<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
AEI HOLDING COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 1222 61-1315723
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification Number)
Organization)
</TABLE>
1500 NORTH BIG RUN ROAD
ASHLAND, KENTUCKY 41102
(606) 928-3433
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
DONALD P. BROWN, PRESIDENT
1500 NORTH BIG RUN ROAD
ASHLAND, KENTUCKY 41102
(606) 928-3433
(Name, Address Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
---------------------
WITH A COPY TO:
PAUL E. SULLIVAN
BROWN, TODD & HEYBURN PLLC
2700 LEXINGTON FINANCIAL CENTER
LEXINGTON, KENTUCKY 40507-1749
(606) 231-0000
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10% Series B Senior Notes due
2007.......................... $200,000,000 100% $200,000,000 $60,606.06
- ------------------------------------------------------------------------------------------------------------------
Guarantees of 10% Series B
Senior Notes due 2007(2)...... $200,000,000 100% $200,000,000 $0(3)
==================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) See inside facing page for table of additional Registrant guarantors.
(3) Pursuant to Rule 457(n), no separate filing fee is required for the
guarantees.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
TABLE OF ADDITIONAL REGISTRANT GUARANTORS
<TABLE>
<CAPTION>
STATE OR OTHER ADDRESS, INCLUDING ZIP CODE
JURISDICTION OF AND TELEPHONE NUMBER OF
EXACT NAME OF INCORPORATION IRS EMPLOYER REGISTRANT GUARANTOR'S
REGISTRANT GUARANTOR OR ORGANIZATION IDENTIFICATION NUMBER PRINCIPAL EXECUTIVE OFFICES
- -------------------- --------------- --------------------- ---------------------------
<S> <C> <C> <C>
Addington Mining, Inc............... Kentucky 61-1315722 1500 North Big Run Road,
Ashland, Kentucky 41102
(606) 928-3433
Tennessee Mining, Inc............... Kentucky 61-1640672 1500 North Big Run Road,
Ashland, Kentucky 41102
(606) 928-3433
Ikerd-Bandy Co., Inc................ Kentucky 61-0505276 1500 North Big Run Road,
Ashland, Kentucky 41102
(606) 928-3433
Mining Technologies, Inc............ Kentucky Pending 1500 North Big Run Road,
Ashland, Kentucky 41102
(606) 928-3433
Leslie Resources, Inc............... Kentucky 61-1013125 1500 North Big Run Road,
Ashland, Kentucky 41102
(606) 928-3433
Leslie Resources Management, Inc.... Kentucky 61-1292388 1500 North Big Run Road,
Ashland, Kentucky 41102
(606) 928-3433
Pro-Land, Inc. d/b/a Kem Coal
Company........................... Kentucky 61-0727363 1500 North Big Run Road,
Ashland, Kentucky 41102
(606) 928-3433
Aceco, Inc.......................... Kentucky 61-0855680 1500 North Big Run Road,
Ashland, Kentucky 41102
(606) 928-3433
Mountain-Clay, Inc. d/b/a Mountain
Clay, Inc......................... Kentucky 61-0621350 1500 North Big Run Road,
Ashland, Kentucky 41102
(606) 928-3433
Highland Coal, Inc.................. Kentucky 61-0923993 1500 North Big Run Road,
Ashland, Kentucky 41102
(606) 928-3433
River Coal Company, Inc............. Kentucky 61-0567214 1500 North Big Run Road,
Ashland, Kentucky 41102
(606) 928-3433
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY , 1998
$200,000,000
[AEI HOLDING COMPANY, INC. LOGO]
OFFER TO EXCHANGE $200,000,000 OF ITS 10% SERIES B SENIOR NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR $200,000,000 OF ITS OUTSTANDING 10% SERIES A SENIOR NOTES DUE 2007
---------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED.
AEI Holding Company, Inc. (the "Company"), hereby offers, upon the terms
and subject to the conditions set forth in this Prospectus (the "Prospectus")
and the accompanying Letter of Transmittal (the "Letter of Transmittal") (which
together constitute the "Exchange Offer"), to exchange an aggregate of up to
$200,000,000 principal amount of 10% Series B Senior Notes due 2007 (the
"Exchange Notes") of the Company for an identical face amount of the issued and
outstanding 10% Series A Senior Notes due 2007 (the "Old Notes" and together
with the Exchange Notes, the "Senior Notes") of the Company. As of the date of
this Prospectus, there is $200,000,000 aggregate principal amount of the Old
Notes outstanding. The terms of the Exchange Notes are identical in all material
respects to the Old Notes, except that the Exchange Notes have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and
therefore will not bear legends restricting their transfer and will not contain
certain provisions providing for Liquidated Damages (as defined) in respect of
the Old Notes under certain circumstances described in the Registration Rights
Agreement (as defined), which provisions will generally terminate as to all of
the Old Notes that are exchanged for the Exchange Notes upon the consummation of
the Exchange Offer.
Interest on the Exchange Notes is payable semiannually in cash in arrears
on May 15 and November 15 of each year, commencing on May 15, 1998. The Exchange
Notes mature on November 15, 2007. The Exchange Notes are redeemable at the
option of the Company, in whole or in part, at any time on or after November 15,
2002, at the redemption prices set forth herein, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of redemption.
Notwithstanding the foregoing, at any time on or prior to November 15, 2000, the
Company may redeem up to 35% of the aggregate principal amount of the Exchange
Notes issued under the Indenture (as defined) with the net proceeds of one or
more equity offerings of the common stock of the Company, at a redemption price
equal to 110% of the principal amount thereof, plus accrued and unpaid interests
and Liquidated Damages, if any, to the date of redemption; provided that at
least $130.0 million of the aggregate principal amount of the Exchange Notes
remains outstanding after such redemption. Upon a Change of Control (as
defined), the Company will be required to make an offer to purchase all
outstanding Exchange Notes at 101% of the principal amount thereof plus accrued
and unpaid interest and Liquidated Damages, if any, to the date of purchase. See
"Description of Exchange Notes -- Repurchase at the Option of Holders -- Change
of Control."
The Exchange Notes will be general unsecured obligations of the Company and
will rank senior in right of payment to all existing and future Indebtedness (as
defined) of the Company that is subordinated to the Exchange Notes and will rank
pari passu in right of payment with all current and future unsecured
unsubordinated Indebtedness of the Company. The Exchange Notes will be
subordinated to the borrowings outstanding under the Company's New Credit
Facility (the "New Credit Facility") to the extent of the value of the assets
securing such borrowings. As of September 30, 1997, on a
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS IN CONNECTION WITH AN
INVESTMENT IN THE EXCHANGE NOTES.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
THE INITIAL PURCHASER (AS DEFINED) MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE EXCHANGE NOTES;
SPECIFICALLY, THE INITIAL PURCHASER MAY BID FOR, AND PURCHASE, EXCHANGE NOTES IN
THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION."
<PAGE> 4
(continued from previous page)
pro forma basis after giving effect to the Pro Forma Transactions (as defined),
the Company would have had $55.8 million of senior Indebtedness outstanding
other than the Exchange Notes, $44.8 million of which would have been secured
debt. The terms of the Indenture between the Company and IBJ Schroder Bank &
Trust Company relating to the Old Notes and the Exchange Notes (the "Indenture")
will permit the Company and its subsidiaries to incur additional Indebtedness,
subject to certain limitations. See "Description of Exchange Notes."
The Exchange Notes will be unconditionally guaranteed on a senior basis
(the "Subsidiary Guarantees") by each of the Company's current and future
Subsidiaries (as defined) other than Bowie Resources, Limited ("Bowie")
(collectively, the "Guarantors"). The Subsidiary Guarantees will be senior
unsecured obligations of the Guarantors and will rank senior in right of payment
to all existing and future subordinated Indebtedness of the Guarantors and pari
passu in right of payment with all other Indebtedness of the Guarantors,
including the guarantees of Indebtedness under the New Credit Facility. Any
Guarantor's obligations under the New Credit Facility, however, will be secured
by a lien on substantially all of the assets of such Guarantor, and the
Indenture restricts, but does not prohibit, the Guarantors from incurring
additional secured Indebtedness. Accordingly, such secured Indebtedness will
rank prior to the Subsidiary Guarantees with respect to such assets. See
"Description of Exchange Notes -- Subsidiary Guarantees."
The Old Notes were issued and sold on November 12, 1997, in a transaction
not registered under the Securities Act in reliance upon an exemption from the
registration requirements thereof (the "Offering"). In general, the Old Notes
may not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act. The Exchange Notes are being offered hereby in order to satisfy
certain obligations of the Company contained in the Registration Rights
Agreement. Based on interpretations by the Commission set forth in no-action
letters issued to third parties, the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold or otherwise transferred by any holder thereof (other than
any such holder that is an "affiliate" of the Company within the meaning of Rule
405 promulgated under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holder's
business, such holder has no arrangement with any person to participate in the
distribution of such Exchange Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such Exchange
Notes. However, the Company has not sought, and does not intend to seek, its own
no-action letter, and there can be no assurance that the Commission would make a
similar determination with respect to the Exchange Offer. Notwithstanding the
foregoing, each Participating Broker-Dealer (as defined) must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with any resale of Exchange Notes
received in exchange for such Old Notes where such Old Notes were acquired by
such Participating Broker-Dealer as a result of market-making activities or
other trading activities (other than Old Notes acquired directly from the
Company or any of its affiliates). To the extent any Participating Broker-Dealer
notifies the Company, or causes the Company to be notified, in writing that such
Participating Broker-Dealer reasonably believes that it is a holder of Exchange
Notes that were acquired in the Exchange Offer in exchange for Old Notes that it
acquired for its own account as a result of market-making activities or other
trading activities (other than directly from the Company or any of its
affiliates) (a "Restricted Broker-Dealer"), the Company has agreed to make
available for a period of one year from the date on which the Exchange Offer is
consummated, or such shorter period as will end when all Transfer Restricted
Securities (as defined) covered by the Exchange Offer Registration Statement
have been sold pursuant thereto, this Prospectus to any such Restricted
Broker-Dealer for use in connection with any resale of Exchange Notes. See "Plan
of Distribution."
In the event that any holder of Old Notes is prohibited by law or any
policy of the Commission from participating in the Exchange Offer or any holder
may not resell the Exchange Notes without delivering a Prospectus and this
Prospectus is inappropriate or unavailable for such resales by such holder or if
such holder is a broker-dealer and holds Old Notes acquired directly from the
Company or one of its affiliates, and such holder satisfies certain other
requirements, the Company has agreed, pursuant to the Registration Rights
Agreement, to file a registration statement in respect of such Exchange Notes
and Old Notes pursuant to Rule 415 under the Securities Act. See "Prospectus
Summary -- The Exchange Offer," "The Exchange Offer," and "Plan of
Distribution."
The Company does not intend to apply for listing of the Exchange Notes on
any securities exchange or for inclusion of the Exchange Notes in any automated
quotation system. The Old Notes have been designated for trading in the Private
Offering, Resales and Trading through Automated Linkages (PORTAL) market of the
National Association of Securities Dealers, Inc.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange. The Exchange Notes will be
delivered as soon as practicable following the Expiration Date (as defined). Old
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date. The Company will not receive any proceeds from the
Exchange Offer. The Company will pay all of the expenses incident to the
Exchange Offer.
ii
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and combined financial statements, including the notes thereto,
contained elsewhere herein. Unless the context indicates otherwise, references
herein to the "Company" include AEI Holding Company, Inc. ("AEI Holding
Company") and its combined subsidiaries and predecessors. The estimates of the
Company's recoverable coal reserves set forth herein have been audited by
Marshall Miller & Associates ("Marshall Miller") in (i) a report of the reserves
controlled by Addington Mining, Inc. ("Addington Mining"), Tennessee Mining,
Inc. ("Tennessee Mining"), Bowie and Ikerd-Bandy Co., Inc. ("Ikerd-Bandy"),
dated September 1997, as amended, and (ii) a report of the reserves controlled
by Leslie Resources, Inc. and Leslie Resources Management, Inc. (collectively,
"Leslie Resources"), dated July 1997, as amended (such reports are collectively
referred to as the "Marshall Miller Reports"). All references to "tons" are
references to short tons unless otherwise indicated. For definitions of certain
coal-related terms see "Industry -- Overview."
THE COMPANY
OVERVIEW
The Company is engaged primarily in the mining and marketing of bituminous
coal, operating as of December 31, 1997, 12 mines in Kentucky, Tennessee and
Colorado. The Company also manufactures highwall mining equipment and other
related coal mining equipment. According to the Marshall Miller Reports,
approximately 75 million tons (36%) of the Company's coal reserves (including
captive reserves) constitutes compliance coal (coal that emits less than 1.2
pounds of sulfur dioxide/MMBtu when burned), and the Company believes that a
significant amount of its remaining reserves is low-sulfur coal (coal that emits
less than 1.6 pounds of sulfur dioxide/MMBtu when burned). The Company sells
over 76% of its coal to electric utilities and other customers under seven
long-term supply contracts (contracts which have an original term of more than
one year) that had a weighted average remaining term of 6.2 years as of June 30,
1997. The remainder of the Company's coal is sold under short-term contracts,
and on the spot market. Based on the Company's contracts as of November 1997,
and sales made to date through November 1997 after giving effect to the Pro
Forma Transactions (as defined) the Company expects pro forma 1997 coal sales to
be approximately 11.9 million tons, resulting in 1997 aggregate revenues of
$288.0 million and EBITDA of $29.7 million, a 25% increase over pro forma 1996
revenues of $231.0 million and an 18% increase over pro forma 1996 EBITDA of
$25.1 million. According to the Marshall Miller Reports, the Company has
approximately 285 million tons of coal reserves and coal resources (including
captive reserves and resources). Coal resources are naturally occurring
concentrations or deposits of coal in the earth's crust, in such forms and
amounts that economic extraction is currently or potentially feasible. Coal
reserves are virgin and/or accessed parts of a coal reserve base that could be
economically extracted or produced at the time of determination considering
environmental, legal and technological constraints.
The Company has expanded its operations over the last three years through a
series of acquisitions. The Company began operations in 1982 with four surface
mines located in eastern Kentucky, which produce substantial amounts of
low-sulfur and compliance coal. In 1994 and 1995, the Company acquired its
Colorado properties, which almost exclusively contain coal having a lower sulfur
content than compliance coal. In 1995, the Company acquired its Tennessee mines.
Through its acquisition of Ikerd-Bandy in October 1997, and its acquisition of
Leslie Resources in January 1998 (see "Prospectus Summary -- Recent
Developments -- Leslie Resources"), the Company acquired its southeastern
Kentucky properties, which are comprised of sizeable low-sulfur and compliance
coal reserves. In January 1998, Mining Technologies, Inc. ("Mining
Technologies") acquired its highwall mining equipment manufacturing operations
and certain intellectual property through an asset purchase of the Mining
Technologies division of Addington Enterprises, Inc. ("Addington Enterprises").
The Company obtained a fairness opinion regarding such asset purchase.
The Company believes that it is well-positioned to benefit from the
anticipated growth in demand for coal. According to data compiled by the Energy
Information Administration of the United States Department of Energy (the
"EIA"), total United States coal consumption reached 1.01 billion tons in 1996,
a 4.6%
1
<PAGE> 6
increase from 1995, and export sales totaled 90 million tons. Electric utilities
accounted for more than 87% of domestic coal consumption in 1996, with
coal-fired facilities generating approximately 56% of the nation's electricity,
a percentage that has been increasing over the past 45 years. United States coal
production totaled 1.06 billion tons in 1996, a 2.3% increase from the 1.03
billion tons produced in 1995 and a record high. The increase in 1996 coal
production levels was driven by an unusually large increase in coal consumption
for electricity generation due to increased natural gas prices, negligible
growth in nuclear-powered generation, abnormally cold weather, and strong
economic growth. Based on industry sources, the Company believes that the demand
for coal will continue to increase.
The Company also believes that it will benefit from the expected future
deregulation of the electric utility industry. Domestic electric utilities
historically have operated in a regulated environment, with prices and return on
investment being determined by state utility and power commissions. However, in
April 1996, the Federal Energy Regulatory Commission ("FERC") established rules
providing for open access to electricity transmission systems for wholesale
electricity transactions, thereby initiating consumer choice in wholesale
electricity purchasing and encouraging competition in the generation of
electricity. It is anticipated that the FERC rules will increase competition in
wholesale electricity markets where competition will focus primarily on price
and thereby benefit the low-cost producers of electricity, such as the Company's
utility customers in Kentucky, Tennessee, and Ohio. The Company also expects
that deregulation will benefit the coal industry generally because coal is a
relatively low-cost fuel for electric utilities.
COMPETITIVE STRENGTHS
The Company believes that it possesses the following competitive strengths:
- Portfolio of Long-Term Contracts. As of June 30, 1997, the Company
had seven long-term contracts with high-rated utilities, such as the
Tennessee Valley Authority ("TVA") and the Cincinnati Gas & Electric
Company ("CG&E"), and with industrial customers, and those contracts had a
weighted average remaining term of approximately 6.2 years (excluding
option periods) as of that date. On average for the period from January 1,
1995 through June 30, 1997, the Company sold more that 76% of its coal
under long-term contracts, with the remainder being sold under short-term
contracts and on the spot market.
- Strong Relationships with Key Customers. The Company believes it
has developed strong relationships with its customers (which are primarily
large electric utilities), due to its reliability and its commitment to
quality and efficiency. In the long term, the Company's strong customer
relationships position it to benefit significantly from (i) the generally
expected increase in the demand for coal by electric utilities and (ii) the
increased market share that low-cost electricity producers, who are the
Company's primary customers, are expected to acquire as the trend toward
price competition in wholesale electric markets increases within the
electric utility industry.
- Low-Cost Operations. The Company believes its production costs are
significantly below those of its primary competitors. The Company's ability
to maintain low-cost operations is attributable to: (i) its substantial use
of mountaintop removal mining, which minimizes the cost of removing
overburden and which the Company believes allows it to save as much as
$4.00 per ton by shipping coal raw, i.e., without the expense of processing
the coal in a processing plant; (ii) the close proximity of its coal
reserves to customers and efficient transportation facilities; (iii) its
acquisition of substantial Colorado coal reserves that are well suited for
low-cost longwall mining; (iv) its non-union workforce; (v) its daily
monitoring of production data from each mine site; and (vi) its arrangement
with an affiliated company to provide timely, cost-efficient equipment
maintenance, repair and transportation. Additionally, the Company has
successfully used the Addcar(TM) highwall mining systems as a
cost-effective method of mining coal that many of its competitors could not
economically mine.
- High-Quality Reserves. According to the Marshall Miller Reports,
approximately 75 million tons (36%) of the Company's 211 million tons of
clean, recoverable coal reserves (including captive reserves) are
compliance coal, and the Company believes that a significant amount of its
remaining reserves are low-sulfur coal. The Company believes this high
percentage of low-sulfur and compliance
2
<PAGE> 7
coal will give it a competitive advantage for the long term because of the
more stringent air quality requirements under Phase II of the Clean Air Act
Amendments (as defined), which currently is scheduled to go into effect in
2000. Moreover, the Company owns or controls coal reserves of sufficient
amounts and characteristics that generally meet or exceed the
specifications established by the Company's current and prospective
customers.
- Experienced Management. The Company's senior management team,
including Larry Addington, Don Brown, John Baum, Keith Sieber, Robert
Addington, Marc Merritt, Vic Grubb and John Lynch, has an average of 18
years of experience in the coal industry, and many of these individuals
have worked together at the Company or one of its predecessors for more
than 10 years. The management team has a proven record of developing
innovative, low-cost operations, maintaining strong customer relationships
and making strategic, opportunistic acquisitions.
- Union-Free Mines. All of the Company's mines are non-union. The
Company offers its employees incentive compensation and believes that such
compensation and its commitment to the safety and welfare of its employees
will enable it to remain union-free. The factors that have allowed the
Company to remain union-free have created a highly motivated, efficient
workforce, which has allowed the Company to minimize business interruptions
and reduce costs, thereby building stronger customer relationships.
- Patented Highwall Mining Technology. In January 1998, the Company
purchased highwall mining technology patented in the United States and
Canada and manufacturing facilities that allow it to manufacture Addcar(TM)
highwall mining systems and other related mining equipment. The Company
uses this equipment in its mining operations and may sell or lease such
equipment to third parties.
BUSINESS STRATEGY
The Company has adopted a business strategy to: (i) enhance its position as
a low-cost producer of high-quality coal, and (ii) increase revenues, cash flow
and profitability. To implement this strategy, the Company will:
- Expand Low-Cost Operations. The Company intends to enhance its
position as a leader in low-cost coal production. In eastern Kentucky, the
Company plans to expand its low-cost operations by acquiring, at favorable
prices, coal reserves that are suited for either mountaintop removal mining
or combined contour/Addcar(TM) highwall mining operations and located near
suitable loading and transportation facilities. In southeastern Kentucky,
the Company intends to use its Addcar(TM) highwall mining systems to
continue expanding its low-cost highwall mining operations. In December
1997, the Company began production from its Bowie #2 mine in Colorado,
which is expected to produce 2 million tons of coal annually using room and
pillar mining. As of December 31, 1997, the Company had commitments for
approximately 1.3 million tons of the Bowie #2 mine production. If the
Company obtains commitments for an additional 2.7 million tons of coal from
the Bowie #2 mine, it expects to install a longwall mining system at the
mine to provide a low-cost, high-output mining method. In its first full
year of production with the longwall system, which is expected to start in
1999, the Company expects the Bowie #2 mine to produce 5.8 million tons of
high-Btu, compliance coal. The Company believes that expanding its low-cost
operations will position it to capture a greater share of the coal market
as demand increases and becomes more price sensitive due to the anticipated
deregulation of the electric utility industry.
- Grow Through Acquisitions. The Company's management, due to its
long history of managing successful coal operations, has demonstrated its
ability to maximize the operating and marketing potential of
underperforming operations and mineral resources. The Company plans to
leverage this expertise by acquiring operations in eastern and southeastern
Kentucky, West Virginia, Colorado and Utah and to use management's
experience to reorganize these acquired operations to realize economies of
scale and increase market share. The Company also will consider acquiring
inefficient or financially-troubled coal companies and assets or divisions
of larger coal companies so that the Company's experienced management can
use its expertise to maximize the value of such operations. Going forward,
3
<PAGE> 8
the Company intends to accelerate the search for suitable acquisition
targets, although there are no current commitments or agreements to acquire
any company.
- Acquire Additional High-Quality Reserves. While the Company's
general strategy is to acquire coal reserves sufficient to replace its
annual coal production, since 1994 the Company has acquired reserves
substantially in excess of its annual production. The Company's coal
reserves and coal resources (including captive reserves and resources) have
grown by 470% from approximately 50 million tons as of December 31, 1994 to
approximately 285 million tons. Currently, approximately 75 million tons
(36%) of the Company's reserves (including captive reserves) are compliance
coal, and the Company believes that a significant amount of its remaining
reserves are low-sulfur coal. The vast majority of the Company's reserves
contain high-Btu coal. As environmental regulations become more stringent,
the Company believes that the demand for high-Btu, low-sulfur or compliance
coal will increase. Therefore, the Company intends to continue its practice
of acquiring low-sulfur, high-Btu coal reserves to ensure that it has ample
reserves of the type of coal its customers will require in the future.
- Expand Scope of Addcar(TM) Systems. The Company intends to expand
its use of the Addcar(TM) highwall mining systems, which allow the Company
to conduct low-cost highwall mining operations. The Company may also
consider leasing, licensing and selling Addcar(TM) systems and related
mining equipment to third parties.
- Capitalize on Efficient Workforce. By providing its employees with
incentive compensation plans that are based on the productivity of
particular mine sites, the Company has managed to develop an efficient,
non-union workforce, which is a factor in minimizing coal production costs.
The Company believes that its workforce is an important factor in the
expansion of its operations through increased production and acquisitions.
Therefore, the Company intends to continue providing incentive plans to its
current employees and to implement such plans in any future acquisitions in
order to maintain a highly efficient, non-union workforce.
RECENT DEVELOPMENTS -- LESLIE RESOURCES
In January 1998, the Company acquired the stock of Leslie Resources for $11
million in cash and approximately $8 million in deferred payments over the next
five years. Leslie Resources conducts coal mining operations in southeastern
Kentucky and maintains administrative offices in Hazard, Kentucky, and has been
in business since 1982.
Leslie Resources operates five mines in southeastern Kentucky, and uses
primarily the mountaintop removal method of mining at these mines. Leslie
Resources owns and operates a storage facility, a preparation plant, a tipple,
and a high speed loadout facility at Hazard, Kentucky. Leslie Resources owns or
controls
4
<PAGE> 9
approximately 41 million tons of recoverable coal reserves and approximately 23
million tons of coal resources. As shown in the following chart, Leslie
Resources currently has five coal supply contracts.
<TABLE>
<CAPTION>
TONS PRICE
CUSTOMER TERM EXPIRATION DATE PER YEAR PER TON
- -------- -------- --------------- --------- -------------
<S> <C> <C> <C> <C>
Kentucky Utilities........................... 3 years(1) 12/31/00 400,000 $20.55
FOB rail car
East Kentucky Power Cooperative.............. 3 years 12/31/98 96,000(2) 29.52(3)
FOB stockpile
James River Coal Sales, Inc.................. 1 year 12/31/98 585,000 22.40
FOB mine
Tennessee Valley Authority (Bull Run)........ 5 years(4) 11/17/00 560,400 21.60(5)
FOB tipple
East Kentucky Power Cooperative.............. 1 year(6) 6/30/98 60,000 27.15(7)
FOB stockpile
</TABLE>
- ---------------
(1) This contract contains annual price reopener provisions, and if the parties
cannot agree on a new price, this contract will terminate.
(2) Monthly delivery requirements were decreased from 10,000 tons to 8,000 tons
effective April 1, 1997.
(3) The price per ton under this contract is $1.2198 per million Btu FOB
stockpile, which equals $29.52 per ton for coal with 12,100 Btu/lb (the
required level of Btu under this contract).
(4) TVA may unilaterally terminate this contract by paying 10% of the base price
multiplied by the tonnage remaining to be shipped through the earliest
termination date.
(5) In August 1997, Leslie Resources exercised its option to renegotiate the
price under this contract. The parties are currently negotiating a price
increase.
(6) East Kentucky Power Cooperative ("East Kentucky Power") may unilaterally
terminate this contract at any time.
(7) The price per ton under this contract is $1.1130 per million Btu FOB
stockpile, which equals $27.15 per ton for coal with 12,200 Btu/lb (the
required level of Btu under this contract).
Leslie currently sells about 60% of its coal on the spot market. Leslie
Resources produced approximately three million tons of coal in each of 1996 and
the nine-month period ended September 30, 1997, and earned revenues of $68.7
million and $63.6 million, respectively. During these periods, Leslie Resources
had EBITDA of $3.5 million and $4.6 million, respectively. Combined with the
Company's existing production base, Leslie Resources increases the Company's
total production and sales to approximately 12 million tons of coal per year.
Leslie Resources is a non-union company, and as of December 31, 1997, Leslie
Resources had 357 employees.
The Company believes that the acquisition of Leslie Resources will
complement the Company's existing operations and help satisfy delivery
requirements for the Company's existing customers in that region. The Company
also believes that it will be able to mine coal on the Leslie Resources
properties more efficiently than its past owner and achieve greater success in
marketing Leslie Resources' coal. The Company intends to use its Addcar(TM)
highwall mining systems to the extent practicable on properties controlled by
Leslie Resources.
5
<PAGE> 10
THE EXCHANGE OFFER
The Exchange Offer......... The Company is offering to exchange pursuant to the
Exchange Offer up to $200,000,000 aggregate
principal amount of its Exchange Notes for a like
aggregate principal amount of its outstanding Old
Notes. The terms of the Exchange Notes are
identical in all material respects (including
principal amount, interest rate and maturity) to
the terms of the Old Notes for which they may be
exchanged pursuant to the Exchange Offer, except
that the Exchange Notes are freely transferrable by
holders thereof (other than as provided herein),
and are not subject to any covenant regarding
registration under the Securities Act. See "The
Exchange Offer."
Interest Payments.......... Interest on the Exchange Notes shall accrue from
the last interest payment date (May 15 or November
15) on which interest was paid on the Old Notes so
surrendered or, if no interest has been paid on
such Old Notes, from November 12, 1997 (the
"Interest Payment Date").
Minimum Condition.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes
being tendered for exchange.
Expiration Date; Withdrawal
of Tender.................. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998, unless the
Exchange Offer is extended, in which case the term
"Expiration Date" means the latest date and time to
which the Exchange Offer is extended. Tenders may
be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. See "The
Exchange Offer -- Withdrawal Rights."
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Company currently expects that each of the
conditions will be satisfied and that no waivers
will be necessary. See "The Exchange
Offer -- Certain Conditions to the Exchange Offer."
The Company reserves the right to terminate or
amend the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
condition.
Procedures for Tendering
Old Notes.................. Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Old Notes and any other required
documentation to the Exchange Agent (as defined) at
the address set forth therein. By executing the
Letter of Transmittal, each holder will represent
to the Company that, among other things, the holder
or the person receiving such Exchange Notes,
whether or not such person is the holder, is
acquiring the Exchange Notes in the ordinary course
of business and that neither the holder nor any
such other person has any arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes, that neither
the holder nor any such person is an "affiliate"
(as defined under Rule 405 of the Securities Act)
of the Company, and if such holder is a
broker-dealer that holds the Old Notes as a result
of market-making or other trading activities, it
will deliver a
6
<PAGE> 11
prospectus meeting the requirements of the
Securities Act in connection with any resales of
the Exchange Notes. In lieu of physical delivery of
the certificates representing Old Notes, tendering
holders may transfer Old Notes pursuant to the
procedure for book-entry transfers, as set forth
under "The Exchange Offer -- Procedures for
Tendering Old Notes."
Use of Proceeds............ There will be no proceeds to the Company from the
exchange of Old Notes pursuant to the Exchange
Offer.
Federal Income Tax
Consequences............. The exchange of Old Notes pursuant to the Exchange
Offer will not be a taxable event for federal
income tax purposes. Consequently, no gain or loss
will be recognized by holders of the Old Notes upon
receipt of the Exchange Notes. See "The Exchange
Offer -- Certain Federal Income Tax Consequences of
the Exchange Offer."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Old Notes are registered
in the name of a broker, dealer, commercial bank,
trust company or other nominee and who wishes to
tender should contact such registered holder
promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such
beneficial owner's own behalf, such beneficial
owner must, prior to completing and executing the
Letter of Transmittal and delivering the Old Notes,
either make appropriate arrangements to register
ownership of the Old Notes in such beneficial
owner's name or obtain a properly completed bond
power from the registered holder. The transfer of
registered ownership may take considerable time.
See "The Exchange Offer -- Procedures for Tendering
Old Notes."
Guaranteed Delivery
Procedures............... Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal, or any other documents
required by the Letter of Transmittal to the
Exchange Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration Date
must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Procedures for Tendering Old
Notes."
Acceptance of Old Notes and
Delivery of Exchange
Notes.................... The Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be
delivered as soon as practicable following the
Expiration Date. See "The Exchange
Offer -- Acceptance of Old Notes for Exchange;
Delivery of Exchange Notes."
Effect on Holders of Old
Notes.................... As a result of the making of, and upon acceptance
for exchange of all validly tendered Old Notes
pursuant to the terms of this Exchange Offer, the
Company will have fulfilled a covenant contained in
the Registration Rights Agreement (the
"Registration Rights Agreement") dated November 12,
1997 among the Company, Addington Mining, Tennessee
Mining, Ikerd-Bandy and NationsBanc Montgomery
Securities, Inc. (the "Initial Purchaser") and the
holders that received Exchange Notes
7
<PAGE> 12
in exchange for Old Notes will have limited further
registration or other rights under the Registration
Rights Agreement. Holders of the Old Notes who do
not tender their Old Notes in the Exchange Offer
will continue to hold such Old Notes and will be
entitled to all the rights and limitations
applicable thereto under the Indenture, except for
any such rights under the Registration Rights
Agreement that by their terms terminate or cease to
have further effectiveness as a result of the
making of, and the acceptance for exchange of all
validly tendered Old Notes pursuant to, the
Exchange Offer. All untendered Old Notes will
continue to be subject to the restrictions on
transfer provided for in the Old Notes and in the
Indenture. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, the
trading market for untendered Old Notes could be
adversely affected.
Consequences of Failure to
Exchange................. Holders of Old Notes who do not exchange their Old
Notes for Exchange Notes pursuant to the Exchange
Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set
forth in the legend thereon as a consequence of the
offer or sale of the Old Notes pursuant to an
exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act
and applicable state securities laws. In general,
the Old Notes may not be offered or sold, unless
registered under the Securities Act, except
pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable
state securities laws.
Exchange Agent............. IBJ Schroder Bank & Trust Company is serving as
exchange agent (the "Exchange Agent") in connection
with the Exchange Offer. See "The Exchange
Offer -- Exchange Agent."
Exchange Offer;
Registration Rights...... If (i) the Exchange Offer is not permitted by
applicable law or (ii) any holder of Transfer
Restricted Securities notifies the Company that (A)
it is prohibited by law or Commission policy from
participating in the Exchange Offer, (B) that it
may not resell the Exchange Notes acquired by it in
the Exchange Offer to the public without delivering
a prospectus and this Prospectus is not appropriate
or available for such resales or (C) that it is a
broker-dealer and holds Notes acquired directly
from the Company or an affiliate of the Company,
and such holders timely notify the Company of such
facts, the Company will be required to provide a
shelf registration statement (the "Shelf
Registration Statement") to cover resales of the
Old Notes by the holders thereof. If the Company
fails to satisfy these registration obligations, it
will be required to pay Liquidated Damages to such
holders of Old Notes under certain circumstances.
See "The Exchange Offer -- Registration Rights and
Effect of Exchange Offer."
8
<PAGE> 13
SUMMARY OF TERMS OF EXCHANGE NOTES
The form and terms of the Exchange Notes are substantially identical to the
form and terms of the Old Notes which they replace except that (i) the Exchange
Notes have been registered under the Securities Act and, therefore, will not
bear legends restricting the transfer thereof, and (ii) the holders of Exchange
Notes generally will not be entitled to further registration rights under the
Registration Rights Agreement, which rights generally will have been satisfied
when the Exchange Offer is consummated. The Exchange Notes will evidence the
same indebtedness as the Old Notes which they replace and will be issued under,
and be entitled to the benefits of the Indenture. See "Description of Exchange
Notes."
Maturity Date.............. November 15, 2007.
Interest Payment Dates..... May 15 and November 15, commencing May 15, 1998.
Optional Redemption........ The Exchange Notes will not be redeemable at the
Company's option prior to November 15, 2002.
Thereafter, the Exchange Notes will be subject to
redemption at any time at the option of the
Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption
prices set forth herein, plus accrued and unpaid
interest and Liquidated Damages, if any, to the
redemption date. In addition, at any time on or
prior to November 15, 2000, the Company may redeem
up to 35% of the aggregate principal amount of the
Exchange Notes ever issued under the Indenture with
the net cash proceeds of an initial public offering
of common stock of the Company, at a redemption
price equal to 110% of the principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
redemption; provided that at least $130.0 million
of the aggregate principal amount of the Exchange
Notes remains outstanding after such redemption and
provided further that such redemption shall occur
within 45 days of the date of the closing of such
initial public offering. Upon a Change of Control,
the Company may be required to make an offer to
purchase all or any part of the outstanding
Exchange Notes at 101% of the principal amount
thereof plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
purchase.
Mandatory Redemption....... None.
Ranking.................... The Exchange Notes will be general unsecured
obligations of the Company and will rank senior in
right of payment to all existing and future
Indebtedness of the Company that is subordinated to
the Exchange Notes and will rank pari passu in
right of payment with all current and future
unsecured unsubordinated Indebtedness of the
Company. Borrowings under the New Credit Facility
will be secured by substantially all of the assets
of the Company and accordingly, the Exchange Notes
will be effectively subordinated to the borrowings
outstanding under the New Credit Facility to the
extent of the value of the assets securing such
borrowings. As of September 30, 1997, on a pro
forma basis after giving effect to the Pro Forma
Transactions, the Company would have had $55.8
million of senior Indebtedness outstanding other
than the Exchange Notes, $44.8 million of which
would have been secured debt. The terms of the
Indenture will permit the Company and its
subsidiaries to incur additional Indebtedness,
subject to certain limitations. See "Description of
Exchange Notes -- General."
Guarantees................. The Exchange Notes will be jointly and severally
and unconditionally guaranteed on a senior basis by
the Guarantors. The Subsidiary Guaran-
9
<PAGE> 14
tees will be senior unsecured obligations of the
Guarantors and will rank senior in right of payment
to all existing and future subordinated
Indebtedness of the Guarantors and pari passu in
right of payment with all other Indebtedness of the
Guarantors, including the guarantees of
Indebtedness under the New Credit Facility. Any
Guarantor's obligations under the New Credit
Facility, however, will be secured by a lien on
substantially all of the assets of such Guarantor,
and the Indenture restricts, but does not prohibit,
the Guarantors from incurring additional secured
Indebtedness. Accordingly, such secured
Indebtedness will rank prior to the Subsidiary
Guarantees with respect to such assets. See
"Description of Exchange Notes -- Subsidiary
Guarantees."
Change of Control.......... Upon a Change of Control, the Company will be
required to make an offer to repurchase all
outstanding Exchange Notes at 101% of the principal
amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of
repurchase.
Covenants.................. The Indenture will restrict, among other things,
the ability of the Company and its subsidiaries to
incur additional Indebtedness and issue preferred
stock, pay dividends or make certain other
restricted payments, apply net proceeds from
certain asset sales, enter into certain
transactions with affiliates, agree to certain
payment restrictions applicable to subsidiaries,
sell stock of subsidiaries, incur liens or enter
into consolidations or mergers. See "Description of
Exchange Notes -- Certain Covenants."
10
<PAGE> 15
RISK FACTORS
Holders of Old Notes should consider carefully the matters set forth in
"Risk Factors", as well as the other information set forth herein before
deciding to tender Old Notes in the Exchange Offer. The matters set forth in
"Risk Factors" are generally applicable to the Old Notes as well as the Exchange
Notes.
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following sets forth summary unaudited pro forma combined financial
data derived from the unaudited pro forma combined financial data contained
elsewhere herein. The following unaudited pro forma combined statement of income
data of the Company for the year ended December 31, 1996, give effect to the
Organizational Transactions (as defined), the acquisition of Ikerd-Bandy, the
acquisition of Leslie Resources, the acquisition of the Mining Technologies
division of Addington Enterprises, the termination of the S corporation status
of all corporations included in the Organizational Transactions, the Offering
and the application of the net proceeds therefrom and the Exchange Offer
(collectively, the "Pro Forma Transactions") as if they had occurred on January
1, 1996. The following unaudited pro forma combined statement of income data for
the Company for the nine months ended September 30, 1997, give effect to the Pro
Forma Transactions as if they had occurred on January 1, 1996. The following
unaudited pro forma combined balance sheet data of the Company give effect to
the Pro Forma Transactions as if they occurred on September 30, 1997. Certain
management assumptions and adjustments relating to the Pro Forma Transactions
are described in the accompanying notes hereto. This pro forma information is
not necessarily indicative of the results that would have occurred had the Pro
Forma Transactions been completed on the dates indicated or the Company's actual
or future results or financial position. The summary pro forma combined
financial data should be read in conjunction with the information contained in
the financial statements of the Company and the notes thereto and with the
information set forth under "Unaudited Pro Forma Combined Financial Statements,"
"Selected Historical Combined Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
herein.
11
<PAGE> 16
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
PRO FORMA
------------------------------
NINE MONTHS
ENDED
FISCAL YEAR SEPTEMBER 30,
1996 1997
----------- -------------
(DOLLARS IN THOUSANDS, EXCEPT
PER TON DATA)
<S> <C> <C>
OPERATING REVENUES AND EXPENSES:
Revenues.................................................... $230,957 $221,051
Cost of operations.......................................... 193,164 186,201
Depreciation, depletion and amortization.................... 13,813 12,508
Selling, general and administrative......................... 12,722 12,694
-------- --------
Income from operations...................................... 11,258 9,648
Interest expense............................................ (27,730) (20,736)
Other income (loss), net.................................... 255 1,097
-------- --------
Income (loss) before minority interest and income tax
provision................................................. (16,217) (9,991)
Minority Interest........................................... (59) --
-------- --------
Income (loss) before income tax provision................... (16,158) (9,991)
OTHER DATA:
EBITDA(1)................................................... $ 25,071 $ 22,156
Depreciation, depletion and amortization.................... 13,813 12,508
Capital expenditures........................................ (17,814) (21,841)
Cash interest expense....................................... (26,099) (19,469)
Ratio of EBITDA to cash interest expense.................... 1.0x 1.1x
Ratio of earnings to fixed charges(2)....................... * *
OPERATING DATA:
Coal production (in thousands of tons)...................... 9,023 9,048
Average sales price per ton................................. $ 23.67 $ 23.05
Average production cost per ton of coal..................... $ 21.60 $ 20.72
BALANCE SHEET DATA AT SEPTEMBER 30, 1997:
Cash and cash equivalents................................... 64,924
Working capital............................................. 70,561
Total assets................................................ 284,240
Long-term debt (including current portion).................. 255,769
Owners' investment (deficit)................................ (53,331)
</TABLE>
- ---------------
* Amounts result in a deficiency.
(1) EBITDA is the sum of income from operations plus depreciation, depletion and
amortization expense. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to service indebtedness and a
similar measure is used in the Indenture to determine compliance with
certain covenants. However, EBITDA should not be considered as an
alternative to income from operations or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of a company's
operating performance or as a measure of liquidity.
(2) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income tax provision plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest incurred (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest. Earnings were
inadequate to cover fixed charges for Fiscal 1996 and the nine months ended
September 30, 1997 by $16.2 million, and $10.1 million, respectively.
12
<PAGE> 17
SUMMARY HISTORICAL COMBINED FINANCIAL DATA
The summary combined financial data below as of and for the years ended
December 31, 1995 and 1996, and as of and for the nine months ended September
30, 1997 have been derived from the Combined Audited Financial Statements of the
Company which have been audited by Arthur Andersen LLP, independent public
accountants, and are included elsewhere in this Prospectus. The summary combined
financial data below for the year ended December 31, 1994, and for the ten
months ended November 1, 1995, have been derived from the Combined Financial
Statements of the Company's predecessor business which operating revenues and
expenses and cash flows have also been audited by Arthur Andersen LLP,
independent public accountants, and are included elsewhere in this Prospectus.
The summary combined financial data as of and for the years ended December 31,
1992 and 1993 have been derived from the unaudited Combined Financial Statements
of the Company's predecessor business and are not included elsewhere herein. The
summary combined financial data for the nine months ended September 30, 1996,
has been derived from the Company's Unaudited Combined Financial Statements for
that period included elsewhere in the Prospectus and the summary combined
financial data as of September 30, 1996, has been derived from the Company's
Unaudited Combined Financial Statements for that period, but are not included
elsewhere herein and, in each case, include, in the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the results for the unaudited interim period. Results for the
nine months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the entire year. The information presented
below is qualified in its entirety by, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Combined Financial Statements of the Company and related
notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR(1) AEI HOLDING COMPANY
------------------------------------------ -------------------------------------------
10 MONTHS 9 MONTHS 9 MONTHS
ENDED ENDED ENDED
FY 1992 FY 1993 FY 1994 11/1/95 FY 1995(2) FY 1996 9/30/96 9/30/97
-------- -------- -------- --------- ---------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER TON DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES AND EXPENSES:
Revenues............................ $154,145 $107,749 $103,100 $ 80,569 $31,694 $123,200 $ 92,512 $124,081
Cost of operations.................. 128,167 101,279 91,460 69,051 25,396 97,101 73,162 100,736
Depreciation, depletion and
amortization...................... 5,923 8,083 4,362 4,624 1,401 6,945 5,069 6,910
Selling, general and
administrative.................... 11,022 9,143 7,121 6,427 2,178 9,025 6,668 9,890
-------- -------- -------- -------- ------- -------- -------- --------
Income (loss) from operations....... 9,033 (10,756) 157 467 2,719 10,129 7,613 6,545
Interest expense.................... (6,728) (6,801) (346) (982) (1,043) (5,527) (4,183) (5,265)
Other income (loss), net............ 2,426 2,637 282 (555) 131 402 221 (586)
-------- -------- -------- -------- ------- -------- -------- --------
Income (loss) before income tax
provision and minority interest... 4,731 (14,920) 93 (1,070) 1,807 5,004 3,651 694
Minority interest................... -- -- -- -- 59 (59) (59) --
Income tax provision (benefit)...... 1,390 4,754 35 (407) -- -- -- 1,398
-------- -------- -------- -------- ------- -------- -------- --------
Excess (deficit) of operating
revenues over expenses............ 3,341 (10,166) 58 (663) 1,748 5,063 3,710 (704)
OTHER DATA:
EBITDA(3)........................... 14,956 (2,673) 4,519 5,091 4,120 17,074 12,682 13,455
Depreciation, depletion and
amortization...................... 5,923 8,083 4,362 4,624 1,401 6,945 5,069 6,910
Capital expenditures................ 3,048 8,727 11,465 6,081 6,477 14,092 8,372 18,340
Cash interest expense............... 5,917 7,996 473 1,126 1,034 5,603 4,251 4,976
Ratio of EBITDA to cash interest
expense........................... 2.5x 0.3x 9.6x 4.5x 4.0x 3.0x 3.0x 2.7x
Ratio of earnings to fixed
charges(4)........................ 1.4x * 1.0x * 2.0x 1.6x 1.6x 1.1x
OPERATING DATA:
Coal production (in millions of
tons)............................. 4.69 3.74 3.54 2.35 0.95 4.22 2.87 4.56
Average sales price per ton of
coal.............................. $ 29.14 $ 26.27 $ 26.31 $ 26.94 $ 23.36 $ 23.90 $ 25.41 $ 24.49
Average production cost per ton of
coal.............................. $ 25.22 $ 25.29 $ 23.48 $ 23.35 $ 19.91 $ 21.13 $ 22.15 $ 21.31
BALANCE SHEET DATA (AT PERIOD END):
Working Capital..................... 17,187 (7,734) (2,610) (10,969) (5,585) (11,551) (10,346) 12,651
Total assets........................ 74,938 56,189 69,682 72,858 92,259 106,930 106,778 141,473
Long-term debt (including current
portion).......................... 3,403 493 5,550 10,447 52,384 55,561 55,615 91,635
Owners' Investment (Deficit)........ $ 37,974 $ 30,190 $ 31,141 $ 26,164 $(4,731) $ 325 $ 247 $ (178)
</TABLE>
- ---------------
* Amounts result in a deficiency.
13
<PAGE> 18
(1) Predecessor represents the operations presently conducted through Addington
Mining, Tennessee Mining and Mining Technologies.
(2) Results for Fiscal 1995 include the operations presently conducted through
Addington Mining, Tennessee Mining and Mining Technologies from November 2,
1995 through December 31, 1995 and the operations of Bowie from January 1,
1995 through December 31, 1995.
(3) EBITDA is the sum of income from operations plus depreciation, depletion and
amortization expense. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to service indebtedness and a
similar measure is used in the Indenture to determine compliance with
certain covenants. However, EBITDA should not be considered as an
alternative to income from operations or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of a company's
operating performance or as a measure of liquidity.
(4) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income tax provision plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest incurred (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest. Earnings were
inadequate to cover fixed charges for Fiscal 1993 and the ten months ended
November 1, 1995 by $14.9 million and $1.2 million, respectively.
14
<PAGE> 19
RISK FACTORS
Holders of Old Notes should consider carefully the risk factors set forth
below, as well as the other information set forth herein, before deciding to
tender Old Notes in the Exchange Offer. The risk factors set forth below are
generally applicable to the Old Notes as well as the Exchange Notes.
FORWARD-LOOKING STATEMENTS
This Prospectus contains statements which constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Those statements appear in a number of places herein and include
statements regarding the intent, belief or current expectations of the Company,
primarily with respect to the future operating performance of the Company or
related industry developments. Holders of Old Notes are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ from those described
in the forward-looking statements as a result of various factors, many of which
are beyond the control of the Company. The information contained herein,
including, without limitation, the information set forth below and the
information under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations," identifies important factors that could
cause such differences.
EXCHANGE OFFER PROCEDURES; CONSEQUENCES OF FAILURE TO EXCHANGE
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to
the Exchange Offer will be made only after timely receipt by the Exchange Agent
of properly completed and duly executed Letters of Transmittal and all other
required documents from holders eligible to participate in the Exchange Offer.
Therefore, holders of the Old Notes desiring to tender such Old Notes in
exchange for Exchange Notes should allow sufficient time to ensure timely
delivery. The Company is under no duty to give notification of defects or
irregularities with respect to the tender of Old Notes for exchange.
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
Old Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. Except as required by the Registration Rights Agreement, the Company does
not currently intend to register the Old Notes under the Securities Act. Based
on interpretations by the Commission, the Company believes that Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be offered
for resale, resold or otherwise transferred by holders thereof (other than any
such holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such Old
Notes were acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the distribution
of such Exchange Notes. Each Participating Broker-Dealer that receives Exchange
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution." To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes may be adversely affected.
SUBSTANTIAL LEVERAGE
The Company is, and will continue after the Exchange Offer to be, highly
leveraged. On September 30, 1997, after giving pro forma effect to the Pro Forma
Transactions, the Company would have had total indebtedness of approximately
$255.8 million (of which $200.0 million would have consisted of the Senior
Notes, $25.0 million would have consisted of borrowings under the New Credit
Facility and the balance would have consisted of $19.8 million of secured senior
Indebtedness and $11.0 million of senior unsecured Indebtedness) and owners'
deficit of approximately $53.3 million. Also after giving pro forma effect to
such
15
<PAGE> 20
Transactions, the Company's earnings would have been insufficient to cover its
fixed charges by approximately $16.2 million and $10.1 million for fiscal year
1996 and for the nine months ended September 30, 1997, respectively. The Company
and its subsidiaries will be permitted to incur additional indebtedness in the
future. See "Capitalization," "Summary Combined Financial Data" and "Description
of Exchange Notes."
The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Senior Notes), or to fund planned capital
expenditures will depend on its future performance, which, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond its control. Based upon the current level of
operations and anticipated revenue growth, the Company believes that cash flow
from operations and available cash, together with available borrowings under the
New Credit Facility, will be adequate to meet the Company's future liquidity
needs for at least the next several years. The Company may, however, need to
refinance all or a portion of the principal of the Senior Notes on or prior to
maturity. There can be no assurance that the Company's business will generate
sufficient cash flow from operations, that anticipated revenue growth and
operating improvements will be realized or that future borrowings will be
available under the New Credit Facility in an amount sufficient to enable the
Company to service its indebtedness, including the Senior Notes, or to fund its
other liquidity needs. In addition, there can be no assurance that the Company
will be able to effect any such refinancing on commercially reasonable terms or
at all. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
The degree to which the Company is currently leveraged could have important
consequences to holders of the Senior Notes, including, but not limited to: (i)
making it more difficult for the Company to satisfy its obligations with respect
to the Senior Notes; (ii) increasing the Company's vulnerability to general
adverse economic and industry conditions; (iii) limiting the Company's ability
to obtain additional financing to fund future working capital, capital
expenditures and other general corporate requirements; (iv) limiting the
Company's ability to obtain additional financing to fund future acquisitions of
coal producers or coal reserves; (v) requiring the dedication of a substantial
portion of the Company's cash flow from operations to the payment of principal
of, and interest on, its indebtedness, thereby reducing the availability of such
cash flow to fund working capital, capital expenditures, research and
development or other general corporate purposes; (vi) limiting the Company's
flexibility in planning for, or reacting to, changes in its business and the
industry; and (vii) placing the Company at a competitive disadvantage vis-a-vis
less leveraged competitors. In addition, the Indenture and the New Credit
Facility contain financial and other restrictive covenants that limit the
ability of the Company to, among other things, borrow additional funds. Failure
by the Company to comply with such covenants could result in an event of default
which, if not cured or waived, could have a material adverse effect on the
Company. In addition, the degree to which the Company is leveraged could prevent
it from repurchasing all of the Senior Notes tendered to it upon the occurrence
of a Change of Control. See "Description of Exchange Notes -- Repurchase at
Option of Holder -- Change of Control" and "Description of New Credit Facility."
HOLDING COMPANY STRUCTURE
The Company is a holding company that conducts all of its operations
exclusively through its subsidiaries. The Company's only significant assets are
the capital stock of its subsidiaries, all but one of which, Bowie, is a wholly
owned subsidiary of the Company. As a holding company, the Company is dependent
on dividends or other distributions of funds from its subsidiaries to meet the
Company's debt service and other obligations, including its obligations under
the Senior Notes. The Company owns only 77.5% of the capital stock of Bowie and
is a party to a shareholders agreement with the other shareholder of Bowie, and
as a result, under certain circumstances the Company may not be able to rely on
the cash flow from operations at Bowie.
EFFECTIVE SUBORDINATION OF THE SENIOR NOTES
The Senior Notes and the Subsidiary Guarantees are senior unsecured
obligations and rank pari passu in right of payment with all other current and
future senior obligations of the Company and the Guarantors, respectively.
However, loans under the New Credit Facility will be secured by substantially
all of the
16
<PAGE> 21
Company's assets and will be guaranteed by the Company's subsidiaries (other
than Bowie), which guarantees will be secured by substantially all of the assets
of such subsidiaries. Accordingly, the Senior Notes and the Subsidiary
Guarantees will be effectively subordinated to all secured indebtedness to the
extent of the collateral and will rank pari passu in right of payment with all
other existing and future senior obligations of the Company or the Guarantors,
respectively. Upon an event of default under any such secured indebtedness, the
Lenders (as defined) could elect to declare all amounts outstanding, together
with accrued and unpaid interest thereon, to be immediately due and payable. If
the Company or the Guarantors were unable to repay those amounts, the Lenders
could proceed against the collateral granted them to secure that indebtedness.
There can be no assurance that the assets of the Company or the relevant
subsidiary remaining after repayment in full of such secured indebtedness would
be sufficient to repay the holders of the Senior Notes.
IMPORTANCE OF ACQUISITIONS AND RELATED RISKS
The Company has grown through the acquisition of coal companies, coal
properties, coal leases and related assets, and management believes that such
acquisitions will continue to be important to the Company. The inability of the
Company to make such acquisitions in the future, due to restrictions under the
Company's existing or future debt agreements, competition from other coal
companies for such properties or the lack of suitable acquisition candidates,
could limit the Company's future growth. Further, acquisitions involve a number
of special risks, including possible adverse effects on the Company's operating
results, diversion of management's attention, failure to retain key acquired
personnel, risks associated with unanticipated events or liabilities, some or
all of which could have a material adverse effect on the Company's financial
condition and results of operations. There can be no assurance that the Company
will be successful in the development of such acquisitions or joint ventures or
that the acquired companies or other businesses acquired in the future will
achieve anticipated revenues and earnings. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
The Company intends in the future to pursue acquisitions of additional coal
reserves and other coal companies, although the Company has no present binding
commitments or agreements with respect to any such acquisitions. Future
acquisitions by the Company could result in potentially dilutive issuances of
equity securities, the incurrence of debt and contingent liabilities and an
increase in amortization expenses related to goodwill and other intangible
assets, each of which could have a material adverse effect upon the Company's
business, financial condition and results of operations. Acquisitions involve
numerous risks, including difficulties in the assimilation of the operations,
technologies, services and products of the acquired companies and the diversion
of management's attention from other business concerns. In the event that any
such acquisition were to occur, there can be no assurance that the Company's
business, financial condition and results of operations would not be materially
adversely affected.
RELIANCE ON LONG-TERM COAL SUPPLY CONTRACTS
A substantial portion of the Company's coal is sold pursuant to long-term
coal supply contracts which are significant to the stability and profitability
of the Company's operations. The execution of a satisfactory long-term contract
is frequently the basis on which the Company undertakes the development of coal
reserves required to be supplied under the contract. In 1996, approximately 87%
of the Company's revenues from coal sales were made under long-term contracts.
As of June 30, 1997, the Company had seven long-term contracts with a weighted
average term of approximately 6.2 years. Nine long-term and nine short-term
contracts with 14 customers, collectively, accounted for approximately 97% of
revenues from coal sales in 1997. As of June 30, 1997, most of the Company's
contracts provide for coal to be sold at a price which exceeds the price at
which such coal could be sold in the spot market.
Some of the Company's long-term coal supply contracts are subject to price
adjustment provisions which permit an increase or decrease in the contract price
at specified times (typically annually) to reflect changes in certain price or
other economic indices, taxes and other charges. Certain of the Company's
long-term coal supply contracts also contain price reopener provisions which
provide for the contract price to be adjusted upward or downward at specified
times on the basis of market factors. Failure of the parties to agree on a price
pursuant to such price adjustment and reopener provisions can lead to early
termination of the contracts. The
17
<PAGE> 22
long-term contracts also typically contain force majeure provisions allowing
suspension of performance by the Company or the customer to the extent necessary
during the duration of certain events beyond the control of the affected party,
including labor disputes and changes in government regulations. See
"Business -- Major Sales Contracts." There can be no assurance that the
Company's currently existing contracts will remain in force for the duration of
their current terms or that the prices obtained by the Company for coal under
such contracts will not be reduced pursuant to the terms thereof or otherwise.
The operating profit margins realized by the Company under its long-term
coal supply contracts depend on a variety of factors, including production
costs, transportation costs, delivered coal qualities and quantities and various
general macro-economic indices, many of which are beyond the Company's control.
In addition, price adjustment, price reopener and other provisions may reduce
the insulation from short-term coal price volatility provided by such contracts
and may adversely impact the Company's operating profit margins. If any of the
Company's long-term contracts were modified or terminated, the Company could be
adversely affected to the extent that it is unable to find alternate customers
at the same level of profitability. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
HIGHLY COMPETITIVE INDUSTRY
The United States coal industry is highly competitive, with numerous
producers in all coal producing regions. The Company competes with other large
producers and hundreds of small producers in the United States and abroad. Many
of the Company's customers also purchase coal from its competitors. The markets
in which the Company sells its coal are highly competitive and affected by
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 87% of domestic coal consumption in recent years.
These coal consumption patterns are influenced by the demand for electricity,
coal transportation costs, environmental and other 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 addition, during the
mid-1970's and early 1980's, a growing coal market and increased demand
attracted new investors to the coal industry and spurred the development of new
mines and added production capacity throughout the industry. As a result of the
increased development of large surface mining operations, particularly in the
western United States, and more efficient mining equipment and techniques, the
industry has developed excess coal production capacity in the United States.
Competition resulting from excess capacity encourages producers to reduce prices
and to pass productivity gains through to customers. Moreover, because of
greater competition in the domestic electric utility industry and increased
pressure from customers and regulators to lower electricity prices, public
utilities are lowering fuel costs by buying higher percentages of spot coal
through a competitive bidding process and by only buying the amount of coal
necessary under existing contracts to meet their contractual requirements. There
can be no assurance that the Company will continue to be able to obtain
long-term contracts with reliable customers as its reserves expand and as
existing contracts expire. If a lower percentage of its revenues are generated
pursuant to long-term contracts, the Company will be increasingly affected by
changes in prices for coal in the spot market.
INTELLECTUAL PROPERTY
The Company's intellectual property is patented, and such patents give the
Company the exclusive right to use its intellectual property for the life of the
patent. However, there can be no guarantee of the validity and enforceability of
any of the Company's patents. The validity of a patent is open to challenge on a
number of grounds, including lack of novelty and the failure to adequately
describe the invention in the patent claim. It is possible that the patents held
by the Company may be successfully challenged in the future, although the
Company does not consider this to be likely. Any loss of patent protection could
have a material impact on the Company, as it might allow new competitors to use
the Company's technology.
18
<PAGE> 23
NEW TECHNOLOGY
The coal mining industry is increasingly affected by advances in
technology. The ability of the Company to compete successfully may depend on the
extent to which it is able to implement and exploit such technological changes.
The failure of the Company to develop, anticipate or respond to such changes
could have a material adverse effect on the Company. Although the Company's
patents provide protection against competitors using highwall mining systems
incorporating the same technology, there is a risk that a competitor may develop
a system which incorporates a new technology and is capable of producing
superior results. The development of new and better technologies by the
Company's competitors could have a material adverse effect on the Company.
ADVERSE HIGHWALL MINING CONDITIONS
The highwall mining process can be complicated by adverse geological
conditions which may diminish coal recovery, and in extreme cases, contribute to
the loss or damage of highwall mining equipment. Some of these adverse
geological conditions which have been encountered in the past, and may also be
encountered in the future, include the following:
Roof stability -- Highwall mining depends on the roof being self-supporting
during the period that the miner is under ground. However, due to weak strata
above the seam, water logged strata, faulting, jointing and other factors, minor
roof falls can occur, stopping the highwall miner and causing it to be
withdrawn. This can cause production delays, and in extreme cases, it may be
necessary to perform a manned entry to recover the highwall miner. Although
projects are under way to produce highwall miners which mine in a manner
reducing this risk, there is no assurance that such results can be achieved.
Highwall failure -- Highwall mining creates or redistributes existing
stresses in the rock strata when an entry is driven into the coal seam. In
certain cases, this may cause highwall failure, resulting in buried equipment
that necessitates excavation efforts.
Pillar failure -- Pillar failure may result when the pillars are narrower
than planned, when the roof or floor is weaker than planned, or in the event of
a stress concentration.
Methane and other gases -- Coal seams contain methane and other gases that
may disrupt mining or limit the depth of the mining operations.
Water -- Water may enter the mine from two sources: pit flooding or strata
aquifers. While highwall mining equipment is water resistant, it is not
waterproof. The flooding of an entry can result in premature evacuation prior to
reaching the full penetration depth. Problems with water inflow are exacerbated
by seam dips because the water flows naturally to the front of the entry.
Faulting -- Structural faults occasionally develop in coal seams and are
often hard to detect. These faults may limit the penetration depth, resulting in
the mining of fewer tons of coal than originally planned.
TRANSPORTATION
The United States coal industry depends on rail, trucking and barge
transportation to deliver shipments of coal to customers. In particular, the
Company is dependent on the Union Pacific railroad to transport coal from its
operations in Colorado. Disruption of these transportation services, based on
weather-related events or otherwise, 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.
19
<PAGE> 24
RISKS INHERENT TO MINING
The Company's mining operations are subject to conditions beyond the
Company's control which can negatively or positively affect the cost of mining
at particular mines for varying lengths of time. These conditions include
weather and natural disasters such as heavy rains and flooding, unexpected
maintenance problems, variations in coal seam thickness, variations in the
amount of rock and soil overlying the coal deposit, variations in rock and other
natural materials and variations in geological and other conditions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
GOVERNMENT REGULATION OF THE MINING INDUSTRY
The coal mining industry is subject to regulation by federal, state and
local authorities on matters such as employee health and safety, permitting and
licensing requirements, air quality standards, water pollution, plant and
wildlife protection, reclamation and restoration of mining properties after
mining is completed, the discharge of materials into the environment, surface
subsidence from underground mining and the effects that mining has on
groundwater quality and availability. In addition, the industry is affected by
significant legislation mandating certain benefits for current and retired coal
miners. Numerous governmental permits and approvals are required for mining
operations. The Company believes all material permits required to conduct its
present mining operations have been obtained. The Company may be required to
prepare and present to federal, state or local authorities data pertaining to
the effect or impact that any proposed exploration for or production of coal may
have upon the environment. All requirements imposed by any such authority may be
costly and time-consuming and may delay commencement or continuation of
exploration or production operations. The possibility exists that new
legislation and/or regulations and orders may be adopted which may materially
adversely affect the Company's mining operations, its cost structure and/or its
customers' ability to use coal. New legislation, including proposals related to
the protection of the environment which would further regulate and tax the coal
industry, may also require the Company or its customers to change their
operations significantly or incur increased costs. Such factors and legislation
(if enacted) could have a material adverse effect on the Company's financial
condition and results of operations. See "Government Regulation."
RECLAMATION AND MINE CLOSURE ACCRUALS
The federal Surface Mining Control and Reclamation Act of 1977 and similar
state statutes require that mine property be restored in accordance with
specified standards and an approved reclamation plan. The Company accrues for
the costs of final mine closure over the estimated useful mining life of the
property. These costs relate to reclaiming the pit and support acreage at
surface mines and sealing portals at deep mines. Other costs common to both
types of mining are related to reclaiming refuse and slurry ponds. The Company
accrues for current mine disturbance which will be reclaimed prior to final mine
closure. The establishment of the final mine closure reclamation liability and
the current disturbance is based upon permit requirements and requires various
estimates and assumptions, principally associated with costs and production
levels. Annually, the Company reviews its entire environmental liability and
makes necessary adjustments, including mine plan and permit changes and
revisions to costs and production levels to optimize mining and reclamation
efficiency. The economic impact of such adjustments is recorded to cost of coal
sales. Although the Company's management believes it is making adequate
provisions for all expected reclamation and other costs associated with mine
closures, future operating results would be adversely affected if such accruals
were later determined to be insufficient.
IMPACT OF CLEAN AIR ACT AMENDMENTS ON COAL CONSUMPTION
The federal Clean Air Act ("Clean Air Act") and Amendments to the Clean Air
Act ("Clean Air Act Amendments"), and corresponding state laws which regulate
the emissions of materials into the air, affect coal mining operations both
directly and indirectly. Coal mining and processing operations may be directly
affected by Clean Air Act permitting requirements and/or emissions control
requirements relating to particulate matter (e.g., "fugitive dust"). Coal mining
and processing may also be impacted by future regulation of fine particular
matter measuring 2.5 micrometers in diameter or smaller. Regulations relating to
20
<PAGE> 25
fugitive dust and coal combustion emissions may restrict the Company's ability
to develop new mines or could require the Company to modify its existing
operations. The Clean Air Act indirectly affects coal mining operations by
extensively regulating the air emissions of coal-fueled utility power plants.
Title IV of the Clean Air Act Amendments places limits on sulfur dioxide
emissions from electric power generation plants. The limits set baseline
emission standards for such facilities. Reductions in such emissions will occur
in two phases: the first began in 1995 ("Phase I") and applies only to certain
identified facilities and the second is currently scheduled to begin in 2000
("Phase II") and will apply to most remaining facilities, including those
subject to the 1995 restrictions. The affected utilities have been and may be
able to meet these requirements by, among other ways, switching to lower sulfur
fuels, installing pollution control devices such as scrubbers, reducing
electricity generating levels or purchasing or trading "pollution credits."
Specific emission sources will receive these credits which utilities and
industrial concerns can trade or sell to allow other units to emit higher levels
of sulfur dioxide. In addition, the Clean Air Act Amendments require a study of
utility power plant emission of certain toxic substances and their eventual
regulation, if warranted.
The effect of the Clean Air Act Amendments on the Company cannot be
completely ascertained at this time. The Company believes that implementation of
Phase II will likely exert a downward pressure on the price of higher sulfur
coal, as additional coal-burning utility power plants become subject to the
restrictions of Title IV. This price effect is expected to result after the
large surplus of pollution credits which has accumulated in connection with
Phase I has been reduced and before utilities electing to comply with Phase II
by installing scrubber sulfur-reduction technologies are able to implement such
a compliance strategy. The extent to which this expected price decrease will
adversely affect the Company will depend upon a number of factors, including the
Company's ability to secure long-term contracts for its coal reserves with
higher sulfur content. Moreover, if the price of compliance coal rises as Phase
II is implemented, scrubber compliance strategies may become more attractive to
utility customers, thereby lessening the downward pressure on the price of high
sulfur coal. See "-- Reliance on Long-Term Coal Supply Contracts,"
"Business -- Major Sales Contracts" and "Government Regulation."
The Clean Air Act Amendments also require that utilities that currently are
major sources of nitrogen oxides in moderate or higher ozone non-attainment
areas install reasonably available control technology ("RACT") for nitrogen
oxides, which are precursors of ozone. In addition, stricter ozone standards are
expected to be implemented by the United States Environmental Protection Agency
(the "EPA") by 2003. The Ozone Transport Assessment Group ("OTAG"), formed to
make recommendations to the EPA for addressing ozone problems in the eastern
United States, submitted its final recommendations to the EPA in June 1997.
Based on the OTAG's recommendations, the EPA recently announced a proposal (the
"SIP call") that would require 22 eastern states, including Kentucky and
Tennessee, to make substantial reductions in nitrous oxide emissions. The EPA
expects that states will achieve these reductions by requiring power plants to
reduce their nitrous oxide emissions by an average of 85%. Installation of RACT
and additional control measures required under the SIP call will make it more
costly to operate coal-fired utility power plants and, depending on the
requirements of individual state attainment plans and the development of revised
new source performance standards, could make coal a less attractive fuel
alternative in the planning and building of utility power plants in the future.
Any reduction in coal's share of the capacity for power generation could have a
material adverse effect on the Company's financial condition and results of
operations. The effect such legislation or regulation, or other legislation that
may be enacted in the future, could have on the coal industry in general and on
the Company in particular cannot be predicted with certainty. Such legislation
and regulation limits the ability of some of the Company's customers to burn
higher sulfur coal unless such customers have or are willing to install
scrubbers, blend coal or bear the cost of acquiring emission credits, which
permit them to burn higher sulfur coal. The Company has endeavored to mitigate
the potential adverse effects of the legislation's limitations on sulfur dioxide
emissions through the acquisition and development of compliance and low-sulfur
coal reserves in eastern Kentucky, Tennessee and Colorado. However, no assurance
can be given that the implementation of the Clean Air Act Amendments or any
future regulatory provisions will not materially adversely affect the Company.
21
<PAGE> 26
REPLACEMENT AND RECOVERABILITY OF RESERVES
The Company's future success depends upon its ability to find, develop or
acquire additional coal reserves that are economically recoverable. The
recoverable reserves of the Company will generally decline as reserves are
depleted, except to the extent that the Company conducts successful exploration
and development activities or acquires properties containing recoverable
reserves. To increase reserves and production, the Company must continue its
development, exploration and acquisition activities or undertake other
replacement activities. The Company's current strategy includes increasing its
reserve base through acquisitions of producing properties and by continuing to
exploit its existing properties. There can be no assurance, however, that the
Company's planned development and exploration projects and acquisition
activities will result in significant additional reserves or that the Company
will have continuing success developing additional mines. For a discussion of
the Company's reserves, see "Business -- Coal Reserves." Most of the Company's
mining operations are conducted on properties owned or leased by the Company.
Because title to most of the Company's leased properties and mineral rights is
not thoroughly verified until a permit is being obtained to mine the property,
the Company's right to mine certain of its reserves may be adversely affected if
defects in title or boundaries exist. In addition, there is no assurance that
the Company can successfully negotiate new leases or mining contracts for
properties containing additional reserves or maintain its leasehold interest in
properties on which mining operations are not commenced during the term of the
lease. See "Business -- Coal Reserves."
PRICE FLUCTUATIONS AND MARKETS
The Company's results of operations are highly dependent upon the prices
received for the Company's coal. Although historically more than 85% of the
Company's coal sales are made pursuant to long-term contracts (contracts having
an initial term of more than one year), virtually all of these contracts include
price adjustment provisions which permit an increase or decrease at specified
times in the contract price to reflect changes in certain price or other
economic indices, taxes and other charges. Additionally, some of the Company's
long-term coal contracts contain price reopener provisions which provide for the
contract price to be adjusted upward or downward at specified times on the basis
of market factors. See "-- Reliance on Long-Term Coal Supply Contracts." Any
significant decline in prices for coal could have a material adverse effect on
the Company's financial condition, results of operation and quantities of
reserves recoverable on an economic basis. Should the industry experience
significant price declines from current levels or other adverse market
conditions, the Company may not be able to generate sufficient cash flow from
operations to meet its obligations and make planned capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Government Regulation."
The availability of a ready market for the Company's coal production also
depends on a number of factors, including the demand and supply of low-sulfur
coal, and the availability of pollution credits. See "-- Impact of Clean Air Act
Amendments on Coal Consumption."
RELIANCE ON ESTIMATES OF RECOVERABLE RESERVES
There are numerous uncertainties inherent in estimating quantities of
recoverable reserves, including many factors beyond the control of the Company.
The coal reserve data set forth in this Prospectus are based on the Marshall
Miller Reports. Estimates of economically recoverable coal reserves and future
net cash flows necessarily depend upon a number of variable factors and
assumptions, such as historical production from the area compared with
production from other producing areas, the assumed effects of regulations by
governmental agencies and assumptions concerning future coal prices, future
operating costs, severance and excise taxes, development costs and reclamation
costs, all of which may in fact vary considerably from actual results. For these
reasons, estimates of the economically recoverable quantities of coal
attributable to any particular group of properties, classifications of such
reserves based on risk of recovery and estimates of future net cash flows
expected therefrom prepared by different engineers or by the same engineers at
different times may vary substantially. Actual production, revenues and
expenditures with respect to the Company's reserves will likely vary from
estimates, and such variances will likely be material. As a result, neither
holders of the Old Notes
22
<PAGE> 27
nor holders considering tendering such Old Notes for Exchange Notes should place
undue reliance on the coal reserve data included herein. See "Business -- Coal
Reserves."
DEPENDENCE ON KEY MANAGEMENT AND CONTROL BY PRINCIPAL SHAREHOLDER
The Company's business is managed by a number of key personnel, the loss of
which could have a material adverse effect on the Company. In addition, as the
Company's business develops and expands, the Company believes that its future
success will depend greatly on its continued ability to attract and retain
highly skilled and qualified personnel. Currently, the Company has employment
agreements with Don Brown and Keith Sieber. There can be no assurance that key
personnel will continue to be employed by the Company or that the Company will
be able to attract and retain qualified personnel in the future. Failure by the
Company to retain or attract such key personnel could have a material adverse
effect on the Company. See "Management."
Larry Addington beneficially owns approximately 90% of the outstanding
voting securities of the Company. Accordingly, Mr. Addington is able to control
the election of the Company's directors and to determine the corporate and
management policies of the Company, including decisions relating to any mergers
or acquisitions by the Company, sales of all or substantially all of the
Company's assets and other significant corporate transactions, which
transactions may result in a Change of Control under the Indenture. See
"Security Ownership of Principal Stockholders and Management."
POTENTIAL INABILITY TO FUND A CHANGE OF CONTROL OFFER
Upon a Change of Control, the Company will be required to offer to
repurchase all outstanding Senior Notes at 101% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
repurchase. However, there can be no assurance that sufficient funds will be
available at the time of any Change of Control to make any required repurchases
of Senior Notes tendered or that restrictions in the New Credit Facility will
allow the Company to make such required repurchases. Notwithstanding these
provisions, the Company could enter into certain transactions, including a
recapitalization, that would not constitute a Change of Control, but would
increase the amount of debt outstanding at such time. See "Description of
Exchange Notes -- Repurchase at Option of Holders -- Change of Control."
ABSENCE OF A PUBLIC MARKET FOR EXCHANGE NOTES AND RESTRICTIONS ON TRANSFER
The Exchange Notes will constitute a new issue of securities for which
there is no established trading market. The Company does not intend to list the
Exchange Notes on any national securities exchange or to seek the admission of
the Exchange Notes for quotation through the National Association of Securities
Dealers Automated Quotation System. Although the Initial Purchaser has advised
the Company that it may make a market in the Exchange Notes, it is not obligated
to do so and may discontinue such market-making activity at any time without
notice. In addition, such market-making activity will be subject to the limits
imposed by the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and may be limited during the Exchange Offer and
the pendency of any shelf registration statement. Although the Old Notes have
been designated for trading in the PORTAL market, there can be no assurance as
to the development or liquidity of any market for the Exchange Notes, the
ability of the holders of the Exchange Notes to sell their Exchange Notes or the
price at which the holders would be able to sell their Exchange Notes. Future
trading prices of the Exchange Notes will depend on many factors, including
among other things, prevailing interest rates, the Company's operating results
and the market for similar securities.
Except for persons that are ineligible to participate in the Exchange Offer
under positions taken by the Commission, holders of Old Notes who do not tender
their Old Notes in the Exchange Offer generally will not have any further
registration rights under the Registration Rights Agreement or otherwise.
Accordingly, any holder of Old Notes that does not exchange that holder's Old
Notes for Exchange Notes will continue to hold unregistered Old Notes and will
be entitled to all the rights and limitations applicable thereto under the
Indenture and the Securities Act, except to the extent that such rights or
limitations, by their terms, terminate or cease to have further effectiveness as
a result of the Exchange Offer. The failure to participate in the
23
<PAGE> 28
Exchange Offer may adversely affect the ability of eligible holders to resell
unregistered Old Notes in the future.
FRAUDULENT CONVEYANCE STATUTES
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the Company
or any Guarantor, at the time it incurred the indebtedness evidenced by the
Senior Notes or its Subsidiary Guarantee: (i) (a) was or is insolvent or
rendered insolvent by reason of such occurrence, (b) was or is engaged in a
business or transaction for which the assets remaining with the Company or such
Guarantor constituted unreasonably small capital, or (c) intended or intends to
incur, or believed or believes that it would incur, debts beyond its ability to
pay such debts as they mature; and (ii) received or receives less than
reasonably equivalent value or fair consideration for the incurrence of such
indebtedness, then the Senior Notes and the Subsidiary Guarantees, and any
pledge or other security interest securing such indebtedness, could be voided,
or claims in respect of the Senior Notes or the Subsidiary Guarantees could be
subordinated to all other debts of the Company or such Guarantor, as the case
may be. In addition, the payment of interest and principal by the Company
pursuant to the Senior Notes or the payment of amounts by a Guarantor pursuant
to a Subsidiary Guarantee could be voided and required to be returned to the
person making such payment, or to a fund for the benefit of the creditors of the
Company or such Guarantor, as the case may be.
The measures of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or a Guarantor would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, were
greater than the saleable value of all of its assets at a fair valuation or if
the present fair saleable value of its assets were less than the amount that
would be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature or (ii) it could not
pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, the Company and each Guarantor believes that, after giving
effect to the indebtedness incurred in connection with the Offering and the
establishment of the New Credit Facility, it will not be insolvent, will not
have unreasonably small capital for the business in which it is engaged and will
not incur debts beyond its ability to pay such debts as they mature. There can
be no assurance, however, as to what standard a court would apply in making such
determinations or that a court would agree with the Company's or the Guarantors'
conclusions in this regard.
24
<PAGE> 29
THE COMPANY
GENERAL
The Company is engaged primarily in the mining and marketing of bituminous
coal, the majority of which is sold to electric utilities under long-term
contracts. The Company also manufactures highwall mining equipment and other
related coal mining equipment at its facilities located near Ashland, Kentucky.
The Company's coal is mined from properties leased or controlled by the Company
in Kentucky, Tennessee and Colorado, and is suitable for use as steam coal for
power generation and as industrial coal for heating and other purposes. The
Company has been mining coal in: (i) Kentucky, since 1982, almost exclusively by
surface mining methods; (ii) Tennessee, since 1995, by surface and deep mining
methods, and (iii) Colorado, since 1995, by deep mining methods. For the year
ended December 31, 1996, approximately 87% of the Company's coal sales were made
under five contracts that had an original term of at least one year. As of
October 20, 1997, the Company had 18 contracts calling for aggregate minimum
sales in excess of 33 million tons over remaining terms ranging from less than
one year to eight years (subject to modification under certain circumstances).
For contract terms, see "Business -- Major Coal Sales Contracts." The Company
also sells excess coal production on the spot market. Spot market sales
comprised 4% of the Company's sales in 1996, and 3% of the Company's sales in
the six-month period ended June 30, 1997.
COMPANY HISTORY
Larry Addington and his brothers have been involved in coal mining since
1972. Their first mining company, Addington Brothers Mining Company ("Addington
Brothers Mining Company"), began mining coal in eastern Kentucky in 1972 and was
sold to Ashland Oil, Inc. ("Ashland Oil") in 1976. Larry Addington formed
Pyramid Mining, Inc. ("Pyramid") in 1978 and sold it to First Mississippi
Corporation ("First Mississippi") in 1981.
From 1982 to 1984, Messrs. Addington developed several coal and
coal-related companies in eastern Kentucky and Ohio. In 1984, ownership of these
companies was consolidated into Addington Resources, Inc. ("Addington
Resources"), which became a public company in 1987. From 1984 through 1995,
Addington Resources expanded its coal operations and developed various other
business lines, including integrated waste disposal operations, mining equipment
manufacturing operations, metal mining operations and citrus operations. In
1995, Messrs. Addington resigned from the board of directors of Addington
Resources and shortly thereafter, purchased the coal mining operations and the
mining equipment manufacturing operations of Addington Resources through
Addington Enterprises, their wholly owned corporation. Those coal mining
operations comprise the Company's eastern Kentucky and Tennessee mining
operations and coal reserves and the Company's mining equipment manufacturing
operations. The Company acquired its Colorado mining operations and coal
reserves through an asset purchase from Cyprus Orchard Valley Coal Corporation
("Cyprus Orchard Valley") in 1994 and the purchase of an adjacent reserve tract
from Coors Energy Company in January 1995. The Company acquired its southeastern
Kentucky mining operations and coal reserves through its acquisition of
Ikerd-Bandy in October 1997, and its acquisition of Leslie Resources in January
1998 (see "Prospectus Summary -- Recent Developments -- Leslie Resources"). In
January 1998, Mining Technologies acquired its highwall mining equipment
manufacturing operations and certain intellectual property through an asset
purchase of the Mining Technologies division of Addington Enterprises. The
Company obtained a fairness opinion regarding such asset purchase.
STRUCTURE
The Company was incorporated under the laws of Delaware on September 19,
1997, in anticipation of the Offering. As part of the incorporation, each of the
Company's initial shareholders, Larry Addington and Addington Enterprises,
subscribed for and received one share of the Company's common stock. Pursuant to
an Exchange Agreement among the Company, Addington Enterprises, the shareholders
of Addington Enter-
25
<PAGE> 30
prises and certain shareholders of Bowie, the following transactions (the
"Organizational Transactions") occurred contemporaneously with the purchase of
the Old Notes by the Initial Purchaser:
- Addington Enterprises contributed all of the outstanding capital
stock of Tennessee Mining and Ikerd-Bandy and certain coal mining
operations and related assets to the Company and received 49 shares of
common stock of the Company as consideration for such contributions.
- The Company contributed the assets it received from Addington
Enterprises, other than the stock of Tennessee Mining and Ikerd-Bandy, to
its wholly-owned subsidiary, Addington Mining.
- Larry Addington contributed capital stock representing 69.8% of the
outstanding capital stock of Bowie to the Company and received 49 shares of
common stock of the Company as consideration for his contribution.
- Harold Sergent sold capital stock representing 7.7% of the
outstanding capital stock of Bowie to the Company for $2.0 million.
Upon consummation of the Organizational Transactions, Addington Enterprises
and Larry Addington each owned 50% of the outstanding capital stock of the
Company. On December 18, 1997, the Company formed Mining Technologies, a
wholly-owned subsidiary, which acquired the Mining Technologies division of
Addington Enterprises on January 2, 1998. On January 15, 1998, the Company
acquired Leslie Resources. The Company's structure currently is as follows:
[CHART]
The Company's principal executive office is located at 1500 North Big Run
Road, Ashland, Kentucky 41102, telephone: (606) 928-3433.
26
<PAGE> 31
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Old Notes
pursuant to the Exchange Offer.
The gross proceeds to the Company from the Offering were $200.0 million
before deducting discounts and commissions and expenses of the Offering. The
Company used a portion of the Offering proceeds to repay certain existing
indebtedness of the Company, comprised of: (i) loans provided by Larry Addington
having an outstanding principal balance and accrued but unpaid interest of
approximately $23.6 million and interest rates ranging from 5.57% to 9.25%; and
(ii) a $50.0 million credit facility with NationsBank of Texas, N.A., an
affiliate of the Initial Purchaser, with a maturity date of January 6, 1998 (the
"Interim Credit Facility"), which was fully drawn as of the consummation of the
Offering. In addition, the Company used a portion of the proceeds of the
Offering to (i) pay commissions of $5.5 million related to the Offering, (ii)
pay expenses of the Offering, estimated to be approximately $2.5 million, (iii)
pay Harold Sergent $2.0 million for his 7.7% of the outstanding capital stock of
Bowie, (iv) acquire the Mining Technologies division of Addington Enterprises
(see "Certain Related Party Transactions") and (v) acquire Leslie Resources (see
"Prospectus Summary -- Recent Developments -- Leslie Resources").
Pursuant to an intercompany loan between the Company and Bowie, the Company
used a portion of the Offering proceeds to purchase a $15.5 million credit
facility from The Provident Bank with Bowie as the borrower, bearing an interest
rate of prime plus 0.25% and a maturity date of March 31, 2004 and provide a
revolving credit facility of up to $44.5 million to Bowie, for which Bowie
executed a fully secured promissory note in favor of the Company. Bowie will use
the proceeds of the revolving credit facility: (i) to repay a promissory note to
Larry Addington having a principal balance of approximately $6.1 million and a
variable interest rate (currently 9.25%), with a maturity date of April 4, 2003;
(ii) for working capital; and (iii) to purchase a longwall mining system if
Bowie is able to obtain commitments for the sale of at least 4 million tons of
coal from its Bowie #2 mine (although there can be no assurance that Bowie will
obtain the necessary sales commitments or purchase the longwall mining system).
The Company will use the remainder of the Offering proceeds for new
acquisitions and general corporate purposes. Although the Company routinely
reviews acquisition opportunities, it currently has no binding agreements or
commitments to acquire any other company.
In connection with the Offering, the Company entered into the New Credit
Facility under which NationsBank of Texas, N.A., and other lending institutions
that elect to participate provided the Company with a $50.0 million revolving
credit facility. Proceeds of the New Credit Facility were used to acquire the
Mining Technologies division of Addington Enterprises and in the future will be
used: (i) to provide working capital and fund capital expenditures; and (ii) to
finance permitted acquisitions. For a more detailed discussion of the New Credit
Facility, see "Description of New Credit Facility."
27
<PAGE> 32
CAPITALIZATION
The following table sets forth, as of September 30, 1997, (i) the combined
capitalization of the Company and (ii) the pro forma combined capitalization of
the Company after giving effect to the Pro Forma Transactions. This table should
be read in conjunction with "Description of Exchange Notes," "Description of New
Credit Facility," the Unaudited Pro Forma Combined Financial Statements and the
notes thereto and the Combined Financial Statements and the notes thereto
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------
HISTORICAL PRO FORMA
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term obligations (including current portion of
long-term obligations).................................... $ 4,075 $ 9,343
-------- --------
Long-term obligations (net of current portion).............. 87,560 21,426
New Credit Facility(1)...................................... -- 25,000
10% Senior Notes due 2007................................... -- 200,000
-------- --------
Total long-term obligations:...................... 87,560 246,426
Owners' investment (deficit)................................ (178) (53,331)
-------- --------
Total Capitalization.............................. $ 91,457 $202,438
======== ========
</TABLE>
- ---------------
(1) Up to $50.0 million will be available to the Company under the New Credit
Facility. See "Description of New Credit Facility."
28
<PAGE> 33
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Combined Financial Statements of the
Company are based on the audited and unaudited financial statements of the
Company appearing elsewhere in this Prospectus as adjusted to illustrate the
estimated effects of the Pro Forma Transactions. The unaudited pro forma
adjustments are based upon available information and certain assumptions that
the Company believes are reasonable. The Unaudited Pro Forma Combined Financial
Statements and accompanying notes should be read in conjunction with the
historical financial statements of the Company and other financial information
pertaining to the Company appearing elsewhere in this Prospectus, including
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Unaudited Pro Forma Combined Financial Statements have been prepared to
give effect to the Pro Forma Transactions as if such transactions had occurred
on January 1, 1996 for the statement of income for the year ended December 31,
1996 and for the statement of income for the nine months ended September 30,
1997 (the "Unaudited Pro Forma Combined Income Statements") and on September 30,
1997 for the balance sheet (the "Unaudited Pro Forma Combined Balance Sheet"
together with the Unaudited Pro Forma Combined Income Statements comprise the
"Unaudited Pro Forma Combined Financial Statements").
The Unaudited Pro Forma Combined Financial Statements do not purport to be
indicative of what the Company's financial position or results of operation
would actually have been had the Pro Forma Transactions been completed on such
date or at the beginning of the periods indicated or to project the Company's
results of operations for any future date.
29
<PAGE> 34
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-------------------------------------------------------------------
AEI HOLDING LESLIE
COMPANY IKERD-BANDY RESOURCES PRO FORMA
HISTORICALS HISTORICALS HISTORICALS ADJUSTMENTS AS ADJUSTED
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................. $ 1,116 $ 1,145 $ 4,293 $200,000(a) $ 64,924
(80,374)(b)
(12,073)(c)
(8,383)(d)
(11,250)(e)
(2,000)(f)
(1,550)(g)
(51,000)(j)
25,000(k)
Accounts receivable........................ 30,228 3,950 6,369 -- 40,547
Inventories................................ 20,700 1,493 1,428 3,121(d) 31,742
5,000(e)
Prepaid expenses and other................. 5,317 848 1,026 -- 7,191
-------- ------- ------- -------- --------
Total current assets................. 57,361 7,436 13,116 66,491 144,404
-------- ------- ------- -------- --------
Property, plant and equipment, including
mineral reserves and mine development
costs, net............................... 78,969 4,093 10,398 6,240(d) 117,612
15,912(e)
2,000(f)
Debt issuance costs........................ 931 -- -- 11,634(c) 12,375
(190)(h)
Other assets............................... 4,212 240 3,497 1,900(l) 9,849
-------- ------- ------- -------- --------
Total assets......................... $141,473 $11,769 $27,011 $103,987 $284,240
======== ======= ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable........................... $ 28,030 $ 3,044 $ 6,820 $ (439)(c) $ 37,455
Current portion of long-term debt and lease
obligations.............................. 4,075 1,579 3,368 (1,579)(d) 9,343
900(d)
1,000(e)
Accrued expenses and other, including
reclamation.............................. 12,605 1,657 6,746 (276)(b) 27,045
2,000(d)
2,000(e)
(937)(i)
3,250(l)
-------- ------- ------- -------- --------
Total current liabilities............ 44,710 6,280 16,934 5,919 73,843
-------- ------- ------- -------- --------
Long-term debt and lease obligations, net
of current portion....................... 87,560 1,804 4,911 200,000(a) 246,426
(80,098)(b)
(1,804)(d)
3,936(d)
5,117(e)
25,000(k)
Other non-current liabilities, including
reclamation.............................. 9,381 210 3,711 1,000(d) 17,302
3,000(e)
-------- ------- ------- -------- --------
Total liabilities.................... 141,651 8,294 25,556 162,070 337,571
-------- ------- ------- -------- --------
Owners' investment (deficit)............... (178) 3,475 1,455 (3,475)(d) (53,331)
(1,455)(e)
(1,550)(g)
(190)(h)
937(i)
(51,000)(j)
(13,350)(l)
12,000(l)
-------- ------- ------- -------- --------
Total liabilities and owners'
investment (deficit)............... $141,473 $11,769 $27,011 $103,987 $284,240
======== ======= ======= ======== ========
</TABLE>
The accompanying notes to the unaudited pro forma combined
balance sheet are an integral part of this statement.
30
<PAGE> 35
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(1) Reflects the effect of the Pro Forma Transactions:
(a) Reflects the gross proceeds from the Offering.
(b) Reflects the repayment of all outstanding term and revolving
indebtedness, including accrued interest, under the credit
facility with The CIT Group/Equipment Financing (the "Former
Credit Facility"), which was repaid with proceeds from the Interim
Credit Facility, and other debt retired.
(c) Reflects the payment of debt issuance costs related to the Interim
Credit Facility, the New Credit Facility and the Offering.
(d) Reflects the purchase (including purchase accounting adjustments)
of Ikerd-Bandy. Offering proceeds of $8,383 were used for the cash
purchase cost plus the refinancing of Ikerd-Bandy's debt.
(e) Reflects the purchase (including purchase accounting adjustments)
of Leslie Resources. Offering proceeds of $11,250 were used for
the cash purchase cost.
(f) Reflects the purchase of a 7.7% minority interest in Bowie.
(g) Reflects the payment of prepayment penalties on the Former Credit
Facility and costs of the Interim Credit Facility.
(h) Reflects the write-off of unamortized deferred financing costs and
fees in connection with repayment of indebtedness under the Former
Credit Facility in the amount of $190.
(i) Reflects the tax effect of pro forma entries (g) and (h) above, as
applicable.
(j) Reflects the $51,000 payment to Addington Enterprises for the
purchase of Mining Technologies. Offering proceeds of $26,000 and
New Credit Facility proceeds of $25,000 were used for the cash
purchase which will be accounted for as a capital distribution.
(k) Reflects borrowings of $25,000 from the New Credit Facility to
fund the purchase of Mining Technologies.
(2) Other entries:
(l) Reflects initial entry to record the net deferred tax liability
($13,350) for change in tax status based on transfer of mining and
technology assets from S corporation to C corporation for the
businesses received from Addington Enterprises. Also reflects the
deferred tax benefit ($12,000) recorded in connection with the
taxable sale of technology assets from Addington Enterprises to
the Company.
31
<PAGE> 36
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------
AEI HOLDING LESLIE
COMPANY IKERD-BANDY RESOURCES PRO FORMA
HISTORICALS HISTORICALS HISTORICALS ADJUSTMENTS AS ADJUSTED
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues................................... $123,200 $39,017 $68,740 $ -- $230,957
Costs and expenses:
Costs of operations...................... 97,101 36,452 59,611 -- 193,164
Depreciation, depletion and
amortization........................... 6,945 1,658 3,120 624(c) 13,813
1,466(d)
Selling, general and administrative...... 9,025 1,151 2,546 -- 12,722
-------- ------- ------- -------- --------
Total costs and expenses.......... 113,071 39,261 65,277 2,090 219,699
-------- ------- ------- -------- --------
Income (loss) from operations............ 10,129 (244) 3,463 (2,090) 11,258
Interest and other income (expense):
Interest expense......................... (5,527) (447) (1,088) (1,172)(a) (27,730)
(15,600)(b)
(459)(e)
(612)(f)
(2,825)(g)
Gain on sale of assets................... 305 57 44 -- 406
Other, net............................... 97 29 (277) -- (151)
-------- ------- ------- -------- --------
Total interest and
other income (expense).......... (5,125) (361) (1,321) (20,668) (27,475)
-------- ------- ------- -------- --------
Income (loss) before minority
interest and income taxes....... 5,004 (605) 2,142 (22,758) (16,217)
Minority Interest.......................... (59) -- -- -- (59)
-------- ------- ------- -------- --------
Income (loss) before income taxes........ 5,063 (605) 2,142 (22,758) (16,158)
Income tax provision (benefit)............. -- -- 12 (12)(h) --
-------- ------- ------- -------- --------
Net income (loss)...................... $ 5,063 $ (605) $ 2,130 $(22,746) $(16,158)
======== ======= ======= ======== ========
OTHER DATA:
EBITDA..................................... $ 17,074 $ 1,414 $ 6,583 $ -- $ 25,071
Capital expenditures....................... (14,092) (1,812) (1,910) -- (17,814)
Cash interest expense............................................................................. $(26,099)
Ratio of EBITDA to cash interest expense.......................................................... 1.0x
Ratio of earnings to fixed charges(3)............................................................. *
</TABLE>
- ---------------
* Amount results in a deficiency.
The accompanying notes to the unaudited pro forma combined
statement of income are an integral part of this statement.
32
<PAGE> 37
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(1) Reflects the statement of income as if the Pro Forma Transactions had
taken place effective January 1, 1996.
(a) Reflects the additional amortization expense resulting from the
capitalization of fees and other deferred financing costs in
conjunction with the Offering in the amount of $1,238, net of
write-off fees and other deferred financing costs related to the
Former Credit Facility in the amount of $66.
(b) Reflects the increase in interest expense resulting from the
issuance of the Senior Notes in the amount of $20,000, based on an
interest rate of 10%, net of the decrease in interest expense
resulting from the prepayment of the Former Credit Facility and
other extinguished debt, in the amount of $4,400.
(c) Reflects the increase in depreciation expense resulting from the
purchase of Ikerd-Bandy.
(d) Reflects the increase in depreciation expense resulting from the
purchase of Leslie Resources.
(e) Reflects the increase in interest expense resulting from the
Ikerd-Bandy note payable.
(f) Reflects the increase in interest expense resulting from the
Leslie Resources note payable.
(g) Reflects the increase in interest expense resulting from the New
Credit Facility borrowing for the purchase of Mining Technologies.
(h) Reflects reversal of tax provision recorded by Leslie Resources
due to ability to offset with losses from proforma adjustments.
(2) The accompanying Pro Forma Combined Statement of Income does not
include the following non-recurring transaction-related items: (a)
recording tax expense of approximately $13,350 related to the initial
recording of deferred tax liabilities caused by the transfer of net
assets from S corporation to C corporation for the businesses received
from Addington Enterprises and Bowie; (b) recording the loss on debt
extinguishment of approximately $1,740, pretax, in conjunction with
retiring the Former Credit Facility and the Interim Credit Facility;
(c) recording the adjustment in cost of operations to conform
Ikerd-Bandy's and Leslie Resources' inventory accounting to the
Company's inventory accounting policies due to the inability of the
Company to estimate reasonably the adjustment because of engineering
calculations needed at the beginning of the year; and (d) recording any
additional interest income on excess net proceeds from the borrowings.
(3) In calculating the ratio of earnings to fixed charges, earnings consist
of income before income tax provision plus fixed charges (excluding
capitalized interest). Fixed charges consist of interest incurred
(which includes amortization of deferred financing costs) whether
expensed or capitalized and one-third of rental expense, deemed
representative of that portion of rental expense estimated to be
attributable to interest. Earnings were inadequate to cover fixed
charges for Fiscal 1996 by $16.2 million.
33
<PAGE> 38
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
-----------------------------------------------------
AEI HOLDING LESLIE
COMPANY IKERD-BANDY RESOURCES PRO FORMA
HISTORICALS HISTORICALS HISTORICALS ADJUSTMENTS AS ADJUSTED
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues.......................................... $124,081 $33,407 $63,563 $ -- $221,051
Costs and Expenses:
Costs of operations............................. 100,736 31,167 56,558 (1,775)(h) 186,201
(485)(i)
Depreciation, depletion and amortization........ 6,910 1,479 2,551 468(c) 12,508
1,100(d)
Selling, general and administrative............. 9,890 854 1,950 -- 12,694
-------- ------- ------- -------- --------
Total costs and expenses.................. 117,536 33,500 61,059 (692) 211,403
-------- ------- ------- -------- --------
Income (loss) from operations................... 6,545 (93) 2,504 692 9,648
Interest and other income (expense):
Interest expense................................ (5,265) (293) (601) (904)(a) (20,736)
(10,732)(b)
(363)(e)
(459)(f)
(2,119)(g)
Gain on sale of assets.......................... 25 89 1,509 -- 1,623
Other, net...................................... (611) (7) 92 -- (526)
-------- ------- ------- -------- --------
Total interest and other income
(expense)............................... (5,851) (211) 1,000 (14,577) (19,639)
-------- ------- ------- -------- --------
Income (loss) before income taxes......... 694 (304) 3,504 (13,885) (9,991)
Income tax provision (benefit).................... 1,398 -- 545 (545)(j) 1,398
-------- ------- ------- -------- --------
Net income (loss)......................... $ (704) $ (304) 2,959 $(13,340) $(11,389)
======== ======= ======= ======== ========
OTHER DATA:
EBITDA............................................ 13,455 1,386 5,055 2,260 22,156
Capital expenditures.............................. (18,340) (339) (3,162) -- (21,841)
Cash interest expense............................. (19,469)
Ratio of EBITDA to cash interest expense.......... 1.1x
Ratio of earnings to fixed charges(3)............. *
</TABLE>
- ---------------
* Amount results in a deficiency.
The accompanying notes to the unaudited pro forma combined
statement of income are an integral part of this statement.
34
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(1) Reflects the statement of income as if the Pro Forma Transactions had
taken place effective January 1, 1996.
(a) Reflects the additional amortization expense resulting from the
capitalization of fees and other deferred financing costs in
conjunction with the Offering in the amount of $928, net of
write-off of fees and other deferred financing costs related to
the Former Credit Facility in the amount of $24.
(b) Reflects the increase in interest expense resulting from the
issuance of the Senior Notes in the amount of $15,000, based on an
interest rate of 10% net of the decrease in interest expense
resulting from the prepayment of the Former Credit Facility and
other extinguished debt, in the amount of $4,268.
(c) Reflects the increase in depreciation expense resulting from the
purchase of Ikerd-Bandy.
(d) Reflects the increase in depreciation expense resulting from the
purchase of Leslie Resources.
(e) Reflects the increase in interest expense resulting from the
Ikerd-Bandy note payable.
(f) Reflects the increase in interest expense resulting from the
Leslie Resources note payable.
(g) Reflects the increase in interest expense resulting from the New
Credit Facility borrowing for the purchase of Mining Technologies.
(h) Reflects the decrease in operating expenses resulting from the
Ikerd-Bandy inventory adjustments to conform to the Company's
inventory accounting policies.
(i) Reflects the decrease in operating expenses resulting from the
Leslie Resources inventory adjustments to conform to the Company's
inventory accounting policies.
(j) Reflects reversal of tax provision recorded by Leslie Resources
due to ability to offset with losses from pro forma adjustments.
Bowie tax provision of $1,398 relates primarily to change in tax
status from S corporation to C corporation and is not available to
offset with pro forma adjustment losses due to Bowie's exclusion
from the consolidated tax return of the Company as less than 80%
owned.
(2) The accompanying Pro Forma Combined Statement of Income does not
include the following non-recurring transaction-related items: (a)
recording tax expense of approximately $13,350 related to the initial
recording of deferred tax liabilities caused by the transfer of net
assets from S corporation to C corporation for the businesses received
from Addington Enterprises; (b) recording the loss on debt
extinguishment of approximately $1,740, pretax, in conjunction with
retiring the Former Credit Facility and bridge financing; and (c)
recording any additional interest income on excess net proceeds from
the borrowings.
(3) In calculating the ratio of earnings to fixed charges, earnings consist
of income before income tax provision plus fixed charges (excluding
capitalized interest). Fixed charges consist of interest incurred
(which includes amortization of deferred financing costs) whether
expensed or capitalized and one-third of rental expense, deemed
representative of that portion of rental expense estimated to be
attributable to interest. Earnings were inadequate to cover fixed
charges for the nine months ended September 30, 1997, by $10.1 million.
35
<PAGE> 40
SELECTED HISTORICAL COMBINED FINANCIAL DATA
The selected combined financial data below as of and for the years ended
December 31, 1995, and 1996 and as of and for the nine months ended September
30, 1997 have been derived from the Combined Audited Financial Statements of the
Company which have been audited by Arthur Andersen LLP, independent public
accountants, and are included elsewhere in this Prospectus. The selected
combined financial data below for the year ended December 31, 1994 and for the
ten months ended November 1, 1995 have been derived from the Combined Financial
Statements of the Company's predecessor business which operating revenues and
expenses and cash flows have also been audited by Arthur Andersen LLP,
independent public accountants, and are included elsewhere in this Prospectus.
The Selected Combined Financial Data as of and for the years ended December 31,
1992 and 1993 have been derived from the Unaudited Combined Financial Statements
of the Company's predecessor business and are not included elsewhere herein. The
selected combined financial data for the nine months ended September 30, 1996,
has been derived from the Company's Unaudited Combined Financial Statements for
that period included elsewhere in this Prospectus and the selected combined
financial data as of September 30, 1996, has been derived from the Company's
Unaudited Combined Financial Statements for that period, but are not included
elsewhere herein and, in each case, include, in the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the results for the unaudited interim period. Results for the
nine months ended September 30, 1997 are not necessarily indicative of the
results that may be expected for the entire year. The information presented
below is qualified in its entirety by, and should be read in conjunction with,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Combined Financial Statements of the Company and related
notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR(1) AEI HOLDING COMPANY
------------------------------------------ -------------------------------------------
10 MONTHS 9 MONTHS 9 MONTHS
ENDED ENDED ENDED
FY 1992 FY 1993 FY 1994 11/1/95 FY 1995(2) FY 1996 9/30/96 9/30/97
-------- -------- -------- --------- ---------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER TON DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES AND EXPENSES:
Revenues............................ $154,145 $107,749 $103,100 $80,569 $31,694 $123,200 $92,512 $124,081
Cost of operations.................. 128,167 101,279 91,460 69,051 25,396 97,101 73,162 100,736
Depreciation, depletion and
amortization...................... 5,923 8,083 4,362 4,624 1,401 6,945 5,069 6,910
Selling, general and
administrative.................... 11,022 9,143 7,121 6,427 2,178 9,025 6,668 9,890
-------- -------- -------- ------- ------- -------- ------- --------
Income (loss) from operations....... 9,033 (10,756) 157 467 2,719 10,129 7,613 6,545
Interest expense.................... (6,728) (6,801) (346) (982) (1,043) (5,527) (4,183) (5,265)
Other income (loss), net............ 2,426 2,637 282 (555) 131 402 221 (586)
-------- -------- -------- ------- ------- -------- ------- --------
Income (loss) before income tax
provision and minority interest... 4,731 (14,920) 93 (1,070) 1,807 5,004 3,651 694
Minority interest................... -- -- -- -- 59 (59) (59) --
Income tax provision (benefit)...... 1,390 4,754 35 (407) -- -- -- 1,398
-------- -------- -------- ------- ------- -------- ------- --------
Excess (deficit) of operating
revenues over expenses............ 3,341 (10,166) 58 (663) 1,748 5,063 3,710 (704)
OTHER DATA:
EBITDA(3)........................... 14,956 (2,673) 4,519 5,091 4,120 17,074 12,682 13,455
Depreciation, depletion and
amortization...................... 5,923 8,083 4,362 4,624 1,401 6,945 5,069 6,910
Capital expenditures................ 3,048 8,727 11,465 6,081 6,477 14,092 8,372 18,340
Cash interest expense............... 5,917 7,996 473 1,126 1,034 5,603 4,251 4,976
Ratio of EBITDA to cash interest
expense........................... 2.5x 0.3x 9.6x 4.5x 4.0x 3.0x 3.0x 2.7x
Ratio of earnings to fixed
charges(4)........................ 1.4x * 1.0x * 2.0x 1.6x 1.6x 1.1x
OPERATING DATA:
Coal production (in millions of
tons)............................. 4.69 3.74 3.54 2.35 0.95 4.22 2.87 4.56
Average sales price per ton of
coal.............................. $ 29.14 $ 26.27 $ 26.31 $ 26.94 $ 23.36 $ 23.90 $ 25.41 $ 24.49
Average production cost per ton of
coal.............................. $ 25.22 $ 25.29 $ 23.48 $ 23.35 $ 19.91 $ 21.13 $ 22.15 $ 21.31
</TABLE>
36
<PAGE> 41
<TABLE>
<CAPTION>
PREDECESSOR(1) AEI HOLDING COMPANY
------------------------------------------ -------------------------------------------
10 MONTHS 9 MONTHS 9 MONTHS
ENDED ENDED ENDED
FY 1992 FY 1993 FY 1994 11/1/95 FY 1995(2) FY 1996 9/30/96 9/30/97
-------- -------- -------- --------- ---------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER TON DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Working Capital..................... 17,187 (7,734) (2,610) (10,969) (5,585) (11,551) (10,346) 12,651
Total assets........................ 74,938 56,189 69,682 72,858 92,259 106,930 106,778 141,473
Long-term debt (including current
portion).......................... 3,403 493 5,550 10,447 52,384 55,561 55,615 91,635
Owners' Investment (Deficit)........ $ 37,974 $ 30,190 $ 31,141 $26,164 $(4,731) $ 325 $ 247 $ (178)
</TABLE>
- ---------------
* Amounts result in a deficiency.
(1) Predecessor represents the operations presently conducted through Addington
Mining, Tennessee Mining and Mining Technologies.
(2) Results for Fiscal 1995 include the operations presently conducted through
Addington Mining, Tennessee Mining and Mining Technologies from November 2,
1995 through December 31, 1995 and the operations of Bowie from January 1,
1995 through December 31, 1995.
(3) EBITDA is the sum of income from operations plus depreciation, depletion and
amortization expense. EBITDA is presented because it is a widely accepted
financial indicator of a company's ability to service indebtedness and a
similar measure is used in the Indenture to determine compliance with
certain covenants. However, EBITDA should not be considered as an
alternative to income from operations or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) and should not be construed as an indication of a company's
operating performance or as a measure of liquidity.
(4) In calculating the ratio of earnings to fixed charges, earnings consist of
income before income tax provision plus fixed charges (excluding capitalized
interest). Fixed charges consist of interest incurred (which includes
amortization of deferred financing costs) whether expensed or capitalized
and one-third of rental expense, deemed representative of that portion of
rental expense estimated to be attributable to interest. Earnings were
inadequate to cover fixed charges for Fiscal 1993, and the ten months ended
November 1, 1995 by $14.9 million and $1.2 million, respectively.
37
<PAGE> 42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Historical Consolidated Financial Data" and the audited Consolidated
Financial Statements of the Company and the notes thereto included elsewhere in
this Prospectus.
GENERAL
The Company derives its revenues primarily from the sale of bituminous coal
to electric utilities and other industrial users under long-term contracts. The
Company sells approximately 76% of its coal under seven long-term contracts that
had a weighted average remaining term of approximately 6.2 years as of June 30,
1997. Based on sales made through November 1997 and minimum tonnage requirements
under the Company's contracts as of such date, the Company expects 1997 coal
sales to exceed 7.5 million tons, a 79% increase over 1996 coal sales of 4.2
million tons. See "Business -- Major Coal Sales Contracts." The Company also
sells excess coal production on the spot market. Spot market sales comprised 4%
of the Company's sales in 1996, and 2% of the Company's sales for the nine-month
period ended September 30, 1997. Based on actual production through November
1997 and contract requirements as of such date, the Company projects that pro
forma 1997 coal production will be approximately 11.9 million tons, a 32%
increase over pro forma 1996 coal production of 9.0 million tons. The Company's
coal reserves and resources (including captive reserves and resources) have
grown 470% from approximately 50 million tons as of December 1994, to
approximately 285 million tons. According to the Marshall Miller Reports,
approximately 75 million tons (36%) of the Company's coal reserves (including
captive reserves) are compliance coal.
The principal components of the Company's expenses are costs relating to
the production and transportation of its coal products, including labor
expenses, royalty and lease payments, reclamation expenditures and rail, barge
and trucking costs. Other expenses include depreciation, depletion, and
amortization, selling, general and administrative and interest expenses.
AEI Holding Company was formed in September 1997 to acquire certain coal
mining operations and coal reserves of Addington Enterprises, including
Tennessee Mining, Ikerd-Bandy and the 77.5% interest in Bowie owned by Larry
Addington and Harold Sergent. Addington Enterprises commenced operations in
November 1995 through the acquisition of the coal mining and equipment
manufacturing operations of Addington Resources, which operations comprise the
Company's eastern Kentucky and Tennessee mining operations and coal reserves and
equipment manufacturing operations. Bowie's operations, which comprise the
Company's Colorado mining operations and coal reserves, were acquired by
purchase from Cyprus Orchard Valley in 1994 and Coors Energy Company in January
1995. In October 1997, the Company acquired mining operations and coal reserves
located in southeastern Kentucky through the purchase of Ikerd-Bandy which will
be accounted for as a purchase. In January 1998, Mining Technologies acquired
its highwall mining equipment manufacturing operations and certain intellectual
property through an asset purchase of the Mining Technologies division of
Addington Enterprises. Also in January 1998, the Company acquired mining
operations and coal reserves in southeastern Kentucky through its acquisition of
Leslie Resources which will be accounted for as a purchase. See "Prospectus
Summary -- Recent Developments -- Leslie Resources." The acquisition of
Addington Resources' coal mining operations by Addington Enterprises and the
acquisition of the Colorado operations by Bowie have been accounted for as a
purchase. The acquisition by the Company of the Bowie stock and Addington
Enterprises' coal mining and equipment manufacturing operations is accounted for
as a transfer of net assets under common control with accounting similar to that
of a pooling-of-interests where the historical cost basis of the assets and
liabilities are carried over.
CERTAIN FACTORS AFFECTING CURRENT AND FUTURE OPERATING RESULTS
The Company's current and future operating results will likely be affected
by the following events and factors:
Ikerd-Bandy Acquisition. The Company's historical financial statements do
not reflect the operating results of Ikerd-Bandy, which was acquired in October
1997. During the nine months ended September 30,
38
<PAGE> 43
1997, Ikerd-Bandy had revenues of $33,407,000 and a pre-tax loss of $304,000.
The Company anticipates that it will be able to increase coal production and
reduce per-ton mining costs at the Ikerd-Bandy properties through the use of the
Addcar(TM) highwall mining systems and the implementation of other
cost-effective mining procedures used by the Company, although there can be no
assurances as to the future operating results of the Ikerd-Bandy properties.
Leslie Resources Acquisition. The Company's historical financial
statements do not reflect the results of Leslie Resources, which was acquired in
January 1998. During the nine months ended September 30, 1997, Leslie Resources
had revenues of $63,563,000 and pre-tax income of $3,504,000. The Company
anticipates that it will be able to increase coal production and reduce per-ton
mining costs at the Leslie Resources properties through the use of the
Addcar(TM) highwall mining systems and the implementation of other cost-
effective mining procedures used by the Company, although there can be no
assurances as to the future operating results of the Leslie Resources
properties.
Other Acquisitions. The Company is considering several possible
acquisitions of coal companies and mineral rights that would allow it to obtain
additional operations and reserves in eastern and southeastern Kentucky, West
Virginia, Colorado and Utah. See "Business -- Recent Acquisitions and
Development Plans." Such acquisitions, if they occur, should positively affect
the Company's revenues and operating income, but would also likely result in a
higher total cost of operations and an increase in interest expense.
Increased Interest Costs. As a result of increased indebtedness incurred
by the Company during the fourth quarter of 1997, the Company expects its
interest expense to increase from 1997 to 1998. Interest costs will increase
further if the Company acquires additional coal companies or coal reserves with
additional debt.
Reclamation and Mine Accruals. Annually, the Company reviews its entire
reclamation liability and makes necessary adjustments, including mine plan and
permit changes and revisions to production levels to optimize mining reclamation
and efficiency. The financial impact of any such adjustment is recorded to cost
of coal sales. Although the Company's management believes it is making adequate
provisions for all expected reclamation and other costs associated with mine
closures, future operating results would be adversely affected if such accruals
were later determined to be insufficient.
Expenses Associated with the Organizational Transactions and the
Offering. The Company will incur approximately $8.0 million in non-recurring
costs during the third and fourth quarters of 1997 in connection with the
Organizational Transactions and the Offering.
Compensation Expenses. In connection with the expansion of its operations,
the Company recently hired a Chief Executive Officer, a Chief Financial Officer,
a Vice President -- Western Operations and a Senior Vice President -- Sales and
Marketing. The Company intends to hire additional senior level executives in the
near future. See "Management -- Directors and Executive Officers." In addition,
the Company intends to eliminate redundant employee positions at Ikerd-Bandy and
Leslie Resources. As a result, the Company's compensation expenses will change
accordingly from 1997 to 1998.
Development of the Bowie #2 Mine. The Company recently developed the Bowie
#2 mine, which began production in the fourth quarter of 1997. It is anticipated
that production from the Bowie #2 mine will reduce the per ton costs of
operations at the Company's Colorado facilities because mining at the mouth of a
new mine allows the Company to recover coal more efficiently and reduces
equipment maintenance costs. The Company is considering installing a longwall
mining system, at an approximate cost of $30.0 million, at the Bowie #2 mine if
the Company can obtain sales commitments for at least 4 million tons of coal
annually from the mine. As of December 31, 1997, the Company had sales
commitments for 1.3 million tons annually. There can be no assurances that such
commitments can be obtained or that the longwall mining system will be
purchased. However, if the Company decides to install the longwall system,
capital expenditures and depreciation will increase accordingly. See "Liquidity
and Capital Resources."
39
<PAGE> 44
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
operating and other data of the Company.
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
FISCAL YEAR ----------------------------- -----------------------------
------------------------------ SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1995(1) 1996 1996 1997 1996 1997
-------- -------- -------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues.............. $103,100 $112,263 $123,200 $92,512 $124,081 $32,390 $46,161
Cost of operations.... 91,460 94,447 97,101 73,162 100,736 26,241 36,970
Depreciation,
depletion and
amortization........ 4,362 6,025 6,945 5,069 6,910 1,619 2,091
Selling, general and
administration
expenses............ 7,121 8,605 9,025 6,668 9,890 2,568 3,629
-------- -------- -------- ------- -------- ------- -------
Income from
operations.......... 157 3,186 10,129 7,613 6,545 1,962 3,471
Interest expense...... (346) (2,025) (5,527) (4,183) (5,265) (1,475) (1,700)
Other income
(expense)........... 282 (424) 402 221 (586) 206 (589)
-------- -------- -------- ------- -------- ------- -------
Income before income
tax provision
(benefit) and
minority interest... 93 737 5,004 3,651 694 693 1,182
Minority interest..... -- 59 (59) (59) -- -- --
Income tax provision
(benefit)........... 35 (407) -- -- 1,398 -- (31)
-------- -------- -------- ------- -------- ------- -------
Excess (deficit) of
operating revenues
over expenses)...... $ 58 $ 1,085 $ 5,063 $ 3,710 $ (704) $ 693 $ 1,213
======== ======== ======== ======= ======== ======= =======
</TABLE>
- ---------------
(1) The operations data for the year ended December 31, 1995 combine the audited
results of operations for the Predecessor for the period January 1, 1995
through November 1, 1995 and of Addington Coal Operations (the Transferred
Business) for the period November 2, 1995 through December 31, 1995. The
operations data for the year ended December 31, 1995 do not purport to
represent what the Company's combined results of operations would have been
if the Predecessor Business had actually been acquired as of January 1,
1995.
The following table sets forth, for the periods indicated, certain
operating and other data of the Company presented as a percent of revenues.
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
FISCAL YEAR ----------------------------- -----------------------------
----------------------- SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1994 1995(1) 1996 1996 1997 1996 1997
----- ------- ----- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues..................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of operations........... 88.7 84.1 78.8 79.1 81.2 81.0 80.1
Depreciation, depletion and
amortization............... 4.3 5.4 5.6 5.4 5.6 5.0 4.5
Selling, general and
administration expenses.... 6.9 7.7 7.3 7.2 7.9 7.9 7.9
----- ----- ----- ----- ----- ----- -----
Income from operations....... 0.1 2.8 8.3 8.3 5.3 6.1 7.5
Interest expense............. (0.3) (1.8) (4.5) (4.5) (4.3) (4.6) (3.7)
Other income (expense)....... 0.3 (0.4) 0.3 0.2 (0.5) 0.6 (1.3)
----- ----- ----- ----- ----- ----- -----
Income before income tax
provision (benefit) and
minority interest.......... 0.1 0.6 4.1 4.0 0.5 2.1 2.5
Minority interest............ -- -- -- -- -- -- --
Income tax provision
(benefit).................. -- (0.4) -- -- 1.1 -- (0.1)
----- ----- ----- ----- ----- ----- -----
Excess (deficit) of operating
revenues over expenses..... 0.1% 1.0% 4.1% 4.0% (0.6)% 2.1% 2.6%
===== ===== ===== ===== ===== ===== =====
</TABLE>
- ---------------
(1) The operations data for the year ended December 31, 1995 combine the audited
results of operations for the Predecessor for the period January 1, 1995
through November 1, 1995 and of Addington Coal Operations (the Transferred
Business) for the period November 2, 1995 through December 31, 1995. The
operations data for the year ended December 31, 1995 do not purport to
represent what the Company's combined results of operations would have been
if the Pro Forma Transactions had actually occurred as of January 1, 1995.
40
<PAGE> 45
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September
30, 1996
Revenues. Revenues were $124,081,000 for the nine months ended September
30, 1997, compared to $92,512,000 for the nine months ended September 30, 1996,
an increase of $31,569,000 or 34%. The increase in revenues resulted primarily
from a 59% increase in tons sold from 2.9 million tons for the nine months ended
September 30, 1996 to 4.6 million tons for the nine months ended September 30,
1997. This increased volume resulted primarily from a 68% increase in coal sales
from the Company's eastern Kentucky operations from 1.9 million tons for the
nine months ended September 30, 1996 to 3.2 million tons for the nine months
ended September 30, 1997. The volume increases are offset by a reduction in
revenue per ton of $0.92 or 4% (from $25.41 for the nine months ended September
30, 1996 to $24.49 for the nine months ended September 30, 1997). This decrease
in revenues per ton resulted primarily because (i) the Company sold more coal
f.o.b. rail car during the nine months ended September 30, 1997 compared to the
nine months ended September 30, 1996, and (ii) a contract which had an average
sales price of $34.33 per ton expired during the nine months ended September 30,
1996.
Cost of Operations. The cost of operations totaled $100,736,000 for the
nine months ended September 30, 1997 compared to $73,162,000 for the nine months
ended September 30, 1996, an increase of $27,574,000 or 38%. The increase was
primarily due to the increase in tons produced during the nine months ended
September 30, 1997. The cost of operations for the Company was $21.31 per ton
shipped for the nine months ended September 30, 1997 compared to $22.15 per ton
for the nine months ended September 30, 1996, a decrease of $0.84 per ton or 4%.
This decrease was attributable primarily to an increase in mining efficiency and
the increased use of an Addcar(TM) highwall mining system by the Company at a
mine in eastern Kentucky.
Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization for the nine months ended September 30, 1997 totaled $6,910,000
compared to $5,069,000 for the nine months ended September 30, 1996, an increase
of $1,841,000 or 36% which is consistent with the increase in cost of
operations. The increase in depreciation, depletion and amortization primarily
resulted from the use of an Addcar(TM) highwall mining system, the amortization
of mine development costs and the full depreciation of the Company's 1996
capital expenditures.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the nine months ended September 30, 1997 were
$9,890,000 compared to $6,668,000 for the nine months ended September 30, 1996,
an increase of $3,222,000 or 48%. The increase in such expenses primarily
resulted from increased costs associated with organizational growth, the 1997
bonus (see note 8h of the audited financials) and other selling related costs.
Interest Expense. Interest expense for the nine months ended September 30,
1997 was $5,265,000 compared to $4,183,000 for the nine months ended September
30, 1996, an increase of $1,082,000 or 26%. This increase resulted primarily
from increased stockholder loans used to fund the development of the Company's
operations.
Provision for Income Taxes. The provision for income taxes for the nine
months ended September 30, 1997 was $1,398,000 compared to $0.00 for the nine
months ended September 30, 1996. The increase in the provision for income taxes
is due to the provision for deferred income taxes resulting from the termination
of Bowie's S corporation status. Addington Enterprises was an S corporation
during both reporting periods.
Net Income (Loss). For the nine months ended September 30, 1997, the
Company had a net loss of $704,000 compared to net income of $3,710,000 for the
nine months ended September 30, 1996, a decrease of $4,414,000 or 119%. The
decrease primarily resulted from the termination of Bowie's S corporation status
and the resulting tax expense recognized in 1997 and the 1997 bonus accrued (see
note 8h of the audited financials).
Three Months Ended September 30, 1997 Compared to Three Months Ended September
30, 1996.
Revenues. Revenues were $46,161,000 for the three months ended September
30, 1997 compared to $32,390,000 for the three months ended September 30, 1996,
an increase of $13,771,000 or 43%. The increase
41
<PAGE> 46
in revenues resulted primarily from a 45% increase in tons sold from 1.1 million
tons for the three months ended September 30, 1996 to 1.6 million tons for the
three months ended September 30, 1997, which was offset in part by a 4% decrease
in revenues per ton from $25.41 for the three months ended September 30, 1996 to
$24.49 for the three months ended September 30, 1997. The increased volume
resulted primarily from a 62% increase in coal sales from the Company's eastern
Kentucky operations from 0.68 million tons for the three months ended September
30, 1996 to 1.1 million tons for the three months ended September 30, 1997.
Revenues also increased in the three months ended September 30, 1997 over the
three months ended September 30, 1996 related to contract mining ($2,087,000
increase) due to two new contracts, and related to equipment sales ($2,181,000
increase) primarily due to highwall miner sales to a related party in Australia.
Cost of Operations. The cost of operations totaled $36,970,000 for the
three months ended September 30, 1997 compared to $26,241,000 for the three
months ended September 30, 1996, an increase of $10,729,000 or 41%. The increase
was primarily due to the 45% increase in tons produced during the three months
ended September 30, 1997 versus September 30, 1996 offset in part by a 4%
decrease in cost per ton (from $22.15 in 1996 to $21.31 in 1997).
Depreciation, Depletion, and Amortization. Depreciation, depletion, and
amortization for the three months ended September 30, 1997 totaled $2,091,000
compared to $1,619,000 for the three months ended September 30, 1996, an
increase of $472,000, or 29%. The increase in depreciation, depletion, and
amortization primarily resulted from the use of an Addcar(TM) highwall mining
system, the amortization of mine development costs and depreciation of
additional equipment to support higher production levels.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended September 30, 1997 were
$3,629,000 compared to $2,568,000 for the three months ended September 30, 1996,
an increase of $1,061,000 or 41%. The increase in such expenses primarily
resulted from increased costs associated with organizational growth and other
selling related costs as well as the 1997 accrued bonus (see note 8h of the
audited financials).
Interest Expense. Interest expense for the three months ended September
30, 1997 was $1,700,000 compared to $1,475,000 for the three months ended
September 30, 1996, an increase of $225,000 or 15%. This increase resulted
primarily from increased stockholder loans used primarily to fund mine
development costs.
Provision (Benefit) for Income Taxes. The income tax benefit for the three
months ended September 30, 1997 was $31,000 compared to $0.00 for the three
months ended September 30, 1996. The increase in the income tax benefit is due
to pre-tax losses at Bowie. In 1997 Bowie changed from an S corporation to a C
corporation. Addington Enterprises was an S corporation during both reporting
periods.
Net Income. For the three months ended September 30, 1997, the Company had
net income of $1,213,000 compared to $693,000 for the three months ended
September 30, 1996, an increase of $520,000 or 75%. The increase primarily
resulted from a higher margin on coal sales and increased contract mining offset
in part by higher depreciation and interest expense and the 1997 accrued bonus.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues. Revenues were $123,200,000 for 1996 compared to $112,263,000 for
1995, an increase of $10,937,000 or 10%. The increase in revenues resulted
primarily from an increase in coal sales revenues of $12,827,000 or 15%. Tonnage
sales increased 900,000 tons or 27% (from 3.3 million tons in 1995 to 4.2
million tons in 1996) which was offset by a $2.01 or 0.8% decrease per ton sold
(from $25.91 in 1995 to $23.90 in 1996). Rental income increased from $1,987,000
in 1995 to $5,605,000 in 1996 as the technology division began to lease mining
equipment to a related party in 1996. Revenue from equipment sales totaled
$8,335,000 in 1996 (primarily from sales to a related party in Australia)
compared to $6,000,000 in 1995 (from the resale of an Addcar(TM) highwall mining
system). These revenue increases were offset in part by a reduction in contract
mining revenues from $14,291,000 in 1995 to $6,648,000 in 1996 as the Company
used equipment on their own sites or leased equipment in lieu of searching out
contract mining projects. The Company's 1995 revenues include revenues generated
from the sale of coal under a contract which had an average sales price of
$34.33 per ton but which expired in March 1996.
42
<PAGE> 47
Cost of Operations. The cost of operations totaled $97,101,000 for 1996
compared to $94,447,000 for 1995, an increase of $2,654,000 or 3%. The increase
primarily resulted from an increase in total production from 3.3 million tons in
1995 to 4.2 million tons in 1996 offset by a decrease in cost per ton of $3.18
or 13% (from $23.72 in 1995 to $20.54 in 1996). The cost of operations also
declined in 1996 as the Company decreased contract mining and increased
equipment leasing.
Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization for 1996 totaled $6,945,000 compared to $6,025,000 for 1995, an
increase of $920,000 or 15%. The increase in depreciation, depletion and
amortization primarily resulted from an increase in amortization associated with
the Company's Colorado mining operations.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 1996 were $9,025,000 compared to $8,605,000 for
1995, an increase of $420,000 or 5%. The increase in selling, general and
administrative expenses was attributable to the application of corporate
overhead being spread over fewer operations for Addington Enterprises in 1996
versus Addington Resources in 1995.
Interest Expense. Interest expense for 1996 was $5,527,000 compared to
$2,025,000 for 1995, an increase of $3,502,000 or 173%. The primary reason for
the increase was the incurrence of debt by Addington Enterprises in connection
with the purchase of the subsidiaries from Addington Resources which was not as
leveraged.
Provision for Income Taxes. The income tax provision for 1996 was $0.00
compared to a benefit of $407,000 for 1995, an increase of $407,000. The change
in the provision for income taxes is due to the S corporation status of
Addington Enterprises versus the C corporation status of Addington Resources.
Net Income. For 1996, the Company had net income of $5,063,000, compared
to net income of $1,085,000 for 1995, an increase of $3,978,000 or 367%. The
increase primarily resulted from a higher margin on coal sales, increased
equipment sales and increased equipment rental partially offset by higher
depreciation and interest expense in 1996.
Year Ended December 31, 1995, compared to Year Ended December 31, 1994
Revenues. Revenues were $112,263,000 for 1995 compared to $103,100,000 for
1994, an increase of $9,163,000 or 9%. Revenue from coal sales declined
$7,715,000 or 9% (from $93,044,000 in 1994 to $85,329,000 in 1995) on a 6%
decrease in tonnages sold (from 3.5 million tons in 1994 to 3.3 million tons in
1995) and a 2% decrease in revenues per ton (from $26.31 in 1994 to $25.91 in
1995). The decreased volume was primarily attributable to the expiration in 1994
of a contract supplied by the Company's western Kentucky operations. The
expiration of this contract was partially offset by the initial production from
the Company's Colorado mining operations, which shipped 521,000 tons during
1995. The declining volumes and revenues per ton were offset by $6,000,000
included in 1995 revenues from the resale of an Addcar(TM) highwall mining
system and an increase of $9,141,000 in contract mining revenues (from
$5,150,000 in 1994 to $14,291,000 in 1995).
Cost of Operations. The cost of operations totaled $94,447,000 for 1995
compared to $91,460,000 for 1994, an increase of $2,987,000 or 3%. The increase
is primarily attributable to an increase in contract mining costs due to greater
activity, and inclusion in costs of $3,200,000 associated with the resale of an
Addcar(TM) highwall mining system in 1995. The increased costs of operations are
partially offset by lower tonnages mined (3.5 million tons in 1994 versus 3.3
million tons in 1995) at a lower cost per ton ($24.13 per ton in 1994 versus
$23.72 per ton in 1995).
Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization for 1995 totaled $6,025,000 compared to $4,362,000 for 1994, an
increase of $1,663,000 or 38%. The increase in depreciation, depletion and
amortization primarily resulted from depreciation on previously-leased mining
equipment which the Company purchased at the end of 1994 and depreciation
associated with the Company's Colorado operations, which were acquired at the
end of 1994.
43
<PAGE> 48
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 1995 were $8,605,000 compared to $7,121,000 for
1994, an increase of $1,484,000 or 21%. The increase in selling, general and
administrative expenses were attributable to costs related to securing contract
mining arrangements in 1995.
Interest Expenses. Interest expense for 1995 was $2,025,000 compared to
$346,000 for 1994, an increase of $1,679,000 or 485%. The increase was due
primarily to the financing of equipment which was purchased as leases expired
near the end of 1994 and new capital leases which the Company entered into
during 1995, along with debt that the company incurred during November of 1995
related to the purchase of subsidiaries from Addington Resources.
Provision for Income Taxes. The income tax benefit for 1995 was $407,000
compared to a provision of $35,000 for 1994, a decrease of $442,000 or 1262%.
The decrease in the provision for income taxes is principally due to increased
pretax losses in 1995 while the Company was a C corporation versus taxable
income in 1994. Pretax 1995 S corporation earnings were $1,748,000.
Net Income. For 1995, the Company had a net income of $1,085,000 compared
to $58,000 for 1994, an increase of $1,027,000 or 1771%. The increase primarily
resulted from the Company's decision to replace its western Kentucky mining
operations with more profitable eastern Kentucky mining operations and profits
from the resale of an Addcar(TM) highwall mining system.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations was ($8,008,000), $4,774,000, $11,123,000 and
($908,000) for the nine-month period ended September 30, 1997 and the years
ended December 31, 1996, 1995 and 1994, respectively. During the year ended
December 31, 1996, the Company had net income of $5,063,000 compared to net
income of $1,085,000 for the year ended December 31, 1995 and net income of
$58,000 for the year ended December 31, 1994. During the year ended December 31,
1996, cash flow from operations was increased by an increase in accounts payable
of $9,518,000 and depreciation of $6,945,000, which was partially offset by an
increase in accounts receivable of $6,079,000, an increase in inventories of
$3,050,000 and a decrease in other non-current liabilities of $5,669,000. During
the year ended December 31, 1995, cash flow from operations was increased due to
depreciation of $6,025,000, a decrease in accounts receivable of $3,254,000, a
decrease in other non-current assets of $2,824,000, and an increase in accrued
expenses and other of $4,264,000, which was partially off-set by an increase in
inventories of $2,282,000, an increase in prepaid expenses and other of
$2,226,000 and a decrease in other non-current liabilities of $1,572,000. During
the year ended December 31, 1994, cash flow from operations was decreased due to
a decrease in other non-current liabilities of $8,377,000, an increase in
accounts receivable of $8,047,000 and an increase in other non-current assets of
$3,025,000 which was partially offset by depreciation of $4,362,000, an increase
in accounts payable of $5,427,000, an increase in accrued expenses and other of
$4,674,000 and a decrease in inventories of $5,124,000.
Cash flow from operations was ($8,008,000) for the nine months ended
September 30, 1997 compared to $3,707,000 for the nine months ended September
30, 1996. During the nine months ended September 30, 1997 the Company had a net
loss of $704,000 compared to net income of $3,710,000 for the nine months ended
September 30, 1996. During the nine months ended September 30, 1997, cash flow
from operations was decreased due to an increase in accounts receivable of
$11,287,000, an increase in inventories of $6,517,000, an increase in other
non-current assets of $1,071,000 and a decrease in other non-current liabilities
of $3,189,000 which was partially offset by depreciation of $6,910,000, an
increase in accounts payable of $4,905,000 and an increase in accrued expenses
and other of $3,355,000. During the nine months ended September 30, 1996, cash
flow from operations was increased due to depreciation of $5,069,000, an
increase in accounts payable of $7,644,000 and an increase in accrued expenses
and other of $1,731,000 which was partially offset by an increase in accounts
receivable of $1,418,000, an increase in inventories of $6,285,000, an increase
in prepaid expenses and other of $2,836,000 and a decrease in other non-current
liabilities of $3,938,000.
44
<PAGE> 49
In 1996, the Company made $14,100,000 in capital expenditures. The Company
has budgeted approximately $20,000,000 for capital expenditures in 1997,
$18,340,000 of which has been spent as of September 30, 1997, $16,000,000 for
capital expenditures in 1998, and $49,200,000 for capital expenditures in 1999,
approximately $27,000,000 of which relates to the longwall mining system that
may be acquired for the Bowie #2 mine. The Company expects to fund its budgeted
capital expenditures through a combination of proceeds from the issuance of the
Senior Notes, borrowings under the New Credit Facility and cash generated from
operations.
As of September 30, 1997, on a pro forma basis after giving effect to the
Pro Forma Transactions, the Company would have had total long-term indebtedness,
including current maturities, in the aggregate principal amount of $255,769,000.
The Indenture permits the Company to incur additional indebtedness, including
secured indebtedness, subject to certain limitations. Such limitations include
certain covenants that, among other things: (i) limit the incurrence by the
Company of additional indebtedness and the issuance of certain preferred stock;
(ii) restrict the ability of the Company to make dividends and other restricted
payments (including investments); (iii) limit transactions by the Company with
affiliates; (iv) limit the ability of the Company to make asset sales; (v) limit
the ability of the Company to incur certain liens; (vi) limit the ability of the
Company to consolidate or merge with or into, or to transfer all or
substantially all of its assets to, another person and (vii) limit the ability
of the Company to engage in other lines of business. In addition, the New Credit
Facility contains additional and more restrictive covenants as compared to the
Indenture and will require the Company to maintain specified financial ratios
and satisfy certain tests relating to its financial condition. See "Use of
Proceeds," "Capitalization," "Description of Exchange Notes -- Certain
Covenants," and "Description of New Credit Facility." For the nine-month period
ended September 30, 1997, on a pro forma basis after giving effect to the Pro
Forma Transactions, the Company's earnings would have been inadequate to cover
fixed charges by $10.1 million.
The Company is continually engaged in evaluating potential acquisitions.
The Company expects that funding for future acquisitions may come from a variety
of sources, depending on the size and nature of any such acquisition. Potential
sources of capital include cash generated from operations, proceeds from the
issuance of the Senior Notes, borrowings under the New Credit Facility, or other
external debt or equity financings. There can be no assurance that such
additional capital sources will be available to the Company, if at all, on terms
which the Company finds acceptable.
In connection with the Offering, the Company entered into the New Credit
Facility, which provides for aggregate borrowings of up to $50,000,000. As of
September 30, 1997, on a pro forma basis after giving effect to the Pro Forma
Transactions, the Company would have aggregate borrowings of $25,000,000 under
the New Credit Facility. Interest rates on the revolving loans under the New
Credit Facility are based, at the Company's option, on the Alternate Base Rate
(as defined therein) or Eurodollar Rate (as defined therein). The New Credit
Facility commitment matures five years after the Closing Date (as defined). The
New Credit Facility contains certain restrictions and limitations, including
financial covenants that require the Company to maintain and achieve certain
levels of financial performance and limit the payment of cash dividends and
similar restricted payments. See "Description of New Credit Facility."
In the future, the Company's principal liquidity requirements will be for
debt service requirements under the Senior Notes, the New Credit Facility, other
outstanding indebtedness, and for working capital needs and capital
expenditures. Historically, the Company has funded its capital and operating
requirements with a combination of operating cash flow, borrowings under credit
facilities and stockholder loans. The Company has utilized these sources of
funds to make acquisitions, fund significant capital investments in its
properties, fund operations and service debt under credit facilities.
The Company's ability to make scheduled payments of principal of, or to pay
the interest and Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Senior Notes), or to fund planned capital
expenditures will depend on its future performance, which, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond its control. Based upon the current level of
operations and anticipated revenue growth, the Company believes that cash flow
from operations and available cash, together with available borrowings under the
New Credit Facility, will be
45
<PAGE> 50
adequate to meet its foreseeable future liquidity needs. However, the Company
currently expects that it will make additional acquisitions, although it
currently has no agreements or commitments to acquire any other company, and in
connection therewith, expects to incur additional indebtedness. In the event
that the Company incurs such additional indebtedness, its ability to make
principal and interest payments on its indebtedness, including the Senior Notes,
may be adversely affected. The Company may, therefore, need to refinance all or
a portion of the principal of the Senior Notes on or prior to maturity. There
can be no assurance that the Company's business will generate sufficient cash
flow from operations, that anticipated revenue growth and operating improvements
will be realized or that future borrowings will be available under the New
Credit facility in an amount sufficient to enable the Company to service its
indebtedness, including the Senior Notes, or to fund its other liquidity needs.
In addition, there can be no assurance that the Company will be able to effect
any such refinancing on commercially reasonable terms or at all. See "Risk
Factors."
INFLATION
Due to the capital-intensive nature of the Company's activities, inflation
may have an impact on the development or acquisition of mining operations, or
the future costs of final mine reclamation and the satisfaction of other
long-term liabilities, such as health care or pneumoconiosis (black lung)
benefits. However, inflation in the United States has not had a significant
effect on the Company's operations in recent years.
46
<PAGE> 51
INDUSTRY OVERVIEW
GENERAL
According to data compiled by the EIA, United States coal production
totaled 1.06 billion tons in 1996, a 2.3% increase from the 1.03 billion tons
produced in 1995 and a record high. The increase in 1996 coal production levels
was driven by a large increase in coal consumption for electricity generation
due to increased natural gas prices, negligible growth in nuclear-powered
generation, abnormally cold weather, and strong economic growth. Total United
States coal consumption reached 1.01 billion tons in 1996, a 4.6% increase from
1995, and export sales totaled 90 million tons. Approximately 87% of the coal
consumed in the United States is used for the generation of electricity, and
coal continues to be the principal energy source for United States utilities,
with its share of total electricity generation rising from 49.3% in 1995 to
56.4% in 1996, as compared with 22% from nuclear, 11% from hydroelectric and 9%
from gas-fired facilities in 1996. In the last three years, coal prices under
long-term contracts have generally remained steady; however, spot market coal
prices have experienced greater fluctuation due to seasonal variations in supply
and demand caused by weather. Despite the increased consumption and the many
inefficient mines that have closed in the last 10 years, coal mining companies
with improving productivity have filled the increasing demand without price
increases. Increased competition in the generation of electricity is forcing
utility buyers to purchase coal more selectively. This heightened fiscal
responsibility has led to lower stockpiles, increased spot market activity and
shorter contract terms, which may create greater price volatility than has been
experienced in the past.
Productivity gains and environmental legislation have worked together to
exert pressures on the fundamental structure of the coal industry. According to
statistics compiled by the federal government, the number of operating mines has
declined 40% from 1986 through 1996, even though production during that same
time has increased 19.5%. During this period, work practice and technological
improvements have allowed overall production per man to increase by 89% while
industry employment declined by 42%. These productivity gains and the resulting
excess productive capacity in most segments of the industry have contributed to
the stability of coal prices in recent years at levels lower than in the 1970's
and early 1980's. Clean air concerns and legislation have increased consumption
of low-sulfur products mined in Appalachia and the western United States.
Although recently there has been some consolidation of coal producers in the
United States, the 10 largest coal producers in 1996 accounted for only 44% of
total domestic coal production, and no company held a domestic market share of
more than 10% in 1996.
47
<PAGE> 52
According to a recent report by Hill & Associates, the demand for steam
coal and the demand for coal by electric utilities in the United States
generally is expected to increase steadily over the next 13 years. The following
chart highlights the increases projected by Hill & Associates:
U.S. STEAM COAL DEMAND AND ELECTRIC UTILITY COAL DEMAND
(MILLION SHORT TONS)
[COAL AND ELECTRICTY DEMAND CHART]
COAL TYPES
In general, steam coal is classified by Btu content and sulfur content. In
ascending order of heat values, the four basic types of coal are lignite,
subbituminous, bituminous and anthracite.
Lignite coal is a brownish-black coal with a Btu content that generally
ranges from 6,500 to 8,300 Btus per pound. Major lignite operations are located
in Texas, North Dakota, Montana and Louisiana. Lignite coal is used almost
exclusively in power plants located adjacent to such mines because any
transportation costs, coupled with the mining costs, would exceed the price a
customer would pay for such low-Btu coal.
Subbituminous coal is a black coal with a Btu content that ranges from
approximately 7,800 to 9,500 Btus per pound. Most subbituminous reserves are
located in Montana, Wyoming, Colorado, New Mexico, Washington and Alaska.
Subbituminous coal is used almost exclusively by electric utilities and some
industrial consumers.
Bituminous coal is a "soft" black coal with a Btu content that ranges from
10,500 to 14,000 Btus per pound. This coal is located primarily in Appalachia,
the Midwest, Colorado and Utah, and is the type most commonly used for electric
power generation in the United States. Bituminous coal is used for utility and
industrial steam purposes, and as a feedstock for coke, which is used in steel
production. All of the Company's reserves are bituminous coal.
48
<PAGE> 53
Anthracite coal is a "hard" coal with a Btu content that can be as high as
15,000 Btus per pound. Anthracite deposits are located primarily in the
Appalachian region of Pennsylvania, and are used primarily for industrial and
home heating purposes.
COAL QUALITIES
The primary factors considered in determining the value and marketability
of coal are the Btu content, the sulfur content and the percentage of ash (small
particles of inert material), moisture and volatile matter. The Btu content
provides the basis for satisfying the heating requirements of boilers. Coal
having a lower Btu content frequently must be blended with coal having a higher
Btu content to allow the consumer to utilize the coal efficiently in its
operations. Due to the restrictive environmental regulations regarding sulfur
dioxide emissions, coal is commonly described with reference to its sulfur
content. Coal that emits no more than 1.6 pounds of sulfur dioxide/MMBtu when
burned is called low-sulfur coal. Coal that emits no more than 1.2 pounds of
sulfur dioxide/MMBtu is called compliance coal. Compliance coal exceeds the
current requirements of Phase I of the Clean Air Act Amendments and meets the
prospective requirements of Phase II of that legislation. Since compliance coal
exceeds the Phase I requirements, consumers using such coal can either earn
sulfur emission credits, which can be sold to other coal consumers, or blend the
coal with higher sulfur coal to lower the overall sulfur emissions without
having to install expensive sulfur-reduction technology (i.e., scrubbers, etc.).
Very low-sulfur coal (0.8 pounds or less of sulfur dioxide/MMBtu), such as
Colorado coal, is desirable because utilities can blend it with higher sulfur
coal or burn it by itself to earn sulfur emission credits even under Phase II of
the Clean Air Act Amendments.
The inert nature of ash diminishes the heating value of the coal (i.e., the
higher the percentage of ash, the lower the heating value). For electric
utilities, the percentage of ash is important not only for its effect on heating
value, but also because it affects the amount of combustion by-products.
Electric utilities typically require coal with an ash content ranging from 6% to
15%, depending on individual power plant specifications. The percentage of
moisture is important because the higher the moisture, the lower the heating
value or Btus per pound. Also, if the percentage of moisture is too high,
customers may experience handling problems with the coal. Moisture concerns are
principally related to coal from the Powder River Basin where the Company does
not operate. Volatility is the percentage of matter which is vaporized in the
combustion process, and is important for electric utilities because power plant
boilers are designed to burn coal having a particular volatility. Most utility
power plants are designed to burn medium- to high-volatility coal.
COAL REGIONS
The majority of United States coal production is generated from six
regions: Central Appalachia, Southern Appalachia, Northern Appalachia, Illinois
Basin, Rocky Mountain, and Powder River Basin. With the exception of the coal
from the Northern Appalachia region, which generally serves only the
northeastern United States market, coal from each region competes in a national
market. The geographic areas that comprise the six regions and characteristics
of the coal in those regions are as follows:
Central Appalachia consists of southern West Virginia, eastern
Kentucky and Virginia. The Company has substantial coal reserves in this
region. The coal in this region is generally quite low in sulfur
(0.7%-1.5%) and high in Btu content (12,000-13,500 Btus per pound of coal).
The majority of this coal complies with Phase I of the Clean Air Act
Amendments and, after the implementation of Phase II of that legislation,
this coal is expected to be in high demand. Central Appalachia sources
provide most of the United States' overseas export coal. According to Hill
& Associates, this region has considerable excess production capacity.
Southern Appalachia, where the Company has significant coal reserves,
consists of southeastern Kentucky, Tennessee and Alabama. Coal from this
region also has a low sulfur content (0.7%-1.5%), which is generally
acceptable for Phase I of the Clean Air Act Amendments, and a high Btu
content (12,000-13,000 Btus per pound of coal). While productivity is
impaired by the region's thin seams, readily accessible waterways and
proximity to southern utility plants help to reduce delivery costs of coal
from this region to utility customers.
49
<PAGE> 54
Northern Appalachia consists of northern West Virginia, Pennsylvania
and Ohio. The Btu content of this coal is generally high (12,000-13,000
Btus per pound of coal), with the exception of coal from Ohio. However, the
sulfur content in this coal (1.5%-2.5%) generally does not meet the Phase I
standards of the Clean Air Act Amendments.
The Illinois Basin consists of western Kentucky, Illinois and Indiana.
Coal from this region generally has a moderately low Btu content
(10,000-12,000 Btus per pound of coal) and a high sulfur content
(2.5%-3.5%). Although there are exceptions, generally no unwashed Illinois
Basin coal satisfies the Phase I or Phase II standards of the Clean Air Act
Amendments. Therefore, Illinois Basin coal is primarily blended with
low-sulfur coal or burned in plants equipped with scrubbers.
The Rocky Mountain region consists of Utah and Colorado. The Company
has substantial coal reserves in this region, which are almost exclusively
compliance coal. The coal in this region is low in sulfur content
(0.4%-0.5%) and has a moderately high Btu content (10,500-12,300 Btus per
pound of coal). This coal complies with Phase I and Phase II of the Clean
Air Act Amendments, and, according to Hill & Associates, production
capacity in this region has increased.
The Powder River Basin consists mainly of Wyoming and parts of
Montana. This coal is very low in sulfur content (0.25% to 0.65%), but also
is low in Btu content (8,000-8,800 Btus per pound of coal) and very high in
moisture content (20%-35%). All of this coal complies with Phase I and
Phase II of the Clean Air Act Amendments, but most utilities cannot burn it
without derating their plants, unless it is blended with higher Btu coal.
According to Hill & Associates, this region has considerable excess
production capacity.
MINING METHODS
Coal is mined using either surface or underground methods. The method
utilized depends upon several factors, including the proximity of the target
coal seam to the earth's surface, and the geology of the surrounding area.
Surface techniques generally are employed when a coal seam is within 200 feet of
the earth's surface, and underground techniques are used for deeper seams. In
1996, surface mining accounted for approximately 62% of total United States coal
production, with underground mining accounting for the balance of production.
Surface mining generally is less expensive and has a higher recovery percentage
than underground mining, with surface mining typically resulting in the recovery
of 80% to 90%, and underground mining resulting in the recovery of 50% to 60%,
of the total coal from a particular deposit.
Mountaintop Removal Mining is a surface mining method in which all material
above the coal seam is removed prior to removal of the coal, leaving a level
plateau in place of the hilltop after mining. A more complete recovery of the
coal is accomplished through this method; however, its feasibility depends on
the amount of overlying material in relation to the coal to be removed.
Highwall Mining is a new, innovative mining method that uses the patented
Addcar(TM) highwall mining system, which was developed by Addington Resources
under the guidance of Larry Addington. Currently, the Addcar(TM) mining system
is used in the United States only by the Company, The Pittston Company
("Pittston"), Cyprus Amax Minerals Group ("Cyprus Amax") and their respective
affiliates. The Addcar(TM) mining system bores into the face of a coal seam
using a continuous miner and transports coal to the mine opening using cascading
conveyor belts with wheels on a series of cars connected to the continuous
miner. The Addcar(TM) mining system is remote-controlled by an employee in a
climate-controlled enclosure on the launch vehicle, which is located at the mine
entrance on the surface. Highwall mining is generally used to recover coal from
surface mines and deep mines that are no longer economical to mine using
traditional surface or deep mining methods and can extract coal from horizontal
depths of up to 1,200 feet. Trench, box, open-pit or contour cuts allow the
highwall mining equipment to be utilized as the primary production machine for
projects requiring large volumes of coal production.
Contour Mining is a surface mining method conducted on coal seams where
mountaintop removal is not feasible because the coal seam is overlain by too
much of the hill to mine economically by mountaintop removal. Mining proceeds
laterally around a hillside, at essentially the same elevation, assuming the
seam is
50
<PAGE> 55
fairly flat. The contour cut in a coal seam provides a flat surface that can be
used to facilitate highwall mining (discussed above) or the less efficient auger
mining (discussed below). This is a common surface mining method in the steeper
slopes of the Appalachian bituminous coalfields.
Strip Mining is essentially a large-scale earth moving operation, with the
rock and soil overlying a coal deposit (the "overburden") being "stripped" away
by means of large earth-moving machines. The coal exposed by stripping is
fractured by blasting and is loaded onto haul trucks or overland conveyors for
transportation to processing and loading facilities. The site then is backfilled
with the overburden and otherwise restored to its approximate original contour
and vegetated condition.
Auger Mining is a surface mining method in which miners remain outside of
the mine and a large, corkscrew-like machine (the "auger") bores into the side
of a hill and extracts coal by "twisting" it out. This method is less efficient
than highwall mining (described above), but is used by many of the Company's
competitors. Auger mining generally permits the extraction of coal to depths of
only 300 feet or less.
Room and Pillar Mining is a method of deep mining which uses
remote-controlled continuous miners that cut out a block of coal (usually 40 x
100 feet), then cut 20-foot wide passages as high as the coal seam. Roof bolters
stabilize the mine roof and pillars (100 x 100 feet) are left to provide overall
roof support. This is the most common method of deep mining.
Longwall Mining is a deep mining method that uses hydraulic jacks, varying
from five feet to 12 feet in height, to support the roof of the mine while
cutting shears extract the coal. Chain belts then move the coal to a standard
deep mine belt system for delivery to the surface. The longwall machine
generally cuts blocks of coal, referred to as longwall panels, that have a width
of approximately 900 feet and a length ranging from 9,000 to 11,000 feet.
Longwall machines that cut panels of coal up to 1,200 feet wide and 18,000 feet
long are being tested for future use. Longwall mining is a low-cost, high-output
method of deep mining that results in the recovery of approximately 60% of coal
reserves. In addition, longwall mining is a much faster method of mining coal
than room and pillar mining. After a longwall panel is cut, the longwall machine
must be disassembled and moved to the next panel location, a process which
generally takes one to two weeks.
COAL PREPARATION
Depending on coal quality and customer requirements, it is sometimes
possible to ship raw coal directly from the mine to the customer. Generally, raw
coal from mountaintop removal, contour and strip mines can be shipped in this
manner. If coal is not shipped raw directly to the customer, it is processed in
a preparation plant. Most coal mined by deep mining methods and some coal mined
by surface mining methods must be processed in a preparation plant. The
preparation plant crushes coal, washes it in a liquid solution, separates it
into higher and lower grades, and removes non-coal materials. Processing the
coal in a preparation plant upgrades the quality and heating value of the coal
by removing or reducing sulfur, rock, clay and other ash-producing materials,
but entails significant expense and results in some loss of coal. Coal blending
or mixing of various sulfur types is often performed at a preparation plant or
loading facility to meet the specific combustion and environmental needs of
customers.
CUSTOMERS
Over the last 10 years, coal consumption in the United States has generally
experienced steady annual growth, reaching a record level of 1.01 billion tons
in 1996. This steady growth in coal consumption is attributable to similar
growth in the demand for electricity over the same period, as the electric
utility industry accounts for more than 86% of domestic coal consumption. In
1996, coal-fired utilities generated approximately 56% of the nation's
electricity, followed by nuclear (22%), hydroelectric (11%) and gas-fired (9%)
utilities. According to Hill & Associates and other industry sources, over the
next several years, electricity usage is expected to increase at an average
annual rate of 1.4% to 1.9%. As demonstrated by the following
51
<PAGE> 56
graph, for the past 47 years coal-fired utilities have generated an increasing
percentage of all electricity generated in the United States and this trend is
expected to continue:
ELECTRICITY GENERATION BY FUEL TYPE
[ELECTRICITY GENERATION CHART]
Electricity can be generated less expensively using coal than gas, oil or
geothermal energy. The delivered cost of coal for utilities averaged $1.20/MMBtu
in 1996 compared to $2.57/MMBtu for gas and $3.00/MMBtu for oil. Although
nuclear and hydro energy are cheaper than coal, no new nuclear plant permits
have been issued since 1978, and many existing plants are near the end of their
useful life. Additionally, the availability of hydro electricity is limited.
Because coal is one of the least expensive and most abundant resources for
the production of electricity, and imports of coal historically have not
exceeded 1% of domestic coal consumption, domestically produced coal is expected
to continue to play a significant role in the production of electricity in the
future. The Company believes that it is well positioned to benefit from
favorable trends in the coal and electric utility industries because
approximately 54% of the Company's 1996 shipments were to electric utilities.
52
<PAGE> 57
The following table (derived from publications of the EIA) presents
five-year domestic coal production by region, and consumption by sector:
<TABLE>
<CAPTION>
FIVE-YEAR COAL PRODUCTION AND CONSUMPTION
-------------------------------------------
1992 1993 1994 1995 1996
----- ----- ------- ------- -------
(IN MILLIONS OF TONS)
<S> <C> <C> <C> <C> <C>
Production by Region
Appalachia................................... 456.6 409.7 445.4 434.9 445.1
Interior..................................... 195.2 167.2 179.9 168.5 172.2
Western...................................... 345.3 368.5 408.3 429.6 439.5
----- ----- ------- ------- -------
Total................................ 997.1 945.4 1,033.6 1,033.0 1,056.8
Consumption by Sector
Utilities.................................... 779.9 813.5 817.3 829.0 873.7
Independent Power Producers.................. 14.8 17.8 20.9 21.2 24.0
Coke Plants.................................. 32.4 31.3 31.7 33.0 31.7
Other Industrial Plants...................... 74.0 74.9 75.2 72.8 70.6
Residential/Commercial Users................. 6.2 6.2 6.0 5.8 5.8
----- ----- ------- ------- -------
Total................................ 907.3 943.7 951.1 961.8 1,005.8
Exports...................................... 102.5 74.5 71.4 88.5 90.5
----- ----- ------- ------- -------
Inventory...................................... 197.7 124.9 136 118.7 79.2
</TABLE>
UTILITY DEREGULATION
Since 1935, domestic electric utilities have operated in a regulated
environment, with prices and return on investment being determined by state
utility and power commissions. In April 1996, the FERC established rules
providing for open access to electricity transmission systems, thereby
initiating consumer choice in electricity purchasing and encouraging competition
in the generation of electricity. It is anticipated that the FERC rules will
create a national market for the sale of wholesale electricity where competition
will primarily focus on price. Within the electric utility industry, the
low-cost producers of electricity, located primarily in Kentucky, Tennessee,
Indiana and Ohio, should benefit most due to the increased focus on price.
Competition will likely benefit the coal industry generally because coal is a
relatively low-cost source of electricity generation. Within the coal industry,
companies with customers that are low-cost producers are likely to see the
greatest increase in coal demand. The Company's primary customers are low-cost
electricity producers, located in Kentucky, Tennessee and Ohio.
CLEAN AIR ACT AMENDMENTS
The Clean Air Act Amendments have had, and will continue to have, a
significant effect on the domestic coal industry. Phase I of the Clean Air Act
Amendments, which became effective in 1995, regulates the level of emissions of
sulfur dioxide from power plants and targets the highest sulfur dioxide
emitters. Phase II, which is scheduled to be implemented in 2000, will extend
the restrictions of the Clean Air Act Amendments to most remaining power plants.
The Clean Air Act Amendments do not define allowable emission levels on a per
plant basis, but instead allocate emission allowances to the affected plants and
allow the emission allowances to be traded so that market participants can
fashion more efficient and flexible compliance strategies. The emission
allowance allocations for Phase I were based on 2.5 pounds of sulfur
dioxide/MMBtu, and Phase II allocations will be based on 1.2 pounds of sulfur
dioxide/MMBtu. See "Government Regulation."
53
<PAGE> 58
BUSINESS
OVERVIEW
The Company is primarily engaged in the mining and marketing of bituminous
coal, operating as of December 31, 1997, 12 mines in Kentucky, Tennessee and
Colorado. The Company also manufactures highwall mining equipment and other
related coal mining equipment. According to the Marshall Miller Reports,
approximately 75 million tons (36%) of the Company's coal reserves (including
captive reserves) constitute clean, recoverable compliance coal, and the Company
believes that a significant amount of its remaining reserves is low-sulfur coal.
The Company sells over 76% of its coal to electric utilities and other customers
under seven long-term supply contracts that had a weighted average remaining
term of 6.2 years as of June 30, 1997. The remainder of the Company's coal is
sold under short-term contracts and on the spot market. Based on the Company's
contracts as of November 1997, and sales made as of such date, after giving
effect to the Pro Forma Transactions, the Company expects pro forma coal sales
for 1997 to be approximately 11.9 million tons, resulting in 1997 aggregate
revenues of $288.0 million and EBITDA of $29.7 million, a 25% increase over pro
forma 1996 revenues of $231.0 million and an 18% increase over pro forma 1996
EBITDA of $25.1 million. According to the Marshall Miller Reports, the Company
has approximately 285 million tons of coal reserves and coal resources
(including captive reserves and resources). Coal resources are naturally
occurring concentrations or deposits of coal in the earth's crust, in such forms
and amounts that economic extraction is currently or potentially feasible. Coal
reserves are virgin and/or accessed parts of a coal reserve base that could be
economically extracted or produced at the time of determination considering
environmental, legal and technological constraints.
The Company has expanded its operations over the last three years through a
series of acquisitions. The Company began operations in 1982 with four surface
mines located in eastern Kentucky, which produce substantial amounts of
low-sulfur and compliance coal. In 1994 and 1995, the Company acquired its
Colorado properties, which almost exclusively contain coal having a lower sulfur
content than compliance coal. In 1995, the Company acquired its Tennessee mines.
Through its acquisition of Ikerd-Bandy in October 1997 and its acquisition of
Leslie Resources in January 1998 (see "Prospectus Summary -- Recent
Developments -- Leslie Resources"), the Company acquired its southeastern
Kentucky properties, which are comprised of sizeable low-sulfur and compliance
coal reserves. The Company acquired, through Mining Technologies, its highwall
mining equipment manufacturing facilities and its intellectual property related
to highwall mining equipment from Addington Enterprises in January 1998. The
Company obtained a fairness opinion regarding such asset purchase.
COMPETITIVE STRENGTHS
The Company believes that it possesses the following competitive strengths:
- Portfolio of Long-Term Contracts. As of June 30, 1997, the Company
had seven long-term contracts with high-rated utilities, such as TVA and
CG&E, and with industrial customers, and those contracts had a weighted
average remaining term of approximately 6.2 years (excluding option
periods) as of that date. On average for the period from January 1, 1995
through June 30, 1997, the Company sold more than 76% of its coal under
long-term contracts, with the remainder being sold under short-term
contracts and on the spot market.
- Strong Relationships with Key Customers. The Company believes it
has developed strong relationships with its customers (which are primarily
large electric utilities), due to its reliability and its commitment to
quality and efficiency. In the long term, the Company's strong customer
relationships position it to benefit significantly from (i) the generally
expected increase in the demand for coal by electric utilities and (ii) the
increased market share that low-cost electricity producers, who are the
Company's primary customers, are expected to acquire as the trend toward
price competition in wholesale electric markets increases within the
electric utility industry.
- Low-Cost Operations. The Company believes its production costs are
significantly below those of its primary competitors. The Company's ability
to maintain low-cost operations is attributable to: (i) its
54
<PAGE> 59
substantial use of mountaintop removal mining, which minimizes the cost of
removing overburden and which the Company believes allows it to save as
much as $4.00 per ton by shipping coal raw, i.e., without the expense of
processing the coal in a processing plant; (ii) the close proximity of its
coal reserves to customers and efficient transportation facilities; (iii)
its acquisition of substantial Colorado coal reserves that are well suited
for low-cost longwall mining; (iv) its non-union workforce; (v) its daily
monitoring of production data from each mine site; and (vi) its arrangement
with an affiliated company to provide timely, cost-efficient equipment
maintenance, repair and transportation. Additionally, the Company has
successfully used the Addcar(TM) highwall mining systems as a
cost-effective method of mining coal that many of its competitors could not
economically mine.
- High-Quality Reserves. According to the Marshall Miller Reports,
approximately 75 million tons (36%) of the Company's 211 million tons of
coal reserves (including captive reserves) constitute clean, recoverable
compliance coal, and the Company believes that a significant amount of its
remaining reserves is low-sulfur coal. The Company believes this high
percentage of low-sulfur and compliance coal will give it a competitive
advantage for the long term because of the more stringent air quality
requirements under Phase II of the Clean Air Act Amendments (as defined),
which currently is scheduled to go into effect in 2000. Moreover, the
Company owns or controls coal reserves of sufficient amounts and
characteristics that generally meet or exceed the specifications
established by the Company's current and prospective customers.
- Experienced Management. The Company's senior management team,
including Larry Addington, Don Brown, John Baum, Keith Sieber, Robert
Addington, Marc Merritt, Vic Grubb and John Lynch, has an average of 18
years of experience in the coal industry. Many of these individuals have
worked together at the Company or one of its predecessors for more than 10
years. The management team has a proven record of developing innovative,
low-cost operations, maintaining strong customer relationships and making
strategic, opportunistic acquisitions.
- Union-Free Mines. All of the Company's mines are non-union. The
Company offers its employees incentive compensation and believes that such
compensation and its commitment to the safety and welfare of its employees
will enable it to remain union-free. The factors that have allowed the
Company to remain union-free have created a highly motivated, efficient
workforce, which has allowed the Company to minimize business interruptions
and reduce costs, thereby building stronger customer relationships.
- Patented Highwall Mining Technology. The Company owns highwall
mining technology patented in the United States and Canada and
manufacturing facilities that allow it to manufacture Addcar(TM) highwall
mining systems and other related mining equipment. The Company can use this
equipment in its mining operations or sell or lease it to third parties.
BUSINESS STRATEGY
The Company has adopted a business strategy to: (i) enhance its position as
a low-cost producer of high-quality coal, and (ii) increase revenues, cash flow
and profitability. To implement this strategy, the Company will:
- Expand Low-Cost Operations. The Company intends to enhance its
position as a leader in low-cost coal production. In eastern Kentucky, the
Company plans to expand its low-cost operations by acquiring, at favorable
prices, coal reserves that are suited for either mountaintop removal mining
or combined contour/Addcar(TM) highwall mining operations and located near
suitable loading and transportation facilities. In southeastern Kentucky,
the Company intends to use its Addcar(TM) highwall mining systems to
continue expanding its low-cost highwall mining operations. In December
1997, the Company began production from its Bowie #2 mine in Colorado,
which is expected to produce 2 million tons of coal annually utilizing room
and pillar mining methods. As of December 31, 1997, the Company had
commitments for approximately 1.3 million tons of the Bowie #2 mine
production. If the Company obtains commitments for an additional 2.7
million tons of coal from the Bowie #2 mine, it expects to install a
longwall mining system at the mine to provide a low-cost, high-output
mining method. In its first
55
<PAGE> 60
full year of production with the longwall system, which is expected to
start in 1999, the Company expects the Bowie #2 mine to produce 5.8 million
tons of high-Btu, compliance coal. The Company believes that expanding its
low-cost operations will position it to capture a greater share of the coal
market as demand increases and becomes more price sensitive due to the
anticipated deregulation of the electric utility industry.
- Grow Through Acquisitions. The Company's management, due to its
long history of managing successful coal operations, has demonstrated its
ability to maximize the operating and marketing potential of
underperforming operations and mineral resources. The Company plans to
leverage this expertise by acquiring operations in eastern and southeastern
Kentucky, West Virginia, Colorado and Utah and to use management's
experience to reorganize these acquired operations to realize economies of
scale and increase market share. The Company also will consider acquiring
inefficient or financially-troubled coal companies and assets or divisions
of larger coal companies so that the Company's experienced management can
use its expertise to maximize the value of such operations. Going forward,
the Company intends to accelerate the search for suitable acquisition
targets, although there are no current commitments or agreements to acquire
any company.
- Acquire Additional High-Quality Reserves. While the Company's
general strategy is to acquire coal reserves sufficient to replace its
annual coal production, since 1994 the Company has acquired reserves
substantially in excess of its annual production. The Company's coal
reserves and coal resources (including captive reserves and resources) have
grown by 470% from approximately 50 million tons as of December 31, 1994 to
approximately 285 million tons. According to the Marshall Miller Reports,
approximately 75 million tons (36%) of the Company's reserves (including
captive reserves) are compliance coal, and the Company believes that a
substantial portion of its remaining reserves are low-sulfur coal. The vast
majority of the Company's reserves contain high-Btu coal. As environmental
regulations become more stringent, the Company believes that the demand for
high-Btu coal that is low-sulfur or compliance coal will increase.
Therefore, the Company intends to continue its practice of acquiring
low-sulfur, high-Btu coal reserves to ensure that it has ample reserves of
the type of coal its customers will require in the future.
- Expand Scope of Addcar(TM) Systems. The Company intends to expand
its use of the Addcar(TM) highwall mining systems to conduct low-cost
highwall mining operations. The Company may also consider leasing,
licensing and selling Addcar(TM) systems and related mining equipment to
third parties.
- Capitalize on Efficient Workforce. By providing its employees with
incentive compensation plans that are based on the productivity of
particular mine sites, the Company has managed to develop an efficient,
non-union workforce, which is a factor in minimizing coal production costs.
The Company believes that its workforce is an important factor in the
expansion of its operations through increased production and acquisitions.
Therefore, the Company intends to continue providing incentive plans to its
current employees and to implement such plans in any future acquisitions in
order to maintain a highly efficient, non-union workforce.
MINING OPERATIONS
Coal Production
As of December 31, 1997, the Company conducted mining operations at a total
of nine surface mines and three deep mines in four regions: eastern Kentucky,
southeastern Kentucky, Tennessee and Colorado. Historically, approximately 80%
of the Company's production has originated from its surface mines, and the
remaining production has originated from its deep mines. The following table
presents each mining region's
56
<PAGE> 61
production, in thousands of tons, for each of the years 1995 and 1996, and the
nine-month period ended September 30, 1997:
<TABLE>
<CAPTION>
PRODUCTION
-----------------------------
1995 1996 1997(1)
----- ----- -------
(IN THOUSANDS OF TONS)
<S> <C> <C> <C>
Mining Region
Eastern Kentucky.......................................... 2,762 2,847 3,204
Southeastern Kentucky(2).................................. 1,549 1,733 1,511
Tennessee................................................. 10 721 667
Colorado.................................................. 521 652 687
----- ----- -----
Total............................................. 4,842 5,953 6,069
===== ===== =====
</TABLE>
- ---------------
(1) Production figures for the nine-month period ended September 30, 1997.
(2) The production figures for 1995, 1996 and the nine-month period ended
September 30, 1997, represent coal production by Ikerd-Bandy prior to the
Company's acquisition of Ikerd-Bandy in October 1997, but exclude production
by Leslie Resources.
The Company uses mountaintop removal mining wherever possible because it
results in the recovery of more tons of coal per acre and facilitates the
permitting of larger projects, allowing for mining activities over a longer
period of time, than would be the case using other mining methods. The Company
also uses other surface mining techniques, including contour mining, to the
extent practicable.
Once surface mining becomes uneconomical due to the location of the coal
and the volume of overburden on top of the coal, the Company conducts highwall
mining operations where viable because it believes that highwall mining is more
cost effective than deep mining. The Company conducts its highwall mining
through the use of three Addcar(TM) highwall mining systems. The Company
currently uses the Addcar(TM) systems in its eastern and southeastern Kentucky
operations. The Company believes the Addcar(TM) systems allow it to mine coal
more cost-effectively than traditional mining methods in areas where such
systems are operable.
With respect to its coal reserves that cannot be mined using surface or
highwall mining methods, the Company generally conducts room and pillar mining.
As part of its strategy to expand its low-cost operations, the Company is
considering installing a longwall mining system at its Bowie #2 mine where the
large contiguous blocks of underground coal reserves and seam heights in excess
of nine feet are suitable for longwall mining. If the longwall mining system is
installed, the Company believes it will provide a low-cost, high-volume source
of high-quality coal production that will allow the Company to acquire
additional long-term contracts.
Operations by Region
Eastern Kentucky. The Company has four surface mines in eastern Kentucky:
Crooked Fork, Flag Knob, Lon Rogers and 17 South. In 1996, the Company produced
approximately 2.8 million tons of coal from these mines, an increase of 100,000
tons or 3% from 1995. The Company has approximately 45.5 million tons of
recoverable reserves and resources remaining in this region. The Company sells
approximately 90% of its production from this region to American Eagle Coal
Company ("American Eagle"), a subsidiary of Pittston, CG&E, Georgia Power
Company ("Georgia Power") and TVA, pursuant to long-term contracts. Coal from
the Crooked Fork, Flag Knob and Lon Rogers mines averages 0.92% sulfur, 10% ash,
and 12,300 Btu per pound. Coal from the 17 South mine averages 1.8% sulfur, 9%
ash and 12,200 Btu per pound. Coal from this region is typically shipped from
the mine by truck or rail to the Sand Lick tipple, a barge, or directly to the
customer.
The Company leases and operates a storage facility, a preparation plant, a
tipple, and a high-speed loadout facility at the 17 South mine. The total cost
of the Company's plant and equipment associated with its eastern Kentucky
operations was $26.0 million at September 30, 1997, and its net book value at
that date was $18.3 million.
57
<PAGE> 62
The Company primarily uses mountaintop removal mining to mine its eastern
Kentucky coal reserves. Mountaintop removal mining provides the highest recovery
rate of the coal in place and thereby extends the life of the reserves. The
Company also uses patented highwall mining systems to mine cost-effectively
reserves with a high overburden ratio. Highwall mining has been especially
successful at the 17 South mine because the Company has been able to mine the
Hazard No. 8 seam at a competitive cost using the Addcar(TM) highwall mining
system. The 17 South reserves currently are estimated to have a 10-year life.
The Company's projected production from this mine for 1998 is 2.4 million tons.
Southeastern Kentucky
Ikerd-Bandy. The Company has several surface mines in southeastern
Kentucky, including Cockrell's Fork and Redbird. In 1996, the Company produced
approximately 1.7 million tons of coal from its southeastern Kentucky mines, an
increase of 200,000 tons or 12% from 1995. Ikerd-Bandy has approximately 35.8
million tons of recoverable reserves and resources remaining in this region, and
sells more than 50% of its production to East Kentucky Power. Coal from these
mines averages 0.7-1.5% sulfur, 8-12% ash, and 12,000 to 13,000 Btu per pound.
This coal is mined using surface and highwall mining methods and is typically
shipped from the mines by rail either to a barge or directly to the customer.
The Company owns or controls a storage facility, a preparation plant, a
tipple and a loadout facility at Cockrell's Fork and Redbird. The total cost of
the Company's plant and equipment associated with its Ikerd-Bandy operations was
$10.5 million at September 30, 1997 on a pro forma basis giving effect to the
acquisition of Ikerd-Bandy as if it occurred on September 30, 1997.
Leslie Resources. In January 1998, the Company acquired the stock of
Leslie Resources. See "Prospectus Summary -- Recent Developments -- Leslie
Resources."
Tennessee. The Company has five mines in Tennessee: two each at Fork
Mountain and Patterson Mountain and one at Cumberland. In 1996, the Company
produced approximately 721,000 tons of coal from its Tennessee mines. The
Company has approximately 48.8 million tons of recoverable reserves and
resources remaining in this region. The Company sells approximately 100% of this
region's production to TVA's Kingston power plant under a 10-year coal contract.
Coal from the Fork Mountain and Patterson Mountain mines averages 1% sulfur, 10%
ash, and 12,600 Btu per pound. Coal from the Cumberland mine averages 2.17%
sulfur, 17% ash, and 12,200 Btu per pound. This coal is mined using surface,
highwall and deep mining methods and is shipped from the mine by truck or rail
for delivery directly to the customer. In light of its recent acquisitions in
southeastern Kentucky, the Company is considering reallocating coal production
among its Kentucky and Tennessee operations to service more economically its
existing and potential future customers.
The Company owns and operates a storage facility, a preparation plant, a
tipple and a loadout facility at the Fork Mountain and Patterson Mountain mines
at Devonia, Tennessee. The total cost of the Company's plant and equipment
associated with its Tennessee operations was $31.9 million at September 30,
1997, and its net book value at that date was $28.8 million.
Colorado. The Company has one active mine (Bowie #2) in Colorado. In 1996,
the Company produced approximately 652,000 tons of coal from the Bowie #1 mine,
an increase of 131,000 tons or 25% from 1995. The Company began production from
the Bowie #2 mine in December 1997 and thereafter phased out production from the
Bowie #1 mine. The Company has approximately 90.4 million tons of recoverable
reserves and resources (including captive reserves and resources) remaining in
this region. The Company sells approximately 100% of its production from this
region to Coors Energy Company ("Coors Energy"), a division of Coors Brewing
Company, and TVA. Coal from the Bowie #1 mine has averaged 0.45% sulfur, 9.3%
ash, and 11,400 Btu per pound, and the coal from the Bowie #2 mine is expected
to average 0.5% sulfur, 9% ash and 12,300 Btu per pound. This coal is shipped
from the mine by rail either to a barge or directly to the customer.
58
<PAGE> 63
The Company owns and operates a storage facility, a tipple and a loadout
facility in this region. The total cost of the Company's plant and equipment
associated with its Colorado operations was $17.7 million at September 30, 1997,
and its net book value at that date was $15.6 million.
The Company currently mines the Bowie #2 mine using the room and pillar
method, but plans to purchase a longwall mining system to provide a very
low-cost method for mining the Bowie #2 mine. The Company's board of directors
has conditioned the acquisition of this equipment on the Company obtaining
annual purchase commitments for at least 4 million tons of coal from the Bowie
#2 mine by January 1999. As of December 31, 1997, the Company had commitments
for 1.3 million tons of coal, and Mitsui Matsushima America, Inc. ("Mitsui")
(which owns a minority interest in Bowie) has indicated that it expects to
provide the Company with annual commitments for 500,000 tons of coal during
1998. There can be no assurances, however, that Mitsui will commit to purchase
any of the Bowie #2 mine production or that the Company will be successful in
securing sufficient commitments from third parties to justify the acquisition of
any additional mining equipment.
Mining Properties
The following table sets forth (in thousands of tons) estimated minimum
recoverable and marketable coal reserves for the Company's mining operations,
and is derived from the Marshall Miller Reports.
<TABLE>
<CAPTION>
TOTAL MEASURED INDICATED
RESERVES RESERVES RESERVES
(IN (IN (IN
MINING PROPERTY THOUSANDS)(1) THOUSANDS)(2) THOUSANDS)(3)
- --------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
I. EASTERN KENTUCKY(4)
Assigned Reserves...... Deep Mineable 1,239 968 271
Highwall Miner 7,749 6,693 1,056
Surface Mineable 16,064 13,877 2,187
----------------- ------- ------- -------
Total Assigned: 25,052 21,538 3,514
Unassigned Reserves.... Deep Mineable 503 503 0
Highwall Miner 4,529 3,292 1,237
Surface Mineable 3,545 2,141 1,404
----------------- ------- ------- -------
Total Unassigned: 8,577 5,936 2,641
Total Reserves......... Deep Mineable 1,742 1,471 271
Highwall Miner 12,278 9,985 2,293
Surface Mineable 19,609 16,018 3,591
----------------- ------- ------- -------
Eastern Kentucky
Subtotal: 33,629 27,474 6,155
II. SOUTHEASTERN KENTUCKY
A. Ikerd-Bandy(5)
Assigned Reserves... Deep Mineable 861 667 194
Highwall Miner 7,945 6,339 1,606
Surface Mineable 9,541 8,000 1,541
----------------- ------- ------- -------
Total Assigned: 18,347 15,005 3,342
Unassigned
Reserves.......... Deep Mineable 6,598 4,275 2,323
Highwall Miner 309 309 0
Surface Mineable 5,221 4,077 1,144
----------------- ------- ------- -------
Total Unassigned: 12,128 8,661 3,467
</TABLE>
59
<PAGE> 64
<TABLE>
<CAPTION>
TOTAL MEASURED INDICATED
RESERVES RESERVES RESERVES
(IN (IN (IN
MINING PROPERTY THOUSANDS)(1) THOUSANDS)(2) THOUSANDS)(3)
- --------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Total Reserves...... Deep Mineable 7,459 4,942 2,517
Highwall Miner 8,254 6,648 1,606
Surface Mineable 14,762 12,077 2,685
----------------- ------- ------- -------
Ikerd-Bandy
Subtotal: 30,475 23,666 6,809
B. Leslie Resources(6)
Assigned Reserves... Deep Mineable 2,598 1,879 719
Highwall Miner 422 404 18
Surface Mineable 27,168 20,479 6,689
----------------- ------- ------- -------
Total Assigned: 30,188 22,762 7,426
Unassigned
Reserves.......... Deep Mineable 0 0 0
Highwall Miner 0 0 0
Surface Mineable 10,724 6,912 3,812
----------------- ------- ------- -------
Total Unassigned: 10,724 6,912 3,812
Total Reserves...... Deep Mineable 2,598 1,879 719
Highwall Miner 422 404 18
Surface Mineable 37,892 27,391 10,501
----------------- ------- ------- -------
Leslie Resources
Subtotal: 40,912 29,674 11,238
----------------- ------- ------- -------
Southeastern
Kentucky
Subtotal: 71,387 53,340 18,047
III. TENNESSEE(7)
Assigned Reserves........ Deep Mineable 22,710 13,465 9,245
Highwall Miner 1,468 1,428 40
Surface Mineable 3,905 3,821 84
----------------- ------- ------- -------
Total Assigned: 28,083 18,714 9,369
Unassigned Reserves...... Deep Mineable 14,538 6,363 8,175
Highwall Miner 0 0 0
Surface Mineable 0 0 0
----------------- ------- ------- -------
Total Unassigned: 14,538 6,363 8,175
Total Reserves........... Deep Mineable 37,248 19,828 17,420
Highwall Miner 1,468 1,428 40
Surface Mineable 3,905 3,821 84
----------------- ------- ------- -------
Tennessee
Subtotal: 42,621 25,077 17,544
IV. COLORADO(8)
Assigned Reserves........ Deep Mineable 22,700 19,014 3,686
Highwall Miner 0 0 0
Surface Mineable 0 0 0
----------------- ------- ------- -------
Total Assigned: 22,700 19,014 3,686
</TABLE>
60
<PAGE> 65
<TABLE>
<CAPTION>
TOTAL MEASURED INDICATED
RESERVES RESERVES RESERVES
(IN (IN (IN
MINING PROPERTY THOUSANDS)(1) THOUSANDS)(2) THOUSANDS)(3)
- --------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Captive Reserves......... Deep Mineable 40,180 13,808 26,372
Highwall Miner 0 0 0
Surface Mineable 0 0 0
----------------- ------- ------- -------
Total Captive: 40,180 13,808 26,372
Total Reserves........... Deep Mineable 62,880 32,822 30,058
Highwall Miner 0 0 0
Surface Mineable 0 0 0
----------------- ------- ------- -------
Colorado
Subtotal: 62,880 32,822 30,058
TOTAL CONTROLLED
Assigned Reserves........ Deep Mineable 50,108 35,993 14,115
Highwall Miner 17,584 14,863 2,721
Surface Mineable 56,678 46,177 10,502
----------------- ------- ------- -------
Total Assigned: 124,370 97,033 27,338
Unassigned Reserves...... Deep Mineable 21,639 11,141 10,498
Highwall Miner 4,838 3,601 1,237
Surface Mineable 19,490 13,130 6,360
----------------- ------- ------- -------
Total Unassigned: 45,967 27,872 18,095
Total Reserves........... Deep Mineable 71,747 47,134 24,613
Highwall Miner 22,422 18,464 3,958
Surface Mineable 76,168 59,307 16,862
----------------- ------- ------- -------
Total Controlled: 170,337 124,905 45,432
GRAND TOTAL
Deep Mineable 111,927 60,942 50,985
Highwall Miner 22,422 18,464 3,958
Surface Mineable 76,168 59,307 16,862
----------------- ------- ------- -------
Total Reserves: 210,517 138,713 71,804
</TABLE>
- ---------------
(1) Total Reserves is the sum of Measured and Indicated Reserves. The
figures listed above are calculated based on the following mine
recovery rates: (i) 90% for surface mining; (ii) 40-50% for highwall
mining; and (iii) 50-60% for deep mining.
(2) Measured Reserves estimates have the highest degree of geologic
assurance. Measured coal lies within a quarter-mile of a valid point of
measurement or point of observation (such as previously mined areas)
supporting such measurements. The sites for thickness measurement are
so closely spaced, and the geologic character is so well defined, that
the average thickness, areal extent, size, shape and depth of coal beds
are well-established.
(3) Indicated Reserves estimates have a moderate degree of geologic
assurance. There are no sample and measurement sites in areas of
indicated coal. However, a single measurement can be used to classify
coal lying beyond measured as indicated. Indicated coal lies more than
a quarter-mile, but less than three-quarters of a mile, from a point of
thickness measurement. Further exploration is necessary to place
indicated coal into the measured category.
(4) The eastern Kentucky reserves are located in Floyd, Martin and Pike
Counties, Kentucky.
(5) The Ikerd-Bandy reserves are located in Bell, Clay and Leslie Counties,
Kentucky.
(6) The Leslie Resources reserves are located in Perry, Leslie, Letcher,
Knott and Breathitt Counties, Kentucky.
(7) The Tennessee reserves are located in Anderson, Campbell, Fentress,
Morgan and Scott Counties, Tennessee.
61
<PAGE> 66
(8) The Colorado reserves are located in Delta County, Colorado.
(9) The Company is currently pursuing a lease of "captive" reserves
adjacent to one of its properties. "Captive" means that economical
access to reserve is available only to the operating company, which
controls property that blocks access to other operating companies.
In addition to the coal reserves listed above, the Company has 74.0 million
tons of coal resources (including captive resources).
Potential investors should be aware that reserve studies are estimates
based on an evaluation of available data, and actual reserves may vary
substantially from the estimates. Estimated minimum recoverable reserves are
comprised of coal that is considered to be merchantable and economically
recoverable by using mining practices and techniques prevalent in the coal
industry at the time of the reserve study and based upon then-current prevailing
market prices for coal. The Company uses the mining method that it believes will
be most profitable with respect to particular reserves. The Company believes its
current reserves exceed its contractual requirements. Although the reserves
shown in the table above include a variety of qualities of coal, the Company
presently blends coal of different qualities to meet contract specifications.
The Company has blended coal to meet contract specifications for many years. See
"Risk Factors -- Reliance on Estimates of Recoverable Reserves."
Coal Transportation
The Company's coal is transported to its customers by rail, barge and
truck. Depending on the proximity of the customer and the transportation
available for delivering coal to that customer, the Company's transportation
costs can range from 10% to 50% of the cost of a customer's coal. The Company
generally pays truck or rail charges to deliver coal to a customer's plant,
railcar or barge, and customers typically pay the transportation costs from the
railcar or the barge for coal not delivered to the customer's plant.
Consequently, the availability and cost of transportation constitute important
factors for the marketability of coal.
In 1996, approximately 30% of the Company's tonnage traveled by rail on
Norfolk Southern Corporation, CSX Corporation and Union Pacific Railroad
Company, with the remaining 70% traveling by truck to either the customer's
plant or designated barge loading facility. The practices of and rates set by
the railroad serving a particular mine might affect, either adversely or
favorably, the Company's marketing efforts with respect to coal produced from
the relevant mine. See "Risk Factors -- Transportation." Currently, with the
exception of the Bowie mines, the Company has alternative forms of
transportation available at each mine site, thereby reducing its dependence on
any one transportation method. At Bowie, the Company relies on rail
transportation provided by Union Pacific to ship the coal to Coors Energy's
facilities and barges on the Mississippi River. Due to the steep elevations in
the western United States, it is not feasible for the Company to transport coal
from these mines other than by rail. However, this limitation affects all coal
producers in the western United States.
Coal Marketing and Sales
The Company's marketing personnel have extensive experience and good
customer relations in the coal industry. These strengths allow the Company to
make long-term sales commitments which are consistent with the Company's
strategy of selling its coal well in advance of production. The Company's
marketing experience and philosophy have allowed it to execute favorable
long-term contracts with strong customers. Over the last four years, the Company
has entered into six contracts with strong customers, including TVA and CG&E,
for periods of five years or more. The Company also utilizes commission agents
on specific accounts where their expertise lends support to the overall effort.
The Company anticipates expanding the sales staff to coincide with future
growth.
Mining Permits and Approvals
Before commencing mining on a particular property, the Company must obtain
mining permits and approval by state regulatory authorities of a reclamation
plan for restoring the mined property to a productive use upon the completion of
mining. The Company typically commences actions to obtain permits between 18
62
<PAGE> 67
and 24 months before the Company plans to mine a specific area. In the Company's
experience, permits generally are approved within 12 months after a completed
application is submitted. The Company has not experienced difficulties in
obtaining mining permits in the areas where its reserves are currently located,
and has already begun the process involved in obtaining such permits. However,
there can be no assurances that the Company will not experience difficulty in
the future in obtaining mining permits in any area where its reserves are
located.
In conjunction with mining the property, the Company reclaims and restores
the mined areas by grading, shaping and preparing the soil for seeding. Upon
completion of mining, reclamation generally is completed by seeding with grasses
or planting trees for use as pasture or timberland, as specified in the approved
reclamation plan. The Company believes it has all material permits required to
carry on its mining operations and believes that it is in compliance in all
material respects with applicable regulations relating to reclamation. Over the
past 10 years, the Company has received several reclamation awards, including
(i) the Kentucky Outstanding Reclamation Award, (ii) the Ohio Greening of the
Lands Award, (iii) the Kentucky Department for Surface Mining Reclamation &
Enforcement Reclamation Award, and (iv) the Governor's Conference on the
Environment Outstanding Reclamation Award. In addition, the Company has been
nominated for the Kentucky Natural Resources and Environmental Protection
Cabinet's 1997 Mining Reclamation (Eastern Kentucky) Award.
MAJOR COAL SALES CONTRACTS
Customers
The Company primarily sells coal to electric utilities under sales
contracts for varying periods. During 1996, excluding coal sales by Ikerd-Bandy
and Leslie Resources, approximately 27% of the Company's coal sales were to
American Eagle, 22% were to CG&E and 21% were to TVA. During the six-month
period ended June 30, 1997, coal sales, excluding sales by Ikerd-Bandy and
Leslie Resources, to TVA, American Eagle and CG&E constituted 37%, 17% and 12%,
respectively, of the Company's coal sales. The following table sets forth
information regarding the remaining contract tonnage, the contract expiration
date, the estimated future average base price per ton and the estimated future
revenue of the Company (excluding Leslie Resources) (i) as of June 30, 1997,
relating to each contract then outstanding, and (ii) as of the date the
Company's delivery obligations commenced for each contract acquired or extended
after June 30, 1997:
<TABLE>
<CAPTION>
ESTIMATED
FUTURE
ESTIMATED REVENUE(3)
CONTRACT TOTAL FUTURE AVERAGE ---------------------
EXP. DATE REMAINING BASE PRICE(2)
------------------- CONTRACT ------------------- BASED ON BASED ON
TONNAGE(1) MIN. MAX.
WITHOUT WITH --------------- WITHOUT WITH CONTRACT CONTRACT
CUSTOMER OPTIONS OPTIONS MIN. MAX. OPTIONS OPTIONS TONNAGE TONNAGE
- -------- -------- -------- ------ ------ -------- -------- -------- ----------
(IN THOUSANDS) (PER TON) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
I. EASTERN KENTUCKY
American Eagle(4).............. 2/28/03 2/28/03 4,320 4,320 $ 25.20 $ 25.20 $108,864 $ 108,864
CG&E(5)........................ 12/31/99 12/31/05 3,000 8,400 $ 26.73 $ 28.92 $ 80,190 $ 242,928
Georgia Power(6)............... 12/31/98 12/31/99 1,800 3,000 $ 22.25 $ 22.38 $ 40,050 $ 67,140
Crimson Management Corporation
(LaFarge)(7)................. 12/31/01 12/31/01 450 450 $ 22.19 $ 22.19 $ 9,985 $ 9,985
TVA (Johnsonville)(8).......... 11/30/97 11/30/97 464 464 $ 26.50 $ 26.50 $ 12,296 $ 12,296
Electric Fuels(9).............. 11/30/97 11/30/97 30 30 $ 27.50 $ 27.50 $ 825 $ 825
Electric Fuels(10)............. 12/31/97 12/31/97 120 120 $ 28.50 $ 28.50 $ 3,420 $ 3,420
Pen Coal(11)................... 12/31/97 12/31/97 120 120 $ 28.00 $ 28.00 $ 3,360 $ 3,360
Pen Coal(12)................... 12/31/97 12/31/97 150 150 $ 26.00 $ 26.00 $ 3,900 $ 3,900
Kentucky Power(13)............. 05/31/97 12/31/97 0 90 $ 25.35 $ 25.35 $ 0 $ 2,281
McCoy Elkhorn(14).............. 12/31/98 12/31/98 585 585 $ 22.50 $ 22.50 $ 13,162 $ 13,162
------ ------ -------- ----------
Subtotal:............. 11,039 17,729 $276,052 $ 468,161
------ ------ -------- ----------
II. SOUTHEASTERN KENTUCKY(15)
Bell County Coal(16)........... 6/30/98 6/30/98 100 100 $ 25.50 $ 25.50 $ 2,550 $ 2,550
</TABLE>
63
<PAGE> 68
<TABLE>
<CAPTION>
ESTIMATED
FUTURE
ESTIMATED REVENUE(3)
CONTRACT TOTAL FUTURE AVERAGE ---------------------
EXP. DATE REMAINING BASE PRICE(2)
------------------- CONTRACT ------------------- BASED ON BASED ON
TONNAGE(1) MIN. MAX.
WITHOUT WITH --------------- WITHOUT WITH CONTRACT CONTRACT
CUSTOMER OPTIONS OPTIONS MIN. MAX. OPTIONS OPTIONS TONNAGE TONNAGE
- -------- -------- -------- ------ ------ -------- -------- -------- ----------
(IN THOUSANDS) (PER TON) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
East Kentucky Power(17)........ 12/31/98 12/31/98 450 450 $ 27.12 $ 27.12 $ 12,204 $ 12,204
Woodruff Coal(18).............. 6/30/98 6/30/98 20 20 $ 31.50 $ 31.50 $ 630 $ 630
International Paper(19)........ 12/31/97 12/31/97 69 69 $ 25.25 $ 25.25 $ 1,742 $ 1,742
------ ------ -------- ----------
Subtotal:............. 639 639 $ 17,126 $ 17,126
------ ------ -------- ----------
III. TENNESSEE
TVA (Kingston)(20)............. 12/31/04 12/31/04 16,030 16,030 $ 25.40 $ 25.40 $407,162 $ 407,162
IV. COLORADO(21)
Coors Energy(22)............... 6/30/05 6/30/05 3,200 3,200 $ 25.18 $ 25.18 $ 80,576 $ 80,576
TVA (Colbert & Shawnee)(23).... 12/31/02 12/31/02 2,750 2,750 $ 16.71/ $ 16.71/ $ 45,952 $ 45,952
------ ------ -------- ----------
29.71 29.71
Subtotal:............. 5,950 5,950 $126,528 $ 126,528
------ ------ -------- ----------
TOTAL................. 33,658 40,348 $826,868 $1,018,977
====== ====== ======== ==========
</TABLE>
- ---------------
(1) Several of the Company's contracts contain provisions allowing the customer
to increase or decrease the contract tonnage for various reasons. Minimum
total remaining contract tonnage has been calculated as if the customer
purchased the base tonnage set forth in the contract, as modified by any
options exercised to date, for the life of the contract without exercising
any existing options to extend the contract term or increase or decrease
the base tonnage. Maximum total remaining contract tonnage has been
calculated as if the customer purchased the base tonnage set forth in the
contract, as modified by any options exercised to date, for the life of the
contract as extended by any options to extend the contract term, but
without exercising any existing options to increase or decrease the base
tonnage.
(2) Estimated future average base price is the average of the base price of the
contract over its remaining life, assuming that coal will be delivered in
accordance with the contract terms. Base price is the stated contract price
for the quality of coal specified in the contract after adjustments, if
any, for fixed and determinable contract price increases. The majority of
the Company's contracts provide for limited adjustments based on unforeseen
changes of law, including tax and environmental and safety legislation. The
actual price received for coal shipped will vary from the estimated future
average base price due to variances in these other adjustments and
adjustments to the base price for the quality of coal actually shipped. See
"Risk Factors -- Reliance on Long-Term Coal Supply Contracts" and "Risk
Factors -- Forward-Looking Statements."
(3) Estimated future revenue is the product of total remaining contract tonnage
and estimated future average base price. See "Risk
Factors -- Forward-Looking Statements."
(4) Pursuant to a Second Amendment to Coal Sales Agreement, dated January 31,
1997, this contract was extended and now expires, unless further extended,
on the expiration or termination of a contract between Addington, Inc. and
South Mississippi Electric Power Association ("SMEPA") having an expiration
date of February 28, 2003. During the extended term, the Company is
required to supply 60,000 tons of coal per month at a weighted average base
price of $25.20 per ton FOB Sand Lick Tipple, and American Eagle may
purchase up to 45,000 additional tons of coal per month at the base price.
The base price increases through the term of the contract, but if the SMEPA
contract price is amended, the base price under this contract will be
adjusted accordingly.
(5) The initial term of this contract expires after the Company has shipped
5,400,000 tons of coal to CG&E, which is projected to occur by December 31,
1999. The monthly tonnage requirement is between 63,750 and 86,250 tons, at
a base price of $26.73 per ton FOB barge milepost 7.3 on the Big Sandy
River. The Company has the option to ship higher sulfur coal at a base
price of $25.25 FOB barge milepost 306 on the Ohio River. Once the initial
5.4 million tons of coal have been shipped under the contract, CG&E
64
<PAGE> 69
has three two-year options for delivery of 1,800,000 tons over each
two-year period. The estimated future average base price over the remaining
term of the contract including all option years is $28.92 per ton FOB
barge. The Company believes that CG&E will exercise all three options, and
if it does, this contract will terminate on December 31, 2005. The contract
also provides that the Company has a right of first refusal to supply up to
15% of CG&E's monthly spot coal requirements for coal meeting the
specifications of the contract, at a base price based on the lowest
acceptable quotations to CG&E from other coal suppliers for supplying that
month's spot coal requirements.
(6) This is a one-year contract for 50,000 tons of coal per month at a base
price of $22.25 per ton FOB railcar, which was amended to increase the
tonnage requirement to 100,000 tons per month effective July 1, 1997, and
extend the term to two years. Georgia Power may exercise an option for
100,000 tons of coal per month through December 31, 1999, at a base price
of $22.58 per ton FOB railcar. The estimated future average base price over
the remaining term of the contract plus the option year is $22.38 per ton
FOB railcar.
(7) This is a five-year supply contract for the delivery of up to 100,000 tons
of coal per year at an estimated future average base price of $22.19 per
ton FOB railcar. This contract expires December 31, 2001. The customer is
not obligated to buy any coal under this contract. The total remaining
contract tonnage is based on the customer's past and future expected orders
under this contract.
(8) This is a six-month contract for delivery of 548,000 tons of coal at a base
price of $26.50 per ton FOB barge. This contract expires November 30, 1997,
but the Company anticipates that it will be renewed through November 30,
1998, subject only to agreement on price.
(9) This is a one-year contract for the delivery of 6,000 tons of coal per
month at a base price of $27.50 per ton FOB KCT dock. This contract expires
November 30, 1997, but the Company anticipates that it will be renewed
through November 30, 1998, subject only to agreement on price.
(10) This is a one-year contract for the delivery of 20,000 tons of coal per
month at a base price of $28.50 per ton FOB KCT dock. This contract expires
December 31, 1997, but the Company anticipates that it will be renewed
through December 31, 1998, subject only to agreement on price.
(11) This is a one-year contract for the delivery of 240,000 tons of coal at a
base price of $28.00 per ton FOB truck. This contract expires December 31,
1997, but the Company anticipates that it will be renewed through December
31, 1998, subject only to agreement on price.
(12) This is a one-year contract for the delivery of 300,000 tons of coal at a
base price of $26.00 per ton FOB barge. This contract expires on December
31, 1997, but the Company anticipates that it will be renewed through
December 31, 1998, subject only to agreement on price.
(13) This is a six-month contract for the delivery of 65,000 tons of coal at a
base price of $25.35 per ton FOB Big Sandy Plant. This contract expired May
31, 1997, but Kentucky Power can extend this contract in increments of at
least one month for the delivery of up to 15,000 tons of coal per month
through December 31, 1997. The Company anticipates that this contract will
be renewed through December 31, 1998.
(14) This is a 13-month coal supply agreement for the delivery of a minimum of
45,000 tons of coal per month at a base price of $22.50 per ton FOB plant,
which expires December 31, 1998.
(15) The Company acquired its southeastern Kentucky contracts through its
purchase of Ikerd-Bandy. See "The Company -- Company History."
(16) This is a ten-month coal supply contract for delivery of a minimum of
10,000 tons of coal per month at a base price of $25.50 per ton FOB plant.
This contract expires on June 30, 1998.
(17) This is a three-year contract for the delivery of 25,000 tons of coal per
month at a base price of $1.1298 per million Btu FOB power station. For
coal with a Btu level of 12,000, the base price would be $27.12 per ton.
This contract expires December 31, 1998.
(18) This is a one-year contract for the delivery of 20,000 tons of coal at a
base price of $31.50 per ton FOB truck. The contract expires June 30, 1998,
but the Company anticipates that it will be renewed through June 30, 1999,
subject only to agreement on price.
(19) This is a one-year contract for the delivery of 130,000 tons of coal at a
base price of $25.25 per ton FOB railcar. The contract expires December 31,
1997, but the Company anticipates that it will be renewed through December
31, 1998, subject only to agreement on price.
65
<PAGE> 70
(20) This is a 10-year contract for the delivery of 17,680,000 tons of coal at
an estimated future average base price of $25.40 per ton FOB railcar. The
contract expires December 31, 2004. The base price will be recalculated
upon the earlier of the enactment of Phase II of the Clean Air Act
Amendments and January 1, 2000. TVA may unilaterally terminate this
contract by paying the Company 10% of the base price multiplied by the
remaining tonnage.
(21) Data presented for the Company's Colorado operations represents 100% of
total remaining contract tonnage and estimated future revenues under
contracts to which Bowie is a party. The Company owns 77.5% of the capital
stock of Bowie and, therefore, the Company's allocable share of total
remaining contract tonnage and estimated future revenues under such
contracts is 4,611 and $98,059, respectively. Accordingly, the Company's
allocable share of total remaining contract tonnage and estimated future
revenues from the Company's contracts is 32,319 and $798,399, respectively,
based on the minimum contract tonnage and 39,009 and $990,508,
respectively, based on the maximum contract tonnage.
(22) This is a ten-year requirements contract for the delivery of coal at a base
price of $24.95 per ton FOB plant for steam coal and $26.50 per ton FOB
plant for stoker coal. The customer's coal requirements are expected to
average 340,000 tons of steam coal per year and 60,000 tons of stoker coal
per year, which results in an estimated future average base price of $25.18
per ton FOB plant. The total remaining contract tonnage is based on the
customer's past and future expected orders under this contract. The
contract includes semi-annual base price adjustments, and when the Company
shifts production from the Bowie #1 mine to the Bowie #2 mine, the base
price is expected to increase by approximately $1.50 per ton due to the
higher Btu content of coal from the Bowie #2 mine.
(23) This is a six-year contract for the delivery of 500,000 tons of coal per
year from the Bowie #2 mine. TVA has consistently exercised its option to
purchase an additional 20% above the base tonnage. The estimated future
average base price under this contract is $16.71 per ton FOB railcar, and
TVA must pay the transportation costs to the plant, which are estimated to
be approximately $14.00 per ton. Therefore, for purposes of comparing the
estimated future average base price under different contracts, the
estimated future average base price under this contract includes the
transportation costs paid to Union Pacific by TVA. However, the estimated
future revenues are calculated based on the estimated future average base
price of $16.71 per ton FOB railcar. Coal will be supplied under this
agreement from the Bowie #1 mine until the Bowie #2 mine is completed. This
contract expires December 31, 2002, and can be reopened for price
negotiations during the nine-month period ending on January 1, 2000. TVA
may unilaterally terminate this contract by paying the Company 10% of the
base price multiplied by the remaining tonnage.
The following table provides information regarding tonnage sold, gross
revenues and the average price per ton for sales to the Company's major
customers (excluding the customers of Ikerd-Bandy and Leslie Resources) during
each of the years 1994 through 1996, and the nine-month period ending September
30, 1997.
<TABLE>
<CAPTION>
TONNAGE SOLD GROSS REVENUES AVERAGE PRICE
CUSTOMER YEAR (IN THOUSANDS)(1) (IN THOUSANDS) (PER TON)
- -------- ---- ----------------- -------------- -------------
<S> <C> <C> <C> <C>
I. EASTERN KENTUCKY
American Eagle 1994 1,308 $ 34,902 $ 26.68
1995 1,147 30,124 26.26
1996 1,032 26,996 26.16
1997 640 16,396 25.61
CG&E 1994 600 $ 16,312 $ 27.19
1995 707 19,063 26.96
1996 872 22,547 25.86
1997 597 16,241 27.21
</TABLE>
66
<PAGE> 71
<TABLE>
<CAPTION>
TONNAGE SOLD GROSS REVENUES AVERAGE PRICE
CUSTOMER YEAR (IN THOUSANDS)(1) (IN THOUSANDS) (PER TON)
- -------- ---- ----------------- -------------- -------------
<S> <C> <C> <C> <C>
TVA (Johnsonville) 1994 736 $ 20,181 $ 27.42
1995 270 6,487 24.03
1996 341 8,572 25.14
1997 757 19,740 26.09
Pen Coal 1994 -- $ -- $ --
1995 213 5,174 24.29
1996 256 6,534 25.52
1997 224 6,068 27.09
Electric Fuels 1994 -- $ -- $ --
1995 -- -- --
1996 35 998 28.51
1997 183 5,335 29.07
Georgia Power 1994 -- $ -- $ --
1995 -- -- --
1996 -- -- --
1997 623 13,632 21.88
Crimson Management 1994 -- $ -- $ --
Corporation (LaFarge) 1995 -- -- --
1996 7 160 22.86
1997 18 386 22.00
Kentucky Power 1994 75 $ 1,885 $ 25.13
1995 -- -- --
1996 6 164 27.33
1997 60 1,494 25.04
Coal Network 1994 -- $ -- $ --
1995 -- -- --
1996 83 1,957 23.58
1997 6 169 26.53
Kentucky Utilities 1994 122 $ 3,951 $ 32.39
1995 355 11,824 33.31
1996 101 3,484 34.50
1997 -- -- --
River Trading 1994 -- $ -- $ --
1995 -- -- --
1996 70 2,070 29.57
1997 46 1,357 29.34
II. TENNESSEE
TVA (Kingston) 1994 -- $ -- $ --
1995 10 237 23.70
1996 693 17,353 25.04
1997 667 16,495 24.74
III. COLORADO(2)
Coors Energy 1994 -- $ -- $ --
1995 314 7,879 25.09
1996 367 9,370 25.53
1997 298 7,336 24.64
</TABLE>
67
<PAGE> 72
<TABLE>
<CAPTION>
TONNAGE SOLD GROSS REVENUES AVERAGE PRICE
CUSTOMER YEAR (IN THOUSANDS)(1) (IN THOUSANDS) (PER TON)
- -------- ---- ----------------- -------------- -------------
<S> <C> <C> <C> <C>
TVA (Colbert & 1994 -- $ -- $ --
Shawnee)(3) 1995 166 2,102 12.66/28.15
1996 270 3,434 12.72/28.21
1997 389 5,763 14.81/28.81
TOTAL -- MAJOR 1994 2,841 $ 77,231 $ 27.18
CUSTOMERS ONLY(4) 1995 3,182 82,890 26.05
1996 4,133 103,639 25.08
1997 4,508 110,412 24.49
</TABLE>
- ---------------
(1) Tonnage sold includes coal sold pursuant to spot orders. For 1997, tonnage
sold is for the nine-month period ended September 30, 1997.
(2) Data presented for the Company's Colorado operations represents 100% of
tonnage sold by and gross revenues of Bowie. The Company owns 77.5% of the
capital stock of Bowie and, therefore, the Company's allocable share of
tonnage sold (in thousands) for 1995, 1996 and the nine-month period ended
September 30, 1997 is 372, 494 and 532, respectively, and the Company's
allocable share of gross revenues (in thousands) for 1995, 1996 and the
nine-month period ended September 30, 1997 is $7,735, $9,923 and $10,152,
respectively. Accordingly, the Company's allocable share of the total
tonnage sold (in thousands) for major customers for 1995, 1996 and the
nine-month period ended September 30, 1997 is 3,074, 3,990 and 4,353,
respectively and the Company's allocable share of gross revenues for major
customers (in thousands) for 1995, 1996 and the nine-month period ended
September 30, 1997 is $80,644, $100,759 and $107,465, respectively.
(3) TVA must pay the transportation costs associated with coal delivered
pursuant to this contract. For purposes of comparing the average price under
different contracts, the average price under this TVA contract includes the
transportation costs paid to Union Pacific railroad by TVA. However, the
gross revenues are calculated based on the average price actually received
by the Company for the coal, which was $12.66, $12.72 and $14.81 for 1995,
1996 and the nine-month period ended September 30, 1997, respectively.
(4) This total includes tonnage sold, gross revenues and average price for major
customers only.
Benefits of Long-Term Contracts to Customers
The Company believes that customers generally enter into long-term
contracts to assure themselves of a supply of coal at a predetermined price,
thereby obtaining some protection from market price fluctuation and establishing
a dependable supply source. Typical contracts between the Company and its
customers contain provisions that (i) give the customer various options to
increase or decrease quantities of coal to be delivered under the contract,
within stated limitations, to advance or delay the delivery schedules to a
specified extent, and to modify or cancel contracts under certain circumstances,
and (ii) call for adjustments in the purchase price of coal based, in most
cases, upon industry-wide or macro-economic factors (although changes in these
may not reflect actual changes in the Company's costs), and in some cases upon
specific costs incurred by the Company.
The contracts also provide that the customers have a right to terminate
their purchase obligations if applicable environmental standards would prohibit
the burning of the coal to be purchased. In addition, the contracts provide for
suspension of deliveries upon the occurrence of certain force majeure events
(i.e., events outside the control of the parties) as defined in the contracts.
Moreover, certain of the contracts require that the coal to be delivered be
mined and shipped only from approved sites, which approval has been secured with
respect to areas mined to date. If the coal supplied is not timely delivered or
fails to meet the contract's specifications, the contract may allow the customer
to suspend its acceptance of deliveries until the Company furnishes reasonable
assurances be entitled to that the deficiency will be corrected. If corrections
are not made within a specified period, the customer may terminate its contract.
The Company has been able to meet its
68
<PAGE> 73
contractual obligations under its coal sales contracts in all material respects.
The discussion of the coal sales contracts is qualified in its entirety by
reference to the actual coal sales contracts.
COAL RESERVES
Existing Reserves
As a result of the Company's leasing and acquisition program, the coal
reserves owned or controlled by the Company have increased since November 1995,
when the Company's eastern Kentucky and Tennessee coal operations were acquired
from Addington Resources. As of June 30, 1997, the Company: (i) owned in fee
approximately 2,000 acres and controlled, primarily through short-term leases
and contract mining agreements, an additional 50,000 acres of reserves in
eastern Kentucky; (ii) owned in fee approximately 12,000 acres of reserves in
Tennessee and controlled through short-term leases and contract mining
agreements an additional 95,000 acres of reserves in Tennessee; and (iii) owned
in fee approximately 5,934 acres of reserves in Colorado and controlled through
short-term leases an additional 7,164 acres of reserves in Colorado. In October
1997, the Company acquired in excess of 20,000 acres of leased reserves in
southeastern Kentucky through its acquisition of Ikerd-Bandy. In January 1998,
the Company acquired approximately 55,000 acres of leased reserves in
southeastern Kentucky through its acquisition of Leslie Resources. See
"Prospectus Summary -- Recent Developments -- Leslie Resources." Substantially
all of the Company's reserves will be pledged as collateral on its bank
indebtedness. See "Description of New Credit Facility."
All of the Company's reserves are bituminous coal. According to the
Marshall Miller Reports, approximately 36% of the Company's coal reserves
(including captive reserves) is compliance coal, and the Company believes that a
significant amount of its remaining reserves is low-sulfur coal. The Company
believes this high percentage of low-sulfur and compliance coal will give it a
competitive advantage for the long term as more stringent air quality
requirements under Phase II of the Clean Air Act Amendments are implemented.
According to Hill & Associates, 94% of the utilities that will be affected by
Phase II and have made a decision on their compliance strategy have indicated
they will switch to compliance coal, whereas only 5% of those utilities have
indicated they will use scrubbers.
A substantial part of the reserves currently available to the Company are
represented by leases which expire after a term, usually less than five years,
and, in most cases, less than two years. Most of the leases contain an option to
renew on the part of the Company, with exercise of the option usually subject to
the condition that mining shall have commenced on (or, as specified in some
leases, near) the leased property. Most of the leases require the payment of an
advance royalty or delay rental (payments to keep the lease in force if mining
has not commenced) on a periodic basis during each year if mining has not begun
on the property. After mining commences, the leases generally require the
payment of a royalty based on the tonnage mined and sold. The Company's average
royalty expense for the year ended December 31, 1996, and the nine-month period
ended September 30, 1997, was: (i) $3.07 per ton and $2.70 per ton,
respectively, for eastern Kentucky; (ii) $2.55 per ton and $1.89 per ton,
respectively, for Tennessee; and (iii) $1.00 and $0.95 per ton, respectively,
for Colorado.
The Company believes that it has conducted mining activities and made
payments to obtain renewal rights with regard to leased properties covering
reserves which, when added to reserves owned in fee by the Company, are
sufficient to satisfy its current requirements under long-term contracts.
However, the availability of reserves on other leased property at the present
time does not assure the Company that the reserves will be available at the time
the Company may wish to mine such reserves. Moreover, the availability of
reserves on leased property is often subject to uncertainties relating to such
matters as the lessor's title to the coal and precise boundaries of the
property.
The extent to which the Company's coal resources will be mined will depend
upon factors over which it has no control, such as future economic conditions,
the price and demand for coal of the quality and type controlled by the Company,
the price and supply of alternative fuels and future mining practices and
regulation. The ability of the Company to mine in areas covered by the reserve
studies depends upon the ability of the Company to maintain control of the
reserves (other than the properties owned in fee) through
69
<PAGE> 74
extensions or renewals of the leases or other agreements or the ability of the
Company to obtain new leases or agreements for other reserves.
Most of the Company's leases describe the leased property in general terms,
and these descriptions are usually not based on actual surveys or boundaries
which are otherwise precisely identified. Because of the short-term nature of
its leases and the expense involved, the Company does not have all titles to the
leases reviewed by qualified title examiners. Title examinations, however, are
performed by qualified title examiners on properties owned by the Company. As to
properties the Company leases, a limited title investigation and, to the extent
possible, a determination of the precise boundaries of a property is made in
most cases only as a part of the process of securing a mining permit shortly
before commencement of mining operations. Title to property is verified prior to
the time the Company begins mining operations. The Company believes that its
practices of investigating title and determining boundaries to the properties it
owns, leases or otherwise controls are consistent with customary industry
practices in Kentucky and that such practices are adequate to enable it to
acquire the right to mine such properties.
In Colorado, the Company currently is a party to multiple federal leases of
coal reserves with the United States Department of the Interior's Bureau of Land
Management ("BLM") and has applied for an additional federal coal lease at the
Bowie #2 mine. As discussed in more detail in "Government Regulation --
Regulations Affecting Coal Mining Operations," the United States is the largest
owner of coal reserves in the nation, and a majority of its reserves are located
in the western United States. Approval from the BLM (which exercises primary
authority over the United States government's reserves) typically takes
approximately one year after a complete application has been submitted.
Acquisition of Additional Reserves
The Company generally attempts to replace the coal reserves that it
depletes during each year of mining. In addition, the Company seeks to maintain
at all times at least five years of reserves available to fulfill its
outstanding contract requirements. To date, the Company has not experienced any
material difficulty in acquiring sufficient reserves to meet its goals. In fact,
since December 31, 1994, the Company's total reserves and resources (including
captive reserves and resources) have increased from 50 million tons to more than
285 million tons.
The Company intends to continue expanding its coal reserves by acquiring
reserves that will allow it to: (i) minimize production and delivery costs; (ii)
improve its reserves of low-sulfur and compliance coal; (iii) utilize its
technological advantages; (iv) increase market share in a geographic area; and
(v) satisfy the quality requirements of its existing and future coal contracts.
To maintain its position as a low-cost operator, the Company will continue to
focus on acquiring reserves that are suitable for mountaintop removal mining and
are located in close proximity to its customers, existing operations or
efficient transportation facilities. The Company will continue to add to its
low-sulfur and compliance coal reserves because it believes these reserves are
more likely to yield a premium as environmental regulations become more
stringent. The Company will seek to utilize the competitive advantage that it
has in the Addcar(TM) systems by acquiring, at below-market rates, reserves that
its competitors cannot economically mine. The Company will also seek to increase
its market share in geographic areas in which it currently has operations by
acquiring additional coal reserves in those areas. Further reserve acquisitions
will be made as necessary to insure the Company can meet the coal quality
requirements under its current and future contracts.
70
<PAGE> 75
EXPANSION OF HIGHWALL MINING OPERATIONS
Acquisition
On January 2, 1998, the Company, through Mining Technologies, acquired
certain assets and intellectual property (the "Highwall Mining Assets"), through
the purchase of a substantial portion of the assets of Addington Enterprises'
Mining Technologies division. The highwall mining assets purchased by the
Company include the following 13 patents and one registered trademark:
PATENTS
<TABLE>
<CAPTION>
TITLE COUNTRY FILED ISSUED EXP. DATE*
----- ------- ----- ------ ----------
<S> <C> <C> <C> <C>
Apparatus and Method for Continuous
Mining................................... Canada 12/09/91 Pending Pending
Launch Vehicle for Continuous Mining
Apparatus................................ Canada 12/09/91 05/27/97 12/9/11
Apparatus and Method for Continuous
Mining................................... United States 12/10/90 05/12/92 12/10/10
Apparatus for Continuous Mining............ United States 11/20/91 11/16/93 12/10/10
Apparatus and Method for Continuous
Mining................................... United States 10/21/93 11/15/94 12/10/10
Launch Vehicle For Continuous Mining
Apparatus................................ United States 10/01/91 08/03/93 10/1/11
Continuous Highwall Mining Machine with
Armless Conveyor......................... United States 10/25/94 06/04/96 10/25/14
Continuous Highwall Mining Machine with
Armless Conveyor......................... United States 11/20/95 Pending -- 11/20/15
issue fee
paid
Self-Propelled Mining Apparatus and Method
For Cutting Arched Opening............... United States 11/22/94 09/10/96 11/22/14
Apparatus and Method For Cutting Arched
Opening.................................. Canada 10/10/95 Pending Pending
Continuous Highwall Mining Machine with
Armless Conveyor......................... Canada 10/18/95 Pending Pending
Electrical Junction Box **................. United States 07/26/96 Pending Pending
Transmission Gearcase For Mining
Apparatus................................ United States 10/20/97 Pending Pending
</TABLE>
TRADEMARKS
<TABLE>
<CAPTION>
MARK COUNTRY ISSUED EXP. DATE*
---- ------- ------ ----------
<S> <C> <C> <C>
Addcar(TM)............................................ United States 09/28/93 09/28/13
</TABLE>
- ---------------
* All expiration dates are contingent on timely payment of fees.
** This patent is held by Richard M. Slagle ("Slagle"). Pursuant to a Patent
License Agreement dated February 15, 1996, Slagle granted the Company an
exclusive worldwide royalty-free license to make, use and sell highwall
mining equipment incorporating this patent. The Company may not assign or
transfer its rights without consent of Slagle, which consent may not be
unreasonably withheld.
As set forth in the preceding chart, the issued patents acquired from Addington
Enterprises will expire between December 10, 2010, and November 20, 2015, and
the registered trademark acquired from Addington Enterprises will expire on
September 28, 2013. The Company has not acquired, and currently does not intend
to acquire from Addington Enterprises, patent rights for highwall mining
equipment in the following countries: Australia, China, France, Germany, Spain,
the United Kingdom, India, Indonesia, Poland, Russia and South Africa.
The Highwall Mining Assets purchased by Mining Technologies also include
the equipment and facility for manufacturing highwall miners and four existing,
operable Addcar(TM) highwall mining systems.
71
<PAGE> 76
Development of the Addcar(TM) System
Addington Resources began developing the Addcar(TM) highwall mining system
in 1989 to recover additional coal that could not be mined by traditional
methods. Addington Resources built and tested four different types of machines
over an 18-month period before a workable design was developed. Addington
Resources built the first two Addcar(TM) systems in late 1990 and early 1991,
and has continued to refine the design for the Addcar(TM) systems over the past
seven years. To date, 21 Addcar(TM) systems have been manufactured.
The Company believes that the Addcar(TM) system represents a significant
advance from past attempts at highwall mining. As addressed above in
"-- Acquisition," the Company has obtained patent protection for the key
features of the Addcar(TM) system. The Company believes that these patents
create significant barriers to the development of a new competing system.
Equipment Description
The main elements of the Addcar(TM) system are: (i) a continuous miner,
(ii) conveyor cars (the Addcars(TM)), (iii) a launch vehicle, (iv) an elevating
stacker/conveyor, and (v) a wheel-loader with a forklift attachment.
The continuous miner is located at the front of the Addcar(TM) system, and
its primary role is to mine coal and convey it to the first Addcar(TM). The
miner forms a rectangular opening in the coal seam at the highwall and continues
to cut a roadway into the seam, approximately 10 feet wide. The cutting end of
the miner is hydraulically raised and lowered as it rotates, allowing the
machine to mine a variety of seam thicknesses and follow the contours of the
seam. A gathering head loads the cut coal onto a chain conveyor, and the coal is
passed on to the first Addcar(TM).
The Addcars(TM) form a modular conveyor system that transports the coal to
the surface. The cars are added individually behind the miner (as it cuts into
the seam) in a manner which does not interrupt the flow of coal. The continuous
nature of this operation is a key feature of the Addcar(TM) system, which, in
the Company's view, adds significantly to its overall productivity and
efficiency. The mined coal is transferred from one car to the next until it is
delivered to the launch vehicle on the surface. Each Addcar(TM) weighs
approximately 12 tons, and is approximately 40 feet long.
The launch vehicle is a two-deck steel structure, which is located on the
floor of the pit at the base of the highwall. The launch vehicle serves as a
stable work platform, propulsion unit, and utility supply center for the
equipment in the highwall entry. It contains an electric powered distribution
center, a control cabin where a person operates the entire system by remote
control, two separate hydraulic power systems, and cable and hose reels for
electrical power, coaxial cable, dust suppression, water, and, when required,
either inert gas or compressed air, for ventilation at the cutting face.
The elevating stacker/conveyor receives the coal from the belt on the
launch vehicle, and pours it beneath the stacker, from where it can be loaded by
the wheel-loader into trucks, or onto a conveyor. The stacker/conveyor is
wheel-mounted and can be relocated easily from entry to entry, as mining
progresses.
The wheel-loader transports the Addcars(TM) by removing the bucket and
adding a forklift attachment. The wheel-loader operator positions the forklift
under the Addcars(TM) and transports them to and from the launch vehicle during
the mining cycle.
The Highwall Mining Process
The highwall mining process can be segregated into the following steps:
Step One: Geological Analysis. Prior to commencing mining, substantial
analysis of each coal seam is required. Such analysis includes geological
surveys and, in some instances, test mining. The mine operator also may be able
to provide details of the seam geology based on such operator's mining
experience and previous exploration.
