benefit of the Banks, the Agents, the Administrative Agent, the Issuing
Banks, the Borrower and their respective successors and assigns, except that the
Borrower may not assign or transfer any of its rights and Obligations hereunder
or any interest herein without the consent of all of the Revolving Credit Banks
(each on its own behalf and on behalf of any Designated Lenders of such
Revolving Credit Bank).
10.11.2 ASSIGNMENTS AND PARTICIPATIONS BY BANKS OTHER
THAN ASSIGNMENTS OF BID LOANS AMONG DESIGNATING
BANKS AND DESIGNATED LENDERS.
This Section shall apply to any assignment or
participation by a Bank of its Loans, Letters of Credit Outstandings or
Commitments except for assignments or designations of Bid Loans among
Designating Banks or Designated Lenders described in Section 10.11.3. Each
Revolving Credit Bank may, at its own cost, make assignments of all or any part
of its Revolving Credit Commitment and Revolving Credit Loans and Bid Loans and
its Ratable
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Share of Letter of Credit Outstandings to one or more banks or other entities,
subject to the consent of the Borrower (which consent shall not be required
during any period in which an Event of Default exists), the applicable Issuing
Banks, and the Administrative Agent with respect to any assignee, such consents
not to be unreasonably withheld, and PROVIDED that assignments may not be made
in amounts less than $10,000,000 and a Bank may assign a Bid Loan to another
Person only if either such Bank is a Revolving Credit Bank and is simultaneously
assigning all or a portion of its Revolving Credit Commitment to such Person, or
the assignee is already a Revolving Credit Bank hereunder. Each Bank may, at its
own cost, grant participations in all or any part of its Revolving Credit
Commitment and the Revolving Credit Loans and Bid Loans made by it and of its
Ratable Share of Letter of Credit Outstandings to one or more banks or other
entities, without the consent of any party hereto. In the case of an assignment
of all or any portion of a Revolving Credit Commitment, upon receipt by the
Administrative Agent of the Assignment and Assumption Agreement, the assignee
shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights, benefits and obligations as it would have if it had
been a signatory Revolving Credit Bank hereunder, the Revolving Credit
Commitments in Section 2.1 shall be adjusted accordingly, and upon surrender of
any Revolving Credit Note subject to such assignment, the Borrower shall execute
and deliver a new Revolving Credit Note to the assignee in an amount equal to
the amount of the Revolving Credit Commitment assumed by it and a new Revolving
Credit Note to the assigning Revolving Credit Bank in an amount equal to the
Revolving Credit Commitment retained by it hereunder. The assigning Bank shall
surrender its Bid Note if it is assigning all of its Revolving Credit
Commitment. The Borrower shall execute and deliver to the assignee a Bid Note in
the form of EXHIBIT 1.1(B). Any assigning Bank shall pay to the Administrative
Agent a service fee in the amount of $3,500 for each assignment, which amount
shall not be subject to reimbursement or indemnification by the Borrower. In the
case of a participation, the participant shall have only the rights specified in
Section 8.2.3 [Set-Off] (the participant's rights against the selling Bank in
respect of such participation to be those set forth in the agreement executed by
such Bank in favor of the participant relating thereto and not to include any
voting rights except with respect to changes of the type referenced in Sections
10.1.1, 10.1.2 and 10.1.3), all of such Bank's obligations under this Agreement
or any other Loan Document shall remain unchanged, and all amounts payable by
any Loan Party hereunder or thereunder shall be determined as if such Bank had
not sold such participation. Any assignee or participant which is not
incorporated under the Laws of the United States of America or a state thereof
shall deliver to the Borrower and the Administrative Agent the form of
certificate described in Section 10.17 relating to federal income tax
withholding. Each Bank may furnish any publicly available information concerning
any Loan Party or its Subsidiaries and any other information concerning any Loan
Party or its Subsidiaries in the possession of such Bank from time to time to
assignees and participants (including prospective assignees or participants),
PROVIDED that such assignees and participants agree to be bound by the
provisions of Section 10.12.
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10.11.3 ASSIGNMENTS OF BID LOANS AMONG DESIGNATING
BANKS AND DESIGNATED LENDERS.