72
<PAGE> 77
Step Two: Geotechnical Design. Before mining commences, a coal extraction
pattern for the target mine must be designed. The primary design parameters
include the thickness of the seam, the strength of the coal, the thickness of
the overburden, the nature of the intermediate roof and the identification and
configuration of any joints and weaknesses in roof and floor strata.
Step Three: Positioning the Launch Vehicle. To start the mining cycle, the
launch vehicle is moved into position in accordance with the survey stations
established prior to mining. Final alignment is completed with a theodolite for
precise location of the entry.
Step Four: Initiating Mining. The miner starts cutting with only the lead
Addcar(TM) behind it. The launch vehicle assists the mining by applying
continuous hydraulic pressure to the continuous miner.
Step Five: Adding Addcars(TM). As the miner and Addcars(TM) move forward,
the loader collects and places another Addcar(TM) on the work platform, holding
it in position while it is connected to the cable. The newly added Addcar(TM) is
then lowered into position and secured. This process is completed without
halting the continuous flow of coal.
Step Six: On-Line Maintenance. While each Addcar(TM) is on the launch
vehicle, the mining crew has access to it for about 15 minutes until it moves
into the entry. This time period gives the crew an opportunity to service the
Addcar(TM) and check its functions before it goes underground. Each 1,200-foot
entry will take approximately 12 hours to complete.
Step Seven: Remote Operation. The remote control system is connected by
coaxial cable to a receiver on the miner. The coaxial cable carries signals from
a diagnostics package which monitors equipment performance, methane and other
gas levels, and other mining parameters. The cable also provides a visual link
for the operator through 3 video cameras mounted in strategic locations on the
miner and the first Addcar(TM).
Step Eight: System Retreat. When the highwall mining entry has been
completed, removal of the Addcar(TM) system involves a simple reverse operation.
The combination of the miner pushing from the front and the hydraulic cylinders
pulling from the rear allows efficient recovery of the Addcar(TM) system so that
it can be relocated quickly and mining can resume without significant delay.
Step Nine: General Maintenance. After the Addcar(TM) system has been
removed from the mine, routine maintenance is performed while the system is
being relocated to the next entry. Under normal circumstances, the time interval
between the withdrawal from one entry and the commencement of mining in the next
entry is between 45 and 60 minutes.
Step Ten: Relocation. Once maintenance is complete, a hydraulic skid
propulsion system on the launch vehicle assists the system in relocating quickly
and efficiently to the next entry.
Manufacturing Facilities
The Company's manufacturing facilities are located in Ashland, Kentucky.
The facilities include the fabrication shop, where launch vehicles and
continuous miners are constructed, and the car shop, where Addcars(TM) are
manufactured. Skilled subcontractors perform machining, heat treating, electric
motor repair, and other aspects of manufacturing and repairing of the Addcar(TM)
systems at the fabrication shop. The car shop has a complete set of jigs, which
have been built for the efficient manufacture of Addcars(TM). These jigs
significantly reduce the cost associated with the manufacturing process, while
improving the quality control of the finished product. Both the fabrication shop
and the car shop also perform major repairs and rebuilds on a routine basis. The
rebuilds range from minor repairs on Addcars(TM) as part of routine maintenance,
to a full-scale overhaul of a continuous miner or launch vehicle. The Company
has capacity to manufacture eight Addcar(TM) systems per year to accommodate
expanding its highwall mining operations and lease, sell or license Addcar(TM)
systems to other coal companies.
Use by the Company
The Company currently uses three Addcar(TM) systems to mine coal on its
properties in eastern Kentucky. The Company intends to enter into contract
mining arrangements, whereby the Company is paid a per ton fee
73
<PAGE> 78
to mine other coal companies' reserves. The Company has four fully operational
Addcar(TM) systems available for contract mining purposes, one of which is
currently being used for contract mining. The Company expects to have all of
these systems in production in the third quarter of 1998, although there can be
no assurance that such events will occur.
Lease/Sale/Licensing of Addcar(TM) Systems
The Company intends to lease, sell and/or license Addcar(TM) systems to
other coal mining companies. The Company is currently discussing such
arrangements with other companies, but there can be no assurance that the
Company will consummate any such transactions.
ACQUISITION AND DEVELOPMENT PLANS
Acquisition Strategy
The Company expects to expand its operations and increase its cash flow by
acquiring additional coal companies. The Company's management believes that its
experience in the coal industry generally and its specific experience in buying
and selling coal companies uniquely positions it as a growth company in the coal
industry. The Company's strategy is to: (i) build regional market share by
consolidating coal companies; (ii) use its management expertise to acquire and
expand small- and medium-sized companies; (iii) acquire inefficient or
financially-troubled companies with high quality assets for below-market prices;
and (iv) acquire divisions of larger companies. By acquiring several coal
companies within a coal-producing region, the Company believes it can add
synergistic value and increase market share in the region due to its control of
regional supply and its proximity to regional customers. The Company believes it
can utilize management's extensive experience in developing small- and
medium-sized companies to increase revenues, cash flow and profitability. By
acquiring inefficient or financially troubled companies that own or control
quality assets, the Company believes it can obtain those assets at below-market
prices and maximize their value in the Company's operations. The Company
believes that it can make bargain purchases from large companies who are
attempting to dispose of divisions that no longer fit the corporate strategy for
various reasons. The Company intends to limit its acquisitions to companies or
divisions that are not unionized.
Development Plans
Kentucky. The Company believes that southeastern Kentucky provides a good
opportunity for expansion because most of the coal seams located in this region
produce a high-Btu, low-sulfur product. The Company also believes the region
provides opportunities to utilize highwall mining to mine previously
uneconomical coal that could be sold into the market or used to satisfy delivery
requirements under its TVA Kingston power plant contract or contracts held by a
target company. In the Company's view, it has a competitive advantage for
building or acquiring new mines within this region because the Company's
Addcar(TM) highwall mining systems can be used to mine high-Btu, low-sulfur coal
at a low cost. For these reasons, the Company currently is considering acquiring
coal companies in the Hazard, Harlan and Pineville areas of southeastern
Kentucky. The Company will evaluate each potential acquisition based on its
ability to significantly increase the Company's market share or add value to the
Company's overall operations in such region. However, there can be no assurance
that such acquisitions will occur.
Colorado. The Company believes that western Colorado provides another good
opportunity for expansion. The coal in Colorado has a high Btu content (above
12,000) and a very low sulfur content (generally 0.5% or less), which electric
utilities can use to comply with the air quality standards of Phase I and Phase
II of the Clean Air Act Amendments. Utilities can burn the Colorado coal without
blending it and thereby utilize this high-Btu, low-sulfur product to accumulate
sulfur emission credits. In addition, the Company's Colorado coal can be blended
with low-Btu Powder River Basin coal to increase its Btu content, or with
eastern high-sulfur coal to create a low-sulfur blend that can be burned by
utilities under Phase II of the Clean Air Act Amendments.
74
<PAGE> 79
Addcar(TM) Systems. The Company plans to expand the use of the Addcar(TM)
highwall mining systems in its coal mining operations and for conducting
contract mining. The Company may also consider leasing, selling and/or licensing
Addcar(TM) systems and related mining equipment to third parties.
ADMINISTRATIVE OFFICES AND EQUIPMENT
The Company maintains administrative offices in Ashland, Kentucky, Hazard,
Kentucky, Jacksboro, Tennessee and Paonia, Colorado. In addition, the Company
currently leases much of the equipment used in its mining operations, such as
bulldozers, scrapers, graders, loaders, continuous miners and trucks. In the
Company's opinion, its offices and equipment are adequate and suitable for
current operations.
LEGAL PROCEEDINGS
By letters to the Company dated January 12, 1995, January 12, 1996, and
January 13, 1997, Pittston Acquisition Company ("PAC"), an indirect wholly-owned
subsidiary of Pittston, made claims for indemnification from the Company under
the terms of the Pittston Agreement (as defined). See "Certain Related Party
Transactions -- Indemnification." The claimed indemnification covers a number of
items, including allegedly delinquent taxes and fees, allegedly assumed
liabilities, alleged failure to transfer specific licenses, assets and permits
and alleged non-compliance with certain agreements and applicable laws and
permits. Addington Enterprises is in the process of investigating and
negotiating the claims with PAC. Many of the claims have been resolved without
any payment by or liability to the Company. To the Company's knowledge, other
than the Billips claim discussed below, no lawsuit has been filed or otherwise
threatened by PAC against the Company. The Company intends to defend these
claims vigorously, and at this time it is not possible to predict the likely
outcome of the claims.
On June 14, 1996, Robert C. Billips, d/b/a Peter Fork Mining Company, sued
the Company in the Circuit Court of Pike County, Kentucky, claiming the Company
breached a lease with Billips in Pike County, Kentucky, caused Billips to lose
business opportunities, and committed waste on Billips' property. The Company
has admitted that it entered into a lease with Billips, but denies that it
breached the lease, caused a loss of business opportunities, or committed waste.
Instead, the Company claims that it mined all minable and merchantable coal (as
defined in the lease) on the leased property, and, therefore, had no further
obligations under the lease. Although written discovery requests have been
exchanged, no other discovery has been taken. No deadline or trial date has been
set. The Company intends to defend the claims vigorously, and at this time it is
not possible to predict the likely outcome of the claims.
In addition, the Company is named as a defendant in various actions in the
ordinary course of its business. These actions generally involve such matters as
property boundaries, mining rights, blasting damage, personal injury and royalty
payments. The Company believes these proceedings are incidental to its business
and are not likely to result in materially adverse judgments.
EMPLOYEES
At June 30, 1997, the Company employed approximately 417 people. None of
the Company's employees are represented by a labor union, and management
believes that its relations with its employees are good. The Company pays
bonuses to its employees for achieving production goals at particular mine
sites. Previous efforts to unionize the Company's employees have been
unsuccessful. The Company believes this is the result of its incentive
compensation system and its commitment to the safety and welfare of its
employees. The Company's ability to remain non-union has allowed it to minimize
business interruptions and reduce costs by maintaining a highly-motivated,
efficient workforce. The Company cannot predict whether there will be any such
activities in the future. Unionization of its work force could adversely affect
the Company's costs.
75
<PAGE> 80
GOVERNMENT REGULATION
MINING-RELATED PERMITS
Various permits (primarily from state agencies) must be obtained before
mining operations are commenced. The Company believes it has obtained all
material permits necessary to conduct its present mining operations. The Company
believes that, upon the filing of the required information with the appropriate
regulatory agencies, it will not encounter substantial difficulty obtaining or
renewing necessary permits in the future.
REGULATIONS AFFECTING COAL MINING OPERATIONS -- ENVIRONMENTAL, HEALTH AND SAFETY
MATTERS
Overview
Various federal, state and local authorities regulate the effect of coal
mining on the environment. Areas regulated include reclamation, air and water
quality control, limitations on land use, health and safety, solid and hazardous
waste disposal, noise levels, blasting, aesthetic considerations, effects on
vegetation and wildlife and other matters. In addition, as discussed below, the
electric utility industry is subject to extensive regulation regarding the
environmental impact of its electricity generation activities, which could
affect demand for coal. New legislation or regulations could be adopted which
may have a significant impact on coal mining operations or coal company
customers' ability to use coal.
Surface Mining Control and Reclamation Act
The federal Surface Mining Control and Reclamation Act of 1977 ("SMCRA")
was enacted to regulate the surface mining of coal and the surface effects of
underground mining of coal. SMCRA, among other things: (i) requires that mined
property be restored to its original condition in accordance with specified
standards and an approved reclamation plan; (ii) requires a mine operator or
permittee to submit a bond or otherwise secure the performance of these
reclamation obligations; and (iii) imposes a maximum abandoned mine lands tax of
$0.35 per ton on surface-mined coal and $0.15 per ton on underground-mined coal.
Kentucky, Tennessee and Colorado have enacted legislation regulating surface and
deep mining that establishes reclamation and environmental standards for coal
mining operations which generally correspond to, and may not be less stringent
than, those found in SMCRA. Surface mining in Tennessee is under the
jurisdiction of the federal Office of Surface Mining. Each state is charged with
enforcing its state laws and with enforcing, subject to federal oversight, the
provisions of SMCRA in its jurisdiction. As of November 1997, the Company had
posted more than $50 million in reclamation bonds. While the Company has no
intention of immediately ceasing its mining operations, Marshall Miller has
estimated the reclamation cost of such action to be $23.7 million (including
Ikerd-Bandy but excluding Leslie Resources). Because much of reclamation occurs
contemporaneously with mining activities in accordance with the approved
reclamation plan, the estimated reclamation cost to immediately cease mining
operations substantially exceeds recorded reclamation accrual.
Clean Air Act
Federal and state legislation regulating the emission of materials into the
air directly and indirectly affect the demand for certain kinds of coal by
limiting the amount of sulfur dioxide (believed to be the cause of "acid rain")
which may be emitted as a result of fuel combustion. This creates a greater
demand for low-sulfur coal. Coal mining and processing operations may be
directly affected by Clean Air Act permitting requirements and/or emission
control requirements relating to particulate matter, e.g., fugitive dust. The
Clean Air Act was amended in 1990 with a goal of reducing the adverse effects of
acid deposition through reductions in annual emissions of sulfur dioxide by
10,000,000 tons from 1980 emission levels and reductions in annual emissions of
nitrogen oxides by 2,000,000 tons from 1980 emission levels. The Clean Air Act
Amendments establish a system in which the EPA issues allowances to fossil
fuel-fired utilities. The allowances will limit sulfur dioxide emissions from
utilities to 8,900,000 tons annually by 2000. The Clean Air Act Amendments
establish civil penalties for excess emissions from utilities. The Company is
unable to
76
<PAGE> 81
predict what effect the legislation will have on its operating results. Certain
of the Company's contracts in the past have provided cancellation rights to the
purchaser if any governmental standards or regulations are enacted which
prohibit the purchase of coal under such contracts or make the purchase of coal
under such contracts commercially unfeasible.
In addition to controlling emissions of sulfur dioxide, the Clean Air Act
Amendments also require the EPA to determine if reductions in the emissions of
nitrous oxides ("NOx") are necessary to achieve air quality standards. The EPA
has proposed new standards which, if adopted, could impose costly new control
equipment on electric utilities or other firms using coal to generate
electricity. If reductions in NOx emissions are required, it is likely that many
power generating stations using fossil fuels will be required to employ new
technology. Alternatives to some power plants include abandoning coal as a fuel
and substituting natural gas which emits less NOx during combustion.
Clean Water Act
The federal Water Pollution Control Act (the "Clean Water Act") affects
coal mining operations by: (i) imposing effluent discharge restrictions on
pollutants discharged into water; (ii) imposing regular monitoring and reporting
requirements; (iii) requiring the issuance and renewal of permits for the
discharge of pollutants into waters; and (iv) imposing performance standards as
a requirement for the issuance of permits. In addition, Kentucky, Tennessee and
Colorado have enacted state legislation regulating the water pollution effects
of coal mining operations. Each state is charged with enforcing its state laws
and with enforcing, subject to federal oversight, the Clean Water Act in its
jurisdiction.
Resource Conservation and Recovery Act
The federal Resource Conservation and Recovery Act ("RCRA") and similar
state laws affect coal mining operations by imposing requirements for the
treatment, storage and disposal of hazardous wastes. Although mining wastes are
excluded from the definition of hazardous waste for purposes of RCRA, the
Company cannot predict that this exclusion will continue.
Mine Safety and Health Act
The federal Coal Mine Safety and Health Act was adopted in 1969. The
federal Mine Safety and Health Act of 1977 brought significant expansion to the
enforcement of health and safety standards. The federal Mine Safety and Health
Administration ("MSHA") monitors compliance with the law's comprehensive
regulation of mining operations, including training of mine personnel, mining
procedures, blasting and mining equipment, as well as other matters. The states
in which the Company operates have programs for mine safety and health
regulation and enforcement. Together with the federal requirements, these
programs provide extensive and comprehensive requirements for protection of
employee safety and health.
Black Lung
The Black Lung Reform Act of 1977 requires each coal mine operator to
secure payment of federal and state black lung benefits to its employees through
insurance, bonds, qualified self-insurance or contributions to a
state-controlled fund. This Act also establishes a trust fund for the payment of
benefits and medical expenses to employees who cannot receive these benefits
from their employer. The trust fund is financed by a tax on coal sales.
Comprehensive Environmental Response, Compensation and Liability Act
The federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") and similar state laws affect coal mining operations by
imposing cleanup requirements for threatened or actual releases of hazardous
substances which may endanger public health or the environment. Joint and
several liability may be imposed on waste generators, past and present site
owners and operators as well as others, regardless of fault or the legality of
the disposal activity at the time it was made. Waste substances generated by
coal production and processing are generally not considered hazardous substances
covered by CERCLA.
77
<PAGE> 82
Products used by coal companies in operations, such as chemicals, and the
disposal of such products, however, are governed by the statute.
Federal Land Policy
The United States government is the largest owner of coal reserves in the
nation. Its authority is exercised through several agencies, but primarily
through the BLM. The majority of these reserves are located in the western
United States. Some are on lands on which the Company has conducted surface coal
mining operations since 1995 and on which it will mine in the future.
The federal government's authority over public lands exceeds the rights of
any private owner of coal. The federal government possesses both the customary
property rights of a private owner and the rights of the sovereign over the
management of public lands. Although the relevant statutes and regulations,
including the Mineral Leasing Act of 1920, as amended by the Federal Coal
Leasing Amendments Act of 1976, the Federal Land Policy Management Act of 1977
and SMCRA, are well-established, they create a complex and cumbersome process
for a lease applicant. The consequence is that an opponent of federal coal
leasing has numerous opportunities to delay the issuance of a federal coal
lease.
Penalties
Under certain circumstances, substantial fines and penalties, including
revocation of mining permits, may be imposed under the laws described above.
Monetary sanctions and, in severe circumstances, criminal sanctions may be
imposed for failure to comply with these laws. Regulations also provide that a
mining permit can be refused or revoked if an officer, director or a shareholder
with a 10% or greater interest in the entity is affiliated with another entity
which has outstanding permit violations. Although the Company has been cited for
isolated violations, the Company and its subsidiaries have never had a permit
suspended or revoked because of any violation by the Company, its subsidiaries
or any affiliates of the Company.
COMPLIANCE WITH REGULATORY REQUIREMENTS
The Company endeavors to conduct its mining operations in compliance with
all applicable federal, state and local laws and regulations. However, because
of the extensive and comprehensive regulatory requirements, minor, inadvertent
violations during mining operations are not unusual, and although the Company
has no intention to commit and seeks to prevent the occurrence of any
infractions, the Company may have violations in the future. The Company believes
its compliance record compares favorably with that of other coal mining
companies.
Because of the extensive nature of the Company's land holdings, it has not
undertaken an investigation of environmental conditions on most of its land
holdings which might subject the Company to liability under existing
environmental laws. From time to time during the course of normal operations
there have been discharges of hazardous materials onto the Company's lands.
Leakage has occurred from a secondary containment structure for motor oil tanks
at the Cockrell's Fork shop area in Kentucky. The extent of the contamination is
not known at this time; if groundwater has been affected, remediation costs may
be significant. The Company is not aware of any other adverse environmental
conditions on its lands which might subject the Company to material liability
under existing environmental laws.
In addition to environmental liability at its own properties, the Company
is potentially liable for environmental conditions on properties transferred to
PAC under the Pittston Agreement. Under the Pittston Agreement, Addington
Holding Company, Inc. ("Addington Holding") transferred to PAC certain mining
properties and indemnified PAC for certain liabilities, including certain
environmental liabilities, associated with the transferred properties. The
Company agreed to assume the liabilities of Addington Holding under this
indemnification when the Company purchased its current operating properties from
Addington Holding in 1995. PAC has notified the Company of various environmental
conditions existing on the transferred properties for which it claims
indemnification. The Company has contested the applicability of the
indemnification to many of these conditions; however, it is possible that the
Company may incur liability as a result of these conditions. See "Certain
Related Party Transactions -- Indemnification."
78
<PAGE> 83
The Company believes that its continued compliance with regulatory
standards will not substantially affect its ability to compete with
similarly-situated coal mining companies. The cost of compliance, however, does
increase the cost of mining coal and to this extent makes coal less competitive
with alternative fuels. While the Company is not aware of any pending or
proposed legislation or regulatory action, except as discussed above, the
possibility exists that new legislation may be enacted or new regulations
adopted which will have the effect of increasing the cost of mining coal.
79
<PAGE> 84
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following information is furnished with respect to the directors and
executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
Larry Addington.................... 61 Chairman of the Board, Director
Don Brown.......................... 52 President, Chief Executive Officer, Director
John Baum.......................... 43 Chief Financial Officer
Keith Sieber....................... 46 Vice President -- Western Operations
Robert Addington................... 58 Senior Vice President -- Eastern Operations, Director
Marc Merritt....................... 44 Senior Vice President -- Sales and Marketing
Vic Grubb.......................... 38 Treasurer/Controller
John Lynch......................... 49 Vice President -- Supply/Maintenance, Secretary
Stonie Barker...................... 71 Director
Jack Fisher........................ 68 Director
</TABLE>
The Company's management has experience in virtually all areas of coal
mining operations. The Company recently expanded its management team to provide
for its expanded operations. In September 1997, the Company hired Don Brown as
President and Chief Executive Officer. Mr. Brown, a former President of Cyprus
Amax, has experience managing growing operations. Effective November 1, 1997,
the Company hired Keith Sieber as Vice President -- Western Operations. Mr.
Sieber has extensive experience with deep mining and longwall mining, a mining
method which the Company anticipates implementing in its Colorado operations.
The Company hired John Baum as Chief Financial Officer in October 1997 and
intends to hire additional senior level executives in the near future.
Larry Addington, Don Brown, Robert Addington, Stonie Barker and Jack Fisher
are the directors of AEI Holding Company, Inc. All directors hold office until
the next annual meeting of stockholders and until their successors are elected
and qualified. Officers serve at the discretion of the Board of Directors. All
officers spend substantially full time working for the Company or its
subsidiaries.
Larry Addington, Chairman of the Board, has substantial experience in the
operation of coal mining ventures. His first mining company, Addington Brothers
Mining Company, began mining coal in eastern Kentucky in 1972 and was sold to
Ashland Oil in 1976. In 1978, Larry Addington formed Pyramid, which mined coal
in western Kentucky and was sold to First Mississippi in 1981. In 1984, Larry
Addington formed Addington Resources, which became a public company in 1987, and
which primarily conducted coal mining and integrated solid waste disposal
operations. Larry Addington continues to hold an interest in Republic
Industries, Inc. ("Republic"), which acquired Addington Resources in 1995, but
has no involvement in the management of Republic. Larry Addington has been
Chairman of the Board of the Company since its organization and was the founder
of each of the corporate entities controlled by the Company. Larry Addington is
the brother of Robert Addington. See "The Company" for more details.
Don Brown, President and Chief Executive Officer, has worked in the coal
industry since 1968, and has extensive experience in all phases of coal mining
operations. From 1987 to 1993, Mr. Brown served as President of Cyprus Coal
Company. From 1993 to 1995, Mr. Brown served as President of Cyprus Amax, and
directed that company's increase in annual production from 10 million tons of
coal to over 80 million tons of coal, making it the second largest coal company
in the United States. From 1995 until his employment by the Company, Mr. Brown
was Chief Executive Officer of International Executive Services LLC, a coal
mining consulting business, and Chief Executive Officer of Beaver Brook Coal
Company, LLC, a coal leasing and exploration company. Mr. Brown's extensive
experience (27 years) with longwall mining makes him an ideal candidate to
oversee the Company's longwall mining project at the Bowie #2 mine. Mr. Brown's
experience with longwall mining includes the planning and development of
Twentymile mine in Routt County, Colorado, which set a world record for monthly
coal production by a longwall mine (944,443 tons).
80
<PAGE> 85
John Baum, Chief Financial Officer, has been involved in the coal industry
since 1981. Mr. Baum was a general consultant with J.E. Baum & Associates from
1996 until his employment by the Company. Prior to 1996, Mr. Baum was employed
by Cyprus Amax as Deputy Chairman and Chief Financial Officer of its Australian
operations.
Keith Sieber, Vice President -- Western Operations, has worked in the coal
industry for more than 20 years, and was employed as a Vice President of Cyprus
Amax from 1992 until he began his employment with the Company. Mr. Sieber was
responsible for the operations of Twentymile mine when it set a world record for
monthly coal production by a longwall mine (944,443 tons).
Robert Addington, Senior Vice President -- Eastern Operations, has been
involved in the coal mining business since 1970. With Larry Addington and Bruce
Addington, he founded Addington Brothers Mining, which was sold to Ashland Oil
in 1976. He served as an officer and director of Addington Resources from 1986
until 1995. From 1995 until his employment by the Company, Mr. Addington .
Marc Merritt, Senior Vice President -- Sales and Marketing, has worked in
the coal industry for 21 years. From 1986 until 1994, he was a sales manager for
Addington, Inc., and from 1994 until 1997, he was the Executive Vice
President -- Coal Sales for Pittston Coal Sales Corp. From 1997 until his
employment by the Company, he was President of M&M Management, Inc., a coal
industry consulting company.
Vic Grubb, Treasurer/Controller, worked for Addington Resources from 1989
to 1995 as a financial analyst, and has been the Chief Financial Officer of
Addington Enterprises since 1995. He has a degree from Morehead State University
in Business Administration with an emphasis in Accounting.
John Lynch, Vice President -- Supply/Maintenance and Secretary, has worked
for various Addington-affiliated companies since 1983 as a manager and an
equipment purchaser. He is currently the Vice President and Secretary of
Addington Enterprises, and the President of Mining Machinery, Inc. ("MMI").
Stonie Barker has been involved in the coal mining business since 1951. He
has served as President, Chief Executive Officer and Chairman of the Board of
Island Creek Coal Company and Executive Vice President of Occidental Petroleum
Corporation. Since 1984, Mr. Barker has served as President of The Executive
Energy Company, a coal industry consulting group. He is also a director of
Kaiser Steel Corporation.
Jack Fisher served as mayor of Owensboro, Kentucky, from 1984 to 1987. He
served as a director of Addington Resources from 1987 to 1996.
Directors of the Company who are also officers of the Company receive no
compensation for their services as directors. Non-management directors are paid
a base salary of $12,000 per year for services as directors; with an additional
$2,000 per meeting actually attended and $500 for each committee meeting
actually attended which was not held in conjunction with a board of directors
meeting.
LIMITATION ON LIABILITY OF DIRECTORS
Pursuant to the Company's Certificate of Incorporation, no director shall
be personally liable to the Company or its stockholders for monetary damages for
breach of his fiduciary duty as a director, except for a breach of the
director's duty of loyalty, for acts and omissions not in good faith or which
involve intentional misconduct or a knowing violation of the law, for
transactions from which a director derived an improper personal benefit or for
unlawful payment of dividends or stock purchases or redemptions pursuant to
Section 174 of the Delaware General Corporation Law. This provision offers
persons who serve on the board of directors of the Company protection against
awards of monetary damages for negligence in the performance of their duties. It
does not affect the availability of equitable remedies such as an injunction or
rescission based upon a director's breach of the duty of care.
81
<PAGE> 86
EXECUTIVE COMPENSATION
The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities for the year ended December 31, 1997, for (i) the chief executive
officer of the Company, and (ii) each of the four other most highly compensated
executive officers of the Company, who received in excess of $100,000, (the
"Named Executive Officers") determined as of December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
ANNUAL COMPENSATION(1) ------------------------------------
---------------------------------- RESTRICTED SECURITIES
NAME AND FISCAL OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION AWARDS OPTIONS/SARS PAYMENTS COMPENSATION
- ------------------ ------ -------- -------- ------------ ---------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Larry Addington(3)... 1997 $484,616 -- -- -- -- -- --
President and Chief
Executive Officer
Don Brown(4)......... 1997 $ 93,565 -- -- -- -- -- --
President and Chief
Executive Officer
Harold Sergent(5).... 1997 -- -- $4,525,000 -- -- -- $8,551
Executive Vice
President
Robert Addington..... 1997 $281,303 -- -- -- -- -- --
Senior Vice
President -- Eastern
Operations
Vic Grubb............ 1997 $ 92,231 $144,928 -- -- -- -- --
Treasurer/Controller
John Lynch........... 1997 $103,696 $289,855 -- -- -- -- --
Vice President-
Supply/Maintenance,
Secretary
</TABLE>
- ---------------
(1) Perquisites and other personal benefits paid in 1996 for the Named Executive
Officers aggregated less than the lesser of $50,000 and 10% of the total
annual salary and bonus set forth in the columns entitled "Salary" and
"Bonus" for each Named Executive Officer.
(2) The Company accrued discretionary cash bonuses in 1997 for extraordinary
services provided by certain key employees in connection with the
restructuring of the Company and its predecessors.
(3) Larry Addington served as President and Chief Executive Officer of the
Company's predecessors through September 21, 1997.
(4) On September 22, 1997, Don Brown was retained as President and Chief
Executive Officer of the Company.
(5) Harold Sergent served in his capacity as Executive Vice President pursuant
to a consulting agreement with the Company. Mr. Sergent's other compensation
was primarily for extraordinary services provided in connection with the
Offering, the Interim Credit Facility and the New Credit Facility. Mr.
Sergent resigned as Executive Vice President contemporaneously with the
expiration of his consulting agreement on November 30, 1997.
82
<PAGE> 87
EMPLOYMENT AND CONSULTING CONTRACTS
Don Brown has an employment agreement with the Company, dated as of
September 22, 1997, which expires on September 21, 2000. Mr. Brown is employed
as President and Chief Executive Officer at an annual base salary of $400,000,
with such annual merit increases and bonus compensation as the Company may
decide. Mr. Brown is also entitled to participate in any employee benefit plan
sponsored by the Company. During the term of Mr. Brown's employment, the Company
will provide him with a house in Ashland, Kentucky and a $150,000 bridge loan to
be paid back on the earlier of the one-year anniversary of his employment with
the Company or the sale of his existing residence. The Company also will pay Mr.
Brown's moving expenses and the real estate commission on the sale of his
residence. Mr. Brown receives a life insurance policy in the amount of $500,000,
a company car and four weeks of paid vacation per year. In the event that the
Company terminates Mr. Brown at any time prior to September 21, 2000, other than
for disability or cause, the Company must continue to pay him the remaining
compensation over the term of his contract. In addition, upon a Change of
Control of the Company (as defined in the employment agreement), Mr. Brown
receives seven and one-half percent (7.5%) of the then issued and outstanding
stock of Addington Enterprises.
Keith Sieber has an employment agreement with the Company, dated as of
November 1, 1997, which expires on November 1, 2000. Mr. Sieber is employed as
Vice President -- Western Operations at an annual base salary of $235,000, with
such annual merit increases and bonus compensation as the Company may decide.
Mr. Sieber is also entitled to participate in any employee benefit plan
sponsored by the Company. For the initial year of his employment, the Company
must lease an apartment in Grand Junction, Colorado, for Mr. Sieber, and loan
Mr. Sieber $10,300 per month until the earlier of the one-year anniversary of
his employment or the sale of his existing residence. During the term of his
employment, Mr. Sieber receives a company car, a life insurance policy in the
amount of $500,000, and four weeks of paid vacation per year. In the event that
the Company terminates Mr. Sieber at any time prior to September 21, 2000, other
than for disability or cause, the Company must continue to pay him the remaining
compensation over the term of his contract. In addition, upon a Change of
Control of the Company (as defined in the employment agreement), Mr. Sieber
receives two and one-half percent (2.5%) of the then issued and outstanding
stock of Addington Enterprises.
Harold Sergent provided services under a consulting agreement with the
Company, dated as of December 1, 1995, which expired on November 30, 1997.
Contemporaneously with the termination of the consulting agreement, Mr. Sergent
resigned as Executive Vice President of the Company. Mr. Sergent was a
consultant with respect to certain management and marketing functions, and
negotiated for the acquisition and sale of coal operations and reserves and for
the sale of coal under certain contracts. The Company paid Mr. Sergent $15,000
per month under the consulting agreement. In addition to his monthly
compensation, Mr. Sergent periodically received other compensation for services
rendered in connection with financing, acquisitions, sales and new coal
contracts that he negotiated for the Company.
83
<PAGE> 88
CERTAIN RELATED PARTY TRANSACTIONS
GENERAL
The Company is closely held and has entered into transactions and loans
with related individuals and entities. As provided in the Indenture, all related
party transactions or loans must be for a bona fide business purpose on terms at
least as favorable as those obtainable from an unaffiliated party. In addition,
all such transactions or loans will be approved or ratified by a majority of the
independent and disinterested directors of the Company. In situations where
there will be an ongoing relationship with related parties for the purchase of
services or products, a majority of the independent and disinterested directors
will be required to approve continuation or initiation of the relationship and
will periodically review such transactions to assure that they meet the
aforementioned standard. See "Description of Exchange Notes -- Certain Covenants
- - Transactions with Affiliates" for a further description of the procedure for
review and approval of transactions with affiliates.
LOANS AND GUARANTEES
Periodically, Larry, Robert and Bruce Addington have made loans to the
Company to provide capital. As of September 30, 1997, the Company owed Larry
Addington approximately $28.8 million. The Company paid Larry Addington interest
in the amount of $37,080 for the year ended December 31, 1996, and $385,000 for
the nine-month period ended September 30, 1997. Accrued but unpaid interest
under Larry Addington's loans as of September 30, 1997, was approximately
$790,000. As of September 30, 1997, the Company owed each of Robert and Bruce
Addington approximately $160,000. Accrued but unpaid interest under Robert and
Bruce Addington's loans as of September 30, 1997, was approximately $11,000. All
of the Company's loans from Larry, Robert and Bruce Addington were repaid in the
fourth quarter of 1997.
Larry Addington has agreed with the Lenders under the New Credit Facility
that he will not take any action which would cause him to own less than 25% of
the outstanding Common Stock of the Company. In addition, Larry Addington has
guaranteed the Company's obligations under the CG&E contract described in
"Business -- Major Sales Contracts."
ARRANGEMENTS INVOLVING AFFILIATES
TASK Trucking Company ("TASK"), which is owned by Austin Dickerson, Larry
Addington's brother-in-law, provides trucking brokerage services to the Company,
for which TASK receives compensation per ton hauled. The Company paid TASK gross
payments of $7.6 million, $9.8 million and $12.9 million for trucking services
in 1994, 1995 and 1996, respectively, and $12.8 million for the nine-month
period ended September 30, 1997. The Company believes that the price charged for
such trucking services was not greater than the prices generally charged by
non-affiliated entities in the area.
Pursuant to a five-year Sales Agency Agreement, dated January 30, 1997, and
amended February 5, 1997, between the Company and Bowie Sales LLC, a Colorado
limited liability company ("Bowie Sales"), which is owned 100% by Harold Sergent
and his wife, the Company is required to pay Bowie Sales a $0.20 per ton
commission on certain coal contracts obtained for the Company by Bowie Sales
that are supplied with coal from certain of the Company's Colorado properties.
This commission is comparable to commissions the Company pays to other brokers.
Pursuant to a Marketing Agreement, dated January 30, 1997, between Bowie
and Mitsui Matsushima Co., Ltd., a Japanese company, Mitsui Matsushima Co., Ltd.
is currently entitled to market 22.5% of the coal produced by Bowie and receive
a commission of $0.30 per ton.
The Company has, from time to time, provided use of its aircraft to Larry
Addington and persons related to, and entities owned or controlled by, him. The
amounts charged to Larry Addington for these services were $624 and $8,873 for
the years ended December 31, 1995 and 1996, respectively. The Company believes
the reimbursement rates charged for aircraft use were generally equivalent to
commercial charter rates.
The Company has a service agreement with MMI, in which Larry Addington owns
more than 75% of the capital stock, whereby MMI repairs and maintains all of the
Company's equipment. In 1996, the Company
84
<PAGE> 89
paid MMI $3.1 million and, for the eight-month period ended August 31, 1997, the
Company paid MMI $7.2 million. The Company believes that the price charged for
such maintenance services is not greater than prices generally charged by
non-affiliated entities in the area.
Pursuant to an Asset Purchase Agreement, dated January 2, 1998, between
Mining Technologies and Addington Enterprises, which is owned 80%, 10% and 10%
by Larry, Robert and Bruce Addington, respectively, Mining Technologies
purchased certain assets and intellectual property which comprised the Mining
Technologies division of Addington Enterprises for $51 million. In making the
decision to purchase these assets and intellectual property, the Company's Board
of Directors reviewed and relied on, among other things, a fairness opinion
provided by the Initial Purchaser.
Pursuant to an agreement among Wabash Land Holding Company ("Wabash") (an
Indiana corporation in which Larry Addington is the majority shareholder), MMI
and Addington Enterprises, in 1997, Wabash paid the Company approximately $1.6
million in connection with Wabash's termination of the development of a mine on
property in Indiana and the sale of such property to an unrelated third party.
In December 1995, Bowie agreed to indemnify Amax Coal Company ("Amax"), a
Delaware corporation, and Meadowlark, Inc. ("Meadowlark"), an Indiana
corporation, for all obligations of Kindill Mining, Inc. ("Kindill"), an Indiana
corporation, under an Asset Purchase Agreement, dated December 6, 1995, among
Amax, Meadowlark and Kindill. Stephen Addington, Larry Addington's brother,
holds an indirect interest in Kindill.
In each of 1996 and 1997, the Company paid Bruce Addington, Larry
Addington's brother, approximately $230,000 for services rendered as an employee
of the Company.
In November 1997, the Company paid Harold Sergent $2 million for his Bowie
stock.
In satisfaction of certain disputed liabilities of Addington Resources that
Addington Enterprises assumed pursuant to the Addington Agreement (as defined),
which were subsequently transferred to the Company pursuant to the Exchange
Agreement, the Company paid $130,000 to John Lynch.
INDEMNIFICATION
Pursuant to a Stock Purchase Agreement, dated September 24, 1993 (the
"Pittston Agreement"), between Addington Holding and PAC, PAC acquired all of
the issued and outstanding stock of certain subsidiaries of Addington Holding
for $157 million. Pursuant to a Guaranty Agreement, dated September 24, 1993,
Addington Resources, the sole shareholder of Addington Holding, guaranteed the
obligations of Addington Holding and its subsidiaries under the Pittston
Agreement.
Pursuant to a Stock Purchase Agreement, dated September 22, 1995 (the
"Addington Agreement"), among Addington Holding, Addington Resources, Addington
Enterprises (formerly known as Addington Acquisition Company), and Messrs.
Addington, Addington Enterprises purchased from Addington Holding all of the
issued and outstanding stock of certain subsidiaries of Addington Holding for
$30 million. In connection with the Addington Agreement, Addington Enterprises
agreed to assume, among other liabilities of Addington Resources and its
affiliates, all liabilities and obligations of Addington Resources and its
affiliates under the Pittston Agreement. Additionally, as part of this purchase,
Addington Enterprises agreed to pay Addington Resources a per-ton royalty, not
to exceed $12.0 million in the aggregate, on coal delivered under a coal
contract between Tennessee Mining and TVA. The Company assumed all of these
obligations as part of the Organizational Transactions.
DEFERRED COMPENSATION
Stock Option Plan
The Company is in the process of adopting the AEI Holding Company, Inc.
Stock Option Plan (the "Plan"), which provides for the issuance to certain key
employees of or advisors to the Company, its Subsidiaries or its Parent (both as
defined therein) (the "Optionees") of options (the "Options") for up to 50% of
the shares of Common Stock (as defined) of the Company outstanding from time to
time, subject to
85
<PAGE> 90
adjustment to reflect certain events such as stock dividends, stock split-ups,
subdivisions or consolidations of shares or other events which necessitate a
similar adjustment. The Plan is intended to, among other things, increase the
profitability and growth of the Company and its Subsidiaries, motivate key
employees to contribute to the success of the Company and its Subsidiaries and
provide competitive compensation while obtaining the benefits of tax deferral.
A committee appointed by the Board of Directors of the Company (the
"Committee") will administer the Plan. The Committee has the authority to
determine the awards made to Optionees (each, a "Grant"). Such Grants are
subject to various limitations and conditions specified in the Plan (including
certain legal restrictions).
All key employees of or advisors to the Company or a Subsidiary or Parent
are eligible for Grants. The Committee has the authority to designate the
employees and advisors to whom Options are to be granted and will specify the
number of shares of Common Stock subject to each Grant.
The Committee has the authority to make such amendments to any terms and
conditions applicable to outstanding Grants as are consistent with the Plan,
except that no such amendment shall become effective without prior approval of
the Optionees if such approval is necessary. No such amendment shall, without an
Optionee's consent, adversely affect any rights of such Optionee under any Grant
outstanding at the time such amendment is made. The Committee shall comply with
any tax or regulatory requirement or rule of any exchange or system upon which
the stock may be listed.
None of the Company's employees or advisors have been granted any Options
pursuant to a Stock Option Agreement.
Stock Option Agreements
The exercise price of any Options granted under the Plan would be
determined by a Stock Option Agreement (the "Stock Option Agreement"), but
cannot be less than the fair market value of Common Stock on date the Option is
granted (the "Grant Date"); provided, however, that the exercise price cannot be
less than 110% of the fair market value if the Optionee receives an incentive
stock option and owns more than 10% of the total combined voting power of the
Company, any Subsidiary or any Parent. In addition, such Options would be
exercised based upon a date set forth in each Optionee's Stock Option Agreement.
Any vesting period for an Option may be subject to acceleration upon a Change in
Control (as defined in the Plan). The exercise period for an Option may be
shortened due to a Termination of Employment (as defined in the Plan). No Option
shall be exercisable more than 10 years from the Grant Date; provided, however,
that no Option shall be exercisable more than five years from the Grant Date if
the Optionee receives an incentive stock option and owns more than 10% of the
total combined voting power of the Company, any Subsidiary or any Parent.
86
<PAGE> 91
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock does not purport
to be complete and is subject in all respects to applicable Delaware law and to
the provisions of the Company's Certificate of Incorporation.
The authorized capital stock of the Company consists of 100,000 shares of
common stock, par value $0.01 per share (the "Common Stock"). As of December 31,
1997, 52,800 of the authorized shares of Common Stock were issued and
outstanding.
Each share of Common Stock has equal voting, dividend, distribution and
liquidation rights. Each share of Common Stock is not redeemable and has no
preemptive, conversion or cumulative voting rights. The declaration and payment
of dividends are restricted by certain covenants in the Indenture and the New
Credit Facility. In the event of a liquidation, dissolution or winding-up of the
Company, the holders of the Common Stock are entitled to share equally and
ratably in the assets of the Company, if any, remaining after the payment of all
debts and liabilities of the Company (including the Senior Notes). There is no
established public trading market for the Common Stock.
87
<PAGE> 92
SECURITY OWNERSHIP
OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information concerning ownership of
the Common Stock by each director, each person who is known to the Company to be
the beneficial owner of more than 5% of the Common Stock and all directors and
officers of the Company as a group. Each stockholder listed below has sole
voting and dispositive power with respect to the shares listed next to his name.
<TABLE>
<CAPTION>
PERCENTAGE OF
CLASS
NAME AND ADDRESS TITLE OF SHARES PERCENTAGE BENEFICIALLY
OF BENEFICIAL OWNER CLASS OWNED OF CLASS OWNED
- ------------------- ------------ ------ ---------- -------------
<S> <C> <C> <C> <C>
Larry Addington(1)...................... Common Stock 26,400 50% 100%
1500 North Big Run Road
Ashland, Kentucky 41101
Addington Enterprises, Inc.(2) ......... Common Stock 26,400 50% 0%
1500 North Big Run Road
Ashland, Kentucky 41101
</TABLE>
- ---------------
(1) Larry Addington's beneficial ownership includes 40% beneficial ownership
through Addington Enterprises and 10% beneficial ownership attributed based
on Robert Addington's and Bruce Addington's interest in Addington
Enterprises. Larry Addington has sole voting power with respect to the
Common Stock he owns individually.
(2) Addington Enterprises is owned 80%, 10% and 10% by Larry Addington, Robert
Addington and Bruce Addington, respectively.
REPORTS TO NOTEHOLDERS
The Company intends to furnish the Senior Note holders with annual reports
containing audited financial statements and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year.
88
<PAGE> 93
THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $200 million
aggregate principal amount of Exchange Notes for a like aggregate principal
amount of Old Notes properly tendered on or prior to the Expiration Date and not
withdrawn as permitted pursuant to the procedures described below. The Exchange
Offer is being made with respect to all of the Old Notes.
As of the date of this Prospectus, $200 million aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1998, to all holders
of Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain conditions set
forth under "Certain Conditions to the Exchange Offer" below. The Company
currently expects that each of the conditions will be satisfied and that no
waivers will be necessary.
REGISTRATION RIGHTS AND EFFECT OF EXCHANGE OFFER
The Old Notes were issued by the Company on November 12, 1997 to the
Initial Purchaser pursuant to the Purchase Agreement. Subsequently, the Initial
Purchaser sold the Old Notes to various qualified institutional buyers and
accredited investors in reliance upon Rule 144A and other available exemptions
under the Securities Act. As a condition to the Purchase Agreement, the Company
and the Initial Purchaser entered into the Registration Rights Agreement.
Pursuant to the Registration Rights Agreement, the Company agreed to file with
the Commission a registration statement under the Securities Act with respect to
the Exchange Notes no later than 90 days following the Closing Date, to use all
reasonable commercial efforts to cause such registration statement to become
effective under the Securities Act at the earliest possible time, but in no
event later than 120 days after the Closing Date and, upon effectiveness of such
registration statement, to commence the Exchange Offer and offer to eligible
holders of Old Notes the opportunity to exchange their Old Notes for a like
principal amount of Exchange Notes.
Holders of Old Notes acquired directly from the Company, affiliates of the
Company and persons participating in, or having any arrangement or understanding
with any person to participate in a distribution of the Exchange Notes will be
ineligible, under Commission policy, to participate in the Exchange Offer, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale of the Old Notes.
The Company agreed, pursuant to the Registration Rights Agreement, that if
notified by a holder of Transfer Restricted Securities within 20 business days
of the consummation of the Exchange Offer that such holder is prohibited by
applicable law or Commission policy from participating in the Exchange Offer, or
that such holder may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus or that such holder
is a broker-dealer and holds Old Notes acquired directly from the Company or one
of its affiliates, it would file a shelf registration statement, pursuant to
Rule 415 under the Securities Act, registering for resale any Transfer
Restricted Securities, subject to the satisfaction by such holder of certain
other conditions. "Transfer Restricted Securities" means each of the Old Notes
until the earliest to occur of (a) the date on which such Old Note is exchanged
in the Exchange Offer and entitled to be resold to the public by the holder
thereof without complying with the prospectus delivery requirements of the
Securities Act, (b) the date on which such Old Note has been disposed of in
accordance with a Shelf Registration Statement or a Registration Statement, (c)
the date on which such Old Note is distributed to the public pursuant to Rule
144 under the Securities Act and (d) following the exchange by a broker-dealer
in the Exchange Offer of an Old Note for an Exchange Note, the date on which
such Exchange Note is disposed of pursuant to the "Plan of Distribution" section
set forth herein. A copy of the Registration Rights Agreement has been filed as
an exhibit to the Registration Statement of which this Prospectus is a part.
This Registration Statement covers the offer of the Exchange Notes pursuant
to the Exchange Offer made hereby and resales by broker-dealers that acquired
Old Notes for their own accounts as a result of
89
<PAGE> 94
market-making and other trading activities. Such resales of Transfer Restricted
Securities made in reliance upon the registration thereof under the Securities
Act may be made only pursuant to the "Plan of Distribution" set forth in this
Prospectus or other prospectus, if any, filed as an amendment to the
Registration Statement. To be eligible to effect resales of Transfer Restricted
Securities pursuant to registration of the Old Notes for resale by holders
ineligible to participate in the Exchange Offer, a holder of Transfer Restricted
Securities must (i) notify the Company within 20 business days of the
consummation of the Exchange Offer that it has determined that it is not
permitted by law or any policy of the Commission to participate in the Exchange
Offer made hereby or that such holder may not resell the Exchange Notes acquired
by it in the Exchange Offer to the public without delivering a prospectus and
that this Prospectus is inappropriate or unavailable for such resales by such
holder or that such holder is a broker-dealer and holds Old Notes acquired
directly from the Company or one of its affiliates and (ii) provide to the
Company, within 20 business days following the Company's request therefor, such
information as the Company may reasonably request for use in preparation of the
Shelf Registration Statement. In the event that any holders of Transfer
Restricted Securities comply with the foregoing requirements, and supply any
additional information reasonably requested by the Company within 20 business
days following such request, the Company will file, as promptly as is
practicable, a Shelf Registration Statement containing an appropriate resale
prospectus and will use its reasonable efforts to cause such Shelf Registration
Statement to become effective under the Securities Act and to remain
continuously effective thereunder for a period of two years, or such shorter
period as will terminate when all Transfer Restricted Securities covered by such
Shelf Registration Statement have been sold pursuant thereto.
If the filing of the Registration Statement occurs within 90 days following
the Closing Date and the Registration Statement becomes effective within 120
days following the Closing Date, and assuming the timely effectiveness of a
Shelf Registration Statement (if required) to provide a resale prospectus with
respect to certain of the Transfer Restricted Securities, as provided in the
Registration Rights Agreement, the Company shall have no obligation to pay any
liquidated damages provided for in the Registration Rights Agreement.
EXCEPT AS OTHERWISE PROVIDED HEREIN, FOLLOWING THE CONSUMMATION OF THE
EXCHANGE OFFER, ANY HOLDER OF OLD NOTES NOT TENDERED AND EFFECTIVELY DELIVERED
TO THE EXCHANGE AGENT IN ACCORDANCE WITH THE EXCHANGE OFFER, AND WHO IS NOT
ENTITLED TO RESELL THE SAME PURSUANT TO A RESALE PROSPECTUS, IF ANY, REQUIRED TO
BE FILED AS PART OF A SHELF REGISTRATION STATEMENT WILL HAVE NO FURTHER EXCHANGE
OR REGISTRATION RIGHTS AND SUCH OLD NOTES WILL CONTINUE TO BE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER.See "-- Termination of Certain Rights,"
"-- Consequences of Failure to Exchange," and "-- Resale of Exchange Notes."
Accordingly, the ability of any such holder of Old Notes to resell its Old Notes
could be adversely affected.
The Exchange Offer is being made by the Company to satisfy its obligations
with respect to the Registration Rights Agreement. The term "holder," with
respect to the Exchange Offer, means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder, or any person whose
Old Notes are held of record by The Depository Trust Company. Other than
pursuant to the Registration Rights Agreement, the Company is not required to
file any registration statement to register any outstanding Old Notes. Holders
of Old Notes who do not tender their Old Notes or whose Old Notes are tendered
but not accepted would have to rely on exemptions from registration requirements
under the securities laws, including the Securities Act, if they wish to sell
their Old Notes.
The Company is making the Exchange Offer in reliance on the position of the
Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, the Company has not sought its own
interpretive letter and there can be no assurance that the Commission would make
a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
Commission, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred
90
<PAGE> 95
by a holder (other than any holder who is a broker-dealer or an "affiliate" of
the Company within the meaning of Rule 405 of the Securities Act) without
further compliance with the registration and prospectus delivery requirements of
the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such Exchange Notes. See "-- Resale of Exchange Notes." Each broker-dealer that
receives Exchange Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of Old
Notes. The terms of the Exchange Notes are identical in all material respects to
the terms of the Old Notes for which they may be exchanged pursuant to this
Exchange Offer, except that the Exchange Notes will generally be freely
transferable by holders thereof and will generally not be subject to any
covenant regarding registration. The Exchange Notes will evidence the same
indebtedness as the Old Notes and will be entitled to the benefits of the
Indenture. See "Description of Exchange Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
The Company has not requested, and does not intend to request, an
interpretation by the Commission with respect to whether the Exchange Notes
issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Instead, based on an interpretation by the Commission set forth
in a series of no-action letters issued to third parties, the Company believes
that Exchange Notes issued pursuant to the Exchange Offer in exchange for Old
Notes may be offered for sale, resold and otherwise transferred by any holder of
such Exchange Notes (other than any such holder that is a broker-dealer or is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such holder's business and such holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and neither such holder nor any other such person is engaging in
or intends to engage in a distribution of such Exchange Notes. Since the
Commission has not considered the Exchange Offer in the context of a no action
letter, there can be no assurance that the Commission would make a similar
determination with respect to the Exchange Offer. Any holder who is an affiliate
of the Company or who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes cannot rely on such
interpretation by the Commission and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each holder, other than a broker-dealer, must acknowledge
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
Interest on the Exchange Notes will accrue from the last Interest Payment
Date on which interest was paid on the Old Notes so surrendered or, if no
interest has been paid on such Old Notes, from November 12, 1997.
Tendering holders of the Old Notes shall not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Old Notes
pursuant to the Exchange Offer.
91
<PAGE> 96
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, has extended the
period of time for which the Exchange Offer is open (such date, as it may be
extended, is referred to herein as the "Expiration Date"). The Expiration Date
will be at least 20 business days after the commencement of the Exchange Offer
in accordance with Rule 14e-1(a) under the Exchange Act. The Company expressly
reserves the right, at any time or from time to time, to extend the period of
time during which the Exchange Offer is open, and thereby delay acceptance for
exchange of any Old Notes, by giving oral or written notice to the Exchange
Agent and by timely public announcement no later than 11:00 a.m. New York City
time, on the next business day after the previously scheduled Expiration Date.
During any such extension, all Old Notes previously tendered will remain subject
to the Exchange Offer unless properly withdrawn.
The Company expressly reserves the right to (i) terminate or amend the
Exchange Offer and not to accept for exchange any Old Notes not theretofore
accepted for exchange upon the occurrence of any of the events specified below
under "-- Certain Conditions to the Exchange Offer" which have not been waived
by the Company and (ii) amend the terms of the Exchange Offer in any manner
which, in its good faith judgment, is advantageous to the holders of the Old
Notes, whether before or after any tender of the Notes. If any such termination
or amendment occurs, the Company will notify the Exchange Agent and will either
issue a press release or give oral or written notice to the holders of the Old
Notes as promptly as practicable.
For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a date on which banking institutions are required or
authorized by New York law to be closed, and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time. Unless the Company
terminates the Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date, the Company will exchange the Exchange Notes for the Old Notes
on the Exchange Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
A holder of Old Notes may tender the same by (i) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Old Notes being tendered and any required signature guarantees
and any other documents required by the Letter of Transmittal, to the Exchange
Agent at its address set forth below on or prior to the Expiration Date (or
complying with the procedure for book-entry transfer described below) or (ii)
complying with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY
IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
INSURE TIMELY DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO
THE COMPANY.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Old Notes are to be reissued) in the name
of the registered holder (which term, for the purposes described herein, shall
include any participant in The Depository Trust Company (also referred to as a
"book-entry transfer facility") whose name appears on a security listing as the
owner of Old Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered holder, and
92
<PAGE> 97
the signature on the endorsement or instrument of transfer must be guaranteed by
a bank, broker, dealer, credit union, savings association, clearing agency or
other institution (each an "Eligible Institution") that is a member of a
recognized signature guarantee medallion program within the meaning of Rule
17Ad-15 under the Exchange Act. If the Exchange Notes and/or Old Notes not
exchanged are to be delivered to an address other than that of the registered
holder appearing on the note register for the Old Notes, the signature in the
Letter of Transmittal must be guaranteed by an Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the Old
Notes at the book-entry transfer facility for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility's system
may make book-entry delivery of Old Notes by causing such book-entry transfer
facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the book-entry
transfer facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures. Delivery of documents to the book-entry transfer
facility does not constitute delivery to the Exchange Agent.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its address set forth below on or prior to the Expiration Date, a letter,
telegram or facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) from an Eligible Institution
setting forth the name and address of the tendering holder, the names in which
the Old Notes are registered and, if possible, the certificate numbers of the
Old Notes to be tendered, and stating that the tender is being made thereby and
guaranteeing that within three business days after the Expiration Date, the Old
Notes in proper form for transfer (or a confirmation of book-entry transfer of
such Old Notes into the Exchange Agent's account at the book-entry transfer
facility), will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Old Notes being tendered by the above-described
method are deposited with the Exchange Agent within the time period set forth
above (accompanied or preceded by a properly completed Letter of Transmittal and
any other required documents), the Company may, at its option, reject the
tender. Copies of the notice of guaranteed delivery ("Notice of Guaranteed
Delivery") which may be used by Eligible Institutions for the purposes described
in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer facility)
is received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of
Exchange Notes in exchange for Old Notes tendered pursuant to a Notice of
Guaranteed Delivery or letter, telegram or facsimile transmission to similar
effect (as provided above) by an Eligible Institution will be made only against
deposit of the Letter of Transmittal (and any other required documents) and the
tendered Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old
93
<PAGE> 98
Notes in the Exchange Offer). The interpretation of the terms and conditions of
the Exchange Offer (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Old Notes, such Old Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered holder or holders appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, that neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that
neither the holder nor any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company, or if it is an affiliate it will
comply with the registration and prospectus requirements of the Securities Act
to the extent applicable.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact
to cause the Old Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The Transferor also warrants
that it will, upon request, execute and deliver any additional documents deemed
by the Exchange Agent or the Company to be necessary or desirable to complete
the exchange, assignment and transfer of tendered Old Notes or transfer
ownership of such Old Notes on the account books maintained by a book-entry
transfer facility. The Transferor further agrees that acceptance of any tendered
Old Notes by the Company and the issuance of Exchange Notes in exchange therefor
shall constitute performance in full by the Company of certain of its
obligations under the Registration Rights Agreement. All authority conferred by
the Transferor will survive the death or incapacity of the Transferor and every
obligation of the Transferor shall be binding upon the heirs, legal
representatives, successors, assigns, executors and administrators of such
Transferor.
The Transferor certifies that it is not an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act and that it is acquiring
the Exchange Notes offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Notes. Each holder, other than
a broker-dealer, must acknowledge that it is not
94
<PAGE> 99
engaged in, and does not intend to engage in, a distribution of Exchange Notes.
Each Transferor which is a broker-dealer receiving Exchange Notes for its own
account must acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes. By so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities (other than directly from the Company or any of its affiliates). To
the extent any Participating Broker-Dealer notifies the Company that it
reasonably believes it is a Restricted Broker-Dealer, the Company will make
available, for a period of one year from the date on which the Exchange Offer is
consummated, or such shorter period as will end when all Transfer Restricted
Securities covered by the Exchange Offer Registration Statement have been sold
pursuant thereto, this Prospectus to any such Restricted Broker-Dealer for use
in connection with any resale of Exchange Notes.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent at the address set forth herein prior to 5:00
p.m., New York City time, on the Expiration Date. Any such notice of withdrawal
must (i) specify the name of the person having tendered the Old Notes to be
withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes), (iii) specify the principal amount of Notes to be withdrawn, (iv)
include a statement that such holder is withdrawing its election to have such
Old Notes exchanged, (v) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered or as otherwise described above (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee under the Indenture register the transfer of such Old Notes into the
name of the person withdrawing the tender, and (vi) specify the name in which
any such Old Notes are to be registered, if different from that of the
Depositor. The Exchange Agent will return the properly withdrawn Old Notes
promptly following receipt of notice of withdrawal. If Old Notes have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn Old Notes or otherwise
comply with the book-entry transfer facility procedure. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by the Company and such determination will be final and binding on
all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account with such
book-entry transfer facility specified by the holder) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly on the Exchange Date, all Old Notes properly
tendered and will issue the Exchange Notes as soon as practicable after such
acceptance. See "-- Certain Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
properly tendered Old Notes for exchange when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
95
<PAGE> 100
For each Old Note accepted for exchange, the holder of such Old Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note.
In all cases, issuance of Exchange Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
book-entry confirmation of such Old Notes into the Exchange Agent's account at
the book-entry transfer facility, a properly completed and duly executed Letter
of Transmittal and all other required documents. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount than
the holder desires to exchange, such unaccepted or non-exchanged Old Notes will
be returned without expense to the tendering holder thereof (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such unaccepted or non-exchanged Old Notes will be credited to
an account maintained with such book-entry transfer facility) as promptly as
practicable after the expiration of the Exchange Offer.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company shall not be required to accept for exchange,
or to issue Exchange Notes in exchange for, any Old Notes and may terminate or
amend the Exchange Offer (by oral or written notice to the Exchange Agent or by
a timely press release) if at any time before the acceptance of such Old Notes
for exchange or the exchange of the Exchange Notes for such Old Notes, any law,
statute, rule or regulation or applicable interpretation of the staff of the
Commission is issued or promulgated which, in the good faith determination of
the Company, does not permit the Company to effect the Exchange Offer.
The Company expressly reserves the right to terminate the Exchange Offer
and not accept for exchange any Old Notes upon the occurrence of the foregoing
condition (which represents the material condition to the acceptance by the
Company of properly tendered Old Notes). In addition, the Company may amend the
Exchange Offer at any time prior to the Expiration Date if the condition set
forth above occurs. Moreover, regardless of whether such condition has occurred,
the Company may amend the Exchange Offer in any manner which, in its good faith
judgment, is advantageous to holders of the Old Notes.
The foregoing condition is for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise the foregoing right shall not be deemed a waiver of such right and
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time. If the Company waives or amends the foregoing condition,
it will, if required by law, extend the Exchange Offer for a minimum of five
business days from the date that the Company first gives notice, by public
announcement or otherwise, of such waiver or amendment, if the Exchange Offer
would otherwise expire within such five business-day period. Any determination
by the Company concerning the event described above will be final and binding
upon all parties.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no Exchange Notes will be issued in exchange for any such Old
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended. In any such event, the Company is required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange.
TERMINATION OF CERTAIN RIGHTS
Holders of the Old Notes to whom this Exchange Offer is made have special
rights under the Registration Rights Agreement, certain of which will terminate
upon the consummation of the Exchange
96
<PAGE> 101
Offer. The Registration Rights Agreement states that the Exchange Offer shall be
deemed "consummated" upon the occurrence of (i) the filing and effectiveness
under the Securities Act of a registration statement relating to the Exchange
Notes to be issued in the Exchange Offer, (ii) the maintenance of such
registration statement continuously effective for a period of not less than the
minimum period required under applicable federal and state securities laws
(provided that such Exchange Offer shall remain open and the registration
statement relating thereto shall remain continuously effective, in each case,
for at least 20 business days), and (iii) the delivery by the Company to the
registrar under the Indenture of the Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of the Old Notes tendered by
holders thereof pursuant to the Exchange Offer. Such special rights which will
terminate include (a) the right to require the Company to comply with the
following: (x) to file with the Commission a registration statement under the
Securities Act with respect to the Exchange Notes no later than 90 days
following the Closing Date, (y) to use its reasonable efforts to cause such
registration statement to become effective under the Securities Act at the
earliest possible time, but in no event later than 120 days after the Closing
Date, and (z) upon effectiveness of the registration statement, to commence the
Exchange Offer and offer to the holders of the Old Notes the opportunity to
exchange their Old Notes for a like principal amount of the Exchange Notes and
to consummate the Exchange Offer within 30 days thereafter; and (b) the right to
payment of Liquidated Damages in the event of a breach by the Company of any of
their obligations set forth in the foregoing clauses (x), (y) or (z), in an
amount, during the first 90-day period immediately following the occurrence, and
during the continuance, of such a breach, equal to $0.05 per week per $1,000
principal amount of Old Notes held by a holder to which transfer restrictions
are applicable, such amount to increase by an additional $0.05 per week per
$1,000 principal amount of such Old Notes for each subsequent 90-day period
until the breach is cured up to a maximum amount of Liquidated Damages of $0.50
per week per $1,000 principal amount of Transfer Restricted Securities.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal should be directed
to the Exchange Agent at one of the addresses set forth below:
<TABLE>
<CAPTION>
BY HAND/OVERNIGHT COURIER: BY MAIL:
- -------------------------- --------
<S> <C>
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
One State Street Post Office Box 84
New York, NY 10004 Bowling Green Station
Attn: Securities Processing Window, New York, NY 10274-0084
Subcellar One (SC-1) Attn: Reorganization Operations
BY FACSIMILE:
IBJ Schroder Bank & Trust Company
Attn: Reorganization Operations
Facsimile No. (212) 858-2611, with a
confirmation by telephone to:
Telephone No. (212) 858-2103
</TABLE>
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the address and
telephone number set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF
TRANSMITTAL, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER
OTHER THAN THE ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE
A VALID DELIVERY.
97
<PAGE> 102
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Company will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this and other related documents to the beneficial owners of the Old
Notes and in handling or forwarding tenders for their customers.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $ , which includes fees and expenses of the Exchange
Agent, Trustee, registration fees, accounting, legal, printing and related fees
and expenses.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Old Notes in any jurisdiction in which
the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Old Notes
in such jurisdiction. In any jurisdiction in which the securities laws or blue
sky laws of which require the Exchange Offer to be made by a licensed broker or
dealer, the Exchange Offer is being made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the Old Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of Exchange Notes for Old Notes. Expenses incurred in
connection with the issuance of the Exchange Notes will be amortized over the
remaining term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. Old Notes not
exchanged pursuant to the Exchange Offer will continue to remain outstanding in
accordance with their terms. In general, the Old Notes may not be offered or
sold unless registered under
98
<PAGE> 103
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. Except
as set forth in the Registration Rights Agreement, the Company does not
currently anticipate that it will register the Old Notes under the Securities
Act.
Participation in the Exchange Offer is voluntary, and holders of Old Notes
should carefully consider whether to participate. Holders of Old Notes are urged
to consult their financial and tax advisors in making their own decision on what
action to take. The Company's Board of Directors makes no recommendation as to
whether holders should tender Old Notes pursuant to the Exchange Offer.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of Old Notes who do not tender their Old Notes in the
Exchange Offer will continue to hold such Old Notes and will be entitled to all
the rights and limitations applicable thereto under the Indenture, except for
any such rights under the Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a result of the making of
this Exchange Offer. All untendered Old Notes will continue to be subject to the
restrictions on transfer set forth in the Indenture. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered Old Notes could be adversely affected.
The Company may in the future seek to acquire, subject to the terms of the
Indenture, untendered Old Notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The Company has
no present plan to acquire any Old Notes which are not tendered in the Exchange
Offer or to file a registration statement to permit resales of any untendered
Old Notes, except as and to the extent required by the Registration Rights
Agreement.
RESALE OF EXCHANGE NOTES
The Company is making the Exchange Offer in reliance on the position of the
Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, the Company has not sought its own
interpretive letter and there can be no assurance that the Commission would make
a similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
Commission, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by a holder (other than any holder who is a broker-dealer
or an "affiliate" of the Company within the meaning of Rule 405 of the
Securities Act) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's business and that such
holder is not participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of the Securities
Act) of such Exchange Notes. However, any holder who is an "affiliate" of the
Company or who has an arrangement or understanding to participate in a
distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, or any broker-dealer who purchased Old Notes from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act
(i) could not rely on the applicable interpretations of the Commission and (ii)
must comply with the registration and prospectus delivery requirements of the
Securities Act. In addition, any such resale transaction should be covered by an
effective registration statement containing the selling security holders'
information required by Item 507 or 508 of Regulation S-K of the Securities Act.
A broker-dealer who holds Old Notes that were acquired for its own account as a
result of market-making or other trading activities may be deemed to be an
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes. Each such broker-dealer that
receives Exchange Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge in the Letter of
Transmittal that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
99
<PAGE> 104
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the Exchange Notes may not be offered or sold unless they have
been registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the Exchange Notes for
offer or sale under the securities or blue sky laws of such jurisdictions as any
holder of the Exchange Notes reasonably requests. Such registration or
qualification may require the imposition of restrictions or conditions
(including suitability requirements for offerees or purchasers) in connection
with the offer or sale of any Exchange Notes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury regulations,
judicial authority and administrative rulings and practice. There can be no
assurance that the Internal Revenue Service (the "IRS") will not take a contrary
view, and no ruling from the IRS has been or will be sought. Legislative,
judicial or administrative changes or interpretations may be forthcoming that
could alter or modify the statements and conditions set forth herein. Any such
changes or interpretations may or may not be retroactive and could affect the
tax consequences to holders. Certain holders of the Old Notes (including
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) may be subject to special rules not discussed
below.
The issuance of the Exchange Notes to holders of the Old Notes pursuant to
the terms set forth in this Prospectus will not constitute an exchange for
federal income tax purposes. Consequently, no gain or loss would be recognized
by holders of the Old Notes upon receipt of the Exchange Notes, and ownership of
the Exchange Notes will be considered a continuation of ownership of the Old
Notes. For purposes of determining gain or loss upon the subsequent sale or
exchange of the Exchange Notes, a holder's basis in the Exchange Notes should be
the same as such holder's basis in the Old Notes exchanged therefor. A holder's
holding period for the Exchange Notes should include the holder's holding period
for the Old Notes exchanged therefor. The issue price, original issue discount
inclusion and other tax characteristics of the Exchange Notes should be
identical to the issue price, original issue discount inclusion and other tax
characteristics of the Old Notes exchanged therefor.
HOLDERS OF OLD NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES OF EXCHANGING SUCH HOLDERS' OLD NOTES FOR EXCHANGE
NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX
LAWS.
100
<PAGE> 105
DESCRIPTION OF EXCHANGE NOTES
The Exchange Notes will be issued by the Company pursuant to the same
Indenture between the Company and IBJ Schroder Bank & Trust Company, as trustee
(the "Trustee"), under which the Old Notes were issued. The terms of the Senior
Notes include those stated in the Indenture, and in addition, with respect to
the Exchange Notes, those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Senior Notes
are subject to all such terms, and holders of Senior Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the Indenture and the Registration Rights
Agreement does not purport to be complete and is qualified in its entirety by
reference to the actual agreements, which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part. For purposes of this
"Description of Exchange Notes," references to "Senior Notes" also include and
mean the Exchange Notes and the Old Notes. The definitions of certain terms used
in the following summary are set forth below under "-- Certain Definitions." For
purposes of this summary, the term "Company" refers only to AEI Holding Company,
Inc. and not to any of its Subsidiaries.
RANKING
The Senior Notes will be general unsecured obligations of the Company and
will rank pari passu in right of payment with all current and future unsecured
senior Indebtedness of the Company. However, the Company and its Subsidiaries
are parties to the New Credit Agreement and all borrowings under the New Credit
Agreement are secured by a first priority Lien on substantially all of the
assets of the Company and its Subsidiaries. As of September 30, 1997, on a pro
forma basis after giving effect to the Pro Forma Transactions, $25 million would
have been outstanding under the New Credit Agreement. The Indenture will permit
additional borrowings under the New Credit Agreement in the future. See "Risk
Factors -- Effective Subordination."
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Company is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Senior Notes. All of
the Company's Subsidiaries are Guarantors of the Company's obligations under the
Senior Notes, except Bowie. A substantial portion of the Company's operations
will be conducted through Bowie and up to $60 million of the proceeds of the
Offering may be loaned to Bowie under a Subsidiary Intercompany Note at an
interest rate equal to the interest rate on the Senior Notes. Such borrowings
will be used by Bowie to refinance existing Indebtedness and to fund the
acquisition of certain capital equipment. The Company owns 77.5% of Bowie and,
as a result, Bowie will not be a Guarantor of the Senior Notes. See "Use of
Proceeds" and "The Company."
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes offered hereby will be limited in aggregate principal
amount to $200.0 million and will mature on November 15, 2007. The Indenture
provides for the issuance of up to $50.0 million aggregate principal amount of
additional Senior Notes having identical terms and conditions to the Senior
Notes issued in the Offering (the "Additional Senior Notes"), subject to
compliance with the covenants contained in the Indenture. Interest on the Senior
Notes will accrue at the rate of 10% per annum and will be payable semi-annually
in arrears on May 15 and November 15 commencing on May 15, 1998, to Holders of
record on the immediately preceding May 1 and November 1, respectively.
Additional Senior Notes may be issued from time to time, subject to the
provisions of the Indenture described below under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock."
Interest on the Senior Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium, if any, and interest and
Liquidated Damages on the Senior Notes will be payable at the office or agency
of the Company maintained for such purpose within the City and State of New York
or, at the option of the Company, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders of the Senior Notes at their
respective addresses set forth in the register of Holders of Senior Notes;
provided that all payments of principal, premium, interest and Liquidated
Damages with respect
101
<PAGE> 106
to Senior Notes the Holders of which have given wire transfer instructions to
the Company will be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof. Until
otherwise designated by the Company, the Company's office or agency in New York
will be the office of the Trustee maintained for such purpose. The Exchange
Notes will be issued in denominations of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Senior Notes will be jointly
and severally guaranteed on a senior unsecured basis by the Guarantors. All of
the Company's Subsidiaries are Guarantors except for Bowie, which is a majority
owned Subsidiary of the Company. The obligations of each Guarantor under its
Subsidiary Guarantee are limited so as not to constitute a fraudulent conveyance
under applicable law. See, however, "Risk Factors -- Fraudulent Conveyance
Matters."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor or the Company) assumes all the obligations of such Guarantor,
pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, under the Senior Notes, the Indenture, the
Registration Rights Agreement and the Subsidiary Guarantee; (ii) immediately
after giving effect to such transaction, no Default or Event of Default exists;
(iii) such Guarantor, or any Person formed by or surviving any such
consolidation or merger, would have Consolidated Net Worth (immediately after
giving effect to such transaction), equal to or greater than the Consolidated
Net Worth of such Guarantor immediately preceding the transaction; and (iv) the
Company would be permitted by virtue of the Company's pro forma Fixed Charge
Coverage Ratio, immediately after giving effect to such transaction, to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the covenant described below under the caption
"-- Incurrence of Indebtedness and Issuance of Preferred Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "Redemption or
Repurchase at Option of Holders -- Asset Sales."
OPTIONAL REDEMPTION
The Senior Notes are not redeemable at the Company's option prior to
November 15, 2002. Thereafter, the Senior Notes will be subject to redemption at
any time at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on November 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002........................................................ 105.000%
2003........................................................ 103.333%
2004........................................................ 101.667%
2005 and thereafter......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or before November 15, 2000,
the Company may on any one or more occasions redeem up to 35% of the aggregate
principal amount of Senior Notes ever issued under
102
<PAGE> 107
the Indenture at a redemption price equal to 110% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the redemption date, with the net cash proceeds of an initial public
offering of common stock of the Company; provided that at least $130.0 million
in aggregate principal amount of Senior Notes remain outstanding immediately
after the occurrence of such redemption (excluding Senior Notes held by the
Company and its Subsidiaries) and provided, further, that such redemption shall
occur within 45 days of the date of the closing of such initial public offering.
SELECTION AND NOTICE
If less than all of the Senior Notes are to be redeemed at any time,
selection of Senior Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Senior Notes are listed, or, if the Senior Notes are not so
listed, on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate; provided that no Senior Notes of $1,000 or less shall be
redeemed in part. Notices of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each Holder of
Senior Notes to be redeemed at its registered address. Notices of redemption may
not be conditional. If any Senior Note is to be redeemed in part only, the
notice of redemption that relates to such Senior Note shall state the portion of
the principal amount thereof to be redeemed. A new Senior Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Senior Note. Senior Notes
called for redemption become due on the date fixed for redemption. On and after
the redemption date, interest ceases to accrue on Senior Notes or portions of
them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Senior Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, the Company will be required to
make an offer to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of each Holder's Senior Notes pursuant to the offer described
below (the "Change of Control Offer") at an offer price in cash equal to 101% of
the aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of purchase (the "Change of
Control Payment"). Within ten days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Senior Notes on
the date specified in such notice, which date shall be no earlier than 30 days
and no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by the Indenture and
described in such notice. The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Senior Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Senior Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Senior
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Company. The Paying Agent will promptly mail to
each Holder of Senior Notes so tendered the Change of Control Payment for such
Senior Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Senior Note equal in
principal amount to any unpurchased portion of the Senior Notes surrendered, if
any; provided that each such new Senior Note will be in a principal amount of
$1,000 or an integral multiple thereof. The
103
<PAGE> 108
Company will publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Senior Notes to require that the
Company repurchase or redeem the Senior Notes in the event of a takeover,
recapitalization or similar transaction.
The Company's other senior Indebtedness, including the New Credit
Agreement, contains prohibitions of certain events that would constitute a
Change of Control. In addition, the exercise by the Holders of Senior Notes of
their right to require the Company to repurchase the Notes could cause a default
under such other senior indebtedness, even if the Change of Control itself does
not, due to the financial effect of such repurchases on the Company. Finally,
the Company's ability to pay cash to the Holders of Senior Notes upon a
repurchase may be limited by the Company's then existing financial resources.
See "Risk Factors -- Potential Inability to Fund a Change of Control Offer."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Senior Notes validly tendered and not withdrawn under such Change
of Control Offer.
The definition of Change of Control set forth under "-- Certain
Definitions" includes a phrase relating to the sale, lease, transfer, conveyance
or other disposition of "all or substantially all" of the assets of the Company
and its Subsidiaries taken as a whole. Although there is a developing body of
case law interpreting the phrase "substantially all," there is no precise
established definition of the phrase under applicable law. Accordingly, the
ability of a Holder of Senior Notes to require the Company to repurchase such
Senior Notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of the Company and its Subsidiaries
taken as a whole to another Person or group may be uncertain.
Asset Sales
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests issued or sold or otherwise disposed
of and (ii) at least 85% of the consideration therefor received by the Company
or such Subsidiary is in the form of cash or Cash Equivalents; provided that the
amount of (x) any liabilities (as shown on the Company's or such Subsidiary's
most recent balance sheet), of the Company or any Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Senior Notes or any guarantee thereof) that are assumed by the transferee of
any such assets pursuant to a customary novation agreement that releases the
Company or such Subsidiary from further liability and (y) any securities, notes
or other obligations received by the Company or any such Subsidiary from such
transferee that are contemporaneously (subject to ordinary settlement periods)
converted by the Company or such Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 180 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds to the acquisition of a majority of
assets of, or a majority of the Voting Stock of, another Permitted Business, the
making of a capital expenditure or the acquisition of other long-term assets
that are used or useful in a Permitted Business, in each case, in the same line
of business as the Company was engaged in on the date of the Indenture. Pending
the final application of any such Net Proceeds, the Company may temporarily
reduce revolving credit borrowings under the Credit Facilities or otherwise
invest such Net Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0 million,
the Company will be required to make an offer to all Holders of Senior Notes and
Additional Senior Notes (an "Asset Sale Offer")
104
<PAGE> 109
to purchase the maximum principal amount of Senior Notes and Additional Senior
Notes that may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase,
in accordance with the procedures set forth in the Indenture. To the extent that
any Excess Proceeds remain after consummation of an Asset Sale Offer, the
Company may use such Excess Proceeds for any purpose not otherwise prohibited by
the Indenture. If the aggregate principal amount of Senior Notes and Additional
Senior Notes tendered into such Asset Sale Offer surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Senior Notes
and Additional Senior Notes to be purchased on a pro rata basis. Upon completion
of such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend
or make any other payment or distribution on account of the Company's or any of
its Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or any of
its Subsidiaries) or to the direct or indirect holders of the Company's or any
of its Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or to the Company or a Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any Affiliate of the Company
(other than any such Equity Interests owned by the Company or any Wholly Owned
Subsidiary of the Company); (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Senior Notes, except a payment of
interest or principal at Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described above under caption "-- Incurrence of Indebtedness
and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Subsidiaries after
the date of the Indenture (including all Restricted Payments permitted by
the next succeeding paragraph but excluding Restricted Payments permitted
by clauses (ii), (iii) and (iv) of the next succeeding paragraph), is less
than the sum, without duplication, of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after the date of the
Indenture to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is
a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
cash proceeds received by the Company from the issue or sale since the date
of the Indenture of Equity Interests of the Company (other than
Disqualified Stock) or of Disqualified Stock or debt securities of the
Company that have been converted into such Equity Interests (other than
Equity Interests (or Disqualified Stock or convertible debt securities)
sold to a Subsidiary of the Company and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified
Stock), plus (iii) to the extent that any Restricted Investment that was
made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid
105
<PAGE> 110
for cash, the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause
(c)(ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase
or other acquisition of subordinated Indebtedness with the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of
any dividend by a Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; and (v) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any Subsidiary of the Company held by any member of the Company's (or any of its
Subsidiaries') management, employees or consultants pursuant to any management,
employee or consultant equity subscription agreement or stock option agreement;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $500,000 in any
twelve-month period and no Default or Event of Default shall have occurred and
be continuing immediately after such transaction; and (vi) cash payments in lieu
of fractional shares issuable as dividends on preferred securities of the
Company or any of its Wholly Owned Subsidiaries; provided that such cash
payments shall not exceed $50,000 in the aggregate in any twelve-month period
and no Default or Event of Default shall have occurred and be continuing
immediately after such transaction.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments" were
computed, together with a copy of any fairness opinion or appraisal required by
the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock
(except that a Subsidiary of the Company may issue preferred stock to the
Company or to any Guarantor); provided, however, that the Company or any of the
Guarantors may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock, and any of the Guarantors may issue preferred stock, if, in
each case: the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock or preferred stock is issued would have been at least
2 to 1, determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom), as if the additional Indebtedness had been
incurred, or the Disqualified Stock or preferred stock had been issued, as the
case may be, at the beginning of such four-quarter period.
The Indenture also provides that the Company will not incur any
Indebtedness that is contractually subordinated in right of payment to any other
Indebtedness of the Company unless such Indebtedness is also contractually
subordinated in right of payment to the Senior Notes on substantially identical
terms; provided,
106
<PAGE> 111
however, that no Indebtedness of the Company shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of the Company solely
by virtue of being unsecured.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company (and the Guarantee thereof by the
Guarantors) of Indebtedness and letters of credit (with letters of credit
being deemed to have a principal amount equal to the maximum potential
liability of the Company and the Guarantors thereunder) under Credit
Facilities; provided that no more than $31.0 million in aggregate principal
amount of all Indebtedness outstanding under all Credit Facilities as of
the date of determination will constitute Permitted Debt (of which $6.0
million shall be permitted to be incurred only to finance insurance
premiums); provided further that the aggregate principal amount of all
Indebtedness outstanding under all Credit Facilities after giving effect to
such incurrence and the use of the proceeds therefrom does not exceed $56.0
million (of which $6.0 million shall be permitted to be incurred only to
finance insurance premiums);
(ii) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(iii) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Senior Notes (other than any Additional Senior Notes)
and the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the
Company or such Subsidiary, in an aggregate principal amount (including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any other Indebtedness incurred pursuant to this clause (iv)) not to exceed
$10.0 million at any time outstanding;
(v) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness to refinance any Indebtedness (other
than intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph hereof or clauses (ii) or (iv) of this
paragraph;
(vi) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Subsidiaries; provided, however, that (i) if the Company is the obligor on,
and a Guarantor is the borrower of, such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Senior Notes, (ii) if the Company is the
obligor on, and a Subsidiary that is not a Guarantor is the borrower of,
such Indebtedness, such Indebtedness is issued pursuant to the provisions
set forth in the covenant under the caption "-- Advances to Subsidiaries"
and (iii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Subsidiary of the Company and (B) any sale or other transfer
of any such Indebtedness to a Person that is not either the Company or a
Guarantor shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Subsidiary, as the case may be,
that was not permitted by this clause (vi);
(vii) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
(viii) Indebtedness incurred in respect of performance, surety and
similar bonds provided by the Company or its Subsidiaries in the ordinary
course of business, and refinancings thereof;
(ix) the Guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Subsidiary of the Company that was
permitted to be incurred by another provision of this covenant; and
(x) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all
107
<PAGE> 112
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any other Indebtedness incurred pursuant to this clause (x), not to exceed
$10.0 million.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (x) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant. Accrual of interest and accretion or
amortization of original issue discount will not be deemed to be an incurrence
of Indebtedness for purposes of this covenant; provided, in each such case, that
the amount thereof is included in Fixed Charges of the Company as accrued.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, enter into any sale and leaseback transaction; provided
that the Company may enter into a sale and leaseback transaction if (i) the
Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "-- Incurrence of Additional
Indebtedness and Issuance of Preferred Stock" and (b) incurred a Lien to secure
such Indebtedness pursuant to the covenant described above under the caption
"-- Liens," (ii) the gross cash proceeds of such sale and leaseback transaction
are at least equal to the fair market value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, the covenant described above under the caption
"-- Asset Sales."
Liens
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer
to exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries (1) on its Capital Stock
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries or (iii) transfer any of its properties or assets to the Company or
any of its Subsidiaries. However, the foregoing restrictions will not apply to
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the New Credit
Agreement as in effect as of the date of the Indenture and any amendments,
modifications, restatements, renewals, increases, supplements refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the New Credit Agreement as in effect on the date of the Indenture, (c) the
Indenture and the Senior Notes, (d) applicable law, (e) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (f) customary non-assignment provisions in leases, mineral rights,
licenses, royalties,
108
<PAGE> 113
encumbrances, contracts or similar assets entered into or acquired in the
ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) any agreement for the sale of a Subsidiary that
restricts distributions by that Subsidiary pending its sale, (i) Permitted
Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced, (j) secured Indebtedness otherwise permitted
to be incurred pursuant to the provisions of the covenant described above under
the caption "-- Liens" that limits the right of the debtor to dispose of the
assets securing such Indebtedness, (k) provisions with respect to the
disposition or distribution of assets or property in joint venture agreements
and other similar agreements entered into in the ordinary course of business and
(l) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Senior Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (iii) immediately
after such transaction no Default or Event of Default exists; and (iv) except in
the case of a merger of the Company with or into a Wholly Owned Subsidiary of
the Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "-- Incurrence
of Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing. Notwithstanding the foregoing, the
following items shall not be deemed to be Affiliate Transactions: (i)
transactions entered into pursuant to the terms of (a) the Haulage and Delivery
Agreement, (b) the Mitsui Marketing Agreement, (c) the MMI Service Agreement,
(d) the MMI Leases and (e) the Bowie Sales Agency Agreement, each as
109
<PAGE> 114
in effect on the date of the Indenture, (ii) any employment agreement entered
into by the Company or any of its Subsidiaries or any employee benefit plan
available to employees of the Company and its Subsidiaries generally, in each
case in the ordinary course of business and consistent with the past practice of
the Company or such Subsidiary, (iii) transactions between or among the Company
and/or its Subsidiaries, (iv) payment of reasonable directors fees to Persons
who are not otherwise Affiliates of the Company, and (v) Restricted Payments
that are permitted by the provisions of the Indenture described above under the
caption "-- Restricted Payments."
Limitation on Issuances and Sales of Equity Interests in Wholly Owned
Subsidiaries
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests in Wholly Owned Subsidiary of the
Company to any Person (other than the Company or a Wholly Owned Subsidiary of
the Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests in such Wholly Owned Subsidiary and
(b) the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with the covenant described above under
the caption "-- Asset Sales," and (ii) will not permit any Wholly Owned
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Wholly Owned Subsidiary of
the Company.
Business Activities
The Company will not, and will not permit any Subsidiary to, engage in any
business other than Permitted Businesses, except to such extent as would not be
material to the Company and its Subsidiaries taken as a whole.
Additional Subsidiary Guarantees
The Indenture provides that if the Company or any of its Subsidiaries
(other than Bowie) acquires or creates another Subsidiary after the date of the
Indenture, then such newly acquired or created Subsidiary shall become a
Guarantor and execute a Supplemental Indenture and deliver an Opinion of
Counsel, in accordance with the terms of the Indenture.
Advances to Subsidiaries
The Indenture provides that the Company will not make any advances or
capital contributions, transfer any assets, or otherwise become a creditor, to
any Subsidiary that is not a Wholly Owned Subsidiary (a "Borrowing Subsidiary")
unless (a) such advance, capital contribution, transfer or creditor arrangement
is made in the form of a senior secured loan to the Borrowing Subsidiary, (b)
the advance, capital contribution, transfer or creditor arrangement is evidenced
by a Subsidiary Intercompany Note in favor of the Company and (c) the Borrowing
Subsidiary has no other Indebtedness (other than Indebtedness evidenced by a
Subsidiary Intercompany Note) at the time the advance, capital contribution,
transfer or creditor arrangement is made or the Borrowing Subsidiary immediately
applies the advance to pay the entire principal of, and any premium and interest
on, all Indebtedness of the Borrowing Subsidiary in existence at the time the
advance is made. The Subsidiary Intercompany Notes will be payable upon demand,
will bear interest at the same rate as the Senior Notes, or such higher rate as
the Company may determine, and will be secured by a first priority Lien on all
of the assets of the Borrowing Subsidiary. A form of Subsidiary Intercompany
Note will be attached as an annex to the Indenture.
Notwithstanding the foregoing, a Subsidiary Intercompany Note will not be
required to be secured by a first priority Lien with respect to all or a portion
of the assets of the Borrowing Subsidiary if (i) such assets are subject to a
first priority Lien securing obligations of the Borrowing Subsidiary that do not
constitute Indebtedness under the Indenture (the "Secured Obligations") and such
Lien is in existence as of the date of issuance of the Subsidiary Intercompany
Note, (ii) the Company provides one or more letters of credit naming the
person(s) identified as the creditor(s) under the Lien securing the Secured
Obligations (or any
110
<PAGE> 115
person identified in writing to the Company by such creditor(s) under such Lien)
as beneficiary thereunder, and (iii) for each fiscal year of the Borrowing
Subsidiary that such Secured Obligations exist, such letters of credit are for
an aggregate amount sufficient to satisfy all payments under the Secured
Obligations becoming due and payable during such fiscal year.
The Indenture provides that the Company will not permit any Subsidiary in
respect of which the Company is a creditor by virtue of a Subsidiary
Intercompany Note to incur any Indebtedness other than Indebtedness to the
Company evidenced by a Subsidiary Intercompany Note. The Indenture requires that
each Subsidiary Intercompany Note be amended, and appropriate financing
statements be filed, simultaneous with any increases or decreases in the
aggregate principal amount outstanding thereunder, and the Indenture prohibits
any amendments of the material terms of any Subsidiary Intercompany Note, except
as may be required to conform the provisions of such instrument to the
provisions to be contained in a Subsidiary Intercompany Note as set forth in the
Indenture. The Indenture also requires the Company to pursue all remedies
available to it thereunder and to enforce fully its rights under the Subsidiary
Intercompany Note.
Use of Proceeds
The Indenture provides that the Company will be permitted to apply the
proceeds from the issuance and sale of the Senior Notes to (i) refinance
Indebtedness of the Company outstanding as of the date of the Indenture in an
aggregate principal amount not to exceed $74.0 million, (ii) purchase all of the
capital stock of Bowie owned by Harold Sergent for an aggregate amount not to
exceed $2.0 million, (iii) acquire certain promissory notes made by Bowie to The
Provident Bank, an Ohio banking corporation, in an aggregate principal amount
not to exceed $15.5 million as in existence on the date of the Indenture in
accordance with the terms of the Indenture, (iv) make advances to a Borrowing
Subsidiary pursuant to the terms of the Indenture, and (v) pay commissions and
expenses incurred in connection with the issuance and sale of the Senior Notes.
The Indenture provides further that the Company will not use any proceeds from
the issuance and sale of the Senior Notes that is not applied to the uses set
forth in clauses (i) through (v) of the preceding sentence (such unapplied
proceeds, the "Surplus Proceeds") for any purpose, except that the Company shall
be permitted to apply any Surplus Proceeds to (a) purchase the capital stock of
any company the principal business of which is coal mining, (b) purchase the
assets of any company that are used in coal mining, (c) purchase the capital
stock or assets of any company whose principal business consists of (A) the
ownership of intellectual property relating to coal mining equipment used by the
Company and (B) manufacturing and maintenance of such coal mining equipment, (d)
purchase additional coal mines, coal reserves, coal facilities and/or coal
supply contracts, (e) purchase equipment used in the coal mining business, (f)
fund development of coal mines, (g) fund coal mining related operating losses
and expenses and (h) pay interest on the Senior Notes on the first two Interest
Payment Dates. Notwithstanding the foregoing, until such time as any Surplus
Proceeds are applied to any of the permitted uses set forth in clauses (a)
through (h) of the preceding sentence, such Surplus Proceeds may be invested in
Cash Equivalents or in such other financial instruments as the Indenture may
specify.
Payments for Consent
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Senior Notes for or
as an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Senior Notes unless such consideration is
offered to be paid or is paid to all Holders of the Senior Notes that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Senior Notes are outstanding, the
Company will furnish to the Holders of Senior Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a
111
<PAGE> 116
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants, (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Company were required to file such reports and (iii) at least annually, an
engineering report with respect to the Company's estimated coal reserves, in
each case within the time periods specified in the Commission's rules and
regulations. In addition, following the consummation of the Exchange Offer,
whether or not required by the rules and regulations of the Commission, the
Company will file a copy of all such information and reports with the Commission
for public availability within the time periods specified in the Commission's
rules and regulations (unless the Commission will not accept such a filing) and
make such information available to securities analysts and prospective investors
upon request. In addition, the Company and the Guarantors have agreed that, for
so long as any Senior Notes are Transfer Restricted Securities, they will
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Senior Notes; (ii) default in payment
when due of the principal of or premium, if any, on the Senior Notes; (iii)
failure by the Company or any of its Subsidiaries to comply with the provisions
described under the captions "-- Change of Control," "-- Asset Sales,"
"-- Restricted Payments" or "-- Incurrence of Indebtedness and Issuance of
Preferred Stock"; (iv) failure by the Company or any of its Subsidiaries for 60
days after notice from the Trustee or the Holders of at least 25% of the Senior
Notes and Additional Senior Notes then outstanding to comply with any of its
other agreements in the Indenture or the Senior Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Subsidiaries) whether such Indebtedness or guarantee
existed as of the date of the Indenture or is created thereafter, which default
(a) is caused by a failure to pay principal of or premium, if any, or interest
on such Indebtedness prior to the expiration of the grace period provided in
such Indebtedness on the date of such default (a "Payment Default") or (b)
results in the acceleration of such Indebtedness prior to its express maturity
and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$5.0 million or more; (vi) failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $5.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days; (vii) except as
permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Guarantor, or any Person acting on behalf
of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary
Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to
the Company or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior Notes
may declare all the Senior Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding Senior Notes will become
due and payable without further action or notice. Holders of the Senior Notes
may not enforce the Indenture or the Senior Notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Senior Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest) if
it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the
112
<PAGE> 117
Company would have had to pay if the Company then had elected to redeem the
Senior Notes pursuant to the optional redemption provisions of the Indenture, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Senior Notes. If an Event
of Default occurs prior to November 15, 2002 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Senior Notes prior to November
15, 2002, then the premium specified in the Indenture shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of the Senior Notes.
The Holders of a majority in aggregate principal amount of the Senior Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Senior Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Senior Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Senior Notes, the Indenture or the Subsidiary Guarantees or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of Senior Notes by accepting a Senior Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Senior Notes. Such waiver may not be effective to waive liabilities under
the federal securities laws and it is the view of the Commission that such a
waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Senior Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Senior Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Senior Notes when such payments are due from the
trust referred to below, (ii) the Company's obligations with respect to the
Senior Notes concerning issuing temporary Senior Notes, registration of Senior
Notes, mutilated, destroyed, lost or stolen Senior Notes and the maintenance of
an office or agency for payment and money for security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and the
Company's obligations in connection therewith and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and at
any time, elect to have the obligations of the Company released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not constitute
a Default or Event of Default with respect to the Senior Notes. In the event
Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Senior Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Senior Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Senior Notes on the stated maturity or on
the applicable redemption date, as the case may be, and the Company must specify
whether the Senior Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of the Indenture, there has been a change in the applicable
113
<PAGE> 118
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the Holders of the outstanding
Senior Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Senior Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the borrowing of funds to be applied
to such deposit) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day after the
date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Senior Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Senior Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Senior Note selected for redemption. Also, the Company is not required to
transfer or exchange any Senior Note for a period of 15 days before a selection
of Senior Notes to be redeemed.
The registered Holder of a Senior Note will be treated as the owner of it
for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture,
the Senior Notes or the Subsidiary Guarantees may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Senior Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Senior Notes), and any existing default or compliance with any provision of
the Indenture, the Senior Notes or the Subsidiary Guarantees may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Senior Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Senior
Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Senior Notes held by a non-consenting Holder): (i) reduce
the principal amount of Senior Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Senior Note or alter the provisions with respect to the redemption of the
Senior Notes (other than provisions relating to the covenants described above
under the caption "-- Repurchase at the Option of Holders"), (iii) reduce the
rate of or change the time for payment of interest on any Senior Note, (iv)
waive a Default or Event of Default in the payment of principal of or premium,
if any, or interest on the Senior Notes (except a rescission of acceleration of
the Senior Notes by the Holders of at least a majority in aggregate
114
<PAGE> 119
principal amount of the Senior Notes and a waiver of the payment default that
resulted from such acceleration), (v) make any Senior Note payable in money
other than that stated in the Senior Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Senior Notes to receive payments of principal of or premium, if
any, or interest on the Senior Notes, (vii) waive a redemption payment with
respect to any Senior Note (other than a payment required by one of the
covenants described above under the caption "-- Repurchase at the Option of
Holders"), (viii) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or the Indenture, except in accordance with the terms of
the Indenture, or (ix) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any Holder of Senior
Notes, the Company, the Guarantors and the Trustee may amend or supplement the
Indenture, the Senior Notes or the Subsidiary Guarantees to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Senior Notes in addition
to or in place of certificated Senior Notes, to provide for the assumption of
the Company's or a Guarantor's obligations to Holders of Senior Notes in the
case of a merger or consolidation or sale of all or substantially all of the
Company's assets, to make any change that would provide any additional rights or
benefits to the Holders of Senior Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding
Senior Notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee,
subject to certain exceptions. The Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Senior Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
BOOK-ENTRY DELIVERY AND FORM
The certificates representing the Exchange Notes will be issued in fully
registered form. Except as described in the next paragraph, the Exchange Notes
initially will be represented by a single, permanent global Exchange Note, in
definitive, fully registered form without interest coupons (the "Global Exchange
Note") and will be deposited with the Trustee as custodian for The Depository
Trust Company, New York, New York ("DTC") and registered in the name of a
nominee of DTC.
Exchange Notes held by persons who elect to take physical delivery of their
certificates instead of holding their interest through the Global Exchange Note
(collectively referred to herein as the "Non-Global Holders") will be issued in
registered certificated form (a "Certificated Exchange Note"). Upon the transfer
of any Certificated Exchange Note initially issued to a Non-Global Holder, such
Certificated Exchange Note will, unless the transferee requests otherwise or a
Global Exchange Note has previously been exchanged in whole for Certificated
Exchange Notes, be exchanged for an interest in such Global Exchange Note.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provision of Section 17A of the
115
<PAGE> 120
Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly ("indirect participants").
Upon the issuance of the Global Exchange Note, DTC or its custodian will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Exchange Note to the
accounts of persons who have accounts with such depositary. Ownership of
beneficial interests in the Global Exchange Note will be limited to persons who
have accounts with DTC ("participants") or persons who hold interests through
participants. Ownership of beneficial interests in the Global Exchange Note will
be shown on, and the transfer of that ownership will be effected only through,
records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants). Holders are advised that the laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer Exchange Notes
evidenced by the Global Exchange Note is limited to such extent. For certain
restrictions on the transferability of the Old Notes, see "The Exchange
Offer -- Consequences of Failure to Exchange."
So long as DTC or its nominee is the registered owner or holder of the
Global Exchange Note, DTC or such nominee, as the case may be, will be
considered the sole record owner or holder of the Exchange Notes represented by
such Global Exchange Note for all purposes under the Indenture and the Exchange
Notes. No beneficial owners of an interest in the Global Exchange Note will be
able to transfer that interest except in accordance with DTC's applicable
procedures.
The Company understands that, under existing industry practices, in the
event that the Company requests any action of holders, or an owner of a
beneficial interest in such permanent Global Exchange Note desires to give or
take any action (including a suit for repayment of principal, premium or
interest) that a holder is entitled to give or take under the Exchange Notes,
DTC would authorize the participants holding the relevant beneficial interests
to give or take such action, and such participants would authorize beneficial
owners owning through such participants to give or take such action or would
otherwise act upon the instruction of beneficial owners owning through them.
Payments of the principal of, premium, if any, and interest on the Global
Exchange Note will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither the Company, the Trustee, nor any paying agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Exchange Note or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global Exchange Note
will credit participants' accounts with payments in amounts proportionate to
their respective beneficial ownership interests in the principal amount of such
Global Exchange Note, as shown on the records of DTC or its nominee. The Company
also expects that payments by participants to owners of beneficial interests in
such Global Exchange Note held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a holder requires physical delivery of
Certificated Exchange Notes for any reason, including to sell Exchange Notes to
persons in states which require such delivery of such Exchange Notes or to
pledge such Exchange Notes, such holder must transfer its interest in the Global
Exchange Note, in accordance with the normal procedures of DTC and the
procedures set forth in the Indenture.
116
<PAGE> 121
Neither the Company nor the Trustee will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
Subject to certain conditions, any person having a beneficial interest in
the Global Exchange Note may, upon request to the Trustee, exchange such
beneficial interest for Exchange Notes in the form of Certificated Exchange
Notes. Upon any such issuance, the Trustee is required to register such
Certificated Exchange Notes in the name of, and cause the same to be delivered
to, such person or persons (or the nominee of any thereof). In addition, if DTC
is at any time unwilling or unable to continue as a depositary for the Global
Exchange Note and a successor depositary is not appointed by the Company within
90 days, the Company will issue Certificated Exchange Notes in exchange for the
Global Exchange Note.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchaser entered into the Registration Rights
Agreement as of the Closing Date. Pursuant to the Registration Rights Agreement,
the Company agreed to file with the Commission this Registration Statement on
the appropriate form under the Securities Act with respect to the Old Notes (the
"Exchange Offer Registration Statement"). Upon the effectiveness of such
Exchange Offer Registration Statement, the Company will offer to the holders of
Transfer Restricted Securities, pursuant to the Exchange Offer, who are able to
make certain representations the opportunity to exchange their Transfer
Restricted Securities for Exchange Notes. If (i) the Company is not required to
file an Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any holder of Transfer Restricted Securities notifies
the Company on or prior to the 20th business day following consummation of the
Exchange Offer that (A) it is prohibited by law or Commission policy from
participating in the Exchange Offer, (B) it may not resell the Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and this Prospectus is not appropriate or available for such resales,
or (C) it is a broker-dealer and owns Old Notes acquired directly from the
Company or an affiliate of the Company, the Company will file with the
Commission a Shelf Registration Statement to cover resales of the Old Notes by
the holders thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement. The Company
will use all commercially reasonable efforts to cause the applicable
registration statement to be declared effective as promptly as possible by the
Commission.
The Registration Rights Agreement provides that (i) the Company will file
an Exchange Offer Registration Statement with the Commission on or prior to 90
days after the Closing Date, (ii) the Company will use all commercially
reasonable efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 120 days after the Closing Date,
(iii) unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Company will commence the Exchange Offer and use all
commercially reasonable efforts to issue on or prior to 30 business days after
the date on which the Exchange Offer Registration Statement was declared
effective by the Commission, Exchange Notes in exchange for all Old Notes
properly tendered prior thereto in the Exchange Offer, and (iv) if obligated to
file the Shelf Registration Statement, the Company will use all commercially
reasonable efforts to file the Shelf Registration Statement with the Commission
on or prior to 30 days after such filing obligation arises (and in any event
within 150 days after the Closing Date) and to cause the Shelf Registration
Statement to be declared effective by the Commission on or prior to 60 days
after such obligation arises. If (a) the Company fails to file any of the
registration statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such registration
statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Company fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
then the Company will pay liquidated damages ("Liquidated Damages") to each
holder of Transfer
117
<PAGE> 122
Restricted Securities, with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to $.05
per week per $1,000 principal amount of Old Notes constituting Transfer
Restricted Securities held by such holder. The amount of the Liquidated Damages
will increase by an additional $.05 per week per $1,000 principal amount
constituting Transfer Restricted Securities with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages of $.50 per week per $1,000 principal amount of Old
Notes constituting Transfer Restricted Securities. All accrued Liquidated
Damages will be paid by the Company on each Damages Payment Date to the Global
Exchange Note holder by wire transfer of immediately available funds or by
federal funds check and to holders of Certificated Exchange Notes by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Old Notes are required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and are required to deliver information to be
used in connection with the Shelf Registration Statement and to provide comments
on the Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Old Notes included in the
Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
ADDITIONAL INFORMATION
The Company is not currently subject to the periodic reporting and other
informational requirements of the Exchange Act, but has agreed to file certain
such reports and information with the Commission so long as any Senior Notes are
outstanding. Anyone who receives this Prospectus may obtain a copy of the
Indenture and the Registration Rights Agreement without charge by writing to AEI
Holding Company, Inc., 1500 North Big Run Road, Ashland, Kentucky, 41102,
Attention: Treasurer/Controller. See "Available Information."
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of coal in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "-- Change of Control" and/or the
provisions described above under the caption "-- Merger, Consolidation or Sale
of Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Company or any of its Subsidiaries of Equity Interests of
any of the Company's Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value (as determined in good faith by
118
<PAGE> 123
the Board of Directors) in excess of $1.0 million or (b) for net proceeds in
excess of $1.0 million. Notwithstanding the foregoing, the following items shall
not be deemed to be Asset Sales: (i) a transfer of assets by the Company to a
Guarantor or by a Guarantor to the Company or to another Guarantor, (ii) an
issuance of Equity Interests by a Guarantor to the Company or to another
Guarantor, and (iii) a Restricted Payment that is permitted by the covenant
described above under the caption "-- Restricted Payments."
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Board of Directors" means the board of directors of the Company.
"Borrowing Base" means, as of any date, an amount equal to the sum of 90%
of the face amount of all accounts receivable that are not more than 90 days
past due and 60% of all Coal Stockpile Inventory, in each case owned by the
Company and its Subsidiaries as of such date and calculated on a consolidated
basis and in accordance with GAAP. To the extent that information is not
available as to the amount of accounts receivable or inventory as of a specific
date, the Company may utilize the most recent available information for purposes
of calculating the Borrowing Base.
"Bowie Sales Agency Agreement" means that certain agreement dated as of
January 30, 1997 between Bowie Sales LLC and Bowie, as the same may be extended
or renewed from time to time without alteration of the material terms thereof.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500.0 million and a Thompson Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition and (vi) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i)-(v) of this
definition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than a Principal or a Related Party of a Principal, (ii) the adoption
of a plan relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
119
<PAGE> 124
Act, except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
currently exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares), or (iv) the
Company consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where the Voting Stock of the Company
outstanding immediately prior to such transaction is converted into or exchanged
for Voting Stock (other than Disqualified Stock) of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting Stock of
such surviving or transferee Person (immediately after giving effect to such
issuance). For purposes of this definition, any transfer of an equity interest
of an entity that was formed for the purpose of acquiring Voting Stock of the
Company will be deemed to be a transfer of such portion of such Voting Stock as
corresponds to the portion of the equity of such entity that has been so
transferred.
"Coal Stockpile Inventory" means the inventory presented in the line item
"coal stockpile inventory" calculated in accordance with GAAP and set forth on
the detailed balance sheet in the Company's unaudited financial statements for
the Company's most recently ended fiscal quarter for which internal financial
statements are available immediately preceding the date of determination.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation, depletion,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, depletion, amortization were deducted in computing such
Consolidated Net Income, minus (v) non-cash items increasing such Consolidated
Net Income for such period, minus (vi) consolidated capital expenditures of such
Person for such period, in each case, without duplications and on a consolidated
basis and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation,
depletion and amortization expenses of, a Subsidiary of the referent Person
shall be added to Consolidated Net Income to compute Consolidated Cash Flow only
to the extent (and in the same proportion) that the Net Income of such
Subsidiary was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Indebtedness" of any Person as of any date of determination
means the sum, without duplication, of (i) the total amount of Indebtedness of
such Person and its Subsidiaries, plus (ii) the total amount of Indebtedness of
another Person, to the extent that such Indebtedness has been Guaranteed by the
referent Person or one of its Subsidiaries, plus (iii) the aggregate liquidation
value of all Disqualified Stock of such Person and all preferred stock of any
Subsidiary of such Person, in each case, determined on a consolidated basis in
accordance with GAAP.
120
<PAGE> 125
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
referent Person or a Wholly Owned Subsidiary thereof that is a Guarantor, (ii)
the Net Income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded and (iv) the cumulative effect of
a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities (including, without limitation, the New Credit Agreement) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable, at the option of the holder thereof) or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Senior Notes mature; provided, however, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with the covenant described above
under the caption "-- Certain Covenants -- Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means the aggregate principal amount of
Indebtedness of the Company and its Subsidiaries (other than Indebtedness under
the New Credit Agreement and Indebtedness incurred to finance insurance
premiums) in existence on the date of the Indenture, until such amounts are
repaid.
121
<PAGE> 126
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations) and (ii) the consolidated interest of such Person and
its Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by such Person or
one of its Subsidiaries or secured by a Lien on assets of such Person or one of
its Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv)
the product of (a) all dividend payments, whether or not in cash, on any series
of preferred stock of such Person or any of its Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests of the
Company (other than Disqualified Stock) or to the Company or a Subsidiary of the
Company, times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on a
consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
referent Person or any of its Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guarantors" means each of (i) Addington Mining, Tennessee Mining and
Ikerd-Bandy and (ii) any other Subsidiary that executes a Subsidiary Guarantee
in accordance with the provisions of the Indenture, and their respective
successors and assigns.
122
<PAGE> 127
"Haulage and Delivery Agreement" means that certain agreement dated as of
October 22, 1997 between the Company and TASK, as the same may be extended or
renewed from time to time without alteration of the material terms thereof.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with the original issue discount, and
(ii) the principal amount thereof, together with any interest thereon that is
more than 30 days past due, in the case of any other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "-- Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Mitsui Marketing Agreement" means that certain agreement dated as of
January 30, 1997 between Mitsui Matsushima Co. Ltd. and Bowie, as the same may
be extended or renewed from time to time without alteration of the material
terms thereof.
"MMI Service Agreement" means that certain agreement dated as of October
22, 1997 between MMI and the Company, as the same may be extended or renewed
from time to time without alteration of the material terms thereof.
"MMI Leases" means all equipment leases between the Company and its
Subsidiaries and MMI in existence as of the date of the Indenture; provided that
MMI Leases shall not include any extension, renewal, exercise of option or
modification of any equipment lease between the Company and its Subsidiaries and
MMI.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however,
123
<PAGE> 128
(i) any gain (but not loss), together with any related provision for taxes on
such gain (but not loss), realized in connection with (a) any Asset Sale
(including, without limitation, dispositions pursuant to sale and leaseback
transactions) or (b) the disposition of any securities by such Person or any of
its Subsidiaries or the extinguishment of any Indebtedness of such Person or any
of its Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not
loss), together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the Credit Facilities) secured by a Lien on the
asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"New Credit Agreement" means that certain credit agreement, dated as of the
date of the Indenture, by and among the Company, the Guarantors and NationsBank
of Texas, N.A., as agent and lender, providing for up to $50.0 million of
revolving credit borrowings, including any related notes, guarantees,
collateral, letters of credit, documents, instruments and agreements executed in
connection therewith, and in each case as amended, extended, modified, renewed,
refunded, replaced or refinanced from time to time.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means coal producing, coal mining, coal brokering or
mine development, or any business that is reasonably similar thereto or a
reasonable extension, development or expansion thereof or ancillary thereto
(including ash disposal and/or environmental remediation).
"Permitted Investments" means (a) any Investment in the Company or in any
Guarantor; (b) any Investment in Bowie by the Company or any Guarantor that is
permitted by the covenant described above under the caption "-- Certain
Covenants -- Advances to Subsidiaries"; (c) any Investment in Cash Equivalents;
(d) any Investment by the Company or any Guarantor in a Person, if as a result
of such Investment (i) such Person becomes a Wholly Owned Subsidiary of the
Company and a Guarantor or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Guarantor; (e) any Investment
made as a result of the receipt of non-cash consideration from an Asset Sale
that was made pursuant to and in compliance with the covenant described above
under the caption "-- Repurchase at the Option of Holders -- Asset Sales"; (f)
any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company and (g) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (g) that are at the time outstanding, not to exceed $5.0 million.
"Permitted Liens" means (i) Liens on assets of the Company and its
Subsidiaries securing Indebtedness under the Credit Facilities that was
permitted by the terms of the Indenture to be incurred; (ii) Liens in favor of
the Company; (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company or such Subsidiary;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory or regulatory obligations, leases, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (vi) Liens to secure Indebtedness (including
Capital Lease Obligations) permitted by clause (iv) of the second paragraph of
the covenant entitled "Incurrence of
124
<PAGE> 129
Indebtedness and Issuance of Preferred Stock" covering only the assets acquired
with such Indebtedness; (vii) Liens existing on the date of the Indenture;
(viii) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (ix) Liens on assets of any Guarantor to
secure senior Indebtedness of such Guarantor that was permitted by the Indenture
to be incurred; and (x) Liens incurred in the ordinary course of business of the
Company or any Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Subsidiaries (other than intercompany
Indebtedness); provided that: (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus accrued interest
on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Senior
Notes, such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of payment to, the
Senior Notes on terms at least as favorable to the Holders of Senior Notes as
those contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Principals" means Larry Addington, Bruce Addington and Robert Addington.
"Related Party" with respect to any Principal means (A) any controlling
stockholder of such Principal, any 80% (or more) owned Subsidiary of such
Principal, or in the case of an individual, any spouse or immediate family
member of such Principal or (B) any trust, corporation, partnership or other
entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist of
such Principal and/or such other Persons referred to in the immediately
preceding clause (A).
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
125
<PAGE> 130
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Intercompany Notes" means one or more intercompany promissory
notes in favor of the Company issued by any Subsidiary that is not a Wholly
Owned Subsidiary of the Company to evidence advances or obligations arising in
connection with capital contributions, transfers of assets or creditor
arrangements by the Company; provided that the aggregate principal amount
outstanding at any time pursuant to all Subsidiary Intercompany Notes shall not
exceed $60.0 million.
"Voting Stock" means, with respect to any Person as of any date, the
Capital Stock of such Person that is at the time entitled to vote in the
election of the Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
126
<PAGE> 131
DESCRIPTION OF NEW CREDIT FACILITY
GENERAL
The Company has entered into a Loan and Security Agreement (the "New Credit
Agreement") with NationsBank of Texas, N.A., as administrative agent (the
"Agent"), and other lending institutions party thereto (the "Lenders"), which
New Credit Agreement shall provide the Company with a $50.0 million credit
facility (the "New Credit Facility"), guaranteed by the Guarantors. The New
Credit Facility includes a $5.0 million sub-limit for the issuance of standby
letters of credit (the "Letters of Credit"). See "Use of Proceeds." This
information relating to the New Credit Facility is qualified in its entirety by
reference to the complete text of the documents entered into or to be entered
into in connection therewith. The following is a description of the general
terms of the New Credit Facility.
SECURITY
Indebtedness of the Company under the New Credit Facility is secured by a
first priority perfected security interest in all of the capital stock of the
Company, 77.5% of the capital stock of Bowie and all the capital stock of each
of the subsidiaries (direct or indirect) of the Company, other than Bowie, which
capital stock may not be subject to any other lien or encumbrance. The Agent (on
behalf of the Lenders) also received a first priority perfected security
interest in all other present and future assets and properties of the Company
and its subsidiaries, except for Bowie (including, without limitation, accounts
receivable, inventory, real property, leasehold interests, machinery, equipment,
rolling stock, contracts, trademarks, copyrights, patents, license agreements
and general intangibles). In the event that Bowie receives any proceeds under
the New Credit Facility ("Bowie Loans"), such Bowie Loans shall be evidenced by
a promissory note executed by Bowie in favor of the Company in a form acceptable
to the Agent (the "Bowie Note") and shall be secured by liens on all of the
present and future assets of Bowie. The Bowie Note and such liens shall be
pledged to the Agent and the Lenders.
INTEREST
Indebtedness under the New Credit Facility bears interest at a rate equal
to (i) LIBOR plus the Applicable Margin, or (ii) the Alternate Base Rate
(defined as the higher of (a) the NationsBank prime rate and (b) the Federal
Funds rate plus .50% plus the Applicable Margin); provided that if, prior to 180
days after closing, any breakage costs, charges or fees are incurred with
respect to LIBOR loans on account of the syndication of the New Credit Facility,
the Company shall immediately reimburse the Agent for any such costs, charges or
fees.
The Company may select interest periods of one, two, three or six months
for LIBOR loans, subject to availability.
BORROWING BASE
Advances under the New Credit Facility will be limited to a borrowing base.
MATURITY
The New Credit Facility will terminate and all amounts outstanding
thereunder will be due and payable on the fifth anniversary of the date of the
New Credit Agreement.
GUARANTEES
All guarantees of the Guarantors shall be guarantees of payment and not of
collection.
FEES
The Company is required to pay to the Lenders in the aggregate a commitment
fee equal to between 25 and 50 basis points depending on the Company's net debt
to EBITDA ratio. The Agent and the Banks shall
127
<PAGE> 132
receive such other fees as have been separately agreed upon with the Agent,
including, without limitation, in respect of Letters of Credit.
LETTERS OF CREDIT SUBFACILITY
Letters of Credit may be issued up to a maximum aggregate amount at any one
time outstanding not to exceed $5.0 million.
CONDITIONS TO CLOSING AND EXTENSIONS OF CREDIT
The obligation of the Lenders to make loans or extend Letters of Credit
will be subject to the satisfaction of certain customary conditions including,
but not limited to: (i) the absence of a default or event of default under the
New Credit Agreement; (ii) all representations and warranties under the New
Credit Agreement being true and correct in all material respects; and (iii) the
absence of a material adverse change.
PURPOSE
The proceeds of the New Credit Facility shall be used: (i) for working
capital, capital expenditures, and other lawful corporate purposes; (ii) to
refinance certain approved existing indebtedness; and (iii) to finance permitted
acquisitions.
COVENANTS
The New Credit Agreement contains customary covenants of the Company and
the Guarantors, including, without limitation, restrictions on: (i) the
incurrence of debt; (ii) the sale of assets; (iii) mergers, acquisitions and
other business combinations; (iv) voluntary prepayment of other debt of the
Company; (v) transactions with affiliates; (vi) investments, as well as
prohibitions on the payment of dividends to, or the repurchase or redemption of
stock from shareholders; and (vii) various financial covenants, including
covenants requiring the maintenance of fixed charge coverage and maximum funded
debt to EBITDA ratios.
EVENTS OF DEFAULT; REMEDIES
The New Credit Agreement contains customary events of default under the New
Credit Facility, including, without limitation: (i) the non-payment of
principal, interest, fees or other amounts when due under the notes issued in
connection with the New Credit Facility or, subject to applicable grace periods
in certain circumstances, upon the non-fulfillment of the covenants described
above; (ii) certain changes in control of the ownership of the Company; (iii)
cross-defaults to certain other indebtedness; (iv) certain events of bankruptcy
and insolvency; (v) the Employee Retirement Income Security Act of 1974
("ERISA"); (vi) judgment defaults; and (vii) failure of any guaranty or security
agreement supporting the New Credit Agreement to be in full force and effect. If
any such event of default occurs, the Agent will be entitled, on behalf of the
Lenders, to take all actions permitted to be taken by a secured creditor under
the Uniform Commercial Code and to accelerate the amounts due under the New
Credit Facility and may require all such amounts outstanding thereunder to be
immediately paid in full.
INDEMNIFICATION
Under the New Credit Agreement, the Company has agreed to indemnify the
Lenders from and against any and all losses, liabilities, claims, damages or
expenses (including, without limitation, reasonable attorneys' fees and
settlement costs) relating to its loans, the Company's use of loan proceeds or
the commitments, provided that the Company is not liable for any such losses,
liabilities, claims, damages or expenses resulting from such indemnified party's
own gross negligence or willful misconduct. Finally, the New Credit Agreement
will contain customary provisions protecting the Lenders in the event of
unavailability of funding, illegality, capital adequacy requirements, increased
costs, withholding taxes and funding losses.
128
<PAGE> 133
OPTIONAL PREPAYMENTS AND COMMITMENT REDUCTIONS
The Borrower may prepay the New Credit Facility in whole or in part at any
time without penalty, subject to reimbursement of the Lenders' breakage and
redeployment costs in the case of prepayment of LIBOR borrowings.
129
<PAGE> 134
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS
The following is a general discussion of certain United States federal
income and estate tax consequences of the acquisition, ownership and disposition
of Senior Notes by an initial beneficial owner of Senior Notes that, for United
States federal income tax purposes, is not a "United States person" (a
"Non-United States Holder"). This discussion is based upon the United States
federal tax law now in effect, which is subject to change, possibly
retroactively. For purposes of this discussion, a "United States person" means a
citizen or resident of the United States, a corporation, partnership or other
entity created or organized in the United States or under the laws of the United
States or of any political subdivision thereof, an estate whose income is
includible in gross income for United States federal income tax purposes
regardless of its source or a trust, if a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons
have the authority to control all substantial decisions of the trust. The tax
treatment of the holders of the Senior Notes may vary depending upon their
particular situations. U.S. persons acquiring the Senior Notes are subject to
different rules than those discussed below. In addition, certain other holders
(including insurance companies, tax exempt organizations, financial institutions
and broker-dealers) may be subject to special rules not discussed below.
Prospective investors are urged to consult their tax advisors regarding the
United States federal tax consequences of acquiring, holding and disposing of
Senior Notes, as well as any tax consequences that may arise under the laws of
any foreign, state, local or other taxing jurisdiction. New final regulations
dealing with withholding tax on income paid to foreign persons and related
matters (the "New Withholding Regulations") were recently issued by the Treasury
Department. In general, the New Withholding Regulations do not significantly
alter the substantive withholding and information reporting requirements, but
unify current certification procedures and forms and clarify reliance standards.
The New Withholding Regulations will generally be effective for payments made
after December 31, 1998, subject to certain transition rules. Accordingly,
payments made on or before December 31, 1998 will continue to be subject to the
regulations that existed before the New Withholding Regulations were issued. THE
NEW WITHHOLDING REGULATIONS ARE QUITE COMPLEX. THE NON-UNITED STATES HOLDERS ARE
STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE NEW
WITHHOLDING REGULATIONS.
INTEREST
Interest paid by the Company to a Non-United States Holder will not be
subject to United States federal income or withholding tax if such interest is
not effectively connected with the conduct of a trade or business within the
United States by such Non-United States Holder and such Non-United States Holder
(i) does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company; (ii) is not a controlled
foreign corporation with respect to which the Company is a "related person"
within the meaning of the United States Internal Revenue Code of 1986, as
amended (the "Code") and (iii) certifies, under penalties of perjury, that such
holder is not a United States person and provides such holder's name and
address. Under the New Withholding Regulations, the statement is required to be
made on Form W-8 and provided prior to payment. For a Non-United States Holder
who is claiming the benefits of a tax treaty, the New Withholding Regulations
may require such holder to obtain a U.S. taxpayer identification number and to
provide certain documentary evidence issued by foreign governmental authorities
to prove residence in the foreign country. Certain special procedures are
provided in the New Withholding Regulations for payments through qualified
intermediaries.
GAIN ON DISPOSITION
A Non-United States Holder will generally not be subject to United States
federal income tax on gain recognized on a sale, redemption or other disposition
of a Senior Note unless (i) the gain is effectively connected with the conduct
of a trade or business within the United States by the Non-United States Holder
or (ii) in the case of a Non-United States Holder who is a nonresident alien
individual and holds the Senior Note as a capital asset, such holder is present
in the United States for 183 or more days in the taxable year and certain other
requirements are met.
130
<PAGE> 135
FEDERAL ESTATE TAXES
If interest on the Senior Notes is exempt from withholding of United States
federal income tax under the rules described above, the Senior Notes will not be
included in the estate of a deceased Non-United States Holder for United States
federal estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For payments made on or before December 31, 1998, the Company will, where
required, report to the holders of Senior Notes and the Internal Revenue Service
the amount of any interest paid on the Senior Notes in each calendar year and
the amounts of tax withheld, if any, with respect to such payments.
In the case of payments of interest to Non-United States Holders, temporary
Treasury regulations provide that the 31% backup withholding tax and certain
information reporting will not apply to such payments with respect to which
either the requisite certification, as described above, has been received or an
exemption has otherwise been established; provided that neither the Company nor
its payment agent has actual knowledge that the holder is a United States person
or that the conditions of any other exemption are not in fact satisfied. Under
temporary Treasury regulations, these information reporting and backup
withholding requirements will apply, however, to the gross proceeds paid to a
Non-United States Holder on the disposition of the Senior Notes by or through a
United States office of a United States or foreign broker, unless the holder
certifies to the broker under penalties of perjury as to its name, address and
status as a foreign person or the holder otherwise establishes an exemption.
Information reporting requirements, but not backup withholding, will also apply
to a payment of the proceeds of a disposition of the Senior Notes by or through
a foreign office of a United States broker or foreign brokers with certain types
of relationships to the United States unless such broker has documentary
evidence in its file that the holder of the Senior Notes is not a United States
person, and such broker has no actual knowledge to the contrary, or the holder
establishes an exception. Neither information reporting nor backup withholding
generally will apply to a payment of the proceeds of a disposition of the Senior
Notes by or through a foreign office of a foreign broker not subject to the
preceding sentence.
The New Withholding Regulations provide that to the extent a Non-United
States Holder certifies on Form W-8 (or a permitted substitute form) as to such
holder's status as a foreign person, the backup withholding provisions and the
information reporting provisions will generally not apply. If a Non-United
States Holder fails to provide such certification, such holder may be subject to
certain information reporting and the 31% backup withholding tax.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the Internal Revenue Service.
131
<PAGE> 136
PLAN OF DISTRIBUTION
Any broker-dealer who holds Transfer Restricted Securities that were
acquired for the account of such broker-dealer as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Company or any of its affiliates) may
exchange such Transfer Restricted Securities pursuant to the Exchange Offer.
Each broker-dealer that receives Exchange Notes for its own account pursuant to
the Exchange Offer (each, a "Participating Broker-Dealer") must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a Participating Broker-Dealer in connection with resales of
Exchange Notes received in exchange for Old Notes where such Old Notes were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities (other than directly from the Company or
any of its affiliates). To the extent any Participating Broker-Dealer notifies
the Company, or causes the Company to be notified in writing that such
Participating Broker-Dealer is a Restricted Broker-Dealer, the Company has
agreed that for a period of one year from the date on which the Exchange Offer
is consummated or such shorter period as will end when all Transfer Restricted
Securities covered by the Exchange Offer Registration Statement have been sold
pursuant thereto, it will make this Prospectus, as amended or supplemented,
available to any Restricted Broker-Dealer for use in connection with any resale
of Exchange Notes, and will promptly send additional copies of this Prospectus
and any amendment or supplement to this Prospectus to any such Restricted
Broker-Dealer that requests such documents at any time during such period.
This Prospectus may not be used for resales of Exchange Notes by any
affiliate of the Company, or any person with respect to Old Notes that were
acquired directly from the Company or any of its affiliates, any person that is
participating or intends to participate in a distribution of the Exchange Notes,
or any person that has any understanding or arrangement to participate in a
distribution of Exchange Notes.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes, or a combination of such
methods of resale, at prevailing market prices at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Exchange Offer
(other than commissions and concessions of any broker-dealers), subject to
certain prescribed limitations, and will indemnify the holders of the Old Notes
against certain liabilities, including certain liabilities that may arise under
the Securities Act.
By its acceptance of the Exchange Offer, any broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer hereby agrees to notify the
Company prior to using the Prospectus in connection with the sale or transfer of
Exchange Notes, and acknowledges and agrees that, upon receipt of notice from
the Company of the happening of any event which makes any statement in the
Prospectus untrue in any material respect or which requires the making of any
changes in the Prospectus in order to make the statements therein not misleading
or which may impose upon the Company disclosure obligations that may have a
material adverse effect on the Company (which notice the Company agrees to
deliver promptly to such broker-dealer), such broker-dealer will suspend use of
the Prospectus until the Company has notified such broker-dealer that
132
<PAGE> 137
delivery of the Prospectus may resume and has furnished copies of any amendment
or supplement to the Prospectus to such broker-dealer.
The Exchange Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list the Exchange
Notes on any national securities exchange or to seek approval for quotation
through any automated quotation system. The Company has been advised by the
Initial Purchaser that following completion of the Exchange Offer, the Initial
Purchaser may make a market in the Exchange Notes. In addition, the Initial
Purchaser may bid for, and purchase, the Exchange Notes on the open market.
These activities may stabilize or maintain the market price of the Exchange
Notes above independent market levels. The Initial Purchaser is not obligated to
make a market for, bid for or purchase the Exchange Notes, and any market-making
activities with respect to the Exchange Notes may be discontinued at any time
without notice. Accordingly, no assurance can be given that an active public or
other market will develop for the Exchange Notes or as to the liquidity of or
the trading market for the Exchange Notes. If a trading market does not develop
or is not maintained, holders of the Exchange Notes may experience difficulty in
reselling the Exchange Notes or may be unable to sell them at all. If a market
for the Exchange Notes develops, any such market may cease to continue at any
time. If a public trading market develops for the Exchange Notes, future trading
prices of the Exchange Notes will depend on many factors, including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities and other factors, including the financial
condition of the Company.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Brown, Todd &
Heyburn PLLC, Lexington, Kentucky.
EXPERTS
The Company's financial statements as of and for the years ended December
31, 1995 and 1996 and as of and for the nine months ended September 30, 1997 as
well as the Company's predecessor financial statements for the year ended
December 31, 1994 and for the ten months ended November 1, 1995, included herein
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
The combined financial statements of Leslie Resources as of and for the
years ended December 31, 1995 and 1996 included herein have been audited by
Faesy, Schmitt & Company, PSC, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
The information appearing in this Prospectus concerning estimates of the
Company's recoverable coal reserves was prepared by Marshall Miller & Associates
and has been included herein upon the authority of that firm as experts.
133
<PAGE> 138
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Exchange Notes being offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the Exchange Notes, reference is made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and, where such contract or other
document is an exhibit to the Registration Statement, each such statement is
qualified in all respects by the provisions in such exhibit, to which reference
is hereby made. The Registration Statement can be inspected and copied at the
Public Reference Section of the Commission located at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at regional public
reference facilities maintained by the Commission located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material,
including copies of all or any portion of the Registration Statement, can be
obtained from the Public Reference Section of the Commission at prescribed
rates. Such material may also be accessed electronically by means of the
Commission's home page on the Internet (http://www.sec.gov).
From and after the effective date of the Registration Statement of which
the Prospectus is a part, so long as the Exchange Notes are outstanding, the
Company will be required to file periodic reports and other information with the
Commission pursuant to certain provisions of the Exchange Act. During such
period, the Company will furnish to the holders of the Exchange Notes copies of
all periodic reports filed by the Company with the Commission.
134
<PAGE> 139
AEI HOLDING COMPANY, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AEI HOLDING COMPANY COMBINED AUDITED FINANCIAL STATEMENTS
Report of Independent Public Accountants.................... F-2
Combined Statements of Assets, Liabilities and Owners'
Investment (Deficit) as of December 31, 1995 and 1996 and
September 30, 1997........................................ F-3
Combined Statements of Operating Revenues and Expenses for
the Years Ended December 31, 1995 and 1996 and the Nine
Months Ended September 30, 1997........................... F-4
Combined Statements of Owners' Investment (Deficit) for the
Years Ended December 31, 1995 and 1996 and the Nine Months
Ended September 30, 1997.................................. F-5
Combined Statements of Cash Flows for the Years Ended
December 31, 1995 and 1996 and the Nine Months Ended
September 30, 1997........................................ F-6
Notes to Combined Financial Statements...................... F-7
AEI HOLDING COMPANY COMBINED INTERIM FINANCIAL STATEMENTS
Combined Statements of Assets, Liabilities and Owners'
Investment as of December 31, 1996 and September 30,
1997...................................................... F-27
Combined Statements of Operating Revenues and Expenses for
the Three and Nine Months Ended September 30, 1996 and
1997...................................................... F-28
Combined Statements of Owners' Investment (Deficit) for the
Nine Months Ended September 30, 1996 and 1997............. F-29
Combined Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and 1997............................... F-30
Notes to Combined Financial Statements (Unaudited).......... F-31
ADDINGTON COAL OPERATIONS (THE PREDECESSOR BUSINESS)
COMBINED FINANCIAL STATEMENTS
Report of Independent Public Accountants.................... F-38
Combined Statements of Operating Revenues and Expenses for
the Year Ended December 31, 1994 and for the Ten Months
ended November 1, 1995.................................... F-39
Combined Statements of Parent Investment for the Year Ended
December 31, 1994 and for the Ten Months ended November 1,
1995...................................................... F-40
Combined Statements of Cash Flows for the Year Ended
December 31, 1994 and for the Ten Months Ended November 1,
1995...................................................... F-41
Notes to Combined Financial Statements...................... F-42
LESLIE RESOURCES, INC & LESLIE RESOURCES MANAGEMENT, INC.
COMBINED FINANCIAL STATEMENTS
Report of Independent Public Accountants.................... F-47
Consolidated and Combined Balance Sheets as of December 31,
1996 and 1995............................................. F-48
Consolidated and Combined Statements of Income and Retained
Earnings for the Years Ended December 31, 1996 and 1995... F-49
Consolidated and Combined Statements of Cash Flows for the
Years Ended December 31, 1996 and 1995.................... F-50
Notes to Consolidated and Combined Financial Statements..... F-51
</TABLE>
F-1
<PAGE> 140
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owners of
AEI Holding Company:
We have audited the accompanying combined statements of assets, liabilities
and owners' investment (deficit) of AEI Holding Company (see Note 1), as of
December 31, 1995 and 1996 and September 30, 1997, and the related combined
statements of operating revenues and expenses, owners' investment (deficit) and
cash flows for the years ended December 31, 1995 and 1996 and the nine months
ended September 30, 1997. 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 audits 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.
The accompanying combined statements have been prepared pursuant to the
shareholder exchange agreement and asset purchase agreement between AEI Holding
Company, Inc. and Addington Enterprises, Inc. and the majority owners of Bowie
Resources, Ltd. (further described in Note 1).
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets, liabilities and owners' investment
(deficit) of AEI Holding Company as of December 31, 1995 and 1996 and September
30, 1997 and the related operating revenues and expenses and cash flows for the
years ended December 31, 1995 and 1996 and the nine months ended September 30,
1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
January 2, 1998
F-2
<PAGE> 141
AEI HOLDING COMPANY
COMBINED STATEMENTS OF ASSETS, LIABILITIES AND OWNERS' INVESTMENT (DEFICIT)
(NOTE 1)
AS OF DECEMBER 31, 1995 AND 1996, AND SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 834 $ 453 $ 1,116
Accounts receivable (including amounts due from related
parties of $2,804, $4,814 and $8,202, respectively).... 12,862 18,941 30,228
Inventories............................................... 11,286 14,336 20,700
Prepaid expenses and other................................ 3,500 4,908 5,317
------- -------- --------
Total current assets.............................. 28,482 38,638 57,361
------- -------- --------
Property, Plant and Equipment, at cost, including mineral
reserves and mine development costs....................... 64,370 76,654 95,002
Less -- accumulated depreciation and amortization...... (2,208) (10,284) (16,033)
------- -------- --------
62,162 66,370 78,969
------- -------- --------
Other non-current assets, net............................... 1,615 1,922 5,143
------- -------- --------
Total assets...................................... $92,259 $106,930 $141,473
======= ======== ========
LIABILITIES AND OWNERS' INVESTMENT (DEFICIT)
Current Liabilities:
Accounts payable (including amounts due to related parties
of $--, $6,094 and $3,850, respectively)............... $11,122 $ 20,640 $ 28,030
Revolving line of credit.................................. 4,326 8,584 --
Current portion of long-term debt (including amounts due
to related parties of $132, $32 and $32,
respectively).......................................... 6,816 5,778 32
Current portion of capital leases......................... 1,645 5,937 4,043
Current portion of reclamation and mine closure costs..... 2,562 2,000 1,200
Accrued expenses and other................................ 7,596 7,250 11,405
------- -------- --------
Total current liabilities......................... 34,067 50,189 44,710
------- -------- --------
Non-Current Liabilities:
Long-term debt and related obligations, less current
portion (including amounts due to related parties of
$1,001, $8,683 and $29,990, respectively).............. 27,642 35,474 80,098
Capital leases, less current portion...................... 16,281 8,372 7,462
Reclamation and mine closure costs, less current
portion................................................ 12,026 9,111 7,067
Other non-current liabilities............................. 6,974 3,459 2,314
------- -------- --------
Total non-current liabilities..................... 62,923 56,416 96,941
------- -------- --------
Total liabilities................................. 96,990 106,605 141,651
------- -------- --------
Commitments and Contingencies (see Notes)
Owners' Investment (Deficit)................................ (4,731) 325 (178)
------- -------- --------
Total liabilities and owners' investment
(deficit)....................................... $92,259 $106,930 $141,473
======= ======== ========
</TABLE>
The accompanying notes to combined financial
statements are an integral part of these statements.
F-3
<PAGE> 142
AEI HOLDING COMPANY
COMBINED STATEMENTS OF OPERATING REVENUES AND EXPENSES (NOTE 1)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues (including revenues from related parties of $557,
$14,940 and $8,109, respectively)......................... $ 31,694 $123,200 $124,081
Costs and expenses:
Cost of operations (including expenses to related parties
of $1,396, $19,866 and $17,918, respectively).......... 25,396 97,101 100,736
Depreciation, depletion and amortization.................. 1,401 6,945 6,910
Selling, general and administrative....................... 2,178 9,025 9,890
-------- -------- --------
Total costs and expenses.......................... 28,975 113,071 117,536
-------- -------- --------
Income from operations............................ 2,719 10,129 6,545
Interest and other income (expense):
Interest expense (including interest expense to related
parties of $ --, $427 and $1,276, respectively)........ (1,043) (5,527) (5,265)
Gain on sale of assets.................................... 114 305 25
Other, net................................................ 17 97 (611)
-------- -------- --------
(912) (5,125) (5,851)
-------- -------- --------
Excess of operating revenues over expenses before
minority interest and income taxes.............. 1,807 5,004 694
Less -- Minority interest................................... 59 (59) --
-------- -------- --------
Excess of operating revenues over expenses before
income taxes.................................... 1,748 5,063 694
Income tax provision........................................ -- -- 1,398
-------- -------- --------
Excess (deficit) of operating revenues over
expenses........................................ $ 1,748 $ 5,063 $ (704)
======== ======== ========
Historical excess (deficit) of operating revenues over
expenses.................................................. $ 1,748 $ 5,063 $ (704)
Unaudited pro forma income tax expense...................... 664 1,924 719
-------- -------- --------
Unaudited pro forma excess of operating revenues over
expenses.................................................. $ 1,084 $ 3,139 $ (1,423)
======== ======== ========
</TABLE>
The accompanying notes to combined financial
statements are an integral part of these statements.
F-4
<PAGE> 143
AEI HOLDING COMPANY
COMBINED STATEMENTS OF OWNERS' INVESTMENT (DEFICIT) (NOTE 1)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
RETAINED
COMMON EARNINGS ADDITIONAL
STOCK (DEFICIT) CAPITAL TOTAL
-------- --------- --------------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at January 1, 1995........................ $ -- $ -- $ 200 $ 200
Fiscal year 1995 earnings.................... -- 528 1,220 1,748
Owners' distribution, net.................... -- -- (6,679) (6,679)
-------- ------- ------- -------
Balance at January 1, 1996........................ -- 528 (5,259) (4,731)
Fiscal year 1996 earnings (loss)............. -- (2,621) 7,684 5,063
Owners' distribution, net.................... -- -- (7) (7)
-------- ------- ------- -------
Balance at January 1, 1997........................ -- (2,093) 2,418 325
Issued 2 shares of $.01 par value common
stock on September 19, 1997................ -- -- -- --
Earnings (loss) through September 30, 1997... -- (2,594) 1,890 (704)
Owners' contribution, net.................... -- -- 201 201
-------- ------- ------- -------
Balance at September 30, 1997..................... $ -- $(4,687) $ 4,509 $ (178)
======== ======= ======= =======
</TABLE>
The accompanying notes to combined financial
statements are an integral part of these statements.
F-5
<PAGE> 144
AEI HOLDING COMPANY
COMBINED STATEMENTS OF CASH FLOWS (NOTE 1)
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Excess (deficit) of operating revenues over expenses...... $ 1,748 $ 5,063 $ (704)
Adjustments to reconcile excess of operating revenues over
expenses to net cash provided by (used in) operating
activities:
Depreciation, depletion and amortization............... 1,401 6,945 6,910
Amortization of finance costs included in interest
expense.............................................. 6 65 24
Gain on sale of assets................................. (114) (305) (25)
Changes in assets and liabilities:
(Increase) decrease in:
Receivables.......................................... 1,046 (6,079) (11,287)
Inventories.......................................... (2,212) (3,050) (6,517)
Prepaid expenses and other........................... (962) (1,408) (409)
Other non-current assets............................. (561) (372) (1,071)
Increase (decrease) in:
Accounts payable..................................... (1,693) 9,518 4,905
Accrued expenses and other........................... 816 66 3,355
Other non-current liabilities........................ 1,186 (5,669) (3,189)
------- -------- --------
Total adjustments................................. (1,087) (289) (7,304)
------- -------- --------
Net cash provided by (used in) operating
activities...................................... 661 4,774 (8,008)
------- -------- --------
Cash Flows From Investing Activities:
Net proceeds from sale of assets.......................... 400 1,589 144
Additions to property, plant and equipment and mine
development costs...................................... (6,477) (14,092) (18,340)
------- -------- --------
Net cash used in investing activities............. (6,077) (12,503) (18,196)
------- -------- --------
Cash Flows From Financing Activities:
Borrowings on long-term debt.............................. 3,173 3,629 12,045
Repayments on long-term debt.............................. (436) (4,150) (7,219)
Net borrowings on revolving line of credit................ 4,326 4,258 5,061
Loans from stockholders, net of repayments................ 1,133 7,315 20,407
Repayment on capital leases............................... (410) (3,617) (2,804)
Payments for debt issuance costs.......................... -- -- (302)
Other changes in owners' investment, net.................. (1,536) (87) (321)
------- -------- --------
Net cash provided by financing activities......... 6,250 7,348 26,867
------- -------- --------
Net increase (decrease) in cash and cash
equivalents .................................... 834 (381) 663
------- -------- --------
Cash And Cash Equivalents, beginning of period.............. -- 834 453
------- -------- --------
Cash And Cash Equivalents, end of period.................... $ 834 $ 453 $ 1,116
======= ======== ========
</TABLE>
The accompanying notes to combined financial
statements are an integral part of these statements.
F-6
<PAGE> 145
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996 AND SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying combined financial statements of AEI Holding Company (the
Company) have been prepared pursuant to two agreements: the Shareholder Exchange
Agreement dated October 20, 1997 (Exchange Agreement) and the Asset Purchase
Agreement dated December 18, 1997 (MTI Agreement).
The Exchange Agreement is between AEI Holding Company, Inc., (AEI HoldCo.),
a Delaware corporation formed on September 19, 1997 (as Transferee), and
Addington Enterprises, Inc. (AEI), a Kentucky corporation (as Transferor) and
Larry Addington and Harold Sergent (as Transferors) for their 77.5% ownership
interest in Bowie Resources, Limited (BRL), a Colorado corporation. The Exchange
Agreement was consummated on November 12, 1997, whereby AEI HoldCo. issued 98
common shares (par value $.01) as consideration for: (1) AEI's coal mining
operations and certain corporate net assets and (2) Larry Addington (69.8%) and
Harold Sergent's (7.7%) ownership interest in BRL. AEI is owned by Larry
Addington (80%), Robert Addington (10%) and Bruce Addington (10%), who are
brothers. The coal mining businesses transferred by AEI included the net assets
of its Addington Mining and corporate divisions as well as its wholly-owned
subsidiary, Tennessee Mining, Inc. AEI retained certain non-coal mining
properties as well as technology related assets which were disposed in the MTI
agreement (see below).
The Exchange Agreement was prepared in connection with, and its
consummation was contingent upon, the closing of the $200,000 Senior Notes
Indenture (Senior Notes) of AEI HoldCo: (note 15). The Senior Notes were offered
in a private placement and AEI HoldCo. has agreed to file a registration
statement (under the US Securities Act) relating to an exchange offer for the
Senior Notes which would provide for their resale. If the registration statement
for the exchange offer is not filed or declared effective within the time
periods allotted in the Senior Notes Offering Memorandum dated November 6, 1997,
the Company will be required to pay liquidated damages to Senior Notes holders.
NationsBanc Montgomery Securities, Inc. was the initial purchaser of the Senior
Notes, which was consummated on November 12, 1997. In connection with the Senior
Notes offering, approximately $2,000 of loan proceeds were used by AEI HoldCo.
to acquire 7.7% of BRL common stock from Harold Sergent. This purchase was
accounted for as an acquisition of minority interest using purchase accounting.
The MTI Agreement is between Mining Technologies, Inc., a newly formed
subsidiary of AEI HoldCo. (as purchaser) and AEI (as seller) for AEI's ownership
interest in its North American (N.A.) mining technologies division. The purchase
price of $51,000 (cash) was delivered at closing on January 2, 1998. The net
assets acquired include mining equipment (primarily Highwall Mining Systems),
coal sales contracts, and the intellectual property for the N.A. Highwall Mining
Systems (patents, trademarks, etc.). AEI retained ownership of the non-N.A.
intellectual property.
The Exchange and MTI transactions described above were treated for
accounting purposes as a transfer of entities and net assets under common
control with accounting similar to that of a pooling of interests. Accordingly,
the historical cost basis of the underlying assets and liabilities transferred
(from AEI and BRL) were carried over from the transferring entity to AEI HoldCo.
Due to common control, the MTI cash purchase price of $51,000 paid by AEI
HoldCo. to AEI will be recorded as a capital distribution when paid in January,
1998. The accompanying combined financial statements represent the historical
accounts of the businesses to be transferred and sold to AEI HoldCo. pursuant to
the Exchange and MTI Agreements. Significant "intercompany" transactions and
accounts have been eliminated in combination.
After the consummation of the Exchange Agreement and MTI Agreement, AEI
HoldCo. is owned by AEI (50%) and Larry Addington (50%). In addition, Addington
Mining, Inc. (AMI), Tennessee Mining Inc. (TMI) and Mining Technologies, Inc.
(MTI) are wholly-owned subsidiaries of AEI HoldCo. while BRL is 77.5% owned by
AEI HoldCo. and 22.5% owned by Mitsui Matsushima (Note 3h).
F-7
<PAGE> 146
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Various allocations and carve-out adjustments have been made in the
preparation of the accompanying financial statements. Such allocations have been
recorded to segregate the historical accounts to reflect the businesses
transferred. Management believes that the method used for allocations and
carve-out adjustments is reasonable.
As of December 31, 1995 and 1996, the combined Company owned 90.1% of BRL,
and 9.9% is considered minority interest. As of September 30, 1997 the Company
owned 69.8% of BRL and 30.2% is considered minority interest (see notes 3h and
15c). No minority interest is recorded in the accompanying statements of assets,
liabilities and owners' investment as of December 31, 1995 and 1996 or September
30, 1997 due to BRL having deficit equity.
2. ACQUISITIONS
A. BOWIE RESOURCES, LIMITED
Bowie Resources, Limited (BRL) was incorporated on November 4, 1994 and
purchased the Bowie #1 mine from Cyprus Orchard Valley Coal Corporation on
December 22, 1994 for $200 plus assumption of reclamation liabilities estimated
at $4,200. Mining activities commenced during 1995. On January 6, 1995, BRL
purchased the Bowie #2 mine from Coors Energy Company for $1,100 and minimum
royalty amounts payable from 1997 to 2014. These transactions have been
accounted for as a purchase in the accompanying financial statements. The
incorporation of BRL on November 4, 1994 represents the commencement of coal
mining operations under the common control of Larry Addington which were
transferred to AEI HoldCo. pursuant to the Exchange Agreement.
B. ADDINGTON ENTERPRISES, INC.
On September 22, 1995, in a related party transaction, AEI entered into a
stock purchase agreement with Addington Resources, Inc. (ARI) whereby AEI agreed
to purchase all the issued and outstanding shares of common stock of ARI's coal
mining and technology subsidiaries. In addition, pursuant to an option agreement
dated August 4, 1995, AEI agreed to purchase from ARI all the issued and
outstanding stock of the ARI subsidiary, TMI, in exchange for a royalty AEI will
pay to ARI based on tons of coal delivered under a certain coal sales contract,
up to a maximum amount of $12,000 (see Note 8b). The stockholders of AEI had
formerly been executive officers and minority owners of ARI.
These agreements were consummated on November 2, 1995, at which time AEI
approved and adopted a plan of merger which provided for the merger of AMI, MTI
and TMI into AEI and the cancellation of the subsidiaries' common stock.
These transactions to acquire the coal mining and technology businesses
from ARI have been accounted for as a purchase in the accompanying financial
statements. Total coal mining assets and liabilities acquired were $52,614 and
$40,235, respectively, at a cost of $12,379. Total technology assets and
liabilities acquired were $20,275 and $7,874, respectively at a cost of $12,401.
Pursuant to the stock purchase agreement with ARI, AEI assumed certain
liabilities and contingencies of the acquired subsidiaries that are reflected in
the net assets acquired and accompanying notes. Further, AEI has granted
indemnification for performance guarantees made by ARI in connection with the
sale of certain ARI coal-related subsidiaries in previous years as well as
guarantees relating to certain mineral lease royalty obligations and workers'
compensation benefits. The Company believes no significant obligation will
result relating to the ARI indemnification. The obligations of AEI under the
above agreement were transferred to AEI HoldCo. pursuant to the Exchange
Agreement.
F-8
<PAGE> 147
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The retention of non-coal mining properties has been accounted for as a
distribution of net assets to owners of $5,220 effective November 2, 1995.
Accordingly, the accompanying financial statements exclude such balances and
activities related to non-coal mining properties.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL
A. MANAGEMENT'S USE OF ESTIMATES
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.
B. COMPANY ENVIRONMENT AND RISKS
The Company's principal business activities consist of surface and deep
mining and marketing of bituminous coal, performance of contract mining for
third parties, construction and licensing of mining equipment, as well as
leasing and repairing mining equipment. These operations are primarily located
in Kentucky, Tennessee and Colorado.
The Company in the course of its business activities is exposed to a number
of risks including: the possibility of the termination or alteration of sales
contracts, fluctuating market conditions of coal and transportation costs,
competitive industry and over capacity, changing government regulations, loss of
key employees and the ability of the Company to obtain financing, necessary
mining permits and control of adequate recoverable mineral reserves. In
addition, adverse (wet) weather and geological conditions tends to increase
mining costs. Precipitation is generally highest at most of the Company's mining
operations in early spring and late fall. Through September 30, 1997, Larry
Addington has provided supplemental financing to fund the Company's growth and
new mine development. The Company is also exposed to risks associated with a
highly leveraged organization.
C. INVENTORIES
Inventories are stated at average cost, which approximates first-in,
first-out (FIFO) cost, and does not exceed market.
D. ADVANCE ROYALTY PAYMENTS (INCLUDED IN PREPAID EXPENSES AND OTHER AND OTHER
NON-CURRENT ASSETS)
The Company is required, under certain royalty lease agreements, to make
minimum royalty payments whether or not mining activity is being performed on
the leased property. These minimum payments are recoupable once mining begins on
the leased property. The Company capitalizes these minimum royalty payments and
amortizes them once mining activities begin or expenses them when the Company
has ceased mining or has made a decision not to mine on such property. Included
in prepaid expenses and other is $1,965, $1,529 and $2,427 for 1995, 1996 and
1997, respectively, relating to advanced royalties.
E. DEPRECIATION AND AMORTIZATION
Property, plant and equipment are recorded at cost, including construction
overhead and interest, where applicable. Expenditures for major renewals and
betterments are capitalized while expenditures for maintenance and repairs are
expensed as incurred. Depreciation and amortization are provided using either
the
F-9
<PAGE> 148
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
straight-line or units of production method with estimated useful lives under
the straight-line method comprising substantially the following ranges:
<TABLE>
<CAPTION>
YEARS
--------
<S> <C>
Buildings................................................... 10 to 45
Mining and other equipment and related facilities........... 2 to 20
Transportation equipment.................................... 2 to 7
Furniture and fixtures...................................... 3 to 10
</TABLE>
Mineral reserves and mine development costs (included in Property, Plant
and Equipment) are amortized using the units-of-production method, based on
estimated recoverable reserves.
Financing costs (included in other non-current assets) are being amortized
using the straight-line method, over the life of the related debt, which
approximates the effective interest method.
F. RESTRICTED CASH (INCLUDED IN PREPAID EXPENSES AND OTHER AND OTHER NON-CURRENT
ASSETS)
The Company pays amounts as required by various royalty agreements. Certain
of these agreements have been disputed by third parties, requiring that cash be
paid into an escrow account until the rightful recipient is determined.
G. COAL MINE RECLAMATION AND MINE CLOSURE COSTS
The Company estimates its future cost requirements for reclamation of land
where it has conducted surface and deep mining operations, based on its
interpretation of the technical standards of regulations enacted by the U.S.
Office of Surface Mining, as well as state regulations.
The Company accrues for the cost of final mine closure over the estimated
useful mining life of the property. These costs relate to reclaiming the pit and
support acreage at surface mines and sealing portals at deep mines. Other costs
common to both types of mining are related to reclaiming refuse and slurry
ponds. The Company accrues for current mine disturbance which will be reclaimed
prior to final mine closure. The establishment of the final mine closure
reclamation liability and the current disturbance is based upon permit
requirements and requires various estimates and assumptions, principally
associated with cost and production levels. Annually, the Company reviews its
entire environmental liability and makes necessary adjustments, including mine
plan and permit changes and revisions to cost and production levels to optimize
mining and reclamation efficiency. The economic impact of such adjustments is
recorded to cost of coal sales. Although the Company's management believes it is
making adequate provisions for all expected reclamation and other costs
associated with mine closures, future operating results would be adversely
affected if such accruals were later determined to be insufficient.
H. INCOME TAXES AND BOWIE RESOURCES, LTD. SALE OF INTEREST
For 1995 and 1996, AEI and BRL have each elected to be recognized as an S
corporation under the Internal Revenue Code and similar state statutes. As a
result, AEI and BRL are not subject to income taxes and their taxable income or
loss is reported in the stockholders' individual tax returns. Accordingly, the
historical excess of operating revenues over expenses presented in the
accompanying financial statements is exclusive of an income tax provision for
1995 and 1996. See Notes 15 and 17.
In April 1997, BRL's shareholders (Larry Addington (90%) and Harold Sergent
(10%) entered into an agreement to sell collectively 22.5% of their shares of
BRL common stock to Mitsui Matsushima (Mitsui). Upon consummation of this
agreement, BRL's S corporation status was terminated. Upon such termination, BRL
was required to record deferred taxes for differences in book versus tax asset
and liability basis. The net deferred tax liability in April 1997 was $1,600 and
was recorded as an increase to income tax provision.
F-10
<PAGE> 149
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the Mitsui transaction, the Company entered into a
Shareholders Agreement with Mitsui which includes BRL stock transfer and lien
restrictions, right of first refusal on share trades and a reciprocal put
clause. The reciprocal put would be triggered in the event of a Board of
Directors impasse (as defined) and provides for conditions whereby the Company
may be required to purchase from Mitsui their BRL shares or sell to Mitsui the
Company's BRL shares based on the fair market value of the shares. The Mitsui
transaction also contained a Marketing Agreement between BRL and Mitsui whereby
Mitsui received the exclusive right to market BRL coal within Japan and market
up to 22.5% of excess available BRL production.
I. REVENUE RECOGNITION
Most of the Company's revenues have been generated under long-term coal
sales contracts with electric utilities or other coal-related organizations,
primarily in the eastern United States. Revenues are recognized on coal sales in
accordance with the sales agreement, which is usually when the coal is shipped
to the customer and title is passed. The Company also rents and sells equipment
and provides repair and contract mining services, and the revenue from such
rental, sale and service is recognized when earned. Revenue from the
construction of mining equipment is recognized on a percentage of completion
basis. The Company grants credit to its customers based on their
creditworthiness and generally does not secure collateral for its receivables.
Included in 1995 revenues is $6,000 related to a sale of equipment
purchased for immediate resale. A gross profit on sale of approximately $2,800
was realized.
For the years ended December 31, 1995 and 1996 and the nine months ended
September 30, 1997, revenue components were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Coal Sales.......................................... $22,139 $ 98,156 $111,615
Equipment Sales..................................... 6,000 7,835 4,672
Other (contract mining, rental, repair, etc.)....... 3,555 17,209 7,794
------- -------- --------
Total.......................................... $31,694 $123,200 $124,081
======= ======== ========
</TABLE>
J. OWNERS' INVESTMENT (DEFICIT)
The owners' equity accounts (retained earnings and additional capital) for
legal entities (BRL) which have been carried over from the transferor (Note 1)
have remained unchanged as presented within the accompanying combined statements
of owners' investment (deficit).
The businesses transferred from AEI have operated as divisions and,
accordingly, the equity account changes (earnings (loss) and owners'
contributions and distributions) have been presented within additional capital
in the accompanying combined statements of owners' investment (deficit).
K. 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.
F-11
<PAGE> 150
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
L. RECLASSIFICATIONS
Certain reclassifications of prior year amounts were made to conform with
the current year presentation with no effect on previously reported excess of
revenues over expenses or owners' investment (deficit).
M. STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers
investments having maturities of three months or less at the time of the
purchase to be cash equivalents.
Supplemental disclosure:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Cash paid for interest, net of $243, $246, and $150
capitalized for 1995, 1996, and 1997, respectively..... $ 791 $5,357 $4,826
</TABLE>
Two capital lease transactions aggregating $6,587 in new debt and increases
to property, plant and equipment have been excluded from the 1995 Statement of
Cash Flows. The 1997 Statement of Cash Flows is exclusive of non-cash property
additions of $766, non-cash capitalized royalties of $1,433 and non-cash
capitalized loan fees of $439.
The impact of the acquisition of ARI's mining and technology business as
described in Note 2b, at a net cost of $24,780 has been excluded from the 1995
Statement of Cash Flows. In addition, the distribution to owners of non-coal
mining properties of $5,220 has been excluded from the 1995 Statement of Cash
Flows.
4. INVENTORIES
As of December 31, 1995 and 1996 and September 30, 1997 inventories
consisted of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Coal and deferred overburden.......................... $ 4,165 $ 6,716 $12,915
Supplies and parts.................................... 7,121 7,620 7,726
Other................................................. -- -- 59
------- ------- -------
$11,286 $14,336 $20,700
======= ======= =======
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including mineral reserves and mine
development costs, at December 31, 1995 and 1996 and September 30, 1997 are
summarized by major classification as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Land.................................................. $ 1,553 $ 1,570 $ 1,670
Mining and other equipment and related facilities..... 43,460 50,194 51,825
Mine development costs................................ 3,137 10,511 19,879
Mineral reserves...................................... 6,008 6,045 5,809
Transportation equipment.............................. 2,968 2,958 3,102
Furniture and fixtures................................ 356 462 200
Mine development in process........................... 1,499 2,277 8,459
Construction work in process.......................... 5,389 2,637 4,058
------- ------- -------
64,370 76,654 95,002
Less accumulated depreciation and amortization........ (2,208) (10,284) (16,033)
------- ------- -------
Net property, plant and equipment..................... $62,162 $66,370 $78,969
======= ======= =======
</TABLE>
F-12
<PAGE> 151
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Included in property, plant and equipment is $6,888 for 1995, $4,914 for
1996 and $12,517 for 1997 related to development and construction projects for
which depreciation and amortization have not yet commenced. During the
development phase, mining revenues are recorded as a reduction in development
costs. The Company reviews the realization of these projects on a periodic
basis.
6. ACCRUED EXPENSES AND OTHER
Significant accrued expenses as of December 31, 1995 and 1996 and September
30, 1997 include:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ -------
<S> <C> <C> <C>
Payroll, Bonus and Vacation............................. $1,401 $1,690 $ 5,116
Royalties............................................... 1,353 1,107 1,204
Property Taxes.......................................... 415 950 1,184
Interest................................................ 382 702 1,141
Workers Compensation and Insurance...................... 956 711 435
Reclamation and Excise Taxes............................ 288 504 609
Other................................................... 2,801 1,586 1,716
------ ------ -------
$7,596 $7,250 $11,405
====== ====== =======
</TABLE>
7. DEBT
A. REVOLVING LINE OF CREDIT
In connection with the acquisition discussed in Note 2b, the Company
entered into a financing agreement with a bank which includes a revolving line
of credit and a term note maturing October 2003 (Note 7b). The revolving line of
credit allows the Company short-term borrowings generally equal to 90% of
eligible accounts receivable plus 60% of eligible coal inventory, up to a
maximum line of credit of $15,000, bearing interest at prime plus .5% or the
LIBOR rate plus 2.75%, and is secured by substantially all of the Company's
assets. As part of the agreement, the Company has available up to $1,500 that
can be used for letters of credit that would offset the available balance on the
line of credit. As of December 31, 1995 and 1996, there are no outstanding
letters of credit with this bank.
The line of credit expires in October 1998 with no single advance remaining
outstanding for a period in excess of three years. However, the Company is
required to maintain a lock-box with the lender, whereby lock-box receipts are
applied against any outstanding borrowings on the line of credit. Accordingly,
the line of credit is classified as a current liability for 1995 and 1996. Due
to this line of credit being refinanced during November 1997 with proceeds from
$200,000 Senior Notes maturing in 2007 (see note 15a), the balance is included
as a non-current liability as of September 30, 1997.
As of December 31, 1995 and 1996 approximately $4,326 and $8,584,
respectively, were outstanding under this line of credit, approximately, $4,326
and $3,584, respectively, of which was at the prime-driven rate (8.75%), and $0
and $5,000, respectively, of which was at the LIBOR-driven rate (8.25%), leaving
borrowing availability under this line of approximately $6,416 at December 31,
1996. As of September 30, 1997 $12,138 was outstanding under this line of credit
with the entire balance at the prime-driven rate (9.00%).
In connection with the above financing agreement, which has been personally
guaranteed by certain of AEI's stockholders up to $10,000 and 500,000 shares of
their ARI stock (subsequently converted to 450,000 shares of Republic
Industries, Inc. stock), the Company has agreed to certain restrictive covenants
which, among others, limits the amount of capital expenditures the Company can
make, limits its ability to incur additional indebtedness, and requires the
Company to maintain certain, as defined, financial ratios. As of December 31,
1996, the Company was not in compliance with one debt covenant and had received
a waiver from the lending institution relating to this covenant. See Note 15.
F-13
<PAGE> 152
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
B. LONG-TERM DEBT
Long-Term debt as of December 31, 1995 and 1996 and September 30, 1997
consisted of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Note payable to bank, secured by substantially all of the
Company's assets and common stock of related party
companies, with monthly principal and interest payments
of $457, bearing interest at 8.801%, due October 2003
(see Note 7a for owner guarantees and restrictive
covenants) (Refinanced with proceeds from $200,000
Senior Notes maturing in 2007 -- see note 15a).......... $29,884 $28,198 $25,900
Payable to owner, unsecured, bearing interest at 9.25%,
with principal and interest due on demand after January
1, 1998 (Refinanced with proceeds from $200,000 Senior
Notes maturing in 2007 -- see note 15a)................. -- 5,683 6,115
Payable to owner, unsecured, bearing interest at 9.25%,
with principal and interest due on demand after January
1, 1998 (Refinanced with proceeds from $200,000 Senior
Notes maturing in 2007 -- see note 15a)................. -- 2,000 21,975
Note payable to a finance company, secured by assets of
Bowie #1 mine, guaranteed by certain owners, payable in
monthly installments of $56 through February 27, 2000,
bearing interest at LIBOR plus 3.3%, (8.675% at December
31, 1996, 8.93% at December 31, 1995). This note was
retired early in 1997................................... 2,000 2,000 --
Payable to credit corporation, with monthly principal and
interest payments of $264, bearing interest at 5.05%,
due December 1997 (Refinanced with proceeds from
$200,000 Senior Notes maturing in 2007 -- see note
15a).................................................... -- 1,564 1,512
Payable to owner, unsecured, bearing interest at 5.57%,
with principal and interest due on demand after January
1, 1998 (Refinanced with proceeds from $200,000 Senior
Notes maturing in 2007 -- see note 15a)................. 1,001 1,000 1,000
Note payable to a company, secured by land, mineral
reserves and other assets of the Bowie #2 mine,
guaranteed by a stockholder, payable in annual
installments of $300, bearing interest at a variable
rate (9.3% at December 31, 1996, 9.25% at December 31,
1995), final payment due December 1998, retired early in
1997.................................................... 900 600 --
Note payable to a related party, unsecured, bearing
interest at 9.25% with principal and interest due on
March 24, 1998 (Refinanced with proceeds from $200,000
Senior Notes maturing in 2007 -- see note 15a).......... -- -- 900
</TABLE>
F-14
<PAGE> 153
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Note payable to bank, secured by substantially all of the
Non-Guarantor subsidiary's assets and common stock, with
monthly interest payments beginning July 1, 1997 and
quarterly principal payments of $350 beginning June 30,
1998 with a $75 step up for the first 3 years, bearing
interest at Prime + 0.25% (8.75% at September 30, 1997),
due May 31, 2004. Included in balance is $1,506 related
to line of credit (8.75%) (Refinanced with proceeds from
$200,000 Senior Notes maturing in 2007 -- see note
15a).................................................... $ -- $ -- $10,444
Line of Credit (see note 7a) (Refinanced with proceeds
from $200,000 Senior Notes maturing in 2007 -- see note
15a).................................................... -- -- 12,138
Note payable to owner, unsecured, bearing interest at 12%,
with principal and interest due on demand............... 132 32 32
Other (Refinanced with proceeds from $200,000 Senior Notes
maturing in 2007 -- see note 15a)....................... 541 175 114
------- ------- -------
Total........................................... 34,458 41,252 80,130
Less Current Portion............................ 6,816 5,778 32
------- ------- -------
$27,642 $35,474 $80,098
======= ======= =======
</TABLE>
After refinancing during November 1997 with proceeds from $200,000 Senior
Notes maturing in 2007 (see note 15a), principal payments required for long-term
debt after September 30, 1997 are as follows:
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31,
- -------------------------
<S> <C>
Three months ended 1997..................................... $ --
Year ended 1998............................................. 32
Year ended 1999............................................. --
Year ended 2000............................................. --
Year ended 2001............................................. --
Year ended 2002............................................. --
Thereafter.................................................. 80,098
-------
$80,130
=======
</TABLE>
C. LETTERS OF CREDIT
The Company has letters of credit amounting to $384 to cover certain
self-insured insurance claims.
8. COMMITMENTS AND CONTINGENCIES
A. COAL SALES CONTRACTS
As of September 30, 1997, the Company had commitments to deliver scheduled
base quantities of coal annually to four customers. The contracts expire in
2002, 2003, 2004 and 2005, with the Company contracted to supply a minimum of
approximately 33 million tons of coal over the remaining lives of the contracts
at prices which are at or above market. Certain of the contracts have sales
price adjustment provisions, subject to certain limitations and adjustments,
based on changes in specified production costs. Larry Addington has guaranteed
the Company's obligations under one of the coal sales contracts.
F-15
<PAGE> 154
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
B. LEASES
Lease Cost
The Company has various operating and capital leases for mining,
transportation and other equipment. Lease expense for the years ended December
31, 1995 and 1996 and the nine months ended September 30, 1997 was approximately
$800, $6,000, and $5,200 (net of amount capitalized in mine development cost of
$1,500), respectively. Property under capital leases included in property,
plant, and equipment in the accompanying balance sheet at December 31, 1995,
1996, and September 30, 1997 was approximately $18,400, $21,200, and $21,400,
respectively, less accumulated depreciation of approximately $300, $2,780, and
$5,040, respectively. Depreciation of assets under capital leases is included in
depreciation expense.
The Company also leases coal reserves under agreements that call for
royalties to be paid as the coal is mined. Total royalty expense for the years
ended December 31, 1995 and 1996 and the nine months ended September 30, 1997
was approximately $1,900, $11,200, and $10,500, respectively. Certain agreements
require minimum annual royalties to be paid regardless of the amount of coal
mined during the year. However, such agreements are generally cancelable at the
Company's discretion. The assets of the Bowie #2 mine are held as collateral for
one of these agreements. As discussed in Note 2b, the Company had committed to
pay a royalty to ARI as coal is delivered under a certain coal sales contract.
This royalty had been recorded as an expense and liability as the coal was
delivered ($1.00 per ton) until ARI (a subsidiary of Republic Industries, Inc.)
and TMI agreed to settle the royalty obligation for a one-time payment of
$2,000, which has been accrued in the accompanying September 30, 1997 financial
statements. The difference between the $2,000 settlement obligation and
liabilities previously recognized is recorded as a prepaid royalty in the
September 30, 1997 financials.
Approximate future minimum lease and royalty payments are as follows:
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, ROYALTIES OPERATING CAPITAL
- ------------------------- --------- --------- -------
<S> <C> <C> <C>
3 months ended 1997................................... $ 3,748 $2,099 $ 1,219
Year ended 1998....................................... 3,028 8,401 6,438
Year ended 1999....................................... 2,228 7,079 3,005
Year ended 2000....................................... 1,528 6,566 397
Year ended 2001....................................... 1,680 4,484 397
Year ended 2002....................................... 1,500 2,045 397
Thereafter............................................ 20,760 1,137 1,235
-------
Total minimum lease payments.......................... 13,088
Less -- amount representing interest.................. 1,583
-------
Present value of minimum lease payments............... 11,505
Less -- current portion............................... 4,043
-------
$ 7,462
=======
</TABLE>
Lease Income
During 1996, the Company leased mining equipment to related and non-related
parties. Approximately $3,970 and $1,700 respectively for 1996 from these leases
is included in revenues. The leases expired during 1996.
C. LEGAL MATTERS
The Company is named as defendant in various actions in the ordinary course
of its business. These actions generally involve disputes related to contract
performance, property boundaries, mining rights, blasting
F-16
<PAGE> 155
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
damages, personal injuries and royalty payments, as well as other civil actions
that could result in additional litigation or other adversary proceedings.
On June 14, 1996, Robert C. Billips, d/b/a Peter Fork Mining Company, sued
the Company in the Circuit Court of Pike County, Kentucky, claiming the Company
breached a lease with Billips in Pike County, Kentucky, caused Billips to lose
business opportunities, and committed waste on Billips' property. The Company
has admitted that it entered into a lease with Billips, but denies that it
breached the lease, caused a loss of business opportunities, or committed waste.
Instead, the Company claims that it mined all minable and merchantable coal (as
defined in the lease) on the leased property, and, therefore, had no further
obligations under the lease. Legal discovery is underway and no trial date has
been set. The Company intends to defend the claims vigorously, and at this time
it is not possible to predict the likely outcome of the claims.
While the final resolution of any matter may have an impact on the
Company's financial results for a particular reporting period, management
believes that the ultimate disposition of these matters will not have a
materially adverse effect upon the financial position of the Company.
D. COMMISSIONS
The Company has entered into four separate agreements to pay commissions
based on coal tonnages shipped to specified customers. Two agreements pay 14c
and 16c per ton, respectively, to a related party and a third agreement pays 25c
per ton to an unrelated company. The costs are expensed as the coal is
delivered. On January 30, 1997 (and amended on February 5, 1997), the Company
entered into a five year Sales and Agency Agreement with Bowie Coal Sales LLC,
which is owned by a related party, whereby the Company pays a 20c per ton
commission on certain coal sales contracts.
E. CONTRACT MINING AGREEMENTS
BRL has entered into an agreement with Sherpa Paonia, Inc. (Sherpa) whereby
Sherpa provides mining services at a rate of $10.50 per clean ton mined. This
agreement has no minimum quantity requirements and may be terminated by either
party.
The Company has entered into contract mining agreements with Ikerd-Bandy
Co., Inc. and Martiki Coal Corporation in February 1997 and May 1997
respectively. The Company provides mining services to Ikerd-Bandy for $5.50 per
ton and continues until all mineable coal is removed (see note 15d). The Company
provides mining services to Martiki for $13.00 per ton, and continues for the
lesser of three years or until all mineable coal is removed. Neither contract
has minimum tonnage requirements and may be terminated by either party.
F. ENVIRONMENTAL MATTERS
Based upon current knowledge, the Company believes that it is in material
compliance with environmental laws and regulations as currently promulgated
(also, see note 3g). However, the Company is aware of leakage that has occurred
from a secondary containment structure for motor oil tanks at a shop area in
Kentucky. The extent of contamination is not known at this time. In addition,
the exact nature of environmental control problems, if any, which the Company
may encounter in the future cannot be predicted, primarily because of the
increasing number, complexity and changing character of environmental
requirements that may be enacted by federal and state authorities.
G. PERFORMANCE BONDS
The Company has outstanding performance bonds of approximately $60,000 as
of September 30, 1997, to secure workers' compensation, reclamation and other
performance commitments.
F-17
<PAGE> 156
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
H. BONUS
During 1997 the Company had an informal bonus arrangement in place for
certain of its employees whereby a cash bonus, determined in the sole discretion
of the Company, will be paid near yearend. The Company has paid approximately
$2,000 in December 1997 and expects to pay a similar amount in January 1998.
Accordingly, $3,000 has been accrued in the accompanying September 30, 1997
Statement of Operating Revenues and Expenses.
9. MAJOR CUSTOMERS
The Company had sales to the following major customers that in any period
exceeded 10% of revenues:
<TABLE>
<CAPTION>
1995 1996
----------------------------------- -----------------------------------
PERCENTAGE YEAR END PERCENTAGE YEAR END
OF TOTAL RECEIVABLE OF TOTAL RECEIVABLE
REVENUES REVENUES BALANCE REVENUES REVENUES BALANCE
-------- ---------- ----------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Customer A........... $4,156 13% $2,076 $27,019 22% $2,350
Customer B........... 3,648 12% 1,787 21,577 18% 6,603
Customer C........... 7,902 25% 478 NA NA NA
Customer D........... 6,000 19% -- NA NA NA
Customer E........... NA NA NA 22,547 18% 593
Customer F........... NA NA NA NA NA NA
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997
----------------------------------
PERIOD
PERCENTAGE END
OF TOTAL RECEIVABLE
REVENUES REVENUES BALANCE
-------- ---------- ----------
<S> <C> <C> <C>
Customer A........... $16,396 13% $1,470
Customer B........... 26,577 21% 8,728
Customer C........... NA NA NA
Customer D........... NA NA NA
Customer E........... 16,241 13% 4,284
Customer F........... 13,632 11% 2,417
</TABLE>
10. WORKERS' COMPENSATION AND BLACK LUNG
The operations of the Company are subject to the Federal Coal Mine Health
and Safety Act of 1969, as amended, and the related state workers' compensation
laws. These laws provide for the payment of benefits to disabled workers and
their dependents, including lifetime benefits for pneumoconiosis (black lung).
In connection with the acquisition described in Note 2a, the Company
entered into an insurance policy to cover workers compensation and black lung
claims. The Company is not obligated for such pre-acquisition claims.
In connection with the acquisition described in Note 2b, the Company
entered into an insurance policy to cover any post-acquisition workers'
compensation and black lung claims. This policy, however, does not cover
pre-existing claims and claims incurred prior to November 2, 1995 and yet to be
reported. The estimated undiscounted obligations for these acquired self-insured
claims are included in accrued expenses and other (Note 6) and other non-current
liabilities in the accompanying balance sheets.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The book values of cash and cash equivalents, accounts receivables and
accounts payable are considered to be representative of their respective fair
values because of the immediate short-term maturity of these financial
instruments. The book value of the Company's debt instruments approximate fair
value given the refinancing in November, 1997.
F-18
<PAGE> 157
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
12. RELATED PARTY TRANSACTIONS AND BALANCES
The Company has dealt with certain companies or individuals which are
related parties either by having stockholders in common or because they are
controlled by stockholders/officers of the Company or by relatives of
stockholders/officers of the Company. In addition to related party transactions
and balances described elsewhere, the following related party transactions and
balances are summarized and approximated as follows below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
1995 1996 SEPTEMBER 30, 1997
------ ------- ------------------
<S> <C> <C> <C>
Revenues, costs and expenses:
Equipment Sales................................ $ -- $ 7,010 $ 4,672
Repair and Maintenance Income.................. -- 2,954 669
Property sales................................. -- -- 145
Equipment Rental Income........................ 90 4,369 336
Management Fee Income.......................... 24 165 150
Flight fee income.............................. 443 442 545
Cancellation fee income........................ -- -- 1,592
Trucking expense............................... 1,396 13,521 13,024
Repair and maintenance expense................. -- 4,916 3,237
Equipment rental expense....................... -- 1,429 1,657
Consultant fees................................ -- 180 135
Interest expense............................... -- 427 1,276
Commission expense............................. 185 91 31
Administrative and miscellaneous expense....... 18 58 200
Assets:
Accounts receivable............................ 2,804 4,814 8,202
Liabilities:
Accounts payable............................... -- 6,094 3,850
Interest payable............................... -- 393 817
Commission payable............................. 33 19 3
</TABLE>
The Company leases mining equipment and aircraft as well as constructs,
repairs and sells equipment to related parties. The Company employs related
parties for trucking, consulting, equipment rental and repair and other
administrative services. The Company has also advanced funds to related parties
as well as borrows from related parties (Note 7). In addition, BRL has
guaranteed certain contractual obligations of a related party. Equipment sales
(listed above) are primarily to a related party in Australia that performs
contract mining using the Highwall Miner.
For 1997, the Company earned $1,592 in fees when a related party cancelled
a mining arrangement with the Company.
13. NEW ACCOUNTING STANDARD
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of (SFAS No. 121). The new standard
requires that long-lived assets and certain identified intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing such
impairment reviews, companies are required to estimate the sum of future cash
flows from an asset and compare such amount to the asset's carrying amount. Any
excess of carrying amount over expected cash flows will result in a possible
write-down of an asset to its fair value. Adopting SFAS No. 121 had no impact on
the Company's financial position or results of operations.
F-19
<PAGE> 158
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
14. DEFINED CONTRIBUTION PLAN
The Company has a qualifying 401(k) savings plan covering substantially all
employees. Under the plan the company is not required to make any contributions
and no contributions were made for the years ended December 31, 1995 and 1996 or
the nine months ended September 30, 1997.
15. SUBSEQUENT EVENTS
A. ISSUANCE OF SENIOR NOTES, BRIDGE FINANCING, NEW CREDIT FACILITY AND DEBT
EXTINGUISHMENT
As discussed in Note 1, in November 1997, AEI HoldCo. issued an Offering
Memorandum to obtain $200,000 in debt in the form of 10 percent Senior Notes,
maturing in 2007, in a private placement. The Senior Notes Indenture was
consummated on November 12, 1997. Virtually all of the Company's outstanding
long-term debt at September 30, 1997 (Note 7b) was retired with proceeds from
the Senior Notes. Other uses of Senior Note proceeds are expected as follows:
debt issuance costs, debt retirement costs, acquisition of MTI (Note 1),
acquisition of BRL 7.7% minority interest (Note 1), acquisition of Ikerd-Bandy
Co. (Note 15d), acquisition of Leslie Resources (Note 15g) and future
acquisitions.
Upon a change in control (as defined), the Company will be required to make
an offer to purchase all outstanding Senior Notes at 101% of the principal
amount. The Senior Notes will be unconditionally guaranteed by each of the
Company's current and future subsidiaries, other than BRL (Note 16). In addition
to containing various financial covenants, the Indenture will restrict, among
other things, additional indebtedness, issuance of preferred stock, dividend
payments, sale of subsidiaries and affiliate transactions.
During October 1997, in anticipation of closing of the Senior Notes
Indenture, the Company entered into a $50,000 secured bridge financing
arrangement with NationsBank of Texas, N.A. The bridge financing was used to
refinance existing term loans and lines of credit as well as for the acquisition
of Ikerd-Bandy Co., Inc. discussed in Note 15d below. This bridge note had a
term of 90 days and was repaid with the proceeds obtained through the Senior
Notes.
The Company has entered into a Loan and Security Agreement (the "New Credit
Agreement") with NationsBank of Texas, N.A., as administrative agent, and other
lending institutions (the "Lenders"), which provides the Company with a $50,000
credit facility (the "New Credit Facility"), guaranteed by the Company
(excluding BRL). The New Credit Facility includes a $5,000 sub-limit for the
issuance of standby letters of credit. Consummation of the New Credit Agreement
was simultaneous with that of the Senior Notes Indenture. In addition to
containing various financial covenants, the New Credit Facility will restrict,
among other things, additional indebtedness, sale of assets, business
combinations, debt prepayments, dividends and affiliate transactions. In
connection with financing the acquisition of MTI (Note 1), the Company has
borrowed $25,000 on the New Credit Facility. A waiver regarding a net worth
covenant was obtained in connection with this borrowing.
Indebtedness of the Company under the New Credit Facility is secured by all
of the capital stock of AEI HoldCo., 77.5% of the capital stock of BRL and all
the capital stock of each of the subsidiaries of the Company, other than BRL.
The Lenders also receive a security interest in all other present and future
assets and properties of the Company and its subsidiaries, except for BRL. In
the event that BRL receives any proceeds under the New Credit Facility, such BRL
Loans shall be evidenced by a promissory note executed by BRL in favor of the
Company in a form acceptable to the Lenders and shall be secured by liens on all
of the present and future assets of BRL. The BRL Note and such liens shall be
pledged to the Lenders. The Senior Notes will be effectively subordinated to the
borrowings outstanding under the New Credit Facility. The New Credit Facility
matures in 2002.
Upon early extinguishment of the Company's previously outstanding credit
facility and bridge financing, the Company expensed in November, 1997
approximately $1,550 of prepayment penalties and bridge
F-20
<PAGE> 159
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
financing costs and $190 of deferred debt issuance costs. In connection with the
financing transactions described above, the Company has committed to pay a fee
of $4,375 to a related party.
B. RECORDING DEFERRED TAXES FOR AEI TRANSFER
Upon consummation of the Exchange Agreement described in Note 1, the mining
businesses transferred from AEI (as an S corporation) will require that deferred
taxes be recorded by AEI HoldCo. (as a C corporation). The net deferred tax
liability at September 30, 1997 is estimated at $13,500 and will be recorded as
an increase to income tax provision upon the actual transfer (in November 1997)
of the net assets from AEI to AEI HoldCo.
Upon consummation in January 1998 of the MTI Agreement described in Note 1, the
technology business transferred from AEI (as an S corporation) will initially
require that a deferred tax asset of $150 be recorded with a corresponding
decrease in income tax provision for the change in tax status. In addition,
because the tax basis of the MTI net assets transferred are being stepped up for
tax purposes, but not book (a taxable pooling), the resulting deferred tax
benefit of approximately $12,000 will be recorded in January 1998 with a
corresponding increase in equity.
C. CHANGE IN MINORITY INTEREST OF BOWIE RESOURCES, LTD.
In November 1997, in connection with the Offering Memorandum described in
Note 1, the Company purchased a 7.7% ownership interest in BRL from Harold
Sergent for $2,000, bringing the Company's total interest in BRL to 77.5%.
D. PURCHASE OF IKERD-BANDY CO., INC.
In October 1997, the Company acquired all of the outstanding capital stock
of Ikerd-Bandy Co., Inc., a coal mining operation with operations in eastern
Kentucky, for the purchase price of approximately $12,000.
E. EMPLOYMENT AGREEMENTS
During September 1997 and November 1997, the Company entered into
employment agreements with two individuals for Chief Executive Officer (CEO) and
Vice President of Western Operations (VP--WO). These agreements expire in
September 2000 and contain termination benefits and other matters. Upon a change
in control of the Company (as defined) the CEO and VP--WO will receive 7.5% and
2.5%, respectively, of the then issued and outstanding stock of AEI. It is
planned for these agreements to be assigned to AEI HoldCo.
F. SURFACE MINING AGREEMENT WITH MID-VOL LEASING, INC.
Effective November 1997, the Company entered into an agreement with Mid-Vol
Leasing, Inc. whereby the Company would surface mine all mineable coal from
certain properties owned by Mid-Vol Leasing. The Company is to produce and
deliver 50,000 to 60,000 tons a month (pending mining conditions but at a
minimum 120,000 tons over any three consecutive months) for a base rate of $23
per ton. The Company is responsible for all costs of mining including haulage to
the loadout facility and reclamation of mined properties.
G. PURCHASE OF LESLIE RESOURCES
In December 1997, the Company reached an agreement to acquire the stock of
Leslie Resources, Inc. and Leslie Resources Management, Inc., (collectively,
Leslie Resources) a coal mining business with operations in eastern Kentucky,
for the purchase price of approximately $20,000.
F-21
<PAGE> 160
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
H. AEI HOLDING COMPANY, INC. SHARES AUTHORIZED, ISSUED AND OUTSTANDING
On November 12, 1997 in conjunction with the consumation of the Exchange
Agreement (see note 1) AEI HoldCo. issued 98 additional shares of $.01 par value
common stock bringing the total issued and outstanding shares to 100.
In December the Company increased authorized shares from 1,000 to 100,000
and declared a 528 to 1 stock split bringing the issued and outstanding shares
to 52,800.
I. STOCK OPTIONS
The Company has initiated plans to offer up to 50% of the issued and
outstanding stock of AEI HoldCo. to various employees and advisors. The option
purchase price will be based on fair value and its exercise will contain various
restrictions. The Company expects to have Stock Option Plan Agreements completed
in early 1998. The Company also plans to account for its stock options under APB
25 with disclosures pursuant to SFAS No. 123.
16. SUBSIDIARY GUARANTEES
The following table summarizes the financial position and operating results
for the Company regarding its guarantor and non-guarantor subsidiaries as of and
for the years ended December 31, 1995 and 1996 and as of and for the nine months
ended September 30, 1997.
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR COMBINING
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------ ------------ ----------- -------
<S> <C> <C> <C> <C>
DECEMBER 31, 1995:
ASSETS, LIABILITIES AND OWNERS' INVESTMENT
(DEFICIT):
Total current assets.......................... $21,547 $ 7,384 $(449) $28,482
Properties, net............................... 52,338 9,824 -- 62,162
Other assets.................................. 1,615 -- -- 1,615
------- ------- ----- -------
Total assets........................ $75,500 $17,208 $(449) $92,259
======= ======= ===== =======
Total current liabilities including current
portion of long-term debt and capital
leases...................................... $26,659 $ 7,857 $(449) $34,067
Long-term debt and capital leases, less
current portion............................. 38,599 5,324 -- 43,923
Other liabilities............................. 14,760 4,240 -- 19,000
------- ------- ----- -------
Total liabilities................... 80,018 17,421 (449) 96,990
------- ------- ----- -------
Total owners' investment (deficit)............ (4,518) (213) -- (4,731)
------- ------- ----- -------
Total liabilities and owners' investment
(deficit)................................... $75,500 $17,208 $(449) $92,259
======= ======= ===== =======
</TABLE>
F-22
<PAGE> 161
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR COMBINING
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------ ------------ ----------- -------
<S> <C> <C> <C> <C>
OPERATING RESULTS (1995):
Revenues...................................... $14,516 $17,178 $ -- $31,694
Costs and expenses............................ 12,670 16,305 -- 28,975
------- ------- ----- -------
Income from operations.............. 1,846 873 -- 2,719
Interest and other, net....................... (626) (286) -- (912)
------- ------- ----- -------
Excess of operating revenues over
expenses before minority
interest.......................... 1,220 587 -- 1,807
Less -- Minority interest..................... -- -- 59 59
------- ------- ----- -------
Excess of operating revenues over
expenses.......................... $ 1,220 $ 587 $ (59) $ 1,748
======= ======= ===== =======
CASH FLOWS (1995):
Cash flows from operating activities:
Excess of operating revenues over expenses.... $ 1,220 $ 587 $ (59) $ 1,748
Total adjustments to reconcile excess of
operating revenues over expenses to net cash
provided by (used in) operating
activities.................................. (2,193) 1,047 59 (1,087)
------- ------- ----- -------
Net cash provided by (used in) operating
activities.................................. (973) 1,634 -- 661
Net cash used in investing activities......... (3,126) (2,951) -- (6,077)
Net cash provided by financing activities..... 4,510 1,740 -- 6,250
------- ------- ----- -------
Net increase in cash and cash equivalents..... 411 423 -- 834
Cash and cash equivalents, beginning of
period...................................... -- -- -- --
------- ------- ----- -------
Cash and cash equivalents, end of period...... $ 411 $ 423 $ -- $ 834
======= ======= ===== =======
</TABLE>
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR COMBINING
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------ ------------ ------------- --------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996:
ASSETS, LIABILITIES AND OWNERS' INVESTMENT
(DEFICIT):
Total current assets.............................. $ 35,707 $ 3,106 $ (175) $ 38,638
Properties, net................................... 50,387 8,488 7,495 66,370
Other assets...................................... 1,614 7,803 (7,495) 1,922
-------- ------- ------- --------
Total assets............................ $ 87,708 $19,397 $ (175) $106,930
======== ======= ======= ========
Total current liabilities including current
portion of long-term debt and capital leases.... $ 45,244 $ 5,120 $ (175) $ 50,189
Long-Term debt and capital leases, less current
portion......................................... 30,916 12,930 -- 43,846
Other liabilities................................. 8,330 4,240 -- 12,570
-------- ------- ------- --------
Total liabilities....................... 84,490 22,290 (175) 106,605
-------- ------- ------- --------
Total owners' investment (deficit)................ 3,218 (2,893) -- 325
-------- ------- ------- --------
Total liabilities and owners' investment
(deficit)....................................... $ 87,708 $19,397 $ (175) $106,930
======== ======= ======= ========
</TABLE>
F-23
<PAGE> 162
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR COMBINING
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------ ------------ ------------- --------
<S> <C> <C> <C> <C>
OPERATING RESULTS (1996):
Revenues.......................................... $109,165 $15,357 $(1,322) $123,200
Costs and expenses................................ 96,981 17,412 (1,322) 113,071
-------- ------- ------- --------
Income (loss) from operations........... 12,184 (2,055) -- 10,129
Interest and other, net........................... (4,500) (625) -- (5,125)
-------- ------- ------- --------
Excess (deficit) of operating revenues
over expenses before minority
interest.............................. 7,684 (2,680) -- 5,004
Less-Minority interest............................ -- -- (59) (59)
-------- ------- ------- --------
Excess (deficit) of operating revenues
over expenses......................... $ 7,684 $(2,680) $ 59 $ 5,063
======== ======= ======= ========
CASH FLOWS (1996):
Cash flows from operating activities:
Excess (deficit) of operating revenues over
expenses........................................ $ 7,684 $(2,680) $ 59 $ 5,063
Total adjustments to reconcile excess (deficit) of
operating revenues over expenses to net cash
used in operating activities.................... 84 (314) (59) (289)
-------- ------- ------- --------
Net cash provided by (used in) operating
activities...................................... 7,768 (2,994) -- 4,774
Net cash used in investing activities............. (10,577) (1,926) -- (12,503)
Net cash provided by financing activities......... 2,801 4,547 -- 7,348
-------- ------- ------- --------
Net decrease in cash and cash equivalents......... (8) (373) -- (381)
Cash and cash equivalents, beginning of period.... 411 423 -- 834
-------- ------- ------- --------
Cash and cash equivalents, end of period.......... $ 403 $ 50 $ -- $ 453
======== ======= ======= ========
SEPTEMBER 30, 1997:
ASSETS, LIABILITIES AND OWNERS' INVESTMENT
(DEFICIT):
Total current assets.............................. $ 53,469 $ 4,011 $ (119) $ 57,361
Properties, net................................... 63,337 15,632 -- 78,969
Other assets...................................... 5,389 1,522 (1,768) 5,143
-------- ------- ------- --------
Total assets............................ $122,195 $21,165 $(1,887) $141,473
======== ======= ======= ========
Total current liabilities including current
portion of long-term debt and capital leases.... $ 39,907 $ 4,922 $ (119) $ 44,710
Long-Term debt and capital leases, less current
portion......................................... 71,002 18,326 (1,768) 87,560
Other liabilities................................. 3,914 5,467 -- 9,381
-------- ------- ------- --------
Total liabilities....................... 114,823 28,715 (1,887) 141,651
-------- ------- ------- --------
Total owners' investment (deficit)................ 7,372 (7,550) -- (178)
-------- ------- ------- --------
Total liabilities and owners' investment
(deficit)....................................... $122,195 $21,165 $(1,887) $141,473
======== ======= ======= ========
</TABLE>
F-24
<PAGE> 163
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR COMBINING
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------ ------------ ------------- --------
<S> <C> <C> <C> <C>
OPERATING RESULTS (1997):
Revenues.......................................... $110,710 $13,376 $ (5) $124,081
Costs and expenses................................ 103,570 13,971 (5) 117,536
-------- ------- ------- --------
Income (loss) from operations........... 7,140 (595) -- 6,545
Interest and other, net........................... (5,250) (601) -- (5,851)
-------- ------- ------- --------
Excess (deficit) of operating revenues
over expenses before income tax
provision............................. 1,890 (1,196) -- 694
Income tax provision.............................. -- 1,398 -- 1,398
-------- ------- ------- --------
Excess (deficit) of operating revenues
over expenses......................... $ 1,890 $(2,594) $ -- $ (704)
======== ======= ======= ========
CASH FLOWS (1997):
Cash flows from operating activities:
Excess (deficit) of operating revenues over
expenses........................................ $ 1,890 $(2,594) $ -- $ (704)
Total adjustments to reconcile excess (deficit) of
operating revenues over expenses to net cash
provided by (used in) operating activities...... (8,981) 1,677 -- (7,304)
-------- ------- ------- --------
Net cash used in operating activities............. (7,091) (917) -- (8,008)
Net cash used in investing activities............. (11,685) (6,511) -- (18,196)
Net cash provided by financing activities......... 18,768 8,099 -- 26,867
-------- ------- ------- --------
Net increase (decrease) in cash and cash
equivalents........................... (8) 671 -- 663
Cash and cash equivalents, beginning of period.... 403 50 -- 453
-------- ------- ------- --------
Cash and cash equivalents, end of period.......... $ 395 $ 721 $ -- $ 1,116
======== ======= ======= ========
</TABLE>
17. INCOME TAXES
As discussed in note 3h, during April 1997 BRL initially recorded deferred
taxes in connection with the change in tax status. Presented below are income
tax disclosures for the September 30, 1997 period ended.
Income tax expense is entirely deferred (no current payable) with federal
tax expense calculated as 34% of the excess of revenues over expenses and state
tax expense calculated as 4% (net of federal benefits and apportionment factors)
of the excess of revenue over expenses.
The difference between the effective tax rate and the statutory rate is
primarily attributable to the initial recording of the deferred tax liability of
$1,600 for differences in book versus tax asset and liability basis upon change
in BRL's tax status in April 1997.
F-25
<PAGE> 164
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
at September 30, 1997 are summarized as follows:
<TABLE>
<S> <C>
Deferred Tax Assets:
Net operating loss carryforwards....................... $2,360
Other.................................................. 120
------
Total Deferred Tax Assets......................... 2,480
------
Deferred Tax Liabilities:
Mine development costs................................. 3,055
Plant and equipment.................................... 666
Other.................................................. 157
------
Total Deferred Tax Liabilities.................... 3,878
------
Net Deferred Tax Liability........................ $1,398
======
</TABLE>
The carryforwards for net operating losses (NOL) of approximately $6,200
relate to BRL and may only be used by BRL, and if not used will expire in 2017.
NOL carryforwards may also be limited under certain ownership changes. Refer to
Note 15b for subsequent events.
18. UNAUDITED PRO FORMA INFORMATION
A pro forma adjustment has been made to historical excess of operating
revenues over expenses to reflect a provision for federal, state and local
income taxes. The 1995 and 1996 expense is calculated as 38% of 1995 and 1996
pretax earnings respectively. The 1997 expense is calculated as 38% of the
pretax earnings of AEI only (since BRL's tax status had changed during the
year -- see notes 3h and 17).
F-26
<PAGE> 165
AEI HOLDING COMPANY
COMBINED STATEMENTS OF ASSETS, LIABILITIES AND OWNERS' INVESTMENT (NOTE 1)
AS OF DECEMBER 31, 1996 AND SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 453 $ 1,116
Accounts receivable (including amounts due from related
parties of $4,814 and $8,202, respectively)............ 18,941 30,228
Inventories............................................... 14,336 20,700
Prepaid expenses and other................................ 4,908 5,317
-------- --------
Total current assets.............................. 38,638 57,361
-------- --------
Property, Plant and Equipment, at cost, including mineral
reserves and mine development costs....................... 76,654 95,002
Less -- accumulated depreciation and amortization......... (10,284) (16,033)
-------- --------
66,370 78,969
-------- --------
Other non-current assets, net............................... 1,922 5,143
-------- --------
Total assets...................................... $106,930 $141,473
======== ========
LIABILITIES AND OWNERS' INVESTMENT (DEFICIT)
Current Liabilities:
Accounts payable (including amounts due to related parties
of $6,094 and $3,850, respectively).................... $ 20,640 $ 28,030
Revolving line of credit.................................. 8,584 --
Current portion of long-term debt (including amounts due
to related parties of $32 and $32, respectively)....... 5,778 32
Current portion of capital leases......................... 5,937 4,043
Current portion of reclamation and mine closure costs..... 2,000 1,200
Accrued expenses and other................................ 7,250 11,405
-------- --------
Total current liabilities......................... 50,189 44,710
-------- --------
Non-Current Liabilities:
Long-term debt, less current portion (including amounts
due to related parties of $8,683 and $29,990,
respectively).......................................... 35,474 80,098
Capital leases, less current portion...................... 8,372 7,462
Reclamation and mine closure costs, less current
portion................................................ 9,111 7,067
Other non-current liabilities............................. 3,459 2,314
-------- --------
Total non-current liabilities..................... 56,416 96,941
-------- --------
Total liabilities................................. 106,605 141,651
-------- --------
Commitments and Contingencies (see Notes)
Owners' Investment (Deficit)................................ 325 (178)
-------- --------
Total liabilities and owners' investment.......... $106,930 $141,473
======== ========
</TABLE>
The accompanying notes to combined financial
statements are an integral part of these statements.
F-27
<PAGE> 166
AEI HOLDING COMPANY
COMBINED STATEMENTS OF OPERATING REVENUES AND EXPENSES (NOTE 1)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- -----------------------
1996 1997 1996 1997
----------- ----------- ----------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues (including revenue from related
parties of $4,170, $3,294, $6,702, and
$8,109).................................. $32,390 $46,161 $92,512 $124,081
Costs and expenses:
Cost of operations (including expense to
related parties of $4,198, $6,059,
$12,824 and $17,918, respectively).... 26,241 36,970 73,162 100,736
Depreciation, depletion and
amortization.......................... 1,619 2,091 5,069 6,910
Selling, general and administrative...... 2,568 3,629 6,668 9,890
------- ------- ------- --------
Total costs and expenses......... 30,428 42,690 84,899 117,536
------- ------- ------- --------
Income from operations........... 1,962 3,471 7,613 6,545
Interest and other income (expense):
Interest expense......................... (1,475) (1,700) (4,183) (5,265)
Gain on sale of assets................... 150 (65) 140 25
Other, net............................... 56 (524) 81 (611)
------- ------- ------- --------
(1,269) (2,289) (3,962) (5,851)
------- ------- ------- --------
Excess of operating revenues over
expenses before minority
interest and income taxes...... 693 1,182 3,651 694
Less -- Minority interest.................. -- -- (59) --
------- ------- ------- --------
Excess of operating revenues over
expenses before income taxes... 693 1,182 3,710 694
Income tax provision (benefit)............. -- (31) -- 1,398
------- ------- ------- --------
Excess (deficit) of operating
revenues over expenses......... $ 693 $ 1,213 $ 3,710 $ (704)
======= ======= ======= ========
Historical excess (deficit) of operating
revenues over expenses................... $ 693 $ 1,213 $ 3,710 $ (704)
Unaudited pro forma income tax expense..... 263 480 1,410 719
------- ------- ------- --------
Unaudited pro forma excess of operating
revenues over expenses................... $ 430 $ 733 $ 2,300 $ (1,423)
======= ======= ======= ========
</TABLE>
The accompanying notes to combined financial
statements are an integral part of these statements.
F-28
<PAGE> 167
AEI HOLDING COMPANY
COMBINED STATEMENTS OF OWNERS' INVESTMENT (DEFICIT) (NOTE 1)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
CAPITAL RETAINED ADDITIONAL
STOCK EARNINGS CAPITAL TOTAL
------- -------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at January 1, 1996............................ $ -- $ 528 $(5,259) $(4,731)
Earnings (loss) through September 30, 1996
(unaudited).................................... -- (2,127) 5,837 3,710
Owners' contribution, net (unaudited)............ -- -- 1,268 1,268
------- ------- ------- -------
Balance at September 30, 1996 (unaudited)............. $ -- $(1,599) $ 1,846 $ 247
======= ======= ======= =======
Balance at January 1, 1997............................ $ -- $(2,093) $ 2,418 $ 325
Issued 2 shares of $.01 par value common stock on
September 19, 1997............................. -- -- -- --
Earnings (loss) through September 30, 1997....... -- (2,594) 1,890 (704)
Owners' contribution, net........................ -- -- 201 201
------- ------- ------- -------
Balance at September 30, 1997......................... $ -- $(4,687) $ 4,509 $ (178)
======= ======= ======= =======
</TABLE>
The accompanying notes to combined financial
statements are an integral part of these statements.
F-29
<PAGE> 168
AEI HOLDING COMPANY
COMBINED STATEMENTS OF CASH FLOWS (NOTE 1)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Cash Flows from Operating Activities:
Excess (deficit) of operating revenues over expenses...... $ 3,710 $ (704)
Adjustments to reconcile excess (deficit) of operating
revenues over expenses to net cash used in operating
activities:
Depreciation, depletion and amortization............... 5,069 6,910
Amortization of finance costs included in interest
expense............................................... 55 24
Gain on sale of assets................................. (140) (25)
Changes in assets and liabilities:
(Increase) decrease in:
Receivables.......................................... (1,418) (11,287)
Inventories.......................................... (6,285) (6,517)
Prepaid expenses and other........................... (2,836) (409)
Other non-current assets............................. 115 (1,071)
Increase (decrease) in:
Accounts payable..................................... 7,644 4,905
Accrued expenses and other........................... 1,731 3,355
Other non-current liabilities........................ (3,938) (3,189)
------- --------
Total adjustments................................. (3) (7,304)
------- --------
Net cash provided by (used in) operating
activities...................................... 3,707 (8,008)
------- --------
Cash Flows from Investing Activities:
Net proceeds from sale of assets.......................... 238 144
Additions to property, plant and equipment and mine
development costs...................................... (8,372) (18,340)
------- --------
Net cash used in investing activities............. (8,134) (18,196)
------- --------
Cash Flows from Financing Activities:
Borrowings on long-term debt.............................. 3,637 12,045
Repayments on long-term debt.............................. (2,267) (7,219)
Net borrowings on revolving line of credit................ 873 5,061
Loans from stockholders, net of repayments................ 4,582 20,407
Repayments on capital leases.............................. (2,721) (2,804)
Payments for debt issuance costs.......................... -- (302)
Other changes in owners' investment, net.................. 288 (321)
------- --------
Net cash provided by financing activities......... 4,392 26,867
------- --------
Net increase (decrease) in cash and cash
equivalents..................................... (35) 663
------- --------
Cash and Cash Equivalents, beginning of period.............. 834 453
------- --------
Cash and Cash Equivalents, end of period.................... $ 799 $ 1,116
======= ========
</TABLE>
The accompanying notes to combined financial
statements are an integral part of these statements.
F-30
<PAGE> 169
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND 1997
(UNAUDITED -- DOLLARS IN THOUSANDS)
1. GENERAL
A. ACCOUNTING POLICIES.
Reference is made elsewhere in the document which includes additional
information about the Company, its operations and its annual combined financial
statements, which contains a summary of the basis of presentation (Note 1) as
well as significant accounting policies followed by the Company in preparation
of its combined financial statements. These policies were also followed in
preparing the interim financial statements included herein.
The management of the Company believes that all adjustments necessary to
make a fair statement of the results in these interim periods have been made.
All adjustments reflected in the financial statements are of a normal recurring
nature except as described in the Notes herein. Net results for the nine-month
periods ended September 30, 1996 and 1997 are not necessarily indicative of the
results to be expected for the full year.
B. STATEMENT OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers
investments having original maturities of three months or less to be cash
equivalents.
Supplemental disclosure:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Cash paid for interest, net of $246 and $150 capitalized for
1996 and 1997, respectively............................... $4,005 $4,826
</TABLE>
The 1997 Statement of Cash Flows is exclusive of non-cash property
additions of $766, non-cash capitalized royalties of $1,433 and non-cash
capitalized loan fees of $439.
2. INVENTORIES
As of December 31, 1996 and September 30, 1997, inventories consisted of
the following:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Coal and deferred overburden................................ $ 6,716 $12,915
Supplies and parts.......................................... 7,620 7,726
Other....................................................... -- 59
------- -------
$14,336 $20,700
======= =======
</TABLE>
3. CHANGE IN TAX STATUS AND BRL OWNERSHIP
In April 1997, BRL's shareholders (Larry Addington (90%) and Harold Sergent
(10%)) entered into an agreement to sell collectively 22.5% of their shares of
BRL common stock to Mitsui Matsushima (Mitsui). Upon consummation of this
agreement, BRL's S corporation status was terminated. Upon termination, BRL was
required to record deferred taxes for differences in book versus tax asset and
liability basis. The net deferred tax liability in April 1997 was $1,600 and was
recorded as an increase to income tax provision.
In connection with the Mitsui transaction, the Company entered into a
Shareholders agreement with Mitsui which includes BRL stock transfer and lien
restrictions, right of first refusal on share trades and a reciprocal put
clause. The reciprocal put would be triggered in the event of a Board of
Directors impasse (as defined) and provides for conditions whereby the Company
may be required to purchase from Mitsui their BRL shares or sell to Mitsui the
Company's BRL shares based on defined conditions which consider the fair market
value of the shares. The Mitsui transaction also contained a Marketing Agreement
between BRL and
F-31
<PAGE> 170
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED -- DOLLARS IN THOUSANDS)
Mitsui whereby Mitsui received the exclusive right to market BRL coal within
Japan and market up to 22.5% of excess available BRL production.
4. INCOME TAXES
As discussed in note 3 above, during April 1997 BRL initially recorded
deferred taxes in connection with the change in tax status. Presented below are
income tax disclosures for the September 30, 1997 period ended.
Income tax expense is entirely deferred (no current payable) with federal
tax expense calculated as 34% of the excess of revenues over expenses and state
tax expense calculated as 4% (net of federal benefits and apportionment factors)
of the excess of revenue over expenses.
The difference between the effective tax rate and the statutory rate is
primarily attributable to the initial recording of the deferred tax liability of
$1,600 for differences in book versus tax asset and liability basis upon change
in BRL's tax status in April 1997.
Significant components of the Company's deferred tax assets and liabilities
at September 30, 1997 are summarized as follows:
<TABLE>
<S> <C>
Deferred Tax Assets:
Net operating loss carryforwards.......................... $2,360
Other..................................................... 120
------
Total Deferred Tax Assets......................... 2,480
------
Deferred Tax Liabilities:
Mine development costs.................................... 3,055
Plant and equipment....................................... 666
Other..................................................... 157
------
Total Deferred Tax Liabilities.................... 3,878
------
Net Deferred Tax Liability........................ $1,398
======
</TABLE>
The carryforwards for net operating losses (NOL) of approximately $6,200
relate to BRL and may only be used by BRL, and if not used will expire in 2017.
NOL carryforwards may also be limited under certain ownership changes. Refer to
Note 6b for subsequent events.
5. COMMITMENTS AND CONTINGENCIES
A. LEGAL MATTERS
The Company is named as defendant in various actions in the ordinary course
of its business. These actions generally involve disputes related to contract
performance, property boundaries, mining rights, blasting damages, personal
injuries and royalty payments, as well as other civil actions that could result
in additional litigation or other adversary proceedings. Certain plaintiffs seek
amounts from the Company which are material to the financial statements.
On June 14, 1996, Robert C. Billips, d/b/a Peter Fork Mining Company, sued
the Company in the Circuit Court of Pike County, Kentucky, claiming the Company
breached a lease with Billips in Pike County, Kentucky, caused Billips to lose
business opportunities, and committed waste on Billips' property. The Company
has admitted that it entered into a lease with Billips, but denies that it
breached the lease, caused a loss of business opportunities, or committed waste.
Instead, the Company claims that it mined all minable and merchantable coal (as
defined in the lease) on the leased property, and, therefore, had no further
obligations under the lease. Legal discovery is underway and no trail date has
been set. The Company intends to defend the claims vigorously, and at this time
it is not possible to predict the likely outcome of the claims.
F-32
<PAGE> 171
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED -- DOLLARS IN THOUSANDS)
While the final resolution of any matter may have an impact on the
Company's financial results for a particular reporting period, management
believes that the ultimate disposition of these matters will not have a
materially adverse financial effect on the financial position of the Company.
B. COMMISSIONS
On January 30, 1997 (and amended on February 5, 1997), the Company entered
into a five year Sales and Agency Agreement with Bowie Coal Sales LLC, which is
owned by a related party, whereby the Company will pay a $.20 per ton commission
on certain coal sales contracts.
C. BONUS
During 1997 the Company had an informal bonus arrangement in place for
certain of its employees whereby a cash bonus, determined in the sole discretion
of the Company, will be paid near yearend. The Company has paid approximately
$2,000 in December 1997 and expects to pay a similar amount in January 1998.
Accordingly, $3,000 has been accrued in the accompanying nine months ended
September 30, 1997 Statement of Operating Revenues and Expenses.
6. SUBSEQUENT EVENTS
A. ISSUANCE OF SENIOR NOTES, BRIDGE FINANCING, NEW CREDIT FACILITY AND DEBT
EXTINGUISHMENT
As described in Note 1 to the audited combined financial statements, in
November 1997, AEI HoldCo. issued an Offering Memorandum to obtain $200,000 in
debt in the form of 10 percent Senior Notes, maturing in 2007, in a private
placement. The Senior Notes Indenture was consummated on November 12, 1997.
Virtually all of the Company's outstanding long-term debt at September 30, 1997
was retired with proceeds from the Senior Notes. Other uses of Senior Note
proceeds are expected as follows: debt issuance costs, debt retirement costs,
acquisition of MTI (Note 1 to audited combined financial statements),
acquisition of BRL 7.7% minority interest (Note 6c), acquisition of Ikerd-Bandy
Co. (Note 6d), acquisition of Leslie Resources (Note 6g) and future
acquisitions.
Upon a change in control (as defined), the Company will be required to make
an offer to purchase all outstanding Senior Notes at 101% of the principal
amount. The Senior Notes will be unconditionally guaranteed by each of the
Company's current and future subsidiaries, other than BRL (Note 7). In addition
to containing various financial covenants, the Indenture will restrict, among
other things, additional indebtedness, issuance of preferred stock, dividend
payments, sale of subsidiaries and affiliate transactions.
During October 1997 in anticipation of closing of the Senior Notes
Indenture, the Company entered into a $50,000 bridge financing arrangement with
NationsBank of Texas, N.A. The bridge financing was used to refinance existing
term loans and lines of credit as well as for the acquisition of Ikerd-Bandy
Co., Inc. discussed in Note 6d below. This bridge note had a term of 90 days and
was repaid with the proceeds obtained through the Senior Notes.
The Company has entered into a Loan and Security Agreement (the "New Credit
Agreement") with NationsBank of Texas, N.A., as administrative agent, and other
lending institutions (the "Lenders"), which provides the Company with a $50,000
credit facility (the "New Credit Facility"), guaranteed by the Company
(excluding BRL). The New Credit Facility includes a $5,000 sub-limit for the
issuance of standby letters of credit. Consummation of the New Credit Agreement
was simultaneous with that of the Senior Notes Indenture. In addition to
containing various financial covenants, the New Credit Facility will restrict,
among other things, additional indebtedness, sale of assets, business
combinations, debt prepayments, dividends and affiliate transactions. In
connection with financing the acquisition of MTI, the Company has borrowed
$25,000
F-33
<PAGE> 172
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED -- DOLLARS IN THOUSANDS)
on the New Credit Facility. A waiver regarding a net worth covenant was obtained
in connection with this borrowing.
Indebtedness of the Company under the New Credit Facility is secured by all
of the capital stock of AEI HoldCo., 77.5% of the capital stock of BRL and all
the capital stock of each of the subsidiaries of the Company, other than BRL.
The Lenders also receive a security interest in all other present and future
assets and properties of the Company and its subsidiaries, except for BRL. In
the event that BRL receives any proceeds under the New Credit Facility, such BRL
Loans shall be evidenced by a promissory note executed by BRL in favor of the
Company in a form acceptable to the Lenders and shall be secured by liens on all
of the present and future assets of BRL. The BRL Note and such liens shall be
pledged to the Lenders. The Senior Notes will be effectively subordinated to the
borrowings outstanding under the New Credit Facility. The New Credit Facility
matures in 2002.
Upon early extinguishment of the Company's previously outstanding credit
facility and bridge financing, the Company expensed in November 1997
approximately $1,550 of prepayment penalties and bridge financing costs and $190
of deferred debt issuance costs. In connection with the financing transactions
described above, the Company has committed to pay a fee of $4,375 to a related
party.
B. RECORDING DEFERRED TAXES FOR AEI TRANSFER
Upon consummation of the Exchange Agreement (as described in Note 1 to the
audited combined financial statements), the mining businesses transferred from
AEI (as an S corporation) will require that deferred taxes be recorded by AEI
HoldCo. (as a C corporation). The net deferred tax liability at September 30,
1997 is estimated at $13,500 and will be recorded as an increase to income tax
provision upon the actual transfer (in November 1997) of the net assets from AEI
to AEI HoldCo.
Upon consummation in January 1998 of the MTI Agreement described in Note 1,
to the audited combined financial statements the technology business transferred
from AEI (as an S corporation) will initially require that a deferred tax asset
of $150 be recorded with a corresponding decrease in income tax provision for
the change in tax status. In addition, because the tax basis of the MTI net
assets transferred are being stepped up for tax purposes, but not book (a
taxable pooling), the resulting deferred tax benefit of approximately $12,000
will be recorded in January 1998 with a corresponding increase in equity.
C. CHANGE IN MINORITY INTEREST OF BOWIE RESOURCES, LTD.
In November 1997, in connection with the Offering Memorandum described in
Note 1 to the audited combined financial statements, the Company purchased a
7.7% ownership interest in BRL from Harold Sergent for $2,000, bringing the
Company's total interest in BRL to 77.5%.
D. PURCHASE OF IKERD-BANDY CO., INC.
In October 1997, the Company acquired all of the outstanding capital stock
of Ikerd-Bandy Co., Inc., a coal mining operation with operations in eastern
Kentucky, for the purchase price of approximately $12,000.
E. EMPLOYMENT AGREEMENTS
During September 1997 and November 1997, the Company entered into
employment agreements with two individuals for Chief Executive Officer (CEO) and
Vice President of Western Operations (VP -- WO). These agreements expire in
September 2000 and contain termination benefits and other matters. Upon a change
in control of the Company (as defined), the CEO and VP -- WO will receive 7.5%
and 2.5% respectively, of the then issued and outstanding stock of AEI. It is
planned for these agreements to be assigned to AEI Holdco.
F-34
<PAGE> 173
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED -- DOLLARS IN THOUSANDS)
F. SURFACE MINING AGREEMENT WITH MID-VOL LEASING, INC.
Effective November 1997, the Company entered into an agreement with Mid-Vol
leasing, Inc. whereby the Company would surface mine all mineable coal from
certain properties owned by Mid-Vol Leasing. The Company is to produce and
deliver 50,000 to 60,000 tons a month (pending mining conditions but at a
minimum 120,000 tons over any three consecutive months) for a base rate of $23
per ton. The Company is responsible for all costs of mining including haulage to
the loadout facility and reclamation of mined properties.
G. PURCHASE OF LESLIE RESOURCES
In December 1997, the Company reached an agreement to acquire the stock of
Leslie Resources, Inc. and Leslie Resources Management, Inc., (collectively,
Leslie Resources) a coal mining business with operations in eastern Kentucky,
for the purchase price of approximately $20,000.
H. AEI HOLDING COMPANY, INC. SHARES AUTHORIZED, ISSUED AND OUTSTANDING
On November 12, 1997 in conjunction with the consummation of the Exchange
Agreement (see note 1) AEI HoldCo. issued 98 additional shares of $.01 par value
common stock bringing the total issued and outstanding shares to 100.
In December the Company increased authorized shares from 1,000 to 100,000
and declared a 528 to 1 stock split bringing the issued and outstanding shares
to 52,800.
I. STOCK OPTIONS
The Company has initiated plans to offer up to 50% of the issued and
outstanding stock of AEI HoldCo. to various employees and advisors. The option
purchase price will be based on fair value and its exercise will contain various
restrictions. The Company expects to have Stock Option Plan Agreements completed
in early 1998. The Company also plans to account for its stock options under APB
25.
7. SUBSIDIARY GUARANTEES
The following table summarizes the financial position and operating results
for the Company regarding its guarantor and non-guarantor subsidiaries as of
September 30, 1997 and for the periods ended September 30, 1996 and 1997.
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR COMBINING
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------ ------------ ------------- --------
<S> <C> <C> <C> <C>
SEPTEMBER 30, 1996:
OPERATING RESULTS:
Revenues.......................................... $ 82,999 $10,590 $(1,077) $ 92,512
Costs and expenses................................ 73,636 12,340 (1,077) 84,899
-------- ------- ------- --------
Income (loss) from operations........... 9,363 (1,750) -- 7,613
Interest and other, net........................... (3,526) (436) -- (3,962)
-------- ------- ------- --------
Excess (deficit) of operating revenues
over expenses before minority
interest.............................. 5,837 (2,186) -- 3,651
Less: Minority interest........................... -- -- (59) (59)
-------- ------- ------- --------
Excess (deficit) of operating revenues
over expenses......................... $ 5,837 $(2,186) $ 59 $ 3,710
======== ======= ======= ========
</TABLE>
F-35
<PAGE> 174
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED -- DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR COMBINING
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------ ------------ ------------- --------
<S> <C> <C> <C> <C>
CASH FLOWS (1996):
Cash flows from operating activities:
Excess (deficit) of operating revenues over
expenses........................................ $ 5,837 $(2,186) $ 59 $ 3,710
Total adjustments to reconcile excess (deficit) of
operating revenues over expenses to net cash
provided by (used in) operating activities...... 614 (558) (59) (3)
-------- ------- ------- --------
Net cash provided by (used in) operating
activities...................................... 6,451 (2,744) -- 3,707
Net cash used in investing activities............. (6,792) (1,342) -- (8,134)
Net cash provided by financing activities......... 328 4,064 -- 4,392
-------- ------- ------- --------
Net increase in cash and cash
equivalents........................... (13) (22) -- (35)
Cash and cash equivalents, beginning of period.... 411 423 -- 834
-------- ------- ------- --------
Cash and cash equivalents, end of period.......... $ 398 $ 401 $ -- $ 799
======== ======= ======= ========
SEPTEMBER 30, 1997:
ASSETS, LIABILITIES AND OWNERS' INVESTMENT (DEFICIT):
Total current assets.............................. $ 53,469 $ 4,011 $ (119) $ 57,361
Properties, net................................... 63,337 15,632 -- 78,969
Other assets...................................... 5,389 1,522 (1,768) 5,143
-------- ------- ------- --------
Total assets............................ $122,195 $21,165 $(1,887) $141,473
======== ======= ======= ========
Total current liabilities including current
portion of long-term debt and capital leases.... $ 39,907 $ 4,922 $ (119) $ 44,710
Long-term debt and capital leases, less current
portion......................................... 71,002 18,326 (1,768) 87,560
Other liabilities................................. 3,914 5,467 -- 9,381
-------- ------- ------- --------
Total liabilities....................... 114,823 28,715 (1,887) 141,651
-------- ------- ------- --------
Total owners' investment (deficit)................ 7,372 (7,550) -- (178)
-------- ------- ------- --------
Total liabilities and owners' investment
(deficit)....................................... $122,195 $21,165 $(1,887) $141,473
======== ======= ======= ========
OPERATING RESULTS (1997):
Revenues.......................................... $110,710 $13,376 $ (5) $124,081
Costs and expenses................................ 103,570 13,971 (5) 117,536
-------- ------- ------- --------
Income (loss) from operations........... 7,140 (595) -- 6,545
Interest and other, net........................... (5,250) (601) -- (5,851)
-------- ------- ------- --------
Excess (deficit) of operating revenues
over expenses before income tax
provision............................. 1,890 (1,196) -- 694
Income tax provision.............................. -- 1,398 -- 1,398
-------- ------- ------- --------
Excess (deficit) of operating revenues
over expenses......................... $ 1,890 $(2,594) $ -- $ (704)
======== ======= ======= ========
</TABLE>
F-36
<PAGE> 175
AEI HOLDING COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED -- DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
GUARANTOR GUARANTOR COMBINING
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS TOTAL
------------ ------------ ------------- --------
<S> <C> <C> <C> <C>
CASH FLOWS (1997):
Cash flows from operating activities:
Excess (deficit) of operating revenues over
expenses........................................ $ 1,890 $(2,594) $ -- $ (704)
Total adjustments to reconcile excess (deficit) of
operating revenues over expenses to net cash
provided by (used in) operating activities...... (8,981) 1,677 -- (7,304)
-------- ------- ------- --------
Net cash used in operating activities............. (7,091) (917) -- (8,008)
Net cash used in investing activities............. (11,685) (6,511) -- (18,196)
Net cash provided by financing activities......... 18,768 8,099 -- 26,867
-------- ------- ------- --------
Net increase (decrease) in cash and cash
equivalents........................... (8) 671 -- 663
Cash and cash equivalents, beginning of period.... 403 50 -- 453
-------- ------- ------- --------
Cash and cash equivalents, end of period.......... $ 395 $ 721 $ -- $ 1,116
======== ======= ======= ========
</TABLE>
8. UNAUDITED PRO FORMA INFORMATION
A pro forma adjustment has been made to historical excess (deficit) of
operating revenues over expenses to reflect a provision (benefit) for federal,
state and local income taxes. The 1996 expense is calculated as 38% of 1996
pretax earnings. The 1997 expense is calculated as 38% of the pretax earnings of
AEI only (since BRL's tax status had changed during the year -- See note 3).
F-37
<PAGE> 176
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Owners of
Addington Coal Operations (the Predecessor Business):
We have audited the accompanying combined statements of operating revenues
and expenses, parent investment and cash flows of Addington Coal Operations (the
Predecessor Business, as described in Note 1) for the year ended December 31,
1994 and for the ten-month period ended November 1, 1995. 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 audits 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.
The accompanying combined statements of the predecessor business have been
prepared to reflect the coal mining & technology operations of the businesses
acquired by Addington Enterprises, Inc., which is the Predecessor Business of
AEI Holding Company, Inc. following the consummation of the shareholder exchange
agreement and asset purchase agreement (as described in Note 1) and are not
intended to be a complete presentation of an existing entity's financial
position or results of operations.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operating revenues and expenses and
cash flows of Addington Coal Operations (the Predecessor Business) for the year
ended December 31, 1994 and for the ten-month period ended November 1, 1995 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Louisville, Kentucky
February 29, 1996 (except with respect to the matter discussed
in Note 1, as to which the date is January 2, 1998)
F-38
<PAGE> 177
ADDINGTON COAL OPERATIONS (THE PREDECESSOR BUSINESS)
COMBINED STATEMENTS OF OPERATING REVENUES AND EXPENSES (NOTE 1)
FOR THE YEAR ENDED DECEMBER 31, 1994 AND FOR THE TEN MONTHS ENDED NOVEMBER 1,
1995
<TABLE>
<CAPTION>
1994 1995
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Revenues.................................................... $103,100 $80,569
Costs and expenses:
Cost of operations........................................ 91,460 69,051
Depreciation, depletion and amortization.................. 4,362 4,624
Selling, general and administrative....................... 7,121 6,427
-------- -------
Total costs and expenses.......................... 102,943 80,102
-------- -------
Income from operations............................ 157 467
Interest and other income (expense):
Interest expense.......................................... (346) (982)
Gain (loss) on sale of assets............................. 178 (541)
Other, net................................................ 104 (14)
-------- -------
(64) (1,537)
-------- -------
Excess (deficit) of operating revenues over
expenses before income taxes.................... 93 (1,070)
Income tax provision (benefit).............................. 35 (407)
-------- -------
Excess (deficit) of operating revenues over
expenses........................................ $ 58 $ (663)
======== =======
</TABLE>
The accompanying notes to combined financial
statements are an integral part of these statements.
F-39
<PAGE> 178
ADDINGTON COAL OPERATIONS (THE PREDECESSOR BUSINESS)
COMBINED STATEMENTS OF PARENT INVESTMENT (NOTE 1)
FOR THE YEAR ENDED DECEMBER 31, 1994 AND FOR THE TEN MONTHS ENDED NOVEMBER 1,
1995
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
Balance at January 1, 1994.................................. $30,190
Excess of operating revenues over expenses................ 58
Other changes in parent investment, net................... 893
-------
Balance at December 31, 1994 31,141
(Deficit) of operating revenues over expenses............. (663)
Other changes in parent investment, net................... (4,314)
-------
Balance at November 1, 1995................................. $26,164
=======
</TABLE>
The accompanying notes to combined financial
statements are an integral part of these statements.
F-40
<PAGE> 179
ADDINGTON COAL OPERATIONS (THE PREDECESSOR BUSINESS)
COMBINED STATEMENTS OF CASH FLOWS (NOTE 1)
FOR THE YEAR ENDED DECEMBER 31, 1994 AND FOR THE TEN MONTHS ENDED NOVEMBER 1,
1995
<TABLE>
<CAPTION>
1994 1995
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Cash Flows From Operating Activities:
Excess (deficit) of operating revenues over expenses...... $ 58 $ (663)
Adjustments to reconcile excess (deficit) of operating
revenues over expenses to net cash provided by (used
in) operating activities:
Depreciation, depletion and amortization............... 4,362 4,624
(Gain) loss on sale of assets.......................... (178) 541
Changes in assets and liabilities:
(Increase) decrease in:
Receivables.......................................... (8,047) 2,208
Inventories.......................................... 5,124 (70)
Prepaid expenses and other........................... (926) (1,264)
Other non-current assets............................. (3,025) 3,385
Increase (decrease) in:
Accounts payable..................................... 5,427 1,011
Accrued expenses and other........................... 4,674 3,448
Other non-current liabilities........................ (8,377) (2,758)
-------- -------
Total adjustments................................. (966) 11,125
-------- -------
Net cash provided by (used in) operating
activities...................................... (908) 10,462
-------- -------
Cash Flows From Investing Activities:
Net proceeds from sale of assets.......................... 1,115 1,170
Additions to property, plant and equipment and mine
development costs...................................... (11,465) (6,081)
-------- -------
Net cash used in investing activities............. (10,350) (4,911)
-------- -------
Cash Flows From Financing Activities:
Borrowings on long-term debt.............................. 4,671 2,279
Repayments on long-term debt.............................. (138) (1,390)
Net payments on revolving line of credit.................. (13,239) (3,116)
Proceeds from capital lease borrowings.................... -- 4,752
Repayments on capital leases.............................. (184) (744)
Payments for debt issuance costs.......................... -- (216)
Other changes in owners investment, net................... 20,218 (6,950)
-------- -------
Net cash provided by (used in) financing
activities...................................... 11,328 (5,385)
-------- -------
Net increase in cash and cash equivalents......... 70 166
-------- -------
Cash and Cash Equivalents, beginning of period.............. 148 218
-------- -------
Cash and Cash Equivalents, end of period.................... $ 218 $ 384
======== =======
</TABLE>
The accompanying notes to combined financial
statements are an integral part of these statements.
F-41
<PAGE> 180
ADDINGTON COAL OPERATIONS (THE PREDECESSOR BUSINESS)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND NOVEMBER 1, 1995
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION AND ACQUISITION
The accompanying combined financial statements of Addington Coal Operations
(the Predecessor Business) (the Company) have been prepared to reflect the coal
mining and North American (N.A.) technology operations acquired by Addington
Enterprises, Inc. (AEI) from Addington Resources, Inc. (ARI) on November 2,
1995. Accordingly, the accompanying combined financial statements for the ten
months ended November 1, 1995 and for the year ended December 31, 1994, reflect
such coal mining and N.A. technology operations while under the ownership and
control of ARI. Significant "intercompany" transactions and accounts have been
eliminated in combination.
On November 12, 1997, AEI (as Transferor) consummated a shareholder
exchange agreement (Exchange Agreement) with AEI Holding Company, Inc. (AEI
HoldCo. -- as Transferee) and Larry Addington and Harold Sergent (as
Transferors) for their 77.5% interest in Bowie Resources, Limited (BRL) (an
entity under common control). The Exchange Agreement calls for AEI HoldCo. to
issue 98 common shares (par value $.01) as consideration for: (1) AEI's coal
mining operations and certain corporate net assets and (2) Larry Addington
(69.8%) and Harold Sergent's (7.7%) ownership interest in BRL. AEI is owned by
Larry Addington (80%), Robert Addington (10%) and Bruce Addington (10%), who are
brothers. The coal mining businesses transferred by AEI included the net assets
of its Addington Mining and corporate divisions as well as its wholly-owned
subsidiary, Tennessee Mining, Inc. AEI retained certain non-coal mining
properties and technology related assets which were disposed in the MTI
Agreement (see below).
The Exchange Agreement was prepared in connection with, and its
consummation was contingent upon, the closing of the $200,000 Senior Notes
Indenture (Senior Notes) of AEI HoldCo. which occurred on November 12, 1997. AEI
HoldCo. issued an Offering Memorandum dated November 6, 1997, to obtain $200,000
in 10 percent Senior Notes, maturing in 2007, in a private placement. In
addition, on November 6, 1997, AEI HoldCo. entered into a Purchase Agreement
with NationsBanc Montgomery Securities, Inc. related to the Senior Notes. After
the consummation of the Exchange Agreement and MTI agreement, AEI HoldCo. is
owned by AEI (50%) and Larry Addington (50%). In addition, Addington Mining,
Inc. (AMI), Tennessee Mining Inc. (TMI) and Mining Technologies, Inc. (MTI) are
wholly-owned subsidiaries of AEI HoldCo. while BRL is 77.5% owned by AEI HoldCo.
and 22.5% owned by Mitsui Matsushima.
The MTI Agreements is between Mining Technologies, Inc., a newly formed
subsidiary of AEI HoldCo. (as purchaser) and AEI (as seller) for AEI's ownership
interest in its N.A., mining technologies division. The purchase price of
$51,000 (cash) was delivered at closing on January 2, 1998. The net assets
acquired include mining equipment (primarily Highwall Mining Systems), coal
sales contracts, and the intellectual property for the N.A. Highwall Mining
System (patents, trademarks, etc). AEI retained ownership of the non-N.A.
intellectual property.
Due to the significance (using total revenues and assets) of AEI's
transferred business to the aggregate of AEI HoldCo. management has determined
for financial reporting purposes the predecessor of AEI HoldCo. is AEI. AEI's
predecessor is ARI's coal mining and N.A.. technology operations. Accordingly,
the accompanying combined financial statements have been prepared to reflect the
preacquisition (November 2, 1995) mining and N.A. technology operations of AEI's
predecessor and are not intended to be a complete presentation of an existing
entity's financial position or results of operations. They do not reflect the
activities from the non-coal mining properties.
Various allocations and carve-out adjustments have been made in the
preparation of the accompanying financial statements. Such allocations have been
recorded to segregate the historical accounts to reflect the business acquired
by AEI. Management believes that the method used for allocations and carve-out
adjustments is reasonable.
F-42
<PAGE> 181
ADDINGTON COAL OPERATIONS (THE PREDECESSOR BUSINESS)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
ACQUISITION BY AEI
On September 22, 1995, in a related party transaction, AEI entered into a
stock purchase agreement with Addington Resources, Inc. (ARI) whereby AEI agreed
to purchase all the issued and outstanding shares of common stock of ARI's coal
mining and technology subsidiaries. In addition, pursuant to an option agreement
dated August 4, 1995, AEI agreed to purchase from ARI all the issued and
outstanding stock of the ARI subsidiary, TMI, in exchange for a royalty AEI will
pay to ARI based on tons of coal delivered under a certain coal sales contract,
up to a maximum amount of $12,000. This royalty will be recorded as a liability
as the coal is delivered. The stockholders of AEI had formerly been executive
officers and minority owners of ARI.
These agreements were consummated on November 2, 1995, at which time AEI
approved and adopted a plan of merger which provided for the merger of AMI, MTI
and TMI into AEI and the cancellation of the subsidiaries' common stock.
Pursuant to the stock purchase agreement with ARI, AEI assumed certain
liabilities and contingencies of the acquired subsidiaries that are reflected in
the net assets acquired and accompanying notes. Further, AEI has granted
indemnification for performance guarantees made by ARI in connection with the
sale of certain ARI coal-related subsidiaries in previous years as well as
guarantees relating to certain mineral lease royalty obligations and workers'
compensation benefits. The Company believes no significant obligation will
result relating to the ARI indemnification. The obligations of AEI under the
above agreement will be transferred to AEI HoldCo. pursuant to the Exchange
Agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL
A. MANAGEMENT'S USE OF ESTIMATES
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.
B. COMPANY ENVIRONMENT AND RISKS
The Company's principal business activities consist of surface mining and
marketing of bituminous coal, performance of contract mining for third parties
and construction, repair and licensing of mining equipment. These operations are
primarily located in Kentucky and Tennessee.
The Company, in the course of its business activities, is exposed to a
number of risks including: the possibility of the termination or alteration of
sales contracts, fluctuating market conditions of coal and transportation costs,
competitive industry and over-capacity, changing government regulations, loss of
key employees and the ability of the Company to obtain necessary mining permits
and control adequate recoverable mineral reserves. In addition, adverse (wet)
weather and geological conditions tend to increase mining costs. Precipitation
is generally highest in early spring and late fall.
C. DEPRECIATION AND AMORTIZATION
Property, plant and equipment are recorded at cost, including construction
overhead and interest, where applicable. Expenditures for major renewals and
betterments are capitalized while expenditures for maintenance and repairs are
expensed as incurred. Depreciation and amortization are provided using either
the
F-43
<PAGE> 182
ADDINGTON COAL OPERATIONS (THE PREDECESSOR BUSINESS)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
straight-line or units of production method with estimated useful lives under
the straight-line method comprising substantially the following ranges:
<TABLE>
<CAPTION>
YEARS
--------
<S> <C>
Buildings................................................... 10 to 45
Mining and other equipment and related facilities........... 2 to 20
Transportation equipment.................................... 2 to 7
Furniture and fixtures...................................... 3 to 7
</TABLE>
Mineral reserves and mine development costs are amortized using the
units-of-production method, based on estimated recoverable reserves.
Financing costs are being amortized using the straight-line method, over
the life of the related debt, which approximates the effective interest method.
D. INCOME TAXES
Deferred income taxes are recorded based upon temporary differences between
the financial statement and tax bases of assets and liabilities and net
operating loss carryforwards and tax credits available for income tax purposes.
Income tax provision (benefit) for the 1995 period and 1994 year represents
38% of pretax earnings as allocated by the parent. There are no significant
differences between the statutory and effective tax rates.
E. REVENUE RECOGNITION
Most of the Company's revenues have been generated under long-term coal
sales contracts with electric utilities or other coal-related organizations,
primarily in the eastern United States. Revenues are recognized on coal sales in
accordance with the sales agreement, which is usually when the coal is shipped
to the customer and title passes. The Company also rents equipment and provides
repair services and the revenue from such rental and service is recognized when
earned. Revenue from the construction of mining equipment is recognized on a
percentage of completion basis.
The Company grants credit to its customers based on their creditworthiness
and generally does not secure collateral for its receivables.
F. RECLASSIFICATIONS
Certain reclassifications of prior year amounts were made to conform with
current year presentation with no effect on previously reported excess (deficit)
of revenues over expenses or parent investment.
G. PARENT INVESTMENT
Parent Investment is comprised of the relevant ARI (and affiliates) equity,
loan and trade account balances with the Company.
H. STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers
investments having maturities of three months or less at the time of the
purchase to be cash equivalents.
F-44
<PAGE> 183
ADDINGTON COAL OPERATIONS (THE PREDECESSOR BUSINESS)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Supplemental disclosure:
<TABLE>
<CAPTION>
TEN
YEAR MONTHS
ENDED 1994 1995
---------- ------
<S> <C> <C>
Cash paid for interest................................. $ 473 $1,126
Interest capitalized................................... 110 142
Non cash capital lease................................. 708 --
Non cash distribution of equipment to affiliates....... -- 1,218
Non cash property additions............................ -- 4,671
</TABLE>
Income taxes for the 1994 year and 1995 period were allocated by the parent
and not specifically paid by the Company. The above non-cash transactions have
been excluded from the accompanying 1994 and 1995 Combined Statements of Cash
Flows.
3. COMMITMENTS AND CONTINGENCIES
A. COAL SALES CONTRACTS
As of November 1, 1995, the Company had commitments to deliver scheduled
base quantities of coal annually to four customers. The contracts expire in
1996, 1997, 2004 and 2005, with the Company contracted to supply a minimum of
approximately 28.7 million tons of coal over the remaining lives of the
contracts at prices which are at or above market. Certain of the contracts have
sales price adjustment provisions, subject to certain limitations and
adjustments, based on changes in specified production costs.
B. LEASES
The Company has various operating and capital leases for mining,
transportation and other equipment. Lease expense for the year ended December
31, 1994 and for the ten-month period ended November 1, 1995 was approximately
$7,063 and $5,692, respectively. Depreciation of assets under capital leases is
included in depreciation expense.
The Company also leases reserves under agreements that call for royalties
to be paid as the coal is mined. Total royalty expense for the year ended
December 31, 1994 and for the ten months ended November 1, 1995 was $8,582 and
$7,607, respectively. Certain agreements require minimum annual royalties to be
paid regardless of the amount of coal mined during the year. However, such
agreements are generally cancelable at the Company's discretion.
Approximate future minimum operating lease and royalty payments are as
follows:
<TABLE>
<CAPTION>
OPERATING
LEASES ROYALTIES
--------- ----------
<S> <C> <C>
2 months ended December 31, 1995............................ $ 640 $1,395
Year ended December 31, 1996................................ 3,489 2,542
Year ended December 31, 1997................................ 2,235 1,862
Year ended December 31, 1998................................ 606 1,296
Year ended December 31, 1999................................ 158 798
Year ended December 31, 2000................................ 27 500
Thereafter.................................................. 8 260
------ ------
Total minimum lease and royalty payments.......... $7,163 $8,653
====== ======
</TABLE>
F-45
<PAGE> 184
ADDINGTON COAL OPERATIONS (THE PREDECESSOR BUSINESS)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
C. LEGAL MATTERS
The Company is named as defendant in various actions in the ordinary course
of its business. These actions generally involve disputes related to contract
performance, property boundaries, mining rights, blasting damages, personal
injuries and royalty payments, as well as other civil actions that could result
in additional litigation or other adversary proceedings. Certain plaintiffs seek
amounts from the Company which are material to the financial statements.
While the final resolution of any matter may have an impact on the
Company's financial results for a particular reporting period, management
believes that the ultimate disposition of these matters will not have a
materially adverse effect upon the financial position of the Company.
4. MAJOR CUSTOMERS
The Company has sales to the following major customers that exceed 10% of
revenues. These revenues and each customer's relative percentage of total
receivables are summarized below:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
REVENUES TOTAL REVENUES TOTAL RECEIVABLES
-------- -------------- -----------------
<S> <C> <C> <C>
Year Ending December 31, 1994:
Customer A..................................... $34,902 34% 25%
Customer B..................................... 16,312 16 22
Customer C..................................... 20,181 20 25
Customer D..................................... 13,563 13 --
Ten Months Ending November 1, 1995:
Customer A..................................... $25,968 32% 19%
Customer B..................................... 16,169 20 16
Customer C..................................... 9,857 12 6
</TABLE>
5. RELATED PARTY TRANSACTIONS
The Company has dealt with certain companies or individuals which are
related parties either by having stockholders in common or because they are
controlled by stockholders/officers of the Company or by relatives of
stockholders/officers of the Company. The Company leases mining equipment from
affiliates and pays trucking, flight fees and building space rentals to related
parties. In addition to related party transactions and balances described
elsewhere, the following related party transactions are summarized and
approximated as follows:
<TABLE>
<CAPTION>
YEAR TEN
ENDED MONTHS
1994 1995
------ ------
<S> <C> <C>
Revenues, costs and expenses:
Equipment rental income................................... $1,129 $1,645
Flight fee expense........................................ -- 315
Building rental expense................................... 110 92
Trucking expense.......................................... 7,407 2,774
Management fee............................................ -- 194
</TABLE>
F-46
<PAGE> 185
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Leslie Resources, Inc.
and
Leslie Resources Management, Inc.
and its Subsidiaries
Hazard, Kentucky
We have audited the accompanying consolidated and combined balance sheet of
Leslie Resources, Inc. and Leslie Resources Management, Inc. and its
Subsidiaries, as of December 31, 1996 and 1995 and the related statements of
income and retained earnings and cash flows for the years then ended. 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 accompanying financial statements present fairly, in
all material respects the consolidated and combined financial position of Leslie
Resources, Inc. and Leslie Resources Management, Inc. and its Subsidiaries as of
December 31, 1996 and 1995 and the results of operations and cash flows for the
years then ended in conformity with generally accepted accounting principles.
FAESY, SCHMITT & COMPANY, PSC
Frankfort, Kentucky
June 24, 1997 (except as to the matter discussed
in Note 18 as to which the date is January 14, 1998)
F-47
<PAGE> 186
LESLIE RESOURCES, INC.
AND
LESLIE RESOURCES MANAGEMENT, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED AND COMBINED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash (Notes 2, 3 & 4)..................................... $ 3,207,195 $ 3,541,603
Accounts receivable (Note 4).............................. 4,905,148 2,674,740
Other receivables......................................... 93,018 701,000
Inventory (Note 2)........................................ 793,448 433,551
Advance royalties (Notes 2 & 8)........................... 237,000 1,015,425
Prepaid insurance & other................................. 241,764 264,794
----------- -----------
Total Current Assets............................... 9,477,573 8,631,113
----------- -----------
Property and Equipment (Note 2 & 7)
Land...................................................... 303,300 303,300
Mining machinery.......................................... 24,230,606 23,262,563
Vehicles.................................................. 773,589 837,115
Office equipment and other................................ 199,734 80,518
----------- -----------
25,507,229 24,483,496
Less accumulated depreciation........................... (14,059,030) (11,377,025)
----------- -----------
Net Property and Equipment................................ 11,448,199 13,106,471
----------- -----------
Other Assets
Coal leases, net (Notes 2 & 6)............................ 268,661 320,709
Mine development costs, net (Note 2)...................... 349,796 426,173
Advance royalties -- long term (Notes 2 & 9).............. 1,006,035 641,000
Organization costs, net................................... 12,400 15,500
Non-marketable security (Note 5).......................... 2,000,000 2,000,000
----------- -----------
Total Other Assets................................. 3,636,892 3,403,382
----------- -----------
TOTAL ASSETS....................................... $24,562,664 $25,140,966
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable and accrued expenses..................... $ 7,476,906 $ 5,598,319
Accrued royalties......................................... 800,093 3,142
Notes payable -- short term (Note 4)...................... 1,243,856 3,322,746
Current portion -- long term debt (Note 7)................ 3,463,663 2,992,844
Current portion -- long term accrued royalties (Notes 9 &
10)..................................................... 813,000 546,000
----------- -----------
Total Current Liabilities.......................... 13,797,518 12,463,051
----------- -----------
Long Term Liabilities
Long term debt (Note 7)................................... 6,045,845 3,481,808
Accrued long term royalties (Note 9)...................... 598,122 981,000
Accrued overriding royalties (Note 10).................... 3,542,931 3,973,000
Accrued reclamation and other (Note 11)................... 424,726 261,519
----------- -----------
Total Long Term Liabilities........................ 10,611,624 8,697,327
----------- -----------
Total Liabilities.................................. 24,409,142 21,160,378
----------- -----------
Stockholder's Equity
Common stock (Note 12).................................... 2,000 2,000
Less: Cost of treasury stock (Notes 12 & 13)............ (4,251,866) (348,866)
Retained earnings (Note 12)............................... 4,403,388 4,327,454
----------- -----------
Total Stockholder's Equity......................... 153,522 3,980,588
----------- -----------
TOTAL LIABILITIES & STOCKHOLDER'S EQUITY........... $24,562,664 $25,140,966
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-48
<PAGE> 187
LESLIE RESOURCES, INC.
AND
LESLIE RESOURCES MANAGEMENT, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF
INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Coal Sales.................................................. $68,739,928 $41,558,695
Cost of Sales............................................... 62,731,514 39,607,002
----------- -----------
Gross Profit...................................... 6,008,414 1,951,693
General and Administrative.................................. 2,545,553 2,339,679
----------- -----------
Operating Income (Loss)................................ 3,462,861 (387,986)
Other Income (Expense)......................................
Interest & dividend income................................ 278,721 214,961
Other Income.............................................. 85,413 --
Interest expense.......................................... (1,087,972) (828,826)
Other expense............................................. (597,202) (99,950)
----------- -----------
Net Other......................................... (1,321,040) (713,815)
----------- -----------
Net Income (Loss) Before Income Taxes............. 2,141,821 (1,101,801)
Income Tax Expense (Note 14)................................ (12,113) --
----------- -----------
NET INCOME (LOSS)................................. $ 2,129,708 $(1,101,801)
Beginning Retained Earnings................................. 4,327,454 6,730,121
Less: Dividends Paid (Note 14).............................. (2,053,774) (1,300,866)
----------- -----------
Ending Retained Earnings.................................... $ 4,403,388 $ 4,327,454
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-49
<PAGE> 188
LESLIE RESOURCES, INC.
AND
LESLIE RESOURCES MANAGEMENT, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities
Net income (Loss)......................................... $ 2,129,708 $(1,101,801)
Adjustments to reconcile to net cash provided by
operations
Depreciation and amortization.......................... 3,119,734 3,449,131
Cost depletion......................................... 52,048 48,174
Equipment used for repairs............................. 75,731 --
Gain on sale of assets................................. (43,999) --
(Increase) Decrease in:
Receivables.......................................... (2,321,426) 66,296
Inventory............................................ (359,897) (333,548)
Prepaids, advances and others........................ 436,420 (300,094)
Increase (Decrease) in:
Accounts payable and accrued expenses................ 2,133,733 704,837
Accrued reclamation costs............................ 159,065 65,100
----------- -----------
Net Cash Provided by Operating Activities................... 5,381,117 2,598,095
----------- -----------
Cash Flows from Investing Activities
Purchases of property and equipment....................... (1,909,922) (253,099)
Equipment distributed to shareholders..................... -- 101,964
Proceeds from sales of equipment.......................... 495,220 --
Affiliate loans........................................... 700,000 (20,093)
Mine development costs.................................... -- (221,993)
Decrease in bond deposits................................. -- 430,777
Purchase of non-marketable securities..................... -- (2,000,000)
----------- -----------
Net Cash Used by Investing Activities....................... (714,702) (1,962,444)
----------- -----------
Cash Flow from Financing Activities
Proceeds from debt........................................ 6,940,300 3,483,046
Repayment of debt......................................... (5,984,349) (3,346,765)
Distributions to shareholders............................. (2,053,774) (1,300,866)
Purchase of treasury stock................................ (3,903,000) --
Issuance of common stock.................................. -- 1,000
----------- -----------
Net Cash Used by Financing Activities....................... (5,000,823) (1,163,585)
----------- -----------
NET INCREASE (DECREASE) IN CASH................... (334,408) (527,934)
Cash, Beginning............................................. 3,541,603 4,069,537
----------- -----------
Cash, Ending................................................ $ 3,207,195 $ 3,541,603
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year totalled:
Interest............................................... $ 1,069,953 $ 823,948
=========== ===========
Income Taxes........................................... $ -- $ --
=========== ===========
Supplemental disclosure of noncash investing and financing
activities:
Equipment acquired in acquisition......................... $ -- $ 3,640,000
=========== ===========
Prepaid royalties acquired in acquisition................. $ -- $ 1,160,000
=========== ===========
Future royalty requirements assumed in acquisition........ $ -- $ 5,500,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE> 189
LESLIE RESOURCES, INC.
AND
LESLIE RESOURCES MANAGEMENT, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. DESCRIPTION OF BUSINESS
Leslie Resources, Inc. and Leslie Resource Management, Inc. and its
Subsidiaries primarily engage in coal mining activities using the strip mining
method. Coal mining and the loading facilities of coal are conducted in four
different counties in the State of Kentucky. The Company's sales are
predominantly to utility and industrial users of coal.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF ACCOUNTING
Leslie Resources, Inc. and Leslie Resource Management, Inc. and its
Subsidiaries have been combined, all of which are hereinafter referred to as the
"Company," because of common business activities, intercompany transactions and
common ownership. All material intercompany transactions have been eliminated in
the combination.
B. PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of Leslie
Resources Management, Inc. and its subsidiaries. All material intercompany
transactions have been eliminated in consolidation.
C. USE OF ESTIMATES
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.
D. CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an initial maturity of one year or
less to be cash equivalents. They may include cash, money market funds and
short-term investments in commercial paper.
E. BAD DEBTS
Bad debts are accounted for using the direct write-off method. The expense
is recognized only when a specific receivable is determined to be uncollectible.
F. INVENTORY
Inventory consists of coal that is available for sale at various loading
facilities, and is stated at an estimated cost using direct operating costs of
mining coal, excluding certain selling costs and taxes.
G. PREPAID ROYALTIES
Recoupable prepaid royalties obtained in the purchase of the subsidiary
companies of Leslie Resource Management, Inc. had a higher recoupable amount
than what portion of the purchase price was allocated to them. The Company is
using an accelerated write off method of recouping these royalties until the
amount of
F-51
<PAGE> 190
LESLIE RESOURCES, INC.
AND
LESLIE RESOURCES MANAGEMENT, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
the royalties equal their cost. When that occurs, the Company will not incur any
expense when recouping the royalty previously paid.
Other recoupable royalties the Company has paid in normal course of
operations are expensed as the coal is mined or the royalty no longer becomes
recoupable.
H. PROPERTY & EQUIPMENT
Property and equipment are stated at cost. The Company provides for
depreciation of the depreciable assets by using accelerated and other methods
with useful lives that range from 5 to 31 years. Depreciation expense was
$3,040,242 and $3,390,552 for 1996 and 1995, respectively.
I. DEPLETION
Cost depletion is calculated on a per ton basis to allocate the cost of the
purchased coal leases against the related coal sales. Cost depletion expense was
$52,048 and $48,174 for 1996 and 1995, respectively.
J. MINE DEVELOPMENT COSTS
Mine development costs are amortized over the expected life of the
respective mine sites. Amortization expense was $76,392 and $58,879 for 1996 and
1995, respectively.
3. CONCENTRATION OF CREDIT RISK
The Company maintains its cash in bank deposits at high credit quality
financial institutions. The balances, at times, may exceed federally insured
limits. At December 31, the Company exceeded the insured limit by $2,911,224 and
$3,184,445 for 1996 and 1995, respectively.
4. PLEDGED ASSETS
At December 31, 1996, the Company has pledged three certificates of deposit
which total $300,000 issued by Citizens National Bank & Trust Co. for a $300,000
line of credit at the same bank. As of December 31, 1996, the line of credit
balance is $150,000.
At December 31, 1995, the Company owned $2,000,000 in certificates of
deposit at the Bank of Whitesburg, which were pledged as security against a note
payable for $2,000,000 at the same bank. This note payable was paid in entirety
with the certificates of deposit on March 19, 1996.
In the normal course of business, the accounts receivable of certain coal
sales made to Tennessee Valley Authority and Carolina Power & Light are pledged
to Citizens National Bank and Trust Co. and Bank of Whitesburg for note payable
cash advances made to the Company. As of December 31, 1996 and 1995 the Company
owed $751,000 and $1,322,746 in notes payable for these cash advances against
accounts receivable of $942,538 and $1,653,425, respectively.
5. NON-MARKETABLE SECURITY
This Investment consists of $2,000,000 for 800 shares of preferred stock in
Reclamation Surety Holding Company, Inc. (RSHC). A subsidiary of (RSHC),
Cumberland Surety Insurance Company provides the Company insurance coverage for
reclamation bonds (See Note 11). This purchase of preferred stock was required
in lieu of the Company placing $2,000,000 in an escrow collateral account. This
preferred stock pays a dividend rate of 6% annually. The Company and RSHC both
have options to redeem this stock after January 1, 1998. The Company also has an
option to convert to common shares of RSHC after January 1,
F-52
<PAGE> 191
LESLIE RESOURCES, INC.
AND
LESLIE RESOURCES MANAGEMENT, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
1998. Under present bonding arrangements, an option to redeem this stock would
result in similar funds being placed into an escrow collateral account.
6. COAL LEASES, NET
Coal leases reflect the cost of the coal leases purchased less the amount
charged against income through cost depletion. The total cost of the leases is
$502,510 less accumulated cost depletion of $233,849 for 1996 and $181,801 for
1995.
7. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
COMBINED MONTHLY BALANCE BALANCE
RATE PAYMENTS 1996 1995
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Fixed assets financed with 21 and 32
different notes to banks, finance
companies and vendors for 1996 and 1995,
respectively. The interest rates range
from 7.00% to 10.99%. Each note is
secured by one or more pieces of fixed
assets................................... 9.14% $268,053 $4,396,778 $6,474,652
Two notes to GE Capital Corporation bearing
interest of 9.25%, payable in
installments of $47,874 for 36 months and
$93,960 for 60 months. Both notes are
secured by equipment..................... 9.25% 141,834 5,112,730 --
-------- ---------- ----------
Totals................................ $409,887 9,509,508 6,474,652
========
Less: Current Portion................. 3,463,663 2,992,844
---------- ----------
Long-Term Debt........................ $6,045,845 $3,481,808
========== ==========
Maturities of long-term debt are as
follows: 1996 -- 2,992,844
1997 $3,463,663 2,010,725
1998 2,469,555 828,435
1999 1,806,405 464,562
2000 1,407,286 92,996
2001 291,470 85,090
2002 and after 71,129 --
---------- ----------
$9,509,508 $6,474,652
========== ==========
</TABLE>
8. ROYALTIES
All of the coal the Company mines and sells belongs to other entities and
individuals. The Company acquires the right to mine and sell the coal through
various leases. These leases require the Company to pay a royalty to the owners
of the land for coal being mined. The Company has entered into several coal
leases, some of which require minimum non-refundable royalty payments. These
payments are recoverable against future royalty payments due on subsequent coal
sales. The minimum royalty payments that are non-recoverable are expensed when
paid. All recoverable payments are expensed as the related coal is mined.
F-53
<PAGE> 192
LESLIE RESOURCES, INC.
AND
LESLIE RESOURCES MANAGEMENT, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company currently maintains many leases that require annual payments of
$1,688,100 and $579,500 for 1996 and 1995, respectively, to keep the leases
intact. However, most of these leases are year-to-year type leases without any
definite long-term obligations.
The Company does have certain leases that require minimum royalty payments.
Required payments for subsequent years are:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
1996........................................................ -- 579,500
1997........................................................ 1,369,010 392,000
1998........................................................ 1,368,210 392,000
1999........................................................ 1,367,010 --
2000........................................................ 1,358,910 --
2001........................................................ 1,357,910 --
</TABLE>
9. ACCRUED ROYALTIES
As part of the purchase of the subsidiary companies by Leslie Resource
Management, Inc., the Company is obligated to pay to Transco Coal Company a
minimum of $1,800,000 in royalties which were previously paid by Transco Coal
and are recoupable. (See Note 2-G). As these royalties are recouped for coal
mined, the company is required to pay monthly an amount equal to the royalty
recouped. The actual possible royalties that could be recouped exceed
$1,800,000. If the company has not paid Transco Coal Company the entire minimum
$1,800,000 by December 31, 1998 by normal payment terms as described above, then
the remaining balance of the $1,800,000 is immediately payable by January 31,
1999. As of December 31, 1996 and 1995, $518,879 and $-0- has been paid on this
obligation, respectively.
10. OVERRIDE ROYALTY OBLIGATION
As part of the purchase of the subsidiary companies by Leslie Resources
Management, Inc., the Company is obligated to pay to Transco Coal Company $.75
(seventy-five cents) for each ton of coal mined from the Ball Creek Property
until a total of $4,000,000 is paid. In 1996 and 1995, $27,069 and $-0- were
paid, respectively. This property is under lease by the subsidiary Pro-Land,
Inc. dba Kemcoal, Inc. Payments are required monthly as the coal is mined.
Beginning in the calendar year 1997, this royalty payment requires minimum
annual payments of $150,000; however the aggregate payments of the two preceding
years may be used in meeting the $150,000 annual minimum. Projected tonnage to
be mined from property during the next 8 to 12 years is 6,000,000 tons.
Projected payments for 1997 on this obligation is $430,000.
11. ACCRUED RECLAMATION COSTS AND CONTINGENCY RECLAMATION LIABILITY
Although the majority of the reclamation process is performed during the
mining process, the Company will incur additional reclamation costs when a
particular mining site ceases. The Company accrues on a per ton basis the
expected remaining reclamation costs. These accrued costs when mining is
completed represent the costs to reclaim the land at the end of the mining
process. However, the Company has a contingency liability to reclaim the land
whenever the mining process stops and these costs could exceed these accrued
amounts.
According to KRS Chapter 350, the Company is required to post reclamation
bonds to assure the reclamation work is completed. Outstanding reclamation bonds
totalled $43,675,778 and $10,352,900 at December 31, 1996 and 1995,
respectively. The Company pays an insurance bonding premium monthly. In
addition, as Note 5 explains, the Company purchased $2,000,000 in preferred
stock in lieu of having an escrow
F-54
<PAGE> 193
LESLIE RESOURCES, INC.
AND
LESLIE RESOURCES MANAGEMENT, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
collateral account for 1996. Beginning in January, 1997, the Company is required
to pay $20,000 monthly into an escrow collateral account.
12. STOCKHOLDER'S EQUITY
Stockholder's equity consists of:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Common Stock:
Leslie Resources, Inc.
-- no par value, 1,000 shares authorized, 20 shares
outstanding....................................... $ 1,000 $ 1,000
Leslie Resource Management, Inc.
-- no par value, 1,000 shares authorized, 25 shares
outstanding....................................... 1,000 1,000
---------- ----------
2,000 2,000
---------- ----------
Treasury Stock:
Leslie Resources, Inc.
20 shares purchased at a cost of..................... 348,866 348,866
60 shares purchased at a cost of..................... 3,903,000 --
---------- ----------
4,251,866 348,866
---------- ----------
Retained Earnings:
Leslie Resources, Inc................................... 4,355,585 4,327,454
Leslie Resources, Management, Inc....................... 47,803 --
---------- ----------
4,403,388 4,327,454
---------- ----------
Total Stockholders Equity....................... $ 153,522 $3,980,588
========== ==========
</TABLE>
13. TREASURY STOCK
On November 20, 1995 Leslie Resources, Inc. signed an option agreement with
three of its stockholders to purchase all the shares of their common stock for
$3,903,000. These 60 shares represented 75% of the total shares of common stock
outstanding. In March 1996, this option was exercised and the three stockholders
were paid the above amount in full for their stock as per the stock option
agreement. After this transaction, only one stockholder, Greg Wells, owns all
the outstanding shares of Leslie Resources, Inc. In 1990 Leslie Resources, Inc.
purchased 20 shares from a previous stockholder for $348,866.
Greg Wells is the only stockholder of Leslie Resources Management, Inc. and
its Subsidiaries, and no treasury stock has ever been purchased.
14. INCOME TAXES
Leslie Resources, Inc. elected to be taxed as a Sub-chapter S Corporation,
effective for the tax year beginning January 1, 1989, which distributes its
taxable income to the stockholders. There was no income taxable at the corporate
level for 1996 and 1995. Sub-chapter S dividends are paid to stockholders at
various times during the year and totalled $2,053,774 and $1,300,866 in 1996 and
1995, respectively.
Leslie Resources Management, Inc. and its Subsidiaries is not a Sub-chapter
S corporation and therefore it incurs income taxes at the corporate level.
Income taxes accrued were $12,113 and $-0- in 1996 and 1995,
F-55
<PAGE> 194
LESLIE RESOURCES, INC.
AND
LESLIE RESOURCES MANAGEMENT, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
respectively. No deferred income taxes have been recorded for Leslie Resources
Management, Inc. due to no significant temporary differences between book and
tax accounting.
15. RELATED PARTY TRANSACTIONS
As indicated in Note 2, all material related party transactions within the
Company have been eliminated. Other related corporations with common ownership
with the Company which had transactions are:
(a) Resource Trucking, Inc. was paid $681,238 and $137,098 in 1996 and
1995, respectively, for contract trucking and equipment rental. These
services are continually provided to the Company on a month to month basis.
(b) Mountain Properties, Inc. was paid $431,821 and $226,644 for coal
royalties, rents and wheelage and $306,732 and $-0- for tipple lease in
1996 and 1995, respectively. The Company has various leases with varying
lengths of time with Mountain Properties, Inc. for future payments for
royalties, rents and wheelage.
No material receivables or payables with these related companies exist at
December 31, 1996. As of December 31, 1995, Mountain Properties, Inc. owed
Leslie Resources Management, Inc. $700,000.
16. CONTINGENT LIABILITY -- AMINEX AGREEMENT
As part of the purchase of the subsidiary companies by Leslie Resources
Management, Inc., the Company is contingently liable under a February 14, 1979
agreement to pay a portion of its "coal proceeds" related to certain leases on
specified properties to a group of partnerships in bankruptcy that were
previously owners of these certain leases. This potential contingent liability
exists until January 1, 2004. The computation and definition of "coal proceeds"
under this agreement is different than net income according to generally
accepted accounting principles. Any prior year deficiencies in calculating "coal
proceeds" is carried forward to future years. According to the most recent audit
report for the period ended June 1, 1996 prepared by KPMG Peat Marwick, LLP,
there exists a deficiency of $2,361,000 that is to be carried forward to future
years. Due to this deficiency carry forward, no liability for this Aminex
agreement has been recorded, nor is any liability expected in the immediate
future.
17. CONTINGENT LIABILITIES -- LITIGATION
The Company is the defendant in several pending lawsuits. The Company
expects to obtain favorable judgments in these cases and/or the ultimate outcome
of these cases is unknown at the present time. Accordingly, no provision for any
liability that might result has been made in the accompanying financial
statements. In the opinion of management, the existing litigation is not
considered to be material in relation to the Company's financial position.
18. SUBSEQUENT EVENTS
In December, 1997, the shareholder agreed to sell all of the stock of the
Company to AEI Holding Company, Inc., the closing of which took place January
14, 1998.
F-56
<PAGE> 195
ANNEX A1
AUDIT OF DEMONSTRATED RESERVES CONTROLLED BY
ADDINGTON MINING, TENNESSEE MINING, INC.,
BOWIE RESOURCES, LTD., AND IKERD-BANDY CO., INC.
JANUARY, 1998
Prepared for:
AEI HOLDING COMPANY, INC.
1500 North Big Run Road
Ashland, KY 41102
Prepared by:
MARSHALL MILLER & ASSOCIATES
P.O. Box 848
Bluefield, VA 24605
A-1
<PAGE> 196
MARSHALL MILLER & ASSOCIATES
GEOLOGY ENGINEERING GEOPHYSICS
January 23, 1998
Mr. Larry Addington, Chairman
AEI Holding Company, Inc.
1500 North Big Run Road
Ashland, KY 41102
Dear Mr. Addington:
Marshall Miller & Associates (MM&A) has completed an audit of reserves
controlled by subsidiaries of AEI Holding Company, Inc. (AEI) as of December
1997. Our audit is based on two previous reports prepared by MM&A: namely,
"Audit of Reserves Controlled by Addington Mining, Tennessee Mining, Inc., Bowie
Resources, Ltd., and Ikerd-Bandy Co., Inc. - September, 1997" and "Addendum
Report - Audit of Reserves Controlled by Addington Mining, Tennessee Mining,
Inc., Bowie Resources, Ltd., and Ikerd-Bandy Co., Inc. - December, 1997." This
letter provides a summary of those portions of the audited reserve base that
qualify as demonstrated reserves.
CONCLUSIONS
Our audit of the subject coal properties has confirmed that AEI controls a
total demonstrated reserve base of 129.4 million tons of recoverable coal. AEI
is also currently pursuing a lease for a "captive" tract that adjoins one of its
properties, which contains additional demonstrated reserves totaling 40.2
million recoverable tons. "Captive" reserves are those for which economic access
is available only to the operating company which controls property that blocks
access by other operating companies.
Of the total demonstrated reserve base controlled by AEI, we have estimated
that 28.9 million recoverable product tons are of average compliance quality and
an additional 10.9 million recoverable product tons are of low average sulfur
(less than one percent) or near compliance quality. Moderate to higher sulfur
reserves include 22.0 million recoverable product tons in the 1.0 to 1.5 percent
sulfur range and 22.4 million recoverable product tons which have a sulfur
content greater than 1.5 percent sulfur. Of the total controlled demonstrated
reserve base, 45.2 million recoverable product tons have a sulfur content which
cannot be empirically determined due to lack of sufficient chemical data. All of
the 40.2 million recoverable product tons of "captive" reserves, for which
Addington is pursuing a lease, are of compliance quality.
A-2
<PAGE> 197
AEI HOLDING COMPANY, INC.
SUMMARY OF RESERVES AND RESOURCES
<TABLE>
<CAPTION>
DEMONSTRATED RESERVES
--------------------------------------
STATUS TOTAL MEASURED INDICATED RESOURCES
- ------ ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
ADDINGTON MINING
ASSIGNED RESERVES
Deep Mineable............................... 1,239,000 968,000 271,000
Highwall Miner.............................. 7,749,000 6,693,000 1,056,000 2,278,000
Surface Mineable............................ 16,064,000 13,877,000 2,187,000 5,534,000
----------- ----------- ---------- ----------
Total Assigned:..................... 25,052,000 21,538,000 3,514,000 7,812,000
UNASSIGNED RESERVES
Deep Mineable............................... 503,000 503,000 139,000
Highwall Miner.............................. 4,529,000 3,292,000 1,237,000 2,535,000
Surface Mineable............................ 3,545,000 2,141,000 1,404,000 1,460,000
----------- ----------- ---------- ----------
Total Unassigned:................... 8,577,000 5,936,000 2,641,000 4,134,000
TOTAL RESERVES
Deep Mineable............................... 1,742,000 1,471,000 271,000 139,000
Highwall Miner.............................. 12,278,000 9,985,000 2,293,000 4,813,000
Surface Mineable............................ 19,609,100 16,018,000 3,591,000 6,994,000
----------- ----------- ---------- ----------
Total Addington Mining:............. 33,629,000 27,474,000 6,155,000 11,946,000
=========== =========== ========== ==========
TENNESSEE MINING, INC.
ASSIGNED RESERVES
Deep Mineable............................... 22,710,000 13,465,000 9,245,000 1,409,000
Highwall Miner.............................. 1,468,000 1,428,000 40,000 102,000
Surface Mineable............................ 3,905,000 3,821,000 84,000 183,000
----------- ----------- ---------- ----------
Total Assigned:..................... 28,083,000 18,714,000 9,369,000 1,694,000
UNASSIGNED RESERVES
Deep Mineable............................... 14,538,000 6,363,000 8,175,000
Highwall Miner..............................
Surface Mineable............................
----------- ----------- ---------- ----------
Total Unassigned:................... 14,538,000 6,363,000 8,175,000 4,589,000
TOTAL RESERVES
Deep Mineable............................... 37,248,000 19,828,000 17,420,000 5,998,000
Highwall Miner.............................. 1,468,000 1,428,000 40,000 102,000
Surface Mineable............................ 3,905,000 3,821,000 84,000 183,000
----------- ----------- ---------- ----------
Total Tennessee Mining, Inc.:....... 42,621,000 25,077,000 17,544,000 6,283,000
=========== =========== ========== ==========
BOWIE RESOURCES, LTD.
TOTAL RESERVES (ASSIGNED)
Deep Mineable............................... 22,700,000 19,014,000 3,686,000 6,742,000
Highwall Miner..............................
Surface Mineable............................
----------- ----------- ---------- ----------
Total Bowie Resources, Ltd.:........ 22,700,000 19,014,000 3,686,000 6,742,000
=========== =========== ========== ==========
IKERD-BANDY CO., INC.
ASSIGNED RESERVES
Deep Mineable............................... 861,000 667,000 194,000 768,000
Highwall Miner.............................. 7,945,000 6,339,000 1,606,000 1,276,000
Surface Mineable............................ 9,541,000 8,000,000 1,541,000
----------- ----------- ---------- ----------
Total Assigned:..................... 18,347,000 15,005,000 3,342,000 2,044,000
</TABLE>
A-3
<PAGE> 198
<TABLE>
<CAPTION>
DEMONSTRATED RESERVES
--------------------------------------
STATUS TOTAL MEASURED INDICATED RESOURCES
- ------ ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
UNASSIGNED RESERVES
Deep Mineable............................... 6,598,000 4,275,000 2,323,000 351,000
Highwall Miner.............................. 309,000 309,000 1,766,000
Surface Mineable............................ 5,221,000 4,077,000 1,144,000 1,199,000
----------- ----------- ---------- ----------
Total Unassigned:................... 12,128,000 8,661,000 3,467,000 3,316,000
TOTAL RESERVES
Deep Mineable............................... 7,459,000 4,942,000 2,517,000 1,119,000
Highwall Miner.............................. 8,254,000 6,648,000 1,606,000 3,042,000
Surface Mineable............................ 14,762,000 12,077,000 2,685,000 1,199,000
----------- ----------- ---------- ----------
Total Ikerd-Bandy Co., Inc.:........ 30,475,000 23,666,000 6,809,000 5,360,000
=========== =========== ========== ==========
RESERVE SUMMARY
ASSIGNED RESERVES
Deep Mineable............................... 47,510,000 34,114,000 13,396,000 8,919,000
Highwall Miner.............................. 17,162,000 14,459,000 2,703,000 3,656,000
Surface Mineable............................ 29,510,000 25,698,000 3,813,000 5,717,000
----------- ----------- ---------- ----------
Total Assigned:..................... 94,182,000 74,271,000 19,911,000 18,292,000
UNASSIGNED RESERVES
Deep Mineable............................... 21,639,000 11,141,000 10,498,000 5,079,000
Highwall Miner.............................. 4,838,000 3,601,000 1,237,000 4,301,000
Surface Mineable............................ 8,766,000 6,218,000 2,548,000 2,659,000
----------- ----------- ---------- ----------
Total Unassigned:................... 35,243,000 20,960,000 14,283,000 12,039,000
TOTAL RESERVES
Deep Mineable............................... 69,149,000 45,255,000 23,894,000 13,998,000
Highwall Miner.............................. 22,000,000 18,060,000 3,940,000 7,957,000
Surface Mineable............................ 38,276,000 31,916,000 6,361,000 8,376,000
----------- ----------- ---------- ----------
Total Controlled Reserves:.......... 129,425,000 95,231,000 34,194,000 30,331,000
----------- ----------- ---------- ----------
* TOTAL "CAPTIVE" RESERVES (POTENTIAL
ACQUISITION)................................ 40,180,000 13,808,000 26,372,000 20,948,000
----------- ----------- ---------- ----------
GRAND TOTAL -- CONTROLLED AND
POTENTIAL ACQUISITION RESERVES...... 169,605,000 109,039,000 60,566,000 51,279,000
=========== =========== ========== ==========
</TABLE>
- ---------------
* AEI is currently pursuing a lease of "captive," reserves adjacent to one of
its properties, which are not currently controlled. "Captive" means that
economical access to reserve is available only to the operating company, which
controls property that blocks access to other operating companies.
In addition to the demonstrated reserves, AEI affiliates control an
additional 30.3 million recoverable tons of product coal in the resource
category. These resources have certain limitations or hindrances that, under
current market conditions, create subeconomic conditions for their extraction.
It is emphasized that, with favorable results of future exploration or property
acquisition and with more favorable future market conditions, some of the
identified coal resources may achieve economic reserve status. AEI is also
pursuing a lease of a tract lying adjacent to its one of its properties which
contains an additional 20.9 million recoverable tons of coal resources.
A-4
<PAGE> 199
DEFINITIONS
Definitions(1)of key terms and criteria applied in our audit are as
follows:
- Resources -- Resources are defined as naturally occurring
concentrations or deposits of coal in the earth's crust, in such forms
and amounts that economic extraction is currently or potentially
feasible. Identified resources are those resources whose location,
rank, quality, and quantity are known or estimated from specific
geologic evidence. Identified coal resources include economic,
marginally economic, and subeconomic components. To reflect varying
distances from points of control or reliability, these subdivisions
can be divided into demonstrated and inferred, or preferably into
measured, indicated, and inferred.
- Reserve Base -- The reserve base is defined as those parts of
identified resources that meet specified minimum physical and chemical
criteria related to current mining and production practices, including
those for quality, depth, thickness, rank, and distance from point of
measurement. The reserve base is the in-place demonstrated (measured
plus indicated) resource from which reserves are estimated.
- Reserve -- Reserve is defined as virgin and/or accessed parts of a
coal reserve base that could be economically extracted or produced at
the time of determination considering environmental, legal, and
technological constraints. Demonstrated reserves are the sum of coal
reserves classified as measured and indicated as explained below.
- Reserve Reliability Categories -- The reliability categories are
related to the level of geologic assurance for the existence of a
quantity of resources. Assurance is based on the distance from points
where coal is measured or sampled and on the abundance and quality of
geologic data as related to thickness of overburden, rank, quality,
thickness of coal, areal extent, geologic history, structure, and
correlation of coal beds and enclosing rocks. The degree of assurance
increases as the proximity to points of control, abundance, and
quality of geologic data increase. The reserve reliability categories
include:
- Measured Coal -- Reserve estimates in this category have the
highest degree of geologic assurance. Measured coal lies within
1/4 mile of a valid point of measurement or point of observation
(such as previously mined areas) supporting such measurements.
The sites for thickness measurement are so closely spaced, and
the geologic character is so well defined, that the average
thickness, areal extent, size, shape, and depth of coal beds are
well established.
- Indicated Coal -- Reserve estimates in this category have a
moderate degree of geologic assurance. There are no sample and
measurement sites in areas of indicated coal. However, a single
measurement can be used to classify coal lying beyond measured as
indicated. Indicated coal lies more than 1/4 mile, but less than
3/4 mile, from a point of thickness measurement. Further
exploration is necessary to place indicated coal into the
measured category.
METHODOLOGY AND QUALIFICATIONS
Our audit of the AEI reserves was planned and performed to obtain
reasonable assurance on the subject coal properties. The audit included
examination by certified professional geologists and engineers of all supplied
reserve maps and supporting data using industry-accepted standards. Although the
audit methodology is inherently not as exhaustive as a detailed reserve
evaluation, in our opinion the audit was conducted in sufficient detail and with
independent verification on a test basis of the underlying supporting evidence
to provide reasonable assurance for the subject estimate. The reserve audit did
not include independent
- ---------------
(1) Source: U.S. Geological Survey Circular 891, "Coal Resource Classification
of the U.S. Geological Survey," 1983.
A-5
<PAGE> 200
verification of property ownership; we have relied on property information
supplied by AEI and considered this information to be accurate.
Sincerely,
Marshall Miller & Associates
<TABLE>
<S> <C>
/s/ Marshall S. Miller /s/ J. Scott Nelson
Marshall S. Miller, C.P.G. J. Scott Nelson, C.P.G.
President Vice President
</TABLE>
A-6
<PAGE> 201
AUDIT OF DEMONSTRATED RESERVES CONTROLLED BY
LESLIE RESOURCES MANAGEMENT, INC.
JANUARY, 1998
Prepared for:
AEI HOLDING COMPANY, INC.
1500 North Big Run Road
Ashland, KY 41102
Prepared by:
MARSHALL MILLER & ASSOCIATES
P.O. Box 848
Bluefield, VA 24605
A-7
<PAGE> 202
MARSHALL MILLER & ASSOCIATES
GEOLOGY ENGINEERING GEOPHYSICS
January 23, 1997
Mr. Larry Addington, Chairman
AEI Holding Company, Inc.
1500 North Big Run Road
Ashland, KY 41102
Dear Mr. Addington:
Marshall Miller & Associates (MM&A) has completed an audit of reserves
controlled by Leslie Resources Management, Inc., and Leslie Resources, Inc.,
(collectively referred to herein as Leslie Resources). AEI Holding Company,
Inc., (AEI) recently acquired the Leslie Resources property. Our audit is based
on a previous report prepared by MM&A entitled, "Evaluation of Reserves
Controlled by Leslie Resources Management, Inc. - Perry, Leslie, Letcher, Knott,
and Breathitt Counties, Kentucky - July 1997." This letter provides a summary of
those portions of the audited reserve base that qualify as demonstrated
reserves.
CONCLUSIONS
Our audit of the subject coal property has confirmed that AEI controls a
total demonstrated reserve base of 40.9 million tons of recoverable coal. Of the
total demonstrated reserve base, we have estimated that 5.7 million recoverable
product tons are of average compliance quality, and an additional 8.1 million
recoverable product tons are of low average sulfur (less than one percent) or
near compliance quality. Moderate- to higher-sulfur reserves include 9.5 million
recoverable product tons in the 1.0 to 1.5 percent sulfur range and 13.8 million
recoverable product tons which have a sulfur content greater than 1.5 percent.
Of the total demonstrated reserve base, 3.8 million recoverable product tons
have a sulfur content which cannot be empirically determined due to lack of
sufficient chemical data. The table below summarizes the subject reserve base.
A-8
<PAGE> 203
AEI HOLDING COMPANY, INC.
SUMMARY OF RESERVES AND RESOURCES
RECENTLY ACQUIRED LESLIE RESOURCES PROPERTY
<TABLE>
<CAPTION>
DEMONSTRATED RESERVES
--------------------------------------
STATUS TOTAL MEASURED INDICATED RESOURCES
- ------ ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
ASSIGNED RESERVES
Deep Mineable............................... 2,598,000 1,879,000 719,000 0
Highwall Miner.............................. 422,000 404,000 18,000 0
Surface Mineable............................ 27,168,000 20,479,000 6,689,000 1,531,000
----------- ----------- ---------- ----------
Total Assigned:..................... 30,188,000 22,762,000 7,426,000 1,531,000
UNASSIGNED RESERVES
Deep Mineable............................... 0 0 0 0
Highwall Miner.............................. 0 0 0 0
Surface Mineable............................ 10,724,000 6,912,000 3,812,000 21,320,000
----------- ----------- ---------- ----------
Total Unassigned:................... 10,724,000 6,912,000 3,812,000 21,320,000
TOTAL RESERVES
Deep Mineable............................... 2,598,000 1,879,000 719,000 0
Highwall Miner.............................. 422,000 404,000 18,000 0
Surface Mineable............................ 37,892,000 27,391,000 10,501,000 22,851,000
----------- ----------- ---------- ----------
Total Leslie Resources:............. 40,912,000 29,674,000 11,238,000 22,851,000
=========== =========== ========== ==========
</TABLE>
In addition to the demonstrated reserves previously discussed, the subject
property has 22.8 million recoverable tons of product coal in the resource
category. These resources have certain limitations or hindrances that, under
current market conditions, create subeconomic conditions for their extraction.
It is emphasized that, with favorable results of future exploration or property
acquisition and with more favorable future market conditions, some of the
identified coal resources may achieve economic reserve status.
DEFINITIONS
Definitions(1)of key terms and criteria applied in our audit are as
follows:
- Resources -- Resources are defined as naturally occurring
concentrations or deposits of coal in the earth's crust, in such forms
and amounts that economic extraction is currently or potentially
feasible. Identified resources are those resources whose location,
rank, quality, and quantity are known or estimated from specific
geologic evidence. Identified coal resources include economic,
marginally economic, and subeconomic components. To reflect varying
distances from points of control or reliability, these subdivisions
can be divided into demonstrated and inferred, or preferably into
measured, indicated, and inferred.
- Reserve Base -- The reserve base is defined as those parts of
identified resources that meet specified minimum physical and chemical
criteria related to current mining and production practices, including
those for quality, depth, thickness, rank, and distance from point of
measurement. The reserve base is the in-place demonstrated (measured
plus indicated) resource from which reserves are estimated.
- Reserve -- Reserve is defined as virgin and/or accessed parts of a
coal reserve base that could be economically extracted or produced at
the time of determination considering environmental, legal, and
technological constraints. Demonstrated reserves are the sum of coal
reserves classified as measured and indicated as explained below.
- ---------------
(1) Source: U.S. Geological Survey Circular 891, "Coal Resource Classification
of the U.S. Geological Survey," 1983.
A-9
<PAGE> 204
- Reserve Reliability Categories -- The reliability categories are
related to the level of geologic assurance for the existence of a
quantity of resources. Assurance is based on the distance from points
where coal is measured or sampled and on the abundance and quality of
geologic data as related to thickness of overburden, rank, quality,
thickness of coal, areal extent, geologic history, structure, and
correlation of coal beds and enclosing rocks. The degree of assurance
increases as the proximity to points of control, abundance, and
quality of geologic data increase. The reserve reliability categories
include:
- Measured Coal -- Reserve estimates in this category have the
highest degree of geologic assurance. Measured coal lies within
1/4 mile of a valid point of measurement or point of observation
(such as previously mined areas) supporting such measurements.
The sites for thickness measurement are so closely spaced, and
the geologic character is so well defined, that the average
thickness, areal extent, size, shape, and depth of coal beds are
well established.
- Indicated Coal -- Reserve estimates in this category have a
moderate degree of geologic assurance. There are no sample and
measurement sites in areas of indicated coal. However, a single
measurement can be used to classify coal lying beyond measured as
indicated. Indicated coal lies more than 1/4 mile, but less than
3/4 mile, from a point of thickness measurement. Further
exploration is necessary to place indicated coal into the
measured category.
METHODOLOGY AND QUALIFICATIONS
Our audit of the AEI reserves was planned and performed to obtain
reasonable assurance on the subject coal properties. The audit included
examination by certified professional geologists and engineers of all supplied
reserve maps and supporting data using industry-accepted standards. Although the
audit methodology is inherently not as exhaustive as a detailed reserve
evaluation, in our opinion the audit was conducted in sufficient detail and with
independent verification on a test basis of the underlying supporting evidence
to provide reasonable assurance for the subject estimate. The reserve audit did
not include independent verification of property ownership; we have relied on
property information supplied by AEI and considered this information to be
accurate.
Sincerely,
Marshall Miller & Associates
<TABLE>
<S> <C>
/s/ Marshall S. Miller /s/ J. Scott Nelson
Marshall S. Miller, C.P.G. J. Scott Nelson, C.P.G.
President Vice President
</TABLE>
A-10
<PAGE> 205
======================================================
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES OFFERED HEREBY
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 15
The Company........................... 25
Use of Proceeds....................... 27
Capitalization........................ 28
Unaudited Pro Forma Combined Financial
Statements.......................... 29
Selected Historical Combined Financial
Data................................ 36
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 38
Industry Overview..................... 47
Business.............................. 54
Government Regulation................. 76
Management............................ 80
Certain Related Party Transactions.... 84
Description of Capital Stock.......... 87
Security Ownership of Principal
Stockholders and Management......... 88
The Exchange Offer.................... 89
Description of Exchange Notes......... 101
Description of New Credit Facility.... 127
Certain United States Federal Tax
Considerations for Non-United States
Holders............................. 130
Plan of Distribution.................. 132
Legal Matters......................... 133
Experts............................... 133
Available Information................. 134
Index to Financial Statements......... F-1
Annex A1 -- Audit of Demonstrated
Reserves............................ A-1
</TABLE>
---------------------
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS OR AS REQUIRED BY THE TERMS OF THE EXCHANGE OFFER.
======================================================
======================================================
[AEI HOLDING COMPANY, INC. LOGO]
OFFER TO EXCHANGE
$200,000,000 IN AGGREGATE PRINCIPAL
AMOUNT OF
10% SERIES B SENIOR NOTES
DUE 2007
FOR ALL $200,000,000 IN
AGGREGATE OUTSTANDING
PRINCIPAL AMOUNT
OF
10% SERIES A SENIOR NOTES
DUE 2007
------------------------------
PROSPECTUS
------------------------------
, 1998
======================================================
<PAGE> 206
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") authorizes
indemnification of directors, officers, employees, and agents of the Company,
allows the advancement of costs of defending against litigation, and permits
companies incorporated in Delaware to purchase insurance on behalf of directors,
officers, employees, and agents against liabilities whether or not in the
circumstances such companies would have the power to indemnify against such
liabilities under the provisions of the statute.
The Company's Certificate of Incorporation provides that no director will
be personally liable to the Company for monetary damages for any breach of
fiduciary duty by such director as a director. However, a director will be
liable, to the extent provided by applicable law, (i) for any breach of a
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) as provided in Section 174 of the DGCL, or (iv) for any
transaction from which a director derived an improper personal benefit.
The Company's Certificate of Incorporation and Bylaws also require the
Company, to the extent permitted by the DGCL and any other applicable law, to
indemnify and advance expenses to directors and executive officers with respect
to all threatened, pending or completed actions, suits or proceedings in which
the director or executive officer was, is, or is threatened to be made a named
defendant or respondent because he is or was a director or executive officer of
the Company. The Certificate of Incorporation obligates the Company to indemnify
and advance expenses to the executive officer or director only in connection
with proceedings arising from the person's conduct in his official capacity with
the Company to the extent permitted by the DGCL, as amended from time to time.
The Company's Bylaws allow it to purchase and maintain insurance on behalf
of a person who is or was a director, officer, employee, fiduciary or agent of
the Company, or was, at the Company's request, serving in a similar capacity for
another entity. The Company currently maintains insurance covering its executive
officers and directors.
Insofar as indemnification by the Company for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors and executive officers of the Company pursuant to the foregoing
provisions, the Company has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
The exhibits to the Registration Statement are listed in the Exhibit Index
which precedes the exhibits to this Registration Statement and is hereby
incorporated herein by reference.
(b) Financial Statement Schedules.
The financial statement schedules (1) are listed in the Exhibit Index which
immediately precedes the exhibits to this Registration Statement and is hereby
incorporated herein by reference, or (2) have been omitted because the
information required to be set forth therein is not applicable or is shown in
the financial statements or notes thereto.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by
II-1
<PAGE> 207
any person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed to be underwriters, in addition to the
information called for by the other items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding undertaking or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-2
<PAGE> 208
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, January 27, 1998.
AEI HOLDING COMPANY, INC.
By: /s/ DONALD P. BROWN
------------------------------------
Donald P. Brown
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of AEI Holding Company, Inc., do
hereby constitute and appoint Vic Grubb and John Lynch, or either of them, our
true and lawful attorneys and agents, to do any and all acts and things in our
name and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD P. BROWN President, Chief Executive January 27, 1998
- ----------------------------------------------------- Officer and Director
Donald P. Brown (Principal Executive
Officer)
/s/ JOHN BAUM Chief Financial Officer January 27, 1998
- ----------------------------------------------------- (Principal Financial and
John Baum Accounting Officer)
/s/ ROBERT ADDINGTON Senior Vice January 27, 1998
- ----------------------------------------------------- President -- Eastern
Robert Addington Operations and a Director
/s/ LARRY ADDINGTON Chairman of the Board and a January 27, 1998
- ----------------------------------------------------- Director
Larry Addington
/s/ STONIE BARKER Director January 27, 1998
- -----------------------------------------------------
Stonie Barker
</TABLE>
II-3
<PAGE> 209
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, January 27, 1998.
ADDINGTON MINING, INC.
By: /s/ DONALD P. BROWN
------------------------------------
Donald P. Brown
President
POWER OF ATTORNEY
We, the undersigned directors and officers of Addington Mining, Inc., do
hereby constitute and appoint Vic Grubb and John Lynch, or either of them, our
true and lawful attorneys and agents, to do any and all acts and things in our
name and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD P. BROWN President (Principal Executive January 27, 1998
- ----------------------------------------------------- Officer)
Donald P. Brown
/s/ LARRY ADDINGTON Director January 27, 1998
- -----------------------------------------------------
Larry Addington
/s/ VIC GRUBB Treasurer (Principal Financial January 27, 1998
- ----------------------------------------------------- and Accounting Officer)
Vic Grubb
</TABLE>
II-4
<PAGE> 210
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, January 27, 1998.
TENNESSEE MINING, INC.
By: /s/ BERNIE MASON
------------------------------------
Bernie Mason
President
POWER OF ATTORNEY
We, the undersigned directors and officers of Tennessee Mining, Inc., do
hereby constitute and appoint Vic Grubb and John Lynch, or either of them, our
true and lawful attorneys and agents, to do any and all acts and things in our
name and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ BERNIE MASON President (Principal Executive January 27, 1998
- ----------------------------------------------------- Officer)
Bernie Mason
/s/ LARRY ADDINGTON Director January 27, 1998
- -----------------------------------------------------
Larry Addington
/s/ VIC GRUBB Treasurer (Principal Financial January 27, 1998
- ----------------------------------------------------- and Accounting Officer)
Vic Grubb
</TABLE>
II-5
<PAGE> 211
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, January 27, 1998.
IKERD-BANDY CO., INC.
By: /s/ DONALD P. BROWN
------------------------------------
Donald P. Brown
President
POWER OF ATTORNEY
We, the undersigned directors and officers of Ikerd-Bandy Co., Inc., do
hereby constitute and appoint Vic Grubb and John Lynch, or either of them, our
true and lawful attorneys and agents, to do any and all acts and things in our
name and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD P. BROWN President (Principal Executive January 27, 1998
- ----------------------------------------------------- Officer)
Donald P. Brown
/s/ LARRY ADDINGTON Director January 27, 1998
- -----------------------------------------------------
Larry Addington
/s/ VIC GRUBB Treasurer (Principal Financial January 27, 1998
- ----------------------------------------------------- and Accounting Officer)
Vic Grubb
</TABLE>
II-6
<PAGE> 212
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, January 27, 1998.
MINING TECHNOLOGIES, INC.
By: /s/ DONALD P. BROWN
------------------------------------
Donald P. Brown
President
POWER OF ATTORNEY
We, the undersigned directors and officers of Mining Technologies, Inc., do
hereby constitute and appoint Vic Grubb and John Lynch, or either of them, our
true and lawful attorneys and agents, to do any and all acts and things in our
name and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD P. BROWN President (Principal Executive January 27, 1998
- ----------------------------------------------------- Officer)
Donald P. Brown
/s/ LARRY ADDINGTON Director January 27, 1998
- -----------------------------------------------------
Larry Addington
/s/ VIC GRUBB Treasurer (Principal Financial January 27, 1998
- ----------------------------------------------------- and Accounting Officer)
Vic Grubb
</TABLE>
II-7
<PAGE> 213
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, January 27, 1998.
LESLIE RESOURCES, INC.
By: /s/ DONALD P. BROWN
------------------------------------
Donald P. Brown
President
POWER OF ATTORNEY
We, the undersigned directors and officers of Leslie Resources, Inc., do
hereby constitute and appoint Vic Grubb and John Lynch, or either of them, our
true and lawful attorneys and agents, to do any and all acts and things in our
name and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD P. BROWN President (Principal Executive January 27, 1998
- ----------------------------------------------------- Officer)
Donald P. Brown
/s/ LARRY ADDINGTON Director January 27, 1998
- -----------------------------------------------------
Larry Addington
/s/ VIC GRUBB Treasurer (Principal Financial January 27, 1998
- ----------------------------------------------------- and Accounting Officer)
Vic Grubb
</TABLE>
II-8
<PAGE> 214
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, January 27, 1998.
LESLIE RESOURCES MANAGEMENT, INC.
By: /s/ DONALD P. BROWN
------------------------------------
Donald P. Brown
President
POWER OF ATTORNEY
We, the undersigned directors and officers of Leslie Resources Management,
Inc., do hereby constitute and appoint Vic Grubb and John Lynch, or either of
them, our true and lawful attorneys and agents, to do any and all acts and
things in our name and on our behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD P. BROWN President (Principal Executive January 27, 1998
- ----------------------------------------------------- Officer)
Donald P. Brown
/s/ LARRY ADDINGTON Director January 27, 1998
- -----------------------------------------------------
Larry Addington
/s/ VIC GRUBB Treasurer (Principal Financial January 27, 1998
- ----------------------------------------------------- and Accounting Officer)
Vic Grubb
</TABLE>
II-9
<PAGE> 215
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, January 27, 1998.
PRO-LAND, INC.
d/b/a Kem Coal Company
By: /s/ DONALD P. BROWN
------------------------------------
Donald P. Brown
President
POWER OF ATTORNEY
We, the undersigned directors and officers of Pro-Land, Inc. d/b/a Kem Coal
Company, do hereby constitute and appoint Vic Grubb and John Lynch, or either of
them, our true and lawful attorneys and agents, to do any and all acts and
things in our name and on our behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD P. BROWN President (Principal Executive January 27, 1998
- ----------------------------------------------------- Officer)
Donald P. Brown
/s/ LARRY ADDINGTON Director January 27, 1998
- -----------------------------------------------------
Larry Addington
/s/ VIC GRUBB Treasurer (Principal Financial January 27, 1998
- ----------------------------------------------------- and Accounting Officer)
Vic Grubb
</TABLE>
II-10
<PAGE> 216
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, January 27, 1998.
ACECO, INC.
By: /s/ DONALD P. BROWN
------------------------------------
Donald P. Brown
President
POWER OF ATTORNEY
We, the undersigned directors and officers of Aceco, Inc., do hereby
constitute and appoint Vic Grubb and John Lynch, or either of them, our true and
lawful attorneys and agents, to do any and all acts and things in our name and
on our behalf in our capacities as directors and officers and to execute any and
all instruments for us and in our names in the capacities indicated below, which
said attorneys and agents, or either of them, may deem necessary or advisable to
enable the Company to comply with the Securities Act and any rules, regulations
and requirements of the Securities and Exchange Commission, in connection with
this Registration Statement, including specifically, but without limitation,
power and authority to sign for us or any of us in our names in the capacities
indicated below, any and all amendments (including post-effective amendments)
hereto and we do hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD P. BROWN President (Principal January 27, 1998
- ----------------------------------------------------- Executive Officer)
Donald P. Brown
/s/ LARRY ADDINGTON Director January 27, 1998
- -----------------------------------------------------
Larry Addington
/s/ VIC GRUBB Treasurer (Principal January 27, 1998
- ----------------------------------------------------- Financial
Vic Grubb and Accounting Officer)
</TABLE>
II-11
<PAGE> 217
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, January 27, 1998.
MOUNTAIN-CLAY, INC.
d/b/a Mountain Clay, Inc.
By: /s/ DONALD P. BROWN
------------------------------------
Donald P. Brown
President
POWER OF ATTORNEY
We, the undersigned directors and officers of Mountain-Clay, Inc. d/b/a
Mountain Clay, Inc., do hereby constitute and appoint Vic Grubb and John Lynch,
or either of them, our true and lawful attorneys and agents, to do any and all
acts and things in our name and on our behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the
Securities Act and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD P. BROWN President (Principal January 27, 1998
- ----------------------------------------------------- Executive Officer)
Donald P. Brown
/s/ LARRY ADDINGTON Director January 27, 1998
- -----------------------------------------------------
Larry Addington
/s/ VIC GRUBB Treasurer (Principal January 27, 1998
- ----------------------------------------------------- Financial and Accounting
Vic Grubb Officer)
</TABLE>
II-12
<PAGE> 218
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, January 27, 1998.
HIGHLAND COAL, INC.
By: /s/ DONALD P. BROWN
------------------------------------
Donald P. Brown
President
POWER OF ATTORNEY
We, the undersigned directors and officers of Highland Coal, Inc., do
hereby constitute and appoint Vic Grubb and John Lynch, or either of them, our
true and lawful attorneys and agents, to do any and all acts and things in our
name and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD P. BROWN President, (Principal January 27, 1998
- ----------------------------------------------------- Executive Officer)
Donald P. Brown
/s/ LARRY ADDINGTON Director January 27, 1998
- -----------------------------------------------------
Larry Addington
/s/ VIC GRUBB Treasurer (Principal January 27, 1998
- ----------------------------------------------------- Financial and Accounting
Vic Grubb Officer)
</TABLE>
II-13
<PAGE> 219
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement, or amendment thereto, to be signed on its
behalf by the undersigned, thereunto duly authorized, January 27, 1998.
RIVER COAL COMPANY, INC.
By: /s/ DONALD P. BROWN
------------------------------------
Donald P. Brown
President
POWER OF ATTORNEY
We, the undersigned directors and officers of River Coal Company, Inc., do
hereby constitute and appoint Vic Grubb and John Lynch, or either of them, our
true and lawful attorneys and agents, to do any and all acts and things in our
name and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Securities Act
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or either of them, shall do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DONALD P. BROWN President (Principal Executive January 27, 1998
- ----------------------------------------------------- Officer)
Donald P. Brown
/s/ LARRY ADDINGTON Director January 27, 1998
- -----------------------------------------------------
Larry Addington
/s/ VIC GRUBB Treasurer (Principal Financial January 27, 1998
- ----------------------------------------------------- and Accounting Officer)
Vic Grubb
</TABLE>
II-14
<PAGE> 220
EXHIBIT INDEX
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
2.1(a) Exchange Agreement dated as of October 20, 1997 among AEI
Holding Company, Inc., Addington Enterprises, Inc., Larry
Addington and Harold Sergent
2.1(b) First Amendment to Exchange Agreement dated as of October
20, 1997 among AEI Holding Company, Inc., Addington
Enterprises, Inc., Larry Addington and Harold Sergent
2.2 Manufacture, Service, Use and License Agreement dated as of
November 11, 1997 between AEI Holding Company, Inc. and
Addington Enterprises, Inc.
2.3 Assumption Agreement dated as of November 12, 1997 between
Addington Enterprises, Inc. and AEI Holding Company, Inc.
2.4 Assumption Agreement dated as of November 12, 1997 between
AEI Holding Company, Inc. and Addington Mining, Inc.
2.5 Bill of Sale, Conveyance and Assignment dated as of November
12, 1997 between AEI Holding Company, Inc. and Addington
Enterprises, Inc.
2.6 Bill of Sale, Conveyance and Assignment dated as of November
12, 1997 between Addington Mining, Inc. and AEI Holding
Company, Inc.
2.7 Assignment of Contracts dated as of November 12, 1997
between Addington Enterprises, Inc. and AEI Holding Company,
Inc.
2.8 Assignment of Contracts dated as of November 12, 1997
between AEI Holding Company, Inc. and Addington Mining, Inc.
3.1(a) Certificate of Incorporation of AEI Holding Company, Inc.
3.1(b) Amendment to Certificate of Incorporation of AEI Holding
Company, Inc.
3.1(c) Bylaws of AEI Holding Company, Inc.
3.1(d) Amendment to Bylaws of AEI Holding Company, Inc.
3.2(a) Articles of Incorporation of Bowie Resources, Limited
3.2(b) Articles of Amendment to the Articles of Incorporation of
Bowie Resources, Limited
3.2(c) Articles of Amendment to Articles of Incorporation of Bowie
Resources, Limited
3.2(d) Amended and Restated Bylaws of Bowie Resources, Limited
3.3(a) Amended and Restated Articles of Incorporation of
Ikerd-Bandy Company, Inc.
3.3(b) Certificate of Amendment to Articles of Incorporation
Changing Name to Ikerd-Bandy, Co., Inc.
3.3(c) Articles of Amendment to the Restated Articles of
Incorporation of Ikerd-Bandy Co., Inc.
3.3(d) Bylaws of Ikerd-Bandy Co., Inc.
3.4(a) Articles of Incorporation of Tennessee Mining, Inc.
3.4(b) Bylaws of Tennessee Mining, Inc.
3.5(a) Articles of Incorporation of Addington Mining, Inc.
3.5(b) Bylaws of Addington Mining, Inc.
3.6(a) Articles of Incorporation of Mining Technologies, Inc.
3.6(b) Bylaws of Mining Technologies, Inc.
3.7(a)* Articles of Incorporation of Leslie Resources, Inc.
3.7(b)* Bylaws of Leslie Resources, Inc.
3.8(a)* Articles of Incorporation of Leslie Resources Management,
Inc.
</TABLE>
<PAGE> 221
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
3.8(b)* Bylaws of Leslie Resources Management, Inc.
3.9(a)* Articles of Incorporation of Pro-Land, Inc. d/b/a Kem Coal
Company
3.9(b)* Bylaws of Pro-Land, Inc. d/b/a Kem Coal Company
3.10(a)* Articles of Incorporation of Aceco, Inc.
3.10(b)* Bylaws of Aceco, Inc.
3.11(a)* Articles of Incorporation of Mountain-Clay, Inc. d/b/a
Mountain Clay, Inc.
3.11(b)* Bylaws of Mountain-Clay, Inc. d/b/a Mountain Clay, Inc.
3.12(a)* Articles of Incorporation of Highland Coal, Inc.
3.12(b)* Bylaws of Highland Coal, Inc.
3.13(a)* Articles of Incorporation of River Coal Company, Inc.
3.13(b)* Bylaws of River Coal Company, Inc.
4.1 Registration Rights Agreement dated as of November 12, 1997
by and among AEI Holding Company, Inc., Addington Mining,
Inc., Tennessee Mining, Inc., Ikerd-Bandy Co., Inc., and
NationsBanc Montgomery Securities, Inc.
4.2(a) Indenture dated as of November 12, 1997 among the Issuers,
the Guarantors and IBJ Schroder Bank & Trust Co., as Trustee
4.2(b) Cross reference of Trust Indenture Act to Indenture
4.3 Form of Notes (included in Exhibit 4.2(a) above)
5.1 Opinion of Brown, Todd & Heyburn PLLC to NationsBank of
Texas, NA
5.2* Opinion of regarding the validity of the Exchange
Notes
10.1 Stock Purchase Agreement dated as of September 24, 1993,
between Addington Holding Company, Inc. and Pittston
Acquisition Company
10.2 Indemnity Agreement dated as of January 14, 1994 among
Addington Resources, Inc., Addington Holding Company, Inc.,
Pittston Minerals Group, Inc. and Pittston Acquisition
Company
10.3 Stock Purchase Agreement dated as of Sept. 22, 1995 among
Addington Holding Co., Inc., Addington Resources, Inc.,
Addington Acquisition Co., Inc., and Larry Addington, Robert
Addington, and Bruce Addington
10.4 Employment Agreement dated as of September 22, 1997 between
Addington Enterprises, Inc. and Donald P. Brown
10.5 Employment Agreement dated as of November 1, 1997 between
Addington Enterprises, Inc. and Keith H. Sieber
10.6 Purchase Agreement between AEI Holding Company, Inc. and
NationsBanc Montgomery Securities, Inc. for $200,000,000 10%
Senior Notes Due 2007 dated as of November 6, 1997
10.7(a) Credit Agreement dated November 11, 1997 by and among AEI
Holding Company, Inc., NationsBank of Texas, N.A.,
NationsBanc Montgomery Securities, Inc., and Certain Banks
10.7(b) First Amendment to Credit Agreement dated as of December 19,
1997 among AEI Holding Company, Inc., NationsBank of Texas,
N.A., and Lenders
10.8* Promissory Note dated November 11, 1997 in the amount of
$30,000,000 payable to the order of NationsBank of Texas,
N.A.
10.9* Promissory Note dated November 11, 1997 in the amount of
$20,000,000 payable to the order of The Provident Bank.
10.10 Stock Pledge Agreement of Larry Addington dated as of
November 11, 1997 in favor of NationsBank of Texas, N.A., as
agent
</TABLE>
<PAGE> 222
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.11 Financing Statement from Larry Addington in favor of
NationsBank of Texas, N.A., individually and as agent
10.12 Stock Pledge Agreement of Addington Enterprises, Inc. dated
as of November 11, 1997 in favor of NationsBank of Texas,
N.A., as agent
10.13 Financing Statement from Addington Enterprises, Inc. in
favor of NationsBank of Texas, N.A., individually and as
agent
10.14(a) Subordination Agreement dated as of November 11, 1997 by AEI
Holding Company, Inc., Larry Addington, Addington
Enterprises, Inc., Tennessee Mining, Inc., Ikerd-Bandy Co.,
Inc., and Addington Mining, Inc.
10.14(b) Supplement to Subordination Agreement dated January 2, 1998
10.15 Security Agreement dated as of November 11, 1997, by AEI
Holding Company, Inc. in favor of NationsBank of Texas, N.A.
10.16 Guaranty dated as of January 2, 1998, by Mining
Technologies, Inc. in favor of NationsBank of Texas, N.A.
10.17 Subsidiary Security Agreement dated as of January 2, 1998,
by Mining Technologies, Inc. in favor of NationsBank of
Texas, N.A.
10.18 Guaranty dated as of November 11, 1997, by Tennessee Mining,
Inc. in favor of NationsBank of Texas, N.A.
10.19 Subsidiary Security Agreement dated as of November 11, 1997,
by Tennessee Mining, Inc. in favor of NationsBank of Texas,
N.A.
10.20 Guaranty dated as of November 11, 1997, by Ikerd-Bandy Co.,
Inc. in favor of NationsBank of Texas, N.A.
10.21 Subsidiary Security Agreement dated as of November 11, 1997,
by Ikerd-Bandy Co., Inc. in favor of NationsBank of Texas,
N.A.
10.22 Subsidiary Security Agreement dated as of November 11, 1997,
by Bowie Resources, Limited in favor of AEI Holding Company,
Inc.
10.23 Guaranty dated as of November 11, 1997, by Addington Mining,
Inc. in favor of NationsBank of Texas, N.A.
10.24 Subsidiary Security Agreement dated as of November 11, 1997,
by Addington Mining, Inc. in favor of NationsBank of Texas,
N.A.
10.25* Amended and Restated Stock Purchase Agreement effective as
of December 18, 1997, among AEI Holding Company, Inc.,
Addington Enterprises, Inc. and Greg Wells
10.26* Promissory Note dated January 15, 1998 in the amount of
$8,050,000.00 payable to the order of Greg Wells
10.27* Employment and Consulting Agreement dated as of January 15,
1997 between Leslie Resources, Inc., AEI Holding Company,
Inc., and Greg Wells.
10.28* Opinion of Hollon, Hollon & Collins to AEI Holding Company,
Inc. and Addington Enterprises, Inc. regarding the purchase
of shares of Leslie Resources, Inc. and Leslie Resources
Management, Inc. by AEI Holding Company, Inc.
10.29* Opinion of Gullett & Combs to AEI Holding Company, Inc. and
Addington Enterprises, Inc. regarding the purchase of shares
of Leslie Resources, Inc. and Leslie Resources Management,
Inc. by AEI Holding Company, Inc.
10.30* Opinion of Brown, Todd & Heyburn to Greg Wells regarding the
purchase of shares of Leslie Resources, Inc. and Leslie
Resources Management, Inc. by AEI Holding Company, Inc.
</TABLE>
<PAGE> 223
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.31* Asset Purchase Agreement dated as of December 18, 1997
between Mining Technologies, Inc. and Addington Enterprises,
Inc.
10.32* Assignment of Contracts dated as of January 2, 1998 between
Addington Enterprises, Inc. and Mining Technologies, Inc.
10.33* Bill of Sale, Conveyance and Assignment dated January 2,
1998 between Mining Technologies, Inc. and Addington
Enterprises, Inc.
10.34* Guaranty Agreement dated as of January 2, 1998 between AEI
Holding Company, Inc. and Addington Enterprises, Inc.
10.35* Non-Competition Agreement dated as of January 2, 1998 among
Mining Technologies, Inc., Addington Enterprises, Inc. and
Larry Addington
10.36* Assumption Agreement dated as of November 11, 1997 among AEI
Holding Company, Inc., Addington Enterprises, Inc. and
NationsBank of Texas, N.A.
10.37* Assignment and Acceptance between NationsBank of Texas, N.A.
and The Provident Bank
10.38* Stock Purchase Agreement dated as of October 17, 1997, among
Addington Enterprises, Inc., James J. Kocian, Bert I. Koenig
and William N. Rich
10.39* Promissory Note dated October 17, 1997 in the amount of
$2,600,000.00 payable to the order of Bert I. Koenig
10.40* Promissory Note dated October 17, 1997 in the amount of
$2,600,000.00 payable to the order of James J. Kocian
10.41* Promissory Note dated October 17, 1997 in the amount of
$1,300,000.00 payable to the order of William N. Rich
10.42* Opinion of Hollon, Hollon & Collins to Addington
Enterprises, Inc. regarding the purchase of shares of
Ikerd-Bandy Co., Inc. by Addington Enterprises, Inc.
10.43* Opinion of Brown, Todd & Heyburn to James Kocian, Bert
Koening and William Rich regarding the purchase of shares of
Ikerd-Bandy Co., Inc. by Addington Enterprises, Inc.
10.44* Shareholders Agreement for Bowie Resources, Limited dated
January 30, 1997
10.45* Marketing Agreement dated as of January 30, 1997, between
Bowie Resources, Limited and Mitsui Matsushima Co., Ltd.
10.46* Agreement dated November 6, 1997 between Task Trucking, Inc.
and AEI Holding Company, Inc.
10.47* Service Agreement dated October 22, 1997 between Mining
Machinery, Inc. and AEI Holding Company, Inc.
10.48* AEI Holding Company, Inc. Stock Option Plan
10.49* Form of Stock Option Agreement for the AEI Holding Company,
Inc. Stock Option Plan
10.50* Mortgages
10.51* Deeds
12.1* Statements Regarding Computation of Ratios
21.1 Subsidiaries of Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Faesy, Schmitt & Company, PSC
23.3 Consent of Marshall Miller & Associates
23.4* Consent of (included as part of its opinion filed as
Exhibit 5.2 hereto)
25.1 Statement of Eligibility of IBJ Schroder Bank & Trust
Company on Form T-1
27.1 Financial Data Schedule (For SEC Use Only)
</TABLE>
<PAGE> 224
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
27.2 Financial Data Schedule (For SEC Use Only)
27.3 Financial Data Schedule (For SEC Use Only)
27.4 Financial Data Schedule (For SEC Use Only)
27.5 Financial Data Schedule (For SEC Use Only)
27.6 Financial Data Schedule (For SEC Use Only)
27.7 Financial Data Schedule (For SEC Use Only)
27.8 Financial Data Schedule (For SEC Use Only)
27.9 Financial Data Schedule (For SEC Use Only)
27.10 Financial Data Schedule (For SEC Use Only)
27.11 Financial Data Schedule (For SEC Use Only)
27.12 Financial Data Schedule (For SEC Use Only)
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Securities Dealers, Commercial Banks,
Trust Companies and Other Nominees
99.4 Form of Letter to Clients
99.5 Guidelines for Certification of Taxpayer Identification
Number on Form W-9
</TABLE>
- ---------------
* To be filed by Amendment
(b) Financial Statement Schedules
None.
<PAGE> 1
EXHIBIT 2.1(a)
EXCHANGE AGREEMENT
dated as of October 20, 1997
among
AEI HOLDING COMPANY, INC.,
ADDINGTON ENTERPRISES, INC.,
LARRY ADDINGTON
and
HAROLD SERGENT
<PAGE> 2
TABLE OF CONTENTS
Page
----
Article 1 - Definitions.......................................................1
1.1 Definitions.................................................1
1.2 Additional Terms............................................3
1.3 Rules of Interpretation.....................................3
Article 2 - Purchase and Sale.................................................4
2.1 Exchange....................................................4
2.2 Purchase....................................................4
2.3 Liabilities.................................................4
Article 3 - Representations and Warranties of AEI.............................5
3.1 Organization and Authority..................................5
3.2 Title to Shares.............................................5
3.3 Assets......................................................6
3.4 AS IS.......................................................6
Article 4 - Representations and Warranties of Addington.......................6
4.1 Authority...................................................6
4.2 Title to Shares.............................................7
Article 5 - Representations and Warranties of Sergent.........................7
5.1 Authority...................................................7
5.2 Title to Shares.............................................8
Article 6 - Representations and Warranties of the Company.....................8
6.1 Organization................................................8
6.2 Shares......................................................8
6.3 Authority...................................................8
6.4 Validity, Etc...............................................8
Article 7 - Conditions to Obligations of the Company..........................9
7.1 Representations and Warranties..............................9
7.2 Statutory Requirements......................................9
i
<PAGE> 3
Page
----
7.3 Other Agreements............................................9
7.4 Deliveries..................................................9
7.5 Initial Purchase Agreement..................................9
Article 8 - Conditions to Obligations of AEI, Addington and Sergent...........9
8.1 Representations, Warranties and Covenants..................10
8.2 Statutory Requirements.....................................10
8.3 Deliveries.................................................10
8.4 Other Agreements...........................................10
8.5 Initial Purchase Agreement.................................10
Article 9 - The Closing......................................................10
9.1 Date and Place.............................................10
9.2 Deliveries.................................................10
Article 10 - Survival of Representations and Warranties......................10
Article 11 - Arbitration.....................................................11
11.1 Dispute Resolution.........................................11
11.2 Selection of Arbitrators...................................11
11.3 Temporary Injunctive Relief................................11
11.4 Arbitration Rules..........................................11
11.5 Arbitration Proceedings....................................11
Article 12 - Miscellaneous...................................................12
12.1 Notices....................................................12
12.2 Waivers....................................................13
12.3 Expenses...................................................13
12.4 Headings...................................................13
12.5 Annexes and Schedules......................................13
12.6 Entire Agreement...........................................13
12.7 Representations and Warranties, Etc........................13
12.8 Governing Law..............................................13
12.9 Counterparts...............................................13
12.10 Severability...............................................13
12.11 Benefit and Binding Effect.................................14
12.12 Specific Performance.......................................14
12.13 No Consequential Damages...................................14
12.14 Further Assurances.........................................14
ii
<PAGE> 4
EXCHANGE AGREEMENT
This is an Exchange Agreement dated as of October ___, 1997 (this
"Agreement"), between (i) AEI HOLDING COMPANY, INC., a Delaware corporation (the
"Company"); (ii) ADDINGTON ENTERPRISES, INC., a Kentucky corporation ("AEI");
(iii) LARRY ADDINGTON ("Addington"); and (iv) HAROLD SERGENT ("Sergent").
RECITALS
A. The Company, AEI and Addington believe that the consolidation of
their various business activities and property investments will enhance the
opportunities for growth and development of those activities when in combined
form.
B. The Company desires to acquire, in exchange for shares of its
capital stock, and AEI and Addington desire to transfer in exchange for shares
of capital stock of the Company, certain assets owned by AEI and Addington.
C. The Company desires to purchase, and Sergent desires to sell, upon
the terms and conditions set forth in this Agreement, all of the capital stock
of Bowie (as defined below) owned by Sergent.
NOW, THEREFORE, in consideration of the mutual benefits and covenants
contained herein, and subject to the terms and conditions set forth herein, the
Parties agree as follows:
Article 1
Definitions
1.1 Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Acquisition Documents" shall mean this Agreement and the
Other Agreements, collectively.
(b) "Addington Shares" shall have the meaning given in Section
2.1(b).
(c) "Affiliate" shall mean (i) a Person that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is controlled by a Person that controls, a Party to this Agreement; and (ii) any
trust or estate in which a Party to this Agreement has a beneficial interest or
as to which a Party to this Agreement serves as a trustee or in another
fiduciary capacity.
(d) "Assignment of Contracts" shall mean the Assignment of
Contracts, in a form reasonably satisfactory to the Company, pursuant to which
AEI shall assign to the Company all of its contracts, except for the contracts
listed on Schedule 2.1(a)(2).
1
<PAGE> 5
(e) "Assignment of Leases" shall mean the Assignment of
Leases, in a form reasonably satisfactory to the Company, pursuant to which AEI
shall assign to the Company all of its leased real property, except for the
leased real property listed on Schedule 2.1(a)(1).
(f) "Assumed Liabilities" shall have the meaning given in
Section 2.3.
(g) "Bill of Sale" shall mean the Bill of Sale, in a form
reasonably satisfactory to the Company, pursuant to which AEI shall transfer the
Transferred Assets (other than any real property interests, leases or contracts)
to the Company.
(h) "Bowie" shall mean Bowie Resources, Limited, a Colorado
corporation.
(i) "Business Days" shall have the meaning given in Section
1.3(h).
(j) "Closing" shall mean the consummation of the transactions
contemplated in this Agreement in accordance with the provisions of Article 9.
(k) "Closing Date" shall mean the date on which the Closing
occurs in accordance with Article 9.
(l) "Deeds" shall mean the Special Warranty Deeds, in a form
reasonably satisfactory to the Company, pursuant to which AEI shall convey to
the Company all of its owned real property, except for the real property listed
on Schedule 2.1(a)(1).
(m) "Initial Purchase Agreement" shall mean the Initial
Purchase Agreement to be executed between the Company and NationsBanc Montgomery
Securities, Inc. ("NationsBanc"), pursuant to which NationsBanc shall agree to
purchase from the Company at least One Hundred Fifty Million Dollars
($150,000,000.00) of senior notes representing unsecured indebtedness of the
Company.
(n) "Liabilities" shall mean all accounts payable, notes
payable, liabilities, commitments, indebtedness or obligations of any kind
whatsoever, whether absolute, accrued, contingent, matured or unmatured, direct
or indirect, known or unknown of the Company to which any of the Company's
properties or assets are subject.
(o) "Manufacture, Service, Use and License Agreement" shall
mean the Manufacture, Service, Use and License Agreement, in the form attached
hereto as Annex 1.1 (o), to be entered into by AEI and the Company.
(p) "Material" (whether or not capitalized) shall include any
matter which might influence a reasonable purchaser's decision to consummate the
transactions contemplated herein.
(q) "Notices" shall have the meaning given in Section 12.1.
2
<PAGE> 6
(r) "Other Agreements" shall mean the Initial Purchase
Agreement, the Manufacture, Service, Use and License Agreement and all other
agreements, certificates, opinions, instruments or documents contemplated by,
required by or referred to in, this Agreement for the consummation of the
transactions contemplated hereby.
(s) "Parties" shall mean the Company, AEI, Addington and
Sergent, collectively.
(t) "Person" shall mean any person, firm, trust, partnership,
corporation or other business entity.
(u) "Purchase Price" shall have the meaning given in Section
2.2.
(v) "Rules" shall have the meaning given in Section 11.4.
(w) "Sergent Shares" shall have the meaning given in Section
2.2.
(x) "Shareholders Agreement" shall mean the Shareholders
Agreement, dated January 30, 1997, among Addington, Sergent, Bowie and Mitsui
Matsushima America, Inc., a Colorado corporation.
(y) "Transferred Assets" shall have the meaning given in
Section 2.1(a).
1.2 Additional Terms. Other capitalized terms used in this Agreement
but not defined in Section 1.1 above shall have the meanings ascribed to them
wherever such terms first appear in this Agreement, or, if no meanings are so
ascribed, the meanings customarily associated with such terms in the coal mining
industry.
1.3 Rules of Interpretation.
(a) The singular includes the plural and the plural includes
the singular.
(b) The word "or" is not exclusive.
(c) A reference to a Person includes its permitted successors
and permitted assigns.
(d) The words "include," "includes" and "including" are not
limiting.
(e) A reference in a document to an Article, Section, Exhibit,
Schedule, Annex or Appendix is to the Article, Section, Exhibit,
Schedule, Annex or Appendix of such document unless otherwise
indicated. Exhibits, Schedules, Annexes or Appendices to any document
shall be deemed incorporated by reference in such document.
(f) References to any document, instrument or agreement (a)
shall include all exhibits, schedules and other attachments thereto,
(b) shall include all documents, instruments or agreements issued or
executed in replacement thereof, and (c) shall mean such document,
instrument or agreement, or replacement or predecessor thereto, as
amended, modified and supplemented from time to time and in effect at
any given time.
3
<PAGE> 7
(g) The words "hereof," "herein" and "hereunder" and words of
similar import when used in any document shall refer to such document
as a whole and not to any particular provision of such document.
(h) References to "days" shall mean calendar days, unless the
term "Business Days" shall be used. "Business Days" shall mean all days
other than any Saturday, Sunday or legal holiday in Ashland, Kentucky.
References to a time of day shall mean such time in Ashland, Kentucky.
(i) The Acquisition Documents are the result of negotiations
among, and have been reviewed by, the Company and AEI. Accordingly, the
Acquisition Documents shall be deemed to be the product of all Parties
thereto, and no ambiguity shall be construed in favor of or against any
Party.
Article 2
Purchase and Sale
2.1 Exchange.
(a) Subject to the terms and conditions of this Agreement, AEI
hereby agrees to sell, transfer and deliver to the Company, and the Company
hereby agrees to purchase, all assets and properties of AEI, except for the
assets listed on Schedules 2.1(a)(1), (2) and (3) (the "Transferred Assets"),
subject to the Assumed Liabilities, at the Closing for forty-nine (49) shares of
the capital stock of the Company.
(b) Subject to the terms and conditions of this Agreement,
Addington hereby agrees to sell, transfer and deliver to the Company, and the
Company hereby agrees to purchase, the six hundred ninety-eight (698) shares of
the capital stock of Bowie owned by Addington (the "Addington Shares") at the
Closing for forty-nine (49) shares of the capital stock of the Company.
2.2 Purchase. Subject to the terms and conditions of this Agreement,
Sergent hereby agrees to sell, transfer and deliver to the Company, and the
Company hereby agrees to purchase the seventy-seven (77) shares of the capital
stock of Bowie owned by Sergent (the "Sergent Shares") at the Closing for Two
Million Dollars ($2,000,000.00) (the "Purchase Price"). The entire Purchase
Price shall be paid in cash in immediately available funds to Sergent at the
Closing.
2.3 Liabilities. Subject to the terms and conditions of this Agreement,
the Company shall, as of the Closing, assume all Liabilities of AEI, except the
liabilities described on Schedule 2.3 (the "Assumed Liabilities").
4
<PAGE> 8
Article 3
Representations and Warranties of AEI
AEI represents and warrants to the Company as follows:
3.1 Organization and Authority
(a) AEI is duly organized, validly existing and in good
standing under the laws of the Commonwealth of Kentucky and is in good standing
in all jurisdictions in which it is qualified to do business or in which the
nature of its activities makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on its
business, assets or operation. The Company has full corporate power and
authority to own, lease and operate its properties as such properties are now
owned, leased and operated, and to conduct its business as and where such
business is currently conducted.
(b) AEI has full right, power, authority, and capacity to
execute and deliver this Agreement and the Other Agreements, and to perform its
obligations under this Agreement and the Other Agreements. This Agreement and
the Other Agreements constitute valid and legally binding obligations of AEI,
enforceable in accordance with their terms.
(c) The execution and delivery of this Agreement and the Other
Agreements, the consummation of the transactions contemplated hereby and
thereby, and the performance and fulfillment of its obligations and undertakings
hereunder and thereunder by AEI will not: (i) violate any provision of, or
result in the breach of or accelerate or permit the acceleration of any
performance required by the terms of (A) the articles of incorporation or bylaws
(or other governing or formation documents) of AEI, (B) any contract, agreement,
arrangement or undertaking to which AEI is a party or by which it may be bound
or of any judgment, decree, writ, injunction, order or award of any arbitration
panel, court or governmental authority applicable to it, or (C) any applicable
law, ordinance, rule or regulation of any governmental body; (ii) result in the
creation of any claim, lien, charge or encumbrance upon any of the properties or
assets (whether real or personal, tangible or intangible) of AEI, except such
claims, liens and encumbrances as are contemplated by this Agreement; or (iii)
terminate or cancel, or result in the termination or cancellation of, any
agreement or undertaking to which AEI is a party.
(d) The execution and delivery of, and the performance and
consummation of the transactions contemplated by, this Agreement and the Other
Agreements have been duly authorized by all requisite corporate action by the
Company and AEI.
3.2 Title to Shares. Except for any liens that may be granted to
NationsBank of Texas, N.A., AEI has, and at the Closing will have, good and
marketable (legal and beneficial) title to all of the outstanding capital stock
of Tennessee Mining, Inc., and at the Closing will have good and marketable
(legal and beneficial) title to all of the outstanding capital stock of
Ikerd-Bandy Co., Inc., free and clear of all liens, pledges, proxies, voting
trusts, encumbrances, security interests, claims, charges, and restrictions
whatsoever, and there are no outstanding purchase agreements, options, warrants,
or other rights of any kind whatsoever, entitling any Person to purchase or
acquire an interest in any of such stock or restricting their transfer in
accordance with this Agreement. Upon delivery to the Company at the Closing of
certificates representing such stock, duly endorsed by AEI for transfer to the
Company, and upon AEI's receipt of fifty (50) shares of the capital stock of the
Company, good and valid title to such stock will pass to the Company, free and
clear of any liens, claims, encumbrances, security interests, options, charges
and restrictions of any kind, except those granted to NationsBank of Texas, N.A.
5
<PAGE> 9
3.3 Assets. AEI has good and marketable title to all of the Transferred
Assets. Upon AEI's receipt of fifty (50) shares of the capital stock of the
Company at the Closing, good and marketable title to the Transferred Assets will
pass to the Company, subject to the Assumed Liabilities.
3.4 AS IS. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN
DOCUMENTS OR INSTRUMENTS EXECUTED PURSUANT TO THIS AGREEMENT, THE COMPANY
ACKNOWLEDGES THAT AEI HAS MADE NO REPRESENTATIONS REGARDING THE VALUE OR
CONDITION OF THE TRANSFERRED ASSETS. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, THE TRANSFERRED ASSETS WILL BE TRANSFERRED TO THE COMPANY AT CLOSING
"AS IS, WHERE IS" WITH NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS
TO TITLE, OWNERSHIP, USE, POSSESSION, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, QUANTITY OR QUALITY OF RESERVES, MINING COSTS OR RATIOS, GRADE,
RECOVERABILITY, VALUE, MINEABILITY, CONDITION, OPERATION, DESIGN, CAPACITY, TAX
TREATMENT OR OTHERWISE, AND ALL SUCH REPRESENTATIONS AND WARRANTIES ARE
EXPRESSLY DISCLAIMED. NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO DIMINISH OR
LIMIT THE EXPRESS REPRESENTATIONS, WARRANTIES, OR COVENANTS CONTAINED IN THIS
AGREEMENT.
Article 4
Representations and Warranties of Addington
Addington represents and warrants to the Company as follows:
4.1 Authority
(a) Addington has full right, power, authority, and capacity
to execute and deliver this Agreement and the Other Agreements, and to perform
his obligations under this Agreement and the Other Agreements. This Agreement
and the Other Agreements constitute valid and legally binding obligations of
Addington enforceable in accordance with their terms.
(b) The execution and delivery of this Agreement and the Other
Agreements, the consummation of the transactions contemplated hereby and
thereby, and the performance and fulfillment of his obligations and undertakings
hereunder and thereunder by Addington will not: (i) violate any provision of, or
result in the breach of or accelerate or permit the acceleration of any
performance required by the terms of (A) any contract, agreement, arrangement or
undertaking to which Addington is a party or by which he may be bound or of any
judgment, decree, writ, injunction, order or award of any arbitration panel,
court or governmental authority applicable to him, or (B) any applicable law,
ordinance, rule or regulation of any governmental body; (ii) result in the
creation of any claim, lien, charge or encumbrance upon the Addington Shares,
except such claims, liens and encumbrances as are contemplated by this
Agreement; or (iii) terminate or cancel, or result in the termination or
cancellation of, any agreement or undertaking to which Addington is a party.
6
<PAGE> 10
4.2 Title to Shares. Except for restrictions under the Shareholders
Agreement and any liens granted to NationsBank of Texas, N.A., Addington has,
and at the Closing will have, good and marketable (legal and beneficial) title
to the Addington Shares, free and clear of all liens, pledges, proxies, voting
trusts, encumbrances, security interests, claims, charges, and restrictions
whatsoever, other than the Shareholders Agreement, and there are no outstanding
purchase agreements, options, warrants, or other rights of any kind whatsoever,
entitling any Person to purchase or acquire an interest in any of the Addington
Shares or restricting their transfer in accordance with this Agreement. Upon
delivery to the Company at the Closing of certificates representing the
Addington Shares, duly endorsed by Addington for transfer to the Company, and
upon Addington's receipt of fifty (50) shares of the capital stock of the
Company, good and valid title to the Addington Shares will pass to the Company,
free and clear of any liens, claims, encumbrances, security interests, options,
charges and restrictions of any kind, except for restrictions under the
Shareholders Agreement and any liens granted to NationsBank of Texas, N.A.
Article 5
Representations and Warranties of Sergent
Sergent represents and warrants to the Company as follows:
5.1 Authority
(a) Sergent has full right, power, authority, and capacity to
execute and deliver this Agreement and the Other Agreements, and to perform his
obligations under this Agreement and the Other Agreements. This Agreement and
the Other Agreements constitute valid and legally binding obligations of
Sergent, enforceable in accordance with their terms.
(b) The execution and delivery of this Agreement and the Other
Agreements, the consummation of the transactions contemplated hereby and
thereby, and the performance and fulfillment of his obligations and undertakings
hereunder and thereunder by Sergent will not: (i) violate any provision of, or
result in the breach of or accelerate or permit the acceleration of any
performance required by the terms of (A) any contract, agreement, arrangement or
undertaking to which Sergent is a party or by which he may be bound or of any
judgment, decree, writ, injunction, order or award of any arbitration panel,
court or governmental authority applicable to him, or (B) any applicable law,
ordinance, rule or regulation of any governmental body; (ii) result in the
creation of any claim, lien, charge or encumbrance upon the Sergent Shares,
except such claims, liens and encumbrances as are contemplated by this
Agreement; or (iii) terminate or cancel, or result in the termination or
cancellation of, any agreement or undertaking to which Sergent is a party.
7
<PAGE> 11
5.2 Title to Shares. Sergent has, and at the Closing will have, good
and marketable (legal and beneficial) title to the Sergent Shares, free and
clear of all liens, pledges, proxies, voting trusts, encumbrances, security
interests, claims, charges, and restrictions whatsoever, other than the
Shareholders Agreement, and there are no outstanding purchase agreements,
options, warrants, or other rights of any kind whatsoever, entitling any Person
to purchase or acquire an interest in any of the Sergent Shares or restricting
their transfer in accordance with this Agreement. Upon delivery to the Company
at the Closing of certificates representing the Sergent Shares, duly endorsed by
Sergent for transfer to the Company, and upon Sergent's receipt of the Purchase
Price, good and valid title to the Sergent Shares will pass to the Company, free
and clear of any liens, claims, encumbrances, security interests, options,
charges and restrictions of any kind, except for restrictions under the
Shareholders Agreement and any liens granted to NationsBank of Texas, N.A.
Article 6
Representations and Warranties of the Company
The Company represents and warrants to AEI, Addington and Sergent as
follows:
6.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
full corporate power and authority to own and lease its properties as such
properties are now owned and leased, and to conduct its business as and where
its business is now conducted.
6.2 Shares. The authorized capital stock of the Company consists of one
thousand (1,000) shares of common stock of One Cent ($0.01) par value, of which
no shares are issued and outstanding.
6.3 Authority. The Company has full right, power, authority and
capacity to execute, deliver and consummate this Agreement and the Other
Agreements, and to perform its obligations under this Agreement and the Other
Agreements. This Agreement and the Other Agreements have been duly and validly
executed and delivered by the Company and constitute valid and legally binding
obligations of the Company, enforceable against the Company in accordance with
their terms.
6.4 Validity, Etc.
(a) The execution and delivery of this Agreement and the Other
Agreements, the consummation of the transactions contemplated hereby and
thereby, and the performance and fulfillment of their respective obligations and
undertakings hereunder and thereunder by the Company, will not violate any
provision of, or result in the breach of or accelerate or permit the
acceleration of any performance required by the terms of (i) the articles of
incorporation or bylaws (or other governing or formation documents) of the
Company; (ii) any contract, agreement, arrangement or undertaking to which the
Company is a party or by which it may be bound; (iii) any judgment, decree,
writ, injunction, order or award of any arbitration panel, court or governmental
authority applicable to the Company; or (iv) any applicable law, ordinance, rule
or regulation of any governmental body.
8
<PAGE> 12
(b) The execution and delivery of, and the performance and
consummation of the transactions contemplated by, this Agreement and the Other
Agreements have been duly authorized by all requisite corporate action of the
Company.
Article 7
Conditions to Obligations of the Company
The obligations of the Company to consummate the transactions
contemplated herein shall be subject to the satisfaction of the following
conditions at or before the Closing:
7.1 Representations and Warranties. The representations and warranties
of AEI, Addington and Sergent contained herein shall be true on the Closing
Date, with the same effect as though made at such time, except to the extent of
changes permitted by the terms of this Agreement. AEI, Addington and Sergent
shall have performed all obligations and complied with all covenants required by
this Agreement to be performed or complied with by them prior to the Closing.
7.2 Statutory Requirements. All statutory requirements for the valid
consummation by the Company of the transactions contemplated by this Agreement
shall have been fulfilled, and all authorizations, consents and approvals of all
federal, state, local and foreign governmental agencies and authorities required
to be obtained in order to permit the consummation by the Company of the
transactions contemplated by this Agreement shall have been obtained.
7.3 Other Agreements. AEI, Addington and Sergent shall have executed
all Other Agreements required to be executed before the Closing Date in
connection with the transactions contemplated in this Agreement.
7.4 Deliveries. At or before the Closing, AEI, Addington and Sergent
shall make all of their deliveries contemplated in this Agreement.
7.5 Initial Purchase Agreement. The parties to the Initial Purchase
Agreement shall have consummated all transactions contemplated therein.
Article 8
Conditions to Obligations of AEI, Addington and Sergent
The obligations of AEI, Addington and Sergent to consummate the
transactions contemplated herein shall be subject to the satisfaction of the
following conditions at or before the Closing:
9
<PAGE> 13
8.1 Representations, Warranties and Covenants. The representations and
warranties of the Company contained herein shall be true on the Closing Date,
with the same effect as though made at such time, except to the extent of
changes permitted by the terms of this Agreement. The Company shall have
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by it prior to the Closing.
8.2 Statutory Requirements. All statutory requirements for the valid
consummation by AEI, Addington and Sergent of the transactions contemplated by
this Agreement shall have been fulfilled, and all authorizations, consents and
approvals of all federal, state, local and foreign governmental agencies and
authorities required to be obtained in order to permit the consummation by AEI,
Addington and Sergent of the transactions contemplated by this Agreement shall
have been obtained.
8.3 Deliveries. At or before the Closing, the Company shall make all of
its deliveries contemplated in this Agreement.
8.4 Other Agreements. The Company shall have executed all Other
Agreements required to be executed on or before the Closing Date in connection
with the transactions contemplated in this Agreement.
8.5 Initial Purchase Agreement. The parties to the Initial Purchase
Agreement shall have consummated all transactions contemplated therein.
Article 9
The Closing
9.1 Date and Place.
(a) The Closing shall occur on the same date as the closing
under the Initial Purchase Agreement.
(b) The Closing shall be held on the Closing Date at 10:00
a.m. (EST) in the offices of Brown, Todd & Heyburn PLLC, 2700 Lexington
Financial Center, Lexington, Kentucky, or at such other place or time on the
Closing Date as the Parties may mutually agree.
9.2 Deliveries. At or before the Closing, the Parties shall make all of
the deliveries contemplated in this Agreement.
Article 10
Survival of Representations and Warranties
Each of the Parties' representations, warranties, covenants and
agreements set forth in this Agreement shall survive the Closing for a period of
two (2) years.
10
<PAGE> 14
Article 11
Arbitration
11.1 Dispute Resolution. All controversies, disputes or claims arising
among the Parties (or any Person making a claim through or under, whether
derivatively or otherwise, any Party) in connection with, or with respect to,
any provision of this Agreement or any of the Other Agreements which has not
been resolved within thirty (30) calendar days after any party to such dispute
has notified the other parties to such dispute in writing of such controversy,
dispute or claim, shall be submitted for arbitration in accordance with the
rules of the American Arbitration Association or any successor thereof.
Arbitration shall take place at an appointed time and place in Lexington,
Kentucky.
11.2 Selection of Arbitrators. Each party to such dispute shall select
one (1) arbitrator (who shall not be counsel for such Party), and the
arbitrators so designated shall select one (1) additional arbitrator (or two (2)
additional arbitrators, if necessary, to constitute an odd number of total
arbitrators). If any party to such dispute shall fail to designate an arbitrator
within seven (7) calendar days after arbitration is requested, or if the
designated arbitrators shall fail to select any additional arbitrator(s) within
fourteen (14) calendar days after arbitration is requested, then such
arbitrator(s) shall be selected by the American Arbitration Association or any
successor thereto upon application of any party to such dispute. Judgment upon
any award of the majority of arbitrators shall be binding and shall be entered
in a court of competent jurisdiction. Subject to the provisions in this
Agreement, including but not limited to Section 12.13, the award of the
arbitrators may grant any relief which a court of general jurisdiction has the
authority to grant, including, without limitation, award of damages and/or
injunctive relief, and shall assess, in addition, the cost of the arbitration,
including the reasonable fees of the arbitrators, reasonable attorneys' fees and
costs of all prevailing parties, against any non-prevailing parties.
11.3 Temporary Injunctive Relief. Nothing herein contained shall bar
the right of any Party to seek and obtain temporary injunctive relief from a
court of competent jurisdiction in accordance with applicable law against
threatened conduct that will cause loss or damage, pending completion of the
arbitration, and the prevailing Party therein shall be entitled to an award of
its reasonable attorneys' fees and costs.
11.4 Arbitration Rules. All disputes and claims shall be determined by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "Rules") in effect on the date hereof, except that
such Rules shall be modified by this Agreement.
11.5 Arbitration Proceedings. All arbitral proceedings arising under,
or in connection with, this Agreement shall be governed by the Federal Rules of
Civil Procedure. Notwithstanding the previous sentence, the arbitrators' award
shall be made no later than ninety (90) days after their appointment. Subject to
the Parties' right to be treated fairly, the arbitrators may shorten the periods
of time otherwise applicable to the arbitral proceedings under the Rules or the
Federal Rules of Civil Procedure to permit the award to be made within the time
limitation set forth in the previous sentence.
11
<PAGE> 15
Article 12
Miscellaneous
12.1 Notices. All notices under this Agreement ("Notices") shall be
given to the Parties at the following addresses (i) by personal delivery; (ii)
by facsimile transmission; (iii) by registered or certified mail, postage
prepaid, return receipt requested; or (iv) by nationally recognized overnight or
other express courier services:
(a) If to the Company:
AEI Holding Company, Inc.
1500 North Big Run Road
Ashland, Kentucky 41102
Attn: Larry Addington
Telephone No.: (606) 928-3433
Telecopier No.: (606) 928-0450
(b) If to AEI:
Addington Enterprises, Inc.
1500 North Big Run Road
Ashland, Kentucky 41102
Attn: Larry Addington
Telephone No.: (606) 928-3433
Telecopier No.: (606) 928-0450
(c) If to Addington:
Larry Addington
1500 North Big Run Road
Ashland, Kentucky 41102
Telephone No.: (606) 928-3433
Telecopier No.: (606) 928-0450
(d) If to Sergent:
Harold Sergent
1500 North Big Run Road
Ashland, Kentucky 41102
Telephone No.: (606) 928-3433
Telecopier No.: (606) 928-0450
All Notices shall be effective and shall be deemed delivered (i) if by personal
delivery, on the date of delivery if delivered during normal business hours of
the recipient, and if not delivered during such normal business hours, on the
next Business Day following delivery; (ii) if by facsimile transmission, on the
next Business Day following dispatch of such facsimile; (iii) if by courier
service, on the third (3rd) Business Day after dispatch thereof; and (iv) if by
mail, on the fifth (5th) Business Day after dispatch thereof. Any Party may
change its address by Notice to all other Parties.
12
<PAGE> 16
12.2 Waivers. No waiver or failure to insist upon strict compliance
with any obligation, covenant, agreement or condition of this Agreement shall
operate as a waiver of, or an estoppel with respect to, any subsequent or other
failure.
12.3 Expenses. Each Party shall assume its respective expenses incurred
in connection with the transactions contemplated by this Agreement.
12.4 Headings. The headings in this Agreement have been included solely
for ease of reference and shall not be considered in the interpretation or
construction of this Agreement.
12.5 Annexes and Schedules. The Annexes and Schedules to this Agreement
are incorporated herein by reference and expressly made a part hereof.
12.6 Entire Agreement. All prior negotiations and agreements by and
among the Parties hereto with respect to the subject matter hereof are
superseded by this Agreement, and there are no representations, warranties,
understandings or agreements with respect to the subject matter hereof other
than those expressly set forth herein or on an Annex or Schedule delivered in
connection herewith. No extension, change, modification, addition or termination
of this Agreement shall be enforceable unless in writing and signed by the Party
against whom enforcement is sought.
12.7 Representations and Warranties, Etc. The representations and
warranties of each Party contained herein shall not be deemed to be waived or
otherwise affected by any investigation made by any other Party hereto.
12.8 Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the Commonwealth of Kentucky.
Subject to Article 11, each Party agrees that any action brought in connection
with this Agreement against another shall be filed and heard in Fayette County,
Kentucky, and each Party hereby submits to the jurisdiction of the Circuit Court
of Fayette County, Kentucky, and the U.S. District Court for the Eastern
District of Kentucky, Lexington Division.
12.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.
12.10 Severability. If any provision of this Agreement or its
application will be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of all other applications of that
provision, and of all other provisions and applications hereof, will not in any
way be affected or impaired. If any court shall determine that any provision of
this Agreement is in any way unenforceable, such provision shall be reduced to
whatever extent is necessary to make such provision enforceable.
13
<PAGE> 17
12.11 Benefit and Binding Effect. This Agreement shall be binding upon,
and shall inure to the benefit of, the Company, AEI, Addington and Sergent, and
each of their respective successors and assigns; provided, however, that no
Party to this Agreement shall assign his or its rights or obligations hereunder
without the express written consent of the other Parties, which consent shall
not be unreasonably withheld.
12.12 Specific Performance. Subject to Article 11, each Party shall be
entitled to specific performance, injunctive relief and other equitable relief
for breaches of any other Party's covenants and agreements, and such relief may
be awarded by the arbitrators pursuant to Article 11. Therefore, it is agreed
that no Party will, in any action to enforce this Agreement, assert that there
is an adequate remedy at law for the default on which such action or proceeding
is based.
12.13 No Consequential Damages. Except as prohibited by law, each Party
waives any right it may have to claim or recover any special, exemplary,
punitive or consequential damages, or any damages other than, or in addition to,
actual damages.
12.14 Further Assurances. From time to time at another Party's request
and without further consideration, a Party shall execute and deliver such
further instruments of conveyance, assignment and transfer, and take such other
actions as the requesting Party may reasonably request, in order to more
effectively convey and transfer any of the Acquired Assets. In addition, any
monies collected by a Party which are due and payable to another Party will be
promptly remitted to such Party upon receipt thereof.
14
<PAGE> 18
IN WITNESS WHEREOF, the Parties have executed and delivered this
Agreement as of the date set forth in the preamble hereto, but actually on the
dates set forth below.
THE COMPANY: AEI HOLDING COMPANY, INC.
By: /s/ Don Brown
----------------------------
Don Brown, President
Date: October 20, 1997
AEI: ADDINGTON ENTERPRISES, INC.
By: /s/ Don Brown
----------------------------
Don Brown, President
Date: October 20, 1997
ADDINGTON: /s/ LARRY ADDINGTON
----------------------------
LARRY ADDINGTON
Date: October 20, 1997
SERGENT: /s/ HAROLD SERGENT
----------------------------
HAROLD SERGENT
Date: October 20, 1997
15
<PAGE> 19
LIST OF ANNEXES AND SCHEDULES
Annexes
- -------
1.1(o) Form of Manufacture, Service, Use and License Agreement
Schedules
- ---------
2.1(a)(1) Equipment Inventory and Land Retained by AEI
2.1(a)(2) Contracts Retained by AEI
2.1(a)(3) General Intangibles Retained by AEI
2.3 Liabilities Retained by AEI
16
<PAGE> 20
SCHEDULE 2.1(A)(1)
EQUIPMENT, INVENTORY AND LAND RETAINED BY AEI
A. EQUIPMENT
<TABLE>
<CAPTION>
UNIT NO. DESCRIPTION SERIAL NO. LOCATION @ 10/17/97
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SCRAPERS
0890 Cat 631 24W2502 Idle Equipment
DOZERS
M1021 Cat D9L 14Y02942 Martiki Coal Company
1993 Cat D4C 1RJ01399 Idle Equipment
LOADERS/FORKLIFTS
2470 Cat 988B 50W699 Martiki Coal Company
2902-1 Balderson Pinion Fork W06445 Idle Equipment
2901 Cat 988B 50W08165 Job #17 South - HWM#12
2902 Komatsu WA600 10164 Idle Equipment
2906 Hyster H50F MMI Shop
2907 John Deere 480-BD 233274T MT Fab Shop
2908 Champ 350-HLDS CC746382 MMI Shop
2909 Yale GLP-080 P334741 MT Fab Shop
2913 Cat GP30G 7AM00289 MMI Shop
2915 Cat GP30 7AM01784 MT Car Shop
2940-1 Balderson F988 Forks MMI Shop
2940 Cat 988B 50W06757 MMI Shop
2945 Case 580, Fork Lift 900579 Idle Equipment
2990 Cat 966C 76J13647 MT Fab Shop
2992-1 Cat 966C 76J11314 MT Car Shop
2991 Cat 966C 76J12357 MMI Shop
2992 Cat 966C 76J11314 MT Car Shop
2993 Cat V80D 37W07908 MT Car Shop
M2995 Cat 988B 50W08647 Patterson Mtn. HWM #13
2998 Cat 988B 50W09278 Job #17 South - HWM#14
</TABLE>
<PAGE> 21
<TABLE>
<S> <C> <C> <C>
DRILL
4700 Ingersoll Rand LME 500C T52054 Equipment Rental - AEI
HEAVY TRUCKS
8603 Ford F700 Mechanic Truck 1FDNK74N5DVA19565 Idle Equipment
8609-1 Lincoln 225 Amp Welder A1160259 MMI Shop
8609 Chevrolet C70 Mechanic Truck 1GBK7D1G1HV107293 Indiana
8612-1 Quincy Air Compressor 325 FBT KOHLER MT Fab Shop
8612 Ford K646 Mechanic Truck 1FDNK64N3FVA64517 MT Fab Shop
8703 Mack Boom Truck 1M2B128C2GA012179 MMI Shop
8751 White Truck BT004HA730540 Idle Equipment
8752 Mack DM685S, Water Truck 1M2B120C3BA050475 Ikerd Bandy HWM
8806 Mack RD866SX 1M2P156C5DA001019 Idle Equipment
8829 Mack DM886SX DM886SX1992 Idle Equipment
8603-1 Miller Big 40 Welder KE754420 Idle Equipment
CRANES
11002 Galion 125KCID Crane 1241272 Idle Equipment
11003 Grove AP308 72162 Idle Equipment
11004 Grove AP308 73380 Idle Equipment
11005 Grove AP308 72170 Idle Equipment
TRUCKS & AUTOMOBILES
14005 Chevrolet K-2500 305729 General & Administrative-AEI
14012 Chevrolet K10 - 4X4 1GCDK14K9KZ253894 MT Fab Shop
14023 Chevrolet C-1500 1GCEK14K5NZ239385 Martiki Coal Company
14029 Chevrolet K-2500 2GCFK29K5R1246340 MT Car Shop
14039 Chevrolet Tahoe, 4x4 3GNEK18R5TG165185 MT Car Shop
14053 Chevrolet Tahoe 3GNEK18R4VG129281 Job #17 South - HWM#12
14234 Chevrolet 1 Ton 1GBJC34KOLE197420 Operations Management - MT
14360 Ford Bronco - 4X4 AFMEU15N6KLA41265 Engineering/Exploration - MT
14602 Chevrolet Van 1GAGC35K5L7132097 MT Car Shop
14608 Chevrolet K-1500 1GCEK19R4TE167167 Operations Management - MT
14898 1993 Chevrolet K20 Suburban 1GNGK26N4PJ340948 General & Administrative-AEI
14891 1993 Chevrolet Blazer 4X4 1GNEK18K3PJ312451 General & Administrative-AEI
14897 Chevrolet K250 1GCGK24K7PE106166 MT Fab Shop
LOWBOY TRUCKS
16303 Kenworth W-800 146478S MMI Shop
16304 Mack RD821SX 1M2P154C2FA001078 MMI Shop
16307-1 Kenworth W-900 2XKWD80XXMM560984 MMI Shop
16307 Kenworth W-900 2XKWDB0XXMM560984 MMI Shop
LOWBOY TRAILERS
16504 Fruhaul 2 Axle Drop Deck Trailer 14334 MMI Shop
</TABLE>
<PAGE> 22
<TABLE>
<S> <C> <C> <C>
16507-1 Talb Axle 40FA00923J1007302 MMI Shop
16506 Birmingham 50 Ton Trailer 1L74S4836KAB01497 MMI Shop
16507 Talb WK615 40FWK615XJ1007301 MMI Shop
16508 2 Axle Trailer 102ASF2144 MMI Shop
16509 Rogers 60 Ton Trailer 18337 MMI Shop
16512 Prog Trailer B26356 MMI Shop
16514 Vulcan Low Boy Trailer VT280775 MMI Shop
16515 Transcraft Flat Bed 1TTF43208F1026382 MMI Shop
16516 Hobbs 42' Lowboy Trailer FHV353905 MMI Shop
16517 Great Dane Trailer - 45'-75' 1GRDP9028DM044402 MMI Shop
16518 Rogers Lowboy 1RBH46304NAR21655 MMI Shop
16519 Steerable Dollie Trailer KYT21404 MMI Shop
16520 Great Dane Drop Deck Trailer 1GRDN882XBM002704 MMI Shop
16521 Clark 48'Drop Deck, Trailer 1CD2L4825SA005141 MMI Shop
PARTS TRAILERS
16754 Great Dane Parts Trailer 20070 Ikerd Bandy HWM
16767 Utility Parts Trailer 1UYVS2430CT703119 Martiki Coal Company
16769 Trailmobile Parts Trailer 593688 Patterson Mtn. HWM #13
16915 Gindy Parts Trailer 115474E Job #17 South - HWM#14
TRACTORS & FARM EQUIPMENT
17504 Ford 5610 BB23601 Idle Equipment
17606 Versadrill GT 805 85027 ASS# 71807 Idle Equipment
17607 John Deere 4240 25766W Idle Equipment
17608 256 Bale Buster 861392 Cumberland #2 Mine
17609 Miller 12' Offset Disc 2H14600 Idle Equipment
17610 Case 2470 8853654 Cumberland #2 Mine
17611 Kewanee 245 Tandem Disc Harrow 100061 Cumberland #2 Mine
17613-1 2512 Bush Hog 81948 MMI Shop
17613 Ford 3930 Tractor BC67905 MMI Shop
17614 Finn B70 1622R5 Idle Equipment
17615 Versadrill GT 85020 Idle Equipment
17616 256 Bale Buster 871711 Idle Equipment
17617 Massey Ferguson 160 Manure Spreader 1632-164999 Idle Equipment
17618 1200 Spreader Idle Equipment
17619 Finn 850 Hydroseeder Idle Equipment
17620 Finn B250D Straw Blower BN2316 Cumberland #2 Mine
17624 660 Hay Rake Reclamation
17626 Herd MD1200 Spreader NA Idle Equipment
17629 Agrip Rotary Plow 8351043 Idle Equipment
17630 7' Rock Rake Idle Equipment
</TABLE>
<PAGE> 23
<TABLE>
<S> <C> <C> <C>
17631 Schulte Rock Picker 9090273205 Idle Equipment
17632 New Holland Roll Baler 641736 Idle Equipment
17634 Electro-Spray Fertilizer Sprayer 002141 Idle Equipment
17644 Allis Front End Mower 3662 Reclamation
17645 Herd MD1250C Seeder 98849 Idle Equipment
17651 MD276 6' Bush Hog MMI Shop
17652 Blade, Scraper, 8' Bushho MMI Shop
17653 Radial Arm Dril Geared Head Lathe MT Fab Shop
17681 Landpride RCP2560 Parallel Mower 14344 MMI Shop
17683 Bush Hog 2620 12-00821 Idle Equipment
GENERATOR SETS
19026 Cat 3516 Generator 25Z02912 Ikerd Bandy HWM
19027 Cat 3516 Generator 25Z03207 Martiki Coal Company
19029 Cat 3516 Generator 25Z02477 Job #17 South - HWM#8
19032 Cat 3516 Generator 25Z04477 Job #17 South - HWM#14
SHOP EQUIPMENT
20303 ASNRMA Compressor A29842 MMI Shop
20304 Miller 250 Amp Welder MMI Shop
20306 Lincoln DC400 Welder AC-751251 MT Car Shop
20349 Hobart 580 Welder 79W509355 MMI Shop
20350 Miller Big 40 Welder HD708894 MMI Shop
20352 Cat Hose Machine & Trailer MMI Shop
20354 Lincoln Wire Feed 176969 MMI Shop
20356 Crimpmaster Hose Machine MMI Shop
20358 Lietz Surveying Station MMI Shop
20359 Lincoln WPG8000 Welder A1193757 MMI Shop
20364 9020 Magnetic Drill 90-1390 MMI Shop
20366 MC-59 Pipe Bender M14821-S MT Fab Shop
20370 Doall Band Saw 90154460-60-3 MT Fab Shop
20371 Jig Manufacturi Add Car Weldment WO 1524 MT Car Shop
20372 Wellsaw Band Saw with Coolant Sys MD8W/1016 MT Car Shop
20376 Sabra 1000 Cutting Mach 93-VIS-9015 MT Fab Shop
21006-4 FMC 4100 Wheel Balancer E41AE345 MMI Shop
21006-3 FMC 601 BSC Brake Sh J21AE100 MMI Shop
21006-2 170H BH Heater 86-2-2 MMI Shop
21006 Hawk 1500 Pressure Washer 001808 MMI Shop
21203 Transformer MT Car Shop
21204 Hydraulic Jig Table MT Car Shop
21205 Hydraulic Jig Table MT Car Shop
</TABLE>
<PAGE> 24
<TABLE>
<S> <C> <C> <C>
ADDCAR SYSTEMS
22003 Addcar System #3 22003-1 to 22003-27 Martiki Coal Company
22006 Addcar System #6 22006 Ikerd Bandy HWM
22011 Addcar System #11 011001-011034 Idle HWM Equipment
22014 Addcar System #14 22014 Job #17 South - HWM#8
ADDCAR LAUNCH VEHICLES
23003 Addcar Launch Vehicle #3 23003 Martiki Coal Company
23006 Addcar Launch Vehicle #6 23006 Ikerd Bandy HWM
23011 Addcar Launch Vehicle #11 LV011 Idle HWM Equipment
23014 Addcar Launch Vehicle #14 LV014 Job #17 South - HWM#14
HIGHWALL MINER STACKERS
23503 Addcar Stacker PO#177951 WO1182 Idle HWM Equipment
23504 Mobile Stacker, 48" TL04P0182526 Idle HWM Equipment
23506 Addcar Stacker PO#197151 WO1158 Job #17 South - HWM#14
23511 Addcar Mobile Stacker for HWM#11 TL011 Idle HWM Equipment
23512 Addcar Stacker for System #12 Martiki Coal Company
23514 Addcar Stacker TL-014 Ikerd Bandy HWM
CONTINOUS MINERS
24001 Joy 14CM-1 Miner JM1634 Idle HWM Equipment
24002 Eimco 2480 Miner 70880018 Idle HWM Equipment
24004 Eimco 2810 Miner 70880051 Idle HWM Equipment
24006 Eimco 2810 Miner 70880059 Idle HWM Equipment
24007 Eimco 2810 Miner 70880060 Idle HWM Equipment
M24014 Joy 14CM15-11CX JM4496 Job #17 South - HWM#12
24018 Joy 14CM15-HW11CX JM4646 Martiki Coal Company
24020 Joy 14CM15-11CX JM4540 Ikerd Bandy HWM
24023 Joy 1410-AA JM4756 Idle HWM Equipment
24031 Joy 14CM-15 JM4837 Idle HWM Equipment
24033 Joy 14CM_15 JM4838 Job #17 South - HWM#14
HIGHWALL MINER DOLLIES
25006 L. Vehicle Carry Dollies Idle HWM Equipment
25007 Tandem Dollie Martiki Coal Company
25010 Small Pull Dollie Martiki Coal Company
25012 5 Ton Dollie 233 Job #17 South - HWM#14
25015 10 Ton Dollie, 14X24 22412428 Idle HWM Equipment
25016 Large Pull Dollie - 68 Co 22011023 Idle HWM Equipment
25017 Large Pull Dollie - 70 Co 22413131 Idle HWM Equipment
25018 Large Pull Dollie with To 1009 Idle HWM Equipment
</TABLE>
<PAGE> 25
<TABLE>
<S> <C> <C> <C>
25019 Large Pull Dollie with To 1210 Idle HWM Equipment
25020 Large Pull Dollie with To 22011017 Idle HWM Equipment
25023 Jeep Dollie 6463 & 956 Job #17 South - HWM#14
25027 Jeep Dollie 16945 Job #17 South - HWM#14
25028 Tandem Dolly, 10T Ikerd Bandy HWM
25029 11:00X20 Dollie Idle HWM Equipment
25030 11:00X20 Dollie Idle HWM Equipment
25031 11:00X20 Dollie Idle HWM Equipment
25033 10 Ton Dollie Martiki Coal Company
25037 5 Ton Dollie Martiki Coal Company
25039 5 Ton Dollie Idle HWM Equipment
25049 11:00 X 20 Tandem Dollie 17414 Job #17 South - HWM#14
25055 11 X 20 5 Ton Dollie 33666 Ikerd Bandy HWM
25057 11 X 20 5 Ton Dollie XM211 Idle HWM Equipment
25061 14 X 24 10 Ton Dollie 075 Idle HWM Equipment
WATER TANKS
26003-P Water Tank Martiki Coal Company
26003 Water Tank Job #17 South - HWM#14
26007 Great Dane Water Tank HT924223 Idle HWM Equipment
26008 71 HL Water Tanker 922644 Ikerd Bandy HWM
CONVEYORS SYSTEMS
27003 74 X 22 Transfer Conveyor Idle Equipment
27005 Overland Conveyor Idle Equipment
27006 Overland Conveyor Idle Equipment
27007 Overland Conveyor Idle Equipment
27008 Overland Conveyor Idle Equipment
27009 Overland Conveyor Idle Equipment
27010 Conveyors Idle Equipment
MISCELLANEOUS HIGHWALL MINER EQUIPMENT
28003 Sullair Air Compressor 004-1002799 Idle Equipment
28005 Sullair 1600DPQCAT 105278 Idle Equipment
28007 Addcar Test Car Patterson Mtn. HWM #13
31005 Steam Jennie MT Car Shop
</TABLE>
<PAGE> 26
<TABLE>
<S> <C> <C> <C>
MISCELLANEOUS
N/A Herd 750 Seed Sower 81948 MMI Shop
</TABLE>
B. ALL CAR SHOP INVENTORY, INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING ITEMS
(AS ADJUSTED TO THE CLOSING DATE)
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
21 Electrical Boxes - From WO #242 (used) $ 6,980 $146,574
2 Electrical Boxes (used) 6,980 13,959
10 Electrical Boxes (new) 6,980 69,797
1 Conn. Box 017-1000 2,002 2,002
2 Skid Cyl. 203-0033 7,857 15,714
1 Bean Pump Assm. 4,000 4,000
1 Pusher Cyl. 203-0034 6,311 6,311
1 100 HP Motor 241-0004 5,000 5,000
2 40 HP Stacker Motor 501-0043 3,500 7,000
2 Transformer 601564-79 7,306 14,612
2 Stab Cylinder 016-0002 700 1,400
1 200 HP Motor 203-1193 4,235 4,235
1 L.H. Gear Pot 012-0003 23,000 23,000
1 R.H. Gear Pot 012-0002 23,000 23,000
1 Lift Cylinder 5,800 5,800
18 Roller Head Pulley 10" X 51" 3 15/16" X 5'1 3/4" Shaft 391-0003 753 13,545
18 Roller 10" X 51 " 2 15/16" X 5' 6 1/2" Shaft 391-0007 540 9,720
1 Roller 361-0002 1,610 1,610
9 Roller 8" X 51" 2 15/16" X 5' Shaft 391-0005 775 6,975
15 Roller 10" X 51" 3 7/16" X 6' 6 12" Shaft 391-0001 708 10,624
4 Old Styler Roller Box 202-1075 5,000 20,000
15 Driver Rollers 1,943 29,148
28 10:1 Speed Reducer - From WO #242 391-0013 2,470 69,164
16 10:1 Speed Reducer 391-0013 4,868 77,891
28 30 HP Motor 391-0012 2,402 67,260
26 30 HP Motor 391-0012 3,022 78,578
1 150 HP Motor 017-0001 18,500 18,500
2 350 HP A-C Motor 017-0000 38,500 77,000
2 50 HP EIMCO Motor 017-0002 19,019 38,038
2 Cutter Head 011-0000 48,800 97,600
129 4" X 33" Roller 1048 37 4,809
208 5" X 33" Roller 1010 40 8,382
492 5" X 15" Roller 1009 27 13,151
48 5" X 33" Impact Roller 110 5,294
810 4" X 15" Roller 1049 25 20,120
47 4" X 30" Roller 1008 36 1,715
106 4" X 30" Impact Roller 1047 104 11,011
2 Hog Gathering Arms 2,000 4,000
</TABLE>
<PAGE> 27
<TABLE>
<S> <C> <C> <C> <C>
12 Used 10" X 63" Lagged Pulley 624 7,488
100 1/4" X 2" X 20' Tube Steel 52 5,220
13 40 per ft 12" X 16" X 23' Tube Steel 920 11,960
2 Mukker Stacker Cyl. 1,000 2,000
1 Shear Jack Cyl. 016-0000 3,985 3,985
2 Planetary 520514552 8,800 17,600
4 Used Motorized Head Pulley 3,000 12,000
2 Starter Box 604-0224 6,673 13,346
1 Shear Jack Cylinder 016-0025 4,255 4,255
1 Siemens 100 HP Motor 8,000 8,000
1 Lincoln 100 HP Motor 5,000 5,000
1 Fork Carriage 8,550 8,550
2 Jeamar Capstan Electric Winch 12,052 24,104
4 Edge 4T6590 169 677
1 Edge 4T6589 325 325
1 Edge 140762 274 274
2 Edge 4T6511 179 359
3 Tooth 9W8552 72 217
6 Tooth 9W8559 64 384
2 Tooth 9W8452 44 89
1 Tooth 9W8451 47 47
1 Shank 7T8454 159 159
1 Protector 9W8365 286 286
8 Tooth 1U3351 26 206
2 Tooth 9W8459 44 88
1 Edge 7T4689 395 395
1 Edge 3G8281 248 248
1 Edge 4J8723 178 178
1 Edge 3G8292 181 181
1 Edge 4T6672 48 48
1 Edge 3G8282 248 248
10 Segment 6Y2931 60 604
1 Bracket 8J9011 1,351 1,351
1 Edge 3G8290 219 219
3 Edge 5J3101 503 1,509
2 Bracket 3S3228 43 85
33 12" x 20" x 6' Tube 291 9,613
3 333 KVA Transformer 1,500 4,500
3 100 KVA Transformer 1,000 3,000
1 25 KVA Transformer 400 400
2 6" x 12" x 17' Beam 133 265
2 6" x 10" x 19' Beam 125 251
</TABLE>
<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C>
4 6" x 10" x 9' Beam 59 238
1 10" x 20' Channel 92 92
1 8" x 20' Channel 60 60
1 10" x 11" x 13' x 1" Beam 343 343
2 1/2" x 6" x 6" x 40' Beam 300 600
1 32" DM45 Bit Sub 495 495
1 DM45 Top Sub 495 495
4 Falk Enclosed Gear Drive 3507J-14 8,233 32,931
2 Rex Bearing ZF5407Y 1,123 2,246
1 Falk Coupling Sleeve 1150T10 594 594
10 Segment 1026686 186 1,860
4 DM45 Top Sub 495 1,980
1 GD35 6' Bottom Sub 783 783
3 DM45 Bot Sub to Wear Plate 641 1,923
2 Plate 9V5793 103 205
1 Edge 4T6760 183 183
3 Edge 9W5432 174 523
----------
$1,221,806
</TABLE>
C. ALL FAB SHOP INVENTORY, INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING ITEMS
(AS ADJUSTED TO THE CLOSING DATE)
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Joy 1415 Complete Cutter Head Assembly $175,000 $175,000
5 Rex 3 15/16" Bearing 423 2,113
1 Rex 1 15/16" Bearing 149 149
1 Dodge 3 15/16" Bearing 588 588
1 18" Take Up Frame 377 377
2 Rex 2 7/16" Bearing 170 339
1 400 Watt Floodlight 250 250
1 Cross Pump Filter 41 41
1 4 7/16" Falk Bushing 328 328
10 Dodge 3 15/16" Bushing 177 1,775
2 Dodge 4 7/16" Bushing 186 373
2 5th Wheel Plate 53 106
4 Water Reel Swivel 149 598
2 Skid Clevis Pin 135 270
3 Prop Clevis Pin 65 195
2 Prop Clevis Rod End 625 1,250
4 Lift Column Rod End 525 2,100
10 Ft 160 Roller Chain 28 279
40 Ft 140 Roller Chain 14 560
</TABLE>
<PAGE> 29
<TABLE>
<S> <C> <C> <C>
20 Ft 80 Roller Chain 15 293
10 Ft 60 Roller Chain 14 139
2 140 Sprocket 138 276
2 160 Sprocket 146 291
2 BS24 1 1/14" Sprocket 17 34
2 Water Regulator 160 320
1 Goodyear Belt 305 305
3 Goodyear Belt 237 712
2 Gates Belt 602 1,204
4 Gates Belt 343 1,373
1 Gates Belt 360 360
1 Blast Sheild Cylinder 340 340
1 ISR Relay 215 215
1 Tail Roller 472 472
0 Keeper for Boom 133 0
1 Demultiplexer 5,864 5,864
2 Insulator Overload 1,562 3,124
3 Thermal Overload Relay 43 128
2 Cat Seal 566 1,132
1 Ring Carrier 740 740
0 Pinion Output Shaft 1,437 0
50 1 1/2" Hose 12 604
50 1" Hose 5 254
50 3/4" Hose 3 162
100 1/2" Hose 4 357
50 3/8" Hose 3 163
2,400 Ft 4/0 Used Cable 6 13,200
60 66" Belting 20 1,200
30 72" Belting 18 540
150 72" X 3/4" Belting 25 3,750
5 Sections Catwald 300 1,500
1 Westinghouse 100 HP Motor 2,800 2,800
25 5" X 30" Impact Roller 130 3,250
74 5" X 11" Impact Roller 66 4,884
14 4" X 33" Impact Roller 100 1,400
14 5" X 57" Roller 60 840
4 1" X 8' X 20' Plate M.S. 1,595 6,380
1 3/4" X 8' X 20 Plate M.S. 1,238 1,238
2 1/2" X 8' X 20' Plate M.S. 800 1,600
1 1/4" X 8' X 20' Plate M.S. 460 460
2 3/8" X 8' X 20' Plate M.S. 599 1,198
1 1 1/4" X 8' X 20' Plate T-1 3,100 3,100
</TABLE>
<PAGE> 30
<TABLE>
<S> <C> <C> <C>
1 1 1/2" X 8' X 20' Plate M.S. 2,400 2,400
1 1 1/2" X 8' X 17' Plate G.R.50 2,000 2,000
1 3/4" x 8' x 20' 400 Plate 1,400 1,400
8 3/8" X 5" X 5" X 40' Tube 435 3,478
17 2" X 4" X 20' Bar 169 2,873
7 1 1/2" X 24" X 20' Plate T-1 850 5,950
4 1 1/2" X 18" X 20' Plate T-1 650 2,600
5 1 1/2" X 24" X 20' Plate T-1 425 2,125
6 245 X 106 X 65' 2,300 13,800
1 245 X 106 X 60' 2,100 2,100
2 24 X 131 X 60' 2,800 5,600
4 14 X 48 X 60' 8,000 32,000
2,400 2/0 3 Cond 5000 Volt Cable 13 31,200
2,000 2/0 3 Cond 2 KV Cable 14 28,280
7 1" X 125' Wire Rope 750 5,250
3 10" X 40' Tube 1,027 3,080
-------------------------
$397,027
</TABLE>
D. ALL IKERD-BANDY INVENTORY, INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING ITEMS
(AS ADJUSTED TO THE CLOSING DATE)
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 DC CONTACTOR 601525-8 $ 750 $ 750
1 DEMULTIPLEXOR 601843-86 6,221 6,221
6 FH28 HEATER STRIP 601547-28 8 45
6 FH47 HEATER STRIP 601547-47 8 45
6 FH71 HEATER STRIP 601547-71 8 45
6 FH75 HEATER STRIP 601547-75 8 45
6 FH80 HEATER STRIP 601547-80 8 45
6 FH93 HEATER STRIP 601547-93 8 45
6 FUSE 600014-102 3 16
1 OVERLOAD 601866-2021 1,665 1,665
3 OVERLOAD BASE 601548-75 44 132
1 OVERLOAD BASE 601548-44 115 115
1 POWER SUPPLY 601566-10 1,290 1,290
1 RECEIVER 601843-135 3,022 3,022
1 ANTENNA 601843-123 63 63
1 SOLENOID ASSEMBLY 570553-2 485 485
1 STARTER 601878-21 1,046 1,046
1 TRANSMITTER 601843-136 3,182 3,182
1 CABLE 601843-34 177 177
</TABLE>
<PAGE> 31
<TABLE>
<S> <C> <C> <C> <C>
2 CLAMP 1564315-9 113 226
2 CLAMP 902224-106 1 1
1 HYD. PUMP 506227-28 926 926
2 SHEAR LOAD LOCK 534613-23 225 450
2 O-RING 910660-273 2 4
2 O-RING 910660-138 0 1
2 O-RING 910659-220 1 2
2 O-RING 910659-447 14 29
2 O-RING 910659-226 3 7
2 O-RING 910660-244 0 1
2 O-RING 910660-437 2 3
2 PIN 1069434-205 534 1,068
2 PIN 1069432-334 12 24
2 PIN 1069432-513 73 145
1 TAIL ROLLER 531840-4 523 523
2 1/4" PLUG 901924-3 0 1
2 SPRING PIN 904685-152 1 1
1 SLIDE SPRING 1069585-83 114 114
2 CONVEYOR SHAFT 1069528-490 305 610
1 CAP 1122770-1 105 105
1 SNAP RING 905362-250 4 4
1 PLUG 1069452-31 9 9
1 PLUG 906512-168 1 1
1 CAP 3069141-63 64 64
1 SNAP RING 905478-425 9 9
1 PLUG 480228 6 6
1 SNAP RING 902109-225 1 1
2 PIN 1451909 14 28
2 DOWEL PIN 1451476-1 1 2
4 SHIM 1069533-373 7 29
4 SHIM 1069533-374 8 32
4 SHIM 1069533-375 8 32
1 VALVE 531872-1 430 430
12 NOZZLE 1566237-6 8 98
4 PIG EYE 3/8" 902140-1 7 29
4 PIG EYE 1/2" 902140-2 5 20
4 PIG EYE 3/4" 902140-3 9 37
4 PLUG 1/8" 901924-2 0 1
4 PLUG 1/4" 901924-3 0 1
4 PLUG 3/8" 901924-4 0 1
4 PLUG 1/2" 901924-5 0 1
4 PLUG 3/4" 901924-6 1 3
</TABLE>
<PAGE> 32
<TABLE>
<S> <C> <C> <C> <C>
4 PLUG 1" 901924-4 3 11
4 PLUG 1 1/4" 901924-8 5 18
2 VENT 903458-10 10 19
2 BEARING/HEAD PULLY 1143 319 639
2 BEARING/L.V. TAKEUP 1018 588 1,175
12 4" X 30" ROLLER 1008 37 442
11 4" X 11" ROLLER 1007 22 244
5 ZIPPER BOOTS 1224 74 370
5 ZIPPER BOOTS 3424 69 345
5 ZIPPER BOOTS 5630 78 388
1 LOT HYDRAULIC FITTINGS 4,850 4,850
1 FILTER 2P4005 9 9
1 FILTER 8N2556 60 60
4 FILTER 1R0719 5 19
6 FILTER 4P2839 15 88
2 FILTER 7W5313 37 74
4 FILTER 8N6309 59 237
10 FILTER 1R0718 5 52
4 FILTER 7J0670 7 27
2 FILTER P181050 9 19
2 FILTER P550534 3 6
4 FILTER P552020 7 28
2 FILTER 9M2341 2 5
50 RG-59 COAX 0 10
50 RG-8 COAX 1 71
10 CONNECTOR 88-18 2 19
10 CONNECTOR 88-2 2 18
5 CONNECTOR CPGD-555 2 12
2 3 15/16" SPROCKET 1053 139 277
2 SUPPORT SKID 1042 535 1,070
1 CLEVIS JACK LIFT 1038 525 525
2 1 1/4" X 4" POLY-BAR 1304 32 65
1 CLEVIS PROP ROLLER 1081 625 625
1 PIN PROP CLEVIS 1082 30 30
1 SPACER SKID CLEVIS 1021 15 15
2 18" FRAME TAKE-UP 1020 377 754
4 BEARING/HEAD/DRIVE PULLY 1017 225 899
2 BEARING/TAIL PUULEY 1263 144 288
2 BEARING/WHEEL 1015 215 431
2 BEARING/L.V. DRIVE 1016 389 779
1 CONTACTOR DPCK3035AW 396 396
6 HEATER STRIP FH47 7 42
</TABLE>
<PAGE> 33
<TABLE>
<S> <C> <C> <C> <C>
12 250 MCM BUTT CONNECTOR 2 20
12 250 MCM LUGG 2 20
10 FUSE ATM10 4 35
10 FUSE ATM15 4 35
10 FUSE ATM30 4 35
5 3/4 FUSE KTK 4 18
30 #33 TAPE 3 82
20 #27 TAPE 7 139
30 HIGH VOLT TAPE 8 230
30 MHSA TAPE 1 26
20 SHEILDING TAPE 4 79
10 2520 TAPE 12 123
10 140 CHAIN 22 219
4 140 MASTERLINKS 5 20
4 140 1/2 LINKS 12 48
1 2" BALL VALVE 20 20
2 1 1/2" BALL VALVE 13 27
2 1 1/4" BALL VALVE 11 21
50 1/8" WIRE ROPE 0 8
200 3/8" WIRE ROPE 0 48
1 REGULATOR 1145511 641 641
2 BULB 1M5898 10 20
4 BULB 7H2976 3 12
5 FILTER P553634 6 31
2 FILTER P556245 3 6
2 FILTER 612506 37 73
2 FILTER 1R0712 7 13
2 FILTER 612506 37 73
6 50W MIN. LAMP 37498-3 4 24
6 3/4" RIDGID STRAP H68 0 1
4 PLUG CAP 1510PW 11 45
4 CONNECTOR BODY 1610CW 16 65
6 3/4" GLAND A25-3/4 STR 9 54
6 3/4" GLAND A26-34 90 9 54
10 1/4" ROPE PACKING TS100014 1 6
10 3/8" ROPE PACKING TS100038 1 10
10 1/2" ROPE PACKING TS100012 1 13
4 PLUG (HEADLIGHT) A40 7 26
12 SPLIT BOLT K529 9 111
75 POWER CABLE 5KV25HD 1 102
250 14/3 CABLE 0 83
250 14/3 CABLE 0 55
</TABLE>
<PAGE> 34
<TABLE>
<S> <C> <C> <C> <C>
50 3/4" CONDUIT HOSE 1 69
50 1 1/2" CONDUIT HOSE 2 108
50 2" CONDUIT HOSE 3 150
24 ELECTRO-KLEEN 6 134
4 20A CONNECTOR 2410-CW 24 96
4 20A PLUG CAP 2310 PW 15 60
1 400W FLOOD LAMP 195 195
1 SLIP FITTER 19 19
2 400W LAMP 34415-0 22 45
4 FILTER KM150 39 156
4 FILTER KM60 65 259
1 AUX. SWITCH 458D13 114 114
1 100 AMP BREAKER 425 425
1 800 AMP BREAKER 1,495 1,495
1 TRIP UNIT 2611D75G05 475 475
1 CONTACT AUX. J11 34 34
4 BURLE MONITOR TC-1914A 246 984
1 600V PLUNGER TYPE LIMITER 9007-AP221 54 54
1 RELAY A280-120 269 269
3 RELAY AA11P 23 68
1 RELAY 0AR2U110A 54 54
2 2 POSITION SELECTOR A779-3 64 128
1 400 AMP REVERSING SWITCH D845-5 1,558 1,558
2 TRANSFORMER TR15710 108 216
1 SW-LIMIT 548-11-01 18 18
1 300 AMP COUPLER PL30DFC067-A1EX 210 210
1 600 AMP COUPLER PL60DFC107-00EX 432 432
2 2.75" BRASS BUSHING A2427-002B 21 42
2 2.75" BRASS BUSHING A2428-002B 22 43
4 CLIP GROUND CONNECTOR A773-002 2 9
4 CLIP GROUND CONNECTOR A773-001 2 9
1 DUST COVER, 400 AMP C1326 99 99
1 DUST COVER C705-001 74 74
1 RECEPTACLE 400 AMP C1458-001 312 312
1 PLUG HOUSING C2361-2 491 491
3 INSULATOR PIN 609 58 173
3 INSULATOR PIN B610 58 173
3 INSULATOR PIN 610 58 173
3 INSULATOR PIN 611 58 173
1 400 AMP PACKING HOUSING B1301 52 52
6 RETAINING RING A858 0 3
6 RETAINING RING A649 1 3
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C> <C> <C>
3 FEMALE GROUND PIN B462-002 26 77
3 MALE GROUND PIN B463A 18 55
3 FEMALE PILOT PIN B614 14 43
3 MALE PILOT PIN B614 13 38
3 RETAINING PIN A3464 1 3
50 WIRE LOCK SEAL A3198 0 21
2 SPIR-O-LOX RETAINING RING RR-387-S 6 13
6 FEMALE POWER PIN B613-001 35 211
6 MALE POWER PIN B612-001 26 154
1 METHANE MONITOR 80730559 1,550 1,550
1 CALIBRATION KIT 80802333 362 362
1 D502 METHAND DISP. 80860117 1,800 1,800
1 POWER SUPPLY 80860166 1,380 1,380
1 SMART SENSOR 80860109 1,478 1,478
1 SENSOR 80801459 296 296
1 SPLASH GUARD SENSOR 80800220 37 37
1 60" BELT 569 569
1 60" BOARD 778 778
10 SPLICE R5-48 19 190
10 PINS NC-48 5 52
10 SPLICE R6-60 51 510
10 PINS NAC-60 27 265
2 RIVETS SRB 187 373
2 RIVETS SRC 197 393
1 MISC. MEDICAL SUPPLIES 2,585 2,585
3 BOX CAMERA 1012 535 1,605
2 RING RETAINING LENS 1014 70 140
1 ROTART JOINT 1091 149 149
2 LENS CAMERA BOX 1013 20 40
2 CAMERA B/W 35MM 1005 376 752
1 5000 WATT GENERATOR 3MK73 599 599
1 POLY CHAIN BELT 14M-1960-68 239 239
1 HTD BELT 3360-14M-115 417 417
600 CUTTER BITS 26007542 5 2,970
-------------------------
$71,520
</TABLE>
<PAGE> 36
E. ALL MARTIKI INVENTORY, INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING ITEMS (AS
ADJUSTED TO THE CLOSING DATE)
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 DC CONTACTOR 601525-8 $ 750 $ 750
1 DEMULTIPLEXOR 601843-86 6,221 6,221
6 FH28 HEATER STRIP 601547-28 8 45
6 FH47 HEATER STRIP 601547-47 8 45
6 FH71 HEATER STRIP 601547-71 8 45
6 FH75 HEATER STRIP 601547-75 8 45
6 FH80 HEATER STRIP 601547-80 8 45
6 FH93 HEATER STRIP 601547-93 8 45
6 FUSE 600014-102 3 16
1 OVERLOAD 601866-2021 1,665 1,665
3 OVERLOAD BASE 601548-75 44 132
1 OVERLOAD BASE 601548-44 115 115
1 POWER SUPPLY 601566-10 1,290 1,290
1 RECEIVER 601843-135 3,022 3,022
1 ANTENNA 601843-123 63 63
1 SOLENOID ASSEMBLY 570553-2 485 485
1 STARTER 601878-21 1,046 1,046
1 TRANSMITTER 601843-136 3,182 3,182
1 CABLE 601843-34 177 177
2 CLAMP 1564315-9 113 226
2 CLAMP 902224-106 1 1
1 HYD. PUMP 506227-28 926 926
2 SHEAR LOAD LOCK 534613-23 225 450
2 O-RING 910660-273 2 4
2 O-RING 910660-138 0 1
2 O-RING 910659-220 1 2
2 O-RING 910659-447 14 29
2 O-RING 910659-226 3 7
2 O-RING 910660-244 0 1
2 O-RING 910660-437 2 3
2 PIN 1069434-205 534 1,068
2 PIN 1069432-334 12 24
2 PIN 1069432-513 73 145
1 TAIL ROLLER 531840-4 523 523
2 1/4" PLUG 901924-3 0 1
2 SPRING PIN 904685-152 1 1
1 SLIDE SPRING 1069585-83 114 114
2 CONVEYOR SHAFT 1069528-490 305 610
1 CAP 1122770-1 105 105
1 SNAP RING 905362-250 4 4
1 PLUG 1069452-31 9 9
1 PLUG 906512-168 1 1
1 CAP 3069141-63 64 64
</TABLE>
<PAGE> 37
<TABLE>
<S> <C> <C> <C> <C>
1 SNAP RING 905478-425 9 9
1 PLUG 480228 6 6
1 SNAP RING 902109-225 1 1
2 PIN 1451909 14 28
2 DOWEL PIN 1451476-1 1 2
4 SHIM 1069533-373 7 29
4 SHIM 1069533-374 8 32
4 SHIM 1069533-375 8 32
1 VALVE 531872-1 430 430
12 NOZZLE 1566237-6 8 98
4 PIG EYE 3/8" 902140-1 7 29
4 PIG EYE 1/2" 902140-2 5 20
4 PIG EYE 3/4" 902140-3 9 37
4 PLUG 1/8" 901924-2 0 1
4 PLUG 1/4" 901924-3 0 1
4 PLUG 3/8" 901924-4 0 1
4 PLUG 1/2" 901924-5 0 1
4 PLUG 3/4" 901924-6 1 3
4 PLUG 1" 901924-4 3 11
4 PLUG 1 1/4" 901924-8 5 18
2 VENT 903458-10 10 19
2 BEARING/HEAD PULLEY 1143 319 639
2 BEARING/L.V. TAKEUP 1018 588 1,175
12 4" X 30" ROLLER 1008 37 442
11 4" X 11" ROLLER 1007 22 244
5 ZIPPER BOOTS 1224 74 370
5 ZIPPER BOOTS 3424 69 345
5 ZIPPER BOOTS 5630 78 388
1 LOT HYDRAULIC FITTINGS 4,850 4,850
1 FILTER 2P4005 9 9
1 FILTER 8N2556 60 60
4 FILTER 1R0719 5 19
6 FILTER 4P2839 15 88
2 FILTER 7W5313 37 74
4 FILTER 8N6309 59 237
10 FILTER 1R0718 5 52
4 FILTER 7J0670 7 27
2 FILTER P181050 9 19
2 FILTER P550534 3 6
4 FILTER P552020 7 28
2 FILTER 9M2341 2 5
50 RG-59 COAX 0 10
</TABLE>
<PAGE> 38
<TABLE>
<S> <C> <C> <C> <C>
50 RG-8 COAX 1 71
10 CONNECTOR 88-18 2 19
10 CONNECTOR 88-2 2 18
5 CONNECTOR CPGD-555 2 12
2 3 15/16 SPROCKET 1053 139 277
2 SUPPORT SKID 1042 535 1,070
1 CLEVIS JACK LIFT 1038 525 525
2 1 1/4" X 4" POLY-BAR 1304 32 65
1 CLEVIS PROP ROLLER 1081 625 625
1 PIN PROP CLEVIS 1082 30 30
1 SPACER SKID CLEVIS 1021 15 15
2 18" FRAME TAKE-UP 1020 377 754
4 BEARING/HEAD/DRIVE PULLEY 1017 225 899
2 BEARING/TAIL PULLEY 1263 144 288
2 BEARING/WHEEL 1015 215 431
2 BEARING/L.V. DRIVE 1016 389 779
1 CONTACTOR DPCK3035AW 396 396
6 HEATER STRIP FH47 7 42
12 250 MCM BUTT CONNECTOR 2 20
12 250 MCM LUG 2 20
10 FUSE ATM10 4 35
10 FUSE ATM15 4 35
10 FUSE ATM30 4 35
5 3/4 FUSE KTK 4 18
30 #33 TAPE 3 82
20 #27 TAPE 7 139
30 HIGH VOLT TAPE 8 230
30 MHSA TAPE 1 26
20 SHEILDING TAPE 4 79
10 2520 TAPE 12 123
10 140 CHAIN 22 219
4 140 MASTERLINKS 5 20
4 140 1/2 LINKS 12 48
1 2" BALL VALVE 20 20
2 1 1/2" BALL VALVE 13 27
2 1 1/4" BALL VALVE 11 21
50 1/8" WIRE ROPE 0 8
200 3/8" WIRE ROPE 0 48
1 REGULATOR 1145511 641 641
2 BULB 1M5898 10 20
4 BULB 7H2976 3 12
5 FILTER P553634 6 31
</TABLE>
<PAGE> 39
<TABLE>
<S> <C> <C> <C> <C>
2 FILTER P556245 3 6
2 FILTER 612506 37 73
2 FILTER 1R0712 7 13
2 FILTER 612506 37 73
6 50W MIN. LAMP 37498-3 4 24
6 3/4" RIDGID STRAP H68 0 1
4 PLUG CAP 1510PW 11 45
4 CONNECTOR BODY 1610CW 16 65
6 3/4" GLAND A25-3/4 STR 9 54
6 3/4" GLAND A26-34 90 9 54
10 1/4" ROPE PACKING TS100014 1 6
10 3/8" ROPE PACKING TS100038 1 10
10 1/2" ROPE PACKING TS100012 1 13
4 PLUG (HEADLIGHT) A40 7 26
12 SPLIT BOLT K529 9 111
75 POWER CABLE 5KV25HD 1 102
250 14/3 CABLE 0 83
250 16/3 CABLE 0 55
50 3/4" CONDUIT HOSE 1 69
50 1 1/2" CONDUIT HOSE 2 108
50 2" CONDUIT HOSE 3 150
24 ELECTRO-KLEEN 6 134
4 20A CONNECTOR 2410-CW 24 96
4 20A PLUG CAP 2310PW 15 60
1 400W FLOOD LAMP 195 195
1 SLIP FILTER 19 19
2 400W LAMP 34415-0 22 45
4 FILTER KM150 39 156
4 FILTER KM60 65 259
1 AUX. SWITCH 458D13 114 114
1 100 AMP BREAKER 425 425
1 800 AMP BREAKER 1,495 1,495
1 TRIP UNIT 2611D75G05 475 475
1 CONTACT AUX. J11 34 34
4 BURLE MONITOR TC-1914A 246 984
1 600V PLUNGER TYPE LIMITER 9007-AP221 54 54
1 RELAY A280-120 269 269
3 RELAY AA11P 23 68
1 RELAY 0AR2U110A 54 54
2 2 POSITION SELECTOR A779-3 64 128
1 400 AMP REVERSING SWITCH D845-5 1,558 1,558
2 TRANSFORMER TR15710 108 216
</TABLE>
<PAGE> 40
<TABLE>
<S> <C> <C> <C> <C>
1 SW-LIMIT 548-11-01 18 18
1 300 AMP COUPLER PL30DFC67-A1EX 210 210
1 600 AMP COUPLER PL60DFC107-00EX 432 432
2 2.75" BRASS BUSHING A2427-002B 21 42
2 2.75" BRASS BUSHING A2428-002B 22 43
4 CLIP GROUND CONNECTOR A773-002 2 9
4 CLIP GROUND CONNECTOR A773-001 2 9
1 DUST COVER, 400 AMP C1326 99 99
1 DUST COVER C705-001 74 74
1 RECEPTACLE 400 AMP C1458-001 312 312
1 PLUG HOUSING C2361-2 491 491
3 INSULATOR PIN 609 58 173
3 INSULATOR PIN B610 58 173
3 INSULATOR PIN 610 58 173
3 INSULATOR PIN 611 58 173
1 400 AMP PACKING HOUSING B1301 52 52
6 RETAINING RING A858 0 3
6 RETAINING RING A649 1 3
3 FEMALE GROUND PIN B462-002 26 77
3 MALE GROUND PIN B463A 18 55
3 FEMALE PILOT PIN B614 14 43
3 MALE PILOT PIN B614 13 38
3 RETAINING PIN A3464 1 3
50 WIRE LOCK SEAL A3198 0 21
2 SPIR-O-LOX RETAINING RINGS RR-387-S 6 13
6 FEMALE POWER PIN B613-001 35 211
6 MALE POWER PIN B612-001 26 154
1 5000 WATT GENERATOR 3MK73 599 599
1 POLY CHAIN BELT 14M-1960-68 239 239
1 HTD BELT 3360-14M-115 417 417
-------------------------
$53,247
</TABLE>
<PAGE> 41
F. THE FOLLOWING MISCELLANEOUS INVENTORY (AS ADJUSTED TO THE CLOSING DATE)
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2,630 RG8 COAX 1001 $ 0.35 $ 921
17,400 COAX VIDEO RG-8 1002 0 2,175
373 COAX 5 CONDUCTOR 1003 1 421
4 CAMERA B/W 35MM 1005 376 1,504
6 LENS 8.5 CAMERA 1006 88 528
4 ROLLER 4"X29-3/4 1008 37 147
400 CLIP ROLLER 1011 2 672
4 BOX CAMERA 1012 535 2,140
11 LEN CAMERA BOX 1013 20 220
3 RING RETAINING LENS 1014 70 210
4 SPACER SKID CLEVIS 1021 15 60
4 KEEPER SKID CLEVIS PIN 1022 5 20
1 VALVE 2 SECTION 1024 308 308
1 HITCH ASSY. FEMALE 1025 880 880
1 PULLY WING 10"X57" 1027 544 544
2 PULLY 11"X69" WING 1029 845 1,690
1 CYLINDER PROP 8"X228" 1032 9,498 9,498
1 CYLINDER SKID 1033 1,918 1,918
1 CYLINDER PROP. 1034 6,311 6,311
2 PIN PROP. 1037 200 400
2 ROD END SKID CYLINDER 1039 1,595 3,190
10 SPACER BRASS 1040 62 620
7 BOX ROLLER N/S 1041 1,807 12,648
12 ROLLER EX. SHAFT 4"X33" 1048 37 447
8 ROLLER EX. SHAFT 4"X15-3/4" 1049 25 199
2 LINK OFFSET 140 1050 10 19
2 CONNECTING LINK 140 CHAIN 1051 4 9
10 6.50 X 10.50 TIRES WHEELS 1054 260 2,600
2 POWER UNIT 1056 6,126 12,253
2 PUSHER ASSY. 1057 509 1,018
1 FOOT VALVE 1061 294 294
1 HANDLES 1063 32 32
2 GUARD FOR OVER HEAD HEATERS 1064 68 135
1 LG. DIAMOND BAR SPOOLING DEVICE 1066 1,250 1,250
2 SM. DIAMOND BAR SPOOLING DEVICE 1067 545 1,090
98 BELTING 28" 2 PLY 3/32 X 3/32 1068 15 1,507
13 GREASE VALVE 1070 14 180
4 TAKE-UP JACK 1071 60 240
3 POLY CHAIN BELT 1075 217 650
2 100 AMP VOLT BRAKER 1078 225 450
1 100 AMP VOLT BRAKER 1078 222 222
4 30 HP MOTOR 1079 3,348 13,391
2 CLEVIS PROP ROLLER 1081 625 1,250
1 DEUBLIN UNION 3" 1000 PSI 1083 425 425
1 DENISON MAIN HYD PUMP 1086 4,790 4,790
1 SPOOLING DEVICE SM. COMPLET 1087 1,495 1,495
5 ROTARY JOINT 1091 149 747
</TABLE>
<PAGE> 42
<TABLE>
<S> <C> <C> <C> <C>
4 CAP ROLLER PROP ASSY. 1095 195 780
2 CAP ROLLER PROP ASSY. 1095 175 350
4 SPACER PROP. ROLLER 1096 40 160
2 SPACER PROP. ROLLER 1096 20 40
4 ROLLER 8" PROP. ASSY 1097 566 2,265
3 MONITOR BURLE 1105 246 738
2 PACKING KIT DEUBLIN UNION 1106 34 68
3 PLANTARY CASE ASSY. 1108 3,600 10,800
1 TRANSFER CASE ASSY. R.H. 1109 9,200 9,200
1 ADAPTOR PLANTARY PLT. 1110 630 630
2 ADAPTOR PLANTARY PLT. 1110 819 1,637
1,500 HOSE AIR 3" 1123 6 9,180
2 CAP PIN PROP ARM 1124 50 100
1 SOLONOID POWER UNIT CABLE REEL 1126 160 160
1 PUMP MAIN HYD.P8W 1128 2,730 2,730
1 POT GEAR-44 1129 16,630 16,630
1 POT GEAR-45 1130 16,630 16,630
3 COLLER 8" PROP. CYLINDER 1133 700 2,100
78 COAX CABLE END 1135 2 148
100 COAX CABLE END 1136 2 180
3 CONNECTOR RECPT. 250MCM 1138 627 1,880
20 COAX CABLE CONNECTOR 1139 2 46
9 CLEVIS SKID CYLINDER 1140 685 6,165
3 MOTOR 40 HP 324T 1770 RPM 1150 340 1,020
1 PUMP TYRONE LIFT SKID 1151 850 850
2 SHAFT TORQUE 1153 163 325
2 SHAFT TORQUE 1153 185 370
6 TIRE AND WHEEL ASSY. 1154 489 2,932
4 FILTER PALL 3 MICRON 1159 130 520
1 CARTRIDGE RELIEF 1160 82 82
1 CARTRIDGE FIXED FLOW 1161 32 32
1 PUMP COMMERCIAL PIGGY BACK 1162 760 760
4 RELAY TIMING 1163 54 216
1 COUPLER LOVEJOY COMPLET 1164 42 42
1 BRACKET DRIVE DOG RETAINER 1167 95 95
1 MOTOR CABLE REEL 1169 314 314
2 PUMP HYD.JOY MINER 1170 416 832
1 PUSHER ROLLER ASSY. COMPLET 1171 4,775 4,775
1 PUSHER ROLLER ASSY. COMPLET 1171 4,775 4,775
1 PUSHER ROLLER ASSY. COMPLET 1171 4,775 4,775
1 MOTOR CROSS CONVEYOR 1772 910 910
10 PULLY MOTORIZED DRIVE 1177 7,083 70,826
</TABLE>
<PAGE> 43
<TABLE>
<S> <C> <C> <C> <C>
4 CYLINDER BAT WING SIDE COVER 1178 239 955
4 BEARING PBE9201-7/16 1179 63 251
1 SPOOLING DEVICE LG. 1184 3,800 3,800
1 FILTER CROSS PUMP 1185 41 41
2 MOTOR CONVYOR JOY 1187 952 1,904
2 SHAFT MOTOR HWH 1189 713 1,426
4 CHAIN CONVEYOR HWH 1190 506 2,024
4 CYLINDER BAT WING HEAD COVER 1191 240 960
2 CLUTCH KIT REBUILD HWH 1232 1,535 3,070
1 FLANGE ASSY.INPUT 1233 855 855
1 PLATE PRUSSURE ASSY. 1234 340 340
2 Misc Hardware 1251 1 2
1 REVERSING MECHANISM ASSY 1255 975 975
2 ROLLER TAIL CONVEYOR HWH 1256 1,029 2,058
1 COMMERCIAL VALVE DVG35 1261 4,591 4,591
4 ROLLER PUSHER 10" 1272 1,256 5,024
1 PUSHER ASSY. 10" 1274 4,500 4,500
1 MONITOR 1275 246 246
11 GASKET CAMERA LENS 1279 5 55
29 SLEEVE BIT HWH 1285 51 1,467
1 SLEEVE BIT HWH 1285 51 51
30 BLOCK BIT W/ SLEEVE 1286 88 2,630
1 MOTOR HOSE REEL 1288 135 135
1 DRUMS HWH COMP. SET CUTTER 1289 25,937 25,937
38 CHAIN CONVEYOR JOY 1415 1290 186 7,066
6 LINK MASTER 1415 1291 32 189
6 LINK ROLLER 1415 1292 20 117
1 TRANSFORMER ISOLATION 3 PH, 1295 4,009 4,009
1 BUSHING TAPER LOCK 4-7/16" 1296 328 328
1 BUSHING TAPER LOCK 3-15/16" 1297 328 328
2 PULLY MOTORIZED DRIVE 1303 1,155 2,310
2 TRACK BELT ASSY.58 PADS 1305 10,125 20,250
1 ROLLER TAIL RECON. 1306 378 378
4 KIT CONTROL RING FLANGE 1309 10 41
3 TERMINAL 1310 2 6
4 BOLT SUPER 1-1/4 X 7 X 4.5 1313 122 487
10 BOLT SUPER 1-1/4 X 7 X 4.5 1313 122 1,218
2 CONNECTOR PLUG 4/0 CABLE 1317 622 1,243
2 CONNECTOR RECPT.4/0 CABLE 1318 563 1,126
1 SHAFT CONVEYOR DRIVE HWH 1326 1,635 1,635
80 CHAIN FLIGHT SECTION HWH 1330 386 30,880
1 DRILL RIB 1337 33,197 33,197
</TABLE>
<PAGE> 44
<TABLE>
<S> <C> <C> <C> <C>
6 CUP TIMKEN 1346 30 179
6 CONE TIMKEN 1347 53 318
3 SEAL CAT 1348 20 61
3 RING RETAINING 1349 9 27
4 SHIM 1359 18 72
12 SHIM 1360 10 120
12 SHIM 1361 10 120
2 PUMP P7 PIGGY BACK 1363 1,150 2,300
1 PUMP MOTOR RECON. 1365 643 643
1 TRACK ASSY. 50 PADS HWH 1368 8,735 8,735
1 PUMP P7W RECON 1371 2,462 2,462
1 VALVE DIRECTIONAL CONTROL 1373 1,334 1,334
4 ACTUATOR ROTARY 1375 957 3,827
3 CONE TIMKEN 1352 34 101
3 CUP TIMKEN 1353 20 61
3 CONE TIMKEN 1354 36 107
3 CUP TIMKEN 1355 18 55
6 CONE TIMKEN 1356 18 109
6 CUP TIMKEN 1357 10 61
3 SEAL CHICAGO RAWHIDE 1358 13 39
9 BEARING WHEEL 1015 215 1,937
1 PUSHER ROLLER ASSY.COMPLET 1171 4,980 4,980
2 CONNECTING LINK 140 CHAIN 1051 4 9
2 LINK OFFSET 140 1050 10 19
10 140 ROLLER CHAIN 1052 171 1,705
50 CLIP ROLLER DOUBLE W/OFFSET 1380 2 98
1 SPROCKETT 160 W/3 15/16 1383 168 168
1 CHAIN 160 1384 24 24
4 LINK MASTER 160 1385 6 23
4 LINK OFFSET 160 1386 11 45
6 TRANSFORMER FOR CAR 1387 108 648
1 VALVE BANK JOY MINER 1186 1,015 1,015
3 PULLY DRUM 10"X57" 1030 611 1,834
1 10X57 ROLLER N/SHAFT 1390 415 415
2 PIN PROP. ARM 1125 170 340
1 TRANSFER CASE ASSY. 1107 3,777 3,777
6 COUPLER LOVEJOY COMPLET 1164 49 294
2 BEARING SKID END 1391 325 650
43 POLY BAR 1 1/4 X 4 X 48 1084 25 1,078
2 SPROCK 140B1315H 3 15/16 1053 139 277
20 140 ROLLER CHAIN 1052 20 391
4 CONNECTING LINK 140 CHAIN 1051 4 18
</TABLE>
<PAGE> 45
<TABLE>
<S> <C> <C> <C> <C>
4 LINK OFFSET 140 1050 10 38
33 POLY BAR 2" X 4" X 60" 1085 49 1,611
41 POLY BAR 1-1/4"X4"X60" 1304 30 1,237
1 MOTOR 100HP. 1394 704 704
3 VALVE BOSCH FOR STACKER 1395 208 624
1 VALVE COMPENSATOR 1396 346 346
2 INSERT 600 MAG. COUPLER 1158 45 91
1 10X57 ROLLER N/SHAFT 1390 414 414
3 10X57 ROLLER N/SHAFT 1390 472 1,415
1 ROLLER TAIL 10X51 1400 218 218
6 PLANTARY CARRIER CASTING 1402 2,425 14,550
1 GRIPPER BELT 1181 625 625
2 PROP ROLLER SHAFTS 1404 400 800
4 ROLLER LIFT COLLUMN 1122 3,348 13,392
2 PULLY WING 10"X57" 1027 991 1,983
75 ROLLER 4"X10-15/16 1007 27 2,029
100 ROLLER 4"X29-3/4 1008 38 3,848
28 CPN-8 FOR RG-8 COAX 1405 3 81
2 PIN PROP CLEVIS 1082 75 150
6 AXLE ASSY. 1055 185 1,110
6 AXLE ASSY. 1055 185 1,110
28 PIN INDEX 1090 15 420
4 PIN SKID CLEVIS 1023 185 740
6 BEARING HEAD PULLY 1143 319 1,916
13 BEARING HEAD/DRIVE PULLY 1017 215 2,799
15 BEARING TAIL PULLY 1263 144 2,160
13 BEARING TAKE UP 1089 162 2,100
4 BEARING L.V. DRIVE 1016 351 1,404
3 BEARING TAKE UP L.V. 1018 588 1,763
4 FRAME 18" TAKE UP 1020 348 1,390
1 SENSOR SMART 1407 1,478 1,478
2 CLUTCH ASSY. COMPLET HWH 1332 4,350 8,700
6 LIGHT HEAD 12 VOLT 1131 145 870
-------------------------
$549,481
</TABLE>
<PAGE> 46
G. LAND, ETC.
<TABLE>
<CAPTION>
DESCRIPTION LOCATION DATE ACQUIRED
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LAND
Land surrounding MTI buildings Coalton, KY 11/02/95
All land located in Boyd, Greenup, Carter Various 11/02/95
and Elliott Counties in Kentucky
(This land has been mined and reclaimed)
BUILDINGS
Mining Technologies Office Building Coalton, KY 11/02/95
Car Shop MT Car Shop 11/02/95
Fab Shop MT Fab Shop 11/02/95
Main Shop AEI Shop 11/02/95
Accounting Office 9431 US RT 60 11/02/95
Executive Office 1500 N. Big Run 11/02/95
Aircraft Hangar Wayne Co., WV 11/02/95
House Office - Mike Johnson's Office 1932 Carter Ave. 11/02/95
Route 23 Transfer Station Greenup Co., KY 11/02/95
Stacy Tract in Greenup County Greenup Co., KY 11/02/95
Newsome Tract in Greenup County Greenup Co., KY 11/02/95
Mays Tract in Greenup County Greenup Co., KY 11/02/95
Vine Center Condominium Unit No. 1907 Lexington, KY 11/02/95
FURNITURE, FIXTURES & OFFICE EQUIPMENT
Office furniture located at above buildings Various Various
DATA PROCESSING EQUIPMENT
Data processing equipment located at above buildings Various Various
</TABLE>
<PAGE> 47
SCHEDULE 2.1(A)(2)
CONTRACTS RETAINED BY AEI
<TABLE>
<CAPTION>
ORIGINAL
CONTRACT TERMINATION
PARTIES DATE DATE NOTES
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A. CONSULTING AGREEMENTS
AEI/Franklin Research & Development 12/17/96 12/17/97 Can be extended by mutual consent
AEI/Richard M. Slagle 02/15/96 See note on previous schedule.
B. CONTRACT MINING AGREEMENTS
Mining Technologies/Ikerd Bandy Co., Inc. 02/01/97 When reserves are
mined out.
Mining Technologies/Martiki Coal Company 05/24/97 Three years or when
reserves are mined out.
C. TECHNOLOGY AGREEMENTS
AEI/ARI/Pittston 01/14/97
Bowie/Amax Coal 10/24/95
AEI/Bluegrass Coal 12/13/96
MTI/Joy Technologies 06/16/92*
D. ASSET LEASES
All asset leases relating to the equipment listed on Schedule 2.1(a)(1).
E. MISCELLANEOUS AGREEMENTS
Mining Technologies/AEP 09/18/95 Annually extended Service @ Coalton Recycling Center
Mining Technologies/AEP 09/28/95 Annually extended Service @ Coalton Compost Center
Mining Technologies/Orkin Pest Control 09/15/96 Annually extended Service @ RT 60 West Coalton
Mining Technologies, Inc./Airgas/ 01/12/94 Annually extended Cylinder Rentals
Virginia Welding Supply
All other contracts or agreements transferred pursuant to that certain Asset Purchase Agreement, dated October 16, 1997, among
Mining Technologies Limited, Mining Technologies, Inc. and Addington Enterprises, Inc.
</TABLE>
*This Agreement was terminated in June of 1995
<PAGE> 48
SCHEDULE 2.1(A)
GENERAL INTANGIBLES RETAINED BY AEI
I. PATENTS
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apparatus and 7/625,211 5,112,111 U.S. 12/10/90 5/12/92 Addington, MTI*
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 7/795,314 5,261,729 U.S. 11/20/91 11/16/93 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 8/140,368 5,364,171 U.S. 10/21/93 11/15/94 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 88968/91 638367 Australia 12/10/91 10/19/93 Addington, BHP**
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 2,075,619-5 Pending Canada 12/9/91 Pending Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apparatus and 91112766.6 91112766.6 China 12/10/91 4/21/95 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 92902730.8 0 519 041 France, 12/9/91 9/13/95 Addington, MTI
Method for (EP); Germany, (PCT) et al.
Continuous 69113034.5-08 Spain, UK 7/22/92
Mining (GER); (EPO)
2076745 (SP)
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 1208/DEL/91 Pending India 12/9/91 Pending Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and P-002080 Pending Indonesia 1/31/92 Pending Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and P-295933 167,662 Poland 12/9/91 3/8/95 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 5053078.03 Pending Russia 8/7/92 Pending Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 50
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apparatus and 91/9730 91/9730 South Africa 12/10/91 9/30/92 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle 7/769,408 5,232,269 U.S. 10/1/91 8/3/93 Addington, MTI
For Continuous et al.
Mining Apparatus
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle 91272/91 644257 Australia 12/9/91 8/1/95 Addington, BHP**
for Continuous et al.
Mining Apparatus
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle 2,075,638 2075638 Canada 12/9/91 5/27/97 Addington, MTI
For Continuous et al.
Mining Apparatus
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle 92902231.7 0 513 338 France, 12/9/91 1/22/97 Addington, MTI
For Continuous (EP); Germany, (PCT) et al.
Mining Apparatus 69124364.6-08 Spain & UK 7/22/92
(GER); (EPO)
2096746 (SP)
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle P-295643 167,642 Poland 8/10/92 3/9/95 Addington, MTI
For Continuous et al.
Mining Apparatus
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 8/328,642 5,522,647 U.S. 10/25/94 6/4/96 Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 51
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Continuous P-952188 Pending Indonesia 10/24/95 Pending Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 95/8543 95/8543 South Africa 10/10/95 7/31/96 Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 08/553,693 Pending U.S. 11/20/95 Pending Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 2,203,625 Pending Canada 10/18/95 Pending Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 38310/95 Pending Australia 10/18/95 Pending Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 95/8998 95/8998 South Africa 10/24/95 10/30/96 Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
</TABLE>
4
<PAGE> 52
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Self-Propelled 8/343,694 5,553,926 U.S. 11/22/94 9/10/96 Blackstock, MTI
Mining Apparatus et al.
and Method For
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and P-952189 Pending Indonesia 10/24/95 Pending Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 95/9629 95/9629 South Africa 11/13/95 8/28/96 Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 39644/95 Pending Australia 10/10/95 Pending Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 2,205,596 Pending Canada 10/10/95 Pending Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 97110226 Pending Russia 10/10/95 Pending Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Junction 08/686,830 Pending U.S. 7/26/96 Pending Slagle***
Box
- ----------------------------------------------------------------------------------------------------------------------------------
Transmission (in process of U.S. Blackstock,
Gearcase For filing) et al.
Mining Apparatus
==================================================================================================================================
</TABLE>
Addington Enterprises has begun the process of patenting a "Cutter Drum
Gearcase." Presently, the only information available for this machinery is: (a)
the U.S. Patentability Search performed by King & Schickli; and (b) the inventor
disclosure.
* MTI is Mining Technologies, Inc., formerly a subsidiary of Addington
Resources, now a division of Addington Enterprises.
5
<PAGE> 53
** MTI transferred to BHP its rights in this patent by a Technology
Exchange Agreement (the "Exchange Agreement") dated July 5, 1995.
However, pursuant to the Exchange Agreement, BHP's use of this patent
is restricted to (i) mining operations owned in whole or in part,
operated or managed in Australia by BHP; (ii) equipment owned in whole
or in part, operated or managed by BHP; (iii) mining systems used for
mining extractions; and (iv) Australia. See Paragraph 3 of the Exchange
Agreement. Furthermore, the Exchange Agreement authorizes MTI to use
the patent worldwide, assign it to a third party and license the patent
for use outside of Australia. See Paragraph 4 of the Exchange
Agreement. In addition, pursuant to a Technological Developments and
Consent Agreement (the "Consent Agreement") dated July 5, 1995, BHP
granted MTI a license to use and, subject to BHP's consent, sublicense
this patent for use in Australia. See Paragraph 2 of the Consent
Agreement.
*** Pursuant to a Patent License Agreement dated February 15, 1996, Richard
M. Slagle ("Slagle") granted AEI an exclusive worldwide royalty-free
license to make, use and sell highwall mining equipment incorporating
U.S. Patent App. No. 08/686,830 (Electrical Junction Box). AEI may not
assign or transfer its rights without consent of Slagle, which consent
may not be unreasonably withheld.
II. TRADEMARKS
================================================================================
MARK COUNTRY REGISTRATION NUMBER ISSUED
- --------------------------------------------------------------------------------
Addcar U.S. 1,795,602 9/28/93
- --------------------------------------------------------------------------------
Addcar Australia 616070 4/30/96
- --------------------------------------------------------------------------------
Addminer Australia A623145 2/21/94
================================================================================
6
<PAGE> 54
SCHEDULE 2.3
LIABILITIES RETAINED BY AEI
1. All Liabilities of AEI to be assumed by Mining Technologies Limited
("MTL") or Mining Technologies, Inc. ("MTI") pursuant to that certain
Asset Purchase Agreement, dated October 16, 1997, among AEI, MTL and
MTI.
2. All Liabilities relating to the contracts listed on Schedule 2.1(a)(2).
3. All Liabilities relating to a Promissory Note made by AEI in favor of
Kentucky Bank & Trust, dated November 2, 1995, in the original
principal amount of $5 million, with a variable interest rate
(currently 8.98%) and a maturity date of November 2, 2005.
<PAGE> 1
EXHIBIT 2.1(b)
FIRST AMENDMENT TO EXCHANGE AGREEMENT
November 11, 1997
Reference is made to the Exchange Agreement dated as of October 20,
1997, by and among AEI Holding Company, Inc. ("the "Company"), Addington
Enterprises, Inc. ("AEI"), Larry Addington and Harold Sergent (the "Exchange
Agreement"). Terms defined in the Exchange Agreement are used herein in this
First Amendment to Exchange Agreement ("Amendment Agreement") with the same
meaning.
WHEREAS, the Company and AEI desire to amend the Exchange Agreement to:
(i) include provisions regarding the transfer of permits and bonds because such
transfer shall not be completed by the Closing Date; and (ii) allocate the
payment of transfer and sales taxes and fees;
NOW, THEREFORE, the Company and AEI hereby agree as follows:
1. Amendment for Permits and Bonds. Upon and from the execution hereof,
the following provisions shall be added to the Exchange Agreement:
ARTICLE 13
13.1 Permits and Bonds. In the event that not all of AEI's
permits and licenses (the "Permits") have been transferred to the
Company or Tennessee Mining, Inc. ("TMI"), as appropriate, by the
Closing, AEI shall cooperate with the Company in any reasonable
arrangement (that is mutually agreeable to AEI and the Company)
designed to provide to the Company or TMI, as the case may be, the
benefits under any such Permits. In the event that not all Replacement
Bonds (as defined in Section 13.2) have been accepted by the
appropriate governmental authority as of the Closing, AEI shall
maintain in full force, following the Closing, all of AEI's reclamation
and performance bonds (the "Bonds") that have not been replaced.
13.2 Permit Transfer Applications and Replacement Bonds.
Promptly after the Closing Date, the Company shall or shall cause TMI
to: (i) submit to the appropriate governmental authorities all
applications and documents to transfer all transferable Permits to the
Company or TMI, as the case may be, as the sole permittee and to obtain
replacement permits for all non-transferable Permits; and (ii) obtain
(or transfer) bonds issued by a nationally recognized surety company to
replace the Bonds (the "Replacement Bonds"). The Company shall use
commercially reasonable efforts to ensure that all such Permits have
been validly issued to the Company or TMI, as the case may be, as the
sole permittee as promptly as practical after the Closing and that all
Replacement Bonds have been accepted by the appropriate governmental
authority as promptly as practical after the Closing. In the event that
the Company or TMI is unable to ensure the transfer of or obtain, as
the case may be, such Permits by Closing, or any
1
<PAGE> 2
governmental authority has not accepted the Replacement Bonds as of the
Closing, the Company shall indemnify and hold AEI harmless from any
loss, damage, cost, expense or liability that AEI suffers in connection
with (A) holding any Permit as agent for, or for the benefit of, the
Company or TMI, and (B) maintaining any Bond in full force and effect
after the Closing, including, without limitation, liability arising
from the Company's or TMI's operations relating to any such Bond.
2. Payment of Transfer and Sales Taxes. Upon and from its execution
hereof, the following provision shall be added to the Exchange Agreement:
2.4 Transfer and Sales Taxes. The Company shall pay all
transfer, sales and use taxes (if any) and all recording, filing and
other fees (if any) required in connection with the transfer of assets
pursuant to Section 2.1(a).
3. Ratification. The Exchange Agreement, as amended hereby, is hereby
ratified and confirmed in all respects. The execution, delivery and
effectiveness of this Amendment Agreement shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of the
Company or AEI under the Exchange Agreement, nor constitute a waiver of any
provision of the Exchange Agreement.
4. Acquisition Document. This Amendment Agreement is an Acquisition
Document, and all provisions in the Exchange Agreement pertaining to Acquisition
Documents apply hereto.
5. Governing Law. This Amendment Agreement shall be governed by and
construed in accordance with the provisions of Section 12.8 of the Exchange
Agreement.
IN WITNESS WHEREOF, this instrument is executed as of the date first
above written.
ADDINGTON ENTERPRISES, INC.
By: /s/ Vic Grubb
------------------------------
Name: Vic Grubb
Title: Chief Financial Officer
AEI HOLDING COMPANY, INC.
By: /s/ John F. Baum
------------------------------
Name: John F. Baum
Title: Chief Financial Officer
2
<PAGE> 1
EXHIBIT 2.2
ANNEX 1.1(o)
MANUFACTURE, SERVICE, USE AND LICENSE AGREEMENT
This Manufacture, Service, Use and License Agreement (this
"Agreement"), dated as of November 11, 1997, is between (i) AEI HOLDING
COMPANY, INC., a Delaware corporation ("Holdco"); and (ii) ADDINGTON
ENTERPRISES, INC., a Kentucky corporation ("AEI").
RECITALS
A. Pursuant to an Exchange Agreement, dated October 20, 1997, among
Holdco, AEI, Larry Addington and Harold Sergent (the "Exchange Agreement"), AEI,
Larry Addington and Harold Sergent have agreed to transfer to Holdco certain
capital stock and mining operations and assets.
B. As a condition to the parties' obligation to close the transactions
contemplated in the Exchange Agreement, the parties have agreed to enter into
this Agreement.
C. In accordance with the terms and conditions set forth below, Holdco
desires to engage AEI to (i) manufacture highwall mining equipment (including,
without limitation, continuous miners), and (ii) repair and provide replacement
parts for all highwall mining equipment (including, without limitation,
continuous miners) transferred to Holdco (or an Affiliate (defined below))
pursuant to the Exchange Agreement or acquired in the future from AEI (the
"Equipment"), and AEI desires to be so engaged.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties to this Agreement,
the parties hereby agree as follows:
1. Definitions. As used in this Agreement only, the following terms
shall have the following meanings:
(a) "Addington Brothers" shall mean Larry Addington, Robert
Addington, Bruce Addington, Stephen Addington, and their respective spouses and
issue.
(b) "Affiliate" shall mean any of the Addington Brothers or
any Person in which the Addington Brothers (collectively or individually)
directly, or indirectly through one or more intermediaries, own or control fifty
percent (50%) or more of the voting power.
(c) "Change of Control" shall mean the acquisition by any
Person of securities or other ownership interests representing more than fifty
percent (50%) of the voting power of Holdco.
(d) "Closing" shall mean the consummation of the transactions
contemplated in the Exchange Agreement.
1
<PAGE> 2
(e) "Control," "Controls" or "Controlled" shall mean the
ownership of fifty percent (50%) or more of the voting rights of a Person.
(f) "Cost" shall mean the direct expenses incurred by AEI in
repairing or manufacturing Equipment for Holdco, plus Overhead
(g) "Overhead" shall mean the indirect expenses of AEI that
are necessary and customary in the business of repairing, designing, providing
replacement parts for and manufacturing coal mining equipment, allocated on a
per-shop-hour basis using the same method used immediately prior to the Closing
but based on the actual indirect expenses of AEI.
(h) "Person" shall mean any individual, firm, trust,
partnership, limited liability company, corporation or other business entity.
(i) "Purchaser" shall mean a Person, other than Holdco or an
Affiliate, that acquires all of the stock, or all or substantially all of the
assets, of Holdco, an Affiliate, a Purchaser or a Purchaser's Related Party.
(j) "Related Party" shall mean (i) any Person that directly,
or indirectly through one or more intermediaries, Controls, is Controlled by, or
is Controlled by a Person that Controls, a party to this Agreement or a
Purchaser, and (ii) any spouse, parent or issue of any party to this Agreement
or a Purchaser.
(k) "United States Intellectual Property" shall mean trade
names, trademarks, service marks, copyrights, pending or issued registrations
for any of the foregoing, patents and patent applications, unpatented
inventions, trade secrets and other confidential or proprietary information,
computer programs, processes, formulas and methods arising under United States
law that relate to or involve highwall mining and are owned or held by AEI as of
the date of this Agreement or subsequently developed or acquired.
2. Non-Exclusive License of Technology. AEI grants Holdco and all
Affiliates a perpetual non-exclusive license in its United States Intellectual
Property to operate the Equipment to conduct highwall mining on or in connection
with real property that is owned or controlled (currently or in the future) by
Holdco or any Affiliate; provided, however, that neither Holdco nor any
Affiliate may operate such Equipment on property acquired after the date this
Agreement is assigned by AEI to any Person other than an Affiliate unless such
property is located in the United States east of the Mississippi River and, at
the time of the acquisition, employees operating mining equipment on such
property are not represented by a union. Notwithstanding the preceding sentence,
neither Holdco nor any Affiliate may use any Equipment in connection with any
contract mining arrangement between Holdco or an Affiliate, on the one hand, and
any other Person that is not an Affiliate, on the other hand, regardless of who
owns or controls the property that is the subject of the contract mining
arrangement. Holdco and all Affiliates are granted such license as part of the
consideration Holdco is receiving for the transfer of shares of its capital
stock to AEI, and neither Holdco nor any Affiliate shall be required to pay any
royalty, fee or other payment to AEI in connection with or as consideration for
such license.
2
<PAGE> 3
3. Obligations of AEI.
(a) At the request of Holdco or any Affiliate, AEI shall
repair the Equipment (including providing all parts required in connection with
making such repairs), provide replacement parts for the Equipment and
manufacture new Equipment until Holdco or such Affiliate terminates its rights
under this Agreement. AEI shall use its best efforts to repair Equipment,
deliver replacement parts and deliver newly manufactured Equipment by the date
requested by Holdco or an Affiliate. Neither Holdco nor any Affiliate shall have
an obligation to purchase Equipment or parts from, or have Equipment repaired
by, or obtain any other services from, AEI. AEI shall be entitled to provide all
goods and services encompassed by this Agreement to Persons other than Holdco
and Affiliates.
(b) At the request of a Purchaser or such Purchaser's Related
Party, AEI shall repair the Equipment and any continuous miners acquired from
AEI (including providing all parts required in connection with making such
repairs), provide replacement parts for the Equipment and any such continuous
miners and manufacture new continuous miners until such Purchaser or such
Related Party terminates its rights under this Agreement. AEI shall use its best
efforts to repair Equipment or continuous miners, deliver replacement parts and
deliver newly manufactured continuous miners by the date requested by the
Purchaser or such Purchaser's Related Party. Neither a Purchaser nor any such
Purchaser's Related Parties shall have an obligation to purchase continuous
miners or parts from, or have Equipment or continuous miners repaired by, or
obtain any other services from, AEI. AEI shall be entitled to provide all goods
and services encompassed by this Agreement to Persons other than a Purchaser and
its Related Parties.
4. Fees. Holdco or an Affiliate, as the case may be, shall pay AEI the
following fees and costs for the services, parts and newly manufactured
Equipment provided under this Agreement:
(a) Repair and Manufacture. Holdco or an Affiliate, as the
case may be, shall pay AEI one hundred ten percent (110%) of AEI's Cost to
repair or manufacture the Equipment; provided, however, that Holdco or an
Affiliate, as the case may be, shall pay for any parts required in connection
with making repairs to the Equipment in accordance with Section 4(b). The one
hundred ten percent (110%) mark-up on repair services shall not be applied to
any replacement parts which Holdco or an Affiliate, as the case may be, pays for
in accordance with Section 4(b).
(b) Parts. For each part that AEI replaces into a piece of
Equipment or otherwise provides to Holdco or an Affiliate, Holdco or such
Affiliate, as the case may be, shall pay AEI one hundred twenty percent (120%)
of AEI's Cost for such part; provided that Cost shall include Overhead only if
the part is manufactured by AEI.
(c) Professional Services. Holdco or an Affiliate, as the case
may be, shall pay AEI an hourly rate for engineering, design and other
professional services equal to two and one-half (2 1/2) times the gross hourly
rate (excluding fringe benefits and Overhead) paid by AEI to each individual
involved in providing such services to Holdco or such Affiliate.
3
<PAGE> 4
5. Transport of Equipment. Holdco or an Affiliate, as the case may be,
shall be required, at its sole cost and expense, to transport Equipment
requiring repair to AEI's repair shops located at Coalton, Kentucky (the
"Shops"), and to transport repaired Equipment from the Shops to the destination
selected by Holdco or such Affiliate. Holdco or an Affiliate, as the case may
be, shall be required to pay any and all shipping charges incurred by AEI in
delivering a replacement part or newly manufactured piece of Equipment to Holdco
or such Affiliate.
6. Payment. AEI shall send Holdco or an Affiliate, as the case may be,
an invoice for all fees and costs for repairing, providing replacement parts
for, or manufacturing a particular piece of Equipment within thirty (30) days
after such repair is completed or such replacement part or newly manufactured
Equipment is delivered. The party receiving the invoice shall pay such invoice
in full within thirty (30) days after receipt. Beginning thirty (30) days after
the due date for a particular payment, until such payment is made in full, the
party receiving the invoice shall be required to pay AEI interest on the
outstanding balance at the rate of two percent (2%) plus the interest rate
published in the Wall Street Journal as the prime rate charged by United States
national banks.
7. Restrictions on Transfer and Use. Without the prior written consent
of AEI, Holdco or an Affiliate shall be entitled to sell, assign, lease or
otherwise transfer any or all of the Equipment or its rights therein to any
Affiliate or a Purchaser; provided, however, that any Purchaser that acquires
any Equipment, or any right or interest therein, shall have only those rights
expressly set forth in Section 8; and provided further that neither Holdco nor
any Affiliate shall sell, assign, lease or otherwise transfer any Equipment, or
any right or interest therein, to any Purchaser, unless such Purchaser executes
a written acknowledgment that its rights are limited to those expressly set
forth in Section 8. Except as set forth in this Section 7, neither Holdco nor
any Affiliate shall sell, assign, lease or otherwise transfer any Equipment, or
any right or interest therein, without obtaining the prior written consent of
AEI, which consent may be withheld in the sole and absolute discretion of AEI.
8. Rights and Obligations of a Purchaser. A Purchaser and its Related
Parties shall have the following rights and obligations with respect to the use
and transfer of the Equipment:
(a) License for Equipment. A Purchaser and its Related Parties
shall have a perpetual non-exclusive license to use AEI's United States
Intellectual Property to operate the Equipment to conduct highwall mining on or
in connection with real property that the Purchaser or such Related Party
acquired from the Person that transferred the Equipment to the Purchaser or such
Related Party; provided, however, that such Person was entitled to operate the
Equipment on such property.
(b) License for Continuous Miners. Notwithstanding Section
8(a), a Purchaser and its Related Parties shall have a perpetual non-exclusive
license to use AEI's United States Intellectual Property to operate continuous
miners (whether acquired directly from AEI or in connection with an acquisition
of Equipment) to conduct any mining or related activities on any property owned
or controlled by the Purchaser or such Related Party.
4
<PAGE> 5
(c) Manufacture and Repair of Continuous Miners. A Purchaser
and its Related Parties shall be entitled to purchase continuous miners from
AEI, and have such continuous miners repaired, for one hundred twenty percent
(120%) of AEI's Cost to manufacture or repair, as the case may be, such
continuous miners.
(d) Repair of Equipment. A Purchaser and its Related Parties
shall be entitled to have AEI repair any Equipment at one hundred ten percent
(110%) of AEI's cost to repair such Equipment; provided that any replacement
parts required in connection with making such repairs shall not be subject to
the one hundred ten percent (110%) mark-up, but shall be subject to the mark-up
provided in Section 8(e).
(e) Parts. A Purchaser and its Related Parties shall be
entitled to have AEI provide replacement parts, including replacement parts
required in connection with repair services provided by AEI, for any continuous
miners or Equipment at one hundred twenty percent (120%) of AEI's Cost for such
part; provided that Cost shall include Overhead only if such part is
manufactured by AEI.
(f) Transfer. Without the prior written consent of AEI, a
Purchaser or its Related Parties shall be entitled to sell, assign, lease or
otherwise transfer any or all of the Equipment or the continuous miners or any
right or interest therein to any of such Purchaser's Related Parties or to a
Person that acquired all of the stock, or all or substantially all of the
assets, of the Purchaser or any of its Related Parties; provided, however, that
neither the Purchaser nor its Related Parties shall sell, assign, lease or
otherwise transfer any Equipment or any right or interest therein, except as set
forth in this Section 8(f), without obtaining the prior written consent of a
member of AEI, which consent may be withheld in the sole and absolute discretion
of AEI.
9. Term. Any Person's rights under this Agreement shall expire thirty
(30) days after such Person gives written notice to all applicable parties to
this Agreement that it no longer desires to exercise its rights under this
Agreement. Sections 2, 7 and 8 shall survive the expiration of this Agreement.
10. Change of Control. In the event of a Change of Control, this
Agreement shall terminate, except for the rights and obligations contained in
Section 8, and Holdco and all Affiliates shall be deemed to be Purchasers
beginning on the day following the day on which the Change of Control occurs.
11. Disputed Costs.
(a) Dispute Resolution. Holdco and AEI agree to negotiate in
good faith to settle any disputed costs, controversies, disputes or claims
arising among the parties in connection with, or with respect to, any provision
of this Agreement, but such negotiations shall not affect Holdco's obligation to
pay for all costs and charges which are not in dispute. All disputes which have
not been resolved within thirty (30) calendar days after either party has
notified the other in writing of such dispute shall be submitted for arbitration
in accordance with the rules of the American Arbitration Association or any
successor thereof. Arbitration shall take place at an appointed time and place
in Lexington, Kentucky.
5
<PAGE> 6
(b) Selection of Arbitrators. Holdco and AEI each shall select
one (1) arbitrator (who shall not be counsel for such party), and the two (2) so
designated shall select a third arbitrator. If either party shall fail to
designate an arbitrator within seven (7) calendar days after arbitration is
requested, or if the two (2) arbitrators shall fail to select a third arbitrator
within fourteen (14) calendar days after arbitration is requested, then such
arbitrator shall be selected by the American Arbitration Association or any
successor thereto upon application of either party. Judgment upon any award of
the majority of arbitrators shall be binding and shall be entered in a court of
competent jurisdiction. Subject to the provisions of this Agreement, including
but not limited to Section 13(d), the award of the arbitrators may grant any
relief that a court of general jurisdiction has authority to grant, including,
without limitation, an award of damages and/or injunctive relief, and shall
assess, in addition, the cost of the arbitration, including the reasonable fees
of the arbitrator, reasonable attorneys' fees and costs of all prevailing
parties, against all non-prevailing parties.
(c) Temporary Injunctive Relief. Nothing herein contained
shall bar the right of any of the parties to seek and obtain temporary
injunctive relief from a court of competent jurisdiction in accordance with
applicable law against threatened conduct that will cause loss or damage,
pending completion of the arbitration, and the prevailing party therein shall be
entitled to an award of its reasonable attorneys' fees and costs.
(d) Arbitration Rules. All disputes and claims shall be
determined by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association (the "Rules") in effect on the date hereof,
except that such Rules shall be modified by this Agreement.
(e) Arbitration Proceedings. All arbitral proceedings arising
under, or in connection with, this Agreement shall be governed by the Federal
Rules of Civil Procedure. Notwithstanding the previous sentence, the
arbitrators' award shall be made no later than ninety (90) days after their
appointment. Subject to the parties' right to be treated fairly, the arbitrators
may shorten the periods of time otherwise applicable to the arbitral proceedings
under the Rules or the Federal Rules of Civil Procedure to permit the award to
be made within the time limitation set forth in the previous sentence.
12. Relationship of the Parties. It is expressly agreed that AEI will
provide the labor and perform the work and services specified by this Agreement
as an independent contractor. Nothing contained herein shall be construed as
creating a partnership, single enterprise, joint venture or joint employer
relationship between AEI and Holdco, or their respective employees.
13. Miscellaneous.
(a) Benefit and Binding Effect. This Agreement shall be
binding on, and inure to the benefit of, the parties hereto and their respective
heirs, legal representatives, successors and assigns.
6
<PAGE> 7
(b) Notices. Any notice, approval or consent authorized or
required hereunder shall be in writing and (i) delivered personally, (ii) sent
postage prepaid by certified mail or registered mail, return receipt requested,
or (iii) sent by a nationally recognized carrier, directed to the other party at
its address set forth in this Section 13(b) or such other addresses or parties
as may be designated by either AEI or Holdco by notice given from time to time
in accordance with this Section 13(b):
If to AEI:
Addington Enterprises, Inc.
1500 North Big Run Road
Ashland, Kentucky 41102
Attention: Don Brown
Telephone No.: (606) 928-3433
Facsimile No.: (606) 928-0450
With a copy to:
Paul E. Sullivan, Esq.
Brown, Todd & Heyburn PLLC
2700 Lexington Financial Center
Lexington, Kentucky 40507
Telephone No.: (606) 231-0000
Facsimile No.: (606) 231-0011
If to Holdco or an Affiliate:
AEI Holding Company, Inc.
1500 North Big Run Road
Ashland, Kentucky 41102
Attention: Larry Addington
Telephone No.: (606) 928-3433
Facsimile No.: (606) 928-0450
With a copy to:
Paul E. Sullivan, Esq.
Brown, Todd & Heyburn PLLC
2700 Lexington Financial Center
Lexington, Kentucky 40507
Telephone No.: (606) 231-0000
Facsimile No.: (606) 231-0011
A notice, approval or consent shall be deemed received (i) upon the delivery
thereof in person, (ii) five (5) days after depositing thereof in any office of
the United States Postal Service or any successor governmental agency, or (iii)
three (3) days after giving thereof to a nationally recognized overnight
carrier. Any party may change its address for receiving notices and
communications by giving the other party appropriate written notice thereof.
7
<PAGE> 8
(c) Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, representations and understandings of the
parties and their principals and affiliates with respect thereto. No amendment
to, or modification of, this Agreement shall be valid or effective unless agreed
to in writing by all of the parties hereto. No waiver of any of the provisions
of this Agreement shall be deemed, or shall constitute, a waiver of any other
provision, nor shall any waiver constitute a continuing waiver. No waiver shall
be valid or binding unless agreed to in writing by the party granting the
waiver.
(d) Limitations. Damages made payable as a result of either
party's default under this Agreement shall be limited to those actual damages
incurred by such party seeking relief. In no event shall any party, its
respective affiliates, agents or attorneys, be liable for any indirect,
punitive, special, extraordinary or consequential damages, or any damages other
than, or in addition to, actual damages under this Agreement or with respect to
the transactions contemplated hereunder.
(e) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
(f) Headings. The headings appearing in this Agreement are
inserted only as a matter of convenience and in no way define, limit or describe
the scope and intent of this Agreement or any of the provisions thereof.
(g) Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
(h) Signatures by Facsimile. Facsimile signatures shall be
considered original signatures for the purpose of execution and enforcement of
the rights delineated in this Agreement.
(i) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Kentucky, without
regard to its conflict of laws principles.
(j) Assignment.
(i) Without the prior written consent of AEI: (i)
Holdco or any Affiliate shall have the right to assign some or all of its rights
and obligations under this Agreement to any Affiliate; (ii) a Purchaser or such
Purchaser's Related Party shall have the right to assign some or all of its
rights and obligations under this Agreement to such Related Party; and (iii)
Holdco, an Affiliate, a Purchaser or such Purchaser's Related Party shall have
the right to assign some or all of its rights and obligations under this
Agreement to a Person that acquires all of the stock, or all or substantially
all, of the assets of Holdco, such Affiliate, such Purchaser or such Purchaser's
Related Party, provided that such Person shall thereafter have only the rights
of a Purchaser that are expressly set forth in Section 8. Except as specifically
provided in this Section 13(j)(i) or Section 8, neither Holdco nor any
Affiliate, Purchaser or Purchaser's Related Party shall transfer, sell or assign
its rights under this Agreement without obtaining the prior written consent of a
member of AEI.
8
<PAGE> 9
(ii) Without the prior written consent of Holdco, AEI
shall have the right to assign its rights under this Agreement to any Related
Party of AEI, Mining Technologies, Inc., a Kentucky corporation, a Related Party
of Mining Technologies, Inc., or a Person that acquires all or substantially all
of the assets of AEI. Except as set forth in the preceding sentence, no member
of AEI shall transfer, sell or assign its rights under this Agreement without
obtaining the prior written consent of Holdco, which consent shall not be
unreasonably withheld or delayed.
(iii) Notwithstanding any provision of this Agreement
to the contrary, any party having rights under this Agreement may assign such
rights and obligations, without the consent of any other party to this
Agreement, to a creditor for purposes of securing any credit extended to such
party by such creditor.
(k) Compliance. The parties agree that they will cause their
respective subsidiaries and affiliated entities to comply with the terms of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above, but actually on the dates set forth below.
HOLDCO: AEI HOLDING COMPANY, INC., a Delaware
corporation
By: /s/ John F. Baum
------------------------------
Name: John F. Baum
Title: Chief Financial Officer
Date: November 11, 1997
AEI: ADDINGTON ENTERPRISES, INC., a Kentucky
corporation
By: /s/ Vic Grubb
------------------------------
Name: Vic Grubb
Title: Chief Financial Officer
Date: November 11, 1997
9
<PAGE> 1
EXHIBIT 2.3
ASSUMPTION AGREEMENT
This Assumption Agreement (this "Agreement"), dated as of November 12,
1997, is between ADDINGTON ENTERPRISES, INC., a Kentucky corporation ("Seller"),
1500 North Big Run Road, Ashland, Kentucky 41102, and AEI HOLDING COMPANY, INC.,
a Delaware corporation ("Purchaser"), 1500 North Big Run Road, Ashland, Kentucky
41102.
RECITALS
A. Pursuant to the Exchange Agreement, dated October 20, 1997, between
Addington Enterprises, Inc. and AEI Holding Company, Inc. (the "Exchange
Agreement") and the other agreements and instruments referred to therein,
Purchaser is acquiring the Transferred Assets from Seller, subject to the terms
and provisions described therein.
B. The sale, transfer, conveyance, assignment and delivery of such
Transferred Assets to Purchaser includes the assumption by Purchaser of all of
the Assumed Liabilities.
C. Purchaser and Seller now desire to evidence and effectuate the
assumption by Purchaser of the Assumed Liabilities.
NOW, THEREFORE, in consideration of the mutual covenants set forth in
the Exchange Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Purchaser and Seller hereby
covenant and agree as follows:
1. Incorporation by Reference; Capitalized Terms. The terms of the
Exchange Agreement, including all Schedules, Exhibits and Annexes thereto, are
incorporated herein by reference, and capitalized terms not otherwise defined in
this Agreement shall have the meanings given to such terms in the Exchange
Agreement.
2. Assumption. Purchaser hereby undertakes on the terms and subject to
the conditions set forth in the Exchange Agreement to assume, pay, perform and
discharge when due the Assumed Liabilities.
3. Counterparts. This Agreement may be executed in one or more
counterparts (including by means of telecopied signature pages) and all such
counterparts taken together shall constitute one and the same Agreement.
4. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Kentucky, without regard to its
conflicts of law rules. Each party agrees that any action brought in connection
with this Agreement against another shall be filed and heard in Fayette County,
Kentucky, and each party hereby submits to the jurisdiction of the Circuit Court
of Fayette County, Kentucky, and the U.S. District Court for the Eastern
District of Kentucky, Lexington Division.
5. Severability. If any provision of this Agreement or its application
will be invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of all other applications of that provision, and of all other
provisions and applications hereof, will not in any way be affected or impaired.
If any court shall determine that any provision of this Agreement is in any way
unenforceable, such provision shall be reduced to whatever extent is necessary
to make such provision enforceable.
1
<PAGE> 2
6. Entire Agreement. All prior negotiations and agreements by and among
the parties hereto with respect to the subject matter hereof are superseded by
this Agreement and the Exchange Agreement (and the Other Agreements), and there
are no representations, warranties, understandings or agreements with respect to
the subject matter hereof other than those expressly set forth in this Agreement
and the Exchange Agreement (and the Other Agreements). No extension, change,
modification, addition or termination of this Agreement shall be enforceable
unless in writing and signed by the party against whom enforcement is sought.
7. No Waiver. The failure of any party to insist in any particular
instance upon strict performance of any term or provision of this Agreement
shall not be construed as a waiver or relinquishment as to the performance of
any such term or provision in the future.
8. Benefit and Binding Effect. The terms hereof shall bind and inure to
the benefit of, and be enforceable by, the parties executing (or deemed to have
consented to) this Agreement and their respective successors and assigns.
9. Headings. Section headings are not to be considered part of this
Agreement, are solely for convenience of reference, and shall not affect the
meaning or interpretation of this Agreement or any provision in it.
10. Exchange Agreement. This Agreement is given pursuant to the
Exchange Agreement and is subject to the terms and conditions thereof. Should
any conflict exist between this Agreement and the Exchange Agreement, the
Exchange Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
SELLER: ADDINGTON ENTERPRISES, INC.,
a Kentucky corporation
By: /s/ Vic Grubb
Name: Vic Grubb
Title: Chief Financial Officer
PURCHASER: AEI HOLDING COMPANY, INC.,
a Delaware corporation
By: /s/ Don Brown
Name: Don Brown
Title: President
2
<PAGE> 1
EXHIBIT 2.4
ASSUMPTION AGREEMENT
This Assumption Agreement (this "Agreement"), dated as of November 12,
1997, is between AEI HOLDING COMPANY, INC., a Delaware corporation ("Holdco"),
1500 North Big Run Road, Ashland, Kentucky 41102, and ADDINGTON MINING, INC., a
Kentucky corporation ("AMI"), 1500 North Big Run Road, Ashland, Kentucky 41102.
RECITALS
A. Pursuant to the Exchange Agreement, dated October 20, 1997, between
Addington Enterprises, Inc. ("AEI") and AEI Holding Company, Inc. (the "Exchange
Agreement") and the other agreements and instruments referred to therein, Holdco
is acquiring certain assets (the "Acquired Assets") from and assuming certain
liabilities of AEI, subject to the terms and provisions described therein.
B. Holdco has transferred certain of the Acquired Assets (the
"Transferred Assets") to AMI pursuant to a Bill of Sale, dated November 12,
1997, between Holdco and AMI; an Assignment of Contracts, dated November 12,
1997, between Holdco and AMI; and Deeds, dated November 12, 1997, between
Holdco and AMI and desires to transfer the related liabilities to AMI.
C. AMI desires to assume all liabilities of Holdco arising from or
related to the Transferred Assets (the "Assumed Liabilities").
NOW, THEREFORE, in consideration of the mutual covenants set forth in
this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, AMI and Holdco hereby covenant and
agree as follows:
1. Assumption. AMI hereby undertakes to assume, pay, perform and
discharge when due the Assumed Liabilities.
2. Counterparts. This Agreement may be executed in one or more
counterparts (including by means of telecopied signature pages) and all such
counterparts taken together shall constitute one and the same Agreement.
3. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Kentucky, without regard to its
conflicts of law rules. Each party agrees that any action brought in connection
with this Agreement against another shall be filed and heard in Fayette County,
Kentucky, and each party hereby submits to the jurisdiction of the Circuit Court
of Fayette County, Kentucky, and the U.S. District Court for the Eastern
District of Kentucky, Lexington Division.
4. Severability. If any provision of this Agreement or its application
will be invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of all other applications of that provision, and of all other
provisions and applications hereof, will not in any way be affected or impaired.
If any court shall determine that any provision of this Agreement
1
<PAGE> 2
is in any way unenforceable, such provision shall be reduced to whatever extent
is necessary to make such provision enforceable.
5. Entire Agreement. All prior negotiations and agreements by and among
the parties hereto with respect to the subject matter hereof are superseded by
this Agreement and there are no representations, warranties, understandings or
agreements with respect to the subject matter hereof other than those expressly
set forth in this Agreement. No extension, change, modification, addition or
termination of this Agreement shall be enforceable unless in writing and signed
by the party against whom enforcement is sought.
6. No Waiver. The failure of any party to insist in any particular
instance upon strict performance of any term or provision of this Agreement
shall not be construed as a waiver or relinquishment as to the performance of
any such term or provision in the future.
7. Benefit and Binding Effect. The terms hereof shall bind and inure to
the benefit of, and be enforceable by, the parties executing (or deemed to have
consented to) this Agreement and their respective successors and assigns.
8. Headings. Section headings are not to be considered part of this
Agreement, are solely for convenience of reference, and shall not affect the
meaning or interpretation of this Agreement or any provision in it.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
HOLDCO: AEI HOLDING COMPANY, INC.,
a Delaware corporation
By: /s/ Don Brown
Name: Don Brown
Title: President
AMI: ADDINGTON MINING, INC.,
a Kentucky corporation
By: /s/ Vic Grubb
Name: Vic Grubb
Title: Treasurer
2
<PAGE> 1
EXHIBIT 2.5
BILL OF SALE, CONVEYANCE AND ASSIGNMENT
This Bill of Sale, Conveyance and Assignment (this "Bill of Sale"),
dated November 12, 1997, is between AEI HOLDING COMPANY, INC., a Delaware
corporation, 1500 North Big Run Road, Ashland, Kentucky 41102 ("Purchaser"), and
ADDINGTON ENTERPRISES, INC., a Kentucky corporation, 1500 North Big Run Road,
Ashland, Kentucky 41102 ("Seller"), and is made and delivered pursuant to, and
subject to the terms of, the Exchange Agreement, dated October 20, 1997, between
Purchaser and Seller (the "Exchange Agreement"), pursuant to which Purchaser
acquired certain assets of Seller.
NOW THEREFORE, subject to the terms and conditions of the Exchange
Agreement and for the consideration set forth therein, the receipt and
sufficiency of which are hereby acknowledged, Purchaser and Seller each hereby
agree as follows:
1. Capitalized Terms; Incorporation by Reference. All annexes and
schedules to this Bill of Sale and the terms of the Exchange Agreement,
including all Schedules, Exhibits and Annexes thereto, are incorporated herein
by reference, and capitalized terms not otherwise defined in this Bill of Sale
shall have the meanings given to such terms in the Exchange Agreement.