10.11.3.1 ASSIGNMENTS TO DESIGNATED LENDERS.
Any Revolving Credit Bank (each a "Designating
Bank") may at any time, subject to the consent of the Borrower which consent
shall not be unreasonably withheld, and subject to the terms of this Section
10.11.3.1, designate one or more Designated Lenders to fund Bid Loans which the
Designating Bank is required to fund. The provisions of Section 10.11.2 shall
not apply to any such designation. No Revolving Credit Bank shall be entitled to
make more than two such designations. The parties to each such designation shall
execute and deliver to the Administrative Agent, for their acceptance, a
Designation Agreement. Upon its receipt of an appropriately completed
Designation Agreement executed by a Designating Bank, a designee representing
that it is a Designated Lender and the Borrower and the Administrative Agent
will accept such Designation Agreement. From and after the later of the date on
which the Administrative Agent receives the executed Designation Agreement and
the effective date specified in the Designation Agreement, the Designated Lender
shall become a party to this Agreement with a right to make any Bid Loan on
behalf of its Designating Bank pursuant to Section 2.9 after the Borrower has
accepted a Bid (or a portion thereof) of the Designating Bank. The Designating
Bank shall not be obligated to designate its Designated Lender to fund any Bid
Loan, and such Designated Lender shall not be obligated to fund any Bid Loan,
each such designation being subject to the agreement of the Designating Bank and
its Designated Lender and to be made at the time that such Bid Loan is made.
Each Designating Bank shall serve as the agent of the Designated Lender for
purposes of giving and receiving all communications and notices and taking all
actions hereunder, including without limitation votes, approvals, waivers,
consents and amendments under or relating to this Agreement or the other Loan
Documents. Any such notice, communication, vote, approval, waiver, consent or
amendment shall be signed by the Designating Bank as agent for the Designated
Lender and shall not be signed by the Designated Lender. The Borrower, the
Agents, the Administrative Agent and the Banks may rely thereon without any
requirement that the Designated Lender sign or acknowledge the same. Any
Designated Lender which is not incorporated under the Laws of the United States
of America or a state thereof shall deliver to the Borrower and the
Administrative Agent the form of certificate described in Section 10.17 relating
to federal income tax withholding.
10.11.3.2 ASSIGNMENTS BY DESIGNATED LENDERS.
Any Designated Lender may assign its Bid Loan
to its Designating Bank or to another Designated Lender designated by such
Designating Bank and such assignment shall not be subject to the requirements of
Section 10.11.2, provided that the Designated Lender and Designating Bank shall
notify the Administrative Agent promptly of such assignment.
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10.11.3.3 WAIVERS AND CERTAIN MATTERS REGARDING
CONDUITS AS DESIGNATING BANKS.
Notwithstanding any provision of this Agreement or
any other Loan Document to the contrary, neither the Administrative Agent, any
Agent, the Borrower nor any Bank shall institute or join any other person in
instituting against Wood Street Funding Corporation, a Delaware corporation (and
a Designating Bank, designated by PNC Bank) or against any similar conduit
established by any other Designated Lender which has been designated by such
Designated Lender as a Designating Bank, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding, or other proceeding under any
federal or state bankruptcy or similar law, for one year and a day after the
Expiration Date of the Credit Agreement.
10.11.4 FOREIGN ASSIGNEES AND PARTICIPANTS.
Any assignee or participant which is not incorporated
under the Laws of the United States of America or a state thereof shall deliver
to the Borrower and the Administrative Agent the form of certificate described
in Section 10.17 [Tax Withholding Clause] relating to federal income tax
withholding. Each Bank may furnish any publicly available information concerning
any Loan Party or its Subsidiaries and any other information concerning any Loan
Party or its Subsidiaries in the possession of such Bank from time to time to
assignees and participants (including prospective assignees or participants),
PROVIDED that such assignees and participants agree to be bound by the
provisions of Section 10.12 [Confidentiality].