2. Assignment. For good and valuable consideration given to Seller in
accordance with and subject to the terms and provisions of the Exchange
Agreement, Seller does hereby sell, convey, transfer, assign and deliver to
Purchaser all of its right, title and interest in and to the assets listed on
Annex A and Annex B (the "Acquired Assets"), to have and to hold unto Purchaser,
its successors and assigns forever.
3. Covenant. Purchaser and Seller covenant and agree that the covenants
contained herein shall be binding upon their respective successors and assigns.
4. Exchange Agreement. The sale, transfer, conveyance, assignment and
delivery of the Acquired Assets are made in accordance with and subject to the
representations, warranties, covenants and provisions contained in the Exchange
Agreement. To the extent that any provision of this Bill of Sale is inconsistent
or conflicts with the Exchange Agreement, the provisions of the Exchange
Agreement shall control.
5. Governing Law. This Bill of Sale shall be governed by, and construed
and interpreted in accordance with, the laws of the Commonwealth of Kentucky,
without regard to its conflict of laws principles. Each party agrees that any
action brought in connection with this Bill of Sale against another shall be
filed and heard in Fayette County, Kentucky, and each party hereby submits to
the jurisdiction of the Circuit Court of Fayette County, Kentucky, and the U.S.
District Court for the Eastern District of Kentucky, Lexington Division.
6. Counterparts This Bill of Sale may be executed in one or more
counterparts (including by means of telecopied signature pages) and all such
counterparts taken together shall constitute one and the same Bill of Sale.
1
<PAGE> 2
7. Severability. If any provision of this Bill of Sale or its
application will be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of all other applications of that
provision, and of all other provisions and applications hereof, will not in any
way be affected or impaired. If any court shall determine that any provision of
this Bill of Sale is in any way unenforceable, such provision shall be reduced
to whatever extent is necessary to make such provision enforceable.
8. Entire Agreement. All prior negotiations and agreements by and among
the parties hereto with respect to the subject matter hereof are superseded by
this Bill of Sale and the Exchange Agreement, and there are no representations,
warranties, understandings or agreements with respect to the subject matter
hereof other than those expressly set forth in this Bill of Sale and the
Exchange Agreement. No extension, change, modification, addition or termination
of this Bill of Sale shall be enforceable unless in writing and signed by the
party against whom enforcement is sought.
9. Headings. Section headings are not to be considered part of this
Bill of Sale, are solely for convenience of reference, and shall not affect the
meaning or interpretation of this Bill of Sale or any provision in it.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Bill of Sale as of the date first above written.
SELLER: ADDINGTON ENTERPRISES, INC.,
a Kentucky corporation
By: /s/ Vic Grubb
----------------------------
Name: Vic Grubb
----------------------------
Title: Chief Financial Officer
----------------------------
PURCHASER: AEI HOLDING COMPANY, INC.,
a Delaware corporation
By: /s/ Don Brown
----------------------------
Name: Don Brown
----------------------------
Title: President
----------------------------
2
<PAGE> 3
ANNEX A
All equipment and inventory of Seller except for the following:
<TABLE>
<CAPTION>
A. EQUIPMENT
UNIT NO. DESCRIPTION SERIAL NO. LOCATION @ 10/17/97
==================================================================================================================
<S> <C> <C> <C>
SCRAPERS
0890 Cat 631 24W2502 Idle Equipment
DOZERS
M1021 Cat D9L 14Y02942 Martiki Coal Company
1993 Cat D4C 1RJ01399 Idle Equipment
LOADERS/FORKLIFTS
2470 Cat 988B 50W699 Martiki Coal Company
2902-1 Balderson Pinion Fork W06445 Idle Equipment
2901 Cat 988B 50W08165 Job #17 South - HWM#12
2902 Komatsu WA600 10164 Idle Equipment
2906 Hyster H50F MMI Shop
2907 John Deere 480-BD 233274T MT Fab Shop
2908 Champ 350-HLDS CC746382 MMI Shop
2909 Yale GLP-080 P334741 MT Fab Shop
2913 Cat GP30G 7AM00289 MMI Shop
2915 Cat GP30 7AM01784 MT Car Shop
2940-1 Balderson F988 Forks MMI Shop
2940 Cat 988B 50W06757 MMI Shop
2945 Case 580, Fork Lift 900579 Idle Equipment
2990 Cat 966C 76J13647 MT Fab Shop
2992-1 Cat 966C 76J11314 MT Car Shop
2991 Cat 966C 76J12357 MMI Shop
2992 Cat 966C 76J11314 MT Car Shop
2993 Cat V80D 37W07908 MT Car Shop
M2995 Cat 988B 50W08647 Patterson Mtn. HWM #13
2998 Cat 988B 50W09278 Job #17 South - HWM#14
DRILL
4700 Ingersoll Rand LME 500C T52054 Equipment Rental - AEI
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
HEAVY TRUCKS
8603 Ford F700 Mechanic Truck 1FDNK74N5DVA19565 Idle Equipment
8609-1 Lincoln 225 Amp Welder A1160259 MMI Shop
8609 Chevrolet C70 Mechanic Truck 1GBK7D1G1HV107293 Indiana
8612-1 Quincy Air Compressor 325 FBT KOHLER MT Fab Shop
8612 Ford K646 Mechanic Truck 1FDNK64N3FVA64517 MT Fab Shop
8703 Mack Boom Truck 1M2B128C2GA012179 MMI Shop
8751 White Truck BT004HA730540 Idle Equipment
8752 Mack DM685S, Water Truck 1M2B120C3BA050475 Ikerd Bandy HWM
8806 Mack RD866SX 1M2P156C5DA001019 Idle Equipment
8829 Mack DM886SX DM886SX1992 Idle Equipment
8603-1 Miller Big 40 Welder KE754420 Idle Equipment
CRANES
11002 Galion 125KCID Crane 1241272 Idle Equipment
11003 Grove AP308 72162 Idle Equipment
11004 Grove AP308 73380 Idle Equipment
11005 Grove AP308 72170 Idle Equipment
TRUCKS & AUTOMOBILES
14005 Chevrolet K-2500 305729 General & Administrative-AEI
14012 Chevrolet K10 - 4X4 1GCDK14K9KZ253894 MT Fab Shop
14023 Chevrolet C-1500 1GCEK14K5NZ239385 Martiki Coal Company
14029 Chevrolet K-2500 2GCFK29K5R1246340 MT Car Shop
14039 Chevrolet Tahoe, 4x4 3GNEK18R5TG165185 MT Car Shop
14053 Chevrolet Tahoe 3GNEK18R4VG129281 Job #17 South - HWM#12
14234 Chevrolet 1 Ton 1GBJC34KOLE197420 Operations Management - MT
14360 Ford Bronco - 4X4 AFMEU15N6KLA41265 Engineering/Exploration - MT
14602 Chevrolet Van 1GAGC35K5L7132097 MT Car Shop
14608 Chevrolet K-1500 1GCEK19R4TE167167 Operations Management - MT
14898 1993 Chevrolet K20 Suburban 1GNGK26N4PJ340948 General & Administrative-AEI
14891 1993 Chevrolet Blazer 4X4 1GNEK18K3PJ312451 General & Administrative-AEI
14897 Chevrolet K250 1GCGK24K7PE106166 MT Fab Shop
LOWBOY TRUCKS
16303 Kenworth W-800 146478S MMI Shop
16304 Mack RD821SX 1M2P154C2FA001078 MMI Shop
16307-1 Kenworth W-900 2XKWD80XXMM560984 MMI Shop
16307 Kenworth W-900 2XKWDB0XXMM560984 MMI Shop
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
LOWBOY TRAILERS
16504 Fruhaul 2 Axle Drop Deck Trailer 14334 MMI Shop
16507-1 Talb Axle 40FA00923J1007302 MMI Shop
16506 Birmingham 50 Ton Trailer 1L74S4836KAB01497 MMI Shop
16507 Talb WK615 40FWK615XJ1007301 MMI Shop
16508 2 Axle Trailer 102ASF2144 MMI Shop
16509 Rogers 60 Ton Trailer 18337 MMI Shop
16512 Prog Trailer B26356 MMI Shop
16514 Vulcan Low Boy Trailer VT280775 MMI Shop
16515 Transcraft Flat Bed 1TTF43208F1026382 MMI Shop
16516 Hobbs 42' Lowboy Trailer FHV353905 MMI Shop
16517 Great Dane Trailer - 45'-75' 1GRDP9028DM044402 MMI Shop
16518 Rogers Lowboy 1RBH46304NAR21655 MMI Shop
16519 Steerable Dollie Trailer KYT21404 MMI Shop
16520 Great Dane Drop Deck Trailer 1GRDN882XBM002704 MMI Shop
16521 Clark 48'Drop Deck, Trailer 1CD2L4825SA005141 MMI Shop
PARTS TRAILERS
16754 Great Dane Parts Trailer 20070 Ikerd Bandy HWM
16767 Utility Parts Trailer 1UYVS2430CT703119 Martiki Coal Company
16769 Trailmobile Parts Trailer 593688 Patterson Mtn. HWM #13
16915 Gindy Parts Trailer 115474E Job #17 South - HWM#14
TRACTORS & FARM EQUIPMENT
17504 Ford 5610 BB23601 Idle Equipment
17606 Versadrill GT 805 85027 ASS# 71807 Idle Equipment
17607 John Deere 4240 25766W Idle Equipment
17608 256 Bale Buster 861392 Cumberland #2 Mine
17609 Miller 12' Offset Disc 2H14600 Idle Equipment
17610 Case 2470 8853654 Cumberland #2 Mine
17611 Kewanee 245 Tandem Disc Harrow 100061 Cumberland #2 Mine
17613-1 2512 Bush Hog 81948 MMI Shop
17613 Ford 3930 Tractor BC67905 MMI Shop
17614 Finn B70 1622R5 Idle Equipment
17615 Versadrill GT 85020 Idle Equipment
17616 256 Bale Buster 871711 Idle Equipment
17617 Massey Ferguson 160 Manure Spreader 1632-164999 Idle Equipment
17618 1200 Spreader Idle Equipment
17619 Finn 850 Hydroseeder Idle Equipment
17620 Finn B250D Straw Blower BN2316 Cumberland #2 Mine
17624 660 Hay Rake Reclamation
17626 Herd MD1200 Spreader NA Idle Equipment
17629 Agrip Rotary Plow 8351043 Idle Equipment
17630 7' Rock Rake Idle Equipment
</TABLE>
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
17631 Schulte Rock Picker 9090273205 Idle Equipment
17632 New Holland Roll Baler 641736 Idle Equipment
17634 Electro-Spray Fertilizer Sprayer 002141 Idle Equipment
17644 Allis Front End Mower 3662 Reclamation
17645 Herd MD1250C Seeder 98849 Idle Equipment
17651 MD276 6' Bush Hog MMI Shop
17652 Blade, Scraper, 8' Bushho MMI Shop
17653 Radial Arm Dril Geared Head Lathe MT Fab Shop
17681 Landpride RCP2560 Parallel Mower 14344 MMI Shop
17683 Bush Hog 2620 12-00821 Idle Equipment
GENERATOR SETS
19026 Cat 3516 Generator 25Z02912 Ikerd Bandy HWM
19027 Cat 3516 Generator 25Z03207 Martiki Coal Company
19029 Cat 3516 Generator 25Z02477 Job #17 South - HWM#8
19032 Cat 3516 Generator 25Z04477 Job #17 South - HWM#14
SHOP EQUIPMENT
20303 ASNRMA Compressor A29842 MMI Shop
20304 Miller 250 Amp Welder MMI Shop
20306 Lincoln DC400 Welder AC-751251 MT Car Shop
20349 Hobart 580 Welder 79W509355 MMI Shop
20350 Miller Big 40 Welder HD708894 MMI Shop
20352 Cat Hose Machine & Trailer MMI Shop
20354 Lincoln Wire Feed 176969 MMI Shop
20356 Crimpmaster Hose Machine MMI Shop
20358 Lietz Surveying Station MMI Shop
20359 Lincoln WPG8000 Welder A1193757 MMI Shop
20364 9020 Magnetic Drill 90-1390 MMI Shop
20366 MC-59 Pipe Bender M14821-S MT Fab Shop
20370 Doall Band Saw 90154460-60-3 MT Fab Shop
20371 Jig Manufacturi Add Car Weldment WO 1524 MT Car Shop
20372 Wellsaw Band Saw with Coolant Sys MD8W/1016 MT Car Shop
20376 Sabra 1000 Cutting Mach 93-VIS-9015 MT Fab Shop
21006-4 FMC 4100 Wheel Balancer E41AE345 MMI Shop
21006-3 FMC 601 BSC Brake Sh J21AE100 MMI Shop
21006-2 170H BH Heater 86-2-2 MMI Shop
21006 Hawk 1500 Pressure Washer 001808 MMI Shop
21203 Transformer MT Car Shop
21204 Hydraulic Jig Table MT Car Shop
21205 Hydraulic Jig Table MT Car Shop
</TABLE>
<PAGE> 7
<TABLE>
<S> <C> <C> <C>
ADDCAR SYSTEMS
22003 Addcar System #3 22003-1 to 22003-27 Martiki Coal Company
22006 Addcar System #6 22006 Ikerd Bandy HWM
22011 Addcar System #11 011001-011034 Idle HWM Equipment
22014 Addcar System #14 22014 Job #17 South - HWM#8
ADDCAR LAUNCH VEHICLES
23003 Addcar Launch Vehicle #3 23003 Martiki Coal Company
23006 Addcar Launch Vehicle #6 23006 Ikerd Bandy HWM
23011 Addcar Launch Vehicle #11 LV011 Idle HWM Equipment
23014 Addcar Launch Vehicle #14 LV014 Job #17 South - HWM#14
HIGHWALL MINER STACKERS
23503 Addcar Stacker PO#177951 WO1182 Idle HWM Equipment
23504 Mobile Stacker, 48" TL04P0182526 Idle HWM Equipment
23506 Addcar Stacker PO#197151 WO1158 Job #17 South - HWM#14
23511 Addcar Mobile Stacker for HWM#11 TL011 Idle HWM Equipment
23512 Addcar Stacker for System #12 Martiki Coal Company
23514 Addcar Stacker TL-014 Ikerd Bandy HWM
CONTINOUS MINERS
24001 Joy 14CM-1 Miner JM1634 Idle HWM Equipment
24002 Eimco 2480 Miner 70880018 Idle HWM Equipment
24004 Eimco 2810 Miner 70880051 Idle HWM Equipment
24006 Eimco 2810 Miner 70880059 Idle HWM Equipment
24007 Eimco 2810 Miner 70880060 Idle HWM Equipment
M24014 Joy 14CM15-11CX JM4496 Job #17 South - HWM#12
24018 Joy 14CM15-HW11CX JM4646 Martiki Coal Company
24020 Joy 14CM15-11CX JM4540 Ikerd Bandy HWM
24023 Joy 1410-AA JM4756 Idle HWM Equipment
24031 Joy 14CM-15 JM4837 Idle HWM Equipment
24033 Joy 14CM_15 JM4838 Job #17 South - HWM#14
HIGHWALL MINER DOLLIES
25006 L. Vehicle Carry Dollies Idle HWM Equipment
25007 Tandem Dollie Martiki Coal Company
25010 Small Pull Dollie Martiki Coal Company
25012 5 Ton Dollie 233 Job #17 South - HWM#14
25015 10 Ton Dollie, 14X24 22412428 Idle HWM Equipment
25016 Large Pull Dollie - 68 Co 22011023 Idle HWM Equipment
25017 Large Pull Dollie - 70 Co 22413131 Idle HWM Equipment
25018 Large Pull Dollie with To 1009 Idle HWM Equipment
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C> <C>
25019 Large Pull Dollie with To 1210 Idle HWM Equipment
25020 Large Pull Dollie with To 22011017 Idle HWM Equipment
25023 Jeep Dollie 6463 & 956 Job #17 South - HWM#14
25027 Jeep Dollie 16945 Job #17 South - HWM#14
25028 Tandem Dolly, 10T Ikerd Bandy HWM
25029 11:00X20 Dollie Idle HWM Equipment
25030 11:00X20 Dollie Idle HWM Equipment
25031 11:00X20 Dollie Idle HWM Equipment
25033 10 Ton Dollie Martiki Coal Company
25037 5 Ton Dollie Martiki Coal Company
25039 5 Ton Dollie Idle HWM Equipment
25049 11:00 X 20 Tandem Dollie 17414 Job #17 South - HWM#14
25055 11 X 20 5 Ton Dollie 33666 Ikerd Bandy HWM
25057 11 X 20 5 Ton Dollie XM211 Idle HWM Equipment
25061 14 X 24 10 Ton Dollie 075 Idle HWM Equipment
WATER TANKS
26003-P Water Tank Martiki Coal Company
26003 Water Tank Job #17 South - HWM#14
26007 Great Dane Water Tank HT924223 Idle HWM Equipment
26008 71 HL Water Tanker 922644 Ikerd Bandy HWM
CONVEYORS SYSTEMS
27003 74 X 22 Transfer Conveyor Idle Equipment
27005 Overland Conveyor Idle Equipment
27006 Overland Conveyor Idle Equipment
27007 Overland Conveyor Idle Equipment
27008 Overland Conveyor Idle Equipment
27009 Overland Conveyor Idle Equipment
27010 Conveyors Idle Equipment
MISCELLANEOUS HIGHWALL MINER EQUIPMENT
28003 Sullair Air Compressor 004-1002799 Idle Equipment
28005 Sullair 1600DPQCAT 105278 Idle Equipment
28007 Addcar Test Car Patterson Mtn. HWM #13
31005 Steam Jennie MT Car Shop
MISCELLANEOUS
N/A Herd 750 Seed Sower 81948 MMI Shop
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
B. ALL CAR SHOP INVENTORY, INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING ITEMS
(AS ADJUSTED TO THE CLOSING DATE)
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
21 Electrical Boxes - From WO #242 (used) $6,980 $146,574
2 Electrical Boxes (used) 6,980 13,959
10 Electrical Boxes (new) 6,980 69,797
1 Conn. Box 017-1000 2,002 2,002
2 Skid Cyl. 203-0033 7,857 15,714
1 Bean Pump Assm. 4,000 4,000
1 Pusher Cyl. 203-0034 6,311 6,311
1 100 HP Motor 241-0004 5,000 5,000
2 40 HP Stacker Motor 501-0043 3,500 7,000
2 Transformer 601564-79 7,306 14,612
2 Stab Cylinder 016-0002 700 1,400
1 200 HP Motor 203-1193 4,235 4,235
1 L.H. Gear Pot 012-0003 23,000 23,000
1 R.H. Gear Pot 012-0002 23,000 23,000
1 Lift Cylinder 5,800 5,800
18 Roller Head Pulley 10" X 51" 3 15/16" X 5'1 3/4" Shaft 391-0003 753 13,545
18 Roller 10" X 51 " 2 15/16" X 5' 6 1/2" Shaft 391-0007 540 9,720
1 Roller 361-0002 1,610 1,610
9 Roller 8" X 51" 2 15/16" X 5' Shaft 391-0005 775 6,975
15 Roller 10" X 51" 3 7/16" X 6' 6 12" Shaft 391-0001 708 10,624
4 Old Styler Roller Box 202-1075 5,000 20,000
15 Driver Rollers 1,943 29,148
28 10:1 Speed Reducer - From WO #242 391-0013 2,470 69,164
16 10:1 Speed Reducer 391-0013 4,868 77,891
28 30 HP Motor 391-0012 2,402 67,260
26 30 HP Motor 391-0012 3,022 78,578
1 150 HP Motor 017-0001 18,500 18,500
2 350 HP A-C Motor 017-0000 38,500 77,000
2 50 HP EIMCO Motor 017-0002 19,019 38,038
2 Cutter Head 011-0000 48,800 97,600
129 4" X 33" Roller 1048 37 4,809
208 5" X 33" Roller 1010 40 8,382
492 5" X 15" Roller 1009 27 13,151
48 5" X 33" Impact Roller 110 5,294
810 4" X 15" Roller 1049 25 20,120
47 4" X 30" Roller 1008 36 1,715
106 4" X 30" Impact Roller 1047 104 11,011
2 Hog Gathering Arms 2,000 4,000
</TABLE>
<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C>
12 Used 10" X 63" Lagged Pulley 624 7,488
100 1/4" X 2" X 20' Tube Steel 52 5,220
13 40 per ft 12" X 16" X 23' Tube Steel 920 11,960
2 Mukker Stacker Cyl. 1,000 2,000
1 Shear Jack Cyl. 016-0000 3,985 3,985
2 Planetary 520514552 8,800 17,600
4 Used Motorized Head Pulley 3,000 12,000
2 Starter Box 604-0224 6,673 13,346
1 Shear Jack Cylinder 016-0025 4,255 4,255
1 Siemens 100 HP Motor 8,000 8,000
1 Lincoln 100 HP Motor 5,000 5,000
1 Fork Carriage 8,550 8,550
2 Jeamar Capstan Electric Winch 12,052 24,104
4 Edge 4T6590 169 677
1 Edge 4T6589 325 325
1 Edge 140762 274 274
2 Edge 4T6511 179 359
3 Tooth 9W8552 72 217
6 Tooth 9W8559 64 384
2 Tooth 9W8452 44 89
1 Tooth 9W8451 47 47
1 Shank 7T8454 159 159
1 Protector 9W8365 286 286
8 Tooth 1U3351 26 206
2 Tooth 9W8459 44 88
1 Edge 7T4689 395 395
1 Edge 3G8281 248 248
1 Edge 4J8723 178 178
1 Edge 3G8292 181 181
1 Edge 4T6672 48 48
1 Edge 3G8282 248 248
10 Segment 6Y2931 60 604
1 Bracket 8J9011 1,351 1,351
1 Edge 3G8290 219 219
3 Edge 5J3101 503 1,509
2 Bracket 3S3228 43 85
33 12" x 20" x 6' Tube 291 9,613
3 333 KVA Transformer 1,500 4,500
3 100 KVA Transformer 1,000 3,000
1 25 KVA Transformer 400 400
2 6" x 12" x 17' Beam 133 265
2 6" x 10" x 19' Beam 125 251
</TABLE>
<PAGE> 11
<TABLE>
<S> <C> <C> <C> <C>
4 6" x 10" x 9' Beam 59 238
1 10" x 20' Channel 92 92
1 8" x 20' Channel 60 60
1 10" x 11" x 13' x 1" Beam 343 343
2 1/2" x 6" x 6" x 40' Beam 300 600
1 32" DM45 Bit Sub 495 495
1 DM45 Top Sub 495 495
4 Falk Enclosed Gear Drive 3507J-14 8,233 32,931
2 Rex Bearing ZF5407Y 1,123 2,246
1 Falk Coupling Sleeve 1150T10 594 594
10 Segment 1026686 186 1,860
4 DM45 Top Sub 495 1,980
1 GD35 6' Bottom Sub 783 783
3 DM45 Bot Sub to Wear Plate 641 1,923
2 Plate 9V5793 103 205
1 Edge 4T6760 183 183
3 Edge 9W5432 174 523
----------
$1,221,806
</TABLE>
C. ALL FAB SHOP INVENTORY, INCLUDING, BUT NOT LIMITED TO, THE
FOLLOWING ITEMS (AS ADJUSTED TO THE CLOSING DATE)
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Joy 1415 Complete Cutter Head Assembly 175,000 $175,000
5 Rex 3 15/16" Bearing 423 2,113
1 Rex 1 15/16" Bearing 149 149
1 Dodge 3 15/16" Bearing 588 588
1 18" Take Up Frame 377 377
2 Rex 2 7/16" Bearing 170 339
1 400 Watt Floodlight 250 250
1 Cross Pump Filter 41 41
1 4 7/16" Falk Bushing 328 328
10 Dodge 3 15/16" Bushing 177 1,775
2 Dodge 4 7/16" Bushing 186 373
2 5th Wheel Plate 53 106
4 Water Reel Swivel 149 598
2 Skid Clevis Pin 135 270
3 Prop Clevis Pin 65 195
2 Prop Clevis Rod End 625 1,250
4 Lift Column Rod End 525 2,100
10 Ft 160 Roller Chain 28 279
40 Ft 140 Roller Chain 14 560
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C> <C>
20 Ft 80 Roller Chain 15 293
10 Ft 60 Roller Chain 14 139
2 140 Sprocket 138 276
2 160 Sprocket 146 291
2 BS24 1 1/14" Sprocket 17 34
2 Water Regulator 160 320
1 Goodyear Belt 305 305
3 Goodyear Belt 237 712
2 Gates Belt 602 1,204
4 Gates Belt 343 1,373
1 Gates Belt 360 360
1 Blast Sheild Cylinder 340 340
1 ISR Relay 215 215
1 Tail Roller 472 472
0 Keeper for Boom 133 0
1 Demultiplexer 5,864 5,864
2 Insulator Overload 1,562 3,124
3 Thermal Overload Relay 43 128
2 Cat Seal 566 1,132
1 Ring Carrier 740 740
0 Pinion Output Shaft 1,437 0
50 1 1/2" Hose 12 604
50 1" Hose 5 254
50 3/4" Hose 3 162
100 1/2" Hose 4 357
50 3/8" Hose 3 163
2,400 Ft 4/0 Used Cable 6 13,200
60 66" Belting 20 1,200
30 72" Belting 18 540
150 72" X 3/4" Belting 25 3,750
5 Sections Catwald 300 1,500
1 Westinghouse 100 HP Motor 2,800 2,800
25 5" X 30" Impact Roller 130 3,250
74 5" X 11" Impact Roller 66 4,884
14 4" X 33" Impact Roller 100 1,400
14 5" X 57" Roller 60 840
4 1" X 8' X 20' Plate M.S. 1,595 6,380
1 3/4" X 8' X 20 Plate M.S. 1,238 1,238
2 1/2" X 8' X 20' Plate M.S. 800 1,600
1 1/4" X 8' X 20' Plate M.S. 460 460
2 3/8" X 8' X 20' Plate M.S. 599 1,198
1 1 1/4" X 8' X 20' Plate T-1 3,100 3,100
</TABLE>
<PAGE> 13
<TABLE>
<S> <C> <C> <C>
1 1 1/2" X 8' X 20' Plate M.S. 2,400 2,400
1 1 1/2" X 8' X 17' Plate G.R.50 2,000 2,000
1 3/4" x 8' x 20' 400 Plate 1,400 1,400
8 3/8" X 5" X 5" X 40' Tube 435 3,478
17 2" X 4" X 20' Bar 169 2,873
7 1 1/2" X 24" X 20' Plate T-1 850 5,950
4 1 1/2" X 18" X 20' Plate T-1 650 2,600
5 1 1/2" X 24" X 20' Plate T-1 425 2,125
6 245 X 106 X 65' 2,300 13,800
1 245 X 106 X 60' 2,100 2,100
2 24 X 131 X 60' 2,800 5,600
4 14 X 48 X 60' 8,000 32,000
2,400 2/0 3 Cond 5000 Volt Cable 13 31,200
2,000 2/0 3 Cond 2 KV Cable 14 28,280
7 1" X 125' Wire Rope 750 5,250
3 10" X 40' Tube 1,027 3,080
-------
$397,027
</TABLE>
D. ALL IKERD-BANDY INVENTORY, INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING
ITEMS (AS ADJUSTED TO THE CLOSING DATE)
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 DC CONTACTOR 601525-8 $750 $750
1 DEMULTIPLEXOR 601843-86 6,221 6,221
6 FH28 HEATER STRIP 601547-28 8 45
6 FH47 HEATER STRIP 601547-47 8 45
6 FH71 HEATER STRIP 601547-71 8 45
6 FH75 HEATER STRIP 601547-75 8 45
6 FH80 HEATER STRIP 601547-80 8 45
6 FH93 HEATER STRIP 601547-93 8 45
6 FUSE 600014-102 3 16
1 OVERLOAD 601866-2021 1,665 1,665
3 OVERLOAD BASE 601548-75 44 132
1 OVERLOAD BASE 601548-44 115 115
1 POWER SUPPLY 601566-10 1,290 1,290
1 RECEIVER 601843-135 3,022 3,022
1 ANTENNA 601843-123 63 63
1 SOLENOID ASSEMBLY 570553-2 485 485
1 STARTER 601878-21 1,046 1,046
1 TRANSMITTER 601843-136 3,182 3,182
1 CABLE 601843-34 177 177
</TABLE>
<PAGE> 14
<TABLE>
<S> <C> <C> <C> <C>
2 CLAMP 1564315-9 113 226
2 CLAMP 902224-106 1 1
1 HYD. PUMP 506227-28 926 926
2 SHEAR LOAD LOCK 534613-23 225 450
2 O-RING 910660-273 2 4
2 O-RING 910660-138 0 1
2 O-RING 910659-220 1 2
2 O-RING 910659-447 14 29
2 O-RING 910659-226 3 7
2 O-RING 910660-244 0 1
2 O-RING 910660-437 2 3
2 PIN 1069434-205 534 1,068
2 PIN 1069432-334 12 24
2 PIN 1069432-513 73 145
1 TAIL ROLLER 531840-4 523 523
2 1/4" PLUG 901924-3 0 1
2 SPRING PIN 904685-152 1 1
1 SLIDE SPRING 1069585-83 114 114
2 CONVEYOR SHAFT 1069528-490 305 610
1 CAP 1122770-1 105 105
1 SNAP RING 905362-250 4 4
1 PLUG 1069452-31 9 9
1 PLUG 906512-168 1 1
1 CAP 3069141-63 64 64
1 SNAP RING 905478-425 9 9
1 PLUG 480228 6 6
1 SNAP RING 902109-225 1 1
2 PIN 1451909 14 28
2 DOWEL PIN 1451476-1 1 2
4 SHIM 1069533-373 7 29
4 SHIM 1069533-374 8 32
4 SHIM 1069533-375 8 32
1 VALVE 531872-1 430 430
12 NOZZLE 1566237-6 8 98
4 PIG EYE 3/8" 902140-1 7 29
4 PIG EYE 1/2" 902140-2 5 20
4 PIG EYE 3/4" 902140-3 9 37
4 PLUG 1/8" 901924-2 0 1
4 PLUG 1/4" 901924-3 0 1
4 PLUG 3/8" 901924-4 0 1
4 PLUG 1/2" 901924-5 0 1
4 PLUG 3/4" 901924-6 1 3
</TABLE>
<PAGE> 15
<TABLE>
<S> <C> <C> <C> <C>
4 PLUG 1" 901924-4 3 11
4 PLUG 1 1/4" 901924-8 5 18
2 VENT 903458-10 10 19
2 BEARING/HEAD PULLY 1143 319 639
2 BEARING/L.V. TAKEUP 1018 588 1,175
12 4" X 30" ROLLER 1008 37 442
11 4" X 11" ROLLER 1007 22 244
5 ZIPPER BOOTS 1224 74 370
5 ZIPPER BOOTS 3424 69 345
5 ZIPPER BOOTS 5630 78 388
1 LOT HYDRAULIC FITTINGS 4,850 4,850
1 FILTER 2P4005 9 9
1 FILTER 8N2556 60 60
4 FILTER 1R0719 5 19
6 FILTER 4P2839 15 88
2 FILTER 7W5313 37 74
4 FILTER 8N6309 59 237
10 FILTER 1R0718 5 52
4 FILTER 7J0670 7 27
2 FILTER P181050 9 19
2 FILTER P550534 3 6
4 FILTER P552020 7 28
2 FILTER 9M2341 2 5
50 RG-59 COAX 0 10
50 RG-8 COAX 1 71
10 CONNECTOR 88-18 2 19
10 CONNECTOR 88-2 2 18
5 CONNECTOR CPGD-555 2 12
2 3 15/16" SPROCKET 1053 139 277
2 SUPPORT SKID 1042 535 1,070
1 CLEVIS JACK LIFT 1038 525 525
2 1 1/4" X 4" POLY-BAR 1304 32 65
1 CLEVIS PROP ROLLER 1081 625 625
1 PIN PROP CLEVIS 1082 30 30
1 SPACER SKID CLEVIS 1021 15 15
2 18" FRAME TAKE-UP 1020 377 754
4 BEARING/HEAD/DRIVE PULLY 1017 225 899
2 BEARING/TAIL PUULEY 1263 144 288
2 BEARING/WHEEL 1015 215 431
2 BEARING/L.V. DRIVE 1016 389 779
1 CONTACTOR DPCK3035AW 396 396
6 HEATER STRIP FH47 7 42
</TABLE>
<PAGE> 16
<TABLE>
<S> <C> <C> <C> <C>
12 250 MCM BUTT CONNECTOR 2 20
12 250 MCM LUGG 2 20
10 FUSE ATM10 4 35
10 FUSE ATM15 4 35
10 FUSE ATM30 4 35
5 3/4 FUSE KTK 4 18
30 #33 TAPE 3 82
20 #27 TAPE 7 139
30 HIGH VOLT TAPE 8 230
30 MHSA TAPE 1 26
20 SHEILDING TAPE 4 79
10 2520 TAPE 12 123
10 140 CHAIN 22 219
4 140 MASTERLINKS 5 20
4 140 1/2 LINKS 12 48
1 2" BALL VALVE 20 20
2 1 1/2" BALL VALVE 13 27
2 1 1/4" BALL VALVE 11 21
50 1/8" WIRE ROPE 0 8
200 3/8" WIRE ROPE 0 48
1 REGULATOR 1145511 641 641
2 BULB 1M5898 10 20
4 BULB 7H2976 3 12
5 FILTER P553634 6 31
2 FILTER P556245 3 6
2 FILTER 612506 37 73
2 FILTER 1R0712 7 13
2 FILTER 612506 37 73
6 50W MIN. LAMP 37498-3 4 24
6 3/4" RIDGID STRAP H68 0 1
4 PLUG CAP 1510PW 11 45
4 CONNECTOR BODY 1610CW 16 65
6 3/4" GLAND A25-3/4 STR 9 54
6 3/4" GLAND A26-34 90 9 54
10 1/4" ROPE PACKING TS100014 1 6
10 3/8" ROPE PACKING TS100038 1 10
10 1/2" ROPE PACKING TS100012 1 13
4 PLUG (HEADLIGHT) A40 7 26
12 SPLIT BOLT K529 9 111
75 POWER CABLE 5KV25HD 1 102
250 14/3 CABLE 0 83
250 14/3 CABLE 0 55
</TABLE>
<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C>
50 3/4" CONDUIT HOSE 1 69
50 1 1/2" CONDUIT HOSE 2 108
50 2" CONDUIT HOSE 3 150
24 ELECTRO-KLEEN 6 134
4 20A CONNECTOR 2410-CW 24 96
4 20A PLUG CAP 2310 PW 15 60
1 400W FLOOD LAMP 195 195
1 SLIP FITTER 19 19
2 400W LAMP 34415-0 22 45
4 FILTER KM150 39 156
4 FILTER KM60 65 259
1 AUX. SWITCH 458D13 114 114
1 100 AMP BREAKER 425 425
1 800 AMP BREAKER 1,495 1,495
1 TRIP UNIT 2611D75G05 475 475
1 CONTACT AUX. J11 34 34
4 BURLE MONITOR TC-1914A 246 984
1 600V PLUNGER TYPE LIMITER 9007-AP221 54 54
1 RELAY A280-120 269 269
3 RELAY AA11P 23 68
1 RELAY 0AR2U110A 54 54
2 2 POSITION SELECTOR A779-3 64 128
1 400 AMP REVERSING SWITCH D845-5 1,558 1,558
2 TRANSFORMER TR15710 108 216
1 SW-LIMIT 548-11-01 18 18
1 300 AMP COUPLER PL30DFC067-A1EX 210 210
1 600 AMP COUPLER PL60DFC107-00EX 432 432
2 2.75" BRASS BUSHING A2427-002B 21 42
2 2.75" BRASS BUSHING A2428-002B 22 43
4 CLIP GROUND CONNECTOR A773-002 2 9
4 CLIP GROUND CONNECTOR A773-001 2 9
1 DUST COVER, 400 AMP C1326 99 99
1 DUST COVER C705-001 74 74
1 RECEPTACLE 400 AMP C1458-001 312 312
1 PLUG HOUSING C2361-2 491 491
3 INSULATOR PIN 609 58 173
3 INSULATOR PIN B610 58 173
3 INSULATOR PIN 610 58 173
3 INSULATOR PIN 611 58 173
1 400 AMP PACKING HOUSING B1301 52 52
6 RETAINING RING A858 0 3
6 RETAINING RING A649 1 3
</TABLE>
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C>
3 FEMALE GROUND PIN B462-002 26 77
3 MALE GROUND PIN B463A 18 55
3 FEMALE PILOT PIN B614 14 43
3 MALE PILOT PIN B614 13 38
3 RETAINING PIN A3464 1 3
50 WIRE LOCK SEAL A3198 0 21
2 SPIR-O-LOX RETAINING RING RR-387-S 6 13
6 FEMALE POWER PIN B613-001 35 211
6 MALE POWER PIN B612-001 26 154
1 METHANE MONITOR 80730559 1,550 1,550
1 CALIBRATION KIT 80802333 362 362
1 D502 METHAND DISP. 80860117 1,800 1,800
1 POWER SUPPLY 80860166 1,380 1,380
1 SMART SENSOR 80860109 1,478 1,478
1 SENSOR 80801459 296 296
1 SPLASH GUARD SENSOR 80800220 37 37
1 60" BELT 569 569
1 60" BOARD 778 778
10 SPLICE R5-48 19 190
10 PINS NC-48 5 52
10 SPLICE R6-60 51 510
10 PINS NAC-60 27 265
2 RIVETS SRB 187 373
2 RIVETS SRC 197 393
1 MISC. MEDICAL SUPPLIES 2,585 2,585
3 BOX CAMERA 1012 535 1,605
2 RING RETAINING LENS 1014 70 140
1 ROTART JOINT 1091 149 149
2 LENS CAMERA BOX 1013 20 40
2 CAMERA B/W 35MM 1005 376 752
1 5000 WATT GENERATOR 3MK73 599 599
1 POLY CHAIN BELT 14M-1960-68 239 239
1 HTD BELT 3360-14M-115 417 417
600 CUTTER BITS 26007542 5 2,970
</TABLE>
<PAGE> 19
E. ALL MARTIKI INVENTORY, INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING ITEMS (AS
ADJUSTED TO THE CLOSING DATE)
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 DC CONTACTOR 601525-8 $750 $750
1 DEMULTIPLEXOR 601843-86 6,221 6,221
6 FH28 HEATER STRIP 601547-28 8 45
6 FH47 HEATER STRIP 601547-47 8 45
6 FH71 HEATER STRIP 601547-71 8 45
6 FH75 HEATER STRIP 601547-75 8 45
6 FH80 HEATER STRIP 601547-80 8 45
6 FH93 HEATER STRIP 601547-93 8 45
6 FUSE 600014-102 3 16
1 OVERLOAD 601866-2021 1,665 1,665
3 OVERLOAD BASE 601548-75 44 132
1 OVERLOAD BASE 601548-44 115 115
1 POWER SUPPLY 601566-10 1,290 1,290
1 RECEIVER 601843-135 3,022 3,022
1 ANTENNA 601843-123 63 63
1 SOLENOID ASSEMBLY 570553-2 485 485
1 STARTER 601878-21 1,046 1,046
1 TRANSMITTER 601843-136 3,182 3,182
1 CABLE 601843-34 177 177
2 CLAMP 1564315-9 113 226
2 CLAMP 902224-106 1 1
1 HYD. PUMP 506227-28 926 926
2 SHEAR LOAD LOCK 534613-23 225 450
2 O-RING 910660-273 2 4
2 O-RING 910660-138 0 1
2 O-RING 910659-220 1 2
2 O-RING 910659-447 14 29
2 O-RING 910659-226 3 7
2 O-RING 910660-244 0 1
2 O-RING 910660-437 2 3
2 PIN 1069434-205 534 1,068
2 PIN 1069432-334 12 24
2 PIN 1069432-513 73 145
1 TAIL ROLLER 531840-4 523 523
2 1/4" PLUG 901924-3 0 1
2 SPRING PIN 904685-152 1 1
1 SLIDE SPRING 1069585-83 114 114
2 CONVEYOR SHAFT 1069528-490 305 610
1 CAP 1122770-1 105 105
1 SNAP RING 905362-250 4 4
1 PLUG 1069452-31 9 9
1 PLUG 906512-168 1 1
1 CAP 3069141-63 64 64
</TABLE>
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C>
1 SNAP RING 905478-425 9 9
1 PLUG 480228 6 6
1 SNAP RING 902109-225 1 1
2 PIN 1451909 14 28
2 DOWEL PIN 1451476-1 1 2
4 SHIM 1069533-373 7 29
4 SHIM 1069533-374 8 32
4 SHIM 1069533-375 8 32
1 VALVE 531872-1 430 430
12 NOZZLE 1566237-6 8 98
4 PIG EYE 3/8" 902140-1 7 29
4 PIG EYE 1/2" 902140-2 5 20
4 PIG EYE 3/4" 902140-3 9 37
4 PLUG 1/8" 901924-2 0 1
4 PLUG 1/4" 901924-3 0 1
4 PLUG 3/8" 901924-4 0 1
4 PLUG 1/2" 901924-5 0 1
4 PLUG 3/4" 901924-6 1 3
4 PLUG 1" 901924-4 3 11
4 PLUG 1 1/4" 901924-8 5 18
2 VENT 903458-10 10 19
2 BEARING/HEAD PULLEY 1143 319 639
2 BEARING/L.V. TAKEUP 1018 588 1,175
12 4" X 30" ROLLER 1008 37 442
11 4" X 11" ROLLER 1007 22 244
5 ZIPPER BOOTS 1224 74 370
5 ZIPPER BOOTS 3424 69 345
5 ZIPPER BOOTS 5630 78 388
1 LOT HYDRAULIC FITTINGS 4,850 4,850
1 FILTER 2P4005 9 9
1 FILTER 8N2556 60 60
4 FILTER 1R0719 5 19
6 FILTER 4P2839 15 88
2 FILTER 7W5313 37 74
4 FILTER 8N6309 59 237
10 FILTER 1R0718 5 52
4 FILTER 7J0670 7 27
2 FILTER P181050 9 19
2 FILTER P550534 3 6
4 FILTER P552020 7 28
2 FILTER 9M2341 2 5
50 RG-59 COAX 0 10
</TABLE>
<PAGE> 21
<TABLE>
<S> <C> <C> <C> <C>
50 RG-8 COAX 1 71
10 CONNECTOR 88-18 2 19
10 CONNECTOR 88-2 2 18
5 CONNECTOR CPGD-555 2 12
2 3 15/16 SPROCKET 1053 139 277
2 SUPPORT SKID 1042 535 1,070
1 CLEVIS JACK LIFT 1038 525 525
2 1 1/4" X 4" POLY-BAR 1304 32 65
1 CLEVIS PROP ROLLER 1081 625 625
1 PIN PROP CLEVIS 1082 30 30
1 SPACER SKID CLEVIS 1021 15 15
2 18" FRAME TAKE-UP 1020 377 754
4 BEARING/HEAD/DRIVE PULLEY 1017 225 899
2 BEARING/TAIL PULLEY 1263 144 288
2 BEARING/WHEEL 1015 215 431
2 BEARING/L.V. DRIVE 1016 389 779
1 CONTACTOR DPCK3035AW 396 396
6 HEATER STRIP FH47 7 42
12 250 MCM BUTT CONNECTOR 2 20
12 250 MCM LUG 2 20
10 FUSE ATM10 4 35
10 FUSE ATM15 4 35
10 FUSE ATM30 4 35
5 3/4 FUSE KTK 4 18
30 #33 TAPE 3 82
20 #27 TAPE 7 139
30 HIGH VOLT TAPE 8 230
30 MHSA TAPE 1 26
20 SHEILDING TAPE 4 79
10 2520 TAPE 12 123
10 140 CHAIN 22 219
4 140 MASTERLINKS 5 20
4 140 1/2 LINKS 12 48
1 2" BALL VALVE 20 20
2 1 1/2" BALL VALVE 13 27
2 1 1/4" BALL VALVE 11 21
50 1/8" WIRE ROPE 0 8
200 3/8" WIRE ROPE 0 48
1 REGULATOR 1145511 641 641
2 BULB 1M5898 10 20
4 BULB 7H2976 3 12
5 FILTER P553634 6 31
</TABLE>
<PAGE> 22
<TABLE>
<S> <C> <C> <C> <C>
2 FILTER P556245 3 6
2 FILTER 612506 37 73
2 FILTER 1R0712 7 13
2 FILTER 612506 37 73
6 50W MIN. LAMP 37498-3 4 24
6 3/4" RIDGID STRAP H68 0 1
4 PLUG CAP 1510PW 11 45
4 CONNECTOR BODY 1610CW 16 65
6 3/4" GLAND A25-3/4 STR 9 54
6 3/4" GLAND A26-34 90 9 54
10 1/4" ROPE PACKING TS100014 1 6
10 3/8" ROPE PACKING TS100038 1 10
10 1/2" ROPE PACKING TS100012 1 13
4 PLUG (HEADLIGHT) A40 7 26
12 SPLIT BOLT K529 9 111
75 POWER CABLE 5KV25HD 1 102
250 14/3 CABLE 0 83
250 16/3 CABLE 0 55
50 3/4" CONDUIT HOSE 1 69
50 1 1/2" CONDUIT HOSE 2 108
50 2" CONDUIT HOSE 3 150
24 ELECTRO-KLEEN 6 134
4 20A CONNECTOR 2410-CW 24 96
4 20A PLUG CAP 2310PW 15 60
1 400W FLOOD LAMP 195 195
1 SLIP FILTER 19 19
2 400W LAMP 34415-0 22 45
4 FILTER KM150 39 156
4 FILTER KM60 65 259
1 AUX. SWITCH 458D13 114 114
1 100 AMP BREAKER 425 425
1 800 AMP BREAKER 1,495 1,495
1 TRIP UNIT 2611D75G05 475 475
1 CONTACT AUX. J11 34 34
4 BURLE MONITOR TC-1914A 246 984
1 600V PLUNGER TYPE LIMITER 9007-AP221 54 54
1 RELAY A280-120 269 269
3 RELAY AA11P 23 68
1 RELAY 0AR2U110A 54 54
2 2 POSITION SELECTOR A779-3 64 128
1 400 AMP REVERSING SWITCH D845-5 1,558 1,558
2 TRANSFORMER TR15710 108 216
</TABLE>
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C>
1 SW-LIMIT 548-11-01 18 18
1 300 AMP COUPLER PL30DFC67-A1EX 210 210
1 600 AMP COUPLER PL60DFC107-00EX 432 432
2 2.75" BRASS BUSHING A2427-002B 21 42
2 2.75" BRASS BUSHING A2428-002B 22 43
4 CLIP GROUND CONNECTOR A773-002 2 9
4 CLIP GROUND CONNECTOR A773-001 2 9
1 DUST COVER, 400 AMP C1326 99 99
1 DUST COVER C705-001 74 74
1 RECEPTACLE 400 AMP C1458-001 312 312
1 PLUG HOUSING C2361-2 491 491
3 INSULATOR PIN 609 58 173
3 INSULATOR PIN B610 58 173
3 INSULATOR PIN 610 58 173
3 INSULATOR PIN 611 58 173
1 400 AMP PACKING HOUSING B1301 52 52
6 RETAINING RING A858 0 3
6 RETAINING RING A649 1 3
3 FEMALE GROUND PIN B462-002 26 77
3 MALE GROUND PIN B463A 18 55
3 FEMALE PILOT PIN B614 14 43
3 MALE PILOT PIN B614 13 38
3 RETAINING PIN A3464 1 3
50 WIRE LOCK SEAL A3198 0 21
2 SPIR-O-LOX RETAINING RINGS RR-387-S 6 13
6 FEMALE POWER PIN B613-001 35 211
6 MALE POWER PIN B612-001 26 154
1 5000 WATT GENERATOR 3MK73 599 599
1 POLY CHAIN BELT 14M-1960-68 239 239
1 HTD BELT 3360-14M-115 417 417
-------
$53,247
</TABLE>
F. THE FOLLOWING MISCELLANEOUS INVENTORY (AS ADJUSTED TO THE CLOSING DATE)
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2,630 RG8 COAX 1001 $0.35 $921
17,400 COAX VIDEO RG-8 1002 0 2,175
373 COAX 5 CONDUCTOR 1003 1 421
4 CAMERA B/W 35MM 1005 376 1,504
6 LENS 8.5 CAMERA 1006 88 528
</TABLE>
<PAGE> 24
<TABLE>
<S> <C> <C> <C> <C>
4 ROLLER 4"X29-3/4 1008 37 147
400 CLIP ROLLER 1011 2 672
4 BOX CAMERA 1012 535 2,140
11 LEN CAMERA BOX 1013 20 220
3 RING RETAINING LENS 1014 70 210
4 SPACER SKID CLEVIS 1021 15 60
4 KEEPER SKID CLEVIS PIN 1022 5 20
1 VALVE 2 SECTION 1024 308 308
1 HITCH ASSY. FEMALE 1025 880 880
1 PULLY WING 10"X57" 1027 544 544
2 PULLY 11"X69" WING 1029 845 1,690
1 CYLINDER PROP 8"X228" 1032 9,498 9,498
1 CYLINDER SKID 1033 1,918 1,918
1 CYLINDER PROP. 1034 6,311 6,311
2 PIN PROP. 1037 200 400
2 ROD END SKID CYLINDER 1039 1,595 3,190
10 SPACER BRASS 1040 62 620
7 BOX ROLLER N/S 1041 1,807 12,648
12 ROLLER EX. SHAFT 4"X33" 1048 37 447
8 ROLLER EX. SHAFT 4"X15-3/4" 1049 25 199
2 LINK OFFSET 140 1050 10 19
2 CONNECTING LINK 140 CHAIN 1051 4 9
10 6.50 X 10.50 TIRES WHEELS 1054 260 2,600
2 POWER UNIT 1056 6,126 12,253
2 PUSHER ASSY. 1057 509 1,018
1 FOOT VALVE 1061 294 294
1 HANDLES 1063 32 32
2 GUARD FOR OVER HEAD HEATERS 1064 68 135
1 LG. DIAMOND BAR SPOOLING DEVICE 1066 1,250 1,250
2 SM. DIAMOND BAR SPOOLING DEVICE 1067 545 1,090
98 BELTING 28" 2 PLY 3/32 X 3/32 1068 15 1,507
13 GREASE VALVE 1070 14 180
4 TAKE-UP JACK 1071 60 240
3 POLY CHAIN BELT 1075 217 650
2 100 AMP VOLT BRAKER 1078 225 450
1 100 AMP VOLT BRAKER 1078 222 222
4 30 HP MOTOR 1079 3,348 13,391
2 CLEVIS PROP ROLLER 1081 625 1,250
1 DEUBLIN UNION 3" 1000 PSI 1083 425 425
1 DENISON MAIN HYD PUMP 1086 4,790 4,790
1 SPOOLING DEVICE SM. COMPLET 1087 1,495 1,495
5 ROTARY JOINT 1091 149 747
</TABLE>
<PAGE> 25
<TABLE>
<S> <C> <C> <C> <C>
4 CAP ROLLER PROP ASSY. 1095 195 780
2 CAP ROLLER PROP ASSY. 1095 175 350
4 SPACER PROP. ROLLER 1096 40 160
2 SPACER PROP. ROLLER 1096 20 40
4 ROLLER 8" PROP. ASSY 1097 566 2,265
3 MONITOR BURLE 1105 246 738
2 PACKING KIT DEUBLIN UNION 1106 34 68
3 PLANTARY CASE ASSY. 1108 3,600 10,800
1 TRANSFER CASE ASSY. R.H. 1109 9,200 9,200
1 ADAPTOR PLANTARY PLT. 1110 630 630
2 ADAPTOR PLANTARY PLT. 1110 819 1,637
1,500 HOSE AIR 3" 1123 6 9,180
2 CAP PIN PROP ARM 1124 50 100
1 SOLONOID POWER UNIT CABLE REEL 1126 160 160
1 PUMP MAIN HYD.P8W 1128 2,730 2,730
1 POT GEAR-44 1129 16,630 16,630
1 POT GEAR-45 1130 16,630 16,630
3 COLLER 8" PROP. CYLINDER 1133 700 2,100
78 COAX CABLE END 1135 2 148
100 COAX CABLE END 1136 2 180
3 CONNECTOR RECPT. 250MCM 1138 627 1,880
20 COAX CABLE CONNECTOR 1139 2 46
9 CLEVIS SKID CYLINDER 1140 685 6,165
3 MOTOR 40 HP 324T 1770 RPM 1150 340 1,020
1 PUMP TYRONE LIFT SKID 1151 850 850
2 SHAFT TORQUE 1153 163 325
2 SHAFT TORQUE 1153 185 370
6 TIRE AND WHEEL ASSY. 1154 489 2,932
4 FILTER PALL 3 MICRON 1159 130 520
1 CARTRIDGE RELIEF 1160 82 82
1 CARTRIDGE FIXED FLOW 1161 32 32
1 PUMP COMMERCIAL PIGGY BACK 1162 760 760
4 RELAY TIMING 1163 54 216
1 COUPLER LOVEJOY COMPLET 1164 42 42
1 BRACKET DRIVE DOG RETAINER 1167 95 95
1 MOTOR CABLE REEL 1169 314 314
2 PUMP HYD.JOY MINER 1170 416 832
1 PUSHER ROLLER ASSY. COMPLET 1171 4,775 4,775
1 PUSHER ROLLER ASSY. COMPLET 1171 4,775 4,775
1 PUSHER ROLLER ASSY. COMPLET 1171 4,775 4,775
1 MOTOR CROSS CONVEYOR 1772 910 910
10 PULLY MOTORIZED DRIVE 1177 7,083 70,826
</TABLE>
<PAGE> 26
<TABLE>
<S> <C> <C> <C> <C>
4 CYLINDER BAT WING SIDE COVER 1178 239 955
4 BEARING PBE9201-7/16 1179 63 251
1 SPOOLING DEVICE LG. 1184 3,800 3,800
1 FILTER CROSS PUMP 1185 41 41
2 MOTOR CONVYOR JOY 1187 952 1,904
2 SHAFT MOTOR HWH 1189 713 1,426
4 CHAIN CONVEYOR HWH 1190 506 2,024
4 CYLINDER BAT WING HEAD COVER 1191 240 960
2 CLUTCH KIT REBUILD HWH 1232 1,535 3,070
1 FLANGE ASSY.INPUT 1233 855 855
1 PLATE PRUSSURE ASSY. 1234 340 340
2 Misc Hardware 1251 1 2
1 REVERSING MECHANISM ASSY 1255 975 975
2 ROLLER TAIL CONVEYOR HWH 1256 1,029 2,058
1 COMMERCIAL VALVE DVG35 1261 4,591 4,591
4 ROLLER PUSHER 10" 1272 1,256 5,024
1 PUSHER ASSY. 10" 1274 4,500 4,500
1 MONITOR 1275 246 246
11 GASKET CAMERA LENS 1279 5 55
29 SLEEVE BIT HWH 1285 51 1,467
1 SLEEVE BIT HWH 1285 51 51
30 BLOCK BIT W/ SLEEVE 1286 88 2,630
1 MOTOR HOSE REEL 1288 135 135
1 DRUMS HWH COMP. SET CUTTER 1289 25,937 25,937
38 CHAIN CONVEYOR JOY 1415 1290 186 7,066
6 LINK MASTER 1415 1291 32 189
6 LINK ROLLER 1415 1292 20 117
1 TRANSFORMER ISOLATION 3 PH, 1295 4,009 4,009
1 BUSHING TAPER LOCK 4-7/16" 1296 328 328
1 BUSHING TAPER LOCK 3-15/16" 1297 328 328
2 PULLY MOTORIZED DRIVE 1303 1,155 2,310
2 TRACK BELT ASSY.58 PADS 1305 10,125 20,250
1 ROLLER TAIL RECON. 1306 378 378
4 KIT CONTROL RING FLANGE 1309 10 41
3 TERMINAL 1310 2 6
4 BOLT SUPER 1-1/4 X 7 X 4.5 1313 122 487
10 BOLT SUPER 1-1/4 X 7 X 4.5 1313 122 1,218
2 CONNECTOR PLUG 4/0 CABLE 1317 622 1,243
2 CONNECTOR RECPT.4/0 CABLE 1318 563 1,126
1 SHAFT CONVEYOR DRIVE HWH 1326 1,635 1,635
80 CHAIN FLIGHT SECTION HWH 1330 386 30,880
1 DRILL RIB 1337 33,197 33,197
</TABLE>
<PAGE> 27
<TABLE>
<S> <C> <C> <C> <C>
6 CUP TIMKEN 1346 30 179
6 CONE TIMKEN 1347 53 318
3 SEAL CAT 1348 20 61
3 RING RETAINING 1349 9 27
4 SHIM 1359 18 72
12 SHIM 1360 10 120
12 SHIM 1361 10 120
2 PUMP P7 PIGGY BACK 1363 1,150 2,300
1 PUMP MOTOR RECON. 1365 643 643
1 TRACK ASSY. 50 PADS HWH 1368 8,735 8,735
1 PUMP P7W RECON 1371 2,462 2,462
1 VALVE DIRECTIONAL CONTROL 1373 1,334 1,334
4 ACTUATOR ROTARY 1375 957 3,827
3 CONE TIMKEN 1352 34 101
3 CUP TIMKEN 1353 20 61
3 CONE TIMKEN 1354 36 107
3 CUP TIMKEN 1355 18 55
6 CONE TIMKEN 1356 18 109
6 CUP TIMKEN 1357 10 61
3 SEAL CHICAGO RAWHIDE 1358 13 39
9 BEARING WHEEL 1015 215 1,937
1 PUSHER ROLLER ASSY.COMPLET 1171 4,980 4,980
2 CONNECTING LINK 140 CHAIN 1051 4 9
2 LINK OFFSET 140 1050 10 19
10 140 ROLLER CHAIN 1052 171 1,705
50 CLIP ROLLER DOUBLE W/OFFSET 1380 2 98
1 SPROCKETT 160 W/3 15/16 1383 168 168
1 CHAIN 160 1384 24 24
4 LINK MASTER 160 1385 6 23
4 LINK OFFSET 160 1386 11 45
6 TRANSFORMER FOR CAR 1387 108 648
1 VALVE BANK JOY MINER 1186 1,015 1,015
3 PULLY DRUM 10"X57" 1030 611 1,834
1 10X57 ROLLER N/SHAFT 1390 415 415
2 PIN PROP. ARM 1125 170 340
1 TRANSFER CASE ASSY. 1107 3,777 3,777
6 COUPLER LOVEJOY COMPLET 1164 49 294
2 BEARING SKID END 1391 325 650
43 POLY BAR 1 1/4 X 4 X 48 1084 25 1,078
2 SPROCK 140B1315H 3 15/16 1053 139 277
20 140 ROLLER CHAIN 1052 20 391
4 CONNECTING LINK 140 CHAIN 1051 4 18
</TABLE>
<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C>
4 LINK OFFSET 140 1050 10 38
33 POLY BAR 2" X 4" X 60" 1085 49 1,611
41 POLY BAR 1-1/4"X4"X60" 1304 30 1,237
1 MOTOR 100HP. 1394 704 704
3 VALVE BOSCH FOR STACKER 1395 208 624
1 VALVE COMPENSATOR 1396 346 346
2 INSERT 600 MAG. COUPLER 1158 45 91
1 10X57 ROLLER N/SHAFT 1390 414 414
3 10X57 ROLLER N/SHAFT 1390 472 1,415
1 ROLLER TAIL 10X51 1400 218 218
6 PLANTARY CARRIER CASTING 1402 2,425 14,550
1 GRIPPER BELT 1181 625 625
2 PROP ROLLER SHAFTS 1404 400 800
4 ROLLER LIFT COLLUMN 1122 3,348 13,392
2 PULLY WING 10"X57" 1027 991 1,983
75 ROLLER 4"X10-15/16 1007 27 2,029
100 ROLLER 4"X29-3/4 1008 38 3,848
28 CPN-8 FOR RG-8 COAX 1405 3 81
2 PIN PROP CLEVIS 1082 75 150
6 AXLE ASSY. 1055 185 1,110
6 AXLE ASSY. 1055 185 1,110
28 PIN INDEX 1090 15 420
4 PIN SKID CLEVIS 1023 185 740
6 BEARING HEAD PULLY 1143 319 1,916
13 BEARING HEAD/DRIVE PULLY 1017 215 2,799
15 BEARING TAIL PULLY 1263 144 2,160
13 BEARING TAKE UP 1089 162 2,100
4 BEARING L.V. DRIVE 1016 351 1,404
3 BEARING TAKE UP L.V. 1018 588 1,763
4 FRAME 18" TAKE UP 1020 348 1,390
1 SENSOR SMART 1407 1,478 1,478
2 CLUTCH ASSY. COMPLET HWH 1332 4,350 8,700
6 LIGHT HEAD 12 VOLT 1131 145 870
--------
$549,481
</TABLE>
<PAGE> 29
G. MISCELLANEOUS
<TABLE>
<CAPTION>
DESCRIPTION LOCATION
- -------------------------------------------------------------------------------------------------
<S> <C>
Data processing equipment and office furniture located at the following
buildings:
Mining Technologies Office Building Coalton, KY
Car Shop MT Car Shop
Fab Shop MT Fab Shop
Main Shop AEI Shop
Accounting Office 9431 US RT 60
Executive Office 1500 N. Big Run
Aircraft Hangar Wayne Co., WV
House Office - Mike Johnson's Office 1932 Carter Ave.
Route 23 Transfer Station Greenup Co., KY
Stacy Tract in Greenup County Greenup Co., KY
Newsome Tract in Greenup County Greenup Co., KY
Mays Tract in Greenup County Greenup Co., KY
Vine Center Condominium Unit No. 1907 Lexington, KY
</TABLE>
<PAGE> 30
ANNEX B
All General Intagibles of Seller except for the following:
I. PATENTS
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apparatus and 7/625,211 5,112,111 U.S. 12/10/90 5/12/92 Addington, MTI*
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 7/795,314 5,261,729 U.S. 11/20/91 11/16/93 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 8/140,368 5,364,171 U.S. 10/21/93 11/15/94 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 88968/91 638367 Australia 12/10/91 10/19/93 Addington, BHP**
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 2,075,619-5 Pending Canada 12/9/91 Pending Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apparatus and 91112766.6 91112766.6 China 12/10/91 4/21/95 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 92902730.8 0 519 041 France, 12/9/91 9/13/95 Addington, MTI
Method for (EP); Germany, (PCT) et al.
Continuous 69113034.5-08 Spain, UK 7/22/92
Mining (GER); (EPO)
2076745 (SP)
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 1208/DEL/91 Pending India 12/9/91 Pending Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and P-002080 Pending Indonesia 1/31/92 Pending Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and P-295933 167,662 Poland 12/9/91 3/8/95 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 5053078.03 Pending Russia 8/7/92 Pending Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 32
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apparatus and 91/9730 91/9730 South Africa 12/10/91 9/30/92 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle 7/769,408 5,232,269 U.S. 10/1/91 8/3/93 Addington, MTI
For Continuous et al.
Mining Apparatus
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle 91272/91 644257 Australia 12/9/91 8/1/95 Addington, BHP**
for Continuous et al.
Mining Apparatus
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle 2,075,638 2075638 Canada 12/9/91 5/27/97 Addington, MTI
For Continuous et al.
Mining Apparatus
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle 92902231.7 0 513 338 France, 12/9/91 1/22/97 Addington, MTI
For Continuous (EP); Germany, (PCT) et al.
Mining Apparatus 69124364.6-08 Spain & UK 7/22/92
(GER); (EPO)
2096746 (SP)
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle P-295643 167,642 Poland 8/10/92 3/9/95 Addington, MTI
For Continuous et al.
Mining Apparatus
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 8/328,642 5,522,647 U.S. 10/25/94 6/4/96 Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 33
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Continuous P-952188 Pending Indonesia 10/24/95 Pending Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 95/8543 95/8543 South Africa 10/10/95 7/31/96 Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 08/553,693 Pending U.S. 11/20/95 Pending Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 2,203,625 Pending Canada 10/18/95 Pending Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 38310/95 Pending Australia 10/18/95 Pending Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 95/8998 95/8998 South Africa 10/24/95 10/30/96 Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
</TABLE>
4
<PAGE> 34
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Self-Propelled 8/343,694 5,553,926 U.S. 11/22/94 9/10/96 Blackstock, MTI
Mining Apparatus et al.
and Method For
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and P-952189 Pending Indonesia 10/24/95 Pending Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 95/9629 95/9629 South Africa 11/13/95 8/28/96 Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 39644/95 Pending Australia 10/10/95 Pending Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 2,205,596 Pending Canada 10/10/95 Pending Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 97110226 Pending Russia 10/10/95 Pending Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Junction 08/686,830 Pending U.S. 7/26/96 Pending Slagle***
Box
- ----------------------------------------------------------------------------------------------------------------------------------
Transmission (in process of U.S. Blackstock,
Gearcase For filing) et al.
Mining Apparatus
==================================================================================================================================
</TABLE>
Addington Enterprises has begun the process of patenting a "Cutter Drum
Gearcase." Presently, the only information available for this machinery is: (a)
the U.S. Patentability Search performed by King & Schickli; and (b) the inventor
disclosure.
* MTI is Mining Technologies, Inc., formerly a subsidiary of Addington
Resources, now a division of Addington Enterprises.
5
<PAGE> 35
** MTI transferred to BHP its rights in this patent by a Technology
Exchange Agreement (the "Exchange Agreement") dated July 5, 1995.
However, pursuant to the Exchange Agreement, BHP's use of this patent
is restricted to (i) mining operations owned in whole or in part,
operated or managed in Australia by BHP; (ii) equipment owned in whole
or in part, operated or managed by BHP; (iii) mining systems used for
mining extractions; and (iv) Australia. See Paragraph 3 of the Exchange
Agreement. Furthermore, the Exchange Agreement authorizes MTI to use
the patent worldwide, assign it to a third party and license the patent
for use outside of Australia. See Paragraph 4 of the Exchange
Agreement. In addition, pursuant to a Technological Developments and
Consent Agreement (the "Consent Agreement") dated July 5, 1995, BHP
granted MTI a license to use and, subject to BHP's consent, sublicense
this patent for use in Australia. See Paragraph 2 of the Consent
Agreement.
*** Pursuant to a Patent License Agreement dated February 15, 1996, Richard
M. Slagle ("Slagle") granted AEI an exclusive worldwide royalty-free
license to make, use and sell highwall mining equipment incorporating
U.S. Patent App. No. 08/686,830 (Electrical Junction Box). AEI may not
assign or transfer its rights without consent of Slagle, which consent
may not be unreasonably withheld.
II. TRADEMARKS
================================================================================
MARK COUNTRY REGISTRATION NUMBER ISSUED
- --------------------------------------------------------------------------------
Addcar U.S. 1,795,602 9/28/93
- --------------------------------------------------------------------------------
Addcar Australia 616070 4/30/96
- --------------------------------------------------------------------------------
Addminer Australia A623145 2/21/94
================================================================================
III. CONTRACTS
All contracts or other agreements (and all rights related to
such contracts and other agreements, including, without limitation, all
accounts receivable, deposits and refunds relating thereto) of Seller,
substantially all of which are to be transferred to Seller pursuant to
an assignment of contracts to be executed between Seller and Purchaser.
6
<PAGE> 1
EXHIBIT 2.6
BILL OF SALE, CONVEYANCE AND ASSIGNMENT
This Bill of Sale, Conveyance and Assignment (this "Bill of Sale"),
dated November 12, 1997, is between ADDINGTON MINING, INC., a Kentucky
corporation and a wholly owned subsidiary of AEI Holding Company, Inc., 1500
North Big Run Road, Ashland, Kentucky 41102 ("Purchaser"), and AEI HOLDING
COMPANY, INC., a Delaware corporation, 1500 North Big Run Road, Ashland,
Kentucky 41102 ("Seller").
NOW, THEREFORE, for and in consideration of the performance and
observance of the terms and conditions contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Assignment. Seller does hereby sell, convey, transfer, assign and
deliver to Purchaser all of its right, title and interest in and to the assets
listed on Annex A (the "Acquired Assets"), to have and to hold unto Purchaser,
its successors and assigns forever.
2. Covenant. Purchaser and Seller covenant and agree that the covenants
contained herein shall be binding upon their respective successors and assigns.
3. Governing Law. This Bill of Sale shall be governed by, and construed
and interpreted in accordance with, the laws of the Commonwealth of Kentucky,
without regard to its conflict of laws principles. Each party agrees that any
action brought in connection with this Bill of Sale against another shall be
filed and heard in Fayette County, Kentucky, and each party hereby submits to
the jurisdiction of the Circuit Court of Fayette County, Kentucky, and the U.S.
District Court for the Eastern District of Kentucky, Lexington Division.
4. Counterparts. This Bill of Sale may be executed in one or more
counterparts (including by means of telecopied signature pages) and all such
counterparts taken together shall constitute one and the same Bill of Sale.
5. Severability. If any provision of this Bill of Sale or its
application will be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of all other applications of that
provision, and of all other provisions and applications hereof, will not in any
way be affected or impaired. If any court shall determine that any provision of
this Bill of Sale is in any way unenforceable, such provision shall be reduced
to whatever extent is necessary to make such provision enforceable.
6. Entire Agreement. All prior negotiations and agreements by and among
the parties hereto with respect to the subject matter hereof are superseded by
this Bill of Sale, and there are no representations, warranties, understandings
or agreements with respect to the subject matter hereof other than those
expressly set forth in this Bill of Sale. No extension, change, modification,
addition or termination of this Bill of Sale shall be enforceable unless in
writing and signed by the party against whom enforcement is sought.
7. Headings. Section headings are not to be considered part of this
Bill of Sale, are solely for convenience of reference, and shall not affect the
meaning or interpretation of this Bill of Sale or any provision in it.
1
<PAGE> 2
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Bill of Sale as of the date first above written.
SELLER: AEI HOLDING COMPANY, INC.,
a Delaware corporation
By: /s/ Don Brown
Name: Don Brown
Title: President
PURCHASER: ADDINGTON MINING, INC.,
a Kentucky corporation
By: /s/ Vic Grubb
Name: Vic Grubb
Title: Treasurer
2
<PAGE> 3
ANNEX A
All assets transferred to Seller pursuant to the Bill of Sale, dated
November 12, 1997, between Seller and Addington Enterprises, Inc., other than
(i) the aircraft leased pursuant to the Aircraft Lease Agreement, dated July 9,
1996, between Provident Commercial Group, Inc. and Addington Enterprises, Inc.,
as amended, and (ii) the aircraft leased pursuant to the Finance Lease, dated
April 7, 1995, between PNC Leasing Corp., Kentucky and Bowie Resources, Limited
("Bowie"), and assigned from Bowie to Addington Enterprises, Inc.
3
<PAGE> 1
EXHIBIT 2.7
ASSIGNMENT OF CONTRACTS
THIS ASSIGNMENT OF CONTRACTS (this "Assignment") is made and entered
into as of November 12, 1997, by and between (i) ADDINGTON ENTERPRISES, INC., a
Kentucky corporation ("Assignor"), and (ii) AEI HOLDING COMPANY, INC., a
Delaware corporation ("Assignee").
RECITALS
A. Pursuant to the Exchange Agreement, dated October 20, 1997, between
Assignor and Assignee (the "Exchange Agreement"), Assignor agreed to transfer,
assign and convey to Assignee, and Assignee agreed to acquire, all right, title
and interest of Assignor in and to the contracts listed and described on Annex A
(the "Contracts") attached hereto and incorporated herein by reference.
B. Assignor desires to transfer, assign and convey to Assignee all of
Assignor's right, title and interest in and to said Contracts and Assignee
desires to acquire and accept the same.
NOW, THEREFORE, for and in consideration of the performance and
observance of the terms and conditions contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Assignment. Assignor hereby transfers, assigns, sets over and
conveys to Assignee, its successors and assigns, and Assignee hereby accepts,
all of Assignor's right, title and interest in and to the Contracts, including,
without limitation, all accounts receivable, deposits and refunds related
thereto.
2. Miscellaneous.
(a) This Assignment shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Kentucky, without regard to its
conflict of laws principles. Each party agrees that any action brought in
connection with this Assignment against another shall be filed and heard in
Fayette County, Kentucky, and each party hereby submits to the jurisdiction of
the Circuit Court of Fayette County, Kentucky, and the U.S. District Court for
the Eastern District of Kentucky, Lexington Division.
(b) This Assignment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.
(c) The terms hereof shall bind and inure to the benefit of
and be enforceable by the parties executing (or deemed to have consented to)
this Assignment and their respective successors and assigns.
(d) The failure of either Assignee or Assignor to insist in
any particular instance upon strict performance of any term or provision of this
Assignment shall not be construed as a waiver or relinquishment as to the
performance of any such term or provision in the future.
(e) This Assignment is given pursuant to the Exchange
Agreement, and is subject to the terms and conditions thereof. If any conflict
exists between this Assignment and the Exchange Agreement, the Exchange
Agreement shall control.
1
<PAGE> 2
(f) If any provision of this Assignment or its application
will be invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of all other applications of that provision, and of all other
provisions and applications hereof, will not in any way be affected or impaired.
If any court shall determine that any provision of this Assignment is in any way
unenforceable, such provision shall be reduced to whatever extent is necessary
to make such provision enforceable.
(g) All prior negotiations and agreements by and among the
parties hereto with respect to the subject matter hereof are superseded by this
Assignment and the Exchange Agreement, and there are no representations,
warranties, understandings or agreements with respect to the subject matter
hereof other than those expressly set forth in this Assignment and the Exchange
Agreement. No extension, change, modification, addition or termination of this
Assignment shall be enforceable unless in writing and signed by the party
against whom enforcement is sought.
(h) The headings preceding the text of the sections of this
Assignment are inserted solely for convenience of reference and shall not
constitute a part of this Assignment or affect its meaning, construction or
effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Assignment as of the date first above written.
ADDINGTON ENTERPRISES, INC.,
a Kentucky corporation
By: /s/ Vic Grubb
----------------------------
Name: Vic Grubb
----------------------------
Title: Chief Financial Officer
----------------------------
AEI HOLDING COMPANY, INC.
a Delaware corporation
By: /s/ Don Brown
----------------------------
Name: Don Brown
----------------------------
Title: President
----------------------------
2
<PAGE> 3
ANNEX A
All contracts of Assignor except for the following:
<TABLE>
<CAPTION>
ORIGINAL
CONTRACT TERMINATION
PARTIES DATE DATE NOTES
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A. CONSULTING AGREEMENTS
AEI/Franklin Research & Development 12/17/96 12/17/97 Can be extended by mutual consent
AEI/Richard M. Slagle 02/15/96
B. CONTRACT MINING AGREEMENTS
Mining Technologies/Ikerd Bandy Co., Inc. 02/01/97 When reserves are mined out.
Mining Technologies/Martiki Coal Company 05/24/97 Three years or when reserves
are mined out.
C. TECHNOLOGY AGREEMENTS
AEI/ARI/Pittston 01/14/97
Bowie/Amax Coal 10/24/95
AEI/Bluegrass Coal 12/13/96
MTI/Joy Technologies 06/16/92*
D. ASSET LEASES
All asset leases relating to the equipment listed on Schedule 2.1(a)(1) of
the Exchange Agreement.
E. MISCELLANEOUS AGREEMENTS
Mining Technologies/AEP 09/18/95 Annually extended Service @ Coalton Recycling Center
Mining Technologies/AEP 09/28/95 Annually extended Service @Coalton Compost Center
Mining Technologies/Orkin Pest Control 08/15/96 Annually extended Service @ RT 60 West Coalton
Mining Technologies, Inc./Airgas/Virginia
Welding Supply 01/12/94 Annually extended Cylinder Rentals
All other contracts or agreements that were to be transferred pursuant to
that certain Asset Purchase Agreement, dated October 16, 1997, among
Mining Technologies Limited, Mining Technologies, Inc. and Addington
Enterprises, Inc.
F. OTHER
All rights of Seller arising from or related to the contracts listed on
this Annex A, including, without limitation, all accounts receivable,
deposits and refunds relating thereto.
* This agreement was terminated in June of 1995.
</TABLE>
<PAGE> 1
EXHIBIT 2.8
ASSIGNMENT OF CONTRACTS
THIS ASSIGNMENT OF CONTRACTS (this "Assignment") is made and entered
into as of November 12, 1997, by and between (i) AEI HOLDING COMPANY, INC., a
Delaware corporation ("Assignor"), and (ii) ADDINGTON MINING, INC., a Kentucky
corporation ("Assignee").
<PAGE> 2
RECITAL
A. Assignor desires to transfer, assign and convey to Assignee all of
Assignor's right, title and interest in and to said Contracts and Assignee
desires to acquire and accept the same.
NOW, THEREFORE, for and in consideration of the performance and
observance of the terms and conditions contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Assignment. Assignor hereby transfers, assigns, sets over and
conveys to Assignee, its successors and assigns, and Assignee hereby accepts,
all of Assignor's right, title and interest in and to the Contracts, including,
without limitation, all accounts receivable, deposits and refunds related
thereto.
2. Miscellaneous.
(a) This Assignment shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Kentucky, without regard to its
conflict of laws principles. Each party agrees that any action brought in
connection with this Assignment against another shall be filed and heard in
Fayette County, Kentucky, and each party hereby submits to the jurisdiction of
the Circuit Court of Fayette County, Kentucky, and the U.S. District Court for
the Eastern District of Kentucky, Lexington Division.
(b) This Assignment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.
(c) The terms hereof shall bind and inure to the benefit of
and be enforceable by the parties executing (or deemed to have consented to)
this Assignment and their respective successors and assigns.
(d) The failure of either Assignee or Assignor to insist in
any particular instance upon strict performance of any term or provision of this
Assignment shall not be construed as a waiver or relinquishment as to the
performance of any such term or provision in the future.
(e) If any provision of this Assignment or its application
will be invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of all other applications of that provision, and of all other
provisions and applications hereof, will not in any way be affected or impaired.
If any court shall determine that any provision of this Assignment is in
any way unenforceable, such provision shall be reduced to whatever extent is
necessary to make such provision enforceable.
1
<PAGE> 3
(f) All prior negotiations and agreements by and among the
parties hereto with respect to the subject matter hereof are superseded by this
Assignment, and there are no representations, warranties, understandings or
agreements with respect to the subject matter hereof other than those expressly
set forth in this Assignment. No extension, change, modification, addition or
termination of this Assignment shall be enforceable unless in writing and signed
by the party against whom enforcement is sought.
(g) The headings preceding the text of the sections of this
Assignment are inserted solely for convenience of reference and shall not
constitute a part of this Assignment or affect its meaning, construction or
effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Assignment as of the date first above written.
AEI HOLDING COMPANY, INC.
a Delaware corporation
By: /s/ Don Brown
----------------------------
Name: Don Brown
----------------------------
Title: President
----------------------------
ADDINGTON MINING, INC.,
a Kentucky corporation
By: /s/ Vic Grubb
----------------------------
Name: Vic Grubb
----------------------------
Title: Treasurer
----------------------------
2
<PAGE> 4
ANNEX A
All contracts transferred to Assignor pursuant to the Assignment of
Contracts, dated November 12, 1997, between Assignor and Addington Enterprises,
Inc., other than (i) the employment agreement between Don Brown and Addington
Enterprises, Inc., dated as of September 22, 1997, (ii) the employment agreement
between Keith Sieber and Addington Enterprises, Inc., dated as of November 1,
1997, (iii) the Aircraft Lease Agreement dated as of July 9, 1996, between
Provident Commercial Group, Inc. and Addington Enterprises, Inc. and all
amendments thereto, and (iv) the Finance Lease dated April 7, 1995, between PNC
Leasing Corp., Kentucky and Bowie Resources, Limited ("Bowie"), and assigned
from Bowie to Addington Enterprises, Inc.
3
<PAGE> 1
EXHIBIT 3.1(a)
CERTIFICATE OF INCORPORATION
OF
AEI HOLDING COMPANY, INC.
1. Name. The name of the Corporation shall be AEI Holding Company, Inc.
2. Registered Office and Agent. The Corporation's registered office in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of Newcastle. The name of its registered agent at
such address is The Corporation Trust Company.
3. Purpose. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
4. Capital Stock. The total number of shares of stock which the
Corporation shall have authority to issue is One Thousand (1,000) and the par
value of each such shares is Zero Dollars and One Cent ($0.01) amounting in the
aggregate to Ten Dollars and No Cents ($10.00).
5. Bylaws. The board of directors is authorized to make, alter or
repeal the bylaws of the Corporation.
6. Cumulative Voting. Cumulative voting shall not be allowed in the
election of directors.
7. Incorporator. The name and mailing address of the sole incorporator
is:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
8. Director Liability. No director shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such director as a director. Notwithstanding the foregoing sentence, a
director shall be liable, to the extent provided by applicable law, (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) as provided in Section 174 of
the Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. No amendment to or repeal of this
provision shall apply to or have
-1-
<PAGE> 2
any effect on the liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring before such
amendment.
9. Indemnification. Each person who is or becomes an executive officer
or director of the Corporation shall be indemnified and advanced expenses by the
Corporation with respect to all threatened, pending or completed actions, suits
or proceedings in which that person was, is, or is threatened to be made a named
defendant or respondent because he is or was a director or executive officer of
the Corporation. This Article obligates the Corporation to indemnify and advance
expenses to its executive officers or directors only in connection with
proceedings arising from that person's conduct in his official capacity with the
Corporation to the extent permitted by the General Corporation Law of the State
of Delaware, as amended from time to time. The indemnification and advancement
of expenses provided by this Article shall not be deemed exclusive of any other
rights to which directors and executive officers may be entitled under any
agreement, vote of shareholders or disinterested directors, or otherwise.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 19th day of September, 1997.
/s/ L.J. Vitalo
---------------------------------------
Sole Incorporator
-2-
<PAGE> 1
EXHIBIT 3.1(b)
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF AEI HOLDING COMPANY, INC.
December 11, 1997
AEI Holding Company, Inc., a Delaware corporation (the "Company"), does
hereby certify that the following amendment to the Certificate of Incorporation
of the Company has been duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of Delaware:
Section 4 of the Company's Certificate of Incorporation is amended to read
in its entirety as set forth below:
4. Capital Stock. The total number of shares of stock which
the Corporation shall have authority to issue is One Hundred
Thousand (100,000) and the par value of each of such shares
is Zero Dollars and One Cent ($0.01) amounting in the aggregate
to One Thousand Dollars ($1,000.00).
AEI HOLDING COMPANY, INC.
By: /s/ John Lynch
-----------------------------
John Lynch, Secretary
<PAGE> 1
EXHIBIT 3.1(c)
BYLAWS
OF
AEI HOLDING COMPANY, INC.
I certify that the following Bylaws, consisting of fifteen (15) pages,
each of which I have initialed for identification, are the Bylaws adopted by the
Board of Directors of AEI Holding Company, Inc. (the "Corporation") by a
Written Action by Directors in Lieu of Organizational Meeting, dated
October 20, 1997.
/s/ John Lynch
----------------------------------------
John Lynch, Secretary
1
<PAGE> 2
BYLAWS
OF
AEI HOLDING COMPANY, INC.
ARTICLE I
Offices
1. Business Offices. The Corporation may have one or more offices at
such place or places as the Board of Directors may from time to time determine
or as the business of the Corporation may require.
2. Principal Office. The initial principal office of the Corporation
shall be as set forth in the Articles of Incorporation. The Board of Directors,
from time to time, may change the principal office of the Corporation.
3. Registered Office. The registered office of the Corporation shall be
as set forth in the Articles of Incorporation, unless changed as provided by the
provisions of the Delaware General Corporation Law, as it may be amended from
time to time (the "DGCL").
ARTICLE II
Shareholders' Meetings
1. Annual Meetings. The annual meeting of shareholders for the election
of directors to succeed those whose terms expire and for the transaction of such
other business as may come before the meeting shall be held each year on March
15, at 10:00 a.m., local time at the place of the meeting fixed by the Board of
Directors, or, if not so fixed, at the principal office designated in the
Articles of Incorporation. If the day so fixed for such annual meeting shall not
be a business day or shall be a legal holiday at the place of the meeting, then
such meeting shall be held on the next succeeding business day at the same hour.
2. Special Meetings. Special meetings of shareholders for any purpose
or purposes, unless otherwise prescribed by statute or by the Articles of
Incorporation, may be called at any time by the President or by the Board of
Directors and shall be called by the President or the Secretary upon the request
(which shall state the purpose or purposes therefor) of a majority of the Board
of Directors or of the holders of shares representing not less than twenty
percent (20%) of all votes entitled to be cast on any issue proposed to be
considered at the meeting. The record date for determining the shareholders
entitled to demand a special meeting is the date of the earliest of any of the
demands pursuant to which the meeting is called, or the date that is 60 days
before the date the first of which demands is received, whichever is later.
Business transacted at any special meeting of shareholders shall be limited to
the purpose or purposes stated in the notice.
3. Place of Special Meetings. Special meetings of shareholders shall be
held at such place or places, as may be determined by the Board of Directors and
designated in the notice of the meeting, or, if no place is so determined and
designated in the notice, the place of the shareholders' meetings shall be the
principal office of the Corporation.
- ------------
Initials
1
<PAGE> 3
4. Notice of Meetings. Not less than 14 nor more than 60 days prior to
each annual or special meeting of shareholders, written notice of the meeting
shall be delivered to each shareholder entitled to vote at such meeting;
provided, however, that if the authorized shares of the Corporation are proposed
to be increased, at least 30 days' notice in like manner shall be given; and
provided, further, that if other or different notice is required by the DGCL,
the provisions of the DGCL shall govern. Notices shall be delivered by i)
personal delivery, ii) facsimile transmission, iii) registered or certified
mail, postage prepaid, return receipt requested; or (iv) nationally recognized
overnight or other express courier services. All notices shall be effective and
shall be deemed delivered (i) if by personal delivery, on the date of delivery
if delivered during normal business hours of the recipient, and if not delivered
during such normal business hours, on the next Business Day following delivery;
(ii) if by facsimile transmission, on the next Business Day following dispatch
of such facsimile; (iii) if by courier service, on the third Business Day after
dispatch of a notice addressed to the shareholder at the address of such
shareholder appearing in the stock transfer books of the Corporation and (iv) if
by mail, on the date of receipt. If three (3) successive letters mailed to the
last known address of any shareholder of record are returned as undeliverable,
no further notices to such shareholder shall be necessary until another address
for such shareholder is made known to the Corporation. The notice of any meeting
shall state the place, day and hour of the meeting. The notice of a special
meeting shall, in addition, state the meeting's purposes.
5. Shareholders List. A complete record of the shareholders entitled to
vote at such meeting (or an adjourned meeting described in Section 9 of this
Article II) arranged by voting groups and, within each voting group, in
alphabetical order, showing the address of each shareholder and the number of
shares registered in the name of each, shall be prepared by the officer or agent
of the Corporation who has charge of the stock transfer books of the
Corporation. The shareholders list shall be available for inspection by any
shareholder beginning on the earlier of ten (10) days before the meeting or two
(2) days after notice is given and continuing through the meeting and any
adjournment thereof, subject to the requirements of the DGCL. Such record shall
also be produced and kept at the time and place of the meeting during the whole
time thereof and subject to inspection for any purpose germane to the meeting by
any shareholder who may be present.
6. Organization. The President or, in the President's absence, any Vice
President shall call meetings of shareholders to order and act as chairperson of
such meetings. In the absence of said officers, any shareholder entitled to vote
at the meeting, or any proxy of any such shareholder, may call the meeting to
order and a chairperson shall be elected by a majority of the shareholders
present and entitled to vote at the meeting. The Secretary or any Assistant
Secretary of the Corporation or any person appointed by the chairperson may act
as secretary of such meetings.
7. Agenda and Procedure. The Board of Directors shall have the
responsibility of establishing an agenda for each meeting of shareholders,
subject to the rights of shareholders to raise matters for consideration which
may otherwise properly be brought before the meeting although not included
within the agenda. The chairperson shall be charged with the orderly conduct of
all meetings of shareholders.
8. Quorum. Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares exists with
respect to that matter. A majority of the votes entitled to be cast on the
matter by the voting group constitutes a quorum of that voting
- ------------
Initials
2
<PAGE> 4
group for action on that matter. In the absence of a quorum at any shareholder's
meeting, a majority of the shareholders present in person or represented by
proxy and entitled to vote at the meeting may adjourn the meeting from time to
time for a period not to exceed 120 days from the original date of the meeting
without further notice (except as provided in Section 9 of this Article II)
until a quorum shall be present or represented.
9. Adjournment. When a meeting is for any reason adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than 120 days
from the date of the original meeting, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each shareholder of record entitled to vote at the meeting.
10. Voting.
a. Except as provided in the Articles of Incorporation or the
DGCL, at every meeting of shareholders, or with respect to corporate action
which may be taken without a meeting, every shareholder shall be entitled to one
vote for each share of stock having voting power held of record by such
shareholder on the record date designated therefor pursuant to Section 3 of
Article X of these Bylaws (or for the record date established pursuant to
statute in the absence of such designation); provided, however, that the
cumulative system of voting for the election of directors shall not be allowed.
b. A shareholder may vote the shareholder's shares in person
or by proxy. A person may appoint a proxy in person or through an
attorney-in-fact and such appointment may be transmitted by telegram, teletype,
or other written statement of appointment permitted by the DGCL. The appointment
is effective for eleven months unless a different period is expressly provided
in the appointment form. An appointment shall be revocable unless coupled with
an interest including the appointment of any of the following: (1) a pledgee;
(2) a person who purchased or agreed to purchase the shares; (3) a creditor of
the Corporation who extended credit to the Corporation under terms requiring the
appointment; (4) an employee of the Corporation whose employment contract
requires the appointment; or (5) a party to a voting trust agreement.
c. The voting rights of fiduciaries, beneficiaries, pledgors,
pledgees and joint, common and other multiple owners of shares of stock shall be
as provided from time to time by the DGCL and any other applicable law.
d. Shares of the Corporation held of record by another
corporation that are entitled to vote may be voted by such officer, agent or
proxy as the bylaws of such other corporation may prescribe, or, in the absence
of such provision, as the Board of Directors of such corporation may determine.
e. When a quorum is present at any meeting of shareholders,
action on a matter by a voting group shall be approved if the shares entitled to
vote are cast so that the votes cast within the voting group favoring the action
exceed the votes cast opposing the action, unless the question is one upon which
by express provision of a statute, or the Articles of Incorporation, or these
- ------------
Initials
3
<PAGE> 5
Bylaws, a different vote is required, in which case such express provision shall
govern and control the decision on such question.
11. Inspectors. The chairperson of the meeting may at any time appoint
two or more inspectors to serve at a meeting of the shareholders. Such
inspectors shall decide upon the qualifications of voters, including the
validity of proxies, accept and count the votes for and against the questions
presented, report the results of such votes, and subscribe and deliver to the
secretary of the meeting a certificate stating the number of shares of stock
issued and outstanding and entitled to vote thereon and the number of shares
voted for and against the questions presented. The voting inspectors need not be
shareholders of the Corporation, and any director or officer of the Corporation
may be an inspector on any question other than a vote for or against such
director's or officer's election to any position with the Corporation or on any
other question in which such officer or director may be directly interested.
12. Meeting by Telecommunication. Any or all of the shareholders may
participate in any annual or special shareholders' meeting by, or the meeting
may be conducted through the use of, any means of communication by which all
persons participating in the meeting may hear each other during the meeting. Any
shareholder participating in a meeting by any such means of communication is
deemed to be present in person at the meeting.
ARTICLE III
Board of Directors
1. Election and Tenure. The business and affairs of the Corporation
shall be managed by a Board of Directors who shall be elected at the annual
meetings of shareholders or special meetings called for that purpose. In an
election of directors, the number of candidates equaling the number of directors
to be elected having the highest number of votes cast in favor of their election
shall be elected to the Board of Directors. Each director shall be elected to
serve and to hold office until the next succeeding annual meeting and until such
director's successor shall be elected and shall qualify, or until such
director's earlier death, resignation or removal.
2. Number and Qualification. The exact number of Directors may be
fixed, increased or decreased from time to time by a resolution adopted by the
majority vote of a quorum of shareholders who are present in person or by proxy
at a meeting held to elect Directors. Directors must be natural persons at least
eighteen years of age but need not be shareholders.
3. Annual Meetings. On the same day each year as, and immediately
following, the annual shareholders' meeting, the Board of Directors shall meet
for the purpose of organization, election of officers and the transaction of any
other business.
4. Regular Meetings. Regular meetings of the Board of Directors shall
be held on the 15th day of February, May, August and November, or the first
business day following each such date, at such time or times as may be
determined by the Board of Directors and specified in the notice of such
meetings.
- ------------
Initials
4
<PAGE> 6
5. Special Meetings. Special meetings may be called by the President or
any shareholder owning greater than twenty-five percent (25%) of the total
outstanding shares of the Corporation, and shall be called by the President or
the Secretary on the written request of any two directors.
6. Place of Meetings. Except as specifically set forth otherwise
herein, any meeting of the Board of Directors may be held at such place or
places either as shall from time to time be determined by the Board of Directors
and as shall be designated in the notice of the meeting.
7. Notice of Meetings. Notice of each meeting of directors, whether
annual, regular or special, shall be given to each director. If such notice is
given either (a) by personally delivering written notice to a director or (b) by
personally telephoning such director, it shall be so given at least ten (10)
days prior to the meeting. If such notice is given either (1) by depositing a
written notice by overnight courier service, postage prepaid, or (2) by
facsimile transmission, in all cases directed to such director at that person's
residence or place of business, it shall be so given at least fourteen (14) days
prior to the meeting. The notice shall state the place, date and hour thereof,
but need not, unless otherwise required by the DGCL, state the purposes of the
meeting.
8. Quorum. A majority of the number of directors fixed by or in
accordance with Section 2 of this Article III that are entitled to vote shall
constitute a quorum at all meetings of the Board of Directors. The vote of a
majority of the directors present and entitled to vote at a meeting at which a
quorum is present shall be the act of the Board of Directors, unless the express
provision of a statute, the Articles of Incorporation, or these Bylaws requires
a different vote, in which case such express provision shall govern and control.
In the absence of a quorum at any such meeting, a majority of the directors
present and entitled to vote may adjourn the meeting from time to time without
further notice, other than announcement at the meeting, until a quorum shall be
present.
9. Organization, Agenda and Procedure. The President, or in the
President's absence, any director chosen by a majority of the directors present,
shall act as chairperson of the meetings of the Board of Directors. The
Secretary, any Assistant Secretary, or any other person appointed by the
chairperson shall act as secretary of each meeting of the Board of Directors.
The agenda of and procedure for such meetings shall be as determined by the
Board of Directors. All proposed agenda topics and documents to be reviewed at
the annual meetings and the regular meetings shall be delivered to each director
at least fourteen (14) days prior to any such meeting.
10. Resignation. Any director of the Corporation may resign at any time
by giving written notice of such director's resignation to the Board of
Directors, the President, any Vice President or the Secretary of the
Corporation. Such resignation shall take effect at the date of receipt of such
notice or at any later time specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective, unless it so provides. A director who resigns may deliver to the
Secretary of State for filing a statement to that effect.
11. Removal. Except as otherwise provided in the Articles of
Incorporation or in these Bylaws, any director may be removed, either with or
without cause, at any time, by the affirmative vote of the holders of a majority
of the issued and outstanding shares of stock entitled to vote for the election
of directors of the Corporation at a special meeting of the shareholders called
and held for
- ------------
Initials
5
<PAGE> 7
such purpose; provided, however, that if less than the entire Board of Directors
is to be removed, and if cumulative voting of shares in the election of
directors is allowed, a director may not be removed if the votes entitled to be
cast against such director's removal would be sufficient to elect such director
if such votes were cumulatively voted for such director at an election of the
entire Board of Directors. A vacancy in the Board of Directors caused by any
such removal may be filled by the Corporation's shareholders at such meeting or,
if the shareholders at such meeting shall fail to fill such vacancy, by the
Board of Directors as provided in Section 12 of this Article III.
12. Vacancies. Except as provided in Section 11 of this Article III,
any vacancy occurring for any reason in the Board of Directors may be filled by
the affirmative vote of a majority of the directors then in office, though less
than a quorum of the Board of Directors, or by an election by the shareholders.
Any directorship to be filled by reason of an increase in the number of
directors shall be filled by the affirmative vote of a majority of the directors
then in office or by an election by the shareholders. A director elected to fill
a vacancy shall be elected for the unexpired term of such director's predecessor
in office and shall hold office until the expiration of such term and until a
successor shall be elected and shall qualify or until such director's earlier
death, resignation or removal. A director chosen to fill a position resulting
from an increase in the number of directors shall hold office until the next
annual meeting of shareholders and until a successor shall be elected and shall
qualify, or until such director's earlier death, resignation or removal. If the
vacant directorship was held by a director elected by a voting group of
shareholders, the vacancy shall be filled by either the vote of the holders of
shares of that voting group entitled to fill such vacancy or the majority vote
of any remaining Directors elected by that voting group.
13. Executive and Other Committees. The Board of Directors, by
resolution adopted by a majority of the number of directors fixed by or in
accordance with Section 2 of this Article III, may designate from among its
members an executive committee and one or more other committees each of which,
to the extent provided in the resolution and except as otherwise prescribed by
statute, shall have and may exercise all of the authority of the Board of
Directors in the management of the Corporation. Rules governing the procedures
for meetings of executive or other committees shall be as established by the
Board of Directors or by such committee. Notwithstanding the foregoing, no
committee shall: (a) authorize distributions; (b) approve or propose to
shareholders action that the DGCL requires to be approved by shareholders; (c)
fill vacancies on the Board of Directors or on any of its committees; (d) amend
the Articles of Incorporation; (e) adopt, amend, or repeal these Bylaws; (f)
approve a plan of merger not requiring shareholder approval; (g) authorize or
approve reacquisition of shares, except according to a formula or method
prescribed by the Board of Directors; or (h) authorize or approve the issuance
or sale of shares, or a contract for the sale of shares, or determine the
designation and relative rights, preferences, and limitations of a class or
series of shares; except that the Board of Directors may authorize a committee
or an officer to do so within limits specifically prescribed by the Board of
Directors.
14. Compensation of Directors. Each director shall be allowed such
amount per annum or such fixed sum for attendance at meetings of the Board of
Directors, executive or other committees, as may be from time to time fixed by
resolution of the Board of Directors, together with reimbursement for the
reasonable and necessary expenses incurred by such director in connection with
the performance of such director's duties (including, but not limited to,
expenses incurred in
- ------------
Initials
6
<PAGE> 8
attending meetings of the Board of Directors). Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity or any of its subsidiaries in any other capacity and receiving proper
compensation therefor.
ARTICLE IV
Waiver of Notice by Shareholders and Directors and Action
of Shareholders and Directors by Consent
1. Waiver of Notice. A shareholder may waive any notice required by the
DGCL or by the Articles of Incorporation or these Bylaws, and a director may
waive any notice of a directors meeting, whether before or after the date or
time stated in the notice as the date or time when any action will occur or has
occurred. The waiver shall be in writing, be signed by the shareholder or
director entitled to the notice, and be delivered to the Corporation for
inclusion in the minutes or filing with the corporate records, but such delivery
and filing shall not be conditions of the effectiveness of the waiver.
Attendance of a shareholder or the attendance or participation by a director at
a meeting (a) waives objection to lack of required notice or defective notice of
the meeting, unless the shareholder at the beginning of the meeting, or the
director, at the beginning of the meeting or promptly upon his or her later
arrival, objects to holding the meeting or transacting business at the meeting
because of lack of notice or defective notice, and, in the case of a director,
does not thereafter vote for or assent to action taken at the meeting, and (b)
waives objection to consideration of a particular matter at the meeting that is
not within the purpose or purposes described in the meeting notice, or of a
matter without special notice required by the DGCL, the Articles of
Incorporation, or these Bylaws, unless the shareholder or director objects to
considering the matter when it is presented and, in the case of a director, does
not thereafter vote for or assent to action taken at the meeting with respect to
such purpose.
2. Action Without a Meeting. Unless the Articles of Incorporation
require that such action be taken at a shareholders' meeting, any action
required or allowed to be taken at a meeting of the shareholders, directors or
members of an executive or other committee may be taken without a meeting if all
shareholders entitled to vote with respect to the subject matter, or all
directors entitled to vote with respect to the subject matter, or all members of
an executive or other committee, as the case may be, give written consent to the
specific action taken. The record date for determining shareholders entitled to
take action without a meeting is the date upon which a writing upon which the
action is to be taken is first received by the Corporation. Action taken without
a meeting shall be effective: (a) in the case of an action of shareholders, as
of the date the last writing necessary to effect the action is received by the
Corporation, unless all writings necessary to effect the action specify a later
date, in which case the later date shall be the date of the action; and (b) in
the case of other actions, action is taken when the last director signs a
writing describing the action taken unless before such time the Secretary has
received a written revocation of the consent of any other director, and any
action so taken shall be effective at the time taken unless the directors
specify a different effective date.
3. Meetings by Telecommunication. One or more members of the Board of
Directors or any committee designated by the Board of Directors may hold or
participate in a meeting of the Board of Directors or such committee through the
use of any means of communication by which all
- ------------
Initials
7
<PAGE> 9
persons participating can hear each other at the same time. Any director
participating in a meeting by any such means of communication is deemed to be
present in person at the meeting.
ARTICLE V
Officers
1. Election and Tenure. The officers of the Corporation shall consist
of a President, a Secretary and Treasurer, each of whom shall be appointed
annually by the Board of Directors. The Board of Directors may also designate
and appoint such other officers and assistant officers as may be deemed
necessary. The Board of Directors may delegate to any such officer the power to
appoint or remove subordinate officers, agents or employees. Any two or more
offices may be held by the same person. Each officer so appointed shall continue
in office until a successor shall be appointed and shall qualify, or until the
officer's earlier death, resignation or removal. Each officer shall be a natural
person who is eighteen years of age or older.
2. Resignation, Removal and Vacancies. Any officer may resign at any
time by giving written notice of resignation to the Board of Directors or the
President. Such resignation shall take effect when the notice is received by the
Corporation unless the notice specifies a later date, and acceptance of the
resignation shall not be necessary to render such resignation effective. Any
officer may at any time be removed by the affirmative vote of a majority of the
number of directors fixed by or in accordance with Section 2 of Article III of
these Bylaws, or by an executive committee of the Board of Directors. If any
office becomes vacant for any reason, the vacancy may be filled by the Board of
Directors. An officer appointed to fill a vacancy shall be appointed for the
unexpired term of such officer's predecessor in office and shall continue in
office until a successor shall be elected or appointed and shall qualify, or
until such officer's earlier death, resignation or removal. The appointment of
an officer shall not itself create contract rights in favor of the officer, and
the removal of an officer does not affect the officer's contract rights, if any,
with the Corporation and the resignation of an officer does not affect the
Corporation's contract rights, if any, with the officer.
3. President. The President shall be the chief executive officer of the
Corporation. The President shall (i) preside at meetings of the shareholders;
(ii) have general and active management of the business of the Corporation;
(iii) see that all orders and resolutions of the Board of Directors are carried
into effect; and (iv) perform all duties as may from time to time be assigned by
the Board of Directors.
4. Vice Presidents. The Vice Presidents, if any, shall perform such
duties and possess such powers as from time to time may be assigned to them by
the Board of Directors or the President. In the absence of the President or in
the event of the inability or refusal of the President to act, the Vice
President (or in the event there be more than one Vice President, the Vice
Presidents in the order designated by the Board of Directors, or in the absence
of any designation, then in the order of the election or appointment of the Vice
Presidents) shall perform the duties of the President and when so performing
shall have all the powers of and be subject to all the restrictions upon the
President.
5. Secretary. The Secretary shall perform such duties and shall have
such powers as may from time to time be assigned by the Board of Directors or
the President. In addition, the
- ------------
Initials
8
<PAGE> 10
Secretary shall perform such duties and have such powers as are incident to the
office of Secretary including, without limitation, the duty and power to give
notice of all meetings of shareholders and the Board of Directors, the
preparation and maintenance of minutes of the directors' and shareholders'
meetings and other records and information required to be kept by the
Corporation under Article XI and for authenticating records of the Corporation,
and to be custodian of the corporate seal and to affix and attest to the same on
documents, the execution of which on behalf of the Corporation is authorized by
these Bylaws or by the action of the Board of Directors.
6. Treasurer. The Treasurer shall perform such duties and shall have
such powers as may from time to time be assigned by the Board of Directors or
the President. In addition, the Treasurer shall perform such duties and have
such powers as are incident to the office of Treasurer including, without
limitation, the duty and power to keep and be responsible for all funds and
securities of the Corporation, to deposit funds of the Corporation in
depositories selected in accordance with these Bylaws, to disburse such funds as
ordered by the Board of Directors, making proper accounts thereof, and to render
as required by the Board of Directors statements of all such transactions as
Treasurer and of the financial condition of the Corporation.
7. Assistant Secretaries and Assistant Treasurers. The Assistant
Secretaries and Assistant Treasurers, if any, shall perform such duties as shall
be assigned to them by the Secretary or the Treasurer, respectively, or by the
President or the Board of Directors. In the absence, inability or refusal to act
of the Secretary or the Treasurer, the Assistant Secretaries or Assistant
Treasurers, respectively, in the order designated by the Board of Directors, or
in the absence of any designation, then in the order of their election or
appointment, shall perform the duties and exercise the powers of the Secretary
or Treasurer, as the case may be.
8. Bond of Officers. The Board of Directors may require any officer to
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for such terms and conditions as
the Board of Directors may specify, including without limitation for the
faithful performance of such officer's duties and for the restoration to the
Corporation of any property belonging to the Corporation in such officer's
possession or under the control of such officer.
9. Salaries. Officers of the Corporation shall be entitled to such
salaries, emoluments, compensation or reimbursement as shall be fixed or allowed
from time to time by the Board of Directors.
ARTICLE VI
Indemnification
1. Indemnification. To the extent permitted or required by the DGCL and
any other applicable law, if any director or officer of the Corporation is made
a party to or is involved in any proceeding because such person is or was a
director or officer of the Corporation, the Corporation shall (a) indemnify such
person from and against any liability, including but not limited to expenses of
investigation and preparation, expenses in connection with appearance as a
witness and fees and disbursements of counsel, accountants or other experts,
incurred by such person in such proceeding, and (b) advance to such person
expenses incurred in such proceeding. The Corporation may in its
- ------------
Initials
9
<PAGE> 11
discretion, but is not obligated in any way to, indemnify and advance expenses
to an employee or agent of the Corporation to the same extent as to a director
or officer, and the Corporation may indemnify an employee, fiduciary, or agent
of the Corporation to a greater extent than expressly permitted herein for
officers and directors, provided such indemnification is not in violation of
public policy.
2. Provisions Not Exclusive. The foregoing provisions for
indemnification and advancement of expenses are not exclusive, and the
Corporation may at its discretion provide for indemnification or advancement of
expenses in a resolution of its shareholders or directors, in a contract or in
its Articles of Incorporation.
3. Effect of Modification of DGCL. Any repeal or modification of the
foregoing provisions of this Article for indemnification or advancement of
expenses shall not affect adversely any right or protection stated in such
provisions with respect to any act or omission occurring prior to the time of
such repeal or modification. If any provision of this Article or any part
thereof shall be held to be prohibited by or invalid under applicable law, such
provision or part thereof shall be deemed amended to accomplish the objectives
of the provision or part thereof as originally written to the fullest extent
permitted by law and all other provisions or parts shall remain in full force
and effect.
4. Definitions. As used in this Article, the following terms have the
following meanings:
(a) DGCL. When used with reference to an act or omission
occurring prior to the effectiveness of any amendment to the DGCL after the
effectiveness of the adoption of this Article, the term "DGCL" shall include
such amendment only to the extent that the amendment permits a Corporation to
provide broader indemnification rights than the DGCL permitted prior to the
amendment.
(b) Corporation. The term "Corporation" includes any domestic
or foreign entity that is a predecessor of the Corporation by reason of a merger
or other transaction in which the predecessor's existence ceased upon
consummation of the transaction.
(c) Director or Officer. A "director" or "officer" is an
individual who is or was a director or officer of the Corporation or an
individual who, while a director or officer of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, fiduciary, or agent of another domestic or foreign corporation or
other person or of an employee benefit plan. A director or officer is considered
to be serving an employee benefit plan at the Corporation's request if his or
her duties to the Corporation also impose duties on, or otherwise involve
services by, the director or officer to the plan or to participants in or
beneficiaries of the plan. The terms "director" and "officer" include, unless
the context requires otherwise, the estate or personal representative of a
director, of officer, as applicable.
(d) Liability. The term "liability" means the obligation
incurred with respect to a proceeding to pay a judgment, settlement, penalty,
fine (including any excise tax assessed with respect to an employee benefit
plan), or reasonable expenses.
- ------------
Initials
10
<PAGE> 12
(e) Proceeding. The term "proceeding" means any threatened,
pending or completed action, suit, or proceeding whether civil, criminal,
administrative or investigative, and whether formal or informal.
5. Insurance. The Corporation may purchase and maintain insurance on
behalf of a person who is or was a director, officer, employee, fiduciary, or
agent of the Corporation, or who, while a director, officer, employee,
fiduciary, or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, fiduciary, or
agent of another domestic or foreign corporation or other person or of an
employee benefit plan, against liability asserted against or incurred by the
person in that capacity or arising from his or her status as a director,
officer, employee, fiduciary, or agent, whether or not the Corporation would
have power to indemnify the person against the same liability under the DGCL.
Any such insurance may be procured from any insurance company designated by the
Board of Directors, whether such insurance company is formed under the laws of
the state of Delaware or any other jurisdiction of the United States or
elsewhere, including any insurance company in which the Corporation has an
equity or any other interest through stock ownership or otherwise.
6. Expenses as a Witness. The Corporation may pay or reimburse expenses
incurred by a director, officer, employee, fiduciary, or agent in connection
with an appearance as a witness in a proceeding at a time when he or she has not
been made a named defendant or respondent in the proceeding.
7. Notice to Shareholders. If the Corporation indemnifies or advances
expenses to a director under this Article in connection with a proceeding by or
in the right of the Corporation, the Corporation shall give written notice of
the indemnification or advance to the shareholders with or before the notice of
the next shareholders' meeting. If the next shareholder action is taken without
a meeting at the instigation of the Board of Directors, such notice shall be
given to the shareholders at or before the time the first shareholder signs a
writing consenting to such action.
ARTICLE VII
Execution of Instruments; Loans; Checks and
Endorsements; Deposits; Proxies
1. Execution of Instruments. The President or any Vice President shall
have the power to execute and deliver on behalf of and in the name of the
Corporation any instrument requiring the signature of an officer of the
Corporation, except as otherwise provided in these Bylaws or when the execution
and delivery of the instrument shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. Unless authorized
to do so by these Bylaws or by the Board of Directors, no officer, agent or
employee shall have any power or authority to bind the Corporation in any way,
to pledge its credit or to render it liable pecuniarily for any purpose or in
any amount.
2. Borrowing. No loan shall be contracted on behalf of the Corporation,
and no evidence of indebtedness shall be issued, endorsed or accepted in its
name, unless authorized by the Board of Directors or a committee designated by
the Board of Directors so to act. Such authority may be general or confined to
specific instances. When so authorized, an officer may (a) effect
- ------------
Initials
11
<PAGE> 13
loans at any time for the Corporation from any bank or other entity and for such
loans may execute and deliver promissory notes or other evidences of
indebtedness of the Corporation; and (b) mortgage, pledge or otherwise encumber
any real or personal property, or any interest therein, owned or held by the
Corporation as security for the payment of any loans or obligation of this
Corporation, and to that end may execute and deliver for the Corporation such
instruments as may be necessary or proper in connection with such transaction.
3. Loans to Directors, Officers and Employees. The Corporation may lend
money to, guarantee the obligations of and otherwise assist directors, officers
and employees of the Corporation, or directors of another corporation of which
the Corporation owns a majority of the voting stock, only upon compliance with
the requirements of the DGCL.
4. Checks and Endorsements. All checks, drafts or other orders for the
payment of money, obligations, notes or other evidences of indebtedness, bills
of lading, warehouse receipts, trade acceptances and other such instruments
shall be signed or endorsed for the Corporation by such officers or agents of
the Corporation as shall from time to time be determined by resolution of the
Board of Directors, which resolution may provide for the use of facsimile
signatures.
5. Deposits. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the Corporation's credit in such banks or
other depositories as shall from time to time be determined by resolution of the
Board of Directors, which resolution may specify the officers or agents of the
Corporation who shall have the power, and the manner in which such power shall
be exercised, to make such deposits and to endorse, assign and deliver for
collection and deposit checks, drafts and other orders for the payment of money
payable to the Corporation or its order.
6. Proxies. Unless otherwise provided by resolution adopted by the
Board of Directors, the President or any Vice President: (a) may from time to
time appoint one or more agents of the Corporation, in the name and on behalf of
the Corporation, (i) to cast the votes which the Corporation may be entitled to
cast as the holder of stock or other securities in any other corporation,
association or other entity whose stock or other securities may be held by the
Corporation, at meetings of the holders of the stock or other securities of such
other corporation, association or other entity, or (ii) to consent in writing to
any action by such other corporation, association or other entity; (b) may
instruct the person so appointed as to the manner of casting such votes or
giving such consent; and (c) may execute or cause to be executed in the name and
on behalf of the Corporation and under its corporate seal, or otherwise, all
such written proxies or other instruments as may be deemed necessary or proper.
ARTICLE VIII
Shares of Stock
1. Certificates of Stock. The shares of the Corporation may, but need
not, be represented by certificates. Unless the DGCL or another law expressly
provides otherwise, the fact that the shares are not represented by certificates
shall have no effect on the rights and obligations of shareholders. If the
shares are represented by certificates, such certificates shall be signed by the
President and the Secretary or Treasurer or such other representatives of the
Corporation as are
- ------------
Initials
12
<PAGE> 14
designated by the Board of Directors; provided, however, that where such
certificate is signed or countersigned by a transfer agent or registrar (both of
which may be the Corporation itself or any employee of the Corporation) the
signatures of such officers of the Corporation may be in facsimile form. In case
any officer of the Corporation who shall have signed, or whose facsimile
signature shall have been placed on, any certificate shall cease for any reason
to be such officer before such certificate shall have been issued or delivered
by the Corporation, such certificate may nevertheless be issued and delivered by
the Corporation as though the person who signed such certificate, or whose
facsimile signature shall have been placed thereon, had not ceased to be such
officer of the Corporation. Every certificate representing shares issued by the
Corporation shall state the number of shares owned by the holder in the
Corporation, shall designate the class of stock to which such shares belong, and
shall otherwise be in such form as is required by law and as the Board of
Directors shall prescribe.
2. Shares Without Certificates. The Board of Directors may authorize
the issuance of any class or series of shares of the Corporation without
certificates. Such authorization shall not affect shares already represented by
certificates until they are surrendered to the Corporation. Within a reasonable
time following the issue or transfer of shares without certificates, the
Corporation shall send the shareholder a complete written statement of the
information required on certificates by the DGCL.
3. Record. A record shall be kept of the name of each person or entity
holding the stock represented by each certificate for shares of the Corporation
issued, the number of shares represented by each such certificate, the date
thereof and, in the case of cancellation, the date of cancellation. The person
or other entity in whose name shares of stock stand on the books of the
Corporation shall be deemed the owner thereof, and thus a holder of record of
such shares of stock, for all purposes as regards the Corporation.
4. Transfer of Stock. Transfers of shares of the stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by such registered holder's attorney thereunto authorized,
and on the surrender of the certificate or certificates for such shares properly
endorsed.
5. Transfer Agents and Registrars; Regulations. The Board of Directors
may appoint one or more transfer agents or registrars with respect to shares of
the stock of the Corporation. The Board of Directors may make such rules and
regulations as it may deem expedient and as are not inconsistent with these
Bylaws, concerning the issue, transfer and registration of certificates for
shares of the stock of the Corporation.
6. Lost, Destroyed or Mutilated Certificates. In case of the alleged
loss, destruction or mutilation of a certificate representing stock of the
Corporation, a new certificate may be issued in place thereof, in such manner
and upon such terms and conditions as the Board of Directors may prescribe, and
shall be issued in such situations as required by the DGCL.
- ------------
Initials
13
<PAGE> 15
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall be the year established by the
Board of Directors.
ARTICLE X
Corporate Books and Records
1. Corporate Books. The books and records of the Corporation may be
kept at such place or places as may be from time to time designated by the Board
of Directors.
2. Addresses of Shareholders. Each shareholder shall furnish to the
Secretary of the Corporation or the Corporation's transfer agent an address to
which notices from the Corporation, including notices of meetings, may be
directed and if any shareholder shall fail so to designate such an address, it
shall be sufficient for any such notice to be directed to such shareholder at
such shareholder's address last known to the Secretary or transfer agent.
3. Fixing Record Date. The Board of Directors may fix in advance a date
as a record date for the determination of the shareholders entitled to a notice
of or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent (or dissent) to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action. Such record date shall not be
more than 50 nor less than 10 days before the date of such meeting, nor more
than 10 days prior to any other action to which the same relates. Only such
shareholders as shall be shareholders of record on the date so fixed shall be so
entitled with respect to the matter to which the same relates. If the Board of
Directors shall not fix a record date as above provided, and if the Board of
Directors shall not for such purpose close the stock transfer books as provided
by statute, then the record date shall be established by statute in such cases
made and provided.
4. Inspection of Books and Records. Any person who has been a holder of
record of shares of the Corporation (or of voting trust certificates
representing such shares) for at least three months immediately preceding such
holder's demand or who is the holder of record of, or the holder of record of
voting trust certificates representing, at least five percent (5%) of all
outstanding shares of the Corporation, has the right, upon written demand
stating the purpose thereof, to examine, in person or by agent or attorney, at
any reasonable time and for any proper purpose, the Corporation's books and
records of account, minutes and record of holders of shares (and of voting trust
certificates therefor) and to make extracts therefrom.
5. Distribution of Financial Statements. Upon the written request of
any shareholder of the Corporation, the Corporation shall mail to such
shareholder its last annual and most recently published financial statement.
6. Audits of Books and Accounts. The Corporation's books and accounts
shall be audited at such times and by such auditors as shall be specified and
designated by unanimous resolution of the Board of Directors.
- ------------
Initials
14
<PAGE> 16
ARTICLE XI
Emergency Bylaws and Actions
Subject to repeal or change by action of the shareholders, the Board of
Directors may adopt emergency bylaws and exercise other powers in accordance
with and pursuant to the provisions of the DGCL.
ARTICLE XII
Amendments
Unless the Articles of Incorporation or a particular Bylaw reserves the
right to amend the Bylaw to the shareholders, and subject to repeal or change by
action of the shareholders, either the Board of Directors or the Shareholders
shall have the power to alter, amend or repeal these Bylaws or adopt new bylaws.
- ------------
Initials
15
<PAGE> 1
EXHIBIT 3.1(d)
AEI HOLDING COMPANY, INC.
Written Action by Shareholders
in Lieu of Meeting
December 10, 1997
The undersigned, being all of the shareholders of AEI Holding Company,
Inc., a Delaware corporation (the "Corporation"), pursuant to Section 228 of the
General Corporation Law of Delaware, hereby waive notice of the time, place and
purpose of a meeting, adopt the following resolutions and consent to the
corporate actions contemplated thereby:
WHEREAS, the shareholders of the Corporation desire to adopt the
following amendment to the Corporation's Bylaws (the "Amendment"):
Article IV, Section 2 of the Corporation's Bylaws is amended
to read in its entirety as set forth below:
2. Action Without a Meeting.
(a) Unless the Corporation's Certificate of Incorporation
requires that such action be taken at a shareholders' meeting,
any action required or allowed to be taken at an annual or
special meeting of the shareholders of the Corporation may be
taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the
action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a
meeting at which at which all shares entitled to vote thereon
were present and voted and shall be delivered to the
Corporation by delivery to its registered office in Delaware,
its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of
meetings of shareholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. Such
action shall be effective as of the time the last writing
necessary to effect the action is received by the Corporation,
unless all writings necessary to effect the action specify a
later time, in which case the later time shall be the time of
the action. The record date for determining shareholders
entitled to take action without a meeting is the date upon
which a writing upon which the action is to be taken is first
received by the Corporation. Prompt notice of the taking of
corporate action without a meeting by less than
<PAGE> 2
unanimous written consent shall be given to those shareholders
who have not consented in writing.
(b) Unless otherwise restricted by the Corporation's
Certificate of Incorporation, any action required or permitted
to be taken at any meeting of the board of directors, or any
committee thereof may be taken without a meeting if all
members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee. Such
action shall be effective as of the time the last director
signs a writing describing the action taken unless before such
time the Secretary has received a written revocation of the
consent of any other director, and any action so taken shall
be effective at the time taken unless the directors specify a
different effective time.
WHEREAS, the shareholders of the Corporation believe it to be in the
best interests of the Corporation to adopt and approve the Amendment;
NOW, THEREFORE, BE IT RESOLVED, that the Amendment is hereby adopted
and approved.
/s/ LARRY ADDINGTON
---------------------------
LARRY ADDINGTON
ADDINGTON ENTERPRISES, INC.
By: /s/ Don Brown
--------------------
Title: President
<PAGE> 1
EXHIBIT 3.2(a)
ARTICLES OF INCORPORATION
OF
BOWIE RESOURCES LIMITED
The undersigned, acting as the incorporator of a corporation to
be incorporated under the laws of the State of Colorado, adopts these
Articles of Incorporation.
Article I.
Name
The name of the Corporation is Bowie Resources Limited.
Article II.
Authorized Capital
The Corporation shall have authority to issue 1,000 shares of common
stock with a par value of $.01 per share.
Article III.
Agent -- Offices
A. Initial Registered Agent. The street address of the initial
registered office of the Corporation is 1535 Grant Street, Suite 140, Denver,
CO 80202, and the name of the initial registered agent at that address is
Search Company International. The written consent of the initial registered
agent to the appointment as such is stated below.
B. Initial Principal Office. The address of the Corporation's
initial principal office is 1535 Grant Street, Suite 140, Denver, CO 80202.
Article IV.
Incorporator
The name and address of the incorporator is Amy Waters an individual,
555 17th Street, Suite 2900, Denver, CO 80002.
<PAGE> 2
Article V.
Purpose - Powers
A. Purpose. The purpose for which the Corporation is organized
is to transact any lawful business or businesses for which corporations may be
incorporated pursuant to the Colorado Business Corporation Act.
B. Powers. The Corporation shall have and may exercise all
powers and rights granted or otherwise provided for by the Colorado Business
Corporation Act, including, but not limited to, ail powers necessary or
convenient to effect the Corporation's purpose.
Article VI.
Preemptive Rights
The Corporation elects to have preemptive rights.
Article VII.
Board of Directors
The corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation shall be managed under the
direction of, a board of directors. The directors shall be elected at each
annual meeting of the shareholders, provided that vacancies may be filled by
election by the remaining directors, though less than a quorum, or by the
shareholders at a special meeting called for that purpose. Despite the
expiration of his or her term, a director continues to serve until his or her
successor is elected and qualifies.
Article VIII.
Cumulative Voting
Cumulative voting shall not be permitted in the election of directors.
Article IX.
Limitation on Director Liability
A director of the Corporation shall not be personally liable to the
Corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director; except that this provision shall not eliminate or limit the
liability of a director to the Corporation or to its shareholders for monetary
damages otherwise existing for (i) any breach of the director's
2
<PAGE> 3
duty of loyalty to the Corporation or to its shareholders; (ii) acts or
omissions no in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) acts specified in Section 7-108-403 of the Colorado
Business Corporation Act; or (iv) any transaction from which the director
directly or indirectly derived any improper personal benefit. If the Colorado
Business Corporation Act is hereafter amended to eliminate or limit further the
liability of a director, then, in addition to the elimination and limitation of
liability provided by the preceding sentence, the liability of each director of
the Corporation shall be eliminated or limited to the fullest extent permitted
by the Colorado Business Corporation Act as so amended. Any repeal or
modification of this Article IX shall not adversely affect any right or
protection of a director of the Corporation under this Article IX, as in effect
immediately prior to such repeal or modification, with respect to any liability
that would have accrued, but for this Article IX, prior to such repeal or
modification.
Article X.
Indemnification
The Corporation may indemnify, to the fullest extent permitted by
applicable law in effect from time to time, any person, and the estate and
personal representative of any such person, against all liability and expense
(including attorneys' fees) incurred by reason of the fact that such person is
or was a director, officer, fiduciary, or agent of the Corporation or, while
serving as a director, officer, fiduciary, or agent of the Corporation, is or
was serving at the request of the Corporation as a director, officer, partner,
trustee, employee, fiduciary, or agent of, or in any similar managerial or
fiduciary position of, another domestic or foreign corporation or other
individual or entity or of an employee benefit plan to the extent and in the
manner provided in any bylaw, resolution of the directors, resolution of the
shareholders, contract, or otherwise, so long as such indemnification is
legally permissible.
Article XI.
Quorum and Voting Requirements for Shareholders' Meetings
A. Quorum. A majority of the outstanding shares shall constitute a
quorum at any meeting of shareholders.
B. Voting. Except as is otherwise provided by the Colorado Business
Corporation Act with respect to action on amendment to these articles of
incorporation, on a plan of merger or share exchange, on the disposition of
substantially all of the property of the Corporation, on the granting of
consent to the disposition of property by an entity controlled by the
Corporation, and on the dissolution of the Corporation, action on a matter
other than the election of directors is approved if a quorum exists and if the
votes cast favoring the action exceed the votes cast opposing the action.
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned incorporator who is a natural
person over the age of eighteen years has executed these Articles of
Incorporation on November 4, 1994.
Name: /s/ Amy Waters
------------------------
Amy Waters, Incorporator
4
<PAGE> 5
CONSENT OF REGISTERED AGENT
The undersigned initial registered agent of Bowie Resources Limited
does hereby confirm the address for such agent and consent to such registered
agent's appointment as such registered agent, all as set forth in Article III,
above, as provided in Section 7-102-lO2(l)(f) of the Colorado Business
Corporation Act.
SEARCH COMPANY INTERNATIONAL
By: /s/ Juditha Ohlmacher
------------------------
Name: JUDITHA OHLMACHER
---------------------
Title: ASST. SECRETARY
---------------------
5
<PAGE> 1
EXHIBIT 3.2(b)
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Bowie Resources Limited.
SECOND: The following amendment to the Articles of Incorporation was adopted on
January 15, 1995, as prescribed by the Colorado Business Corporation Act, in
the manner marked with an X below:
X Such amendment was adopted by the board of directors where shares have been
- --- issued.
If these amendments are to have a delayed effective date, please list that date:
NA
- -----------
(Not to exceed ninety (90) days from the date of filing)
THIRD: The manner, if not set forth in such amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows:
Article II is hereby deleted in its entirety and replaced with the
following new Article II.
Article II. Authorized Capital.
The Corporation shall have the authority to issue 100,000 shares of common
stock with a par value of $.01 per share.
Bowie Resources Limited,
a Colorado corporation
By /s/ Larry Addington
---------------------------------
Larry Addington, President
<PAGE> 1
EXHIBIT 3.2(c)
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
BOWIE RESOURCES, LIMITED
Pursuant to the provisions of the Colorado Business Corporation Act,
BOWIE RESOURCES, LIMITED hereby adopts the following Articles of Amendment to
its Articles of Incorporation as follows:
1. The name of the corporation is Bowie Resources, Limited (the
"Corporation").
2. Article VIII of the Corporation's Articles of Incorporation, as
amended or restated to date, is deleted in its entirety and replaced with the
following new Article VIII:
"Article VIII.
Cumulative Voting
Cumulative voting shall be required in the election of
directors of the Corporation."
3. This amendment was authorized by the shareholders on
__________________, 1997, pursuant to the provisions of the Colorado Business
Corporation Act.
4. There were _____ common shares of the Corporation issued,
outstanding and entitled to vote on the amendment. Of these shares, _____ were
indisputably represented and cast in favor of the amendment. The number of votes
cast in favor of the amendment was sufficient for approval.
IN WITNESS WHEREOF, the undersigned duly authorized officer of the
Corporation has executed these Articles of Amendment to Articles of
Incorporation of Bowie Resources, Limited.
BOWIE RESOURCES, LIMITED
By: /s/ Larry A. Addington
-----------------------------------
Larry A. Addington, President
THIS INSTRUMENT PREPARED BY:
ATTORNEY FOR BOWIE RESOURCES, LIMITED
- 1 -
<PAGE> 1
EXHIBIT 3.2(d)
AMENDED AND RESTATED BYLAWS
OF
BOWIE RESOURCES LIMITED
(a Colorado Corporation)
ARTICLE I
Offices
1. Business Offices. The Corporation may have one or more offices at
such place or places within or outside the State of Colorado as the Board of
Directors may from time to time determine or as the business of the Corporation
may require.
2. Principal Office. The initial principal office of the Corporation
shall be as set forth in the Articles of Incorporation. The Board of Directors,
from time to time, may change the principal office of the Corporation.
3. Registered Office. The registered office of the Corporation shall be
as set forth in the Articles of Incorporation, unless changed as provided by the
provisions of the Colorado Business Corporation Act, as it may be amended from
time to time (the "Act").
ARTICLE II
Business of the Corporation
The business of the Corporation shall be limited solely to conducting
coal mining, high-wall mining, and orchard operations, and carrying on any and
all activities related thereto.
1
<PAGE> 2
ARTICLE III
Shareholders' Meetings
1. Annual Meetings. The annual meeting of shareholders for the election
of directors to succeed those whose terms expire and for the transaction of such
other business as may come before the meeting shall be held each year on
November 15, at 10:00 a.m., local time at the place of the meeting fixed by the
Board of Directors, or, if not so fixed, at the principal office designated in
the Articles of Incorporation. If the day so fixed for such annual meeting shall
not be a business day or shall be a legal holiday at the place of the meeting,
then such meeting shall be held on the next succeeding business day at the same
hour.
2. Special Meetings. Special meetings of shareholders for any purpose
or purposes, unless otherwise prescribed by statute or by the Articles of
Incorporation, may be called at any time by the President or by the Board of
Directors and shall be called by the President or the Secretary upon the request
(which shall state the purpose or purposes therefor) of a majority of the Board
of Directors or of the holders of shares representing not less than ten percent
(10%) (or, in the event of any merger or other consolidation, the percentage
ownership interest in the entity surviving such merger or other consolidation
that a ten percent (10%) shareholder in the Corporation would have received in
such merger or consolidation) of all votes entitled to be cast on any issue
proposed to be considered at the meeting. The record date for determining the
shareholders entitled to demand a special meeting is the date of the earliest of
any of the demands pursuant to which the meeting is called, or the date that is
60 days before the date the first of which demands is received, whichever is
later. Business transacted at any special meeting of shareholders shall be
limited to the purpose or purposes stated in the notice.
3. Place of Special Meetings. Special meetings of shareholders shall be
held at such place or places, within or outside the State of Colorado, as may be
determined by the Board of
2
<PAGE> 3
Directors and designated in the notice of the meeting, or, if no place is so
determined and designated in the notice, the place of the shareholders' meetings
shall be the principal office of the Corporation.
4. Notice of Meetings. Not less than 14 nor more than 60 days prior to
each annual or special meeting of shareholders, written notice of the meeting
shall be delivered to each shareholder entitled to vote at such meeting;
provided, however, that if the authorized shares of the Corporation are proposed
to be increased, at least 30 days' notice in like manner shall be given; and
provided, further, that if other or different notice is required by the Act (as
in the case of the sale, lease or exchange of the Corporation's assets other
than in the usual and regular course of business, or the merger, consolidation
or dissolution of the Corporation) the provisions of the Act shall govern.
Notices shall be delivered by i) personal delivery, ii) facsimile transmission,
iii) registered or certified mail, postage prepaid, return receipt requested; or
(iv) nationally recognized overnight or other express courier services. All
notices shall be effective and shall be deemed delivered (i) if by personal
delivery, on the date of delivery if delivered during normal business hours of
the recipient, and if not delivered during such normal business hours, on the
next Business Day following delivery; (ii) if by facsimile transmission, on the
next Business Day following dispatch of such facsimile; (iii) if by courier
service, on the third Business Day after dispatch of a notice addressed to the
shareholder at the address of such shareholder appearing in the stock transfer
books of the Corporation and (iv) if by mail, on the date of receipt. If three
(3) successive letters mailed to the last known address of any shareholder of
record are returned as undeliverable, no further notices to such shareholder
shall be necessary until another address for such shareholder is made known to
the Corporation. The notice of any meeting shall state the place, day and hour
of the meeting. The notice of a special meeting shall, in addition, state the
meeting's purposes.
5. Shareholders List. A complete record of the shareholders entitled to
vote at such meeting (or an adjourned meeting described in Section 9 of this
Article III) arranged by voting
3
<PAGE> 4
groups and, within each voting group, in alphabetical order, showing the address
of each shareholder and the number of shares registered in the name of each,
shall be prepared by the officer or agent of the Corporation who has charge of
the stock transfer books of the Corporation. The shareholders list shall be
available for inspection by any shareholder beginning on the earlier of ten (10)
days before the meeting or two (2) days after notice is given and continuing
through the meeting and any adjournment thereof, subject to the requirements of
Article 116 of the Act. Such record shall also be produced and kept at the time
and place of the meeting during the whole time thereof and subject to inspection
for any purpose germane to the meeting by any shareholder who may be present.
6. Organization. The President or, in the President's absence, any Vice
President shall call meetings of shareholders to order and act as chairperson of
such meetings. In the absence of said officers, any shareholder entitled to vote
at the meeting, or any proxy of any such shareholder, may call the meeting to
order and a chairperson shall be elected by a majority of the shareholders
present and entitled to vote at the meeting. The Secretary or any Assistant
Secretary of the Corporation or any person appointed by the chairperson may act
as secretary of such meetings.
7. Agenda and Procedure. The Board of Directors shall have the
responsibility of establishing an agenda for each meeting of shareholders,
subject to the rights of shareholders to raise matters for consideration which
may otherwise properly be brought before the meeting although not included
within the agenda. The chairperson shall be charged with the orderly conduct of
all meetings of shareholders.
8. Quorum. Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares exists with
respect to that matter. A majority of the votes entitled to be cast on the
matter by the voting group constitutes a quorum of that voting group for action
on that matter. In the absence of a quorum at any shareholder's meeting, a
majority of the shareholders present in person or represented by proxy and
entitled to vote at the meeting may
4
<PAGE> 5
adjourn the meeting from time to time for a period not to exceed 120 days from
the original date of the meeting without further notice (except as provided in
Section 9 of this Article III) until a quorum shall be present or represented.
9. Adjournment. When a meeting is for any reason adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than 120 days
from the date of the original meeting, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each shareholder of record entitled to vote at the meeting.
10. Voting.
a. Except as provided in the Articles of Incorporation or the
Act, at every meeting of shareholders, or with respect to corporate action which
may be taken without a meeting, every shareholder shall be entitled to one vote
for each share of stock having voting power held of record by such shareholder
on the record date designated therefor pursuant to Section 3 of Article XII of
these Bylaws (or for the record date established pursuant to statute in the
absence of such designation).
b. A shareholder may vote the shareholder's shares in person
or by proxy. A person may appoint a proxy in person or through an
attorney-in-fact and such appointment may be transmitted by telegram, teletype,
or other written statement of appointment permitted by the Act. The appointment
is effective for eleven months unless a different period is expressly provided
in the appointment form. An appointment shall be revocable unless coupled with
an interest including the appointment of any of the following: (1) a pledgee;
(2) a person who purchased or agreed to purchase the shares; (3) a creditor of
the Corporation who extended credit to the Corporation under
5
<PAGE> 6
terms requiring the appointment; (4) an employee of the Corporation whose
employment contract requires the appointment; or (5) a party to a voting trust
agreement.
c. The voting rights of fiduciaries, beneficiaries, pledgors,
pledgees and joint, common and other multiple owners of shares of stock shall be
as provided from time to time by the Act and any other applicable law.
d. Shares of the Corporation held of record by another
corporation that are entitled to vote may be voted by such officer, agent or
proxy as the bylaws of such other corporation may prescribe, or, in the absence
of such provision, as the Board of Directors of such corporation may determine.
e. When a quorum is present at any meeting of shareholders,
action on a matter (other than the election of directors) by a voting group
shall be approved if the shares entitled to vote are cast so that the votes cast
within the voting group favoring the action exceed the votes cast opposing the
action, unless the question is one upon which by express provision of a statute,
or the Articles of Incorporation, or these Bylaws, a different vote is required,
in which case such express provision shall govern and control the decision on
such question.
f. At each election for directors, each shareholder entitled
to vote at such election shall have the right to cast, in person or by proxy, as
many votes in the aggregate as such shareholder shall be entitled to vote under
the Articles of Incorporation, multiplied by the number of directors to be
elected at such election; and each shareholder may cast the whole number of
votes for one (1) candidate, or distribute such votes among two (2) or more
candidates. Such directors shall not be elected in any other manner.
11. Inspectors. The chairperson of the meeting may at any time appoint
two or more inspectors to serve at a meeting of the shareholders. Such
inspectors shall decide upon the qualifications of voters, including the
validity of proxies, accept and count the votes for and against
6
<PAGE> 7
the questions presented, report the results of such votes, and subscribe and
deliver to the secretary of the meeting a certificate stating the number of
shares of stock issued and outstanding and entitled to vote thereon and the
number of shares voted for and against the questions presented. The voting
inspectors need not be shareholders of the Corporation, and any director or
officer of the Corporation may be an inspector on any question other than a vote
for or against such director's or officer's election to any position with the
Corporation or on any other question in which such officer or director may be
directly interested.
12. Meeting by Telecommunication. Any or all of the shareholders may
participate in any annual or special shareholders' meeting by, or the meeting
may be conducted through the use of, any means of communication by which all
persons participating in the meeting may hear each other during the meeting. Any
shareholder participating in a meeting by any such means of communication is
deemed to be present in person at the meeting.
ARTICLE IV
Board of Directors
1. Election and Tenure. The business and affairs of the Corporation
shall be managed by a Board of Directors who shall be elected at the annual
meetings of shareholders or special meetings called for that purpose. In an
election of directors, the number of candidates equaling the number of directors
to be elected having the highest number of votes cast in favor of their election
shall be elected to the Board of Directors. Each director shall be elected to
serve and to hold office until the next succeeding annual meeting and until such
director's successor shall be elected and shall qualify, or until such
director's earlier death, resignation or removal.
7
<PAGE> 8
2. Number and Qualification. The Board of Directors shall consist of
four (4) members. Directors must be natural persons at least eighteen years of
age but need not be shareholders or residents of the State of Colorado.
3. Annual Meetings. On the same day each year as, and immediately
following, the annual shareholders' meeting, the Board of Directors shall meet
for the purpose of organization, election of officers, approval of the annual
Budget, the annual Mining Plan, and the annual Schedule of Mining Operations,
and the transaction of any other business.
4. Regular Meetings. Regular Meetings of the Board of Directors shall
be held on the 15th day of February, May, August and November, or the first
business day following each such date, at such time or times as may be
determined by the Board of Directors and specified in the notice of such
meetings. One such meeting, to be agreed upon by the Board of Directors, shall
be held in Tokyo, Japan, each year, provided that a shareholder that is a
subsidiary of, or affiliated with, a Japanese corporation (a) holds greater than
fifteen percent (15%) (or, in the event of any merger or other consolidation,
the percentage ownership interest in the entity surviving such merger or other
consolidation that a fifteen percent (15%) shareholder in the Corporation would
have received in such merger or consolidation) of the total outstanding shares
of the Corporation on average for the year; and (b) is a shareholder at the time
of such meeting.
5. Special Meetings. Special Meetings of the Board of Directors shall
be held within the United States only. Such meetings may be called by the
President or any shareholder owning greater than fifteen percent (15%) (or, in
the event of any merger or other consolidation, the percentage ownership
interest in the entity surviving such merger or other consolidation that a
fifteen percent (15%) shareholder in the Corporation would have received in such
merger or consolidation) of the total outstanding shares of the Corporation, and
shall be called by the President or the Secretary on the written request of any
two directors.
8
<PAGE> 9
6. Place of Meetings. Except as specifically set forth otherwise
herein, any meeting of the Board of Directors may be held at such place or
places either within or outside the State of Colorado as shall from time to time
be determined by the Board of Directors and as shall be designated in the notice
of the meeting.
7. Notice of Meetings. Notice of each meeting of directors, whether
annual, regular or special, shall be given to each director. If such notice is
given either (a) by personally delivering written notice to a director or (b) by
personally telephoning such director, it shall be so given at least ten (10)
days prior to the meeting. If such notice is given either (1) by depositing a
written notice by overnight courier service, postage prepaid, or (2) by
facsimile transmission, in all cases directed to such director at that person's
residence or place of business, it shall be so given at least fourteen (14) days
prior to the meeting. The notice shall state the place, date and hour thereof,
but need not, unless otherwise required by the Act, state the purposes of the
meeting.
8. Quorum. Seventy-five percent (75%) of the number of directors fixed
by or in accordance with Section 2 of this Article IV that are entitled to vote
shall constitute a quorum at all meetings of the Board of Directors, provided
that at least one director elected by each shareholder having sufficient shares
to elect a director is present at the meeting (unless all directors elected by
such shareholder are not entitled to vote). The vote of a majority of the
directors present and entitled to vote at a meeting at which a quorum is present
shall be the act of the Board of Directors, unless the express provision of a
statute, the Articles of Incorporation, or these Bylaws requires a different
vote, in which case such express provision shall govern and control. In the
absence of a quorum at any such meeting, a majority of the directors present and
entitled to vote may adjourn the meeting from time to time without further
notice; other than announcement at the meeting, until a quorum shall be present.
9
<PAGE> 10
9. Organization, Agenda and Procedure. The President, or in the
President's absence, any director chosen by a majority of the directors present,
shall act as chairperson of the meetings of the Board of Directors. The
Secretary, any Assistant Secretary, or any other person appointed by the
chairperson shall act as secretary of each meeting of the Board of Directors.
The agenda of and procedure for such meetings shall be as determined by the
Board of Directors. All proposed agenda topics and documents to be reviewed at
the Annual Meetings and the Regular Meetings shall be delivered to each director
at least fourteen (14) days prior to any such meeting.
10. Resignation. Any director of the Corporation may resign at any time
by giving written notice of such director's resignation to the Board of
Directors, the President, any Vice President or the Secretary of the
Corporation. Such resignation shall take effect at the date of receipt of such
notice or at any later time specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective, unless it so provides. A director who resigns may deliver to the
Secretary of State for filing a statement to that effect.
11. Removal. Except as otherwise provided in the Articles of
Incorporation or in these Bylaws, any director may be removed, either with or
without cause, at any time, by the affirmative vote of the holders of a majority
of the issued and outstanding shares of stock entitled to vote for the election
of directors of the Corporation at a special meeting of the shareholders called
and held for such purpose; provided, however, that if less than the entire Board
of Directors is to be removed, and if cumulative voting of shares in the
election of directors is allowed, a director may not be removed if the votes
entitled to be cast against such director's removal would be sufficient to elect
such director if such votes were cumulatively voted for such director at an
election of the entire Board of Directors.
12. Vacancies. Any vacancy occurring for any reason in the Board of
Directors shall be filled by an election by the shareholders. Any directorship
to be filled by reason of an increase in
10
<PAGE> 11
the number of directors shall be filled by an election by the shareholders. A
director elected to fill a vacancy shall be elected for the unexpired term of
such director's predecessor in office and shall hold office until the expiration
of such term and until a successor shall be elected and shall qualify or until
such director's earlier death, resignation or removal. A director chosen to fill
a position resulting from an increase in the number of directors shall hold
office until the next annual meeting of shareholders and until a successor shall
be elected and shall qualify, or until such director's earlier death,
resignation or removal. If the vacant directorship was held by a director
elected by a voting group of shareholders, the vacancy shall be filled by the
vote of the holders of shares of that voting group entitled to fill such
vacancy.
13. Technical Committee. The Board of Directors shall create a
technical committee that shall prepare a proposed Mining Plan and Schedule of
Mining Operations and advise the Board of Directors and report to it prior to
each of its Annual Meetings and Regular Meetings and as otherwise directed by
the Board of Directors (the "Technical Committee"). The Technical Committee
shall be comprised of three persons, a Chairperson and two engineer
representatives, who shall be appointed by the Board of Directors, provided,
however, that the Board of Directors shall appoint at least one individual
selected by each shareholder having sufficient shares to elect a director. The
persons appointed to the Technical Committee shall not be required to be
directors. The Technical Committee shall not have or exercise any authority of
the Board of Directors other than such authority as is necessary to prepare a
proposed Mining Plan and Schedule of Mining Operations, except as specifically
delegated to it by resolution of the Board of Directors. The Corporation shall
reimburse the members of the Technical Committee for their expenses incurred in
attending the Annual Meeting and the Regular Meetings of the Board of Directors.
11
<PAGE> 12
14. Executive and Other Committees. The Board of Directors, by
resolution adopted by a majority of the number of directors fixed by or in
accordance with Section 2 of this Article IV, may designate from among its
members an executive committee and one or more other committees each of which,
to the extent provided in the resolution and except as otherwise prescribed by
statute or Section 15 of this Article IV, shall have and may exercise all of the
authority of the Board of Directors in the management of the Corporation. Rules
governing the procedures for meetings of executive or other committees shall be
as established by the Board of Directors or by such committee. Notwithstanding
the foregoing, no committee shall: (a) authorize distributions; (b) approve or
propose to shareholders action that the Act requires to be approved by
shareholders; (c) fill vacancies on the Board of Directors or on any of its
committees; (d) amend the Articles of Incorporation; (e) adopt, amend, or repeal
these Bylaws; (f) approve a plan of merger not requiring shareholder approval;
(g) authorize or approve reacquisition of shares, except according to a formula
or method prescribed by the Board of Directors; or (h) authorize or approve the
issuance or sale of shares, or a contract for the sale of shares, or determine
the designation and relative rights, preferences, and limitations of a class or
series of shares; except that the Board of Directors may authorize a committee
or an officer to do so within limits specifically prescribed by the Board of
Directors.
15. Actions Requiring Unanimous Consent. The following actions shall
require the unanimous approval of the members of the Board of Directors that are
entitled to vote thereon:
(a) Selecting the accounting firm that will audit the
Corporation's financial statements;
(b) Authorizing the Corporation to engage in any business
or operation outside of coal mining, high-wall
mining, or operating orchards;
(c) Approving the Corporation's annual Budget (including,
but not limited to, projected annual borrowings),
which shall be in substantially the same form
12
<PAGE> 13
as the attached Annex A, annual Mining Plan, and
annual Schedule of Mining Operations;
(d) Making any change in the schedule of mining
operations that results in an aggregate deviation of
twenty-five percent (25%) or more (fifteen percent
(15%) or more for any fiscal year following a fiscal
year in which the amount of coal produced by the
Corporation exceeds 1,500,000 tons) from the annual
Schedule of Mining Operations last approved by the
Board of Directors;
(e) Making any change in the annual Budget that results
in an aggregate increase or decrease of twenty-five
(25%) or more (fifteen percent (15%) or more for any
fiscal year following a fiscal year in which the
amount of coal produced by the Corporation exceeds
1,500,000 tons) in the amount of any category of
expenditure or borrowing contained in the most recent
annual Budget unanimously approved by the Board of
Directors;
(f) Making any decision relating to a construction or
development project that (i) costs or is budgeted to
cost in excess of One Million United States Dollars
(US$1,000,000.00), and (ii) has incurred actual costs
and expenses that exceed the budget for the project
by at least Two Hundred Fifty Thousand United States
Dollars (US$250,000);
(g) Approving the sale, transfer, assignment or other
disposition of any asset which has a fair market
value exceeding One Million United States Dollars
(US$1,000,000.00);
(h) Approving any financing related to the construction
and development of Bowie Mine #2;
(i) Permanently closing any mine of the Corporation;
(j) Issuing additional shares of stock, or any warrants,
rights, options, debentures or bonds of ,or in, the
Corporation;
(k) Amending or repealing any provisions of the Articles
of Incorporation or these Bylaws relating to (i)
quorum or voting requirements (including this Section
15) for or by the Board of Directors, (ii) the number
of Directors, (iii) the frequency of Annual Meetings
and Regular Meetings of the Board of Directors, (iv)
the establishment and membership of committees, and
(v) the business, and any and all activities related
thereto, that may be conducted by the Corporation;
(l) Adopting any articles of incorporation or bylaws
having provisions relating to (i) quorum or voting
requirements for the Board of Directors, (ii) the
number of Directors, (iii) the frequency of Annual
Meetings and Regular Meetings of the Board of
Directors, (iv) the establishment and membership
13
<PAGE> 14
of committees, and (v) the business, and any and all
activities related thereto, that may be conducted by
the Corporation;
(m) Dissolving the Corporation;
(n) Selling, exchanging, transferring or otherwise
disposing of substantially all of the assets of the
Corporation;
(o) Entering into any merger or other consolidation with
any other entity unless (i) the Corporation is the
surviving entity, (ii) the agreement of merger or
other consolidation provides that any and all rights
of the parties to that certain Marketing Agreement
dated January 30, 1997, between the Corporation and
Mitsui Matsushima Co., Ltd. and that certain
Shareholders Agreement dated January 30, 1997, among
the Corporation, Larry A. Addington, Harold E.
Sergent and Mitsui Matsushima America, Inc., as such
rights exist as of the date of the merger or other
consolidation, shall be respected by the Corporation,
(iii) any shares of capital stock received by
shareholders that were shareholders of the
Corporation immediately prior to the merger or
consolidation (the "Pre-merger Shareholders") shall
be allocated among such Pre-merger Shareholders in
proportion to their share ownership before the merger
or other consolidation, and (iv) on the date
following the merger or other consolidation, the fair
market value of all shares received by the Pre-merger
Shareholders as a result of such merger shall not be
less than the fair market value of the shares of the
Corporation held by the Pre-merger Shareholders
immediately prior to such merger or other
consolidation;
(p) Executing an employment contract with an executive
that is related to, or affiliated with, a shareholder
or an affiliate thereof; and
(q) Commencing a voluntary case under any applicable
Federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or consenting
to the entry of an order for relief in an involuntary
case under any such law, or consenting to the
appointment of, or possession being taken by, a
receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for the Corporation
or for any substantial part of the Corporation's
property, or the making of any general assignment for
the benefit of creditors.
16. Compensation of Directors. Each director shall be allowed such
amount per annum or such fixed sum for attendance at meetings of the Board of
Directors, executive or other committees, as may be from time to time fixed by
resolution of the Board of Directors, together with reimbursement for the
reasonable and necessary expenses incurred by such director in connection
14
<PAGE> 15
with the performance of such director's duties (including, but not limited to,
expenses incurred in attending meetings of the Board of Directors). Nothing
herein contained shall be construed to preclude any director from serving the
Corporation in any other capacity or any of its subsidiaries in any other
capacity and receiving proper compensation therefor.
ARTICLE V
Waiver of Notice by Shareholders and Directors and Action
of Shareholders and Directors by Consent
1. Waiver of Notice. A shareholder may waive any notice required by the
Act or by the Articles of Incorporation or these Bylaws, and a director may
waive any notice of a directors meeting, whether before or after the date or
time stated in the notice as the date or time when any action will occur or has
occurred. The waiver shall be in writing, be signed by the shareholder or
director entitled to the notice, and be delivered to the Corporation for
inclusion in the minutes or filing with the corporate records, but such delivery
and filing shall not be conditions of the effectiveness of the waiver.
Attendance of a shareholder or the attendance or participation by a director at
a meeting waives objection to lack of required notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting, or the
director, at the beginning of the meeting or promptly upon his or her later
arrival, objects to holding the meeting or transacting business at the meeting
because of lack of notice or defective notice, and, in the case of a director,
does not thereafter vote for or assent to action taken at the meeting, and
waives objection to consideration of a particular matter at the meeting that is
not within the purpose or purposes described in the meeting notice, or of a
matter without special notice required by the Act, the Articles of
Incorporation, or these Bylaws, unless the shareholder or director objects to
considering
15
<PAGE> 16
the matter when it is presented and, in the case of a director, does not
thereafter vote for or assent to action taken at the meeting with respect to
such purpose.
2. Action Without a Meeting. Unless the Articles of Incorporation
require that such action be taken at a shareholders' meeting, any action
required or allowed to be taken at a meeting of the shareholders, directors or
members of an executive or other committee may be taken without a meeting if all
shareholders entitled to vote with respect to the subject matter, or all
directors entitled to vote with respect to the subject matter, or all members of
an executive or other committee, as the case may be, give written consent to the
specific action taken. The record date for determining shareholders entitled to
take action without a meeting is the date upon which a writing upon which the
action is to be taken is first received by the Corporation. Action taken without
a meeting shall be effective: in the case of an action of shareholders, as of
the date the last writing necessary to effect the action is received by the
Corporation unless all writings necessary to effect the action specify a later
date, in which case the later date shall be the date of the action; in the case
of other actions, action is taken when the last director signs a writing
describing the action taken unless before such time the Secretary has received a
written revocation of the consent of any other director, and any action so taken
shall be effective at the time taken unless the directors specify a different
effective date.
3. Meetings by Telecommunication. One or more members of the Board of
Directors or any committee designated by the Board of Directors may hold or
participate in a meeting of the Board of Directors or such committee through the
use of any means of communication by which all persons participating can hear
each other at the same time. Any director participating in a meeting by any such
means of communication is deemed to be present in person at the meeting.
However, any director participating in a meeting by any such means of
communication may appoint, by written
16
<PAGE> 17
appointment delivered to the Board of Directors at least three (3) business days
prior to the meeting, a person to be physically present, but not vote, at the
meeting on behalf of the director.
ARTICLE VI
Officers
1. Election and Tenure. The officers of the Corporation shall consist
of a President, a Secretary and Treasurer, each of whom shall be appointed
annually by the Board of Directors. The Board of Directors may also designate
and appoint such other officers and assistant officers as may be deemed
necessary. The Board of Directors may delegate to any such officer the power to
appoint or remove subordinate officers, agents or employees. Any two or more
offices may be held by the same person. Each officer so appointed shall continue
in office until a successor shall be appointed and shall qualify, or until the
officer's earlier death, resignation or removal. Each officer shall be a natural
person who is eighteen years of age or older.
2. Resignation, Removal and Vacancies. Any officer may resign at any
time by giving written notice of resignation to the Board of Directors or the
President. Such resignation shall take effect when the notice is received by the
Corporation unless the notice specifies a later date, and acceptance of the
resignation shall not be necessary to render such resignation effective. Any
officer may at any time be removed by the affirmative vote of a majority of the
number of directors fixed by or in accordance with Section 2 of Article IV of
these Bylaws, or by an executive committee of the Board of Directors. If any
office becomes vacant for any reason, the vacancy may be filled by the Board of
Directors. An officer appointed to fill a vacancy shall be appointed for the
unexpired term of such officer's predecessor in office and shall continue in
office until a successor shall be elected or appointed and shall qualify, or
until such officer's earlier death, resignation or removal. The appointment of
an officer shall not itself create contract rights in favor of the officer, and
the
17
<PAGE> 18
removal of an officer does not affect the officer's contract rights, if any,
with the Corporation and the resignation of an officer does not affect the
Corporation's contract rights, if any, with the officer.
3. President. The President shall be the chief executive officer of the
Corporation. The President shall (i) preside at meetings of the shareholders;
(ii) have general and active management of the business of the Corporation;
(iii) see that all orders and resolutions of the Board of Directors are carried
into effect; and (iv) perform all duties as may from time to time be assigned by
the Board of Directors.
4. Vice Presidents. The Vice Presidents, if any, shall perform such
duties and possess such powers as from time to time may be assigned to them by
the Board of Directors or the President. In the absence of the President or in
the event of the inability or refusal of the President to act, the Vice
President (or in the event there be more than one Vice President, the Vice
Presidents in the order designated by the Board of Directors, or in the absence
of any designation, then in the order of the election or appointment of the Vice
Presidents) shall perform the duties of the President and when so performing
shall have all the powers of and be subject to all the restrictions upon the
President.
5. Secretary. The Secretary shall perform such duties and shall have
such powers as may from time to time be assigned by the Board of Directors or
the President. In addition, the Secretary shall perform such duties and have
such powers as are incident to the office of Secretary including, without
limitation, the duty and power to give notice of all meetings of shareholders
and the Board of Directors, the preparation and maintenance of minutes of the
directors' and shareholders' meetings and other records and information required
to be kept by the Corporation under Article XII and for authenticating records
of the Corporation, and to be custodian of the corporate seal and to affix and
attest to the same on documents, the execution of which on behalf of the
Corporation is authorized by these Bylaws or by the action of the Board of
Directors.
18
<PAGE> 19
6. Treasurer. The Treasurer shall perform such duties and shall have
such powers as may from time to time be assigned by the Board of Directors or
the President. In addition, the Treasurer shall perform such duties and have
such powers as are incident to the office of Treasurer including, without
limitation, the duty and power to keep and be responsible for all funds and
securities of the Corporation, to deposit funds of the Corporation in
depositories selected in accordance with these Bylaws, to disburse such funds as
ordered by the Board of Directors, making proper accounts thereof, and to render
as required by the Board of Directors statements of all such transactions as
Treasurer and of the financial condition of the Corporation.
7. Assistant Secretaries and Assistant Treasurers. The Assistant
Secretaries and Assistant Treasurers, if any, shall perform such duties as shall
be assigned to them by the Secretary or the Treasurer, respectively, or by the
President or the Board of Directors. In the absence, inability or refusal to act
of the Secretary or the Treasurer, the Assistant Secretaries or Assistant
Treasurers, respectively, in the order designated by the Board of Directors, or
in the absence of any designation, then in the order of their election or
appointment, shall perform the duties and exercise the powers of the Secretary
or Treasurer, as the case may be.
8. Bond of Officers. The Board of Directors may require any officer to
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for such terms and conditions as
the Board of Directors may specify, including without limitation for the
faithful performance of such officer's duties and for the restoration to the
Corporation of any property belonging to the Corporation in such officer's
possession or under the control of such officer.
9. Salaries. Officers of the Corporation shall be entitled to such
salaries, emoluments, compensation or reimbursement as shall be fixed or allowed
from time to time by the Board of Directors.
19
<PAGE> 20
ARTICLE VII
Indemnification
1. Indemnification. To the extent permitted or required by the Act and
any other applicable law, if any director or officer of the Corporation is made
a party to or is involved in any proceeding because such person is or was a
director or officer of the Corporation, the Corporation shall (a) indemnify such
person from and against any liability, including but not limited to expenses of
investigation and preparation, expenses in connection with appearance as a
witness and fees and disbursements of counsel, accountants or other experts,
incurred by such person in such proceeding, and (b) advance to such person
expenses incurred in such proceeding. The Corporation may in its discretion, but
is not obligated in any way to, indemnify and advance expenses to an employee or
agent of the Corporation to the same extent as to a director or officer, and the
Corporation may indemnify an employee, fiduciary, or agent of the Corporation to
a greater extent than expressly permitted herein for officers and directors,
provided such indemnification is not in violation of public policy.
2. Provisions Not Exclusive. The foregoing provisions for
indemnification and advancement of expenses are not exclusive, and the
Corporation may at its discretion provide for indemnification or advancement of
expenses in a resolution of its shareholders or directors, in a contract or in
its Articles of Incorporation.
3. Effect of Modification of Act. Any repeal or modification of the
foregoing provisions of this Article for indemnification or advancement of
expenses shall not affect adversely any right or protection stated in such
provisions with respect to any act or omission occurring prior to the time of
such repeal or modification. If any provision of this Article or any part
thereof shall be held to be prohibited by or invalid under applicable law, such
provision or part thereof shall be deemed
20
<PAGE> 21
amended to accomplish the objectives of the provision or part thereof as
originally written to the fullest extent permitted by law and all other
provisions or parts shall remain in full force and effect.
4. Definitions. As used in this Article, the following terms have the
following meanings:
(a) Act. When used with reference to an act or omission
occurring prior to the effectiveness of any amendment to the Act after the
effectiveness of the adoption of this Article, the term "Act" shall include such
amendment only to the extent that the amendment permits a Corporation to provide
broader indemnification rights than the Act permitted prior to the amendment.
(b) Corporation. The term "Corporation" includes any domestic
or foreign entity that is a predecessor of the Corporation by reason of a merger
or other transaction in which the predecessor's existence ceased upon
consummation of the transaction.
(c) Director or Officer. A "director" or "officer" is an
individual who is or was a director or officer of the Corporation or an
individual who, while a director or officer of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, fiduciary, or agent of another domestic or foreign corporation or
other person or of an employee benefit plan. A director or officer is considered
to be serving an employee benefit plan at the Corporation's request if his or
her duties to the Corporation also impose duties on, or otherwise involve
services by, the director or officer to the plan or to participants in or
beneficiaries of the plan. The terms "director" and "officer" include, unless
the context requires otherwise, the estate or personal representative of a
director, of officer, as applicable.
(d) Liability. The term "liability" means the obligation
incurred with respect to a proceeding to pay a judgment, settlement, penalty,
fine (including any excise tax assessed with respect to an employee benefit
plan), or reasonable expenses.
21
<PAGE> 22
(e) Proceeding. The term "proceeding" means any threatened,
pending or completed action, suit, or proceeding whether civil, criminal,
administrative or investigative, and whether formal or informal.
5. Insurance. The Corporation may purchase and maintain insurance on
behalf of a person who is or was a director, officer, employee, fiduciary, or
agent of the Corporation, or who, while a director, officer, employee,
fiduciary, or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, fiduciary, or
agent of another domestic or foreign corporation or other person or of an
employee benefit plan, against liability asserted against or incurred by the
person in that capacity or arising from his or her status as a director,
officer, employee, fiduciary, or agent, whether or not the Corporation would
have power to indemnify the person against the same liability under the Act. Any
such insurance may be procured from any insurance company designated by the
Board of Directors, whether such insurance company is formed under the laws of
this state or any other jurisdiction of the United States or elsewhere,
including any insurance company in which the Corporation has an equity or any
other interest through stock ownership or otherwise.
6. Expenses as a Witness. The Corporation may pay or reimburse expenses
incurred by a director, officer, employee, fiduciary, or agent in connection
with an appearance as a witness in a proceeding at a time when he or she has not
been made a named defendant or respondent in the proceeding.
7. Notice to Shareholders. If the Corporation indemnifies or advances
expenses to a director under this Article in connection with a proceeding by or
in the right of the Corporation, the Corporation shall give written notice of
the indemnification or advance to the shareholders with or before the notice of
the next shareholders' meeting. If the next shareholder action is taken without
22
<PAGE> 23
a meeting at the instigation of the Board of Directors, such notice shall be
given to the shareholders at or before the time the first shareholder signs a
writing consenting to such action.
ARTICLE VIII
Execution of Instruments; Loans; Checks and
Endorsements; Deposits; Proxies
1. Execution of Instruments. The President or any Vice President shall
have the power to execute and deliver on behalf of and in the name of the
Corporation any instrument requiring the signature of an officer of the
Corporation, except as otherwise provided in these Bylaws or when the execution
and delivery of the instrument shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. Unless authorized
to do so by these Bylaws or by the Board of Directors, no officer, agent or
employee shall have any power or authority to bind the Corporation in any way,
to pledge its credit or to render it liable pecuniarily for any purpose or in
any amount.
2. Borrowing. No loan shall be contracted on behalf of the Corporation,
and no evidence of indebtedness shall be issued, endorsed or accepted in its
name, unless authorized by the Board of Directors or a committee designated by
the Board of Directors so to act. Such authority may be general or confined to
specific instances. When so authorized, an officer may (a) effect loans at any
time for the Corporation from any bank or other entity and for such loans may
execute and deliver promissory notes or other evidences of indebtedness of the
Corporation; and (b) mortgage, pledge or otherwise encumber any real or personal
property, or any interest therein, owned or held by the Corporation as security
for the payment of any loans or obligation of this Corporation, and to that end
may execute and deliver for the Corporation such instruments as may be necessary
or proper in connection with such transaction.
23
<PAGE> 24
3. Loans to Directors, Officers and Employees. The Corporation may lend
money to, guarantee the obligations of and otherwise assist directors, officers
and employees of the Corporation, or directors of another corporation of which
the Corporation owns a majority of the voting stock, only upon compliance with
the requirements of the Act.
4. Checks and Endorsements. All checks, drafts or other orders for the
payment of money, obligations, notes or other evidences of indebtedness, bills
of lading, warehouse receipts, trade acceptances and other such instruments
shall be signed or endorsed for the Corporation by such officers or agents of
the Corporation as shall from time to time be determined by resolution of the
Board of Directors, which resolution may provide for the use of facsimile
signatures.
5. Deposits. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the Corporation's credit in such banks or
other depositories as shall from time to time be determined by resolution of the
Board of Directors, which resolution may specify the officers or agents of the
Corporation who shall have the power, and the manner in which such power shall
be exercised, to make such deposits and to endorse, assign and deliver for
collection and deposit checks, drafts and other orders for the payment of money
payable to the Corporation or its order.
6. Proxies. Unless otherwise provided by resolution adopted by the
Board of Directors, the President or any Vice President: (a) may from time to
time appoint one or more agents of the Corporation, in the name and on behalf of
the Corporation, (i) to cast the votes which the Corporation may be entitled to
cast as the holder of stock or other securities in any other corporation,
association or other entity whose stock or other securities may be held by the
Corporation, at meetings of the holders of the stock or other securities of such
other corporation, association or other entity, or (ii) to consent in writing to
any action by such other corporation, association or other entity; (b) may
instruct the person so appointed as to the manner of casting such votes or
giving such
24
<PAGE> 25
consent; and (c) may execute or cause to be executed in the name and on behalf
of the Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as may be deemed necessary or proper.
ARTICLE IX
Shares of Stock
1. Certificates of Stock. The shares of the Corporation may, but need
not, be represented by certificates. Unless the Act or another law expressly
provides otherwise, the fact that the shares are not represented by certificates
shall have no effect on the rights and obligations of shareholders. If the
shares are represented by certificates, such certificates shall be signed by the
President and the Secretary or such other representatives of the Corporation as
are designated by the Board of Directors; provided, however, that where such
certificate is signed or countersigned by a transfer agent or registrar (both of
which may be the Corporation itself or any employee of the Corporation) the
signatures of such officers of the Corporation may be in facsimile form. In case
any officer of the Corporation who shall have signed, or whose facsimile
signature shall have been placed on, any certificate shall cease for any reason
to be such officer before such certificate shall have been issued or delivered
by the Corporation, such certificate may nevertheless be issued and delivered by
the Corporation as though the person who signed such certificate, or whose
facsimile signature shall have been placed thereon, had not ceased to be such
officer of the Corporation. Every certificate representing shares issued by the
Corporation shall state the number of shares owned by the holder in the
Corporation, shall designate the class of stock to which such shares belong, and
shall otherwise be in such form as is required by law and as the Board of
Directors shall prescribe.
25
<PAGE> 26
2. Shares Without Certificates. The Board of Directors may authorize
the issuance of any class or series of shares of the Corporation without
certificates. Such authorization shall not affect shares already represented by
certificates until they are surrendered to the Corporation. Within a reasonable
time following the issue or transfer of shares without certificates, the
Corporation shall send the shareholder a complete written statement of the
information required on certificates by the Act.
3. Record. A record shall be kept of the name of each person or entity
holding the stock represented by each certificate for shares of the Corporation
issued, the number of shares represented by each such certificate, the date
thereof and, in the case of cancellation, the date of cancellation. The person
or other entity in whose name shares of stock stand on the books of the
Corporation shall be deemed the owner thereof, and thus a holder of record of
such shares of stock, for all purposes as regards the Corporation.
4. Transfer of Stock. Transfers of shares of the stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by such registered holder's attorney thereunto authorized,
and on the surrender of the certificate or certificates for such shares properly
endorsed.
5. Transfer Agents and Registrars; Regulations. The Board of Directors
may appoint one or more transfer agents or registrars with respect to shares of
the stock of the Corporation. The Board of Directors may make such rules and
regulations as it may deem expedient and as are not inconsistent with these
Bylaws, concerning the issue, transfer and registration of certificates for
shares of the stock of the Corporation.
6. Lost, Destroyed or Mutilated Certificates. In case of the alleged
loss, destruction or mutilation of a certificate representing stock of the
Corporation, a new certificate may be issued in
26
<PAGE> 27
place thereof, in such manner and upon such terms and conditions as the Board of
Directors may prescribe, and shall be issued in such situations as required by
the Act.
ARTICLE X
Corporate Seal
The corporate seal shall be in the form approved by resolution of the
Board of Directors. Said seal may be used by causing it or a facsimile thereof
to be impressed or affixed or in any other manner reproduced. The impression of
the seal may be made and attested by either the Secretary or any Assistant
Secretary for the authentication of contracts or other papers required the seal.
ARTICLE XI
Fiscal Year
The fiscal year of the Corporation shall be the year established by the
Board of Directors.
ARTICLE XII
Corporate Books and Records
1. Corporate Books. The books and records of the Corporation may be
kept within or outside the State of Colorado at such place or places as may be
from time to time designated by the Board of Directors.
2. Addresses of Shareholders. Each shareholder shall furnish to the
Secretary of the Corporation or the Corporation's transfer agent an address to
which notices from the Corporation, including notices of meetings, may be
directed and if any shareholder shall fail so to designate such an address, it
shall be sufficient for any such notice to be directed to such shareholder at
such shareholder's address last known to the Secretary or transfer agent.
27
<PAGE> 28
3. Fixing Record Date. The Board of Directors may fix in advance a date
as a record date for the determination of the shareholders entitled to a notice
of or to vote at any meeting of shareholders or any adjournment thereof, or to
express consent (or dissent) to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action. Such record date shall not be
more than 50 nor less than 10 days before the date of such meeting, nor more
than 10 days prior to any other action to which the same relates. Only such
shareholders as shall be shareholders of record on the date so fixed shall be so
entitled with respect to the matter to which the same relates. If the Board of
Directors shall not fix a record date as above provided, and if the Board of
Directors shall not for such purpose close the stock transfer books as provided
by statute, then the record date shall be established by statute in such cases
made and provided.
4. Inspection of Books and Records. Any person who has been a holder of
record of shares of the Corporation (or of voting trust certificates
representing such shares) for at least three months immediately preceding such
holder's demand or who is the holder of record of, or the holder of record of
voting trust certificates representing, at least five percent (5%) (or, in the
event of any merger or other consolidation, the percentage ownership interest in
the entity surviving such merger or other consolidation that a five percent (5%)
shareholder in the Corporation would have received in such merger or
consolidation) of all outstanding shares of the Corporation, has the right, upon
written demand stating the purpose thereof, to examine, in person or by agent or
attorney, at any reasonable time and for any proper purpose, the Corporation's
books and records of account, minutes and record of holders of shares (and of
voting trust certificates therefor) and to make extracts therefrom.
28
<PAGE> 29
5. Distribution of Financial Statements. Upon the written request of
any shareholder of the Corporation, the Corporation shall mail to such
shareholder its last annual and most recently published financial statement.
6. Audits of Books and Accounts. The Corporation's books and accounts
shall be audited at such times and by such auditors as shall be specified and
designated by unanimous resolution of the Board of Directors.
ARTICLE XIII
Emergency Bylaws and Actions
Subject to repeal or change by action of the shareholders, the Board of
Directors may adopt emergency bylaws and exercise other powers in accordance
with and pursuant to the provisions of the Act.
ARTICLE XIV
Amendments
Unless the Articles of Incorporation or a particular Bylaw reserves the
right to amend the Bylaw to the shareholders, and subject to repeal or change by
action of the shareholders, either the Board of Directors or the Shareholders
shall have the power to alter, amend or repeal these Bylaws or adopt new bylaws.
29
<PAGE> 1
EXHIBIT 3.3(a)
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF IKERD-BANDY COMPANY, INC.
Pursuant to the provisions of KRS 271A.295, et seq the undersigned
corporation executes these Restated and Amended Articles of Incorporation and
states that the name of the corporation is Ikerd-Bandy Company, Inc., and the
following designated amendments to the Articles of Incorporation were adopted
by the shareholders of the corporation on November 15, 1985, in the manner
prescribed by the Kentucky Business Corporation Act.
KNOW ALL MEN BY THESE PRESENTS:
That we Frank Ikerd, Jr., Edsel Bandy, and Jerry S. Ikerd, of Pineville,
Bell County, Kentucky, do associate to form a corporation under the laws of the
State of Kentucky.
Article I. The corporation hereby proposed to be organized shall be named
and known as the Ikerd-Bandy Company, Inc., by which name it may contract and
be contracted with, sue and be sued.
Article II. The principal office and place of business of said
corporation shall be Walnut Street, Pineville, Bell County, Kentucky.
Article III. The nature of the business proposed to be transacted,
promoted and carried on by said corporation shall be formed for the purpose of
all types of manners of
<PAGE> 2
mining coal and dealing in coal, coke and kindred products, and the doing of
all things necessary and incident thereto; with power to purchase, sell and
lease suitable mineral land and other real estate for the transaction of its
business; and the transaction of any or all lawful business for which
corporations may be incorporated under Chapter 271A of the Kentucky Revised
Statutes.
Article IV. The capital stock of the company shall be $55,200.00 which
shall be represented by one million shares of no per common stock. The
shareholders of the corporation shall be entitled to no preemptive rights to
acquire additional shares of common stock.
Article V. [deleted]
Article VI. The corporation shall commence business as soon as
practicable after these Articles are filed in the County Clerk's office of Bell
County, and in the office of the Secretary of State of Kentucky, and after 50%
of the capital stock of said corporation has been in good faith subscribed, and
all such subscriptions certified to the Secretary of State of Kentucky. The
duration of the corporation shall be perpetual.
Article VII. The affairs and business of the corporation shall be
conducted by a Board of Directors elected by the shareholders. The Board of
Directors shall have power
-2-
<PAGE> 3
to make all such By-Laws and rules to regulate the business and affairs of the
corporation as will not be inconsistent with the provisions of these Articles
of Incorporation or the laws of Kentucky.
Article VIII. [deleted]
Article IX. The private property of the stockholders shall not be subject
to the payment of the debts of the corporation.
Article X. Robert R.R. Boone, attorney of Pikeville, Kentucky, is
designated agent for process of this corporation.
Except for the designated amendments, the foregoing Restated Articles of
Incorporation correctly set forth without change the corresponding provisions
of the Articles of Incorporation as heretofore amended, and the Restated
Articles of Incorporation together with the designated amendments supersede the
original Articles of Incorporation and all amendments thereto.
The number of shares of the corporation outstanding at the time of such
adoption was 24.5; and the number of shares entitled to vote thereon was 24.5.
The number of shares voted for such amendment was 24.5; and the number of
shares voted against such amendment was zero.
-3-
<PAGE> 4
The corporation shall issue or cause to be issued to the persons lawfully
entitled thereto, 3,333.34 of such new authorized capital stock of the
corporation of the same class and without par value for each one share of
present outstanding capital stock of the corporation held by them upon the
surrender of the certificates for share of such present outstanding capital
stock.
The amendment to the Articles of Incorporation whereby the authorized
capital stock of the corporation is increased to number one million shares of
common no par value stock shall not change the amount of stated capital which
shall remain at $56,200.00
Dated November 15, 1985.
IKERD-BANDY COMPANY, INC.
By: /s/ Frank Ikerd, Jr.
-------------------------
President
By: /s/ J.J. Kocian
--------------------------
Secretary
<PAGE> 5
COMMONWEALTH OF KENTUCKY )
)
COUNTY OF FAYETTE )
I, the undersigned Notary Public in and for the Commonwealth and County
aforesaid, do hereby certify that Frank Ikerd, Jr. as President and J.J. Kocian
as Secretary personally appeared before me, and after having been duly sworn,
declared and acknowledged and verified the foregoing Amended and Restated
Articles of Incorporation of Ikerd-Bandy Company, Inc. as of the 15th day of
November, 1985.
My Commission Expires: 5/23/88
-------------
Patricia E. Hart
-----------------
Notary Public
THIS INSTRUMENT WAS PREPARED BY:
JOE TERRY
- --------------------------------
Wyatt, Tarrant & Combs
1100 Kincaid Towers
Lexington, Kentucky 40507
(606) 233-2042
-5-
<PAGE> 1
EXHIBIT 3.3(b)
177787-A
222350-I
COMMONWEALTH OF KENTUCKY
OFFICE OF
SECRETARY OF STATE
DREXELL R. DAVIS [LOGO] FRANKFORT,
Secretary KENTUCKY
CERTIFICATE OF AMENDMENT
TO ARTICLES OF INCORPORATION
I, DREXELL R. DAVIS, Secretary of State of the Commonwealth of Kentucky, do
hereby certify that Amended Articles of Incorporation of
- ---------------------------------------------------------------------------
CHANGING NAME TO IKERD-BANDY, CO., INC.
- ---------------------------------------------------------------------------
amended pursuant to Kentucky Revised Statutes, 271A, (273) duly signed and
verified or acknowledged according to law, have been filed in my office by said
corporation, and that all taxes, fees and charges payable upon the filing of
said Articles of Amendment have been paid.
Given under my hand and seal of Office as Secretary of State,
at Frankfort, Kentucky, this 26TH
-------------------------------
day of NOVEMBER , 1986.
----------------------------
Drexel R. Davis
---------------------------------------
SECRETARY OF STATE
[LOGO]
SECRETARY OF STATE ---------------------------------------
ASSISTANT SECRETARY OF STATE
<PAGE> 1
EXHIBIT 3.3(c)
ARTICLES OF AMENDMENT
TO THE RESTATED
ARTICLES OF INCORPORATION
OF
IKERD-BANDY CO., INC.
Pursuant to the provisions of KRS 271A.305, the undersigned corporation
executes these Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is Ikerd-Bandy Company, Inc.
SECOND: The following amendment to the Restated Articles of
Incorporation were adopted by the shareholders of the corporation on November
20, 1986 in the manner prescribed by the Kentucky Business Corporation Act:
ARTICLE I: The Corporation hereby proposed to be organized shall be
named and known as the Ikerd-Bandy Co., Inc., by which name it may contract
and be contracted with, sue and be sued.
THIRD: The number of shares of the corporation outstanding at the time
of such adoption was 81,668; and the number of shares entitled to vote thereon
was 81,668.
FOURTH: The number of shares voted for such amendment was 81,668; and
the number of shares voted against such amendment was none.
Dated Nobember 20, 1986.
IKERD-BANDY CO., INC.
By: /s/ J.J. Kocian
--------------------------------
President
<PAGE> 2
By: /s/ Burt I. Koenig
------------------------
Secretary
STATE OF KENTUCKY )
) : SS
COUNTY OF PULASKI )
I, a notary public, do hereby certify that on this 21st day of November,
1986, James J. Kowen personally appeared before me, who, being duly sworn,
declared that he is the President of Ikerd-Bandy Co., Inc., that he signed the
foregoing document as President of the corporation, and that the statements
contained therein are true.
My Commission Expires: May 17, 1989
--------------
/s/ Morris F. Crump
-------------------------
NOTARY PUBLIC
STATE OF KENTUCKY )
) : SS
COUNTY OF PULASKI )
I, a notary public, do hereby certify that on this 21st day of November,
1986, Burt Koenig personally appeared before me, who, being duly sworn,
declared that he is the Secretary of Ikerd-Bandy Co., Inc., that he signed the
foregoing document as President of the corporation, and that the statements
contained therein are true.
My Commission Expires: May 17, 1989
--------------
/s/ Morris F. Crump
-------------------------
NOTARY PUBLIC
THIS INSTRUMENT PREPARED BY:
/s/ Sara A. Smith
- -----------------------------
WYATT, TARRANT & COMBS
1100 Kincaid Towers
Lexington, Kentucky 40507
(606) 233-2012
<PAGE> 1
EXHIBIT 3.3(d)
IKERD-BANDY CO., INC.
BYLAWS
* * * * * *
ARTICLE I
OFFICES
Section 1. The registered office shall be located in Somerset,
Pulaski County, Kentucky.
Section 2. The corporation may also have offices at such other
places both within and without the State of Kentucky as the board of directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
ANNUAL MEETINGS OF SHAREHOLDERS
Section 1. All meetings of shareholders for the election of directors
shall be held in Houston, State of Texas, at such place as may be fixed from
time to time by the board of directors.
Section 2. Annual meetings of shareholders, commencing with the year
1976, shall be held on the second Monday in May, if not a legal holiday, and if
a legal holiday, then on the next secular day following at 1:00 p.m., at which
they shall elect by plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. Written or printed notice of the annual meeting stating
the place, date and hour of the meeting, shall be given to each shareholder
entitled to vote thereat not less than ten (10) days before the date of the
meeting.
The notice shall also set forth the purpose or purposes for which the
meeting is called.
ARTICLE III
SPECIAL MEETINGS OF SHAREHOLDERS
Section 1. Special meetings of shareholders for any
<PAGE> 2
purpose other than the election of directors may be held at such time and
place within or without the State of Kentucky as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
Section 2. Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the chairman of the board, the president, the
board of directors, or the holders of not less than one fifth (1/5) of all the
shares entitled to vote at the meeting.
Section 3. Written or printed notice of a special meeting stating the
place, day and hour of the meeting and the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) nor more than
thirty-five (35) days before the date of the meeting, either personally or by
mail, by or at the direction of the president, or the secretary, or the officer
or persons calling the meeting, to each shareholder of record entitled to vote
at such meeting.
Section 4. The business transacted at any special meeting of
shareholders shall be limited to the purposes stated in the notice.
ARTICLE IV
QUORUM AND VOTING OF STOCK
Section 1. The holders of a majority of the shares of stock issued
and outstanding and entitled to vote, represented in person or by proxy, shall
constitute a quorum at all meetings of the shareholders for the transaction of
business except as otherwise provided by statute or by the articles of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the shareholders, the shareholders present in person or
represented by proxy shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. In the case of any meeting for
election of directors, such meeting may be adjourned only from day to day and
those who attend the second of such adjourned meetings, although less than a
quorum as fixed herein, shall nevertheless constitute a quorum for the purpose
of electing directors.
Section 2. If a quorum is present, the affirmative vote of a
majority of the shares of stock represented at the
-2-
<PAGE> 3
meeting shall be the act of the shareholders unless the vote of a greater
number of shares of stock is required by law or the articles of incorporation.
Section 3. Each outstanding share of stock, having voting power,
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. A shareholder may vote either in person or by proxy executed in
writing by the shareholder or by his duly authorized attorney-in-fact.
In all elections for directors, every shareholder entitled to vote
shall have the right to vote, in person or by proxy, the number of shares of
stock owned by him, for as many persons as there are directors to be elected,
or to cumulate the votes of said shares, and give one candidate as many votes
as the number of directors multiplied by the number of his shares of stock
shall equal, or to distribute the votes on the same principal among as many
candidates as he may see fit.
Section 4. Any action required to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
ARTICLE V
DIRECTORS
Section 1. The number of directors shall not be less than three (3)
nor more than fifteen (15), none of whom need be a stockholder of the
corporation. Directors need not be residents of the State of Kentucky, nor
shareholders of the corporation. The directors, other than the first board of
directors, shall be elected at the annual meeting of the shareholders, and each
director elected shall serve until the next succeeding annual meeting and until
his successor shall have been elected and qualified. Any director may be
removed from office, with or without cause, by a majority vote of the
shareholders at any meeting of which a quorum of shareholders is present. The
first board of directors shall hold office until the first annual meeting of
shareholders.
Section 2. Any vacancy occurring in the board of directors may be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum of the board of directors. A director elected to fill a
vacancy shall be elected for the unexpired portion of the term of
-3-
<PAGE> 4
his predecessor in office.
Any directorship to be filled by reason of an increase in the number
of directors shall be filled by election at an annual meeting or at a special
meeting of shareholders called for that purpose. A director elected to fill a
newly created directorship shall serve until the next succeeding annual meeting
of shareholders and until his successor shall have been elected and qualified.
Section 3. The business affairs of the corporation shall be managed
by its board of directors which may exercise all such powers of the corporation
and to all such lawful acts and things as are not by statute or by the articles
of incorporation or by these bylaws directed or required to be exercised or
done by the shareholders.
Section 4. The directors may keep the books of the corporation,
except such as are required by law to be kept within the state, outside of the
State of Kentucky, at such place or places as they may from time to time
determine.
Section 5. The board of directors, by the affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, shall have authority to establish reasonable
compensation of all directors for services to the corporation as directors,
officers or otherwise.
ARTICLE VI
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Meetings of the board of directors, regular or special,
may be held either within or without the State of Kentucky.
Section 2. The first meeting of each newly elected board of
directors shall be held at such time and place as shal1 be fixed by the vote of
the shareholders at the annual meeting and no notice or such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present, or it may convene at such place and
time as shall be-fixed by the consent in writing of all the directors.
Section 3. Regular meetings of the board of directors may be held
upon such notice, or without notice, and at such time and at such place as shall
from time to time be determined by the board.
Section 4. Special meetings of the board of directors
-4-
<PAGE> 5
may be called by the chairman of the board or the president on two (2) day's
notice to each director, either personally or by mail or by telegram; special
meetings shall be called by the chairman of the board or the president or
secretary in like manner and on like notice on the written request of two
directors.
Section 5. Attendance of a director at any meeting shall constitute
a waiver of notice of such meeting, except where a director attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
Section 6. A majority of the directors shall constitute a quorum for
the transaction of business unless a greater number is required by law or by
the articles of incorporation. The act of a majority of the directors present
at any meeting at which a quorum is present shall be the act of the board of
directors, unless the act of a greater number is required by statute or by the
articles of incorporation. If a quorum shall not be present at any meeting of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
ARTICLE VII
EXECUTIVE COMMITTEE
Section l. The board of directors, by resolution adopted by a
majority of the number of directors fixed by the bylaws or otherwise, may
designate two or more directors to constitute an executive committee, which
committee, to the extent provided in such resolution, shall have and exercise
all of the authority of the board of directors in the management of the
corporation, except as otherwise required by law. Vacancies in the membership of
the committee shall be filled by the board of directors at a regular or special
meeting of the board of directors. The executive committee shall keep regular
minutes of its proceedings and report the same to the board when required.
ARTICLE VIII
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
articles of incorporation, or of these
-5-
<PAGE> 6
bylaws, notice is required to be given to any director or shareholder, it shall
not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such director or shareholder, at his address as
it appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
telegram.
Section 2. Whenever any notice whatever is required to be given
under the provisions of the statutes or under the provisions of the articles of
incorporation or these bylaws, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
ARTICLE IX
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
board of directors and shall be a chairman of the board, a president, a vice
president, a secretary and a treasurer. The board of directors may also choose
additional vice presidents, and one or more assistant secretary and assistant
treasurer.
Section 2. The board of directors at its first meeting after each
annual meeting of shareholders shall choose a chairman of the board, a
president, one or more vice president, a secretary and a treasurer, none of
whom need be a member of the board.
Section 3. The board of directors may appoint such other officers
and agents as it shall deem necessary who shall hold offices for such terms and
shall exercise such powers and perform such duties as shall be determined from
time to time by the board of directors.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time, with or without cause, by the
affirmative vote of a majority of the board of directors. Any vacancy occurring
in any office of the corporation shall be filled by the board of directors.
-6-
<PAGE> 7
THE CHAIRMAN
Section 6. The Chairman of the Board shall preside at all meetings
of the shareholders and of the board of directors and shall have such other
powers and duties as designated by the bylaws and as from time to time may be
assigned to him by the board of directors.
THE PRESIDENT
Section 7. The President shall be the chief executive officer of the
corporation and, subject to the board of directors, shall have general and
active management of the business and of the corporation and shall see that all
orders and resolutions of the board of directors are carried into effect.
Section 8. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE PRESIDENTS
Section 9. The Vice President, of if there shall be more than one,
the Vice Presidents in the order determined by the board of directors, shall, in
the absence or disability of the president, perform the duties and exercise the
by the board of directors, shall, in the absence or disability of the president,
perform the duties and exercise the powers of the president and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 10. The secretary shall attend all meetings of the board of
directors and all meetings of the shareholders and record all the proceedings
of the meetings of the corporation and of the board of directors in a book to
be kept for that purpose and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of shareholders and special meetings of the board of directors, and
shall perform such other duties as may be prescribed by the board of directors
or president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors
-7-
<PAGE> 8
may give general authority to any other officer to affix the seal of the
corporation and to attest the affixing of his signature.
Section 11. The assistant secretary, or if there be more than one,
the assistant secretaries, in the order determined by the board of directors,
shall, in the absence or disability of the secretary, perform the duties and
exercise the powers of the secretary and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 12. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements, in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of
directors.
Section 13. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 14. If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 15. The assistant treasurer, or, if there shall be more than
one, the assistant treasurers in the order determined by the board of
directors, shall in the absence cf or disability of the treasurer, perform the
duties and exercise the powers of the treasurer and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
-8-
<PAGE> 9
ARTICLE X
CERTIFICATE OF SHARES
Section 1. The shares of the corporation shall be represented by
certificates signed by the chairman of the board or the president or a vice
president and the secretary or an assistant secretary of the corporation, and
may be sealed with the seal of the corporation or a facsimile thereof.
When the corporation is authorized to issue shares of more than one
class there shall be set forth upon the face of or back of the certificate, or
the certificate shall have a statement that the corporation will furnish to any
shareholder upon request and without charge, a full or summary statement of the
designations, preferences, limitations, and relative rights of the shares of
each class authorized to be issued and, if the corporation is authorized to
issue any preferred or special class in series, the variations in the relative
rights and preferences between the shares of each such series so far as the
same have been fixed and determined and the authority of the board of directors
to fix and determine the relative rights and preferences of subsequent series.
Section 2. The signatures of the officers of the corporation upon a
certificate may be facsimilies if the certificate is countersigned by a
transfer agent, or registered by a registrar, other than the corporation itself
or an employee of the corporation. In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of its
issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate to be
issued in place of any certificate theretofore issued by the corporation
alleged to have been lost or destroyed. When authorizing such issue of a new
certificate, the board of directors, in its discretion and as a condition
precedent to the issuance thereof, may prescribe such terms and conditions as
it deems expedient, and may require such indemnities as it deems adequate, to
protect the corporation from any claim that may be made against it with respect
to any such certificate alleged to have been lost or destroyed.
-9-
<PAGE> 10
TRANSFER OF SHARES
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate representing shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, a new certificate shall be issued to the person entitled thereto, and
the old certificate cancelled and the transaction recorded upon the books of
the corporation.
CLOSING OF TRANSFER BOOKS
Section 5. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders, or shareholders entitled
to receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the board of directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, forty days. If the stock transfer books shall be closed
for the purpose of determining shareholders entitled to notice of or to vote at
a meeting of shareholders, such books shall be closed for at least ten (10)
days, immediately preceding such meeting. In lieu of closing the stock transfer
books, the board of directors may fix in advance a date as the record date for
any such determination of shareholders such date in any case to be not more
than forty (40) days and, in case of a meeting of shareholders, not less than
ten (10) days prior to the date on which the particular action requiring such,
determination of shareholders is to be taken. If the stock transfer books are
not closed and no record date is fixed, the determination of shareholders
entitled to notice of or to vote at a meeting, or to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the board of directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination, shall apply to any adjournment thereof.
REGISTERED SHAREHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares
-10-
<PAGE> 11
On the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Kentucky
ARTICLE XI
GENERAL PROVISIONS
DIVIDENDS
Section 1. Subject to the provisions of the articles of incorporation
relating thereto, if any, dividends may be declared by the board of directors
at any regular or special meeting, pursuant to law. Dividends may be paid in
cash, in property or in shares of the capital stock, subject to any provisions
of the articles of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conductive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
ARTICLE XII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the affirmative vote of a majority of the board of
directors at any regular or special meeting of the board.
-11-
<PAGE> 12
The shareholders shall have the right to change or repeal bylaws
adopted by the board of directors.
-12-
<PAGE> 1
EXHIBIT 3.4(a)
ARTICLES OF INCORPORATION
OF
TENNESSEE MINING, INC.
The undersigned incorporator executes these Articles of Incorporation for
the purpose of forming and hereby forms a corporation under the laws of the
Commonwealth of Kentucky in accordance with the following provisions:
ARTICLE I
The name of the corporation is Tennessee Mining, Inc.
ARTICLE II
The number of shares the corporation is authorized to issue is 1,000
shares of common stock, no par value per share.
ARTICLE III
The street address of the corporation's initial registered office is 2800
Citizens Plaza, Louisville, Kentucky 40202. The name of the corporation's
initial registered agent at that office is WT&C Corporation Services, Inc.
ARTICLE IV
The mailing address of the corporation's principal office is 1500 North
Big Run Road, Ashland, Kentucky 41102.
ARTICLE V
The name and mailing address of the incorporator are Kevin J. Hable, 2800
Citizens Plaza, Louisville, Kentucky 40202.
ARTICLE VI
No directors shall be personally liable to the corporation or its
shareholders for monetary damages for breach of his duties as a director except
to the extent that the applicable law from time to time in effect shall provide
that such liability may not be
<PAGE> 2
eliminated or limited. Neither the amendment nor repeal of this Article shall
affect the liability of any director of the corporation with respect to any act
or failure to act which occurred prior to such amendment or repeal.
This Article VI is not intended to eliminate or limit any protection
otherwise available to the directors of the corporation.
ARTICLE VII
Any action, except the election of directors, required or permitted to be
taken at a shareholders' meeting may be taken without a meeting and without
prior notice (except as otherwise provided by law) if the action is taken by
shareholders representing not less than 80% (or such higher percentage as may
be required by law) of the votes entitled to be cast. Prompt notice of the
taking or any action by shareholders without a meeting by less than unanimous
consent shall be given to those shareholders entitled to vote on the action who
have not consented in writing.
Dated this 7th day of March, 1996.
/s/ Kevin J. Hable
------------------------------------
Kevin J. Hable, Incorporator
This Instrument Prepared by:
/s/ Kevin J. Hable
- ----------------------------------
Kevin J. Hable
WYATT, TARRANT & COMBS
2800 Citizens Plaza
Louisville, KY 40202
(502) 562-7232
2
<PAGE> 1
EXHIBIT 3.4(b)
BYLAWS OF
TENNESSEE MINING, INC.
ARTICLE I
OFFICES
The principal office of the corporation shall be located at Ashland,
Kentucky. The corporation may have such other offices, either within or without
the Commonwealth of Kentucky, as the business of the corporation may require
from time to time.
ARTICLE II
SHAREHOLDERS MEETINGS AND RECORD DATES
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held on the date and at the time fixed by resolution the board of directors,
for the purpose of electing directors and for the transaction of such other
business as may come before the meeting.
Section 2. Special Meetings. Special meetings of the shareholders may be
called by the president, by a majority of the members of the board of directors
or by the holders of not less than one-third of all the shares entitled to vote
at the meeting.
Section 3. Place of Meeting. The board of directors may designate any
place within or without the Commonwealth of Kentucky as the place of meeting for
any annual meeting or for any special meeting called by the board of directors.
If no designation is made, or if a special meeting be called by other
than the board of directors, the place of meeting shall be the principal office
of the corporation, except as otherwise provided in Section 5 of this Article.
Section 4. Notice of Meetings. Written notice stating the place, day and
hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called, shall be delivered not less than ten
nor more than sixty days before the date of the meeting, either personally or by
telegraph, teletype or other form of wire or wireless communication or by mail
or private carrier, by or at the direction of the president, or the secretary,
or the officer or persons calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail in a sealed envelope
addressed to the shareholder at his address as it appears on the records of the
corporation, with first class postage thereon prepaid.
<PAGE> 2
Section 5. Meeting of all Shareholders. If all of the shareholders shall
meet at any time and place, either within or without the Commonwealth of
Kentucky, and consent to the holding of a meeting, such meeting shall be valid
without call or notice, and at such meeting any corporate action may be taken.
Section 6. Fixing of Record Date. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
first date on which notice of the meeting is mailed or the date on which the
resolution of the board of directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided herein, such determination shall apply to
any adjournment thereof unless the meeting is adjourned to a date more than 120
days after the date fixed for the original meeting, in which case the board
shall fix a new record date.
Section 7. Voting Lists and Share Ledger. The secretary shall prepare a
complete list of the shareholders entitled to notice of any meeting, or any
adjournment thereof, arranged by voting group (and within each voting group by
class or series of shares) with the address of and the number of shares held by
each shareholder, which list, for a period of five business days prior to any
meeting and continuing through the meeting, shall be kept on file at the
principal office of the corporation and shall be subject to inspection by any
shareholder at any time during usual business hours. Such list shall be produced
and kept open at the meeting and shall be subject to the inspection of any
shareholder during the meeting or any adjournment thereof. The original share
ledger or stock transfer book, or a duplicate thereof kept in this State, shall
be prima facie evidence as to the shareholders entitled to examine such list or
share ledger or stock transfer book, or the shareholders entitled to vote at any
meeting of shareholders or to receive any dividend.
Section 8. Quorum. A majority of the outstanding shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders. The shareholders present at a duly organized meeting can continue
to do business for the remainder of the meeting and for any adjournment thereof,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum, unless a new record date is or must be set for that adjourned meeting.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting.
2
<PAGE> 3
Section 10. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting and without prior notice if one or more consents in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
In addition, so long as permitted by the corporation's articles of
incorporation, any action, except the election of directors, required or
permitted to be taken at a shareholders, meeting may be taken without a meeting
and without prior notice (except as otherwise provided by law) if one or more
consents in writing, setting forth the action so taken, shall be signed by
shareholders representing not less than 80% (or such higher percentage as may be
required by law) of the votes entitled to be cast and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
Prompt notice of the taking of any action by shareholders without a meeting by
less than unanimous consent shall be given to those shareholders entitled to
vote on the action who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed under the direction of a board of directors.
Section 2. Number and Tenure. A variable range of between one member (the
minimum) and ten members (the Maximum) is established for the size of the board
of directors. The number of directors may be fixed or changed from time to time,
within the minimum and maximum, by resolution of the shareholders or by
resolution of the board of directors, provided, however, that, after shares are
issued, only the shareholders may change the range for the size of the board of
directors or change from a variable range board to a fixed number of directors.
Each director shall hold office for a term expiring at the next annual
shareholders' meeting following his or her election; provided that, despite the
expiration of a director's term, the director shall continue to serve until his
or her successor shall have been elected and qualifies for the office or until
there is a decrease in the number of directors.
Section 3. Regular Meetings. A regular meeting of the board of directors
shall be held without other notice than this Bylaw, immediately after, and at
the same place as, the annual meeting of shareholders. The board of directors
may provide, by resolution, the time and place, either within or without the
Commonwealth of
3
<PAGE> 4
Kentucky, for the holding of additional regular meetings without other notice
than such resolution.
Section 4. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the president or any one director. The
person or persons authorized to call special meetings of the board of directors
may fix any place, either within or without the Commonwealth of Kentucky, as the
place for holding any special meeting of the board of directors called by them.
Section 5. Notice. Notice of any special meeting shall be given at least
two (2) days prior thereto by written notice delivered personally, mailed or
telegrammed to each director at his business address. If mailed, such notice
shall be deemed to be delivered five (5) days after its deposit in the United
States mail in a sealed envelope so addressed, with first class postage thereon
prepaid. If notice be given by telegram, such notice shall be deemed to be
delivered when the telegram is delivered to the telegraph company. Any director
may waive notice of any meeting. The attendance of a director at any meeting
shall constitute a waiver of notice of such meeting, unless the director at the
beginning of the meeting (or promptly upon his arrival) objects to the
transaction of any business at the meeting and does not thereafter vote for or
assent to action taken at the meeting. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the board of directors
need be specified in the notice or waiver of notice of such meeting.
Section 6. Quorum. A majority of the board of directors shall constitute
a quorum for the transaction of business at any meeting of the board of
directors, provided that if less than a majority of the directors are present at
said meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice.
Section 7. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 8. Vacancies. Any vacancy occurring in the board of directors may
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the board of directors. A director elected to fill
a vacancy shall serve until the next shareholders' meeting at which directors
are elected.
Section 9. Committees. The board of directors shall have authority to
establish such committee as it may consider necessary or convenient for the
conduct of its business. The board of directors may establish an executive
committee in accordance with and subject to the restrictions set out in the
statutes of the Commonwealth of Kentucky.
4
<PAGE> 5
Section 10. Informal Action. Any action required or permitted to be taken
at a meeting of the board of directors, or any action which may be taken at a
meeting of the board of directors or of a committee, may be taken without a
meeting if a consent, in writing, setting forth the action so taken shall be
signed by all of the directors, or all of the members of the committee, as the
case may be, and included in minutes or filed with the corporate records. Such
consent shall have the same effect as a unanimous vote.
In addition to the foregoing, any action, except the election of
directors, required or permitted to be taken at a shareholders' meeting may be
taken without a meeting and without prior notice (except as otherwise provided
by law) if the action is taken by shareholders representing not less than 80%
(or such higher percentage as may be required by law) of the votes entitled to
be cast. Prompt notice of the taking of any action by shareholders without a
meeting by less than unanimous consent shall be given to those shareholders
entitled to vote on the action who have not consented in writing.
ARTICLE IV
OFFICERS
Section 1. Classes. The officers of the corporation shall be a president,
a secretary, and such other officers, as may be provided by the board of
directors and elected in accordance with the provisions of this article.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at the first meeting of the
board of directors held after each annual meeting of shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as convenient. Vacancies may be filled or new offices
created and filled at any meeting of the board of directors. Each officer shall
hold office until his successor shall have been duly elected and shall have
qualified or until his death or until he shall resign or shall have been removed
from office in the manner hereinafter provided.
Section 3. Removal. Any officer elected by the board of directors may be
removed by the board of directors, with or without cause, whenever in its
judgment the best interest of the corporation would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of an officer or agent shall not of itself
create contractual rights.
Section 4. President. The president shall be the chief executive officer
of the corporation and shall, in general,
5
<PAGE> 6
supervise and control all of the business and affairs of the corporation. The
president shall perform all duties normally incident to the office of president
and such other duties as may be prescribed by the board of directors from time
to time.
Section 5. Secretary. The secretary shall [a] keep the minutes of the
shareholders' and of the board of directors' meetings in one or more books
provided for that purpose; [b] see that all notices are duly given in accordance
with the provisions of these bylaws or as required by law; [c] be custodian of
the corporate records and stock transfer books of the corporation; and, [d] in
general, perform all duties normally incident to the office of secretary and
such other duties as from time to time may be assigned by the president or by
the board of directors.
Section 6. Vice President. If the office of vice president is filled by
the board of directors, the vice president shall perform the duties of the
president in the absence of the president or in the event of his inability or
refusal to act, and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the president. The vice president shall perform
such other duties as from time to time may be assigned by the president or by
the board of directors.
Section 7. Treasurer. If the office of treasurer is filled by the board
of directors, the treasurer shall be the chief financial officer of the
corporation and shall perform all duties normally incident to the office of
treasurer and such other duties as from time to time may be assigned by the
president or by the board of directors.
ARTICLE V
CONTRACTS LOANS CHECKS AND DEPOSITS
Section 1. Contracts and Agreements. The board of directors may authorize
any officer or officers, agent or agents, to enter into any contract or
agreement or execute and deliver any instruments in the name of and on behalf of
the corporation, and such authority may be general or confined to specific
instances.
Section 2. Loans. No loans shall be contracted on behalf of the
corporation, and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts, Orders, Etc. All checks, drafts, or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the corporation shall be signed by such officer or officers,
agent or agents, of the
6
<PAGE> 7
corporation and in such manner as shall from time to time be determined by
resolution of the board of directors.
Section 4. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
bands, trust companies, or other depositories as the board of directors may
select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
the corporation shall be in such form as may be determined by the board of
directors. Such certificates shall be signed by the president or vice president
and by the secretary or an assistant secretary and may be sealed with the seal
of the corporation or a facsimile thereof. All certificates surrendered to the
corporation for transfer shall be cancelled, and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except that in case of a lost, destroyed or mutilated
certificate, a new certificate may be issued therefor upon such terms and
indemnity to the corporation as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of the corporation
shall be made only on the books of the corporation by the registered holder
thereof or by his attorney authorized by power of attorney duly executed and
filed with the secretary of the corporation, and on surrender for cancellation
of the certificate for such shares. The person in whose name shares stand on the
books of the corporation shall be deemed the owner thereof for all purposes as
regards the corporation.
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall be the calendar year.
ARTICLE VIII
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the provisions
of these Bylaws, or under the provisions of the Articles of Incorporation, or
under the provisions of the corporation laws of the Commonwealth of Kentucky,
waiver thereof in
7
<PAGE> 8
writing, signed by the person, or persons, entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice.
ARTICLE IX
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The corporation shall indemnify any person who is or was a director of
the corporation and may, as determined by the board of directors, indemnify any
person who is or was an officer or employee of the corporation, from any and all
judgments, settlements, penalties, fines and reasonable expenses that may be
incurred by or imposed against him in connection with any claims,
investigations, proceedings and/or litigation arising out of or relating to any
acts or omissions by him in his capacity as a director or officer or employee
of, or as trustee of any employee benefit plan maintained by, the corporation,
other than acts or omissions not in good faith or which involve intentional
misconduct or are known to him to be a violation of law or for any transaction
from which he derived an improper personal benefit, and except as otherwise
prohibited by Kentucky or Federal law. The right or privilege of
indemnification, as the case may be, granted hereunder shall include the payment
of reasonable expenses incurred in advance of the final disposition of a claim,
investigation, proceeding or litigation subject to the receipt by the
corporation of a written undertaking of the person requesting such payment that
he will repay such amounts if it is finally determined by a court of competent
jurisdiction that he is not entitled to indemnification under this bylaw.
ARTICLE X
AMENDMENT OF BYLAWS
The board of directors may alter, amend or rescind these bylaws, subject
to the rights of the shareholders to repeal or modify such actions.
8
<PAGE> 1
EXHIBIT 3.5(a)
ARTICLES OF INCORPORATION
OF
ADDINGTON MINING, INC.
1. Corporate Name. The Corporation's name shall be Addington Mining,
Inc.
2. Authorized Shares. The Corporation shall have authority to issue One
Thousand (1,000) shares of no par value common stock.
3. Registered Office and Agent. The street address of the Corporation's
initial registered office shall be 2700 Lexington Financial Center, Lexington,
Kentucky 40507. The name of the Corporation's initial registered agent at that
office shall be BTH Inc., Lexington.
4. Principal Office. The mailing address of the Corporation's principal
office shall be 1500 North Big Run Road, Ashland, Kentucky 41102.
5. Incorporator. The name and mailing address of the incorporator are:
Paul E. Sullivan, 2700 Lexington Financial Center, Lexington, Kentucky 40507.
6. Action by Shareholders in Lieu of Meeting. Any action required or
permitted to be taken at a shareholders' meeting may be taken without a meeting
and without prior notice if the action is taken by shareholders entitled to vote
on the action who represent not less than eighty percent (80%) of the votes
entitled to be cast on such action (or such higher percentage as may be required
by these Articles), except for the election of directors, which shall require
the written consent of all the shareholders entitled to vote in the election.
Notice of the taking of any action by shareholders without a meeting by less
than unanimous written consent shall be given promptly after the action becomes
effective to those shareholders entitled to vote on the action who have not
consented in writing.
7. Indemnification. Each person who is or becomes an executive officer
or director of the Corporation shall be indemnified and advanced expenses by the
Corporation with respect to all threatened, pending or completed actions, suits
or proceedings in which that person was, is, or is threatened to be made a named
defendant or respondent because he is or was a director or executive officer of
the Corporation. This Article obligates the Corporation to indemnify and advance
expenses to its executive officers or directors only in connection with
proceedings arising from that person's conduct in his official capacity with the
Corporation to the extent permitted by the Kentucky Business Corporation Act, as
amended from time to time. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which directors and executive officers may be entitled under any agreement, vote
of shareholders or disinterested directors, or otherwise. The Corporation may
indemnify and advance expenses to any employee or agent to the fullest extent
permitted by law.
1
<PAGE> 2
8. Limitation of Director Liability.
(a) Except as otherwise provided by Subsection (b) below, no
director of the Corporation shall have any personal liability to the Corporation
or its shareholders for monetary damages for breach of his duties as a director.
(b) Nothing in Article 9 (a) above shall be deemed or
construed to eliminate or limit the liability of a director for:
(i) Any transaction in which the director's personal
financial interest is in conflict with the financial interests of the
Corporation or its shareholders;
(ii) Acts or omissions not in good faith or which
involve intentional misconduct or are known to the director to be a violation of
law;
(iii) Any vote for or assent to an unlawful
distribution to shareholders as prohibited under KRS 271B.8-330 (or under any
corresponding provision of the Kentucky Business Corporation Act, as amended
from time to time); or
(iv) Any transaction from which the director derived
an improper personal benefit.
/s/ Paul E. Sullivan
------------------------------
Paul E. Sullivan, Incorporator
Date: October 20, 1997
Prepared by:
/s/ Jeff Jefferson
- -------------------------------
Jeff Jefferson
Brown, Todd & Heyburn PLLC
2700 Lexington Financial Center
Lexington, Kentucky 40507
(606) 231-0000
2
<PAGE> 1
EXHIBIT 3.5(b)
BYLAWS
OF
ADDINGTON MINING, INC.
I certify that the following Bylaws, consisting of three pages, each of
which I have initialed for identification, are the Bylaws adopted by the Board
of Directors of Addington Mining, Inc. (the "Corporation") by a Written Action
by Director in Lieu of Organizational Meeting, dated October 20, 1997.
/s/ John Lynch
---------------------------
John Lynch, Secretary
4
<PAGE> 2
BYLAWS
OF
ADDINGTON MINING, INC.
1. Meetings of Shareholders
1.1 Except as the Board of Directors may otherwise designate, the
annual meeting of the shareholders of the Corporation shall be held at 10:00
a.m. on March 15 in each year if not a Saturday, Sunday or legal holiday, and if
a Saturday, Sunday or legal holiday, then on the next day not a Saturday, Sunday
or legal holiday.
1.2 The annual meeting of the shareholders shall be held at a place
designated by the Board of Directors or, if the Board of Directors does not
designate a place, then at a place designated by the Secretary or, if the
Secretary does not designate a place, at the Corporation's principal office.
1.3 Special meetings of the shareholders shall be held at a place
designated by the Board of Directors if the special meeting is called by the
Board of Directors. If the special meeting is not called by the Board of
Directors, the meeting shall be held at the Corporation's principal office.
2. Board of Directors
2.1 The exact number of directors may be fixed, increased or decreased
from time to time by a resolution adopted by the majority vote of a quorum of
shareholders who are present in person or by proxy at a meeting held to elect
directors.
2.2 Meetings of the Board of Directors may be called by the
President/Chief Executive Officer or by any director.
2.3 Unless waived as permitted by the Kentucky Business Corporation
Act, notice of the time and place of each meeting of the directors shall be
either (a) telephoned or personally delivered to each director at least
forty-eight hours before the time of the meeting, or (b) mailed to each director
at his last known address at least ninety-six hours before the time of the
meeting.
3. Officers
3.1 The Corporation shall have a President/Chief Executive Officer, a
Secretary and a Treasurer, and may have one or more Vice Presidents, all of whom
shall be appointed by the Board of Directors. The Corporation may also have such
assistant officers as the Board of Directors may deem necessary, all of whom
shall be appointed by the Board of Directors or appointed by an officer or
officers authorized by it.
- --------
Initials
<PAGE> 3
3.2 The President shall have:
(a) General charge and authority over the business of the
Corporation, subject to the direction of the Board of Directors;
(b) Authority to preside at all meetings of the shareholders
and of the Board of Directors;
(c) Authority acting alone, except as otherwise directed by
the Board of Directors, to sign and deliver any document on behalf of the
Corporation, including, without limitation, any deed conveying title to any real
estate owned by the Corporation and any contract for the sale or other
disposition of any such real estate, and;
(d) Such other powers and duties as the Board of Directors may
assign.
3.3 The Vice President, or if there be more than one Vice President,
the Vice Presidents in the order of their seniority by designation (or, if not
designated, in the order of their seniority of election), shall perform the
duties of the President/Chief Executive Officer in his absence. The Vice
Presidents shall have such other powers and duties as the Board of Directors or
the President/Chief Executive Officer may assign to them.
3.4 The Secretary shall:
(a) Issue notices of all meetings for which notice is required
to be given;
(b) Have responsibility for preparing minutes of the
directors' and shareholders' meetings and for authenticating records of the
Corporation;
(c) Have charge of the corporate record books; and
(d) Have such other duties and powers as the Board of
Directors or the President/Chief Executive Officer may assign.
3.5 The Treasurer shall:
(a) Keep adequate and correct accounts of the Corporation's
affairs and transactions, and
(b) Have such other duties and powers as the Board of
Directors or the President/Chief Executive Officer may assign.
3.6 Other officers and agents of the Corporation shall have such
authority and perform such duties in the management of the Corporation as the
Board of Directors or the President/Chief Executive Officer may assign.
2
- --------
Initials
<PAGE> 4
4. Certificates and Transfer
4.1 Shares of the Corporation shall be represented by certificates in
such form as shall from time to time be prescribed by the President/Chief
Executive Officer.
4.2 Certificates representing shares of the Corporation shall be signed
(either manually or in facsimile) by the President/Chief Executive Officer and
by the Secretary or Treasurer.
4.3 Transfer of shares shall be made only on the stock transfer books
of the Corporation.
Prepared by
BROWN, TODD & HEYBURN PLLC
2700 Lexington Financial Center
Lexington, Kentucky 40507
3
- --------
Initials
<PAGE> 1
EXHIBIT 3.6(a)
ARTICLES OF INCORPORATION
OF
MINING TECHNOLOGIES, INC.
1. Corporate Name. The Corporation's name shall be Mining Technologies,
Inc.
2. Authorized Shares. The Corporation shall have authority to issue One
Thousand (1,000) shares of no par value common stock.
3. Registered Office and Agent. The street address of the Corporation's
initial registered office shall be 2700 Lexington Financial Center, Lexington,
Kentucky 40507. The name of the Corporation's initial registered agent at that
office shall be BTH Inc., Lexington.
4. Principal Office. The mailing address of the Corporation's principal
office shall be 1500 North Big Run Road, Ashland, Kentucky 41102.
5. Incorporator. The name and mailing address of the incorporator are:
Paul E. Sullivan, 2700 Lexington Financial Center, Lexington, Kentucky 40507.
6. Action by Shareholders in Lieu of Meeting. Any action required or
permitted to be taken at a shareholders' meeting may be taken without a meeting
and without prior notice if the action is taken by shareholders entitled to vote
on the action who represent not less than eighty percent (80%) of the votes
entitled to be cast on such action (or such higher percentage as may be required
by these Articles), except for the election of directors, which shall require
the written consent of all the shareholders entitled to vote in the election.
Notice of the taking of any action by shareholders without a meeting by less
than unanimous written consent shall be given promptly after the action becomes
effective to those shareholders entitled to vote on the action who have not
consented in writing.
7. Indemnification. Each person who is or becomes an executive officer
or director of the Corporation shall be indemnified and advanced expenses by the
Corporation with respect to all threatened, pending or completed actions, suits
or proceedings in which that person was, is, or is threatened to be made a named
defendant or respondent because he is or was a director or executive officer of
the Corporation. This Article obligates the Corporation to indemnify and advance
expenses to its executive officers or directors only in connection with
proceedings arising from that person's conduct in his official capacity with the
Corporation to the extent permitted by the Kentucky Business Corporation Act, as
amended from time to time. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which directors and executive officers may be entitled under any agreement, vote
of shareholders or disinterested directors, or otherwise. The Corporation may
indemnify and advance expenses to any employee or agent to the fullest extent
permitted by law.
1
<PAGE> 2
8. Limitation of Director Liability.
(a) Except as otherwise provided by Subsection (b) below, no
director of the Corporation shall have any personal liability to the Corporation
or its shareholders for monetary damages for breach of his duties as a director.
(b) Nothing in Article 8 (a) above shall be deemed or
construed to eliminate or limit the liability of a director for:
(i) Any transaction in which the director's personal
financial interest is in conflict with the financial interests of the
Corporation or its shareholders;
(ii) Acts or omissions not in good faith or which
involve intentional misconduct or are known to the director to be a violation of
law;
(iii) Any vote for or assent to an unlawful
distribution to shareholders as prohibited under KRS 271B.8-330 (or under any
corresponding provision of the Kentucky Business Corporation Act, as amended
from time to time); or
(iv) Any transaction from which the director derived
an improper personal benefit.
/s/ Paul E. Sullivan
------------------------------
Paul E. Sullivan, Incorporator
Date: December 18, 1997
Prepared by:
/s/ Jeff Jefferson
- -------------------------------
Jeff Jefferson
Brown, Todd & Heyburn PLLC
2700 Lexington Financial Center
Lexington, Kentucky 40507
(606) 231-0000
2
<PAGE> 1
EXHIBIT 3.6(b)
BYLAWS
OF
MINING TECHNOLOGIES, INC.
I certify that the following Bylaws, consisting of three pages, each of
which I have initialed for identification, are the Bylaws adopted by the Board
of Directors of Mining Technologies, Inc. (the "Corporation") by a Written
Action by Director in Lieu of Organizational Meeting, dated December 18, 1997.
/s/ John Lynch
---------------------------
John Lynch, Secretary
<PAGE> 2
BYLAWS
OF
MINING TECHNOLOGIES, INC.
1. Meetings of Shareholders
1.1 Except as the Board of Directors may otherwise designate, the
annual meeting of the shareholders of the Corporation shall be held at 10:00
a.m. on March 15 in each year if not a Saturday, Sunday or legal holiday, and if
a Saturday, Sunday or legal holiday, then on the next day not a Saturday, Sunday
or legal holiday.
1.2 The annual meeting of the shareholders shall be held at a place
designated by the Board of Directors or, if the Board of Directors does not
designate a place, then at a place designated by the Secretary or, if the
Secretary does not designate a place, at the Corporation's principal office.
1.3 Special meetings of the shareholders shall be held at a place
designated by the Board of Directors if the special meeting is called by the
Board of Directors. If the special meeting is not called by the Board of
Directors, the meeting shall be held at the Corporation's principal office.
2. Board of Directors
2.1 The exact number of directors may be fixed, increased or decreased
from time to time by a resolution adopted by the majority vote of a quorum of
shareholders who are present in person or by proxy at a meeting held to elect
directors.
2.2 Meetings of the Board of Directors may be called by the President
or by any director.
2.3 Unless waived as permitted by the Kentucky Business Corporation
Act, notice of the time and place of each meeting of the directors shall be
either (a) telephoned or personally delivered to each director at least
forty-eight hours before the time of the meeting, or (b) mailed to each director
at his last known address at least ninety-six hours before the time of the
meeting.
3. Officers
3.1 The Corporation shall have a President, a Secretary and a
Treasurer, and may have one or more Vice Presidents, all of whom shall be
appointed by the Board of Directors. The Corporation may also have such
assistant officers as the Board of Directors may deem necessary, all of whom
shall be appointed by the Board of Directors or appointed by an officer or
officers authorized by it.
- --------
Initials
<PAGE> 3
3.2 The President shall have:
(a) General charge and authority over the business of the
Corporation, subject to the direction of the Board of Directors;
(b) Authority to preside at all meetings of the shareholders;
(c) Authority acting alone, except as otherwise directed by
the Board of Directors, to sign and deliver any document on behalf of the
Corporation, including, without limitation, any deed conveying title to any real
estate owned by the Corporation and any contract for the sale or other
disposition of any such real estate, and;
(d) Such other powers and duties as the Board of Directors may
assign.
3.3 The Vice President, or if there be more than one Vice President,
the Vice Presidents in the order of their seniority by designation (or, if not
designated, in the order of their seniority of election), shall perform the
duties of the President in his absence. The Vice Presidents shall have such
other powers and duties as the Board of Directors or the President may assign to
them.
3.4 The Secretary shall:
(a) Issue notices of all meetings for which notice is required
to be given;
(b) Have responsibility for preparing minutes of the
directors' and shareholders' meetings and for authenticating records of the
Corporation;
(c) Have charge of the corporate record books; and
(d) Have such other duties and powers as the Board of
Directors or the President may assign.
3.5 The Treasurer shall:
(a) Keep adequate and correct accounts of the Corporation's
affairs and transactions, and
(b) Have such other duties and powers as the Board of
Directors or the President may assign.
3.6 Other officers and agents of the Corporation shall have such
authority and perform such duties in the management of the Corporation as the
Board of Directors or the President may assign.
2
- --------
Initials
<PAGE> 4
4. Certificates and Transfer
4.1 Shares of the Corporation shall be represented by certificates in
such form as shall from time to time be prescribed by the President.
4.2 Certificates representing shares of the Corporation shall be signed
(either manually or in facsimile) by the President and by the Secretary or
Treasurer.
4.3 Transfer of shares shall be made only on the stock transfer books
of the Corporation.
Prepared by
BROWN, TODD & HEYBURN PLLC
2700 Lexington Financial Center
Lexington, Kentucky 40507
3
- --------
Initials
<PAGE> 1
EXHIBIT 4.1
===============================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of November 12, 1997
by and among
AEI Holding Company, Inc.
Addington Mining, Inc.
Tennessee Mining, Inc.
Ikerd-Bandy Co., Inc.
and
NationsBanc Montgomery Securities, Inc.
===============================================================================
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and
entered into as of November 12, 1997, by and among AEI HOLDING COMPANY, INC., a
Delaware corporation (the "Company"), ADDINGTON MINING, INC., a Kentucky
corporation, TENNESSEE MINING, INC., a Kentucky corporation, IKERD-BANDY CO.,
INC., a Kentucky corporation (each a "Guarantor" and, collectively, the
"Guarantors"), and NATIONSBANC MONTGOMERY SECURITIES, INC. (the "Initial
Purchaser" ) who has agreed to purchase the Company's 10% Series A Senior Notes
due 2007 (the "Series A Notes") pursuant to the Purchase Agreement (as defined
below).
This Agreement is made pursuant to that certain Purchase Agreement,
dated November 6, 1997 (the "Purchase Agreement"), by and among the Company, the
Guarantors and the Initial Purchaser. In order to induce the Initial Purchaser
to purchase the Series A Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchaser set
forth in Section 2 of the Purchase Agreement. Capitalized terms used herein and
not otherwise defined shall have the meaning assigned to them in the Indenture,
dated November 12, 1997, between the Company and IBJ Schroder Bank & Trust
Company, as Trustee, relating to the Series A Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The U.S. Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Business Day: Any day except a Saturday, Sunday or other day in The
City of New York on which banks are authorized or ordered to close.
Certificated Securities: Definitive Notes, as defined in the Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer; (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and; (c) the delivery by the Company to
the Registrar under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal amount of Series A Notes tendered by
Holders thereof pursuant to the Exchange Offer.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The U.S. Securities Exchange Act of 1934, as amended.
1
<PAGE> 3
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the Prospectus contained therein..
Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Series A Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act, to certain institutional
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3), and
(7) of Regulation D under the Act and pursuant to Regulation S under the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of the Closing Date, between the
Company and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"),
pursuant to which the Notes are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms therein.
Notes: Series A and Series B Notes.
Person: An individual, partnership, corporation, trust, or
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and
the Guarantors relating to (a) an offering of Series B Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i) that
is filed pursuant to the provisions of this Agreement and (ii) including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Regulation S: Regulation S promulgated under the Act.
Restricted Broker-Dealer: Any Broker-Dealer that holds Series B Notes
that were acquired in the Exchange Offer in exchange for Series A Notes that
such Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its affiliates).
2
<PAGE> 4
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Company's 10% Series B Senior Notes due 2007 to be
issued pursuant to the Indenture in the Exchange Offer or as contemplated by
Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Series A Note, until the earliest
to occur of (a) the date on which such Series A Note is exchanged in the
Exchange Offer and entitled to be resold to the public by the Holder thereof
without complying with the prospectus delivery requirements of the Act, (b) the
date on which such Series A Note has been disposed of in accordance with a Shelf
Registration Statement, (c) the date on which such Series A Note is disposed of
by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (d) the date on which such Series A Note is distributed to
the public pursuant to Rule 144 under the Act.
Trustee: As set forth in the Indenture and shall also include any of
its successors.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company and the Guarantors shall (i) cause the Exchange
Offer Registration Statement to be filed with the Commission as soon as
practicable after the Closing Date (the "Exchange Offer Filing Date"), but in no
event later than 90 days after the Closing Date (such 90th day being the "Filing
Deadline"), (ii) use its best efforts to cause such Exchange Offer Registration
Statement to become effective at the earliest possible time, but in no event
later than 120 days after the Closing Date (such 120th day being the
"Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause it to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the Series B Notes to be
made under the Blue Sky laws of such jurisdictions as are necessary to permit
Consummation of the Exchange Offer, and (iv) upon the effectiveness of such
Exchange Offer Registration Statement, commence and Consummate the Exchange
Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Series B Notes to be offered in exchange for the Series A
Notes that are Transfer Restricted Securities and to permit resales of Series B
Notes by Broker-Dealers that tendered into the Exchange Offer Series A Notes
that such Broker-Dealer acquired for its own account as a result of market
making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its Affiliates) as contemplated by
Section 3(c) below.
3
<PAGE> 5
(b) The Company and the Guarantors shall use their respective best
efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 20 Business Days. The Company and the Guarantors shall
cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Series B Notes shall be included
in the Exchange Offer Registration Statement. The Company and the Guarantors
shall use their respective best efforts to cause the Exchange Offer to be
Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
Business Days thereafter.
(c) (1) The Company shall include a "Plan of Distribution" section in
the Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Broker-Dealer who holds Transfer Restricted Securities
that were acquired for the account of such Broker-Dealer as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company or any Affiliate of the
Company), may exchange such Transfer Restricted Securities pursuant to the
Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter"
within the meaning of the Act and must, therefore, deliver a prospectus meeting
the requirements of the Act in connection with its initial resale of any Series
B Notes received by such Broker-Dealer in the Exchange Offer and that the
Prospectus contained in the Exchange Offer Registration Statement may be used to
satisfy such prospectus delivery requirement. Such "Plan of Distribution"
section shall also contain all other information with respect to such sales by
such Broker-Dealers that the Commission may require in order to permit such
sales pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Transfer Restricted Securities held by
any such Broker-Dealer, except to the extent required by the Commission as a
result of a change in policy, rules or regulations after the date of this
Agreement.
(2) To the extent necessary to ensure that the Exchange Offer
Registration Statement is available for sales of Series B Notes by
Broker-Dealers, upon the reasonable request of any Broker-Dealer who certifies
in writing to the Company that it anticipates it will be a Restricted-Broker
Dealer, the Company and the Guarantors agree to use their respective best
efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(c) hereof and in conformity with the requirements of this Agreement, the Act
and the policies, rules and regulations of the Commission as announced from time
to time, for a period of one year from the date on which the Exchange Offer is
Consummated, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been sold
pursuant thereto. The Company and the Guarantors shall promptly provide
sufficient copies of the latest version of such Prospectus to such
Broker-Dealers promptly upon request, and in no event later than one Business
Day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the Consummation of the Exchange Offer that (A) such Holder was prohibited by
law or Commission policy from participating in the Exchange Offer or (B) such
Holder may not resell the Series B Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Notes
4
<PAGE> 6
acquired directly from the Company or any of its Affiliates, then the Company
and the Guarantors shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i)
the date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "Filing Deadline"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement) (the "Shelf Registration Statement"), relating to
all Transfer Restricted Securities, and
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 60 days after the
Filing Deadline (such 60th day the "Shelf Effectiveness Deadline").
If, after the Company and the Guarantors have filed an Exchange Offer
Registration Statement that satisfies the requirements of Section 3(a) above,
the Company and the Guarantors are required to file and make effective a Shelf
Registration Statement solely because the Exchange Offer is not permitted under
applicable federal law, then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above;
provided that, in such event, the Company and the Guarantors shall remain
obligated to meet the Shelf Effectiveness Deadline set forth in clause (y).
The Company and the Guarantors shall use their respective best efforts to keep
any Shelf Registration Statement required by this Section 4(a) continuously
effective, supplemented and amended as required by and subject to the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least two years (as extended pursuant to Section 6(c)(i)) following the date on
which such Shelf Registration Statement first becomes effective under the Act,
or such shorter period as will terminate when all Transfer Restricted Securities
covered by such Registration Statement have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the Exchange Offer Filing Date or
Filing Deadline, as applicable, (ii) any such Registration Statement has not
been declared effective by the Commission on or prior to the Effectiveness
Deadline or Shelf Effectiveness Deadline, as applicable, (iii) the Exchange
Offer has not been Consummated within 30 Business Days after the Exchange Offer
Registration Statement is first declared effective by the Commission or (iv) any
Registration Statement required by this Agreement is
5
<PAGE> 7
filed and declared effective but shall thereafter cease to be effective or fail
to be usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective immediately (each such event referred to
in clauses (i) through (iv), a "Registration Default"), then the Company and the
Guarantors hereby jointly and severally agree to pay to each Holder of Transfer
Restricted Securities affected thereby liquidated damages ("Liquidated Damages")
in an amount equal to $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities held by such Holder for each week or portion thereof that
the Registration Default continues for the first 90-day period immediately
following the occurrence of such Registration Default. The amount of the
Liquidated Damages shall increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages of $.50 per week per $1,000 in principal
amount of Transfer Restricted Securities; provided that the Company and the
Guarantors shall in no event be required to pay Liquidated Damages for more than
one Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
Liquidated Damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued Liquidated Damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Transfer Restricted Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors shall comply with all applicable
provisions of Section 6(c) below, shall use their respective best efforts to
effect such exchange and to permit the resale of Series B Notes by
Broker-Dealers that tendered in the Exchange Offer Series A Notes that such
Broker-Dealer acquired for its own account as a result of its market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its Affiliates) being sold in accordance
with the intended method or methods of distribution thereof, and shall comply
with all of the following provisions:
(i) If, following the Closing Date there has been announced a
change in Commission policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the
Company raises a substantial question as to whether the Exchange Offer
is permitted by applicable federal law, the Company and the Guarantors
hereby agree to seek a no-action letter or other favorable decision
from the Commission allowing the Company and the Guarantors to
Consummate an Exchange Offer for such Transfer Restricted Securities.
The Company and the Guarantors hereby agree to pursue the issuance of
such a decision to the Commission staff level. In connection with the
foregoing, the Company and the Guarantors hereby agree to take all such
other actions as may be
6
<PAGE> 8
requested by the Commission or otherwise required in connection with
the issuance of such decision, including without limitation (A)
participating in telephonic conferences with the Commission, (B)
delivering to the Commission staff an analysis prepared by counsel to
the Company setting forth the legal bases, if any, upon which such
counsel has concluded that such an Exchange Offer should be permitted
and (C) diligently pursuing a resolution (which need not be favorable)
by the Commission staff.
(ii) As a condition to its participation in the Exchange
Offer, each Holder of Transfer Restricted Securities (including,
without limitation, any Holder who is a Broker-Dealer) shall furnish,
upon the request of the Company, prior to the Consummation of the
Exchange Offer, a written representation to the Company and the
Guarantors (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an Affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Series B Notes to be issued in the Exchange Offer and (C) it is
acquiring the Series B Notes in its ordinary course of business. Each
Holder using the Exchange Offer to participate in a distribution of the
Series B Notes hereby acknowledges and agrees that, if the resales are
of Series B Notes obtained by such Holder in exchange for Series A
Notes acquired directly from the Company or an Affiliate thereof, it
(1) could not, under Commission policy as in effect on the Closing
Date, rely on the position of the Commission enunciated in Morgan
Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling (available July 2, 1993) and
similar no-action letters (including, if applicable, any no-action
letter obtained pursuant to clause (i) above), and (2) must comply with
the registration and prospectus delivery requirements of the Act in
connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508 of Regulation S-K , as
applicable.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company and the Guarantors shall provide a
supplemental letter to the Commission (A) stating that the Company and
the Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) as interpreted in the Commission's letter to
Shearman & Sterling (available July 2, 1993) and, if applicable, any
no-action letter obtained pursuant to clause (i) above, (B) including a
representation that neither the Company nor any Guarantor has entered
into any arrangement or understanding with any Person to distribute the
Series B Notes to be received in the Exchange Offer and that, to the
best of the Company's and each Guarantor's information and belief, each
Holder participating in the Exchange Offer is acquiring the Series B
Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Series B Notes received in the Exchange Offer and (C) any other
undertaking or representation required by the Commission as set forth
in any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their respective best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 4(b) hereof), and pursuant thereto the Company and the
Guarantors shall prepare and file with the Commission a Registration
7
<PAGE> 9
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration
Statement and any related Prospectus required by this Agreement, the Company and
the Guarantors shall:
(i) use their respective best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not
to be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company and the
Guarantors shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use their respective best efforts to cause such amendment to
be declared effective as soon as practicable;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to such Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be; cause the Prospectus contained in such Registration Statement to be
supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424, 430A and 462, as applicable, under the Act
in a timely manner; and comply with the provisions of the Act with
respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Registration Statement or supplement to the
Prospectus contained in such Registration Statement;
(iii) advise the selling Holders promptly and, if requested by
such Persons, confirm such advice in writing, (A) when the related
Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to any such Registration Statement or any
post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
related Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement in order
to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If at any time the Commission
issues any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory
authority issues an order suspending the qualification or exemption
from qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, then the Company and the Guarantors shall
8
<PAGE> 10
use their respective best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
(iv) subject to Section 6(c)(i) hereof, if any fact or
event contemplated by Section 6(c)(iii)(D) hereof shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to the Initial Purchaser(s) and each selling
Holder named in any Registration Statement or related Prospectus in
connection with such sale, if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein
or any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents shall
be subject to the review and comment of such Holders in connection with
such sale, if any, for a period of at least five Business Days, and the
Company and the Guarantors shall not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which the selling Holders of the Transfer
Restricted Securities covered by such Registration Statement in
connection with such sale, if any, shall reasonably object within five
Business Days after the receipt thereof. A selling Holder shall be
deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains a material misstatement or omission or
fails to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is
to be incorporated by reference into a Registration Statement or
Prospectus, provide copies of such document to the selling Holders in
connection with such sale, if any, make the Company's and the
Guarantors' representatives available for discussion of such document
and other customary due diligence matters, and include such information
in such document prior to the filing thereof as such selling Holders
may reasonably request;
(vii) make available at reasonable times for inspection by
the selling Holders participating in any disposition pursuant to such
Registration Statement and any attorney or accountant retained by such
selling Holders, all financial and other records, pertinent corporate
documents of the Company and the Guarantors and cause the Company's and
the Guarantors' officers, directors and employees to supply all
information reasonably requested by any such selling Holder, attorney
or accountant in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness;
(viii) if requested by any selling Holders in connection with
such sale, if any, promptly include in any Registration Statement or
related Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders may
reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as
practicable after the Company and the Guarantors are notified of the
matters to be included in such Prospectus supplement or post-effective
amendment;
9
<PAGE> 11
(ix) furnish to each selling Holder in connection with such
sale, if any, without charge, at least one copy of the Registration
Statement, as first filed with the Commission, and of each amendment
thereto, including all documents incorporated by reference therein and
all exhibits (including exhibits incorporated therein by reference);
(x) deliver to each selling Holder, without charge, as many
copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such Persons reasonably may
request; the Company and the Guarantors hereby consent to the use (in
accordance with law) of the Prospectus and any amendment or supplement
thereto by each of the selling Holders in connection with the offering
and the sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto;
(xi) upon the request of any selling Holder, enter into such
agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any applicable
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder of Transfer Restricted Securities in
connection with any sale or resale pursuant to any applicable
Registration Statement and in such connection, the Company and the
Guarantors shall:
(A) upon request of any selling Holder, furnish (or in the
case of paragraphs (2) and (3) below, use its best efforts to
cause to be furnished) to each selling Holder, upon the
effectiveness of the Shelf Registration Statement or upon
Consummation of the Exchange Offer, as the case may be:
(1) a certificate, dated such date, signed on behalf of
the Company and each Guarantor by (x) the President or any
Vice President and (y) a principal financial or accounting
officer of the Company and such Guarantor, confirming, as of
the date thereof, the matters set forth in paragraphs (b)
through (f) of Section 7 of the Purchase Agreement and such
other similar matters as the selling Holders may reasonably
request;
(2) an opinion, dated such date, of counsel for the
Company and the Guarantors covering matters similar to those
set forth in Section 7(j) of the Purchase Agreement and such
other matter as the selling Holders may reasonably request,
and in any event including a statement to the effect that such
counsel has participated in conferences with officers and
other representatives of the Company and the Guarantors and
representatives of the independent public accountants for the
Company and the Guarantors and have considered the matters
required to be stated therein and the statements contained
therein, although such counsel has not independently verified
the accuracy, completeness or fairness of such statements; and
that such counsel advises that, on the basis of the foregoing
(relying as to materiality to the extent such counsel deems
appropriate upon the statements of officers and other
representatives of the Company and the Guarantors and without
independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that
the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment thereto
became effective and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the
Exchange Offer, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its
10
<PAGE> 12
date and, in the case of the opinion dated the date of
Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a material fact
or omitted to state a material fact necessary in order to make
the statements therein, in the light of the circumstances
under which they were made, not misleading. Without limiting
the foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or fairness
of the financial statements, notes and schedules and other
financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Section 7(p) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may
be reasonably requested by the selling Holders to evidence
compliance with clause (A) above and with any customary conditions
contained in the any agreement entered into by the Company and the
Guarantors pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided, however, that neither
the Company nor any Guarantor shall be required to register or qualify
as a foreign corporation where it is not now so qualified or to take
any action that would subject it to the service of process in suits or
to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xiii) issue, upon the request of any Holder of Series A
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to
the aggregate principal amount of Series A Notes surrendered to the
Company by such Holder in exchange therefor or being sold by such
Holder; such Series B Notes to be registered in the name of such Holder
or in the name of the purchaser(s) of such Series B Notes, as the case
may be; in return, the Series A Notes held by such Holder shall be
surrendered to the Company for cancellation;
(xiv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders to facilitate
the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted
Securities in such denominations and such names as the selling Holders
may request at least two Business Days prior to such sale of Transfer
Restricted Securities;
(xv) use their respective best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved
11
<PAGE> 13
by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition
of such Transfer Restricted Securities, subject to the proviso
contained in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xvii) otherwise use their respective best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act);
(xviii) make appropriate officers of the Company available to
the selling Holders for meetings with prospective purchasers of the
Transfer Restricted Securities and prepare and present to potential
investors customary "road show" material in a manner consistent with
other new issuances of other securities similar to the Transfer
Restricted Securities;
(xix) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use its best efforts to
cause the Trustee to execute, all documents that may be required to
effect such changes and all other forms and documents required to be
filed with the Commission to enable such Indenture to be so qualified
in a timely manner; and
(xx) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of
a Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) hereof or any notice from the Company of the existence of any
fact of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"Suspension Notice"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "Recommencement
Date"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the Recommencement Date.
12
<PAGE> 14
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors'
performance of or compliance with this Agreement shall be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all SEC or National Association of Securities Dealers,
Inc. ("NASD") registration and filing fees and expenses; (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including printing certificates for the
Series B Notes to be issued in the Exchange Offer and printing of Prospectuses),
messenger and delivery services and telephone and telephone; (iv) all fees and
disbursements of counsel for the Company, the Guarantors, and the Holders of
Transfer Restricted Securities and fees and disbursements of the Trustee and
counsel; (v) all application and filing fees in connection with listing the
Series B Notes on a national securities exchange or automated quotation system
pursuant to the requirements hereof; and (vi) all fees and disbursements of
independent certified public accountants of the Company and the Guarantors
(including the expenses of any special audit and comfort letters required by or
incident to such performance) and underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of the Series B
Notes by a Holder.
The Company shall, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
shall reimburse the Holders of Transfer Restricted Securities being tendered in
the Exchange Offer and/or resold pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or registered pursuant to
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Latham & Watkins,
unless another firm shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless (i) each Holder and (ii) each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto) provided by the Company to any holder
or any prospective purchaser of Series B Notes, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by an untrue
statement or omission or alleged untrue
13
<PAGE> 15
statement or omission that is based upon information relating to any of the
Holders furnished in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or the Guarantors, to the same extent as the foregoing indemnity
from the Company and the Guarantors to each of the Indemnified Holders, but only
with reference to information relating to such Indemnified Holder furnished in
writing to the Company by such Indemnified Holder expressly for use in any
Registration Statement. In no event shall any Indemnified Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Indemnified Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Indemnified Holder for such Transfer Restricted Securities
and (ii) the amount of any damages that such Indemnified Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), an Indemnified Holder shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Indemnified Holder). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by a majority of the Indemnified Holders, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and
hold harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such
14
<PAGE> 16
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantor(s), on the one hand, and the Holders, on the other hand, from their
sale of Transfer Restricted Securities or (ii) if the allocation provided by
clause 8(d)(i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
8(d)(i) above but also the relative fault of the Company and the Guarantors, on
the one hand, and of the Indemnified Holder, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors, on the one
hand, and of the Indemnified Holder, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or such Guarantor, on the one
hand, or by the Indemnified Holder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and judgments referred to above shall
be deemed to include, subject to the limitations set forth in the second
paragraph of Section 8(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company, the Guarantors and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder or its
related Indemnified Holders shall be required to contribute, in the aggregate,
any amount in excess of the amount by which the total received by such Holder
with respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant to
this Section 8(c) are several in proportion to the respective principal amount
of Transfer Restricted Securities held by each of the Holders hereunder and not
joint.
15
<PAGE> 17
SECTION 9. RULE 144A
The Company and each Guarantor hereby agrees with each Holder, for so
long as any Transfer Restricted Securities remain outstanding and during any
period in which the Company or such Guarantor is not subject to Section 13 or
15(d) of the Securities Exchange Act, to make available, upon request of any
Holder of Transfer Restricted Securities, to any Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A.
SECTION 10. MISCELLANEOUS
(a) No Inconsistent Agreements. Neither the Company nor any Guarantor
shall, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantors' securities under any agreement in effect on the date hereof.
(b) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(b)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose securities are being tendered pursuant to the Exchange Offer
and that does not affect directly or indirectly the rights of other Holders
whose securities are not being tendered pursuant to such Exchange Offer may be
given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities subject to such Exchange Offer.
(c) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchaser, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
16
<PAGE> 18
AEI Holding Company, Inc.
1500 North Big Run Road
Ashland, Kentucky 41102
Telecopier No.: (606) 928-0450
Attention: Chief Financial Officer
With a copy to:
Brown, Todd & Heyburn, PLLC
2700 Lexington Financial Center
Lexington, Kentucky 40507-1749
Telecopier No.: (606) 231-0011
Attention: Paul Sullivan, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to the Initial
Purchaser in the form attached hereto as Exhibit A.
(e) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Transfer Restricted Securities in violation of the terms hereof or of the
Purchase Agreement or the Indenture. If any transferee of any Holder shall
acquire Transfer Restricted Securities in any manner, whether by operation of
law or otherwise, such Transfer Restricted Securities shall be held subject to
all of the terms of this Agreement, and by taking and holding such Transfer
Restricted Securities such Holder shall be conclusively deemed to have agreed to
be bound by and to perform all of the terms and provisions of this Agreement,
including the restrictions on resale set forth in this Agreement and, if
applicable, the Purchase Agreement, and such Holder shall be entitled to receive
the benefits hereof.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(i) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity,
17
<PAGE> 19
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be affected or impaired
thereby.
(j) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted to the Holders of the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
18
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AEI HOLDING COMPANY, INC.
By:/s/Vic Grubb
-------------------------------
Name: Vic Grubb
Title: Treasurer/Controller
ADDINGTON MINING, INC.
By:/s/Vic Grubb
-------------------------------
Name: Vic Grubb
Title: Treasurer
TENNESSEE MINING, INC.
By:/s/Vic Grubb
-------------------------------
Name: Vic Grubb
Title: Treasurer
IKERD-BANDY CO., INC.
By:/s/Vic Grubb
-------------------------------
Name: Vic Grubb
Title: Treasurer
NATIONSBANC MONTGOMERY SECURITIES, INC.
By:/s/J. Scott Holmes
------------------------------------
Name: J. Scott Holmes
Title: Director
<PAGE> 21
EXHIBIT A
NOTICE OF FILING OF REGISTRATION STATEMENT
To: NationsBanc Montgomery Securities, Inc.
From: AEI Holding Company, Inc.
Re: 10% Senior Notes Due 2007
Date:________________, 199__
For your information only (NO ACTION REQUIRED):
Today, ________________, 199__, we filed [an A/B Exchange
Registration Statement] [a Shelf Registration Statement] with the Securities and
Exchange Commission. We currently expect this registration statement to be
declared effective by __________________________, 1998.
<PAGE> 1
EXHIBIT 4.2(a)
===============================================================================
AEI HOLDING COMPANY, INC.
AS ISSUER
ADDINGTON MINING, INC.
TENNESSEE MINING, INC.
IKERD-BANDY CO., INC.
AS GUARANTORS
$250,000,000
10% SENIOR NOTES DUE 2007
INDENTURE
----------------------
Dated as of November 12, 1997
----------------------
IBJ Schroder Bank & Trust Company
Trustee
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1
SECTION 1.01. DEFINITIONS.........................................................................................1
SECTION 1.02. OTHER DEFINITIONS..................................................................................14
SECTION 1.03. TIA TERMS..........................................................................................15
SECTION 1.04. RULES OF CONSTRUCTION..............................................................................15
ARTICLE 2. THE NOTES.............................................................................................16
SECTION 2.01. FORM AND DATING....................................................................................16
SECTION 2.02. EXECUTION AND AUTHENTICATION.......................................................................17
SECTION 2.03. REGISTRAR AND PAYING AGENT.........................................................................18
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST................................................................18
SECTION 2.05. HOLDER LISTS.......................................................................................18
SECTION 2.06. TRANSFER AND EXCHANGE..............................................................................18
SECTION 2.07. REPLACEMENT SENIOR NOTES...........................................................................31
SECTION 2.08. OUTSTANDING SENIOR NOTES...........................................................................31
SECTION 2.09. TREASURY NOTES.....................................................................................31
SECTION 2.10. TEMPORARY SENIOR NOTES.............................................................................32
SECTION 2.11. CANCELLATION.......................................................................................32
SECTION 2.12. DEFAULTED INTEREST.................................................................................32
ARTICLE 3. REDEMPTION AND PREPAYMENT.............................................................................32
SECTION 3.01. NOTICES TO TRUSTEE.................................................................................32
SECTION 3.02. SELECTION OF SENIOR NOTES TO BE REDEEMED...........................................................33
SECTION 3.03. NOTICE OF REDEMPTION...............................................................................33
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.....................................................................34
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE........................................................................34
SECTION 3.06. SENIOR NOTES REDEEMED IN PART......................................................................34
SECTION 3.07. OPTIONAL REDEMPTION................................................................................34
SECTION 3.08. MANDATORY REDEMPTION...............................................................................35
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS................................................35
ARTICLE 4. COVENANTS.............................................................................................37
SECTION 4.01. PAYMENT OF SENIOR NOTES............................................................................37
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY....................................................................37
SECTION 4.03. REPORTS............................................................................................38
SECTION 4.04. COMPLIANCE CERTIFICATE.............................................................................38
SECTION 4.05. TAXES..............................................................................................39
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.....................................................................39
SECTION 4.07. RESTRICTED PAYMENTS................................................................................39
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.....................................41
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.........................................42
SECTION 4.10. ASSET SALES........................................................................................44
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.......................................................................44
SECTION 4.12. LIENS..............................................................................................45
SECTION 4.13. BUSINESS ACTIVITIES................................................................................45
SECTION 4.14. CORPORATE EXISTENCE................................................................................45
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.........................................................45
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.16. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS......................................................46
SECTION 4.17. LIMITATION ON ISSUANCES OF EQUITY INTERESTS IN WHOLLY OWNED SUBSIDIARIES...........................47
SECTION 4.18. ADVANCES TO SUBSIDIARIES...........................................................................47
SECTION 4.19. USE OF PROCEEDS....................................................................................48
SECTION 4.20. PAYMENTS FOR CONSENT...............................................................................48
SECTION 4.21. ADDITIONAL NOTE GUARANTEES.........................................................................48
ARTICLE 5. SUCCESSORS............................................................................................49
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS...........................................................49
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED..................................................................49
ARTICLE 6. DEFAULTS AND REMEDIES.................................................................................49
SECTION 6.01. EVENTS OF DEFAULT..................................................................................49
SECTION 6.02. ACCELERATION.......................................................................................51
SECTION 6.03. OTHER REMEDIES.....................................................................................52
SECTION 6.04. WAIVER OF PAST DEFAULTS............................................................................52
SECTION 6.05. CONTROL BY MAJORITY................................................................................52
SECTION 6.06. LIMITATION ON SUITS................................................................................53
SECTION 6.07. RIGHTS OF HOLDERS OF SENIOR NOTES TO RECEIVE PAYMENT...............................................53
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.........................................................................53
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM...................................................................53
SECTION 6.10. PRIORITIES.........................................................................................54
SECTION 6.11. UNDERTAKING FOR COSTS..............................................................................54
ARTICLE 7. TRUSTEE...............................................................................................55
SECTION 7.01. DUTIES OF TRUSTEE..................................................................................55
SECTION 7.02. RIGHTS OF TRUSTEE..................................................................................56
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.......................................................................56
SECTION 7.04. TRUSTEE'S DISCLAIMER...............................................................................56
SECTION 7.05. NOTICE OF DEFAULTS.................................................................................57
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE SENIOR NOTES..................................................57
SECTION 7.07. COMPENSATION AND INDEMNITY.........................................................................57
SECTION 7.08. REPLACEMENT OF TRUSTEE.............................................................................58
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC...................................................................59
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION......................................................................59
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY..................................................59
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE..............................................................60
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE...........................................60
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.....................................................................60
SECTION 8.03. COVENANT DEFEASANCE................................................................................60
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.........................................................61
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS......62
SECTION 8.06. REPAYMENT TO COMPANY...............................................................................62
SECTION 8.07. REINSTATEMENT......................................................................................63
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER......................................................................63
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF SENIOR NOTES.........................................................63
SECTION 9.02. WITH CONSENT OF HOLDERS OF SENIOR NOTES............................................................64
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT................................................................65
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS..................................................................65
SECTION 9.05. NOTATION ON OR EXCHANGE OF SENIOR NOTES............................................................66
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC....................................................................66
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 10. NOTE GUARANTEES......................................................................................66
SECTION 10.01. GUARANTEE.........................................................................................66
SECTION 10.02. LIMITATION ON GUARANTOR LIABILITY.................................................................67
SECTION 10.03. EXECUTION AND DELIVERY OF NOTE GUARANTEE..........................................................67
SECTION 10.04. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS................................................68
SECTION 10.05. RELEASES FOLLOWING SALE OF ASSETS.................................................................69
ARTICLE 11. MISCELLANEOUS........................................................................................69
SECTION 11.01. TRUST INDENTURE ACT CONTROLS......................................................................69
SECTION 11.02. NOTICES...........................................................................................69
SECTION 11.03. COMMUNICATION BY HOLDERS OF SENIOR NOTES WITH OTHER HOLDERS OF SENIOR NOTES.......................70
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT................................................70
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.....................................................71
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.......................................................................71
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS..........................71
SECTION 11.08. GOVERNING LAW.....................................................................................71
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.....................................................72
SECTION 11.10. SUCCESSORS........................................................................................72
SECTION 11.11. SEVERABILITY......................................................................................72
SECTION 11.12. COUNTERPART ORIGINALS.............................................................................72
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC..................................................................72
EXHIBITS
Exhibit A-1 FORM OF SENIOR NOTE
Exhibit A-2 FORM OF TEMPORARY REGULATION S GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E FORM OF NOTE GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
Exhibit G FORM OF SUBSIDIARY INTERCOMPANY NOTE
</TABLE>
iii
<PAGE> 5
INDENTURE dated as of November 12, 1997 among AEI Holding
Company, Inc., a Delaware corporation (the "Company"), Addington Mining, Inc.,
Tennessee Mining, Inc. and Ikerd-Bandy Co., Inc. (collectively, the
"Guarantors"), and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee").
The Company, the Guarantors and the Trustee agree as follows
for the benefit of each other and for the equal and ratable benefit of the
Holders of the 10% Senior Notes due 2007.
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01 DEFINITIONS.
"144A Global Note" means a Global Note in the form of Exhibit
A-1 hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Senior Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any assets acquired by such specified Person.
"Additional Senior Notes" means up to $50.0 million in
aggregate principal amount of Senior Notes (other than the Initial Senior Notes)
issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided, however, that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of coal in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of this
Indenture in Section 4.15 hereof and/or the provisions
<PAGE> 6
in Section 5.01 hereof and not by the provisions of Section 4.10 hereof), and
(ii) the issue or sale by the Company or any of its Subsidiaries of Equity
Interests of any of the Company's Subsidiaries, in the case of either clause (i)
or (ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value (as determined in good faith by the Board of
Directors) in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (i) a transfer of assets by the Company to a Guarantor or by
a Guarantor to the Company or to another Guarantor, (ii) an issuance of Equity
Interests by a Guarantor to the Company or to another Guarantor, and (iii) a
Restricted Payment that is permitted by Section 4.07 hereof.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company, or any authorized committee of the Board of Directors.
"Bowie" means Bowie Resources, Limited, a Colorado
corporation, that is 77.5% owned by the Company as of the date of the Indenture.
"Bowie Sales Agency Agreement" means that certain agreement
dated as of January 30, 1997 between Bowie Sales LLC and Bowie, as the same may
be extended or renewed from time to time without alteration of the material
terms thereof.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
"Capital Stock" means any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock, including, without limitation, with respect to partnerships, partnership
interests (whether general or limited) and any other interest or participation
that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, such partnership.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the full faith
and credit of the United States government or any agency or instrumentality
thereof having maturities of not more than six months from the date of
acquisition, (iii) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500,000,000 and a Thompson Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii)
2
<PAGE> 7
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above, (v) commercial paper having the highest rating
obtainable from either Moody's Investors Service, Inc. or Standard & Poor's
Corporation and, in each case, maturing within six months after the date of
acquisition and (vi) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i)-(v) of this
definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a
Principal, (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above),other than the Principals and their
Related Parties, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that such person has the
right to acquire, whether such right is currently exercisable or is exercisable
only upon the occurrence of a subsequent condition), directly or indirectly, of
more than 50% of the Voting Stock of the Company (measured by voting power
rather than number of shares), or (iv) the Company consolidates with, or merges
with or into, any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which any of
the outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance). For purposes of this definition, any
transfer of an equity interest of an entity that was formed for the purpose of
acquiring Voting Stock of the Company will be deemed to be a transfer of such
portion of such Voting Stock as corresponds to the portion of the equity of such
entity that has been so transferred.
"Company" means AEI Holding Company, Inc., and any and all
successors thereto.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
depletion, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were paid
in a prior period) of such Person and its
3
<PAGE> 8
Subsidiaries for such period to the extent that such depreciation, depletion,
amortization were deducted in computing such Consolidated Net Income, minus (v)
non-cash items increasing such Consolidated Net Income for such period, minus
(vi) consolidated capital expenditures of such Person for such period, in each
case, without duplications and on a consolidated basis and determined in
accordance with GAAP. Notwithstanding the foregoing, the provision for taxes
based on the income or profits of, and the depreciation, depletion and
amortization expenses of, a Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in the same proportion) that the Net Income of such Subsidiary was included
in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"Consolidated Indebtedness" of any Person as of any date of
determination means the sum, without duplication, of (i) the total amount of
Indebtedness of such Person and its Subsidiaries, plus (ii) the total amount of
Indebtedness of another Person, to the extent that such Indebtedness has been
Guaranteed by the referent Person or one of its Subsidiaries, plus (iii) the
aggregate liquidation value of all Disqualified Stock of such Person and all
preferred stock of any Subsidiary of such Person, in each case, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or a Wholly Owned Subsidiary thereof that is
a Guarantor, (ii) the Net Income of any Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar distributions by
that Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common stockholders
of such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
4
<PAGE> 9
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 11.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or
more debt facilities (including, without limitation, the New Credit Agreement)
or commercial paper facilities with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Custodian" means the Trustee, as custodian with respect to
the Senior Notes in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Senior Note registered
in the name of the Holder thereof and issued in accordance with Section 2.06
hereof, in the form of Exhibit A-1 hereto except that such Senior Note shall not
bear the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Senior Notes issuable
or issued in whole or in part in global form, the Person specified in Section
2.03 hereof as the Depositary with respect to the Senior Notes, and any and all
successors thereto, reasonably acceptable to the Custodian, appointed as
depositary hereunder and having become such pursuant to the applicable provision
of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable, at the option of the holder thereof) or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Senior Notes mature; provided, however, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with Section 4.07 hereof.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
5
<PAGE> 10
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Senior Notes issued in the Exchange
Offer pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
"Existing Indebtedness" means the aggregate principal amount
of Indebtedness of the Company and its Subsidiaries (other than Indebtedness
under the New Credit Agreement and Indebtedness incurred to finance insurance
premiums) in existence on the date of the Indenture, until such amounts are
repaid.
"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated interest expense
of such Person and its Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, imputed interest with respect to Attributable
Debt, commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging Obligations) and (ii) the consolidated interest of such
Person and its Subsidiaries that was capitalized during such period, and (iii)
any interest expense on Indebtedness of another Person that is Guaranteed by
such Person or one of its Subsidiaries or secured by a Lien on assets of such
Person or one of its Subsidiaries (whether or not such Guarantee or Lien is
called upon) and (iv) the product of (a) all dividend payments, whether or not
in cash, on any series of preferred stock of such Person or any of its
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company (other than Disqualified Stock) or to the
Company or a Subsidiary of the Company, times (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the referent Person or any of its Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (ii)
6
<PAGE> 11
the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its
Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date of this Indenture.
"Global Notes" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A-1 hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantors" means each of (i) Addington Mining, Inc.,
Tennessee Mining, Inc. and Ikerd-Bandy Co., Inc. and (ii) any other Subsidiary
that executes a Subsidiary Guarantee in accordance with the provisions of the
Indenture, and their respective successors and assigns.
"Haulage and Delivery Agreement" means that certain agreement
dated as of October 22, 1997 between the Company and TASK, as the same may be
extended or renewed from time to time without alteration of the material terms
thereof.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Senior Note is
registered.
"IAI Global Note" means the Global Note in the form of Exhibit
A-1 hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Senior Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or
7
<PAGE> 12
similar instruments or letters of credit (or reimbursement agreements in respect
thereof) or banker's acceptances or representing Capital Lease Obligations or
the balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
(other than letters of credit and Hedging Obligations) would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
as well as all Indebtedness of others secured by a Lien on any asset of such
Person (whether or not such Indebtedness is assumed by such Person) and, to the
extent not otherwise included, the Guarantee by such Person of any indebtedness
of any other Person. The amount of any Indebtedness outstanding as of any date
shall be (i) the accreted value thereof, in the case of any Indebtedness issued
with the original issue discount, and (ii) the principal amount thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Senior Notes" means $200.0 million in aggregate
principal amount of Senior Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including guarantees of Indebtedness or other
obligations),advances or capital contributions (excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business),purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of clause
(c) of Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Senior Notes for use by
such Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or
8
<PAGE> 13
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement, any lease in the nature thereof, any option or
other agreement to sell or give a security interest in and any filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Mitsui Marketing Agreement" means that certain agreement
dated as of January 30, 1997 between Mitsui Matsushima Co. Ltd. and Bowie, as
the same maybe extended or renewed from time to time without alteration of the
material terms thereof.
"MMI Service Agreement" means that certain agreement dated as
of October 22, 1997 between MMI and the Company, as the same may be extended or
renewed from time to time without alteration of the material terms thereof.
"MMI Leases" means all equipment leases between the Company
and its Subsidiaries and MMI in existence as of the date of the Indenture;
provided that MMI Leases shall not include any extension, renewal, exercise of
option or modification of any equipment lease between the Company and its
Subsidiaries and MMI.
"MSU&L Agreement" means that certain agreement to be entered
into between the Company and Addington Enterprises on or before the date of the
Indenture, as the same may be extended or renewed from time to time without
alteration of the material terms thereof.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions),
or (b) the disposition of any securities by such Person or any of its
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Subsidiaries, and (ii) any extraordinary gain (but not loss), together with
any related provision for taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the Credit Facilities) secured by a Lien on the
asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"New Credit Agreement" means that certain credit agreement,
dated as of the date of the Indenture, by and among the Company, the Guarantors
and NationsBank of Texas, N.A., as agent and lender, providing for up to $50.0
million of revolving credit borrowings, including any related notes, guarantees,
collateral, letters of credit, documents, instruments and agreements executed in
9
<PAGE> 14
connection therewith, and in each case as amended, extended, modified, renewed,
refunded, replaced or refinanced from time to time.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Guarantee" means the Guarantee by each Guarantor of the
Company's payment obligations under this Indenture and the Senior Notes,
executed pursuant to the provisions of this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Senior Notes by the
Company.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate reasonably
acceptable to the Trustee signed on behalf of the Company by two Officers of the
Company, one of whom must be the principal executive officer, the principal
financial officer, the treasurer or the principal accounting officer of the
Company, that meets the requirements of Section 11.05 hereof.
"Opinion of Counsel" means an opinion, in form and substance
reasonably satisfactory to the Trustee, from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 11.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Business" means coal producing, coal mining, coal
brokering or mine development, or any business that is reasonably similar
thereto or a reasonable extension, development or expansion thereof or ancillary
thereto (including ash disposal and/or environmental remediation).
"Permitted Investments" means (a) any Investment in the
Company or in any Guarantor; (b) any Investment in Bowie by the Company or any
Guarantor that is permitted by Section 4.21 hereof; (c) any Investment in Cash
Equivalents; (d) any Investment by the Company or any Guarantor in a Person, if
as a result of such Investment (i) such Person becomes a Wholly Owned Subsidiary
of the Company and a Guarantor or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Guarantor; (e) any Investment
made as a result of the receipt of non-cash consideration from an Asset Sale
that was made pursuant to and in compliance with Section 4.10 hereof; (f) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Company and (g) other Investments in any
Person having an aggregate fair
10
<PAGE> 15
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (g) that are at the time
outstanding, not to exceed $5.0 million.
"Permitted Liens" means (i) Liens on assets of the Company and
its Subsidiaries securing Indebtedness under the Credit Facilities that was
permitted by the terms of the Indenture to be incurred; (ii) Liens in favor of
the Company; (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company or such Subsidiary;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory or regulatory obligations, leases, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (vi) Liens to secure Indebtedness (including
Capital Lease Obligations) permitted by clause (iv) of the second paragraph of
Section 4.09 hereof covering only the assets acquired with such Indebtedness;
(vii) Liens existing on the date of the Indenture; (viii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (ix) Liens on assets of any Guarantor to secure senior
Indebtedness of such Guarantor that was permitted by the Indenture to be
incurred; and (x) Liens incurred in the ordinary course of business of the
Company or any Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Subsidiaries (other than
intercompany Indebtedness); provided that: (i) the principal amount (or accreted
value, if applicable) of such Permitted Refinancing Indebtedness does not exceed
the principal amount of (or accreted value, if applicable), plus accrued
interest on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the Senior
Notes, such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of payment to, the
Senior Notes on terms at least as favorable to the Holders of Senior Notes as
those contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
11
<PAGE> 16
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principals" means Larry Addington, Bruce Addington and Robert
Addington.
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) to be placed on all Senior Notes issued under this Indenture
except where otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of November 12, 1997, by and among the Company, the
Guarantors and the other party named on the signature pages thereof, as such
agreement may be amended, modified or supplemented from time to time and, with
respect to any Additional Senior Notes, one or more registration rights
agreements among the Company, the Guarantors and the other parties thereto, as
such agreement(s) may be amended, modified or supplemented from time to time,
relating to rights given by the Company to the purchasers of Additional Senior
Notes to register such Additional Senior Notes under the Securities Act.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Note" means a Regulation S Temporary
Global Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent Global
Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary Global
Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Senior Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Party" with respect to any Principal means (A) any
controlling stockholder of such Principal, any 80% (or more) owned Subsidiary of
such Principal, or in the case of an individual, any spouse or immediate family
member of such Principal or (B) any trust, corporation, partnership or other
entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist of
such Principal and/or such other Persons referred to in the immediately
preceding clause (A).
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
12
<PAGE> 17
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means any Investment other than a
Permitted Investment.
"Restricted Period" means the 40-day restricted period as
defined in Regulation S.
"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Rule 903" means Rule 903 promulgated under the Securities
Act.
"Rule 904" means Rule 904 promulgated under the Securities
Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Notes" means the Company's 10% Senior Notes due 2007
issued pursuant to this Indenture.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined Article 1, Rule 1-20 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
13
<PAGE> 18
"Subsidiary Intercompany Notes" means the intercompany notes
in favor of the Company issued by any Subsidiary that is not a Wholly Owned
Subsidiary of the Company to evidence advances by the Company.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA, as amended from time to time.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent Global Note in
the form of Exhibit A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Senior Notes that do not bear the
Private Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Voting Stock" means, with respect to any Person as of any
date, the Capital Stock of such Person that is at the time entitled to vote in
the election of the Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.02 OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction".................................................4.11
"Asset Sale"............................................................4.10
"Asset Sale Offer"......................................................3.09
"Authentication Order"..................................................2.02
"Bankruptcy Law"........................................................4.01
"Borrowing Subsidiary"..................................................4.21
"Change of Control Offer"...............................................4.15
"Change of Control Payment".............................................4.15
</TABLE>
14
<PAGE> 19
<TABLE>
<S> <C>
"Change of Control Payment Date" .......................4.15
"Covenant Defeasance"...................................8.03
"Event of Default"......................................6.01
"Excess Proceeds".......................................4.10
"incur".................................................4.09
"Legal Defeasance" .....................................8.02
"Offer Amount"..........................................3.09
"Offer Period"..........................................3.09
"Paying Agent"..........................................2.03
"Permitted Debt"........................................4.09
"Purchase Date".........................................3.09
"Registrar".............................................2.03
"Restricted Payments"...................................4.07
"Secured Obligations"...................................4.22
"Surplus Proceeds"......................................4.21
</TABLE>
SECTION 1.03 TIA TERMS
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Senior Notes;
"indenture security Holder" means a Holder of a Senior Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Senior Notes and the Note Guarantees means
the Company and the Guarantors, respectively, and any successor obligor upon the
Senior Notes and the Note Guarantees, respectively.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
15
<PAGE> 20
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
ARTICLE 2.
THE SENIOR NOTES
SECTION 2.01 FORM AND DATING.
(a) General. The Senior Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto. The
Senior Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Senior Note shall be dated the date of its
authentication. The Senior Notes shall be in denominations of $1,000 and
integral multiples thereof.
The terms and provisions contained in the Senior Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company, the Guarantors and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Senior Note conflicts with the
express provisions of this Indenture, the provisions of this Indenture shall
govern and be controlling.
(b) Global Notes. Senior Notes issued in global form shall be
substantially in the form of Exhibit A-1 or A-2 attached hereto (including the
Global Note Legend thereon and the "Schedule of Exchanges of Interests in the
Global Note" attached thereto). Senior Notes issued in definitive form shall be
substantially in the form of Exhibit A-1 attached hereto (but without the Global
Note Legend thereon and without the "Schedule of Exchanges of Interests in the
Global Note" attached thereto). Each Global Note shall represent such of the
outstanding Senior Notes as shall be specified therein and each shall provide
that it shall represent the aggregate principal amount of outstanding Senior
Notes from time to time endorsed thereon and that the aggregate principal amount
of outstanding Senior Notes represented thereby may from time to time be reduced
or increased, as appropriate, to reflect exchanges and redemptions. Any
endorsement of a Global Note to reflect the amount of any increase or decrease
in the aggregate principal amount of outstanding Senior Notes represented
thereby shall be made by the Trustee or the Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.06 hereof.
(c) Temporary Global Notes. Senior Notes offered and sold in
reliance on Regulation S shall be issued initially in the form of the Regulation
S Temporary Global Note, which shall be deposited on behalf of the purchasers of
the Senior Notes represented thereby with the Trustee, at its New York office,
as custodian for the Depositary, and registered in the name of the Depositary or
the nominee of the Depositary for the accounts of designated agents holding on
behalf of Euroclear or Cedel, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The Restricted Period shall be terminated
upon the receipt by the Trustee of (i) a written certificate from the
Depositary, together with copies of certificates from Euroclear and Cedel
certifying that they have received certification of non-United States beneficial
ownership of 100% of the aggregate principal amount of the Regulation S
Temporary Global Note (except to the extent of any beneficial owners thereof who
acquired an interest therein during the Restricted Period pursuant to another
exemption
16
<PAGE> 21
from registration under the Securities Act and who will take delivery of a
beneficial ownership interest in a 144A Global Note or an IAI Global Note
bearing a Private Placement Legend, all as contemplated by Section 2.06(a)(ii)
hereof), and (ii) an Officers' Certificate from the Company. Following the
termination of the Restricted Period, the Trustee shall notify the Company that
it is authorized to effect the exchange of beneficial interests in the
Regulation S Temporary Global Note for beneficial interests in Regulation S
Permanent Global Notes pursuant to the Applicable Procedures by simultaneously
canceling the Regulation S Temporary Global Note and authenticating, upon
receipt of an Authentication Order, one or more Regulation S Permanent Global
Notes. The aggregate principal amount of the Regulation S Temporary Global Note
and the Regulation S Permanent Global Notes may from time to time be increased
or decreased by adjustments made on the records of the Trustee and the
Depositary or its nominee, as the case may be, in connection with transfers of
interest as hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions
of the "Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel shall be applicable to transfers of beneficial
interests in the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes that are held by Participants through Euroclear or Cedel.
Euroclear and Cedel are not agents of the Trustee, and the Trustee accepts no
responsibility for the acts or omissions of Euroclear or Cedel.
SECTION 2.02 EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Senior Notes for the Company by
manual or facsimile signature. The Company's seal shall be reproduced on the
Senior Notes and may be in facsimile form.
If an Officer whose signature is on a Senior Note no longer
holds that office at the time a Senior Note is authenticated, the Senior Note
shall nevertheless be valid.
A Senior Note shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be conclusive evidence that
the Senior Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by two Officers (an "Authentication Order"), authenticate Senior Notes
consisting of Initial Senior Notes and Additional Senior Notes for original
issue up to the aggregate principal amount stated in paragraph 4 of the Senior
Notes. In the case of Additional Senior Notes, the Authentication Order shall
state that the Senior Notes to be authenticated constitute Additional Senior
Notes as provided for in this Indenture. The aggregate principal amount of
Senior Notes outstanding at any time may not exceed $250,000,000 except as
provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Senior Notes. An authenticating agent may
authenticate Senior Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with
Holders or an Affiliate of the Company.
17
<PAGE> 22
SECTION 2.03 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Senior
Notes may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Senior Notes may be presented for
payment ("Paying Agent"). The Registrar shall keep a register of the Senior
Notes and of their transfer and exchange. The Company may appoint one or more
co-registrars and one or more additional paying agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company shall notify the Trustee in writing of the
name and address of any Agent not a party to this Indenture. If the Company
fails to appoint or maintain another entity as Registrar or Paying Agent, the
Trustee shall act as such.
The Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Custodian with respect to the Global
Notes.
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Senior Notes, and will notify the Trustee of any default by the Company in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company or a Subsidiary) shall have no further liability for the money. If the
Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a
separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company, the Trustee shall serve as Paying Agent for the Senior Notes.
SECTION 2.05 HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the Trustee at least
seven Business Days before each interest payment date and at such other times as
the Trustee may request in writing, a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of the Holders of
Senior Notes and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06 TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. All Global Notes will be
exchanged
18
<PAGE> 23
by the Company for Definitive Notes if (i) the Company delivers to the Trustee
written notice from the Depositary that it is unwilling or unable to continue to
act as Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee in writing. Global Notes also
may be exchanged or replaced, in whole or in part, as provided in Sections 2.07
and 2.10 hereof. Every Senior Note authenticated and delivered in exchange for,
or in lieu of, a Global Note or any portion thereof, pursuant to this Section
2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the
form of, and shall be, a Global Note. A Global Note may not be exchanged for
another Senior Note other than as provided in this Section 2.06(a), however,
beneficial interests in a Global Note may be transferred and exchanged as
provided in Section 2.06(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the
Global Notes. The transfer and exchange of beneficial interests in the Global
Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial interests
in the Restricted Global Notes shall be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act. Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same
Global Note. Beneficial interests in any Restricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Note in accordance
with the transfer restrictions set forth in the Private Placement
Legend ; provided, however, that prior to the expiration of the
Restricted Period, transfers of beneficial interests in the Temporary
Regulation S Global Note may not be made to a U.S. Person or for the
account or benefit of a U.S. Person (other than NationsBanc Montgomery
Securities, Inc.). Beneficial interests in any Unrestricted Global Note
may be transferred to Persons who take delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note. No written orders
or instructions shall be required to be delivered to the Registrar to
effect the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial
Interests in Global Notes. In connection with all transfers and
exchanges of beneficial interests that are not subject to Section
2.06(b)(i) above, the transferor of such beneficial interest must
deliver to the Registrar either (A) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
credit or cause to be credited a beneficial interest in another Global
Note in an amount equal to the beneficial interest to be transferred or
exchanged and (2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to
be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
cause to be issued a Definitive Note in an amount equal to the
beneficial interest
19
<PAGE> 24
to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person
in whose name such Definitive Note shall be registered to effect the
transfer or exchange referred to in (1) above; provided that in no
event shall Definitive Notes be issued upon the transfer or exchange of
beneficial interests in the Regulation S Temporary Global Note prior to
(x) the expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates required pursuant to Rule 903 under the
Securities Act. Upon consummation of an Exchange Offer by the Company
in accordance with Section 2.06(f) hereof, the requirements of this
Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt
by the Registrar of the instructions contained in the Letter of
Transmittal delivered by the Holder of such beneficial interests in the
Restricted Global Notes. Upon satisfaction of all of the requirements
for transfer or exchange of beneficial interests in Global Notes
contained in this Indenture and the Senior Notes or otherwise
applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to Section
2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another
Restricted Global Note. A beneficial interest in any Restricted Global
Note may be transferred to a Person who takes delivery thereof in the
form of a beneficial interest in another Restricted Global Note if the
transfer complies with the requirements of Section 2.06(b)(ii) above
and the Registrar receives the following:
(A) if the transferee will take delivery in
the form of a beneficial interest in the 144A Global Note,
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transferee will take delivery in
the form of a beneficial interest in the Regulation S
Temporary Global Note or the Regulation S Global Note, then
the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2)
thereof; and
(C) if the transferee will take delivery in
the form of a beneficial interest in the IAI Global Note, then
the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications and
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in
a Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note if the exchange or transfer complies with the requirements of
Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the holder of the beneficial
interest to be transferred, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
20
<PAGE> 25
(B) such transfer is effected pursuant
to the Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for
Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes
to Restricted Definitive Notes. If any holder of a beneficial interest
in a Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note or to transfer such
beneficial interest to a Person who takes delivery thereof in the form
of a Restricted Definitive Note, then, upon receipt by the Registrar of
the following documentation:
(A) if the holder of such beneficial
interest in a Restricted Global Note proposes to exchange such
beneficial interest for a Restricted Definitive Note, a
certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (2)(a) thereof;
21
<PAGE> 26
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such beneficial interest is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such beneficial interest is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such beneficial interest is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such beneficial interest is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Senior Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear
the Private Placement Legend and shall be subject to all restrictions
on transfer contained therein.
Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes delivery
thereof in the form of a Definitive Note prior to (x) the expiration of the
Restricted Period and (y) the receipt by the Registrar of any certificates
required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except in
the case of a transfer pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 903 or Rule 904.
22
<PAGE> 27
(ii) Beneficial Interests in Restricted Global Notes
to Unrestricted Definitive Notes. A holder of a beneficial interest in
a Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the holder of such
beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to
the Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial
interest in a Restricted Global Note proposes to
exchange such beneficial interest for a Definitive
Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit
C hereto, including the certifications in item (1)(b)
thereof; or
(2) if the holder of such beneficial
interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a
Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in
the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global
Notes to Unrestricted Definitive Notes. If any holder of a beneficial
interest in an Unrestricted Global Note proposes to exchange such
beneficial interest for a Definitive Note or to transfer such
beneficial interest to a Person who takes delivery thereof in the form
of a Definitive Note, then, upon satisfaction of the conditions set
forth in Section 2.06(b)(ii) hereof, the Trustee shall cause the
aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall
execute and the Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iii) shall be
registered in such name or names and in such authorized denomination or
23
<PAGE> 28
denominations as the holder of such beneficial interest shall instruct
the Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Senior Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall not bear the
Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for
Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial
Interests in Restricted Global Notes. If any Holder of a Restricted
Definitive Note proposes to exchange such Senior Note for a beneficial
interest in a Restricted Global Note or to transfer such Restricted
Definitive Notes to a Person who takes delivery thereof in the form of
a beneficial interest in a Restricted Global Note, then, upon receipt
by the Registrar of the following documentation:
(A) if the Holder of such Restricted
Definitive Note proposes to exchange such Senior Note for a
beneficial interest in a Restricted Global Note, a certificate
from such Holder in the form of Exhibit C hereto, including
the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is
being transferred to a QIB in accordance with Rule 144A under
the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such Restricted Definitive Note is
being transferred to a Non-U.S. Person in an offshore
transaction in accordance with Rule 903 or Rule 904 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such Restricted Definitive Note is
being transferred pursuant to an exemption from the
registration requirements of the Securities Act in accordance
with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is
being transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such Restricted Definitive Note is
being transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is
being transferred pursuant to an effective registration
statement under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted
24
<PAGE> 29
Global Note, in the case of clause (B) above, the 144A Global Note, in
the case of clause (c) above, the Regulation S Global Note, and in all
other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial
Interests in Unrestricted Global Notes. A Holder of a Restricted
Definitive Note may exchange such Senior Note for a beneficial interest
in an Unrestricted Global Note or transfer such Restricted Definitive
Note to a Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case of
an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to
the Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive
Notes proposes to exchange such Senior Notes for a
beneficial interest in the Unrestricted Global Note,
a certificate from such Holder in the form of Exhibit
C hereto, including the certifications in item (1)(c)
thereof; or
(2) if the Holder of such Definitive
Notes proposes to transfer such Senior Notes to a
Person who shall take delivery thereof in the form of
a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of
Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel the
Definitive Notes and increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial
Interests in Unrestricted Global Notes. A Holder of an Unrestricted
Definitive Note may exchange such Senior Note for a beneficial interest
in an Unrestricted Global Note or transfer such Definitive Notes to a
Person who takes delivery thereof in the form of a beneficial interest
in an Unrestricted Global
25
<PAGE> 30
Note at any time. Upon receipt of a request for such an exchange or
transfer, the Trustee shall cancel the applicable Unrestricted
Definitive Note and increase or cause to be increased the aggregate
principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for
Definitive Notes. Upon request by a Holder of Definitive Notes and such
Holder's compliance with the provisions of this Section 2.06(e), the Registrar
shall register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted
Definitive Notes. Any Restricted Definitive Note may be transferred to
and registered in the name of Persons who take delivery thereof in the
form of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to
Rule 144A under the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to
Rule 903 or Rule 904, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to
any other exemption from the registration requirements of the
Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted
Definitive Notes. Any Restricted Definitive Note may be exchanged by
the Holder thereof for an Unrestricted Definitive Note or transferred
to a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:
(A) such exchange or transfer is effected
pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case of
an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
26
<PAGE> 31
(B) any such transfer is effected pursuant
to the Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) any such transfer is effected by a
Participating Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted
Definitive Notes proposes to exchange such Senior
Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(d)
thereof; or
(2) if the Holder of such Restricted
Definitive Notes proposes to transfer such Senior
Notes to a Person who shall take delivery thereof in
the form of an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iii) Unrestricted Definitive Notes to Unrestricted
Definitive Notes. A Holder of Unrestricted Definitive Notes may
transfer such Senior Notes to a Person who takes delivery thereof in
the form of an Unrestricted Definitive Note. Upon receipt of a request
to register such a transfer, the Registrar shall register the
Unrestricted Definitive Notes pursuant to the instructions from the
Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer
in accordance with the Registration Rights Agreement, the Company shall issue
and, upon receipt of an Authentication Order in accordance with Section 2.02,
the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Senior Notes, the Trustee shall cause the aggregate
principal amount of the applicable Restricted Global Notes to be reduced
accordingly, and the Company shall execute and the Trustee shall authenticate
and deliver to the Persons designated by the Holders of Definitive Notes so
accepted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face
of all Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
27
<PAGE> 32
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B)
below, each Global Note and each Definitive Note (and all
Senior Notes issued in exchange therefor or substitution
thereof) shall bear the legend in substantially the following
form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S.
PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON
AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE
144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT AS IN
EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER
THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON
WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE
904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) TO AN IAI
THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE REGISTRATION
OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE OR ANY INTEREST HEREIN
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A
PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE
IN VIOLATION OF THE FOREGOING RESTRICTIONS."
(B) Notwithstanding the foregoing, any
Global Note or Definitive Note issued pursuant to
subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii),
(e)(ii),
28
<PAGE> 33
(e)(iii) or (f) to this Section 2.06 (and all Senior Notes
issued in exchange therefor or substitution thereof) shall not
bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall
bear a legend in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF AEI HOLDING COMPANY,
INC."
(iii) Regulation S Temporary Global Note Legend.
The Regulation S Temporary Global Note shall bear a legend in
substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such
time as all beneficial interests in a particular Global Note have been exchanged
for Definitive Notes or a particular Global Note has been redeemed, repurchased
or canceled in whole and not in part, each such Global Note shall be returned to
or retained and canceled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Senior Notes represented by such Global Note
shall be reduced accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary at the direction of the Trustee to
reflect such reduction; and if the beneficial interest is being exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note, such other Global Note shall be
increased accordingly and an endorsement shall be made on such Global Note by
the Trustee or by the Depositary at the direction of the Trustee to reflect such
increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall authenticate
Global Notes and Definitive Notes upon the Company's written order or
at the Registrar's written request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax or
similar
29
<PAGE> 34
governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15
and 9.05 hereof).
(iii) The Registrar shall not be required to register
the transfer of or exchange any Senior Note selected for redemption in
whole or in part, except the unredeemed portion of any Senior Note
being redeemed in part.
(iv) All Global Notes and Definitive Notes issued
upon any registration of transfer or exchange of Global Notes or
Definitive Notes shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Global Notes or Definitive Notes surrendered upon
such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue,
to register the transfer of or to exchange any Senior Notes during a
period beginning at the opening of business 15 days before the day of
any selection of Senior Notes for redemption under Section 3.02 hereof
and ending at the close of business on the day of selection, (B) to
register the transfer of or to exchange any Senior Note so selected for
redemption in whole or in part, except the unredeemed portion of any
Senior Note being redeemed in part or (c) to register the transfer of
or to exchange a Senior Note between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of
a transfer of any Senior Note, the Trustee, any Agent and the Company
may deem and treat the Person in whose name any Senior Note is
registered as the absolute owner of such Senior Note for the purpose of
receiving payment of principal of and interest on such Senior Notes and
for all other purposes, and none of the Trustee, any Agent or the
Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions
of Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
SECTION 2.07 REPLACEMENT SENIOR NOTES
If any mutilated Senior Note is surrendered to the Trustee or
the Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Senior Note, the Company shall issue and the
Trustee, upon receipt of an Authentication Order, shall authenticate a
replacement Senior Note if the Trustee's requirements are met. If required by
the Trustee or the Company, an indemnity bond must be supplied by the Holder
that is sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Senior Note is replaced. The Company may charge for
its expenses in replacing a Senior Note.
30
<PAGE> 35
Every replacement Senior Note is an additional obligation of
the Company and shall be entitled to all of the benefits of this Indenture
equally and proportionately with all other Senior Notes duly issued hereunder.
SECTION 2.08 OUTSTANDING SENIOR NOTES.
The Senior Notes outstanding at any time are all the Senior
Notes authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation, those reductions in the interest in a Global
Note effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Senior Note does not cease to be outstanding because the Company
or an Affiliate of the Company holds the Senior Note; however, Senior Notes held
by the Company or a Subsidiary of the Company shall not be deemed to be
outstanding for purposes of Section 3.07(b) hereof.
If a Senior Note is replaced pursuant to Section 2.07 hereof,
it ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Senior Note is held by a bona fide purchaser.
If the principal amount of any Senior Note is considered paid
under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases
to accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Senior Notes payable on that date, then on and after that date
such Senior Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
SECTION 2.09 TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Senior Notes have concurred in any direction, waiver or consent,
Senior Notes owned by the Company, or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company, shall be considered as though not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Senior Notes that the Trustee actually
knows are so owned shall be so disregarded.
SECTION 2.10 TEMPORARY SENIOR NOTES
Until certificates representing Senior Notes are ready for
delivery, the Company may prepare and the Trustee, upon receipt of an
Authentication Order, shall authenticate temporary Senior Notes. Temporary
Senior Notes shall be substantially in the form of certificated Senior Notes but
may have variations that the Company considers appropriate for temporary Senior
Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate Definitive
Notes in exchange for temporary Senior Notes.
Holders of temporary Senior Notes shall be entitled to all of
the benefits of this Indenture.
31
<PAGE> 36
SECTION 2.11 CANCELLATION.
The Company at any time may deliver Senior Notes to the
Trustee for cancellation. The Registrar and Paying Agent shall forward to the
Trustee any Senior Notes surrendered to them for registration of transfer,
exchange or payment. The Trustee and no one else shall cancel all Senior Notes
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall destroy canceled Senior Notes (subject to the record
retention requirement of the Exchange Act). Certification of the destruction of
all canceled Senior Notes shall be delivered to the Company. The Company may not
issue new Senior Notes to replace Senior Notes that it has paid or that have
been delivered to the Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Senior
Notes, it shall pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the defaulted interest, to the Persons who
are Holders on a subsequent special record date, in each case at the rate
provided in the Senior Notes and in Section 4.01 hereof. The Company shall
notify the Trustee in writing of the amount of defaulted interest proposed to be
paid on each Senior Note and the date of the proposed payment. The Company shall
fix or cause to be fixed each such special record date and payment date,
provided that no such special record date shall be less than 10 days prior to
the related payment date for such defaulted interest. At least 15 days before
the special record date, the Company (or, upon the written request of the
Company given at least 20 days before the special record date, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01 NOTICES TO TRUSTEE.
If the Company elects to redeem Senior Notes pursuant to the
optional redemption provisions of Section 3.07 hereof, it shall furnish to the
Trustee, at least 35 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Senior Notes to be redeemed and (iv) the redemption price.
SECTION 3.02 SELECTION OF SENIOR NOTES TO BE REDEEMED
If less than all of the Senior Notes are to be redeemed or
purchased in an offer to purchase at any time, the Trustee shall select the
Senior Notes to be redeemed or purchased among the Holders of the Senior Notes
in compliance with the requirements of the principal national securities
exchange, if any, on which the Senior Notes are listed or, if the Senior Notes
are not so listed, on a pro rata basis, by lot or in accordance with any other
method the Trustee considers fair and appropriate. In the event of partial
redemption by lot, the particular Senior Notes to be redeemed shall be selected,
unless otherwise provided herein, not less than 30 nor more than 60 days prior
to the redemption date by the Trustee from the outstanding Senior Notes not
previously called for redemption.
32
<PAGE> 37
The Trustee shall promptly notify the Company in writing of
the Senior Notes selected for redemption and, in the case of any Senior Note
selected for partial redemption, the principal amount thereof to be redeemed.
Senior Notes and portions of Senior Notes selected shall be in amounts of $1,000
or whole multiples of $1,000 except that if all of the Senior Notes of a Holder
are to be redeemed, the entire outstanding amount of Senior Notes held by such
Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided
in the preceding sentence, provisions of this Indenture that apply to Senior
Notes called for redemption also apply to portions of Senior Notes called for
redemption.
SECTION 3.03 NOTICE OF REDEMPTION
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Senior Notes are to be redeemed at its registered address.
The notice shall identify the Senior Notes to be redeemed and
shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Senior Note is being redeemed in part, the
portion of the principal amount of such Senior Note to be redeemed and
that, after the redemption date upon surrender of such Senior Note, a
new Senior Note or Senior Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original
Senior Note;
(d) the name and address of the Paying Agent;
(e) that Senior Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Senior Notes called for redemption
ceases to accrue on and after the redemption date;
(g) the paragraph of the Senior Notes and/or Section
of this Indenture pursuant to which the Senior Notes called for
redemption are being redeemed; and
(h) that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed in such
notice or printed on the Senior Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
33
<PAGE> 38
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Senior Notes called for redemption become irrevocably due and
payable on the redemption date at the redemption price. A notice of redemption
may not be conditional.
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest on all Senior Notes to be redeemed
on that date. The Trustee or the Paying Agent shall promptly return to the
Company any money deposited with the Trustee or the Paying Agent by the Company
in excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Senior Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Senior Notes or the portions of Senior Notes called for redemption. If a
Senior Note is redeemed on or after an interest record date but on or prior to
the related interest payment date, then any accrued and unpaid interest shall be
paid to the Person in whose name such Senior Note was registered at the close of
business on such record date. If any Senior Note called for redemption shall not
be so paid upon surrender for redemption because of the failure of the Company
to comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case at
the rate provided in the Senior Notes and in Section 4.01 hereof.
SECTION 3.06 SENIOR NOTES REDEEMED IN PART.
Upon surrender of a Senior Note that is redeemed in part, the
Company shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Senior Note
equal in principal amount to the unredeemed portion of the Senior Note
surrendered.
SECTION 3.07 OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07,
the Company shall not have the option to redeem the Senior Notes pursuant to
this Section 3.07 prior to November 15, 2002. Thereafter, the Senior Notes will
be subject to redemption at any time at the option of the Company, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
November 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002................................... 105.000%
2003................................... 103.333%
2004................................... 101.667%
2005 and thereafter.................... 100.000%
</TABLE>
34
<PAGE> 39
(b) Notwithstanding the foregoing, at any time on or before
November 15, 2000, the Company may on any one or more occasions redeem up to 35%
of the aggregate principal amount of Senior Notes ever issued under the
Indenture at a redemption price equal to 110% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds of an initial public offering of
common stock of the Company; provided that at least $130.0 million in aggregate
principal amount of Senior Notes remain outstanding immediately after the
occurrence of such redemption (excluding Senior Notes held by the Company and
its Subsidiaries) and provided, further, that such redemption shall occur within
45 days of the date of the closing of such initial public offering.
(c) Any redemption pursuant to this Section 3.07 shall be
made pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08 MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
payments with respect to the Senior Notes.
SECTION 3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an offer to all Holders to purchase Senior
Notes (an "Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Senior
Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer
Amount") or, if Senior Notes aggregating less than the Offer Amount have been
tendered, all Senior Notes tendered in response to the Asset Sale Offer. Payment
for any Senior Notes so purchased shall be made in the same manner as interest
payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Senior Note is registered
at the close of business on such record date, and no additional interest shall
be payable to Holders who tender Senior Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Senior Notes pursuant
to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The
notice, which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made
pursuant to this Section 3.09 and Section 4.10 hereof and the length of
time the Asset Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the
Purchase Date;
35
<PAGE> 40
(c) that any Senior Note not tendered or accepted for
payment shall continue to accrue interest;
(d) that, unless the Company defaults in making such
payment, any Senior Note accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Senior Note
purchased pursuant to an Asset Sale Offer may only elect to have all of
such Senior Note purchased and may not elect to have only a portion of
such Senior Note purchased;
(f) that Holders electing to have a Senior Note
purchased pursuant to any Asset Sale Offer shall be required to
surrender the Senior Note, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Senior Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address specified in
the notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their
election if the Company, the depositary or the Paying Agent, as the
case may be, receives, not later than the expiration of the Offer
Period, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Senior Note
the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Senior Note purchased;
(h) that, if the aggregate principal amount of Senior
Notes surrendered by Holders exceeds the Offer Amount, the Company
shall select the Senior Notes to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that
only Senior Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(i) that Holders whose Senior Notes were purchased
only in part shall be issued new Senior Notes equal in principal amount
to the unpurchased portion of the Senior Notes surrendered (or
transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Senior Notes or portions thereof tendered pursuant to the
Asset Sale Offer, or if Senior Notes aggregating less than the Offer Amount have
been tendered, all Senior Notes tendered, and shall deliver to the Trustee an
Officers' Certificate stating that such Senior Notes or portions thereof were
accepted for payment by the Company in accordance with the terms of this Section
3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall
promptly (but in any case not later than five days after the Purchase Date) mail
or deliver to each tendering Holder an amount equal to the purchase price of the
Senior Notes tendered by such Holder and accepted by the Company for purchase,
and the Company shall promptly issue a new Senior Note, and the Trustee, upon
written request from the Company shall authenticate and mail or deliver such new
Senior Note to such Holder, in a principal amount equal to any unpurchased
portion of the Senior Note surrendered. Any Senior Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
36
<PAGE> 41
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01 PAYMENT OF SENIOR NOTES.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Senior Notes on the dates and in the manner
provided in the Senior Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest rate on the
Senior Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the same rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Senior Notes may
be surrendered for registration of transfer or for exchange and where notices
and demands to or upon the Company in respect of the Senior Notes and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Senior Notes may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, the City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03.
37
<PAGE> 42
SECTION 4.03 REPORTS.
(a) Whether or not required by the rules and regulations of
the SEC, so long as any Senior Notes are outstanding, the Company shall furnish
to the Trustee and the Holders of Senior Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the SEC on Forms 10-Q and 10-K if the Company were required to file such forms,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants, (ii) all
current reports that would be required to be filed with the SEC on Form 8-K if
the Company were required to file such reports, in each case, within the time
periods specified in the SEC's rules and regulations and (iii) at least
annually, an engineering report with respect to the Company's estimated coal
reserves, in each case within the time periods specified in the Commission's
rules and regulations In addition, following consummation of the Exchange Offer,
whether or not required by the rules and regulations of the SEC, the Company
shall file a copy of all such information and reports with the SEC for public
availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Company shall at all times comply with TIA ss. 314(a).
(b) For so long as any Senior Notes remain outstanding, the
Company and the Guarantors shall furnish to the Holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.04 COMPLIANCE CERTIFICATE.
(a) The Company and each Guarantor (to the extent that such
Guarantor is so required under the TIA) shall deliver to the Trustee, within 90
days after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes to take with respect thereto) and
that to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Senior Notes is prohibited or if such event has
occurred, a description of the event and what action the Company is taking or
proposes to take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.03(a) above shall
be accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements,
nothing has come to their attention that would lead them to believe that the
Company has violated any provisions of Article 4 or Article 5 hereof or, if any
such violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable directly
or indirectly to any Person for any failure to obtain knowledge of any such
violation.
38
<PAGE> 43
(c) The Company shall, so long as any of the Senior Notes are
outstanding, deliver to the Trustee, forthwith upon (and in no event more than 5
Business Days after) any Officer becoming aware of any Default or Event of
Default, an Officers' Certificate specifying such Default or Event of Default
and what action the Company is taking or proposes to take with respect thereto.
SECTION 4.05 TAXES.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Senior Notes.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS.
The Company and each of the Guarantors covenant (to the extent
that it may lawfully do so) that it shall not at any time insist upon, plead, or
in any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Company and each of the Guarantors (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 4.07 RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Subsidiaries' Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company or any of its
Subsidiaries) or to the direct or indirect holders of the Company's or any of
its Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or to the Company or a Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any Affiliate of the Company
(other than any such Equity Interests owned by the Company or any Wholly Owned
Subsidiary of the Company); (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Senior Notes, except a payment of
interest or principal at Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through(iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and
39
<PAGE> 44
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its Subsidiaries
after the date of the Indenture (including all Restricted Payments permitted by
the next succeeding paragraph but excluding Restricted Payments permitted by
clauses (ii), (iii) and (iv) of the next succeeding paragraph), is less than the
sum, without duplication, of (i) 50% of the Consolidated Net Income of the
Company for the period (taken as one accounting period) from the beginning of
the first fiscal quarter commencing after the date of the Indenture to the end
of the Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale since the date of the Indenture of Equity
Interests of the Company (other than Disqualified Stock) or of Disqualified
Stock or debt securities of the Company that have been converted into such
Equity Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company and other than
Disqualified Stock or convertible debt securities that have been converted into
Disqualified Stock), plus (iii) to the extent that any Restricted Investment
that was made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if any) and
(B) the initial amount of such Restricted Investment.
The foregoing provisions will not prohibit (i) the payment of
any dividend within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause(c)(ii)
of the preceding paragraph; (iii) the defeasance, redemption, repurchase or
other acquisition of subordinated Indebtedness with the net cash proceeds from
an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any
dividend by a Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; and (v) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any Subsidiary of the Company held by any member of the Company's (or any of its
Subsidiaries') management, employees or consultants pursuant to any management,
employee or consultant equity subscription agreement or stock option agreement;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $500,000 in any
twelve-month period and no Default or Event of Default shall have occurred and
be continuing immediately after such transaction; and (vi) cash payments in lieu
of fractional shares issuable as dividends on preferred securities of the
Company or any of its Wholly Owned Subsidiaries; provided that such cash
payments shall not exceed $50,000 in the aggregate in any twelve-month period
and no Default or Event of Default shall have occurred and be continuing
immediately after such transaction.
The amount of all Restricted Payments (other than cash) shall
be the fair market value on the date of the Restricted Payment of the asset(s)
or securities proposed to be transferred or issued by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $5.0 million. Not later than the date of making any
Restricted
40
<PAGE> 45
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by Section 4.07 hereof were computed,
together with a copy of any fairness opinion or appraisal required by this
Indenture.
SECTION 4.08 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to (i)(a) pay dividends or make any other distribution to the Company
or any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in , or measured by, its profits, or (b) pay any
indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or
advances to the Company or any of its Subsidiaries or (iii) transfer any of its
properties or assets to the Company or any of its Subsidiaries. However, the
foregoing restriction will not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the New Credit Agreement as in effect as of the date of the
Indenture and any amendment, modifications, restatements, renewals, increases,
supplements refundings, replacements or refinancings thereof, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refunding, replacement or refinancings are not more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in the New Credit Agreement as in effect on the date of the Indenture,
(c) the Indenture and the Senior Notes, (d) applicable law, (e) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connections with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, provided that,
in the case of Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred, (f) customary non-assignment provisions in leases,
mineral rights, licenses, royalties, encumbrances, contracts or similar assets
entered into or acquired in the ordinary course of business and consistent with
past practices, (g) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, (h) any agreement for the sale
of a Subsidiary that restricts distributions by that Subsidiary pending its
sale, (i) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive, taken as a whole, than those contained in the
agreements governing the Indebtedness being refinanced, (j) secured Indebtedness
otherwise permitted to be incurred pursuant to the provisions in Section 4.12
hereof that limits the right of the debtor to dispose of the assets securing
such Indebtedness, (k) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business and (l) restrictions
on cash or other deposits or net worth imposed by customers under contracts
entered into in the ordinary course of business:
SECTION 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and that the Company will not issue any Disqualified Stock and will not
permit any of its Subsidiaries to issue any shares of preferred stock (except
that a Subsidiary of the Company may issue
41
<PAGE> 46
preferred stock to the Company or to any Guarantor); provided, however, that the
Company or any of the Guarantors may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock, and any of the Guarantors may issue
preferred stock, if, in each case: the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or preferred
stock is issued would have been at least 2 to 1, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified Stock or
preferred stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The Company shall not incur any Indebtedness that is
contractually subordinated in right of payment to any other Indebtedness of the
Company unless such Indebtedness is also contractually subordinated in right of
payment to the Senior Notes on substantially identical terms; provided, however,
that no Indebtedness of the Company shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of the Company solely
by virtue of being unsecured.
The provisions of the first paragraph of this covenant will
not apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company (and the Guarantee
thereof by the Guarantors) of Indebtedness and letters of credit (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and the Guarantors
thereunder) under Credit Facilities; provided that no more than $31.0
million in aggregate principal amount of all Indebtedness outstanding
under all Credit Facilities as of the date of determination shall
constitute Permitted Debt (of which $6.0 million shall be permitted to
be incurred only to finance insurance premiums); provided, further,
that the aggregate principal amount of all Indebtedness outstanding
under all Credit Facilities after giving effect to such incurrence and
the use of the proceeds therefrom does not exceed $56.0 million (of
which $6.0 million shall be permitted to be incurred only to finance
insurance premiums);
(ii) the incurrence by the Company and its
Subsidiaries of the Existing Indebtedness;
(iii) the incurrence by the Company and the
Guarantors of Indebtedness represented by the Senior Notes (other than
any Additional Senior Notes) and the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case
incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in the business of the Company or such Subsidiary, in an
aggregate principal amount (including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (iv)) not to exceed $10.0
million at any time outstanding;
(v) the incurrence by the Company or any of its
Subsidiaries of Permitted Refinancing Indebtedness to refinance any
Indebtedness (other than intercompany Indebtedness)
42
<PAGE> 47
that was permitted by the Indenture to be incurred under the first
paragraph hereof or clauses (ii) or (iv) of this paragraph;
(vi) the incurrence by the Company or any of its
Subsidiaries of intercompany Indebtedness between or among the Company
and any of its Subsidiaries; provided, however, that (i) if the Company
is the obligor on, and a Guarantor is the borrower of, such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Senior
Notes, (ii) if the Company is the obligor on, and a Subsidiary that is
not a Guarantor is the borrower of, such Indebtedness, such
Indebtedness is issued pursuant to the provisions set forth in Section
4.21 hereof and (iii)(A) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person
other than the Company or a Subsidiary of the Company and (B) any sale
or other transfer of any such Indebtedness to a Person that is not
either the Company or a Guarantor shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be, that was not permitted by this clause
(vi);
(vii) the incurrence by the Company or any of its
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of this Indenture to
be outstanding;
(viii) Indebtedness incurred in respect of
performance, surety and similar bonds provided by the Company or its
Subsidiaries in the ordinary course of business, and refinancings
thereof;
(ix) the Guarantee by the Company or any of the
Guarantors of Indebtedness of the Company or a Subsidiary of the
Company that was permitted to be incurred by another provision of this
covenant; and
(viii) the incurrence by the Company or any of its
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred pursuant to this
clause (x), not to exceed $10.0 million.
For purposes of determining compliance with this Section 4.09,
in the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Debt described in clauses (i) through (x) above or
is entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09. Accrual of interest and
accretion or amortization of original issue discount will not be deemed to be an
incurrence of Indebtedness for purposes of this Section 4.09; provided, in each
such case, that the amount thereof is included in Fixed Charges of the Company
as accrued.
SECTION 4.10 ASSET SALES
The Company shall not, and shall not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Subsidiary, as the case may be) receives consideration at the time of such Asset
Sale at least equal to the fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) of the assets or Equity Interests
43
<PAGE> 48
issued or sold or otherwise disposed of and (ii) at least 85% of the
consideration therefor received by the Company or such Subsidiary is in the form
of cash or Cash Equivalents; provided that the amount of (x) any liabilities (as
shown on the Company's or such Subsidiary's most recent balance sheet), of the
Company or any Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the Senior Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Subsidiary from
further liability and (y) any securities, notes or other obligations received by
the Company or any such Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or such Subsidiary into cash (to the extent of the cash received), shall
be deemed to be cash for purposes of this provision.
Within 180 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds to the acquisition of a
majority of assets of, or a majority of the Voting Stock of, another Permitted
Business, the making of a capital expenditure or the acquisition of other
long-term assets that are used or useful in a Permitted Business, in each case,
in the same line of business as the Company was engaged in on the date of this
Indenture. Pending the final application of any such Net Proceeds, the Company
may temporarily reduce revolving credit borrowings under the Credit Facilities
or otherwise invest such Net Proceeds in any manner that is not prohibited by
the Indenture. Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company will be required to make an offer to all
Holders of Senior Notes and Additional Senior Notes (an "Asset Sale Offer") to
purchase the maximum principal amount of Senior Notes and Additional Senior
Notes that may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 100% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages thereon, if any, to the date of purchase,
in accordance with the procedures set forth in the Indenture. To the extent that
any Excess Proceeds remain after consummation of an Asset Sale Offer, the
Company may use such Excess Proceeds for any purpose not otherwise prohibited by
the Indenture. If the aggregate principal amount of Senior Notes and Additional
Senior Notes tendered into such Asset Sale Offer surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Senior Notes
and Additional Senior Notes to be purchased on a pro rata basis. Upon completion
of such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Subsidiary with an unrelated
Person and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view
44
<PAGE> 49
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be
deemed to be Affiliate Transactions: (i) transactions entered Into pursuant to
the terms of (a) the Haulage and Delivery Agreement, (b) the Mitsui Marketing
Agreement, (c) the MMI Service Agreement, (d) the MMI Leases, (e) the Bowie
Sales Agency Agreement and (f) the MSU&L Agreement, each as in effect on the
date of the Indenture, (ii) any employment agreement entered into by the Company
or any of its Subsidiaries or any employee benefit plan available to employees
of the Company and its Subsidiaries generally, in each case in the ordinary
course of business and consistent with the past practice of the Company or such
Subsidiary, (iii) transactions between or among the Company and/or its
Subsidiaries, (iv) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company, and (v) Restricted Payments that are
permitted by the provisions of this Indenture in Section 4.07 hereof.
SECTION 4.12 LIENS.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist
any Lien on any asset now owned or hereafter acquired, or any income or profits
therefrom or assign or convey any right to receive income therefrom, except
Permitted Liens.
SECTION 4.13 BUSINESS ACTIVITIES.
The Company will not, and will not permit any Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Subsidiaries taken as a whole.
SECTION 4.14 CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of its Subsidiaries, if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Senior Notes.
SECTION 4.15 OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company
shall make an offer (a "Change of Control Offer") to each Holder to repurchase
all or any part (equal to $1,000 or an integral multiple thereof) of each
Holder's Senior Notes at a purchase price equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of the "Change of Control Payment"). Within 10 days
following any Change of Control, the Company shall mail a notice to the Trustee
and to each Holder stating: (1) that the Change of Control Offer is being made
pursuant to this Section 4.15 and that all Senior Notes tendered will be
accepted for payment; (2) the purchase price and the purchase date, which shall
be no later than 30 business days from the date such notice is mailed (the
"Change of Control Payment Date"); (3) that any
45
<PAGE> 50
Senior Note not tendered will continue to accrue interest; (4) that, unless the
Company defaults in the payment of the Change of Control Payment, all Senior
Notes accepted for payment pursuant to the Change of Control Offer shall cease
to accrue interest after the Change of Control Payment Date; (5) that Holders
electing to have any Senior Notes purchased pursuant to a Change of Control
Offer will be required to surrender the Senior Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Senior Notes
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Change of Control
Payment Date; (6) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Senior Notes delivered for purchase, and a statement that
such Holder is withdrawing his election to have the Senior Notes purchased; and
(7) that Holders whose Senior Notes are being purchased only in part will be
issued new Senior Notes equal in principal amount to the unpurchased portion of
the Senior Notes surrendered, which unpurchased portion must be equal to $1,000
in principal amount or an integral multiple thereof. The Company shall comply
with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Senior Notes in
connection with a Change of Control.
(b) On the Change of Control Payment Date, the Company shall,
to the extent lawful, (1) accept for payment all Senior Notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (2) deposit
with the Paying Agent an amount equal to the Change of Control Payment in
respect of all Senior Notes or portions thereof so tendered and (3) deliver or
cause to be delivered to the Trustee the Senior Notes so accepted together with
an Officers' Certificate stating the aggregate principal amount of Senior Notes
or portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to each Holder of Senior Notes so tendered payment in an amount
equal to the purchase price for the Senior Notes, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Senior Note equal in principal amount to any unpurchased portion of the
Senior Notes surrendered by such Holder, if any; provided, that each such new
Senior Note shall be in a principal amount of $1,000 or an integral multiple
thereof. The Company shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
SECTION 4.16 LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company may enter into a sale and leaseback transaction if (i) the Company
could have (a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof and
(b) incurred a Lien to secure such Indebtedness pursuant to Section 4.12 hereof,
(ii) the gross cash proceeds of such sale and leaseback transaction are at least
equal to the fair market value (as determined in good faith by the Board of
Directors and set forth in an Officers' Certificate delivered to the Trustee) of
the property that is the subject of such sale and leaseback transaction and
(iii) the transfer of assets in such sale and leaseback transaction is permitted
by, and the Company applies the proceeds of such transaction in compliance with,
Section 4.10 hereof.
46
<PAGE> 51
SECTION 4.17. LIMITATION ON ISSUANCES OF EQUITY INTERESTS IN WHOLLY OWNED
SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Wholly
Owned Subsidiary of the Company to, transfer, convey, sell, lease or otherwise
dispose of any Equity Interests in Wholly Owned Subsidiary of the Company to any
Person (other than the Company or a Wholly Owned Subsidiary of the Company),
unless (a) such transfer, conveyance, sale, lease or other disposition is of all
the Equity Interests in such Wholly Owned Subsidiary and (b) the cash Net
Proceeds from such transfer, conveyance, sale, lease or other disposition are
applied in accordance with Section 4.10 hereof, and (ii) will not permit any
Wholly Owned Subsidiary of the Company to issue any of its Equity Interests
(other than, if necessary, shares of its Capital Stock constituting directors'
qualifying shares) to any Person other than to the Company or a Wholly Owned
Subsidiary of the Company.
SECTION 4.18 ADVANCES TO SUBSIDIARIES
The Company shall not make any advances or capital
contributions, transfer any assets, or otherwise become a creditor, to any
Subsidiary that is not a Wholly Owned Subsidiary (a "Borrowing Subsidiary")
unless (a) such advance, capital contribution, transfer or creditor arrangement
is made in the form of a senior secured loan to the Borrowing Subsidiary, (b)
the advance, capital contribution, transfer or creditor arrangement is evidenced
by a Subsidiary Intercompany Note in favor of the Company and (c) the Borrowing
Subsidiary has no other Indebtedness (other than Indebtedness evidenced by a
Subsidiary Intercompany Note) at the time the advance, capital contribution,
transfer or creditor arrangement is made or the Borrowing Subsidiary immediately
applies the advance to pay the entire principal of, and any premium and interest
on, all Indebtedness of the Borrowing Subsidiary in existence at the time the
advance is made. The Subsidiary Intercompany Notes shall be payable upon demand,
shall bear interest at the same rate as the Senior Notes, or such higher rate as
the Company may determine, and shall be secured by a first priority Lien on all
of the assets of the Borrowing Subsidiary. A form of Subsidiary Intercompany
Note is attached as Exhibit G hereto.
Notwithstanding the foregoing, a Subsidiary Intercompany Note
will not be required to be secured by a first priority Lien with respect to all
or a portion of the assets of the Borrowing Subsidiary if (i) such assets are
subject to a first priority Lien securing obligations of the Borrowing
Subsidiary that do not constitute Indebtedness under the Indenture (the "Secured
Obligations") and such Lien is in existence as of the date of issuance of the
Subsidiary Intercompany Note, (ii) the Company provides one or more letters of
credit naming the person(s) identified as the creditor(s) under the Lien
securing the Secured Obligations (or any person identified in writing to the
Company by such creditor(s) under such Lien) as beneficiary thereunder, and
(iii) for each fiscal year of the Borrowing Subsidiary that such Secured
Obligations exist, such letters of credit are for an aggregate amount sufficient
to satisfy all payments under the Secured Obligations becoming due and payable
during such fiscal year.
The Company shall not permit any Subsidiary in respect of
which the Company is a creditor by virtue of a Subsidiary Intercompany Note to
incur any Indebtedness other than Indebtedness to the Company evidenced by a
Subsidiary Intercompany Note. Each Subsidiary Intercompany Note shall be
amended, and appropriate financing statements be filed, simultaneous with any
increases or decreases in the aggregate principal amount outstanding thereunder,
and the Company shall not amend any of the material terms of the Subsidiary
Intercompany Note, except as may be required to conform the provisions of such
instrument to the provisions to be contained in a Subsidiary Intercompany Note
as set forth in this Section 4.18 and in Exhibit G hereto. The Company shall
pursue all remedies
47
<PAGE> 52
available to it under any Subsidiary Intercompany Note and the Company shall
enforce fully its rights under any Subsidiary Intercompany Note.
SECTION 4.19 USE OF PROCEEDS.
The Company may apply the proceeds from the issuance and sale
of the Senior Notes to (i) refinance Indebtedness of the Company outstanding as
of the date of the indenture in an aggregate principal amount not to exceed
$74.0 million, (ii) purchase all of the capital stock of Bowie owned by Harold
Sergent for an aggregate amount not to exceed $2.0 million, (iii) acquire
certain promissory notes made by Bowie to The Provident Bank, an Ohio banking
corporation, in an aggregate principal amount not to exceed $15.05 million as in
existence on the date of this Indenture, (iv) make advances to a Borrowing
Subsidiary pursuant to the terms of the Indenture and (v) pay commissions and
expenses incurred in connection with the issuance and sale of the Senior Notes.
The Company shall not use any proceeds from the issuance and sale of the Senior
Notes that is not applied to the uses set forth in clauses (i) through (v) of
the preceding sentence (such unapplied proceeds, the "Surplus Proceeds") for any
purpose, except that the Company shall be permitted to apply any Surplus
Proceeds to (a) purchase the capital stock of any company the principal business
of which is coal mining, (b) purchase the assets of any company that are used in
coal mining, (c) purchase the capital stock or assets of any company whose
principal business consists of (A) the ownership of intellectual property
relating to coal mining equipment used by the Company and (B) manufacturing and
maintenance of such coal mining equipment, (d) purchase additional coal mines,
coal reserves, coal facilities and/or coal supply contracts, (e) purchase
equipment used in the coal mining business, (f) fund development of new coal
mines, (g) fund coal mining related operating losses and expenses and (h) pay
interest on the Senior Notes on the first two Interest Payment Dates.
Notwithstanding the foregoing, until such time as any Surplus Proceeds are
applied to any of the permitted uses set forth in clause (a) through (h) of the
preceding sentence, such Surplus Proceeds may be (x) invested in Cash
Equivalents or (y) deposited with or applied to repurchase obligations entered
into with Kentucky Bank & Trust Company of Greenup County, a Kentucky banking
corporation; provided that the aggregate principal amount so deposited or
applied with such institution at any time shall not exceed $10,000,000.
SECTION 4.20 PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Senior Notes for or as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Senior Notes unless such consideration is
offered to be paid or is paid to all Holders of the Senior Notes that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
SECTION 4.21 ADDITIONAL NOTE GUARANTEES
If the Company or any of its Subsidiaries (other than Bowie)
shall acquire or create another Subsidiary after the date of this Indenture,
then such newly acquired or created Subsidiary shall become a Guarantor by
executing a Supplemental Indenture in the form attached hereto as Exhibit F and
deliver an Opinion of Counsel to the Trustee to the effect that such
Supplemental Indenture has been duly authorized, executed and delivered by such
Subsidiary and constitutes a valid and binding obligation of such Subsidiary,
enforceable against such Subsidiary in accordance with its terms (subject to
customary exceptions).
48
<PAGE> 53
ARTICLE 5.
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into
(whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Senior Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (iii) immediately
after such transaction no Default or Event of Default exists; and (iv) except in
the case of a merger of the Company with or into a Wholly Owned Subsidiary of
the Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Senior Notes except in
the case of a sale of all of the Company's assets that meets the requirements of
Section 5.01 hereof
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of
interest on, or Liquidated Damages with respect to, the Senior Notes
and such default continues for a period of 30 days;
49
<PAGE> 54
(b) the Company defaults in the payment when due of
principal of or premium, if any, on the Senior Notes when the same
becomes due and payable at maturity, upon redemption (including in
connection with an offer to purchase) or otherwise;
(c) the Company fails to comply with any of the
provisions of Section 4.07, 4.09, 4.10 or 5.01 hereof;
(d) the Company fails to observe or perform any other
covenant, representation, warranty or other agreement in this Indenture
or the Senior Notes for 60 days after notice to the Company by the
Trustee or the Holders of at least 25% in aggregate principal amount of
the Senior Notes and Additional Senior Notes then outstanding voting as
a single class;
(e) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company
or any of its Subsidiaries, whether such Indebtedness or guarantee now
exists, or is created after the date of this Indenture, which default
(i) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
"Payment Default") or (ii) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated,
aggregates $5.0 million or more;
(f) a final judgment or final judgments for the
payment of money are entered by a court or courts of competent
jurisdiction against the Company or any of its Significant Subsidiaries
or any group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary and such judgment or judgments remain
undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
undischarged judgments exceeds $5 million;
(g) the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary pursuant to or within the meaning
of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for
relief against it in an involuntary case,
(iii) consents to the appointment of a
custodian of it or for all or substantially all of its
property,
(iv) makes a general assignment for the
benefit of its creditors, or
(v) generally is not paying its debts as
they become due;
(h) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:
50
<PAGE> 55
(i) is for relief against the Company or any
of its Significant Subsidiaries or any group of Subsidiaries
that, taken as a whole, would constitute a Significant
Subsidiary in an involuntary case,
(ii) appoints a Custodian of the Company or
any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary or for all or substantially all of the
property of the Company or any of its Significant Subsidiaries
or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary, or
(iii) orders the liquidation of the Company
or any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary,
and the order or decree remains unstayed and in effect for 60
consecutive days; or
(i) except as permitted by this Indenture, any Note
Guarantee is held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or
any Guarantor, or any Person acting on behalf of any Guarantor, shall
deny or disaffirm its obligations under such Guarantor's Note
Guarantee.
SECTION 6.02 ACCELERATION.
If any Event of Default (other than an Event of Default
specified in clause (g) or (h) of Section 6.01 hereof with respect to the
Company, any Significant Subsidiary or any group of Significant Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Senior Notes may declare all the Senior Notes to be due and
payable immediately. Notwithstanding the foregoing, if an Event of Default
specified in clause (g) or (h) of Section 6.01 hereof occurs with respect to the
Company, any of its Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary, all outstanding
Senior Notes shall be due and payable immediately without further action or
notice. The Holders of a majority in aggregate principal amount of the then
outstanding Senior Notes by written notice to the Trustee may on behalf of all
of the Holders rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default (except nonpayment of principal, interest or premium that has become due
solely because of the acceleration) have been cured or waived.
If an Event of Default occurs on or after November 15, 2002 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Senior Notes pursuant to Section 3.07 hereof, then, upon acceleration of the
Senior Notes, an equivalent premium shall also become and be immediately due and
payable, to the extent permitted by law, anything in this Indenture or in the
Senior Notes to the contrary notwithstanding. If an Event of Default occurs
prior to November 15, 2002 by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Senior Notes prior to such date, then, upon
acceleration of the Senior Notes, an additional premium shall also become and be
immediately due and payable in an amount, for each of the years beginning on
November 15 of the years set forth below, as set forth below:
51
<PAGE> 56
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
1997................................................ 110.000%
1998................................................ 109.000%
1999................................................ 108.000%
2000................................................ 107.000%
2001................................................ 106.000%
</TABLE>
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Senior Notes or to enforce the performance of any
provision of the Senior Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Senior Notes or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Holder of a Senior Note in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Senior Notes by written notice to the Trustee may
on behalf of the Holders of all of the Senior Notes waive an existing Default or
Event of Default and its consequences hereunder, except a continuing Default or
Event of Default in the payment of the principal of, premium and Liquidated
Damages, if any, or interest on, the Senior Notes (including in connection with
an offer to purchase) (provided, however, that the Holders of a majority in
aggregate principal amount of the then outstanding Senior Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration). Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then
outstanding Senior Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Senior Notes or that
may involve the Trustee in personal liability.
SECTION 6.06 LIMITATION ON SUITS.
Holders of the Senior Notes may not enforce the Indenture or
the Senior Notes except as provided in the Indenture. A Holder of a Senior Note
may pursue a remedy with respect to this Indenture or the Senior Notes only if:
52
<PAGE> 57
(a) the Holder of a Senior Note gives to the Trustee
written notice of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of
the then outstanding Senior Notes make a written request to the
Trustee to pursue the remedy;
(c) such Holder of a Senior Note or Holders of Senior
Notes offer and, if requested, provide to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer and, if
requested, the provision of indemnity; and
(e) during such 60-day period the Holders of a
majority in principal amount of the then outstanding Senior Notes
do not give the Trustee a direction inconsistent with the request.
A Holder of a Senior Note may not use this Indenture to
prejudice the rights of another Holder of a Senior Note or to obtain a
preference or priority over another Holder of a Senior Note.
SECTION 6.07 RIGHTS OF HOLDERS OF SENIOR NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Senior Note to receive payment of principal, premium
and Liquidated Damages, if any, and interest on the Senior Note, on or after the
respective due dates expressed in the Senior Note (including in connection with
an offer to purchase), or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Senior Notes and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel) and
the Holders of the Senior Notes allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Senior Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
53
<PAGE> 58
other amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Senior
Notes or the rights of any Holder, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for
amounts due under Section 7.07 hereof, including payment of all
compensation, expense and liabilities incurred, and all advances made,
by the Trustee and the costs and expenses of collection;
Second: to Holders of Senior Notes for amounts due
and unpaid on the Senior Notes for principal, premium and Liquidated
Damages, if any, and interest, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Senior
Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Third: to the Company or to such party as a court
of competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Senior Notes pursuant to this Section 6.10.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Senior Note pursuant to Section 6.07 hereof, or a suit by Holders of
more than 10% in principal amount of the then outstanding Senior Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in
54
<PAGE> 59
its exercise, as a prudent man would exercise or use under the circumstances in
the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined
solely by the express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee
55
<PAGE> 60
may consult with counsel and the written advice of such counsel or any Opinion
of Counsel shall be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Senior Notes and may otherwise deal with the Company or
any Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04 TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Senior
Notes, it shall not be accountable for the Company's use of the proceeds from
the Senior Notes or any money paid to the Company or upon the Company's
direction under any provision of this Indenture, it shall not be responsible for
the use or application of any money received by any Paying Agent other than the
Trustee, and it shall not be responsible for any statement or recital herein or
any statement in the Senior Notes or any other document in connection with the
sale of the Senior Notes or pursuant to this Indenture other than its
certificate of authentication.
SECTION 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is actually known to the Trustee, the Trustee shall mail to Holders of
Senior Notes a notice of the Default or Event of Default within 90 days after it
becomes known to the Trustee. Except in the case of a Default or Event of
Default in payment of principal of, premium, if any, or interest on any Senior
Note, the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of the Holders of the Senior Notes. Notwithstanding anything to
the contrary expressed in this Indenture, the Trustee shall not be deemed to
have knowledge of any Default or Event of Default hereunder, except in the case
of an Event of Default under Section 6.1(a) or (b) hereof (provided that the
Trustee is the Paying Agent), unless and until a Responsible Officer shall have
actual knowledge thereof or shall have received written notice, at its
56
<PAGE> 61
principal Corporate Trust Office as specified in Section 11.02 hereof, from the
Company or any Holder of Senior Notes that such a Default or an Event of
Default has occurred.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE SENIOR NOTES.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Senior Notes remain
outstanding, the Trustee shall mail to the Holders of the Senior Notes a brief
report dated as of such reporting date that complies with TIA ss. 313(a) (but if
no event described in TIA ss. 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all
reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the
Holders of Senior Notes shall be mailed to the Company and filed with the SEC
and each stock exchange on which the Senior Notes are listed in accordance with
TIA ss. 313(d). The Company shall promptly notify the Trustee when the Senior
Notes are listed on any stock exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time such
compensation for its acceptance of this Indenture and services hereunder as the
Company and the Trustee shall agree. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee and its officers,
directors, shareholders, agents and employees (each, an "Indemnified Party") for
and hold each Indemnitied Party harmless against any and all losses, liabilities
or expenses incurred by it arising out of or in connection with the acceptance
or administration of its duties and the exercise of its rights and powers under
this Indenture or the Senior Notes, including the costs and expenses of
enforcing this Indenture against the Company (including this Section 7.07) and
defending itself against any claim (whether asserted by the Company or any
Holder or any other person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent any
such loss, liability or expense may be attributable to its negligence or bad
faith. The Trustee and its officers, directors, shareholders, agents and
employeees in its capacity as Paying Agent, Registrar, Custodian and agent for
service of notices and demands shall have the full benefit of the foregoing
indemnity. An Indemnified Party shall notify the Company promptly of any claim
for which it may seek indemnity. Failure by an Indemnified Party to so notify
the Company shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim and the Indemnified Party shall cooperate in the
defense. The Indemnified Parties collectively may have one separate counsel and
the Company shall pay the reasonable fees and expenses of such counsel. The
Company need not pay for any settlement made without its consent, which consent
shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge or other termination of this Indenture.
57
<PAGE> 62
To secure the Company's payment obligations in this Section
with respect to compensation and indemnity and the Company's obligations to
reimburse expenses of the Trustee, the Trustee shall have a Lien prior to the
Senior Notes on all money or property held or collected by the Trustee, except
that held in trust to pay principal and interest on particular Senior Notes.
Such Lien shall survive the satisfaction and discharge or other termination of
this Indenture. The Trustee's right to receive payment of any amounts under this
Indenture shall not be subordinate to any other Indebtedness of the Company.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss.
313(b)(2) to the extent applicable.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Senior Notes of a majority in principal amount of the then
outstanding Senior Notes may remove the Trustee by so notifying the Trustee and
the Company in writing. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent
or an order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a custodian or public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Senior Notes
may appoint a successor Trustee to replace the successor Trustee appointed by
the Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Senior Notes of at least 10% in principal amount of
the then outstanding Senior Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a
Senior Note who has been a Holder of a Senior Note for at least six months,
fails to comply with Section 7.10, such Holder of a
58
<PAGE> 63
Senior Note may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Senior Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
59
<PAGE> 64
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding
Senior Notes upon compliance with the conditions set forth below in this Article
Eight.
SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Senior
Notes on the date the conditions set forth below are satisfied (hereinafter,
"Legal Defeasance"). For this purpose, Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Senior Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 hereof and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Senior Notes and this Indenture
(and the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following provisions
which shall survive until otherwise terminated or discharged hereunder: (a) the
rights of Holders of outstanding Senior Notes to receive solely from the trust
fund described in Section 8.04 hereof, and as more fully set forth in such
Section, payments in respect of the principal of, premium, if any, and interest
on such Senior Notes when such payments are due, (b) the Company's obligations
with respect to such Senior Notes under Article 2 and Section 4.02 hereof, (c)
the rights, powers, trusts, duties and immunities of the Trustee hereunder and
the Company's obligations in connection therewith and (d) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.
SECTION 8.03 COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, and Sections 4.15 through 4.23 hereof with respect to
the outstanding Senior Notes on and after the date the conditions set forth in
Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Senior
Notes shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Senior Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Senior Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Senior Notes shall be unaffected thereby. In addition, upon the Company's
exercise under Section 8.01 hereof of the option applicable to this Section 8.03
hereof, subject to the
60
<PAGE> 65
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(d) through 6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Senior Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium and Liquidated
Damages, if any, and interest on the outstanding Senior Notes on the stated date
for payment thereof or on the applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Senior Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Senior Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Senior Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion
of Counsel (which may be subject to customary exceptions) to the effect that on
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
61
<PAGE> 66
(g) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company; and
(h) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Senior Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Senior Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Senior Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Senior
Notes.
Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the request of the Company any money or non-callable Government
Securities held by it as provided in Section 8.04 hereof which, in the opinion
of a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06 REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Senior Note and remaining unclaimed for two years
after such principal, and premium, if any, or interest has become due and
payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Senior Note
shall thereafter, as a secured creditor, look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times (national edition) and
The Wall Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the
62
<PAGE> 67
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 8.07 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Senior Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as
the Trustee or Paying Agent is permitted to apply all such money in accordance
with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that,
if the Company makes any payment of principal of, premium, if any, or interest
on any Senior Note following the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Senior Notes to receive
such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF SENIOR NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company,
the Guarantors and the Trustee may amend or supplement this Indenture, the Note
Guarantees or the Senior Notes without the consent of any Holder of a Senior
Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Senior Notes in
addition to or in place of certificated Senior Notes or to alter the
provisions of Article 2 hereof (including the related definitions) in a
manner that does not materially adversely affect any Holder;
(c) to provide for the assumption of the Company's or
a Guarantor's obligations to the Holders of the Senior Notes by a
successor to the Company or a Guarantor pursuant to Article 5 or
Article 10 hereof;
(d) to make any change that would provide any
additional rights or benefits to the Holders of the Senior Notes or
that does not adversely affect the legal rights hereunder of any Holder
of the Senior Notes;
(e) to comply with requirements of the SEC in order
to effect or maintain the qualification of this Indenture under the
TIA;
(f) to provide for the issuance of Additional Senior
Notes in accordance with the limitations set forth in this Indenture
as of the date hereof; or
(g) to allow any Guarantor to execute a supplemental
indenture and/or a Note Guarantee with respect to the Senior Notes.
63
<PAGE> 68
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company and
the Guarantors in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into such amended or supplemental
Indenture that affects its own rights, duties or immunities under this Indenture
or otherwise.
SECTION 9.02 WITH CONSENT OF HOLDERS OF SENIOR NOTES.
Except as provided below in this Section 9.02, the Company and
the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10
and 4.15 hereof), the Note Guarantees and the Senior Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Senior Notes (including Additional Senior Notes, if any) then
outstanding voting as a single class (including consents obtained in connection
with a tender offer or exchange offer for, or purchase of, the Senior Notes),
and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of
Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Senior Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of this Indenture, the Note Guarantees or the Senior Notes
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Senior Notes (including Additional Senior Notes, if any)
voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Senior Notes).
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Senior Notes as
aforesaid, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company in the execution of such
amended or supplemental Indenture unless such amended or supplemental Indenture
directly affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Senior Notes under this Section 9.02 to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Senior Notes
affected thereby a notice briefly describing the amendment, supplement or
waiver. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such amended
or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof,
the Holders of a majority in aggregate principal amount of the Senior Notes
(including Additional Senior Notes, if any) then outstanding voting as a single
class may waive compliance in a particular instance by the Company with any
provision of this Indenture or the Senior Notes. However, without the consent of
each Holder affected, an amendment or waiver under this Section 9.02 may not
(with respect to any Senior Notes held by a non-consenting Holder):
64
<PAGE> 69
(a) reduce the principal amount of Senior Notes whose
Holders must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed
maturity of any Senior Note or alter or waive any of the provisions
with respect to the redemption of the Senior Notes except as provided
above with respect to Sections 3.09, 4.10 and 4.15 hereof;
(c) reduce the rate of or change the time for
payment of interest, including default interest, on any Senior Note;
(d) waive a Default or Event of Default in the
payment of principal of or premium, if any, or interest on the Senior
Notes (except a rescission of acceleration of the Senior Notes by the
Holders of at least a majority in aggregate principal amount of the
then outstanding Senior Notes (including Additional Senior Notes, if
any) and a waiver of the payment default that resulted from such
acceleration);
(e) make any Senior Note payable in money other than
that stated in the Senior Notes;
(f) make any change in the provisions of this
Indenture relating to waivers of past Defaults or the rights of Holders
of Senior Notes to receive payments of principal of or interest on the
Senior Notes;
(g) make any change in Section 6.04 or 6.07 hereof
or in the foregoing amendment and waiver provisions;
(h) release any Guarantor from any of its
obligations under its Note Guarantee or this Indenture, except in
accordance with the terms of this Indenture;
(i) make any Senior Note payable in money other than
that stated in the Senior Notes; or
(j) waive a redemption payment with respect to any
Senior Note (other than a payment required by Sections 3.09, 4.10 or
4.15 hereof).
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Senior
Notes shall be set forth in a amended or supplemental Indenture that complies
with the TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Senior Note is a continuing consent by the Holder
of a Senior Note and every subsequent Holder of a Senior Note or portion of a
Senior Note that evidences the same debt as the consenting Holder's Senior Note,
even if notation of the consent is not made on any Senior Note. However, any
such Holder of a Senior Note or subsequent Holder of a Senior Note may revoke
the consent as to its Senior Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
65
<PAGE> 70
SECTION 9.05 NOTATION ON OR EXCHANGE OF SENIOR NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Senior Note thereafter authenticated. The
Company in exchange for all Senior Notes may issue and the Trustee shall, upon
receipt of an Authentication Order, authenticate new Senior Notes that reflect
the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Senior
Note shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 11.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
NOTE GUARANTEES
SECTION 10.01 GUARANTEE.
Subject to this Article 10, each of the Guarantors hereby,
jointly and severally, unconditionally guarantees to each Holder of a Senior
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Senior Notes or the obligations of the Company hereunder or
thereunder, that: (a) the principal of and interest on the Senior Notes will be
promptly paid in full when due, whether at maturity, by acceleration, redemption
or otherwise, and interest on the overdue principal of and interest on the
Senior Notes, if any, if lawful, and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Senior Notes or any of
such other obligations, that same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing payment when due of any
amount so guaranteed or any performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay the same immediately.
Each Guarantor agrees that this is a guarantee of payment and not a guarantee of
collection.
The Guarantors hereby agree that their obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Senior Notes or this Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder of the Senior Notes
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the
66
<PAGE> 71
Company, any right to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenant that this Note Guarantee shall
not be discharged except by complete performance of the obligations contained
in the Senior Notes and this Indenture.
If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors or any custodian, trustee,
liquidator or other similar official acting in relation to either the Company or
the Guarantors, any amount paid by either to the Trustee or such Holder, this
Note Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect.
Each Guarantor agrees that it shall not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Note Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Note Guarantee. The Guarantors shall have the right to
seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.
SECTION 10.02 LIMITATION ON GUARANTOR LIABILITY.
Each Guarantor, and by its acceptance of Senior Notes, each
Holder, hereby confirms that it is the intention of all such parties that the
Note Guarantee of such Guarantor not constitute a fraudulent transfer or
conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to
the extent applicable to any Note Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor under its Note Guarantee and this Article
10 shall be limited to the maximum amount as will, after giving effect to such
maximum amount and all other contingent and fixed liabilities of such Guarantor
that are relevant under such laws, and after giving effect to any collections
from, rights to receive contribution from or payments made by or on behalf of
any other Guarantor in respect of the obligations of such other Guarantor under
this Article 10, result in the obligations of such Guarantor under its Note
Guarantee not constituting a fraudulent transfer or conveyance.
SECTION 10.03 EXECUTION AND DELIVERY OF NOTE GUARANTEE.
To evidence its Note Guarantee set forth in Section 10.01,
each Guarantor hereby agrees that a notation of such Note Guarantee
substantially in the form included in Exhibit E shall be endorsed by an Officer
of such Guarantor on each Senior Note authenticated and delivered by the Trustee
and that this Indenture shall be executed on behalf of such Guarantor by its
President or one of its Vice Presidents.
Each Guarantor hereby agrees that its Note Guarantee set forth
in Section 10.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Senior Note a notation of such Note Guarantee.
67
<PAGE> 72
If an Officer whose signature is on this Indenture or on the
Note Guarantee no longer holds that office at the time the Trustee authenticates
the Senior Note on which a Note Guarantee is endorsed, the Note Guarantee shall
be valid nevertheless.
The delivery of any Senior Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Note
Guarantee set forth in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new
Subsidiaries subsequent to the date of this Indenture, if required by Section
4.24 hereof, the Company shall cause such Subsidiaries to execute supplemental
indentures to this Indenture and Note Guarantees in accordance with Section 4.24
hereof and this Article 10, to the extent applicable.
SECTION 10.04 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) another Person whether
or not affiliated with such Guarantor unless:
(a) subject to Section 10.05 hereof, the Person formed by or
surviving any such consolidation or merger (if other than a Guarantor or the
Company) unconditionally assumes all the obligations of such Guarantor, pursuant
to a supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Senior Notes, the Indenture and the Note Guarantee on the
terms set forth herein or therein;
(b) such Guarantor, or any Person formed by or surviving any
such consolidation or merger, would have Consolidated Net Worth (immediately
after giving effect to such transaction), equal to or greater than the
Consolidated Net Worth of such Guarantor immediately preceding the transaction
(c) immediately after giving effect to such transaction, no
Default or Event of Default exists; and
(d) the Company would be permitted, immediately after giving
effect to such transaction, to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.09 hereof.
In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor Person, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the Note Guarantee endorsed upon the Senior Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Note Guarantees to be endorsed upon all of the Senior Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Note Guarantees so issued shall in all
respects have the same legal rank and benefit under this Indenture as the Note
Guarantees theretofore and thereafter issued in accordance with the terms of
this Indenture as though all of such Note Guarantees had been issued at the date
of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and
notwithstanding clauses (a) and (b) above, nothing contained in this Indenture
or in any of the Senior Notes shall prevent any consolidation
68
<PAGE> 73
or merger of a Guarantor with or into the Company or another Guarantor, or
shall prevent any sale or conveyance of the property of a Guarantor as an
entirety or substantially as an entirety to the Company or another Guarantor.
SECTION 10.05 RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all of the capital stock of any Guarantor, then such
Guarantor (in the event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Note Guarantee; provided that
the Net Proceeds of such sale or other disposition are applied in accordance
with the applicable provisions of this Indenture, including without limitation
Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the applicable provisions
of this Indenture, including without limitation Section 4.10 hereof, the Trustee
shall execute any documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Note Guarantee.
Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and interest
on the Senior Notes and for the other obligations of any Guarantor under this
Indenture as provided in this Article 10.
ARTICLE 11.
MISCELLANEOUS
SECTION 11.01 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA ss. 318(c), the imposed duties shall
control.
SECTION 11.02 NOTICES.
Any notice or communication by the Company, any Guarantor or
the Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address
If to the Company and/or any Guarantor:
AEI Holding Company, Inc.
1500 North Big Run Road
Ashland, Kentucky 41102
Telecopier No.: (606) 928-0450
Attention: Chief Financial Officer
69
<PAGE> 74
With a copy to:
Brown, Todd & Heyburn, PLLC
2700 Lexington Financial Center
Lexington, Kentucky 40507-1749
Telecopier No.: (606) 231-0011
Attention: Paul Sullivan, Esq.
If to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Telecopier No.: (212) 858-2952
Attention: Corporate Trust Administration
The Company, any Guarantor or the Trustee, by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA ss. 313(c), to the extent required by the
TIA. Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03 COMMUNICATION BY HOLDERS OF SENIOR NOTES WITH OTHER HOLDERS OF
SENIOR NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Senior Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA ss. 312(c).
SECTION 11.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
70
<PAGE> 75
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 11.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 11.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 11.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 11.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee,
incorporator or stockholder of the Company or any Guarantor, as such, shall have
any liability for any obligations of the Company or such Guarantor under the
Senior Notes, the Note Guarantees, this Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Senior Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Senior Notes.
SECTION 11.08 GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
71
<PAGE> 76
SECTION 11.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 11.10 SUCCESSORS.
All agreements of the Company in this Indenture and the Senior
Notes shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 11.11 SEVERABILITY.
In case any provision in this Indenture or in the Senior Notes
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 11.12 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 11.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
72
<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
AEI HOLDING COMPANY, INC.
BY: /s/ Vic Grubb
------------------------------
Name: Vic Grubb
Title: Treasurer/Controller
ADDINGTON MINING, INC.
BY: /s/ Vic Grubb
------------------------------
Name: Vic Grubb
Title: Treasurer
TENNESSEE MINING, INC.
BY: /s/ Vic Grubb
------------------------------
Name: Vic Grubb
Title: Treasurer
IKERD-BANDY CO., INC.
BY: /s/ Vic Grubb
------------------------------
Name: Vic Grubb
Title: Treasurer
IBJ SCHRODER BANK TRUST COMPANY
BY: /s/ Luis Perez
------------------------------
Name: Luis Perez
Title: Asst. Vice President
<PAGE> 78
EXHIBIT A-1
(Face of Senior Note)
===============================================================================
CUSIP/CINS
--------------------
10% Senior Notes due 2007
No. $
---- -----------------
AEI HOLDING COMPANY, INC.
promises to pay to
-------------------------------------------
or registered assigns,
the principal sum of
-----------------------------------------
Dollars on November 15, 2007.
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
===============================================================================
A1-1
<PAGE> 79
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.
Date:
-----------------------
AEI HOLDING COMPANY, INC.
By:
-------------------------------------
Name:
Title:
A1-2
<PAGE> 80
This is one of the Senior Notes described in the
within-mentioned Indenture.
Date:
----------------------
IBJ SCHRODER BANK & TRUST COMPANY
By:
-------------------------------------
Authorized Signatory
A1-3
<PAGE> 81
(Back of Senior Note)
10% Senior Notes due 2007
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT IS NOT A U.S.
PERSON, IS NOT ACQUIRING THIS NOTE FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON
AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT) (AN "IAI"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF
RULE 144(d) UNDER THE SECURITIES ACT, IF APPLICABLE) UNDER THE SECURITIES ACT
AS IN EFFECT ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO
A PERSON WHOM THE HOLDER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QIB IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE REGISTRATION OF TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS NOTE OR ANY INTEREST HEREIN WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING
TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II)
A1-4
<PAGE> 82
THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE
TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV)
THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF AEI HOLDING COMPANY, INC.
Capitalized terms used herein shall have the meanings
assigned to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. AEI Holding Company, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Senior Note at 10% per annum from November 12, 1997 until maturity and shall
pay the Liquidated Damages payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and
Liquidated Damages semi-annually on November 15 and May 15 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each
an "Interest Payment Date"). Interest on the Senior Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance; provided that if there is no existing Default
in the payment of interest, and if this Senior Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; provided, further, that the first Interest Payment Date shall be May 15,
1998. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
and Liquidated Damages (without regard to any applicable grace periods) from
time to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on
the Senior Notes (except defaulted interest) and Liquidated Damages to the
Persons who are registered Holders of Senior Notes at the close of business on
the November 1 or May 1 next preceding the Interest Payment Date, even if such
Senior Notes are canceled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture with respect
to defaulted interest. The Senior Notes will be payable as to principal,
premium and Liquidated Damages, if any, and interest at the office or agency of
the Company maintained for such purpose within or without the City and State of
New York, or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the Holders at their addresses set forth
in the register of Holders, and provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium and Liquidated Damages on, all Global Notes and all other
Senior Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided that Liquidated
Damages may be paid through the issuance of additional Senior Notes having a
value at the time of issuance equal to the amount of Liquidated Damages so
paid.
3. PAYING AGENT AND REGISTRAR. Initially, IBJ Schroder
Bank & Trust Company, the Trustee under the Indenture, will act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in any
such capacity.
A1-5
<PAGE> 83
4. INDENTURE. The Company issued the Senior Notes under
an Indenture dated as of November 12, 1997 ("Indenture") between the Company
and the Trustee. The terms of the Senior Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The
Senior Notes are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. To the extent any
provision of this Senior Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling. The
Senior Notes are obligations of the Company limited to $250.0 million in
aggregate principal amount, plus amounts, if any, issued to pay Liquidated
Damages on outstanding Senior Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this
Paragraph 5, the Company shall not have the option to redeem the Senior Notes
prior to November 15, 2002. Thereafter, the Company shall have the option to
redeem the Senior Notes, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon to the applicable redemption date, if redeemed
during the twelve-month period beginning on November 15 of the years indicated
below:
<TABLE>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................ 105.000%
2003........................................................ 103.333%
2004........................................................ 101.667%
2005 and thereafter.......................................... 100.000%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of
this Paragraph 5, at any time prior to November 15, 2000, the Company may
redeem up to 35% of Senior Notes ever issued under the Indenture at a
redemption price equal to 110% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the redemption
date, with the net cash proceeds of an initial public offering of its common
stock; provided that at least $130.0 million in aggregate principal amount of
the Senior Notes remain outstanding immediately after the occurrence of such
redemption (excluding Senior Notes held by the Company or its Subsidiaries) and
that such redemption occurs within 45 days of the date of the closing of such
initial public offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall
not be required to make mandatory redemption payments with respect to the
Senior Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, each Holder of the
Senior Notes will have the right to require the Company to make an offer (a
"Change of Control Offer") to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of each Holder's Senior Notes at a purchase price
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment").
A1-6
<PAGE> 84
Within 10 days following any Change of Control, the Company shall mail a notice
to each Holder setting forth the procedures governing the Change of Control
Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $10 million, the Company shall commence an offer to all
Holders of Senior Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Senior Notes (including
any Additional Senior Notes) that may be purchased out of the Excess Proceeds
at an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date fixed for the closing of such offer in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Senior Notes (including any Additional Senior Notes) tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Subsidiary) may use such deficiency for general corporate purposes. If the
aggregate principal amount of Senior Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Senior
Notes to be purchased on a pro rata basis. Holders of Senior Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Senior
Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Senior Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the redemption date to
each Holder whose Senior Notes are to be redeemed at its registered address.
Senior Notes in denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000, unless all of the Senior Notes held by a
Holder are to be redeemed. On and after the redemption date interest ceases to
accrue on Senior Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes
are in registered form in denominations of $1,000 and integral multiples of
$1,000. The transfer of Senior Notes may be registered and Senior Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Senior Note or portion of a Senior
Note selected for redemption, except for the unredeemed portion of any Senior
Note being redeemed in part. Also, the Company need not exchange or register
the transfer of any Senior Notes for a period of 15 days before a selection of
Senior Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a
Senior Note may be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture , the Note Guarantees or the Senior Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the then outstanding Senior Notes and Additional Senior
Notes, if any, voting as a single class, and any existing default or compliance
with any provision of the Indenture , the Note Guarantees or the Senior Notes
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Senior Notes and Additional Senior Notes, if any,
voting as a single class. Without the consent of any Holder of a Senior Note,
the Indenture, the Note Guarantees or the Senior Notes may be amended or
supplemented
A1-7
<PAGE> 85
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Senior Notes in addition to or in place of certificated Senior Notes, to
provide for the assumption of the Company's or Guarantor's obligations to
Holders of the Senior Notes in case of a merger or consolidation, to make any
change that would provide any additional rights or benefits to the Holders of
the Senior Notes or that does not adversely affect the legal rights under the
Indenture of any such Holder, to comply with the requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act, to provide for the Issuance of Additional Senior Notes in
accordance with the limitations set forth in the Indenture, or to allow any
Guarantor to execute a supplemental indenture to the Indenture and/or a Note
Guarantee with respect to the Senior Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest or Liquidated Damages
on the Senior Notes; (ii) default in payment when due of principal of or
premium, if any, on the Senior Notes when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to purchase)
or otherwise, (iii) failure by the Company to comply with Section 4.07, 4.09,
4.10 or 5.01 of the Indenture; (iv) failure by the Company for 60 days after
notice to the Company by the Trustee or the Holders of at least 25% in
principal amount of the Senior Notes (including Additional Senior Notes, if
any) then outstanding voting as a single class to comply with certain other
agreements in the Indenture or the Senior Notes; (v) default under certain
other agreements relating to Indebtedness of the Company which default (a) is
caused by a failure to pay principal or of premium, if any, on interest of such
Indebtedness prior to the expiration of the grace period in such Indebtedness
on the date of such default (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5 million
or more; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; (vii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Material Subsidiaries; and
(vii) except as permitted by the Indenture, any Note Guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor or any Person acting on
its behalf shall deny or disaffirm its obligations under such Guarantor's Note
Guarantee. If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior
Notes may declare all the Senior Notes to be due and payable. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events
of bankruptcy or insolvency, all outstanding Senior Notes will become due and
payable without further action or notice. Holders may not enforce the Indenture
or the Senior Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Senior Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of the Senior Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest. The Holders of a majority in aggregate principal amount
of the Senior Notes then outstanding by notice to the Trustee may on behalf of
the Holders of all of the Senior Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of interest on, or the principal of, the Senior
Notes. The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
A1-8
<PAGE> 86
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer,
employee, incorporator or stockholder, of the Company, as such, shall not have
any liability for any obligations of the Company under the Senior Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Senior Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Senior Notes.
15. AUTHENTICATION. This Senior Note shall not be valid
until authenticated by the manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL
NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to
Holders of Senior Notes under the Indenture, Holders of Restricted Global Notes
and Restricted Definitive Notes shall have all the rights set forth in the
Registration Rights Agreement dated as of November 12, 1997, among the Company,
the Guarantors and the party named on the signature pages thereof (the
"Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Senior Notes and the
Trustee may use CUSIP numbers in notices of redemption as a convenience to
Holders. No representation is made as to the accuracy of such numbers either as
printed on the Senior Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
AEI Holding Company
1500 North Big Run Road
Ashland, Kentucky 41102
Attention: Chief Financial Officer
A1-9
<PAGE> 87
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint_______________________________________________________
to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
- -------------------------------------------------------------------------------
Date:
-----------------
Your Signature:
----------------------------------
(Sign exactly as your name appears on the face
of this Senior Note)
SIGNATURE GUARANTEE.
A1-10
<PAGE> 88
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by
the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box
below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Senior Note
purchased by the Company pursuant to Section 4.10 or Section 4.15 of the
Indenture, state the amount you elect to have purchased: $________
<TABLE>
<S> <C>
Date: Your Signature:
------------- -----------------------------------------------------------
(Sign exactly as your name appears on the Senior
Note)
Tax Identification No:
----------------------------------------------------
</TABLE>
Signature Guarantee.
A1-11
<PAGE> 89
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a
part of another Global Note or Definitive Note for an interest in this Global
Note, have been made:
<TABLE>
<CAPTION>
Principal Amount Signature of
Amount of decrease in Amount of increase in of this Global Note authorized officer
Principal Amount Principal Amount of following such of Trustee or Note
Date of Exchange of this Global Note this Global Note decrease (or increase) Custodian
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
A1-12
<PAGE> 90
[EXHIBIT A-2]
(Face of Regulation S Temporary Global Note)
===============================================================================
CUSIP/CINS
-------------------
10% Senior Notes due 2007
No. $
----- ---------------------
AEI HOLDING COMPANY, INC.
promises to pay to
---------------------------------------
or registered assigns,
the principal sum of
-------------------------------------
Dollars on November 15, 2007.
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
Dated:
------------------------
AEI Holding Company, Inc.
By:
---------------------------
Name:
Title:
[(SEAL)]
This is one of the
Senior Notes referred to in the
within-mentioned Indenture:
IBJ Schroder Bank & Trust Company,
as Trustee
By:
--------------------------------
===============================================================================
A2-1
<PAGE> 91
(Back of Regulation S Temporary Global Note)
10% Senior Notes due 2007
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE
TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME
AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE NOTE
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT. THE
HOLDER OF THE NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO
A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
(AS DEFINED IN OF RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
A2-2
<PAGE> 92
REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTE EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (1) ABOVE.
Capitalized terms used herein shall have the meanings
assigned to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. AEI Holding Company, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Senior Note at 10% per annum from November 12, 1997 until maturity and shall
pay the Liquidated Damages payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and
Liquidated Damages semi-annually on November 15 and May 15 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each
an "Interest Payment Date"). Interest on the Senior Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance; provided that if there is no existing Default
in the payment of interest, and if this Senior Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; provided, further, that the first Interest Payment Date shall be May 15,
1998. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
and Liquidated Damages (without regard to any applicable grace periods) from
time to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged
for one or more Regulation S Permanent Global Notes, the Holder hereof shall
not be entitled to receive payments of interest hereon; until so exchanged in
full, this Regulation S Temporary Global Note shall in all other respects be
entitled to the same benefits as other Senior Notes under the Indenture.
2. METHOD OF PAYMENT. The Company will pay interest on
the Senior Notes (except defaulted interest) and Liquidated Damages to the
Persons who are registered Holders of Senior Notes at the close of business on
the November 1 or May 1 next preceding the Interest Payment Date, even if such
Senior Notes are canceled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture with respect
to defaulted interest. The Senior Notes will be payable as to principal,
premium and Liquidated Damages, if any, and interest at the office or agency of
the Company maintained for such purpose within or without the City and State of
New York, or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the Holders at their addresses set forth
in the register of Holders, and provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium and Liquidated Damages on, all Global Notes and all other
Senior Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided that Liquidated
Damages may be paid through the issuance of additional Senior Notes having a
value at the time of issuance equal to the amount of Liquidated Damages so
paid.
A2-3
<PAGE> 93
3. PAYING AGENT AND REGISTRAR. Initially, IBJ Schroder
Bank & Trust Company, the Trustee under the Indenture, will act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in any
such capacity.
4. INDENTURE. The Company issued the Senior Notes under
an Indenture dated as of November 12, 1997 ("Indenture") between the Company
and the Trustee. The terms of the Senior Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The
Senior Notes are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. To the extent any
provision of this Senior Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling. The
Senior Notes are obligations of the Company limited to $250.0 million in
aggregate principal amount, plus amounts, if any, issued to pay Liquidated
Damages on outstanding Senior Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this
Paragraph 5, the Company shall not have the option to redeem the Senior Notes
prior to November 15, 2002. Thereafter, the Company shall have the option to
redeem the Senior Notes, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon to the applicable redemption date, if redeemed
during the twelve-month period beginning on November 15 of the years indicated
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................ 105.000%
2003........................................................ 103.333%
2004..........................................................101.667%
2005 and thereafter.......................................... 100.000%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of
this Paragraph 5, at any time prior to November 15, 2000, the Company may
redeem up to 35% of Senior Notes ever issued under the Indenture at a
redemption price equal to 110% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the redemption
date, with the net cash proceeds of an initial public offering of its common
stock; provided that at least $130.0 million in aggregate principal amount of
the Senior Notes remain outstanding immediately after the occurrence of such
redemption (excluding Senior Notes held by the Company or its Subsidiaries) and
that such redemption occurs within 45 days of the date of the closing of such
initial public offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall
not be required to make mandatory redemption payments with respect to the
Senior Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, each Holder of the
Senior Notes will have the right to require the Company to make an offer (a
"Change of Control Offer") to repurchase all or any
A2-4
<PAGE> 94
part (equal to $1,000 or an integral multiple thereof) of each Holder's Senior
Notes at a purchase price equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date of purchase (the "Change of Control Payment"). Within 10 days
following any Change of Control, the Company shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $10 million, the Company shall commence an offer to all
Holders of Senior Notes (as "Asset Sale Offer") pursuant to Section 3.09 of the
Indenture to purchase the maximum principal amount of Senior Notes (including
any Additional Senior Notes) that may be purchased out of the Excess Proceeds
at an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date fixed for the closing of such offer in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Senior Notes (including any Additional Senior Notes) tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Subsidiary) may use such deficiency for general corporate purposes. If the
aggregate principal amount of Senior Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Senior
Notes to be purchased on a pro rata basis. Holders of Senior Notes that are the
subject of an offer to purchase will receive an Asset Sale Offer from the
Company prior to any related purchase date and may elect to have such Senior
Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Senior Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the redemption date to
each Holder whose Senior Notes are to be redeemed at its registered address.
Senior Notes in denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000, unless all of the Senior Notes held by a
Holder are to be redeemed. On and after the redemption date interest ceases to
accrue on Senior Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes
are in registered form in denominations of $1,000 and integral multiples of
$1,000. The transfer of Senior Notes may be registered and Senior Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Senior Note or portion of a Senior
Note selected for redemption, except for the unredeemed portion of any Senior
Note being redeemed in part. Also, the Company need not exchange or register
the transfer of any Senior Notes for a period of 15 days before a selection of
Senior Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment
This Regulation S Temporary Global Note is exchangeable in
whole or in part for one or more Global Notes only (i) on or after the
termination of the 40-day restricted period (as defined in Regulation S) and
(ii) upon presentation of certificates (accompanied by an Opinion of Counsel,
if applicable) required by Article 2 of the Indenture. Upon exchange of this
Regulation S Temporary Global Note for one or more Global Notes, the Trustee
shall cancel this Regulation S Temporary Global Note.
A2-5
<PAGE> 95
10. PERSONS DEEMED OWNERS. The registered Holder of a
Senior Note may be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Senior Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding Senior Notes, and any existing default or compliance with
any provision of the Indenture or the Senior Notes may be waived with the
consent of the Holders of a majority in principal amount of the then
outstanding Senior Notes. Without the consent of any Holder of a Senior Note,
the Indenture or the Senior Notes may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Senior Notes
in addition to or in place of certificated Senior Notes, to provide for the
assumption of the Company's obligations to Holders of the Senior Notes in case
of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Senior Notes or that does
not adversely affect the legal rights under the Indenture of any such Holder,
or to comply with the requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act..
12. DEFAULTS AND REMEDIES. Events of Default include: (i)
default for 30 days in the payment when due of interest or Liquidated Damages
on the Senior Notes; (ii) default in payment when due of principal of or
premium, if any, on the Senior Notes when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to purchase)
or otherwise, (iii) failure by the Company to comply with Section 4.07, 4.09,
4.10 or 5.01 of the Indenture; (iv) failure by the Company for 60 days after
notice to the Company by the Trustee or the Holders of at least 25% in
principal amount of the Senior Notes (including Additional Senior Notes, if
any) then outstanding voting as a single class to comply with certain other
agreements in the Indenture or the Senior Notes; (v) default under certain
other agreements relating to Indebtedness of the Company which default (a) is
caused by a failure to pay principal or of premium, if any, on interest of such
Indebtedness prior to the expiration of the grace period in such Indebtedness
on the date of such default (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness together with the principal
amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $5 million
or more; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; (vii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Material Subsidiaries; and
(vii) except as permitted by the Indenture, any Note Guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor or any Person acting on
its behalf shall deny or disaffirm its obligations under such Guarantor's Note
Guarantee. If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Senior
Notes may declare all the Senior Notes to be due and payable. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events
of bankruptcy or insolvency, all outstanding Senior Notes will become due and
payable without further action or notice. Holders may not enforce the Indenture
or the Senior Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Senior Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of the Senior Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest. The Holders of a majority in aggregate principal amount
of the Senior Notes then outstanding by notice to the Trustee may on behalf of
the Holders of all of the Senior Notes waive any existing Default or Event of
Default and its consequences under the
A2-6
<PAGE> 96
Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Senior Notes. The Company is required to
deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer,
employee, incorporator or stockholder, of the Company, as such, shall not have
any liability for any obligations of the Company under the Senior Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Senior Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Senior Notes.
15. AUTHENTICATION. This Senior Note shall not be valid
until authenticated by the manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL
NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to
Holders of Senior Notes under the Indenture, Holders of Restricted Global Notes
and Restricted Definitive Notes shall have all the rights set forth in the
Registration Rights Agreement dated as of November 12, 1997, between the
Company and the parties named on the signature pages thereof (the "Registration
Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Senior Notes and the
Trustee may use CUSIP numbers in notices of redemption as a convenience to
Holders. No representation is made as to the accuracy of such numbers either as
printed on the Senior Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
AEI Holding Company, Inc.
1500 North Big Run Road
Ashland, Kentucky 41102
Attention: Chief Financial Officer
A2-7
<PAGE> 97
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign and
transfer this Senior Note to
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
- -------------------------------------------------------------------------------
Date:
-----------------
Your Signature:
-------------------------
(Sign exactly as your name appears on the face of this Senior Note)
Signature Guarantee.
A2-8
<PAGE> 98
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by
the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the
appropriate box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Senior Note
purchased by the Company pursuant to Section 4.10 or Section 4.15 of the
Indenture, state the amount you elect to have purchased: $___________
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Date: Your Signature:
------------------ ---------------------------------------------
(Sign exactly as your name appears on the Senior Note)
Tax Identification No.:
---------------
</TABLE>
Signature Guarantee.
A2-9
<PAGE> 99
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S
Temporary Global Note for an interest in another Global Note, or of other
Restricted Global Notes for an interest in this Regulation S Temporary Global
Note, have been made:
<TABLE>
<CAPTION>
Amount of Principal Amount Signature of
decrease in Amount of increase in of this Global Note authorized officer
Principal Amount Principal Amount of following such of Trustee or Note
Date of Exchange of this Global Note this Global Note decrease (or increase) Custodian
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
A2-10
<PAGE> 100
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
AEI Holding Company, Inc.
1500 North Big Run Road
Ashland, Kentucky 41102
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Re: AEI Holding Company, Inc. 10% Senior Notes Due 2007
Reference is hereby made to the Indenture, dated as of
November 12, 1997 (the "Indenture"), between AEI Holding Company, Inc., as
issuer (the "Company"), and IBJ Schroder Bank & Trust Company, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
____________________, (the "Transferor") owns and proposes to
transfer the Senior Note[s] or interest in such Senior Note[s] specified in
Annex A hereto, in the principal amount of $___________ in such Senior Note[s]
or interests (the "Transfer"), to __________ (the "Transferee"), as further
specified in Annex A hereto. In connection with the Transfer, the Transferor
hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer
is being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Note for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer" within
the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A
and such Transfer is in compliance with any applicable blue sky securities laws
of any state of the United States. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the 144A Global Note
and/or the Definitive Note and in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A
DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities
Act and, accordingly, the Transferor hereby further certifies that (i) the
Transfer is not being made to a person in the United States and (x) at the time
the buy order was originated, the Transferee was outside the United States or
such Transferor and any Person acting on its behalf reasonably believed and
believes that the Transferee was outside the United States or (y) the
transaction
B-1
<PAGE> 101
was executed in, on or through the facilities of a designated offshore
securities market and neither such Transferor nor any Person acting on its
behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities
Act and, (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION
OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities
Act and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) a certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) an Opinion of Counsel provided by the Transferor or the
Transferee (a copy of which the Transferor has attached to this certification),
to the effect that such Transfer is in compliance with the Securities Act. Upon
consummation of the proposed transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the IAI Global Note and/or the Definitive Notes and in the
Indenture and the Securities Act.
B-2
<PAGE> 102
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any state of
the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
-------------------------------
[Insert Name of Transferor]
By:
----------------------------
Name:
Title:
Dated:
------------, ----
B-3
<PAGE> 103
ANNEX A TO CERTIFICATE OF TRANSFER
<TABLE>
<CAPTION>
1. The Transferor owns and proposes to transfer the following:
CHECK ONE OF (a) OR (b)
<S> <C> <C>
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP__________), or
(ii) [ ] Regulation S Global Note (CUSIP__________), or
(iii) [ ] IAI Global Note (CUSIP_________); or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
CHECK ONE
(a) [ ] beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP_________), or
(ii) [ ] Regulation S Global Note (CUSIP_________), or
(iii) [ ] IAI Global Note (CUSIP_________); or
(iv) [ ] Unrestricted Global Note (CUSIP_________); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
</TABLE>
in accordance with the terms of the Indenture.
B-4
<PAGE> 104
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
AEI Holding Company, Inc.
1500 North Big Run Road
Ashland, Kentucky 41102
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Re: AEI Holding Company, Inc. 10% Senior Notes due 2007
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of
November 12, 1997 (the "Indenture"), between AEI Holding Company, Inc., as
issuer (the "Company"), and IBJ Schroder Bank & Trust Company, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
______________________, (the "Owner") owns and proposes to
exchange the Senior Note[s] or interest in such Senior Note[s] specified
herein, in the principal amount of $____________ in such Senior Note[s] or
interests (the "Exchange"). In connection with the Exchange, the Owner hereby
certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE.
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global Note
in an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance with the
United States Securities Act of 1933, as amended (the "Securities Act"), (iii)
the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an Unrestricted Global Note
is being acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive
Note is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with
C-1
<PAGE> 105
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in
an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest is
being acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for the
Owner's own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to Restricted Definitive
Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Unrestricted Definitive Note is being acquired in compliance with
any applicable blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Definitive Note and
in the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] |_| 144A Global Note, |_| Regulation S Global Note, |_| IAI
Global Note with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Note and in the Indenture and the Securities Act.
C-2
<PAGE> 106
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
---------------------------------------
[Insert Name of Owner]
By:
------------------------------------
Name:
Title:
Dated:
-----------------, ----
C-3
<PAGE> 107
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
AEI Holding Company, Inc.
1500 North Big Run Road
Ashland, Kentucky 41102
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Re: AEI Holding Company, Inc. 10% Senior Notes due 2007
Reference is hereby made to the Indenture, dated as of
November 12, 1997 (the "Indenture"), between AEI Holding Company, Inc. as
issuer (the "Company"), and IBJ Schroder Bank & Trust Company, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the
Senior Notes or any interest therein is subject to certain restrictions and
conditions set forth in the Indenture and the undersigned agrees to be bound
by, and not to resell, pledge or otherwise transfer the Senior Notes or any
interest therein except in compliance with, such restrictions and conditions
and the United States Securities Act of 1933, as amended (the "Securities
Act").
2. We understand that the offer and sale of the Senior
Notes have not been registered under the Securities Act, and that the Senior
Notes and any interest therein may not be offered or sold except as permitted
in the following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we should sell
the Senior Notes or any interest therein, we will do so only (A) to the Company
or any subsidiary thereof, (B) in accordance with Rule 144A under the
Securities Act to a "qualified institutional buyer" (as defined therein), (c)
to an institutional "accredited investor" (as defined below) that, prior to
such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you and to the Company a signed letter substantially in the
form of this letter and an Opinion of Counsel in form reasonably acceptable to
the Company to the effect that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule
144(k) under the Securities Act or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing the Definitive Note
D-1
<PAGE> 108
or beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising
such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the
Senior Notes or beneficial interest therein, we will be required to furnish to
you and the Company such certifications, legal opinions and other information
as you and the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the Senior
Notes purchased by us will bear a legend to the foregoing effect. We further
understand that any subsequent transfer by us of the Senior Notes or beneficial
interest therein acquired by us must be effected through one of the Placement
Agents.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of our investment in the
Senior Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment.
5. We are acquiring the Senior Notes or beneficial
interest therein purchased by us for our own account or for one or more
accounts (each of which is an institutional "accredited investor") as to each
of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
------------------------------------------
[Insert Name of Accredited Investor]
By:
---------------------------------------
Name:
Title:
Dated:
---------------, ----
D-2
<PAGE> 109
EXHIBIT E
FORM OF NOTATION OF GUARANTEE
GUARANTEE
10% Senior Notes due 2007
of AEI Holding Company, Inc.
For value received, each Guarantor (which term includes any
successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and
subject to the provisions in the Indenture dated as of November 12, 1997 (the
"Indenture") among AEI Holding Company, Inc., the Guarantors listed on the
signature page thereto and IBJ Schroder Bank & Trust Company, as trustee (the
"Trustee"), (a) the due and punctual payment of the principal of, premium, if
any, and interest on the Senior Notes (as defined in the Indenture), whether at
maturity, by acceleration, redemption or otherwise, the due and punctual
payment of interest on overdue principal and premium, and, to the extent
permitted by law, interest, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee all in accordance with
the terms of the Indenture and (b) in case of any extension of time of payment
or renewal of any Senior Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise. The obligations of the Guarantors to the Holders of Senior Notes
and to the Trustee pursuant to the Note Guarantee and the Indenture are
expressly set forth in Article 10 of the Indenture and reference is hereby made
to the Indenture for the precise terms of the Note Guarantee. Each Holder of a
Senior Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee, on behalf of such Holder,
to take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Note Guarantee shall cease to be so subordinated
and subject in right of payment upon any defeasance of this Senior Note in
accordance with the provisions of the Indenture.
E-1
<PAGE> 110
IN WITNESS WHEREOF, each of the undersigned has caused this
instrument to be duly executed.
Date:
--------------------
ADDINGTON MINING, INC.
By:
------------------------------------
Name:
Title:
TENNESSEE MINING, INC.
By:
-----------------------------------
Name:
Title:
IKERD-BANDY CO., INC.
By:
------------------------------------
Name:
Title:
E-2
<PAGE> 111
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated
as of ________________, among __________________ (the "Guaranteeing
Subsidiary"), a subsidiary of AEI Holding Company, Inc., a Delaware corporation
(the "Company"), the Company, the other Guarantors (as defined in the Indenture
referred to herein) and IBJ Schroder Bank & Trust Company, as trustee under the
indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of November 12, 1997
providing for the issuance of an aggregate principal amount of up to $250.0
million of 10% Senior Notes due 2007 (the "Senior Notes");
WHEREAS, the Indenture provides that under certain
circumstances the Guaranteeing Subsidiary shall execute and deliver to the
Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary
shall unconditionally guarantee all of the Company's Obligations under the
Senior Notes and the Indenture on the terms and conditions set forth herein
(the "Note Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and
agree for the equal and ratable benefit of the Holders of the Senior Notes as
follows:
1. CAPITALIZED TERMS. Capitalized terms used herein
without definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary
hereby agrees as follows:
(a) Along with all Guarantors named in the
Indenture, to jointly and severally Guarantee to each Holder of a
Senior Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity
and enforceability of the Indenture, the Senior Notes or the
obligations of the Company hereunder or thereunder, that:
(i) the principal of and interest on the
Senior Notes will be promptly paid in full when due, whether
at maturity, by acceleration, redemption or otherwise, and
interest on the overdue principal of and interest on the
Senior Notes, if any, if lawful, and all other obligations of
the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and
F-1
<PAGE> 112
(ii) in case of any extension of time of
payment or renewal of any Senior Notes or any of such other
obligations, that same will be promptly paid in full when due
or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so
guaranteed or any performance so guaranteed for whatever
reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be
unconditional, irrespective of the validity, regularity or
enforceability of the Senior Notes or the Indenture, the absence of
any action to enforce the same, any waiver or consent by any Holder of
the Senior Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to enforce
the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence,
presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require
a proceeding first against the Company, protest, notice and all
demands whatsoever.
(d) This Note Guarantee shall not be discharged
except by complete performance of the obligations contained in the
Senior Notes and the Indenture.
(e) If any Holder or the Trustee is required by
any court or otherwise to return to the Company, the Guarantors, or
any Custodian, Trustee, liquidator or other similar official acting in
relation to either the Company or the Guarantors, any amount paid by
either to the Trustee or such Holder, this Note Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and
effect.
(f) The Guaranteeing Subsidiary shall not be
entitled to any right of subrogation in relation to the Holders in
respect of any obligations guaranteed hereby until payment in full of
all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity
of the obligations guaranteed hereby may be accelerated as provided in
Article 6 of the Indenture for the purposes of this Note Guarantee,
notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and
(y) in the event of any declaration of acceleration of such
obligations as provided in Article 6 of the Indenture, such
obligations (whether or not due and payable) shall forthwith become
due and payable by the Guarantors for the purpose of this Note
Guarantee.
(h) The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as the exercise of
such right does not impair the rights of the Holders under the
Guarantee.
F-2
<PAGE> 113
(i) Pursuant to Section 10.02 of the Indenture,
the obligations of any Guarantor under its Note Guarantee, after
giving effect to any maximum amount and any other contingent and fixed
liabilities that are relevant under any applicable Bankruptcy or
fraudulent conveyance laws, and after giving effect to any collections
from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such
other Guarantor under Article 10 of the Indenture, shall be limited or
reduced so that the obligations of such Guarantor under its Note
Guarantee shall not constitute a fraudulent transfer or conveyance.
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary
agrees that the Note Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Senior Note a notation of such
Note Guarantee.
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON
CERTAIN TERMS.
(a) The Guaranteeing Subsidiary may not consolidate
with or merge with or into (whether or not such Guarantor is the
surviving Person) another corporation, Person or entity whether or not
affiliated with such Guarantor unless:
(i) subject to Section 10.05 of the Indenture,
the Person formed by or surviving any such consolidation or
merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the
Senior Notes, the Indenture and the Note Guarantee on the
terms set forth herein or therein; and
(ii) immediately after giving effect to such
transaction, no Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale
or conveyance and upon the assumption by the successor corporation, by
supplemental indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the Note Guarantee endorsed
upon the Senior Notes and the due and punctual performance of all of
the covenants and conditions of the Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had been
named herein as a Guarantor. Such successor corporation thereupon may
cause to be signed any or all of the Note Guarantees to be endorsed
upon all of the Senior Notes issuable hereunder which theretofore
shall not have been signed by the Company and delivered to the
Trustee. All the Note Guarantees so issued shall in all respects have
the same legal rank and benefit under the Indenture as the Note
Guarantees theretofore and thereafter issued in accordance with the
terms of the Indenture as though all of such Note Guarantees had been
issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the
Indenture, and notwithstanding clauses (a) and (b) above, nothing
contained in the Indenture or in any of the Senior Notes shall prevent
any consolidation or merger of a Guarantor with or into the Company or
another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety
to the Company or another Guarantor.
F-3
<PAGE> 114
5. RELEASES.
(a) In the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock
of any Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all of
the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be released
and relieved of any obligations under its Note Guarantee; provided
that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture, including
without limitation Section 4.10 of the Indenture. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion of
Counsel to the effect that such sale or other disposition was made by
the Company in accordance with the provisions of the Indenture,
including without limitation Section 4.10 of the Indenture, the
Trustee shall execute any documents reasonably required in order to
evidence the release of any Guarantor from its obligations under its
Note Guarantee.
(b) Any Guarantor not released from its obligations
under its Note Guarantee shall remain liable for the full amount of
principal of and interest on the Senior Notes and for the other
obligations of any Guarantor under the Indenture as provided in
Article 10 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Senior Notes, any Note
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of the Senior Notes by accepting a Senior Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Senior Notes. Such waiver may not be effective to waive
liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE
OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE
BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
8. COUNTERPARTS The parties may sign any number of copies
of this Supplemental Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are
for convenience only and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in
any manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Company.
F-4
<PAGE> 115
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Dated:
---------------, ----
[Guaranteeing Subsidiary]
By:
-----------------------------------
Name:
Title:
AEI HOLDING COMPANY, INC.
By:
-----------------------------------
Name:
Title:
[EXISTING GUARANTORS]
By:
-----------------------------------
Name:
Title
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:
-----------------------------------
Name:
Title:
F-5
<PAGE> 116
EXHIBIT G
FORM OF SUBSIDIARY INTERCOMPANY NOTE
REVOLVING PROMISSORY NOTE
$___________ [Date]
FOR VALUE RECEIVED, the undersigned, BOWIE RESOURCES,
LIMITED, a Colorado corporation (the "Maker"), promises to pay to the order of
AEI HOLDING COMPANY, INC., a Delaware corporation (together with any subsequent
holder of this Note, the "Holder") at its office located at 1500 North Big Run
Road, Ashland, Kentucky 41102, or at such other address as the Holder may from
time to time designate in writing, the principal sum of ____________ Dollars
($_________) (the "Maximum Credit"), or as much thereof as is loaned to the
undersigned from time to time pursuant to the Loan and Security Agreement (the
"Loan Agreement") between the undersigned and the Lender dated November __,
1997, together with interest thereon.
Reference to the Loan Agreement is hereby made for a
statement of the rights of the Holder and the duties and obligations of the
Maker, but neither this reference to the Loan Agreement nor any provision
thereof shall affect or impair the absolute and unconditional obligation of the
Maker to pay the principal, interest and other amounts, if any, payable with
respect to this Note when due. Capitalized terms used herein without definition
shall have the meanings ascribed to such terms in the Loan Agreement. The
outstanding principal amount shall bear interest at the rates provided for in
the Loan Agreement.
This Note is secured by the security documents as defined in
the Schedule I attached hereto (the "Security Documents"), including but not
limited to the Security Agreement of even date herewith between Maker as Debtor
to AEI Holding Company, Inc. as Secured Party (the "Security Agreement").
Lender shall pay interest on the outstanding principal to the
Lender at the rate of ten percent (10%) per annum payable semi-annually in
arrears on November 15 and May 15 of each year. Interest shall be computed on
the basis of a 360 day-year comprised of twelve 30-day months. All past due
principal and/or interest or installments thereof shall bear interest from
maturity at the rate of eighteen percent (18%) per anum (the "Default Rate").
The entire outstanding principal and all accrued but unpaid
interest on this Note and all charges pursuant to the Loan Agreement or any
portion thereof shall be due and payable in full on demand by the Holder or, if
not sooner demanded.
The principal sum evidenced by this Note, together with
accrued interest and other sums or amounts due hereunder, shall become
immediately due and payable at the option of the Holder upon the occurrence of
any Default or Event of Default in accordance with the provisions of the
Security Agreement.
With respect to the amounts due pursuant to this Note, the
Maker waives the following: (1) all rights of exemption of property from levy
or sale under execution or other process for the collection of debts under the
Constitution or laws of the United States or any state thereof or (2) demand,
G-1
<PAGE> 117
presentment, protest, notice of dishonor, notice of nonpayment, suit against
any party, diligence in collection of this Note, and all other requirements
necessary to enforce this Note.
In no event shall the amount of interest (and any other sums
or amounts that are deemed to constitute interest under applicable law) due or
payable hereunder (including interest calculated at the Default Rate) exceed
the maximum rate of interest designated by applicable law (the "Maximum
Amount"), and in the event such payment is inadvertently paid by the Maker or
inadvertently received by the Holder, then such excess sum shall be credited as
a payment of principal, and if in excess of such balance, shall be immediately
returned to the Maker upon such determination. It is the express intent hereof
that the Maker not pay and the Holder not receive, directly or indirectly,
interest in excess of the Maximum Amount.
The Holder shall not by any act, delay, omission or otherwise
be deemed to have modified, amended, waived, extended, discharged or terminated
any of its rights or remedies, and no modification, amendment, waiver,
extension, discharge or termination of any kind shall be valid unless in
writing and signed by the Holder. All rights and remedies of the Holder under
the terms of this Note and applicable statutes or rules of law shall be
cumulative, and may be exercised successively or concurrently. The Maker agrees
that there are no defenses, equities or setoffs with respect to the obligations
set forth herein, and to the extent any such defenses, equities, or setoffs may
exist, the same are hereby expressly released, forgiven, waived and forever
discharged.
Wherever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable Legal
Requirements, but if any provision of this Note shall be prohibited by or
invalid under applicable Legal Requirements, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Note.
The Holder may, at its option, release any Collateral given
to secure the indebtedness evidenced hereby, and no such release shall impair
the obligations of the Maker to the Holder.
This Note and the obligations arising hereunder shall be
governed by, and construed in accordance with, the laws of the State of
Colorado applicable to contracts made and performed in such State and any
applicable law of the United States of America.
Any legal suit, action or proceeding against the Holder by
the Maker arising out of or relating to this Note shall be instituted in any
federal or state court in Kentucky. Any legal suit, action or proceeding
against the Maker by the Holder arising out of or relating to this Note shall
be instituted in any federal or state court in Kentucky or in the state of
Colorado. The Maker hereby (i) irrevocably waives, to the fullest extent
permitted by applicable law, any objection which it may now or hereafter have
to the laying of venue of any such suit, action or proceeding brought in such a
court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum, and (ii) irrevocably submits to the
jurisdiction of any such court in any suit, action or proceeding. The Maker
does hereby designate and appoint CT Corporation Systems as its authorized
agent to accept and acknowledge on its behalf service of any and all process
which may be served in any such suit, action or proceeding in any federal or
state court in Kentucky, and agrees that service of process upon said agent at
said address (or at such other office in Colorado as may be designated by such
agent in accordance with the terms hereof) with a copy to the Maker at 1500
North Big Run Road, Ashland, Kentucky 41102, Attn: Vic Grubb, and a copy to:
Brown, Todd & Heyburn, 2700 Lexington Financial Center, Attn: Jeff Hallos shall
be effective and binding service in every respect. The Maker (i) shall give
prompt notice to the Holder of any
G-2
<PAGE> 118
changed address of its authorized agent hereunder, (ii) may at any time and
from time to time designate a substitute authorized agent with an office in
Colorado (which office shall be designated as the address for service of
process), and (iii) shall promptly designate such a substitute if its
authorized agent ceases to have an office in Colorado or is dissolved without
leaving a successor.
THE MAKER, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO,
WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING, WITHOUT
LIMITATION, ANY TORT ACTION), BROUGHT BY ANY PARTY HERETO WITH RESPECT TO THIS
NOTE OR THE OTHER LOAN DOCUMENTS. THE MAKER AGREES THAT THE HOLDER MAY FILE A
COPY OF THIS WAIVER WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING,
VOLUNTARY AND BARGAINED AGREEMENT OF THE MAKER IRREVOCABLY TO WAIVE ITS RIGHT
TO TRIAL BY JURY, AND THAT, TO THE FULLEST EXTENT THAT IT MAY LAWFULLY DO SO,
ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN THE MAKER AND THE HOLDER SHALL
INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING
WITHOUT A JURY.
[SIGNATURE PAGE FOLLOWS]
G-3
<PAGE> 119
IN WITNESS WHEREOF, the Maker has caused this Note to be
properly executed on the date first above written, and has authorized this Note
to be dated as of the day and year first above written.
[Name of Subsidiary]
By:
------------------------------------
Name:
Title:
G-4
<PAGE> 1
EXHIBIT 4.2(B)
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
TRUST INDENTURE ACT SECTION INDENTURE SECTION
- --------------------------- -----------------
<S> <C>
Section 310(a)(1)........................................... Section 7.10
Section 310(a)(2)........................................... Section 7.10
Section 310(a)(3)........................................... N/A
Section 310(a)(4)........................................... N/A
Section 310(a)(5)........................................... Section 7.10
Section 310(b).............................................. Section 7.10
Section 310(c).............................................. N/A
Section 311(a).............................................. Section 7.11
Section 311(b).............................................. Section 7.11
Section 311(c).............................................. N/A
Section 312(a).............................................. Section 2.05
Section 312(b).............................................. Section 11.03
Section 312(c).............................................. Section 11.03
Section 313(a).............................................. Section 7.06
Section 313(b)(1)........................................... N/A
Section 313(b)(2)........................................... Section 7.06
Section 313(c).............................................. Section 7.06
Section 313(d).............................................. Section 7.06
Section 314(a).............................................. Section 4.03
Section 314(b).............................................. N/A
Section 314(c).............................................. Section 11.04
Section 314(d).............................................. N/A
Section 314(e).............................................. Section 11.05
Section 314(f).............................................. N/A
Section 315(a).............................................. Section 7.01(b)
Section 315(b).............................................. Section 7.05
Section 315(c).............................................. Section 7.01(a)
Section 315(d).............................................. Section 7.01(c)
Section 315(e).............................................. Section 6.11
Section 316(a)(1)........................................... Sections 6.04, 6.05
Section 316(a)(2)........................................... N/A
Section 316(b).............................................. Section 6.07
Section 316(c).............................................. N/A
Section 317(a)(1)........................................... Section 6.08
Section 317(a)(2)........................................... Section 6.09
Section 317(b).............................................. Section 2.04
Section 318(a).............................................. Section 11.01
</TABLE>
<PAGE> 1
EXHIBIT 5.1
NationsBank of Texas, N.A.
November 11, 1997
Page 1
November 11, 1997
NationsBank of Texas, N.A.
901 Main Street, 64th Floor
Dallas, Texas 75202
Re: Financing of AEI Holding Company, Inc.
Ladies and Gentlemen:
We have acted as counsel to (i) AEI Holding Company, Inc., a Delaware
corporation ("Borrower"), (ii) Bowie Resources, Limited, a Colorado corporation
("Bowie"); and (iii) Tennessee Mining, Inc., a Kentucky corporation ("TMI"), and
Addington Mining, Inc., a Kentucky corporation ("AMI"), and Ikerd-Bandy Co.,
Inc., a Kentucky corporation ("Ikerd") (TMI, AMI and Ikerd collectively are
referred to as "Guarantors," and Guarantors, Bowie and Borrower collectively are
referred to as the "Restricted Parties"), in connection with the preparation,
execution and delivery of (a) the Credit Agreement, dated as of November 11,
1997 (the "Credit Agreement"), among Borrower and NationsBank of Texas, N.A., a
national banking association ("NationsBank"), as Agent and Lender, and The
Provident Bank, an Ohio banking corporation ("Provident"), and (b) the other
Loan Documents (as defined in the Credit Agreement) to which any Restricted
Party is a party. This opinion is rendered to you pursuant to the Credit
Agreement. Capitalized terms used herein without definition shall have the
respective meanings given them in the Credit Agreement, and, if not defined in
the Credit Agreement, in the applicable Security Document.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
the Articles of Incorporation of the Restricted Parties and the Loan Documents.
We also have examined the originals or copies, certified or otherwise identified
to our satisfaction, of all such records of the Restricted Parties and all such
agreements, certificates of public officials, certificates of officers of the
Restricted Parties and others, and such other documents, certificates and
corporate or other records as we have deemed necessary or appropriate as a basis
for the opinions set forth below. In our examination, we have assumed the
genuineness of all signatures, the legal competence of all natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such documents. We also have
assumed that: (i) each party other than any Restricted Party has validly
authorized, approved, executed and delivered each of the agreements referred to
herein, (ii) each of such other parties has been duly organized and is validly
existing and in good standing under its jurisdiction of incorporation with the
corporate or other organizational power to perform its obligations thereunder;
(iii) each such agreement is a valid, binding and enforceable obligation of each
such other party thereto; and (iv) all proceedings and undertakings which are
necessary for each party other than any Restricted Party to execute and deliver
the Loan Documents to which it is a party and make the Loan have been properly
carried out in accordance with the requirements of applicable law.
<PAGE> 2
NationsBank of Texas, N.A.
November 11, 1997
Page 2
In rendering this opinion, we have relied as to factual matters on the
representations and warranties contained in the Loan Documents delivered to
NationsBank by the Restricted Parties and certificates of the Restricted Parties
(the "Certificates"), dated November 11, 1997, and as to the accuracy and
completeness of certain representations and warranties and other factual
matters, delivered to us, and we have assumed that all representations and
warranties in the Loan Documents are accurate and complete, and that statements
in the Certificates as to factual matters are accurate and not materially
misleading. Although we have made inquiries with respect to such matters, and
relied upon representations of officers of the Restricted Parties, we have not,
except as specifically noted above, made any independent review or investigation
of facts in connection with this opinion. Without limiting the generality of the
foregoing, except as specifically noted above, we have not made any independent
review or investigation in connection with this opinion of any judgment, order,
decree, agreement or instrument, in each case to which any Restricted Party is a
party or by which properties of any Restricted Party are bound, nor have we made
any independent investigation as to the existence of any actions, suits,
proceedings or investigations, if any, pending or threatened against any
Restricted Party.
Members of our firm are admitted to the bar in the Commonwealth of
Kentucky and admitted to practice in certain federal courts throughout the
United States. We express no opinion as to the laws of any jurisdiction except
the laws of the Commonwealth of Kentucky and the United States of America. To
the extent to which this opinion deals with matters governed by or relating to
the laws of the State of Texas, the State of Colorado, the State of Delaware or
any other state, we have assumed that such laws are the same as the laws of the
Commonwealth of Kentucky, and that such laws are not contrary to a fundamental
public policy of the Commonwealth of Kentucky. In addition, if any or all of the
property or collateral is located outside of Kentucky, then we have assumed that
the laws of such state are identical to the laws of the Commonwealth of
Kentucky.
Our opinion is further subject to the following exceptions,
qualifications and assumptions:
(a) We have made no examination of, and no opinion is given herein as
to, the title or other ownership rights of any Restricted Party in or to, or
(except as expressly provided herein with respect to the attachment and
perfection of the security interests contemplated by the Security Documents) the
existence or relative priority of any liens, charges or encumbrances on, or
adverse claims against, any of the Collateral (as defined in the Credit
Agreement), and we have assumed for purposes of this opinion that each
Restricted Party has rights in any Collateral in which it purports to grant a
security interest. We express no opinion as to the attachment or perfection of
any security interest as it relates to any Collateral excluded from Article 9 of
the Uniform Commercial Code of the Commonwealth of Kentucky (the "UCC").
Further, we express no opinion as to the relative priority of the security
interests granted pursuant to the Security Documents.
<PAGE> 3
NationsBank of Texas, N.A.
November 11, 1997
Page 3
(b) The opinions hereinafter expressed are qualified to the extent
that: (i) the enforceability of any obligations of any Restricted Party under
any of the Loan Documents may be affected or limited by, or subject to, any
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other laws and rules of law affecting the enforcement generally of creditors'
rights and remedies (including such as may deny giving effect to waivers of
debtors' or guarantors' rights or which address the adequacy with consideration
for the giving of a guarantee) which may be in effect from time to time; (ii)
equitable principles may be applied in construing or enforcing the provisions of
the Loan Documents or of any other instrument or document (regardless of whether
enforcement is sought in a proceeding in equity or at law), including, without
limitation, refusing to give effect to any restriction on any Restricted Party's
right to transfer any Collateral because such restriction is deemed
unreasonable; and (iii) the enforceability, validity or binding effect of
certain remedial provisions of the Loan Documents may be limited by applicable
law which may limit particular rights and remedies. In addition, the opinions
set forth below are subject to the qualification that the enforcement of any of
NationsBank's rights may in all cases be subject to an implied duty of good
faith on its part.
(c) Further, we express no opinion as to the validity or enforceability
of any particular provision of any of the Loan Documents relating to: (i) the
availability of any specific or equitable relief of any kind; (ii) the
collection of interest on overdue interest or providing for a penalty rate of
interest or late charges on overdue or defaulted obligations; or (iii) the
recovery of attorneys' fees beyond those permitted by applicable statutes; (iv)
the survivability of any term, covenant or condition contained in the Loan
Documents after the termination of the applicable Loan Documents; (v) future
advances or the right of NationsBank to pay expenses, disburse funds or apply
Loan proceeds on behalf of Borrower beyond such disbursements and advances
permitted by applicable statutes or advances that are directly authorized under
the Loan Documents; (vi) the grant of any powers of attorney to NationsBank or
the authorization to disburse Loan proceeds on behalf of Borrower; (vii) the
assignment of any insurance policies, the exercise of rights thereunder or the
right to proceeds thereof, to the extent that such provisions may conflict with
the terms and conditions of such insurance policies; (viii) exculpation clauses
and clauses relating to releases or waivers of unmatured claims or rights; or
(ix) the appointment of a receiver without judicial approval.
<PAGE> 4
NationsBank of Texas, N.A.
November 11, 1997
Page 4
(d) In addition, we express no opinion as to the validity and
enforceability of any provision in any Loan Document to the extent that such
provision purports to: (i) waive or release NationsBank or any party from the
obligation to comply with, any requirement of diligent performance, commercial
reasonableness, good faith, notice or other care with respect to the recognition
or preservation of any rights of any Restricted Party to, or interest in, any
property subject to the security interests granted thereby, to the extent that
any such provision is not specifically authorized under the UCC or other
applicable statutes as now or hereafter in effect; (ii) grant to NationsBank or
any person or entity any remedies with respect to any seizure or disposition of
property or assets (or the proceeds thereof) of any Restricted Party, with or
without notice of hearing, and before or after an event of default or default,
to the extent that any such remedies are not specifically provided for under the
UCC, other applicable statutes or the common law as now or hereafter in effect;
(iii) authorize NationsBank to set off and apply any deposits at any time held,
and any other indebtedness at any time owing, by it to or for the account of any
Restricted Party against any indebtedness of any Restricted Party to NationsBank
except to the extent such indebtedness has matured, is in a liquidated amount
and the security held by NationsBank is not adequate for the repayment of such
indebtedness, or to set off and apply any funds held in a special purpose
account as to which NationsBank has notice of the interest of any third party;
(iv) grant NationsBank a security interest in any property as to which a valid
security interest cannot be granted under Article 9 of the UCC; (v) require any
Restricted Party to indemnify or hold NationsBank harmless from (A) the
consequences of any willful misconduct or negligent or other wrongful or
unlawful act or omission on the part of NationsBank, or (B) any personal
liability of any officer, director or employee of NationsBank; (vi) constitute a
waiver by any Restricted Party of (A) any statutory right except where advance
waiver is expressly permitted by the relevant statute; (B) rights of redemption
or appraisal, or the benefits of any law which exempts property from liability
for debt; or (C) provisions which are not capable of waiver under the UCC; (vii)
nullify the effect of a lack of validity or enforceability of a Loan Document;
(viii) limit the liability of any party for any labor, service or materials
furnished to the property, or for re-entry of the property by force; or (ix)
preclude the modification of the Loan Documents through conduct, custom or
course of performance, action or dealing.
<PAGE> 5
NationsBank of Texas, N.A.
November 11, 1997
Page 5
(e) We call to your attention that (i) in the case of proceeds of any
Collateral, continuation of perfection of any security interest therein is
limited to the extent set forth in Section 9-306 of the UCC, (ii) Section 552 of
the United States Bankruptcy Code (the "Bankruptcy Code") limits the extent to
which assets acquired by a debtor after the commencement of a case under the
Bankruptcy Code may be subject to a security interest arising from a security
agreement entered into by the debtor before the commencement of such case, and
(iii) under Section 547 of the Bankruptcy Code, a security interest that
attaches within the relevant period set forth in Section 547(b)(4) of the
Bankruptcy Code may be avoidable under certain circumstances.
(f) When an opinion set forth below is given "to our knowledge" that
knowledge is limited to the actual knowledge of the individual lawyers in the
firm who have participated directly and substantively in the specific
transactions to which this opinion relates and without any special or additional
investigation undertaken for the purposes of this opinion.
(g) As to any opinion below relating to the existence, qualification or
standing of any corporation in any jurisdiction, our opinion relies entirely
upon and is limited by those certificates of public officials attached hereto as
Exhibit A.
Based upon the foregoing, and subject to the limitations and
qualifications set forth below, we are of the opinion that:
1. Each Restricted Party other than Borrower and Bowie is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Kentucky and has the corporate power and authority to enter into
and to perform its obligations under each of the Loan Documents to which it is a
party. Borrower is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power and
authority to enter into and perform its obligations under each of the Loan
Documents to which it is a party. Bowie is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado and has
the corporate power and authority to enter into and perform its obligations
under each of the Loan Documents to which it is a party.
<PAGE> 6
NationsBank of Texas, N.A.
November 11, 1997
Page 6
2. The execution and delivery by each Restricted Party of each of the
Loan Documents to which it is a party, the borrowing of the Loans and the
performance by each Restricted Party of its agreements and obligations under
each of such Loan Documents to which it is a party has (to the extent
applicable) been duly authorized by all requisite corporate action on the part
of such Restricted Party and do not and will not: (i) conflict with the
certificate or articles of organization or bylaws of such Restricted Party; (ii)
to our knowledge, contravene or constitute a default under, any provision of any
applicable law or regulation, ruling or order, of the Commonwealth of Kentucky
or the United States of America, applicable to such Restricted Party; (iii) to
our knowledge, constitute a violation of or a default under, or result in the
creation of any mortgage, lien, pledge, charge, security interest or other
encumbrance (other than in favor of NationsBank) upon the property of such
Restricted Party under any indenture, mortgage, deed of trust, agreement or
instrument to which such Restricted Party is a party, or by which such
Restricted Party or any of its property is bound, including but not limited to,
the Intercreditor Agreement dated as of June 27, 1997, by and among Coors Energy
Company, a Colorado corporation, Bowie Resources, Limited, a Colorado
corporation, and The Provident Bank, an Ohio Banking Corporation (the "Coors
Intercreditor Agreement"), the Provident Security Documents (as defined in the
Coors Intercreditor Agreement), and the Indenture dated as of November __, 1997,
among Borrower, Guarantors, and IBJ Schroder Bank & Trust Company; or (iv) to
our knowledge, require any authorization, approval, consent, order, license, or
other action by, and no notice to or filing with (other than the filings
necessary to create, record or perfect, or maintain the perfection of, the
security interests created by the Security Documents), any governmental
authority or agency under any applicable law or regulation of the Commonwealth
of Kentucky or the United States of America, or any judgment, decree or order of
any court or governmental or regulatory authority applicable to such Restricted
Party.
3. Each of the Loan Documents constitutes the valid and binding
agreement of each Restricted Party that is a party to such Loan Document
enforceable against such Restricted Party, in accordance with such Loan
Document's terms.
4. To our knowledge, except as set forth in the Disclosure Schedule,
there is no pending or threatened action, suit or proceeding before any court,
governmental agency or arbitrator against any Restricted Party which, if
adversely determined, would be required to be disclosed under Section 5.9 of the
Credit Agreement or which purports to affect the enforceability of any Loan
Document or the performance thereof.
5. Assuming that the representations and warranties in the Loan
Documents (other than the Certificates) are accurate and complete and that the
representations and warranties in the Certificate provided by Borrower to us
with respect to the intended use of the proceeds of the Loans are accurate and
not materially misleading, the transactions and arrangements contemplated by the
Loan Documents do not violate Regulation U of the Board of Governors of the
Federal Reserve Board.
<PAGE> 7
NationsBank of Texas, N.A.
November 11, 1997
Page 7
6. Assuming that the representations and warranties in the Loan
Documents (other than the Certificates) are accurate and complete and that the
representations and warranties in the Certificates are accurate and not
materially misleading: (i) no Restricted Party is an "investment company" or a
company "controlled by" an "investment company," as such terms are defined in
the Investment Company Act of 1940, as amended; (ii) no Restricted Party is
subject to the Public Utility Holding Company Act of 1935; and (iii) no
Restricted Party is subject to the Federal Power Act or the Interstate Commerce
Act (as such preceding acts have been amended), or any other Law relating to
common carriers or the sale of electricity, gas, steam, water or other public
utility services which regulates the incurring of Indebtedness by any
Restricted Party.
7. We have reviewed the contents of the Collateral Certificate and the
Perfection Certificates which identify the jurisdictions in which the Restricted
Parties and the Collateral are located. We have assumed that the Collateral
Certificate and the Perfection Certificates are accurate and complete and that
the representations of the Restricted Parties relating to their chief executive
offices and principal places of business in the Collateral Certificate and the
Perfection Certificates and the Loan Documents are accurate and complete. We
have also reviewed _______ (___) financing statements (the "Financing
Statements") to be filed in connection with the Collateral. A fully executed
counterpart of the Financing Statements must be filed and recorded in the office
of the Kentucky Secretary of State, the Tennessee Secretary of State, the West
Virginia Secretary of State and in the County Clerk's offices for Boyd, Bell,
Clay, Harlan, Knox, Leslie, Perry and Jefferson Counties, Kentucky. [OTHERS?] We
call to your attention that: (a) a continuation statement with respect to the
Financing Statements must be filed under the UCC in the office where such
financing statement was filed within six months prior to the expiration of five
years from the date of such filing, and subsequent continuation statements must
be filed within six months prior to the end of each subsequent five-year period;
and (b) amendments or supplements to the Financing Statements or additional
financing statements may be required to be filed in the event of a change in the
name, identity or corporate structure of any Restricted Party or in the event
the Financing Statement otherwise becomes inaccurate or incomplete. Based on the
assumptions set forth in this paragraph, and subject to the filing requirements
described in this paragraph, each of the Security Agreements creates a perfected
security interest in favor of NationsBank in the "Collateral" and proceeds of
"Collateral" (as such terms are defined in the Security Agreements) with respect
to which a security interest can be created under the UCC and perfected by the
filing of financing statements in the Commonwealth of Kentucky pursuant to the
UCC and, in the case of certificated securities that are part of such
Collateral, the taking and maintaining of possession thereof by NationsBank.
<PAGE> 8
NationsBank of Texas, N.A.
November 11, 1997
Page 8
8. A fully executed counterpart of [THE ASSIGNMENT BY PROVIDENT OF THE
INTERCOMPANY NOTES AND THE BOWIE MORTGAGE] (the "Assignment") and the
[COLLATERAL ASSIGNMENT OF INTERCOMPANY NOTES AND BOWIE MORTGAGE] (the
"Collateral Assignment"), each Mortgage and each Deed of Trust (in each case, as
amended) is required to be filed and recorded in the appropriate real estate
records of the offices of the County Clerk of each of the counties in which
properties described in each Mortgage and Deeds of Trust are located (the
"County Clerks"), and fully executed counterpart of each Mortgage Financing
Statement and each Deed of Trust Financing Statement is required to be filed in
the "fixture" records of the offices of the County Clerk of the counties in
which properties containing "fixtures" are located. Once the Mortgages, the Deed
of Trust, the Mortgage Financing Statements, the Deed of Trust Financing
Statements, the Assignment and the Collateral Assignment are so filed and
recorded, no further or subsequent filing or refiling will be necessary in the
Commonwealth of Kentucky in order to continue the existence or perfection of the
liens and security interests referred to in this paragraph, except that: (a) in
the event any indebtedness secured by any Mortgage or any Deed of Trust has not
been paid before the expiration of twenty (20) years from the date provided for
therein or in the Note, as appropriate, for payment of such indebtedness, an
extension agreement with respect to the Mortgage or the Deed of Trust, providing
for the renewal or extension of such indebtedness, should be entered into and
filed and recorded in the same records of each office in which such Mortgage or
Deed of Trust has been filed prior to the expiration of such twenty (20) year
period; (b) a continuation statement with respect to the Mortgage Financing
Statements and Deed of Trust Financing Statements must be filed under the UCC in
the office where each such financing statement was filed within six months prior
to the expiration of five years from the date of such filing, and subsequent
continuation statements must be filed within six months prior to the end of each
subsequent five-year period; and (c) amendments or supplements to the Mortgage
Financing Statements, Deed of Trust Financing Statements or additional financing
statements may be required to be filed in the event of a change in the name,
identity or corporate structure of a Restricted Party or in the event the
Mortgage Financing Statements or Deed of Trust Financing Statements otherwise
become inaccurate or incomplete. Subject to the filing requirements described in
this paragraph, each Mortgage and Deed of Trust creates a mortgage lien in favor
of NationsBank in the "Mortgaged Properties" (as defined in each such Mortgage)
and the "Properties" (as defined in each Deed of Trust) located in the
Commonwealth of Kentucky and a perfected security interest in the "Collateral"
and proceeds of "Collateral" (as such term is defined in each Mortgage) with
respect to which a security interest can be created under the UCC and perfected
by the filing of fixture financing statements in the Commonwealth of Kentucky
pursuant to the UCC.
9. The acceptance of each Mortgage, Deed of Trust, the Deed of Trust
Financing Statements and the Mortgage Financing Statements by NationsBank, its
possession and retention of its rights thereunder, and its presentation of such
instruments for filing and recording as described in Paragraphs 7 and 8 hereof
will not require NationsBank to pay or otherwise subject NationsBank to any tax,
fee or other charge except the customary fee charged by each filing or recording
officer on a per-page or per-instrument basis and any applicable mortgage tax
due. Assuming that the only business transacted by NationsBank within the
Commonwealth of Kentucky is the creating or acquiring of indebtedness, mortgages
and security interests in real or personal property, the securing or collecting
of debts or the enforcing of mortgages and security interests in property within
the Commonwealth of Kentucky securing the debts, and the lending of money, or
the acquisition by purchase, by contract to purchase, by making of advance
commitments to purchase, or by assignment to it of loans, including construction
loans, or any interest in loans, secured in whole or in part by mortgages, deeds
of trust or other forms of security on real or personal property in the
Commonwealth of Kentucky, if such activities are carried on from outside the
Commonwealth of Kentucky by NationsBank or within the Commonwealth of Kentucky
by independent agencies on behalf of NationsBank, NationsBank is not required to
qualify to do business in the Commonwealth of Kentucky or to otherwise register
or make any filing (other than those described in Paragraphs 7 and 8 hereof)
under Kentucky law as a result of its acceptance of such instruments, its
possession and retention of its rights thereunder, or the filing or recording
thereof.
<PAGE> 9
NationsBank of Texas, N.A.
November 11, 1997
Page 9
10. The Credit Agreement provides that, except to the extent that the
law of another jurisdiction is expressly elected in a Loan Document, the Loan
Documents shall be deemed contracts made under the laws of the State of Texas
and shall be enforced in accordance with Texas Law. You have asked us to
consider whether a Kentucky court would honor this provision as an effective
choice of law.
Based upon the following assumptions and upon an analysis of existing
case law and statutes of the Commonwealth of Kentucky, we are of the opinion
that the courts of the Commonwealth more likely than not will enforce and give
effect to those provisions in the Agreements which stipulate that such documents
shall be governed by and shall be construed in accordance with, the laws of the
State of Texas, except to the extent that the laws of the Commonwealth of
Kentucky or any other state in which any of the Property is located shall govern
the effect of real estate interests created, transferred or reserved and the
perfection and the effect of perfection or non-perfection of liens and security
interests.
We have assumed for purposes of this opinion that (1) the parties to
the Agreements are sophisticated in financial dealings, and that there was no
collusion or fraud in relation to the parties' choice of law with respect to
terms of the Loan Documents and (2) negotiations of the Loan Documents have
taken place in part in the State of Texas, and have been accepted in the State
of Texas and the performance of the Loan Documents will take place in part in
the State of Texas.
Although we believe these facts to be only some of the facts relevant
to a determination of the enforceability of the choice of law clause contained
in the Loan Documents, the courts (the "Courts") of the Commonwealth of Kentucky
have not explicitly stated that these types of facts are the only ones that they
would consider. With your knowledge and consent, we have not inquired into facts
deemed relevant in tort cases or in cases interpreting contracts of insurance.
Although we consider such factors to be irrelevant, the Courts may nevertheless
deem them to be relevant.
The seminal Kentucky case ruling on the issue of the validity of a
choice of foreign law to govern a credit transaction is Big Four Mills Ltd. v.
Commercial Credit Co., Inc., 211 S.W.2d 831 (Ky. App. 1948), in which a Maryland
corporation brought suit against a Kentucky corporation in the Commonwealth of
Kentucky to recover money due under a written contract. The court, quoting with
approval 11 Am. Jur. "Conflict of Laws" Section 157, page 461, said:
"There is one broad fundamental principle that seems to pervade the
cases dealing with the conflict of laws with respect to interest and
usury and this is to accept, as the governing law, that law with
reference to which the parties, acting in good faith and not for the
purpose of evading the law of the real situs of the contract, intended
to contract. The almost unanimous decision is that where residents of
different jurisdictions contract for the loan of money, if the
obligation is made in one state, but is to be performed in another, the
parties are at liberty to regard it as a contract of either state and
to stipulate for the higher rate of interest allowable in either,
provided that in so doing they act in good faith and that the form of
the transaction is not adopted to disguise its real character. If it is
a bona fide transaction, the contract will be sustained; if it is a
device for securing usurious interest, it will be held invalid. Where
the parties have by the express terms of the contract designated the
governing law, the only question for the court is whether they acted in
good faith or in bad faith and for the purpose of evading the law of
the place to which the contract was really referable."
<PAGE> 10
NationsBank of Texas, N.A.
November 11, 1997
Page 10
The Big Four court further noted: "Implicit in the rule is that some
vital element of the transaction (i.e., execution, performance, intent) is
connected with the state whose law is sought to be invoked. If so, we should
respect the presumption that the parties intend to enter into a legal rather
than an illegal contract." Id. The Big Four case thus holds that a choice of
foreign law will be upheld if at least one vital element of the contract is
associated with the foreign state whose laws are sought to be invoked and the
transaction is entered into in good faith.
The Big Four case has been cited with approval by Consol. Jewelers,
Inc. v. Standard Fin. Corp., 325 F.2d 31 (6th Cir. 1963), which involved a fact
pattern substantially similar to the fact pattern present in the Big Four case.
In Consol. Jewelers, the Sixth Circuit Court of Appeals upheld the choice of New
York law to govern a credit transaction entered into between a New York
corporation, as lender, and a Kentucky corporation, as borrower. The Consol.
Jewelers court at 325 F.2d 31, 34 quoted with approval the decision of the lower
court, to wit:
"The Big Four Mills case demonstrates conclusively that no claim of bad
faith can be made against a foreign lender, even one who intends to
avoid Kentucky's usury laws, if the real situs of the transaction in
question is not in Kentucky and if the nonresident lender's connections
with another state are sufficient to justify contracting with reference
to the laws of that state. There is nothing devious about a New York
corporation, having its principal place of business in New York,
loaning money in New York under a contract negotiated in part and
entered into in New York and to be performed in large part in New York,
and the fact that the defendant had sufficient contact with this State
to be amenable to process here does not alter the fact that this is
essentially a New York transaction."
We also refer you to Prudential Resources Corp. v. Plunkett, 583 S.W.2d
97 (Ky. App. 1979), in which a lessee under an oil and gas contract brought suit
in the Commonwealth of Kentucky against the lessor seeking a declaration that
the lessee had not lost its right to exercise the option to purchase the
leasehold estate embodied in the oil and gas contract. The contract at issue
involved oil and gas wells located in the Commonwealth of Kentucky, but neither
the lessee nor the lessor was a Kentucky resident. In upholding the validity of
the contract provision requiring that all suits involving the contract be
brought in Dallas County, Texas, the court noted that Kentucky had a minimal
interest in the lawsuit. This case is noteworthy because the sole contact of the
lawsuit with the Commonwealth of Kentucky was that the property at issue was
located in the Commonwealth of Kentucky. Neither the lessee nor the lessor was a
resident of the Commonwealth of Kentucky, and the oil and gas contract was
entered into out of state. Although the Prudential Resources court was not asked
to rule on the validity of a choice of law provision, we believe that the
court's refusal in Prudential Resources to invalidate the choice of forum clause
contained in the contract because of the minimal Kentucky contact supports our
conclusion that it is more likely than not that a Kentucky court would enforce
the choice of law provision contained in the Loan Documents.
<PAGE> 11
NationsBank of Texas, N.A.
November 11, 1997
Page 11
We should point out that two opinions of Kentucky courts have taken a
different approach than the Big Four and the Consol. Jewelers cases. In Lewis
v. Am. Family Ins. Group, 555 S.W.2d 579 (Ky. 1977), and Breeding v. Mass.
Indem. & Life Ins., 633 S.W.2d 717 (Ky. 1982), the Court held that the law of
the state which had the most significant contacts to the transaction would
govern. The Sixth Circuit Court of Appeals noted in Harris Corp. v. Comair,
Inc., 712 F.2d 1069 (6th Cir. 1983), that Kentucky courts apply Kentucky law
whenever possible. Even so, we believe that the Big Four and the Consolidated
Jewelers cases remain applicable to the Loan Documents. The Lewis and Breeding
cases involved different facts, neither one of them involving a choice of law
provision in a credit transaction. The Harris Corp. case involved tort rather
than contract claims. Neither Big Four nor Consol. Jewelers has been overruled.
Although a court could, conceivably, rule that Kentucky law governs the
Loan Documents if it determined that the choice of Texas law was a sham to avoid
the application of Kentucky law, or if it applied the test articulated in Lewis
and Breeding cases, we have found no Kentucky case in which a Kentucky court has
done so involving facts like those addressed in this opinion.
******
This opinion is limited to the matter stated herein and no opinion is
implied or may be inferred beyond the matters expressly stated. We undertake no
obligation to update this opinion based on events, changes in the law or other
matters occurring after the date hereof or to provide any notice to NationsBank
of any subsequent events, facts or other matters which might affect the opinions
given herein. This opinion is provided to you at your request and is to be
limited in its use to reliance by NationsBank and its assignees or participants
in the Loans in consummating the transactions described in the Loan Documents
and by Thompson & Knight, P.C., in rendering its legal opinion to NationsBank in
connection with the Loan Documents. This opinion is being furnished only to you
and is solely for your benefit. This opinion may not be used, circulated,
quoted, relied upon or otherwise referred to for any purpose without our prior
written consent; provided, however, that you may furnish this opinion to
assignees or participants in the Loans.
Very truly yours,
BROWN, TODD & HEYBURN PLLC
By: /s/ Paul E. Sullivan
---------------------------
Paul E. Sullivan, Member
<PAGE> 12
NationsBank of Texas, N.A.
November 11, 1997
Page 12
EXHIBIT A
<PAGE> 1
EXHIBIT 10.1
===============================================================================
STOCK PURCHASE AGREEMENT
between
ADDINGTON HOLDING COMPANY, INC.
and
PITTSTON ACQUSITION COMPANY
-------------------------------
Dated as of September 24, 1993
-------------------------------
SALE OF STOCK OF
ADDINGTON, INC.
APPALACHIAN MINING, INC.
APPALACHIAN LAND COMPANY
VANDALIA RESOURCES, INC.
KANAWHA DEVELOPMENT CORPORATION
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1. Purchase and Sale of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Buyer's Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Seller's Obligation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Pre-Closing and Post-Closing Actions . . . . . . . . . . . . . . . . . . . . . . 7
4. Representations and Warranties of Seller. . . . . . . . . . . . . . . . . . . . . . . 9
(a) Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) The Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Organization and Standing of Each
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(d) Capital Stock of Each Company. . . . . . . . . . . . . . . . . . . . . . . . . . 11
(e) Equity Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(f) Financial Statements; Undisclosed
Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(g) Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(h) Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(i) Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(j) Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(k) Litigation; Decrees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(l) Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(m) Absence of Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(n) Compliance with Applicable Laws. . . . . . . . . . . . . . . . . . . . . . . . . 20
(o) Employee and Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(p) Licenses; Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(q) Bank Accounts and Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . 22
(r) Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(s) West Virginia Business Investment and
Jobs Expansion Tax Credits ("STC") . . . . . . . . . . . . . . . . . . . . . . . 23
(t) Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(u) Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(v) AS IS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5. A. Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(b) Ordinary Conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) Pro Forma Closing Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . 26
(d) Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(e) Other Transactions; Seller Break-up Fee. . . . . . . . . . . . . . . . . . . . . 27
(f) Supplemental Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(g) Trustee and Bank Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(h) Other Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5. B. Covenants of Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Buyer's Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(b) Supplemental Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Planned Closing of Any Company
Employment Site. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(d) Certain Rulings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
6. Representations and Warranties of Buyer . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Actions and Proceedings, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 30
(c) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(d) Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(e) No Broker. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(f) Investment Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(g) Permit Blocking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7. Mutual Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(c) Antitrust Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(d) Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(e) Non Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(f) Litigation Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(a) Tax Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(b) Other Indemnification by Seller. . . . . . . . . . . . . . . . . . . . . . . . . 35
(c) Indemnification by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(d) Losses Net of Insurance, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 37
(e) Termination of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 38
(f) Procedures Relating to Indemnification
(Other than Under Sections 9(a)
and (h)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(g) Procedures Relating to Indemnification
of Tax Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(h) STC Indemnification and Procedures
Relating Thereto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12. No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
13. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
15. Attorney Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
17. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
18. Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
19. Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
20. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
21. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
22. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
23. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
24. Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
25. Non-solicitation of Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
26. Other Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
27. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
28. Affiliate Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
29. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
30. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
31. Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
<PAGE> 4
Exhibit A Form of Opinion of Counsel to Seller
Exhibit B Form of Equipment Payment Agreement
Exhibit C Form of Coal Purchase Agreement (Job #17)
Exhibit D Form of Building Lease
Exhibit E ARI Form of Guaranty Agreement
Exhibit F Form of Royalty Agreement
Exhibit G Form of Opinion of Counsel to Buyer
Exhibit H Form of Indemnity Agreement
Exhibit I Form of Pittston Guaranty Agreement
Exhibit J Form of Indemnity Agreement (NERCO)
Exhibit K Form of Other Agreement
<PAGE> 5
<TABLE>
<CAPTION>
SCHEDULES PAGE
- --------- -----
<S> <C> <C>
1 Shares of Each Company and State of
Incorporation ..................... 1,10,11
1(b) Method of Computation of Deferred
Overburden, Etc. .................. 1
3(a)(xi) Description of Accounting Building
and Repair Shop ................... 4
3(a)(xiii) Certain Coal Customers ............ 4
3(b)(ix) ARI Bonds ......................... 6,28
3(b)(x) ARI Guarantees .................... 6,28
3(b)(xiv) Certain Seller Consents ........... 6,31
3(c)(i) Excluded Assets ................... 7
3(c)(iii) Excluded Litigation ............... 8
4(a) Consents on behalf of Seller or the
Companies ......................... 9,10,31
4(e) Equity Interests .................. 11
4(f)(i) Financial Statements - To be
delivered ......................... 11
4(g)(ii) Tax Returns; Tax Examinations ..... 12
4(g)(iv) Tax Statute of Limitations ........ 12
4(h) Tangible Personal Property ........ 13
4(i) Real Property ..................... 13,14
4(j) Contracts ......................... 14,16
4(k) Litigation ........................ 17
4(l)(i) Welfare and Company Plans ......... 17,21,22
4(l)(ii) Company Plans Noncompliance ....... 12,17,18
4(l)(iii) Welfare Plan Funding .............. 18
4(l)(iv) Seller Pension Plans .............. 18
4(l)(v) Reportable Events or Termination .. 18
4(l)(vii) Multiemployer Plans ............... 18,19
4(l)(viii) Agreements with Present or Former
Officers .......................... 19
4(l)(x) Enhanced Benefits ................. 19
4(n) Notice of Non-Compliance with
Applicable Laws ................... 20
4(n)(iv) Underground Storage Tanks ......... 21
4(o) Employee and Labor Relations
Agreements ........................ 21,22
4(p) Licenses, Permits and
Authorizations .................... 22
4(q) Bank Accounts and Powers of
Attorney .......................... 22
4(s)(i) STC Qualified Investments ......... 23
4(s)(ii) STC Credit Claimed ................ 23
4(s)(iii) STC New Jobs ...................... 23
4(u) Policies of Insurance ............. 23
5A(b) Exceptions to Ordinary Conduct .... 24
5A(c) Pro Forma Balance Sheet .......... 1,26
5B(a) Releases .......................... 28
6(g) Buyer Permit Blocking ............. 30
10(a) Allocation of Purchase Price -
To be delivered ................... 41
24 Non Solicitation of Company
Employees ......................... 47
</TABLE>
<PAGE> 6
STOCK PURCHASE AGREEMENT dated as of September 24, 1993, between
ADDINGTON HOLDING COMPANY, INC., a Delaware corporation ("Sellers"), and
PITTSTON ACQUISITION COMPANY, a Virginia corporation ("Buyer").
Buyer desires to purchase from Seller, and Seller desires to sell to
buyer, all the issued and outstanding shares of Common Stock (the "Shares"), of
Addington, Inc., Appalachian Mining, Inc., Appalachian Land Company, Vandalia
Resources, Inc. and Kanawha Development Corporation (each, as well as Ironton
Coal Company, a wholly owned subsidiary of Addington, Inc., hereinafter referred
to as "Company" and collectively as the "Companies"), such Shares being more
fully described on Schedule 1 attached hereto.
Accordingly, the parties hereto hereby agree as follows:
1. Purchase and Sale of the Shares. (a) On the terms and subject to the
conditions of this Agreement, Seller will sell, transfer and deliver or cause to
be sold, transferred and delivered to Buyer, and Buyer will purchase from
Seller, free and clear of all liens, claims and encumbrances of any kind, the
Shares for an aggregate purchase price (the "Purchase Price") of One Hundred
Fifty Seven Million ($157,000,000) dollars cash.
(b) Within 60 days after the Closing Date, Seller will prepare and
deliver to Buyer a statement of working capital for the Companies (the "Working
Capital Statement") showing the Companies' Combined Net Working Capital as of
the close of business on the Closing Date. "Companies' Combined Net Working
Capital" means current assets minus current liabilities of the Companies on a
combined basis determined after giving effect to the transactions to be
consummated prior to or at the Closing (eliminating the working capital effect
of any Excluded Assets and Excluded Liabilities to be distributed out of the
Companies prior to the Closing and the current portion of any liability for
which the Companies shall not be responsible), with current assets and current
liabilities accounts calculated in accordance with generally accepted accounting
principles ("GAAP"), and on a basis consistent with the past accounting
practices of the Companies, except to the extent the same is modified by the
agreement of the parties to compute the deferred overburden, pit inventory and
current portion of accrued reclamation, accrued expenses and other calculations,
the method of such computation being set out in Schedule l(b) and except as
modified and reflected in the current assets and current liabilities accounts on
the Pro Forma Balance Sheet attached as Schedule 5A(c) (except to the extent
inconsistent with Schedule l(b)).
(c) Within 10 days after the determination of the Companies' Combined
Net Working Capital (as provided in Section l(b) above), (i) if the Companies'
Combined Net Working Capital exceeds $0.00, Buyer shall cause the Companies to
distribute to Seller or Buyer shall pay to Seller an amount equal to the
difference between the Companies' Combined Net Working Capital and
<PAGE> 7
$0.00, or (ii) if the Companies' Combined Net Working Capital is less than
$0.00, Seller shall pay to the Companies or Buyer an amount equal to the
difference between the Companies' combined Net Working Capital and $0.00. Any
adjustment pursuant to this Section shall be paid in cash by Buyer or Seller,
as applicable, within 10 days after determination of the Companies' Combined
Net Working Capital, by wire transfer of immediately available funds to a bank
account designated in writing by the party receiving payment.
(d) The Working Capital Statement will become final for all purposes
30 days after receipt by Buyer unless Buyer has delivered a detailed statement
describing its objections thereto. Buyer and Seller will use reasonable
efforts to resolve any such objections. If the parties do not achieve a final
resolution within 15 days after Seller has received the statement of
objections, Buyer and Seller will within 10 days select a mutually acceptable
accounting firm to resolve any remaining objections. If Buyer and Seller are
unable to agree on the choice of an accounting firm, they will select a
nationally recognized accounting firm by lot (after excluding their respective
outside auditors). The selected accounting firm shall be retained jointly by
the parties on the condition, among other things, that it shall notify the
parties of its determination within 30 days after its selection. The
determination of the accounting firm so selected regarding the matters in
dispute will be set forth in writing and will be conclusive and binding upon
the parties and the Working Capital Statement shall thereupon become final.
The parties shall each pay one-half of the fees and expenses of such accounting
firm.
(e) Buyer will make the books, records and financial staff of the
Companies available to Seller, its accountants and other representatives at
reasonable times and upon reasonable notice during the preparation by Seller of
the Working Capital Statement and the resolution by the parties of any
objections thereto.
2. Closing. (a) The closing (the "Closing") of the purchase and
sale of the Shares shall be held at the offices of Jackson & Kelly, 1600
Laidley Tower, Charleston, West Virginia at 10:00 a.m. on the date (the "Closing
Date") which is 10 business days following the date on which the parties
mutually agree that the conditions to the Closing set forth in Section 3 of the
Agreement have been or will be satisfied (or waived) by the Closing Date;
provided, that the Closing Date shall not be earlier than 40 days after the
Date on which Buyer shall have been provided the financial statements referred
to in Section 5A(h); provided, further that if the Closing shall not have
occurred on or before December 31, 1993, either party shall have the right to
terminate all its rights and obligations hereunder, subject to the provisions
of Sections 5A(e), 5A(h) and 29. The date on which the Closing shall occur is
hereinafter referred to as the "Closing Date".
(b) At closing, (i) Buyer shall deliver to Seller, by wire transfer
to a bank account designated in writing by Seller
- 2 -
<PAGE> 8
at least two business days prior to the Closing Date, immediately available
funds in an amount equal to the sum of (A) the Purchase Price plus (B) the
Closing Tax Adjustment Amount (as defined in Section 9(a)), and (ii) Seller
shall deliver or cause to be delivered to Buyer certificates representing the
Shares, duly endorsed in blank or accompanied by stock powers duly endorsed in
blank in proper form for transfer, with appropriate transfer stamps, if any,
affixed.
3. Conditions to Closing. (a) Buyer's Obligation. The obligation of
Buyer to purchase and pay for the Shares is subject to the satisfaction (or
waiver by Buyer) as of the Closing of the following conditions:
(i) The representations and warranties of Seller made in this
Agreement shall be true and correct in all material respects as of the date
hereof and on and as of the Closing, as though made on and as of the
Closing Date, and Seller shall have performed or complied in all material
respects with all obligations and covenants required by this Agreement to
be performed or complied with by Seller by the time of the Closing; and
Seller shall have delivered to Buyer a certificate dated the Closing Date
and signed by an authorized officer of Seller confirming the foregoing.
"Material" for purposes of this provision shall mean that the
representations, warranties and covenants shall have an adverse affect on
Buyer of $250,000 or more in the aggregate.
(ii) Buyer shall have received an opinion dated the Closing Date of
Brown, Todd & Heyburn, counsel to Seller, substantially in the form of
Exhibit A.
(iii) No injunction or order of any court or administrative agency of
competent jurisdiction shall be in effect, and no statute, rule or
regulation of any governmental authority or instrumentality shall have been
promulgated or enacted, as of the Closing which restrains or prohibits the
purchase and sale of the Shares.
(iv) No action, suit or other proceeding by any person to restrain or
prohibit the purchase and sale of the Shares shall be pending which in the
written opinion of Buyer's counsel is reasonably likely to succeed.
(v) The waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") shall have expired or been
terminated.
(vi) Buyer (or its designee) and Seller (or its designee) shall have
executed an Equipment Payment Agreement
- 3 -
<PAGE> 9
pertaining to two high wall mining units ("HWM Units"), substantially in the
form of Exhibit B.
(vii) Addington Mining, Inc. and American Eagle Coal Company shall
have executed a Coal Purchase Agreement providing for the sale by Addington
Mining, Inc. of coal to American Eagle Coal Company, substantially in the form
of Exhibit C.
(viii) Documentation from each of Bank of America National Trust and
Savings Association, successor to Security Pacific National Bank (the "Trustee",
as trustee of the 12% Senior Secured Notes of Addington Resources, Inc. ("ARI"))
and Pittsburgh National Bank and PNC Bank (the "Bank", the Seller's primary
lender), individually and as agent for itself and Pittsburgh National Bank,
evidencing the release of each Company and its assets under existing credit
agreements, satisfactory to Buyer in its sole discretion, shall have been
obtained.
(ix) Buyer shall have received such other documents as to Seller and
each Company as Buyer's counsel shall reasonably request.
(x) Buyer shall have received all requisite corporate approvals
(including without limitation the approval of the Board of Directors of The
Pittston Company (the ultimate parent of Buyer).
(xi) An affiliate of Seller and Addington, Inc. shall have executed
a Lease Agreement relating to the lease of the accounting building and repair
shop described on Schedule 3(a)(xi), substantially in the form of Exhibit D.
(xii) Buyer shall not have received a ruling within 45 days of the
date hereof from the West Virginia Department of Tax and Revenue that its
purchase of the Shares of Appalachian Mining, Inc., Appalachian Land Company and
Vandalia Resources, Inc. and Buyers and Seller's election to treat this
transaction as an asset purchase for federal income tax purposes under IRC ss.
338(h)(10) will be considered a transfer of qualified investment to successors
under W. Va. Code ss. 11-13C-9(b).
(xiii) Buyer shall be satisfied in its sole discretion by not later
than 14 days from the date of this Agreement or three business days following
the date of availability of the appropriate representatives of each of the coal
customers of the Companies identified on Schedule 3(a)(xiii) that the business
and commercial relationships between the Companies and such customers are not in
jeopardy. Failure of Buyer to
- 4 -
<PAGE> 10
advise Seller of its dissatisfaction within the time period specified shall
be deemed a waiver of this condition.
(xiv) ARI shall have executed and delivered a Guaranty Agreement,
substantially in the form of Exhibit E.
(xv) Addington Mining, Inc. and Appalachian Mining, Inc. shall have
executed and delivered a Royalty Agreement, substantially in the form of
Exhibit F.
(xvi) Within five business days after execution of this Agreement,
Seller shall have obtained from the Board of Directors of Seller and
Addington Resources, Inc. approval of the transactions contemplated by this
Agreement and advised Buyer that such approval has been obtained.
(b) Seller's Obligation. The obligation of Seller to sell and
deliver the Shares to Buyer is subject to the satisfaction (or waiver by Seller)
as of the Closing of the following conditions:
(i) The representations and warranties of Buyer made in this
Agreement shall be true and correct in all material respects as of the date
hereof and on and as of the Closing, as though made on and as of the
Closing Date, and Buyer shall have performed or complied in all material
respects with all obligations and covenants required by this Agreement to
be performed or complied with by Buyer by the time of the Closing; and
Buyer shall have delivered to Seller a certificate dated the Closing Date
and signed by an authorized officer of Buyer confirming the foregoing.
"Material" for purposes of this provision shall mean that the
representation, warranty or covenant shall have an adverse affect on Seller
of $250,000 or more in the aggregate.
(ii) Seller shall have received an opinion dated the Closing Date of
Jackson & Kelly, counsel to Buyer, substantially in the form of Exhibit G.
(iii) No injunction or order of any court or administrative agency or
instrumentality shall be in effect, and no statute, rule or regulation of
any governmental authority of competent jurisdiction shall have been
promulgated or enacted, as of the Closing which restrains or prohibits the
purchase and sale of the Shares.
(iv) No action, suit or other proceeding by any person to restrain or
prohibit the purchase and sale of the Shares shall be pending which in the
written opinion of Seller's counsel is reasonably likely to succeed.
- 5 -
<PAGE> 11
(v) The waiting period under the HSR Act shall have expired or been
terminated.
(vi) Buyer (or its designee) and seller (or its designee) shall have
executed an Equipment Payment Agreement pertaining to two HWM Units,
substantially in the form of Exhibit B.
(vii) Addington Mining, Inc. and American Eagle Coal Company shall
have executed a Coal Purchase Agreement providing for the sale by Addington
Mining, Inc. of coal to American Eagle Coal Company, substantially in the
form of Exhibit C.
(viii) Documentation from each of the Trustee and the Bank evidencing
the release of each Company and its assets under existing credit
agreements, satisfactory to Seller in its sole discretion, shall have been
obtained.
(ix) At or prior to Closing, ARI and its affiliates, principals,
directors, officers and agents of ARI (excluding each Company)
(collectively, the "ARI Group") shall have been removed and released from
any and all liability or obligation under the bonds specified on Schedule
3(b)(ix).
(x) At or prior to Closing, the ARI Group shall have been removed
and released from the guaranties and indemnities under the documents
specified on Schedule 3(b)(x).
(xi) Seller shall have received such other documents as Seller's
counsel shall reasonably request.
(xii) Seller shall have received approval of the transactions
contemplated by this Agreement from the Board of Directors and shareholders
of ARI. Seller and its affiliates shall have the right in their sole
discretion, but not the obligation, to structure the transactions
contemplated by this Agreement so that the shareholders of ARI have the
opportunity to exercise dissenters rights with respect to this transaction
and receive fair value for their shares. If Seller makes available
dissenters rights to the ARI shareholders, then not more than ten percent
of the shareholders shall have exercised such dissenters rights.
(xiii) ARI shall have received an opinion from its financial advisor
to the effect that the sale of the Shares and the transactions contemplated
by this Agreement are fair to the ARI Shareholders from a financial
viewpoint.
(xiv) All consents required under the documents described on Schedule
3(b)(xiv) shall have been obtained.
- 6 -
<PAGE> 12
(xv) Pittston Minerals Group, Inc. shall have executed
and delivered a Guaranty Agreement, substantially in the form of Exhibit I.
(xvi) Pittston Minerals Group, Inc. shall have executed and
delivered to ARI an Indemnity Agreement (NERCO), substantially in the form
of Exhibit J.
(xvii) Addington Mining, Inc. and Appalachian Mining, Inc. shall have
executed and delivered a Royalty Agreement, substantially in the form of
Exhibit F.
(xviii) Within five business days of the execution of this Agreement,
Buyer shall have obtained from the Board of Directors of Pittston Minerals
Group, Inc. and The Pittston Company approval of the transactions
contemplated by this Agreement and advised Seller that such approval has
been obtained.
(c) Pre-Closing and Post-Closing Actions.
(i) Excluded Assets. Seller shall, before the Closing, use
commercially reasonable efforts to obtain all necessary consents, permits and
transfers of permits, and to take all other steps necessary for the conveyance,
assignment and transfer of certain personal and real property and other items
from the Companies to Seller or its affiliates ("Excluded Assets"). "Excluded
Assets" shall include the personal and real property and other items described
on Schedule 3(c)(i). With respect to any Excluded Assets which are unable to be
fully conveyed, assigned or transferred out of the Companies prior to the
Closing or in connection with the taking of any action with respect to those
Excluded Assets, Seller shall use commercially reasonable efforts to obtain all
consents, permits and transfers of permits, and to take all other steps
necessary for the conveyance, assignment or transfer of such Excluded Assets to
Seller or its affiliates as soon as its practicable after the Closing, and Buyer
shall cooperate, and shall cause the Companies to cooperate, with Seller and its
affiliates, in all such efforts, including requesting third parties to consent
to such conveyances and assignments, filing applications for the transfer of
regulatory permits pertaining to the Excluded Assets and executing and
delivering such further instruments and documents as Seller may reasonably
request. Seller through its affiliates shall be allowed to utilize at its sole
expense all Excluded Assets not distributed out prior to the Closing as long as
Seller indemnifies Buyer from and against any liability or loss arising out of
ownership, operation, maintenance or use of the Excluded Assets. As soon as all
necessary consents, permits and transfers of permits have been obtained and all
other steps necessary for the conveyance, assignment and transfer of the
Excluded Assets have been taken, Buyer shall cause the Companies or
- 7 -
<PAGE> 13
other successor in interest to the Excluded Assets to execute and deliver such
agreements and instruments as may be necessary or appropriate to convey, assign
or transfer each such Excluded Asset to the designated affiliate of Seller free
and clear of any liens or encumbrances created or permitted by Buyer other than
liens in existence prior to the Closing. All costs and expenses including Taxes
(including any STC recapture) associated with the transfer of Excluded Assets
shall be the sole responsibility of Seller.
(ii) Excluded Liabilities. As of the Closing Date, Seller shall
assume and shall be solely responsible for, and Buyer and the Companies shall
have no responsibility for, any liabilities or obligations of any Company of any
nature, kind or description whatsoever, known or unknown, absolute, contingent
or otherwise, which arise or accrue with respect to or are attributable to the
following (the "Excluded Liabilities"):
(A) The ownership, operation and maintenance of the Excluded
Assets, whether before or after the Closing Date.
(B) The litigation (the Excluded Litigation") specified on
Schedule 3(c)(iii) and referred to in Section 3(c)(iii) hereof.
(C) All liabilities for Addington, Inc.'s state workers
compensation claims for traumatic injury and occupational disease where the date
of injury or the event giving rise to the claim or the date of last exposure was
prior to the Closing Date, whether the claim is filed before or after the
Closing Date; and all liabilities for all of Addington, Inc.'s federal claims
under 30 U.S.C. Sections 901-945 to the extent claims were made prior to the
Closing Date and to the extent made by employees of Addington, Inc. who do not
work for Addington, Inc. more than 125 working days after the Closing Date.
Addington, Inc. presently maintains an excess coverage insurance policy which
protects it from amounts in excess of $300,000 per claim. Buyer agrees to cause
Addington, Inc. after closing to cooperate with Seller in continuing such
insurance coverage (if necessary) at Seller's expense until Seller no longer has
liability under this provision.
(iii) Excluded Litigation. With respect to the excluded litigation
specified on Schedule 3(c)(iii) (the "Excluded Litigation"), the parties agree
as follows:
(A) Seller:
(1) shall assume control of and be responsible for the
Excluded Litigation, but the Excluded Litigation shall remain in the Companies,
- 8 -
<PAGE> 14
(2) may contest and defend against the Excluded
Litigation in any manner it reasonably may deem appropriate (including the
choice of counsel and experts),
(3) may consent to the entry of any judgment or enter
into any settlement with respect to the Excluded Litigation without the prior
consent of Buyer or any of the Companies,
(4) shall pay the net amount of any final judgment or
settlement entered into with respect to the claims of any party in the Excluded
Litigation after subtracting any offsets, recoveries from permissible
counterclaim, crossclaims or third party pleadings, if any; provided, however,
the foregoing shall in no way limit the right of Seller to exhaust its rights of
appeal at its own cost and expense prior to the payment of any judgment.
(B) After the Closing Date, Buyer will provide, and will
cause each of the Companies to provide, Seller with full access, at any
reasonable time and from time to time, to such information and data relating to
the Excluded Litigation as Seller may reasonably request, and Buyer will furnish
and request independent accountants and outside legal counsel of Buyer or any
Company to furnish to Seller such additional information or documents relating
to the Excluded Litigation in the possession of such persons as Seller may from
time to time reasonably request. In addition, Buyer will cooperate, and will
cause each of the Companies to cooperate, with Seller and its legal counsel in
the defense or contest of the Excluded Litigation, including making available
their respective officers and other personnel to attend hearings, depositions
and trials, as Seller may reasonably request in connection with the defense or
contest of the Excluded Litigation but Seller shall reimburse Buyer and each of
the Companies for all costs and expenses incurred in connection therewith.
4. Representations and Warranties of Seller. Seller hereby represents
and warrants to Buyer as follows:
(a) Authority. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Seller has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate acts and other
proceedings required to be taken by Seller to authorize the execution, delivery
and performance of this Agreement and the Consummation of the transactions
contemplated hereby have been duly and properly taken. This Agreement has been
duly executed and delivered by Seller and constitutes a valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
The execution and delivery of this Agreement does not, and the
-9-
<PAGE> 15
Consummation of the transactions contemplated hereby and compliance with the
terms hereof will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or result in the creation of any lien, claim or
encumbrance of any kind upon any of the properties or assets of any Company
under, any provision of (i) the General Corporation Law of the State of Delaware
and the corporation laws of each state of incorporation of each Company and each
state where each Company is qualified or required to be qualified to conduct
business, (ii) the Certificate or Articles of Incorporation or Bylaws of each of
Seller or any Company, (iii) any material note, bond, mortgage, indenture, deed
of trust, license, lease, contract, commitment, agreement or arrangement to
which Seller or any Company is a party or by which any of their respective
properties or assets are bound except as disclosed on Schedule 4(a) or (iv) any
judgment, order or decree, or material statute, law, ordinance, rule or
regulation applicable to Seller or any Company or the property or assets of
Seller or any Company. Except as disclosed on Schedule 4(a) and except in the
ordinary course of business following the Closing, no consent, approval,
license, permit, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, or any other
third party is required to be obtained or made by or with respect to Seller or
any Company or any of their respective affiliates in connection with (i) the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby or (ii) the conduct by any Company of its business following
the Closing as conducted on the date hereof, other than (A) compliance with and
filings under the HSR Act, (B) compliance with and filings under Section 13(a)
or 15(d), as the case may be, of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and (C) compliance with and filings under various Federal
and state environmental and/or mining laws.
(b) The Shares. The Shares are duly authorized and validly issued and
fully paid and non-assessable. Seller has good and valid title to the Shares,
free and clear of any liens, claims and encumbrances of any kind, except that
the Shares of Addington, Inc. are pledged but such pledge shall be released as
of Closing. Upon delivery to Buyer at the Closing of certificates representing
the Shares, duly endorsed by Seller for transfer to Buyer, and upon Seller's
receipt of the Purchase Price, good and valid title to the Shares will pass to
Buyer, free and clear of any liens, claims, encumbrances, security interests,
options, charges and restrictions of any kind. Other than this Agreement, the
Shares are not subject to any voting trust agreement or other contract,
agreement, arrangement, commitment or understanding, including any such
agreement, arrangement, commitment or understanding restricting or otherwise
relating to the voting, dividend rights or disposition of the Shares.
- 10 -
<PAGE> 16
(c) Organization and Standing of Each Company. Each Company is a
corporation duly organized and validly existing under the laws of the state
identified on Schedule 1. Each Company has full corporate power and authority
and, to the best of Seller's knowledge after reasonable investigation, possesses
all governmental franchises, licenses, permits, authorizations and approvals
necessary (including, without limitation, all Federal and state mining licenses,
permits, approvals and authorizations and bonds posted in connection therewith,
whether pertaining to health or safety, the environment or otherwise) to enable
it to use its corporate name and to own, lease or otherwise hold its properties
and assets and to carry on its business as presently conducted. Each Company is
duly qualified and in good standing to do business in each jurisdiction (shown
on Schedule 1) in which the nature of its business or the ownership, leasing or
holding of its properties makes such qualification necessary, except such
jurisdictions where the failure so to qualify would not have a material adverse
effect on the business, assets, condition (financial or otherwise) or results of
operations of the Company. Seller has made available to Buyer true and complete
copies of the Articles of Incorporation, as amended to date, and the By-laws, as
in effect on the date hereof, of each Company. The stock certificate and
transfer books and the minute books of each Company (which have been made
available for inspection by Buyer) are true and complete.
(d) Capital Stock of Each Company. The authorized capital stock, par
value per share, and the number of issued and outstanding shares for each
Company, is set forth on Schedule 1. The Shares are duly authorized and validly
issued and are fully paid and nonassessable. Seller is the registered holder of
the Shares. The Shares have not been issued in violation of, and none of the
Shares is subject to, any preemptive or subscription rights. Except as set forth
above, there are no shares of capital stock or other equity securities of any
Company outstanding. There are no outstanding warrants, options, agreements,
convertible or exchangeable securities or other commitments (other than this
Agreement) pursuant to which Seller or any Company is or may become obligated to
issue, sell, purchase, return or redeem any shares of capital stock or other
securities of any Company, and there are not any equity securities of any
Company reserved for issuance for any purpose.
(e) Equity Interests. Except as described on Schedule 4(e), no Company
directly or indirectly owns any capital stock of or other equity interests in
any corporation, partnership or other entity.
(f) Financial Statements; Undisclosed Liabilities.
(i) Within 10 days of the date hereof, Sellers shall have delivered to
Buyer Schedule 4(f)(i) setting forth the audited
- 11 -
<PAGE> 17
statement of assets, liabilities and parent investment of the combined Companies
as of December 31, 1991 and as of December 31, 1992 (collectively, the "Balance
Sheets"), and the related statements of operating revenues and expenses and cash
flow of the combined Companies for each of the years in the three year period
ended December 31, 1992 and unaudited statement of assets, liabilities and
parent investment and such related statements for the year to date periods ended
June 30, 1992 and June 30, 1993 (the financial statements described above,
collectively, the "Financial Statements").
(ii) The Financial Statements for all periods presented shall reflect,
in accordance with GAAP and on a consistent basis which is mutually agreeable to
the Buyer and Seller, the accounting results for only the assets and liabilities
and related revenues and expenses of the Companies to be acquired by the Buyer
under this Agreement and any other transactions contemplated by this Agreement
which should appropriately be included.
(iii) Seller agrees to provide access to Buyer upon reasonable request
any other existing financial statements, data or information in the possession
of Seller.
(g) Taxes.
(i) For purposes of this Agreement, (A) "Tax" or "Taxes" shall mean
all Federal, state, local and foreign taxes and assessments and any other
governmental impositions which may be imposed, no matter how measured or
applied, including all interest, penalties and additions imposed with respect to
such amounts; (B) "Pre-Closing Tax Period" shall mean all taxable periods ending
on or before the Closing Date and the portion ending on the Closing Date of any
taxable period that includes (but does not end on) such day; and (C) "Code"
shall mean the Internal Revenue Code of 1986 and the Regulations thereunder, as
amended.
(ii) Except as set forth on Schedule 4(g)(ii) or Schedule 4(l)(ii),
(A) each Company and each affiliated group (within the meaning of Section 1504
of the Code) or consolidated, combined or unitary group (under any state or
local Tax law) of which any such Company is or has been a member (each such
group, an "Affiliated Group") has filed or caused to be filed in a timely manner
(within any applicable extension periods) all Tax returns, reports and forms
required to be filed by any taxing authority or any tax laws, including but not
limited to the Code and any applicable state, local or foreign tax laws, (B) all
Taxes shown to be due on such returns, reports and forms have been timely paid
in full or will be timely paid in full by the due date thereof, (C) no tax liens
have been filed and no claims are being asserted in writing with respect to any
Taxes and (D) no examinations or inquiries are currently being conducted by any
taxing authority.
- 12 -
<PAGE> 18
(iii) (A) neither Seller nor any of its affiliates has made with
respect to any Company, or any property held by any Company, any consent under
Section 341 of the Code, (B) no property of any Company is "tax-exempt: use
property" within the meaning of Section 168(h) of the Code and (C) no Company is
a Party to any lease made pursuant to Section 168(f)(8) of the Internal Revenue
Code of 1954.
(iv) Except as set forth in Schedule 4(g)(iv), there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any Tax returns required to be filed with respect to any Company,
and neither any Company nor any Affiliated Group has requested any extension of
time within which to file any Tax return, which return has not yet been filed.
(h) Tangible Personal Property. Schedule 4(h) is a list of each item of
tangible personal property which will be owned or leased by any Company as of
the Closing. Except as described in Schedule 4(h), each Company owns all of its
tangible personal property listed on Schedule 4(h) and all other tangible
personal property reflected on each of its books and records as being owned by
each of it, free and clear of all liens and encumbrances, except for liens for
ad valorem property taxes not yet due and payable, purchase money security
interests arising in the ordinary course of their respective businesses, and
each Company is entitled to possession of its leased tangible personal property
listed on Schedule 4(h), with all such leases being valid and in full force and
effect.
(i) Real Property. Set forth in Schedule 4(i) is (i) a true and
complete description of all real property which will be owned by each Company as
of the Closing and all buildings and other structures located thereon; (ii) an
identification of all leases, subleases, easements, licenses or other
agreements, together with all amendments thereto, under which each Company will
be, as of the Closing, a lessor, lessee, licensor, licensee, grantor, grantee or
other party with respect to any real property or any interest therein (except
where a Company acquired its interest in such real property subject to any of
the foregoing); and (iii) an identification of all options which will be held by
each Company as of the Closing or contractual obligations which will exist on
the Closing Date on the part of each Company to purchase or acquire any interest
in any real property. Except as indicated in Schedule 4(i), (i) each of Company
owns the real property described in Schedule 4(i) as owned by it in fee, free
and clear of all liens, encumbrances, equities, claims, covenants, conditions,
reservations, restrictions, easements, rights, rights of way and other
agreements arising by, through or under Seller or any Company or any of its or
their affiliates; (ii) each of the leases, subleases, easements, licenses,
agreements and options described in Schedule 4(i) is a valid, binding,
enforceable agreement of each of
- 13 -
<PAGE> 19
the parties thereto, and is in full force and effect, and each Company has
performed all covenants and obligations in all material respects required to be
performed by it under such lease, sublease, easement, license, agreement and
option and there exists no material default or event which, with lapse of time
or notice to it, would constitute a material default by such Company; and (iii)
neither Seller nor any Company has received any notice that a lessor, grantor,
licensor or optionor or under any of such leases, subleases, easements,
licenses, agreements or options intends to cancel or terminate any of such
leases, subleases, agreements, licenses or options or to exercise or not to
exercise any option of any of such leases, subleases, easements, licenses or
agreements. There are no eminent domain or condemnation proceedings pending or,
to the knowledge of Seller, threatened against any asset or property of any
Company.