10.11.5 ASSIGNMENTS BY BANKS TO FEDERAL RESERVE BANKS.
Notwithstanding any other provision in this Agreement,
any Bank may at any time pledge or grant a security interest in all or any
portion of its rights under this Agreement, its Notes (if any) and the other
Loan Documents to any Federal Reserve Bank in accordance with Regulation A of
the FRB or U.S. Treasury Regulation 31 CFR Section 203.14 without notice to or
consent of the Borrower and the Administrative Agent. No such pledge or grant of
a security interest shall release the transferor Bank of its obligations
hereunder or under any other Loan Document.
10.12. CONFIDENTIALITY.
10.12.1 GENERAL.
The Agents, the Administrative Agent and the Banks each
agree to keep confidential all information obtained from any Loan Party or its
Subsidiaries which is nonpublic and confidential or proprietary in nature
(including any information the Borrower specifically designates as
confidential), except as provided below, and to use such information only in
connection with their respective capacities under this Agreement and for the
purposes contemplated hereby. The Agents, the Administrative Agent and the Banks
shall be permitted to disclose such information (i) to outside legal counsel,
accountants and other professional
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advisors who need to know such information in connection with the administration
and enforcement of this Agreement, subject to agreement of such Persons to
maintain the confidentiality, (ii) to assignees and participants as contemplated
by Section 10.11, (iii) to the extent requested by any bank regulatory authority
or, with notice to the Borrower as permitted by applicable Law, as otherwise
required by applicable Law or by any subpoena or similar legal process, or in
connection with any investigation or proceeding arising out of the transactions
contemplated by this Agreement, (iv) if it becomes publicly available other than
as a result of a breach of this Agreement or becomes available from a source not
known to be subject to confidentiality restrictions, or (v) if the Borrower
shall have consented to such disclosure.
10.12.2 SHARING INFORMATION WITH AFFILIATES OF THE
BANKS.
The Borrower acknowledges that from time to time
financial advisory, investment banking and other services may be offered or
provided to the Borrower or one or more of its Affiliates (in connection with
this Agreement or otherwise) by any Bank or by one or more Subsidiaries or
Affiliates of such Bank and the Borrower (on its own behalf and on behalf of its
Subsidiaries) hereby authorizes each Bank to share any information delivered to
such Bank by the Borrower and its Subsidiaries pursuant to this Agreement, or in
connection with the decision of such Bank to enter into this Agreement, to any
such Subsidiary or Affiliate of such Bank, it being understood that any such
Subsidiary or affiliate of any Bank receiving such information shall be bound by
the provisions of Section 10.12.1 as if it were a Bank hereunder. Such
Authorization shall survive the repayment of the Loans and other Obligations and
the termination of the Commitments.
10.13. COUNTERPARTS.
This Agreement may be executed by different parties hereto on any
number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together constitute one
and the same instrument.
10.14. AGENT'S OR BANK'S CONSENT.
Whenever the Administrative Agent's, any Agent's or any Bank's
consent is required to be obtained under this Agreement or any of the other Loan
Documents as a condition to any action, inaction, condition or event, the
Administrative Agent, each Agent and each Bank shall be authorized to give or
withhold such consent in its sole and absolute discretion and to condition its
consent upon the giving of additional collateral, the payment of money or any
other matter.
10.15. EXCEPTIONS.
The representations, warranties and covenants contained herein shall
be independent of each other, and no exception to any representation, warranty
or covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein
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unless expressly provided, nor shall any such exceptions be deemed to permit any
action or omission that would be in contravention of applicable Law.
10.16. CONSENT TO FORUM; WAIVER OF JURY TRIAL.
THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY AND THE UNITED
STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA, AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE
BORROWER AT THE ADDRESS PROVIDED FOR IN SECTION 10.6 AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. THE BORROWER WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE. THE BORROWER, THE AGENTS, THE ADMINISTRATIVE AGENT AND
THE BANKS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER
LOAN DOCUMENT OR THE COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.