(j) Contracts. Schedule 4(j) contains a correct and complete list of
agreements, contracts, personal property leases (other than those listed on
Schedule 4(i)) and commitments (whether written or oral) to which, as of the
Closing Date, any Company will be a party or which, as of the Closing Date, will
affect or bind any Company or any of its property (except those made in the
ordinary course of business and requiring aggregate future payments or
performance by any Company or receipts having a value of less than $30,000),
including without limitation, the following:
(a) notes, mortgages, indentures, loan or credit agreements,
equipment lease agreements, security agreements and other
agreements and instruments reflecting obligations for borrowed
money or other monetary indebtedness or otherwise relating to the
borrowing of money by, or the extension of credit to any Company
or related to its business and binding agreements or commitments
to enter into any such agreements or commitments;
(b) management consulting and employment agreements and binding
agreements or commitments to enter into same;
(c) coal sales agreements, purchase orders, contract bids or other
agreements and commitments to sell or offer to sell coal, or to
purchase or offer to purchase coal;
(d) coal sales agency agreements or commitments authorizing any
person to act as agent for the purchase or sale of coal or to
otherwise represent any Company in connection with the purchase
or sale of coal;
- 14 -
<PAGE> 20
(e) contract mining agreements, whether as contract miner or
owner/employer;
(f) processing, storage, loading or transloading agreements or other
agreements or commitments pursuant to which any Company utilizes
or is obligated to utilize any preparation plant, stockpile area,
crushing plant, screening plant, tipple, processing facility,
rail car or unit train loading facility, barge loading facility
or other installation or facility owned, leased or used by it to
process, wash, crush, grade, screen, store, load, transload or
ship coal for persons other than a Company (a "Third Party") or
any agreement or contract pursuant to which any Third Party
utilizes or is obligated to utilize any preparation plant,
stockpile area, crushing plant, screening plant, tipple,
processing facility, rail car or unit train facility, barge
loading facility or other installation or facility owned, leased
or used by such Third Party to process, wash, crush, grade,
screen, store, load, transload or ship coal for any Company;
(g) agreements relating to the transportation and movement of coal
mined or sold by any Company or agreements or commitments for any
rates, tariffs or other charges applicable to such transportation
or movement;
(h) agreements to pay any overriding royalty, finder's fee,
commission or other compensation or consideration or to pay any
person in connection with or related to the identification,
purchase, sale, leasing or other acquisition of any real
property, equipment, machinery, personal property, lease,
contract, opportunity, permit, license, authorization or other
right or asset, tangible or intangible, of any Company;
(i) option, purchase and sale or lease agreements involving any real
property, equipment, machinery, personal property or other asset,
tangible or intangible;
(j) agreements and purchase orders entered into or issued in the
ordinary course of business for the purchase or sale of goods
(other than coal), services, supplies or capital assets;
- 15 -
<PAGE> 21
(k) joint venture or other agreements involving the sharing of
profits or losses;
(l) contracts or agreements with ARI, Seller, or any subsidiary or
affiliate of either, or any director or officer of ARI, Seller,
or any subsidiary or affiliate of either, or any person who is an
immediate relative of any such person, or any combination of such
persons;
(m) outstanding powers of attorney empowering any person, company or
other organization to act on behalf of any Company;
(n) outstanding guarantees, subordination agreements, indemnity
agreements and other similar types of agreements, whether or not
entered into in the ordinary course of business, which any
Company is or may become liable for or obligated to discharge, or
any asset of any Company is or may become subject to the
satisfaction of, any indebtedness, obligation, performance or
undertaking of any other person, except for indemnification
agreements contained in any of the instruments listed in the
Schedules hereto;
(o) contracts, orders, decrees or judgments preventing or restricting
any Company from carrying on business in any location;
(P) agreements, contracts or commitments relating to the acquisition
of the outstanding capital stock or equity interest of any
business enterprise; and
(q) contracts, commitments or obligations not made in the ordinary
course of business and having unexpired terms in excess of one
year or requiring aggregate future payments or receipts in excess
of $30,000 or otherwise material to the business or operations of
any Company.
Seller has provided Buyer with true and complete copies of all such written
leases, agreements, contracts, commitments and related agreements listed on
Schedule 4(j), including all amendments, modifications, waivers and elections
applicable thereto.
- 16 -
<PAGE> 22
Except as set forth in Schedule 4(j), such leases, agreements,
contracts, commitments and related agreements are valid and binding, enforceable
in accordance with their respective terms (subject to any applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws affecting generally the enforcement of creditors' rights) and are in full
force and effect. Except as disclosed in Schedule 4(j), there is not under any
such lease, contract, agreement, commitment or related agreement, any existing
material breach or material default (or event or condition, which after notice
or lapse of time, or both, would constitute a material breach or material
default), by Seller or any Company, or to the knowledge of Seller any other
party thereto.
(k) Litigation; Decrees. No Company is a party to any lawsuit,
claim (including without limitation claims for occupational pneumoconiosis,
occupational injury and occupational disease), proceeding or investigation, and
no such lawsuit, claim, proceeding or investigation has been threatened in
writing within the last 24 months, as of the date of this Agreement, by or
against or affecting any Company or any of its properties, assets, operations or
businesses other than as set forth on Schedule 4(k). Schedule 4(k) identifies
the items of Excluded Litigation which Seller shall assume control of and be
responsible for pursuant to Section 3(c)(iii) and the items to be retained by
the Companies. No Company is subject to or in default under any material
judgment, order or decree of any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, applicable
to it or any of its properties, assets, operations or businesses.
(l) Benefit Plans. (i) No Company has ever maintained or
contributed to, or now maintains or contributes to, any "employee pension
benefit plan" (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (referred to herein as a "Pension
Plan") or "employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
(referred to herein as a "Welfare Plan") except such Welfare Plans disclosed on
Schedule 4(l)(i). Schedule 4(l)(i) also discloses any deferred compensation
plan, bonus plan, incentive plan, disability or other group insurance plan,
stock option plan, employee stock purchase plan, vacation plan, severance plan,
sick leave plan or policy, holiday plan or policy, maternity leave plan or
policy or any other benefit plan, program, agreement (including employment
agreement or union contracts), arrangements or commitments of any kind,
maintained by any Company, that is not a Pension Plan or Welfare Plan. Seller
has delivered to Buyer true, complete and correct copies of (A) each plan
disclosed on Schedule 4(l)(i) (a "Company Plan") (or, in the case of any
unwritten Company Plans, descriptions thereof), (B) the most recent annual
report on Form 5500 filed with the Internal Revenue Service with respect to each
- 17 -
<PAGE> 23
Company Plan (if any such report was required by applicable law), (C) the most
recent summary plan description for each Company Plan for which a summary plan
description is required by applicable law and (4) each trust agreement and
insurance or annuity contract relating to any Company Plan.
(ii) Each Company Plan has been administered in all material respects
in accordance with its terms, except as disclosed in Schedule 4(l)(ii). Each
Company, its subsidiaries and all Company Plans are in compliance in all
material respects with the applicable provisions of ERISA and the Internal
Revenue Code of 1986, as amended (the "Code"), except as disclosed in Schedule
4(l)(ii). Except as disclosed in Schedule 4(l)(ii), all reports, returns and
similar documents with respect to the Company Plans required to be filed with
any governmental agency or distributed to any Company Plan participant have been
duly and timely filed or distributed. Except as disclosed in Schedule 4(l)(ii),
there are no investigations by any governmental agency, termination proceedings
or other claims (except claims for benefits payable in the normal operation of
the Company Plans), suits or proceedings against or involving any Company Plan
or asserting any rights or claims to benefits under any Company Plan that could
give rise to any material liability, and there are not any facts that could give
rise to any material liability in the event of any such investigation, claim,
suit or proceeding.
(iii) Schedule 4(l)(iii) discloses whether each Welfare Plan is (i)
unfunded, (ii) funded through a "welfare benefit fund", as such term is defined
in Section 419(e) of the Code, or other funding mechanism or (iii) insured. Each
Welfare Plan (including any Welfare Plan covering retirees or other former
employees) may be amended or terminated without material liability to any
Company on or at any time after the Closing Date. The Companies and its
subsidiaries comply with the applicable requirements of Section 4980B(f) of the
Code with respect to each Company Plan that is a group health plan, as such term
is defined in Section 5000(b)(1) of the Code.
(iv) Seller has listed on Schedule 4(l)(iv) each Pension Plan
subject to Title IV of ERISA or Section 412 of the Code (a "Seller Pension
Plan") maintained or contributed to by any person or entity that, together with
Seller, is treated as a single employer under Section 414(b), (c), (m) or (o) of
the Code (each a "Commonly Controlled Entity"). Except as disclosed in Schedule
4(l)(iv), (A) all contributions to each Seller Pension Plan that may have been
required to be made in accordance with Section 302 of ERISA or Section 412 of
the Code have been timely made, (B) there has been no application for or waiver
of the minimum funding standards imposed by Section 412 of the Code with respect
to any Seller Pension Plan and (C) no Seller Pension Plan
- 18 -
<PAGE> 24
has an "accumulated funding deficiency" within the meaning of Section 412(a) of
the Code as of the most recent plan year.
(v) Except as disclosed in Schedule 4(l)(v), no Seller Pension Plan
has been terminated nor have there been any reportable events" (as defined in
Section 4043 of ERISA and the regulations thereunder) with respect thereto.
(vi) With respect to any Seller Pension Plan subject to Title IV of
ERISA, no Commonly Controlled Entity has incurred any material liability to such
Seller Pension Plan or to the Pension Benefit Guaranty Corporation other than
for the payment of premiums, all of which have been paid when due.
(vii) Except as disclosed in Schedule 4(l)(vii), at no time within the
five years preceding the Closing Date has Seller or any Commonly Controlled
Entity been required to contribute to any "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA), and neither Seller nor any Commonly Controlled
Entity has incurred any withdrawal liability, within the meaning of Section 4201
of ERISA, which liability has not been fully paid as of the date hereof, or
announced an intention to withdraw, but not yet completed such withdrawal, from
any multiemployer plan. Except as disclosed on Schedule 4(l)(vii), no action has
been taken and no circumstances exist that, alone or with the passage of time,
could result in either a partial or complete withdrawal from any multiemployer
plan. Schedule 4(l)(vii) lists for each multiemployer plan, Seller's best
estimate of the amount of withdrawal liability that would be incurred if each
Commonly Controlled Entity were to make a complete withdrawal from such plan as
of the Closing Date. The aggregate amount of withdrawal liability from such
complete withdrawal from all such plans will not exceed $10,000.
(viii) Schedule 4(l)(viii) sets forth and identifies all
agreements to which any Company is a party, whether oral or in writing, with
present or former officers, directors or employees of, or consultants to, any
Company which (A) obligate any Company to pay, on any date or dates during the
remaining term of such agreement, an aggregate amount in excess of $10,000, or
(B) cannot be terminated on 60 days' notice.
(ix) Neither any Company nor any related person (within the
meaning of section 9701(c)(2) of the Code) has any liability under subtitle J of
the Code (Coal Industry Health Benefits).
(x) Except as set forth in Schedule 4(l)(x), no employee or former
employee with any Company or any beneficiary thereof will become entitled to any
bonus, retirement, severance, job security or similar benefits or any enhanced
benefits as a
- 19 -
<PAGE> 25
result of the transactions contemplated hereby that will constitute post closing
obligation of any of the Companies.
(m) Absence of Changes or Events. Except as expressly permitted by the
terms of this Agreement (including without limitation the distribution of
Excluded Assets and excess working capital as contemplated by this Agreement),
there has not been any material adverse change in the business, assets,
condition (financial or otherwise) or results of operations of any Company since
June 30, 1993; and Addington Resources, Inc. has caused the business of its
consolidated group (including the Companies), since June 30, 1993, to be
conducted in the ordinary course and in substantially the same manner as
presently conducted and has made all reasonable efforts consistent with past
practices to preserve the Companies' relationships with customers, suppliers and
others with whom such Company deals, and each such Company has not taken any
action that, if taken after the date hereof, would constitute breach of any of
the covenants set forth in Section 5A(b).
(n) Compliance with Applicable Laws. (i) Except as set forth in
Schedule 4(n), each Company is in compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any governmental authority or
instrumentality, domestic or foreign (including, without limitation, the Surface
Mining Control and Reclamation Act of 1977, as amended ("SMCRA"), the Federal
Mine Safety and Health Act of 1977, as amended, and the Black Lung Benefits
Reform Act of 1977, as amended), except where noncompliance would not have a
material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of such Company. In addition, each of the
Companies is in material compliance with, and in good standing under, applicable
workers' compensation laws and in material compliance under black lung laws.
Except as set forth in Schedule 4(n), Seller has not received any written
communication from a governmental authority that alleges that any Company is not
in compliance, in all material respects, with all material Federal, state, local
or foreign laws, ordinances, rules and regulations.
(ii) Except as set forth in Schedule 4(n), to the best of Seller's
knowledge after reasonable investigation none of the operations or properties of
any Company is the subject of any Federal, state or foreign investigation
evaluating whether any remedial action is needed to respond to a release of any
Hazardous Substance (as hereinafter defined) into the environment, and neither
Seller nor any Company has received any written communication from a
governmental authority that alleges that any Company is not in compliance, and
each Company is in compliance, in all respects, with all Federal, state, local
or foreign laws, ordinances, codes, rules and regulations relating to the
environment ("Environmental Laws"). Except as set forth in Schedule 4(n), Seller
(in respect of the business of each Company)
- 20 -
<PAGE> 26
and each Company have filed all notices and compliance reports required to be
filed under any Environmental Law indicating past or present treatment, storage
or disposal of a Hazardous Substance or reporting a spill or release of a
Hazardous Substance into the environment. Except as set forth in Schedule 4(n),
to the best of Seller's knowledge after reasonable investigation no company has
any material contingent liabilities in respect of its business in Connection
with any Hazardous Substance that individually or in the aggregate would have a
material adverse effect on the business, assets, condition (financial or
otherwise) or results of its operations. "Hazardous Substance" shall mean: (i)
any hazardous, toxic or dangerous waste, substance or material defined as such
in (or for the purposes of) the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, Super Fund Amendments and
Reauthorization Act and any so-called superfund or superlien law, or any other
Environmental Law, including Environmental Laws relating to or imposing
liability or standards of conduct concerning any hazardous, toxic or dangerous
waste, substance or material in effect on the date of this Agreement, (ii)
petroleum, asbestos or PCBs and (iii) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any Federal, state,
foreign or local governmental authority pursuant to any Environmental Law or any
health and safety or similar law, code, ordinance, rule or regulation, order or
decree, and which may or could pose a hazard to the health and safety of workers
at or users of any properties of any Company or cause offsite damage to adjacent
property owner or cause damage to the environment.
(iii) Neither Seller nor any person or entity downed or controlled" by
Seller nor any person or entity which "owns or controls" Seller has been
notified by the Federal Office of Surface Mining or the agency of any state
administering the SMCRA (or any comparable state statute), that it is (A)
ineligible to receive additional surface mining permits or (B) under
investigation to determine whether its eligibility to receive such permits
should be revoked, i.e., "permit blocked". As used herein, the terms "owned or
controlled" and "owns or controls" shall be defined as set for in 30 C.F.R. ss.
773.5 (1991).
(iv) Except as set forth on Schedule 4(n)(iv), as of the Closing Date
there will be no underground storage tanks on any real property owned or
controlled by any Company.
(o) Employee and Labor Relations. Except as set forth on Schedule
4(o), no Company is a party to, bound by, or negotiating any collective
bargaining agreement or any other agreement with any labor union, association or
other employee group, nor is any employee of any Company represented by any
labor union or similar association. No labor union or employee organization has
been certified or recognized as the collective
- 21 -
<PAGE> 27
bargaining representative of any employees of any Company. There are no formal
union organizational campaigns or representation proceedings underway or to the
best of Seller's knowledge pending or planned with respect to any employees of
any Company nor are there any existing or pending or planned labor strikes, work
stoppages, slowdowns, disputes, grievances, unfair labor practice charges,
labor arbitration proceedings or other disturbances affecting any employee of
any Company, or affecting operations at or deliveries to any mine or other
facility of any Company. Except as described on Schedule 4(o) or Schedule
4(l)(i), each Company has at all times complied in all material respects with
all applicable provisions of the National Labor Relations Act, as amended, the
Fair Labor Standards Act, as amended, and all other Federal and state laws,
regulations, and executive orders pertaining to employment, including without
limitation all provisions thereof relating to wages, hours and conditions,
collective bargaining, and the payment of unemployment benefits and taxes
therefor, FICA taxes and all similar taxes, and worker's compensation and
occupational disease benefits. Except as described on Schedule 4(o) or Schedule
4(1)(i), no Company has any liability for any arrearages of wages or for any
delinquent unemployment, FICA or other employee taxes or for any penalties or
interest for failure to timely pay any such taxes due. No Company has pending
against it any unfair labor practice charges, other administrative charges,
claims, grievances or lawsuits before any court, governmental agency, regulatory
body or arbitrator arising under any Federal or state law, regulation or
executive order governing employment.
(p) Licenses; Permits. Schedule 4(p) sets forth a true and complete
list of all material licenses, permits, certificates, bonds, approvals and other
such authorizations issued or granted to each Company by local, state or Federal
governmental authorities or agencies. Except as disclosed on Schedule 4(p), all
material licenses, permits, certificates, bonds, approvals or other such
authorizations of each Company are validly held by it, each Company has complied
with all material requirements in connection therewith and the same will not be
subject to suspension, modification or revocation as a result of this Agreement
or the consummation of the transactions contemplated hereby. Each Company has
all material licenses, permits, certificates, bonds, approvals and other such
authorizations from local, state or Federal government authorities or agencies
which are necessary for the conduct of each Company's business.
(q) Bank Accounts and Powers of Attorney. Schedule 4(q) contains a
complete and correct list and summary description showing (i) the name of each
bank in which any Company has an account or safe deposit box and the names of
all persons authorized to draw thereon or to have access thereto, and (ii) the
names of all persons, if any, holding powers of attorney from any Company.
- 22 -
<PAGE> 28
(r) Transactions with Affiliates Except as set forth in the notes to
the Financial Statements or in the Schedules hereto, no Company has any
outstanding contract, agreement or other arrangement with Seller or any of its
affiliates which will continue in effect subsequent to the Closing.
(s) West Virginia Business Investment and Jobs Expansion Tax Credits
("STC"). Seller's affiliate, Appalachian Mining, Inc. ("AMI") is a participant
in a qualified multiyear, multiparticipant STC project (the "Alloy STC
Project"). Neither Seller nor its affiliates, including Vandalia Resources, Inc.
("Vandalia") and AMI, has since January 29, 1993 taken any action or failed to
take any action which would impair the status (if any) which the multiyear,
multiparticipant STC project (the "Vandalia STC Project") had on January 29,
1993. The Alloy STC Project and the Vandalia STC Project, are collectively
referred to as the STC Projects". Schedule 4(s)(i) lists the assets of AMI and
of Vandalia which will remain in service in the STC Projects on the Closing
Date and the useful lives that AMI and Vandalia have respectively assigned to
those assets for STC purposes. Schedule 4(s)(ii) lists the actual amounts of
credit claimed through 1992 by AMI in the Alloy STC Project. Schedule 4(s)(iii)
lists the "new jobs", as defined in W. Va. Code ss. 11-13C-4(b) which AMI and
Vandalia claim are created as of the Closing Date in each of the STC Projects.
Notwithstanding anything in this Agreement to the contrary, SELLER DOES NOT
REPRESENT, WARRANT OR GUARANTY THAT BUYER OR AMI OR VANDALIA WILL RECEIVE ANY
TAX CREDITS RELATING TO THE STC PROJECTS OR THAT POSITION TAKEN BY AMI AND
VANDALIA AS TO THE "NEW JOBS" LISTED IN SCHEDULE 4(s)(iii) WILL BE ACQUIESCED TO
BY THE WEST VIRGINIA DEPARTMENT OF TAX AND REVENUE.
(t) Patents and Trademarks. No Company has any patents, trademarks,
tradenames, service marks, copyrights or patent applications pending, and are
not subject to any license agreements with third parties or agreements requiring
royalty or other payments in respect of such matters.
(u) Insurance. Schedule 4(u) contains a complete and correct list and
summary description of all policies of insurance which are in effect, including
amounts thereof, in which any Company is named as the insured party, has a
beneficial interest or for which it has paid any premiums. Such policies are in
full force and effect and insure all assets and property of each Company against
loss or damage in amounts as set forth in such policies. Until the Closing Date,
Seller will cause each Company to maintain in full force and effect its
presently existing insurance coverage, or insurance comparable to such existing
coverage.
(v) AS IS. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN
DOCUMENTS OR INSTRUMENTS EXECUTED PURSUANT TO THIS AGREEMENT, BUYER ACKNOWLEDGES
THAT SELLER HAS MADE NO
- 23 -
<PAGE> 29
REPRESENTATIONS REGARDING THE VALUE OR CONDITION OF THE ASSETS OF THE COMPANIES.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ASSETS OF THE COMPANIES
WILL BE HELD BY THE COMPANIES AT CLOSING "AS IS, WHERE IS" WITH NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO TITLE, OWNERSHIP, USE,
POSSESSION, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, QUANTITY OR
QUALITY OF RESERVES, MINING COSTS OR RATIOS, GRADE, RECOVERABILITY, VALUE,
MINEABILITY, CONDITION, OPERATION, DESIGN, CAPACITY, TAX TREATMENT OR OTHERWISE,
AND ALL SUCH REPRESENTATIONS AND WARRANTIES ARE EXPRESSLY DISCLAIMED. NOTHING
CONTAINED HEREIN SHALL BE CONSTRUED TO DIMINISH OR LIMIT THE EXPRESS
REPRESENTATIONS, WARRANTIES OR COVENANTS CONTAINED IN THIS AGREEMENT.
5. Covenants.
5A. Covenants of Seller. Seller covenants and agrees as follows:
(a) Access. Seller shall, and shall cause each Company, and its or
their officers, directors, employees and agents to, afford the officers,
employees and agents of Buyer complete access at all reasonable times, from the
date hereof to the Closing, to its or their officers, employees, agents,
properties, books and records, and shall furnish Buyer all financial, operating
and other data and information as Buyer, through its officers, employees or
agents, may reasonably request, but only to the extent that any of the foregoing
relates to any Company. Buyer acknowledges that it has been given access to such
information at various times over the twelve month period preceding this
Agreement. Subject to applicable law or court orders, Buyer shall cause all such
information of a non-public nature to be retained confidentially. If this
Agreement is terminated, Buyer shall promptly return all such information of a
non-public nature provided by Seller, and shall promptly destroy all analyses,
compilations, studies or other documents of or prepared by the Buyer from such
non-public information. If this Agreement is terminated, Buyer shall not use or
disclose any confidential information obtained from Seller or the Companies, or
other information concerning the business or properties of the Seller or the
Companies. Buyer shall be responsible for maintaining the confidentiality of
such confidential and trade secret information and ensuring that such
information is not used or disclosed by its employees, affiliates and agents,
and Buyer shall be responsible for the acts of its agents, employees and
affiliates in that regard.
(b) Ordinary Conduct. Except as set forth on Schedule 5A(b) or
otherwise expressly permitted by the terms of this Agreement, or as necessary in
connection with taking such actions with regard to the assets and liabilities of
the Companies as are contemplated by this Agreement (including without
limitation the distribution of Excluded Assets and excess working capital as
- 24 -
<PAGE> 30
contemplated by this Agreement), from the date hereof to the Closing, Seller
will cause the business of each Company to be conducted in the ordinary course
in substantially the same manner as presently conducted and will make all
reasonable efforts consistent with past practices to preserve its relationships
with customers, employees, suppliers and others with whom such Company deals. In
addition, except as set forth on Schedule 5A(b) or otherwise expressly permitted
by the terms of this Agreement (including without limitation the distribution of
Excluded Assets and excess working capital as contemplated by this Agreement),
Seller will not permit any Company to do any of the following without the prior
written consent of Buyer:
(i) amend its Articles of Incorporation or By-laws;
(ii) declare or pay any dividend or make any other
distributions to its shareholders whether or not upon or in respect of
any shares of its capital stock;
(iii) redeem or otherwise acquire any shares of its capital
stock or issue any capital stock or any option, warrant or right
relating thereto or any securities convertible into or exchangeable for
any shares of capital stock;
(iv) grant to any employee, officer or director any increase
in compensation or benefits, or enter into any employment contract or
adopt, amend or terminate any profit sharing, compensation, bonus,
deferred compensation, pension, retirement or other employee benefit
plan, agreement, fund, trust or arrangement, for the benefit or welfare
of any employee;
(v) incur or assume any liabilities, obligations or
indebtedness for borrowed money or guarantee any such liabilities,
obligations or indebtedness;
(vi) permit, allow or suffer any of its assets to be
subjected to any mortgage, pledge, lien, encumbrance, restriction or
charge of any kind;
(vii) cancel any material indebtedness (individually or in
the aggregate) or waive any claims or rights of substantial value;
(viii) except as contemplated by this Agreement, loan or
advance any amount to, or sell, transfer or lease any of its assets to,
or enter into any agreement or arrangement with Seller or any of its
affiliates;
- 25 -
<PAGE> 31
(ix) make any change in any method of accounting or
accounting practice or policy other than those required by generally
accepted accounting principles;
(x) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets (other than inventory)
which are material individually, or in the aggregate, to such Company;
(xi) make or incur any capital expenditure or expenditures
which, individually, is in excess of $5,000 or, in the aggregate, are
in excess of $25,000;
(xii) sell, lease or otherwise dispose of, or agree to sell,
lease or otherwise dispose of, any of its assets, except in the
ordinary course of business consistent with past practice;
(xiii) enter into any lease of real property;
(xiv) enter into any new commitments for the sale or purchase
of coal the performance of which extends beyond January 31, 1994 or the
purchase or disposition of coal properties or amend any existing coal
sales agreements; or
(xv) agree, whether in writing or otherwise, to do any of
the foregoing.
Seller shall not, and shall not permit any Company to, take
any action that would, or that could reasonably be expected to, result in (i)
any of its representations and warranties set forth in this Agreement becoming
untrue or (ii) any of the conditions to the purchase and sale of the Shares not
being satisfied.
(c) Pro Forma Balance Sheet. Schedule 5A(c) sets forth a
pro forma balance sheet (the "Pro Forma Balance Sheet") reflecting the assets,
liabilities, and working capital which each Company would have had if the
Closing had occurred on June 30, 1993 after the distribution of the Excluded
Assets and Excluded Liabilities.
(d) Resignations. On the Closing Date, Seller shall cause
to be delivered to Buyer duly signed resignations, effective immediately after
the Closing Date, of all officers and directors of each Company and shall take
such other action as is necessary to accomplish the foregoing.
- 26 -
<PAGE> 32
(e) Other Transactions; Seller Break-Up Fee. Prior to the Closing, none
of Seller, any Company, ARI nor any other affiliate of Seller shall, nor shall
they permit any of their respective officers, directors, or other
representatives to, directly or indirectly, encourage, solicit, initiate or
participate in discussions or negotiations with, or provide any information or
assistance to, any corporation, partnership, person, or other entity or group
(other than Buyer and its representatives) concerning any merger, sale of
securities, sale of substantial assets or similar transaction involving any
Company; but the foregoing shall not prohibit Seller or its affiliates from
engaging in discussions or negotiations with, or furnishing information to,
a third party who seeks to initiate such discussions or negotiations following
Seller's receipt of a written proposal which is financially superior as compared
to this Agreement (as determined by Seller's Board of Directors), but only to
the extent that Seller's Board of Directors shall conclude in good faith on the
basis of written advice from Seller's outside securities counsel that such
action is necessary in order for Seller and its board of directors to act in a
manner consistent with its or their fiduciary duties (a "Superior Offer"). In
the event that Seller or any Company receives a Superior Offer, Seller will
promptly notify Buyer of such proposal and keep Buyer fully informed of any
progress, action or event with respect thereto. Upon receipt of any such notice
from Seller, Buyer shall have the sole and exclusive right to terminate the
obligations of Buyer and Seller under this Agreement; provided that if AIR or
Seller executes an agreement pertaining to a Superior Offer, Seller shall pay
Buyer $15 million as a break-up fee within five business days of such execution.
However, nothing contained in the foregoing provisions of this Section 5A(e)
shall preclude or limit Buyer from pursuing any rights or remedies against any
person or entity who submits any such Superior Offer.
(f) Supplemental Disclosure. Seller shall have the continuing
obligation until the Closing to supplement or amend the Schedules hereto with
respect to any matter hereafter arising or discovered which, if existing or
known at the date of this Agreement, would have been required to be set forth or
described in such Schedules; provided, however, that, for the purpose of the
rights and obligations of the parties hereunder, any such supplemental or
amended disclosure shall not be deemed to have been disclosed as of the date of
this Agreement unless so agreed in writing by Buyer.
(g) Trustee and Bank Releases. ARI and Seller shall obtain
documentation from each of the Trustee and the Bank evidencing the release of
each Company and its assets under existing credit agreements prior to the
Closing.
- 27 -
<PAGE> 33
(h) Other Financial Statements. On or before October 20, 1993, Seller
acknowledges and agrees to use its best efforts to provide to Buyer unaudited
financial statements described in Section 4(f)(i) above for the quarter year and
year to date periods ended September 30, 1992 and September 30, 1993 which shall
then be included as a part of the Financial Statements (as defined in Section
4(f)(i)) If such financial statements are provided to Buyer after October 20,
1993, the dates specified in Sections 2(a) and 29 shall be extended for the same
number of days between October 20, 1993 and the date such financial statements
are provided to Buyer. Such financial statements shall in any event be provided
to Buyer not later than November 15, 1993.
5B. Covenants of Buyer. Buyer covenants and agrees as follows:
(a) Buyer's Actions. Buyer shall not take any action that would, or
that could reasonably be expected to, result in (i) any of its representations
and warranties set forth in this Agreement becoming untrue in any material
respect, or (ii) any of the conditions to the purchase and sale of the Shares
not being satisfied in any material respect; and Buyer shall cooperate with
Seller in the removal of liability and obligations under bonds and guarantees
specified on Schedule 5B(a). Buyer also agrees to provide such financial and
other information of Buyer and of Pittston Minerals Group, Inc. as is necessary
to accomplish such replacement or substitution. Except for the bonds listed on
Schedule 3(b)(ix) and the guarantees specified on Schedule 3(b)(x), if the
removal of liabilities and obligations are unable to be obtained as of the
Closing Date with respect to each of those bonds and guarantees described on
Schedule 5B(a), then in lieu of such removal, Seller will accept an indemnity
substantially in the form of Exhibit H from Pittston Minerals Group, Inc.
("PMGI"), provided that PMGI shall have at least $70 million net worth and
debt not exceeding $90 million (exclusive of debt of the Companies) immediately
following the Closing. After the Closing Date, Buyer shall also continue to also
use its best efforts to remove Seller and its affiliates and its officers from
such liabilities or obligations listed on Schedule 5B(a).
(b) Supplemental Disclosure. Buyer shall have the continuing obligation
until the Closing to supplement, or amend its Schedules with respect to any
matter hereafter arising or discovered which, if existing or known at the date
of this Agreement, would have been required to be set forth or described in such
Schedules; provided, however, that for the purpose of the rights and obligations
of the parties hereunder, any such supplemental or amended disclosure shall not
be deemed to have been disclosed as of the date of this Agreement unless so
agreed in writing by Seller.
- 28 -
<PAGE> 34
(c) Planned Closing of Any Company Employment Site. Prior to the
Closing, Buyer shall have the continuing obligation to immediately advise Seller
of any planned or intended closing of any Company's employment sites existing
immediately prior to the Closing, or layoff of any Company's employees employed
immediately prior to Closing, where such closing or layoff may or will be
sufficient to invoke coverage of the Worker Adjustment and Retraining
Notification Act of 1989 for such Company.
(d) Certain Rulings. With regard to the ruling referred to in Section
3(a)(xii), Buyer will make such request for determination with reasonable
diligence.
6. Representations and Warranties of Buyer. Buyer hereby represents
and warrants to Seller as follows:
(a) Authority. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Virginia. Buyer has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate acts and other
proceedings required to be taken by Buyer to authorize the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and properly taken. This Agreement has been
duly executed and delivered by Buyer and constitutes a valid and binding
obligations of Buyer, enforceable against Buyer in accordance with its terms.
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give right to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any lien, claim, encumbrance, security
interest, option, charge or restriction of any kind upon any of the properties
or assets of the Company under, any provision of (i) the Stock Corporation Act
of the Commonwealth of Virginia, (ii) the Articles of Incorporation or bylaws of
Buyer, (iii) any material note, bond, mortgage, indenture, deed of trust,
license, lease, contract, commitment, agreement or arrangement to which Buyer is
a party or by which any of its properties are bound or (iv) any judgment, order,
or decree, or material statute, law, ordinance, rule or regulation applicable to
Buyer or its property or assets. No consent, approval, license, permit order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, is required to be obtained or made by or
with respect to Buyer in connection with the execution and delivery of this
Agreement or the consummation by Buyer of the transactions contemplated hereby,
other than (A) compliance with and filings
- 29 -
<PAGE> 35
under the HSR Act and (B) compliance with and filings under Section 13(a) or
15(d), as the case may be, of the Exchange Act.
(b) Actions and proceedings, etc. There are no (i) outstanding
judgments, orders, writs, injunctions or decrees of any court, governmental
agency or arbitration tribunal against Buyer which have an adverse effect on the
ability of Buyer to consummate the transactions contemplated hereby or (ii)
actions, suits, claims or legal, administrative or arbitration proceedings or
investigations pending or, to the best knowledge of Buyer, threatened against
Buyer, which are likely to have a material adverse effect on the ability of
Buyer to consummate the transactions contemplated hereby.
(c) Consents. No consent of any party and no consent, license, approval
or authorization of, or exemption by, or filing, restriction or declaration
with, any governmental authority, bureau, agency or regulatory authority is
required in connection with the execution, delivery, validity or enforceability
of this Agreement or the consummation of the transactions contemplated hereby
and thereby.
(d) Qualification. Buyer is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership, leasing or holding of its properties makes such qualification
necessary, except such jurisdictions where the failure so to qualify would not
have a material adverse effect on the business, assets, conditions (financial or
otherwise) or results of operations of Buyer. Buyer has made available to Seller
true and complete copies of its Articles of Incorporation, as amended to date,
and its By-laws, as in effect on the date hereof.
(e) No Broker. Buyer has not retained any broker or finder nor has any
finder or broker acted on behalf of Buyer in connection with this Agreement or
the transactions contemplated hereby.
(f) Investment Intent. Buyer is acquiring the Shares solely for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, and has no present intention or plan
to effect any resale, assignment or distribution of the Shares. Buyer
acknowledges that the Shares have not been registered or qualified under the
Securities Act of 1933 or any state securities laws and may be sold, assigned,
pledge or otherwise disposed of in the absence of such registration only
pursuant to an exemption from such registration. Buyer acknowledges that the
certificates evidencing the Shares shall each bear a restrictive legend to the
foregoing effect. Buyer has received such information from Seller and the
Companies as it has requested and acknowledges that there are no
- 30 -
<PAGE> 36
representations or warranties, express or implied, except as expressly set forth
in this Agreement.
(g) Permit Blocking. Except as set out on Schedule 6(g), neither Buyer
nor any person or entity "owned or controlled" by Buyer nor any person or entity
which "owns or controls" Buyer has been notified by the Federal Office of
Surface Mining or the agency of any state administering the SMCRA (or any
comparable state statute), that it is (A) ineligible to receive additional
surface mining permits or (B) under investigation to determine whether its
eligibility to receive such permits should be revoked, i.e., "permit blocked".
As used herein, the terms "owned or controlled" and "owns or controls" shall be
defined as set for in 30 C.F.R. ss. 773.5 (1991).
7. Mutual Covenants. Each of Seller and Buyer covenants and agrees as
follows:
(a) Cooperation. Buyer and Seller shall cooperate with each other and
shall cause their officers, employees, agents, auditors and representatives to
cooperate with each other after the Closing to ensure the orderly transition of
each Company from Seller to Buyer and to minimize any disruption to the
respective businesses of Seller, Buyer or any Company that might result from the
transactions contemplated hereby. Neither party shall be required by this
Section 7(a) to take any action that would unreasonably interfere with the
conduct of its business.
(b) Best Efforts. (i) Subject to the terms and conditions of this
Agreement, each party will use its best efforts to cause the consents of or
releases from, as appropriate, the Trustee and the Bank set forth in Section 3
to be obtained and all other conditions to the Closing to occur.
(ii) Seller shall use its best efforts to take, and cause to be taken,
all actions and to do, and cause to be done, all things necessary, proper or
advisable under applicable laws and regulations and otherwise, to obtain prior
to Closing all authorizations, consents and waivers ("Consents") required from
third parties to consummate and make effective the transactions contemplated by
this Agreement (which Consents shall include without limitation those set forth
on Schedule 4(a)), provided, however, that nothing contained herein shall
require Seller, Buyer or any Company to assume any additional obligation or
incur any additional liability in order to obtain Consents. Buyer shall use its
best efforts to assist and cooperate with Seller in such efforts. Each party
agrees to keep the other fully informed with respect to such efforts. In the
event any Consent is not obtained prior to Closing despite the best efforts of
Seller and Buyer, Buyer and Seller shall negotiate in good faith a mutually
acceptable solution to the failure to obtain any required Consent,
- 31 -
<PAGE> 37
but if a mutually acceptable solution is not reached and the failure to obtain
such Consent would have material adverse consequences to the transactions
contemplated by this Agreement, then in such event the party or parties
disadvantaged by failure to obtain such Consent shall have the right to
terminate this agreement without any further liability to the other party.
(iii) Notwithstanding the foregoing provisions of Section 7(b)(ii),
with respect to consents required with respect to the documents specified on
Schedule 3(b)(xiv) (the "Early Consents), within 30 days of execution of this
Agreement, Seller shall advise Buyer of any Early Consents seller reasonably
determines that it will not be able to obtain prior to Closing. Buyer shall
thereupon have the right for an additional 15 days to pursue the obtaining of
such Early Consents which Seller has determined are not obtainable. At the
expiration of the aforesaid 45 day period, if Buyer and Seller have not been
able to agree on a mutually acceptable solution to the failure to obtain any
required Early Consent, then seller shall have the right for a period of five
days following expiration of such 45 day period to terminate this Agreement
without any further liability to Buyer.
(c) Antitrust Notification. Each of Seller and Buyer will as promptly
as practicable, but in no event later than five business days following the
execution and delivery of this Agreement, file with the United States Federal
Trade Commission (the "FTC") and the United States Department of Justice (the
"DOJ") the notification and report form required for the transactions
contemplated hereby and any supplemental information requested in connection
therewith pursuant to the HSR Act. Any such notification and report form and
supplemental information will be in substantial compliance with the requirements
of the HSR Act. Each of Buyer and Seller shall furnish to the other such
necessary information and reasonable assistance as the other may request in
connection with its preparation of any filing or submission which is necessary
under the HSR Act. Seller and Buyer shall keep each other apprised of the status
of any communications with, and inquiries or requests for additional information
from, the FTC and the DOJ and shall comply promptly with any such inquiry or
request. Each of Seller and Buyer will use its best efforts to obtain any
clearance required under the HSR Act for the purchase and sale of the Shares.
Each party shall be responsible for its filing fees relating to the filing of
HSR Act notification and report form.
(d) Records. (i) On the Closing Date, Seller shall deliver or cause
to be delivered to Buyer all original agreements, documents, books, records and
files (collectively, "Records"), in the possession of Seller relating to the
business and operations of each Company to the extent not then in the possession
of such Company, subject to the following exceptions:
- 32 -
<PAGE> 38
(A) Buyer recognizes that certain Records may contain
incidental information relating to a Company or may relate primarily to
subsidiaries or divisions of Seller other than such Company, and that
Seller may retain such Records and shall provide copies of the relevant
portions thereof to Buyer; and
(B) Seller may retain any Tax returns, reports or forms, and
Buyer shall be provided with copies of such returns, reports or forms
only to the extent that they relate to any Company's separate returns
or separate Tax liability.
(ii) After the Closing, upon reasonable written notice, Buyer
and Seller agree to furnish or cause to be furnished to each other and their
representatives, employees, counsel and accountants access, during normal
business hours, such information (including Records pertinent to each Company)
and assistance relating to any Company as is reasonably necessary for financial
reporting and accounting matters, the preparation and filing of any Tax returns,
reports or forms or the defense of any Tax claim or assessment; provided,
however, that such access does not unreasonably disrupt the normal operations of
Seller, Buyer or such Company.
(e) Non Disclosure. Subject to applicable law or court order,
each party shall cause all such information of a non-public nature obtained by
it pursuant to this Agreement to be retained confidentially. If this Agreement
is terminated, each party shall promptly return all such information of a
non-public nature provided by the other party, shall promptly destroy all
analyses, compilations, studies or other documents of or prepared by it from
such non-public information, shall not use or disclose any such non-public
information to third parties and shall take reasonable step to cause its agents
and employees to comply with this provision.
(f) Litigation Support. The parties shall cooperate with each
other in the defense or contest, make available their personnel, and provide
such testimony and reasonable access to their books and records as shall be
necessary in connection with the defense or contest of any action, suit,
proceeding, hearing, investigation, charge, complaint or claim which questions
the validity of this Agreement or seeks to enjoin, retrain or prohibit the
transactions contemplated by this Agreement.
8. Further Assurances. From time to time, as and when
requested by either party hereto, the other party shall execute and deliver, or
cause to be executed and delivered, all such documents and instruments and shall
take, or cause to be taken, all such further or other actions, as such other
party may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
- 33 -
<PAGE> 39
9. Indemnification. (a) Tax Indemnification.
(i) Seller shall indemnify Buyer and its affiliates (including each
Company) and each of their respective officers, directors, employees and agents
and hold them harmless from (A) all liability for Taxes of any Company for the
Pre-Closing Tax Period, (B) all liability (as a result of Treasury Regulation
ss. 1.1502-6 or otherwise) for Taxes of Seller, any Affiliated Group or any
member of any Affiliated Group, (C) all liability for federal and state income
taxes and sales taxes resulting from the Section 338(g) and 338(h)(10) elections
(or any, comparable election under state or local Tax law) contemplated by
Section 10(a) of this Agreement, and (d) all liability for reasonable legal fees
and expenses attributable to any item in clause (A), (B) or (C) above.
(ii) Buyer shall, and shall cause each Company to, indemnify Seller
and its affiliates and each of their respective officers, directors, employees
and agents and hold them harmless from (A) all liability for Taxes of each such
Company (other than Taxes described in clauses (i)(A), (i)(B) or (i)(C) of this
Section 9(a)) and (B) all liability for reasonable legal fees and expenses
attributable to any item in clause (A) above.
(iii) Any Tax returns (other than those returns relating to an election
made under Section lO(a) of this Agreement) for the Pre-Closing Tax Period, the
due dates for which returns are not until after Closing and have not been filed
prior to Closing (other than for Straddle Period Tax returns), shall be prepared
by Seller and furnished, along with payment of any Tax liability due, to any
Company for approval (which approval shall not be unreasonably withheld) and
signature at least 30 days prior to the due date for filing such returns.
(iv) In the case of any taxable period that includes (but does not end
on) the Closing Date (each a "Straddle Period"):
(A) real, personal and intangible property Taxes ("Property
Taxes") of any Company attributable to the PreClosing Tax Period shall
be equal to the amount of such Property Taxes for the entire Straddle
Period multiplied by a fraction, the numerator of which is the number
of days during the Straddle Period that are in the Pre-Closing Tax
Period and the denominator of which is the number of days in the
Straddle Period;
(B) The West Virginia Severance Tax ("Severance Tax") of any
Company attributable to the Pre-Closing Tax Period shall be computed as
if such taxable period ended as of the close of business on the Closing
Date including all Severance Tax on the sale of inventory as a result
of this transaction and the STC Credits attributable to the Pre-Closing
Tax Period
- 34 -
<PAGE> 40
shall be equal to the amount of such STC Credits for the entire
Straddle Period, multiplied by a fraction, the numerator of which is
the number of days during the Straddle Period that are in the
Pre-Closing Tax Period and the denominator of which is the number of
days in the Straddle Period; and
(C) the Taxes of any Company (other than Property Taxes and
Severance Tax) attributable to the Pre-Closing Tax Period shall be
computed as if such taxable period ended as of the close of business on
the Closing Date.
Seller's indemnity obligation in respect of Taxes for a Straddle Period shall
initially be effected by its payment to Buyer of the excess of (x) such Taxes
for the Pre-Closing Tax Period over (y) the amount of such Taxes paid by Seller
or any of its affiliates (other than any Company) at any time plus the amount of
such Taxes paid by any Company on or prior to the Closing Date. Seller shall
initially pay such excess to Buyer within five days prior to the due date of any
return, report or form with respect to Straddle Period Taxes. If the amount of
such Taxes paid by Seller or any of its affiliates (other than any Company) at
any time plus the amount of such Taxes paid by any Company on or prior to the
Closing Date exceeds the amount payable by Seller pursuant to the preceding
sentence, Buyer shall pay to Seller the amount of such excess (a) in the case of
Property Taxes, at the Closing (the "Closing Tax Adjustment Amount") and (b) in
all other cases, within five days prior to the due date of the return, report or
form with respect to the final liability for such Taxes is required to be filed.
The payments to be made pursuant to this paragraph by Seller or Buyer with
respect to a Straddle Period shall be appropriately adjusted to reflect any
final determination (which shall include the execution of Form 870-AD or
successor form) with respect to Straddle Period Taxes.
(b) Other Indemnification by Seller. Seller shall indemnify
Buyer, its affiliates (including each Company) and each of their respective
officers, directors, employees and agents and hold them harmless from any loss,
liability, claim, damage or expense (including reasonable legal fees and
expenses) suffered or incurred by any such indemnified party (other than any
relating to Taxes and STC, for which indemnification provisions are set forth in
paragraphs (a), (g) and (h) of this Section 9) to the extent arising from (i)
any breach of any representation or warranty of Seller contained in this
Agreement or in any Schedule, certificate, instrument or other document
delivered by it pursuant hereto (ii) any breach of any covenant of Seller
contained in this Agreement requiring performance after the Closing Date or
(iii) any Excluded Liabilities. Seller's obligation to indemnify Buyer under
this Section 9(b) shall be subject to the following:
- 35 -
<PAGE> 41
(A) Subject to the limitations specified in Section 9(i) hereof, there
shall be no other limitation on the amount of ability for breach of
representations contained in Sections 4(a), (b), (c), (d), (e), (g) and (s);
(B) There shall be no limitation on the amount of liability for
obligations of any Company which by the express terms of this Agreement are not
to be obligations of any Company as of the Closing but instead are to be
distributed out of the Company by not later than the Closing or are to be
retained by Seller specifically including the Excluded Liabilities;
(C) For all other obligations to indemnify, Seller shall be responsible
as follows:
(w) For losses exceeding $250,000.00 if notice of a claim for
indemnification is received by Seller before the first anniversary of the
Closing;
(x) For losses exceeding $500,000.00 if notice of a claim for
indemnification is received by Seller during the period between the first and
second anniversary of the Closing;
(y) For losses exceeding $1,000,000.00 if notice of a claim
for indemnification is received by Seller during the period between the second
and third anniversary of the Closing; and
(z) For losses exceeding $5,000,000.00 if notice of a claim
for indemnification is received by Seller during the period between the third
and fourth anniversary of the Closing.
(D) Notice of any claim for indemnification shall be in writing and
shall state with specificity the nature and circumstances giving rise to such
claim and the amount thereof. Claims for indemnification shall not be
accumulated from year to year for purposes of annual thresholds.
(c) Indemnification by Buyer. Buyer shall indemnify Seller, its
affiliates, and each of their respective officers, directors, employees and
agents and hold them harmless from any loss, liability, claim, damage or expense
(including reasonable legal fees and expenses) suffered or incurred by any such
indemnified party to the extent arising from (i) any breach of any
representation or warranty of Buyer contained in this Agreement or in any
Schedule, certificate, instrument or other document delivered by it pursuant
hereto, (ii) any breach of any covenant of Buyer contained in this Agreement
requiring performance after the Closing Date, (iii) any breach of the covenant
of Buyer contained in this Agreement obligating Buyer to immediately notify
Seller of any planned or intended closing of employment sites or layoff of
employees, involving any Company's employment sites or employees
- 36 -
<PAGE> 42
existing immediately prior to the Closing, where such closing or layoff may or
will be sufficient to invoke coverage of the Worker Adjustment and Retraining
Notification Act of 1989 for such Company or (iv) any liabilities or obligations
of any Company arising from events which occur after the Closing Date except any
Excluded Liabilities. With respect to Buyer's obligation to indemnify under this
Section 9(c), Buyer shall be subject to the following:
(A) There shall be no limitation on the amount of liability for breach
of representations contained in Section 6(a)(d) and (f).
(B) For all other obligations to indemnify, Buyer shall be responsible
as follows:
(w) For losses exceeding $250,000.00 if notice of a claim for
indemnification is received by Buyer before the first anniversary of the
Closing;
(x) For losses exceeding $500,000.00 if notice of a claim for
indemnification is received by Buyer during the period between the first and
second anniversary of the Closing;
(y) For losses exceeding $1,000,000.00 if notice of a claim
for indemnification is received by Buyer during the period between the second
and third anniversary of the Closing; and
(z) For losses exceeding $5,000,000.00 if notice of a claim
for indemnification is received by Buyer during the period between the third and
fourth anniversary of the Closing.
(C) Notice of any claim for indemnification shall be in writing and
shall state with specificity the nature and circumstances giving rise to such
claim and the amount thereof. Claims for indemnification shall not be
accumulated from year to year for purposes of annual thresholds.
(d) Losses Net of Insurance, etc. The amount of any loss, liability,
claim, damage, expense or Tax for which indemnification is provided under this
Section 9 shall be net of any amounts recovered or recoverable by the
indemnified party under insurance policies with respect to such loss, liability,
claim, damage, expense or Tax and shall be (i) increased to take account of any
net Tax cost incurred by the indemnified party arising from the receipt of
indemnity payments hereunder (grossed up for such increase) and (ii) reduced to
take account of any net Tax benefit available to and/or realized by the
indemnified party arising from the incurrence or payment of any such loss,
liability, claim, damage, expense or Tax. In computing the amount of any such
Tax cost or Tax benefit, the indemnified party shall be deemed to recognize all
other items of income, gain, loss, deduction or
- 37 -
<PAGE> 43
credit before any item arising from the receipt of any indemnity recognizing
payment hereunder or the incurrence or payment of any indemnified loss,
liability, claim, damage, expense or Tax.
(e) Termination of Indemnification. The obligations to indemnify and
hold harmless a party hereto (i) pursuant to Section 9(a) shall terminate at the
time the applicable statute of limitations with respect to the Tax liability in
question expires (giving effect to any extension thereof), (ii) pursuant to
Section 9(b)(i) shall terminate when the applicable representation or warranty
terminates pursuant to Section 13, (iii) pursuant to Section 9(h)(i) shall not
terminate, (iv) with respect to any liability of any Company which by the
express terms of this Agreement are not to be obligations of any Company as of
the Closing shall not terminate and (v) pursuant to any other provision to
indemnify and hold harmless hereunder shall terminate at the close of business
four years following the Closing Date; provided, however, that as to clauses (i)
and (ii) above such obligations to indemnify and hold harmless shall not
terminate with respect to any item as to which the person to be indemnified or
the related party hereto shall have, before the expiration of the applicable
period, previously made a claim by delivering a notice (stating in reasonable
detail the basis of such claim) to the indemnifying party.
(f) Procedures Relating to Indemnification (Other than Under Sections
9(a) and (h)). In order for a party (the "indemnified party") to be entitled to
any indemnification provided for under this Agreement (other than under Sections
9(a) or (h)) in respect of, arising out of or involving a claim or demand made
by any person, firm, governmental authority or corporation against the
indemnified party (a "Third Party Claim"), such indemnified party must notify
the indemnifying party in writing, and in reasonable detail, of the Third Party
Claim within 10 business days after receipt by such indemnified party of written
notice of the Third Party Claim; provided, however, that failure to give such
notification shall not affect the indemnification provided hereunder except and
unless to the extent the indemnifying party shall have been actually prejudiced
as a result of such failure (the indemnifying party shall not be liable for any
expenses incurred during the period in which the indemnified party failed to
give such notice). Thereafter, the indemnified party shall deliver to the
indemnifying party, within five business days after the indemnified party's
receipt thereof, copies of all notices and documents (including court papers)
received by the indemnified party relating to the Third Party Claim.
If a Third Party Claim is made against an indemnified party, the
indemnifying party will be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof with counsel selected by the
indemnifying party and
- 38 -
<PAGE> 44
reasonably satisfactory to the indemnified party. Should the indemnifying party
so elect to assume the defense of a Third Party Claim, the indemnifying party
will not be liable to the indemnified party for legal expenses subsequently
incurred by the indemnified party in connection with the defense thereof. If the
indemnifying party assumes such defense, the indemnified party shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the indemnifying party, it being
understood that the indemnifying party shall control such defense. The
indemnifying party shall be liable for the fees and expenses of counsel employed
by the indemnified party for any period during which the indemnifying party has
not assumed the defense thereof (other than during any period in which the
indemnified party shall have failed to give notice of the Third Party Claim as
provided above). If the indemnifying party chooses to defend or prosecute any
Third Party Claim, all of the parties hereto shall cooperate in the defense or
prosecution thereof. Such cooperation shall include the retention and (upon the
indemnifying party's request) the provision to the indemnifying party of records
and information which are reasonably relevant to such Third Party Claim, and
making employees available on a mutually convenient and reasonable basis to
provide additional information and explanation of any material provided
hereunder. Whether or not the indemnifying party shall have assumed the defense
of a Third Party Claim, the indemnified party shall not admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the indemnifying party's prior written consent (which consent shall not be
unreasonably withheld).
(g) Procedures Relating to Indemnification of Tax Claims. If either
Seller or Buyer receives a written claim from any taxing authority that, if
successful, would result in an indemnity payment to Buyer, Seller or one of
their respective affiliates (a "Tax Claim"), the party receiving such Tax Claim
shall promptly notify the other party in writing of such Tax Claim.
With respect to any Tax Claim (other than those relating solely to
Taxes of any Company for a Straddle Period), the indemnifying party shall
control all proceedings taken in connection with such Tax Claim (including,
without limitation, selection of counsel) and, without limiting the foregoing,
may in its sole discretion forgo any and all administrative appeals,
proceedings, hearings and conferences with any taxing authority with respect
thereto, and may, in its sole discretion, either pay the Tax claimed and sue for
a refund where applicable law permits such refund suits or contest such Tax
Claim in any permissible manner. The indemnifying party shall, however, consider
in good faith the advice of the other party concerning the most appropriate
forum in which to proceed and other related matters (it being understood,
however, that all such decisions shall be left to the sole discretion of
indemnifying party); provided, however, that in
- 39 -
<PAGE> 45
no case shall the indemnifying party settle or otherwise compromise any Tax
Claim without the other party's prior written consent, which consent shall not
be unreasonably withheld. Buyer shall control all proceedings taken in
connection with any Tax Claim relating solely to Taxes of any Company for a
Straddle Period. Buyer, Seller, any Company and each of their respective
affiliates shall cooperate with each other in contesting any Tax Claim, which
cooperation shall include, without limitation, the retention and (upon request)
the provision of records and information to the other party that are reasonably
relevant to such Tax Claim.
(h) STC Indemnification and Procedures Relating Thereto. (i) Seller
shall indemnify Buyer, its affiliates (including the Companies) and each of
their respective officers, directors, employees and agents and hold them
harmless from any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses) suffered or incurred by any such indemnified
party (other than any loss, liability, claim, damage or expense relating to the
indemnification set forth in paragraphs (a) and (b) of this Section 9) arising
from any assessment by the West Virginia Department of Tax and Revenue, made
against Appalachian Mining, Inc. or Vandalia Resources, Inc. for credits, if
any, taken by Appalachian Mining, Inc. or Vandalia Resources, Inc. while either
was affiliated with Seller prior to Closing. Seller shall pay to Buyer such
amount claimed pursuant to paragraph (h)(iii) of this Section 9 within five days
of the receipt of such claim.
(ii) Buyer shall indemnify Seller, its affiliates and each of their
respective officers, directors, employees and agents and hold them harmless from
any loss, liability, claim, damage or expense (including reasonable legal fees
and expenses) suffered or incurred by any such indemnified party arising from
any assessment by the West Virginia Department of Tax and Revenue to the extent
such assessment reduces STC claimed for periods prior to the Closing Date and
was caused by actions taken by Buyer after the Closing Date. Buyer shall pay to
Seller such amount claimed pursuant to paragraph (h)(iii) of this Section 9
within five days of receipt of such claim.
(iii) If either Seller or Buyer receives a written claim from any
taxing authority that, if successful, would result in an indemnity payment to an
indemnified party or one of its affiliates pursuant to paragraph (h)(i) or (ii)
of this Section 9 (a "STC Claim"), the party receiving such STC Claim shall
promptly notify the other party in writing of such STC Claim. With respect to
any STC Claim, the procedure set forth in paragraph (g) shall be applicable.
(i) The aggregate liability of Seller under this Section 9 shall not
exceed the Purchase Price. The sole and exclusive
- 40 -
<PAGE> 46
remedy of Buyer for damages exceeding such amount shall be a right of
rescission.
(j) In no event shall either Buyer or Seller or any of their respective
affiliates, director, officers, agents or attorneys be liable for any indirect,
special, extraordinary or consequential damages under this Agreement or with
respect to the transactions contemplated hereunder or in the agreements attached
as Exhibits hereto unless specifically and expressly permitted by the terms and
provisions thereof.
10. Tax Matters. (a) Buyer shall (i) timely make an election under
Section 338(g) of the Code (and any comparable election under state or local Tax
law) with respect to each Company, (ii) join Seller in timely making an election
under Section 338(h)(10) of the Code (and any comparable election under state or
local Tax law) with respect thereto and (iii) cooperate with Seller in the
completion and timely filing of such elections in accordance with the provisions
of Temporary Regulation ss. 1.338(h)(10)-1T (or any comparable provisions of
state or local Tax law) or any successor provision. By not later than seven days
after the date hereof, Seller and Buyer shall negotiate in good faith an
agreement to allocate the sum of (i) Purchase Price and (ii) the liabilities
(other than the Excluded Liabilities) of the Companies within the meaning of
Temporary Regulations ss. 1.338(b)1T(f)(1) immediately after the Closing Date
(hereinafter collectively referred to as the "Adjusted Purchase Price"), and
such allocation shall be set forth on Schedule 10(a) to be attached hereto.
Neither Seller nor Buyer (nor any of their respective affiliates) shall take any
position on any Tax return or with any taxing authority that is inconsistent
with the Adjusted Purchase Price allocation set forth on Schedule 10(a).
(b) For any Straddle Period, Buyer shall timely prepare and file with
the appropriate authorities all Tax returns, reports and forms required to be
filed and will pay all Taxes due with respect to such returns, reports and
forms; provided that Seller will reimburse Buyer (in accordance with the
procedures set forth in Section 9(a)) for any amount owed by Seller pursuant to
Section 9(a) with respect to the taxable periods covered by such returns,
reports or forms. For any taxable period of any Company that ends on or before
the Closing Date, other than for returns, reports and forms which have been
previously filed, Seller shall timely prepare and furnish to such Company for
approval all Tax returns, reports and forms required to be filed, and will pay
all Taxes due with respect to such returns, reports and forms in accordance with
the provisions of Section 9(a). Buyer and Seller agree to cause each Company to
file all Tax returns, reports and forms for the period including the Closing
Date on the basis that the relevant taxable period ended as of the close of
business on
- 41 -
<PAGE> 47
the Closing Date, unless the relevant taxing authority will not accept a return,
report or form filed on that basis.
(c) Seller, each Company and Buyer shall reasonably cooperate, and
shall cause their respective affiliates, officers, employees, agents, auditors
and representatives reasonably to cooperate, in preparing and filing all
returns, reports and forms relating to Taxes, including maintaining and making
available to each other all records necessary in connection with Taxes and in
resolving all disputes and audits with respect to all taxable periods relating
to Taxes. Buyer and Seller recognize that each party and their respective
affiliates will need access, from time to time, after the Closing Date, to
certain accounting and Tax records and information held by any Company or Seller
to the extent such records and information pertain to events occurring prior to
the Closing Date; therefore, Buyer, Seller and their respective affiliates
agree, and Buyer agrees to cause each Company, (i) to use its reasonable efforts
to properly retain and maintain such records until such time as the other party
agrees that such retention and maintenance is no longer necessary, and (ii) to
allow Seller, Buyer and their respective agents and representatives (and agents
or representatives of any of their affiliates), at times and dates mutually
acceptable to the parties, to inspect, review and make copies of such records as
such party may deem necessary or appropriate from time to time, such activities
to be conducted during normal business hours and at the expense of the party
requesting such copies.
(d) Any refunds or credits of Taxes of any Company for any taxable
period ending on or before the Closing Date shall be for the account of Seller
except to the extent any such refund is reflected on the Working Capital
Statement, in which case such refund shall be for the account of Buyer. Any
refunds or credits of Taxes of any Company for any taxable period beginning
after the Closing Date shall be for the account of the Buyer. Any refunds or
credits of Taxes of any Company for any Straddle Period shall be apportioned
between Seller and Buyer in accordance with the formula in Section 9(a) as it
relates to a Straddle Period. Buyer shall, if Seller so requests and at Sellers
expense and if Buyer obtains, at Sellers expense, an opinion from outside tax
counsel that such action does not cause Buyer harm, cause any Company to file
for and obtain any refunds or credits to which Seller is entitled under this
Section 10(d). Buyer and Seller shall jointly control the presentation of any
such refund claim made on behalf of Seller. Buyer shall cause each Company to
forward to Seller any such refund due to Seller within 10 days after the refund
is received (or reimburse Seller for any such credit within 10 days after the
credit is allowed or applied against other Tax liability); provided however,
that any such amounts payable to Seller shall be net of any Tax cost to Buyer or
such Company, as the case may be, attributable to the receipt of such refund.
Notwithstanding the
- 42 -
<PAGE> 48
foregoing, the control of the prosecution of a claim for refund of taxes paid
pursuant to a deficiency assessed subsequent to the Closing Date as a result of
an audit shall be governed by the provisions of Section 9(g).
(e) Seller shall be responsible for filing any amended consolidated,
combined or unitary Tax returns, reports or forms for taxable years ending on or
prior to the Closing Date which are required as a result of examination
adjustments made by the Internal Revenue Service or by the applicable state,
local or foreign taxing authorities for such taxable years as finally
determined. For those jurisdictions in which separate Tax returns are filed by
any Company, any required amended returns resulting from such examination
adjustments, as finally determined, shall be prepared by Seller and furnished to
such Company for approval (which approval should not be unreasonably withheld),
signature and filing at least 30 days prior to the due date for filing such
returns.
(f) Seller shall deliver to Buyer at the Closing an affidavit in form
and substance satisfactory to Buyer, duly executed and acknowledged, certifying
that the sale of the Shares is exempt from the provisions of the Foreign
Investment in Real Property Tax Act of 1980.
(g) On the Closing Date, Buyer will cause each Company to conduct its
business in the ordinary course in substantially the same manner as presently
conducted and on the Closing Date will not permit such Company to effect any
extraordinary transactions (other than any such transactions expressly required
by applicable law or by this Agreement) that could result in Tax liability to
such company in excess of Tax liability associated with the conduct of its
business in the ordinary course.
(h) Seller shall cause the provisions of any Tax sharing or allocation
agreement to which any Company is a party to be terminated on or before the
Closing Date, such that such Company shall not have any obligation with respect
to any such agreement after the Closing Date.
(i) Buyer shall pay any stock transfer Taxes due as a result of the
sale of the Shares.
11. Assignment. This Agreement and the rights and obligations hereunder
shall not be assignable or transferable by Buyer or Seller (including by
operation of law in connection with a merger, or sale of substantially all the
assets, of Buyer or Seller) without the prior written consent of the other party
hereto; provided, however, that Buyer may assign its right to purchase the
Shares hereunder to one or more subsidiaries or affiliates of Buyer without the
prior written consent of Seller;
- 43 -
<PAGE> 49
provided further, however, that no assignment shall limit or affect the
assignor's obligations hereunder.
12. No Third-Party Beneficiaries. Except as provided in Section 9, this
Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied shall give or be construed to
give to any person or entity, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.
13. Survival of Representations. The representations and warranties in
this Agreement and in any other document delivered in connection herewith shall
survive the Closing solely for purposes of Section 9 of this Agreement and (i)
in the case of representations, other than those contained in Sections 4(a),
(b), (c), (d), (e), (g) and (s) and in Sections 6(a)-(d) and (f), shall
terminate at the close of business four years following the Closing Date, (ii)
in the case of the representations contained in Sections 4(g) and (s) shall
terminate upon the expiration of the applicable statute of limitations and (iii)
in the case of the representations contained in Sections 4(a)-(e) and in
Sections 6(a)-(d) and (f) shall not terminate. Nothing contained in this
Agreement shall extend the statute of limitations for purpose of Buyer bringing
a fraud action against Seller or ARI under the various federal and state anti
fraud and securities statutes.
14. Expenses. Whether or not the transactions contemplated hereby are
consummated, and except as otherwise provided in this Agreement, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs or expenses.
15. Attorney Fees. Should any litigation be commenced concerning this
Agreement or the rights and duties of any party with respect to it, the party
prevailing shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum for such partying attorney fees and expenses
determined by the court in such litigation or in a separate action brought for
that purpose.
16. Amendments. No amendment to this Agreement shall be effective
unless it shall be in writing and signed by both parties hereto. Each party
acknowledges that no officer, employee, agent or other representative of the
other party has authority, actual or apparent, to bind such other party to any
amendment or other modification of this Agreement, except pursuant to a written
document properly executed fly an authorized representative of such other party.
17. Notices. Notice and other communications provided for herein shall
be in writing and shall be delivered by hand or
- 44 -
<PAGE> 50
overnight courier service, mailed or sent by telecopy by the sending party, as
follows:
(i) If to Buyer:
Pittston Acquisition Company
100 First Stamford Place
Stamford, Connecticut 06912
(Telecopy No. 203-978-5205)
Attention: President
With copies to:
Pittston Coal Management Company
P.O. Box 5100
Lebanon, Virginia 24266
(Telecopy No. 703-889-6160)
Attention: General Counsel
and
Jackson & Kelly
1600 Laidley Tower
P.O. Box 553
Charleston, West Virginia 25322
(Telecopy No. 304-340-1130)
Attention: Charles Q. Gage, Esq.
and
Latham & Watkins
Suite 1000, 885 Third Avenue
New York, New York 10022-4802
(Telecopy No. 212-751-4864)
Attention: Jeffrey J. Hass
(ii) If to Seller:
In care of Addington Resources, Inc.
9431 U.S. Route 60
Ashland, Kentucky 41102
(Telecopy No. 606-928-9527)
Attention: R. Douglas Striebel,
Chief Financial Officer
- 45 -
<PAGE> 51
With copies to:
Michael D. Johnson, Esq.
1932 Carter Avenue
P.O. Box 1545
Ashland, Kentucky 41105-1545
(Telecopy No. 606-325-1690)
and
Paul E. Sullivan, Esq.
Brown, Todd & Heyburn
2700 Lexington Financial Center
Lexington, Kentucky 40507
(Telecopy No. 606-231-0011)
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight courier service
or sent by telecopy, or on the date five business days after dispatch by
certified or registered mail if mailed, in each case delivered, sent or mailed
(properly addressed) to such party as provided in this Section 17 or in
accordance with the latest unrevoked direction from such party given in
accordance with this Section 17.
18. Interpretation. The headings contained in this Agreement, in any
Exhibit or Schedule hereto and in the table of contents to this Agreement, are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. Waiver. Whenever in this Agreement a party is permitted to waive a
condition, right or obligation of the other party, such waiver to be effective
must be in writing and signed by the waiving party with notice in accordance
with this Agreement.
20. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
21. Entire Agreement. This Agreement, including the Exhibits and
Schedules attached hereto, constitutes the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter.
22. Fees. (a) Each party to this Agreement shall pay all expenses
incurred by it or on its behalf in connection with the
-46 -
<PAGE> 52
preparation, authorization, execution and performance of this Agreement,
including, but not limited to, all fees and expenses of agents, representatives,
counsel and accountants.
(b) Each party to this Agreement shall hold the other party harmless
with respect to any broker's, finder's or other similar agent's fee with respect
to the transactions contemplated hereby claimed by any broker, finder or similar
agent engaged or employed by the indemnifying party.
23. Severability. If any provision of this Agreement or the application
of any such provision to any person or circumstance shall be held invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other
provision hereof.
24. Consent to Jurisdiction. Each of Buyer and Seller irrevocably
submits to the exclusive jurisdiction of (a) the Circuit Court of Boyd County,
Kentucky, and (b) the United States District Court for the Eastern District of
Kentucky, for the purposes of any suit, action or other proceeding arising out
of this Agreement or any transaction contemplated hereby. Each of Buyer and
Seller agrees to commence any action, suit or proceeding relating hereto either
in the United States District Court for the Eastern District of Kentucky or, if,
for jurisdictional reasons, such suit, action or other proceeding may not be
brought in such court, in the Circuit Court of Boyd County, Kentucky. Each of
Buyer and Seller further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set forth
above shall be effective service of process for any action, suit or proceeding
in Kentucky with respect to any matters to which it has submitted to
jurisdiction as set forth above in the immediately preceding sentence. Each of
Buyer and Seller irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or the transactions contemplated hereby in (a) the Circuit Court of Boyd County,
Kentucky, or (b) the United States District Court for the Eastern District of
Kentucky, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
25. Non-solicitation of Personnel. Except for the employees whose names
are set forth on Schedule 24 or otherwise agreed to by Seller and Buyer in
writing, Seller hereby agrees that for a period of one year following the
Closing Date neither it nor any person affiliated with it will, directly or
indirectly, solicit or recruit any employee of any Company or any employee of
Buyer or its affiliates previously employed by any Company or otherwise request
or cause any such employee to terminate his or her
- 47 -
<PAGE> 53
employment with any Company or Buyer or its affiliates. Seller acknowledges that
the covenant contained in this Section is reasonable and necessary to protect
the legitimate business interests of Buyer. Notwithstanding the above, Seller
shall not be prohibited from employing individuals who are not on Schedule 24
who without solicitation by Seller terminate employment with the Companies and
who seek employment with Seller or its affiliates.
26. Other Agreement. At Closing, Seller shall cause the Agreement
substantially in the form attached hereto as Exhibit K to be excluded by the
parties thereto (other than Buyer) and delivered to Buyer.
27. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Kentucky.
28. Affiliate Defined. As used in this Agreement, the term "affiliate"
shall mean any person or entity that directly or indirectly controls, is
controlled by or is under common control with, any other person or entity.
29. Termination.
(a) If a condition to Buyer's obligation to close in Section 3(a)
is not satisfied on or before December 31, 1993, then Buyer shall have the right
to either waive the condition and acquire the Shares or terminate the parties
obligation to close the sale of the Shares under this Agreement. If Buyer elects
to acquire the Shares, then Buyer shall not seek indemnification from Seller
with respect to the event or facts giving rise to the failure of the condition.
If Buyer elects to terminate the parties' obligations to consummate the
transactions contemplated by this Agreement by reason of such failure, then
neither party shall have any liability to the other party in connection with the
failure to close, subject however to the provisions of Section 5A(e).
(b) If a condition to Sellers obligation to close in Section 3(b)
is not satisfied on or before December 31, 1993, then Seller shall have the
right to either waive the condition and sell the Shares or terminate the parties
obligation to close the sale of the Shares under this Agreement. If Seller
elects to sell the Shares, then Seller shall not seek indemnification from Buyer
with respect to the event or facts giving rise to the failure of the condition.
If Seller elects to terminate the parties' obligations to consummate the
transactions contemplated by this Agreement by reason of such failure, then
neither party shall have any liability to the other party in connection with the
failure to close.
- 48 -
<PAGE> 54
30. Publicity. Through the Closing, neither Seller nor Buyer shall
issue any public announcement regarding the terms of this Agreement or the
transactions contemplated hereby without the prior consent of the other party,
unless required by law in which event each party shall provide the other party
with prior opportunity to comment on any such public announcement.
31. Trade Secrets. Except as expressly provided to the contrary in this
Agreement or the Exhibits attached hereto, Seller and its affiliates shall have
the right to use any confidential or trade secrets information of the Companies
acquired through Seller's ownership of the Companies in connection with Seller's
and its affiliates activities after Closing.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
ADDINGTON HOLDING COMPANY, INC.
by /s/ Larry Addington
-------------------------------
Name: Larry Addington
Title: President
PITTSTON ACQUISITION COMPANY
by /s/ Garold R. Spindler
-------------------------------
Name: Garold R. Spindler
Title: Vice President
- 49 -
<PAGE> 55
EXHIBIT I
PITTSTON
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT ("Agreement") made this ___ day of ___________,
1993 by PITTSTON MINERALS GROUP, INC., a Virginia corporation("Guarantor") in
favor of ADDINGTON HOLDING COMPANY, INC., ADDINGTON MINING, INC., MINING
TECHNOLOGIES, INC. (collectively, the "Addington Companies").
RECITALS
A. Guarantor is the sole shareholder of Pittston Acquisition Company
("Pittston Acquisition").
B. This Agreement is entered into concurrently with and pursuant to (i)
a Stock Purchase Agreement (the "Stock Purchase Agreement") of even date
herewith between Addington Holding Company, Inc. and Pittston Acquisition; (ii)
a Coal Purchase Agreement (the "Coal Purchase Agreement") of even date herewith
between Addington Mining, Inc. ("AMI") and American Eagle Coal Company ("AECC");
(iii) a Lease Agreement (the "Lease Agreement") of even date herewith between
Addington, Inc. ("Addington") and AMI; (iv) a Royalty Agreement (the "Royalty
Agreement") of even date herewith between Appalachian Mining, Inc.
("Appalachian") and AMI; and (v) Equipment Payment Agreement ("Equipment Payment
Agreement") between AMI and Addington.
C. The Stock Purchase Agreement, the Coal Purchase Agreement, the Lease
Agreement, the Royalty Agreement and the Equipment Payment Agreement are herein
collectively referred to as the "Acquisition Documents". Pittston Acquisition,
AECC, Addington and Appalachian are herein collectively referred to as the
"Pittston Companies."
NOW, THEREFORE, Guarantor agrees as follows:
1. The Guarantor hereby absolutely and unconditionally guarantees (a)
the prompt payment in full by each of the Pittston Companies of all obligations
under each of the Acquisition Documents to which each is a party; and (b) the
punctual and faithful performance and observance by each of the Pittston
Companies of all other obligations and undertakings to be performed or observed
by the Pittston Companies pursuant to the Acquisition Documents to which each is
a party (all such obligations and liabilities being herein collectively referred
to as the "Guaranteed Obligations"), and hereby agrees that if any of the
Pittston Companies shall fail to pay or perform any of the Guaranteed
Obligations when and as the same may be due and payable, the Guarantor will
forthwith pay or discharge such Guaranteed
<PAGE> 56
Obligations punctually to all intents and purposes as though such Guaranteed
Obligations were those of the Guarantor and not the Pittston Companies;
provided, however, in no event shall the Guarantor's liability under this
Agreement exceed $157,000,000 in the aggregate.
2. In the event of any default by any OF the Pittston Companies as to
any of the Guaranteed Obligations, the Addington Companies shall have the right
immediately to proceed against the Guarantor and shall not be obligated first to
assert, prosecute and exhaust any rights or remedies the Addington Companies may
otherwise have against any of the Pittston Companies.
3. Provided the Guaranteed Obligations shall then exist, the
obligations of the Guarantor hereunder shall be absolute and unconditional,
irrespective of the validity or enforceability of any provision or term of this
Agreement, the absence of any action or proceeding to enforce the same or any
judgment recovered thereon, any waiver or consent or forbearance or indulgence
with respect to any provision thereof or with respect hereto, or any other
circumstances which might otherwise constitute a legal or equitable discharge or
defense of a guarantor.
4. The Guarantor hereby waives (a) notice of the occurrence of a
default under the Acquisition Documents or any other agreement; (b) notice of
acceptance hereof or of the terms and provisions hereof; (c) notice of any
waivers, indulgences or extensions granted to the Pittston Companies under the
Acquisition Documents or any other agreement; (d) notice of any amendment or
change in any of the terms of any of the Acquisition Documents or any other
present or future agreement relating directly or indirectly to any of the
Acquisition Documents; (e) any right to require either of the Addington
Companies first to proceed against the Pittston Companies or any other party;
and (f) to the extent the Guarantor may lawfully do so, any and all demands and
other notices of every kind which may be required to be given by any statute or
rule of law.
5. Provided the Guaranteed Obligations shall then exist, the Guarantors
guaranty hereunder is absolute and unconditional, and shall not be affected or
released by any action, failure or omission on the part of the Addington
Companies to enforce any right or remedy which it may have under this Agreement
or any other agreement relating hereto, or by any indulgence or extension to, or
waiver or acquiescence in any default by, any of the Pittston Companies or any
successor to any of the Pittston Companies, or by any modification, alteration,
amendment or Addition to, or waiver of compliance with, any provision of the
Acquisition Documents, or by the release of, or by any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or similar
proceeding with respect to, any of the
-2-
<PAGE> 57
Pittson Companies, or by any change in or release of any security or guaranty
with respect to the Acquisition Documents, or by any circumstances whatever
(with or without notice to or knowledge of the Guarantor) which might vary the
risk of the Guarantor under this Agreement or otherwise constitute a basis for a
legal or equitable discharge of a surety or guarantor, it being the intent of
the Guarantor that the guarantor's guaranty under this Agreement shall not be
discharged except by the payment and performance in full of all of the
Guaranteed Obligations.
6. Notwithstanding anything contained herein to the contrary, the
obligations of the Guarantor under this Agreement shall be subject to any
counterclaim, set-off, deduction or defense which the primary obliger (and no
other party) may have with respect to any claim which may be asserted against
Guarantor hereunder.
7. The Guarantor represents and warrants to each of the Addington
Companies as follows:
(a) Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia. Guarantor has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate acts and other
proceedings required to be taken by Guarantor to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and properly taken. This
Agreement has been duly executed and delivered by Guarantor and constitutes a
valid and binding obligation of Guarantor, enforceable against Guarantor in
accordance with its terms. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby and compliance with
the terms hereof will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give right
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any lien, claim,
encumbrance, security interest, option, charge or restriction of any kind upon
any of the properties or assets of the Guarantor under, any provision of (i) the
corporate laws of the state of its incorporation, (ii) the Articles of
Incorporation or bylaws of Guarantor, (iii) any material note, bond, mortgage,
indenture, deed of trust, license, lease, contract, commitment, agreement or
arrangement to which Guarantor is a party or by which any of its properties are
bound, or (iv) any judgment, order, or decree, or material statute, law,
ordinance, rule or regulation applicable to Guarantor or its property or assets.
No consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, or
-3-
<PAGE> 58
other third party is required to be obtained or made by or with respect to
Guarantor in connection with the execution and delivery of this Agreement.
(b) There are no (i) outstanding judgements, orders, writs,
injunctions or decrees of any court, governmental agency or arbitration tribunal
against guarantor which have an adverse effect on the ability of Guarantor to
perform under the terms of this Agreement or to consummate the transactions
contemplated hereby or (ii) actions, suits, claims or legal, administrative or
arbitration proceedings or investigations pending or, to the best knowledge of
Guarantor, threatened against Pittston Acquisition, which are likely to have a
material adverse effect on the ability of Guarantor to consummate the
transactions contemplated hereby.
(c) No consent of any party and no consent, license, approval
or authorization of, or exemption by, or filing, restriction or declaration
with, any governmental authority, bureau, agency or regulatory authority is
required in connection with the execution, delivery, validity or enforceability
of this Agreement or the consummation of the transactions contemplated hereby.
(d) Guarantor has previously furnished the Addington Companies
with a pro forma balance sheet, income statement and statement of cash flow of
Guarantor through June 30, 1993 (the "Financial Statements"). The Financial
Statements fairly present the assets, liabilities, financial condition and
results of operations of Guarantor as of the respective dates thereof, all in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved. Guarantor will furnish the Addington Companies
unaudited financial statements of the Guarantor and its subsidiaries as of the
first quarter ending after the date hereof and audited financial statements as
of December 31, 1993.
8. Consent to Jurisdiction. Each of Guarantor and the Addington
Companies irrevocably submits to the exclusive jurisdiction of (a) the Circuit
Court of Boyd County, Kentucky, and (b) the United States District Court for the
Eastern District of Kentucky, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby.
Each of Guarantor and the Addington Companies agrees to commence any action,
suit or proceeding relating hereto either in the United States District Court
for the Eastern District of Kentucky or, if, for jurisdictional reasons, such
suit, action or other proceeding may not be brought in such court, in the
Circuit Court of Boyd County, Kentucky. Each of Guarantor and the Addington
Companies further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's effective address set forth
above shall be effective service of
-4-
<PAGE> 59
process for any action, suit or proceeding in Kentucky with respect to any
matters to which it has submitted to jurisdiction as set forth above in the
immediately preceding sentence. Each of Guarantor and the Addington Companies
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (a) the Circuit Court of Boyd County, Kentucky, or (b)
the United States District Court for the Eastern District of Kentucky, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
9. All notices, requests, demands and other communications hereunder
shall be in writing and shall have been deemed to be duly given if delivered
personally or mailed first class, postage prepaid, registered or certified mail,
as follows:
If to the Guarantor:
Pittston Minerals Group, Inc.
100 First Stamford Place
Stamford, Connecticut 06912
Attention: President
With a copy to:
Charles Q. Gage, Esq.
Jackson & Kelly
1600 Laidley Tower
P. O. Box 553
Charleston, West Virginia 25322
If to the Addington Companies:
In care of Addington Resources, Inc.
9431 U.S. Route 60
Ashland, Kentucky 41102
Attention: R. Douglas Striebel
Chief Financial Officer
With a copy to:
Paul E. Sullivan, Esq.
Brown, Todd & Heyburn
2700 Lexington Financial Center
Lexington, Kentucky 40507
Any party may change the address to which such communications are to be directed
to it by giving notice to the other in the manner provided in this Section.
-5-
<PAGE> 60
10. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Kentucky.
11. All of the terms and conditions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by, the parties hereto and
their respective successors and assigns, but this Agreement and the rights and
obligations of the parties hereunder shall not be assignable.
12. This Agreement may be amended, modified, superseded or canceled,
and any of the terms and covenants hereof may be waived, only by a written
instrument executed by the parties hereto or, in the case of a waiver, by the
party waiving compliance. The failure of the Addington Companies at any time or
times to require performance of any term hereof shall in no manner affect the
right at a later time to enforce the same. No waiver by the Addington Companies
or any breach of any term contained in this Agreement in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any such breach or a waiver of any breach of any other term of this
Agreement.
13. This Agreement and the documents referred to herein set forth the
entire agreement and understanding of the parties concerning the subject matter
hereof and supersede all prior agreements, arrangements and understandings
between the parties hereto concerning the subject matter hereof. No
representation, promise, inducement or statement of intention has been made by
or on behalf of either party hereto which is not set forth in this Agreement or
such documents.
IN WITNESS WHEREOF, the undersigned has duly executed this Agreement on
the date first above written.
PITTSTON MINERALS GROUP, INC
By /s/ Karl K. Kendig
---------------------------
Its Vice President
---------------------------
-6-
<PAGE> 1
EXHIBIT 10.2
INDEMNITY AGREEMENT
THIS IS AN INDEMNITY AGREEMENT dated as of January 14, 1994, among
ADDINGTON RESOURCES, INC. ("ARI"), ADDINGTON HOLDING COMPANY, INC. ("Addington
Holding"), PITTSTON MINERALS GROUP INC. ("PMGI") and PITTSTON ACQUISITION
COMPANY ("PAC") (PMGI, together with PAC, collectively "Pittston").
Recitals
Reference is hereby made to the obligations of Addington, Inc. set
forth in (i) the Lease Agreement dated February 13, 1975 by and between Cleo
Knuckles, et al. and King Coal Company, as amended and supplemented and assigned
or sub-leased, and (ii) the Lease Agreement dated March 1, 1988 between
Addington, Inc. and South Mississippi Electric Power Association, as amended and
supplemented and assigned or sub-leased, (collectively the "Addington Leases").
Reference is made to that certain Stock Purchase Agreement (the "Stock
Purchase Agreement") dated September 24, 1993, between PAC and Addington Holding
pursuant to which Addington Holding sold to PAC all of the issued and
outstanding stock of certain subsidiaries, including Addington, Inc.
In connection with the transactions contemplated by the Stock Purchase
Agreement, ARI and Addington Holding have agreed to execute and deliver this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties to this
Agreement, the parties agree as follows:
WITNESSETH:
1. Each of ARI and Addington Holding, jointly and severally, (each an
"Indemnitor", and collectively, the "Indemnitors") hereby agrees to indemnify,
defend and hold Pittston and its or their respective agents, directors,
officers, attorneys and affiliates (individually, and "Indemnified Party" and
collectively, the "Indemnified Parties") harmless from and against any loss,
liability, claim, damage and expense (including reasonable legal fees and
expenses) suffered or incurred by an Indemnified Party under the Addington
Leases.
2. In order for an Indemnified Party to be entitled to any
indemnification provided for under this Agreement arising out of or involving a
claim or demand made by any person, firm, governmental authority or corporation
against the Indemnified Party (a "Third Party Claim"), such Indemnified Party
must notify the Indemnitors in writing, and in reasonable detail, of the Third
Party Claim within 10 business days after receipt by such
<PAGE> 2
Indemnified Party of written notice of the Third Party Claim; provided, however,
that failure to give such notification shall not affect the Indemnification
provided hereunder except and unless to the extent the Indemnitors shall have
been actually prejudiced as a result of such failure (the Indemnitors shall not
be liable for any expenses incurred during the period in which the Indemnified
Party failed to give such notice). Thereafter, the Indemnified Party shall
deliver to the Indemnitors, within five business days after the Indemnified
Party's receipt thereof, copies of all notices and documents (including court
papers) received by the Indemnified Party relating to the Third Party Claim.
3. If a Third Party Claim is made against an Indemnified Party, the
Indemnitors will be entitled to participate in the defense thereof and, if it so
chooses, to assume the defense thereof with counsel selected by the Indemnitors
and reasonably satisfactory to the Indemnified Party. Should the Indemnitors so
elect to assume the defense of a Third Party Claim, the Indemnitors will not be
liable to the Indemnified Party for legal expenses subsequently incurred by the
indemnified party in connection with the defense thereof. If the Indemnitors
assume such defense, the Indemnified Party shall have the right to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the Indemnitors, it being understood that the
Indemnitors shall control such defense. The Indemnitors shall be liable for the
fees and expenses of counsel employed by the Indemnified Party for any period
during which the Indemnitors have not assumed the defense thereof (other than
during any period in which the Indemnified Party shall have failed to give
notice of the Third Party Claim as provided above). If the Indemnitors choose to
defend or prosecute any Third Party Claim, all of the parties hereto shall
cooperate in the defense or prosecution thereof. Such cooperation shall include
the retention and (upon the Indemnitors' request) the provision to the
Indemnitors of records and information which are reasonably relevant to such
Third Party Claim, and making employees available on a mutually convenient and
reasonable basis to provide additional information and explanation of any
material provided hereunder. Whether or not the Indemnitors shall have assumed
the defense of a Third Party Claim, the Indemnified Party shall not admit any
liability with respect to, or settle, compromise or discharge, such Third Party
Claim without the Indemnitors' prior written consent (which consent shall not be
unreasonably withheld).
4. Should any litigation be commenced concerning this Agreement or the
rights and duties of any party with respect to it, the party prevailing shall be
entitled, in addition to such other relief as may be granted, to a reasonable
sum for such party's attorney's fees and expenses determined by the court in
such litigation or in a separate action brought for that purpose.
- 2 -
<PAGE> 3
5. No amendment to this Agreement shall be effective unless it shall be
in writing and signed by both parties hereto. Each party acknowledges that no
officer, employee, agent or other representative of the other party has
authority, actual or apparent, to bind such other party to any amendment or
other modification of this Agreement, except pursuant to a written document
properly executed by an authorized representative of such other party.
6. This Agreement constitutes the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings relating to such subject
matter. No representation, promise or statement of intention has been made by
either party that is not embodied herein, and neither party shall be bound by or
liable for any alleged representation, promise or statement of intention not so
set forth.
7. If any provision of this Agreement or the application of any such
provision to any person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof.
8. Each of the parties to this Agreement irrevocably submits to the
exclusive jurisdiction of (a) the Circuit Court of Boyd County, Kentucky, and
(b) the United States District Court for the Eastern District of Kentucky, for
the purposes of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of the parties to this
Agreement agrees to commence any action, suit or proceeding relating hereto
either in the United States District Court for the Eastern District of Kentucky
or, if, for jurisdictional reasons, such suit, action or other proceeding may
not be brought in such court, in the Circuit Court of Boyd County, Kentucky.
Each of the parties to this Agreement further agrees that service of any
process, summons, notice or document by U.S. registered mail to such party's
respective address as provided in paragraph 10 below shall be effective service
of process for any action, suit or proceeding in Kentucky with respect to any
matters to which it has submitted to jurisdiction as set forth above in the
immediately preceding sentence. Each of the parties to this Agreement
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (a) the Circuit Court of Boyd County, Kentucky, or (b)
the United States District Court for the Eastern District of Kentucky, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
- 3 -
<PAGE> 4
9. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Kentucky, without regard to its conflicts
of law rules.
10. All notice or communications under this Agreement shall be in
writing and shall be (1) mailed by registered or certified mail, return receipt
requested, (2) hand delivered, or (3) delivered by overnight carrier, to the
parties at the addresses set forth below their names on the signature page(s) to
this Agreement, and any notice so addressed and mailed or delivered to and/or
deposited with such carrier, freight prepaid, shall be deemed to have been given
when so mailed if mailed; or delivered if hand-delivered; or delivered to such
overnight courier if delivered by overnight courier. The parties hereto may at
any time, and from time to time, change the address(es) to which notice shall be
mailed, transmitted or otherwise delivered by written notice setting forth the
changed address(es).
11. Nothing in this Agreement shall affect the rights and obligations
of the parties to the Stock Purchase Agreement.
IN WITNESS WHEREOF, the parties have executed this as of the date set
out on the preamble hereto, but actually on the date(s) set forth below.
ADDINGTON RESOURCES, INC.
By /s/ Robert Addington
-------------------------------
Title: Vice President
---------------------------
Date: 1/14/94
----------------------------
Address:
9431 U.S. Route 60
Ashland, Kentucky 41102
Attn: President
- 4-
<PAGE> 5
ADDINGTON HOLDING COMPANY, INC.
By /s/ Robert Addington
-------------------------------
Title: Vice President
---------------------------
Date: 1/14/94
----------------------------
Address:
9431 U.S. Route 60
Ashland, Kentucky 41102
Attn: President
PITTSTON MINERALS GROUP INC.
By /s/ Karl K. Kendig
-------------------------------
Title: Vice President
---------------------------
Date: 1/14/94
----------------------------
Address:
100 First Stamford Place
Stamford, Connecticut 06912
Attn: President
PITTSTON ACQUSITION COMPANY
By /s/ Karl K. Kendig
-------------------------------
Title: Executive Vice President
---------------------------
Date: 1/14/94
----------------------------
Address:
100 First Stamford Place
Stamford, Connecticut 06912
Attn: President
- 5 -
<PAGE> 1
EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
between
ADDINGTON HOLDING COMPANY, INC.
and
ADDINGTON ACQUISITION COMPANY, INC.
----------------------------------------
Dated as of September 22, 1995
----------------------------------------
SALE OF STOCK OF
ADDINGTON MINING, INC.
MINING TECHNOLOGIES, INC.
ADDWEST MINING, INC.
ADDINGTON COAL HOLDING, INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1. Purchase and Sale of the Shares; Interim 1
Conduct of ARI and the Companies ................ 1
(a) Purchase Price ......................... 1
(b) Interim Control ........................ 1
(c) Pre-Closing Distributions .............. 2
(d) Working Capital Statement .............. 2
(e) Excess Working Capital ................. 2
(f) Disputes ............................... 3
(g) Access ................................. 3
(h) Tennessee Mining, Inc. ................. 3
2. Closing ......................................... 4
3. Conditions to Closing ........................... 4
(a) Buyer's Obligation ..................... 4
(b) Seller's Obligation .................... 6
(c) Pre-Closing and Post-Closing Actions.... 8
(d) Rescission ............................. 12
4. Representations and Warranties of Seller ........ 12
(a) Authority .............................. 12
(b) The Shares ............................. 13
(c) Organization and Standing of Each
Company ................................ 13
(d) Capital Stock of Each Company .......... 14
(e) Equity Interests ....................... 14
(f) Financial Statements; Undisclosed
Liabilities ............................ 14
(g) Taxes .................................. 15
(h) Tangible Personal Property ............. 16
(i) Real Property .......................... 16
(j) Contracts .............................. 17
(k) Litigation; Decrees .................... 20
(l) Benefit Plans .......................... 20
(m) Absence of Changes or Events ........... 22
(n) Compliance with Applicable Laws ........ 23
(o) Employee and Labor Relations ........... 24
(p) Licenses; Permits ...................... 25
(q) Bank Accounts and Powers of Attorney ... 25
(r) Transactions with Affiliates ........... 25
(s) Patents and Trademarks ................. 26
(t) Insurance .............................. 26
(u) AS IS .................................. 26
5. A. Covenants of Seller .......................... 27
(a) Access ................................. 27
(b) Pro Forma Balance Sheet ................ 27
(c) Supplemental Disclosure ................ 27
(d) No Solicitation ........................ 28
(e) Fees and Expenses ...................... 29
5. B. Covenants of Buyer ........................... 29
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
(a) Buyer's Actions ........................ 29
(b) Supplemental Disclosure ................ 30
(c) Planned Closing of Any Company
Employment Site ........................ 30
(d) Ordinary Conduct ....................... 30
6. Representations and Warranties of Buyer ......... 32
(a) Authority .............................. 32
(b) Actions and Proceedings, etc. .......... 33
(c) Consents ............................... 33
(d) Qualification .......................... 34
(e) No Broker .............................. 34
(f) Investment Intent ...................... 34
(g) Contracts; Commitments ................. 34
7. Mutual Covenants ................................ 34
(a) Cooperation ............................ 34
(b) Best Efforts ........................... 35
(c) Antitrust Notification ................. 36
(d) Records ................................ 36
(e) Non Disclosure ......................... 37
(f) Litigation Support ..................... 37
(g) Release ................................ 37
8. Further Assurances .............................. 37
9. Indemnification ................................. 38
(a) Tax Indemnification .................... 38
(b) Other Indemnification by Seller ........ 39
(c) Indemnification by Buyer ............... 40
(d) Losses Net of Insurance, etc. .......... 41
(e) Termination of Indemnification ......... 41
(f) Procedures Relating to Indemnification
(g) (Other than Under Sections 9(a))........ 41
Procedures Relating to Indemnification
of Tax Claims .......................... 43
10. Tax Matters ..................................... 44
11. Assignment ...................................... 47
12. No Third-Party Beneficiaries .................... 47
13. Survival of Representations ..................... 47
14. Expenses ........................................ 47
15. Attorney Fees ................................... 47
16. Amendments ...................................... 47
17. Notices ......................................... 48
18. Interpretation .................................. 48
19. Counterparts .................................... 48
20. Entire Agreement ................................ 48
21. Fees ............................................ 49
22. Severability .................................... 50
23. Consent to Jurisdiction ......................... 50
24. Non-solicitation of Personnel ................... 50
25. Governing Law ................................... 51
26. Affiliate Defined ............................... 51
27. Termination ..................................... 51
28. Publicity ....................................... 51
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Exhibit A Form of Opinion of Counsel to Seller
Exhibit B Form of Opinion of Counsel to Buyer
Exhibit C Form of Indemnity Agreement (Bonds and Guarantees)
Exhibit D Form of Deed
Exhibit E Form of Release
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
SCHEDULES
- ---------
<S> <C>
1 Shares of Each Company and State of Incorporation
1(h)(ii) TMI Balance Sheet
3(a)(vi) Financing Terms
3(a)(vii) Certain Buyer Consents
3(b)(vii) ARI Bonds and Guarantees
3(b)(x) Certain Seller Consents
3(c)(i) Excluded Assets
3(c)(iii) Included Assets
3(c)(iv) Assumed Liabilities
4(a) Consents
4(b) Liens on Shares
4(e) Equity Interests
4(f)(i) Financial Statements
4(g)(ii) Exceptions to Tax Returns; Tax Examinations
4(g)(iii) Tax ss.ss. 341, 168(h) and 168(f)(8) Exceptions
4(g)(iv) Tax Statute of Limitations
4(h) Tangible Personal Property
4(i) Real Property
4(j) Contracts
4(k) Litigation
4(l)(i) Welfare and Company Plans
4(l)(ii) Company Plans Noncompliance
4(l)(v) Multiemployer Plans
4(l)(vi) Agreements with Present or Former Officers
4(l)(viii) Enhanced Benefits
4(m) Material Adverse Changes
4(n) Notice of Non-Compliance with Applicable Laws
4(n)(iii) Permit Blocking
4(o) Collective Bargaining Agreements
4(p) Licenses, Permits and Authorizations
4(q) Bank Accounts and Powers of Attorney
4(s) Patents and Trademarks
4(t) Policies of Insurance
5A(b) Pro Forma Balance Sheet
5B(a) Parties to be Removed from Bonds and Guarantees
5B(d) Exceptions to Ordinary Conduct
6(g) Contracts; Commitments
10(a) Allocation of Purchase Price
24 Non Solicitation of Company Employees
</TABLE>
<PAGE> 6
STOCK PURCHASE AGREEMENT dated as of September 22, 1995, among
ADDINGTON HOLDING COMPANY, INC., a Delaware corporation ("Seller"), ADDINGTON
RESOURCES, INC., a Delaware corporation ("ARI"), ADDINGTON ACQUISITION COMPANY,
INC., a Kentucky corporation ("Buyer"), and LARRY ADDINGTON, ROBERT ADDINGTON
and BRUCE ADDINGTON (collectively, the "Addington Group").
Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, all the issued and outstanding shares of common stock (the "Shares"), of
Addington Mining, Inc., Mining Technologies, Inc., Addwest Mining, Inc. and
Addington Coal Holding, Inc. (hereinafter each, including their subsidiaries,
referred to as a "Company" and collectively, as the "Companies"), such Shares
and the shares of each subsidiary being more fully described on Schedule 1
attached hereto.
The Addington Group are parties to this Agreement for the purposes
of (i) making certain representations and warranties to Seller, and (ii)
guaranteeing the Buyer's indemnification obligations under Section 9 hereof.
ARI is a party to this Agreement for purposes of guaranteeing
Seller's indemnification obligations under Section 9 hereof.
Accordingly, the parties hereto hereby agree as follows:
1. Purchase and Sale of the Shares; Interim Conduct of ARI and
the Companies.
(a) Purchase Price. On the terms and subject to the
conditions of this Agreement, Seller will sell, transfer and deliver or cause to
be sold, transferred and delivered to Buyer, and Buyer will purchase from
Seller, free and clear of all liens, claims and encumbrances of any kind, the
Shares for an aggregate purchase price (the "Purchase Price") (subject to any
adjustments as set forth in Section 1(e) below) of THIRTY MILLION DOLLARS
($30,000,000.00) cash, plus the Royalty as defined in Section 1(h)(ii).
(b) Interim Control. Upon the execution of this Agreement,
and continuing throughout the interim period until Closing (the "Interim"), the
Buyer shall enter into immediate possession of the Companies, and Seller shall
cause Larry Addington, Robert Addington and Bruce Addington to be elected and
they shall remain directors (the "Directors") of each of the Companies during
the Interim. The Directors shall have the authority and the responsibility to
manage the day-to-day operations and activities of the Companies, but only in
the ordinary course of business and in a manner not inconsistent with this
Agreement, including, but not limited to Section 5B(d). It is understood and
agreed that in no event shall the Companies make contributions (capital or
otherwise) to Tennessee Mining, Inc. ("TMI") that would cause the TMI
Contribution (as defined below) limits to be exceeded.
<PAGE> 7
(c) Pre-Closing Distributions. It is understood and agreed
that from September 7, 1995, and continuing thereafter, no Company shall be
required to contribute funds, directly or indirectly, whether by dividend, loan
or otherwise, to Seller or any affiliate of Seller (other than another Company).
In the event that the Companies make any such distributions to Seller or any
affiliate of Seller, such funds will be reimbursed to the respective Companies
at the Closing.
(d) Working Capital Statement. Within sixty (60) days after
the Closing Date, Seller will prepare and deliver to Buyer a statement of
working capital for the Companies (the "Working Capital Statement") showing the
Companies' Combined Net Working Capital as of the close of business on the
Closing Date. "Companies' Combined Net Working Capital" means current assets
minus current liabilities of the Companies on a combined basis determined after
giving effect to the transactions to be consummated prior to or at the Closing
((i) eliminating the working capital effect of any Excluded Assets and Excluded
Liabilities to be distributed out of the Companies prior to the Closing and the
current portion of any liability for which the Companies shall not be
responsible, and (ii) including the working capital effect of any Included
Assets and Assumed Liabilities to be transferred to the Companies prior to the
Closing)), with current assets and current liabilities accounts calculated in
accordance with generally accepted accounting principles ("GAAP"), and on a
basis consistent with the past accounting practices of the Companies, except
that (x) deferred overburden shall be excluded from current assets and (y) the
accrued reclamation liabilities shall remain as stated on the July 31, 1995 Pro
Forma Balance Sheet attached as Schedule 5A(b). Notwithstanding the above, for
purposes of this Agreement, excluded from the Companies Combined Net Working
Capital shall be the following items: (1) except for the effect of the Owed
Contribution as described in Section 1(h)(ii), TMI, (2) the Equipment Payment,
as defined in Section 3(c), (3) any state and federal income tax liability, and
(4) the Consumers Power Liability and the Pittston Liability, both as defined in
Section 3(c)(iv)(B).
(e) Excess Working Capital. Subject to Section 1(h)(ii)
below, within 10 days after the final determination of the Companies Combined
Net Working Capital (as provided in Section 1(d) above), if the Companies
Combined Net Working Capital exceeds Zero Dollars ($0.00), the parties shall
adjust the Purchase Price by increasing the Purchase Price by an amount equal to
the difference between the Companies Combined Net Working Capital and $0.00. Any
such adjustment in the Purchase Price pursuant to this Section shall be paid in
cash by Buyer within 10 days after determination of the Companies Combined Net
Working Capital, by wire transfer of immediately available funds to a bank
account designated in writing by Seller.
- 2 -
<PAGE> 8
(f) Disputes. The Working Capital Statement will become
final for all purposes 30 days after receipt by Buyer unless Buyer has delivered
a detailed statement describing its objections thereto. Buyer and Seller will
use reasonable efforts to resolve any such objections. If the parties do not
achieve a final resolution within 15 days after Seller has received the
statement of objections, Buyer and Seller will within 10 days select a mutually
acceptable accounting firm to resolve any remaining objections. If Buyer and
Seller are unable to agree on the choice of an accounting firm, they will select
a nationally recognized accounting firm by lot (after excluding their respective
regular outside auditors). The selected accounting firm shall be retained
jointly by the parties on the condition, among other things, that it shall
notify the parties of its determination within 30 days after its selection. The
determination of the accounting firm so selected regarding the matters in
dispute will be set forth in writing and will be conclusive and binding upon the
parties and the Working Capital Statement shall thereupon become final. The
parties shall each pay one-half of the fees and expenses of such accounting
firm.
(g) Access. Buyer will make the books, records and financial
staff of the Companies available to Seller, its accountants and other
representatives at reasonable times and upon reasonable notice during the
preparation by Seller of the Working Capital Statement and the resolution by the
parties of any objections thereto. Buyer shall have reasonable access to the
working papers that Seller's accountants use or produce in the preparation and
calculation of the Working Capital Statement.
(h) Tennessee Mining, Inc.
(i) Reference is made to that certain letter agreement
(the "Put Agreement") dated August 4, 1995, by and among ARI and Buyer, pursuant
to which ARI obtained the right to transfer TMI to Buyer. It is understood and
agreed that the Put Agreement, which has been exercised by letter dated
September 6, 1995, remains effective, although it has been incorporated in the
terms of this Agreement. Should the transactions contemplated by this Agreement
not close for any reason, the parties will still close the transactions
contemplated by the Put Agreement, though any time limits therein relating to
the Closing of the transaction contemplated thereby shall be tolled from
September 5, 1995 to the date of expiration or termination of this Agreement.
(ii) Schedule 1(h)(ii) sets forth a pro forma balance
sheet of TMI (the "TMI Balance Sheet") reflecting the assets, liabilities and
working capital which TMI would have had if the Closing had occurred on July 31,
1995. Schedule 1(h)(ii) shows TMI's shareholder equity equal to approximately
$1,534,329.00. Since July 31, 1995 to the Closing, the Seller and the Companies
- 3 -
<PAGE> 9
shall have caused to be contributed to TMI an additional $2,500,000.00 (the "TMI
Contribution"). TMI shall not be entitled to receive more than the TMI
Contribution from the Seller and the Companies. Between July 31, 1995 and
September 7, 1995, ARI has contributed to TMI $1,160,610.00, leaving
$1,339,390.00 to be contributed to TMI after September 7, 1995 (the "Owed
Contribution"). Buyer shall pay, or cause to be paid, to the Seller an
overriding royalty equal to $1.00 per ton, up to a maximum $12,000,000.00 (the
"Royalty"), on all coal delivered to the Tennessee Valley Authority ("TVA")
under that certain coal supply contract between TMI and the TVA dated August 7,
1995 (the "TVA Contract"), on the terms and conditions set forth in the Put
Agreement. The Companies Combined Net Working Capital shall be adjusted downward
to reflect the Owed Contribution, and if the Companies Combined Net Working
Capital is negative, the Royalty shall be suspended and the Buyer shall receive
a credit and recoupment for the Royalty during such period of suspension until
the amount of the credit and recoupment is equal to the lesser of the negative
working capital or the Owed Contribution.
2. Closing. (a) The closing (the "Closing") of the purchase and
sale of the Shares shall be held at the offices of Brown, Todd & Heyburn, 2700
Lexington Financial Center, Lexington, Kentucky at 10:00 a.m. within three
business days of the satisfaction or waiver of the conditions to the Closing set
forth in Section 3 of this Agreement; provided, however, that if the Closing
shall not have occurred on or before November 6, 1995, either party shall have
the right to terminate all its rights and obligations hereunder, subject to the
provisions of Sections 1(h), 3(d), 7(e), 15, 27 and 28, which shall survive
termination of this Agreement. The date on which the Closing shall occur is
hereinafter referred to as the "Closing Date".
(b) At the Closing, (i) Buyer shall deliver to Seller, by wire
transfer to a bank account designated in writing by Seller immediately available
funds in an amount equal to the sum of (A) the Purchase Price, plus (B) the
Closing Tax Adjustment Amount (as defined in Section 9(a)), and (ii) Seller
shall deliver or cause to be delivered to Buyer certificates representing the
Shares, duly endorsed in blank or accompanied by stock powers duly endorsed in
blank in proper form for transfer, with appropriate transfer stamps, if any,
affixed.
3. Conditions to Closing. (a) Buyer's Obligation. The obligation
of Buyer to purchase and pay for the Shares is subject to the satisfaction (or
waiver by Buyer) as of the Closing of the following conditions:
(i) The representations and warranties of Seller and ARI
made in this Agreement shall be true and correct in all material
respects as of the date hereof and on and as of the
- 4 -
<PAGE> 10
Closing, as though made on and as of the Closing Date, and Seller
shall have performed or complied in all material respects with all
obligations and covenants required by this Agreement to be performed
or complied with by Seller by the time of the Closing; and Seller
shall have delivered to Buyer a certificate dated the Closing Date
and signed by an authorized officer of Seller confirming the
foregoing.
(ii) Buyer shall have received an opinion dated the Closing
Date of Brown, Todd & Heyburn PLLC, counsel to Seller, substantially
in the form of Exhibit A. Buyer also shall have received a copy of
an opinion addressed to ARI dated the Closing Date from special
Delaware counsel to ARI to the effect that the transactions
contemplated in this Agreement do not require the approval of the
stockholders of ARI under Delaware General Corporation Law.
(iii) No injunction or order of any court or administrative
agency of competent jurisdiction shall be in effect, and no statute,
rule or regulation of any governmental authority or instrumentality
shall have been promulgated or enacted, as of the Closing which
restrains or prohibits the purchase and sale of the Shares.
(iv) No action, suit or other proceeding by any person to
restrain or prohibit the purchase and sale of the Shares or seeking
material damages in connection therewith shall be pending which in
the written opinion of Buyer's counsel is reasonably likely to
succeed.
(v) The waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") shall have expired or been
terminated.
(vi) Financing shall be available to the Buyer from the CIT
Group under the terms and conditions set forth in Schedule 3(a)(vi).
(vii) Any consents required under the documents described on
Schedule 3(a)(vii) shall have been obtained.
(viii) The conditions to the ARI Shareholders' obligations
under that Agreement and Plan of Corporate Separation among Seller,
ARI, Larry Addington and Bruce Addington shall have been satisfied
or waived.
(b) Seller's Obligation. The obligation of Seller to sell
and deliver the Shares to Buyer is subject to the satisfaction (or waiver by
Seller) as of the Closing of the following conditions:
- 5 -
<PAGE> 11
(i) The representations and warranties of Buyer and the Addington
Group made in this Agreement shall be true and correct in all material
respects as of the date hereof and on and as of the Closing, as though
made on and as of the Closing Date, and Buyer and the Addington Group
shall have performed or complied in all material respects with all
obligations and covenants required by this Agreement to be performed or
complied with by Buyer and the Addington Group by the time of the Closing;
and Buyer and the Addington Group shall have delivered to Seller a
certificate dated the Closing Date and signed by an authorized officer of
Buyer and by the Addington Group confirming the foregoing.
(ii) Seller shall have received an opinion dated the Closing Date
of Wyatt, Tarrant & Combs, counsel to Buyer and the Addington GRoup,
substantially in the form of Exhibit B.
(iii) No injunction or order of any court or administrative agency
or instrumentality shall be in effect, and no statute, rule or regulation
of any governmental authority of competent jurisdiction shall have been
promulgated or enacted, as of the Closing which restrains or prohibits the
purchase and sale of the Shares.
(iv) No action, suit or other proceeding by any person to restrain
or prohibit the purchase and sale of the Shares or seeking material
damages in connection therewith shall be pending which in the written
opinion of Seller's counsel is reasonably likely to succeed.
(v) The waiting period under the HSR Act shall have expired or
been terminated.
(vi) Documentation from (A) PNC Bank ("PNC Bank", the Companies'
primary lender), individually and as agent for itself and Pittsburgh
National Bank, evidencing the release of each of ARI and Seller and their
respective assets under existing credit agreements, and (B) Provident Bank
evidencing the release of ARI under its guaranty of capitalized lease
obligations of TMI and the other Companies, satisfactory to ARI and Seller
in their sole discretion shall have been obtained.
(vii) At or prior to Closing, ARI and principals, directors,
officers and agents of ARI and its subsidiaries (excluding each Company),
shall have been removed and released from any liability or obligation
under all bonds and guarantees made for the benefit of the Companies,
including, but not limited to, the bonds and guarantees specified on
Schedule 3(b)(vii); or in the alternative, at Seller's option, shall have
been provided an Indemnity Agreement substantially
- 6 -
<PAGE> 12
in the form of the Indemnity Agreement attached hereto as Exhibit C. The
Buyer and the Addington Group will use their best efforts to obtain the
above-described releases under the bonds and guarantees in an expeditious
manner.
(viii) Seller shall have received all necessary approvals of the
transactions contemplated by this Agreement from the Boards of Directors
of ARI and Seller, and where applicable, the Companies.
(ix) ARI shall have received a fairness opinion from a nationally
recognized investment banking firm to the effect that the sale of the
Shares and the transactions contemplated by this Agreement and the
Agreement of Split-Off and Reorganization are fair from a financial point
of view to the stockholders of ARI other than the Addington Group.
(x) Any consents required under the documents described on
Schedule 3(b)(x) shall have been obtained.
(xi) Seller shall have received an opinion from special Delaware
counsel to the effect that the transactions contemplated in this Agreement
do not require the approval of the stockholders of ARI under Delaware
General Corporation Law.
(xii) A certificate of the Chief Executive Officer and the Chief
Financial Officer of the Buyer to the effect that after giving effect to
the transactions contemplated hereby and by any financing of Buyer to
consummate said transactions, the Buyer and the Companies are Solvent.
"Solvent" shall mean that after giving effect to the transactions
contemplated hereby and the financing (a) the sum of the assets, at a fair
valuation, of the Companies (taken as a whole) will exceed their debts;
(b) the Companies (taken as a whole) have not incurred and do not intend
to incur, and do not believe that they will incur, debts beyond their
ability to pay such debts as such debts mature; and (c) the Companies
(taken as a whole) will have sufficient capital with which to conduct
their business. For their purposes "debt" means any liability on a claim,
and "claim" means (i) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured
or (ii) right to an equitable remedy for breach of performance if such
breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured,
disputed, undisputed, secured or unsecured. In lieu of the foregoing,
Buyer may furnish a copy of any solvency certificate furnished to Buyer's
financing source, addressed to Seller.
- 7 -
<PAGE> 13
(xiii) The conditions to Seller's obligations under that Agreement
and Plan of Corporate Separation among Seller, ARI, Larry Addington and
Bruce Addington shall have been satisfied or waived.
(c) Pre-Closing and Post-Closing Actions.
(i) Excluded Assets. Seller shall, before the Closing, use
commercially reasonable efforts to obtain all consents and permits, and to take
all other steps necessary for the conveyance, assignment and transfer subject to
existing liens, claims, encumbrances, defects in title and other liabilities
(contingent or otherwise) existing as of the date of this Agreement, of certain
personal and real property and other items from the Companies to Seller or its
affiliates ("Excluded Assets"). "Excluded Assets" shall mean the personal and
real property and other items described on Schedule 3(c)(i), including, but not
limited to, the right to receive (including the right to enforce the right to
receive) cash payments scheduled to be received under that certain Technology
Exchange Agreement between Mining Technologies, Inc. and BHP Australia Coal Pty.
Ltd. dated July 5, 1995 (the "BHP Agreement")(three separate payments totaling
$7,000,000.00 and specifically referred to in Sections 6(b),(c) and (d) of the
BHP Agreement). The $1,000,000.00 payment from BHP for mobile equipment (the
"Equipment Payment") under Section 6(e) of the BHP Agreement shall remain with
Mining Technologies, Inc.. With respect to any Excluded Assets which are unable
to be fully conveyed, assigned or transferred out of the Companies prior to the
Closing or in connection with the taking of any action with respect to those
Excluded Assets, Seller shall use commercially reasonable efforts to obtain all
consents and permits, and to take all other steps necessary for the conveyance,
assignment or transfer of such Excluded Assets to Seller or its affiliates as
soon as practicable after the Closing, and Buyer shall cooperate, and shall
cause the Companies to cooperate, with Seller and its affiliates, in all such
efforts, including requesting third parties to consent to such conveyances and
assignments, filing applications for the transfer of regulatory permits
pertaining to the Excluded Assets and executing and delivering such further
instruments and documents as Seller may reasonably request. As soon as all
necessary consents, permits and transfers of permits have been obtained and all
other steps necessary for the conveyance, assignment and transfer of the
Excluded Assets have been taken, Buyer shall cause the Companies or other
successor in interest to the Excluded Assets to execute and deliver such
agreements and instruments as may be necessary or appropriate to convey, assign
or transfer each such Excluded Asset to the designated affiliate of Seller free
and clear of any liens or encumbrances created or permitted by Buyer other than
liens in existence prior to the Closing. All costs and expenses except Taxes,
which are to be paid in accordance with Section 10(i) below,
- 8 -
<PAGE> 14
associated with the transfer of Excluded Assets shall be the sole responsibility
of Seller.
(ii) Excluded Liabilities. As of the Closing Date, Seller
shall assume and shall be solely responsible for, and Buyer and the Companies
shall have no responsibility for, and shall indemnify and hold Buyer harmless
against any liabilities or obligations of any Company of any nature, kind or
description whatsoever, known or unknown, absolute, contingent or otherwise,
which arise or accrue or are attributable to operations, activities, events or
occurrences with respect to the following (the "Excluded Liabilities"):
(A) The ownership, operation and maintenance of the Excluded
Assets, whether before or after the Closing Date.
(B) Income taxes for periods up to the Closing Date,
including (i) accrued state and federal income taxes, as of the Closing Date,
and (ii) state and federal income taxes resulting from the transaction, except
to the extent provided otherwise in Section 10(i).
(C) The assets, businesses and liabilities (contingent or
otherwise) of ARI and its subsidiaries (other than those relating to the
Companies).
(iii) Included Assets. Seller shall, before the Closing, use
commercially reasonable efforts to take all steps necessary for the conveyance,
assignment and transfer for no additional consideration and on an "as-is,
where-is" basis, subject to existing liens, claims, encumbrances, defects in
title and other liabilities (contingent or otherwise) existing as of the date of
this Agreement of the Included Assets from Seller or its affiliates to the
Companies. "Included Assets" shall mean the personal and real property and other
items described on Schedule 3(c)(iii), including, but not limited to,
miscellaneous real property located near or adjoining the Green Valley landfill,
which will be transferred pursuant to a Deed substantially in the form of
Exhibit D, excepting and reserving such easements, rights, licenses, rights of
ingress and egress as necessary to operate and maintain said landfill. With
respect to any Included Assets which are unable to be fully conveyed, assigned
or transferred to the Companies prior to the Closing or in connection with the
taking of any action with respect to those Included Assets, Seller shall use
commercially reasonable efforts to take all other steps necessary for the
conveyance, assignment or transfer of such Included Assets to Seller or its
affiliates as soon as practicable after the Closing, and Buyer shall cooperate,
and shall cause the Companies to cooperate, with Seller and its affiliates, in
all such efforts, including requesting third parties to consent to such
conveyances and assignments, filing applications for the transfer of regulatory
- 9 -
<PAGE> 15
permits pertaining to the Included Assets and executing and delivering such
further instruments and documents as Seller may reasonably request. As soon as
all other steps necessary for the conveyance, assignment and transfer of the
Included Assets have been taken, Seller shall cause its affiliates or other
successor in interest to the Included Assets to execute and deliver such
agreements and instruments as may be necessary or appropriate to convey, assign
or transfer each such Included Asset to the designated Company free and clear of
any liens or encumbrances created or permitted by Seller other than liens in
existence prior to the date of this Agreement. All costs and expenses except
Taxes, which are to be paid in accordance with Section 10(i), associated with
the transfer of Included Assets shall be the sole responsibility of Buyer.
(iv) Assumed Liabilities. As of the Closing Date, Buyer shall
assume and shall be solely responsible for, and Seller and ARI and its
affiliates shall have no responsibility for, and shall hold Seller, ARI and its
affiliates harmless against any liabilities or obligations of any nature, kind
or description whatsoever, known or unknown, absolute, contingent or otherwise,
which arise or accrue or are attributable to operations, activities, events or
occurrences with respect to the following (the "Assumed Liabilities"):
(A) The ownership, operation and maintenance of the
Included Assets, after the Closing Date and their transfer to Buyer.
(B) The liabilities specified on Schedule 3(c)(iv),
including, but not limited to, (1) liabilities or obligations owed to Pittston
Acquisition Company under that certain Stock Purchase Agreement dated as of
September 24, 1993, including, but not limited to, workers' compensation claims
and unmined minerals taxes (collectively, the "Pittston Liability"), (2) debt
obligations and liabilities to PNC Bank, (3) liabilities or obligations under
the bonds and guarantees specified on Schedule 3 (b)(vii), (4) obligations
arising under the settlement agreement with Consumers' Power dated June 28, 1994
(the "Consumers Power Liability"), and (5) certain ongoing or threatened
litigation ("Assumed Litigation").
(C) The Companies and their assets, businesses or
liabilities, contingent or otherwise except as otherwise expressly provided in
this Agreement.
(v) Assumed Litigation. With respect to the Assumed
Litigation specified on Schedule 3(c)(iv) and which ARI, and/or any of its
subsidiaries (except any of the Companies) is or becomes a party, the parties
agree as follows:
- 10 -
<PAGE> 16
(A) Buyer:
(1) shall assume control of and be responsible
for the Assumed Litigation,
(2) may contest and defend against the Assumed
Litigation at its sole expense in any manner it reasonably may deem appropriate
(including the choice of counsel and experts),
(3) may consent to the entry of any judgment or
enter into any settlement with respect to the Assumed Litigation with the prior
consent of Seller or any affiliates of Seller (which shall not be unreasonably
withheld) provided, however, that a release of ARI and its subsidiaries is
obtained,
(4) shall pay any final judgment or (provided
that Buyer has approved or consented thereto) settlement entered into with
respect to the claims of any party in the Assumed Litigation; provided, however,
the foregoing shall in no way limit the right of Buyer to exhaust its rights of
appeal at its own cost and expense prior to the payment of any judgment.
(B) After the Closing Date, Seller will provide, and
will cause each of its affiliates, if applicable, to provide, Buyer with full
access, at any reasonable time and from time to time, to such information and
data relating to the Assumed Litigation as Buyer may reasonably request, and
Seller will furnish and request independent accountants and outside legal
counsel of Seller or any affiliate to furnish to Buyer such additional
information or documents relating to the Assumed Litigation in the possession of
such persons as Buyer may from time to time reasonably request. In addition,
Seller will cooperate, and will cause its affiliates to cooperate, with Buyer
and its legal counsel in the defense or contest of the Assumed Litigation,
including making available their respective officers and other personnel to
attend hearings, depositions and trials, as Buyer may reasonably request in
connection with the defense or contest of the Assumed Litigation but Buyer shall
reimburse Seller and each of its affiliates for all costs and expenses incurred
in connection therewith.
(d) Rescission. In the event that either party elects to
terminate its rights and obligations hereunder in accordance with the terms of
this Agreement, the control of the Companies vested with the Buyer, and the
management authority vested in the Directors during the Interim pursuant to
Section 1(b) shall be automatically revoked and rescinded.
4. Representations and Warranties of Seller and ARI. For
purposes of Seller's and ARI's representations and warranties contained in this
Section 4, to the extent any representation or
- 11 -
<PAGE> 17
warranty is made to the best of Seller's and ARI's knowledge, such
representation or warranty is limited to the actual knowledge, without
investigation, of the individual members of ARI's board of directors and ARI's
executive officers, but excluding the Management Group. Seller hereby represents
and warrants, but only to the extent that Larry Addington, Robert Addington,
Bruce Addington, Doug Moore, John Lynch, Jeff Sartaine, Norm Cornett and Bernie
Mason (the "Management Group") do not have actual knowledge to the contrary as
of the date hereof, to Buyer as follows:
(a) Authority. Seller and ARI are corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Seller and ARI have all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. All corporate acts and other proceedings required to be taken by Seller
and ARI to authorize the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
properly taken. This Agreement has been duly executed and delivered by Seller
and ARI and constitutes a valid and binding obligation of Seller and ARI,
enforceable against Seller and ARI in accordance with its terms. The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will not,
conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any lien, claim or encumbrance of any kind
upon any of the properties or assets of any Company (including the Included
Assets) under, any provision of (i) the General Corporation Law of the State of
Delaware and the corporation laws of each state of incorporation of each Company
and each state where each Company is qualified or required to be qualified to
conduct business, (ii) the Certificate or Articles of Incorporation or By-laws
of each of Seller, ARI or any Company, (iii) any material note, bond, mortgage,
indenture, or deed of trust to which Seller, ARI or any Company is a party or by
which any of their respective properties or assets are bound except as disclosed
on Schedule 4(a) or (iv) any judgment, order or decree, or material statute,
law, ordi nance, rule or regulation applicable to Seller, ARI or any Company or
the property or assets of Seller, ARI or any Company. Except as disclosed on
Schedule 4(a) and except in the ordinary course of business following the
Closing, no consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, or any other third party is required to be obtained or made by or with
respect to Seller, ARI or any Company or any of their respective affiliates in
connection with (i) the execution and delivery of this Agreement or the
consummation of the transactions
- 12 -
<PAGE> 18
contemplated hereby or (ii) the conduct by any Company of its business following
the Closing as conducted on the date hereof, other than (A) compliance with and
filings under the HSR Act, (B) compliance with and filings under Section 13(a)
or 15(d), as the case may be, of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and (C) compliance with and filings under various Federal
and state environmental and/or mining laws.
(b) The Shares. The Shares and the shares of each Company
are duly authorized and validly issued and fully paid and non-assessable. Except
as described on Schedule 4(b), Seller and any Company that owns capital stock of
or other equity interests in any other Company have good and valid title to the
Shares, free and clear of any liens, claims and encumbrances of any kind. Upon
delivery to Buyer at the Closing of certificates representing the Shares, duly
endorsed by Seller for transfer to Buyer, and upon Seller's receipt of the
Purchase Price, good and valid title to the Shares will pass to Buyer, free and
clear of any liens, claims, encumbrances, security interests, options, charges
and restrictions of any kind. Other than this Agreement, or credit agreements
with any financial institution that Buyer is assuming, the Shares and the shares
of each Company are not subject to any voting trust agreement or other contract,
agreement, arrangement, commitment or understanding, including any such
agreement, arrangement, commitment or understanding restricting or otherwise
relating to the voting, dividend rights or disposition of the Shares or the
shares of any Company.
(c) Organization and Standing of Each Company. Each Company
is a corporation duly organized and validly existing under the laws of the state
identified on Schedule 1. Each Company is duly qualified and in good standing to
do business in each jurisdiction (shown on Schedule 1) in which the nature of
its busi ness or the ownership, leasing or holding of its properties makes such
qualification necessary, except such jurisdictions where the failure so to
qualify would not have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations of the Company.
Seller has made available to Buyer true and complete copies of the Articles of
Incorporation, as amended to date, and the By-laws, as in effect on the date
hereof, of each Company. The stock certificate and transfer books of each
Company (which have been made available for inspection by Buyer) are true and
complete.
(d) Capital Stock of Each Company. The authorized capital
stock, par value per share, and the number of issued and outstanding shares for
each Company, is set forth on Schedule 1. The Shares and the shares of each
Company are duly authorized and validly issued and are fully paid and
nonassessable. Seller is the registered holder of the Shares. The Shares and the
shares of each Company have not been issued in violation of, and none of the
- 13 -
<PAGE> 19
Shares and none of the shares of any Company is subject to, any preemptive or
subscription rights in favor of any third party. Except as set forth above,
there are no shares of capital stock or other equity securities of any Company
outstanding. There are no outstanding warrants, options, agreements, convertible
or exchangeable securities or other commitments (other than this Agreement)
pursuant to which Seller or any Company is or may become obligated to issue,
sell, purchase, return or redeem any shares of capital stock or other securities
of any Company, and there are not any equity securities of any Company reserved
for issuance for any purpose.
(e) Equity Interests. Except as described on Schedule 4(e),
no Company directly or indirectly owns any capital stock of or other equity
interests in any corporation, partnership or other entity.
(f) Financial Statements; Undisclosed Liabilities.
(i) Attached is Schedule 4(f)(i), setting forth the
unaudited statement of assets, liabilities and parent investment of the combined
Companies as of December 31, 1994 (collectively, the "Balance Sheet"), and the
related statements of operating revenues and expenses and parent investment of
the combined Companies for each of the years in the three year period ended
December 31, 1994 and unaudited statement of assets, liabilities and parent
investment and such related statements for the year to date periods ended June
30, 1994 and June 30, 1995 (the financial statements described above,
collectively, the "Financial Statements").
(ii) The Financial Statements for all periods presented
reflect, in accordance with GAAP and on a consistent basis which is mutually
agreeable to the Buyer and Seller, the accounting results for only the assets
and liabilities and related revenues and expenses of the Companies and any other
transactions contemplated by this Agreement which should appropriately be
included.
(iii) Seller agrees to promptly provide to Buyer upon request
any other financial statements, data or information reasonably requested by
Buyer.
(iv) To the best of Seller's and ARI's knowledge, there are
no liabilities, contingent or otherwise, except as set forth on the Financial
Statements or arising out of the ordinary course of business since the dates of
the Financial Statements.
(g) Taxes.
(i) For purposes of this Agreement, (A) "Tax" or "Taxes"
shall mean all Federal, state, local and foreign taxes and assessments and any
other governmental impositions which may be
- 14 -
<PAGE> 20
imposed, no matter how measured or applied, including all interest, penalties
and additions imposed with respect to such amounts; (B) "Pre-Closing Tax Period"
shall mean all taxable periods ending on or before the Closing Date and the
portion ending on the Closing Date of any taxable period that includes (but does
not end on) such day; and (C) "Code" shall mean the Internal Revenue Code of
1986 and the Regulations thereunder, as amended.
(ii) Except as set forth on Schedule 4(g)(ii) or Schedule
4(l)(ii), (A) each Company and each affiliated group (within the meaning of
Section 1504 of the Code) or consolidated, combined or unitary group (under any
state or local Tax law) of which any such Company is or has been a member and
which ARI is the common parent within the meaning of Section 1504 of the Code or
any analogous provision of state or local Tax law (each such group, an
"Affiliated Group") has filed or caused to be filed in a timely manner (within
any applicable extension periods) all Tax returns, reports and forms required to
be filed by any taxing authority or any tax laws, including but not limited to
the Code and any applicable state, local or foreign tax laws, (B) all Taxes
shown to be due on such returns, reports and forms have been timely paid in full
or will be timely paid in full by the due date thereof, (C) no tax liens have
been filed and no claims are being asserted in writing with respect to any Taxes
and (D) no examinations or inquiries are currently being conducted by any taxing
authority.
(iii) Except as set forth in Schedule 4(g)(iii), (A) neither
Seller nor any of its affiliates has made with respect to any Company, or any
property held by any Company, any consent under Section 341 of the Code, (B) no
property of any Company is "tax-exempt use property" within the meaning of
Section 168(h) of the Code and (C) no Company is a party to any lease made
pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954.
(iv) Except as set forth in Schedule 4(g)(iv), there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any Tax returns required to be filed with respect to any Company,
and neither any Company nor any Affiliated Group has requested any extension of
time within which to file any Tax return, which return has not yet been filed.
(v) Reserves sufficient for the payment of all Taxes, other
than income Taxes, have been established.
(h) Tangible Personal Property. Schedule 4(h) is a list,
which has been prepared by the Management Group, of each item of tangible
personal property which will be owned or leased by any Company as of the
Closing. To the best of Seller's and ARI's knowledge, except as described in
Schedule 4(h), each Company owns all of its tangible personal property listed on
Schedule 4(h) and all other tangible personal property reflected on each of its
books
- 15 -
<PAGE> 21
and records as being owned by each of it, free and clear of all liens and
encumbrances, except for liens for ad valorem property taxes not yet due and
payable, purchase money security interests arising in the ordinary course of
their respective businesses, and each Company is entitled to possession of its
leased tangible personal property listed on Schedule 4(h), with all such leases
being valid and in full force and effect.
(i) Real Property. Schedule 4(i) is a list, which has been
prepared by the Management Group, of all real property which will be owned by
each Company as of the Closing. To the best of Seller's and ARI's knowledge,
Schedule 4(i) is (i) a true and complete description of all real property which
will be owned by each Company as of the Closing and all buildings and other
structures located thereon; (ii) an identification of all leases, subleases,
easements, licenses or other agreements, together with all amendments thereto,
under which each Company will be, as of the Closing, a lessor, lessee, licensor,
licensee, grantor, grantee or other party with respect to any real property or
any interest therein (except where a Company acquired its interest in such real
property subject to any of the foregoing); and (iii) an identification of all
options which will be held by each Company as of the Closing or contractual
obligations which will exist on the Closing Date on the part of each Company to
purchase or acquire any interest in any real property. Except as indicated in
Schedule 4(i), to the best of Seller's and ARI's knowledge, (i) each of Company
owns the real property described in Schedule 4(i) as owned by it in fee, free
and clear of all liens, encumbrances, equities, claims, covenants, conditions,
reservations, restrictions, easements, rights, rights of way and other
agreements arising by, through or under Seller or any Company or any of its or
their affiliates; (ii) each of the leases, subleases, easements, licenses,
agreements and options described in Schedule 4(i) is a valid, binding,
enforceable agreement of each of the parties thereto, and is in full force and
effect, and each Company has performed all covenants and obligations in all
material respects required to be performed by it under such lease, sublease,
easement, license, agreement and option and there exists no material default or
event which, with lapse of time or notice to it, would constitute a material
default by such Company; and (iii) neither Seller nor any Company has received
any notice that a lessor, grantor, licensor or optionor under any of such
leases, subleases, easements, licenses, agreements or options intends to cancel
or terminate any of such leases, subleases, agreements, licenses or options or
to exercise or not to exercise any option of any of such leases, subleases,
easements, licenses or agreements. To the best of Seller's and ARI's knowledge,
there are no eminent domain or condemnation proceedings pending or, threatened
against any asset or property of any Company.
- 16 -
<PAGE> 22
(j) Contracts. Schedule 4(j) has been prepared by the Management
Group. To the best of Seller's and ARI's knowledge, Schedule 4(j) contains a
list of agreements, contracts, personal property leases (other than those listed
on Schedule 4(i)) and commitments (whether written or oral) to which, as of the
Closing Date, any Company will be a party or which, as of the Closing Date, will
affect or bind any Company or any of its property (including the Included
Assets) (except those made in the ordinary course of business and requiring
aggregate future payments or performance by any Company or receipts having a
value of less than $30,000), including without limitation, the following:
(a) notes, mortgages, indentures, loan or credit agreements,
equipment lease agreements, security agreements and
other agreements and instruments reflecting obligations
for borrowed money or other monetary indebtedness or
otherwise relating to the borrowing of money by, or the
extension of credit to any Company or related to its
business and binding agreements or commitments to enter
into any such agreements or commitments;
(b) management consulting and employment agreements and
binding agreements or commitments to enter into same;
(c) coal sales agreements, purchase orders, contract bids or
other agreements and commitments to sell or offer to
sell coal, or to purchase or offer to purchase coal;
(d) coal sales agency agreements or commitments authorizing
any person to act as agent for the purchase or sale of
coal or to otherwise represent any Company in connection
with the purchase or sale of coal;
(e) contract mining agreements, whether as contract miner or
owner/employer;
(f) processing, storage, loading or transloading agreements
or other agreements or commitments pursuant to which any
Company utilizes or is obligated to utilize any
preparation plant, stockpile area, crushing plant,
screening plant, tipple, processing facility, rail car
or unit train loading facility, barge loading facility
or other installation or facility owned, leased or used
by it to process, wash, crush, grade, screen, store,
load, transload
- 17 -
<PAGE> 23
or ship coal for persons other than a Company (a "Third
Party") or any agreement or contract pursuant to which
any Third Party utilizes or is obligated to utilize any
preparation plant, stockpile area, crushing plant,
screening plant, tipple, processing facility, rail car
or unit train facility, barge loading facility or other
installation or facility owned, leased or used by such
Third Party to process, wash, crush, grade, screen,
store, load, transload or ship coal for any Company;
(g) agreements relating to the transportation and movement
of coal mined or sold by any Company or agreements or
commitments for any rates, tariffs or other charges
applicable to such transportation or movement;
(h) agreements to pay any overriding royalty, finder's fee,
commission or other compensation or consideration or to
pay any person in connection with or related to the
identification, purchase, sale, leasing or other
acquisition of any real property, equipment, machinery,
personal property, lease, contract, opportunity, permit,
license, authorization or other right or asset, tangible
or intangible, of any Company;
(i) option, purchase and sale or lease agreements involving
any real property, equipment, machinery, personal
property or other asset, tangible or intangible;
(j) agreements and purchase orders entered into or issued in
the ordinary course of business for the purchase or sale
of goods (other than coal), services, supplies or
capital assets;
(k) joint venture or other agreements involving the sharing
of profits or losses;
(1) contracts or agreements with ARI, Seller, or any
subsidiary or affiliate of either, or any director or
officer of ARI, Seller, or any subsidiary or affiliate
of either, or any person who is an immediate relative of
any such person, or any combination of such persons;
- 18 -
<PAGE> 24
(m) outstanding powers of attorney empowering any person,
company or other organization to act on behalf of any
Company;
(n) outstanding guarantees, subordination agreements,
indemnity agreements and other similar types of
agreements, whether or not entered into in the ordinary
course of business, which any Company is or may become
liable for or obligated to discharge, or any asset of
any Company is or may become subject to the satisfaction
of, any indebtedness, obligation, performance or
undertaking of any other person, except for
indemnification agreements contained in any of the
instruments listed in the Schedules hereto;
(o) contracts, orders, decrees or judgments preventing or
restricting any Company from carrying on business in any
location;
(p) agreements, contracts or commitments relating to the
acquisition of the outstanding capital stock or equity
interest of any business enterprise; and
(q) contracts, commitments or obligations not made in the
ordinary course of business and having unexpired terms
in excess of one year or requiring aggregate future
payments or receipts in excess of $30,000 or otherwise
material to the business or operations of any Company.
Buyer has had access and has obtained for itself true and complete copies of all
such written leases, agreements, contracts, commitments and related agreements
listed on Schedule 4(j), including all amendments, modifications, waivers and
elections applicable thereto.
To the best of Seller's and ARI's knowledge, except as set forth in
Schedule 4(j), such leases, agreements, contracts, commitments and related
agreements are valid and binding, enforceable in accordance with their
respective terms (subject to any applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting generally
the enforcement of creditors' rights) and are in full force and effect. To the
best of Seller's and ARI's knowledge, except as disclosed in Schedule 4(j),
there is not under any such lease, contract, agreement, commitment or related
agreement, any existing material breach or material default (or event or
-19-
<PAGE> 25
condition, which after notice or lapse of time, or both, would constitute a
material breach or material default), by Seller or any Company, or to the
knowledge of Seller and ARI any other party thereto.
(k) Litigation; Decrees. No Company is a party to any material
(i.e., amount in controversy in excess of $100,000) lawsuit, claim (including
without limitation claims for occupational pneumoconiosis, occupational injury
and occupational disease), proceeding or investigation, and to the best of
Seller's and ARI's knowledge, no such lawsuit, claim, proceeding or
investigation has been threatened in writing within the last 24 months, by or
against or affecting any Company or any of its properties, assets, operations or
businesses other than as set forth on Schedule 4(k). No Company is in default
under any material judgment, order or decree of any court, administrative agency
or commission or other governmental authority or instrumen tality, domestic or
foreign, applicable to it or any of its proper ties, assets, operations or
businesses.
(l) Benefit Plans. (i) To the best of Seller's and ARI's
knowledge, no Company has ever maintained or contributed to, or now maintains or
contributes to, any "employee pension benefit plan" (as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(referred to herein as a "Pension Plan") or "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA) (referred to herein as a "Welfare Plan")
except such Welfare Plans disclosed on Schedule 4(l)(i). Schedule 4(l)(i) also
discloses any deferred compensation plan, bonus plan, incentive plan, disability
or other group insurance plan, stock option plan, employee stock purchase plan,
vacation plan, severance plan, sick leave plan or policy, holiday plan or
policy, maternity leave plan or policy or any other benefit plan, program,
agreement (including employment agreement or union contracts), arrangements or
commitments of any kind, maintained by any Company, that is not a Pension Plan
or Welfare Plan. Seller has delivered to Buyer true, complete and correct copies
of (A) each plan disclosed on Schedule 4(l)(i) (a "Company Plan") (or, in the
case of any unwritten Company Plans, descriptions thereof), (B) the most recent
annual report on Form 5500 filed with the Internal Revenue Service with respect
to each Company Plan (if any such report was required by applicable law), (C)
the most recent summary plan description for each Company Plan for which a
summary plan description is required by applicable law and (4) each trust
agreement and insurance or annuity contract relating to any Company Plan.
(ii) To the best of Seller's and ARI's knowledge, each Company Plan
has been administered in all material respects in accordance with its terms,
except as disclosed in Schedule 4(l)(ii). To the best of Seller's and ARI's
knowledge, each Company, its subsidiaries and all Company Plans are in
compliance
-20-
<PAGE> 26
in all material respects with the applicable provisions of ERISA and the
Internal Revenue Code of 1986, as amended (the "Code"), except as disclosed in
Schedule 4(l)(ii). To the best of Seller's and ARI's knowledge, except as
disclosed in Schedule 4(l)(ii), all reports, returns and similar documents with
respect to the Company Plans required to be filed with any governmental agency
or distributed to any Company Plan participant have been duly and timely filed
or distributed. To the best of Seller's and ARI's knowledge, except as disclosed
in Schedule 4(l)(ii), there are no investigations by any governmental agency,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Company Plans), suits or proceedings against or
involving any Company Plan or asserting any rights or claims to benefits under
any Company Plan that could give rise to any material liability, and there are
not any facts that could give rise to any material liability in the event of any
such investigation, claim, suit or proceeding.
(iii) To the best of Seller's and ARI's knowledge, each Company Plan
that is a Welfare Plan (including any Welfare Plan covering retirees or other
former employees) may be amended or terminated without material liability to any
Company on or at any time after the Closing Date. To the best of Seller's and
ARI's knowledge, the Companies and its subsidiaries comply with the applicable
requirements of Section 4980B(f) of the Code with respect to each Company Plan
that is a group health plan, as such term is defined in Section 5000(b)(1) of
the Code.
(iv) To the best of Seller's and ARI's knowledge, neither Seller
nor any Commonly Controlled Entity (as defined below) maintains a Pension Plan
subject to Title IV of ERISA or Section 412 of the Code.
(v) To the best of Seller's and ARI's knowledge, except as
disclosed in Schedule 4(l)(v), at no time within the five years preceding the
Closing Date has Seller or any person or entity that, together with Seller, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(each a "Commonly Controlled Entity") been required to contribute to any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA), and neither
Seller nor any Commonly Controlled Entity has incurred any withdrawal liability,
within the meaning of Section 4201 of ERISA, which liability has not been fully
paid as of the date hereof, or announced an intention to withdraw, but not yet
completed such withdrawal, from any multiemployer plan. To the best of Seller's
and ARI's knowledge, except as disclosed on Schedule 4(l)(v), no action has been
taken and no circumstances exist that, alone or with the passage of time, could
result in either a partial or complete withdrawal from any multiemployer plan.
-21-
<PAGE> 27
(vi) Schedule 4(l)(vi) sets forth and identifies all agreements to
which any Company is a party, whether oral or in writing, with present or former
officers, directors or employees of, or consultants to, any Company which (A)
obligate any Company to pay, on any date or dates during the remaining term of
such agreement, an aggregate amount in excess of $100,000, or (B) cannot be
terminated on 60 days' notice.
(vii) To the best of Seller's and ARI's knowledge, neither any
Company nor any related person (within the meaning of section 9701(c)(2) of the
Code) has any liability under subtitle J of the Code (Coal Industry Health
Benefits).
(viii) To the best of Seller's and ARI's knowledge, except as set
forth in Schedule 4(l)(viii), no employee or former employee with any Company or
any beneficiary thereof will become entitled to any bonus, severance, job
security or similar benefits or any enhanced benefits as a result of the
transactions contemplated hereby.
(m) Absence of Changes or Events. Except as disclosed on Schedule
4(m) or otherwise expressly permitted by the terms of this Agreement (including
without limitation the distribution of Excluded Assets and excess working
capital as contemplated by this Agreement), to the best of Seller's and ARI's
knowledge, there has not been any material adverse change in the business,
assets, financial condition or results of operations of the Companies taken as a
whole since June 30, 1995 to the date hereof; and to the best of Seller's and
ARI's knowledge, Seller has caused the business of each Company, since June 30,
1995 to the date hereof, to be con ducted in the ordinary course and has made
all reasonable efforts consistent with past practices to preserve each such
Company's relationships with customers, suppliers and others with whom such
Company deals.
(n) Compliance with Applicable Laws. (i) Except as set forth in
Schedule 4(n), which has been prepared by the Management Group, to the best of
Seller's and ARI's knowledge, each Company is in compliance with all applicable
statutes, laws, ordinances, rules, orders and regulations of any governmental
authority or instrumentality, domestic or foreign (including, without
limitation, the Surface Mining Control and Reclamation Act of 1977, as amended
("SMCRA"), the Federal Mine Safety and Health Act of 1977, as amended, and the
Black Lung Benefits Reform Act of 1977, as amended), except where noncompliance
(individually or in the aggregate) would not have a material adverse effect on
the business, assets, condition (financial or otherwise) or results of
operations of such Company. In addition, each of the Companies is in material
compliance with, and in good standing under, applicable workers' compensation
and black lung laws. Except as set forth in Schedule 4(n), to the best of
Seller's and ARI's knowledge, Seller
-22-
<PAGE> 28
has not received any written communication from a governmental authority that
alleges that any Company is not in compliance, in all material respects, with
all material Federal, state, local or foreign laws, ordinances, rules and
regulations.
(ii) Except as set forth in Schedule 4(n), to the best of Seller's
and ARI's knowledge without investigation none of the operations or properties
of any Company is the subject of any Federal, state or foreign investigation
evaluating whether any remedial action is needed to respond to a release of any
Hazardous Substance (as hereinafter defined) into the environment, and neither
Seller nor any Company has received any written communication from a
governmental authority that alleges that any Company is not in compliance, and
each Company is in compliance, in all respects, except where noncompliance
(individually or in the aggregate) would not have a material adverse effect on
the business, assets, condition (financial or otherwise) or results of
operations of such Company, with all Federal, state, local or foreign laws,
ordinances, codes, rules and regulations relating to the environment
("Environmental Laws"). To the best of Seller's and ARI's knowledge, except as
set forth in Schedule 4(n), Seller (in respect of the business of each Company)
and each Company have filed all notices and compliance reports required to be
filed under any Environmental Law indicating past or present treatment, storage
or disposal of a Hazardous Substance or reporting a spill or release of a
Hazardous Substance into the environment. Except as set forth in Schedule 4(n),
to the best of Seller's and ARI's knowledge without investigation no Company has
any material contin gent liabilities in respect of its business in connection
with any Hazardous Substance that individually or in the aggregate would have a
material adverse effect on the business, assets, condition (financial or
otherwise) or results of its operations. "Hazardous Substance" shall mean: (i)
any hazardous, toxic or dangerous waste, substance or material defined as such
in (or for the purposes of) the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, Super Fund Amendments and
Reauthorization Act and any so-called superfund or superlien law, or any other
Environmental Law, including Environmental Laws relating to or imposing
liability or standards of conduct concerning any hazardous, toxic or dangerous
waste, substance or material in effect on the date of this Agreement, (ii)
petroleum, asbestos or PCBs and (iii) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any Federal, state,
foreign or local governmental authority pursuant to any Environmental Law or any
health and safety or similar law, code, ordinance, rule or regulation, order or
decree, and which may or could pose a hazard to the health and safety of workers
at or users of any properties of any Company or cause offsite damage to adjacent
property owner or cause damage to the environment.
-23-
<PAGE> 29
(iii) To the best of Seller's and ARI's knowledge, neither Seller
nor any person or entity "owned or controlled" by Seller nor any person or
entity which "owns or controls" Seller has been notified by the Federal Office
of Surface Mining or the agency of any state administering the SMCRA (or any
comparable state statute), that it is (A) ineligible to receive additional
surface mining permits or (B) under investigation to determine whether its
eligibility to receive such permits should be revoked, i.e., "permit blocked",
except as set forth on Schedule 4(n)(iii). As used herein, the terms "owned or
controlled" and "owns or controls" shall be defined as set for in 30 C.F.R. ss.
773.5 (1991).
(o) Employee and Labor Relations. Except as set forth on Schedule
4(o), no Company is a party to, bound by, or negotiating any collective
bargaining agreement or any other agreement with any labor union, association or
other employee group, nor is any employee of any Company represented by any
labor union or similar association. No labor union or employee organization has
been certified or recognized as the collective bargaining representative of any
employees of any Company. There are no formal union organizational campaigns or
representation proceedings underway or to the best of Seller's and ARI's
knowledge pending or planned with respect to any employees of any Company nor to
the best of Seller's and ARI's knowledge are there any existing or pending or
planned labor strikes, work stoppages, slowdowns, disputes, grievances, unfair
labor practice charges, labor arbitration proceedings or other disturbances
affecting any employee of any Company, or affecting operations at or deliveries
to any mine or other facility of any Company. To the best of Seller's and ARI's
knowledge, except as described on Schedule 4(o) or Schedule 4(l)(i), each
Company has at all times complied in all material respects with all applicable
provisions of the National Labor Relations Act, as amended, the Fair Labor
Standards Act, as amended, and all other Federal and state laws, regulations,
and executive orders pertaining to employment, including without limitation all
provisions thereof relating to wages, hours and conditions, collective
bargaining, and the payment of unemployment benefits and taxes therefor, FICA
taxes and all similar taxes, and worker's compensation and occupational disease
benefits. Except as described on Schedule 4(o) or Schedule 4(l)(i), to the best
of Seller's and ARI's knowledge, no Company has any liability for any arrearages
of wages or for any delinquent unemployment, FICA or other employee taxes or for
any penalties or interest for failure to timely pay any such taxes due. To the
best of Seller's and ARI's knowledge, no Company has pending against it any
unfair labor practice charges, other administrative charges, claims, grievances
or lawsuits before any court, governmental agency, regulatory body or arbitrator
arising under any Federal or state law, regulation or executive order governing
employment.
-24-
<PAGE> 30
(p) Licenses; Permits. Schedule 4(p) has been prepared by the
Management Group. To the best of Seller's and ARI's knowledge, Schedule 4(p)
sets forth a true and complete list of all material licenses, permits,
certificates, bonds, approvals and other such authorizations issued or granted
to each Company by local, state or Federal governmental authorities or agencies.
To the best of Seller's and ARI's knowledge, except as disclosed on Schedule
4(p), all material licenses, permits, certificates, bonds, approvals or other
such authorizations of each Company are validly held by it, each Company has
complied with all material requirements in connection therewith and the same
will not be subject to suspension, modification or revocation as a result of
this Agreement or the consummation of the transactions contemplated hereby. To
the best of Seller's and ARI's knowledge, each Company has all material
licenses, permits, certificates, bonds, approvals and other such authorizations
from local, state or Federal government authorities or agencies which are
necessary for the conduct of each Company's business.
(q) Bank Accounts and Powers of Attorney. Schedule 4(q) contains a
complete and correct list and summary description showing (i) the name of each
bank in which any Company has an account or safe deposit box and the names of
all persons authorized to draw thereon or to have access thereto, and (ii) the
names of all persons, if any, holding powers of attorney from any Company.
(r) Transactions with Affiliates. Except as set forth in the
Schedules hereto, no Company has any outstanding contract, agreement or other
arrangement with Seller, ARI or any of its subsidiaries which will continue in
effect subsequent to the Closing.
(s) Patents and Trademarks. To the best of Seller's and ARI's
knowledge, no Company has any patents, trademarks, tradenames, service marks,
copyrights or patent applications pending, and are not subject to any license
agreements with third parties or agreements requiring royalty or other payments
in respect of such matters except as set forth on Schedule 4(s). To the best of
Seller's and ARI's knowledge, there are no claims pending or threatened against
any Company with regard to the infringement of any patents, trademarks,
tradenames, service marks, copyrights or patent applications pending.
(t) Insurance. Schedule 4(t) contains a complete and correct list
and summary description of all policies of insurance which are in effect,
including amounts thereof, in which any Company is named as the insured party,
has a beneficial interest or for which it has paid any premiums. Such policies
are in full force and effect and insure all assets and property of each Company
against loss or damage in amounts as set forth in such policies. Until the
Closing Date, Seller will cause each Company to maintain
-25-
<PAGE> 31
in full force and effect its presently existing insurance coverage, or insurance
comparable to such existing coverage.
(u) AS IS. BUYER AND THE ADDINGTON GROUP ACKNOWLEDGE THAT THE
ADDINGTON GROUP HAS BEEN INVOLVED IN THE OPERATIONS OF THE COMPANIES FROM THEIR
INCEPTION, AND THAT THE ADDINGTON GROUP IS WELL FAMILIAR WITH THE COMPANIES AND
THEIR OPERATIONS, ASSETS AND LIABILITIES. THE REPRESENTATIONS AND WARRANTIES OF
SELLER ARE A MATERIAL PART OF THIS AGREEMENT. THE LIMITATIONS AND QUALIFICATIONS
OF SELLER'S REPRESENTATIONS AND WARRANTIES ARE ALSO A MATERIAL PART OF THIS
AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN DOCUMENTS OR
INSTRUMENTS EXECUTED PURSUANT TO THIS AGREEMENT, BUYER ACKNOWLEDGES THAT SELLER
HAS MADE NO REPRESENTATIONS REGARDING THE VALUE OR CONDITION OF THE ASSETS OF
THE COMPANIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE ASSETS OF
THE COMPANIES WILL BE HELD BY THE COMPANIES AT CLOSING "AS IS, WHERE IS" WITH NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AS TO TITLE, OWNERSHIP, USE,
POSSESSION, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, QUANTITY OR
QUALITY OF RESERVES, MINING COSTS OR RATIOS, GRADE, RECOVERABILITY, VALUE,
MINEABILITY, CONDITION, OPERATION, DESIGN, CAPACITY, TAX TREATMENT OR OTHERWISE,
AND ALL SUCH REPRESENTATIONS AND WARRANTIES ARE EXPRESSLY DISCLAIMED. NOTHING
CONTAINED HEREIN SHALL BE CONSTRUED TO DIMINISH OR LIMIT THE EXPRESS
REPRESENTATIONS, WARRANTIES OR COVENANTS CONTAINED IN THIS AGREEMENT, AS THE
SAME MAY BE LIMITED OR QUALIFIED HEREIN.
-26-
<PAGE> 32
5. Covenants.
5A. Covenants of Seller. Seller covenants and agrees as follows:
(a) Access. Seller shall, and shall cause each Company, and its or
their officers, directors, employees and agents to, afford the officers,
employees and agents of Buyer complete access at all reasonable times, from the
date hereof to the Closing, to its or their officers, employees, agents,
properties, books and records, and shall furnish Buyer all financial, operating
and other data and information as Buyer, through its officers, employees or
agents, may reasonably request, but only to the extent that any of the foregoing
relates to any Company. Subject to applicable law or court orders, Buyer shall
cause all such information of a non-public nature to be retained confidentially.
If this Agreement is terminated, Buyer shall promptly return all such
information of a non-public nature provided by Seller, and shall promptly
destroy all analyses, compilations, studies or other documents of or prepared by
the Buyer from such non-public information. If this Agreement is terminated,
Buyer shall not use or disclose any confidential information obtained from
Seller or the Companies, or other information concerning the business or
properties of the Seller or the Companies. Buyer shall be responsible for
maintaining the confidentiality of such confidential and trade secret
information and ensuring that such information is not used or disclosed by its
employees, affiliates and agents, and Buyer shall be responsible for the acts of
its agents, employees and affiliates in that regard.
(b) Pro Forma Balance Sheet. Schedule 5A(b) sets forth a pro forma
balance sheet (the "Pro Forma Balance Sheet") reflecting the assets, liabilities
and working capital which each Company would have had if the Closing had
occurred on July 31, 1995 after the distribution of the Excluded Assets and the
Excluded Liabilities.
(c) Supplemental Disclosure. Seller shall have the continuing
obligation until the Closing to supplement or amend the Schedules hereto with
respect to any matter hereafter arising or discovered which, if existing or
known to Seller at the date of this Agreement, would have been required to be
set forth or described in such Schedules; provided, however, that, (i) for the
purpose of the rights and obligations of the parties hereunder, any such
supplemental or amended disclosure shall not be deemed to have been disclosed as
of the date of this Agreement unless so agreed in writing by Buyer, and (ii) no
such supplemental disclosure shall be required as a result of any act or
omissions of the Companies taken or permitted to be taken by the Directors (or
any of them) pursuant to Section 1(b) or otherwise.
-27-
<PAGE> 33
(d) No Solicitation. (i) Seller shall not, nor shall it permit any
of its affiliates to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor or
representative of, Seller or any of its affiliates to, (A) solicit or initiate,
or encourage the submission of, any Alternative Proposal (as hereinafter
defined), (B) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Alternative Proposal; provided,
however, that to the extent required by the fiduciary obligations of the Board
of Directors of Seller or ARI, as determined in good faith by such Board of
Directors, Seller may (1) in response to an unsolicited request therefor,
furnish information with respect to any of the Companies to any person pursuant
to a customary confidentiality agreement (as determined by Seller's independent
counsel) and discuss such information with such person, and (2) upon receipt by
the Company of an Alternative Proposal, participate in negotiations regarding
such Alternative Proposal. For purposes of this Agreement, "Alternative
Proposal" means any proposal for a merger or other business combination
involving any of the Companies or any proposal or offer to acquire in any
manner, directly or indirectly, an equity interest in, any voting securities of,
or a substantial portion of the assets of any of the Companies, other than the
transactions contemplated by this Agreement.
(ii) If the Board of Directors of Seller or ARI receives an
Alternative Proposal that, in the exercise of its fiduciary duties, it
determines to be a Superior Proposal (as hereinafter defined), the Board of
Directors may (subject to the following sentences) enter into an agreement with
respect to such Superior Proposal or terminate this Agreement, in each case at
any time after the second business day following Buyer's receipt of written
notice (a "Notice of Superior Proposal") advising Buyer that the Board of
Directors has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal. In addition, if Seller proposes to enter into an agreement
with respect to any Superior Proposal, it shall pay, or cause to be paid, to
Buyer the Expense Reimbursement (as defined in Section 5A(e)). For purposes of
this Agreement, a "Superior Proposal" means any bona fide Alternative Proposal
to acquire, directly or indirectly, for consideration consisting of cash and/or
readily marketable securities or royalties, any of the Companies or all or
substantially all the assets of any of the Companies, and otherwise on terms
that the Board of Directors of Seller determines in its good faith reasonable
judgment to be more favorable to ARI's stockholders other than the Addington
Group than the transactions contemplated by this Agreement.
-28-
<PAGE> 34
(iii) In addition to the obligations of Seller set forth in Section
5A(d)(ii), Seller shall promptly advise Buyer orally and in writing of any
request for information or of any Alternative Proposal, or any inquiry with
respect to or that could lead to any Alternative Proposal, the material terms
and conditions of such request, Alternative Proposal or inquiry, and the
identity of the person making any such Alternative Proposal or inquiry. The
Seller will keep Buyer reasonably informed of the status and details of any such
Alternative Proposal or inquiry.
(e) Fees and Expenses. (i) Except as provided below, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such fees or expenses,
whether or not such transactions are consummated.
(ii) The Seller shall reimburse, or cause to be reimbursed, to the
Buyer its documented out-of-pocket expenses, including attorney fees, reasonably
incurred by the Buyer in connection with the transactions contemplated hereby
(the "Expense Reimbursement"), concurrently with the Seller entering into any
agreement with respect to any Superior Proposal in accordance with Section
5A(d); unless Buyer or the Addington Group shall have failed to perform in any
material respect any of their obligations under this Agreement, provided that
Seller shall in no event be obligated to reimburse Buyer and the Addington Group
more than $350,000.00 of out-of-pocket expenses, plus any reasonable commitment
fee paid to Buyer's financing source.
5B. Covenants of Buyer. Buyer covenants and agrees as follows:
(a) Buyer's Actions. Buyer shall not take, nor permit the
Directors to take, any action that would, or that could reasonably be expected
to, result in (i) any of its representations and warranties set forth in this
Agreement becoming untrue in any material respect, or (ii) any of the conditions
to the purchase and sale of the Shares not being satisfied in any material
respect; and Buyer shall cooperate with Seller in the removal of liability and
obligations under bonds and guarantees as contemplated in Section 3(b)(vii)
hereof, including replacement of guarantees with those of Buyer, subject to the
provisions of Section 3(b)(vii). Buyer also agrees to provide such financial and
other information of Buyer as is necessary to accomplish such replacement or
substitution. If the removal of liabilities and obligations are unable to be
obtained as of the Closing Date with respect to each of those bonds and
guarantees described on Schedule 5B(a), or with respect to those bonds and
guarantees described on Schedule 3(b)(vii) if any such bonds or guarantees are
waived as a condition to Seller's obligation to close, then Buyer shall
indemnify the applicable guarantor or obligor from and against such liability,
obligation,
-29-
<PAGE> 35
loss or expenses arising out of or with respect to such bonds and guarantees and
shall execute an indemnity agreement to that effect in a form reasonably
satisfactory to Seller. After the Closing Date, Buyer shall also continue to
also use its best efforts to remove the parties listed on Schedule 5B(a) from
such liabilities or obligations. These foregoing provisions are supplementary
to, and do not waive or supersede, the provisions of the letter agreement, dated
August 14, 1995, between ARI and Larry Addington, relating to ARI's guaranty of
the capital lease financing provided by Provident Bank to TMI.
(b) Supplemental Disclosure. Buyer shall have the continuing
obligation until the Closing to supplement, or amend its Schedules with respect
to any matter hereafter arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set forth or described in
such Schedules; provided, however, that for the purpose of the rights and
obligations of the parties hereunder, any such supplemental or amended
disclosure shall not be deemed to have been disclosed as of the date of this
Agreement unless so agreed in writing by Seller.
(c) Planned Closing of Any Company Employment Site. Prior to
the Closing, Buyer shall have the continuing obligation to immediately advise
Seller of any planned or intended closing of any Company's employment sites
existing immediately prior to the Closing, or layoff of any Company's employees
employed immediately prior to Closing, where such closing or layoff may or will
be sufficient to invoke coverage of the Worker Adjustment and Retraining
Notification Act of 1989 for such Company.
(d) Ordinary Conduct. Except as set forth on Schedule 5B(d)
or otherwise expressly permitted by the terms of this Agreement, or as necessary
in connection with taking such actions with regard to the assets and liabilities
of the Companies as are contemplated by this Agreement (including without
limitation the distribution of Excluded Assets as contemplated by this
Agreement), from the date hereof to the Closing, Buyer in exercising its
management responsibility under this Agreement will cause the business of each
Company to be conducted in the ordinary course in substantially the same manner
as presently conducted and will make all reasonable efforts consistent with past
practices to preserve its relationships with customers, employees, suppliers and
others with whom such Company deals. In addition, except as set forth on
Schedule 5B(d) or otherwise expressly permitted by the terms of this Agreement
(including without limitation the distribution of Excluded Assets as
contemplated by this Agreement), neither Buyer nor Seller will permit any
Company to do any of the following without the prior written consent of Seller
or Buyer respectively:
-30-
<PAGE> 36
(i) amend its Articles of Incorporation or By-laws;
(ii) declare or pay any dividend or make any other
distributions to its shareholders whether or not upon or in respect
of any shares of its capital stock;
(iii) redeem or otherwise acquire any shares of its capital
stock or issue any capital stock or any option, warrant or right
relating thereto or any securities convertible into or exchangeable
for any shares of capital stock;
(iv) grant to any employee, officer or director any increase
in compensation or benefits, or enter into any employment contract
or adopt, amend or terminate any profit sharing, compensation,
bonus, deferred compensation, pension, retirement or other employee
benefit plan, agreement, fund, trust or arrangement, for the benefit
or welfare of any employee;
(v) incur or assume any liabilities, capitalized leases,
operating leases, bonds (without the prior written consent of the
Seller, which will not be unreasonably withheld or delayed),
obligations or indebtedness for borrowed money or guarantee any such
liabilities, obligations or indebtedness;
(vi) permit, allow or suffer any of its assets to be
subjected to any mortgage, pledge, lien, encumbrance, restriction or
charge of any kind;
(vii) cancel any material indebtedness (individually or in the
aggregate) or waive any claims or rights of substantial value;
(viii) except as contemplated by this Agreement, loan or
advance any amount to, or sell, transfer or lease any of its assets
to, or enter into any agreement or arrangement with Buyer or any of
its affiliates;
(ix) make any change in any method of accounting or
accounting practice or policy other than those required by generally
accepted accounting principles;
(x) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets (other than
inventory) which are material individually, or in the aggregate, to
such Company;
-31-
<PAGE> 37
(xi) make or incur any capital expenditure or expenditures
which, individually, is in excess of $5,000 or, in the aggregate,
are in excess of $25,000;
(xii) sell, lease or otherwise dispose of, or agree to sell,
lease or otherwise dispose of, any of its assets, except in the
ordinary course of business consistent with past practice;
(xiii) enter into any lease of real property;
(xiv) enter into any new commitments for the sale or purchase
of coal or the purchase or disposition of coal properties or amend
any existing coal sales agreements;
(xv) hire or terminate any employee of the Companies without
cause, or pay or agree to pay any severance or termination pay with
respect thereto;
(xvi) engage in any transaction with the Addington Group or
any of its affiliates (except as permitted by this Agreement); or
(xvii) agree, whether in writing or otherwise, to do any of
the foregoing.
Buyer shall not, and shall not permit any Company to, take any
action that would, or that could reasonably be expected to, result in (i) any of
its representations and warranties set forth in this Agreement becoming untrue,
(ii) any of the representations and warranties of Seller set forth in this
Agreement becoming untrue, or (iii) any of the conditions to the purchase and
sale of the Shares not being satisfied.
6. Representations and Warranties of Buyer. Buyer and the
Addington Group, jointly and severally, hereby represent and warrant to Seller
as follows:
(a) Authority. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Kentucky. Buyer has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. All
corporate acts and other proceedings required to be taken by Buyer to authorize
the consummation of the transactions contemplated hereby have been duly and
properly taken. This Agreement has been duly executed and delivered by Buyer and
the Addington Group and constitutes a valid and binding obligation of Buyer and
the Addington Group, en forceable against Buyer and the Addington Group in
accordance with its terms. The execution and delivery of this Agreement do not,
-32-
<PAGE> 38
and the consummation of the transactions contemplated hereby and compliance with
the terms hereof will not, conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both) under, or give right
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any lien, claim,
encumbrance, security interest, option, charge or restriction of any kind upon
any of the properties or assets of the Buyer under, any provision of (i) the
Business Corporation Act of Kentucky, (ii) the Articles of Incorporation or
bylaws of Buyer, (iii) any material note, bond, mortgage, indenture, deed of
trust, license, lease, contract, commitment, agreement or arrangement to which
Buyer and the Addington Group is a party or by which any of its properties are
bound or (iv) any judgment, order, or decree, or material statute, law,
ordinance, rule or regulation applicable to Buyer and the Addington Group or its
property or assets. No consent, approval, license, permit order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumen tality,
domestic or foreign, is required to be obtained or made by or with respect to
Buyer or the Addington Group in connection with the execution and delivery of
this Agreement or the consummation by Buyer and the Addington Group of the
transactions contemplated hereby, other than (A) compliance with and filings
under the HSR Act and (B) compliance with and filings under Section 13(d) or 16,
as the case may be, of the Exchange Act.
(b) Actions and Proceedings, etc. There are no (i)
outstanding judgments, orders, writs, injunctions or decrees of any court,
governmental agency or arbitration tribunal against Buyer or the Addington Group
which have an adverse effect on the ability of Buyer and the Addington Group to
consummate the transactions contemplated hereby or (ii) actions, suits, claims
or legal, administrative or arbitration proceedings or investigations pending
or, to the best knowledge of Buyer, threatened against Buyer or the Addington
Group, which are likely to have a material adverse effect on the ability of
Buyer and the Addington Group to consummate the transactions contemplated
hereby.
(c) Consents. Subject to Section 6(a), no consent of any
party and no consent, license, approval or authorization of, or exemption by, or
filing, restriction or declaration with, any governmental authority, bureau,
agency or regulatory authority is required in connection with the execution,
delivery, validity or enforceability of this Agreement or the consummation of
the transactions contemplated hereby and thereby.
(d) Qualification. Buyer is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its business
or the ownership, leasing or holding of its properties makes such qualification
necessary, except such jurisdictions where
-33-
<PAGE> 39
the failure so to qualify would not have a material adverse effect on the
business, assets, conditions (financial or otherwise) or results of operations
of Buyer. Buyer has made available to Seller true and complete copies of its
Articles of Incorporation, as amended to date, and its bylaws, as in effect on
the date hereof.
(e) No Broker. Buyer has not retained any broker or finder
nor has any finder or broker acted on behalf of Buyer in connection with this
Agreement or the transactions contemplated hereby.
(f) Investment Intent. Buyer and the Addington Group are
acquiring the Shares solely for their own account for the purpose of investment
and not with a view to or for sale in connection with any distribution thereof,
and have no present intention or plan to effect any resale, assignment or
distribution of the Shares. Buyer and the Addington Group acknowledge that the
Shares have not been registered or qualified under the Securities Act of 1933 or
any state securities laws and may be sold, assigned, pledge or otherwise
disposed of in the absence of such registration only pursuant to an exemption
from such registration. Buyer and the Addington Group acknowledge that the
certificates evidencing the Shares shall each bear a restrictive legend to the
foregoing effect. Buyer and the Addington Group have received such information
from Seller and the Companies as they have requested and acknowledge that there
are no representations or warranties, express or implied, except as expressly
set forth in this Agreement.
(g) Contracts; Commitments. Except as set forth on Schedule
6(g), to the best of Buyer's and the Addington Group's knowledge, there are no
contracts, commitments or agreements (whether written or oral) to which the
Seller or any affiliate of the Seller (other than the Companies) is a party
pertaining to management consulting and employment agreements, finder's fees,
broker's or commission agreements, bonuses, or any binding agreements or
commitments to enter into same.
7. Mutual Covenants. Each of Seller and Buyer covenants and
agrees as follows:
(a) Cooperation. Buyer and Seller shall cooperate with each
other and shall cause their officers, employees, agents, auditors and
representatives to cooperate with each other after the Closing to ensure the
orderly transition of each Company from Seller to Buyer and to minimize any
disruption to the respective businesses of Seller, Buyer or any Company that
might result from the transactions contemplated hereby. Neither party shall be
required by this Section 7(a) to take any action that would unreasonably
interfere with the conduct of its business.
-34-
<PAGE> 40
(b) Best Efforts. (i) Subject to the terms and condi tions
of this Agreement, each party will use its best efforts to cause the consents of
or releases set forth in Section 3 to be obtained and the satisfaction of all
other conditions to the Closing to occur.
(ii) Seller shall use its best efforts to take, and cause to
be taken, all actions and to do, and cause to be done, all things necessary,
proper or advisable under applicable laws and regulations and otherwise, to
obtain prior to Closing all authorizations, consents and waivers ("Consents")
required from third parties to consummate and make effective the transactions
contemplated by this Agreement (which Consents shall include without limitation
those set forth on Schedule 4(a)), provided, however, that nothing contained
herein shall require Seller, Buyer or any Company to assume any additional
obligation or incur any additional liability in order to obtain Consents. Buyer
shall reasonably cooperate in such efforts. Each party agrees to keep the other
fully informed with respect to such efforts. In the event any Consent is not
obtained prior to Closing despite the best efforts of Seller and Buyer, Buyer
and Seller shall negotiate in good faith a mutually acceptable solution to the
failure to obtain any required Consent, but if a mutually acceptable solution is
not reached and the failure to obtain such Consent would have material adverse
consequences to the transactions contemplated by this Agreement, then in such
event the party or parties disadvantaged by failure to obtain such Consent shall
have the right to terminate this Agreement without any further liability to the
other party.
(iii) Notwithstanding the foregoing provisions of Section
7(b)(ii), with respect to consents required with respect to the documents
specified on Schedule 3(b)(x) (the "Early Consents"), within 30 days of
execution of this Agreement, Seller shall advise Buyer of any Early Consents
Seller reasonably determines that it will not be able to obtain prior to
Closing. Buyer shall thereupon have the right for an additional 15 days to
pursue the obtaining of such Early Consents which Seller has determined are not
obtainable. At the expiration of the aforesaid 45 day period, if Buyer and
Seller have not been able to agree on a mutually acceptable solution to the
failure to obtain any required Early Consent, then Seller shall have the right
for a period of five days following expiration of such 45 day period to
terminate this Agreement without any further liability to Buyer.
(iv) Buyer will use its best efforts to obtain the financing
required hereunder, and shall make diligent applications for said financing, and
shall keep Seller reasonably informed of its progress in that regard.
(c) Antitrust Notification. Each of ARI and Buyer will as
promptly as practicable, but in no event later than five
-35-
<PAGE> 41
business days following the execution and delivery of this Agreement, file with
the United States Federal Trade Commission (the "FTC") and the United States
Department of Justice (the "DOJ") the notification and report form required for
the transactions contemplated hereby and any supplemental information requested
in connection therewith pursuant to the HSR Act. Any such notification and
report form and supplemental information will be in substantial compliance with
the requirements of the HSR Act. Each of Buyer and Seller shall furnish to the
other such necessary information and reasonable assistance as the other may
request in connection with its preparation of any filing or submission which is
necessary under the HSR Act. Seller and Buyer shall keep each other apprised of
the status of any communications with, and inquiries or requests for additional
information from, the FTC and the DOJ and shall comply promptly with any such
inquiry or request. Each of Seller and Buyer will use its best efforts to obtain
any clearance required under the HSR Act for the purchase and sale of the
Shares. Each party shall be responsible for its filing fees relating to the
filing of HSR Act notification and report form.
(d) Records. (i) On the Closing Date, Seller shall deliver
or cause to be delivered to Buyer all original agreements, documents, books,
records and files (collectively, "Records"), in the possession of Seller
relating to the business and operations of each Company to the extent not then
in the possession of such Company, subject to the following exceptions:
(A) Buyer recognizes that certain Records may contain
incidental information relating to a Company or may relate primarily to
subsidiaries or divisions of Seller other than such Company, and that
Seller may retain such Records and shall provide copies of the relevant
portions thereof to Buyer; and
(B) Seller may retain any Tax returns, reports or forms, and
Buyer shall be provided with copies of such returns, reports or forms only
to the extent that they relate to any Company's separate returns or
separate Tax liability (including any successor liability under Treas.
Reg. 1.1502-6 or otherwise).
(C) Seller shall be entitled to retain copies of such
Records as it may desire for financial reporting, tax, employee benefits,
liability and other business purposes.
(ii) After the Closing, upon reasonable written notice, Buyer
and Seller agree to furnish or cause to be furnished to each other and their
representatives, employees, counsel and accountants access, during normal
business hours, such information (including Records pertinent to each Company)
and assistance relating to any Company as is reasonably necessary for financial
reporting and
-36-
<PAGE> 42
accounting matters, the preparation and filing of any Tax returns, reports or
forms or the defense of any Tax claim or assessment; provided, however, that
such access does not unreasonably disrupt the normal operations of Seller, Buyer
or such Company.
(e) Non Disclosure. Subject to applicable law or court
order, each party shall cause all such information of a non-public nature
obtained by it pursuant to this Agreement to be retained confidentially. If this
Agreement is terminated, each party shall promptly return all such information
of a non-public nature provided by the other party, shall promptly destroy all
analyses, compilations, studies or other documents of or prepared by it from
such non-public information, shall not use or disclose any such non-public
information to third parties and shall take reasonable step to cause its agents
and employees to comply with this provision.
(f) Litigation Support. The parties shall cooperate with
each other in the defense or contest, make available their personnel, and
provide such testimony and reasonable access to their books and records as shall
be necessary in connection with the defense or contest of any action, suit,
proceeding, hearing, investigation, charge, complaint or claim which questions
the validity of this Agreement or seeks to enjoin, retrain or prohibit the
transactions contemplated by this Agreement.
(g) Release. Each of the parties shall execute and deliver
at Closing a release substantially in the form of Exhibit E, mutually releasing
each other from any claims or liabilities except those arising under the
representations, warranties and covenants contained in this Agreement.
8. Further Assurances. From time to time, as and when
requested by either party hereto, the other party shall execute and deliver, or
cause to be executed and delivered, all such documents and instruments and shall
take, or cause to be taken, all such further or other actions, as such other
party may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
9. Indemnification. (a) Tax Indemnification.
(i) Seller shall indemnify Buyer and its affiliates
(including each Company) and each of their respective officers, directors,
employees and agents and hold them harmless from (A) all liability for Taxes of
any Company for the Pre-Closing Tax Period, (B) all liability (as a result of
Treasury Regulation ss. 1.1502-6 or otherwise) for Taxes of Seller, any
Affiliated Group or any member of any Affiliated Group, (C) all liability for
federal, state, and local income taxes resulting from the Section 338(h)(10)
election (or any comparable election under state or local Tax law)
-37-
<PAGE> 43
contemplated by Section 10(a) of this Agreement (other than state and local
income taxes arising out of a failure of any state or local jurisdiction to
treat a Section 338(h)(10) election in the same manner as such election is
treated for federal purposes), (D) Seller's share of the Taxes for which it is
responsible under Section 10(i) hereof, and (E) all liability for reasonable
legal fees and expenses attributable to any item in clause (A), (B), (C) or (D)
above.
(ii) Buyer shall, and shall cause each Company to, indemnify
Seller and its affiliates and each of their respective officers, directors,
employees and agents and hold them harmless from (A) all liability for Taxes of
each such Company (other than Taxes described in clauses (i)(A), (i)(B), (i)(C)
or (i)(D) of this Section 9(a)) (B) Buyer's share of the Taxes for which it is
responsible under Section 10(i) hereof, and (C) all liability for reasonable
legal fees and expenses attributable to any item in clause (A) or (B) above.
(iii) In the case of any taxable period that includes (but
does not end on) the Closing Date (each a "Straddle Period"):
(A) real, personal and intangible property Taxes not
reflected in the Companies Combined Net Working Capital as adjusted
pursuant to Section 1(d)("Property Taxes") of any Company
attributable to the Pre-Closing Tax Period shall be equal to the
amount of such Property Taxes for the entire Straddle Period
multiplied by a fraction, the numerator of which is the number of
days during the Straddle Period that are in the Pre-Closing Tax
Period and the denominator of which is the number of days in the
Straddle Period; and
(B) the Taxes of any Company (other than Property Taxes and
severance Tax) not reflected in the Companies Combined Net Working
Capital as adjusted pursuant to Section 1(d) attributable to the
Pre-Closing Tax Period shall be computed as if such taxable period
ended as of the close of business on the Closing Date.
Seller's indemnity obligation in respect of Taxes for a Straddle Period not
reflected in the Companies Combined Net Working Capital as adjusted pursuant to
Section 1(d) shall initially be effected by its payment to Buyer of the excess
of (x) such Taxes for the Pre-Closing Tax Period over (y) the amount of such
Taxes paid by Seller or any of its affiliates (other than any Company) at any
time plus the amount of such Taxes paid or accrued by any Company on or prior to
the Closing Date. Seller shall initially pay such excess to Buyer within five
days prior to the due date of any return, report or form with respect to
Straddle Period Taxes. If the amount of such Taxes paid by Seller or any of its
affiliates (other than any Company) at any time plus the amount of such Taxes
paid or accrued
-38-
<PAGE> 44
by any Company on or prior to the Closing Date exceeds the amount payable by
Seller pursuant to the preceding sentence, Buyer shall pay to Seller the amount
of such excess (a) in the case of Property Taxes, at the Closing (the "Closing
Tax Adjustment Amount") and (b) in all other cases, within five days prior to
the due date of the return, report or form with respect to the final liability
for such Taxes is required to be filed. The payments to be made pursuant to this
paragraph by Seller or Buyer with respect to a Straddle Period shall be
appropriately adjusted to reflect any final determination (which shall include
the execution of Form 870-AD or successor form) with respect to Straddle Period
Taxes.
(b) Other Indemnification by Seller. Seller shall indemnify
Buyer, its affiliates (including each Company) and each of their respective
officers, directors, employees and agents and hold them harmless from any loss,
liability, claim, damage or expense (including reasonable legal fees and
expenses) suffered or incurred by any such indemnified party (other than any
relating to Taxes, for which indemnification provisions are set forth in
paragraphs (a) and (g) of this Section 9) to the extent arising from (i) any
breach of any representation or warranty of Seller contained in this Agreement
or in any Schedule, certificate, instrument or other document delivered by it
pursuant hereto (ii) any breach of any covenant of Seller contained in this
Agreement, or (iii) any Excluded Liabilities, including any liability arising
out of the assets, business or liabilities (contingent or otherwise) of ARI and
its subsidiaries (other than those relating to the Companies). Seller's
obligation to indemnify Buyer under this Section 9(b) shall be subject to the
following:
(A) There shall be no limitation on the amount of liability
for breach of representations contained in Sections 4(a), (b), (c), (d), (e),
(g) and (s);
(B) There shall be no limitation on the amount of liability
for the Excluded Liabilities or the Excluded Assets;
(C) For all other obligations to indemnify under Section
9(b), Seller shall be responsible only for claims or losses (i) exceeding
$300,000.00 and only to the extent exceeding $300,000.00, (ii) of which Seller
is notified pursuant to Section 17 within one year of the Closing.
(c) Indemnification by Buyer. Buyer shall indemnify Seller,
its affiliates, and each of their respective officers, directors, employees and
agents and hold them harmless from any loss, liability, claim, damage or expense
(including reasonable legal fees and expenses) suffered or incurred by any such
indemnified party to the extent arising from (i) any breach of any
representation or warranty of Buyer contained in this Agreement or in any
Schedule, certificate, instrument or other document
-39-
<PAGE> 45
delivered by it pursuant hereto, (ii) any breach of any covenant of Buyer
contained in this Agreement, (iii) any breach of the covenant of Buyer contained
in this Agreement obligating Buyer to immediately notify Seller of any planned
or intended closing of employment sites or layoff of employees, involving any
Company's employment sites or employees existing immediately prior to the
Closing, where such closing or layoff may or will be sufficient to invoke
coverage of the Worker Adjustment and Retraining Notification Act of 1989 for
such Company, (iv) any Assumed Liabilities, (v) any liabilities or obligations
of any Company arising from violations of the covenants contained in Section
5B(d) and for which Seller did not give its consent, or (vi) any liabilities or
obligations of any Company whether arising from events which occur prior to, on
or after the Closing Date except to the extent Seller has breached any
representation or warranty with respect thereto and except for any Excluded
Liabilities. Buyer's obligation to indemnify under this Section 9(c) shall be
subject to the following:
(A) There shall be no limitation on the amount of liability
for breach of representations contained in Section 6(a);
(B) There shall be no limitation on the amount of liability
for the Assumed Liabilities or for any liabilities or obligations of any Company
(whether arising from events which occur prior to, on or after the Closing Date)
except to the extent Seller has breached any representation or warranty with
respect thereto and except for Excluded Liabilities; and
(C) For all other obligations to indemnify under Section
9(c), Buyer shall be responsible only for claims or losses (i) exceeding
$300,000.00 and only to the extent exceeding of $300,000.00, (ii) of which Buyer
is notified pursuant to Section 17 within one year of the Closing.
(d) Losses Net of Insurance, etc. The amount of any loss,
liability, claim, damage, expense or Tax for which indemnification is provided
under this Section 9 shall be net of any amounts recovered or recoverable by the
indemnified party under insurance policies with respect to such loss, liability,
claim, damage, expense or Tax and shall be (i) increased to take account of any
net Tax cost incurred by the indemnified party arising from the receipt of
indemnity payments hereunder (grossed up for such increase) and (ii) reduced to
take account of any net Tax benefit available to and/or realized by the
indemnified party arising from the incurrence or payment of any such loss,
liability, claim, damage, expense or Tax. In computing the amount of any such
Tax cost or Tax benefit, the indemnified party shall be deemed to recognize all
other items of income, gain, loss, deduction or credit before any item arising
from the receipt of any indemnity
-40-
<PAGE> 46
recognizing payment hereunder or the incurrence or payment of any indemnified
loss, liability, claim, damage, expense or Tax.
(e) Termination of Indemnification. The obligations to
indemnify and hold harmless a party hereto (i) pursuant to Section 9(a) shall
terminate 120 days after the time the applicable statute of limitations with
respect to the Tax liability in question expires (giving effect to any extension
thereof), (ii) pursuant to Section 9(b)(i) shall terminate when the applicable
representation or warranty terminates pursuant to Section 13, (iii) pursuant to
Section 9(h)(i) shall not terminate, (iv) with respect to any Excluded Liability
including any liability arising out of the assets, business or liabilities
(contingent or otherwise) of ARI and its subsidiaries (other than those relating
to the Companies) shall not terminate, (v) with respect to the Assumed
Liabilities, and any liabilities or obligations of the Companies (whether
arising from events which occur prior to, on or after the Closing Date to the
extent that Seller has breached any representation or warranty with respect
thereto) shall not terminate, and (vi) pursuant to any other provision to
indemnify and hold harmless hereunder shall terminate at the close of business
one year following the Closing Date; provided, however, that as to clauses (i)
and (ii) above such obligations to indemnify and hold harmless shall not
terminate with respect to any item as to which the person to be indemnified or
the related party hereto shall have, before the expiration of the applicable
period, previ ously made a claim by delivering a notice (stating in reasonable
detail the basis of such claim) to the indemnifying party.
(f) Procedures Relating to Indemnification (Other than Under
Sections 9(a)). In order for a party (the "indemnified party") to be entitled to
any indemnification provided for under this Agreement (other than under Sections
9(a) or (h)(i)) in respect of, arising out of or involving a claim or demand
made by any person, firm, governmental authority or corporation against the
indemnified party (a "Third Party Claim"), such indemnified party must notify
the indemnifying party in writing, and in reasonable detail, of the Third Party
Claim within 10 business days after receipt by such indemnified party of written
notice of the Third Party Claim; provided, however, that failure to give such
notifi cation shall not affect the indemnification provided hereunder except and
unless to the extent the indemnifying party shall have been materially
prejudiced as a result of such failure (the indemnifying party shall not be
liable for any expenses incurred during the period in which the indemnified
party failed to give such notice). Thereafter, the indemnified party shall
deliver to the indemnifying party, within five business days after the indem
nified party's receipt thereof, copies of all notices and documents (including
court papers) received by the indemnified party relating to the Third Party
Claim.
-41-
<PAGE> 47
If a Third Party Claim is made against an indemnified party,
the indemnifying party will be entitled to participate in the defense thereof
and, if it so chooses, to assume the defense thereof with counsel selected by
the indemnifying party and reasonably satisfactory to the indemnified party.
Should the indemnifying party so elect to assume the defense of a Third Party
Claim, the indemnifying party will not be liable to the indemnified party for
legal expenses subsequently incurred by the indemnified party in connection with
the defense thereof. If the indemnifying party assumes such defense, the
indemnified party shall have the right to participate in the defense thereof and
to employ counsel, at its own expense, separate from the counsel employed by the
indemnifying party, it being understood that the indemnifying party shall
control such defense. The indemnifying party shall be liable for the fees and
expenses of counsel employed by the indemnified party for any period during
which the indemnifying party has not assumed the defense thereof (other than
during any period in which the indemnified party shall have failed to give
notice of the Third Party Claim as provided above). If the indemnifying party
chooses to defend or prosecute any Third Party Claim, all of the parties hereto
shall cooperate in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the indemnifying party's request) the provision
to the indemnifying party of records and information which are reasonably
relevant to such Third Party Claim, and making employees available on a mutually
convenient and reasonable basis to provide additional information and
explanation of any material provided hereunder. Whether or not the indemnifying
party shall have assumed the defense of a Third Party Claim, the indemnified
party shall not admit any liability with respect to, or settle, compromise or
discharge, such Third Party Claim without the indemnifying party's prior written
consent (which consent shall not be unreasonably withheld or delayed).
(g) Procedures Relating to Indemnification of Tax Claims. If
either Seller or Buyer receives a written claim from any taxing authority that,
if successful, would result in an indemnity payment to Buyer, Seller or one of
their respective affiliates (a "Tax Claim"), the party receiving such Tax Claim
shall promptly notify the other party in writing of such Tax Claim.
With respect to any Tax Claim (other than those relating
solely to Taxes of any Company for a Straddle Period), the indemnifying party
shall control all proceedings taken in connection with such Tax Claim
(including, without limitation, selection of counsel) and, without limiting the
foregoing, may in its sole discretion forgo any and all administrative appeals,
proceedings, hearings and conferences with any taxing authority with respect
thereto, and may, in its sole discretion, either pay the Tax claimed and sue for
a refund where applicable law permits such refund suits or contest such Tax
Claim in any permissible manner. The indemnifying party shall, however, consider
in good
-42-
<PAGE> 48
faith the advice of the indemnified party concerning the most appropriate forum
in which to proceed and other related matters (it being understood, however,
that all such decisions shall be left to the sole discretion of the indemnifying
party). Buyer and Seller shall jointly control all proceedings taken in
connection with any Tax Claim relating solely to Taxes of any Company for a
Straddle Period except for proceedings relating to Taxes of an Affiliated Group,
which shall be controlled by Seller. Buyer, Seller, any Company and each of
their respective affiliates shall cooperate with each other in contesting any
Tax Claim, which cooperation shall include, without limitation, the retention
and (upon request) the provision of records and information to the other party
that are reasonably relevant to such Tax Claim.
(h) The aggregate liability of Seller under this Section 9
shall not exceed the Purchase Price. The sole and exclusive remedy of Buyer for
damages exceeding such amount shall be a right of rescission.
(i) In no event shall either Buyer or Seller or any of their
respective affiliates, directors, officers, agents or attorneys be liable for
any indirect, special, extraordinary or consequential damages under this
Agreement or with respect to the transactions contemplated hereunder or in the
agreements attached as Exhibits hereto unless specifically and expressly
permitted by the terms and provisions thereof.
(j) The Addington Group hereby jointly and severally,
guarantee the Indemnification obligations of the Buyer to Seller specified under
Section 9(a)(ii) and Section 9(c).
(k) ARI hereby guarantees the Indemnification obligations of
the Seller to Buyer specified under Section 9(a)(i) and Section 9(b).
10. Tax Matters. (a) Buyer and Seller shall timely make a
joint election under Section 338(h)(10) of the Code (and any comparable election
under state or local Tax law) with respect to each eligible Company, and
cooperate with each other in the completion and timely filing of such election
in accordance with the provisions of Regulation ss. 1.338(h)(10)-1 (or any
comparable provisions of state or local Tax law) or any successor provision.
Prior to the Closing, Seller and Buyer shall negotiate in good faith an
agreement to allocate the Purchase Price and such allocation shall be set forth
on Schedule 10(a) to be attached hereto. Neither Seller nor Buyer (nor any of
their respective affiliates) shall take any position on any Tax return or with
any taxing authority that is inconsistent with the purchase price allocation set
forth on Schedule 10(a).
-43-
<PAGE> 49
(b) For any Straddle Period, Buyer shall timely prepare and
file with the appropriate authorities all Tax returns, reports and forms (other
than Tax returns, reports and forms of an Affiliated Group) required to be filed
and will pay all Taxes due with respect to such returns, reports and forms;
provided that Seller will reimburse Buyer (in accordance with the procedures set
forth in Section 9(a)) for any amount owed by Seller pursuant to Section 9(a)
with respect to the taxable periods covered by such returns, reports or forms.
For any Straddle Period, Seller shall timely prepare and file all Tax returns,
reports and forms of an Affiliated Group and Buyer shall cause the eligible
Companies to consent to be included in such returns. For any taxable period of
any Company that ends on or before the Closing Date, other than for returns,
reports and forms which have been previously filed, Seller shall timely prepare
at its own expense and furnish to such Company (other than Tax returns, reports
and forms of an Affiliated Group) all Tax returns, reports and forms required to
be filed, and will pay all Taxes due with respect to such returns, reports and
forms in accordance with the provisions of Section 9(a). Buyer and Seller agree
to cause each Company to file all Tax returns, reports and forms for the period
including the Closing Date on the basis that the relevant taxable period ended
as of the close of business on the Closing Date, unless the relevant taxing
authority will not accept a return, report or form filed on that basis.
(c) Seller, each Company and Buyer shall reasonably cooperate,
and shall cause their respective affiliates, officers, employees, agents,
auditors and representatives reasonably to cooperate, in preparing and filing
all returns, reports and forms relating to Taxes, including maintaining and
making available to each other all records necessary in connection with Taxes
and in resolving all disputes and audits with respect to all taxable periods
relating to Taxes. Buyer and Seller recognize that each party and their
respective affiliates will need access, from time to time, after the Closing
Date, to certain accounting and Tax records and information held by any Company
or Seller to the extent such records and information pertain to events occurring
prior to the Closing Date; therefore, Buyer, Seller and their respective
affiliates agree, and Buyer agrees to cause each Company, (i) to use its
reasonable efforts to properly retain and maintain such records until such time
as the other party agrees that such retention and maintenance is no longer
necessary, and (ii) to allow Seller, Buyer and their respective agents and
representatives (and agents or representatives of any of their affiliates), at
times and dates mutually acceptable to the parties, to inspect, review and make
copies of such records as such party may deem necessary or appropriate from time
to time, such activities to be conducted during normal business hours and at the
expense of the party requesting such copies.
-44-
<PAGE> 50
(d) Any refunds or credits of Taxes of any Company for any
taxable period ending on or before the Closing Date shall be for the account of
Seller. Any refunds or credits of Taxes of any Company for any taxable period
beginning after the Closing Date shall be for the account of the Buyer. Any
refunds or credits of Taxes of any Company for any Straddle Period shall be
apportioned between Seller and Buyer in accordance with the formula in Section
9(a) as it relates to a Straddle Period. Other than for refunds or credits of an
Affiliated Group, Buyer shall, if Seller so requests and at Seller's expense and
if Buyer obtains, at Seller's expense, an opinion from outside tax counsel that
such action does not cause Buyer material harm, cause any Company to file for
and obtain any refunds or credits to which Seller is entitled under this Section
10(d). Buyer and Seller shall jointly control the presentation of any such
refund claim made on behalf of Seller. Buyer shall cause each Company to forward
to Seller any such refund due to Seller within 10 days after the refund is
received (or reimburse Seller for any such credit within 10 days after the
credit is allowed or applied against other Tax liabil ity); provided, however,
that any such amounts payable to Seller shall be net of any Tax cost to Buyer or
such Company, as the case may be, attributable to the receipt of such refund.
Notwithstanding the foregoing, the control of the prosecution of a claim for
refund of Taxes paid pursuant to a deficiency assessed subsequent to the Closing
Date as a result of an audit shall be governed by the provisions of Section
9(g).
(e) Seller shall be responsible for filing at its own expense
any amended consolidated, combined or unitary Tax returns, reports or forms for
taxable years ending on or prior to the Closing Date which are required as a
result of examination adjustments made by the Internal Revenue Service or by the
applicable state, local or foreign taxing authorities for such taxable years as
finally determined. For those jurisdictions in which separate Tax returns are
filed by any Company, any required amended returns resulting from such
examination adjustments, as finally determined, shall be prepared by Seller and
furnished to such Company for approval (which approval should not be
unreasonably withheld), signature and filing at least 30 days prior to the due
date for filing such returns.
(f) Seller shall deliver to Buyer at the Closing a certificate
stating that Seller is not a "foreign person" within the meaning of United
States Treasury regulations Section 1.1445-2T(b)(2), in the form specified by
such regulation.
(g) On the Closing Date, Buyer will cause each Company to
conduct its business in the ordinary course in substantially the same manner as
presently conducted and on the Closing Date will not permit such Company to
effect any extraordinary transactions (other than any such transactions
expressly required by applicable law or
-45-
<PAGE> 51
by this Agreement) that could result in Tax liability to such Company in excess
of Tax liability associated with the conduct of its business in the ordinary
course.
(h) Seller shall cause the provisions of any Tax sharing or
allocation agreement to which any Company is a party to be terminated on or
before the Closing Date, such that such Company shall not have any obligation
with respect to any such agreement after the Closing Date.
(i) Notwithstanding any other provision of this Agreement, the
Buyer and Seller shall each pay one half of the (i) expense for any applicable
sales, use or other transfer tax relating to the transfer of any equipment,
property or other assets conveyed pursuant to Section 3(c) of this Agreement,
(ii) income Taxes arising from the transfer of such equipment, property or other
assets, and (iii) liability for sales, use and other state and local transfer
and excise taxes arising from the Section 338(h)(10) election (or any comparable
election under state or local Tax law) contemplated by Section 10(a) of this
Agreement.
(j) In the event of a delay in the making of any payment
relating to Taxes by Buyer, Seller, a Company or any other person required
pursuant to Sections 9 and 10 hereof beyond the period expressly provided for
herein, the payor shall, in addition, pay to the payee interest at the prime
rate of interest of as published in and quoted by The Wall Street Journal from
time to time, which represents the base rate on corporate loans posted by at
least 75% of the nation's 30 largest banks.
11. Assignment. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by Buyer or Seller (including
by operation of law in connection with a merger, or sale of substantially all
the assets, of Buyer or Seller) without the prior written consent of the other
party hereto; provided, however, that Buyer may assign its right to purchase the
Shares hereunder to one or more subsidiaries or affiliates of Buyer without the
prior written consent of Seller; provided further, however, that no assignment
shall limit or affect the assignor's obligations hereunder.
12. No Third-Party Beneficiaries. Except as may be provided in
Section 9, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any person or entity, other than the parties hereto and
such assigns, any legal or equitable rights hereunder.
13. Survival of Representations. The representations and
warranties in this Agreement and in any other document delivered in connection
herewith shall survive the Closing solely for purposes
-46-
<PAGE> 52
of Section 9 of this Agreement and (i) in the case of representations, other
than those contained in Sections 4(a), (b), (c), (d), (e), (g) and (s) and in
Sections 6(a)-(d) and (f), shall terminate at the close of business one year
following the Closing Date, (ii) in the case of the representations contained in
Sec tions 4(g) and (s) shall terminate upon the expiration of the applicable
statute of limitations and (iii) in the case of the representations contained in
Sections 4(a)-(e) and in Sections 6(a)-(d) and (f) shall not terminate.
14. Expenses. Whether or not the transactions contemplated
hereby are consummated, and except as otherwise provided in this Agreement, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
or expenses.
15. Attorney Fees. Should any litigation be commenced
concerning this Agreement or the rights and duties of any party with respect to
it, the party prevailing shall be entitled, in addition to such other relief as
may be granted, to a reasonable sum for such party's attorney fees and expenses
determined by the court in such litigation or in a separate action brought for
that purpose.
16. Amendments. No amendment to this Agreement shall be
effective unless it shall be in writing and signed by both parties hereto. Each
party acknowledges that no officer, employee, agent or other representative of
the other party has authority, actual or apparent, to bind such other party to
any amendment or other modification of this Agreement, except pursuant to a
written document properly executed by an authorized representative of such other
party.
17. Notices. Notice and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed or sent by telecopy by the sending party, as follows:
(i) If to Buyer:
Addington Acquisition Company, Inc.
1500 North Big Run Road
Ashland, Kentucky 41102
(Telecopy No. (606) 928-9527)
Attention: Larry Addington
With copies to:
-47-
<PAGE> 53
Kevin J. Hable, Esq.
Wyatt, Tarrant & Combs
2800 Citizens Plaza
Louisville, Kentucky 40202
(Telecopy No. (502) 589-0308)
(ii) If to Seller:
Addington Resources, Inc.
771 Corporate Drive
Suite 1000
Lexington, Kentucky 40503
(Telecopy No. (606) 223-4178)
Attention: R. Douglas Striebel,
Chief Financial Officer
With copies to:
Howard P. Berkowitz
Chairman of the Board
888 Seventh Avenue
New York, New York 10106
(Telecopy No. (212 757-0577)
-48-
<PAGE> 54
and
Stuart D. Freedman, Esq.
Schulte, Roth & Zabel
900 Third Avenue
New York, New York 10022
(Telecopy No. (212) 593-5955)
and
Paul E. Sullivan, Esq.
Brown, Todd & Heyburn
2700 Lexington Financial Center
Lexington, Kentucky 40507
(Telecopy No. (606) 231-0011)
All notices and other communications given to any party hereto
in accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight courier service
or sent by telecopy, or on the date five business days after dispatch by
certified or registered mail if mailed, in each case delivered, sent or mailed
(properly addressed) to such party as provided in this Section 17 or in
accordance with the latest unrevoked direction from such party given in
accordance with this Section 17.
18. Interpretation. The headings contained in this Agreement,
in any Exhibit or Schedule hereto and in the table of contents to this
Agreement, are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
19. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties and delivered to the other party. For purposes of this
Section 19, a counterpart shall be deemed delivered when transmitted by
facsimile and upon receipt of confirmation of such transmission by the
delivering party.
20. Entire Agreement. This Agreement, including the Exhibits
and Schedules attached hereto, constitutes the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
21. Fees. (a) Each party to this Agreement shall pay all
expenses incurred by it or on its behalf in connection with the preparation,
authorization, execution and performance of this
-49-
<PAGE> 55
Agreement, including, but not limited to, all fees and expenses of agents,
representatives, counsel and accountants.
(b) Each party to this Agreement shall hold the other party
harmless with respect to any broker's, finder's or other similar agent's fee
with respect to the transactions contemplated hereby claimed by any broker,
finder or similar agent engaged or employed by the indemnifying party.
22. Severability. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
23. Consent to Jurisdiction. Each of Buyer and Seller
irrevocably submits to the exclusive jurisdiction of (a) the Circuit Court of
Boyd County, Kentucky, and (b) the United States District Court for the Eastern
District of Kentucky, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
Buyer and Seller agrees to commence any action, suit or proceeding relating
hereto either in the United States District Court for the Eastern District of
Kentucky or, if, for jurisdictional reasons, such suit, action or other
proceeding may not be brought in such court, in the Circuit Court of Boyd
County, Kentucky. Each of Buyer and Seller further agrees that service of any
process, summons, notice or document by U.S. registered mail to such party's
respective address set forth above shall be effective service of process for any
action, suit or proceeding in Kentucky with respect to any matters to which it
has submitted to jurisdiction as set forth above in the immediately preceding
sentence. Each of Buyer and Seller irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (a) the Circuit
Court of Boyd County, Kentucky, or (b) the United States District Court for the
Eastern District of Kentucky, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an inconvenient
forum.
24. Non-solicitation of Personnel. Except for the employees
whose names are set forth on Schedule 24 or otherwise agreed to by Seller and
Buyer in writing, Seller hereby agrees that for a period of one year following
the Closing Date neither it nor any person affiliated with it will, directly or
indirectly, solicit or recruit any employee of any Company or any employee of
Buyer or its affiliates previously employed by any Company or otherwise request
or cause any such employee to terminate his or her employment with any Company
or Buyer or its affiliates. Seller
-50-
<PAGE> 56
acknowledges that the covenant contained in this Section is reasonable and
necessary to protect the legitimate business interests of Buyer.
25. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Kentucky.
26. Affiliate Defined. As used in this Agreement, the term
"affiliate" shall mean any person or entity that directly or indirectly
controls, is controlled by or is under common control with, any other person or
entity.
27. Termination.
(a) If a condition to Buyer's obligation to close in Section
3(a) is not satisfied on or before December 31, 1995, then Buyer shall have the
right to either waive the condition and acquire the Shares or terminate the
parties obligation to close the sale of the Shares under this Agreement. If
Buyer elects to acquire the Shares, then Buyer shall not seek indemnification
from Seller with respect to the event or facts giving rise to the failure of the
condition. If Buyer elects to terminate the parties' obligations to consummate
the transactions contemplated by this Agreement by reason of such failure, then
neither party shall have any liability to the other party in connection with the
failure to close (other than a failure caused by a party's breach of its
obligations under this Agreement), subject however to the provisions of Sections
1(h), 3(d), 7(e), 15 and 28.
(b) If a condition to Seller's obligation to close in Section
3(b) is not satisfied on or before December 31, 1995, then Seller shall have the
right to either waive the condition and sell the Shares or terminate the parties
obligation to close the sale of the Shares under this Agreement. If Seller
elects to sell the Shares, then Seller shall not seek indemnification from Buyer
with respect to the event or facts giving rise to the failure of the condition.
If Seller elects to terminate the parties' obligations to consummate the
transactions contemplated by this Agreement by reason of such failure, then
neither party shall have any liability to the other party in connection with the
failure to close (other than a failure caused by a party's breach of its
obligations under this Agreement), subject however to the provisions of Sections
1(h), 3(d), 7(e), 15 and 28.
28. Publicity. Through the period 30 days following Closing,
neither Seller nor Buyer shall issue any public announcement regarding the terms
of this Agreement or the transactions contemplated hereby without the prior
consent of the other party, unless required by law in which event each party
shall provide the other party with prior opportunity to comment on any
-51-
<PAGE> 57
such public announcement. After the Closing, neither Buyer nor Seller, nor any
of their affiliates, shall use or disclose, or permit to be used or disclosed,
any confidential information that is in their possession and which relates to
the other parties to this Agreement and the Companies.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first written above.
ADDINGTON HOLDING COMPANY, INC.
By /s/ Howard Berkowitz
--------------------------------
Name: Howard Berkowitz
-----------------------
Title: Chairman
-----------------------
ADDINGTON RESOURCES, INC.
By /s/ Howard Berkowitz
--------------------------------
Name: Howard Berkowitz
-----------------------
Title: Chairman
-----------------------
ADDINGTON ACQUISITION COMPANY, INC.
By /s/ Larry Addington
--------------------------------
Name:
-----------------------
Title:
-----------------------
/s/ Larry Addington
-----------------------------------
LARRY ADDINGTON
/s/ Robert Addington
-----------------------------------
ROBERT ADDINGTON
/s/ Bruce Addington
-----------------------------------
BRUCE ADDINGTON
-52-
<PAGE> 58
INDEMNITY AGREEMENT
THIS IS AN INDEMNITY AGREEMENT dated as of November 1, 1995,
among ADDINGTON ENTERPRISES, INC. (f/k/a Addington Acquisition
Company, Inc. ("AEC"), LARRY ADDINGTON, ROBERT ADDINGTON and BRUCE
ADDINGTON (collectively, the "Addington Group"), ADDINGTON
RESOURCES, INC. ("ARI") and ADDINGTON HOLDING COMPANY, INC.
("Addington Holding"), (Addington Holding, together with ARI,
collectively "Addington").
Recitals
Reference is made to that certain Stock Purchase Agreement (the "Stock
Purchase Agreement") dated September 22, 1995, between AEC and Addington
Holding pursuant to which Addington Holding sold to AEC all of the issued and
outstanding stock of certain subsidiaries (together with their respective
subsidiaries, collectively, the "Companies").
Reference is hereby made to all guaranty obligations of ARI or AHC for
the benefit of the Companies, including, but not limited to, the guaranty
obligations referred to on Schedule A to this Agreement, and all obligations of
ARI under bonds for the benefit of the Companies, including, but not limited
to, the bonds described on Schedule B to this Agreement (the guaranty and bond
obligations are collectively referred to as the "ARI Obligations").
In connection with the transactions contemplated by the Stock Purchase
Agreement, AEC and the Addington Group have agreed to execute and deliver this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties to this
Agreement, the parties agree as follows:
WITNESSETH:
1. Each of AEC and the Addington Group, jointly and severally,
(each an "Indemnitor", and collectively, the "Indemnitors") hereby agrees to
indemnify, defend and hold Addington and its or their respective agents,
directors, officers, attorneys and affiliates (individually, an "Indemnified
Party" and collectively, the "Indemnified Parties") harmless from and against
any loss, liability, claim, damage and expense (including reasonable legal fees
and expenses) suffered or incurred by an Indemnified Party under the ARI
Obligations.
2. In order for an Indemnified Party to be entitled to any
indemnification provided for under this Agreement arising out of or involving a
claim or demand made by any person, firm, governmental
<PAGE> 59
authority or corporation against the Indemnified Party (a "Third Party Claim"),
such Indemnified Party must notify the Indemnitors in writing, and in
reasonable detail, of the Third Party Claim within 10 business days after
receipt by such Indemnified Party of written notice of the Third Party Claim;
provided, however, that failure to give such notification shall not affect the
indemnification provided hereunder except and unless to the extent the
Indemnitors shall have been actually prejudiced as a result of such failure
(the Indemnitors shall not be liable for any expenses incurred during the
period in which the Indemnified Party failed to give such notice). Thereafter,
the Indemnified Party shall deliver to the Indemnitors, within five business
days after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party relating
to the Third Party Claim.
3. If a Third Party Claim is made against an Indemnified Party, the
Indemnitors will be entitled to participate in the defense thereof and, if it
so chooses, to assume the defense thereof with counsel selected by the
Indemnitors and reasonably satisfactory to the Indemnified Party. Should the
Indemnitors so elect to assume the defense of a Third Party Claim, the
Indemnitors will not be liable to the Indemnified Party for legal expenses
subsequently incurred by the indemnified party in connection with the defense
thereof. If the Indemnitors assume such defense, the Indemnified Party shall
have the right to participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by the Indemnitors, it
being understood that the Indemnitors shall control such defense. The
Indemnitors shall be liable for the fees and expenses of counsel employed by
the Indemnified Party for any period during which the Indemnitors have not
assumed the defense thereof (other than during any period in which the
Indemnified Party shall have failed to give notice of the Third Party Claim as
provided above). If the Indemnitors choose to defend or prosecute any Third
Party Claim, all of the parties hereto shall cooperate in the defense or
prosecution thereof. Such cooperation shall include the retention and (upon the
Indemnitors' request) the provision to the Indemnitors of records and
information which are reasonably relevant to such Third Party Claim, and making
employees available on a mutually con venient and reasonable basis to provide
additional information and explanation of any material provided hereunder.
Whether or not the Indemnitors shall have assumed the defense of a Third Party
Claim, the Indemnified Party shall not admit any liability with respect to, or
settle, compromise or discharge, such Third Party Claim without the
Indemnitors' prior written consent (which consent shall not be unreasonably
withheld).
4. Should any litigation be commenced concerning this Agreement or
the rights and duties of any party with respect to it, the party prevailing
shall be entitled, in addition to such other
- 2 -
<PAGE> 60
relief as may be granted, to a reasonable sum for such party's attorney fees
and expenses determined by the court in such litigation or in a separate action
brought for that purpose.
5. No amendment to this Agreement shall be effective unless it
shall be in writing and signed by both parties hereto. Each party acknowledges
that no officer, employee, agent or other representative of the other party has
authority, actual or apparent, to bind such other party to any amendment or
other modification of this Agreement, except pursuant to a written document
properly executed by an authorized representative of such other party.
6. This Agreement constitutes the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter. No representation, promise or statement of intention has been
made by either party that is not embodied herein, and neither party shall be
bound by or liable for any alleged representation, promise or statement of
intention not so set forth.
7. If any provision of this Agreement or the application of any
such provision to any person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof.
9. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Kentucky, without regard to its conflicts
of law rules.
10. All notice or communications under this Agreement shall be in
writing and shall be (1) mailed by registered or certified mail, return receipt
requested, (2) hand delivered, or (3) delivered by overnight carrier, to the
parties at the addresses set forth below their names on the signature page(s)
to this Agreement, and any notice so addressed and mailed or delivered to
and/or deposited with such carrier, freight prepaid, shall be deemed to have
been given when so mailed if mailed; or delivered if hand-delivered; or
delivered to such overnight courier if delivered by overnight courier. The
parties hereto may at any time, and from time to time, change the address(es)
to which notice shall be mailed, transmitted or otherwise delivered by written
notice setting forth the changed address(es).
- 3 -
<PAGE> 61
IN WITNESS WHEREOF, the parties have executed this as of the date set
out on the preamble hereto, but actually on the date(s) set forth below.
ADDINGTON ENTERPRISES, INC.
By /s/ Larry Addington
---------------------------------------
Title: President
-----------------------------------
Date: 11/1/95
------------------------------------
Address:
1500 North Big Run Road
Ashland, Kentucky 41102
/s/ Larry Addington
-----------------------------------------
LARRY ADDINGTON
Date: 11/1/95
------------------------------------
Address:
1500 North Big Run Road
Ashland, Kentucky 41102
/s/ Robert Addington
-----------------------------------------
ROBERT ADDINGTON
Date: 11/1/95
------------------------------------
Address:
1500 North Big Run Road
Ashland, Kentucky 41102
/s/ Bruce Addington
-----------------------------------------
BRUCE ADDINGTON
Date: 11/1/95
------------------------------------
Address:
1500 North Big Run Road
Ashland, Kentucky 41102
- 4 -
<PAGE> 62
ADDINGTON RESOURCES, INC.
By /s/ R. Douglas Striebel
--------------------------------
Title: V.P.
----------------------------
Date: 11/1/95
-----------------------------
Address:
771 Corporate Drive
Suite 1000
Lexington, Kentucky 40503
Attn: President
ADDINGTON HOLDING COMPANY, INC.
By /s/ R. Douglas Striebel
--------------------------------
Title: Sec/Treas
----------------------------
Date: 11/1/95
-----------------------------
Address:
771 Corporate Drive
Suite 1000
Lexington, Kentucky 40503
Attn: President
- 5 -
<PAGE> 63
Schedule 3(c)(iv)
ASSUMED LIABILITIES
* Indemnification Claims of Pittston Acquisition Company
Liabilities or obligations owed to Pittston Acquisition Company under
that certain Stock Purchase Agreement dated September 24, 1993 and other
agreements executed in connection therewith, including, but not limited to,
workers' compensation claims and unmined minerals taxes
* Debt Obligations and Liabilities to PNC Bank
* Liabilities or Obligations Under Bonds and Guarantees Specified on
Schedule 3(b)(vii)
* Obligations Arising Under the Settlement Agreement With Consumers Power
Company, including but not limited to, Agreement dated June 28, 1994 between
Seller and Pittston Acquisition Company
* Obligations Arising Under Contract/Commitment to Harold Sergent, and Relating
to Commissions, Fees, Brokerage Arrangements, Described in Attached Letter
Dated September 6, 1995.
CERTAIN ONGOING OR THREATENED LITIGATION AS SET FORTH BELOW:
Addington, Inc. v. Kentucky Natural Resources and Environmental Protection
Cabinet
Office of Administration Hearings
File No. PDM-21443-039
Harvey Giese, Terry Giese and John Wilson v. Addington, Inc. and Addington
Resources, Inc.
United States District Court, Eastern District of Kentucky Case No. 91-405
Ruth A. Sloas v. Addington, Inc.
EEOC Charge No. 241910604
Equal Employment Opportunity Commission v. Addington, Inc.
United States District Court, Eastern District of Kentucky No. 93-159
Bill E. McKay, Jr. v. Linda S. Sergent, et al.,
Fayette Circuit Court, 22d Judicial Division, First Division No. 89-CI-4113,
and all related actions, claims or suits, whether pending, on appeal, or
threatened
<PAGE> 64
See Attached List of Additional Litigation
<PAGE> 65
September 6, 1995
Mr. Doug Striebel
Chief Financial Officer
Addington Resources, Inc.
Dear Doug:
I have been asked to explain the contract between myself and Addington
relating to payments due and a potential final payoff to allow a clean break
with no future payments.
The contract is accurate except for two areas. These are:
(a) Upon execution of the Pittston contract, I was asked to look over the
Marketing, purchased coal, distribution areas, and I agreed to this for the
$15,000 becoming a monthly fee plus individual projects would continue to be
spelled out for separate fees.
(b) The project areas worked on were:
(1) NuEast -- HWM $.10 clean ton if profitable.
(2) Colony Bay - HWM $.10 raw ton.
(3) Spot Coal Sales made other than T.V.A.
(4) Converting the Alloy Royalty into Cash (i.e. $1.8MM @ 3%).
(5) Converting the Pittston Sales Contract to Cash (i.e. $3.8MM @ 3%).
(6) Sale of Coal to E.Ky - (27,000 tons @ .25/ton) completed.
(7) Sale of Coal to Pen Coal (115,000 tons @ .25/ton) continuing.
(8) New Contract for D.P.&L. - (.25/ton if acquired) long term.
(9) Straight Creek HWM w/Cyprus - $.10 raw ton if executed.
(10) Owe $100,000 plus interest on NuEast note!
For the sake of simplicity and a clean break, I propose a final payment of
$50,000 plus allow me to keep my vehicle (on the books for $0). I will waive
all right to all future payment streams. These are listed below:
(1) NuEast - $0 no profit
(2) Colony Bay - $0 contract terminated
(3) Listed in #6 & 7 $0
(4) $54,000 due
(5) $114,000 due
(6) $6,750 due
(7) 28,750 due plus 35,000 T.P.M. thru 12/31 plus a 3 year
reopener among parties for 20,000 tons (if totally
completed - $35,000 until 12/31. Then 5,000 mos
for 36 mos = $180,000.)
<PAGE> 66
(8) 600,000 tons yr. for 16 yrs. @ .25 = $2,250,000 if totally completed.
(9) 100,000 tons Mo. x .10 ton for 3 yrs = $360,000.
Less (10) $100,000 note plus interest until Pittston $3.8 fee which closes
interest and nets positive.
I have hand written this for confidentiality. I am in Tennessee, give me
a call.
Thanks,
Harold
<PAGE> 67
ADDINGTON RESOURCES, INC.
CURRENT LITIGATIONS
AUGUST 14, 1995
<PAGE> 68
Addington Mining, Inc.
Current Litigations
1
ADDINGTON MINING, INC.
CURRENT LITIGATIONS
AUGUST 1995
JOB 17
Civil Action No. 89-CI-797
Pike Circuit Court; Big Sandy Company, et al v. Addington Inc.
(Property areas A - G)
JOB 11 - JOB 14
Civil Action No. 92-CI-638
Pike Circuit Court; Lola Henry, et al v. Addington, Inc. d/b/a Delta Energy
Corporation, Terry A. Giese and John H. Wilson
(Property dispute)
This action was filed by plaintiffs alleging that Addington failed to pay
royalties on coal mined, removed and transported from plaintiff's
property. The action seeks both compensatory and punitive damages
against all defendants, including Addington, Inc. This action was
previously set for trail but continued by the Court. Addington filed a
crossclaim against the other named defendants for indemnity and/or
contribution for any amount of damages that may be awarded in favor of
plaintiffs.
IVY CREEK
Civil Action No. 90-CI-6171
Floyd Circuit Court; Addington, Inc., Virginia Layne, Malcolm Layne, et al v.
Nancy Watkins and Elmer Watkins.
(Property line dispute.) Royalty possibly paid to the wrong lessor.
IVY CREEK
Civil Action No. 93-CI-353
Pike County Circuit Court; Barry L. Boyd and Deborah Boyd, his wife, v.
Addington, Inc. and Costain Coal, Inc.
(Blasting claim)
TURNHOLE
Civil Action No. 92-CI-1563
Pike Circuit Court; Howard James and Opal James v. Addington, Inc., et al.
(Blasting claim)
This is an action filed by the plaintiffs against Addington, Inc. and
other alleging damage to plaintiffs' property by mining activities and
failure to pay rent or royalties for the use of the property.
Addington obtained the right of entry on this property through a Lease
Agreement from Citation Coal Corporation, another named defendant.
This action is being defended by the law firm of Todd & Smith on behalf
of Chubb & Son Insurance Company who has been put on notice of this
claim.
<PAGE> 69
Addington Mining, Inc.
Current Litigations
2
TURNHOLE
Civil Action No. 94-CI-00955
Pike Circuit Court; Hagan H. Draughn and Mary Lou Draughn v. Addington Inc.
(Blasting Claim)
JOB 17
Civil Action No. 93-CI-1397
Pike Circuit Court; Amos and Gladys Ray, his wife, v. Addington, Inc.
(Blasting claim)
IVY H
Civil Action No. 94-CI-469
Pike Circuit Court; Woody Smith v. Unit Coal et al Declared Judgment - no
exposure, we will pay into Court
(Property dispute) No exposure
This is a declaratory judgment action filed by Addington Mining against
Woody Smith and others requesting the Court to determine the rights of
the parties under certain Lease and Sublease Agreements between
Addington Mining, Inc., Woody Smith, Unit Coal Corporation and others.
Addington seeks a binding judgment from the Court determining the true
owners of the mineral estate of the property.
JOB 17
Civil Action No. 94-CI-00266
Boyd Circuit Court; Sandy Valley Enterprises v. Addington Mining, Inc.
(Dispute involving "Slab Coal") No exposure.
INDIAN RUN
Civil Action No. 92-CI-00489
Greenup County Circuit Court; Jerry and Jodie Bates v. Addington Inc.
(Blasting claim)
JOB 9
Civil Action No. 91-CI-00651
Greenup County Circuit Court; Joe and Delores Melvin v. Addington Inc.
(Property claim) Settled.
some minor dozer work and a quit claim deed to approximately 5 acres
where a pond is located.
Civil Action No. 90-CI-495
Bell Circuit Court, 44th Judicial District; Esther Kay Taylor, et al v. Great
Western Land Management, Inc. v. Addington, Inc. et al. KEITH MORMAN, ATTY
HANDLING CASE.
<PAGE> 70
Addington Mining, Inc.
Current Litigations
3
Suites and Cross-Claims related to the Knuckles Heirs V. Great Western Land
Management, Inc. and involving Addington Inc., Adalex Resources and South
Mississippi Electric Power Association described in Brown, Todd & Heyburn's
letter of January 20, 1993 addressed to Arthur Anderson & Co. and
additionally, correspondence to Harrington, Fowler & Hornday dated February 1,
1993 related to the Southern Illinois Mining Company. KEITH MORMAN & TOM
WALKER, ATTORNEYS HANDLING CASE.
Civil Action No. 94-CI-00217
Floyd Circuit Court; Kenneth Caldwell, et al v. Addington Inc. and Rocky Top
Energies, Inc.
(Royalty dispute regarding the Gross Sales Price)
This action was filed by the plaintiffs seeking damages from Addington,
Inc. and Rocky Top Energies, Inc. for failure to pay royalties pursuant
to certain Lease Agreement entered into between the plaintiffs and Rocky
Top Energies, Inc. in 1978 and subsequently subleased to Addington, Inc.
Civil Action 91-CI-00397
Boyd Circuit Court; Addington Inc. v. Jack Fitz, Patsy Jane Coal Company, Scott
Fuels, Inc. and R.M. Mining, Inc.
Supreme Court
This is a declaratory judgment action brought by Addington to declare the
rights of parties pursuant to an attempt by the parties to enter into a
definitive written agreement for purchase by Addington of certain assets
owned by the defendants.
The trial court entered a Summary Judgment in favor of Addington
declaring that the parties never entered into a binding contract. The
Court of Appeals affirmed the Summary Judgment entered by the Boyd
Circuit Court and this action is presently pending before the Kentucky
Supreme Court.
Civil Action CA-93-CI00267
Greenup Circuit Court; Jack Skaggs v. Addington, Inc.