10.17. TAX WITHHOLDING CLAUSE.
Each Bank or assignee or participant of a Bank that is not
incorporated under the Laws of the United States of America or a state thereof
agrees that it will deliver to each of the Borrower and the Administrative Agent
two (2) duly completed copies of the following: (i) Internal Revenue Service
Form W-9, 4224 or 1001, or other applicable form prescribed by the Internal
Revenue Service, certifying that such Bank, assignee or participant is entitled
to receive payments under this Agreement and the other Loan Documents without
deduction or withholding of any United States federal income taxes, or is
subject to such tax at a reduced rate under an applicable tax treaty, or (ii)
Internal Revenue Service Form W-8 or other applicable form or a certificate of
such Bank, assignee or participant indicating that no such exemption or reduced
rate is allowable with respect to such payments. Each Bank, assignee or
participant required to deliver to the Borrower and the Administrative Agent a
form or certificate pursuant to the preceding sentence shall deliver such form
or certificate as follows: (A) each Bank which is a party hereto on the Closing
Date shall deliver such form or certificate at least five (5) Business Days
prior to the first date on which any interest or fees are payable by the
Borrower hereunder for the account of such Bank; (B) each assignee or
participant shall deliver such form or certificate at least five (5) Business
Days before the effective date of such assignment or participation (unless the
Administrative Agent in its sole discretion shall permit such assignee or
participant to deliver such form or certificate less than five (5) Business Days
before such date in which case it shall be due on the date specified by the
Administrative Agent). Each Bank, assignee or participant which so delivers a
Form W-8, W-9, 4224 or 1001 further undertakes to
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deliver to each of the Borrower and the Administrative Agent two (2) additional
copies of such form (or a successor form) on or before the date that such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by the Borrower
or the Administrative Agent, either certifying that such Bank, assignee or
participant is entitled to receive payments under this Agreement and the other
Loan Documents without deduction or withholding of any United States federal
income taxes or is subject to such tax at a reduced rate under an applicable tax
treaty or stating that no such exemption or reduced rate is allowable. The
Administrative Agent shall be entitled to withhold United States federal income
taxes at the full withholding rate unless the Bank, assignee or participant
establishes an exemption or that it is subject to a reduced rate as established
pursuant to the above provisions.
10.18. JOINDER OF GUARANTORS.
Any Significant Subsidiary of the Borrower which is required to
become a Guarantor pursuant to Section 7.2.6 [Subsidiaries, Partnerships and
Joint Ventures] shall execute and deliver to the Administrative Agent (i) a
Guarantor Joinder in substantially the form attached hereto as EXHIBIT 1.1(G)(1)
pursuant to which it shall join as a Guarantor each of the documents to which
the Guarantors are parties; and (ii) documents in the forms described in Section
6.1 [First Loans and Letters of Credit] modified as appropriate to relate to
such Subsidiary. The Borrower shall deliver such Guarantor Joinder and related
documents to the Administrative Agent within five (5) Business Days after any
Subsidiary of the Borrower becomes a Significant Subsidiary.
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IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
ATTEST: ARCH COAL, INC.
/s/ Miriam Rogers Singer By: /s/ Patrick A. Kriegshauser
- ------------------------ -----------------------------
Assistant Secretary Title: Senior Vice President and
[Seal] Chief Financial Officer
----------------------------
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[REVOLVING CREDIT BANKS:]
PNC BANK, NATIONAL ASSOCIATION,
individually and as Administrative
Agent and Agent
By: /s/ Michael J. Beyer
----------------------
Title: Senior Vice President
------------------------
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, individually and as Agent
By: /s/ Adam J. Silver
---------------------
Title: Associate
---------------------
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-30563) pertaining to the Ashland Coal, Inc. Employee Thrift Plan and
in the related Prospectus, the Registration Statement (Form S-8 No. 333-30565)
pertaining to the Arch Coal, Inc. 1997 Stock Incentive Plan and in the related
Prospectus, and the Registration Statement (Form S-8 No. 333-30567) pertaining
to the Coal-Mac, Inc. Savings and Retirement Plan and in the related Prospectus
of our report dated January 22, 1997, with respect to the consolidated financial
statements of Ashland Coal, Inc. and subsidiaries as of December 31, 1996 and
1995 and for each of the three years in the period ended December 31, 1996
included in this Current Report (Form 8-K).
/s/ ERNST & YOUNG LLP
Louisville, Kentucky
July 11, 1997