(Blasting claim)
Civil Action No. 94-CI-000340
Pike Circuit Court; W.T. Fraley v. Addington, Inc.
(Blasting claim)
Civil Action 94-CI-000267
Pike Circuit Court; Gredis Caines V. Addington, Inc.
(Property dispute) No exposure
This action was filed by the heirs of Jack Caines alleging damages for
failure to pay wheelage pursuant to the terms of an Agreement dated June
18, 1992 and for the damage to plaintiff's property by erecting a hollow
fill on the property without authorization from plaintiffs.
<PAGE> 71
Addington Mining, Inc.
Current Litigations
4
Addington Holding Company, Inc. v. Southern Illinois Mining Co. and Marion
Mining Company
Classic Coal Corporation v. Southern Illinois Mining Company, et al
JOHN EGAN, ATTY HANDLING CASE
Gordon & Price, Inc. v. Southern Illinois Mining Company
Tennessee Wildlife Resources Agency v. Tennessee Mining, Inc.
NO MONETARY LOSS
OSM LAWSUIT
Action Number 94-464C; Pending U.S. Court of Federal Claims, Washington, D.C.:
Lawsuit regarding abandoned mine land. THE GOVERNMENT HAS NOT ANSWERED SUIT.
DONALD VISCHE, ATTY HANDLING CASE HAS APPT WITH
JUSTICE DEPARTMENT ON OCT. 24, 1994
No exposure
Civil Action No. 95-CI-00834-Pike County Circuit Court
Harold Sesco and Mary Ann Sesco, his wife, v. Addinton, Inc.
(Blasting complaint)
Civil Action No. 95-CI-00843-Pike County Circuit Court
Leonard Sesco and Wilma Jannell Sesco, his wife, v. Addington, Inc.
(Blasting complaint)
**NOTE: ALL SETTLEMENT AMOUNTS WHETHER PUNITIVE OR OTHERWISE ARE ESTIMATED AND
IN NO WAY REPRESENT THE TRUE OR ACCURATE FINDINGS OF ANY COURT.
<PAGE> 72
SCHEDULE
4(K)
<PAGE> 73
Schedule 4(k)
LITIGATION
Addington Mining, Inc. v. The United States
United States Court of Federal Claims
Case No. 94-464C
Addwest Mining, Inc./Tri-City Turf Club and M.L. Vaughan and Nicolette Vaughan
United States Bankruptcy Court, Eastern District of Kentucky
State of Tennessee v. Tennessee Mining, Inc., et al.
Civil Action No. 10041
Addwest Mining, Inc. v. Green Construction of Indiana, Inc. and Green Coal
Company, Inc.
Daviess Circuit Court, Division II
Case No. 94-CI-00311
Bill E. McKay, Jr. v. Linda S. Sergent, et al.,
Fayette Circuit Court, 22d Judicial Division, First Division No. 89-CI-4113,
and all related actions, claims or suits, whether pending, on appeal, or
threatened
<PAGE> 74
ADDINGTON MINING - ADDINGTON RESOURCES
PENDING LITIGATION
CLAIMS AND ASSESSMENTS
The following is a list of pending litigation, claims and
assessments involving Addington Resources, Inc., or one of its subsidiaries.
1. Harvey Giese v. Addington, Inc. and Addington Resources, Inc., U.S.
District Court, Eastern District of Kentucky, Pikeville, Kentucky, Civil
Action No. 91-405.
The only remaining claim is Jefferson Coals claim for costs and attorneys
fees against Addington.
2. Addington, Inc. v. Jack Fitz, Patsy Jane Coal Company, Scott Fuels, Inc.
and R.M. Mining, Inc., Boyd Circuit Court Civil Action No. 91-CI-00397.
This is a declaratory judgment action brought by Addington to declare the
rights of the parties pursuant to an attempt by the parties to enter into a
definitive written agreement for purchase by Addington of certain assets
owned by the defendants.
The trial court entered a Summary Judgment in favor of Addington declaring
that the parties never entered into a binding contract. The Court of
Appeals affirmed the Summary Judgment entered by the Boyd Circuit Court and
this action is presently pending before the Kentucky Supreme Court.
This litigation claims damages for breach of contract in the amount of $4
million.
3. Lola Henry, et al v. Addington, Inc. d/b/a Delta Energy Corporation, Terry
A. Giese and John H. Wilson, Pike Circuit Court, Civil Action No.
92-CI-638.
This action was filed by plaintiffs alleging that Addington failed to pay
royalties on coal mined, removed and transported from plaintiffs' property.
The action seeks both compensatory and punitive damages against all
defendants, including Addington, Inc.
This action was previously set for trial but continued by the Court.
Addington filed a crossclaim against the other named defendants for
indemnity and/or contribution for any amount of damages that may be awarded
in favor of the plaintiffs.
4. Addington, Inc. v. Harry Jones and Loo-Con Energies, Inc., Boyd Circuit
Court, Civil Action No. 89-CI-1006.
This is a declaratory action filed by Addington, Inc. requesting the Court
to declare the rights of the parties pursuant to an Agreement entered into
between Harry Jones and Addington, Inc. dated November 18, 1988.
<PAGE> 75
Jones is holding two notes payable by Addington Resources in the amount of
$100,000 each. The first payable is 10/14/95 and the last is 10/14/96.
Interest at 7% from 10/14/94 until paid.
The Loo-Con claim stems from an Agreement dated June 10, 1986, between
Addington and CJC Leasing whereby Addington acknowledged in the Agreement
and agreed to assume an obligation of NOR Mining to pay Loo-Con the sum of
twenty-five (25) cents per ton for coal mined, removed and sold from a
certain permitted area and the sum of ten (10) cents per ton for coal mined
from the mountain top area subject to the CJC Agreement.
5. Millis and Lola Roberts v. Hawkeye Coal Company, Pike Circuit Court, Civil
Action No. 86-CI-1737.
This is an action by the plaintiffs against Hawkeye Coal Company for
trespass to plaintiffs' property and failure to pay royalties pursuant to a
Lease Agreement entered into between the parties on February 24, 1972. The
plaintiffs seek both compensatory and punitive damages.
Addington obtained a Sublease from Hawkeye of the Roberts' lease and all
the Sublease contains an indemnity clause to hold Hawkeye harmless from
any and all claims which are brought by any third parties as a result of
Addington's acts or omissions on the property.
This case was thought to have been settled in 1993 by Addington
contributing $20,000 toward settlement. However, Millis Roberts died in
1992 and his heirs have rejected the proposed settlement and the case is
presently pending in the Pike Circuit Court.
6. Howard James and Opal James v. Addington, Inc., et al, Pike Circuit Court,
Civil Action No. 92-CI-1563.
This is an action filed by the plaintiffs against Addington, Inc. and
others alleging damage to plaintiffs' property by mining activities and
failure to pay rent or royalties for the use of the property.
Addington obtained the right of entry on this property through a Lease
Agreement from Citation Coal Corporation, another named defendant.
This action is being defended by the law firm of Todd & Smith on behalf of
Chubb & Son Insurance Company who has been put on notice of this claim.
2
<PAGE> 76
7. Addington Mining, Inc. v. Woody Smith, et al, Pike Circuit Court, Civil
Action No. 94-CI-00469.
This is a declaratory judgment action filed by Addington Mining against
Woody Smith and others requesting the Court to determine the rights of
the parties under certain Lease and Sublease Agreements between Addington
Mining, Woody Smith, Unit Coal Corporation and others. Addington seeks a
binding judgment from the Court determining the true owners of the
mineral estate of the property.
8. Greedis Caines v. Addington, Inc., Pike Circuit Court, Civil Action No.
94-CI-267.
This action was filed by the heirs of Jack Caines, alleging damages for
failure to pay wheelage pursuant to the terms of an Agreement dated June
18, 1992, and for damage to plaintiff's property by erecting a hollow
fill on the property without authorization from plaintiffs.
9. Kenneth Caldwell, et al v. Addington, Inc., Floyd Circuit Court, Civil
Action No. 94-CI-00217.
This action was filed by the plaintiffs seeking damages from Addington,
Inc. and Rocky Top Energies, Inc. for failure to pay royalties pursuant
to a certain Lease Agreement entered into between the plaintiffs and
Rocky Top Energies, Inc. in 1978 and subsequently Subleased to Addington,
Inc.
10. Robert Dworak, et al v. Addington, Inc., Addington Mining, Inc. and Mar
Pike Coal Company, NREPC Permit Nos. 898-0409, 898-0330 and 498-0215.
The Dworaks are contesting the issuance of these permits originally to
Unit Coal Company and subsequently to Addington, Inc. and Addington
Mining, Inc. All these claims are presently pending before the Department
of Natural Resources with exception of 498-0125 and 898-0330, the
issuance of which has been appealed to the Franklin Circuit Court by the
Dworak's.
11. Addington Mining, Inc. v. Combs Brothers Investments, et al, Floyd
Circuit Court, Civil Action No. 94-CI-00520.
This is an action filed by Addington Mining, Inc. for declaratory
judgment against Combs Brothers Investments, et al requesting the Court
to determine the rightful owners of certain real estate, the ownership of
which is claimed by Combs Brothers as well as Harkins Mineral Associates
and Bull Creek Coal Corporation.
Addington seeks a binding judgment from the Court determining the
rightful owners of the mineral rights to the property so that royalties
owned by Addington for mining the property can be paid to the rightful
owners.
3
<PAGE> 77
12. Addington, Inc. et al v. Nancy Watkins, Floyd Circuit Court, Civil Action
No. 90-CI-617.
This is a declaratory judgment action filed by Addington and other
property owners against Watkins and requesting the Court determine the
rightful owners of property claimed by both Watkins and the other named
plaintiffs.
13. Ruth Budnick v. Addington Mining, Inc., Floyd Circuit Court No.
94-CI-730.
This is a suit for breach of contract for failure to construct home site
on plaintiff's property.
14. Yolanda Hehenecker v. Addington Mining, Inc., Floyd Circuit Court No.
95-CI-00062.
This is a suit for failure to pay all royalties due under lease
agreement.
PENDING WORKERS' COMPENSATION CLAIMS AND NATURAL
RESOURCES AND ENVIRONMENTAL PROTECTION CABINET PROCEEDINGS
1. Randall Taylor v. Addington, Inc. W.C. Claim No. 93-20842.
2. Jimmy Dean Hylton v. Addington, Inc., W.C. Claim No. 93-14360.
3. Ronald Caudill v. Addington, Inc., W.C. Claim No. 92-48973.
4. Cecil Jarvis, Jr. v. Addwest Mining, W.C. Claim No. 94-03869.
5. Arnold Lewis v. Addington, Inc., W.C. Claim No. 94-15318.
6. Gary Dunn v. Addington, Inc. W.C. Claim No. 93-41851.
7. Nora Caines et al v. Addington Mining, Inc., Claim for Wheelage.
8. Ray Cantrell v. Addington Mining, Inc., W.C. Claim No. 95-15271.
9. Stanley Collins v. Addington Mining, Inc., W.C. Claim No. 94-05819.
10. Luther Fletcher v. Addington Mining, Inc., W.C. Claim No. 94-52356.
11. Vergil Hall v. Addington Mining, Inc., W.C. Claim No. 94-44436.
4
<PAGE> 78
12. Thomas Holbrook v. Addington Mining, Inc., W.C. Claim No. 94-10027.
13. Floyd Leedy v. Addington Mining, Inc., W.C. Claim Nos. 95-03862 and
95-00751.
14. Department of Mines and Minerals v. Addington Mining, Inc., Blasting
Citation No. 1908.
15. NREPC v. Addington Mining, Inc., Noncompliance No. 046195.
16. NREPC v. Addington Mining, Inc., Noncompliance No. 41-0847.
17. NREPC v. Addington Mining, Inc., Permit No. 898-0425.
18. NREPC v. Addington Mining, Inc., Noncompliance No. 510502.
19. NREPC v. Addington Mining, Inc., Noncompliance No. 41-0666.
20. Phillip Rice v. Addington Mining, Inc., W.C. Claim No. 93-13692.
21. Ova Stephens v. Addington Mining, Inc., W.C. No. 93-46264.
22. Arlis Jones v. Addington Mining, Inc., W.C. No. 94-15550.
23. James Cantrell v. Addington Resources, Inc., W.C. No. 95-20678.
24. NREPC v. Addington Mining, Inc., Noncompliance No. 410653.
NEW RIVER LIME
1. Joseph Greer et al v. New River Lime, Inc., Meade Circuit Court,
property ownership dispute over M.J. Bennett Heirs tract.
5
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This is an Employment Agreement dated as of September 22, 1997, between
Addington Enterprises, Inc., a Kentucky corporation with offices in Ashland,
Kentucky ("Employer") and Donald P. Brown of Littleton, Colorado ("Employee").
RECITALS
A. Whereas, Employer desires to hire Employee to serve in the
capacity of President and Chief Executive Officer of Addington
Enterprises, Inc., and
B. Whereas, Employee desires to accept such employment on the terms herein
set forth.
NOW, THEREFORE, in consideration of the foregoing and of the covenants
herein contained, the parties hereto agree as follows:
1. Employment. Employer hereby agrees to employ Employee, and Employee
hereby accepts such employment by Employer, upon the terms and conditions set
forth in this Agreement.
2. Term. The term of this agreement (the "Term") shall be the
three-year period commencing September 22, 1997, and ending on September 21,
2000, unless terminated sooner pursuant to paragraph 10 below. The Term may be
extended by agreement of the parties.
3. Duties. During the Term, Employee shall hold the position of
President and CEO of Employer and such other affiliates requested by Employer.
Employee shall perform the duties customary for that position, and such other
duties as Employer may from time to time assign to him. Employee agrees to use
his best efforts for Employer's benefit, and throughout the Term shall devote
his entire time, attention, and energies to Employer's business. Employee shall
not, without Employer's prior consent engage in other business activities
requiring significant time of the Employee, provided however that Employee shall
be permitted to continue his ownership and participation (which shall require
more of Employee's time during the next three months to fulfill existing
commitments) in International Executive Services, LLC, and Beaver Brook Coal,
LLC, as long as such involvement does not conflict with Employees duties
hereunder. Employee may invest his assets in such form or manner as will not
require any services on his part in the operation of the affairs of the
enterprises in which the investments are made.
4. Compensation. During the Term, Employee's compensation for duties
performed under this Agreement shall consist of the following:
(a) An annual Base Salary of $400,000, to be paid bi-weekly
with annual merit increases as set by the Employer.
- 1 -
<PAGE> 2
(b) Bonus compensation as Employer may, from time to time
decide.
(c) Employee shall be entitled to participate in any employee
benefit plan sponsored by Employer for the benefit of its employees, upon the
same terms and conditions as other employees of the Employer.
(d) Notwithstanding any provision herein to the contrary, if
during the Term of this Agreement there shall be a Change of Control as defined
herein, Employee shall have the right to receive seven and one-half percent
(7.5%) of the then issued and outstanding stock of Addington Enterprises, Inc.
Such right shall not include the right to share in sale of the Mining
Technologies Division assets (referred to as "the MTI Assets"). Currently
Employer is negotiating the sale of the MTI Assets, but if for any reason same
is not consummated at the time Employee is to receive stock pursuant to this
paragraph the parties shall negotiate a reasonable reduction in the number and
percentage of stock to be transferred to Employee to reflect the value of the
MTI Assets. Employee has been given a copy of a draft Asset Purchase Agreement
between Addington Enterprises, Inc., Mining Technologies, Inc. and Mining
Technologies, Limited, that describes in detail the MTI Assets.
(e) Other benefits.
(1) During the Term, Employer shall at no expense to
Employee provide Employee with a house (owned or leased by the Employer) in the
Ashland, Kentucky area, that is mutually agreeable.
(2) During the Term, Employer shall at no expense to
Employee provide Employee with an automobile for use in connection with
Employee's performance of his duties hereunder, so long as Employer may recover
the cost of that automobile over a three-year period in accordance with Section
168 of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
(3) Upon execution of this Agreement, Employer shall
provide Employee an interest free $150,000 "bridge loan" to be fully paid by
Employee upon (i) the sale of Employee's Residence (defined below); or (ii) one
(1) year from the date hereof, whichever shall occur first.
(4) Employer shall reimburse Employee for reasonable
moving expenses from Colorado to Ashland, Kentucky and shall reimburse Employee
for his realtor's fee incurred in the sale of Employee's house located at 5367
East Mineral Circle, Littleton Colorado (the "Employee's Residence") (not to
exceed six percent (6%) of the sales price) so he can relocate to Ashland,
Kentucky.
- 2 -
<PAGE> 3
(5) Employer shall furnish or pay the cost of a term
life insurance policy in the amount of $500,000, during the Term or any
extension thereof.
5. Reimbursal of Expenses. Employer shall reimburse Employee for all
reasonable travel, entertainment, and similar expenses that Employee incurs in
promoting Employer's business subject to policies and directives from the
Employer.
6. Vacations. Employee shall be entitled to four weeks of vacation time
per year, during which time Employee's salary shall be paid in full. Unused
vacation for any year during the term may be accumulated for use in subsequent
years. Upon termination of Employee's employment hereunder, Employee shall
entitled to compensation for all unused vacation time earned during the term of
this Agreement or any extension thereof.
7. Facilities. Employer shall provide Employee with an office, books,
stenographic and technical help, and such other facilities, equipment, supplies
and services as are suitable to his position and adequate for the performance of
his duties.
8. Disclosure of Information. Employee acknowledges and agrees that
Employer's operations, financial reports, customer information, strategic plan,
salary and employee information, and other confidential information pertaining
to Employer's operations and business affairs, as the same may exist from
time-to-time, are valuable, special, and unique assets of Employer's business,
and Employee shall not (without Employer's prior written consent), either during
the Term or thereafter, for any reason or purpose whatsoever, disclose any such
information to any person, firm, corporation, association, or other entity.
Employer may protect this interest by seeking and obtaining a court injunction.
9. Disability. If during the Term Employee becomes unable to perform
his duties hereunder because of disability that is not due to an injury incurred
by Employee in the line of duty while performing company business hereunder,
Employee shall be entitled to his full monthly salary during the six months next
following the onset of such disability. If that disability continues throughout
that six month period, Employer may terminate the Employee's employment
hereunder. Upon such termination, the Term shall be deemed to have ended and all
obligations of Employer and of Employee under this Agreement shall cease, except
as provided in Section 10(a)(ii) of this Agreement. Solely as used in this
paragraph "disability" shall mean Employee's inability (as determined by a
physician mutually selected by the parties) due to accident or physical or
mental illness, to adequately and fully perform the duties that Employee was
performing for Employer when the disability began. If at any time during the
Term the physician mutually agreed upon by Employer and Employee makes a
determination with respect to Employee's disability, that determination shall be
final, conclusive, and binding upon Employer, Employee, and their successors in
interest.
- 3 -
<PAGE> 4
10. Termination.
(a) Events of Termination. Notwithstanding any other provision
of this Agreement to the contrary, and except for any notice required pursuant
to paragraph 10(b), this Agreement and Employee's employment under the terms of
this Agreement will terminate immediately and without notice upon the first of
the following events to occur:
(i) Employee's death;
(ii) A "disability" of Employee, as defined in
Paragraph 9 of this Agreement lasting more than six months, provided that such
disability is not due to an injury incurred by Employee in the line of duty
while performing company business hereunder;
(iii) Termination for "cause" (as defined below) by
Employer; or
(iv) September 22, 2000 (the end of the Term), unless
extended by written agreement of the parties.
(b) Notice of Termination. Any termination by Employer or by
Employee, pursuant to Sections 10(a)(ii) or 10(a)(iii) to this Agreement, shall
be communicated by written notice of such termination to the other party hereto.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice,
from Employer or from Employee, which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Employee's employment under the provision so indicated.
(c) Compensation Upon Termination. In the event of termination
of this Agreement due to an event of termination pursuant to paragraph 10a
above, Employee shall be entitled to be paid for services rendered up to the
time of actual termination, and reimbursed for costs incurred pursuant to
Paragraph 5. Should Employee be terminated for any other reason, Employee shall
continue to be paid the remaining compensation over the Term, even though he is
no longer working for Employer.
(d) Definitions. For purposes of this Agreement, the following
words and terms shall have the following meanings:
(i) Cause. Termination by Employer of Employee's
employment for "cause" shall be limited to mean termination upon (A) the willful
and continued failure by Employee substantially to perform his duties with
Employer after written demand for substantial performance has been delivered to
Employee by Employer; or (B) the willful engaging by Employee in gross
misconduct materially and demonstrably injurious to Employer; (C) breach of
- 4 -
<PAGE> 5
fiduciary duty involving personal profit; or (D) commission of any federal or
state criminal offense. For purposes of this definition, no act, or failure to
act, on Employee's part shall be considered "willful" unless done, or admitted
to be done, by Employee not in good faith and without reasonably belief that
Employee's action or omission was in the best interest of Employer.
(ii) Change of Control. A "change of control" shall
have occurred if (A) any "person"(as such term is used in Sections 13(d) and
14(d) (2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of Employer representing 50% or more of the combined
voting power of Employer's then outstanding securities; (B) during any period of
two consecutive years, individuals who at the beginning of such period
constitute Employer's Board cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for election by
Employer's shareholders, of each new director was approved by a vote of at least
2/3 of the directors then still in office who were directors at the beginning of
the period; (C) substantially all the assets of Employer are sold, other than to
an affiliate; or (D) if Employer or AEI Holding Company, Inc issues equity
securities pursuant to an initial public offering.
11. Employee Representation. Employee represents that his past actions
in the coal industry will not cause Employer to be permit blocked, due to the
employment hereunder.
12. Assignment. The services to be rendered by Employee under this
Agreement are unique and personal, and Employee may not assign any of his rights
or delegate any of his duties under this Agreement. Except as provided in the
immediately preceding sen tence, this Agreement shall benefit Employee and his
heirs and per sonal representatives.
13. Severability and No Violation. If any provision of this Agreement
or its application shall be invalid, illegal, or unenforceable in any respect,
the validity, legality, and enforceability of all other applications of that
provision and of all other provisions and applications hereof shall not in any
way be affected or impaired. The laws of the Commonwealth of Kentucky shall
govern the validity, construction, and interpretation of this Agreement.
Employee represents that in signing this Agreement he will not violate any other
agreement to which he is a party.
14. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Kentucky.
15. Non-Waiver. A delay or failure by either party to exercise a right
under this Agreement, or a partial or single exercise of that right, shall not
constitute a waiver of that or any other right.
- 5 -
<PAGE> 6
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
17. Entire Contract. This Agreement constitutes the entire
understanding and agreement between Employer and Employee with regard to all
matters herein. There are no other agreements, conditions or representations,
oral or written, expressed or implied with regard thereto. This Agreement may be
amended only in writing, signed by both parties.
18. Headings. The headings in this Agreement have been inserted solely
for convenience of reference and shall not be considered in the interpretation
or construction of this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Employment Agreement as of the date set forth in the preamble hereto, but
actually on the date set forth below.
Employer:
Addington Enterprises, Inc.
By:___________________________
Employee:
/s/ Donald P. Brown
------------------------------
Donald P. Brown
- 6 -
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This is an Employment Agreement dated as of November 1, 1997, between
Addington Enterprises, Inc., a Kentucky corporation with offices in Ashland,
Kentucky ("Employer") and Keith H. Sieber, 1001 North Fort Canyon Road, Alpine,
Utah 84004 ("Employee").
RECITALS
A. Whereas, Employer desires to hire Employee to serve in the
capacity of Senior Vice-President for western operations of
Addington Enterprises, Inc., and
B. Whereas, Employee desires to accept such employment on the terms herein
set forth.
NOW, THEREFORE, in consideration of the foregoing and of the covenants
herein contained, the parties hereto agree as follows:
1. Employment. Employer hereby agrees to employ Employee, and Employee
hereby accepts such employment by Employer, upon the terms and conditions set
forth in this Agreement.
2. Term. The term of this agreement (the "Term") shall be the
three-year period commencing November 1, 1997, and ending on October 31, 2000,
unless terminated sooner pursuant to paragraph 10 below. The Term may be
extended by agreement of the parties.
3. Duties. During the Term, Employee shall serve as vice-president for
western operations for Employer. Employee shall perform the duties customary for
that position, and such other duties as Employer may from time to time assign to
him. Employee agrees to use his best efforts for Employer's benefit, and
throughout the Term shall devote his entire time, attention, and energies to
Employer's business. Employee shall not, without Employer's prior consent engage
in other business activities requiring significant time of the Employee.
Employee may invest his assets in such form or manner as will not require any
services on his part in the operation of the affairs of the enterprises in which
the investments are made.
4. Compensation. During the Term, Employee's compensation for duties
performed under this Agreement shall consist of the following:
(a) An annual Base Salary of $235,000 to be paid bi-weekly
with annual merit increases as set by the Employer.
(b) Bonus compensation as Employer may, from time to time
decide.
(c) Employee shall be entitled to participate in any employee
benefit plan sponsored by Employer for the benefit of its
- 1 -
<PAGE> 2
employees, upon the same terms and conditions as other employees of the
Employer.
(d) Notwithstanding any provision herein to the contrary, if
during the Term of this Agreement there shall be a Change of Control as defined
herein, Employee shall have the right to receive two and one-half percent (2.5%)
of the then issued and outstanding stock of Addington Enterprises, Inc. Such
right shall not include the right to share in sale of the Mining Technologies
Division assets (referred to as "the MTI Assets"). Currently Employer is
negotiating the sale of the MTI Assets, but if for any reason same is not
consummated at the time Employee is to receive stock pursuant to this paragraph
the parties shall negotiate a reasonable reduction in the number and percentage
of stock to be transferred to Employee to reflect the value of the MTI Assets.
Employee has been given a copy of a draft Asset Purchase Agreement between
Addington Enterprises, Inc., Mining Technologies, Inc. and Mining Technologies,
Limited, that describes in detail the MTI Assets.
(e) Other benefits.
(1) For a period of one year, Employer shall lease
and provide Employee with an apartment in the Grand Junction, Colorado area.
Employee shall be responsible for all utilities.
(2) During the Term, Employer shall at no expense to
Employee provide Employee with an automobile for use in connection with
Employee's performance of his duties hereunder, so long as Employer may recover
the cost of that automobile over a three-year period in accordance with Section
168 of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
(3) Employer shall loan Employee $10,300 per month
for twelve consecutive months or until Employee sells his existing home
whichever shall first occur. Said loan shall bear interest at six and two
hundredths percent (6.02%) per annum and shall be subject to a setoff from any
sums payable to Employee as a result of this Agreement if not repaid in
accordance with the terms of the note to be signed by Employee.
(4) Employer shall furnish or pay the cost of a term
life insurance policy in the amount of $500,000, during the Term or any
extension thereof.
5. Reimbursal of Expenses. Employer shall reimburse Employee for all
reasonable travel, entertainment, and similar expenses that Employee incurs in
promoting Employer's business subject to policies and directives from the
Employer.
6. Vacations. Employee shall be entitled to four weeks of vacation time
per year, during which time Employee's salary shall be paid in full. Unused
vacation for any year during the term may be accumulated for use in subsequent
years. Upon termination of
- 2 -
<PAGE> 3
Employee's employment hereunder, Employee shall entitled to compensation for all
unused vacation time earned during the term of this Agreement or any extension
thereof.
7. Facilities. Employer shall provide Employee with an office, books,
stenographic and technical help, and such other facilities, equipment, supplies
and services as are suitable to his position and adequate for the performance of
his duties.
8. Disclosure of Information. Employee acknowledges and agrees that
Employer's operations, financial reports, customer information, strategic plan,
salary and employee information, and other confidential information pertaining
to Employer's operations and business affairs, as the same may exist from
time-to-time, are valuable, special, and unique assets of Employer's business,
and Employee shall not (without Employer's prior written consent), either during
the Term or thereafter, for any reason or purpose whatsoever, disclose any such
information to any person, firm, corporation, association, or other entity.
Employer may protect this interest by seeking and obtaining a court injunction.
9. Disability. If during the Term Employee becomes unable to perform
his duties hereunder because of disability that is not due to an injury incurred
by Employee in the line of duty while performing company business hereunder,
Employee shall be entitled to his full monthly salary during the six months next
following the onset of such disability. If that disability continues throughout
that six month period, Employer may terminate the Employee's employment
hereunder. Upon such termination, the Term shall be deemed to have ended and all
obligations of Employer and of Employee under this Agreement shall cease, except
as provided in Section 10(a)(ii) of this Agreement. Solely as used in this
paragraph "disability" shall mean Employee's inability (as determined by a
physician mutually selected by the parties) due to accident or physical or
mental illness, to adequately and fully perform the duties that Employee was
performing for Employer when the disability began. If at any time during the
Term the physician mutually agreed upon by Employer and Employee makes a
determination with respect to Employee's disability, that determination shall be
final, conclusive, and binding upon Employer, Employee, and their successors in
interest.
10. Termination.
(a) Events of Termination. Notwithstanding any other provision
of this Agreement to the contrary, and except for any notice required pursuant
to paragraph 10(b), this Agreement and Employee's employment under the terms of
this Agreement will terminate immediately and without notice upon the first of
the following events to occur:
(i) Employee's death;
- 3 -
<PAGE> 4
(ii) A "disability" of Employee, as defined in
Paragraph 9 of this Agreement lasting more than six months, provided that such
disability is not due to an injury incurred by Employee in the line of duty
while performing company business hereunder;
(iii) Termination for "cause" (as defined below) by
Employer; or
(iv) October 31, 2000 (the end of the Term), unless
extended by written agreement of the parties.
(b) Notice of Termination. Any termination by Employer or by
Employee pursuant to Sections 10(a)(ii) or 10(a)(iii) to this Agreement shall be
communicated by written notice of such termination to the other party hereto.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice,
from Employer or from Employee, which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Employee's employment under the provision so indicated.
(c) Compensation Upon Termination. In the event of termination
of this Agreement due to an event of termination pursuant to paragraph 10a
above, Employee shall be entitled to be paid for services rendered up to the
time of actual termination, and reimbursed for costs incurred pursuant to
Paragraph 5. Should Employee be terminated for any other reason, Employee shall
continue to be paid the remaining compensation over the Term, even though he is
no longer working for Employer.
(d) Definitions. For purposes of this Agreement, the following
words and terms shall have the following meanings:
(i) Cause. Termination by Employer of Employee's
employment for "cause" shall be limited to mean termination upon (A) the willful
and continued failure by Employee substantially to perform his duties with
Employer after written demand for substantial performance has been delivered to
Employee by Employer; or (B) the willful engaging by Employee in gross
misconduct materially and demonstrably injurious to Employer; (C) breach of
fiduciary duty involving personal profit; or (D) commission of any federal or
state criminal offense. For purposes of this definition, no act, or failure to
act, on Employee's part shall be considered "willful" unless done, or admitted
to be done, by Employee not in good faith and without reasonably belief that
Employee's action or omission was in the best interest of Employer.
(ii) Change of Control. A "change of control" shall
have occurred if (A) any "person"(as such term is used in Sections 13(d) and
14(d) (2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of Employer representing 50% or more of the combined
voting power of Employer's
- 4 -
<PAGE> 5
then outstanding securities; (B) during any period of two consecutive years,
individuals who at the beginning of such period constitute Employer's Board
cease for any reason to constitute at least a majority thereof unless the
election, or the nomination for election by Employer's shareholders, of each new
director was approved by a vote of at least 2/3 of the directors then still in
office who were directors at the beginning of the period; (C) substantially all
the assets of Employer are sold, other than to an affiliate; or (D) if Employer
or AEI Holding Company, Inc issues equity securities pursuant to an initial
public offering.
11. Employee Representation. Employee represents that his past actions
in the coal industry will not cause Employer to be permit blocked, due to the
employment hereunder.
12. Assignment. The services to be rendered by Employee under this
Agreement are unique and personal, and Employee may not assign any of his rights
or delegate any of his duties under this Agreement. Except as provided in the
immediately preceding sen tence, this Agreement shall benefit Employee and his
heirs and per sonal representatives.
13. Severability and No Violation. If any provision of this Agreement
or its application shall be invalid, illegal, or unenforceable in any respect,
the validity, legality, and enforceability of all other applications of that
provision and of all other provisions and applications hereof shall not in any
way be affected or impaired. The laws of the Commonwealth of Kentucky shall
govern the validity, construction, and interpretation of this Agreement.
Employee represents that in signing this Agreement he will not violate any other
agreement to which he is a party.
14. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Kentucky.
15. Non-Waiver. A delay or failure by either party to exercise a right
under this Agreement, or a partial or single exercise of that right, shall not
constitute a waiver of that or any other right.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement.
17. Entire Contract. This Agreement constitutes the entire
understanding and agreement between Employer and Employee with regard to all
matters herein. There are no other agreements, conditions or representations,
oral or written, expressed or implied with regard thereto. This Agreement may be
amended only in writing, signed by both parties.
- 5 -
<PAGE> 6
18. Headings. The headings in this Agreement have been inserted solely
for convenience of reference and shall not be considered in the interpretation
or construction of this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Employment Agreement as of the date set forth in the preamble hereto.
Employer:
Addington Enterprises, Inc.
By:___________________________
Employee:
/s/ Keith H. Sieber
------------------------------
Keith H. Sieber
- 6 -
<PAGE> 1
EXHIBIT 10.6
AEI HOLDING COMPANY, INC.
$200,000,000
10% SENIOR NOTES DUE 2007
PURCHASE AGREEMENT
November 6, 1997
NationsBanc Montgomery Securities, Inc.
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
AEI Holding Company, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to you (the "Initial Purchaser")
$200,000,000 in aggregate principal amount of its 10% Senior Notes due 2007
(the "Notes"). The Notes will be fully and unconditionally guaranteed (the
"Guarantees" and, collectively with the Notes, the "Securities") on a senior
unsecured basis, jointly and severally, by each domestic subsidiary of the
Company listed on the signature page hereto (the "Guarantors"). The Securities
are to be issued pursuant to an indenture (the "Indenture"), dated as of the
Closing Date (as defined below), by and among the Company, the Guarantors and
IBJ Schroder Bank & Trust Company. As used in this Agreement, references to the
"Issuers" shall mean the Company and the Guarantors.
The sale of the Securities to the Initial Purchaser will be
made without registration of the Securities under the Securities Act of 1933,
as amended (the "Securities Act"), in reliance upon exemptions from the
registration requirements of the Securities Act. You have advised the Issuers
that you will offer and sell the Securities purchased by you hereunder in
accordance with Section 3 hereof as soon as you deem advisable.
In connection with the sale of the Securities, the Issuers
have prepared a preliminary offering memorandum, dated October 21, 1997 (the
"Preliminary Memorandum") and a final offering memorandum, dated November 6,
1997 (the "Final Memorandum"). Each of the Preliminary Memorandum and the Final
Memorandum sets forth certain information concerning the Issuers and the
Securities. The Issuers hereby confirm that they have authorized the use of the
Preliminary Memorandum and the Final Memorandum, and any amendment or
supplement thereto, in connection with the offer and sale of the Securities by
the Initial Purchaser. Unless stated to the contrary, all references herein to
the Final Memorandum are to the Final Memorandum at the time of execution and
delivery of this Agreement (the "Execution Time") and are not meant to include
any amendment or supplement, or any information incorporated by reference
therein, subsequent to the Execution Time.
The Initial Purchaser and its direct and indirect transferees
will be entitled to the benefits of the Registration Rights Agreement,
substantially in the form attached hereto as Exhibit A (the "Registration
Rights Agreement"), pursuant to which the Issuers will agree to use their best
efforts to commence an offer to exchange the Securities for securities that
have been registered under the Securities Act and that otherwise are identical
in all respects to the Securities (the "Exchange
<PAGE> 2
Securities"), or to cause a shelf registration statement to become effective
under the Securities Act and to remain effective for the period designated in
such Registration Rights Agreement.
1. REPRESENTATIONS AND WARRANTIES. The Issuers jointly and severally
represent and warrant to the Initial Purchaser as follows:
(a) The Preliminary Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading. The
Final Memorandum, at the date hereof, does not, and at the Closing
Date will not (and any amendment or supplement thereto, at the date
thereof and at the Closing Date, will not), contain any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the Issuers make no representation or warranty as to the
information relating to the Initial Purchaser contained in or omitted
from the Preliminary Memorandum or the Final Memorandum, or any
amendment or supplement thereto, in reliance upon and in conformity
with information furnished in writing to the Issuers by or on behalf
of the Initial Purchaser specifically for inclusion therein.
(b) Neither the Issuers, nor any of their "Affiliates" (as
defined in Rule 501(b) of Regulation D under the Securities Act
("Regulation D")), nor any person acting on their behalf has, directly
or indirectly, made offers or sales of any security, or solicited
offers to buy any security, under circumstances that would require the
registration of the Securities under the Securities Act. Neither the
Issuers, nor any of their Affiliates, nor any person acting on their
behalf has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with
any offer or sale of the Securities, provided, that the Issuers make
no representation in this sentence regarding the Initial Purchaser.
The Securities satisfy the eligibility requirements of Rule 144A(d)(3)
under the Securities Act. The Final Memorandum and each amendment or
supplement thereto, as of its date, contains the information specified
in Rule 144A(d)(4) under the Act. The Issuers have been advised by the
National Association of Securities Dealers, Inc. Private Offerings,
Resales and Trading through Automated Linkages Market ("PORTAL") that
the Securities have been designated PORTAL eligible securities in
accordance with the rules and regulations of the National Association
of Securities Dealers, Inc.
(c) None of the Issuers nor any of their respective
affiliates or any person acting on its or their behalf (other than the
Initial Purchaser, as to whom the Issuers make no representation) has
engaged or will engage in any directed selling efforts within the
meaning of Regulation S under the Securities Act ("Regulation S") with
respect to the Securities. The Securities offered and sold in reliance
on Regulation S have been and will be offered and sold only in
offshore transactions. The sale of the Securities pursuant to
Regulation S is not part of a plan or scheme to evade the registration
provisions of the Securities Act. No registration under the Securities
Act of the Securities is required for the sale of the Securities to
the Initial Purchaser as contemplated hereby or for the Exempt Resales
(as defined below) assuming the accuracy of, and compliance with, the
Initial Purchaser's representations, warranties and agreements set
forth in this Agreement. The Securities sold pursuant to Regulation S
will initially be represented by a temporary global security as
required by Rule 903 of Regulation S.
2
<PAGE> 3
(d) Neither the Company nor any of its subsidiaries is, or
will be after giving effect to the offering and sale of the Securities
and the application of the proceeds therefrom as described in the
Final Memorandum, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company
Act").
(e) Assuming that (i) the representations and warranties and
covenants of the Initial Purchaser contained in Section 3 hereof are
true and correct and (ii) the Initial Purchaser complies with its
agreements contained in Section 3 hereof, (A) registration under the
Securities Act of the Securities or qualification of the Indenture
under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), is not required in connection with the offer and sale
of the Securities to the Initial Purchaser in the manner contemplated
by the Final Memorandum or this Agreement and (B) initial resales of
the Securities by the Initial Purchaser on the terms and in the manner
set forth in the Final Memorandum and Section 3 hereof are exempt from
the registration requirements of the Securities Act.
(f) Since the respective dates as of which information is
given in the Preliminary Memorandum and the Final Memorandum, except
as otherwise stated therein, (i) there has been no material adverse
change in the condition (financial or otherwise), results of
operations, affairs or business prospects of the Company and its
subsidiaries considered as a whole, whether or not arising in the
ordinary course of business and (ii) there have been no material
transactions entered into by the Company or any of its subsidiaries
(collectively, a "Material Adverse Change").
(g) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the state
of its incorporation with corporate power and authority to own, lease
and operate its properties and conduct its business as described in
the Preliminary Memorandum and the Final Memorandum; and the Company
is duly qualified as a foreign corporation to transact business and is
in good standing in each jurisdiction in which the conduct of its
business requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not, singly or
in the aggregate, reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), results of
operations, affairs or business prospects of the Company and its
subsidiaries considered as a whole (a "Material Adverse Effect").
(h) All of the issued and outstanding capital stock of the
Company at November 6, 1997, was as set forth in the "Actual" column
under the caption "Capitalization" in the Preliminary Memorandum and
the Final Memorandum. All of the outstanding shares of capital stock
of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. Attached as Schedule A hereto is a
complete and accurate list of each subsidiary of the Company. Each of
the subsidiaries of the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has corporate power and
authority to own, lease and operate its properties and conduct its
business as described in the Preliminary Memorandum and the Final
Memorandum and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which the
conduct of its business requires such qualification, except to the
extent that the failure to be so qualified or be in good standing
would not, singly or in the aggregate, reasonably be expected to have
a Material Adverse Effect. All of the issued and outstanding capital
stock of each subsidiary has been duly authorized and validly issued
and is fully paid and nonassessable, and, except as described in the
Preliminary
3
<PAGE> 4
Memorandum and the Final Memorandum, all shares of capital
stock of each subsidiary are owned by the Company, directly or through
subsidiaries, free and clear of any mortgage, pledge, lien,
encumbrance, claim or equity.
(i) This Agreement has been duly authorized, executed and
delivered by the Issuers and constitutes the valid and binding
agreement of the Issuers, enforceable against the Issuers in
accordance with its terms, except that (i) enforcement thereof may be
subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law) and (ii) the
enforceability of any indemnification or contribution provisions
thereof may be limited under applicable securities laws or the public
policies underlying such laws.
(j) The Notes have been duly authorized by the Company, and,
when executed and authenticated in accordance with the provisions of
the Indenture and delivered to and paid for by the Initial Purchaser
in accordance with this Agreement, will constitute the valid and
binding obligations of the Company enforceable against the Company in
accordance with their terms, and will be entitled to the benefits, of
the Indenture, except that enforcement thereof may be subject to (A)
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and (B) general principles
of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law).
(k) The Guarantees endorsed on the Notes have been duly
authorized by each Guarantor and, when the Notes are executed and
authenticated in accordance with the provisions of the Indenture and
delivered to the Initial Purchaser in accordance with this Agreement,
the Guarantees will constitute the valid and binding obligation of the
Guarantors enforceable against the Guarantors in accordance with their
terms and will be entitled to the benefits of the Indenture except
that enforcement thereof may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws now or hereafter in effect relating to or affecting creditors'
rights generally and (B) general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at
law).
(l) The Indenture has been duly authorized by the Issuers.
When the Securities are delivered and paid for pursuant to this
Agreement on the Closing Date, the Indenture will have been duly
executed and delivered by the Issuers and, assuming the due execution
and delivery thereof by the Trustee, will constitute a valid and
binding agreement of the Issuers, enforceable against the Issuers in
accordance with its terms, except that enforcement thereof may be
subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(m) The Exchange Securities have been duly authorized and,
when duly executed, authenticated, issued and delivered, will be
validly issued and outstanding, and will constitute the valid and
binding obligations of the Issuers, entitled to the benefits of the
Indenture and enforceable against the Issuers in accordance with their
terms except that enforcement thereof
4
<PAGE> 5
may be subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(n) The Registration Rights Agreement has been duly
authorized by the Issuers and, when duly executed and delivered by the
Issuers (assuming the due execution and delivery by the Initial
Purchaser), will constitute a valid and binding agreement of the
Issuers, enforceable against the Issuers in accordance with its terms
except that (i) enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in
equity or at law) and (ii) the enforceability of any indemnification or
contribution provisions thereof may be limited under applicable
securities laws or the public policies underlying such laws.
(o) On the Closing Date, the New Credit Agreement (as defined
in the Final Memorandum) and the guarantee of the obligations
thereunder by the Guarantors (a) shall have been duly authorized,
executed and delivered by the Company and the Guarantors,
respectively, and will constitute the valid and binding agreement of
the Company and the Guarantors, respectively, enforceable against the
Company and the Guarantors, as applicable, in accordance with their
terms except that enforcement thereof may be subject to (A)
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating
to or affecting creditors' rights generally and (B) general principles
of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law). On the Closing Date, no event of
default or event which, with the giving of notice or passage of time
or both, would constitute an event of default shall have occurred
under the New Credit Agreement or the guarantees thereof by the
Guarantors and all conditions to the extension of credit thereunder
shall have been satisfied without waiver (or with waiver if such
waiver is reasonably acceptable to the Initial Purchaser).
(p) On the Closing Date, a Subsidiary Intercompany Note (as
defined in the Final Memorandum) from the Company to Bowie Resources,
Limited, a majority-owned subsidiary of the Company ("Bowie"), (a)
shall have been duly authorized, executed and delivered by the Company
and Bowie and will constitute the valid and binding agreement of the
Company and Bowie, respectively, enforceable against the Company and
Bowie, as applicable, in accordance with their terms except that
enforcement thereof may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws now or hereafter in effect relating to or affecting creditors'
rights generally and (B) general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at
law). On the Closing Date, no event of default or event which, with
the giving of notice or passage of time or both, would constitute an
event of default shall have occurred under the Subsidiary Intercompany
Note and all conditions to the extension of credit thereunder shall
have been satisfied without waiver (or with waiver if such waiver is
reasonably acceptable to the Initial Purchaser).
(q) The execution, delivery and performance of this
Agreement, the Indenture, the Registration Rights Agreement, the New
Credit Agreement and the Subsidiary Intercompany Note by the Issuers
and Bowie (to the extent each is a party thereto), and the
consummation of
5
<PAGE> 6
the transactions contemplated hereby and thereby will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan or credit agreement or other agreement
or instrument to which either the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound
or to which any of the properties or assets of the Company or any of
its subsidiaries are subject, nor will such actions result in any
violation of the provisions of the charter or by-laws of the Company
or any of its subsidiaries or any statute to which they may be subject
or any order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties or assets (except to the
extent any such conflict, breach, violation or default singly or in
the aggregate, would not reasonably be expected to have a Material
Adverse Effect); and except for such consents, approvals,
authorizations, registrations or qualifications as may be required
under applicable state securities and Blue Sky laws in connection with
the purchase and distribution of the Securities by the Initial
Purchaser or as set forth in the Registration Rights Agreement, no
consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of this
Agreement, the Indenture, the Registration Rights Agreement, the New
Credit Agreement and the Subsidiary Intercompany Note by the Issuers
and Bowie (to the extent each is a party thereto), the consummation of
the transactions contemplated hereby and thereby, and the issuance and
sale of the Securities and the Exchange Securities by the Issuers.
(r) Neither the Company nor any of its subsidiaries is in
breach or violation of any of the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound or
to which any of the properties or assets of the Company or any of its
subsidiaries are subject, nor is the Company or any of its
subsidiaries in violation of the provisions of its respective charter
or by-laws or any statute or any judgment, order, rule or regulation
of any court or governmental agency or body having jurisdiction over
the Company, any of its subsidiaries or any of their properties or
assets (except to the extent any such conflict, breach, violation or
default is cured at or prior to the Closing Date and within the grace
period applicable thereto or would not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect).
(s) As of the Closing Date, the Securities and the Indenture
will conform in all material respects to the descriptions thereof
contained in the Final Memorandum. As of the Closing Date, the
provisions of the Registration Rights Agreement and the New Credit
Agreement, to the extent that such provisions are summarized in the
Final Memorandum, will conform in all material respects to the
descriptions thereof contained in the Final Memorandum.
(t) Except as set forth in the Registration Rights Agreement,
there are no contracts, agreements or understandings between the
Company or any of its subsidiaries and any person granting such person
the right to require the Company or any of its subsidiaries to file a
registration statement under the Securities Act with respect to any
securities owned or to be owned by such person or to require the
Company or any of its subsidiaries to include such securities in any
securities being registered pursuant to any registration statement
filed by the Company or any of its subsidiaries under the Securities
Act.
6
<PAGE> 7
(u) Except as set forth in the Preliminary Memorandum and the
Final Memorandum, there is no action, suit or proceeding before or by
any court or governmental agency or body, domestic or foreign, now
pending or, to the knowledge of the Issuers, threatened against or
affecting the Company or any of its subsidiaries, which would
reasonably be expected to result in a Material Adverse Change or,
singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect or materially and adversely affect the offering of the
Securities.
(v) The Company and each of its subsidiaries has good and
indefeasible title in fee simple to all real property and good and
indefeasible title to all personal property owned by it and necessary
in the conduct of the business of the Company or such subsidiary, in
each case free and clear of all liens, encumbrances and defects except
(i) such as are referred to in the Final Memorandum or (ii) such as do
not materially and adversely affect the value of such property to the
Company or such subsidiary, and do not interfere with the use made and
proposed to be made of such property by the Company or such subsidiary
to an extent that such interference would, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. All leases
to which the Company or its subsidiaries is a party are valid and
binding, and no default has occurred or is continuing thereunder which
could, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect or materially and adversely affect the
offering of the Securities, and the Company and its subsidiaries enjoy
peaceful and undisturbed possession under all such leases to which any
of them is a party as lessee (with such exceptions as do not
materially interfere with the use made by the Company or such
subsidiary). The Company and its subsidiaries possess adequate
certificates, authorizations or permits issued by the appropriate
state, federal or foreign regulatory agencies or bodies necessary to
conduct the business now operated by them, and except as set forth in
the Final Memorandum, neither the Company nor any of its subsidiaries
has received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(w) Each of Arthur Andersen LLP and Ernst & Young LLP, who
have certified certain financial statements of the Company and its
subsidiaries, are independent public accountants within the meaning of
Rule 101 of the Code of Professional Conduct of the American Institute
of Certified Public Accountants (the "AICPA"). The financial
statements included in the Preliminary Memorandum and the Final
Memorandum present fairly in all material respects the combined
financial position of the Company and its subsidiaries, on a combined
basis, as at the dates indicated and the results of their respective
operations and the changes in their combined financial position for
the periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis during the periods involved, except as indicated
therein, and comply as to form in all material respects with the
requirements applicable to such financial statements included in
registration statements under the Securities Act. The Company and each
of its subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the
7
<PAGE> 8
existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
The unaudited pro forma financial statements included in the
Preliminary Memorandum and the Final Memorandum have been prepared on
a basis consistent with the historical financial statements of the
Company and its subsidiaries and give effect to assumptions used in
the preparation thereof on a reasonable basis and in good faith and
present fairly the historical and proposed transactions contemplated
by the Preliminary Memorandum and the Final Memorandum; and such
unaudited pro forma financial statements comply as to form in all
material respects with the requirements applicable to pro forma
financial statements included in registration statements on Form S-1
under the Act. The other unaudited pro forma financial and statistical
information and data included in the Preliminary Memorandum and the
Final Memorandum are, in all material respects, accurately presented
and prepared on a basis consistent with the pro forma financial
statements.
The historical and unaudited pro forma financial statements
included in the Preliminary Memorandum and the Final Memorandum
constitute all of the financial statements that would be required to
be included in a registration statement on Form S-1 under the
Securities Act, except for the exclusion of Bowie financial statements
in the 1994 combined financial statements of AEI Holding Company, Inc.
(x) Neither the Company nor any of its subsidiaries is now
or, after giving effect to the issuance of the Securities, and the
application of the proceeds thereof, will be (i) insolvent, (ii) left
with unreasonably small capital with which to engage in its
anticipated businesses or (iii) incurring debts beyond its ability to
pay such debts as they become due.
(y) Except as would not reasonably be expected to have a
Material Adverse Effect, the Company and its subsidiaries own, or
otherwise possess the right to use, all patents, trademarks, service
marks, trade names and copyrights, all applications and registrations
for each of the foregoing, and all other proprietary rights and
confidential information used in the conduct of their respective
businesses as currently conducted; and neither the Company nor any of
its subsidiaries has received any notice or is otherwise aware, of any
infringement of or conflict with the rights of any third party with
respect to any of the foregoing which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would
reasonably be expected to have a Material Adverse Effect. The Company
and its subsidiaries do not own or otherwise possess the right to use
any patents, trademarks, service marks, trade names and copyrights,
the loss of which would result in a Material Adverse Effect.
(z) The Company and its subsidiaries are (i) in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or
other approvals or failure to comply with the terms and conditions of
such permits, licenses or approvals would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
In connection with the preparation of the Offering Memorandum, the
Company conducted a review of the effect of
8
<PAGE> 9
Environmental Laws on the business, operations and properties
of the Company and its subsidiaries, in the course of which it
identified and evaluated associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for
reclamation, clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to
third parties). On the basis of such review, the Company has
reasonably concluded that such associated costs and liabilities would
not, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(aa) No labor problem or disturbance with the employees of the
Company or any of its subsidiaries exists or, to the knowledge of the
Issuers, is threatened which, singly or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
(bb) Neither the Company nor any of its subsidiaries, nor, to
any Issuers' knowledge, any director, officer, agent, employee,
stockholder or other person, in any such case, acting on behalf of the
Company or any of its subsidiaries, has used any corporate funds
during the last five years for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political
activity; made any unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is
in violation of any provision of the Foreign Corrupt Practices Act of
1977, as amended; or made any bribe, payoff, influence payment,
kickback or other payment that is unlawful.
(cc) Neither the Company nor any of its subsidiaries has
taken, and none of them will take, any action that would cause this
Agreement or the issuance or sale of the Securities and Exchange
Securities to violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System or analogous foreign laws and
regulations.
(dd) The Company and its subsidiaries have complied with all
provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws
of Florida) relating to doing business with the Government of Cuba or
with persons or affiliates located in Cuba.
(ee) Other than as specifically identified in the Offering
Memorandum or as set forth on Schedule B hereto, neither the Company
nor any subsidiary is a party to any contract or agreement that would
be required to be filed with the Commission as an exhibit to a
registration statement on Form S-1 pursuant to entries (2), (4) and
(10) of the Exhibit Table of Item 601 of Regulation S-K under the
Securities Act.
(ff) No Issuer or Affiliate of any Issuer has sold,
offered for sale or solicited offers to buy or otherwise negotiated in
respect of any security (as defined in the Securities Act) in a
transaction that would require the registration under the Securities
Act of the Securities.
(gg) Neither the Company nor any subsidiary is a "public
utility" or a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
2. PURCHASE AND SALE. On the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this
Agreement, the Issuers agree to sell to the Initial Purchaser and the Initial
Purchaser agrees to purchase the aggregate principal amount of Securities set
9
<PAGE> 10
forth opposite its name as shown in Schedule C hereto, at a purchase price
equal to 97.25% of the principal amount thereof.
The Issuers shall not be obligated to deliver any of the Securities to
be delivered except upon payment for all the Securities to be purchased as
provided herein.
3. SALE AND RESALE OF THE SECURITIES BY THE INITIAL PURCHASER. The
Initial Purchaser represents and warrants to the Issuers that:
(a) It will offer the Securities to be purchased hereunder
for resale only upon the terms and conditions set forth in this
Agreement and in the Final Memorandum.
(b) It (i) will not solicit offers for, or offer or sell, the
Securities by means of any form of general solicitation or general
advertising within the meaning of Regulation D or in any manner
involving a public offering within the meaning of Section 4(2) of the
Securities Act, and (ii) will solicit offers for the Securities only
from, and will offer, sell or deliver (the "Exempt Resales") the
Securities, as part of its initial offering, only to the following
persons (each an "Eligible Purchaser"): (A) persons whom the Initial
Purchaser reasonably believes to be qualified institutional buyers
("QIBs") as defined in Rule 144A under the Securities Act, as such
rule may be amended from time to time ("Rule 144A") or, if any such
person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has
represented to such Initial Purchaser that each such account is a QIB,
to whom notice has been given that such sale or delivery is being made
in reliance on Rule 144A, (B) to a limited number of institutional
accredited investors as defined in Rule 501(a) (1), (2), (3) or (7)
under Regulation D ("Accredited Investors") that, prior to their
purchase of the Securities, execute and deliver a letter containing
certain representations and agreements in the form attached as Annex A
to the Final Memorandum and (C) outside the United States in offshore
transactions in reliance on Regulation S.
(c) With respect to Securities sold in reliance on Regulation
S, (i) neither the Initial Purchaser nor any of its affiliates nor
anyone acting on its behalf has offered or sold, or will offer or
sell, any Securities by means of any directed selling efforts (as
defined in Rule 902 of Regulation S) in the United States, (ii) at or
prior to confirmation of all sales of Securities made in reliance on
Regulation S, it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that
purchases the Securities from it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and
may not be offered or sold within the United States or to, or
for the account or benefit of, U.S. persons (i) as part of a
distribution thereof at any time or (ii) otherwise until 40
days after the later of the date of the commencement of the
offering and the closing date, except in either case in
accordance with an exemption from or in a transaction not
subject to the Securities Act. Terms used above have the
meanings given them by Regulation S."
The sale of the Securities to non-U.S. persons in offshore
transactions is not part of a plan or scheme to avoid the registration
requirements of the Securities Act.
10
<PAGE> 11
(d) (i) It has not solicited, and will not solicit, offers to
purchase any of the Securities from, (ii) it has not sold, and will
not sell, any of the Securities to, and (iii) it has not distributed,
and will not distribute, the Preliminary Memorandum or the Final
Memorandum to, any person or entity in any jurisdiction outside of the
United States except, in each case, in compliance in all material
respects with all applicable laws of such jurisdiction. For purposes
of this Agreement, "United States" means the United States of America,
its territories, its possessions (including the Commonwealth of Puerto
Rico), and other areas subject to its jurisdiction.
(e) Unless prohibited by applicable law, (i) it will furnish
to each person to whom it offers any Securities, a copy of the
Preliminary Memorandum (as amended or supplemented) or Final
Memorandum or (unless delivery of such Preliminary Memorandum is
required by applicable law) shall inform each such person that a copy
of such Preliminary Memorandum or the Final Memorandum will be
available upon request and (ii) it will furnish to each person to whom
it sells Securities a copy of the Final Memorandum (as then amended or
supplemented by applicable law) and shall inform each such person that
a copy of such Final Memorandum will be available upon request.
4. DELIVERY OF AND PAYMENT FOR THE SECURITIES. Delivery of and payment
for the Securities shall be made at the office of Latham & Watkins, 885 Third
Avenue, New York, New York at 9:00 A.M., New York City time, on November 12,
1997, or at such other date or place as shall be determined by agreement
between the Initial Purchaser and the Company. This date and time are sometimes
referred to herein as the "Closing Date." On the Closing Date, the Issuers
shall deliver or cause to be delivered the Securities to the Initial Purchaser
for the account of the Initial Purchaser against payment to or upon the order
of the Company of the purchase price by wire transfer in federal (same-day)
funds. Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation
of the Initial Purchaser hereunder. Upon delivery, the Securities shall be in
definitive fully registered form and registered in the name of Cede & Co., as
nominee of the Depository Trust Company ("DTC"), or such other name or names
and in such denominations as the Initial Purchaser shall request in writing not
less than one business day prior to the Closing Date. For the purpose of
expediting the checking and packaging of the Securities, the Issuers shall make
the Securities available for inspection by the Initial Purchaser in New York,
New York, not later than 2:00 P.M., New York City time, on the business day
prior to the Closing Date.
5. FURTHER AGREEMENTS OF THE ISSUERS. The Issuers jointly and
severally agree with the Initial Purchaser as set forth below in this Section
5:
(a) The Issuers will furnish to the Initial Purchaser,
without charge, as many copies of the Final Memorandum and any
supplements and amendments thereto as they may reasonably request.
(b) Prior to making any amendment or supplement to the
Preliminary Memorandum or the Final Memorandum, the Issuers shall
furnish a copy thereof to the Initial Purchaser and counsel to the
Initial Purchaser and will not effect any such amendment or supplement
to which the Initial Purchaser shall reasonably object by notice to
the Company after a reasonable period to review.
(c) If, at any time prior to completion of the distribution
of the Securities by the Initial Purchaser, any event shall occur or
condition exist as a result of which it is necessary, in
11
<PAGE> 12
the opinion of counsel for the Initial Purchaser or counsel
for the Issuers, to amend or supplement the Final Memorandum in order
that the Final Memorandum will not include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein not misleading in light of the
circumstances existing at the time it is delivered to a purchaser, or
if it is necessary to amend or supplement the Final Memorandum to
comply with applicable law, the Issuers will promptly prepare such
amendment or supplement as may be necessary to correct such untrue
statement or omission or so that the Final Memorandum, as so amended
or supplemented, will comply with applicable law and furnish to the
Initial Purchaser such number of copies of such amendment or
supplement as they may reasonably request.
(d) So long as any Securities are outstanding and are
"Restricted Securities" within the meaning of Rule 144(a)(3) under the
Securities Act and during any period in which the Issuers are not
subject to Section 13 or 15(d) of the Exchange Act of 1934, as amended
(the "Exchange Act"), the Issuers will furnish to holders of the
Securities and prospective purchasers of Securities designated by such
holders, upon request of such holders or such prospective purchasers,
the information, if any, required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
(e) So long as the Securities and Exchange Securities are
outstanding, the Issuers will furnish to the Initial Purchaser copies
of any annual reports, quarterly reports and current reports filed
with the Securities and Exchange Commission ("SEC") on Forms 10-K,
10-Q and 8-K, or such other similar forms as may be designated by the
SEC, and such other documents, reports and information as shall be
furnished by the Issuers to the Trustee or to the holders of the
Securities and Exchange Securities pursuant to the Indenture.
(f) The Issuers will use their best efforts to qualify the
Securities for sale under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchaser reasonably designates and to
continue such qualifications in effect so long as reasonably required
for the distribution of the Securities. The Issuers will also arrange
for the determination of the eligibility for investment of the
Securities under the laws of such jurisdictions as the Initial
Purchaser reasonably requests. Notwithstanding the foregoing, the
Issuers shall not be obligated to qualify as a foreign corporation in
any jurisdiction in which they are not so qualified or to file a
general consent to service of process or to subject themselves to
taxation in respect of doing business in any jurisdiction in which it
is not otherwise subject.
(g) The Issuers will use their best efforts to permit the
Securities to be designated PORTAL securities in accordance with the
rules and regulations adopted by the National Association of
Securities Dealers, Inc. relating to trading in the PORTAL market and
to permit the Securities to be eligible for clearance and settlement
through DTC.
(h) Except following the effectiveness of any Registration
Statement (as defined in the Registration Rights Agreement) and except
for such offers as may be made as a result of, or subsequent to,
filing such Registration Statement or amendments thereto prior to the
effectiveness thereof, the Issuers will not, and will cause their
affiliates not to, solicit any offer to buy or offer to sell the
Securities by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act.
12
<PAGE> 13
(i) The Issuers will take such steps as shall be necessary to
ensure that neither the Company nor any of its subsidiaries shall
become (i) an "investment company" within the meaning of the
Investment Company Act, or (ii) a "holding company" or a "subsidiary
company" or an "affiliate" of a holding company within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
(j) The Company and its subsidiaries will not, and will cause
their affiliates not to, take any action that would require the
registration under the Securities Act of the Securities (other than
pursuant to the Registration Rights Agreement) including, without
limitation, (i) engaging in any directed selling efforts (within the
meaning of Regulation S) during any applicable restricted period or
(ii) offering any other securities in a manner that would be
integrated with the transactions contemplated hereby.
(k) Prior to the consummation of the Exchange Offer or the
effectiveness of an applicable shelf registration statement if, in the
reasonable judgment of the Initial Purchaser, the Initial Purchaser or
any of its affiliates are required to deliver an offering memorandum
in connection with sales of, or market-making activities with respect
to, the Securities, (A) the Issuers will periodically amend or
supplement the Final Memorandum so that the information contained in
the Final Memorandum complies with the requirements of Rule 144A of
the Securities Act, (B) the Issuers will amend or supplement the Final
Memorandum when necessary to reflect any material changes in the
information provided therein so that the Final Memorandum will not
contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in
light of the circumstances existing as of the date the Final
Memorandum is so delivered, not misleading and (C) the Issuers will
provide the Initial Purchaser with copies of each such amended or
supplemented Final Memorandum, as the Initial Purchaser may reasonably
request.
The Issuers hereby expressly acknowledge that the
indemnification and contribution provisions of Section 8 hereof are
specifically applicable and relate to each offering memorandum,
registration statement, prospectus, amendment or supplement referred
to in this Section 5(k).
(l) The Issuers will do all things reasonably necessary to
satisfy the closing conditions set forth in Section 7 hereof.
6. EXPENSES. The Issuers, jointly and severally, agree to pay (a) the
costs incident to the authorization, issuance, sale and delivery of the
Securities and Exchange Securities and any issue or stamp taxes payable in that
connection; (b) the costs incident to the preparation and printing of the
Preliminary Memorandum, the Final Memorandum and any amendments, supplements
and exhibits thereto; (c) the costs of distributing the Preliminary Memorandum,
the Final Memorandum and any amendment or supplement thereto; (d) the fees and
expenses of qualifying the Securities and Exchange Securities under the
securities laws of the several jurisdictions as provided in Section 5(f) hereof
and of preparing, printing and distributing a Blue Sky Memorandum (including
reasonable related fees and expenses of counsel to the Initial Purchaser); (e)
the cost of printing the Securities and the Exchange Securities; (f) the fees
and expenses of the Trustee and any agent of the Trustee and the fees and
disbursements of any counsel for the Trustee in connection with the Indenture
and the Securities and Exchange Securities; (g) any fees paid to rating
agencies in connection with the rating of the Securities and Exchange
Securities; (h) the costs and expenses of DTC and its nominee, including its
book-entry system; (i) all expenses and listing fees incurred in connection
with the application for quotation of the
13
<PAGE> 14
Securities on the PORTAL market; and (j) all other costs and expenses incident
to the performance of the obligations of the Issuers under this Agreement.
7. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligations of
the Initial Purchaser to purchase the Securities shall be subject to the
accuracy of the representations and warranties on the part of the Issuers
contained herein at the Execution Time and the Closing Date, to the accuracy of
the statements of the Issuers made in any certificates pursuant to the
provisions hereof, to the performance by the Issuers of their obligations
hereunder in all material respects and to the following additional conditions:
(a) The Initial Purchaser shall not have discovered and
disclosed to the Company on or prior to the Closing Date that the
Final Memorandum or any amendment or supplement thereto contains an
untrue statement of a fact which, in the opinion of Latham & Watkins,
counsel for the Initial Purchaser, is material or omits to state a
fact which, in the opinion of such counsel, is material and is
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The Final Memorandum shall have been printed and copies
distributed to the Initial Purchaser as soon as practicable but in no
event later than on the Business Day following the date of this
Agreement or at such later date and time as to which the Initial
Purchaser may agree, and no stop order suspending the qualification or
exemption from qualification of the Securities in any jurisdiction
referred to in Section 5(f) hereof shall have been issued and no
proceeding for that purpose shall have been commenced or shall be
pending or threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, singly or in
the aggregate, reasonably be expected to have a Material Adverse
Effect; no action, suit or proceeding shall have been commenced and be
pending against or affecting or, to the knowledge of the Company,
threatened against, the Company or any of its subsidiaries before any
court or arbitrator or any governmental body, agency or official that,
singly or in the aggregate, if adversely determined, would reasonably
be expected to result in a Material Adverse Effect; and no stop order
shall have been issued by the SEC or any governmental agency of any
jurisdiction referred to in Section 5(f) hereof preventing the use of
the Final Memorandum, or any amendment or supplement thereto, or which
would reasonably be expected to have a Material Adverse Effect.
(d) Since the dates as of which information is given in the
Final Memorandum and other than as set forth in the Final Memorandum,
(i) there shall not have been any Material Adverse Change, or any
development that is reasonably likely to result in a Material Adverse
Change, or any material change in the long-term debt, or material
increase in the short-term debt, from that set forth in the Final
Memorandum; (ii) no dividend or distribution of any kind shall have
been declared, paid or made by the Company on any class of its capital
stock; (iii) the Company and its subsidiaries shall not have incurred
any liabilities or obligations, direct or contingent, that are
material, individually or in the aggregate, to the Company and its
subsidiaries, taken as a whole, and that are required to be disclosed
on a balance sheet or notes thereto in accordance with generally
accepted accounting principles and are not disclosed on the latest
balance sheet or notes thereto included in the Final Memorandum.
14
<PAGE> 15
(e) The Company shall have consummated the Organizational
Transactions (as defined in the Final Memorandum).
(f) Since the dates as of which information is given in the
Final Memorandum and other than as set forth in the Final Memorandum,
there shall not have been any material change in the contracts listed
on Schedule B hereto or otherwise discussed or disclosed in the Final
Memorandum under the caption "Business--Major Sales Contracts."
(g) The Initial Purchaser shall have received a certificate,
dated the Closing Date, signed on behalf of the Company by (i) Don
Brown, Chief Executive Officer and (ii) Harold Sergent, Executive Vice
President (or, in the alternate, John Baum, Chief Financial Officer),
confirming that (A) such officers have participated in conferences
with other officers and representatives of the Issuers,
representatives of the independent public accountants of the Issuers
and representatives of counsel to the Issuers at which the contents of
the Final Memorandum and related matters were discussed and (B) the
matters set forth in paragraphs (b), (c), (d), (e) and (f) of this
Section 7 are true and correct as of the Closing Date.
(h) The Initial Purchaser shall have received a certificate,
dated the Closing Date, signed on behalf of the Company by Harold
Sergent, Executive Vice President (or, in the alternate, Vic Grubb,
Treasurer and Controller), in form and substance satisfactory to the
Initial Purchaser, with respect to certain matters relating to the
disclosure in the Final Memorandum (i) under the caption "Projected
Pro Forma Combined Financial Data," (ii) in the column under the
heading "Pro Forma--Projected Fiscal Year 1997" under the caption
"Summary Unaudited Pro Forma and Projected Pro Forma Combined
Financial Data," (iii) referred to in footnote 1 to the table
following the first paragraph under the caption "Business--Mining
Operations--Coal Production," (iv) referred to in footnotes 2 and 3 to
the table in the first paragraph under the caption "Business--Major
Sales Contracts--Customers" and (v) referred to in footnote 1 to the
table in the second paragraph under the caption "Business--Major Sales
Contracts--Customers" and in the last sentence of footnote 3 to such
table.
(i) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Agreement,
the Securities, the Exchange Securities, the Indenture, the
Registration Rights Agreement, the Final Memorandum, the New Credit
Agreement and all other legal matters relating to this Agreement and
the transactions contemplated hereby and thereby, shall be reasonably
satisfactory in all material respects to counsel for the Initial
Purchaser, and the Issuers shall have furnished to such counsel all
documents and information that they may reasonably request to enable
them to pass upon such matters.
(j) Brown, Todd & Heyburn, counsel for the Issuers, shall
have furnished to the Initial Purchaser its written opinion
(containing customary limitations and approvals that shall be
reasonably satisfactory in all material respects to the Initial
Purchaser's counsel), addressed to the Initial Purchaser and dated the
Closing Date, in form and substance reasonably satisfactory to the
Initial Purchaser, to the effect that:
(i) The Company and each of its subsidiaries is
validly existing as a corporation and is in good standing
under the laws of its jurisdiction of incorporation. The
Company and each of its subsidiaries is duly qualified to do
business and in good standing as foreign corporations in each
jurisdiction with respect to which it has certified to us
that they own property, maintain business or have employees
(except
15
<PAGE> 16
where failure to so qualify would not, singly or in
the aggregate, reasonably be expected to have a Material
Adverse Effect).
(ii) Assuming, (i) the accuracy of and compliance
with the representations, warranties and covenants of the
Issuers set forth in Section 1 of this Agreement, and (ii)
the accuracy of and compliance with the Initial Purchaser's
representations, warranties and covenants set forth in this
Agreement, the offer, issuance, sale and delivery of the
Securities to the Initial Purchaser, and the initial reoffer,
resale and delivery of the Securities by the Initial
Purchaser, as contemplated by this Agreement and the Final
Memorandum, do not require registration under the Securities
Act, or qualification of the Indenture under the Trust
Indenture Act, it being understood that no opinion is
expressed as to any subsequent resale of Securities or any
resale of Securities by any person other than the Initial
Purchaser.
(iii) Each of the Company and the Guarantors has the
corporate power and authority to execute and deliver, and to
consummate the transactions contemplated by, this Agreement;
the Company has the corporate power and authority to issue
and deliver the Notes as contemplated by this Agreement; and
the Guarantors have the corporate power and authority to
issue and deliver the Guarantees as contemplated by this
Agreement.
(iv) The execution and delivery of this Agreement
have been duly authorized by all requisite corporate action
of the Company and each Guarantor, and this Agreement has
been duly executed and delivered by the Company and each
Guarantor.
(v) The execution and delivery of the Indenture have
been duly authorized by all requisite corporate action of the
Company and each Guarantor; and the Indenture has been duly
executed and delivered by the Company and each Guarantor, and
assuming due authorization, execution and delivery by the
Trustee, is a valid and binding agreement of the Company and
each Guarantor, enforceable against the Company and each
Guarantor in accordance with its terms, except that
enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws now or hereafter in effect relating to
or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law) and the
exercise of discretionary authority of any court before which
a proceeding may be brought.
(vi) The execution and delivery of the Securities
have been duly authorized by all requisite corporate action
of the Company and each of the Guarantors; the Notes have
been duly executed and delivered by the Company and the
Guarantees have been duly executed and delivered by the
Guarantors and, assuming due authentication by the Trustee,
the Notes and the Guarantees are valid and binding
obligations of the Company and each of the Guarantors,
respectively, entitled to the benefits of the Indenture,
enforceable against the Company and each of the Guarantors in
accordance with their terms, except that enforcement thereof
may be subject to (A) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
now or hereafter in effect relating to or affecting
creditors' rights generally and (B)
16
<PAGE> 17
general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at
law) and the exercise of discretionary authority of any court
before which a proceeding may be brought.
(vii) The execution and delivery of the Exchange
Securities have been duly authorized by all requisite
corporate action of the Company and each of the Guarantors;
and, when duly executed and delivered by the Company and each
of the Guarantors and duly authenticated by the Trustee, will
be valid and binding obligations of the Company and each of
the Guarantors, entitled to the benefits of the Indenture,
enforceable against the Company and each of the Guarantors in
accordance with their terms, except that enforcement thereof
may be subject to (A) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
now or hereafter in effect relating to or affecting
creditors' rights generally and (B) general principles of
equity (regardless of whether enforceability is considered in
a proceeding in equity or at law) and the exercise of
discretionary authority of any court before which a
proceeding may be brought.
(viii) The execution and delivery of the
Registration Rights Agreement have been duly authorized by
all requisite corporate action of the Company and each of the
Guarantors; the Registration Rights Agreement has been duly
executed and delivered by the Company and each of the
Guarantors and, assuming due authorization, execution and
delivery by the Initial Purchaser, the Registration Rights
Agreement is a valid and binding agreement of the Company and
each of the Guarantors, enforceable against the Company and
each of the Guarantors in accordance with its terms, except
that (i) enforcement thereof may be subject to (A)
bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors'
rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a
proceeding in equity or at law) and the exercise of
discretionary authority of any court before which a
proceeding may be brought and (ii) the validity and
enforceability of any indemnification or contribution
provisions thereof may be limited under applicable securities
laws or public policies.
(ix) The execution and delivery of the New Credit
Agreement have been duly authorized by all requisite
corporate action of the Company and each of the Guarantors
(to the extent each is a party thereto); and the New Credit
Agreement has been duly executed and delivered by the Company
and each of the Guarantors (to the extent each is a party
thereto) and, assuming the due authorization, execution and
delivery by the other parties thereto, is a valid and binding
agreement of the Company and each of the Guarantors (to the
extent each is a party thereto), enforceable against each of
the Company and the Guarantors (to the extent each is a party
thereto) in accordance with its terms, except that
enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws now or hereafter in effect relating to
or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law) and the
exercise of discretionary authority of any court before which
a proceeding may be brought.
17
<PAGE> 18
(x) The execution and delivery of the Subsidiary
Intercompany Note have been duly authorized by all requisite
corporate action of the Company and Bowie; and the Subsidiary
Intercompany Note has been duly executed and delivered by the
Company and Bowie and is a valid and binding agreement of the
Company and Bowie, enforceable against each of the Company
and Bowie in accordance with its terms, except that
enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws now or hereafter in effect relating to
or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law) and the
exercise of discretionary authority of any court before which
a proceeding may be brought.
(xi) Except as disclosed in the Final Memorandum,
all of the capital stock of the Company's subsidiaries is
owned of record by the Company. All shares of capital stock
of the Company's subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable and except
as disclosed in the Final Memorandum, to the knowledge of
such counsel, all such shares are owned by the Company free
and clear of any security interests, liens, pledges or
encumbrances.
(xii) To the knowledge of such counsel, neither the
Company nor any of its subsidiaries is in violation of its
corporate charter or by-laws, or in default under any
material agreement (including loan and credit agreements),
indenture or instrument known to such counsel, which default
could, singly or in the aggregate, reasonably be expected to
have a Material Adverse Effect; to the best knowledge of such
counsel, the Company and each of its subsidiaries is not in
violation of any material law, ordinance, governmental rule
or regulation or court decree to which it may be subject
which violation, singly or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect and
has obtained each material license, permit, patent,
certificate, franchise or other governmental authorization or
permit (collectively, "Permits") necessary to ownership of
its properties or to the conduct of its business as described
in the Final Memorandum, other than Permits being applied for
in the ordinary course of business of the subsidiaries and
other than Permits the violation of or failure to obtain
which would singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(xiii) The execution and delivery by the Company and
each of the Guarantors of this Agreement, the Purchase
Agreement, the Indenture, the Registration Rights Agreement,
the New Credit Agreement (or, in the case of the Guarantors,
the guarantees related thereto) and the Subsidiary
Intercompany Note, the consummation by the Company and the
Guarantors of the transactions contemplated hereby and
thereby and by the Final Memorandum will not (A) to the
knowledge of such counsel, result in a breach or violation of
any of the terms or provisions of, or constitute a default
under, any material agreement or instrument of the Company or
any of its subsidiaries or (B) result in any violation of the
provisions of the charter or bylaws of the Company or any of
its subsidiaries, or, to the knowledge of such counsel, any
applicable law, rule or regulation (other than Securities
Laws as to which an opinion is given in paragraph (ii) above)
with respect to the Company or any of its subsidiaries or, to
the knowledge of such counsel, any rule or regulation (other
than Securities Laws (as defined below) as to which an
opinion is given in paragraph (ii) above) or order of any
18
<PAGE> 19
court or governmental agency having jurisdiction over the
Company or any of its subsidiaries, except for such
violations that would not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect;
and, to the knowledge of such counsel, except for such
consents, approvals or authorizations of, or filings,
registrations or qualifications with, governmental
authorities as may be required under the Securities Act and
the rules and regulations thereunder, the Trust Indenture Act
and the rules and regulations thereunder or applicable states
securities or Blue Sky laws, rules or regulations (all of
such laws, rules and regulations are collectively referred to
herein as "Securities Laws") in connection with the purchase
and distribution of the Securities by the Initial Purchaser
and as set forth in, and in order to consummate the
transactions contemplated by, the Registration Rights
Agreement, no consent, approval, authorization or order of,
or filing or registration with, any such court or
governmental agency or body is required in connection with
the execution and delivery by the Company and the Guarantors
of this Agreement, the Purchase Agreement Supplement, the
Indenture, the Registration Rights Agreement, the New Credit
Agreement, or the Subsidiary Intercompany Note, the
consummation by the Company and the Guarantors of the
transactions contemplated hereby and thereby and the issuance
and sale of the Securities and Exchange Securities by the
Company and the Guarantors.
(xiv) The descriptions in the Final Memorandum of
the Indenture, the Securities, the Registration Rights
Agreement, the New Credit Agreement and the Subsidiary
Intercompany Note are accurate summaries of such documents in
all material respects.
(xv) To the knowledge of such counsel, the Company
and its subsidiaries own or otherwise possess the right to
use all patents, trademarks, service marks, trade names and
copyrights, all applications and registrations for each of
the foregoing, used in the conduct of their respective
businesses as currently conducted; and, to the knowledge of
such counsel neither the Company nor any of its subsidiaries
has received any notice, of any infringement of or conflict
with the rights of any third party with respect to any of the
foregoing which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result
in a Material Adverse Effect on the Company.
(xvi) To the knowledge of such counsel, the
statements made in the Final Memorandum under the heading
"Business -- Legal Proceedings" to the extent they constitute
matters of law or legal conclusions, have been reviewed by
such counsel and fairly present in all material respects the
information disclosed therein.
(xvii) To such counsel's knowledge, no legal or
governmental proceedings are pending to which the Company or
any of its subsidiaries is a party that would be required
under the Securities Act to be described in a registration
statement on Form S-1 or a prospectus contained therein
delivered at the time of the confirmation of the sale of an
offering of securities registered under the Securities Act
that are not described in the Final Memorandum, or, to such
counsel's knowledge, that seek to restrain, enjoin, prevent
the consummation of or otherwise challenge the issuance or
sale of the Securities to the Initial Purchaser or the
consummation of the transactions described in the Final
Memorandum under the caption "Use of Proceeds."
19
<PAGE> 20
(xviii) Neither the Company nor any of its
subsidiaries is (i) subject to registration and regulation as
an "investment company" within the meaning of the Investment
Company Act, or (ii) a "holding company" or a "subsidiary
company" or an "affiliate" of a holding company within the
meaning of the Public Utility Holding Company Act of 1935, as
amended.
(xix) When the Securities are issued and delivered
pursuant to this Agreement, such Securities will not be of
the same class (within the meaning of Rule 144A(d)(3) under
the Securities Act) as securities of the Company or any of
its subsidiaries that are listed on a national securities
exchange registered under Section 6 of the Exchange Act or
quoted on an automated inter-dealer quotation system.
(xx) Assuming the Initial Purchaser purchases the
Securities in accordance with Rule 144A under the Securities
Act, neither the issuance or sale of the Securities nor the
application by the Company of the net proceeds thereof as set
forth in the Final Memorandum will violate Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System.
In addition, such counsel shall also state that such counsel
has participated in conferences with officers and representatives of
the Issuers, representatives of the independent public accountants for
the Issuers and representatives of the Initial Purchaser and its
counsel at which the contents of the Final Memorandum and related
matters were discussed and, although such counsel is not passing upon
and does not assume any responsibility for and has not verified the
accuracy, completeness or fairness of the statements contained in the
Final Memorandum, and has not made any independent check or
verification thereof, on the basis of the foregoing (relying as to
materiality to the extent they deemed appropriate upon facts provided
by officers and other representatives of the Issuers), no facts have
come to the attention of such counsel that lead such counsel to
believe that the Final Memorandum, as of its date or the Closing Date,
contained an untrue statement of a material fact or omitted to state
any material fact necessary to make the statements therein, in light
of the circumstances under which there were made, not misleading (it
being understood that such counsel need express no belief or opinion
with respect to the financial statements and notes thereto and other
financial and statistical data included therein).
(k) You shall have received on the Closing Date an opinion of
Latham & Watkins, counsel for the Initial Purchaser, dated the Closing
Date and addressed to you, in form and substance reasonably
satisfactory to you.
(l) The Issuers and the Trustee shall have entered into the
Indenture and the Initial Purchaser shall have received counterparts,
conformed as executed, thereof.
(m) The Issuers and the Initial Purchaser shall have entered
into the Registration Rights Agreement and the Initial Purchaser shall
have received counterparts, conformed as executed, thereof.
(n) The Issuers shall have entered into the New Credit
Agreement (the form and substance of which shall be reasonably
acceptable to the Initial Purchaser) and the Initial Purchaser shall
have received counterparts, conformed as executed, thereof and of all
other documents and agreements entered into in connection therewith.
There shall exist at and as of
20
<PAGE> 21
the Closing Date no conditions that would constitute a
default (or an event that with notice or the lapse of time, or both,
would constitute a default) under the New Credit Agreement. On the
Closing Date, the New Credit Agreement shall be in full force and
effect and shall not have been modified.
(o) The Company shall have been assigned those certain
promissory notes comprising of (I) a term loan promissory note in an
original principal amount of $12,000,000, (ii) a revolving loan
promissory note in an original principal amount of $3,000,000 and
(iii) a letter of credit promissory note in an original principal
amount of $500,000 (collectively, the "Assigned Notes"), in each case
made by Bowie and dated as of June 17, 1997 and payable to The
Provident Bank, and Ohio banking corporation; and the Initial
Purchaser shall have received counterparts, conformed as executed,
thereof and of all other documents and agreements entered into in
connection therewith. There shall exist at and as of the Closing Date
no conditions that would constitute a default (or an event that with
notice or the lapse of time, or both, would constitute a default)
under the Assigned Notes. On the Closing Date, the Assigned Notes
shall be in full force and effect and shall not have been modified
other than such modifications as are reasonably acceptable to the
Initial Purchaser.
(p) The Company and Bowie shall have entered into the
Subsidiary Intercompany Note (the form and substance of which is set
forth in the Indenture) and the Initial Purchaser shall have received
counterparts, conformed as executed, thereof and of all other
documents and agreements entered into in connection therewith. There
shall exist at and as of the Closing Date no conditions that would
constitute a default (or an event that with notice or the lapse of
time, or both, would constitute a default) under the Subsidiary
Intercompany Note. On the Closing Date, the Subsidiary Intercompany
Note shall be in full force and effect and shall not have been
modified.
(q) At the Execution Time and at the Closing Date, Arthur
Andersen LLP and Ernst & Young LLP shall have furnished to the Initial
Purchaser a letter or letters, dated respectively as of the Execution
Time and as of the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchaser, confirming that they are
independent accountants within the meaning of Rule 101 of the Code of
Professional Conduct of the AICPA and otherwise reasonably
satisfactory in form and substance to the Initial Purchaser and its
counsel.
(r) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest financial statements
included in the Final Memorandum losses or interferences with their
businesses, taken as a whole, from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Final Memorandum and (ii)
since such date there shall not have been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or
any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company or its
subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Final Memorandum, the effect of which, in any such
case described in clause (i) or (ii), is, in the reasonable judgment
of the Initial Purchaser, so material and adverse as to make it
impracticable or inadvisable to proceed with the offering or the
delivery of the Securities being delivered on the Closing Date on the
terms and in the manner contemplated herein and in the Final
Memorandum.
21
<PAGE> 22
(s) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following: (i)
trading in securities generally on the New York Stock Exchange or The
NASDAQ Stock Market's National Market or in the over-the-counter
market shall have been suspended or materially limited, or minimum
prices shall have been established on such exchange by the SEC, or by
such exchange or by any other regulatory body or governmental
authority having jurisdiction, (ii) a banking moratorium shall have
been declared by Federal or state authorities, (iii) the United States
shall have become engaged in hostilities, there shall have been an
escalation in hostilities involving the United States or there shall
have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse
change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the
United States shall be such) as to make it, in the reasonable judgment
of the Initial Purchaser, impracticable or inadvisable to proceed with
the offering or delivery of the Securities being delivered on the
Closing Date on the terms and in the manner contemplated herein and in
the Final Memorandum.
(t) As of the Closing Date, no "nationally recognized
statistical rating organization" as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act (i) will have imposed (or
will have informed the Company or any Guarantor that it is considering
imposing) any condition (financial or otherwise) on the Company's or
any Guarantor's retaining any rating assigned to the Company or any
Guarantor, any securities of the Company or any Guarantor or (ii) will
have indicated to the Company or any Guarantor that it is considering
(a) the downgrading, suspension, or withdrawal of, or any review for a
possible change that does not indicate the direction of the possible
change in, any rating so assigned or (b) any change in the outlook for
any rating of the Company, any Guarantor or any securities of the
Company or any Guarantor.
(u) The Company shall have entered into (i) a Manufacture,
Service, Use and License Agreement with Addington Enterprises relating
to the purchase, maintenance and use of Addcar(TM) highwall mining
systems and equipment, (ii) a Haulage and Delivery Agreement with TASK
Trucking Company relating to certain trucking brokerage services,
(iii) a service agreement with Mining Machinery, Inc. relating to
maintenance and repair of equipment, (iv) certain leases with Mining
Machinery, Inc. relating to properties leased by the Company and its
subsidiaries and (v) a Sales Agency Agreement with Bowie Sales LLC
relating to certain coal contracts, in each case on terms reasonably
acceptable to the Initial Purchaser, and the Company shall have
delivered an executed copy of each such agreement to the Initial
Purchaser.
(v) Bowie shall have entered into a Marketing Agreement with
Mitsui Matsushima Co., Ltd., relating to marketing of 22.5% of the
coal produced by Bowie and payment of a 3.0% commission in connection
therewith on terms reasonably acceptable to the Initial Purchaser, and
the Company shall have caused Bowie to deliver an executed copy of
such agreement to the Initial Purchaser.
(w) Latham & Watkins shall have been furnished with such
documents, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass
upon the matters referred to in this Section 7 and in order to
evidence the accuracy, completeness or satisfaction in all material
respects of any of the representations, warranties or conditions
herein contained.
22
<PAGE> 23
(x) Prior to the Closing Date, the Issuers shall have
furnished to the Initial Purchaser such further information,
certificates and documents as the Initial Purchaser may reasonably
request.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchaser.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Issuers jointly and severally agree to indemnify and
hold harmless the Initial Purchaser, the directors, officers,
employees and agents (including, without limitation, attorneys) of the
Initial Purchaser and each person who controls the Initial Purchaser
within the meaning of either the Securities Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the
Securities Act, the Exchange Act or other Federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Memorandum,
the Final Memorandum or any information provided by the Issuers to any
holder or prospective purchaser of Securities pursuant to Section
5(e), or in any amendment thereof or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, and agree to reimburse each such
indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Issuers will not be liable in any such case to the
Initial Purchaser to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission
relating to the Initial Purchaser made in the Preliminary Memorandum
or the Final Memorandum, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written information
furnished to the Issuers by or on behalf of the Initial Purchaser
specifically for inclusion therein.
(b) The Initial Purchaser agrees to indemnify and hold
harmless the Issuers, their directors, officers, employees and agents
(including, without limitation, attorneys), and each person who
controls the Issuers within the meaning of either the Securities Act
or the Exchange Act, to the same extent as the foregoing indemnity
from the Issuers to the Initial Purchaser, but only with reference to
written information relating to the Initial Purchaser furnished to the
Issuers by or on behalf of the Initial Purchaser specifically for
inclusion in the Preliminary Memorandum or the Final Memorandum (or in
any amendment or supplement thereto). This indemnity agreement will be
in addition to any liability which the Initial Purchaser may otherwise
have. The Issuers and the Initial Purchaser acknowledge that the
statements set forth in the last paragraph of the cover page and under
the heading "Plan of Distribution" in the Preliminary Memorandum and
the Final Memorandum constitute the only information furnished in
writing by or on behalf of the Initial Purchaser for inclusion in the
Preliminary Memorandum or the Final Memorandum (or any amendment or
supplement thereto).
23
<PAGE> 24
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the commencement thereof, but the
failure so to notify the indemnifying party (i) will not relieve it
from liability under paragraph (a) or (b) above unless and to the
extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other
than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of
the indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any
separate counsel retained by the indemnified party or parties except
as set forth below); provided, however that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall have the
right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses
of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would, in the
opinion of legal counsel to the indemnified party, present such
counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party
shall have been informed in writing by legal counsel that there may be
legal defenses available to it and/or other indemnified parties which
are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice
of the institution of such action or (iv) the indemnifying party shall
authorize the indemnified party to employ separate counsel at the
expense of the indemnifying party. An indemnifying party will not,
without the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment with respect to
any pending or threatened claim, action, suit or proceeding in respect
of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party
from all liability arising out of such claim, action, suit or
proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Issuers and the
Initial Purchaser agree to contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same)
(collectively "Losses") to which the Issuers and the Initial Purchaser
may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Issuers and by the Initial Purchaser
from the offering of the Securities; provided, however, that in no
case shall the Initial Purchaser be responsible for any amount in
excess of the purchase discount or commission applicable to the
Securities purchased by the Initial Purchaser hereunder. If the
allocation provided by the immediately preceding sentence is
unavailable for any reason, the Issuers and the Initial Purchaser
shall contribute in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Issuers
and of the Initial Purchaser in connection with the statements or
omissions which resulted in such Losses as well as any other relevant
equitable considerations. Benefits
24
<PAGE> 25
received by the Issuers shall be deemed to be equal to the
total net proceeds from the offering (before deducting expenses), and
benefits received by the Initial Purchaser shall be deemed to be equal
to the total purchase discounts and commissions received by the
Initial Purchaser from the Issuers in connection with the purchase of
the Securities hereunder. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates
to information provided by the Issuers or the Initial Purchaser. The
Issuers and the Initial Purchaser agree that it would not be just and
equitable if contribution were determined by pro rata allocation or
any other method of allocation that does not take account of the
equitable considerations referred to above. Notwithstanding the
provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls the Initial Purchaser within
the meaning of either the Securities Act or the Exchange Act and each
director, officer, employee and agent of the Initial Purchaser shall
have the same rights to contribution as the Initial Purchaser, and
each person who controls the Issuers within the meaning of either the
Securities Act or the Exchange Act and each partner, officer,
director, employee and agent of the Issuers shall have the same rights
to contribution as the Issuers, subject in each case to the applicable
terms and conditions of this paragraph (d).
9. TERMINATION. The obligations of the Initial Purchaser hereunder may
be terminated by the Initial Purchaser by notice given to and received by the
Company prior to delivery of and payment for the Securities if, prior to that
time, any of the events described in Sections 7(m) or 7(n) shall have occurred
or if the Initial Purchaser shall decline to purchase the Securities for any
reason permitted under this Agreement.
10. REIMBURSEMENT OF INITIAL PURCHASER'S EXPENSES. If (a) the Issuers
shall fail to tender the Securities for delivery to the Initial Purchaser
otherwise than for any reason permitted under this Agreement or (b) the Initial
Purchaser shall decline to purchase the Securities for any reason permitted
under this Agreement, the Issuers shall reimburse the Initial Purchaser for the
reasonable fees and expenses of their counsel and for such other reasonable
out-of-pocket expenses as shall have been incurred by them in connection with
this Agreement and the proposed purchase of the Securities, and upon demand the
Issuers shall pay the full amount thereof to the Initial Purchaser.
11. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) If to the Initial Purchaser, shall be delivered or sent
by mail, telex or facsimile transmission to NationsBanc Montgomery
Securities, Inc., 100 North Tryon Street, 20th Floor, Charlotte, North
Carolina 28255, Attention: Scott Holmes, with a copy to Latham &
Watkins, 885 Third Avenue, New York, New York 10022, Attention: Kirk
A. Davenport.
(b) If to the Company, shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set
forth in the Final Memorandum, Attention: Don Brown, with a copy to
Brown, Todd & Heyburn, 2700 Lexington Financial Center, Lexington,
Kentucky 40507, Attention: Paul Sullivan.
Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof. The Issuers shall be entitled to
act and rely upon any request, consent, notice or agreement given or made on
behalf of the Initial Purchaser.
25
<PAGE> 26
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchaser, the Issuers
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of the Issuers
contained in this Agreement shall also be deemed to be for the benefit of
directors, officers, employees and agents (including, without limitation,
attorneys) of the Initial Purchaser and the person or persons, if any, who
control the Initial Purchaser within the meaning of Section 15 of the
Securities Act and (B) the indemnity agreement of the Initial Purchaser
contained in Section 8(b) of this Agreement shall be deemed to be for the
benefit of directors of the Issuers, officers, employees and agents (including,
without limitation, attorneys) of the Issuers and any person controlling any of
the Issuers within the meaning of Section 15 of the Securities Act. Nothing in
this Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section 12, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision
contained herein.
13. SURVIVAL. The respective indemnities, representations, warranties
and agreements of the Issuers and the Initial Purchaser contained in this
Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Securities and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any of them or any person controlling any of them.
14. DEFINITION OF "BUSINESS DAY." For purposes of this Agreement,
"business day" means each Monday, Tuesday, Wednesday, Thursday and Friday that
is not a day on which banking institutions in The City of New York, New York
are authorized or obligated by law, executive order or regulation to close.
15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
[Signature page follows]
26
<PAGE> 27
If the foregoing correctly sets forth the agreement between
the Issuers and the Initial Purchaser, please indicate your acceptance in the
space provided for that purpose below.
Very truly yours,
AEI HOLDING COMPANY, INC.
By: /s/ John Lynch
-------------------------------------
Name: John Lynch
Title: Secretary
ADDINGTON MINING, INC.
By: /s/ John Lynch
-------------------------------------
Name: John Lynch
Title: Secretary
TENNESSEE MINING, INC.
By: /s/ John Lynch
-------------------------------------
Name: John Lynch
Title: Secretary
IKERD-BANDY CO., INC.
By: /s/ John Lynch
-------------------------------------
Name: John Lynch
Title: Secretary
27
<PAGE> 28
The foregoing Agreement is hereby confirmed, accepted and agreed as of the date
first above written.
NATIONSBANC MONTGOMERY SECURITIES, INC.
By: /s/ Scott Holmes
------------------------------------
Name: Scott Holmes
Title: Director
28
<PAGE> 29
EXHIBIT A
Registration Rights Agreement
29
<PAGE> 30
SCHEDULE A
Subsidiaries
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
---- -----------------------------
<S> <C> <C>
1. Addington Mining, Inc. Kentucky
2. Tennessee Mining, Inc. Kentucky
3. Ikerd-Bandy Co., Inc. Kentucky
4. Bowie Resources, Limited Colorado
</TABLE>
30
<PAGE> 31
SCHEDULE B
MATERIAL CONTRACTS
I. Addington Mining, Inc.
1. Leases SA-098-274 and SA-098-358 with Lauren Land Company, a Kentucky
corporation.
2. Lease SA-013-001 with Consol of Kentucky, Inc., a Delaware corporation.
3. Lease LA-098-370 with KYBC Land Corporation, a Kentucky corporation.
4. Leases LA-098-099 and LA-098-390 with ANR Coal Company, LLC, a
Delaware limited liability company.
5. Lease LA-098-245 with The Elk Horn Coal Corporation, a West Virginia
corporation.
6. Lease LA-013-003 with Ark Land Company, a Delaware corporation.
7. Leases LA-098-165 and LA-098-335 with Big Sandy, L.P., a ________
limited partnership.
8. Leases SA-098-175 and SA-098-170 with Unit Coal Corporation, a
_________ corporation.
9. Lease LA-098-368 with Lowe/Fraley heirs.
10. Lease LA-098-367 with Roert Dworak.
II. Tennessee Mining, Inc.
1. Lease _______ with Brimstone Company, a __________ corporation.
2. Lease LA-010-001 with Coal Creek Manufacturing Company, a _________
corporation.
3. Lease _______ with the Bruno Grent estate.
III. Ikerd-Bandy Co., Inc.
1. Lease _______ with the South Mississippi Electric Power Association, a
__________.
2. Lease _______ with Kentucky River Coal Corporation, a _________
corporation.
31
<PAGE> 32
SCHEDULE C
<TABLE>
<CAPTION>
Initial Purchaser Amount
- ----------------- ------
<S> <C>
NationsBanc Montgomery Securities, Inc......................... $200,000,000.00
$200,000,000.00
===============
</TABLE>
32
<PAGE> 1
EXHIBIT 10.7(a)
===============================================================================
CREDIT AGREEMENT
--------------------------------------------------------------
AEI HOLDING COMPANY, INC.
as Borrower
NATIONSBANK OF TEXAS, N.A.
as Agent
NATIONSBANC MONTGOMERY SECURITIES, INC.
as Arranger
CERTAIN BANKS
as Lenders
-------------------------------------------------------------
$50,000,000
November 11, 1997
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - Definitions and References............................................................................1
Section 1.1. Defined Terms..........................................................................1
Section 1.2. Exhibits and Schedules; Additional Definitions........................................23
Section 1.3. Amendment of Defined Instruments......................................................23
Section 1.4. References and Titles.................................................................23
Section 1.5. Calculations and Determinations.......................................................24
ARTICLE II - The Loans and Letters of Credit ....................................................................24
Section 2.1. Commitments to Lend; Notes............................................................24
Section 2.2. Requests for New Loans................................................................25
Section 2.3. Continuations and Conversions of Existing Loans.......................................26
Section 2.4. Use of Proceeds.......................................................................27
Section 2.5. Fees..................................................................................27
Section 2.6. Optional Prepayments..................................................................27
Section 2.7. Mandatory Prepayments.................................................................28
Section 2.8. Initial Borrowing Base................................................................28
Section 2.9. Subsequent Redeterminations of Borrowing Base.........................................28
Section 2.10. Letters of Credit.....................................................................28
Section 2.11. Requesting Letters of Credit..........................................................29
Section 2.12. Reimbursement and Participations......................................................29
Section 2.13. Letter of Credit Fees.................................................................31
Section 2.14. No Duty to Inquire....................................................................31
Section 2.15. LC Collateral.........................................................................32
ARTICLE III - Payments to Lenders................................................................................33
Section 3.1. General Procedures....................................................................33
Section 3.2. Increased Cost and Reduced Return.....................................................34
Section 3.3. Limitation on Types of Loans..........................................................36
Section 3.4. Illegality............................................................................36
Section 3.5. Treatment of Affected Loans...........................................................36
Section 3.6. Compensation..........................................................................37
Section 3.7. Taxes.................................................................................38
Section 3.8. Compensation Procedure................................................................39
ARTICLE IV - Conditions Precedent to Lending.....................................................................40
Section 4.1. Documents to be Delivered.............................................................40
Section 4.2. Additional Conditions Precedent to First Loan.........................................41
Section 4.3. Additional Conditions Precedent to All Loans..........................................42
ARTICLE V - Representations and Warranties.......................................................................43
Section 5.1. No Default............................................................................43
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.2. Organization and Good Standing........................................................43
Section 5.3. Authorization.........................................................................43
Section 5.4. No Conflicts or Consents..............................................................43
Section 5.5. Enforceable Obligations...............................................................44
Section 5.6. Initial Financial Statements..........................................................44
Section 5.7. Other Obligations and Restrictions....................................................44
Section 5.8. Full Disclosure.......................................................................44
Section 5.9. Litigation............................................................................45
Section 5.10. Labor Disputes and Acts of God........................................................45
Section 5.11. ERISA Plans and Liabilities...........................................................45
Section 5.12. Mining and Environmental and Other Laws...............................................46
Section 5.13. Names and Places of Business..........................................................46
Section 5.14. Borrower's Subsidiaries...............................................................46
Section 5.15. Title to Properties, Licenses, Permits, Leases and Contracts.........................46
Section 5.16. Government Regulation.................................................................47
Section 5.17. Insider...............................................................................47
ARTICLE VI - Affirmative Covenants of Borrower...................................................................47
Section 6.1. Payment and Performance...............................................................47
Section 6.2. Books, Financial Statements and Reports...............................................47
Section 6.3. Other Information and Inspections. ..................................................49
Section 6.4. Notice of Material Events and Change of Address.......................................49
Section 6.5. Maintenance of Properties.............................................................50
Section 6.6. Maintenance of Existence, Qualifications and Permits..................................51
Section 6.7. Payment of Trade Liabilities, Taxes, etc..............................................51
Section 6.8. Insurance.............................................................................52
Section 6.9. Performance on Borrower's Behalf......................................................52
Section 6.10. Interest..............................................................................52
Section 6.11. Compliance with Agreements and Law....................................................52
Section 6.12. Evidence of Compliance................................................................52
Section 6.13. Solvency..............................................................................52
Section 6.14. Agreement to Deliver Security Documents...............................................52
Section 6.15. Perfection and Protection of Security Interests and Liens.............................53
Section 6.16. Bank Accounts; Offset.................................................................53
Section 6.17. Subsidiary Guaranties.................................................................53
Section 6.18. Coal Sales Agreements.................................................................54
Section 6.19. Exploration and Reserves..............................................................54
Section 6.20. Coors Letter of Credit................................................................54
ARTICLE VII - Negative Covenants of Borrower.....................................................................54
Section 7.1. Indebtedness..........................................................................55
Section 7.2. Limitation on Liens...................................................................56
Section 7.3. Intentionally Omitted.................................................................56
Section 7.4. Limitation on Mergers, Issuances of Securities........................................56
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 7.5. Limitation on Sales of Property.......................................................57
Section 7.6. Limitation on Distributions and Redemptions...........................................57
Section 7.7. Limitation on Investments and New Businesses..........................................58
Section 7.8. Limitation on Credit Extensions.......................................................58
Section 7.9. Transactions with Affiliates..........................................................58
Section 7.10. Certain Contracts; Amendments; Multiemployer ERISA Plans..............................59
Section 7.11. Fiscal Year...........................................................................59
Section 7.12. Current Ratio.........................................................................59
Section 7.13. Net Debt to EBITDA Ratio..............................................................59
Section 7.14. Net Worth.............................................................................59
Section 7.15. Senior Debt Leverage..................................................................59
Section 7.16. Fixed Charge Ratio....................................................................60
ARTICLE VIII - Events of Default and Remedies....................................................................60
Section 8.1. Events of Default.....................................................................60
Section 8.2. Remedies..............................................................................63
ARTICLE IX - Agent...............................................................................................63
Section 9.1. Appointment, Powers, and Immunities...................................................63
Section 9.2. Reliance by Agent.....................................................................64
Section 9.3. Defaults..............................................................................64
Section 9.4. Rights as Lender......................................................................64
Section 9.5. Indemnification.......................................................................65
Section 9.6. Non-Reliance on Agent and Other Lenders...............................................65
Section 9.7. Resignation of Agent..................................................................65
Section 9.8. Sharing of Set-Offs and Other Payments................................................66
Section 9.9. Investments...........................................................................66
Section 9.10. Benefit of Article IX.................................................................66
ARTICLE X - Miscellaneous........................................................................................67
Section 10.1. Waivers and Amendments; Acknowledgments...............................................67
Section 10.2. Survival of Agreements; Cumulative Nature.............................................69
Section 10.3. Notices...............................................................................69
Section 10.4. Payment of Expenses; Indemnity........................................................69
Section 10.5. Joint and Several Liability; Parties in Interest......................................71
Section 10.6. Assignments and Participations........................................................71
Section 10.7. Confidentiality.......................................................................73
Section 10.8. Governing Law; Submission to Process..................................................73
Section 10.9. Limitation on Interest................................................................75
Section 10.10. Termination: Limited Survival.................................................76
Section 10.11. Severability..................................................................76
Section 10.12. Counterparts..................................................................76
Section 10.13. Waiver of Jury Trial, Punitive Damages, etc...................................76
Section 10.14. Restatement...................................................................77
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
Section 10.15. No Novation or Release................................................................77
Section 10.16. Effectiveness of Agreement............................................................77
</TABLE>
SCHEDULES
Schedule 1. Disclosure Schedule
Schedule 2. Security Schedule
Schedule 3. Lenders Schedule
Schedule 4. Insurance Schedule
EXHIBITS
Exhibit A. Note
Exhibit B. Borrowing Notice
Exhibit C. Continuation/Conversion Notice
Exhibit D. Certificate Accompanying Financial Statements
Exhibit E. Assignment and Acceptance
Exhibit F. Form of Subsidiary Guaranty
Exhibit G. Opinion of Borrower's Counsel
Exhibit H. Standby Letter of Credit Application and Agreement
iv
<PAGE> 6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of November 11, 1997, by and among AEI
Holding Company, Inc., a Delaware corporation (herein called "Borrower"),
NationsBank of Texas, N.A., a national banking association ("NationsBank"),
individually and as agent (herein called "Agent"), and the Lenders referred to
below. In consideration of the mutual covenants and agreements contained herein
the parties hereto agree as follows:
ARTICLE I - Definitions and References
Section 1.1. Defined Terms. As used in this Agreement, each of the
following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"Acquisition Purchase Price" means the sum of (i) all cash delivered to
the seller or its designee for a Permitted Acquisition; (ii) the face amount of
promissory notes made by any Restricted Person and delivered to the seller or
its designee in connection with such Permitted Acquisition; and (iii) the
remaining balance of any Capital Leases assumed by any Restricted Person in
connection with such Permitted Acquisition.
"Addington Mining" means Addington Mining, Inc., a Kentucky corporation
and wholly-owned subsidiary of Borrower.
"Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the per annum rate equal to the sum of (a) the
Eurodollar Margin plus (b) the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) determined by the Agent to be equal to quotient
obtained by dividing (i) the Eurodollar Rate for such Eurodollar Loan for such
Interest Period by (ii) 1 minus the Reserve Requirement for such Eurodollar
Loan for such Interest Period. The Adjusted Eurodollar Rate for any Eurodollar
Loan shall change whenever the Eurodollar Margin or the Reserve Percentage
changes. No Adjusted Eurodollar Rate shall ever exceed the Highest Lawful Rate.
"Affiliate" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to vote 10% Voting Stock of such Person; or
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agent" means NationsBank, as Agent hereunder, and its successors in
such capacity; provided, however, that until such time as a Lender other than
NationsBank becomes a party hereto, "Agent" shall mean NationsBank,
individually.
<PAGE> 7
"Agreement" means this Credit Agreement.
"Alternate Base Rate" means the per annum rate equal to (a) the Base
Rate Margin plus (b) the higher of (i) the Prime Rate and (ii) the Federal
Funds Rate plus one-half percent (0.5%) per annum. If the Base Rate Margin,
Prime Rate or the Federal Funds Rate, as the case may be, changes after the
date hereof the Alternate Base Rate shall be automatically increased or
decreased, as the case may be, without notice to Borrower, from time to time as
of the effective time of each such change. The Alternate Base Rate shall in no
event, however, exceed the Highest Lawful Rate.
"Applicable Lending Office" means, for each Lender and for each Type of
Loan, the "Lending Office" of such Lender (or of an affiliate of such Lender)
designated for such Type of Loan on the Lender Schedule or such other office of
such Lender (or an affiliate of such Lender) as such Lender may from time to
time specify to the Agent and the Borrower by written notice in accordance with
the terms hereof as the office by which its Loans of such Type are to be made
and maintained; with respect to LC Issuer, the office, branch, or agency
through which it issues Letters of Credit; and with respect to Agent, the
office, branch, or agency through which it administers this Agreement.
"Appraisal Report" means the Initial Appraisal and each subsequent
appraisal report covering rolling stock and other equipment of the Restricted
Persons prepared by an independent appraiser acceptable to Agent and in a form
acceptable to Agent and delivered to Agent.
"Appraised Equipment." means, at any time, all rolling stock and other
equipment of the Borrowing Base Persons covered by the most recent Appraisal
Report.
"Arm's Length Transaction" means, with respect to any transaction
between a Restricted Person and one of its Affiliates, that the terms thereof
are no less favorable to such Restricted Person than those which could have
been obtained at the time of such transaction in arm's-length dealing with
Persons other than such Affiliate.
"Base Rate Loan" means a Loan which bears interest at the Alternate
Base Rate.
"Base Rate Margin" means (a) on each day other than a day during a
Default Period, the Non-Default Base Rate Margin; and (b) on each day during a
Default Period, the Default Base Rate Margin.
"Base Rate Payment Date" means (a) the last day of March, June,
September and December of each year, beginning December 31, 1997, and (b) any
day on which past due interest or principal is owed under the Notes and is
unpaid. If the terms of any Loan Document provide that payments of interest or
principal on the Notes shall be deferred from one Base Rate Payment Date to
another day, such other day shall also be a Base Rate Payment Date.
2
<PAGE> 8
"Borrower" means AEI Holding Company, Inc., a Delaware corporation.
"Borrowing" means a borrowing of new Loans of a single Type pursuant to
Section 2.2 or a continuation or conversion of existing Loans into a single
Type (and, in the case of Eurodollar Loans, with the same Interest Period)
pursuant to Section 2.3.
"Borrowing Base" means, at any time, an amount equal to the sum of (a)
ninety percent (90%) of the face amount of Eligible Receivables, plus (b) fifty
percent (50%) of Eligible Coal Inventory, plus (c) fifty percent (50%) of
Eligible Parts Inventory, but in no event shall Eligible Parts Inventory exceed
ten percent (10%) of the total Borrowing Base, plus (d) sixty percent (60%) of
the fair market value of the Eligible Appraised Equipment as reflected in the
most recent Appraisal Report, plus (e) the Fixed Asset Value; but in no event
shall the Borrowing Base exceed the Commitment.
"Borrowing Base Deficiency" has the meaning given it in Section 2.7(a).
"Borrowing Base Persons" means, collectively, Borrower, Addington
Mining, Tennessee Mining, Ikerd-Bandy and Bowie.
"Borrowing Base Report" means a report describing the Eligible Accounts
Receivables, the Eligible Coal Inventory, the Eligible Parts Inventory and the
Eligible Appraised Equipment in a form acceptable to Agent, together with the
following attachments: (a) a detailed aged schedule of all Eligible Accounts
Receivable as of the date specified in such report, (b) a schedule of Eligible
Inventory, setting forth the location of all such Eligible Inventory,
identifying any Eligible Inventory not in the possession of the Restricted
Persons, and including the name of the Person in possession thereof, each such
schedule to be in a form acceptable to Agent.
"Borrowing Notice" means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.2.
"Bowie" means Bowie Resources, Limited, a Colorado corporation.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Dallas, Texas. Any
Business Day in any way relating to Eurodollar Loans (such as the day on which
an Interest Period begins or ends) must also be a day on which, in the judgment
of Agent, significant transactions in dollars are carried out in the interbank
eurocurrency market.
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
3
<PAGE> 9
"Capital Stock" means (a) in the case of a corporation, corporate
stock, (b) in the case of an association, limited liability company or other
business entity, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock, (c) in the case of a
partnership, partnership interests (whether general or limited) and (d) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"Cash Equivalents" means investments in:
(a) marketable obligations, maturing within 12 months after
acquisition thereof, issued or unconditionally guaranteed by the United
States of America or an instrumentality or agency thereof and entitled
to the full faith and credit of the United States of America.
(b) demand deposits, and time deposits (including certificates
of deposit) maturing within 12 months from the date of deposit thereof,
with any office of any Lender or with a domestic office of any national
or state bank or trust company which is organized under the Laws of the
United States of America or any state therein, which has capital,
surplus and undivided profits of at least $500,000,000, and whose
certificates of deposit have at least the third highest credit rating
given by either Rating Agency, or with Kentucky Bank and Trust;
provided that the aggregate amount of such deposits and the repurchase
obligations from Kentucky Bank and Trust described in the following
subsection (c) do not exceed $10,000,000.
(c) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (a)
above entered into with any commercial bank meeting the specifications
of clause (b) above.
(d) open market commercial paper, maturing within 360 days after
acquisition thereof, which has the highest or second highest credit
rating given by either Rating Agency.
(e) investments in money market or other mutual funds
substantially all of whose assets comprise securities of the types
described in clauses (a) through (d) above.
"Change of Control" means the occurrence of any of the following: (a)
the sale, lease, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Borrower and its Subsidiaries taken
as a whole to any "person" or group of related "persons" (a "Group") (as such
terms are used in Section 13(d)(3) of the Exchange Act), (b) the adoption of a
plan relating to the liquidation or dissolution of the Borrower, (c) the
consummation of any transaction (including, without limitation, any purchase,
sale, acquisition, disposition, merger or consolidation) the result of which is
that any "Person" (as defined above) or Group becomes the "beneficial owner"
(as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act)
of more than thirty percent (30%) of the outstanding Voting Stock of Borrower
having the right to elect
4
<PAGE> 10
directors under ordinary circumstances, or (d) the first day on which a
majority of the members of the Board of Directors of the Borrower are not
Continuing Directors.
"Coal" means all of the coal and other minerals produced, severed from
and located on the properties which are described in the deeds of trust and
mortgages listed on the Security Schedule, and all of the in place, produced
and severed coal located in, on, or under all other properties owned or leased
by the Restricted Persons. With respect to properties hereafter acquired by any
Restricted Person "Coal" means in place, produced and severed coal, as to such
properties which are mortgageable, and produced and severed Coal as to such
properties which are not mortgageable.
"Coal Sales Agreements" means contracts, verbal or written, now in
effect and hereafter entered into by any Restricted Person for the sale,
purchase, exchange, processing or handling of Coal.
"Collateral" means all property of any kind which is subject to a Lien
in favor of Lenders (or in favor of Agent for the benefit of Lenders) or which,
under the terms of any Security Document, is purported to be subject to such a
Lien.
"Commitment" means $50,000,000.
"Commitment Fee Rate" means (a) on, and on each day prior to, March 31,
1998, 0.75 percent (75bp), and (b) on each day thereafter:
(i) 0.25 percent (25bp) per annum if the Net Debt to EBITDA Ratio for
the Fiscal Quarter immediately preceding the Fiscal Quarter during which such
day occurred is less than or equal to 2.5 to 1,
(ii) 0.35 percent (35bp) per annum if the Net Debt to EBITDA Ratio for
the Fiscal Quarter immediately preceding the Fiscal Quarter during which such
day occurred is less than or equal to 3.0 to 1, but greater than 2.5 to 1,
(iii) 0.40 percent (40bp) per annum if the Net Debt to EBITDA Ratio for
the Fiscal Quarter immediately preceding the Fiscal Quarter during which such
day occurred is less than or equal to 3.5 to 1, but greater than 3.0 to 1,
(iv) 0.45 percent (45bp) per annum if the Net Debt to EBITDA Ratio for
the Fiscal Quarter immediately preceding the Fiscal Quarter during which such
day occurred is less than or equal to 4.0 to 1, but greater than 3.5 to 1, and
(v) 0.50 percent (50bp) per annum if the Net Debt to EBITDA Ratio for
the Fiscal Quarter immediately preceding the Fiscal Quarter during which such
day occurred is less than or equal to 4.5 to 1, but greater than 4.0 to 1;
5
<PAGE> 11
provided that none of the percentages described in clauses (b)(i) through
(b)(v) of this definition shall become effective unless Borrower has delivered
to Agent its financial statements for the Fiscal Quarter ended March 31, 1998
as required by Section 6.2(b), and the percentage set forth in clause (a) of
this definition shall remain in effect.
"Commitment Period" means the period from and including the date hereof
until and including the Maturity Date (or, if earlier, the day on which the
Notes first become due and payable in full).
"Consolidated" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Wholly-owned Subsidiary thereof that is a
Guarantor, (ii) the Net Income of any Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar distributions by
that Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means the sum of (a) the remainder of all
Consolidated assets of Borrower, minus all Consolidated Liabilities of Borrower
which under GAAP would be shown on Borrower's balance sheet as a liability and
(b) all Liabilities of Borrower to its shareholders that have been subordinated
to the Obligations pursuant to the Subordination Agreement.
"Continuation/Conversion Notice" means a written or telephonic request,
or a written confirmation, made by Borrower which meets the requirements of
Section 2.3.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 2.3 hereof of a Eurodollar Loan as a
Eurodollar Loan from one Interest Period to the next Interest Period.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of Borrower who (a) was a member of such Board
of Directors on the date hereof or
6
<PAGE> 12
(b) was nominated for election or elected to such Board of Directors with the
approval of (i) two-thirds of the Continuing Directors who were members of such
Board of Directors at the time of such nomination or election or (ii)
two-thirds of those Directors who were previously approved by Continuing
Directors.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 2.3 or Article III of one Type of Loan into another Type of
Loan.
"Default" means any Event of Default and any default, event or
condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
"Default Base Rate Margin" means on any day the rate of interest equal
to the Non-Default Base Rate Margin for such day plus two percent (2%) per
annum.
"Default Eurodollar Margin" means on any day the rate of interest equal
to the Non-Default Eurodollar Margin for such day plus two percent (2%) per
annum.
"Default Period" means any day on which and each period of consecutive
days during which a Default or Event of Default has occurred and is continuing.
"Default Rate" means on any day the per annum rate equal to (a) the
Default Base Rate Margin plus (b) the higher of (i) the Prime Rate and (ii) the
Federal Funds Rate plus one-half percent (0.5%) per annum. If the Prime Rate or
the Federal Funds Rate, as the case may be, changes after the date hereof the
Default Rate shall be automatically increased or decreased, as the case may be
at the time of each such change. The Default Rate shall in no event, however,
exceed the Highest Lawful Rate.
"Disclosure Report" means either a notice given by Borrower under
Section 6.4 or a certificate given by Borrower's chief financial officer under
Section 6.2(b).
"Disclosure Schedule" means Schedule 1 hereto.
"Disqualified Stock" means any capital stock of Borrower that, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, is
convertible or exchangeable for indebtedness or other Disqualified Stock.
"Distribution" means (a) any dividend or other distribution made by a
Restricted Person on or in respect of the Capital Stock of such Restricted
Person (including any option or warrant to buy such an equity interest), or (b)
any payment made by a Restricted Person to purchase, redeem, acquire or retire
any Capital Stock in such Restricted Person (including any such option or
warrant).
7
<PAGE> 13
"EBITDA" means, for any Person for any period, the sum of (a) the
Consolidated Net Income of such Person during such period, plus (b) all
interest paid or accrued during such period on Indebtedness (including
amortization of original issue discount and the interest component of any
deferred payment obligations and Capital Lease Obligations) which was deducted
in determining such Consolidated Net Income, plus (c) all income taxes which
were deducted in determining such Consolidated Net Income, plus (d) all
depletion, depreciation and amortization (including amortization of good will
and debt issue costs) which were deducted in determining such Consolidated Net
Income, minus (e) all non-cash items of income which were included in
determining such Consolidated Net Income. For Fiscal Quarters ending on or
before March 31, 1998, EBITDA shall be calculated on an annualized basis taking
into account each Fiscal Quarter in the period from and including July 1, 1997
until and including the last day of such Fiscal Quarter. For each Fiscal
Quarter thereafter, EBITDA shall be calculated for the Four Quarter Period then
ended.
"Eligible Accounts Receivable" means the gross amount of the Borrowing
Base Persons' accounts receivable that conform to the warranties contained in
the Loan Documents, including without limitation that Agent shall have a
validly perfected first and exclusive security interest therein, subject to
Permitted Liens, and which at all times continue to be acceptable to Agent in
the exercise of its reasonable business judgment, less, without duplication,
the sum of (a) any returns, discounts, claims, credits and allowances of any
nature (whether issued, owing, granted or outstanding) and (b) reserves for:
(i) sales to the United States of America or to any agency, department or
division thereof unless the Borrowing Base Persons have complied with all
requirements in connection with the assignment of such account to Agent of the
Assignment of Claims Act of 1940, as amended, 31 U.S.C. Sec. 3727, 41 U.S.C.
Sec. 15, or successor or similar applicable laws; (ii) foreign sales, other
than sales to Mitsui Matsushima Co., Ltd. not to exceed a maximum aggregate
amount designated by Agent from time to time and sales secured by stand-by
letters of credit (in form and substance satisfactory to Agent) issued or
confirmed by, and payable at, banks having a place of business in the United
States of America and payable in United States currency; (iii) accounts that
remain unpaid more than ninety (90) days from invoice date; (iv) contras; (v)
sales to any Affiliates of the Borrowing Base Persons; (vi) bill and hold
(deferred shipment) or consignment sales; (vii) sales to any customer which is
(a) insolvent, (the debtor in any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceedings under any federal or state
law), (b) negotiating, or has called a meeting of its creditors for purposes of
negotiating, a compromise or composition of its debts, (c) financially
unacceptable to Agent or has a credit rating unacceptable to Agent or (d)
located in the States of Indiana, New Jersey or Minnesota; provided, however
that such restriction shall not apply to an account receivable if at the time
the account receivable was created and at all times thereafter (x) the
Borrowing Base Person to which such account receivable is owed had filed and
has maintained effective a CURRENT Notice of Business Activities Report with
the appropriate office or agency of the State of Indiana, New Jersey or
Minnesota, as applicable or (y) the aggregate dollar amount of all outstanding
invoices, are unpaid more than ninety (90) days from invoice date; (viii)
Unbilled Sales exceeding $8,000,000 in the aggregate at any particular time;
(ix) any other reasons deemed necessary by Agent in its reasonable business
judgment and which are customary either in the commercial finance industry or
in the
8
<PAGE> 14
lending practices of Agent; and (x) an amount representing, historically,
returns, discounts, claims, credits and allowances.
"Eligible Appraised Equipment " means all Appraised Equipment which is
owned by the Borrowing Base Persons, which conforms to the warranties contained
in the Loan Documents, including without limitation that Agent shall have a
validly perfected first and exclusive security interest therein (subject to
Permitted Liens) and which at all times continues to be acceptable to Agent in
the exercise of its reasonable business judgment, excluding Appraised Equipment
which is (a) located outside the United States; (b) located on leased or
mortgaged premises and the lessor, landlord or mortgagee of such premises has
not executed a lien waiver in respect of such Appraised Equipment (if the Agent
in its sole discretion deems such waiver necessary) or (c) on lease or
consignment to any Person.
"Eligible Coal Inventory" means the gross amount of the Borrowing Base
Persons' Inventory consisting of mined coal that is wash plant inventory or
stockpiled inventory (as set forth on Borrower's detailed balance sheet), that
conforms to the warranties contained in the Loan Documents, including without
limitation that Agent shall have a validly perfected first and exclusive
security interest therein, subject to Permitted Liens, and which at all times
continues to be acceptable to Agent in the exercise of its reasonable business
judgment, less (or excluding) any (a) work-in-progress, (b) supplies and raw
materials, (c) goods not present in the United States of America, (d) goods
returned or rejected by the Borrowing Base Persons' customers, (e) goods to be
returned to the Borrowing Base Persons' suppliers, (f) goods in transit to
third parties, (g) goods which do not meet all applicable standards imposed by
any governmental Person having regulatory authority over such inventory, its
use or its sale, (h) goods which are not currently usable or currently saleable
in the normal course of the Borrowing Base Persons' business without notice to,
or consent of, any governmental Person, (i) inventory which Agent determines,
in the exercise of its reasonable business judgment, to be unacceptable due to
age, type, category and/or quantity, (j) inventory which is consigned to a
third party for sale or is on consignment from a third party to the Borrowing
Base Persons for sale; and less any reserves required by Agent in its
reasonable business judgment. Eligible Coal Inventory shall be valued at the
lower of cost determined on a first-in-first-out basis (determined in
accordance with GAAP, consistently applied) or market value.
"Eligible Inventory" means, collectively, Eligible Coal Inventory and
Eligible Parts Inventory.
"Eligible Parts Inventory" means all parts and accessories held by the
Borrowing Base Persons to be used in or attached to their Operating Equipment
that conform to the warranties contained in the Loan Documents, including
without limitation that Agent shall have a validly perfected first and
exclusive security interest therein, subject to Permitted Liens, and which at
all times continues to be acceptable to Agent in the exercise of its reasonable
business judgment, less (or excluding) any (a) parts or accessories which Agent
determines, in the exercise of its reasonable business judgment, to be
unacceptable due to age, type, category and/or quantity, (b) parts and
accessories which are consigned to a third party for sale or are on consignment
from a
9
<PAGE> 15
third party to the Borrowing Base Persons for sale; and less any reserves
required by Agent in its reasonable business judgment. Eligible Parts Inventory
shall be valued at the lower of cost determined on a first-in-first-out basis
(determined in accordance with GAAP, consistently applied) or market value.
"Eligible Transferee" means a Person which either (a) is a Lender or an
Affiliate of a Lender, or (b) is consented to as an Eligible Transferee by
Agent and so long as no Default or Event of Default is continuing by Borrower,
which consents in each case will not be unreasonably withheld (provided that no
Person organized outside the United States may be an Eligible Transferee if
Borrower would be required to pay withholding taxes on interest or principal
owed to such Person).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Affiliate" means Borrower and all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated)
under common control that, together with Borrower, are treated as a single
employer under Section 414 of the Internal Revenue Code of 1986, as amended.
"ERISA Plan" means any employee pension benefit plan subject to Title
IV of ERISA maintained by any ERISA Affiliate with respect to which any
Restricted Person has a fixed or contingent liability.
"Eurodollar Loan" means a Loan that bears interest at rates based upon
the Adjusted Eurodollar Rate.
"Eurodollar Margin" means (a) on each day other than a day during a
Default Period, the Non-Default Eurodollar Margin; and (b) on each day during a
Default Period, the Default Eurodollar Margin.
"Eurodollar Rate" means, for any Eurodollar Loan within a Borrowing and
with respect to the related Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Telerate Page 3750 (or any successor page) as the London interbank offered rate
for deposits in Dollars at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period. If for any reason such rate is not available, the term
"Eurodollar Rate" shall mean, for any Eurodollar Loan within a Borrowing and
with respect to the related Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period for a term comparable to such Interest
Period; provided, however, if more than one rate is specified on Reuters Screen
LIBO Page, the applicable rate shall be the arithmetic mean of all such rates
(rounded upwards, if necessary, to the nearest 1/100 of 1%).
10
<PAGE> 16
"Eurodollar Rate Payment Date" means, with respect to any Eurodollar
Loan: (a) the day on which the related Interest Period ends (and, if such
Interest Period is three months or longer, the three-month anniversary of the
first day of such Interest Period), and (b) any day on which past due interest
or past due principal is owed under the Notes with respect to such Eurodollar
Loan and is unpaid. If the terms of any Loan Documents provide that payments of
interest or principal with respect to such Eurodollar Loan shall be deferred
from one Eurodollar Rate Payment Date to another day, such other day shall also
be a Eurodollar Rate Payment Date.
"Event of Default" has the meaning given it in Section 7.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Facility Usage" means, at the time in question, the sum of (a) the
aggregate unpaid principal balance of the Loans plus (b) the aggregate amount
of LC Obligations.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of one percent) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of Dallas, Texas on the Business
Day next succeeding such day, provided that (a) if the day for which such rate
is to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as
so published on the next succeeding Business Day, and (b) if such rate is not
so published for any day, the Federal Funds Rate for such day shall be the
average rate quoted to Agent on such day on such transactions as determined by
Agent.
"Fiscal Quarter" means a three-month period ending on March 31, June
30, September 30, or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
year.
"Fixed Asset Value" means (a) from the date hereof until the earlier of
(i) the date on which Agent receives consents necessary to mortgage all
properties owned by Addington Mining (other than Big Sandy) and completes its
title due diligence on the Bowie No. 1 mineral lease and (ii) December 31,
1998, $11,000,000; and (b) if the foregoing is completed prior to December 31,
1998, from the date of such completion until December 31, 1998, $15,000,000,
and (c) thereafter, zero.
"Four Quarter Period" means any period of four consecutive Fiscal
Quarters.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) and which, in the case of
Borrower and its Consolidated subsidiaries, are applied for all periods after
the date hereof in a manner consistent with the manner in which such principles
11
<PAGE> 17
and practices were applied to the audited Initial Financial Statements. If any
change in any accounting principle or practice is required by the Financial
Accounting Standards Board (or any such successor) in order for such principle
or practice to continue as a generally accepted accounting principle or
practice, all reports and financial statements required hereunder with respect
to Borrower or with respect to Borrower and its Consolidated subsidiaries may
be prepared in accordance with such change, but all calculations and
determinations to be made hereunder may be made in accordance with such change
only after notice of such change is given to each Lender and Required Lenders
agree to such change insofar as it affects the accounting of Borrower or of
Borrower and its Consolidated subsidiaries.
"GAAP Indebtedness" means as to any Person, Indebtedness of such Person
which under GAAP would be shown as a liability on such Person's balance sheet.
"Guarantor" means each Restricted Person (other than Borrower), and any
other Person who has guaranteed some or all of the Obligations and has been
accepted by Agent as a Guarantor.
"Hazardous Materials" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Hedging Contract" means (a) any agreement providing for options,
swaps, floors, caps, collars, forward sales or forward purchases involving
interest rates, commodities or commodity prices, equities, currencies, bonds,
or indexes based on any of the foregoing, (b) any option, futures or forward
contract traded on an exchange, and (c) any other derivative agreement or other
similar agreement or arrangement.
"Highest Lawful Rate" means, with respect to each Lender, the maximum
nonusurious rate of interest that such Lender is permitted under applicable Law
to contract for, take, charge, or receive with respect to its Loan. All
determinations herein of the Highest Lawful Rate, or of any interest rate
determined by reference to the Highest Lawful Rate, shall be made separately
for each Lender as appropriate to assure that the Loan Documents are not
construed to obligate any Person to pay interest to any Lender at a rate in
excess of the Highest Lawful Rate applicable to such Lender.
"Ikerd-Bandy" means Ikerd-Bandy Co., Inc., a Kentucky corporation and
wholly-owned subsidiary of Borrower.
"Indebtedness" of any Person means Liabilities in any of the following
categories:
(a) Liabilities for borrowed money,
(b) Liabilities constituting an obligation to pay the deferred
purchase price of property or services,
12
<PAGE> 18
(c) Liabilities evidenced by a bond, debenture, note or similar
instrument,
(d) Liabilities which (i) would under GAAP be shown on such
Person's balance sheet as a liability, and (ii) is payable more than
one year from the date of creation thereof (other than reserves for
taxes and reserves for contingent obligations),
(e) Liabilities arising under Hedging Contracts,
(f) Capitalized Lease Obligations, Liabilities arising under
operating leases, and Liabilities arising with respect to sale and
lease-back transactions,
(g) Liabilities arising under conditional sales or other title
retention agreements,
(h) Liabilities owing under direct or indirect guaranties of
Liabilities of any other Person or constituting obligations to purchase
or acquire or to otherwise protect or insure a creditor against loss in
respect of Liabilities of any other Person (such as obligations under
working capital maintenance agreements, agreements to keep-well, or
agreements to purchase Liabilities, assets, goods, securities or
services), but excluding endorsements in the ordinary course of
business of negotiable instruments in the course of collection,
(i) Liabilities (for example, repurchase agreements) consisting
of an obligation to purchase securities or other property, if such
Liabilities arises out of or in connection with the sale of the same or
similar securities or property,
(j) Liabilities with respect to letters of credit or
applications or reimbursement agreements therefor,
(k) Liabilities with respect to payments received in
consideration of coal or other minerals yet to be acquired or produced
at the time of payment (including obligations under "take-or-pay"
contracts to deliver coal in return for payments already received), or
(l) Liabilities with respect to other obligations to deliver
goods or services in consideration of advance payments therefor;
provided, however, that the "Indebtedness" of any Person shall not include
Liabilities that were incurred by such Person on ordinary trade terms to
vendors, suppliers, or other Persons providing goods and services for use by
such Person in the ordinary course of its business, unless and until (x) such
Liabilities are outstanding more than 90 days past the original invoice or
billing date therefor or, (y) if such Person is contesting any such Liability
in good faith by appropriate proceedings (promptly initiated and diligently
conducted) and has set aside on its books adequate reserves therefor, such
Liability is outstanding more than 180 days past the original invoice or
billing date therefor.
13
<PAGE> 19
"Indenture" means that certain Indenture by and between Borrower, as
issuer, and IBJ Schroder Bank & Trust Company, as Trustee, pursuant to which
Borrower issued the Senior Unsecured Notes.
"Initial Appraisals" means collectively, (a) the Appraisal Report of
Machinery and Vehicles for Addington Enterprises, Inc. (which includes
Tennessee Mining, Inc.) prepared by Hunyady Auction Company, dated October 10,
1997, (b) the report of the Fair Market Value Determination of Land-Based
Assets of Addington Mining (a Division of Addington Enterprises, Inc.),
Tennessee Mining, Inc. and Ikerd-Bandy Co., Inc. by Marshall Miller &
Associates, dated October 7, 1997, (c) the report of the Mineral Estate
Valuation of Addington Mining, Tennessee Mining, Inc. and Ikerd-Bandy Co., Inc.
by Marshall Miller & Associates, dated October 1, 1997, (d) the report of Coal
Mining Operations Overview of Mining Ventures Controlled by Addington Mining,
Bowie Resources, Ltd., Ikerd-Bandy Co., Inc. and Tennessee Mining, Inc. by
Marshall Miller & Associates, dated October 1997, and (e) the Appraisal Report
of Addington Mining, Bowie Resources, Ltd., Ikerd-Bandy Co., Inc. and Tenn.
Mining, Inc. Past and Proposed Financial Performance by Marshall Miller &
Associates, dated October 15, 1997.
"Initial Engineering Report" means the Audit of Reserves Controlled by
Addington Mining (a Division of Addington Enterprises, Inc.), Tennessee Mining,
Inc., Bowie Resources, Ltd., and Ikerd-Bandy Co., Inc. by Marshall Miller &
Associates, dated September 23, 1997.
"Initial Environmental Report" means the Modified Phase I ESA of
Surface Properties Controlled by Addington Mining (a Division of Addington
Enterprises, Inc.), Tennessee Mining, Inc., Bowie Resources, Ltd., and
Ikerd-Bandy Co., Inc. by Marshall Miller & Associates, dated September 23,
1997.
"Initial Financial Projections" means the five-year financial
projections dated August 14, 1997 set forth in the booklet entitled "AEI
Holding Company Group of Companies" delivered to Agent.
"Initial Financial Statements" means (a) the audited annual financial
statements of Borrower and Ikerd-Bandy, each dated as of December 31, 1995 and
December 31, 1996, and (b) the unaudited quarterly Consolidated financial
statements of such companies dated as of June 30, 1997.
"Insurance Schedule" means Schedule 4 attached hereto.
"Interest Period" means, with respect to each particular Eurodollar
Loan in a Borrowing, a period of 1, 2 , 3 or 6 months, as specified in the
Borrowing Notice applicable thereto, beginning on and including the date
specified in such Borrowing Notice (which must be a Business Day), and ending
on but not including the same day of the month as the day on which it began
(e.g., a period beginning on the third day of one month shall end on but not
include the third day of another month), provided that each Interest Period
which would otherwise end on a day which is not a Business Day shall end on the
next succeeding Business Day (unless such next succeeding
14
<PAGE> 20
Business Day is the first Business Day of a calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day). No
Interest Period may be elected which would extend past the date on which the
associated Note is due and payable in full.
"Investment" means any investment, in cash or by delivery of property
made, directly or indirectly in any Person, whether by acquisition of shares of
Capital Stock, indebtedness or other obligations or securities or by loan,
advance, capital contribution or otherwise.
"Law" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision or regulatory agency thereof of any foreign country or any
department, province or other political subdivision thereof, including without
limitation Mining and Environmental Laws.
"LC Application" means any application for a Letter of Credit hereafter
made by Borrower to LC Issuer.
"LC Collateral" has the meaning given it in Section 2.15(a).
"LC Issuer" means NationsBank in its capacity as the issuer of Letters
of Credit hereunder, and its successors in such capacity and Provident as
issuer of the Provident LC. Agent may, with the consent of Borrower and the
Lender in question, appoint any Lender hereunder as the LC Issuer in place of
or in addition to NationsBank.
"LC Obligations" means, at the time in question, the sum of all Matured
LC Obligations plus the Maximum Drawing Amount.
"LC Sublimit" means $5,000,000.
"Lender Parties" means Agent, LC Issuer and all Lenders.
"Lenders" means each signatory hereto (other than Restricted Persons)
(a party hereto), including NationsBank in its capacity as a lender hereunder
rather than as Agent, and the successors of each such party as holder of a
Note.
"Lender Schedule" means Schedule 3 hereto, as modified from time to
time.
"Letter of Credit" means any letter of credit issued by LC Issuer
hereunder at the application of Borrower and the Provident LC.
"Liabilities" means, as to any Person, all indebtedness, liabilities
and obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
15
<PAGE> 21
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Liabilities owed to him or any other
arrangement with such creditor which provides for the payment of such
Liabilities out of such property or assets or which allows him to have such
Liabilities satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security
interest, pledge, deposit, production payment, rights of a vendor under any
title retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by Law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business. "Lien" also means any filed financing
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would
serve to perfect a Lien described in the preceding sentence, regardless of
whether such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"Loan" has the meaning given it in Section 2.1.
"Loan Documents" means this Agreement, the Notes, the LC Applications,
the Letters of Credit, the Security Documents, and all other agreements,
certificates, documents, instruments and writings at any time delivered in
connection herewith or therewith (exclusive of term sheets, commitment letters,
correspondence and similar documents used in the negotiation hereof, except to
the extent the same contain information about Borrower or its Affiliates,
properties, business or prospects).
"Material Adverse Change" means a material and adverse change, from the
state of affairs presented in the Initial Financial Statements, the Initial
Engineering Report or the Initial Appraisals, or as represented or warranted in
any Loan Document, to (a) Borrower's financial condition or the Consolidated
financial condition of Borrower and all of its Subsidiaries, (b) the business,
operations or properties of Borrower or of Borrower and all of its
Subsidiaries, considered as a whole, (c) Borrower's ability to timely pay the
Obligations or to comply with any other obligations under the Loan Documents,
or (d) the enforceability of the material terms of any Loan Document.
"Matured LC Obligations" means all amounts paid by LC Issuer on drafts
or demands for payment drawn or made under or purported to be under any Letter
of Credit and all other amounts due and owing to LC Issuer under any LC
Application for any Letter of Credit, to the extent the same have not been
repaid to LC Issuer (with the proceeds of Loans or otherwise).
"Maximum Drawing Amount" means at the time in question the sum of the
maximum amounts which Agent might then or thereafter be called upon to advance
under all Letters of Credit then outstanding.
"Maturity Date" means November 11, 2002.
16
<PAGE> 22
"Mine" shall mean any excavation or opening into the earth now and
hereafter made from which Coal is or can be extracted on or from any of the
properties owned or leased by any Restricted Person, together with all
appurtenances, fixtures, structures, improvements, and all tangible property of
whatsoever kind or nature in connection therewith, and together with each and
every license, permit, bond, governmental approval and contract right in
connection therewith, including without limitation the Mines described in the
Initial Appraisals, the Initial Environmental Report and the Initial
Engineering Reports.
"Mining and Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions relating to mining operations and activities or
to the environment or to emissions, discharges, releases or threatened releases
of pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment including ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes or to the reclamation of lands. Mining and Environmental
Laws shall include, but not be limited to the Surface Mining Control and
reclamation Act of 1977, as amended, all other land reclamation and use
statutes and regulations, the federal Coal Mine Health and Safety Act of 1969,
as amended, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986; the Resource Conservation and Recovery Act of
1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste
Disposal Act Amendments of 1980 and the Hazardous and Solid Waste Amendments of
1984; the Toxic Substances Control Act, 15 U.S.C.; the Federal Water Pollution
Control Act; the Hazardous Materials Transportation Act; the Clean Air Act; the
Safe Drinking Water Act; The Occupational Safety and Health Act of 1970; the
Federal Insecticide, Fungicide and Rodenticide Act and the Endangered Species
Act, each as amended and their state and local counterparts or equivalents.
"Mortgaged Properties" means all properties subject to the Security
Documents.
"NationsBank" means NationsBank of Texas, N.A.
"Net Debt" means for any Fiscal Quarter, (a) Borrower's Consolidated
GAAP Indebtedness as of the end of such Fiscal Quarter minus (b) the amount by
which the Cash Equivalents held by the Restricted Persons at such time, which
are free and clear of all Liens except Liens in favor of Agent, exceeds
$20,000,000.
"Net Debt to EBITDA Ratio" means as of the end of any Fiscal Quarter
the ratio of (i) Borrower's Net Debt as of the end of such Fiscal Quarter, to
(ii) Borrower's EBITDA for such Fiscal Quarter; provided that if a Permitted
Acquisition of a Person or properties has been made during the period used in
the calculation of EBITDA for such Fiscal Quarter, EBITDA for such Person or
arising out of the operation of such properties, adjusted based on assumptions
17
<PAGE> 23
approved by Required Lenders in their sole and absolute discretion, shall be
included in Borrower's Consolidated EBITDA for such period.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any asset sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions), or (b)
the disposition of any securities by such Person or any of its Subsidiaries or
the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries, and (ii) any extraordinary gain (but not loss), together with any
related provision for taxes on such extraordinary gain (but not loss).
"Non-Default Base Rate Margin" means (a) on, and on each day prior to,
March 31, 1998, three-fourths of one percent (0.75%) per annum; and (b) on each
day thereafter:
(i) zero percent (0%) per annum if the Net Debt to EBITDA Ratio for
the Fiscal Quarter immediately preceding the Fiscal Quarter during which such
day occurs is less than or equal to 3.0 to 1.0.
(ii) one-fourth of one percent (0.25%) per annum if the Net Debt to
EBITDA Ratio for the Fiscal Quarter immediately preceding the Fiscal Quarter
during which such day occurred is less than or equal to 3.5 to 1 but greater
than 3.0 to 1;
(iii) one-half of one percent (0.5%) per annum if the Net Debt to
EBITDA Ratio for the Fiscal Quarter immediately preceding the Fiscal Quarter
during which such day occurred is less than or equal to 4.0 to 1, but greater
than 3.5 to 1, and
(iv) three-fourths of one percent (0.75%) per annum if the Net Debt to
EBITDA Ratio for the Fiscal Quarter immediately preceding the Fiscal Quarter
during which such day occurred is less than or equal to 4.5 to 1, but greater
than 4.0 to 1;
provided that none of the percentages described in clauses (b)(i) through
(b)(v) of this definition shall become effective unless Borrower has delivered
to Agent its financial statements for the Fiscal Quarter ended March 31, 1998
as required by Section 6.2(b), and the percentage set forth in clause (a) of
this definition shall remain in effect.
"Non-Default Eurodollar Margin" means (a) on, and on each day prior to,
March 31, 1998, two and one-fourth percent (2.25%) per annum; and (b) on each
day thereafter:
(i) one percent (1%) per annum if the Net Debt to EBITDA Ratio for
the Fiscal Quarter immediately preceding the Fiscal Quarter during which such
day occurred is less than or equal to 2.5 to 1,
18
<PAGE> 24
(ii) one and one-half percent (1.5%) per annum if the Net Debt to
EBITDA Ratio for the Fiscal Quarter immediately preceding the Fiscal Quarter
during which such day occurred is less than or equal to 3.0 to 1, but greater
than 2.5 to 1,
(iii) one and three-fourths percent (1.75%) per annum if the Net Debt
to EBITDA Ratio for the Fiscal Quarter immediately preceding the Fiscal Quarter
during which such day occurred is less than or equal to 3.5 to 1, but greater
than 3.0 to 1,
(iv) two percent (2.0%) per annum if the Net Debt to EBITDA Ratio for
the Fiscal Quarter immediately preceding the Fiscal Quarter during which such
day occurred is less than or equal to 4.0 to 1, but greater than 3.5 to 1, and
(v) two and one-fourth percent (2.25%) per annum if the Net Debt to
EBITDA Ratio for the Fiscal Quarter immediately preceding the Fiscal Quarter
during which such day occurred is less than or equal to 4.5 to 1, but greater
than 4.0 to 1.0;
provided that none of the percentages described in clauses (b)(i) through
(b)(v) of this definition shall become effective unless Borrower has delivered
to Agent its financial statements for the Fiscal Quarter ended March 31, 1998
as required by Section 6.2(b), and the percentage set forth in clause (a) of
this definition shall remain in effect.
"Note" has the meaning given it in Section 2.1.
"Obligation" means any part of the Obligations.
"Obligations" means all Liabilities from time to time owing by any
Restricted Person to any Lender Party under or pursuant to any of the Loan
Documents.
"Operating Equipment" shall mean all surface and subsurface machinery,
equipment, facilities and other property of every kind or nature now owned or
hereafter acquired by any Restricted Person, which are useful for the
transportation of Coal, including, but not by way of limitation, all hoisting
shafts, air shafts, engines, boilers, dynamos, generators, belts and conveyor
belts and other electrical apparatus, machinery and tipples, store house and
other buildings of every kind, used in connection with the Mines; and all
tools, supplies, equipment and personal property of every kind or nature now
owned or hereafter acquired by any Restricted Person for use, or used in
connection with, the Mines or the processing and transportation of Coal.
"Original Credit Agreement" means the Credit Agreement between
Addington Enterprises, Inc. and NationsBank of Texas, N.A. dated as of October
8, 1997.
"Original Note" means the promissory note dated as of October 8, 1997
made by Addington Enterprises, Inc. payable to the order of NationsBank of
Texas, N.A. as Initial Lender, in the amount of $50,000,000.
19
<PAGE> 25
"Percentage Share" means, with respect to any Lender (a) when used in
Sections 2.1 or 2.5, in any Borrowing Notice or when no Loans are outstanding
hereunder, the percentage set forth opposite such Lender's name on Lender
Schedule attached hereto, and (b) when used otherwise, the percentage obtained
by dividing (i) the sum of the unpaid principal balance of such Lender's Loans
at the time in question and the Matured LC Obligations which such Lender has
funded pursuant to Section 2.15(c) and the portion of the Maximum Drawing
Amount which such Lender might be obligated to fund under Section 2.15(c), by
(ii) the sum of the aggregate unpaid principal balance of all Loans at such
time and the aggregate amount of LC Obligations outstanding at such time.
"Permitted Acquisition" means an acquisition of Capital Stock or assets
of any Person which is permitted by Section 7.7.
"Permitted Lien" has the meaning given to such term in Section 7.2.
"Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture,
Tribunal, or any other legally recognizable entity.
"Prime Rate" means the per annum rate of interest established from time
to time by NationsBank as its prime rate, which rate may not be the lowest rate
of interest charged by NationsBank to its customers.
"Provident" means The Provident Bank.
"Provident LC" means that certain Letter of Credit No. S007610 issued
on July 3, 1997 in the amount of $500,000 for the benefit of Coors Energy Co.
"Rating Agency" means either Standard & Poor's Ratings Group (a
division of McGraw Hill, Inc.) or Moody's Investors Service, Inc., or their
respective successors.
"Receivables and Inventory Audit" means the report of the receivables
and inventory audit of the Restricted Persons conducted by NationsBank.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect.
"Required Lenders" means Lenders whose aggregate Percentage Shares
equal or exceed sixty-six and two-thirds percent (66-2/3%).
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental,
or emergency reserves) are required to be maintained under regulations issued
from time to time by the Board of
20
<PAGE> 26
Governors of the Federal Reserve System (or any successor) by member banks of
the Federal Reserve System against "Eurocurrency liabilities" (as such term is
used in Regulation D). Without limiting the effect of the foregoing, the
Reserve Requirement shall reflect any other reserves required to be maintained
by such member banks with respect to (a) any category of liabilities which
includes deposits by reference to which the Adjusted Eurodollar Rate is to be
determined, or (b) any category of extensions of credit or other assets which
include Eurodollar Loans. The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Requirement.
"Restricted Person" means any of Borrower and each direct and indirect
Subsidiary of Borrower.
"SEC" means the Securities and Exchange Commission.
"Securities Offering" means the securities offering described in that
certain letter agreement dated September 16, 1997, between Borrower and
NationsBanc Montgomery Securities, Inc.
"Security Documents" means Subordination Agreement, the instruments
listed in the Security Schedule and all other security agreements, deeds of
trust, mortgages, chattel mortgages, pledges, guaranties, financing statements,
continuation statements, extension agreements and other agreements or
instruments now, heretofore, or hereafter delivered by any Restricted Person to
Agent in connection with this Agreement or any transaction contemplated hereby
to secure or guarantee the payment of any part of the Obligations or the
performance of any Restricted Person's other duties and obligations under the
Loan Documents.
"Security Schedule" means Schedule 2 hereto.
"Senior Unsecured Notes" means the promissory notes of Borrower in an
aggregate principal amount not to exceed $250,000,000 due 2007 issued under the
Indenture.
"Subordination Agreement" means the Subordination Agreement of EVEN
DATE HEREWITH among the shareholders and Subsidiaries of Borrower, as
subordinated creditors, and Agent and Lenders, as senior creditors, pursuant to
which all Liabilities of the Restricted Persons to shareholders and
Subsidiaries of Borrower are subordinated to all Liabilities of such Persons to
Lender Parties.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.
"Tennessee Mining" means Tennessee Mining, Inc. a Kentucky corporation
and wholly- owned subsidiary of Borrower.
21
<PAGE> 27
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA
or (ii) any other reportable event described in Section 4043(b) of ERISA other
than a reportable event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation
under Section 4043(a) of ERISA, or (b) the withdrawal of any ERISA Affiliate
from an ERISA Plan during a plan year in which it was a "substantial employer"
as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of
intent to terminate any ERISA Plan or the treatment of any ERISA Plan amendment
as a termination under Section 4041 of ERISA, or (d) the institution of
proceedings to terminate any ERISA Plan by the Pension Benefit Guaranty
Corporation under Section 4042 of ERISA, or (e) any other event or condition
which might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any ERISA Plan.
"Tribunal" means any government, any arbitration panel, any court or
any governmental department, commission, board, bureau, agency or
instrumentality of the United States of America or any state, province,
commonwealth, nation, territory, possession, county, parish, town, township,
village or municipality, whether now or hereafter constituted and/or existing.
"Type" means, with respect to any Loans, the characterization of such
Loans as either Base Rate Loans or Eurodollar Loans.
"Unbilled Sale" means any sale of coal by the Borrowing Base Persons as
to which (a) an invoice has not yet been issued and (b) the Borrowing Base
Persons have written evidence, in form and substance satisfactory to Agent,
that the goods giving rise to such sale have been delivered to the customer.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of Texas.
"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person normally entitling the holders
thereof to vote in the election of members of the Board of Directors or other
governing body of such Person.
"Wholly-owned Subsidiary" means any Subsidiary of Borrower, one hundred
percent (100%) of the Voting Stock of which is directly or indirectly (through
one or more intermediaries) owned Borrower.
Section 1.2. Exhibits and Schedules; Additional Definitions. All
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein, which
definitions are incorporated herein by reference.
Section 1.3. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in
this Agreement which refer to a particular
22
<PAGE> 28
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments and restatements of such agreement,
instrument or document, provided that nothing contained in this section shall
be construed to authorize any such renewal, extension, modification, amendment
or restatement.
Section 1.4. References and Titles. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
Section 1.5. Calculations and Determinations. All calculations under
the Loan Documents of interest chargeable with respect to Eurodollar Loans and
of fees shall be made on the basis of actual days elapsed (including the first
day but excluding the last) and a year of 360 days. All other calculations of
interest made under the Loan Documents shall be made on the basis of actual
days elapsed (including the first day but excluding the last) and a year of 365
or 366 days, as appropriate. Each determination by a Lender Party of amounts to
be paid under any of Sections 3.2, 3.6 and 3.7 or any other matters which are
to be determined hereunder by a Lender Party (such as any Adjusted Eurodollar
Rate, Eurodollar Rate, Business Day, Interest Period, or Reserve Percentage)
shall, in the absence of manifest error, be conclusive and binding. Unless
otherwise expressly provided herein or unless Required Lenders otherwise
consent all financial statements and reports furnished to any Lender Party
hereunder shall be prepared and all financial computations and determinations
pursuant hereto shall be made in accordance with GAAP.
ARTICLE II - The Loans and Letters of Credit
Section 2.1. Commitments to Lend; Notes. Subject to the terms and
conditions hereof, each Lender agrees to renew and extend its Percentage Share
of the loans evidenced by the Original Note and to make new loans to Borrower
(herein such renewed and extended loans and such new loans are collectively
called such Lender's "Loans") upon Borrower's request from time to time during
the Commitment Period, provided that (a) subject to Sections 3.3, 3.4 and 3.5,
all Lenders are requested to make Loans of the same Type in accordance with
their respective Percentage Shares and as part of the same Borrowing, and (b)
after giving effect to such Loans, the Facility Usage does not exceed the
Commitment and the aggregate amount of each Lender's Loans outstanding plus
such Lender's LC Obligations do not exceed such
23
<PAGE> 29
Lender's Percentage Share of the Borrowing Base determined as of the date on
which the requested Loan is to be made. The aggregate amount of all Loans in
any Borrowing of Base Rate Loans must be greater than or equal to $1,000,000
(any higher multiple thereof) or must equal the unadvanced portion of the
Borrowing Base. The aggregate amount of all Loans in any Borrowing of
Eurodollar Loans must be greater than or equal to $1,000,000 (or any higher
multiple thereof) or must equal the remaining availability under the
Commitment. Borrower may have no more than six (6) Borrowings of Eurodollar
Loans outstanding at any time. The obligation of Borrower to repay to each
Lender the aggregate amount of all Loans made by such Lender, together with
interest accruing in connection therewith, shall be evidenced by a single
promissory note (herein called such Lender's "Note") made by Borrower payable
to the order of such Lender in the form of Exhibit A with appropriate
insertions. The amount of principal owing on any Lender's Note at any given
time shall be the aggregate amount of all Loans theretofore made by such Lender
minus all payments of principal theretofore received by such Lender on such
Note. Interest on each Note shall accrue and be due and payable as provided
herein and therein, with Eurodollar Loans bearing interest at the Adjusted
Eurodollar Rate and Base Rate Loans bearing interest at the Alternate Base Rate
(subject to the applicability of the Default Rate and limited by the provisions
of Section 10.9). Subject to the terms and conditions hereof, Borrower may
borrow, repay, and reborrow hereunder.
Section 2.2. Requests for New Loans. Borrower must give to Agent
written notice (or telephonic notice promptly confirmed in writing) of any
requested Borrowing of new Loans to be advanced by Lenders. Each such notice
constitutes a "Borrowing Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of
new Base Rate Loans and the date on which such Base Rate Loans are to
be advanced, or (ii) the aggregate amount of any such Borrowing of new
Eurodollar Loans, the date on which such Eurodollar Loans are to be
advanced (which shall be the first day of the Interest Period which is
to apply thereto), and the length of the applicable Interest Period;
and
(b) be received by Agent not later than 11:00 a.m., Dallas,
Texas time, on (i) the day on which any such Base Rate Loans are to be
made, or (ii) the third Business Day preceding the day on which any
such Eurodollar Loans are to be made.
Each such written request or confirmation must be made in the form and
substance of the "Borrowing Notice" attached hereto as Exhibit B, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Borrowing Notice, Agent shall give each Lender prompt notice of the terms
thereof. If all conditions precedent to such new Loans have been met, each
Lender will on the date requested promptly remit to Agent at Agent's office in
Dallas, Texas, the amount of such Lender's new Loan in immediately available
funds, and upon receipt of such funds, unless to its actual knowledge any
conditions precedent to such Loans have been neither met nor waived as provided
herein, Agent shall promptly make such Loans available to Borrower. Unless
Agent
24
<PAGE> 30
shall have received prompt notice from a Lender that such Lender will not make
available to Agent such Lender's new Loan, Agent may in its discretion assume
that such Lender has made such Loan available to Agent in accordance with this
section and Agent may if it chooses, in reliance upon such assumption, make
such Loan available to Borrower. If and to the extent such Lender shall not so
make its new Loan available to Agent, such Lender and Borrower severally agree
to pay or repay to Agent within three days after demand the amount of such Loan
together with interest thereon, for each day from the date such amount was made
available to Borrower until the date such amount is paid or repaid to Agent,
with interest at (i) the Federal Funds Rate, if such Lender is making such
payment and (ii) the interest rate applicable at the time to the other new
Loans made on such date, if Borrower is making such repayment. If neither such
Lender nor Borrower pay or repay to Agent such amount within such three-day
period, Agent shall in addition to such amount be entitled to recover from such
Lender and from Borrower, on demand, interest thereon at the Default Rate,
calculated from the date such amount was made available to Borrower. The
failure of any Lender to make any new Loan to be made by it hereunder shall not
relieve any other Lender of its obligation hereunder, if any, to make its new
Loan, but no Lender shall be responsible for the failure of any other Lender to
make any new Loan to be made by such other Lender.
Section 2.3. Continuations and Conversions of Existing Loans. Borrower
may make the following elections with respect to Loans already outstanding: to
convert Base Rate Loans to Eurodollar Loans, to convert Eurodollar Loans to
Base Rate Loans on the last day of the Interest Period applicable thereto, or
to continue Eurodollar Loans beyond the expiration of such Interest Period by
designating a new Interest Period to take effect at the time of such
expiration. In making such elections, Borrower may combine existing Loans made
pursuant to separate Borrowings into one new Borrowing or divide existing Loans
made pursuant to one Borrowing into separate new Borrowings. To make any such
election, Borrower must give to Agent written notice (or telephonic notice
promptly confirmed in writing) of any such conversion or continuation of
existing Loans, with a separate notice given for each new Borrowing. Each such
notice constitutes a "Continuation/Conversion Notice" hereunder and must:
(a) specify the existing Loans which are to be continued or
converted;
(b) specify (i) the aggregate amount of any Borrowing of Base
Rate Loans into which such existing Loans are to be continued or
converted and the date on which such continuation or conversion is to
occur, or (ii) the aggregate amount of any Borrowing of Eurodollar
Loans into which such existing Loans are to be continued or converted,
the date on which such continuation or conversion is to occur (which
shall be the first day of the Interest Period which is to apply to such
Eurodollar Loans), and the length of the applicable Interest Period;
and
(c) be received by Agent not later than 11:00 a.m., Dallas,
Texas time, on (i) the day on which any such continuation or conversion
to Base Rate Loans is to occur, or (ii) the third Business Day
preceding the day on which any such continuation or conversion to
Eurodollar Loans is to occur.
25
<PAGE> 31
Each such written request or confirmation must be made in the form and
substance of the "Continuation/Conversion Notice" attached hereto as Exhibit C,
duly completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Borrowing Notice, Agent shall give each Lender prompt notice of the terms
thereof. Each Borrowing Notice shall be irrevocable and binding on Borrower.
During the continuance of any Default, Borrower may not make any election to
convert existing Loans into Eurodollar Loans or continue existing Loans as
Eurodollar Loans. If (due to the existence of a Default or for any other
reason) Borrower fails to timely and properly give any notice of continuation
or conversion with respect to a Borrowing of existing Eurodollar Loans at least
three days prior to the end of the Interest Period applicable thereto, such
Eurodollar Loans shall automatically be continued as Eurodollar Loans with an
Interest Period of one month at the end of such Interest Period. No new funds
shall be repaid by Borrower or advanced by any Lender in connection with any
continuation or conversion of existing Loans pursuant to this section, and no
such continuation or conversion shall be deemed to be a new advance of funds
for any purpose; such continuations and conversions merely constitute a change
in the interest rate applicable to already outstanding Loans.
Section 2.4. Use of Proceeds. Borrower shall use all Loans (a) to
refinance existing indebtedness, (b) to finance capital expenditures permitted
hereunder, (c) to provide working capital for Borrower's operations and for
other general business purposes, and (d) to make loans to the other Restricted
Persons to be used by them for working capital for their operations, to
refinance existing indebtedness, and to finance their capital expenditures . In
no event shall the funds from any Loan be used directly or indirectly by any
Person (x) for personal, family, household or agricultural purposes or (y) for
the purpose, whether immediate, incidental or ultimate, of purchasing,
acquiring or carrying any "margin stock" or any "margin securities" (as such
terms are defined respectively in Regulation U and Regulation G promulgated by
the Board of Governors of the Federal Reserve System) or to extend credit to
others directly or indirectly for the purpose of purchasing or carrying any
such margin stock or margin securities. Borrower represents and warrants that
Borrower is not engaged principally, or as one of Borrower's important
activities, in the business of extending credit to others for the purpose of
purchasing or carrying such margin stock or margin securities.
Section 2.5. Fees.
(a) Commitment Fees. In consideration of each Lender's
commitment to make Loans, Borrower will pay to Agent for the account of
each Lender a commitment fee determined on a daily basis by applying
the Commitment Fee Rate to such Lender's Percentage Share of the unused
portion of the Borrowing Base on each day during the Commitment Period,
determined for each such day by deducting from the amount of the
Borrowing Base at the end of such day the Facility Usage. This
commitment fee shall be due and payable in arrears on each Base Rate
Payment Date and at the end of the Commitment Period.
26
<PAGE> 32
(b) Other Fees. In addition to all other amounts due to Agent
under the Loan Documents, Borrower will pay fees to Agent as described
in a letter agreement of even date herewith between Agent and Borrower.
Section 2.6. Optional Prepayments. Borrower may, upon one Business
Day's notice in the case of Base Rate Loans, or three Business Days' notice in
the case of Eurodollar Loans, to each Lender, from time to time and without
premium or penalty prepay the Notes, in whole or in part, so long as the
aggregate amounts of all partial prepayments of principal on the Notes equals
$1,000,000 or any higher integral multiple of $100,000, so long as Borrower
pays all breakage costs associated with the prepayment of any Eurodollar Loan
as provided in Section 3.6, and so long as Borrower does not make any
prepayments which would reduce the unpaid principal balance of any Loan to less
than $100,000 without first either (a) terminating this Agreement or (b)
providing assurance satisfactory to Agent in its discretion that Lenders' legal
rights under the Loan Documents are in no way affected by such reduction. Any
principal or interest prepaid pursuant to this section shall be in addition to,
and not in lieu of, all payments otherwise required to be paid under the Loan
Documents at the time of such prepayment.
Section 2.7. Mandatory Prepayments.
(a) If at any time the Facility Usage is in excess of the
Borrowing Base (such excess being herein called a "Borrowing Base
Deficiency"), Borrower shall immediately upon demand prepay the
principal of the Loans in an amount at least equal to such Borrowing
Base Deficiency (or, if the Loans have been repaid in full, pay to LC
Issuer LC Collateral as required under Section 2.15(a)).
(b) Any principal or interest prepaid pursuant to this section
shall be in addition to, and not in lieu of, all payments otherwise
required to be paid under the Loan Documents at the time of such
prepayment.
Section 2.8. Initial Borrowing Base. During the period from the date
hereof to the first Determination Date, the Borrowing Base shall be
$47,661,000.
Section 2.9. Subsequent Redeterminations of Borrowing Base. Promptly
after receiving each Borrowing Base Report, Agent shall determine the Borrowing
Base and notify Borrower of the new Borrowing Base, which determination shall
take effect immediately on the date on which such notice is sent (herein called
a "Determination Date") and remain in effect until the Agent receives the next
Borrowing Base Report and determines the next Borrowing Base. In the event
Agent has not received an appropriately completed Borrowing Base Report (with
all attachments) within the time period specified herein, Agent shall have no
obligation to redetermine the Borrowing Base and no Lender shall have any
obligation to make any additional Loans until such time as Agent shall have
received such information.
27
<PAGE> 33
Section 2.10. Letters of Credit. Subject to the terms and conditions
hereof, Borrower may during the Commitment Period request LC Issuer to issue
one or more Letters of Credit, provided that, after taking such Letter of
Credit into account:
(a) the Facility Usage does not exceed the Borrowing Base at such
time; and
(b) the aggregate amount of LC Obligations at such time does not
exceed the LC Sublimit;
(c) the expiration date of such Letter of Credit is prior to the end
of the Commitment Period;
(d) such Letter of Credit is not directly or indirectly used to assure
payment of or otherwise support any Indebtedness of any Person other than
Indebtedness of any Restricted Person;
(e) the issuance of such Letter of Credit will be in compliance with
all applicable governmental restrictions, policies, and guidelines and will not
subject LC Issuer to any cost which is note reimbursable under Article III;
(f) the form and terms of such Letter of Credit are acceptable to LC
Issuer in its sole and absolute discretion; and
(g) all other conditions in this Agreement to the issuance of such
Letter of Credit have been satisfied.
LC Issuer will honor any such request if the foregoing conditions (a) through
(g) (in the following Section 2.11 called the "LC Conditions") have been met as
of the date of issuance of such Letter of Credit.
Section 2.11. Requesting Letters of Credit. Borrower must make written
application for any Letter of Credit at least five Business Days before the
date on which Borrower desires for LC Issuer to issue such Letter of Credit. By
making any such written application Borrower shall be deemed to have
represented and warranted that the LC Conditions described in Section 2.10 will
be met as of the date of issuance of such Letter of Credit. Each such written
application for a Letter of Credit must be made in writing in the form and
substance of Exhibit H, the terms and provisions of which are hereby
incorporated herein by reference (or in such other form as may mutually be
agreed upon by LC Issuer and Borrower). Two Business Days after the LC
Conditions for a Letter of Credit have been met as described in Section 2.10,
LC Issuer will issue such Letter of Credit at LC Issuer's office in Dallas,
Texas. If any provisions of any LC Application conflict with any provisions of
this Agreement, the provisions of this Agreement shall govern and control.
28
<PAGE> 34
Section 2.12. Reimbursement and Participations.
(a) Reimbursement by Borrower. Each Matured LC Obligation shall
constitute a loan by LC Issuer to Borrower. Borrower promises to pay to LC
Issuer, or to LC Issuer's order, on demand, the full amount of each Matured LC
Obligation, together with interest thereon at the Default Rate.
(b) Letter of Credit Advances. If the beneficiary of any Letter of
Credit makes a draft or other demand for payment thereunder then Borrower may,
during the interval between the making thereof and the honoring thereof by LC
Issuer, request Lenders to make Loans to Borrower in the amount of such draft
or demand, which Loans shall be made concurrently with LC Issuer's payment of
such draft or demand and shall be immediately used by LC Issuer to repay the
amount of the resulting Matured LC Obligation. Such a request by Borrower shall
be made in compliance with all of the provisions hereof, provided that for the
purposes of the first sentence of Section 2.1 the amount of such Loans shall be
considered but the amount of the Matured LC Obligation to be concurrently paid
by such Loans shall not be considered.
(c) Participation by Lenders. LC Issuer irrevocably agrees to grant
and hereby grants to each Lender, and -- to induce LC Issuer to issue Letters
of Credit hereunder -- each Lender irrevocably agrees to accept and purchase
and hereby accepts and purchases from LC Issuer, on the terms and conditions
hereinafter stated and for such Lender's own account and risk an undivided
interest equal to such Lender's Percentage Share of LC Issuer's obligations and
rights under each Letter of Credit issued hereunder and the amount of each
Matured LC Obligation paid by LC Issuer thereunder. Each Lender unconditionally
and irrevocably agrees with LC Issuer that, if a Matured LC Obligation is paid
under any Letter of Credit for which LC Issuer is not reimbursed in full by
Borrower in accordance with the terms of this Agreement and the related LC
Application (including any reimbursement by means of concurrent Loans or by the
application of LC Collateral), such Lender shall (in all circumstances and
without set-off or counterclaim) pay to LC Issuer on demand, in immediately
available funds at LC Issuer's address for notices hereunder, such Lender's
Percentage Share of such Matured LC Obligation (or any portion thereof which
has not been reimbursed by Borrower). Each Lender's obligation to pay LC Issuer
pursuant to the terms of this subsection is irrevocable and unconditional. If
any amount required to be paid by any Lender to LC Issuer pursuant to this
subsection is paid by such Lender to LC Issuer within three Business Days after
the date such payment is due, LC Issuer shall in addition to such amount be
entitled to recover from such Lender, on demand, interest thereon calculated
from such due date at the Federal Funds Rate. If any amount required to be paid
by any Lender to LC Issuer pursuant to this subsection is not paid by such
Lender to LC Issuer within three Business Days after the date such payment is
due, LC Issuer shall in addition to such amount be entitled to recover from
such Lender, on demand, interest thereon calculated from such due date at the
Default Rate.
(d) Distributions to Participants. Whenever LC Issuer has in
accordance with this section received from any Lender payment of such Lender's
Percentage Share of any Matured LC Obligation, if LC Issuer thereafter receives
any payment of such Matured LC Obligation or
29
<PAGE> 35
any payment of interest thereon (whether directly from Borrower or by
application of LC Collateral or otherwise, and excluding only interest for any
period prior to LC Issuer's demand that such Lender make such payment of its
Percentage Share), LC Issuer will distribute to such Lender its Percentage
Share of the amounts so received by LC Issuer; provided, however, that if any
such payment received by LC Issuer must thereafter be returned by LC Issuer,
such Lender shall return to LC Issuer the portion thereof which LC Issuer has
previously distributed to it.
(e) Calculations. A written advice setting forth in reasonable detail
the amounts owing under this section, submitted by LC Issuer to Borrower or any
Lender from time to time, shall be conclusive, absent manifest error, as to the
amounts thereof.
Section 2.13. Letter of Credit Fees. In consideration of LC Issuer's
issuance of any Letter of Credit, Borrower agrees to pay (a) to Agent, for the
account of all Lenders in accordance with their respective Percentage Shares, a
letter of credit issuance fee at a rate equal to the Eurodollar Margin applied
to the face amount of such Letter of Credit for the stated term thereof, and
(b) to such LC Issuer for its own account, a letter of credit fronting fee at a
rate equal to one-eighth of one percent (.125%) per annum applied to the face
amount of such Letter of Credit for the stated term thereof, each calculated on
the date of issuance and due and payable on the first Base Rate Payment Date
following the date of issuance. In addition, Borrower will pay to LC Issuer its
customary drawing fees.
Section 2.14. No Duty to Inquire.
(a) Drafts and Demands. LC Issuer is authorized and instructed to
accept and pay drafts and demands for payment under any Letter of Credit
without requiring, and without responsibility for, any determination as to the
existence of any event giving rise to said draft, either at the time of
acceptance of payment or thereafter. LC Issuer is under no duty to determine
the proper identity of anyone presenting such a draft or making such a demand
(whether by tested telex or otherwise) as the officer, representative or agent
of any beneficiary under any Letter of Credit, and payment by LC Issuer to any
such beneficiary when requested by any such purported officer, representative
or agent is hereby authorized and approved. Borrower agrees to hold LC Issuer
and each other Lender harmless and indemnified against any liability or claim
in connection with or arising out of the subject matter of this section, WHICH
INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY
OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
OF ANY KIND BY ANY LENDER, provided only that no Lender shall be entitled to
indemnification for that portion, if any, of any liability or claim which is
proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit is
extended by its terms or by Law or governmental action, if any extension of the
maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of
30
<PAGE> 36
any Restricted Person, or if the amount of any Letter of Credit is increased at
the request of any Restricted Person, this Agreement shall be binding upon all
Restricted Persons with respect to such Letter of Credit as so extended,
increased or otherwise modified, with respect to drafts and property covered
thereby, and with respect to any action taken by LC Issuer, LC Issuer's
correspondents, or any Lender in accordance with such extension, increase or
other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit provides
that it is transferable, LC Issuer shall have no duty to determine the proper
identity of anyone appearing as transferee of such Letter of Credit, nor shall
LC Issuer be charged with responsibility of any nature or character for the
validity or correctness of any transfer or successive transfers, and payment by
LC Issuer to any purported transferee or transferees as determined by LC Issuer
is hereby authorized and approved, and Borrower further agrees to hold LC
Issuer and each other Lender harmless and indemnified against any liability or
claim in connection with or arising out of the foregoing, WHICH INDEMNITY SHALL
APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT
CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY
ANY LENDER, provided only that no Lender shall be entitled to indemnification
for that portion, if any, of any liability or claim which is proximately caused
by its own individual gross negligence or willful misconduct, as determined in
a final judgment.
Section 2.15. LC Collateral.
(a) LC Obligations in Excess of Borrowing Base. If, after the making of
all mandatory prepayments required under Section 2.7, the outstanding LC
Obligations will exceed the Borrowing Base, then in addition to prepayment of
the entire principal balance of the Loans Borrower will immediately pay to LC
Issuer an amount equal to such excess. LC Issuer will hold such amount as
security for the remaining LC Obligations (all such amounts held as security
for LC Obligations being herein collectively called "LC Collateral") until such
LC Obligations become Matured LC Obligations, at which time such LC Collateral
may be applied to such Matured LC Obligations. Neither this subsection nor the
following subsection shall, however, limit or impair any rights which LC Issuer
may have under any other document or agreement relating to any Letter of Credit
or LC Obligation, including any LC Application, or any rights which any Lender
may have to otherwise apply any payments by Borrower and any LC Collateral
under Section 3.1.
(b) Acceleration of LC Obligations. If the Obligations or any part
thereof become immediately due and payable pursuant to Section 8.1 then, unless
Required Lenders otherwise specifically elect to the contrary (which election
may thereafter by retracted by Required Lenders at any time), all LC
Obligations shall become immediately due and payable without regard to whether
or not actual drawings or payments on the Letters of Credit have occurred, and
Borrower shall be obligated to pay to LC Issuer immediately an amount equal to
the aggregate LC Obligations which are then outstanding. All amounts so paid
shall first be applied to Matured LC Obligations and then held by LC Issuer as
LC Collateral until such LC Obligations
31
<PAGE> 37
become Matured LC Obligations, at which time such LC Collateral shall be
applied to such Matured LC Obligations.
(c) Investment of LC Collateral. Pending application thereof, all LC
Collateral shall be invested by LC Issuer in such investments as LC Issuer may
choose in its sole discretion. All interest on such investments shall be
reinvested or applied to Matured LC Obligations. When all Obligations have been
satisfied in full, including all LC Obligations, all Letters of Credit have
expired or been terminated, and all of Borrower's reimbursement obligations in
connection therewith have been satisfied in full, LC Issuer shall release any
remaining LC Collateral. Borrower hereby assigns and grants to LC Issuer a
continuing security interest in all LC Collateral paid by it to LC Issuer, all
investments purchased with such LC Collateral, and all proceeds thereof to
secure its Matured LC Obligations and its Obligations under this Agreement, the
Note, and the other Loan Documents, and Borrower agrees that such LC Collateral
and investments shall be subject to all of the terms and conditions of the
Security Documents. Borrower further agrees that LC Issuer shall have all of
the rights and remedies of a secured party under the Uniform Commercial Code as
adopted in the State of Texas with respect to such security interest and that
an Event of Default under this Agreement shall constitute a default for
purposes of such security interest.
(d) Payment of LC Collateral. When Borrower is required to provide LC
Collateral for any reason and fails to do so on the day when required, LC
Issuer may without notice to Borrower or any other Restricted Person provide
such LC Collateral (whether by application of proceeds of other Collateral, by
transfers from other accounts maintained with LC Issuer, or otherwise) using
any available funds of Borrower or any other Person also liable to make such
payments. Any such amounts which are required to be provided as LC Collateral
and which are not provided on the date required shall, for purposes of each
Security Document, be considered past due Obligations owing hereunder, and LC
Issuer is hereby authorized to exercise its respective rights under each
Security Document to obtain such amounts.
ARTICLE III - Payments to Lenders
Section 3.1. General Procedures. Borrower will make each payment which
it owes under the Loan Documents to Agent for the account of the Lender Party
to whom such payment is owed. Each such payment must be received by Agent not
later than 11:00 a.m., Dallas, Texas time, on the date such payment becomes due
and payable, in lawful money of the United States of America, without set-off,
deduction or counterclaim, and in immediately available funds. Any payment
received by Agent after such time will be deemed to have been made on the next
following Business Day. Should any such payment become due and payable on a day
other than a Business Day, the maturity of such payment shall be extended to
the next succeeding Business Day, and, in the case of a payment of principal or
past due interest, interest shall accrue and be payable thereon for the period
of such extension as provided in the Loan Document under which such payment is
due. Each payment under a Loan Document shall be due and payable at the place
provided therein and, if no specific place of payment is provided, shall be due
and payable
32
<PAGE> 38
at the place of payment of NationsBank's Note. When Agent collects or receives
money on account of the Obligations, Agent shall distribute all money so
collected or received, and each Lender Party shall apply all such money so
distributed, as follows:
(a) first, for the payment of all Obligations which are then due
(and if such money is insufficient to pay all such Obligations, first
to any reimbursements due Agent under Section 6.9 or 10.4 and then to
the partial payment of all other Obligations then due in proportion to
the amounts thereof, or as Lender Parties shall otherwise agree);
(b) then for the prepayment of amounts owing under the Loan
Documents (other than principal on the Notes) if so specified by
Borrower;
(c) then for the prepayment of principal on the Notes, together
with accrued and unpaid interest on the principal so prepaid;
(d) then for the payment or prepayment of any other Obligations;
and
(e) last, for the payment or prepayment of any other Liabilities
secured by the Security Documents.
All payments applied to principal or interest on any Note shall be applied
first to any interest then due and payable, then to principal then due and
payable, and last to any prepayment of principal and interest in compliance
with Sections 2.6 and 2.7. All distributions of amounts described in any of
subsections (b), (c), (d) or (e) above shall be made by Agent pro rata to each
Lender Party then owed Obligations or Liabilities described in such subsection
in proportion to all amounts owed to all Lender Parties which are described in
such subsection; provided that if any Lender then owes payments to LC Issuer
for the purchase of a participation under Section 2.12(c), any amounts
otherwise distributable under this section to such Lender shall be deemed to
belong to LC Issuer, to the extent of such unpaid payments, and Agent shall
apply such amounts to make such unpaid payments rather than distribute such
amounts to such Lender.
Section 3.2. Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any applicable
Law, rule, or regulation, or any change in any applicable Law, rule, or
regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank, or comparable
agency charged with the interpretation or administration thereof, or
compliance by any Lender (or its Applicable Lending Office) with any
request or directive (whether or not having the force of Law) of any
such governmental authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable Lending
Office) to any tax, duty, or other charge with respect to any
Eurodollar Loans, its Notes, its obligation to make Eurodollar
Loans, or change the basis of taxation of any amounts payable to
33
<PAGE> 39
such Lender (or its Applicable Lending Office) under this
Agreement or its Notes in respect of any Eurodollar Loans (other
than taxes imposed on the overall net income of such Lender by
the jurisdiction in which such Lender has its principal office
or such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement
(other than the Reserve Requirement utilized in the
determination of the Adjusted Eurodollar Rate) relating to any
extensions of credit or other assets of, or any deposits with or
other liabilities or commitments of, such Lender (or its
Applicable Lending Office), including the Commitment of such
Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable
Lending Office) or the London interbank market any other
condition affecting this Agreement or its Notes or any of such
extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such
Lender (or its Applicable Lending Office) of making, Converting into,
Continuing, or maintaining any Eurodollar Loans or to reduce any sum
received or receivable by such Lender (or its Applicable Lending
Office) under this Agreement or its Notes with respect to any
Eurodollar Loans, then Borrower shall pay to such Lender on demand such
amount or amounts as will compensate such Lender for such increased
cost or reduction. If any Lender requests compensation by Borrower
under this Section 3.2(a), Borrower may, by notice to such Lender (with
a copy to Agent), suspend the obligation of such Lender to make or
Continue Loans of the Type with respect to which such compensation is
requested, or to Convert Loans of any other Type into Loans of such
Type, until the event or condition giving rise to such request ceases
to be in effect (in which case the provisions of Section 3.5 shall be
applicable); provided that such suspension shall not affect the right
of such Lender to receive the compensation so requested.
(b) If, after the date hereof, LC Issuer or any Lender shall
have determined that the adoption of any applicable Law, rule, or
regulation regarding capital adequacy or any change therein or in the
interpretation or administration thereof by any governmental authority,
central bank, or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of Law) of any such
governmental authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of
such Lender or any corporation controlling such Lender as a consequence
of the obligations of LC Issuer or such Lender hereunder to a level
below that which such Lender or such corporation could have achieved
but for such adoption, change, request, or directive (taking into
consideration its policies with respect to capital adequacy), then from
time to time upon demand Borrower shall pay to LC Issuer or such Lender
such additional amount or amounts as will compensate LC Issuer or such
Lender for such reduction but
34
<PAGE> 40
only to the extent that such Lender has not been compensated therefor
by an increase in the Adjusted Eurodollar Rate.
(c) LC Issuer and each Lender shall promptly notify Borrower and
Agent of any event of which it has knowledge, occurring after the date
hereof, which will entitle LC Issuer or such Lender to compensation
pursuant to this Section and each Lender will designate a different
Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the
judgment of such Lender, be otherwise disadvantageous to it. LC Issuer
or any Lender claiming compensation under this Section shall furnish to
Borrower and Agent a statement setting forth the additional amount or
amounts to be paid to it hereunder which shall be conclusive in the
absence of manifest error. In determining such amount, LC Issuer or
such Lender shall act in good faith and may use any reasonable
averaging and attribution methods.
Section 3.3. Limitation on Types of Loans. If on or prior to the first
day of any Interest Period for any Eurodollar Loan:
(a) Agent determines (which determination shall be conclusive)
that by reason of circumstances affecting the relevant market, adequate
and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period; or
(b) the Required Lenders determine (which determination shall be
conclusive) and notify Agent that the Adjusted Eurodollar Rate will not
adequately and fairly reflect the cost to Lenders of funding Eurodollar
Loans for such Interest Period;
then Agent shall give Borrower prompt notice thereof specifying the relevant
Type of Loans and the relevant amounts or periods, and so long as such
condition remains in effect, Lenders shall be under no obligation to make
additional Loans of such Type, continue Loans of such Type, or to Convert Loans
of any other Type into Loans of such Type and Borrower shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Loans of the
affected Type, either prepay such Loans or Convert such Loans into another Type
of Loan in accordance with the terms of this Agreement.
Section 3.4. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to make, maintain, or fund Eurodollar Loans
hereunder, then such Lender shall promptly notify Borrower thereof and such
Lender's obligation to make or continue Eurodollar Loans and to Convert other
Types of Loans into Eurodollar Loans shall be suspended until such time as such
Lender may again make, maintain, and fund Eurodollar Loans (in which case the
provisions of Section 3.5 shall be applicable).
Section 3.5. Treatment of Affected Loans. If the obligation of any
Lender to make a particular Type of Eurodollar Loan or to continue, or to
Convert Loans of any other Type into, Loans of a particular Type shall be
suspended pursuant to Section 3.2 or 3.4 hereof (Loans of
35
<PAGE> 41
such Type being herein called "Affected Loans" and such Type being herein
called the "Affected Type"), such Lender's Affected Loans shall be
automatically Converted into Base Rate Loans on the last day(s) of the then
current Interest Period(s) for Affected Loans (or, in the case of a Conversion
required by Section 3.4 hereof, on such earlier date as such Lender may specify
to Borrower with a copy to Agent) and, unless and until such Lender gives
notice as provided below that the circumstances specified in Section 3.2 or 3.4
hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Affected Loans have been so
Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Affected Loans shall be applied
instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or continued by such
Lender as Loans of the Affected Type shall be made or continued instead
as Base Rate Loans, and all Loans of such Lender that would otherwise
be Converted into Loans of the Affected Type shall be Converted instead
into (or shall remain as) Base Rate Loans.
If such Lender gives notice to Borrower (with a copy to Agent) that the
circumstances specified in Section 3.2 or 3.4 hereof that gave rise to the
Conversion of such Lender's Affected Loans pursuant to this Section 3.5 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Loans of the Affected Type made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Loans of the Affected Type, to the extent necessary so that,
after giving effect thereto, all Loans held by Lenders holding Loans of the
Affected Type and by such Lender are held pro rata (as to principal amounts,
Types, and Interest Periods) in accordance with their Percentage Shares of the
Commitment.
Section 3.6. Compensation. Upon the request of any Lender, Borrower
shall pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost, or
expense (including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar Loan
for any reason (including, without limitation, the acceleration of the
Loans pursuant to Section 8.1) on a date other than the last day of the
Interest Period for such Loan; or
(b) any failure by Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in Article
IV to be satisfied) to borrow, Convert, continue, or prepay a
Eurodollar Loan on the date for such borrowing, Conversion,
continuation, or prepayment specified in the relevant notice of
borrowing, prepayment, continuation, or Conversion under this
Agreement.
36
<PAGE> 42
Section 3.7. Taxes.
(a) Any and all payments by Borrower to or for the account of
any Lender, Agent or LC Issuer hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any
and all present or future taxes, duties, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender, Agent and LC Issuer, taxes
imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the Laws of which such Lender (or its Applicable
Lending Office) or Agent (as the case may be) is organized or any
political subdivision thereof (all such non-excluded taxes, duties,
levies, imposts, deductions, charges, withholdings, and liabilities
being hereinafter referred to as "Taxes"). If Borrower shall be
required by Law to deduct any Taxes from or in respect of any sum
payable under this Agreement or any other Loan Document to any Lender,
Agent or LC Issuer, (i) the sum payable shall be increased as necessary
so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 3.7) such
Lender, Agent or LC Issuer receives an amount equal to the sum it would
have received had no such deductions been made, (ii) Borrower shall
make such deductions, and (iii) Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable Law.
(b) In addition, Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property
taxes or charges or similar levies which arise from any payment made
under this Agreement or any other Loan Document or from the execution
or delivery of, or otherwise with respect to, this Agreement or any
other Loan Document (hereinafter referred to as "Other Taxes").
(c) Borrower agrees to indemnify each Lender, Agent and LC
Issuer for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section 3.7) paid by such
Lender or Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect
thereto.
(d) Each Lender organized under the Laws of a jurisdiction
outside the United States, on or prior to the date of its execution and
delivery of this Agreement in the case of each Lender listed on the
signature pages hereof and on or prior to the date on which it becomes
a Lender in the case of each other Lender, and from time to time
thereafter if requested in writing by Borrower or Agent (but only so
long as such Lender remains lawfully able to do so), shall provide
Borrower and Agent with (i) Internal Revenue Service Form 1001 or 4224,
as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Lender is entitled to benefits
under an income tax treaty to which the United States is a party which
reduces the rate of withholding tax on payments of interest or
certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the
United States, (ii) Internal Revenue Service Form W-8 or W-9, as
appropriate, or any
37
<PAGE> 43
successor form prescribed by the Internal Revenue Service, and (iii)
any other form or certificate required by any taxing authority
(including any certificate required by Sections 871(h) and 881(c) of an
the Internal Revenue Code), certifying that such Lender is entitled to
exemption from or a reduced rate of tax on payments pursuant to this
Agreement or any of the other Loan Documents.
(e) For any period with respect to which a Lender has failed to
provide Borrower and Agent with the appropriate form pursuant to
Section 3.7(d) (unless such failure is due to a change in treaty, Law,
or regulation occurring subsequent to the date on which a form
originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 3.7(a) or 3.7(b) with respect
to Taxes imposed by the United States; provided, however, that should a
Lender, which is otherwise exempt from or subject to a reduced rate of
withholding tax, become subject to Taxes because of its failure to
deliver a form required hereunder, Borrower shall take such steps as
such Lender shall reasonably request to assist such Lender to recover
such Taxes.
(f) If Borrower is required to pay additional amounts to or for
the account of any Lender pursuant to this Section 3.7, then such
Lender will agree to use reasonable efforts to change the jurisdiction
of its Applicable Lending Office so as to eliminate or reduce any such
additional payment which may thereafter accrue if such change, in the
judgment of such Lender, is not otherwise disadvantageous to such
Lender and in the event Lender is reimbursed for an amount paid by
Borrower pursuant to this Section 3.7, it shall promptly return such
amount to Borrower.
(g) Within thirty (30) days after the date of any payment of
Taxes, Borrower shall furnish to Agent the original or a certified copy
of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower
contained in this Section 3.7 shall survive the termination of the
Commitment and the payment in full of the Notes.
Section 3.8. Compensation Procedure. Any Lender or LC Issuer notifying
Borrower of the incurrence of additional costs under Sections 3.2 through 3.7
shall in such notice to Borrower and Agent set forth in reasonable detail the
basis and amount of its request for compensation. Determinations and
allocations by each Lender or LC Issuer for purposes of Sections 3.2 through
3.7 of the effect of any change in applicable Laws, treaties, rules or
regulations or in the interpretation or administration thereof, any losses or
expenses incurred by reason of the liquidation or reemployment of deposits or
other funds, any taxes, levies, costs and charges imposed, or the effect of
capital maintained on its costs or rate of return of maintaining Loans or its
obligation to make Loans, or on amounts receivable by it in respect of Loans,
and of the amounts required to compensate such Lender under Sections 3.2
through 3.7 , shall be conclusive and binding for all purposes, absent manifest
error. Any request for compensation under this Section 3.8 shall be paid by
Borrower within thirty (30) Business Days of the receipt by Borrower of the
notice described in this Section 3.8.
38
<PAGE> 44
ARTICLE IV - Conditions Precedent to Lending
Section 4.1. Documents to be Delivered. No Lender has any obligation to
make its first Loan or to issue the first Letter of Credit (whether or not
otherwise agreed to by Lender) unless Agent shall have received all of the
following, duly executed and delivered and in form, substance and date
satisfactory to Agent:
(a) This Agreement and any other documents that Lenders are to
execute in connection herewith.
(b) Each Note.
(c) Each Security Document listed in the Security Schedule and
the Subordination Agreement..
(d) Certain certificates of Borrower including:
(i) An "Omnibus Certificate" of the Secretary and of the
Chairman of the Board or President of Borrower, which shall
contain the names and signatures of the officers of Borrower
authorized to execute Loan Documents and which shall certify to
the truth, correctness and completeness of the following
exhibits attached thereto: (1) a copy of resolutions duly
adopted by the Board of Directors of Borrower and in full force
and effect at the time this Agreement is entered into,
authorizing the execution of this Agreement and the other Loan
Documents delivered or to be delivered in connection herewith
and the consummation of the transactions contemplated herein and
therein, (2) a copy of the charter documents of Borrower and all
amendments thereto, certified by the appropriate official of
Borrower's state of organization, and (3) a copy of any bylaws
of Borrower; and
(ii) A "Compliance Certificate" of the Chairman of the
Board or President and the chief financial officer of Borrower,
of even date with such Loan or Letters of Credit , in which such
officers certify to the satisfaction of the conditions set out
in subsections (a), (b), and (c) of Section 4.2.
(e) A certificate (or certificates) of the due formation, valid
existence and good standing of Borrower in its state of organization,
issued by the appropriate authorities of such jurisdiction, and
certificates of Borrower's good standing and due qualification to do
business, issued by appropriate officials in any states in which
Borrower owns property subject to Security Documents.
(f) Documents similar to those specified in subsections (d)(i)
and (e) of this section with respect to Guarantors, and the execution
by them of the Security Documents described in the Security Schedule.
39
<PAGE> 45
(g) A favorable opinion of counsel for Restricted Persons,
substantially in the form set forth in Exhibit G, and favorable
opinions of local counsel in the States of Kentucky and Tennessee in
form and substance acceptable to Agent and its counsel.
(h) The Initial Financial Statements and the Receivables and
Inventory Audit and an updated Appraisal Report from Hunyady Auction
Company, each satisfactory to Agent, in its sole discretion.
(i) Certificates or binders evidencing Restricted Persons'
insurance in effect on the date hereof.
(j) Solvency Certificates of each Restricted Person.
(k) A certificate from the President or chief financial officer
of Borrower certifying that, to the best of his knowledge and in all
material respects: (i) except as set forth on an exhibit to the
certificate, on a net basis there are no take or pay or other
prepayments with respect to the properties covered by the Reports (in
this paragraph called "Covered Properties") (other than those permitted
by the Security Documents) which would require any Restricted Person to
deliver coal mined from the Covered Properties at some future time
without then or thereafter receiving full payment therefor, (ii) none
of the Covered Properties has been sold, and (iii) the Covered
Properties are part of the Mortgaged Properties.
(l) consents of lessors necessary to enable the pledge of the
capital stock of Borrower and Addington Mining to Agent and the
mortgage of all leasehold mineral interests of Borrower and Addington
Mining to Agent (other than leases from Big Sandy).
Section 4.2. Additional Conditions Precedent to First Loan. No Lender
has any obligation to make its first Loan or to issue any Letter of Credit ,
unless the following conditions precedent have been satisfied:
(a) Agent shall have completed its due diligence with respect to
the Restricted Persons and their properties (including, but not limited
to due diligence with respect to capital structure, title to
properties, environmental and labor matters, material contracts, and
actual and contingent liabilities) and shall have received such reports
and data as it shall have deemed necessary in connection therewith, and
such due diligence, reports and data shall be satisfactory to Agent, in
its sole discretion.
(b) Agent and NationsBanc Montgomery Securities, Inc. shall have
received payment of all commitment, underwriting, agency and other fees
required to be paid to any Lender Party pursuant to any Loan Documents
or any commitment agreement heretofore entered into and all fees and
disbursements of Agent's counsel.
40
<PAGE> 46
(c) The Restricted Persons shall have appointed CT Corporation
Systems as its agent for service of process in the State of Texas.
(d) Agent shall have received confirmation (which may be given
by facsimile transmission) that Borrower has received the net proceeds
from the issuance of the Senior Unsecured Notes, in a principal amount
equal to or greater than $200,000,000 (less underwriting discounts,
commissions and offering expenses), and that such proceeds have been
applied as described in the offering memorandum for the Senior
Unsecured Notes.
Section 4.3. Additional Conditions Precedent to All Loans. No Lender
has any obligation to make any Loan (including its first) or to issue any
Letter of Credit (whether or not otherwise agreed to by Lender), unless the
following conditions precedent have been satisfied:
(a) All representations and warranties made by any Restricted
Person in any Loan Document shall be true on and as of the date of such
Loan (except to the extent that the facts upon which such
representations are based have been changed by the extension of credit
hereunder) as if such representations and warranties had been made as
of the date of such Loan or the date of the issuance of such Letter of
Credit.
(b) No Default shall exist at the date of such Loan or the
issuance of such Letter of Credit.
(c) No Material Adverse Change shall have occurred to, and no
event or circumstance shall have occurred that could cause a Material
Adverse Change to, Borrower's Consolidated financial condition or
businesses since the date of this Agreement.
(d) Each Restricted Person shall have performed and complied
with all agreements and conditions required in the Loan Documents and
in the Indenture to be performed or complied with by it on or prior to
the date of such Loan or the issuance of such Letter of Credit.
(e) The making of such Loan or the issuance of such Letter of
Credit shall not be prohibited by any Law and shall not subject any
Lender to any penalty or other onerous condition under or pursuant to
any such Law.
(f) Agent shall have received all documents and instruments
which Agent has then requested, in addition to those described in
Section 4.1 (including opinions of legal counsel for Restricted Persons
and Agent; corporate documents and records; documents evidencing
governmental authorizations, consents, approvals, licenses and
exemptions; and certificates of public officials and of officers and
representatives of Borrower and other Persons), as to (i) the accuracy
and validity of or compliance with all representations, warranties and
covenants made by any Restricted Person in this Agreement and the
other Loan Documents, (ii) the satisfaction of all conditions contained
herein or therein, and
41
<PAGE> 47
(iii) all other matters pertaining hereto and thereto. All such
additional documents and instruments shall be satisfactory to Agent in
form, substance and date.
ARTICLE V - Representations and Warranties
To confirm each Lender Party's understanding concerning Restricted
Persons and Restricted Persons' businesses, properties and obligations and to
induce each Lender Party to enter into this Agreement and to extend credit
hereunder, Borrower represents and warrants to each Lender Party that:
Section 5.1. No Default. No Restricted Person is in default in the
performance of any of the covenants and agreements contained in any Loan
Document. No event has occurred and is continuing which constitutes a Default.
Section 5.2. Organization and Good Standing. Each Restricted Person is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers required to carry on its
business and enter into and carry out the transactions contemplated hereby.
Each Restricted Person is duly qualified, in good standing, and authorized to
do business in all other jurisdictions within the United States wherein the
character of the properties owned or held by it or the nature of the business
transacted by it makes such qualification necessary. Each Restricted Person has
taken all actions and procedures customarily taken in order to enter, for the
purpose of conducting business or owning property, each jurisdiction outside
the United States wherein the character of the properties owned or held by it
or the nature of the business transacted by it makes such actions and
procedures desirable.
Section 5.3. Authorization. Each Restricted Person has duly taken all
action necessary to authorize the execution and delivery by it of the Loan
Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder. Borrower is duly authorized to borrow funds hereunder.
Section 5.4. No Conflicts or Consents. The execution and delivery by
the various Restricted Persons of the Loan Documents to which each is a party,
the performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (a) conflict with any provision of (i) any Law, (ii) the
organizational documents of any Restricted Person, or (iii) any agreement,
judgment, license, order or permit applicable to or binding upon any Restricted
Person, (b) result in the acceleration of any Indebtedness owed by any
Restricted Person, or (c) result in or require the creation of any Lien upon
any assets or properties of any Restricted Person except as expressly
contemplated in the Loan Documents. Except as expressly contemplated in the
Loan Documents no consent, approval, authorization or order of, and no notice
to or filing with, any Tribunal or third party is required in connection with
the execution, delivery or performance by any Restricted Person of any Loan
Document or to consummate any
42
<PAGE> 48
transactions contemplated by the Loan Documents, except consents described in
the Disclosure Schedule and consents which will be obtained within 60 days
after the date hereof.
Section 5.5. Enforceable Obligations. This Agreement is, and the other
Loan Documents when duly executed and delivered will be, legal, valid and
binding obligations of each Restricted Person which is a party hereto or
thereto, enforceable in accordance with their terms except as such enforcement
may be limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors' rights.
Section 5.6. Initial Financial Statements. Borrower has heretofore
delivered to each Lender Party true, correct and complete copies of the Initial
Financial Statements and Initial Financial Projections. The Initial Financial
Statements fairly present Borrower's Consolidated financial position at the
respective dates thereof and the Consolidated results of Borrower's operations
and Borrower's Consolidated cash flows for the respective periods thereof. The
Initial Financial Projections represent a good-faith and reasonable projection
of the Company's expected revenues for the periods set forth therein and are
based on all information with Borrower's knowledge of the time such projections
were prepared. Since the date of the audited Initial Financial Statements and
the Initial Financial Projections no Material Adverse Change has occurred,
except as reflected in the quarterly Initial Financial Statements or in the
Disclosure Schedule. All Initial Financial Statements were prepared in
accordance with GAAP.
Section 5.7. Other Obligations and Restrictions. No Restricted Person
has any outstanding Liabilities of any kind (including contingent obligations,
tax assessments, and unusual forward or long-term commitments) which is, in the
aggregate, material to Borrower or material with respect to Borrower's
Consolidated financial condition and not shown in the Initial Financial
Statements or disclosed in the Disclosure Schedule or a Disclosure Report.
Except as shown in the Initial Financial Statements or disclosed in the
Disclosure Schedule or a Disclosure Report, no Restricted Person is subject to
or restricted by any franchise, contract, deed, charter restriction, or other
instrument or restriction which could cause a Material Adverse Change.
Section 5.8. Full Disclosure.
(a) Appraisals and Reports. No certificate, statement or other
information delivered herewith or heretofore by any Restricted Person to any
Lender Party in connection with the negotiation of this Agreement or in
connection with any transaction contemplated hereby contains any untrue
statement of a material fact or omits to state any material fact known to any
Restricted Person (other than industry-wide risks normally associated with the
types of businesses conducted by Restricted Persons) necessary to make the
statements contained herein or therein not misleading as of the date made or
deemed made. There is no fact known to any Restricted Person (other than
industry-wide risks normally associated with the types of businesses conducted
by Restricted Persons) that has not been disclosed to Agent in writing which
could cause a Material Adverse Change. There are no statements or conclusions
in the Initial Appraisals, the Initial Environmental Report or the Initial
Engineering Report which are based upon or include misleading information or
fail to take into account material information
43
<PAGE> 49
regarding the matters reported therein, it being understood that each such
appraisal and report is necessarily based upon professional opinions, estimates
and projections and that Borrower does not warrant that such opinions,
estimates and projections will ultimately prove to have been accurate. Borrower
has heretofore delivered to Agent true, correct and complete copies of the
Initial Appraisals, the Initial Environmental Report and the Initial
Engineering Report.
(b) Coal Reserves. The mineral interests of each of the Restricted
Persons are legally sufficient in respect of the Coal reserves held by it to
permit it to exhaust the contained Coal on the development and production
schedules in effect or planned by Borrower for each such Restricted Person, in
the ordinary course of operations, for the particular reserve and in compliance
with applicable Law, including but not limited to Mining and Environmental
Laws. No such reserves have been disposed of since the date of such appraisals
and reports.
Section 5.9. Litigation. Except as disclosed in the Initial Financial
Statements or in the Disclosure Schedule: (a) there are no actions, suits or
legal, equitable, arbitrative or administrative proceedings pending, or to the
knowledge of any Restricted Person threatened, against any Restricted Person
before any Tribunal which could cause a Material Adverse Change, and (b) there
are no outstanding judgments, injunctions, writs, rulings or orders by any such
Tribunal against any Restricted Person or any Restricted Person's stockholders,
partners, directors or officers which could cause a Material Adverse Change.
Section 5.10. Labor Disputes and Acts of God. Except as disclosed in
the Disclosure Schedule or a Disclosure Report, neither the business nor the
properties of any Restricted Person has been affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), which could cause a Material Adverse
Change.
Section 5.11. ERISA Plans and Liabilities. All currently existing ERISA
Plans are listed in the Disclosure Schedule or a Disclosure Report. Except as
disclosed in the Initial Financial Statements or in the Disclosure Schedule or
a Disclosure Report, no Termination Event has occurred with respect to any
ERISA Plan and all ERISA Affiliates are in compliance with ERISA in all
material respects. No ERISA Affiliate is required to contribute to, or has any
other absolute or contingent liability in respect of, any "multiemployer plan"
as defined in Section 4001 of ERISA. Except as set forth in the Disclosure
Schedule or a Disclosure Report: (a) no "accumulated funding deficiency" (as
defined in Section 412(a) of the Internal Revenue Code of 1986, as amended)
exists with respect to any ERISA Plan, whether or not waived by the Secretary
of the Treasury or his delegate, and (b) the current value of each ERISA Plan's
benefits does not exceed the current value of such ERISA Plan's assets
available for the payment of such benefits by more than $500,000.
Section 5.12. Mining and Environmental and Other Laws. Except as
disclosed in the Disclosure Schedule or a Disclosure Report: (a) the Restricted
Persons are conducting their businesses in material compliance with all
applicable Laws, including Mining and Environmental Laws, and have and are in
compliance in all material respects with all licenses
44
<PAGE> 50
and permits required under any such Laws; (b) to the best knowledge of
Borrower, none of the operations or properties of any Restricted Person is the
subject of federal, state or local investigation regarding any release of any
Hazardous Materials into the environment or the improper storage or disposal
(including storage or disposal at offsite locations) of any Hazardous
Materials; (c) no Restricted Person (and to the best knowledge of Borrower, no
other Person) has filed or received any notice under any federal, state or
local Law of any actual or potential violation of Mining and Environmental Laws
or any violation of any applicable license or permit within the three years
preceding the date hereof which have subjected or could subject any Restricted
Person to a fine or penalty of $2,000 or more; and (d) no Restricted Person
otherwise has any known contingent liability under any Mining and Environmental
Laws or in connection with the release into the environment, or the storage or
disposal, of any Hazardous Materials.
Section 5.13. Names and Places of Business. No Restricted Person has,
during the preceding five years or since the date of such Restricted Person's
formation, if such formation was less than five years ago, had or been known
by, or used any other trade or fictitious name, except as disclosed in the
Disclosure Schedule. Except as otherwise indicated in the Disclosure Schedule
or a Disclosure Report, the chief executive office and principal place of
business of each Restricted Person are (and for the preceding five years or
since the date of such Restricted Person's formation, if such formation was
less than five years ago) located at the address of Borrower set out in Section
10.3. Except as indicated in the Disclosure Schedule or a Disclosure Report, no
Restricted Person has any other office or place of business.
Section 5.14. Borrower's Subsidiaries. Borrower does not presently have
any direct or indirect Subsidiary or own any stock in any other corporation or
association, except those listed in the Disclosure Schedule or a Disclosure
Report. Neither Borrower nor any Restricted Person is a member of any general
or limited partnership, joint venture or association of any type whatsoever
except those listed in the Disclosure Schedule or a Disclosure Report.
Section 5.15. Title to Properties, Licenses, Permits, Leases and
Contracts. Each Restricted Person has good and marketable title to all material
properties and assets owned by it, free and clear of all Liens other than
Permitted Liens and of all impediments to the use of such properties and assets
in such Restricted Person's business. The Restricted Persons possess all
leasehold interests necessary for the operation of the Mines currently being
operated by the Restricted Persons and each Restricted Person's rights under
the leases, contracts, rights-of-way and easements necessary for the operation
of such Mines are in full force and effect. No Restricted person is in default
under any of the foregoing. Each Restricted Person possesses all licenses,
permits (including but not limited to all permits necessary for the operation
of the Mines in accordance with applicable Mining and Environmental Laws),
franchises, patents, copyrights, trademarks and trade names, and other
intellectual property (or otherwise possesses the right to use such
intellectual property without violation of the rights of any other Person)
which are necessary to carry out its business as presently conducted and as
presently proposed to be conducted hereafter, and no Restricted Person is in
violation in any material respect any such license, permit or franchise or of
the terms under which it possesses such intellectual property or the right to
use such intellectual property.
45
<PAGE> 51
Section 5.16. Government Regulation. Neither Borrower nor any other
Restricted Person owing Obligations is subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the Investment
Company Act of 1940 (as any of the preceding acts have been amended) or any
other Law which regulates the incurring by such Person of Indebtedness,
including Laws relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.
Section 5.17. Insider. No Restricted Person, nor any Person having
"control" (as that term is defined in 12 U.S.C. ss. 375b(9) or in regulations
promulgated pursuant thereto) of any Restricted Person, is a "director" or an
"executive officer" or "principal shareholder" (as those terms are defined in
12 U.S.C. ss. 375b(8) or (9) or in regulations promulgated pursuant thereto) of
any Lender Party, of a bank holding company of which any Lender Party is a
Subsidiary or of any Subsidiary of a bank holding company of which any Lender
Party is a Subsidiary.
ARTICLE VI - Affirmative Covenants of Borrower
To conform with the terms and conditions under which each Lender Party
is willing to have credit outstanding to Borrower, and to induce each Lender
Party to enter into this Agreement and extend credit hereunder, Borrower
warrants, covenants and agrees that until the full and final payment of the
Obligations and the termination of this Agreement, unless Required Lenders have
previously agreed otherwise:
Section 6.1. Payment and Performance. Borrower will pay all amounts due
under the Loan Documents in accordance with the terms thereof and will observe,
perform and comply with every covenant, term and condition expressed or implied
in the Loan Documents. Borrower will cause each other Restricted Person to
observe, perform and comply with every such term, covenant and condition.
Section 6.2. Books, Financial Statements and Reports. Each Restricted
Person will at all times maintain full and accurate books of account and
records. Borrower will maintain and will cause its Subsidiaries to maintain a
standard system of accounting, will maintain its Fiscal Year, and will furnish
the following statements and reports to each Lender Party at Borrower's
expense:
(a) As soon as available, and in any event by the one hundred
twentieth (120th) day after the end of each Fiscal Year, complete
Consolidated and consolidating financial statements of Borrower
together with all notes thereto, prepared in reasonable detail in
accordance with GAAP, together with an unqualified opinion, based on an
audit using generally accepted auditing standards, by Arthur Andersen
LLP, or other independent certified public accountants selected by
Borrower and acceptable to Required Lenders, stating that such
Consolidated and consolidating financial statements have been so
prepared. These financial statements shall contain Consolidated and
consolidating balance sheet as of the end of such Fiscal Year and
Consolidated and consolidating statements of
46
<PAGE> 52
earnings, of cash flows, and of changes in owners' equity for such
Fiscal Year, each setting forth in comparative form the corresponding
figures for the preceding Fiscal Year. Together with such financial
statements, Borrower will furnish a report signed by such accountants
(i) stating that they have read this Agreement, (ii) containing
calculations showing compliance (or non-compliance) at the end of such
Fiscal Year with the requirements of Sections 7.12 through 7.16, and
(iii) further stating that in making their examination and reporting
on the Consolidated and consolidating financial statements described
above they did not conclude that any Default existed at the end of
such Fiscal Year or at the time of their report, or, if they did
conclude that a Default existed, specifying its nature and period of
existence.
(b) As soon as available, and in any event by the forty-fifth
(45th) day after the end of the first three Fiscal Quarters in each
Fiscal Year, Borrower's Consolidated balance sheet as of the end of
such Fiscal Quarter and Consolidated statements of Borrower's earnings
and cash flows for the period from the beginning of the then current
Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail
and prepared in accordance with GAAP, subject to changes resulting from
normal year-end adjustments. In addition Borrower will, together with
each such set of financial statements and each set of financial
statements furnished under subsection (a) of this section, furnish a
certificate in the form of Exhibit D signed by the chief financial
officer of Borrower stating that such financial statements are accurate
and complete (subject to normal year-end adjustments), stating that he
has reviewed the Loan Documents, containing calculations showing
compliance (or non-compliance) at the end of such Fiscal Quarter with
the requirements of Sections 7.12 through 7.16, and stating that no
Default exists at the end of such Fiscal Quarter or at the time of such
certificate or specifying the nature and period of existence of any
such Default.
(c) Within fifteen days after the end of each calendar month, a
Borrowing Base Report.
(d) Within sixty (60) days after the end of each Fiscal Year:
(i) an operating plan and budget for the succeeding Fiscal Year (the
"Operating Plan and Budget"), including reasonable details regarding
the major assumptions forming the basis for such Operating Plan and
Budget and the annual mining plan (including calculations regarding the
reserve positions of the Restricted Persons); and (ii) a forecast of
income and cash flows (the "Forecast" for the succeeding five years
including all reasonable details regarding the major assumptions
forming the basis for such Forecast. The Forecast and the Operating
Plan and Budget shall be certified by the chief financial officer,
treasurer or vice president-finance.
(e) Within thirty (30) days after the end of each Fiscal Year,
an Appraisal Report, in form and substance acceptable to Agent, and
copies of all Coal Supply Contracts of the Restricted Persons, not
theretofore delivered to Agent as well as copies of any amendments
47
<PAGE> 53
or modifications to any Coal Supply Contracts of the Restricted Person
not theretofore delivered to Agent and such other information as Agent
may request.
(f) Promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent by any
Restricted Person to its stockholders and all registration statements,
periodic reports and other statements and schedules filed by any
Restricted Person with any securities exchange, the SEC or any similar
governmental authority.
Section 6.3. Other Information and Inspections. Each Restricted Person
will furnish to each Lender any information which Agent may from time to time
request in writing concerning the Eligible Accounts Receivable (such as face
amounts and dates of invoices and the name and address of each account debtor
obligated on such Eligible Receivable), Eligible Coal Inventory and Eligible
Parts Inventory and any covenant, provision or condition of the Loan Documents
or any matter in connection with Restricted Persons' businesses and operations.
Each Restricted Person will permit representatives appointed by Agent
(including independent accountants, auditors, agents, attorneys, appraisers and
any other Persons) to visit and inspect during normal business hours any of
such Restricted Person's property, including its books of account, other books
and records, and any facilities or other business assets, and to make extra
copies therefrom and photocopies and photographs thereof, and to write down and
record any information such representatives obtain, and each Restricted Person
shall permit Agent or its representatives to investigate and verify the
accuracy of the information furnished to Agent or any Lender in connection with
the Loan Documents and to discuss all such matters with its officers, employees
and representatives; provided that such visits and inspections shall be
conducted in a manner that does not unreasonably interfere such Restricted
Person's business.
Section 6.4. Notice of Material Events and Change of Address. Borrower
will promptly notify each Lender Party in writing, stating that such notice is
being given pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Change,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Indebtedness
including but not limited to the Senior Unsecured Notes, owed by any
Restricted Person or of any default by any Restricted Person under any
indenture, mortgage, agreement, contract or other instrument to which
any of them is a party or by which any of them or any of their
properties is bound, if such acceleration or default could cause a
Material Adverse Change,
(d) the occurrence of any Termination Event,
(e) the filing of any suit or proceeding against any Restricted
Person in which an adverse decision could cause a Material Adverse
Change, and
48
<PAGE> 54
(f) the occurrence of any change or disruption under or with
respect to any Coal Sale Agreement as required under Section 6.18.
Upon the occurrence of any of the foregoing Restricted Persons will take all
necessary or appropriate steps to remedy promptly any such Material Adverse
Change, Default, acceleration, default or Termination Event, to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing. Borrower will also notify
Agent and Agent's counsel in writing at least twenty Business Days prior to the
date that any Restricted Person changes its name or the location of its chief
executive office or principal place of business or the place where it keeps its
books and records concerning the Collateral, furnishing with such notice any
necessary financing statement amendments or requesting Agent and its counsel to
prepare the same.
Section 6.5. Maintenance of Properties. Each Restricted Person will
maintain, preserve, protect, and keep all Collateral and all other property
used or useful in the conduct of its business in good condition and in
compliance with all applicable Laws, and will from time to time make all
repairs, renewals and replacements needed to enable the business and operations
carried on in connection therewith to be promptly and advantageously conducted
at all times. In furtherance of the foregoing, each Restricted Person will:
(a) keep in full force and effect all of the leases and other
contract rights, and all rights of way, easements and privileges
necessary or appropriate for the proper operation of such leases and
all Mines by the proper payment of all rentals, royalties, including
minimum royalty payments, and other sums due thereunder and the proper
performance of all obligations and other acts required thereunder
unless such Restricted Person generates revenues associated with any of
the foregoing by an alternative means;
(b) obtain and comply with each permit, license, authorization
and other governmental approval necessary to recover Coal from any Mine
and observe the requirements thereof in all material respects;
(c) cause each Mine to be operated, maintained, developed and
mined and cause the associated processing plants and other fixed and
operating assets to be operated and maintained, in a workmanlike
manner, as would a prudent coal mine operator, and in accordance with
generally accepted mining practices and all applicable Laws, including
but not limited to applicable Mining and Environmental Laws (except
those being contested in good faith);
(d) cause the Operating Equipment, the processing plants
associated with the Mines and other fixed and operating assets to be
kept in effective operating condition, and all repairs, renewals,
replacements, addition and improvements thereof or thereto, needful to
the production, processing or transportation of Coal from any Mine or
associated properties to be promptly made;
49
<PAGE> 55
(e) pay or cause to be paid when due all expenses incurred in
connection with the maintenance, development, operation and protection
of processing plants associated with the mines and other fixed and
operating assets;
(f) permit Agent, through its employees and agents, to enter the
Mines and the associated property for the purposes of investigating and
inspecting the condition and operation of the processing plants and
other fixed and operating assets, and to do all things necessary and
proper to enable Agent to exercise this right whenever Agent so
desires; provided that such investigation and inspection shall be
conducted in a manner that does not unreasonably interfere such
Restricted Person's business.
Section 6.6. Maintenance of Existence, Qualifications and Permits. Each
Restricted Person will maintain and preserve its existence and its rights and
franchises in full force and effect and will qualify to do business in all
states or jurisdictions where required by applicable Law, except where the
failure so to qualify will not cause a Material Adverse Change. Each Restricted
Person will maintain and preserve all of its permits including, without
limitation, mining, air emission and Interstate Commerce Commission permits, as
applicable, which it must obtain for the proper conduct of its business, as
well as maintain and preserve such bonds or other surety required pursuant to
said permits. In connection with the sale of its Mining Technologies Division,
Borrower will retain the right to use the patents currently held in its Mining
Technologies Division in connection with Mines currently owned or operated by
any Restricted Person.
Section 6.7. Payment of Trade Liabilities, Taxes, etc. Each Restricted
Person will (a) timely file all required tax returns; (b) timely pay all taxes,
assessments, and other governmental charges or levies imposed upon it or upon
its income, profits or property; (c) within ninety (90) days after the same
becomes due pay all Liabilities owed by it on ordinary trade terms to vendors,
suppliers and other Persons providing goods and services used by it in the
ordinary course of its business; (d) pay and discharge when due all other
Liabilities now or hereafter owed by it; and (e) maintain appropriate accruals
and reserves for all of the foregoing in accordance with GAAP. Each Restricted
Person may, however, delay paying or discharging any of the foregoing so long
as it is in good faith contesting the validity thereof by appropriate
proceedings (promptly instituted and diligently concluded) and in the case of
matters described in clause (b) of this section has set aside on its books
adequate reserves therefor.
Section 6.8. Insurance. Each Restricted Person will keep or cause to
be kept insured by financially sound and reputable insurers its property in
accordance with the Insurance Schedule.
Section 6.9. Performance on Borrower's Behalf. If any Restricted Person
fails to pay any taxes, insurance premiums, expenses, attorneys' fees or other
amounts it is required to pay under any Loan Document, Agent may pay the same.
Borrower shall immediately reimburse Agent for any such payments and each
amount paid by Agent shall constitute an Obligation owed hereunder which is due
and payable on the date such amount is paid by Agent.
50
<PAGE> 56
Section 6.10. Interest. Borrower hereby promises to each Lender Party
to pay interest at the Default Rate on all Obligations (including Obligations
to pay fees or to reimburse or indemnify any Lender Party) which Borrower has
in this Agreement promised to pay to such Lender Party and which are not paid
when due. Such interest shall accrue from the date such Obligations become due
until they are paid.
Section 6.11. Compliance with Agreements and Law. Each Restricted
Person will perform all material obligations it is required to perform under
the terms of each indenture, mortgage, deed of trust, security agreement,
lease, franchise, agreement, contract or other instrument or obligation to
which it is a party or by which it or any of its properties is bound. Each
Restricted Person will conduct its business and affairs in compliance with all
Laws applicable thereto, including Mining and Environmental Laws.
Section 6.12. Evidence of Compliance. Each Restricted Person will
furnish to each Lender Party at such Restricted Person's or Borrower's expense
all evidence which Agent from time to time reasonably requests in writing as to
the accuracy and validity of or compliance with all representations, warranties
and covenants made by any Restricted Person in the Loan Documents, the
satisfaction of all conditions contained therein, and all other matters
pertaining thereto.
Section 6.13. Solvency. Upon giving effect to the issuance of the
Notes, the execution of the Loan Documents by Borrower and the consummation of
the transactions contemplated hereby and the making of each Advance, (a)
Borrower will be solvent (as such term is used in applicable bankruptcy,
liquidation, receivership, insolvency or similar Laws), and (b) each other
Restricted Person will be solvent (as such term is used in applicable
bankruptcy, liquidation, receivership, insolvency or similar Laws).
Section 6.14. Agreement to Deliver Security Documents. Each Restricted
Person agrees to deliver, to further secure the Obligations whenever requested
by Agent in its sole and absolute discretion, deeds of trust, mortgages,
chattel mortgages, security agreements, financing statements and other Security
Documents in form and substance satisfactory to Agent for the purpose of
granting, confirming, and perfecting first and prior liens or security
interests in any real or personal property now owned or hereafter acquired by
any of the Restricted Persons, except leasehold interests which would be
rendered void by the granting of a Lien therein and the stock of Ikerd-Bandy.
Borrower also agrees to deliver, whenever requested by Agent in its sole and
absolute discretion, favorable title opinions from legal counsel acceptable to
Agent with respect to any leasehold or fee interests of Borrower that are
material to the Mines being operated by Borrower at the time in question and
which are designated by Agent, based upon abstract or record examinations to
dates acceptable to Agent and (a) stating that such Restricted Person has good
and defensible title to such properties and interests, free and clear of all
Liens that are not Permitted Liens, (b) confirming that, except with respect to
leasehold interests that would be rendered void by the granting of a Lien
therein, such properties and interests are subject to Security Documents
securing the Obligations that constitute and create legal, valid and
51
<PAGE> 57
duly perfected first deed of trust or mortgage liens in such properties and the
proceeds thereof, and (c) covering such other matters as Agent may reasonably
request.
Section 6.15. Perfection and Protection of Security Interests and
Liens. Borrower will from time to time deliver to Agent any financing
statements, continuation statements, extension agreements and other documents,
properly completed and executed (and acknowledged when required) by the
Restricted Persons in form and substance satisfactory to Agent, which Agent
requests for the purpose of perfecting, confirming, or protecting any Liens or
other rights in Collateral securing any Obligations.
Section 6.16. Bank Accounts; Offset. To secure the repayment of the
Obligations Borrower hereby grants to each Lender Party a security interest, a
lien, and a right of offset, each of which shall be in addition to all other
interests, liens, and rights of any Lender Party at common law, under the Loan
Documents, or otherwise, and each of which shall be upon and against (a) any
and all moneys, securities or other property (and the proceeds therefrom) of
Borrower now or hereafter held or received by or in transit to any Lender Party
from or for the account of Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, (b) any and all deposits (general or
special, time or demand, provisional or final) of Borrower with any Lender
Party, and (c) any other credits and claims of Borrower at any time existing
against any Lender Party, including claims under certificates of deposit. At
any time and from time to time after the occurrence of any Default, each Lender
Party is hereby authorized to foreclose upon, or to offset against the
Obligations then due and payable (in either case without notice to Borrower),
any and all items hereinabove referred to. The remedies of foreclosure and
offset are separate and cumulative, and either may be exercised independently
of the other without regard to procedures or restrictions applicable to the
other.
Section 6.17. Subsidiary Guaranties. Each Restricted Person (other
than Borrower and Bowie), whether existing on the date hereof or formed or
acquired after the date hereof, shall execute and deliver to Agent an
unconditional Guaranty of the Obligations substantially in the form of Exhibit
G and a supplement to the Subordination Agreement by which such Restricted
Person shall become a party thereto as a "Subsidiary", (ii) waive and agree not
in any manner whatsoever to claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
Borrower or any other Restricted Person as a result of any payment by such
Subsidiary under such Guaranty, and (iii) deliver to Agent an opinion of
counsel to the effect that (A) such Guaranty has been duly executed and
authorized and (B) such Guaranty constitutes a valid, binding and enforceable
obligation of such Subsidiary, except insofar as enforcement thereof may be
limited by bankruptcy, insolvency or similar Laws (including, without
limitation, all Laws relating to fraudulent transfers) and except insofar as
enforcement thereof is subject to general principles of equity.
Section 6.18. Coal Sales Agreements. Each of the Restricted Persons
shall at all times comply fully and timely with all of the terms and conditions
of its Coal Sales Agreements, the nonperformance with which may have a material
and adverse effect upon its properties or business (including maintaining the
ownership or availability of adequate reserves); but in any
52
<PAGE> 58
event it shall take all necessary action to prevent it from being in default
thereunder. Each Restricted Person shall further perform any and all actions
necessary to maintain all of its Coal Sale Agreements in full force and effect.
Borrower shall promptly notify Agent of any new Coal Sale Agreement entered
into by any Restricted Person and of any material suspension of shipments,
default or event of force majeure under any existing Coal Sales Agreement by or
respecting any party thereto or of any condition or event which, with notice or
lapse of time or both, would constitute an event of default or event of force
majeure, such notices to be in detail specifying the nature of the act or event
of default, or event of force majeure, the estimated period of existence
thereof and the actions, if any, which the Restricted Persons have taken or
propose to take with respect thereto.
Section 6.19. Exploration and Reserves. All primary and basic
exploration data and information pertaining to the Mines will be preserved
where reasonable in a sound and careful manner for future use and review. All
such information together with all other reserve reports and maps, analysis,
engineering and operating data and similar information shall be available to
all reasonable times for inspection and review by authorized representatives of
Agent.
Section 6.20. Coors Letter of Credit. Borrower shall request and
maintain in effect at all times, a Letter of Credit issued by LC Issuer for the
benefit of Coors Energy Company (in this section called "Coors") having a face
amount greater than the Liabilities owing by Bowie to Coors during each Fiscal
Year and in a form acceptable to Agent.
ARTICLE VII - Negative Covenants of Borrower
To conform with the terms and conditions under which each Lender Party
is willing to have credit outstanding to Borrower, and to induce each Lender
Party to enter into this Agreement and make the Loans, Borrower warrants,
covenants and agrees that until the full and final payment of the Obligations
and the termination of this Agreement, unless Required Lenders have previously
agreed otherwise:
Section 7.1. Indebtedness. No Restricted Person will in any manner owe
or be liable for Indebtedness except:
(a) the Obligations.
(b) unsecured Indebtedness among Borrower and the Restricted
Persons that have complied with the terms of Section 6.17.
(c) Indebtedness outstanding under the instruments and
agreements described on the Disclosure Schedule on the date hereof, and
any renewals or extensions thereof provided that the amount of such
Liabilities is not increased nor the terms thereof changed in any
manner which is less favorable to such Restricted Person than the
original terms of such Liabilities.
53
<PAGE> 59
(d) obligations arising with respect to operating leases entered
into in the ordinary course of such Restricted Person's business in
arm's length transactions at competitive market rates under competitive
terms and conditions in all respects.
(e) unsecured Liabilities with respect to surety bonds covering
reclamation obligations of the Restricted Persons.
(f) unsecured Liabilities owing to Sellers of Ikerd-Bandy in an
amount not to exceed $7,000,000 and on terms acceptable to Agent in its
sole discretion.
(g) Indebtedness evidenced by the Senior Unsecured Notes in a
principal amount not to exceed $250,000,000.
(h) Indebtedness of Bowie to Borrower evidenced by promissory
notes which have been pledged to Agent.
(i) Capital Lease Obligations in an aggregate amount not to
exceed $10,000,000.
(j) unsecured Indebtedness incurred for the purchase of paying
insurance premiums for the Restricted Persons, provided that such
indebtedness has a maturity date not later than eighteen months after
the date of incurrence thereof and in an aggregate principal amount
which does not exceed $10,000,000.
(k) unsecured Indebtedness incurred in connection with a
Permitted Acquisition; provided that the aggregate principal amount of
such Indebtedness does not exceed fifteen percent (15%) of the
Acquisition Purchase Price for such Permitted Acquisition.
(l) unsecured miscellaneous items of Indebtedness not described
in subsections (a) through (e) above which do not in the aggregate
(taking into account all such Indebtedness of all Restricted Persons)
exceed an amount equal to $1,000,000, at any one time outstanding.
Section 7.2. Limitation on Liens. No Restricted Person will create,
assume or permit to exist any Lien upon any of the properties or assets which
it now owns or hereafter acquires, except, to the extent not otherwise
forbidden by the Security Documents the following ("Permitted Liens"):
(a) Liens which secure Obligations only.
(b) statutory Liens for taxes, statutory mechanics' and
materialmen's Liens incurred in the ordinary course of business, and
other similar Liens incurred in the ordinary course of business,
provided such Liens do not secure Indebtedness and secure only
obligations which are not delinquent or which are being contested as
provided in Section 6.7 and which do not exceed $500,000 in the
aggregate.
54
<PAGE> 60
(c) as to property which is Collateral, any Liens expressly
permitted to encumber such Collateral under any Security Document
covering such Collateral.
(d) purchase money Liens that secure indebtedness permitted
under Section 7.1.
(e) Liens on assets of Bowie securing the Indebtedness described
in Section 7.1(h) so long as such Liens have been collaterally assigned
to Agent.
(f) Liens securing Capital Lease Obligations permitted by
Section 7.1(i), in each case which cover only the asset acquired under
the particular capital lease and which secure only the Capital Lease
Obligation incurred with respect to such asset.
Section 7.3. INTENTIONALLY OMITTED.
Section 7.4. Limitation on Mergers, Issuances of Securities. Except as
expressly provided in this subsection no Restricted Person will merge or
consolidate with or into any other business entity. Any Subsidiary of Borrower
may, however, be merged into or consolidated with (a) another Subsidiary of
Borrower that has complied with the terms of Section 6.17, or (b) Borrower, so
long as Borrower is the surviving business entity. Borrower will not issue any
securities other than shares of its common stock and any options or warrants
giving the holders thereof only the right to acquire such shares. No Subsidiary
of Borrower will issue any additional shares of its Capital Stock or other
securities or any options, warrants or other rights to acquire such additional
shares or other securities except (x) to Borrower and (y) for the purposes of
implementing employee stock options plans, but only to the extent not otherwise
forbidden under the terms hereof.
Section 7.5. Limitation on Sales of Property. No Restricted Person will
sell, transfer, lease, exchange, alienate or dispose of any of its material
assets or properties or any material interest therein except, to the extent not
otherwise forbidden under the Security Documents:
(a) equipment which is worthless or obsolete or which is
replaced by equipment of equal suitability and value.
(b) inventory (including coal and related products and mining
equipment) which is sold in the ordinary course of business on ordinary
trade terms.
(c) other property which is sold for fair consideration not in
the aggregate in excess of $3,000,000 in any Fiscal Year.
(d) assets described in the Schedules to the Security Agreement
of even date herewith from Borrower in favor of Agent.
Neither Borrower nor any of Borrower's Subsidiaries will sell, transfer or
otherwise dispose of Capital Stock of any of Borrower's Subsidiaries except
that any Subsidiary of Borrower may sell
55
<PAGE> 61
or issue its own Capital Stock to the extent not otherwise prohibited
hereunder. No Restricted Person will discount, sell, pledge or assign any notes
payable to it, accounts receivable or future income except to the extent
expressly permitted under the Loan Documents.
Section 7.6. Limitation on Distributions and Redemptions and on Senior
Unsecured Notes. No Restricted Person will
(i) declare or pay any dividends on, or make any other
distribution in respect of any interest in it, nor will any
Restricted Person directly or indirectly make any capital
contribution to or purchase, redeem, acquire or retire any
securities in any Restricted Person (whether such interests are
now or hereafter issued, outstanding or created);
(ii) cause or permit any reduction or retirement of the
capital stock of any Restricted Person; or
(iii) purchase, repurchase, defease or make any
prepayments on the Senior Unsecured Notes.
The foregoing provisions of this Section 7.6 notwithstanding;
(i) dividends, distributions, contributions, purchases,
redemptions, acquisitions, retirements or reductions may be made
by any Subsidiary of Borrower with respect to any shares of its
capital stock owned by Borrower and in the case of Bowie, when
the foregoing are made to Borrower, pro rata distributions to
Bowie.
(ii) Borrower or Addington Enterprises, Inc. may
distribute the net proceeds for the sale of the assets listed on
the Schedules to the Security Agreement of even date herewith
from Borrower in favor of Agent.
(iii) Borrower may declare and pay cash dividends if at
the time such dividend is made, and immediately after such
dividend is made, (A) the Net Debt to EBITDA Ratio is less than
or equal to 3.0 to 1.0; (b) Borrower's Consolidated Net Worth is
a positive number and (C) no Event of Default shall have
occurred and be continuing; and
(iv) Borrower may declare and pay dividends in its
common stock.
Section 7.7. Limitation on Investments and New Businesses. No
Restricted Person will (a) make any expenditure or commitment or incur any
obligation or enter into or engage in any transaction except in the ordinary
course of business or except as otherwise expressly permitted hereunder, (b)
engage directly or indirectly in any business or conduct any operations other
than
56
<PAGE> 62
the coal business or the manufacture of mining equipment, (c) make any
acquisitions of or other Investments in any Person or properties except (i)
Investments in Cash Equivalents; (ii) Investments in any Subsidiary of Borrower
that is a Wholly-owned Subsidiary at the time such Investment is made; (iii)
Investments in Bowie in an aggregate amount not to exceed $60,000,000; and (iv)
acquisitions of all (but not less than all) of the Capital Stock of Persons
involved in the coal business or the manufacture of mining equipment or
properties used in the coal business or the manufacture of mining equipment,
provided that the Acquisition Purchase Price for any such acquisition does not
exceed $65,000,000, and provided further that, in each case described in this
clause (c) no Default or Event of Default exists at the time such Investment or
acquisition is made or will occur as a result thereof.
Section 7.8. Limitation on Credit Extensions. Except for Investments
permitted by Section 7.7, no Restricted Person will extend credit, make
advances or make loans other than (a) normal and prudent extensions of credit
to customers buying goods and services in the ordinary course of business,
which extensions shall not be for longer periods nor on terms more favorable
than those extended by similar businesses operated in a normal and prudent
manner and (b) loans to Restricted Persons that have complied with the terms of
Section 6.17, so long as no Default or Event of Default exists at the time such
loan is made.
Section 7.9. Transactions with Affiliates. No Restricted Person will
engage in any material transaction with any of its Affiliates on terms which
are less favorable to it than those which would have been obtainable at the
time in arm's-length dealing with Persons other than such Affiliates, provided
that such restriction shall not apply to transactions among Borrower and the
Guarantors.
Section 7.10. Certain Contracts; Amendments; Multiemployer ERISA Plans.
Except as expressly provided for in the Loan Documents, no Restricted Person
will, directly or indirectly, enter into, create, or otherwise allow to exist
any contract or other consensual restriction on the ability of any Subsidiary
of Borrower to: (a) pay dividends or make other distributions to Borrower, (b)
to redeem equity interests held in it by Borrower, (c) to repay loans and other
indebtedness owing by it to Borrower, or (d) to transfer any of its assets to
Borrower. No Restricted Person will enter into any "take-or-pay" contract or
other contract or arrangement for the purchase of goods or services which
obligates it to pay for such goods or service regardless of whether they are
delivered or furnished to it. No Restricted Person will amend or permit any
amendment to any other contract or lease which releases, qualifies, limits,
makes contingent or otherwise detrimentally affects the rights and benefits of
Agent or any Lender under or acquired pursuant to any Security Documents. No
ERISA Affiliate will incur any obligation to contribute to any "multiemployer
plan" as defined in Section 4001 of ERISA.
Section 7.11. Fiscal Year. No Restricted Person will change its fiscal
year.
Section 7.12. Current Ratio. The ratio of Borrower's Consolidated
current assets to Borrower's Consolidated current liabilities will never be
less than 1.25 to 1.0. For purposes of this section (a) Borrower's Consolidated
current liabilities will be calculated without including
57
<PAGE> 63
any payments of principal on the Notes which are required to be repaid within
one year from the time of calculation and (b) all LC Obligations shall be
included as current liabilities, regardless of whether or not contingent (but
without duplication).
Section 7.13. Net Debt to EBITDA Ratio. The Net Debt to EBITDA Ratio
shall not be greater than (a) 5.0 to 1.0 as of the end of any Fiscal Quarter
ending on or before December 31, 1997; (b) 4.5 to 1.0 as of the end of any
Fiscal Quarter ending on or before December 31, 1998, (c) 3.5 to 1.0 as of the
end of any Fiscal Quarter ending on or before December 31, 1999; and (d) 3.0 to
1.0 as of the end of any Fiscal Quarter ending thereafter.
Section 7.14. Net Worth. Borrower's Consolidated Net Worth will never
be less than negative $33,000,000 plus the sum of (a) if Borrower's
Consolidated Net Worth is a positive number, fifty percent (50%) of Borrower's
Net Income, or if Borrower's Net Worth is a negative number, seventy-five
percent (75%) of Borrower's Net Income; and (b) one hundred percent (100%) of
the proceeds of the issuance by Borrower of any equity.
Section 7.15. Senior Debt Leverage. The ratio of (a) the unpaid
principal balance of the Loans as of the end of any Fiscal Quarter, to (b)
Borrower's EBITDA for such Fiscal Quarter shall not be great than 2.5 to 1.0.
Section 7.16. Fixed Charge Ratio. At the end of any Fiscal Quarter, the
ratio of (a) Borrower's Adjusted EBITDAR (as defined below) for the Four
Quarter Period then ended, to (b) Borrower's Fixed Charges (as defined below)
for such Four Quarter Period will not be less than (i) 1.25 to 1.0 as of the
end of any Fiscal Quarter ending on or before September 30, 1999 and (ii) 1.50
to 1.0 as of the end of any Fiscal Quarter ending thereafter. For purposes of
this section, "ADJUSTED EBITDAR" means for any period, Borrower's EBITDA for
such period (i) plus rent and operating lease payments made by Borrower during
such period and (ii) minus (A) maintenance capital expenditures in an amount
not less than $2,500,000 and (B) cash expended for payment of taxes. "FIXED
CHARGES" means for any period, the sum of (i) principal and interest payments
on Borrower's Consolidated Indebtedness (including payments under capital
leases) due during such period (whether or not paid), (ii) payments under
operating leases due during such period (whether or not paid), and (iii)
dividends and distributions made by Borrower during such period (if for any
reason this Agreement is modified to permit any such dividends or
distributions).
ARTICLE VIII - Events of Default and Remedies
Section 8.1. Events of Default. Each of the following events
constitutes an Event of Default under this Agreement:
(a) Any Restricted Person or any Guarantor fails to pay the
principal component of any Obligation when due and payable, whether at
a date for the payment of a fixed
58
<PAGE> 64
installment or as a contingent or other payment becomes due and payable
or as a result of acceleration or otherwise;
(b) Any Restricted Person or any Guarantor fails to pay any
Obligation (other than the Obligations in clause (a) above) when due
and payable, whether at a date for the payment of a fixed installment
or as a contingent or other payment becomes due and payable or as a
result of acceleration or otherwise, within three Business Days after
the same becomes due;
(c) Any "default" or "event of default" occurs under any Loan
Document which defines either such term, and the same is not remedied
within the applicable period of grace (if any) provided in such Loan
Document;
(d) Any Restricted Person fails to duly observe, perform or
comply with any covenant, agreement or provision of Section 6.4 or
Article VII;
(e) Any Restricted Person fails (other than as referred to in
subsections (a), (b), (c) or (d) above) to duly observe, perform or
comply with any covenant, agreement, condition or provision of any Loan
Document, and such failure remains unremedied for a period of thirty
(30) days;
(f) Any representation or warranty previously, presently or
hereafter made in writing by or on behalf of any Restricted Person in
connection with any Loan Document shall prove to have been false or
incorrect in any material respect on any date on or as of which made,
or any Loan Document at any time ceases to be valid, binding and
enforceable as warranted in Section 5.5 for any reason other than its
release or subordination by Agent;
(g) Any Restricted Person fails to duly observe, perform or
comply with any agreement with any Person or any term or condition of
any instrument, if such agreement or instrument is materially
significant to Borrower or to Borrower and its Subsidiaries on a
Consolidated basis, and such failure is not remedied within the
applicable period of grace (if any) provided in such agreement or
instrument;
(h) Any Restricted Person (i) fails to pay any portion, when
such portion is due, of any of its Indebtedness owing under or in
respect of the Senior Unsecured Notes or any other Indebtedness in
excess of $2,000,000, or (ii) breaches or defaults in the performance
of any agreement or instrument by which any such Indebtedness is
issued, evidenced, governed, or secured, including but not limited to
the Indenture, and any such failure, breach or default continues beyond
any applicable period of grace provided therefor;
(i) Either (i) any "accumulated funding deficiency" (as defined
in Section 412(a) of the Internal Revenue Code of 1986, as amended) in
excess of $2,000,000 exists with respect to any ERISA Plan, whether or
not waived by the Secretary of the Treasury or his
59
<PAGE> 65
delegate, or (ii) any Termination Event occurs with respect to any
ERISA Plan and the then current value of such ERISA Plan's benefit
liabilities exceeds the then current value of such ERISA Plan's assets
available for the payment of such benefit liabilities by more than
$2,000,000 (or in the case of a Termination Event involving the
withdrawal of a substantial employer, the withdrawing employer's
proportionate share of such excess exceeds such amount);
(j) Any Restricted Person, any Guarantor, Addington
Enterprises, Inc. or Larry Addington;
(i) suffers the entry against it of a judgment, decree
or order for relief by a Tribunal of competent jurisdiction in
an involuntary proceeding commenced under any applicable
bankruptcy, insolvency or other similar Law of any jurisdiction
now or hereafter in effect, including the federal Bankruptcy
Code, as from time to time amended, or has any such proceeding
commenced against it which remains undismissed for a period of
thirty days; or
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar Law now or hereafter in
effect, including the federal Bankruptcy Code, as from time to
time amended; or applies for or consents to the entry of an
order for relief in an involuntary case under any such Law; or
makes a general assignment for the benefit of creditors; or
fails generally to pay (or admits in writing its inability to
pay) its debts as such debts become due; or takes corporate or
other action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by
a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of all or a substantial part of
its assets or of any part of the Collateral in a proceeding
brought against or initiated by it, and such appointment or
taking possession is neither made ineffective nor discharged
within thirty days after the making thereof, or such appointment
or taking possession is at any time consented to, requested by,
or acquiesced to by it;
(k) Any Restricted Person:
(i) suffers the entry against it of a final judgment for
the payment of money in excess of $5,000,000 (not covered by
insurance satisfactory to Agent in its discretion), unless the
same is discharged within thirty days after the date of entry
thereof or an appeal or appropriate proceeding for review
thereof is taken within such period and a stay of execution
pending such appeal is obtained; or
(ii) suffers a writ or warrant of attachment or any
similar process to be issued by any Tribunal against all or any
substantial part of its assets or any part of the Collateral,
and such writ or warrant of attachment or any similar process is
not
60
<PAGE> 66
stayed or released within thirty days after the entry or levy
thereof or after any stay is vacated or set aside;
(l) Any Change of Control occurs;
(m) Any Material Adverse Change occurs;
(n) Any Loan Document or any Lien created thereby shall be
invalid, or any Person shall have asserted that such Loan Document or
Lien is invalid;
(o) Larry Addington and members of his immediate family shall
cease to own at least twenty-five percent (25%) of the outstanding
Voting Stock of Borrower; and
(p) An Event of Default shall occur under the Indenture.
Upon the occurrence of an Event of Default described in subsection (j)(i),
(j)(ii) or (j)(iii) of this section with respect to Borrower, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Restricted Person who at any time
ratifies or approves this Agreement. Upon any such acceleration, any obligation
of any Lender to make any further Loans shall be permanently terminated. During
the continuance of any other Event of Default, Agent at any time and from time
to time may (and upon written instructions from Required Lenders, Agent shall),
without notice to Borrower or any other Restricted Person, do either or both of
the following: (1) terminate any obligation of Lenders to make Loans hereunder,
and (2) declare any or all of the Obligations immediately due and payable, and
all such Obligations shall thereupon be immediately due and payable, without
demand, presentment, notice of demand or of dishonor and nonpayment, protest,
notice of protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Restricted Person who at any time
ratifies or approves this Agreement.
Section 8.2. Remedies. If any Default shall occur and be continuing,
each Lender Party may protect and enforce its rights under the Loan Documents
by any appropriate proceedings, including proceedings for specific performance
of any covenant or agreement contained in any Loan Document, and each Lender
Party may enforce the payment of any Obligations due it or enforce any other
legal or equitable right which it may have. All rights, remedies and powers
conferred upon Lender Parties under the Loan Documents shall be deemed
cumulative and not exclusive of any other rights, remedies or powers available
under the Loan Documents or at Law or in equity.
61
<PAGE> 67
ARTICLE IX - Agent
Section 9.1. Appointment, Powers, and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent under this
Agreement and the other Loan Documents with such powers and discretion as are
specifically delegated to the Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. The Agent (which term as used in this sentence and in
Section 9.5 and the first sentence of Section 9.6 hereof shall include its
affiliates and its own and its affiliates' officers, directors, employees, and
agents): (a) shall not have any duties or responsibilities except those
expressly set forth in this Agreement and shall not be a trustee or fiduciary
for any Lender; (b) shall not be responsible to the Lenders for any recital,
statement, representation, or warranty (whether written or oral) made in or in
connection with any Loan Document or any certificate or other document referred
to or provided for in, or received by any of them under, any Loan Document, or
for the value, validity, effectiveness, genuineness, enforceability, or
sufficiency of any Loan Document, or any other document referred to or provided
for therein or for any failure by any Loan Party or any other Person to perform
any of its obligations thereunder; (c) shall not be responsible for or have any
duty to ascertain, inquire into, or verify the performance or observance of any
covenants or agreements by any Loan Party or the satisfaction of any condition
or to inspect the property (including the books and records) of any Loan Party
or any of its Subsidiaries or affiliates; (d) shall not be required to initiate
or conduct any litigation or collection proceedings under any Loan Document;
and (e) shall not be responsible for any action taken or omitted to be taken by
it under or in connection with any Loan Document, except for its own gross
negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.
Section 9.2. Reliance by Agent. The Agent shall be entitled to rely
upon any certification, notice, instrument, writing, or other communication
(including, without limitation, any thereof by telephone or telecopy) believed
by it to be genuine and correct and to have been signed, sent or made by or on
behalf of the proper Person or Persons, and upon advice and statements of legal
counsel (including counsel for any Loan Party), independent accountants, and
other experts selected by the Agent. The Agent may deem and treat the payee of
any Note as the holder thereof for all purposes hereof unless and until the
Agent receives and accepts an Assignment and Acceptance executed in accordance
with Section 10.6(c) hereof. As to any matters not expressly provided for by
this Agreement, the Agent shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding on
all of the Lenders; provided, however, that the Agent shall not be required to
take any action that exposes the Agent to personal liability or that is
contrary to any Loan Document or applicable Law or unless it shall first be
indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking any such action.
62
<PAGE> 68
Section 9.3. Defaults. The Agent shall not be deemed to have knowledge
or notice of the occurrence of a Default or Event of Default unless the Agent
has received written notice from a Lender or the Borrower specifying such
Default or Event of Default and stating that such notice is a "Notice of
Default". In the event that the Agent receives such a notice of the occurrence
of a Default or Event of Default, the Agent shall give prompt notice thereof to
the Lenders. The Agent shall (subject to Section 9.2 hereof) take such action
with respect to such Default or Event of Default as shall reasonably be
directed by the Required Lenders, provided that, unless and until the Agent
shall have received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interest of
the Lenders.
Section 9.4. Rights as Lender. With respect to its Percentage Share of
the Commitment and the Loans made by it, NationsBank (and any successor acting
as Agent) in its capacity as a Lender hereunder shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it
were not acting as the Agent, and the term "Lender" or "Lenders" shall, unless
the context otherwise indicates, include the Agent in its individual capacity.
NationsBank (and any successor acting as Agent) and its affiliates may (without
having to account therefor to any Lender) accept deposits from, lend money to,
make investments in, provide services to, and generally engage in any kind of
lending, trust, or other business with any Loan Party or any of its
Subsidiaries or affiliates as if it were not acting as Agent, and NationsBank
(and any successor acting as Agent) and its affiliates may accept fees and
other consideration from any Loan Party or any of its Subsidiaries or
affiliates for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
Section 9.5. Indemnification. The Lenders agree to indemnify the Agent
(to the extent not reimbursed under Section 10.4 hereof, but without limiting
the obligations of the Borrower under such Section) ratably in accordance with
their respective Commitments, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including
attorneys' fees), or disbursements of any kind and nature whatsoever that may
be imposed on, incurred by or asserted against the Agent (including by any
Lender) in any way relating to or arising out of any Loan Document or the
transactions contemplated thereby or any action taken or omitted by the Agent
under any Loan Document (INCLUDING ANY OF THE FOREGOING ARISING FROM THE
NEGLIGENCE OF AGENT); provided that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Person to be indemnified. Without limitation of the
foregoing, each Lender agrees to reimburse the Agent promptly upon demand for
its ratable share of any costs or expenses payable by the Borrower under
Section 10.4, to the extent that the Agent is not promptly reimbursed for such
costs and expenses by the Borrower. The agreements contained in this Section
shall survive payment in full of the Loans and all other amounts payable under
this Agreement.
Section 9.6. Non-Reliance on Agent and Other Lenders. Each Lender
agrees that it has, independently and without reliance on the Agent or any
other Lender, and based on such
63
<PAGE> 69
documents and information as it has deemed appropriate, made its own credit
analysis of the Loan Parties and their Subsidiaries and decision to enter into
this Agreement and that it will, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under the Loan Documents. Except for
notices, reports, and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition, or business of any
Loan Party or any of its Subsidiaries or affiliates that may come into the
possession of the Agent or any of its affiliates.
Section 9.7. Resignation of Agent. The Agent may resign at any time by
giving notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Lenders and shall have accepted such appointment within thirty (30) days after
the retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent which shall be a
commercial bank organized under the Laws of the United States of America having
combined capital and surplus of at least $100,000,000. Upon the acceptance of
any appointment as Agent hereunder by a successor, such successor shall
thereupon succeed to and become vested with all the rights, powers, discretion,
privileges, and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article IX shall
continue in effect for its benefit in respect of any actions taken or omitted
to be taken by it while it was acting as Agent.
Section 9.8. Sharing of Set-Offs and Other Payments. Each Lender Party
agrees that if it shall, whether through the exercise of rights under Security
Documents or rights of banker's lien, set off, or counterclaim against Borrower
or otherwise, obtain payment of a portion of the aggregate Obligations owed to
it which, taking into account all distributions made by Agent under Section
3.1, causes such Lender Party to have received more than it would have received
had such payment been received by Agent and distributed pursuant to Section
3.1, then (a) it shall be deemed to have simultaneously purchased and shall be
obligated to purchase interests in the Obligations as necessary to cause all
Lender Parties to share all payments as provided for in Section 3.1, and (b)
such other adjustments shall be made from time to time as shall be equitable to
ensure that Agent and all Lenders share all payments of Obligations as provided
in Section 3.1; provided, however, that nothing herein contained shall in any
way affect the right of any Lender Party to obtain payment (whether by exercise
of rights of banker's lien, set-off or counterclaim or otherwise) of
indebtedness other than the Obligations. Borrower expressly consents to the
foregoing arrangements and agrees that any holder of any such interest or other
participation in the Obligations, whether or not acquired pursuant to the
foregoing arrangements, may to the fullest extent permitted by Law exercise any
and all rights of banker's lien, set-off, or counterclaim as fully as if such
holder were a holder of the Obligations in the amount of such interest or other
participation. If all or any part of any funds transferred pursuant to this
section is thereafter recovered from the seller under this section which
received the same, the purchase
64
<PAGE> 70
provided for in this section shall be deemed to have been rescinded to the
extent of such recovery, together with interest, if any, if interest is
required pursuant to Tribunal order to be paid on account of the possession of
such funds prior to such recovery.
Section 9.9. Investments. Whenever Agent in good faith determines that
it is uncertain about how to distribute to Lenders any funds which it has
received, or whenever Agent in good faith determines that there is any dispute
among Lenders about how such funds should be distributed, Agent may choose to
defer distribution of the funds which are the subject of such uncertainty or
dispute. If Agent in good faith believes that the uncertainty or dispute will
not be promptly resolved, or if Agent is otherwise required to invest funds
pending distribution to Lenders, Agent shall invest such funds pending
distribution; all interest on any such investment shall be distributed upon the
distribution of such investment and in the same proportion and to the same
Persons as such investment. All moneys received by Agent for distribution to
Lenders (other than to the Person who is Agent in its separate capacity as a
Lender) shall be held by Agent pending such distribution solely as Agent for
such Lenders, and Agent shall have no equitable title to any portion thereof.
Section 9.10. Benefit of Article IX. The provisions of this Article are
intended solely for the benefit of Lender Parties, and no Restricted Person
shall be entitled to rely on any such provision or assert any such provision in
a claim or defense against any Lender Party. Lender Parties may waive or amend
such provisions as they desire without any notice to or consent of Borrower or
any Restricted Person.
ARTICLE X - Miscellaneous
Section 10.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by
course of conduct or otherwise) by any Lender Party in exercising any
right, power or remedy which such Lender Party may have under any of
the Loan Documents shall operate as a waiver thereof or of any other
right, power or remedy, nor shall any single or partial exercise by any
Lender Party of any such right, power or remedy preclude any other or
further exercise thereof or of any other right, power or remedy. No
waiver of any provision of any Loan Document and no consent to any
departure therefrom shall ever be effective unless it is in writing and
signed as provided below in this section, and then such waiver or
consent shall be effective only in the specific instances and for the
purposes for which given and to the extent specified in such writing.
No notice to or demand on any Restricted Person shall in any case of
itself entitle any Restricted Person to any other or further notice or
demand in similar or other circumstances. This Agreement and the other
Loan Documents set forth the entire understanding between the parties
hereto with respect to the transactions contemplated herein and therein
and supersede all prior discussions and understandings with respect to
the subject matter hereof and thereof, and no waiver, consent, release,
modification or amendment of or supplement to this Agreement or the
other Loan Documents shall be valid or effective against any party
hereto unless the same is in writing
65
<PAGE> 71
and signed by (i) if such party is Borrower, by Borrower, (ii) if such
party is Agent, by Agent, (iii) if such party is LC Issuer, by LC
Issuer and (iv) if such party is a Lender, by such Lender or by Agent
on behalf of Lenders with the written consent of Required Lenders
(which consent has already been given as to the termination of the
Loan Documents as provided in Section 10.9). Notwithstanding the
foregoing or anything to the contrary herein, Agent shall not, without
the prior consent of each individual Lender, execute and deliver on
behalf of such Lender any waiver or amendment which would: (1) waive
any of the conditions specified in Article IV (provided that Agent may
in its discretion withdraw any request it has made under Section
4.3(f)), (2) increase the Commitment of such Lender or subject such
Lender to any additional obligations, (3) reduce any fees payable to
such lender hereunder, or the principal of, or interest on, such
Lender's Note, (4) postpone any date fixed for any payment of any such
fees, principal or interest, (5) amend the definition herein of
"Required Lenders" or otherwise change the aggregate amount of
Percentage Shares which is required for Agent, Lenders or any of them
to take any particular action under the Loan Documents, (6) release
Borrower from its obligation to pay such Lender's Note or any
Guarantor from its obligations under its Guaranty or (7) release all
or substantially all of the Collateral.
(b) Acknowledgments and Admissions. Borrower hereby represents,
warrants, acknowledges and admits that (i) it has been advised by
counsel in the negotiation, execution and delivery of the Loan
Documents to which it is a party, (ii) it has made an independent
decision to enter into this Agreement and the other Loan Documents to
which it is a party, without reliance on any representation, warranty,
covenant or undertaking by Agent or any Lender, whether written, oral
or implicit, other than as expressly set out in this Agreement or in
another Loan Document delivered on or after the date hereof, (iii)
there are no representations, warranties, covenants, undertakings or
agreements by any Lender Party as to the Loan Documents except as
expressly set out in this Agreement or in another Loan Document
delivered on or after the date hereof, (iv) no Lender Party has any
fiduciary obligation toward Borrower with respect to any Loan Document
or the transactions contemplated thereby, (v) the relationship pursuant
to the Loan Documents between Borrower and the other Restricted
Persons, on one hand, and each Lender Party, on the other hand, is and
shall be solely that of debtor and creditor, respectively, (vi) no
partnership or joint venture exists with respect to the Loan Documents
between any Restricted Person and any Lender Party, (vii) Agent is not
Borrower's Agent, but Agent for Lenders, (viii) should an Event of
Default or Default occur or exist, each Lender Party will determine in
its sole discretion and for its own reasons what remedies and actions
it will or will not exercise or take at that time, (ix) without
limiting any of the foregoing, Borrower is not relying upon any
representation or covenant by any Lender Party, or any representative
thereof, and no such representation or covenant has been made, that any
Lender Party will, at the time of an Event of Default or Default, or at
any other time, waive, negotiate, discuss, or take or refrain from
taking any action permitted under the Loan Documents with respect to
any such Event of Default or Default or any other provision of the Loan
Documents, and (x) all Lender Parties have relied upon the
66
<PAGE> 72
truthfulness of the acknowledgments in this section in deciding to
execute and deliver this Agreement and to become obligated hereunder.
(c) Representation by Lenders. Each Lender hereby represents
that it will acquire its Note for its own account in the ordinary
course of its commercial lending business; however, the disposition of
such Lender's property shall at all times be and remain within its
control and, in particular and without limitation, such Lender may sell
or otherwise transfer its Note, any participation interest or other
interest in its Note, or any of its other rights and obligations under
the Loan Documents.
(d) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 10.2. Survival of Agreements; Cumulative Nature. All of
Restricted Persons' various representations, warranties, covenants and
agreements in the Loan Documents shall survive the execution and delivery of
this Agreement and the other Loan Documents and the performance hereof and
thereof, including the making or granting of the Loans and the delivery of the
Notes and the other Loan Documents, and shall further survive until all of the
Obligations are paid in full to each Lender Party and all of Lender Parties'
obligations to Borrower are terminated. All statements and agreements contained
in any certificate or other instrument delivered by any Restricted Person to
any Lender Party under any Loan Document shall be deemed representations and
warranties by Borrower or agreements and covenants of Borrower under this
Agreement. The representations, warranties, indemnities, and covenants made by
Restricted Persons in the Loan Documents, and the rights, powers, and
privileges granted to Lender Parties in the Loan Documents, are cumulative,
and, except for expressly specified waivers and consents, no Loan Document
shall be construed in the context of another to diminish, nullify, or otherwise
reduce the benefit to any Lender Party of any such representation, warranty,
indemnity, covenant, right, power or privilege. In particular and without
limitation, no exception set out in this Agreement to any representation,
warranty, indemnity, or covenant herein contained shall apply to any similar
representation, warranty, indemnity, or covenant contained in any other Loan
Document, and each such similar representation, warranty, indemnity, or
covenant shall be subject only to those exceptions which are expressly made
applicable to it by the terms of the various Loan Documents.
Section 10.3. Notices. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Agent may give telephonic notices to the other Lender Parties), and shall
be deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy or telex, by delivery service with proof of delivery, or by registered
or
67
<PAGE> 73
certified United States mail, postage prepaid, to Borrower and Restricted
Persons at the address of Borrower specified on the signature pages hereto and
to each Lender Party at its address specified in the Lenders Schedule as its
lending offices for Base Rate Loans (unless changed by similar notice in
writing given by the particular Person whose address is to be changed). Any
such notice or communication shall be deemed to have been given (a) in the case
of personal delivery or delivery service, as of the date of first attempted
delivery during normal business hours at the address provided herein, (b) in
the case of telecopy or telex, upon receipt, or (c) in the case of registered
or certified United States mail, three days after deposit in the mail;
provided, however, that no Borrowing Notice shall become effective until
actually received by Agent.
Section 10.4. Payment of Expenses; Indemnity.
(a) Payment of Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, Borrower will promptly
(and in any event, within 30 days after any invoice or other statement
or notice) pay: (i) all transfer, stamp, mortgage, documentary or other
similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Agreement or any of the other Loan
Documents or any other document referred to herein or therein, (ii) all
reasonable costs and expenses incurred by or on behalf of Agent
(including attorneys' fees, consultants' fees and engineering fees,
travel costs and miscellaneous expenses) in connection with (1) the
negotiation, preparation, execution and delivery of the Loan Documents,
and any and all consents, waivers or other documents or instruments
relating thereto, (2) the filing, recording, refiling and re-recording
of any Loan Documents and any other documents or instruments or further
assurances required to be filed or recorded or refiled or re-recorded
by the terms of any Loan Document, (3) the borrowings hereunder and
other action reasonably required in the course of administration
hereof, (4) monitoring or confirming (or preparation or negotiation of
any document related to) Borrower's compliance with any covenants or
conditions contained in this Agreement or in any Loan Document, (5) the
syndication of the Loans, (iii) all reasonable costs or expenses
incurred by or on behalf of NationsBanc Montgomery Securities, Inc.
(including attorneys' fees) in connection with the syndication of the
Loans and (iv) all reasonable costs and expenses incurred by or on
behalf of any Lender Party (including attorneys' fees, consultants'
fees and accounting fees) in connection with the defense or enforcement
of any of the Loan Documents (including this section) or the defense of
any Lender Party's exercise of its rights thereunder. In addition to
the foregoing, until and all Obligations have been paid in full,
Borrower will also pay or reimburse Agent for all reasonable
out-of-pocket costs and expenses of Agent or its agents or employees in
connection with the continuing administration of the Loans and the
related due diligence of Agent, including travel and miscellaneous
expenses and fees and expenses of Agent's outside counsel, reserve
engineers and consultants engaged in connection with the Loan
Documents.
(b) Indemnity. Borrower agrees to indemnify each Lender Party,
upon demand, from and against any and all liabilities, obligations,
claims, losses, damages, penalties,
68
<PAGE> 74
fines, actions, judgments, suits, settlements, costs, expenses or
disbursements (including reasonable fees of attorneys, accountants,
experts and advisors) of any kind or nature whatsoever (in this
section collectively called "liabilities and costs") which to any
extent (in whole or in part) may be imposed on, incurred by, or
asserted against such Lender Party growing out of, resulting from or
in any other way associated with any of the Collateral, the Loan
Documents, the actual or proposed use of the proceeds of the Loans and
the transactions and events (including the enforcement or defense
thereof) at any time associated therewith or contemplated therein
(including any violation or noncompliance with any Mining and
Environmental Laws by any Restricted Person or any liabilities or
duties of any Restricted Person or any Lender Party with respect to
the presence or release of Hazardous Materials found in or released
into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH
LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE
OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE
CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY
KIND BY ANY LENDER PARTY,
provided only that no Lender Party shall be entitled under this section
to receive indemnification for that portion, if any, of any liabilities
and costs which is proximately caused by its own individual gross
negligence or willful misconduct, as determined in a final judgment. If
any Person (including Borrower or any of its Affiliates) ever alleges
such gross negligence or willful misconduct by any Lender Party, the
indemnification provided for in this section shall nonetheless be paid
upon demand, subject to later adjustment or reimbursement, until such
time as a court of competent jurisdiction enters a final judgment as to
the extent and effect of the alleged gross negligence or willful
misconduct. As used in this section the term "Lender Parties" shall
refer not only to the Persons designated as such in Section 1.1 but
also to each director, officer, agent, attorney, employee,
representative and Affiliate of such Persons.
Section 10.5. Joint and Several Liability; Parties in Interest. All
Obligations which are incurred by two or more Restricted Persons shall be their
joint and several obligations and liabilities. All grants, covenants and
agreements contained in the Loan Documents shall bind and inure to the benefit
of the parties thereto and their respective successors and assigns; provided,
however, that no Restricted Person may assign or transfer any of its rights or
delegate any of its duties or obligations under any Loan Document without the
prior consent of Required Lenders. Neither Borrower nor any Affiliates of
Borrower shall directly or indirectly purchase or otherwise retire any
Obligations owed to any Lender nor will any Lender accept any offer to do so,
unless each Lender shall have received substantially the same offer with
respect to the same Percentage Share of the Obligations owed to it. If Borrower
or any Affiliate of Borrower at any time purchases some but less than all of
the Obligations owed to all Lender Parties, such purchaser shall not be
entitled to any rights of any Lender Party under the Loan Documents unless and
until Borrower or its Affiliates have purchased all of the Obligations.
69
<PAGE> 75
Section 10.6. Assignments and Participations.
(a) Each Lender may assign to one or more Eligible Assignees all
or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Loans, its
Note, and its Percentage Share of the Commitment); provided, however,
that
(i) each such assignment shall be to an Eligible
Assignee;
(ii) except in the case of an assignment to another
Lender or an assignment of all of a Lender's rights and
obligations under this Agreement, any such partial assignment
shall be in an amount at least equal to $10,000,000 or an
integral multiple of $10,000,000 in excess thereof;
(iii) each such assignment by a Lender shall be of a
constant, and not varying, percentage of all of its rights and
obligations under the Loan Documents; and
(iv) the parties to such assignment shall execute and
deliver to the Agent for its acceptance an Assignment and
Acceptance in the form of Exhibit E hereto, together with any
Note subject to such assignment and a processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to the
extent of such assignment, have the obligations, rights, and benefits
of a Lender hereunder and the assigning Lender shall, to the extent of
such assignment, relinquish its rights and be released from its
obligations under this Agreement. Upon the consummation of any
assignment pursuant to this Section, the assignor, Agent and Borrower
shall make appropriate arrangements so that, if required, new Notes are
issued to the assignor and the assignee. If the assignee is not
incorporated under the Laws of the United States of America or a state
thereof, it shall deliver to Borrower and Agent certification as to
exemption from deduction or withholding of Taxes in accordance with
Section 3.7(d).
(b) Agent shall maintain at its address referred to in Section
10.3 a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the recordation of the names and addresses of
Lenders and their Percentage Share of the Commitment of, and principal
amount of the Loans owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the
Agent and the Lenders may treat each Person whose name is recorded in
the Register as a Lender hereunder for all purposes of this Agreement.
The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable
prior notice.
70
<PAGE> 76
(c) Upon its receipt of an Assignment and Acceptance executed by
the parties thereto, together with any Note subject to such assignment
and payment of the processing fee, Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of
Exhibit E hereto, (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give
prompt notice thereof to the parties thereto.
(d) Each Lender may sell participations to one or more Persons
in all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and its Loans); provided,
however, that (i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to
the other parties hereto for the performance of such obligations, (iii)
the participant shall be entitled to the benefit of the yield
protection provisions contained in Article III and the right of set-off
contained in Section 6.18, and (iv) the Borrower shall continue to deal
solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender shall
retain the sole right to enforce the obligations of the Borrower
relating to its Loans and its Note and to approve any amendment,
modification, or waiver of any provision of this Agreement (other than
amendments, modifications, or waivers decreasing the amount of
principal of or the rate at which interest is payable on such Loans or
Note, extending any scheduled principal payment date or date fixed for
the payment of interest on such Loans or Note, or extending its
Commitment).
(e) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time assign and pledge all or any
portion of its Loans and its Note to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular
issued by such Federal Reserve Bank. No such assignment shall release
the assigning Lender from its obligations hereunder.
(f) Any Lender may furnish any information concerning the
Borrower or any of its Subsidiaries in the possession of such Lender
from time to time to assignees and participants (including prospective
assignees and participants), subject, however, to the provisions of
Section 10.7 hereof.
Section 10.7. Confidentiality. Each Lender Party agrees that it will
take all reasonable steps to keep confidential any proprietary information
given to it by any Restricted Person, provided, however, that this restriction
shall not apply to information which (a) has at the time in question entered
the public domain, (b) is required to be disclosed by Law (whether valid or
invalid) of any Tribunal, (c) is disclosed to any Lender Party's Affiliates,
auditors, attorneys, or agents, (d) is furnished to any other Lender Party or
to any purchaser or prospective purchaser of participations or other interests
in any Loan or Loan Document (provided each such purchaser or prospective
purchaser first agrees to hold such information in confidence on the terms
provided in this section), or (e) is disclosed in the course of enforcing its
rights and remedies during the existence of an Event of Default.
71
<PAGE> 77
Section 10.8. Governing Law; Submission to Process.
(a) EXCEPT TO THE EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS
EXPRESSLY ELECTED IN A LOAN DOCUMENT, THE LOAN DOCUMENTS SHALL BE DEEMED
CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. CHAPTER 15 OF THE TEXAS REVISED CIVIL STATUTES
ANNOTATED ARTICLE 5069 (WHICH REGULATES REVOLVING CREDIT LOANS AND TRI-PARTY
ACCOUNTS) DOES NOT APPLY TO THIS AGREEMENT OR THE NOTES. BORROWER HEREBY AGREES
THAT ANY LEGAL ACTION OR PROCEEDING AGAINST BORROWER WITH RESPECT TO THIS
AGREEMENT, THE NOTES OR ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS
OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN
DISTRICT OF TEXAS AS LENDER PARTIES MAY ELECT, AND, BY EXECUTION AND DELIVERY
HEREOF, BORROWER ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS, AND FURTHER AGREES TO A TRANSFER OF ANY SUCH PROCEEDING TO A FEDERAL
COURT SITTING IN THE STATE OF TEXAS TO THE EXTENT THAT IT HAS SUBJECT MATTER
JURISDICTION, AND OTHERWISE TO A STATE COURT IN TEXAS, AND AGREES THAT SUCH
JURISDICTION SHALL BE EXCLUSIVE, UNLESS WAIVED BY LENDER PARTIES IN WRITING,
WITH RESPECT TO ANY ACTION OR PROCEEDING BROUGHT BY IT AGAINST LENDER PARTIES
AND ANY QUESTIONS RELATING TO USURY. BORROWER WAIVES ANY RIGHT TO STAY OR TO
DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF
FORUM NON CONVENIENS. IN FURTHERANCE OF THE FOREGOING, BORROWER HEREBY
DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, 350 NORTH ST. PAUL STREET,
DALLAS, TEXAS 75201, AS AGENT OF BORROWER TO RECEIVE SERVICE OF ALL PROCESS
BROUGHT AGAINST BORROWER WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH COURT
IN TEXAS, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY BORROWER TO BE EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT. COPIES OF ANY SUCH PROCESS SO SERVED
SHALL ALSO, IF PERMITTED BY LAW, BE SENT BY REGISTERED MAIL TO BORROWER AT ITS
ADDRESS SET FORTH BELOW, BUT THE FAILURE OF BORROWER TO RECEIVE SUCH COPIES
SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS AS AFORESAID. BORROWER
SHALL FURNISH TO LENDER PARTIES A CONSENT OF CT CORPORATION SYSTEM AGREEING TO
ACT HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF LENDER PARTIES TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER PARTIES TO BRING
PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. BORROWER
SHALL NOT REVOKE SUCH APPOINTMENT BUT IF FOR ANY REASON CT CORPORATION
72
<PAGE> 78
SYSTEM SHALL RESIGN OR OTHERWISE CEASE TO ACT AS BORROWER'S AGENT, BORROWER
HEREBY IRREVOCABLY AGREES TO (A) IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT
ACCEPTABLE TO AGENT TO SERVE IN SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW
AGENT SHALL BE DEEMED TO BE SUBSTITUTED FOR CT CORPORATION SYSTEM FOR ALL
PURPOSES HEREOF AND (B) PROMPTLY DELIVER TO LENDER PARTIES THE WRITTEN CONSENT
(IN FORM AND SUBSTANCE SATISFACTORY TO AGENT) OF SUCH NEW AGENT AGREEING TO
SERVE IN SUCH CAPACITY.
(b) BORROWER FURTHER AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST
BORROWER WITH RESPECT TO ANY SECURITY DOCUMENT MAY BE BROUGHT IN THE COURTS OF
THE STATES OF KENTUCKY, TENNESSEE OR COLORADO, OR THE COURTS OF THE UNITED
STATES OF AMERICA LOCATED IN ANY SUCH STATE AND, BY EXECUTION AND DELIVERY
HEREOF, BORROWER ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. BORROWER HEREBY IRREVOCABLY SUBMITS ITSELF AND EACH OTHER RESTRICTED
PERSON TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
SITTING IN THE STATES OF KENTUCKY, TENNESSEE OR COLORADO AND AGREES AND
CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING
RELATING TO THE SECURITY DOCUMENTS OR THE OBLIGATIONS BY ANY MEANS ALLOWED
UNDER THE LAW OF SUCH STATES OR FEDERAL LAW.
Section 10.9. Limitation on Interest.
Lender Parties, Restricted Persons and the other parties to the Loan
Documents intend to contract in strict compliance with applicable usury Law
from time to time in effect. In furtherance thereof such persons stipulate and
agree that none of the terms and provisions contained in the Loan Documents
shall ever be construed to provide for interest in excess of the maximum amount
of interest permitted to be charged by applicable Law from time to time in
effect. Neither any Restricted Person nor any present or future guarantors,
endorsers, or other Persons hereafter becoming liable for payment of any
Obligation shall ever be liable for unearned interest thereon or shall ever be
required to pay interest thereon in excess of the maximum amount that may be
lawfully charged under applicable Law from time to time in effect, and the
provisions of this section shall control over all other provisions of the Loan
Documents which may be in conflict or apparent conflict herewith. Bank Parties
expressly disavow any intention to charge or collect excessive unearned
interest or finance charges in the event the maturity of any Obligation is
accelerated. If (a) the maturity of any Obligation is accelerated for any
reason, (b) any Obligation is prepaid and as a result any amounts held to
constitute interest are determined to be in excess of the legal maximum, or (c)
any Lender or any other holder of any or all of the Obligations shall otherwise
collect moneys which are determined to constitute interest which would
otherwise increase the interest on any or all of the Obligations to an amount
in excess of that permitted to be charged by applicable Law then in effect,
then all
73
<PAGE> 79
sums determined to constitute interest in excess of such legal limit shall,
without penalty, be promptly applied to reduce the then outstanding principal
of the related Obligations or, at such Lender's or holder's option, promptly
returned to Borrower or the other payor thereof upon such determination. In
determining whether or not the interest paid or payable, under any specific
circumstance, exceeds the maximum amount permitted under applicable Law,
Lenders and Restricted Persons (and any other payors thereof) shall to the
greatest extent permitted under applicable Law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and amortize,
prorate, allocate, and spread the total amount of interest throughout the
entire contemplated term of the instruments evidencing the Obligations in
accordance with the amounts outstanding from time to time thereunder and the
maximum legal rate of interest from time to time in effect under applicable Law
in order to lawfully charge the maximum amount of interest permitted under
applicable Law. In the event applicable Law provides for an interest ceiling
under ss.303 of the Texas Finance Code (the "Texas Finance Code") and Chapter
1D of Title 79, Tex. Rev. Civ. Stats. 1925 ("Chapter 1D") as amended,
respectively for that day, the ceiling shall be the "indicated rate ceiling" or
"weekly ceiling" as defined in the Texas Finance Code and Chapter 1D. As used
in this section the term "applicable Law" means the Laws of the State of Texas
or the Laws of the United States of America, whichever Laws allow the greater
interest, as such Laws now exist or may be changed or amended or come into
effect in the future.
Section 10.10. Termination: Limited Survival. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to Agent to terminate this Agreement. Upon receipt by
Agent of such a notice, if no Obligations are then owing this Agreement and all
other Loan Documents shall thereupon be terminated and the parties thereto
released from all prospective obligations thereunder. Notwithstanding the
foregoing or anything herein to the contrary, any waivers or admissions made by
any Restricted Person in any Loan Document, any Obligations under any of
Sections 3.2, 3.3, 3.4, 3.5 or 3.6, and any obligations which any Person may
have to indemnify or compensate any Lender Party shall survive any termination
of this Agreement or any other Loan Document. At the request and expense of
Borrower, Agent shall prepare and execute all necessary instruments to reflect
and effect such termination of the Loan Documents. Agent is hereby authorized
to execute all such instruments on behalf of all Lenders, without the joinder
of or further action by any Lender.
Section 10.11. Severability. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable Law.
Section 10.12. Counterparts. This Agreement may be separately executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
74
<PAGE> 80
Section 10.13. Waiver of Jury Trial, Punitive Damages, etc.
BORROWER AND EACH LENDER PARTY HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED
BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN
CONNECTION WITH THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR
ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (B) WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
SUCH LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW, (C) CERTIFIES THAT NO
PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL,
EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE
ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR
DELIVER TO ANY OTHER PARTY HERETO.
Section 10.14. Restatement. This Agreement amends and restates in its
entirety the Original Credit Agreement.
Section 10.15. No Novation or Release. Each Borrower and each
Restricted Person hereby acknowledges, warrants, represents and agrees that
this Agreement is not intended to be, and shall not be deemed or construed to
be, a novation or release of the Loan or the Loan Documents, or any of them.
Section 10.16. Effectiveness of Agreement. This Agreement and the other
Loan Documents shall not be effective until this Agreement has been executed in
the State of Texas by NationsBank and the Loan Documents have been accepted in
the State of Texas by NationsBank.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
75
<PAGE> 81
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
BORROWER:
AEI HOLDING COMPANY, INC.
By: /s/ Vic Grubb
----------------------------------------
Name: Vic Grubb
Title: Controller/Treasurer
Address: 1500 North Big Run Road
Ashland, Kentucky 41102
Telephone: (606) 928-3433
Fax: (606) 928-0450
AGENT AND LENDERS:
NATIONSBANK OF TEXAS, N.A.,
as Agent and Lender
By: /s/ Denise A. Smith
----------------------------------------
Name: Denise A. Smith
Title: S.V.P.
Address: 901 Main Street, Floor 64
Dallas, Texas 75202
Telephone: (214) 508-1261
Fax: (214) 508-1285
THE PROVIDENT BANK
By: /s/ Tom B. Scherpenberg
----------------------------------------
Name: Tom B. Scherpenberg
Title: Vice President
Address: One East Fourth Street
Cincinnati, Ohio 45202
Telephone: (513) 579-2069
Fax: (513) 579-2201
76
<PAGE> 82
DISCLOSURE SCHEDULE
I. Section 5.4--Conflicts and Consents
1. All leases and subleases with Big Sandy Company, L. P., a Delaware
limited partnership.
2. All leases and subleases with Kentucky River Coal Corporation, a
Virginia corporation.
3. Release from Agreement and Surface Access Agreement, dated October
1, 1993, by and between Lois P. Pavlisick and James Andrew Pavlisick, and Cyprus
Orchard Valley Coal Corporation, a Delaware corporation, as assigned to Bowie.
Bowie did not obtain the lessor's consent to a grant of a security interest in
this agreement under the Loan and Security Agreement with The Provident Bank.
4. Lease No. 16709, dated August 15, 1976, between the Denver and Rio
Grande Western Railroad Company, a Delaware corporation, and Colorado
Westmoreland Inc., a Delaware corporation, as assigned to Bowie. Bowie must pay
the lessor $300 per year under this lease. Bowie did not obtain the lessor's
consent to a grant of a security interest in this lease under the Loan and
Security Agreement with The Provident Bank.
II. Section 5.9--Litigation
1. EAS Claim.
Larry Addington was contacted by letter dated September 18,
1995 from Energy Associated Services, Inc. ("EAS") regarding a
potential claim by EAS for payments allegedly due as a result of the
assignment of the T-1 Contract by Southern Illinois Mining Company
("SIMCO") to Arclar Company in the SIMCO bankruptcy case. EAS,
Addington Resources, Inc. ("ARI"), Addwest Mining, Inc., Addington
Inc., and others were party to a Settlement Agreement dated as of April
1, 1991 (the "Settlement Agreement") relating to the T-1 contract. We
are not aware of any other communications with or demands by EAS, and
to our knowledge no litigation with respect to this claim is pending or
threatened.
Addington Acquisition Company, Inc. (now Addington
Enterprises, Inc.) assumed responsibility for certain liabilities
relating to SIMCO pursuant to the above-referenced Stock Purchase
Agreement dated September 22, 1995. EAS did not, however, release
Addington Resources, Inc. from any liability associated therewith.
<PAGE> 83
2. Indemnification Claims of Pittston Acquisition Company.
By letters dated January 12, 1995, January 12, 1996, and
January 13, 1997, to R. Douglas Striebel from Charles Q. Gage, Esq.,
Pittston Acquisition Company ("PAC") demanded indemnification from
Addington Holding, Inc. ("AHC") under the terms of their Stock Purchase
Agreement dated September 24, 1993 (the "Agreement"). The sale of
Addington, Inc., Addington Mining, Inc., Appalachian Land Company,
Vandalia Resources, Inc. and Kanawha Development Corporation
(collectively, the "Sold Subsidiaries") by AHC to PAC on January 14,
1994, was effected pursuant to the Agreement.
The Company assumed responsibility for the indemnification
claims of PAC pursuant to a certain Stock Purchase Agreement dated
September 22, 1995.
The claimed indemnification covers a number of items including
allegedly delinquent taxes and fees, allegedly assumed liabilities,
alleged failure to transfer specific licenses, assets and permits and
alleged non-compliance with certain agreements and applicable laws and
permits.
Mr. Gage's letters specifically mentioned a number of lawsuits
involving the Sold Subsidiaries that PAC maintains AHC has the
responsibility to defend pursuant to the terms of the Agreement. Other
suits that AHC agreed to defend are listed in the Agreement.
3. Robert Billips d/b/a Peter Fork Mining Company v. Addington,
Inc., Pike Circuit Court, Civil Action No. 96-CI-00858
On June 14, 1996, Robert C. Billips d/b/a Peter Fork Mining
Company sued Addington, Inc. in the Circuit Court of Pike County,
Kentucky, claiming that Addington, Inc. breached a lease with Billips
in Pike County, Kentucky, caused Billips to lose business
opportunities, and committed waste on Billips' property. Addington has
admitted that it entered into a lease with Billips, but denies that it
breached the lease, caused a loss of business opportunities, or
committed waste. Instead, Addington claims that it mined all mineable
and merchantable coal (as defined in the lease), on the leased
property, and, therefore, had no further obligations under the lease.
Although written discovery requests have been exchanged, no
other discovery has been taken. No deadlines or trial date have been
set. The company intends to vigorously defend the claims, and at this
time it is not possible to predict the likely outcome of the claim.
2
<PAGE> 84
4. Claim of Ratliff Coal Sales, Inc.
On December 13, 1996, Ratliff Coal Sales, Inc. ("Ratliff")
sent a letter entitled Notice and Demand for Payment Pursuant to Tipple
Agreement of January 15, 1985, between Ratliff Coal Sales, Inc. and
Delta Energy Corporation (now Addington, Inc.). The Tipple Agreement
obligates Addington, Inc. to compensate Ratliff for coal tipple
services at the rate of 7% of the sales price of coal or $2.00 per ton,
whichever is greater. Ratliff's Demand for Payment is comprised of
three claims. The first claim seeks the principal sum of $370,239.86
for alleged underpayment of "service payments" as defined in the Tipple
Agreement. Interest due on the above amount, calculated at 8% simple
interest, in the amount of $145,095.95 through November 30, 1996, is
also sought. The total amount of this first claim as of November 30,
1996, is $515,335.81. Ratliff's second claim seeks a 7% service payment
on what Ratliff calls "quarterly bonus payments" received by Addington
from Consumers Power Company ("Consumers"). This claim totals
$119,776.43 in principal and $70,614.65 in interest, for a total of
$190,391.08. The third claim appears to seek a 7% service payment on
the difference between the April, 1994 sales price for coal to
Consumers of $34.164 and the amended sales price of $27.00, plus
interest, through the date of termination of the Tipple Agreement in
January, 1996. Ratliff does not specify a dollar amount for this third
claim, but it has been preliminarily estimated it to be approximately
$100,000.
While Addington, Inc. is still in the process of analyzing
Ratliff's claims, it did formally respond to Ratliff on April 30, 1997.
In general, Addington, Inc. denied liability to Ratliff regarding each
of its three claims.
Regarding Ratliff's first claim totaling $515,335.81,
Addington responded that Ratliff failed to take into consideration the
effect of a $2,901,600 price rebate paid by Addington, Inc. to
Consumers Power Company and Ratliff also improperly calculated the
F.O.B. tipple price of coal. Addington, Inc. advised Ratliff that the
result of these two factors is that Ratliff owes Addington, Inc. a net
amount of $23,784.08.
In response to Ratliff's second claim in the amount of
$190,391.08, Addington, Inc. pointed out a number of reasons why
Ratliff's claim is without merit. Likewise, Addington, Inc. rejected
Ratliff's third claim as it is not supported by the provisions of the
Tipple Agreement.
Subsequently, Ratliff and Addington, Inc. have exchanged
information and have discussed having a meeting to attempt to resolve
these disputed claims. No litigation has been initiated by Ratliff or
Addington, Inc.
III. Section 5.11--ERISA Plans and Liabilities
1. Ikerd-Bandy Co., Inc. Employee Benefit Plan, Plan No. 550, with an
effective date of January 1, 1995.
2. Cockrell's Fork Mining Employee Benefit Plan, Plan No. 550, with an
effective date of January 1, 1995, and amended April 1, 1995, January 1, 1996,
and January 1, 1997.
3
<PAGE> 85
IV. Section 5.12--Environment
1. All matters disclosed in Marshall Miller's audit of September, 1997,
have been disclosed to Lender.
2. Those matters reflected in the document attached hereto and marked
as Attachment A, being Schedule 3.2.13 to the Asset Purchase and Sale Agreement
by and between Cyprus Orchard Valley Coal Corporation and Bowie dated December
22, 1994.
3. Those matters reflected in the Greystone Environment Audit Report
dated December 1994, a copy of which has been provided to Lender.
4. The Company has received the following notices of material mining
permit violations:
(1) Permit (or other identifying) No. 898-0430
MSHA No. 15-17349
Violation ID No. 510606
Issuing regulatory authority KYDSMRE
Date violation issued 6/27/95
Date of Abatement actions 7/31/96
(2) Permit (or other identifying) No. 898-0430
MSHA No. 15-17349
Violation ID No. 510947
Issuing regulatory authority KYDSMRE
Date violation issued 6/13/96
Date of Abatement actions 1/28/97
(3) Permit (or other identifying) No. 832-0043
MSHA No. Pending
Violation ID No. 411642
Issuing regulatory authority KYDSMRE
Date violation issued 2/11/97
Date of Abatement actions 3/17/97
(4) Permit (or other identifying) No. 898-0369
MSHA No. 15-17434
Violation ID No. 057519
Issuing regulatory authority KYDSMRE
Date violation issued 11/3/93
Date of Abatement actions 3/30/95
(5) Permit (or other identifying) No. 836-0233
MSHA No. Pending
Violation ID No. 410610
Issuing regulatory authority KYDSMRE
Date violation issued 5/18/94
Date of Abatement actions 9/29/95
5. Actual amounts of coal throughput, processed, or handled at various
points may exceed limitations in Bowie's existing air quality permits. In
December 1995, Bowie submitted an application to the Air Pollution Control
Division of the Colorado Department of Public Health (the "Division") for a
revised permit, which clarifies the production limits, the production throughput
from the mine and allowable stockpile sizes. The Division has not yet responded
because it has a significant backlog in permit applications. The Division has
not issued or threatened to issue any notice of violation to Bowie for exceeding
of air emissions limits.
4
<PAGE> 86
6. All matters disclosed in the Asbestos Summary, dated May 20, 1992,
have been disclosed to Lender. (The results of the Asbestos Summary were
disclosed in the Greystone Report for the Bowie Property.)
7. KYDSMRE is currently investigating a pattern of violations relating
to permit nos. 836-0247 and 898-0439.
8. The Colorado Division of Minerals and Geology has threatened to
investigate a pattern of violations relating to permits at the Bowie #2 mine.
V. Section 5.13--Names and Places of Business
1. From the date of its incorporation until October 12, 1995, Addington
Enterprises' corporate name was Addington Acquisition Company, Inc.
2. Tennessee Mining's principal place of business is 241 Myers Road,
Jacksboro, Tennessee 37757.
3. Ikerd-Bandy conducts certain of its operations under the assumed
name of Cockrell's Fork Mining. The mailing address of Ikerd-Bandy's principal
place of business is P.O. Box 375, Manchester, Kentucky 40962.
4. Bowie's principal place of business is 1720 4010 Drive, P.O. Box
1488, Paonia, Colorado 81428-1488. Bowie also maintains offices at 1855 Old
Highway 133, P.O. Box 483, Paonia, Colorado 81428, and 1612 4175 Drive, Paonia,
Colorado 81428.
VI. Section 5.14--Borrower's Subsidiaries
Borrower owns 77.5% of the stock of Bowie Resources, Limited, a
Colorado corporation, 100% of the stock of Addington Mining, Inc., a Kentucky
corporation, 100% of the stock of Ikerd-Bandy Co., Inc., a Kentucky corporation
and 100% of the stock of Tennessee Mining, Inc., a Kentucky corporation.
VII. Section 5.15--Title to Properties; Licenses
1. Ikerd-Bandy has good and marketable title to all of its material
properties and assets, free and clear of all Liens other than (i) Permitted
Liens, (ii) statutory and contractual inchoate landlord's liens and (iii) liens
for taxes assessed but not yet due and payable.
2. Ikerd-Bandy currently operates a loadout facility and a shop
facility without mining permits on two of its properties. Ikerd-Bandy believes
that no permits are necessary for these operations, and Borrower has contacted
government officials to confirm this belief.
3. Bowie is in the process of obtaining certain air quality permits.
5
<PAGE> 87
4. Bowie has good and marketable title to all of its assets, but the
CIT Group has a lien against all fixed assets and inventories. Bowie has repaid
the loan from CIT underlying the liens, and is preparing to file termination
statements for such liens.
5. Bowie is currently not in compliance with section 14(a)(v)(c) of the
Master Lease Agreement dated July 17, 1995, between Bowie and CIT, which
prohibits Bowie from guaranteeing or providing security for any indebtedness or
liabilities of any Person, without the prior written consent of CIT, such
consent not to be unreasonably withheld.
6. Bowie is currently not in compliance with section 5(B)(7)(iii) of
the Loan and Security Agreement dated January 27, 1995, between Bowie and CIT,
which prohibits Bowie from guaranteeing or providing security for any
indebtedness or liabilities of any Person, without the prior written consent of
CIT, such consent not to be unreasonably withheld.
7. Bowie is currently not in compliance with section 5(B)(7)(i) of the
Loan and Security Agreement dated January 27, 1995, between Bowie and CIT, which
prohibits Bowie from incurring any indebtedness for borrowed money other than
$1,000,000 owed to Coors Energy Company (plus interest thereon) without the
prior written consent of CIT, such consent not to be unreasonably withheld.
8. Bowie is currently not in compliance with section 14(a)(v)(a) of the
Master Lease Agreement dated July 17, 1995, between Bowie and CIT, which
prohibits Bowie from incurring any indebtedness for borrowed money other than
$1,000,000 owed to Coors Energy Company (plus interest thereon) without the
prior written consent of CIT, such consent not to be unreasonably withheld.
9. Bowie is currently not in compliance with section 7 of Rider A to
the Loan and Security Agreement dated January 27, 1995, between Bowie and CIT,
which requires Bowie to maintain an interest coverage ratio of not less than 2.0
to 1.0 during each fiscal quarter.
10. Bowie is currently not in compliance with section 12 of Exhibit A
to the Master Lease Agreement dated July 17, 1995, between Bowie and CIT, which
requires Bowie to maintain a cash flow coverage ratio of not less than 2.0 to
1.0 as of the end of each fiscal quarter.
6
<PAGE> 88
SCHEDULE 2
SECURITY SCHEDULE
1. Assumption Agreement by Borrower of obligations of Addington
Enterprises, Inc.
2. Security Agreement of even date herewith executed by Borrower
("Borrower Security Agreement").
3. Mortgage and Assignment executed by Borrower and Tennessee Mining, Inc.
dated as of October 8, 1997 (the "Kentucky Mortgage").
4. Modification Agreement of even date herewith to the Kentucky Mortgage
(the "Kentucky Amendment").
5. Guaranty of even date herewith executed by Tennessee Mining, Inc. in
favor of Agent and Lenders.
6. Security Agreement of even date herewith executed by Tennessee Mining,
Inc. ("Tennessee Mining Security Agreement").
7. Deed of Trust executed by Borrower and Tennessee Mining, Inc. dated as
of October 8, 1997 (the "Tennessee Deed of Trust").
8. Modification Agreement of even date herewith to the Tennessee Deed of
Trust (the "Tennessee Amendment").
9. Guaranty of even date herewith executed by Ikerd-Bandy Co., Inc in
favor of Agent and Lenders.
10. Security Agreement of even date herewith executed by Ikerd-Bandy Co.,
Inc. (Ikerd- Bandy Security Agreement")
11. Mortgage and Assignment executed by Ikerd-Bandy Co., Inc. dated as of
October 17, 1997 (the "Ikerd Mortgage").
12. Modification Agreement of even date herewith to the Ikerd Mortgage (the
"Ikerd Amendment").
13. Guaranty of even date herewith executed by Addington Mining, Inc. in
favor of Agent and Lenders.
14. Security Agreement of even date herewith executed by Addington Mining,
Inc. ("Addington Mining Security Agreement").
<PAGE> 89
15. Deed of Trust to Public Trustee, Security Agreement, Assignment of
Rents, Income and Proceeds, and Financing Statement dated as of June
17, 1997 from Bowie Resources, Limited to the Public Trustee of the
County of Delta, State of Colorado ("Bowie Mortgage").
16. Amendment of even date herewith to the Bowie Mortgage (the "Bowie
Amendment") (the Kentucky Mortgage, Kentucky Amendment, Tennessee Deed
of Trust, Tennessee Amendment, Ikerd Mortgage, Ikerd Amendment, Bowie
Mortgage, and the Bowie Amendment are collectively referred to as the
"Mortgages").
17. Promissory Note from Bowie Resources, Limited in the amount of
$15,500,000 payable to the order of Borrower.
18. Promissory Note from Bowie Resources, Limited in the amount of
$44,500,000 payable to the order of Borrower.
19. Security Agreement of even date herewith of Bowie Resources, Limited in
favor of Borrower, covering all personal property of Bowie Resources,
Limited ("Bowie Security Agreement").
20. Assignment of Intercompany Notes and Liens and Bowie Mortgage from
Borrower to Agent.
21. Stock Pledge Agreement of even date herewith executed by Larry
Addington in favor of Agent and Lenders ("Larry Addington Stock
Pledge").
22. Stock Pledge Agreement of even date herewith executed by Addington
Enterprises, Inc. in favor of Agent and Lenders ("Addington Enterprises
Stock Pledge") (the Borrower Security Agreement, Tennessee Mining
Security Agreement, Ikerd-Bandy Security Agreement, Bowie Security
Agreement, Addington Mining Security Agreement, Larry Addington Stock
Pledge, and Addington Enterprises Stock Pledge are collectively
referred to as the "Security Agreements").
<PAGE> 90
SCHEDULE 3
<TABLE>
<CAPTION>
LENDERS
-------
Amount
Percentage Share (in millions)
---------------- -------------
<S> <C> <C>
NATIONSBANK OF TEXAS, N.A. 60.0% $30,000,000
LENDING OFFICE FOR BASE RATE LOANS:
NationsBank Plaza
901 Main Street (75202)
Post Office Box 830104
Dallas, Texas 75202
Tel: 214/508-9452
Fax: 214/508-2881
LENDING OFFICE FOR COMMITTED EURODOLLAR LOANS:
Same
THE PROVIDENT BANK 40.0% $20,000,000
LENDING OFFICE FOR BASE RATE LOANS:
One East Fourth Street
Cincinnati, Ohio 45202
Tel: 513/579-2000
Fax: 513/579-2201
LENDING OFFICE FOR COMMITTED EURODOLLAR LOANS:
Same
</TABLE>
<PAGE> 91
SCHEDULE 4
INSURANCE SCHEDULE
<PAGE> 92
INSURANCE SCHEDULE
<TABLE>
<CAPTION>
=============================================================================================================================
TITLE OF POLICY INSURANCE COMPANY POLICY #
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Policy Declarations AIG Energy GL 565-28-99 RA
- -----------------------------------------------------------------------------------------------------------------------------
Commercial Auto Coverage/Business National Union Fire Insurance CA 565-49-06 RA
Auto Declarations Company of Pittsburgh, PA
- -----------------------------------------------------------------------------------------------------------------------------
Workers' Compensation & Employers' Reliance Insurance Company NWA 0139-873
Liability Policy
- -----------------------------------------------------------------------------------------------------------------------------
Commercial Umbrella Declarations AIG Excess BE-932-72-84
- -----------------------------------------------------------------------------------------------------------------------------
Open Cargo Policy - Marine Only Security Insurance Company of Hartford CR 38804A
- -----------------------------------------------------------------------------------------------------------------------------
Crime Policy Reliance Insurance Company B2762127A
- -----------------------------------------------------------------------------------------------------------------------------
Fiduciary Liability Coverage Reliance Insurance Company B2762128
(401(k) Profit Sharing Plan)
- -----------------------------------------------------------------------------------------------------------------------------
Property & Equipment Starr Technical Risks Agency, Inc. ST 2604582
- -----------------------------------------------------------------------------------------------------------------------------
Aviation Insurance Associated Aviation Underwriters 22 BHV 109221
- -----------------------------------------------------------------------------------------------------------------------------
Common Policy Declarations National Union Fire Insurance Company of GL5852606
Pittsburgh, PA
- -----------------------------------------------------------------------------------------------------------------------------
Pollution Legal Liability American International Speciality Lines PLS 0192671
- -----------------------------------------------------------------------------------------------------------------------------
Commercial Auto coverage/Business Auto United States Fire Insurance Co. 1336396869
Declarations
- -----------------------------------------------------------------------------------------------------------------------------
Workers Compensation & Employers Security Insurance of Hartford WC 374843
Liability Policy
- -----------------------------------------------------------------------------------------------------------------------------
Commercial Umbrella Declarations National Union Fire Insurance Company of BE9328704
Pittsburgh, PA
- -----------------------------------------------------------------------------------------------------------------------------
Property & Equipment CIGNA Insurance Company CF120164062
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=============================================================================================================================
TITLE OF POLICY TYPE OF INSURANCE POLICY PERIOD
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Policy Declarations General Liability/Products Liability 8/1/97 to 8/1/98
- -----------------------------------------------------------------------------------------------------------------------------
Commercial Auto Coverage/Business Automobile 8/1/97 to 8/1/98
Auto Declarations
- -----------------------------------------------------------------------------------------------------------------------------
Workers' Compensation & Employers' Workers' Compensation 8/1/97 to 8/1/98
Liability Policy
- -----------------------------------------------------------------------------------------------------------------------------
Commercial Umbrella Declarations Umbrella 8/1/97 to 8/1/98
- -----------------------------------------------------------------------------------------------------------------------------
Open Cargo Policy - Marine Only Cargo - Marine 8/1/97 to 8/1/98
- -----------------------------------------------------------------------------------------------------------------------------
Crime Policy Crime Policies 8/1/97 to 8/1/98
- -----------------------------------------------------------------------------------------------------------------------------
Fiduciary Liability Coverage Coverage on 401(k) Profit Sharing Plan 8/1/97 to 8/1/98
(401(k) Profit Sharing Plan)
- -----------------------------------------------------------------------------------------------------------------------------
Property & Equipment Property & Equipment 4/14/97 to 4/14/98
- -----------------------------------------------------------------------------------------------------------------------------
Aviation Insurance Aircraft Insurance 5/24/97 to 5/24/98
- -----------------------------------------------------------------------------------------------------------------------------
Common Policy Declarations General Liability 6/1/97 to 6/1/98
- -----------------------------------------------------------------------------------------------------------------------------
Pollution Legal Liability Pollution Legal Liability 6/1/97 - 6/1/98
- -----------------------------------------------------------------------------------------------------------------------------
Commercial Auto coverage/Business Auto Automobile 8/5/97 to 8/5/98
Declarations
- -----------------------------------------------------------------------------------------------------------------------------
Workers Compensation & Employers Workers' Compensation 10/1/97 to 10/1/98
Liability Policy
- -----------------------------------------------------------------------------------------------------------------------------
Commercial Umbrella Declarations Umbrella 6/1/97 - 6/1/98
- -----------------------------------------------------------------------------------------------------------------------------
Property & Equipment Property & Equipment 2/14/97 to 2/14/98
=============================================================================================================================
</TABLE>
<PAGE> 93
EXHIBIT A
PROMISSORY NOTE
$___________ Dallas, Texas _________, 1997
FOR VALUE RECEIVED, the undersigned, AEI Holding Company, Inc. a
Delaware corporation (herein called "Borrower"), hereby promises to pay to the
order of NationsBank of Texas, N.A., a national banking association ("Lender"),
the principal sum of Fifty Million Dollars ($50,000,000) or, if greater or less,
the aggregate unpaid principal amount of the Loans made under this Note by
Lender to Borrower pursuant to the terms of the Credit Agreement (as hereinafter
defined), together with interest on the unpaid principal balance thereof as
hereinafter set forth, both principal and interest payable as herein provided in
lawful money of the United States of America at the offices of NationsBank of
Texas, N.A., 901 Main Street, Dallas, Texas or at such other place within Dallas
County, Texas, as from time to time may be designated by the holder of this
Note.
This Note (i) is issued and delivered under that certain Credit
Agreement of even date herewith by and between Borrower, NationsBank of Texas,
N.A., individually and as Agent, and the other Lenders (including Lender)
referred to therein (herein, as from time to time supplemented, amended or
restated, called the "Credit Agreement"), and is a Note as defined therein, (ii)
is subject to the terms and provisions of the Credit Agreement, which contains
provisions for payments and prepayments hereunder and acceleration of the
maturity hereof upon the happening of certain stated events and (iii) is secured
by and entitled to the benefits of certain Security Documents (as identified and
defined in the Credit Agreement). Payments on this Note shall be made and
applied as provided herein and in the Credit Agreement. Reference is hereby made
to the Credit Agreement for a description of certain rights, limitations of
rights, obligations and duties of the parties hereto and for the meanings
assigned to terms used and not defined herein and to the Security Documents for
a description of the nature and extent of the security thereby provided and the
rights of the parties thereto.
This Note is executed in renewal, modification and extension of, but
not in extinguishment or novation of, indebtedness of Borrower to Lender in the
amount of $_________ evidenced by the Original Note (as hereinafter defined),
such indebtedness having been assumed by Borrower pursuant to an Assumption
Agreement of even date herewith among Borrower, Addington Enterprises, Inc.
("Addington") and Agent. As used herein the term "Original Note" means that
certain Promissory Note dated October 8, 1997 made by Addington payable to the
order of Lender in the stated principal amount of $50,000,000.
The principal amount of this Note shall be due and payable in full on
the Maturity Date. This Note is subject to mandatory prepayments as required in
the Credit Agreement.
-1-
<PAGE> 94
Lender's Base Rate Loans (exclusive of any past due principal or
interest) from time to time outstanding shall bear interest on each day
outstanding at the Alternate Base Rate in effect on such day. On each Base Rate
Payment Date, Borrower shall pay to the holder hereof all unpaid interest which
has accrued on Lender's Base Rate Loans to but not including such Base Rate
Payment Date. Each Eurodollar Loan of Lender (exclusive of any past due
principal or interest) shall bear interest on each day during the related
Interest Period at the related Adjusted Eurodollar Rate in effect on such day.
On each Eurodollar Rate Payment Date relating to such Eurodollar Loan, Borrower
shall pay to the holder hereof all unpaid interest which has accrued on such
Eurodollar Loan to but not including such Eurodollar Rate Payment Date. All past
due principal of and past due interest on Lender's Loans shall bear interest on
each day outstanding at the Default Rate in effect on such day, and such
interest shall be due and payable immediately as it accrues.
Notwithstanding the foregoing provisions of this Note, if at any time
the rate at which interest is payable on this Note (considering together all
portions of the Loan and the interest payable thereon) exceeds the Highest
Lawful Rate, this Note shall bear interest at the Highest Lawful Rate only but
shall continue to bear interest at the Highest Lawful Rate until such time as
the total amount of interest accrued hereon equals (but does not exceed) the
total amount of interest which would have accrued hereon had there been no
Highest Lawful Rate applicable hereto.
Notwithstanding the foregoing paragraph and all other provisions of
this Note, in no event shall the interest payable hereon, whether before or
after maturity, exceed the maximum amount of interest which, under applicable
law, may be charged hereon to Borrower, and this Note is expressly made subject
to the provisions of the Credit Agreement which more fully set out the
limitations on how interest accrues hereon. In the event applicable law provides
for a ceiling, such ceiling shall be the "weekly ceiling" (as defined in Section
303 of the Texas Finance Code and Chapter 1D of Title 79, Texas Rev.Civ. Stats.
1925, as amended, respectively) for that day and shall be used in this Note for
calculating the Highest Lawful Rate and for all other purposes. The term
"applicable law" as used in this Note shall mean the laws of the State of Texas
or the laws of the United States, whichever laws allow the greater interest, as
such laws now exist or may be changed or amended or come into effect in the
future.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment for payment, protest, notice of protest,
notice of intention to accelerate the maturity of this Note, notice of the
acceleration of the maturity of this Note, diligence in collecting, the bringing
of any suit against any party and any notice of or defense on account of any
extensions, renewals, partial payments or changes in any manner of or in this
Note or
-2-
<PAGE> 95
in any of its terms, provisions and covenants, or any releases or substitutions
of any security, or any delay, indulgence or other act of any trustee or any
holder hereof, whether before or after maturity.
THIS NOTE AND THE RIGHTS, DUTIES AND LIABILITIES OF THE PARTIES
HEREUNDER AND/OR ARISING FROM OR RELATING IN ANY WAY TO THE INDEBTEDNESS
EVIDENCED BY THIS NOTE OR THE TRANSACTION OF WHICH SUCH INDEBTEDNESS IS A PART
SHALL BE GOVERNED AND CONSTRUED FOR ALL PURPOSES BY THE LAWS OF THE STATE OF
TEXAS, EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE FEDERAL LAW.
AEI HOLDING COMPANY, INC.
By:
--------------------------------------
Name:
Title:
-3-
<PAGE> 96
EXHIBIT B
BORROWING NOTICE
Reference is made to that certain Credit Agreement dated as of November
___, 1997 (as from time to time amended, the "Agreement"), by and among AEI
Holding Company, Inc. ("Borrower"), NationsBank of Texas, N.A., individually and
as Agent, and the lenders referred to therein ("Lenders"). Terms which are
defined in the Agreement are used herein with the meanings given them in the
Agreement.
Borrower hereby requests a Borrowing of new Loans to be advanced
pursuant to Section 2.2(a) of the Agreement as follows:
<TABLE>
<S> <C>
Aggregate amount of Borrowing: $
------------------
Type of Loans in Borrowing: ------------------
Date on which Loans are to
be advanced: ------------------
Length of Interest Period for
Eurodollar Loans (1, 2, 3 or 6 months): ----------- months
If combined with existing Loans
see attached Continuation/Conversion Notice.
</TABLE>
To induce Lenders to make such Loans, Borrower hereby represents, warrants,
acknowledges, and agrees to and with Agent and each Lender that:
(a) The officer of Borrower signing this instrument is the
duly elected, qualified and acting officer of Borrower as indicated
below such officer's signature hereto having all necessary authority to
act for Borrower in making the request herein contained.
(b) The representations and warranties of Restricted Persons
set forth in the Agreement and the other Loan Documents are true and
correct on and as of the date hereof (except to the extent that the
facts on which such representations and warranties are based have been
changed by the extension of credit under the Agreement), with the same
effect as though such representations and warranties had been made on
and as of the date hereof.
(c) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing
as provided in Section 10.1(a) of the Agreement; nor will any such
Default exist upon Borrower's receipt and application of the Borrowing
requested hereby. Borrower will use the Loans hereby requested in
compliance with Section 2.4 of the Agreement.
(d) Except to the extent waived in writing as provided in
Section 10.1(a) of the Agreement, each Restricted Person has performed
and complied with all agreements and conditions in the Agreement
required to be performed or complied
<PAGE> 97
with by such Restricted Person on or prior to the date hereof, and each
of the conditions precedent to Loans contained in the Agreement remains
satisfied.
(e) The aggregate amount of all outstanding Loans, after the
making of the Loans requested hereby, will not be in excess of the
Commitment on the date requested for the making of such Loans.
(f) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any
course of dealing, or by any other means not provided for in Section
10.1(a) of the Agreement. The Agreement and the other Loan Documents
are hereby ratified, approved, and confirmed in all respects.
The officer of Borrower signing this instrument hereby certifies that,
to the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgements, and agreements of Borrower are true, correct and
complete.
IN WITNESS WHEREOF, this instrument is executed as of __________, 19__.
AEI HOLDING COMPANY, INC.
By:
-----------------------------------------------
Name:
Title:
-2-
<PAGE> 98
EXHIBIT C
CONTINUATION/CONVERSION NOTICE
Reference is made to that certain Credit Agreement dated as of November
___, 1997 (as from time to time amended, the "Agreement"), by and among AEI
Holding Company, Inc. ("Borrower"), NationsBank of Texas, N.A., individually and
as Agent, and the lenders referrred to therein ("Lenders"). Terms which are
defined in the Agreement are used herein with the meanings given them in the
Agreement.
Borrower hereby requests a conversion or continuation of existing Loans
into a new Borrowing pursuant to Section 2.3 of the Agreement as follows:
Existing Borrowing(s) to be continued or converted:
$____________ of Eurodollar Loans with Interest Period ending
-------------
$____________ of Base Rate Loans
If being combined with new Loans, $____________ of new Loans
to be advanced on ____________
<TABLE>
<S> <C>
$
Aggregate amount of new Borrowing: ------------------
Type of Loans in new Borrowing: ------------------
Date of continuation or conversion: ------------------
Length of Interest Period for Eurodollar Loans
(1, 2, 3 or 6 months): ----------- months
</TABLE>
To meet the conditions set out in the Agreement for such
conversion/continuation, Borrower hereby represents, warrants, acknowledges, and
agrees to and with Agent and each Lender that:
(a) The officer of Borrower signing this instrument is the
duly elected, qualified and acting officer of Borrower as indicated
below such officer's signature hereto having all necessary authority to
act for Borrower in making the request herein contained.
(b) There does not exist on the date hereof any condition or
event which constitutes a Default which has not been waived in writing
as provided in Section 10.1(a) of the Agreement.
(c) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any
course of dealing, or by any other means not provided for in Section
10.1(a) of the Agreement. The Agreement
<PAGE> 99
and the other Loan Documents are hereby ratified, approved, and
confirmed in all respects.
The officer of Borrower signing this instrument hereby certifies that,
to the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgements, and agreements of Borrower are true, correct and
complete.
IN WITNESS WHEREOF this instrument is executed as of _________________.
AEI HOLDING COMPANY, INC.
By:
-----------------------------------------------
Name:
Title:
-2-
<PAGE> 100
EXHIBIT D
CERTIFICATE ACCOMPANYING FINANCIAL STATEMENTS
Reference is made to that certain Credit Agreement dated November ___,
1997 (as from time to time amended, the "Credit Agreement"), by and among AEI
Holding Company, Inc., ("Borrower"), NationsBank of Texas, N.A., individually
and as Agent, and lenders referred to therein ("Lenders"). Terms which are
defined in the Credit Agreement and which are used but not defined herein shall
have the meanings given them in the Credit Agreement.
The undersigned, ______________________________, does hereby certify
that he is the duly elected, qualified and acting
__________________________________ of Borrower. The undersigned hereby certifies
that he has made a thorough inquiry into all matters certified herein and based
upon such inquiry does hereby further certify that:
1. Attached hereto are statements confirming Borrower's
compliance (or failure to comply) with the requirements of Sections of the
Credit Agreement and calculations showing all of the foregoing, if applicable.
2. Concurrently herewith Borrower is delivering to Lenders
[INSERT THE FINANCIAL STATEMENTS BEING DELIVERED] and all such financial
statements are materially complete.
3. He has reviewed the Loan Documents and carried out or caused
to be carried out such further review as is necessary to enable him to express
an informed opinion as to compliance with the Loan Documents and that to the
best of his knowledge there is no condition or event at the date of the balance
sheet referred to in paragraph 2 above or at the date of this certificate which
constitutes an Event of Default or a Default [EXCEPT NOTE ANY CONDITION OR EVENT
AND THE NATURE AND PERIOD OF EXISTENCE OF SUCH CONDITION OR EVENT].
IN WITNESS WHEREOF, this instrument is executed by the undersigned on
this ____ day of _________________, 19__.
AEI HOLDING COMPANY, INC.
By:
---------------------------------
Name:
Title:
<PAGE> 101
EXHIBIT E
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of November ___,
1997 (the "Credit Agreement") by and among AEI Holding Company, Inc.,
("Borrower"), NationsBank of Texas, N.A., individually and as Agent, and the
lenders referred to therein ("Lenders"). Terms defined in the Credit Agreement
are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, without
recourse and without representation or warranty except as expressly set forth
herein, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents as of the date hereof equal to the
percentage interest specified on Schedule 1 of all outstanding rights and
obligations under the Credit Agreement and the other Loan Documents. After
giving effect to such sale and assignment, the Assignee's Commitment [and][,]
the amount of the Loans owing to the Assignee will be as set forth on Schedule
1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Restricted Person
or the performance or observance by any Restricted Person of any of its
obligations under the Loan Documents or any other instrument or document
furnished pursuant thereto; and (iv) attaches the Note held by the Assignor and
requests that Agent exchange such Note for new Notes payable to the order of the
Assignee in an amount equal to the Commitment assumed by the Assignee pursuant
hereto and to the Assignor in an amount equal to the Commitment retained by the
Assignor, if any, as specified on Schedule 1.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 6.1(b) thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) confirms that it is an Eligible Transferee; (iv) appoints and
authorizes Agent to take such action as agent on its behalf and to exercise such
powers and discretion under the Credit Agreement as are delegated to Agent by
the terms thereof, together with such powers and discretion as are reasonably
incidental thereto; (v) agrees that it will perform in accordance with their
terms all of the obligations that by the terms of the Credit Agreement are
required
<PAGE> 102
to be performed by it as a Lender; and (vi) attaches any U.S. Internal Revenue
Service or other forms required under Section 3.7(d).
4. Following the execution of this Assignment and Acceptance, it will
be delivered to Agent for acceptance and recording by Agent. The effective date
for this Assignment and Acceptance (the "Effective Date") shall be the date of
acceptance hereof by Agent, unless otherwise specified on Schedule 1.
5. Upon such acceptance and recording by Agent, as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by Agent, from and after the
Effective Date, Agent shall make all payments under the Credit Agreement and the
Notes in respect of the interest assigned hereby (including, without limitation,
all payments of principal, interest and commitment fees with respect thereto) to
the Assignee. The Assignor and Assignee shall make all appropriate adjustments
in payments under the Credit Agreement and the Notes for periods prior to the
Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of Texas.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule
1 to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
-2-
<PAGE> 103
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
<TABLE>
<S> <C>
Percentage interest assigned by Assignor:
--------%
Aggregate outstanding principal amount
of Loans assigned: $
-------
Principal amount of New Note payable to Assignor: $
-------
Principal amount of Note payable to Assignee: $
-------
Effective Date (if other than date
of acceptance by Agent): *_______, 19__
</TABLE>
[NAME OF ASSIGNOR], as Assignor
By:
-----------------------------
Name:
Title:
Dated: , 19
--------------- -
[NAME OF ASSIGNEE], as Assignee
By:
-----------------------------
Name:
Title:
<PAGE> 104
Accepted [and Approved] **
this ___ day of ___________, 19 _
NATIONSBANK OF TEXAS, N.A.
By:
-------------------------------------
Name:
Title:
[Approved this ____ day
of ____________, 19__
AEI HOLDING COMPANY, INC.
By:
-------------------------------------
Name:
Title:
** Required if the Assignee is an Eligible Transferee solely by reason of
clause (b) of the definition of "Eligible Transferee".
-2-
<PAGE> 105
EXHIBIT F
GUARANTY
[Subsidiary Name]
THIS GUARANTY is made as of November 11, 1997, by [Subsidiary], a
__________ corporation ("Guarantor"), in favor of NationsBank of Texas, N.A., a
national banking association, individually and as agent for Lenders, as such
term is defined in the Credit Agreement described below (in such capacities
"Agent").
RECITALS:
1. AEI Holding Company, Inc., a Kentucky corporation ("Borrower"), has
executed that certain Promissory Note dated November**, 1997, payable to the
order of NationsBank of Texas, N.A. in the original principal amount of
$30,000,000 and that certain Promissory Note dated November**, 1997, payable to
the order of The Provident Bank in the original principal amount of $20,000,000
(such Promissory Notes, as from time to time amended, and all promissory notes
given in substitution, renewal or extension therefor or thereof, in whole or in
part, being herein collectively called the "Notes").
2. The Notes were executed pursuant to a Credit Agreement dated
November**, 1997, (herein, as from time to time amended, supplemented or
restated, called the "Credit Agreement"), by and between Borrower and Agent,
pursuant to which funds are to be advanced to Borrower under the Notes which
funds may be advanced by Borrower to its Affiliates, including Guarantor.
3. It is a condition precedent to Lenders' obligations to advance funds
pursuant to the Credit Agreement that Guarantor shall execute and deliver to
Agent a satisfactory guaranty of Borrower's obligations under the Notes and the
Credit Agreement.
4. Borrower owns directly, or indirectly through one or more
subsidiaries, one hundred percent (100%) of the outstanding shares of stock of
Guarantor.
5. Borrower, Guarantor, and the other direct and indirect subsidiaries
of Borrower are mutually dependent on each other in the conduct of their
respective businesses under a holding company structure, with the credit needed
from time to time by each often being provided by another or by means of
financing obtained by one such affiliate with the support of the others for
their mutual benefit and the ability of each to obtain such financing being
dependent on the successful operations of the others.
6. The board of directors of Guarantor has determined that Guarantor's
execution, delivery and performance of this Guaranty may reasonably be expected
to benefit Guarantor, directly or indirectly, and are in the best interests of
Guarantor.
<PAGE> 106
NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Guarantor from Lenders' advances of funds to Borrower under the
Credit Agreement, and of Ten Dollars and other good and valuable consideration,
the receipt and sufficiency of all of which are hereby acknowledged, and in
order to induce Lenders to advance funds under the Credit Agreement, Guarantor
hereby agrees with Agent, for the benefit of Agent and Lenders as follows:
AGREEMENTS
Section 1. Definitions. Reference is hereby made to the Credit
Agreement for all purposes. All terms used in this Guaranty which are defined in
the Credit Agreement and not otherwise defined herein shall have the same
meanings when used herein. All references herein to any Obligation Document,
Loan Document, or other document or instrument refer to the same as from time to
time amended, supplemented or restated. As used herein the following terms shall
have the following meanings:
"Agent" means the Person who, at the time in question, is the "Agent"
under the Credit Agreement. Whenever there is only one Lender under the Credit
Agreement, "Agent" shall also refer to such Lender in such capacity as the only
Lender.
"Lenders" means NationsBank of Texas, N.A. and all other Persons who at
any time are "Lenders" under the Credit Agreement.
"Obligations" means collectively all of the indebtedness, obligations,
and undertakings which are guaranteed by Guarantor and described in subsections
(a) and (b) of Section 2.
"Obligation Documents" means this Guaranty, the Notes, the Credit
Agreement, the Loan Documents.
"Obligors" means Borrower, Guarantor and any other endorsers,
guarantors or obligors, primary or secondary, of any or all of the Obligations.
"Security" means any rights, properties, or interests of Agent or
Lenders, under the Obligation Documents or otherwise, which provide recourse or
other benefits to Agent or Lenders in connection with the Obligations or the
non-payment or non-performance thereof, including collateral (whether real or
personal, tangible or intangible) in which Agent or Lenders have rights under or
pursuant to any Obligation Documents, guaranties of the payment or performance
of any Obligation, bonds, surety agreements, keep-well agreements, letters of
credit, rights of subrogation, rights of offset, and rights pursuant to which
other claims are subordinated to the Obligations.
Section 2. Guaranty.
2
<PAGE> 107
(a) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to Agent and each Lender the prompt, complete, and full payment when
due, and no matter how the same shall become due, of:
(i) the Notes, including all principal, all interest
thereon and all other sums payable thereunder; and
(ii) All other sums payable under the other Obligation
Documents, whether for principal, interest, fees or otherwise; and
(iii) Any and all other indebtedness or liabilities which
Borrower may at any time owe to Agent or any Lender, whether incurred
heretofore or hereafter or concurrently herewith, voluntarily or
involuntarily, whether owed alone or with others, whether fixed,
contingent, absolute, inchoate, liquidated or unliquidated, whether
such indebtedness or liability arises by notes, discounts, overdrafts,
open account indebtedness or in any other manner whatsoever, and
including interest, attorneys' fees and collection costs as may be
provided by law or in any instrument evidencing any such indebtedness
or liability.
Without limiting the generality of the foregoing, Guarantor's obligations
hereunder shall extend to and include all post-petition interest, expenses, and
other duties and liabilities of Borrower described above in this subsection (a),
or below in the following subsection (b), which would be owed by Borrower but
for the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization, or similar proceeding involving Borrower.
(b) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to Agent and each Lender the prompt, complete and full performance,
when due, and no matter how the same shall become due, of all obligations and
undertakings of Borrower to Agent or such Lender under, by reason of, or
pursuant to any of the Obligation Documents.
(c) If Borrower shall for any reason fail to pay any Obligation, as and
when such Obligation shall become due and payable, whether at its stated
maturity, as a result of the exercise of any power to accelerate, or otherwise,
Guarantor will, forthwith upon demand by Agent, pay such Obligation in full to
Agent for the benefit of Agent or the Lender to whom such Obligation is owed. If
Borrower shall for any reason fail to perform promptly any Obligation, Guarantor
will, forthwith upon demand by Agent, cause such Obligation to be performed or,
if specified by Agent, provide sufficient funds, in such amount and manner as
Agent shall in good faith determine, for the prompt, full and faithful
performance of such Obligation by Agent or such other Person as Agent shall
designate.
(d) If either Borrower or Guarantor fails to pay or perform any
Obligation as described in the immediately preceding subsections (a), (b), or
(c) Guarantor will incur the additional obligation to pay to Agent, and
Guarantor will forthwith upon demand by Agent pay to Agent, the amount of any
and all expenses, including fees and disbursements of
3
<PAGE> 108
Agent's counsel and of any experts or agents retained by Agent, which Agent may
incur as a result of such failure.
(e) As between Guarantor and Agent or Lenders, this Guaranty shall be
considered a primary and liquidated liability of Guarantor.
(f) The obligations of Guarantor hereunder shall be limited to an
aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provisions of any applicable state or
federal law.
Section 3. Unconditional Guaranty.
(a) No action which Agent or any Lender may take or omit to take in
connection with any of the Obligation Documents, any of the Obligations (or any
other indebtedness owing by Borrower to Agent or any Lender), or any Security,
and no course of dealing of Agent or any Lender with any Obligor or any other
Person, shall release or diminish Guarantor's obligations, liabilities,
agreements or duties hereunder, affect this Guaranty in any way, or afford
Guarantor any recourse against Agent or any Lender, regardless of whether any
such action or inaction may increase any risks to or liabilities of Agent or any
Lender or any Obligor or increase any risk to or diminish any safeguard of any
Security. Without limiting the foregoing, Guarantor hereby expressly agrees that
Agent and Lenders may, from time to time, without notice to or the consent of
Guarantor, do any or all of the following:
(i) Amend, change or modify, in whole or in part, any one or
more of the Obligation Documents and give or refuse to give any waivers
or other indulgences with respect thereto.
(ii) Neglect, delay, fail, or refuse to take or prosecute any
action for the collection or enforcement of any of the Obligations, to
foreclose or take or prosecute any action in connection with any
Security or Obligation Document, to bring suit against any Obligor or
any other Person, or to take any other action concerning the
Obligations or the Obligation Documents.
(iii) Accelerate, change, rearrange, extend, or renew the
time, rate, terms, or manner for payment or performance of any one or
more of the Obligations (whether for principal, interest, fees,
expenses, indemnifications, affirmative or negative covenants, or
otherwise).
(iv) Compromise or settle any unpaid or unperformed
Obligation or any other obligation or amount due or owing, or claimed
to be due or owing, under any one or more of the Obligation Documents.
4
<PAGE> 109
(v) Take, exchange, amend, eliminate, surrender, release, or
subordinate any or all Security for any or all of the Obligations,
accept additional or substituted Security therefor, and perfect or fail
to perfect Agent's or Lenders' rights in any or all Security.
(vi) Discharge, release, substitute or add Obligors.
(vii) Apply all monies received from Obligors or others, or
from any Security for any of the Obligations, as Agent or Lenders may
determine to be in their best interest, without in any way being
required to marshall Security or assets or to apply all or any part of
such monies upon any particular Obligations.
(b) No action or inaction of any Obligor or any other Person, and no
change of law or circumstances, shall release or diminish Guarantor's
obligations, liabilities, agreements, or duties hereunder, affect this Guaranty
in any way, or afford Guarantor any recourse against Agent or any Lender.
Without limiting the foregoing, the obligations, liabilities, agreements, and
duties of Guarantor under this Guaranty shall not be released, diminished,
impaired, reduced, or affected by the occurrence of any or all of the following
from time to time, even if occurring without notice to or without the consent of
Guarantor:
(i) Any voluntary or involuntary liquidation, dissolution,
sale of all or substantially all assets, marshalling of assets or
liabilities, receivership, conservatorship, assignment for the benefit
of creditors, insolvency, bankruptcy, reorganization, arrangement, or
composition of any Obligor or any other proceedings involving any
Obligor or any of the assets of any Obligor under laws for the
protection of debtors, or any discharge, impairment, modification,
release, or limitation of the liability of, or stay of actions or lien
enforcement proceedings against, any Obligor, any properties of any
Obligor, or the estate in bankruptcy of any Obligor in the course of or
resulting from any such proceedings.
(ii) The failure by Agent or any Lender to file or enforce a
claim in any proceeding described in the immediately preceding
subsection (i) or to take any other action in any proceeding to which
any Obligor is a party.
(iii) The release by operation of law of any Obligor from any
of the Obligations or any other obligations to Agent or any Lender.
(iv) The invalidity, deficiency, illegality, or
unenforceability of any of the Obligations or the Obligation Documents,
in whole or in part, any bar by any statute of limitations or other law
of recovery on any of the Obligations, or any defense or excuse for
failure to perform on account of force majeure, act of God, casualty,
impossibility, impracticability, or other defense or excuse whatsoever.
5
<PAGE> 110
(v) The failure of any Obligor or any other Person to sign
any guaranty or other instrument or agreement within the contemplation
of any Obligor, Agent or any Lender.
(vi) The fact that Guarantor may have incurred directly part
of the Obligations or is otherwise primarily liable therefor.
(vii) Without limiting any of the foregoing, any fact or event
(whether or not similar to any of the foregoing) which in the absence
of this provision would or might constitute or afford a legal or
equitable discharge or release of or defense to a guarantor or surety
other than the actual payment and performance by Guarantor under this
Guaranty.
(c) Agent and Lenders may invoke the benefits of this Guaranty before
pursuing any remedies against any Obligor or any other Person and before
proceeding against any Security now or hereafter existing for the payment or
performance of any of the Obligations. Agent and Lenders may maintain an action
against Guarantor on this Guaranty without joining any other Obligor therein and
without bringing a separate action against any other Obligor.
(d) If any payment to Agent or any Lender by any Obligor is held to
constitute a preference or a voidable transfer under applicable state or federal
laws, or if for any other reason Agent or any Lender is required to refund such
payment to the payor thereof or to pay the amount thereof to any other Person,
such payment to Agent or such Lender shall not constitute a release of Guarantor
from any liability hereunder, and Guarantor agrees to pay such amount to Agent
or such Lender on demand and agrees and acknowledges that this Guaranty shall
continue to be effective or shall be reinstated, as the case may be, to the
extent of any such payment or payments. Any transfer by subrogation which is
made as contemplated in Section 6 prior to any such payment or payments shall
(regardless of the terms of such transfer) be automatically voided upon the
making of any such payment or payments, and all rights so transferred shall
thereupon revert to and be vested in Agent and Lenders.
(e) This is a continuing guaranty and shall apply to and cover all
Obligations and renewals and extensions thereof and substitutions therefor from
time to time.
Section 4. Waiver. Guarantor hereby waives, with respect to the
Obligations, this Guaranty, and the other Obligation Documents:
(a) notice of the incurrence of any Obligation by Borrower, and notice
of any kind concerning the assets, liabilities, financial condition,
creditworthiness, businesses, prospects, or other affairs of Borrower (it being
understood and agreed that: (i) Guarantor shall take full responsibility for
informing itself of such matters, (ii) neither Agent nor any Lender shall have
any responsibility of any kind to inform Guarantor of such matters, and (iii)
Agent and Lenders are hereby authorized to assume that Guarantor, by virtue of
its relationships with Borrower which are independent of this Guaranty, has full
and complete knowledge of such
6
<PAGE> 111
matters whenever Lenders extend credit to Borrower or take any other action
which may change or increase Guarantor's liabilities or losses hereunder).
(b) notice that Agent, any Lender, any Obligor, or any other Person has
taken or omitted to take any action under any Obligation Document or any other
agreement or instrument relating thereto or relating to any Obligation.
(c) notice of acceptance of this Guaranty and all rights of Guarantor
under ss.34.02 of the Texas Business and Commerce Code.
(d) demand, presentment for payment, and notice of demand, dishonor,
nonpayment, or nonperformance.
(e) notice of intention to accelerate, notice of acceleration, protest,
notice of protest, notice of any exercise of remedies (as described in the
following Section 5 or otherwise), and all other notices of any kind whatsoever.
Section 5. Exercise of Remedies. Agent, on behalf of Lenders, shall
have the right to enforce, from time to time, in any order and at Agent's sole
discretion, any rights, powers and remedies which Agent, on behalf of Lenders,
may have under the Obligation Documents or otherwise, including judicial
foreclosure, the exercise of rights of power of sale, the taking of a deed or
assignment in lieu of foreclosure, the appointment of a receiver to collect
rents, issues and profits, the exercise of remedies against personal property,
or the enforcement of any assignment of leases, rentals, oil or gas production,
or other properties or rights, whether real or personal, tangible or intangible;
and Guarantor shall be liable to Agent, on behalf of Lenders, hereunder for any
deficiency resulting from the exercise by Agent or any Lender of any such right
or remedy even though any rights which Guarantor may have against Borrower or
others may be destroyed or diminished by exercise of any such right or remedy.
No failure on the part of Agent, on behalf of Lenders, to exercise, and no delay
in exercising, any right hereunder or under any other Obligation Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right preclude any other or further exercise thereof or the exercise of any
other right. The rights, powers and remedies of Agent, on behalf of Lenders,
provided herein and in the other Obligation Documents are cumulative and are in
addition to, and not exclusive of, any other rights, powers or remedies provided
by law or in equity. The rights of Agent, on behalf of Lenders, hereunder are
not conditional or contingent on any attempt by Agent or any Lender to exercise
any of its rights under any other Obligation Document against any Obligor or any
other Person.
Section 6. Limited Subrogation. Until all of the Obligations have been
paid and performed in full Guarantor shall have no right to exercise any right
of subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which it may now or hereafter have against or to any Obligor or any
Security in connection with this Guaranty (including any right of subrogation
under ss.34.04 of the Texas Business and Commerce Code), and Guarantor hereby
waives any rights to enforce any remedy which Guarantor may
7
<PAGE> 112
have against Borrower and any right to participate in any Security until such
time. If any amount shall be paid to Guarantor on account of any such
subrogation or other rights, any such other remedy, or any Security at any time
when all of the Obligations and all other expenses guaranteed pursuant hereto
shall not have been paid in full, such amount shall be held in trust for the
benefit of Agent, shall be segregated from the other funds of Guarantor and
shall forthwith be paid over to Agent to be held by Agent as collateral for, or
then or at any time thereafter applied in whole or in part by Agent against, all
or any portion of the Obligations, whether matured or unmatured, in such order
as Agent shall elect. If Guarantor shall make payment to Agent of all or any
portion of the Obligations and if all of the Obligations shall be finally paid
in full, Agent will, at Guarantor's request and expense, execute and deliver to
Guarantor (without recourse, representation or warranty) appropriate documents
necessary to evidence the transfer by subrogation to Guarantor of an interest in
the Obligations resulting from such payment by Guarantor; provided that such
transfer shall be subject to Section [3(d)] above and that without the consent
of Agent (which Agent may withhold in its discretion) Guarantor shall not have
the right to be subrogated to any claim or right against any Obligor which has
become owned by Agent or any Lender, whose ownership has otherwise changed in
the course of enforcement of the Obligation Documents, or which Agent otherwise
has released or wishes to release from its Obligations.
Section 7. Successors and Assigns. Guarantor's rights or obligations
hereunder may not be assigned or delegated, but this Guaranty and such
obligations shall pass to and be fully binding upon the successors of Guarantor,
as well as Guarantor. This Guaranty shall apply to and inure to the benefit of
Agent and Lenders and their successors or assigns. Without limiting the
generality of the immediately preceding sentence, Agent and each Lender may
assign, grant a participation in, or otherwise transfer any Obligation held by
it or any portion thereof, and Agent and each Lender may assign or otherwise
transfer its rights or any portion thereof under any Obligation Document, to any
other Person, and such other Person shall thereupon become vested with all of
the benefits in respect thereof granted to Agent or such Lender hereunder unless
otherwise expressly provided by Agent or such Lender in connection with such
assignment or transfer.
Section 8. Offset. Guarantor hereby grants to Lenders a right of offset
to secure the payment of the Obligations and Guarantor's obligations and
liabilities hereunder, which right of offset shall be upon any and all monies,
securities and other property (and the proceeds therefrom) of Guarantor now or
hereafter held or received by or in transit to Agent or any Lender from or for
the account of Guarantor, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special), credits and claims of Guarantor at any time existing
against Agent or any Lender. Upon the occurrence of any Default or Event of
Default Agent and each Lender is hereby authorized at any time and from time to
time, without notice to Guarantor, to offset, appropriate and apply any and all
items hereinabove referred to against the Obligations and Guarantor's
obligations and liabilities hereunder irrespective of whether or not Agent or
such Lender shall have made any demand under this Guaranty and although such
obligations and liabilities may be contingent or unmatured. Agent and each
Lender agrees promptly to notify Guarantor after any such offset and application
made by Agent or such Lender, provided that the failure to
8
<PAGE> 113
give such notice shall not affect the validity of such offset and application.
The rights of Agent and each Lender under this section are in addition to, and
shall not be limited by, any other rights and remedies (including other rights
of offset) which Agent and Lenders may have.
Section 9. Representations and Warranties. Guarantor hereby represents
and warrants to Agent and each Lender as follows:
(a) The Recitals at the beginning of this Guaranty are true and correct
in all respects.
(b) Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation as set forth in
the Recitals to this Guaranty; and Guarantor has all requisite power and
authority to execute, deliver and perform this Guaranty.
(c) The execution, delivery and performance by Guarantor of this
Guaranty have been duly authorized by all necessary corporate action and do not
and will not contravene its certificate or articles of incorporation or bylaws.
(d) The execution, delivery and performance by Guarantor of this
Guaranty do not and will not contravene any law or governmental regulation or
any contractual restriction binding on or affecting Guarantor or any of its
Affiliates or properties, and do not and will not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties.
(e) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body or third
party is required for the due execution, delivery and performance by Guarantor
of this Guaranty.
(f) This Guaranty is a legal, valid and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its terms except as
limited by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors' rights.
(g) There is no action, suit or proceeding pending or, to the knowledge
of Guarantor, threatened against or otherwise affecting Guarantor before any
court, arbitrator or governmental department, commission, board, bureau, agency
or instrumentality which may materially and adversely affect Guarantor's
financial condition or its ability to perform its obligations hereunder.
(h) The direct or indirect value of the consideration received and to
be received by Guarantor in connection herewith is reasonably worth at least as
much as the liability and obligations of Guarantor hereunder, and the incurrence
of such liability and obligations in return for such consideration may
reasonably be expected to benefit Guarantor, directly or indirectly.
9
<PAGE> 114
(i) Guarantor is not "insolvent" on the date hereof (that is, the sum
of Guarantor's absolute and contingent liabilities, including the Obligations,
does not exceed the fair market value of Guarantor's assets). Guarantor's
capital is adequate for the businesses in which Guarantor is engaged and intends
to be engaged. Guarantor has not incurred (whether hereby or otherwise), nor
does Guarantor intend to incur or believe that it will incur, debts which will
be beyond its ability to pay as such debts mature.
(j) All balance sheets, earning statements, financial data and other
information concerning Guarantor which have been furnished to Agent and each
Lender to induce it to accept this Guaranty (or otherwise furnished to Agent and
each Lender in connection with the transactions contemplated hereby or
associated herewith) fairly represent the financial condition of Guarantor as of
the dates and the results of Guarantor's operations for the periods for which
the same are furnished. None of such balance sheets, earnings and cash flow
statements, financial data and other information contains any untrue statement
of a material fact or omits to state any material fact which is necessary to
make any statements contained therein not misleading.
Section 10. No Oral Change. No amendment of any provision of this
Guaranty shall be effective unless it is in writing and signed by Guarantor and
Lenders, and no waiver of any provision of this Guaranty, and no consent to any
departure by Guarantor therefrom, shall be effective unless it is in writing and
signed by Lenders, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
Section 11. Invalidity of Particular Provisions. If any term or
provision of this Guaranty shall be determined to be illegal or unenforceable
all other terms and provisions hereof shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by applicable law.
Section 12. Headings and References. The headings used herein are for
purposes of convenience only and shall not be used in construing the provisions
hereof. The words "this Guaranty," "this instrument," "herein," "hereof,"
"hereby" and words of similar import refer to this Guaranty as a whole and not
to any particular subdivision unless expressly so limited. The phrases "this
section" and "this subsection" and similar phrases refer only to the
subdivisions hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
Section 13. Term. This Guaranty shall be irrevocable until all of the
Obligations have been completely and finally paid and performed, no Lender has
any obligation to make any loans or other advances to Borrower, and all
obligations and undertakings of Borrower under, by reason of, or pursuant to the
Obligation Documents have been completely performed, and this Guaranty is
thereafter subject to reinstatement as provided in Section
10
<PAGE> 115
3(d). All extensions of credit and financial accommodations heretofore or
hereafter made by Agent or Lenders to Borrower shall be conclusively presumed to
have been made in acceptance hereof and in reliance hereon.
Section 14. Notices. Any notice or communication required or permitted
hereunder shall be given as provided in the Credit Agreement.
Section 15. Limitation on Interest. Agent, Lenders and Guarantor intend
to contract in strict compliance with applicable usury law from time to time in
effect, and the provisions of the Credit Agreement limiting the interest for
which Guarantor is obligated are expressly incorporated herein by reference.
Section 16. Loan Document. This Guaranty is a Loan Document, as defined
in the Credit Agreement, and is subject to the provisions of the Credit
Agreement governing Loan Documents. Guarantor hereby approves all provisions of
the Credit Agreement and the other Loan Documents and ratifies and confirms any
provisions thereof which relate to Guarantor.
Section 17. Counterparts. This Guaranty may be executed in any number
of counterparts, each of which when so executed shall be deemed to constitute
one and the same Guaranty.
SECTION 18. GOVERNING LAW; SUBMISSION TO PROCESS. (I) THIS GUARANTY
SHALL BE DEEMED A CONTRACT MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. GUARANTOR HEREBY AGREES THAT ANY LEGAL ACTION OR
PROCEEDING AGAINST GUARANTOR WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE
NORTHERN DISTRICT OF TEXAS AS LENDER PARTIES MAY ELECT, AND, BY EXECUTION AND
DELIVERY HEREOF, GUARANTOR ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS, AND FURTHER AGREES TO A TRANSFER OF ANY SUCH PROCEEDING TO A FEDERAL
COURT SITTING IN THE STATE OF TEXAS TO THE EXTENT THAT IT HAS SUBJECT MATTER
JURISDICTION, AND OTHERWISE TO A STATE COURT IN TEXAS. GUARANTOR WAIVES ANY
RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS
ON THE BASIS OF FORUM NON CONVENIENS. IN FURTHERANCE OF THE FOREGOING, GUARANTOR
HEREBY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, 350 NORTH ST. PAUL STREET,
DALLAS, TEXAS 75201, AS AGENT OF GUARANTOR TO RECEIVE SERVICE OF ALL PROCESS
BROUGHT AGAINST GUARANTOR WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH COURT
IN TEXAS, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY GUARANTOR TO BE EFFECTIVE
AND BINDING SERVICE
11
<PAGE> 116
IN EVERY RESPECT. COPIES OF ANY SUCH PROCESS SO SERVED SHALL ALSO, IF PERMITTED
BY LAW, BE SENT BY REGISTERED MAIL TO GUARANTOR AT ITS ADDRESS SET FORTH IN THE
CREDIT AGREEMENT, BUT THE FAILURE OF GUARANTOR TO RECEIVE SUCH COPIES SHALL NOT
AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS AS AFORESAID. GUARANTOR SHALL
FURNISH TO LENDER PARTIES A CONSENT OF CT CORPORATION SYSTEM AGREEING TO ACT
HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF LENDER PARTIES TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER PARTIES TO BRING PROCEEDINGS
AGAINST GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION. GUARANTOR SHALL NOT
REVOKE SUCH APPOINTMENT BUT IF FOR ANY REASON CT CORPORATION SYSTEM SHALL RESIGN
OR OTHERWISE CEASE TO ACT AS GUARANTOR'S AGENT, GUARANTOR HEREBY IRREVOCABLY
AGREES TO (A) IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT ACCEPTABLE TO AGENT
TO SERVE IN SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW AGENT SHALL BE DEEMED TO
BE SUBSTITUTED FOR CT CORPORATION SYSTEM FOR ALL PURPOSES HEREOF AND (B)
PROMPTLY DELIVER TO LENDER PARTIES THE WRITTEN CONSENT (IN FORM AND SUBSTANCE
SATISFACTORY TO AGENT) OF SUCH NEW AGENT AGREEING TO SERVE IN SUCH CAPACITY.
(II) GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND
IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (B) WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW, (C) CERTIFIES THAT NEITHER
IT NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR GUARANTOR HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE WAIVERS
AND CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION, "SPECIAL
DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES
(REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH
GUARANTOR HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO AGENT OR LENDERS.
12
<PAGE> 117
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date first written above.
[SUBSIDIARY NAME]
By:
-------------------------------
Name:
Title:
13
<PAGE> 118
[NATIONSBANK LOGO] APPLICATION AND AGREEMENT EXHIBIT H
FOR STANDBY LETTER OF CREDIT
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
LETTER OF CREDIT DEPARTMENT Letter of Credit Number Date
Please issue an Irrevocable Letter of Credit in favor of the (For NationsBank use only)
Beneficiary substantially as shown below and deliver the Credit by
[ ] Regular Mail [ ] Airmail [ ] Courier [ ] Teletransmission
- -----------------------------------------------------------------------------------------------------------------------------------
Applicant (full name and mailing address) BENEFICIARY (full name and mailing address; if courier
delivery requested full street address must
be provided)
For Account of (if different from Applicant)
- -----------------------------------------------------------------------------------------------------------------------------------
Advising Bank (if left blank, NationsBank will choose as appropriate) Amount (in figures and words)
Currency (if left blank, U.S. dollars will apply)
--------------------------------------------------------
Expiry Date (draft must be presented to drawee or for
negotiation [when negotiable] on or before)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Available by draft(s) at SIGHT drawn at NationsBank's option, on NationsBank or
NationsBank's correspondent when accompanied by the following document(s):
(Please check the documents and fill in the blanks below as applicable)
[ ] A written statement purportedly signed by (if left blank the Beneficiary)
________________________ with the following wording:
Quote
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Close Quote
- ---------------------------------------------------------------------
[ ] Other
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] Issue as per attached exhibit marked exhibit ___________________ (exhibit
must be signed by the Applicant and becomes an integral part of this
Application).
<PAGE> 119
NOTE: If the Credit provides for automatic withdrawal without amendment,
Applicant agrees that it will notify NationsBank in writing at least sixty (60)
days prior to the last day specified in the Credit by which NationsBank must
give notice of nonrenewal as to whether or not it wishes the Credit to be
renewed. Any decision to renew or not renew the Credit shall be in
NationsBank's sole discretion. Applicant hereby acknowledges that in the event
NationsBank notifies the Beneficiary of the Credit that it has elected not to
renew the Credit, the Credit may be drawn on if permitted by the terms of the
Credit and further acknowledges and agrees that Applicant shall have no claim
or cause of action against NationsBank or defense against payment under the
Agreement for NationsBank's renewal or non-renewal of the Credit in the
exercise of NationsBank's discretion as set forth above.
Multiple Drawings [ ] PROHIBITED (permitted if left blank)
- -------------------------------------------------------------------------------
Special Instructions to NationsBank NOT TO BE INCLUDED IN THE CREDIT (if any):
- -------------------------------------------------------------------------------
The terms and conditions set out above and below, and any attached exhibits,
supplements or schedules referred to in this Application, have been reviewed by
Applicant, and by Applicant's signature below and for good and valuable
consideration, Applicant agrees to the same and to be obligated and liable
under the Agreement. In the event this Application requests an Account Party
different from Applicant, then such party will sign below as Co-Applicant.
COMPLETION AND SUBMITTAL OF THIS APPLICATION BY APPLICANT DOES NOT OBLIGATE
NATIONSBANK TO ENTER INTO THE AGREEMENT OR ISSUE THE REQUESTED CREDIT.
<TABLE>
<S> <C>
- ------------------------------------------------------------- ------------------------------------------------------------------
Name of Company, or signature if Applicant is an individual Name of Company, or signature if Co-Applicant is an individual
By By
----------------------------------------------------------- ----------------------------------------------------------------
Authorized Signature Title Authorized Signature Title
- ------------------------------------------------------------- ------------------------------------------------------------------
Address Address
- ------------------------------------------------------------- ------------------------------------------------------------------
- ------------------------------------------------------------- ------------------------------------------------------------------
- ------------------------------------------------------------- ------------------------------------------------------------------
Telephone Fax Telephone Fax
- ------------------------------------------------------------- ------------------------------------------------------------------
Date Date
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
BANK USE ONLY
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Approving NationsBank Officer - Signature Approving NationsBank Officer - Printed Officer Number
- -----------------------------------------------------------------------------------------------------------------------------------
Officer - Title Officer - Interoffice Address Cost Center Number
- -----------------------------------------------------------------------------------------------------------------------------------
Officer Telephone Number (area code and number) Purpose Code Officer Fax (area code and number)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Standard Letter 1:_______________________________ by: (Swift telex mail fax)
Standard Letter 2:_______________________________ by: (Swift telex mail fax)
Standard Letter 3:_______________________________ by: (Swift telex mail fax)
<PAGE> 120
1. DEFINITIONS.
In the Agreement:
(1) "Agreement" means the Application, the terms and conditions set out above
and below, and the Credit, together with any and all modifications, amendments
and extensions of any thereof.
(2) "Applicable Interest Rate" means, unless otherwise defined in and governed
by a separate agreement between NationsBank and Applicant, the lesser of the
maximum lawful rate permitted by applicable law or a per annum rate (calculated
on the basis of a 360 day year) equal to the sum of the prime rate of interest
established by NationsBank from time to time (which is not necessarily the
lowest or best rate of interest charged by NationsBank to any of its customers)
plus three percent.
(3) "Applicant" means, singularly or collectively, and, if more than one,
jointly and severally, each person or entity who has executed the Application
as Applicant or Co-Applicant.
(4) "Application" means the foregoing application of Applicant relating to the
Credit as such application may be amended or modified from time to time in
accordance herewith.
(5) "Credit" or "Letter of Credit" means the letter of credit issued pursuant
to the Application as it may be amended or modified from time to time in
accordance herewith.
(6) "Instrument" means the Credit or any draft, receipt, acceptance or written
demand (to include teletransmissions) for payment under the Credit.
(7) "NationsBank" means the banking subsidiary of NationsBank Corporation that
issues the Credit in the sole discretion of NationsBank.
(8) "property" means goods and any and all documents related thereto,
securities, funds, choses in action, and any and all other forms of property,
whether real, personal or mixed and any right or interest therein.
2. PROMISE TO PAY.
(a) As to instruments drawn under or purporting to be drawn under the Credit,
which are payable in United States currency; (i) in the case of each sight
instrument, Applicant will reimburse NationsBank, at the address specified by
NationsBank to Applicant, on demand, in United States currency, the amount paid
thereon, or, if so demanded by NationsBank, will pay to NationsBank in advance
the amount required to pay the same; and (ii) in the case of each time
instrument, Applicant will pay to NationsBank, at the address specified by
NationsBank to Applicant, in United States currency, the amount thereof, on
demand but in any event not later than one business day prior to maturity of
such time instrument at the place specified by the Credit for payment.
(b) As to instruments drawn under or purporting to be drawn under the Credit,
which are payable in currency other than United States currency: (i) in the case
of each sight instrument, Applicant will reimburse NationsBank, at the address
specified by NationsBank to Applicant, on demand, in United States currency, the
equivalent of the amount paid under the instrument at NationsBank's then current
selling rate of exchange for teletransmission to the place of payment in the
currency in which such instrument is payable or, if so demanded by NationsBank,
will pay to NationsBank, in advance, in United States currency, the equivalent
of the amount required to pay the same; and (ii) in the case of each time
instrument, Applicant will pay to NationsBank, at the address specified by
NationsBank to Applicant, on demand but in any event sufficiently in advance of
maturity of such time instrument to enable NationsBank to arrange for cover to
reach the place of payment not later than three business days prior to maturity,
the equivalent of the time instrument in United States currency at NationsBank's
then current selling rate of exchange for teletransmission to the place of
payment in the currency in which such instrument is payable. If for any cause
whatsoever there exists at the time in question no rate of exchange generally
current for effecting transfers as above described, or such currency is not
available for purchase by NationsBank, Applicant agrees to pay NationsBank on
demand, at NationsBank's election, (i) an amount in United States currency
equivalent to the actual cost to NationsBank of settlement of NationsBank's
obligation to the holder of the instrument or other person, however and whenever
such settlement shall be made by NationsBank, or (ii) an amount in United States
currency equivalent to the estimated cost to NationsBank, as projected by
NationsBank, of the future settlement of NationsBank's obligation to the holder
of the instrument or other person, however and whenever such settlement shall be
made by NationaBank, or (ii) an amount in United States currency equivalent to
the estimated cost to NationsBank, as projected by NationsBank, of the future
settlement of NationsBank's obligations to the holder of the instrument or other
person, provided that upon the actual settlement of NationsBank's obligation,
however and whenever occurring, NationsBank shall reimburse Applicant or
Applicant shall pay to NationsBank, as the case may be, an amount in United
States currency equal to the difference between the initial estimated payment by
Applicant to NationsBank and the actual settlement paid by NationsBank.
(c) NationsBank may accept or pay any instrument presented to it, regardless of
when drawn and whether or not negotiated, if such instrument, the other
required documents and any transmittal advice are dated on or before the
expiration date of the Credit, and NationsBank may honor, as complying with the
terms of the Credit and of the Agreement, any instruments or other documents
otherwise in order signed or issued by any person who is, or is in good faith
believed by NationsBank to be, an administrator, executor, trustee in
bankruptcy, debtor in possession, conservator, assignee for the benefit of
creditors, liquidator, receiver or other legal representative or successor by
operation of law of the party authorized under the Credit to draw or issue such
instruments or other documents.
3. PROMISE TO PAY INTEREST AND FEES.
(a) Applicant will pay NationsBank, on demand: (i) NationsBank's commission at
such rate as NationsBank may determine to be proper, (ii) unless expressly
provided otherwise in the Application, all charges and expenses paid or
incurred by NationsBank in connection with the Credit, including, without
limitation, reasonable attorneys' fees for the enforcement of any rights
hereunder, and (iii) interest on any amounts due by Applicant to NationsBank
hereunder from the date due to the date of payment at the Applicable Interest
Rate.
(b) No provision of the Agreement shall require the payment or permit the
collection of interest in excess of the maximum rate permitted by applicable
law.
4. CLEAN ADVANCES.
If the Application requests inclusion in the Credit of any provision for clean
advances to the Beneficiary, NationsBank may place in the Credit such a
provision in that respect as NationsBank may deem appropriate, under which any
bank entitled to negotiate drafts under the Credit, acting in its discretion in
each instance and upon the request and receipt in writing from the Beneficiary,
may make one or more clean advances at any time on or prior to the date by
which drafts are to be negotiated under the Credit. The aggregate of such
advances shall in no event be more than the amount specified in the Application
for clean advances, and whether or not specified therein in no event shall any
such advance exceed the amount remaining available under the Credit at the time
of the advance. While it is expected by Applicant that each such advance will
be repaid by the Beneficiary to the bank that made the advance from the
proceeds of any drafts drawn under the Credit, should any such advance not be
thus repaid. Applicant will on demand pay NationsBank the amounts thereof as if
such advances were evidenced by drafts drawn under the Credit. It is understood
that neither NationsBank nor any bank which may make such advances shall be
obligated to inquire into the use that may be made thereof by the Beneficiary
and that NationsBank and each such bank shall be without liability for any
wrongful use that may be made by the Beneficiary of any funds so advanced.
5. UNIFORM CUSTOMS AND PRACTICE.
The Uniform Customs and Practice for Documentary Credits, as published as of
the date of issue of the Credit by the International Chamber of Commerce (the
"UCP"), shall in all respects be deemed a part hereof as fully as if
incorporated herein and shall apply to the Credit. Unless expressly provided
otherwise in the Credit, in the event any provision of the UCP is or is
construed to vary from or be in conflict with the laws of the United States of
America or any state hereof, as from time to time amended and in force, the UCP
shall prevail to the extent permitted by applicable law.
<PAGE> 121
6. LICENSES AND COMPLIANCE.
Applicant will procure promptly any necessary expenses for the services
performed or the import, export or shipping of property shipped under or
pursuant to or in connection with the Credit, and will comply with all foreign
and domestic laws, rules and regulations now or hereafter applicable to the
transaction related to the Credit or applicable to the execution, delivery and
performance by Applicant of the Agreement. Applicant further agrees to furnish
to NationsBank such evidence in respect of the above as NationsBank may at any
time require.
7. INSURANCE.
Applicant shall keep such property as may be the subject of the Credit
adequately covered by insurance in amounts, against risks and with companies
satisfactory to NationsBank. Applicant hereby irrevocably grants its power of
attorney to NationsBank and any of its officers, with the power of substitution,
to endorse any check in the name of Applicant received in payment of any loss or
adjustment.
8. DEFAULT
(a) In the event of the happening of any one or more of the following events
(any such event being hereinafter called an "Event of Default"), namely: (i) the
nonpayment of any obligations of Applicant to NationsBank (under the Agreement
or otherwise, or to any other person or entity, now or hereafter existing, when
due, or (ii) the failure of Applicant to perform or observe any other term or
covenant of the Agreement, or (iii) the dissolution or termination of existence
of Applicant, or (iv) the institution by or against Applicant of any proceeding
seeking to adjudicate Applicant a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of Applicant or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian, or other
similar official for Applicant or for any substantial part of its property, or
(v) any seizure, vesting or intervention by or under authority of a government
by which the management of Applicant is displaced or its authority in the
control of its business is curtailed, or (vi) the attachment of or restraint as
to any funds or other property which may be in, or come into, the possession or
control of NationsBank, or of any third party acting on NationsBank's behalf,
for the account or benefit of Applicant, or the issuance of any order of court
or other legal process against the same, or (vii) the occurrence of any of the
above events with respect to any person or entity which has guaranteed any
obligations of Applicant to NationsBank (under the Agreement or otherwise):
then, or at any time after the happening of such event, the amount of the
Credit, as well as any and all other obligations of Applicant under the
Agreement, shall, at NationsBank's option, and whether or not otherwise then due
and payable, become due and payable immediately without demand upon or notice to
Applicant.
(b) Upon the occurrence and during the continuance of any Event of Default,
NationsBank is hereby authorized to set off and apply and all deposits (general
or special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by NationsBank or any subsidiary or affiliate of
NationsBank to or for the credit or the account of Applicant against any and all
of Applicant's obligations to NationsBank under the Agreement, irrespective of
whether or not NationsBank shall have made any demand under the Agreement and
although such deposits, indebtedness or obligations may be unmatured or
contingent. NationsBank's rights under this Section 8(b) are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which NationsBank may have.
9. SECURITY.
(a) As collateral for the payment of any and all obligations of Applicant to
NationsBank under the Agreement, Applicant hereby grants to NationsBank a
security interest in (i) any and all documents of title, policies or
certificates of insurance and other documents accompanying or related to
instruments drawn under the Credit, and any and all other property shipped
under or in connection with the Credit or in any way related thereto or to any
of the instruments drawn thereunder (whether or not such documents or property
are released to or upon the order of Applicant in trust or otherwise) and (ii)
any and all proceeds and products of the foregoing. Also to secure the payment
of any and all obligations of Applicant under the Agreement, NationsBank shall
be subrogated to the rights (but shall have none of the obligations) of
Applicant in respect of any transaction to which the Credit relates. Insofar
as any property which may be held by NationsBank, or for NationsBank's account,
as collateral hereunder may be released to or upon the order of Applicant.
Applicant hereby acknowledges that such delivery of property is in trust
pending satisfaction of Applicant's payment obligations to NationsBank, and
hereby agrees to execute and/or file such receipts, agreements, forms or other
documents as NationsBank may request to further evidence NationsBank's
interests in such property, it being understood that NationsBank's rights as
specified therein shall be in furtherance of and in addition to (but not in
limitation of) NationsBank's rights hereunder. If at any time and from time to
time NationsBank in good faith deems itself insecure and requires collateral
(or additional collateral), Applicant will, on demand, assign and deliver to
NationsBank as security for any and all obligations under the Agreement,
collateral of a type and value satisfactory to NationsBank or pledge such cash
collateral as NationsBank may require. NationsBank is hereby authorized, at
its option at any time and with or without notice to Applicant, to transfer to
or register in its name or the name of any NationsBank's nominees all or any
part of the property subject to any of the security interests granted under or
contemplated by the Agreement. NationsBank is also authorized, at its option,
to file financing statements without the signature of Applicant with
respect to all or any part of such property. Applicant will pay the cost of
any such filing and, upon NationsBank's request, sign such instruments,
documents or other papers, and take such other action, as NationsBank may
reasonably require to perfect such security interests.
(b) If any Event of Default shall have occurred and be continuing, NationsBank
may exercise in respect of the property subject to any of the security interests
granted under or contemplated by the Agreement all the rights and remedies of a
secured party on default under the applicable Uniform Commercial Code or any
other applicable law, and also may, without notice except as specified below,
sell such property or any part thereof in one or more parcels at public or
private sale, at any NationsBank office or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as NationsBank may deem commercially
reasonable. To the extent notice of sale of such property shall be required by
law, reasonable notification shall be satisfied by written notice mailed or
delivered to Applicant at the address specified above at least five business
days prior to the date of public sale or prior to the date after which private
sale is to be made Applicant will pay to NationsBank on demand all costs and
expenses (including, without limitation, reasonable attorney's fees and legal
expenses) related or incidental to the custody, preservation or sale of, or
collection from, or other realization upon, any of such property, or related or
incidental to the establishment, preservation or enforcement of NationsBank's
rights in respect of any such property. In the event of sale of, collection
from, or other realization upon all or any part of such property, NationsBank
may, in its discretion, hold the proceeds thereof as additional collateral
hereunder or then or at any time thereafter apply the proceeds thereof to the
payment of such of the costs and expenses referred to above and such of the
obligations of Applicant under the Agreement, whether or not then due, as
NationsBank amy determine in its discretion, any surplus to be paid over to
Applicant or to whomever may be lawfully entitled to receive such surplus.
10. INDEMNITY.
Applicant will indemnify and hold NationsBank (such term to include for purposes
of this paragraph NationsBank's affiliates and its and its affiliates' officers,
directors, employees and agents' harmless from and against (i) all loss or
damage arising out of NationsBank's issuance of, or any other action taken by
NationsBank in connection with, the Credit other than loss or damage resulting
form the gross negligence or willful misconduct of the party seeking
indemnification, and (ii) all costs and expenses (including reasonable
attorney's fees and legal expenses) of all claims or legal proceedings arising
out of NationsBank's issuance of the Credit or incident to the collection of
amounts owed by Applicant hereunder or the enforcement of NationsBank's rights
hereunder, including, without limitation, legal proceedings related to any court
order, injunction, or other process or decree restraining or seeking to restrain
NationsBank from paying any amount under the Credit. Additionally, Applicant
will indemnify and hold NationsBank harmless from and against all claims,
losses, damages, suits, costs or expenses arising out of Applicant's failure to
timely procure licenses or comply with applicable laws, regulations or rules, or
any other conduct or failure of Applicant
<PAGE> 122
11. EFFECT OF WAIVERS.
No delay, extension of time, renewal, compromise or other indulgence which may
occur or be granted by NationsBank shall impair NationsBank's rights or powers
hereunder. NationsBank shall not be deemed to have waived any of its rights
hereunder, unless NationsBank or its authorized agent shall have signed such
waiver in writing
12. FINANCIAL INSTITUTION APPLICANT
If Applicant or Co-Applicant is a financial institution (the "Financial
Institution") the Financial Institution hereby requests the issuance of the
Credit for its customer (the "Customer"), who has also executed the Application
as Applicant or Co-Applicant. In consideration of such issuance and as a
direct and primary obligation, the Financial Institution agrees to pay to
NationsBank all amounts owed by the Customer under the Agreement when due, and
to pay to NationsBank its fees and expenses according to its fee schedule from
time to time in effect. The Financial Institution hereby grants to NationsBank
a security interest in all of the property in which the Customer has heretofore
granted or may hereafter grant to the Financial Institution a security interest
to secure the obligations of the Customer to the Financial Institution arising
out of the execution of the Application by the Financial Institution.
13. MISCELLANEOUS.
(a) Any notice from NationsBank to Applicant shall be deemed given when mailed,
postage paid, or when delivered to a courier, fee paid by shipper, addressed to
Applicant at the last business address furnished by Applicant to NationsBank,
or when confirmed by electronic confirmation to NationsBank as having been
delivered via facsimile or other teletransmission. Any notice from Applicant
to NationsBank shall be sent to the address of NationsBank specified by
NationsBank to Applicant and shall be effective upon receipt by NationsBank.
(b) Each provision of the Agreement shall be interpreted in such manner as to
be effective and valid under applicable law but if any provision of the
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of the Agreement.
(c) If any law, treaty, regulation or the interpretation thereof by any court
or administrative or governmental authority shall impose, modify or deem
applicable any capital, reserve, insurance premium or similar requirement
against letters of credit issued by NationsBank and the result thereof shall be
to increase the cost to NationsBank of making any payment under or issuing or
maintaining the Credit or to reduce the yield to NationsBank in connection with
the Credit or the Agreement, then, on demand, Applicant will pay to
NationsBank, from time to time, such additional amounts as NationsBank may in
good faith determine to be necessary to compensate NationBank for such increased
cost or reduced yield.
(d) Any and all payments made to NationsBank hereunder shall be made free and
clear of and without deduction for any present or future taxes, levies,
imposts, deductions, charges, or witholdings, and all liabilities with respect
thereto, excluding taxes imposed on net income and all income and franchise
taxes of the United States and any political subdivisions thereof (such
nonexcluded taxes being herein called "Taxes"). If Applicant shall be required
by law to deduct any Taxes from or in respect of any sum payable hereunder, (i)
the sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 13(d), NationsBank shall receive an amount equal to the sum
NationsBank would have received had no such deductions been made, (ii)
Applicant shall make such deductions, and (iii) Applicant shall pay the full
amount deducted to the relevant authority in accordance with applicable law.
Applicant will indemnify NationsBank for the full amount of Taxes (including,
without limitation, any Taxes imposed by any jurisdiction on amounts payable
under this Section 13(d) paid by NationsBank and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date NationsBank makes
written demand therefor. Within 30 days after the date of any payment of
Taxes, Applicant will furnish to NationsBank the original or a certified copy
of a receipt evidencing payment thereof.
(e) The Agreement shall be binding upon Applicant, its successors and assigns,
and shall inure to the benefit of NationsBank, its successors, transferees and
assigns: provided that any assignment by Applicant of any of its rights or
obligations under the Agreement without the prior written consent of
NationsBank shall be void.
(f) Applicant hereby authorizes NationsBank, in NationsBank's discretion, to set
forth the terms of the Application in the Credit in such language as NationsBank
deems appropriate, with variations not materially inconsistent with the
Application.
(g) Any action, inaction, waiver or omission taken or suffered by NationsBank
or by any of NationsBank's correspondents under or in connection with the Credit
or any related instruments, services or property, if in good faith and in
conformity with foreign or domestic laws, regulations or customs applicable
thereto, shall be binding upon Applicant and shall not place NationsBank or any
of NationsBank's correspondents under any resulting liability to Applicant.
Without limiting the generality of the foregoing, NationsBank and
NationsBank's correspondents may act in reliance upon any written, oral,
telephonic, telegraphic, facsimile or other request or notice, believed in good
faith to have been authorized, whether or not given or signed by an authorized
person and any such written, oral, telephonic, telegraphic, facsimile or other
request or notice, shall be binding on Applicant.
(h) Except as provided in Section 13(g), no term or provision of the Agreement
can be changed orally, and no executory agreement shall be effective to modify
or to discharge the Agreement unless such executory agreement is in writing and
signed by NationsBank. Applicant's payment and indemnity obligations under the
Agreement shall survive payment under or expiration of the Credit or
termination of this Agreement.
14. JURISDICTION AND WAIVER.
Applicant hereby irrevocably submits to the non-exclusive jurisdiction of any
State or Federal court sitting in the city, county, or district in which the
principal office of NationsBank is located over any action or proceeding arising
out of or relating to the Agreement, and Applicant hereby irrevocably agrees
that all claims in respect to such action or proceeding may be heard and
determined in such State or Federal court. APPLICANT HEREBY IRREVOCABLY WAIVES
TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING AND THE LACK OF PERSONAL
JURISDICTION. TO THE FULLEST EXTENT IT MAY LAWFULLY AND EFFECTIVELY DO SO, EACH
OF APPLICANT AND NATIONSBANK WAIVES THE RIGHT TO TRIAL BY JURY. Applicant
irrevocably consents to the service of any and all process in any such action or
proceeding by the mailing of copies of in any such process to Applicant at the
last business address furnished by Applicant to NationsBank. Applicant agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing, however, in this Section 14, shall affect the
right of NationsBank to serve legal process in any other manner permitted by law
or affect the right of NationsBank to bring any action or proceeding against
Applicant or its property in the courts of any other jurisdiction. Moreover, to
the extent that Applicant has or hereafter may acquire any immunity from
jurisdiction or any court or from any legal process whether through service or
notice, attachment prior to judgment, attachment in aid of execution or
otherwise with respect to itself or its property. Applicant hereby revocably
waives such immunity in respect of its obligations under the Agreement.
15. FINAL AGREEMENT.
EXCEPT AS PROVIDED IN SECTION 13(G), THIS WRITTEN AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO WRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE> 1
EXHIBIT 10.7(b)
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (herein called the
"Amendment") made as of December 19, 1997, by and among AEI Holding Company,
Inc., a Delaware corporation ("Borrower"), NationsBank of Texas, N.A., a
national banking association ("NationsBank"), individually and as Agent
("Agent"), and the Lenders named on Schedule 3 to the Original Agreement
("Lenders"),
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lenders have entered into that certain
Credit Agreement dated as of November 11, 1997 (the "Original Agreement") for
the purpose and consideration therein expressed, whereby Lenders became
obligated to make loans to Borrower as therein provided; and
WHEREAS, Borrower, Agent and Lenders desire to amend the Original
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and in the Original Agreement and in
consideration of the loans which may hereafter be made by Lenders to Borrower,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
Definitions and References
Section 1.1. Terms Defined in the Original Agreement. Unless the
context otherwise requires or unless otherwise expressly defined herein, the
terms defined in the Original Agreement shall have the same meanings whenever
used in this Amendment.
Section 1.2. Other Defined Terms. Unless the context otherwise
requires, the following terms when used in this Amendment shall have the
meanings assigned to them in this Section 1.2.
"Amendment" shall mean this First Amendment to Credit Agreement.
"Credit Agreement" shall mean the Original Agreement as amended
hereby.
1
<PAGE> 2
ARTICLE II.
Amendment to Original Agreement
Section 2.1. Net Worth. Section 7.14 of the Original Agreement is
hereby amended in its entirety to read as follows:
"Borrower's Consolidated Net Worth will never be less than the
Maximum Net Worth plus the sum of (a) if Borrower's Consolidated Net
Worth is a positive number, fifty percent (50%) of Borrower's Net
Income, or if Borrower's Net Worth is a negative number, seventy-five
percent (75%) of Borrower's Net Income; and (b) one hundred percent
(100%) of the proceeds of the issuance by Borrower of any equity. As
used in this section, the term "Maximum Net Worth" means the sum of
(i) negative $63,000,000 plus (ii) the amount of any deferred tax
benefit (if a positive number) available to Borrower as a result of
the transfer to any Restricted Person of the assets described in
Schedule 1 to the Borrower Security Agreement."
ARTICLE III.
Conditions of Effectiveness
Section 3.1. Effective Date. This Amendment shall become effective as
of the date first above written when, and only when Agent shall have received
all of the following, duly executed and delivered and in form, substance and
date satisfactory to Agent and a Restricted Person shall have purchased the
assets described in Schedule 1 to the Borrower Security Agreement:
(a) This Amendment and any other documents that Lenders are to
execute in connection herewith.
(b) A Guaranty, Security Agreement, and all applicable financing
statements relating thereto executed by Mining Technologies, Inc. in
accordance with the requirements of the Credit Agreement.
(c) A certificate of the President and Secretary of Borrower
dated the date of this Amendment (i) certifying that all of the
representations and warranties set forth in Article IV hereof are true
and correct at and as of the time of such effectiveness, (ii)
certifying that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of Borrower authorizing
the execution, delivery and performance of this Amendment and
certifying the names and true signatures of the officers of Borrower
authorized to sign this Amendment, (iii) certifying that attached
thereto is a true and complete copy of the charter documents of
Borrower, with all amendments thereto, certified by the appropriate
official of Borrower's state of organization and the bylaws of
Borrower, and (iv) certifying satisfaction of the conditions set out
in subsections (a), (b), (c), and (d) of Section 4.3 of the Credit
Agreement.
(d) Solvency Certificate of Mining Technologies, Inc.
2
<PAGE> 3
(e) Opinion of Borrower's counsel addressing such matters as
Agent may reasonably request.
(f) Such supporting documents as Agent may reasonably request.
ARTICLE IV.
Representations and Warranties
Section 4.1. Representations and Warranties of Borrower. In order to
induce each Lender to enter into this Amendment, Borrower represents and
warrants to each Lender that:
(a) The representations and warranties contained in Sections 5.1
through 5.17 of the Original Agreement are true and correct at and as
of the time of the effectiveness hereof.
(b) Borrower is duly authorized to execute and deliver this
Amendment and is and will continue to be duly authorized to borrow
monies and to perform its obligations under the Credit Agreement.
Borrower has duly taken all corporate action necessary to authorize
the execution and delivery of this Amendment and to authorize the
performance of the obligations of Borrower hereunder.
(c) The execution and delivery by Borrower of this Amendment, the
performance by Borrower of its obligations hereunder and the
consummation of the transactions contemplated hereby do not and will
not conflict with any provision of law, statute, rule or regulation or
of the certificate of incorporation and bylaws of Borrower, or of any
material agreement, judgment, license, order or permit applicable to
or binding upon Borrower, or result in the creation of any lien,
charge or encumbrance upon any assets or properties of Borrower.
Except for those which have been obtained, no consent, approval,
authorization or order of any court or governmental authority or third
party is required in connection with the execution and delivery by
Borrower of this Amendment or to consummate the transactions
contemplated hereby.
(d) When duly executed and delivered, each of this Amendment and
the Credit Agreement will be a legal and binding obligation of
Borrower, enforceable in accordance with its terms, except as limited
by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors' rights and by equitable
principles of general application.
(e) No Default exists as of the date hereof.
3
<PAGE> 4
ARTICLE V.
Miscellaneous
Section 5.1. Ratification of Agreements. The Original Agreement as
hereby amended is hereby ratified and confirmed in all respects. Any reference
to the Credit Agreement in any Loan Document shall be deemed to be a reference
to the Original Agreement as hereby amended. The execution, delivery and
effectiveness of this Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of Lenders under the Credit
Agreement, the Notes, or any other Loan Document nor constitute a waiver of any
provision of the Credit Agreement, the Notes or any other Loan Document.
Section 5.2. Survival of Agreements. All representations, warranties,
covenants and agreements of Borrower herein shall survive the execution and
delivery of this Amendment and the performance hereof, including without
limitation the making or granting of the Loans, and shall further survive until
all of the Obligations are paid in full. All statements and agreements contained
in any certificate or instrument delivered by Borrower or any Restricted Person
hereunder or under the Credit Agreement to any Lender shall be deemed to
constitute representations and warranties by, and/or agreements and covenants
of, Borrower under this Amendment and under the Credit Agreement.
Section 5.3. Loan Documents. This Amendment is a Loan Document, and all
provisions in the Credit Agreement pertaining to Loan Documents apply hereto.
Section 5.4. Governing Law. This Amendment shall be governed by and
construed in accordance with the provisions of Section 10.8 of the Credit
Agreement.
Section 5.5. Counterparts. This Amendment may be separately executed in
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed to constitute one and the same
Amendment.
THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
4
<PAGE> 5
IN WITNESS WHEREOF, this Amendment is executed as of the date first
above written.
BORROWER:
AEI HOLDING COMPANY, INC.
By: /s/ Don Brown
---------------------------------------------
Name: Don Brown
Title: President
Address: 1500 North Big Run Road
Ashland, Kentucky 41102
Telephone: (606) 928-3433
Fax: (606) 928-0450
AGENT AND LENDERS:
NATIONSBANK OF TEXAS, N.A.,
as Agent and Lender
By: /s/ Denise A. Smith
---------------------------------------------
Denise A. Smith
Senior Vice President
Address: 901 Main Street, Floor 64
Dallas, Texas 75202
Telephone: (214) 508-1261
Fax: (214) 508-1285
THE PROVIDENT BANK
By: /s/ Tom B. Scherpenberg
---------------------------------------------
Tom B. Scherpenberg
Vice President
Address: One East Fourth Street
Cincinnati, Ohio 45202
Telephone: (513) 579-2069
Fax: (513) 579-2201
5
<PAGE> 6
CONSENT AND AGREEMENT
Tennessee Mining, Inc., a Kentucky corporation, hereby (i) consents to
the provisions of this Amendment and the transactions contemplated herein, (ii)
ratifies and confirms the Guaranty dated as of November 11, 1997 made by it for
the benefit of Lenders ("Guaranty"), and (iii) ratifies and confirms any and all
security agreements, deeds of trust, mortgages, chattel mortgages, pledges and
other security or other documents, agreements or instruments (collectively, the
"Security Documents") delivered by it to Agent for the benefit of Lenders in
connection with the Credit Agreement or any transaction contemplated therein and
agrees that all of its respective obligations and covenants thereunder (to the
extent it is a party thereto) shall remain unimpaired by the execution and
delivery of the Amendment and the other documents and instruments executed in
connection therewith and that the Guaranty and Security Documents to which it is
a party shall remain in full force and effect.
THIS CONSENT AND AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
IN WITNESS WHEREOF, this Certificate is executed by the undersigned as
of December 19, 1997.
TENNESSEE MINING, INC.
BY:
----------------------------------------
Name:
Title:
6
<PAGE> 7
CONSENT AND AGREEMENT
Addington Mining, Inc., a Kentucky corporation, hereby (i) consents to
the provisions of this Amendment and the transactions contemplated herein, (ii)
ratifies and confirms the Guaranty dated as of November 11, 1997 made by it for
the benefit of Lenders ("Guaranty"), and (iii) ratifies and confirms any and all
security agreements, deeds of trust, mortgages, chattel mortgages, pledges and
other security or other documents, agreements or instruments (collectively, the
"Security Documents") delivered by it to Agent for the benefit of Lenders in
connection with the Credit Agreement or any transaction contemplated therein and
agrees that all of its respective obligations and covenants thereunder (to the
extent it is a party thereto) shall remain unimpaired by the execution and
delivery of the Amendment and the other documents and instruments executed in
connection therewith and that the Guaranty and Security Documents to which it is
a party shall remain in full force and effect.
THIS CONSENT AND AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
IN WITNESS WHEREOF, this Certificate is executed by the undersigned as
of December 19, 1997.
ADDINGTON MINING, INC.
By:
-----------------------------------------
Name:
Title:
7
<PAGE> 8
CONSENT AND AGREEMENT
Ikerd-Bandy Co., Inc., a Kentucky corporation, hereby (i) consents to
the provisions of this Amendment and the transactions contemplated herein, (ii)
ratifies and confirms the Guaranty dated as of November 11, 1997 made by it for
the benefit of Lenders ("Guaranty"), and (iii) ratifies and confirms any and all
security agreements, deeds of trust, mortgages, chattel mortgages, pledges and
other security or other documents, agreements or instruments (collectively, the
"Security Documents") delivered by it to Agent for the benefit of Lenders in
connection with the Credit Agreement or any transaction contemplated therein and
agrees that all of its respective obligations and covenants thereunder (to the
extent it is a party thereto) shall remain unimpaired by the execution and
delivery of the Amendment and the other documents and instruments executed in
connection therewith and that the Guaranty and Security Documents to which it is
a party shall remain in full force and effect.
THIS CONSENT AND AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
IN WITNESS WHEREOF, this Certificate is executed by the undersigned as
of December 19, 1997.
IKERD-BANDY CO., INC.
By:
--------------------------------
Name:
Title:
8
<PAGE> 9
CONSENT AND AGREEMENT
Addington Enterprises, Inc., a Kentucky corporation, hereby (i)
consents to the provisions of this Amendment and the transactions contemplated
herein and (ii) ratifies and confirms the Stock Pledge Agreement dated as of
November 11, 1997 made by it for the benefit of Lenders ("Stock Pledge
Agreement") and agrees that all of its respective obligations and covenants
thereunder shall remain unimpaired by the execution and delivery of the
Amendment and the other documents and instruments executed in connection
therewith and that the Stock Pledge Agreement shall remain in full force and
effect.
THIS CONSENT AND AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
IN WITNESS WHEREOF, this Certificate is executed by the undersigned as
of December 19, 1997.
ADDINGTON ENTERPRISES, INC.
By:
----------------------------------
Name:
Title:
<PAGE> 10
CONSENT AND AGREEMENT
Larry Addington hereby (i) consents to the provisions of this Amendment
and the transactions contemplated herein and (ii) ratifies and confirms the
Stock Pledge Agreement dated as of November 11, 1997 made by him for the benefit
of Lenders ("Stock Pledge Agreement") and agrees that all of his respective
obligations and covenants thereunder shall remain unimpaired by the execution
and delivery of the Amendment and the other documents and instruments executed
in connection therewith and that the Stock Pledge Agreement shall remain in full
force and effect.
THIS CONSENT AND AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
IN WITNESS WHEREOF, this Certificate is executed by the undersigned as
of December 19, 1997.
-----------------------------------
Larry Addington
<PAGE> 1
EXHIBIT 10.10
STOCK PLEDGE AGREEMENT
of
LARRY ADDINGTON
THIS PLEDGE AGREEMENT (this "Agreement") is made as of November 11,
1997, by Larry Addington (herein called "Debtor") in favor of NationsBank of
Texas, N.A., a national banking association, in its capacity as agent for
itself and certain other Lenders from time to time parties to the Credit
Agreement described herein (herein called "Secured Party").
RECITALS:
1. AEI Holding Company, Inc., a Delaware corporation ("Borrower"), has
executed in favor of Secured Party certain Notes (as defined in the Credit
Agreement) of even date herewith, payable to the order of Lenders (such Notes,
as from time to time amended, and all promissory notes given in substitution,
renewal or extension therefor or thereof, in whole or in part, being herein
collectively called the "Notes").
2. The Notes were executed pursuant to a Credit Agreement of even date
herewith (herein, as from time to time amended, supplemented or restated,
called the "Credit Agreement"), by and between Borrower, and Secured Party,
individually and as agent, and the other Lenders from time to time parties
thereto, pursuant to which Secured Party has agreed to advance funds to
Borrower under the Notes.
3. It is a condition precedent to Secured Party's obligation to
advance funds pursuant to the Credit Agreement that Debtor shall execute and
deliver this Agreement to Secured Party.
4. Debtor owns fifty percent (50%) of the outstanding capital stock of
Borrower.
NOW, THEREFORE, in consideration of the premises, of the benefits
which will inure to Debtor from Secured Party's extensions of credit under the
Credit Agreement, and of Ten Dollars and other good and valuable consideration,
the receipt and sufficiency of all of which are hereby acknowledged, and in
order to induce Secured Party to extend credit under the Credit Agreement,
Debtor hereby agrees with Secured Party as follows:
AGREEMENTS:
ARTICLE I -- Definitions and References
Section 1.1. General Definitions. As used herein, the terms
"Agreement", "Debtor", "Secured Party", "Notes", "Borrower", "Guaranty," and
"Credit Agreement" shall have the meanings indicated above, and the following
terms shall have the following meanings:
1
<PAGE> 2
"Collateral" means all property, of whatever type, which is described
in Section 2.1 as being at any time subject to a security interest granted
hereunder to Secured Party.
"Commitment" means the agreement or commitment by Secured Party to
make loans or otherwise extend credit to Debtor under the Credit Agreement, and
any other agreement, commitment, statement of terms or other document
contemplating the making of loans or advances or other extension of credit by
Secured Party to or for the account of Debtor which is now or at any time
hereafter intended to be secured by the Collateral under this Agreement.
"Issuer" means any issuer of Pledged Shares and any successor of such
Issuer.
"Obligation Documents" means the Credit Agreement, all other Loan
Documents, and all other documents and instruments under, by reason of which,
or pursuant to which any or all of the Secured Obligations are evidenced,
governed, secured, guarantied, or otherwise dealt with, and all other
agreements, certificates, and other documents, instruments and writings
heretofore or hereafter delivered in connection herewith or therewith.
"Other Liable Party" means any Person, other than Debtor, but
including Borrower, who may now or may at any time hereafter be primarily or
secondarily liable for any of the Secured Obligations or who may now or may at
any time hereafter have granted to Secured Party a Lien upon any property as
security for the Secured Obligations.
"Pledged Shares" has the meaning given it in Section 2.1(a).
"Related Person" means Debtor and each Other Liable Party.
"Secured Obligations" shall have the meaning given it in Section 2.2.
"UCC" means the Uniform Commercial Code in effect in the State of
Texas on the date hereof.
Section 1.2. Incorporation of Other Definitions. Reference is hereby
made to the Credit Agreement for a statement of the terms thereof. All
capitalized terms used in this Agreement which are defined in the Credit
Agreement and not otherwise defined herein shall have the same meanings herein
as set forth therein. All terms used in this Agreement which are defined in the
UCC and not otherwise defined herein or in the Credit Agreement shall have the
same meanings herein as set forth therein, except where the context otherwise
requires.
Section 1.3. Attachments. All exhibits or schedules which may be
attached to this Agreement are a part hereof for all purposes.
Section 1.4. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document (including, but not
limited to, references in Section 2.1) also refer to and include all renewals,
extensions, amendments, modifications, supplements or restatements of any such
agreement, instrument or document, provided that nothing contained
2
<PAGE> 3
in this Section shall be construed to authorize any Person to execute or enter
into any such renewal, extension, amendment, modification, supplement or
restatement.
Section 1.5. References and Titles. All references in this Agreement
to Exhibits, Articles, Sections, subsections, and other subdivisions refer to
the Exhibits, Articles, Sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any subdivision are for convenience only and do not constitute any
part of any such subdivision and shall be disregarded in construing the
language contained in this Agreement. The words "this Agreement", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited. The phrases "this Section" and "this subsection" and similar phrases
refer only to the Sections or subsections hereof in which the phrase occurs.
The word "or" is not exclusive, and the word "including" (in all of its forms)
means "including without limitation". Pronouns in masculine, feminine and
neuter gender shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa unless
the context otherwise requires.
ARTICLE II -- Security Interest
Section 2.1. Grant of Security Interest. As collateral security for
all of the Secured Obligations, Debtor hereby pledges and assigns to Secured
Party and grants to Secured Party a continuing security interest in and to all
right, title and interest of the following:
(a) Pledged Shares. All of the following, whether now or hereafter
existing, which are owned by Debtor or in which Debtor otherwise has any
rights: all shares of stock of AEI Holding Company, Inc. including but not
limited to the shares described on Exhibit A hereto, all certificates
representing any such shares, all options and other rights, contractual or
otherwise, at any time existing with respect to such shares, and all dividends,
cash, instruments and other property now or hereafter received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares (any and all such shares, certificates, options, rights, dividends,
cash, instruments and other property being herein called the "Pledged Shares").
(b) Proceeds. All proceeds of any and all of the foregoing Collateral
and, to the extent not otherwise included, all payments under insurance
(whether or not Secured Party is the loss payee thereof) or under any
indemnity, warranty or guaranty by reason of loss to or otherwise with respect
to any of the foregoing Collateral.
In each case, the foregoing shall be covered by this Agreement, whether
Debtor's ownership or other rights therein are presently held or hereafter
acquired and however Debtor's interests therein may arise or appear (whether by
ownership, security interest, claim or otherwise).
3
<PAGE> 4
Section 2.2. Secured Obligations Secured. The security interest
created hereby in the Collateral constitutes continuing collateral security for
all of the following obligations, indebtedness and liabilities, whether now
existing or hereafter incurred or arising:
(a) Credit Agreement Indebtedness. The payment by Borrower, as and
when due and payable, of the "Obligations", as defined in the Credit Agreement,
and of all amounts from time to time owing by Borrower under or in respect of
the Credit Agreement, or any of the other Obligation Documents to which
Borrower is a party, and the due performance by Borrower of all of its other
respective obligations under or in respect of the various Obligation Documents.
(b) Other Indebtedness. All loans and future advances made by Secured
Party to Borrower or Debtor and all other debts, obligations and liabilities of
every kind and character of Borrower or Debtor now or hereafter existing in
favor of Secured Party, whether such debts, obligations or liabilities be
direct or indirect, primary or secondary, joint or several, fixed or
contingent, and whether originally payable to Secured Party or to a third party
and subsequently acquired by Secured Party and whether such debts, obligations
or liabilities are evidenced by notes, open account, overdraft, endorsement,
security agreement, guaranty or otherwise (it being contemplated that Borrower
or Debtor may hereafter become indebted to Secured Party in further sum or sums
but Secured Party shall have no obligation to extend further indebtedness by
reason of this Agreement).
(c) Renewals. All renewals, extensions, amendments, modifications,
supplements, or restatements of or substitutions for any of the foregoing.
As used herein, the term "Secured Obligations" refers to all present
and future indebtedness, obligations, and liabilities of whatever type which
are described above in this section, including any interest which accrues after
the commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of the Borrower or the Debtor.
ARTICLE III -- Representations, Warranties and Covenants
Section 3.1. Representations and Warranties. Debtor represents and
warrants to Secured Party as follows:
(a) Ownership Free of Liens. Debtor has good and marketable title to
the Collateral free and clear of all Liens, encumbrances or adverse claims,
except for the security interest created by this Agreement. No dispute, right
of setoff, counterclaim or defense exists with respect to all or any part of
the Collateral. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office except any which have been filed in favor of Secured Party relating to
this Agreement.
(b) No Conflicts or Consents. Neither the ownership or the intended
use of the Collateral by Debtor, nor the grant of the security interest by
Debtor to Secured Party herein,
4
<PAGE> 5
nor the exercise by Secured Party of its rights or remedies hereunder, will (i)
conflict with any provision of (a) any domestic or foreign law, statute, rule
or regulation, (b) the certificate of incorporation or bylaws of any Issuer, or
(c) any agreement, judgment, license, order or permit applicable to or binding
upon Debtor or any Issuer, or (ii) result in or require the creation of any
Lien, charge or encumbrance upon any assets or properties of Debtor or of any
Issuer or Related Person except as expressly contemplated in the Obligation
Documents. Except as expressly contemplated in the Obligation Documents, no
consent, approval, authorization or order of, and no notice to or filing with,
any court, governmental authority, Issuer or third party is required in
connection with the grant by Debtor of the security interest herein, or the
exercise by Secured Party of its rights and remedies hereunder.
(c) Security Interest. Debtor has and will have at all times full
right, power and authority to grant a security interest in the Collateral to
Secured Party as provided herein, free and clear of any Lien, adverse claim, or
encumbrance. This Agreement creates a valid and binding first priority security
interest in favor of Secured Party in the Collateral, which security interest
secures all of the Secured Obligations. The taking possession by Secured Party
of all certificates constituting Collateral from time to time and the filing of
the financing statements delivered concurrently herewith by Debtor to Secured
Party will perfect, and establish the first priority of, Secured Party's
security interest hereunder in the Collateral securing the Secured Obligations.
No further or subsequent filing, recording, registration, other public notice
or other action is necessary or desirable to perfect or otherwise continue,
preserve or protect such security interest except for continuation statements
or filings described in Section 3.3(d).
(d) Location of Debtor and Records. Debtor's principal place of
residence and the place where the records concerning the Collateral are kept is
his address set forth on the signature page hereto.
(e) Pledged Shares. Debtor has delivered to Secured Party all
certificates evidencing Pledged Shares. All such certificates are valid and
genuine and have not been altered. All shares and other securities constituting
the Pledged Shares have been duly authorized and validly issued, are fully paid
and non-assessable, and were not issued in violation of the preemptive rights
of any Person or of any agreement by which Debtor or the Issuer thereof is
bound. All documentary, stamp or other taxes or fees owing in connection with
the issuance, transfer or pledge of Pledged Shares (or rights in respect
thereof) have been paid. No restrictions or conditions exists with respect to
the transfer, voting or capital of any Pledged Shares. The Pledged Shares
constitute the percentage of the class of issued shares of capital stock which
is indicated on Exhibit A. No Issuer of any Pledged Shares has any outstanding
stock rights, rights to subscribe, options, warrants or convertible securities
outstanding or any other rights outstanding whereby any Person would be
entitled to have issued to him capital stock of such Issuer, except as
described on Exhibit A.
Section 3.2. Affirmative Covenants. Unless Secured Party shall
otherwise consent in writing, Debtor will at all times comply with the
covenants contained in this Section 3.2 from the date hereof and so long as any
part of the Secured Obligations or the Commitment is outstanding.
5
<PAGE> 6
(a) Ownership and Liens. Debtor will maintain good and marketable
title to all Collateral free and clear of all Liens, encumbrances or adverse
claims, except for the security interest created by this Agreement. Debtor will
not permit any dispute, right of setoff, counterclaim or defense to exist with
respect to all or any part of the Collateral. Debtor will cause to be
terminated any financing statement or other registration or instrument similar
in effect covering all or any part of the Collateral, except any which have
been filed in favor of Secured Party relating to this Agreement. Debtor will
defend Secured Party's right, title and special property and security interest
in and to the Collateral against the claims of any Person.
(b) Further Assurances. Debtor will, at his expense and at any time
and from time to time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable or
that Secured Party may request in order (i) to perfect and protect the security
interest created or purported to be created hereby and the first priority of
such security interest; (ii) to enable Secured Party to exercise and enforce
its rights and remedies hereunder in respect of the Collateral; or (iii) to
otherwise effect the purposes of this Agreement, including but not limited to:
(A) executing and filing such financing or continuation statements, or
amendments thereto, as may be necessary or desirable or that Secured Party may
request in order to perfect and preserve the security interest created or
purported to be created hereby; (B) delivering to Secured Party (upon request,
to the extent not otherwise required hereunder to be delivered without request)
all originals of chattel paper, documents or instruments which are from time to
time included in the Collateral; and (C) furnishing to Secured Party from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as Secured
Party may reasonably request, all in reasonable detail.
(c) Inspection and Information. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all representatives
appointed by Secured Party, including independent accountants, agents,
attorneys, appraisers and any other persons, to inspect any of the Collateral
and the books and records of or relating to the Collateral at any time during
normal business hours, and to make photocopies and photographs thereof, and to
write down and record any information as such representatives shall obtain.
Debtor will furnish to Secured Party any information which Secured Party may
from time to time request concerning any covenant, provision or representation
contained herein or any other matter in connection with the Collateral or
Debtor's business, properties, or financial condition.
(d) Delivery of Pledged Shares. All instruments and writings
evidencing the Pledged Shares shall be delivered to Secured Party on or prior
to the execution and delivery of this Agreement. All other instruments and
writings hereafter evidencing or constituting Pledged Shares shall be delivered
to Secured Party promptly upon the receipt thereof by or on behalf of Debtor.
All such Pledged Shares shall be held by or on behalf of Secured Party pursuant
hereto and shall be delivered in suitable form for transfer by delivery with
any necessary endorsement or shall be accompanied by fully executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
Secured Party.
(e) Proceeds of Pledged Shares. If Debtor shall receive, by virtue of
his being or having been an owner of any Pledged Shares, any (i) stock
certificate (including any certificate representing a stock dividend or
distribution in connection with any increase or
6
<PAGE> 7
reduction of capital, reorganization, reclassification, merger, consolidation,
sale of assets, combination of shares, stock split, spinoff or split-off),
promissory note or other instrument or writing; (ii) option or right, whether
as an addition to, substitution for, or in exchange for, any Pledged Shares, or
otherwise; (iii) dividends payable in cash (except such dividends permitted to
be retained by Debtor pursuant to Section 4.8 hereof) or in securities or other
property, or (iv) dividends or other distributions in connection with a partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, Debtor shall receive the same in
trust for the benefit of Secured Party, shall segregate it from Debtor's other
property, and shall promptly deliver it to Secured Party in the exact form
received, with any necessary endorsement or appropriate stock powers duly
executed in blank, to be held by Secured Party as Collateral.
(f) Status of Pledged Shares. The certificates evidencing the Pledged
Shares shall at all times be valid and genuine and shall not be altered. The
Pledged Shares at all times shall be duly authorized, validly issued, fully
paid, and non-assessable, and shall not be issued in violation of the
pre-emptive rights of any Person or of any agreement by which Debtor or the
Issuer thereof is bound and shall not be subject to any restrictions with
respect to transfer, voting or Capital of such Pledged Shares.
(g) Notices from Issuer. Debtor will promptly deliver to Secured Party
a copy of each notice or other communication received by Debtor from any Issuer
in respect of any Pledged Shares.
Section 3.3. Negative Covenants. Unless Secured Party shall otherwise
consent in writing, Debtor will at all times comply with the covenants
contained in this Section 3.3 from the date hereof and so long as any part of
the Secured Obligations or the Commitment is outstanding.
(a) Transfer or Encumbrance. Debtor will not sell, assign (by
operation of law or otherwise), transfer, exchange or otherwise dispose of any
of the Collateral, nor will Debtor grant a Lien upon or execute, file or record
any financing statement or other registration with respect to the Collateral,
nor will Debtor allow any such Lien, financing statement, or other registration
to exist or deliver actual or constructive possession of the Collateral to any
other Person, other than Liens in favor of Secured Party or expressly permitted
by the Credit Agreement.
(b) Impairment of Security Interest. Debtor will not take or fail to
take any action which would in any manner impair the value or enforceability of
Secured Party's first priority security interest in any Collateral.
(c) Compromise of Collateral. Debtor will not adjust, settle,
compromise, amend or modify any of his rights in the Collateral.
(d) Financing Statement Filings. Debtor recognizes that financing
statements pertaining to the Collateral have been or may be filed where Debtor
maintains any Collateral, has his records concerning any Collateral or has his
principal residence. Without limitation of any other covenant herein, Debtor
will cause or permit any change to be made in his name
7
<PAGE> 8
or identity or any change to be made to a jurisdiction other than as
represented in Section 3.1 hereof in (i) the location of any records concerning
any Collateral or (ii) his principal place of residence, unless Debtor shall
have notified Secured Party of such change at least thirty (30) days prior to
the effective date of such change, and shall have first taken all action
required by Secured Party for the purpose of further perfecting or protecting
the security interest in favor of Secured Party in the Collateral. In any
notice furnished pursuant to this subsection, Debtor will expressly state that
the notice is required by this Agreement and contains facts that may require
additional filings of financing statements or other notices for the purposes of
continuing perfection of Secured Party's security interest in the Collateral.
(e) Dilution of Shareholdings. Debtor will not permit the issuance of
(i) any additional shares of any class of capital stock of any Issuer (unless
immediately upon issuance the same are pledged and delivered to Secured Party
pursuant to the terms hereof to the extent necessary to give Secured Party a
first priority security interest after such issue in at least the same
percentage of such Issuer's outstanding shares as Debtor had before such
issue), (ii) any securities convertible voluntarily by the holder thereof or
automatically upon the occurrence or non-occurrence of any event or condition
into, or exchangeable for, any such shares of capital stock, or (iii) any
warrants, options, contracts or other commitments entitling any Person to
purchase or otherwise acquire any such shares of capital stock not outstanding
as of the date of this Agreement.
(f) Restrictions on Pledged Shares. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any Pledged Shares.
ARTICLE IV -- Remedies, Powers and Authorizations
Section 4.1. Provisions Concerning the Collateral.
(a) Additional Filings. Debtor hereby authorizes Secured Party to
file, without the signature of Debtor where permitted by law, one or more
financing or continuation statements, and amendments thereto, relating to the
Collateral. Debtor further agrees that a carbon, photographic or other
reproduction of this Security Agreement or of any financing statement
describing any Collateral is sufficient as a financing statement and may be
filed in any jurisdiction by Secured Party may deem appropriate.
(b) Power of Attorney. Debtor hereby irrevocably appoints Secured
Party as Debtor's attorney-in-fact and proxy, with full authority in the place
and stead of Debtor and in the name of Debtor or otherwise, from time to time
in Secured Party's discretion, to take any action, and to execute or indorse
any instrument, certificate or notice, which Secured Party may deem necessary
or advisable to accomplish the purposes of this Agreement including any action
or instrument: (i) to request or instruct each Issuer (and each registrar,
transfer agent, or similar Person acting on behalf of each Issuer) to register
the pledge or transfer of the Collateral to Secured Party; (ii) to otherwise
give notification to any Issuer, registrar, transfer agent, financial
intermediary, or other Person of Secured Party's security interests hereunder;
(iii) to ask, demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect
of any of the Collateral; (iv)
8
<PAGE> 9
to receive, indorse and collect any drafts or other instruments or documents;
(v) to enforce any obligations included among the Collateral; and (vi) to file
any claims or take any action or institute any proceedings which Secured Party
may deem necessary or desirable for the collection of any of the Collateral or
otherwise to enforce, perfect, or establish the priority of the rights of
Secured Party with respect to any of the Collateral. Debtor hereby acknowledges
that such power of attorney and proxy are coupled with an interest, and are
irrevocable.
(c) Performance by Secured Party. If Debtor fails to perform any
agreement or obligation contained herein, Secured Party may itself perform, or
cause performance of, such agreement or obligation, and the expenses of Secured
Party incurred in connection therewith shall be payable by Debtor under Section
4.5.
(d) Collection Rights. Secured Party shall have the right at any time,
either before or after the occurrence of a Default or of an Event of Default,
to notify (or require Debtor to notify) any or all Persons (including any
Issuer) obligated to make payments which are included among the Collateral
(whether accounts, general intangibles, dividends, or otherwise) of the
assignment thereof to Secured Party under this Agreement and to direct such
obligors to make payment of all amounts due or to become due to Debtor
thereunder directly to Secured Party and, upon such notification and at the
expense of Debtor and to the extent permitted by law, to enforce collection
thereof and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as Debtor could have done. After Debtor
receives notice that Secured Party has given (and after Secured Party has
required Debtor to give) any notice referred to above in this subsection:
(i) all amounts and proceeds (including instruments and writings)
received by Debtor in respect of such rights to payments, accounts, or
general intangibles shall be received in trust for the benefit of
Secured Party hereunder, shall be segregated from other funds of
Debtor and shall be forthwith paid over to Secured Party in the same
form as so received (with any necessary indorsement) to be, at Secured
Party's discretion, either (A) held as cash collateral and released to
Debtor upon the remedy of all Defaults or Events of Default, or (B) if
any Event of Default shall have occurred and be continuing, applied as
specified in Section 4.3, and
(ii) Debtor will not adjust, settle or compromise the amount or
payment of any such account or general intangible or release wholly or
partly any account debtor or obligor thereof (including any Issuer) or
allow any credit or discount thereon.
Section 4.2. Event of Default Remedies. If an Event of Default shall
have occurred and be continuing, Secured Party may from time to time in its
discretion, without limitation and without notice except as expressly provided
below:
(a) exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein, under the other Obligation Documents
or otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral);
9
<PAGE> 10
(b) require Debtor to, and Debtor hereby agrees that he will at his
expense and upon request of Secured Party, promptly assemble all or part of the
Collateral as directed by Secured Party and make it (together with all books,
records and information of Debtor relating thereto) available to Secured Party
at a place to be designated by Secured Party which is reasonably convenient to
both parties;
(c) reduce its claim to judgment or foreclose or otherwise enforce, in
whole or in part, the security interest created hereby by any available
judicial procedure;
(d) dispose of, at its office, on the premises of Debtor or elsewhere,
all or any part of the Collateral, as a unit or in parcels, by public or
private proceedings, and by way of one or more contracts (it being agreed that
the sale of any part of the Collateral shall not exhaust Secured Party's power
of sale, but sales may be made from time to time, and at any time, until all of
the Collateral has been sold or until the Secured Obligations have been paid
and performed in full), and at any such sale it shall not be necessary to
exhibit any of the Collateral;
(e) buy the Collateral, or any part thereof, at any public sale;
(f) buy the Collateral, or any part thereof, at any private sale if
the Collateral is of a type customarily sold in a recognized market or is of a
type which is the subject of widely distributed standard price quotations;
(g) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Debtor hereby consents to
any such appointment; and
(h) at its discretion, retain the Collateral in satisfaction of the
Secured Obligations whenever the circumstances are such that Secured Party is
entitled to do so under the UCC or otherwise (provided that Secured Party shall
in no circumstances be deemed to have retained the Collateral in satisfaction
of the Secured Obligations in the absence of an express notice by Secured Party
to Debtor that Secured Party has either done so or intends to do so).
Debtor agrees that, to the extent notice of sale shall be required by law, at
least seven (7) days' notice to Debtor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
Section 4.3. Application of Proceeds. If any Event of Default shall
have occurred and be continuing, Secured Party may in its discretion apply any
cash held by Secured Party as Collateral, and any cash proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral, to any or all of the following in such
order as Secured Party may elect:
10
<PAGE> 11
(a) To the repayment of all costs and expenses, including reasonable
attorneys' fees and legal expenses, incurred by Secured Party in connection
with (i) the administration of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization
upon, any Collateral, (iii) the exercise or enforcement of any of the rights of
Secured Party hereunder, or (iv) the failure of Debtor to perform or observe
any of the provisions hereof;
(b) To the payment or other satisfaction of any Liens, encumbrances,
or adverse claims upon or against any of the Collateral;
(c) To the reimbursement of Secured Party for the amount of any
obligations of Debtor or any Other Liable Party paid or discharged by Secured
Party pursuant to the provisions of this Agreement or the other Obligation
Documents, and of any expenses of Secured Party payable by Debtor hereunder or
under the other Obligation Documents;
(d) To the satisfaction of any other Secured Obligations;
(e) By holding the same as Collateral;
(f) To the payment of any other amounts required by applicable law
(including any provision of the UCC); and
(g) By delivery to Debtor or to whomever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 4.4. Deficiency. In the event that the proceeds of any sale,
collection or realization of or upon Collateral by Secured Party are
insufficient to pay all Secured Obligations and any other amounts to which
Secured Party is legally entitled, Debtor shall be liable for the deficiency,
together with interest thereon as provided in the governing Obligation
Documents or (if no interest is so provided) at such other rate as shall be
fixed by applicable law, together with the costs of collection and the
reasonable fees of any attorneys employed by Secured Party to collect such
deficiency.
Section 4.5. Indemnity and Expenses. In addition to, but not in
qualification or limitation of, any similar obligations under other Obligation
Documents:
(a) DEBTOR WILL INDEMNIFY SECURED PARTY AND EACH LENDER FROM AND
AGAINST ANY AND ALL CLAIMS, LOSSES AND LIABILITIES GROWING OUT OF OR RESULTING
FROM THIS AGREEMENT (INCLUDING ENFORCEMENT OF THIS AGREEMENT), WHETHER OR NOT
SUCH CLAIMS, LOSSES AND LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY
OR ARISING OUT OF SUCH INDEMNIFIED PARTY'S OWN NEGLIGENCE, EXCEPT TO THE EXTENT
SUCH CLAIMS, LOSSES OR LIABILITIES ARE PROXIMATELY CAUSED BY SUCH INDEMNIFIED
PARTY'S INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(b) Debtor will upon demand pay to Secured Party the amount of any and
all costs and expenses, including the fees and disbursements of Secured Party's
counsel and of any
11
<PAGE> 12
experts and agents, which Secured Party may incur in connection with (i) the
transactions which give rise to this Agreement, (ii) the preparation of this
Agreement and the perfection and preservation of this security interest created
under this Agreement, (iii) the administration of this Agreement; (iv) the
custody, preservation, use or operation of, or the sale of, collection from, or
other realization upon, any Collateral; (v) the exercise or enforcement of any
of the rights of Secured Party hereunder; or (vi) the failure by Debtor to
perform or observe any of the provisions hereof, except expenses resulting from
Secured Party's individual gross negligence or willful misconduct.
Section 4.6. Non-Judicial Remedies. In granting to Secured Party the
power to enforce its rights hereunder without prior judicial process or
judicial hearing, Debtor expressly waives, renounces and knowingly relinquishes
any legal right which might otherwise require Secured Party to enforce its
rights by judicial process. In so providing for non-judicial remedies, Debtor
recognizes and concedes that such remedies are consistent with the usage of
trade, are responsive to commercial necessity, and are the result of a bargain
at arm's length. Nothing herein is intended, however, to prevent Secured Party
or Debtor from resorting to judicial process at his or its option.
Section 4.7. Other Recourse. Debtor waives any right to require
Secured Party to proceed against any other Person, to exhaust any Collateral or
other security for the Secured Obligations, or to have any Other Liable Party
joined with Debtor in any suit arising out of the Secured Obligations or this
Agreement, or pursue any other remedy in Secured Party's power. Debtor further
waives any and all notice of acceptance of this Agreement and of the creation,
modification, rearrangement, renewal or extension for any period of any of the
Secured Obligations of any Other Liable Party from time to time. Debtor further
waives any defense arising by reason of any disability or other defense of any
Other Liable Party or by reason of the cessation from any cause whatsoever of
the liability of any Other Liable Party. This Agreement shall continue
irrespective of the fact that the liability of any Other Liable Party may have
ceased and irrespective of the validity or enforceability of any other
Obligation Document to which Debtor or any Other Liable Party may be a party,
and notwithstanding any death, incapacity, reorganization, or bankruptcy of any
Other Liable Party or any other event or proceeding affecting any Other Liable
Party. Until all of the Secured Obligations shall have been paid in full,
Debtor shall have no right to subrogation and Debtor waives the right to
enforce any remedy which Secured Party has or may hereafter have against any
Other Liable Party, and waives any benefit of and any right to participate in
any other security whatsoever now or hereafter held by Secured Party. Debtor
authorizes Secured Party, without notice or demand, without any reservation of
rights against Debtor, and without in any way affecting Debtor's liability
hereunder or on the Secured Obligations, from time to time to (a) take or hold
any other property of any type from any other Person as security for the
Secured Obligations, and exchange, enforce, waive and release any or all of
such other property, (b) apply the Collateral or such other property and direct
the order or manner of sale thereof as Secured Party may in its discretion
determine, (c) renew, extend for any period, accelerate, modify, compromise,
settle or release any of the obligations of any Other Liable Party in respect
to any or all of the Secured Obligations or other security for the Secured
Obligations, (d) waive, enforce, modify, amend, restate or supplement any of
the provisions of any Obligation Document with any Person other than Debtor,
and (e) release or substitute any Other Liable Party.
12
<PAGE> 13
Section 4.8. Voting Rights, Dividends, Etc. in Respect of Pledged
Shares.
(a) So long as no Default or Event of Default shall have occurred and
be continuing Debtor may receive and retain any and all dividends or interest
paid in respect of the Pledged Shares; provided, however, that any and all
(i) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of or in exchange for,
any Pledged Shares,
(ii) dividends and other distributions paid or payable in
cash in respect of any Pledged Shares in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, and
(iii) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Shares,
shall be, and shall forthwith be delivered to Secured Party to hold as, Pledged
Shares and shall, if received by Debtor, be received in trust for the benefit
of Secured Party, be segregated from the other property or funds of Debtor, and
be forthwith delivered to Secured Party in the exact form received with any
necessary indorsement or appropriate stock powers duly executed in blank, to be
held by Secured Party as Collateral.
(b) Upon the occurrence and during the continuance of a Default or an
Event of Default:
(i) all rights of Debtor to receive and retain the dividends
and interest payments which it would otherwise be authorized to
receive and retain pursuant to subsection (a) of this section shall
automatically cease, and all such rights shall thereupon become vested
in Secured Party which shall thereupon have the sole right to receive
and hold as Pledged Shares such dividends and interest payments;
(ii) without limiting the generality of the foregoing,
Secured Party may at its option exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any of the Pledged Shares as if it were the
absolute owner thereof, including, without limitation, the right to
exchange, in its discretion, any and all of the Pledged Shares upon
the merger, consolidation, reorganization, recapitalization or other
adjustment of any Issuer, or upon the exercise by any Issuer of any
right, privilege or option pertaining to any Pledged Shares, and, in
connection therewith, to deposit and deliver any and all of the
Pledged Shares with any committee, depository, transfer, agent,
registrar or other designated agent upon such terms and conditions as
it may determine; and
(iii) all dividends and interest payments which are received
by Debtor contrary to the provisions of subsection (b)(i) of this
section shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Debtor, and shall be
13
<PAGE> 14
forthwith paid over to Secured Party as Pledged Shares in the exact
form received, to be held by Secured Party as Collateral.
Anything herein to the contrary notwithstanding, Debtor may at all times
exercise any and all voting rights pertaining to the Pledged Shares or any part
thereof for any purpose not inconsistent with the terms of this Agreement or
any other Obligation Document.
Section 4.9. Private Sale of Pledged Shares. Debtor recognizes that
Secured Party may deem it impracticable to effect a public sale of all or any
part of the Pledged Shares and that Secured Party may, therefore, determine to
make one or more private sales of any such securities to a restricted group of
purchasers who will be obligated to agree, among other things, to acquire such
securities for their own account, for investment and not with a view to the
distribution or resale thereof. Debtor acknowledges that any such private sale
may be at prices and on terms less favorable to the seller than the prices and
other terms which might have been obtained at a public sale and,
notwithstanding the foregoing, agrees that such private sales shall be deemed
to have been made in a commercially reasonable manner and that Secured Party
shall have no obligation to delay sale of any such securities for the period of
time necessary to permit the Issuer of such securities to register such
securities for public sale under the Securities Act of 1933, as amended. Debtor
further acknowledges and agrees that any offer to sell such securities which
has been (a) publicly advertised on a bona fide basis in a newspaper or other
publication of general circulation in the financial community of Dallas, Texas
(to the extent that such an offer may be so advertised without prior
registration under the Securities Act), or (b) made privately in the manner
described above to not less than fifteen (15) bona fide offerees shall be
deemed to involve a "public sale" for the purposes of Section 9.504(c) of the
UCC (or any successor or similar, applicable statutory provision) as then in
effect in the State of Texas, notwithstanding that such sale may not constitute
a "public offering" under the Securities Act of 1933, as amended, and that
Secured Party may, in such event, bid for the purchase of such securities.
ARTICLE V. -- Miscellaneous
Section 5.1. Notices. Any notice or communication required or
permitted hereunder shall be given as provided in the Credit Agreement.
Section 5.2. Amendments. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Debtor and
Secured Party, and no waiver of any provision of this Agreement, and no consent
to any departure by Debtor therefrom, shall be effective unless it is in
writing and signed by Secured Party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given and to the extent specified in such writing.
Section 5.3. Preservation of Rights. No failure on the part of Secured
Party to exercise, and no delay in exercising, any right hereunder or under any
other Obligation Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. Neither the execution nor
the delivery of this Agreement shall in any manner impair or affect any other
security for the Secured Obligations. The rights and remedies of Secured Party
14
<PAGE> 15
provided herein and in the other Obligation Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The
rights of Secured Party under any Obligation Document against any party thereto
are not conditional or contingent on any attempt by Secured Party to exercise
any of its rights under any other Obligation Document against such party or
against any other Person.
Section 5.4. Unenforceability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or invalidity
without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 5.5. Survival of Agreements. All representations and
warranties of Debtor herein, and all covenants and agreements herein shall
survive the execution and delivery of this Agreement, the execution and
delivery of any other Obligation Documents and the creation of the Secured
Obligations.
Section 5.6. Other Liable Party. Neither this Agreement nor the
exercise by Secured Party or the failure of Secured Party to exercise any
right, power or remedy conferred herein or by law shall be construed as
relieving any Other Liable Party from liability on the Secured Obligations or
any deficiency thereon. This Agreement shall continue irrespective of the fact
that the liability of any Other Liable Party may have ceased or irrespective of
the validity or enforceability of any other Obligation Document to which Debtor
or any Other Liable Party may be a party, and notwithstanding the
reorganization, death, incapacity or bankruptcy of any Other Liable Party, and
notwithstanding the reorganization or bankruptcy or other event or proceeding
affecting any Other Liable Party.
Section 5.7. Binding Effect and Assignment. This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Debtor and his successors and permitted assigns and (b) shall inure, together
with all rights and remedies of Secured Party hereunder, to the benefit of
Secured Party and its successors, transferees and assigns. Without limiting the
generality of the foregoing, Secured Party may (except as otherwise provided in
the Credit Agreement) pledge, assign or otherwise transfer any or all of its
rights under any or all of the Obligation Documents to any other Person, and
such other Person shall thereupon become vested with all of the benefits in
respect thereof granted to Secured Party, herein or otherwise. None of the
rights or duties of Debtor hereunder may be assigned or otherwise transferred
without the prior written consent of Secured Party.
Section 5.8. Termination. It is contemplated by the parties hereto
that there may be times when no Secured Obligations are outstanding, but
notwithstanding such occurrences, this Agreement shall remain valid and shall
be in full force and effect as to subsequent outstanding Secured Obligations.
Upon the satisfaction in full of the Secured Obligations, upon the termination
or expiration of the Credit Agreement and any other commitment of Secured Party
to extend credit to Debtor, and upon written request for the termination hereof
delivered by Debtor to Secured Party, this Agreement and the security interest
created hereby shall terminate and all rights to the Collateral shall revert to
Debtor. Secured Party will, upon Debtor's request and at Debtor's expense, (a)
return to Debtor such of the Collateral as shall not have been sold or
otherwise disposed of or applied pursuant to the terms hereof; and (b)
15
<PAGE> 16
execute and deliver to Debtor such documents as Debtor shall reasonably request
to evidence such termination.
SECTION 5.9. GOVERNING LAW; SUBMISSION TO PROCESS. (I) THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE
EXTENT THAT THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF
THE SECURITY INTEREST CREATED HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
DEBTOR HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST DEBTOR WITH
RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR
OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF TEXAS AS SECURED
PARTY MAY ELECT, AND, BY EXECUTION AND DELIVERY HEREOF, DEBTOR ACCEPTS AND
CONSENTS FOR HIMSELF AND IN RESPECT TO HIS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS, AND FURTHER AGREES
TO A TRANSFER OF ANY SUCH PROCEEDING TO A FEDERAL COURT SITTING IN THE STATE OF
TEXAS TO THE EXTENT THAT IT HAS SUBJECT MATTER JURISDICTION, AND OTHERWISE TO A
STATE COURT IN TEXAS. DEBTOR WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY ACTION
OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS.
IN FURTHERANCE OF THE FOREGOING, DEBTOR HEREBY DESIGNATES AND APPOINTS CT
CORPORATION SYSTEM, 350 NORTH ST. PAUL STREET, DALLAS, TEXAS 75201, AS AGENT OF
DEBTOR TO RECEIVE SERVICE OF ALL PROCESS BROUGHT AGAINST DEBTOR WITH RESPECT TO
ANY SUCH PROCEEDING IN ANY SUCH COURT IN TEXAS, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY DEBTOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
COPIES OF ANY SUCH PROCESS SO SERVED SHALL ALSO, IF PERMITTED BY LAW, BE SENT
BY REGISTERED MAIL TO DEBTOR AT HIS ADDRESS SET FORTH ABOVE, BUT THE FAILURE OF
DEBTOR TO RECEIVE SUCH COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH
PROCESS AS AFORESAID. DEBTOR SHALL FURNISH TO SECURED PARTY A CONSENT OF CT
CORPORATION SYSTEM AGREEING TO ACT HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THE
CREDIT AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF SECURED PARTY TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
SECURED PARTY TO BRING PROCEEDINGS AGAINST DEBTOR IN THE COURTS OF ANY OTHER
JURISDICTION. DEBTOR SHALL NOT REVOKE SUCH APPOINTMENT BUT IF FOR ANY REASON CT
CORPORATION SYSTEM SHALL RESIGN OR OTHERWISE CEASE TO ACT AS DEBTOR'S AGENT,
DEBTOR HEREBY IRREVOCABLY AGREES TO (A) IMMEDIATELY DESIGNATE AND APPOINT A NEW
AGENT ACCEPTABLE TO AGENT TO SERVE IN SUCH CAPACITY AND, IN SUCH EVENT, SUCH
NEW AGENT SHALL BE DEEMED TO BE SUBSTITUTED FOR CT CORPORATION SYSTEM FOR ALL
PURPOSES HEREOF AND (B) PROMPTLY DELIVER TO SECURED PARTY THE WRITTEN CONSENT
(IN FORM AND SUBSTANCE SATISFACTORY TO AGENT) OF SUCH NEW AGENT AGREEING TO
SERVE IN SUCH CAPACITY.
Section 5.10. Counterparts. This Agreement may be separately executed
in any number of counterparts, all of which when so executed shall be deemed to
constitute one and the same Agreement.
16
<PAGE> 17
Section 5.11. Loan Document. This Agreement is a "Loan Document", as
defined in the Credit Agreement, and, except as expressly provided herein to
the contrary, this Agreement is subject to all provisions of the Credit
Agreement governing such Loan Documents.
Section 5.12. Final Agreement.
THIS WRITTEN STOCK PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
17
<PAGE> 18
IN WITNESS WHEREOF, Debtor has caused this Agreement to be executed
and delivered as of the date first above written.
Address of Debtor: DEBTOR:
1500 North Big Run Road
Ashland, Kentucky 41102
/s/ LARRY ADDINGTON
------------------------------------
LARRY ADDINGTON
Address of Records
Concerning Collateral:
1500 North Big Run Road
Ashland, Kentucky 41102
<PAGE> 19
EXHIBIT A
Description of Interests in Issuers
<TABLE>
<CAPTION>
Name of Issuer Certificate No. No. of Shares Percentage Interest
- -------------- --------------- ------------- -------------------
<S> <C> <C> <C>
AEI Holding
Company, Inc. 1 1 1
AEI Holding 3 49 49
Company, Inc.
</TABLE>
1
<PAGE> 1
EXHIBIT 10.11
FINANCING STATEMENT
This instrument is prepared and is intended to be a Financing
Statement complying with the formal requisites therefor as set forth in the
Uniform Commercial Code.
1. The name and address of the debtor ("Debtor") is:
LARRY ADDINGTON
1500 North Big Run Road
Ashland, Kentucky 41102
2. The name and address of the secured party ("Secured Party") is:
NATIONSBANK OF TEXAS, N.A. , INDIVIDUALLY AND AS AGENT
901 Main Street
Dallas, Texas 75202
Attention: Paul L. Colon
Secured Party is agent for itself and various other financial
institutions (and their successors and assigns).
3. This Financing Statement covers the following types or items of
property (collectively, the "Collateral"):
All rights, titles, and interests now owned or hereafter acquired by
Debtor in:
(a) Pledged Shares. All of the following, whether now or hereafter
existing, which are owned by Debtor or in which Debtor otherwise has
any rights: all shares of stock of AEI Holding Company, Inc. including
but not limited to the shares described in Exhibit A hereto, all
certificates representing any such shares, all options and other
rights, contractual or otherwise, at any time existing with respect to
such shares, and all dividends, cash, instruments and other property
now or hereafter received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares (any and all
such shares, certificates, options, rights, dividends, cash,
instruments and other property being herein called the "Pledged
Shares").
(b) Proceeds. All proceeds of any and all of the foregoing Collateral
and, to the extent not otherwise included, all payments under
insurance (whether or not Secured Party is the loss payee thereof) or
under any indemnity, warranty or guaranty by reason of loss to or
otherwise with respect to any of the foregoing Collateral.
4. This Financing Statement is presented for filing to Clerk of Fayette
Co., Kentucky.
/s/ LARRY ADDINGTON
--------------------------------
LARRY ADDINGTON, Debtor
1
<PAGE> 1
EXHIBIT 10.12
STOCK PLEDGE AGREEMENT
of
ADDINGTON ENTERPRISES, INC.
THIS PLEDGE AGREEMENT (this "Agreement") is made as of November 11,
1997, by Addington Enterprises, Inc. (herein called "Debtor") in favor of
NationsBank of Texas, N.A., a national banking association, in its capacity as
agent for itself and certain other Lenders from time to time parties to the
Credit Agreement described herein (herein called "Secured Party").
RECITALS:
1. AEI Holding Company, Inc., a Delaware corporation ("Borrower"), has
executed in favor of Secured Party certain Notes (as defined in the Credit
Agreement) of even date herewith, payable to the order of Lenders (such Notes,
as from time to time amended, and all promissory notes given in substitution,
renewal or extension therefor or thereof, in whole or in part, being herein
collectively called the "Notes").
2. The Notes were executed pursuant to a Credit Agreement of even date
herewith (herein, as from time to time amended, supplemented or restated, called
the "Credit Agreement"), by and between Borrower, and Secured Party,
individually and as agent, and the other Lenders from time to time parties
thereto, pursuant to which Secured Party has agreed to advance funds to Borrower
under the Notes.
3. It is a condition precedent to Secured Party's obligation to advance
funds pursuant to the Credit Agreement that Debtor shall execute and deliver
this Agreement to Secured Party.
4. Debtor owns fifty percent (50%) of the outstanding capital stock of
Borrower.
NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Debtor from Secured Party's extensions of credit under the Credit
Agreement, and of Ten Dollars and other good and valuable consideration, the
receipt and sufficiency of all of which are hereby acknowledged, and in order to
induce Secured Party to extend credit under the Credit Agreement, Debtor hereby
agrees with Secured Party as follows:
AGREEMENTS:
ARTICLE I -- Definitions and References
Section 1.1. General Definitions. As used herein, the terms
"Agreement", "Debtor", "Secured Party", "Notes", "Borrower", "Guaranty," and
"Credit Agreement" shall have the meanings indicated above, and the following
terms shall have the following meanings:
1
<PAGE> 2
"Collateral" means all property, of whatever type, which is described
in Section 2.1 as being at any time subject to a security interest granted
hereunder to Secured Party.
"Commitment" means the agreement or commitment by Secured Party to make
loans or otherwise extend credit to Debtor under the Credit Agreement, and any
other agreement, commitment, statement of terms or other document contemplating
the making of loans or advances or other extension of credit by Secured Party to
or for the account of Debtor which is now or at any time hereafter intended to
be secured by the Collateral under this Agreement.
"Issuer" means any issuer of Pledged Shares and any successor of such
Issuer.
"Obligation Documents" means the Credit Agreement, all other Loan
Documents, and all other documents and instruments under, by reason of which, or
pursuant to which any or all of the Secured Obligations are evidenced, governed,
secured, guarantied, or otherwise dealt with, and all other agreements,
certificates, and other documents, instruments and writings heretofore or
hereafter delivered in connection herewith or therewith.
"Other Liable Party" means any Person, other than Debtor, but including
Borrower, who may now or may at any time hereafter be primarily or secondarily
liable for any of the Secured Obligations or who may now or may at any time
hereafter have granted to Secured Party a Lien upon any property as security for
the Secured Obligations.
"Pledged Shares" has the meaning given it in Section 2.1(a).
"Related Person" means Debtor and each Other Liable Party.
"Secured Obligations" shall have the meaning given it in Section 2.2.
"UCC" means the Uniform Commercial Code in effect in the State of Texas
on the date hereof.
Section 1.2. Incorporation of Other Definitions. Reference is hereby
made to the Credit Agreement for a statement of the terms thereof. All
capitalized terms used in this Agreement which are defined in the Credit
Agreement and not otherwise defined herein shall have the same meanings herein
as set forth therein. All terms used in this Agreement which are defined in the
UCC and not otherwise defined herein or in the Credit Agreement shall have the
same meanings herein as set forth therein, except where the context otherwise
requires.
Section 1.3. Attachments. All exhibits or schedules which may be
attached to this Agreement are a part hereof for all purposes.
Section 1.4. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document (including, but not
limited to, references in Section 2.1) also refer to and
2
<PAGE> 3
include all renewals, extensions, amendments, modifications, supplements or
restatements of any such agreement, instrument or document, provided that
nothing contained in this Section shall be construed to authorize any Person to
execute or enter into any such renewal, extension, amendment, modification,
supplement or restatement.
Section 1.5. References and Titles. All references in this Agreement to
Exhibits, Articles, Sections, subsections, and other subdivisions refer to the
Exhibits, Articles, Sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the beginning
of any subdivision are for convenience only and do not constitute any part of
any such subdivision and shall be disregarded in construing the language
contained in this Agreement. The words "this Agreement", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited. The
phrases "this Section" and "this subsection" and similar phrases refer only to
the Sections or subsections hereof in which the phrase occurs. The word "or" is
not exclusive, and the word "including" (in all of its forms) means "including
without limitation". Pronouns in masculine, feminine and neuter gender shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa unless the context otherwise
requires.
ARTICLE II -- Security Interest
Section 2.1. Grant of Security Interest. As collateral security for all
of the Secured Obligations, Debtor hereby pledges and assigns to Secured Party
and grants to Secured Party a continuing security interest in and to all right,
title and interest of the following:
(a) Pledged Shares. All of the following, whether now or hereafter
existing, which are owned by Debtor or in which Debtor otherwise has any rights:
all shares of stock of AEI Holding Company, Inc. including but not limited to
the shares described on Exhibit A hereto, all certificates representing any such
shares, all options and other rights, contractual or otherwise, at any time
existing with respect to such shares, and all dividends, cash, instruments and
other property now or hereafter received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares (any and all such
shares, certificates, options, rights, dividends, cash, instruments and other
property being herein called the "Pledged Shares").
(b) Proceeds. All proceeds of any and all of the foregoing Collateral
and, to the extent not otherwise included, all payments under insurance (whether
or not Secured Party is the loss payee thereof) or under any indemnity, warranty
or guaranty by reason of loss to or otherwise with respect to any of the
foregoing Collateral.
In each case, the foregoing shall be covered by this Agreement, whether Debtor's
ownership or other rights therein are presently held or hereafter acquired and
however Debtor's interests therein may arise or appear (whether by ownership,
security interest, claim or otherwise).
3
<PAGE> 4
Section 2.2. Secured Obligations Secured. The security interest created
hereby in the Collateral constitutes continuing collateral security for all of
the following obligations, indebtedness and liabilities, whether now existing or
hereafter incurred or arising:
(a) Credit Agreement Indebtedness. The payment by Borrower, as and when
due and payable, of the "Obligations", as defined in the Credit Agreement, and
of all amounts from time to time owing by Borrower under or in respect of the
Credit Agreement, or any of the other Obligation Documents to which Borrower is
a party, and the due performance by Borrower of all of its other respective
obligations under or in respect of the various Obligation Documents.
(b) Other Indebtedness. All loans and future advances made by Secured
Party to Borrower or Debtor and all other debts, obligations and liabilities of
every kind and character of Borrower or Debtor now or hereafter existing in
favor of Secured Party, whether such debts, obligations or liabilities be direct
or indirect, primary or secondary, joint or several, fixed or contingent, and
whether originally payable to Secured Party or to a third party and subsequently
acquired by Secured Party and whether such debts, obligations or liabilities are
evidenced by notes, open account, overdraft, endorsement, security agreement,
guaranty or otherwise (it being contemplated that Borrower or Debtor may
hereafter become indebted to Secured Party in further sum or sums but Secured
Party shall have no obligation to extend further indebtedness by reason of this
Agreement).
(c) Renewals. All renewals, extensions, amendments, modifications,
supplements, or restatements of or substitutions for any of the foregoing.
As used herein, the term "Secured Obligations" refers to all present
and future indebtedness, obligations, and liabilities of whatever type which are
described above in this section, including any interest which accrues after the
commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of the Borrower or the Debtor.
ARTICLE III -- Representations, Warranties and Covenants
Section 3.1. Representations and Warranties. Debtor represents and
warrants to Secured Party as follows:
(a) Ownership Free of Liens. Debtor has good and marketable title to
the Collateral free and clear of all Liens, encumbrances or adverse claims,
except for the security interest created by this Agreement. No dispute, right of
setoff, counterclaim or defense exists with respect to all or any part of the
Collateral. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office except any which have been filed in favor of Secured Party relating to
this Agreement.
(b) No Conflicts or Consents. Neither the ownership or the intended use
of the Collateral by Debtor, nor the grant of the security interest by Debtor to
Secured Party herein, nor
4
<PAGE> 5
the exercise by Secured Party of its rights or remedies hereunder, will (i)
conflict with any provision of (a) any domestic or foreign law, statute, rule or
regulation, (b) the certificate of incorporation or bylaws of any Issuer, or (c)
any agreement, judgment, license, order or permit applicable to or binding upon
Debtor or any Issuer, or (ii) result in or require the creation of any Lien,
charge or encumbrance upon any assets or properties of Debtor or of any Issuer
or Related Person except as expressly contemplated in the Obligation Documents.
Except as expressly contemplated in the Obligation Documents, no consent,
approval, authorization or order of, and no notice to or filing with, any court,
governmental authority, Issuer or third party is required in connection with the
grant by Debtor of the security interest herein, or the exercise by Secured
Party of its rights and remedies hereunder.
(c) Security Interest. Debtor has and will have at all times full
right, power and authority to grant a security interest in the Collateral to
Secured Party as provided herein, free and clear of any Lien, adverse claim, or
encumbrance. This Agreement creates a valid and binding first priority security
interest in favor of Secured Party in the Collateral, which security interest
secures all of the Secured Obligations. The taking possession by Secured Party
of all certificates constituting Collateral from time to time and the filing of
the financing statements delivered concurrently herewith by Debtor to Secured
Party will perfect, and establish the first priority of, Secured Party's
security interest hereunder in the Collateral securing the Secured Obligations.
No further or subsequent filing, recording, registration, other public notice or
other action is necessary or desirable to perfect or otherwise continue,
preserve or protect such security interest except for continuation statements or
filings described in Section 3.3(d).
(d) Location of Debtor and Records. Debtor's principal executive office
and the place where the records concerning the Collateral are kept is its
address set forth on the signature page hereto.
(e) Pledged Shares. Debtor has delivered to Secured Party all
certificates evidencing Pledged Shares. All such certificates are valid and
genuine and have not been altered. All shares and other securities constituting
the Pledged Shares have been duly authorized and validly issued, are fully paid
and non-assessable, and were not issued in violation of the preemptive rights of
any Person or of any agreement by which Debtor or the Issuer thereof is bound.
All documentary, stamp or other taxes or fees owing in connection with the
issuance, transfer or pledge of Pledged Shares (or rights in respect thereof)
have been paid. No restrictions or conditions exists with respect to the
transfer, voting or capital of any Pledged Shares. The Pledged Shares constitute
the percentage of the class of issued shares of capital stock which is indicated
on Exhibit A. No Issuer of any Pledged Shares has any outstanding stock rights,
rights to subscribe, options, warrants or convertible securities outstanding or
any other rights outstanding whereby any Person would be entitled to have issued
to him capital stock of such Issuer, except as described on Exhibit A.
(f) Duly Authorized. Debtor is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Kentucky;
Debtor has all requisite power and authority to execute, deliver and perform
this Agreement; and the execution, delivery and
5
<PAGE> 6
performance by Debtor of this Agreement have been duly authorized by all
necessary corporate action and do not and will not contravene its certificate or
articles of incorporation or bylaws.
Section 3.2. Affirmative Covenants. Unless Secured Party shall
otherwise consent in writing, Debtor will at all times comply with the covenants
contained in this Section 3.2 from the date hereof and so long as any part of
the Secured Obligations or the Commitment is outstanding.
(a) Ownership and Liens. Debtor will maintain good and marketable title
to all Collateral free and clear of all Liens, encumbrances or adverse claims,
except for the security interest created by this Agreement. Debtor will not
permit any dispute, right of setoff, counterclaim or defense to exist with
respect to all or any part of the Collateral. Debtor will cause to be terminated
any financing statement or other registration or instrument similar in effect
covering all or any part of the Collateral, except any which have been filed in
favor of Secured Party relating to this Agreement. Debtor will defend Secured
Party's right, title and special property and security interest in and to the
Collateral against the claims of any Person.
(b) Further Assurances. Debtor will, at its expense and at any time and
from time to time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable or that
Secured Party may request in order (i) to perfect and protect the security
interest created or purported to be created hereby and the first priority of
such security interest; (ii) to enable Secured Party to exercise and enforce its
rights and remedies hereunder in respect of the Collateral; or (iii) to
otherwise effect the purposes of this Agreement, including but not limited to:
(A) executing and filing such financing or continuation statements, or
amendments thereto, as may be necessary or desirable or that Secured Party may
request in order to perfect and preserve the security interest created or
purported to be created hereby; (B) delivering to Secured Party (upon request,
to the extent not otherwise required hereunder to be delivered without request)
all originals of chattel paper, documents or instruments which are from time to
time included in the Collateral; and (C) furnishing to Secured Party from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as Secured
Party may reasonably request, all in reasonable detail.
(c) Inspection and Information. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all representatives
appointed by Secured Party, including independent accountants, agents,
attorneys, appraisers and any other persons, to inspect any of the Collateral
and the books and records of or relating to the Collateral at any time during
normal business hours, and to make photocopies and photographs thereof, and to
write down and record any information as such representatives shall obtain.
Debtor will furnish to Secured Party any information which Secured Party may
from time to time request concerning any covenant, provision or representation
contained herein or any other matter in connection with the Collateral or
Debtor's business, properties, or financial condition.
6
<PAGE> 7
(d) Delivery of Pledged Shares. All instruments and writings evidencing
the Pledged Shares shall be delivered to Secured Party on or prior to the
execution and delivery of this Agreement. All other instruments and writings
hereafter evidencing or constituting Pledged Shares shall be delivered to
Secured Party promptly upon the receipt thereof by or on behalf of Debtor. All
such Pledged Shares shall be held by or on behalf of Secured Party pursuant
hereto and shall be delivered in suitable form for transfer by delivery with any
necessary endorsement or shall be accompanied by fully executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Secured Party.
(e) Proceeds of Pledged Shares. If Debtor shall receive, by virtue of
its being or having been an owner of any Pledged Shares, any (i) stock
certificate (including any certificate representing a stock dividend or
distribution in connection with any increase or reduction of capital,
reorganization, reclassification, merger, consolidation, sale of assets,
combination of shares, stock split, spinoff or split-off), promissory note or
other instrument or writing; (ii) option or right, whether as an addition to,
substitution for, or in exchange for, any Pledged Shares, or otherwise; (iii)
dividends payable in cash (except such dividends permitted to be retained by
Debtor pursuant to Section 4.8 hereof) or in securities or other property, or
(iv) dividends or other distributions in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, Debtor shall receive the same in trust for the
benefit of Secured Party, shall segregate it from Debtor's other property, and
shall promptly deliver it to Secured Party in the exact form received, with any
necessary endorsement or appropriate stock powers duly executed in blank, to be
held by Secured Party as Collateral.
(f) Status of Pledged Shares. The certificates evidencing the Pledged
Shares shall at all times be valid and genuine and shall not be altered. The
Pledged Shares at all times shall be duly authorized, validly issued, fully
paid, and non-assessable, and shall not be issued in violation of the
pre-emptive rights of any Person or of any agreement by which Debtor or the
Issuer thereof is bound and shall not be subject to any restrictions with
respect to transfer, voting or Capital of such Pledged Shares.
(g) Notices from Issuer. Debtor will promptly deliver to Secured Party
a copy of each notice or other communication received by Debtor from any Issuer
in respect of any Pledged Shares.
Section 3.3. Negative Covenants. Unless Secured Party shall otherwise
consent in writing, Debtor will at all times comply with the covenants contained
in this Section 3.3 from the date hereof and so long as any part of the Secured
Obligations or the Commitment is outstanding.
(a) Transfer or Encumbrance. Debtor will not sell, assign (by operation
of law or otherwise), transfer, exchange or otherwise dispose of any of the
Collateral, nor will Debtor grant a Lien upon or execute, file or record any
financing statement or other registration with respect to the Collateral, nor
will Debtor allow any such Lien, financing statement, or other
7
<PAGE> 8
registration to exist or deliver actual or constructive possession of the
Collateral to any other Person, other than Liens in favor of Secured Party or
expressly permitted by the Credit Agreement.
(b) Impairment of Security Interest. Debtor will not take or fail to
take any action which would in any manner impair the value or enforceability of
Secured Party's first priority security interest in any Collateral.
(c) Compromise of Collateral. Debtor will not adjust, settle,
compromise, amend or modify any of its rights in the Collateral.
(d) Financing Statement Filings. Debtor recognizes that financing
statements pertaining to the Collateral have been or may be filed where Debtor
maintains any Collateral, has its records concerning any Collateral or has its
principal executive office. Without limitation of any other covenant herein,
Debtor will cause or permit any change to be made in its name or identity or any
change to be made to a jurisdiction other than as represented in Section 3.1
hereof in (i) the location of any records concerning any Collateral or (ii) its
principal executive office, unless Debtor shall have notified Secured Party of
such change at least thirty (30) days prior to the effective date of such
change, and shall have first taken all action required by Secured Party for the
purpose of further perfecting or protecting the security interest in favor of
Secured Party in the Collateral. In any notice furnished pursuant to this
subsection, Debtor will expressly state that the notice is required by this
Agreement and contains facts that may require additional filings of financing
statements or other notices for the purposes of continuing perfection of Secured
Party's security interest in the Collateral.
(e) Dilution of Shareholdings. Debtor will not permit the issuance of
(i) any additional shares of any class of capital stock of any Issuer (unless
immediately upon issuance the same are pledged and delivered to Secured Party
pursuant to the terms hereof to the extent necessary to give Secured Party a
first priority security interest after such issue in at least the same
percentage of such Issuer's outstanding shares as Debtor had before such issue),
(ii) any securities convertible voluntarily by the holder thereof or
automatically upon the occurrence or non-occurrence of any event or condition
into, or exchangeable for, any such shares of capital stock, or (iii) any
warrants, options, contracts or other commitments entitling any Person to
purchase or otherwise acquire any such shares of capital stock not outstanding
as of the date of this Agreement.
(f) Restrictions on Pledged Shares. Debtor will not enter into any
agreement creating, or otherwise permit to exist, any restriction or condition
upon the transfer, voting or control of any Pledged Shares.
8
<PAGE> 9
ARTICLE IV -- Remedies, Powers and Authorizations
Section 4.1. Provisions Concerning the Collateral.
(a) Additional Filings. Debtor hereby authorizes Secured Party to file,
without the signature of Debtor where permitted by law, one or more financing or
continuation statements, and amendments thereto, relating to the Collateral.
Debtor further agrees that a carbon, photographic or other reproduction of this
Security Agreement or of any financing statement describing any Collateral is
sufficient as a financing statement and may be filed in any jurisdiction by
Secured Party may deem appropriate.
(b) Power of Attorney. Debtor hereby irrevocably appoints Secured Party
as Debtor's attorney-in-fact and proxy, with full authority in the place and
stead of Debtor and in the name of Debtor or otherwise, from time to time in
Secured Party's discretion, to take any action, and to execute or indorse any
instrument, certificate or notice, which Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement including any action or
instrument: (i) to request or instruct each Issuer (and each registrar, transfer
agent, or similar Person acting on behalf of each Issuer) to register the pledge
or transfer of the Collateral to Secured Party; (ii) to otherwise give
notification to any Issuer, registrar, transfer agent, financial intermediary,
or other Person of Secured Party's security interests hereunder; (iii) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral; (iv) to receive, indorse and collect any drafts or other instruments
or documents; (v) to enforce any obligations included among the Collateral; and
(vi) to file any claims or take any action or institute any proceedings which
Secured Party may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce, perfect, or establish the priority of the
rights of Secured Party with respect to any of the Collateral. Debtor hereby
acknowledges that such power of attorney and proxy are coupled with an interest,
and are irrevocable.
(c) Performance by Secured Party. If Debtor fails to perform any
agreement or obligation contained herein, Secured Party may itself perform, or
cause performance of, such agreement or obligation, and the expenses of Secured
Party incurred in connection therewith shall be payable by Debtor under Section
4.5.
(d) Collection Rights. Secured Party shall have the right at any time,
either before or after the occurrence of a Default or of an Event of Default, to
notify (or require Debtor to notify) any or all Persons (including any Issuer)
obligated to make payments which are included among the Collateral (whether
accounts, general intangibles, dividends, or otherwise) of the assignment
thereof to Secured Party under this Agreement and to direct such obligors to
make payment of all amounts due or to become due to Debtor thereunder directly
to Secured Party and, upon such notification and at the expense of Debtor and to
the extent permitted by law, to enforce collection thereof and to adjust, settle
or compromise the amount or payment thereof, in the same manner and to the same
extent as Debtor could have done. After Debtor receives notice that Secured
Party has given (and after Secured Party has required Debtor to give) any notice
referred to above in this subsection:
9
<PAGE> 10
(i) all amounts and proceeds (including instruments and writings)
received by Debtor in respect of such rights to payments, accounts, or
general intangibles shall be received in trust for the benefit of
Secured Party hereunder, shall be segregated from other funds of Debtor
and shall be forthwith paid over to Secured Party in the same form as
so received (with any necessary indorsement) to be, at Secured Party's
discretion, either (A) held as cash collateral and released to Debtor
upon the remedy of all Defaults or Events of Default, or (B) if any
Event of Default shall have occurred and be continuing, applied as
specified in Section 4.3, and
(ii) Debtor will not adjust, settle or compromise the amount or payment
of any such account or general intangible or release wholly or partly
any account debtor or obligor thereof (including any Issuer) or allow
any credit or discount thereon.
Section 4.2. Event of Default Remedies. If an Event of Default shall
have occurred and be continuing, Secured Party may from time to time in its
discretion, without limitation and without notice except as expressly provided
below:
(a) exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein, under the other Obligation Documents or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral);
(b) require Debtor to, and Debtor hereby agrees that he will at its
expense and upon request of Secured Party, promptly assemble all or part of the
Collateral as directed by Secured Party and make it (together with all books,
records and information of Debtor relating thereto) available to Secured Party
at a place to be designated by Secured Party which is reasonably convenient to
both parties;
(c) reduce its claim to judgment or foreclose or otherwise enforce, in
whole or in part, the security interest created hereby by any available judicial
procedure;
(d) dispose of, at its office, on the premises of Debtor or elsewhere,
all or any part of the Collateral, as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it being agreed that the sale
of any part of the Collateral shall not exhaust Secured Party's power of sale,
but sales may be made from time to time, and at any time, until all of the
Collateral has been sold or until the Secured Obligations have been paid and
performed in full), and at any such sale it shall not be necessary to exhibit
any of the Collateral;
(e) buy the Collateral, or any part thereof, at any public sale;
(f) buy the Collateral, or any part thereof, at any private sale if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations;
10
<PAGE> 11
(g) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Debtor hereby consents to
any such appointment; and
(h) at its discretion, retain the Collateral in satisfaction of the
Secured Obligations whenever the circumstances are such that Secured Party is
entitled to do so under the UCC or otherwise (provided that Secured Party shall
in no circumstances be deemed to have retained the Collateral in satisfaction of
the Secured Obligations in the absence of an express notice by Secured Party to
Debtor that Secured Party has either done so or intends to do so).
Debtor agrees that, to the extent notice of sale shall be required by law, at
least seven (7) days' notice to Debtor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
Section 4.3. Application of Proceeds. If any Event of Default shall
have occurred and be continuing, Secured Party may in its discretion apply any
cash held by Secured Party as Collateral, and any cash proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral, to any or all of the following in such
order as Secured Party may elect:
(a) To the repayment of all costs and expenses, including reasonable
attorneys' fees and legal expenses, incurred by Secured Party in connection with
(i) the administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Collateral, (iii) the exercise or enforcement of any of the rights of Secured
Party hereunder, or (iv) the failure of Debtor to perform or observe any of the
provisions hereof;
(b) To the payment or other satisfaction of any Liens, encumbrances, or
adverse claims upon or against any of the Collateral;
(c) To the reimbursement of Secured Party for the amount of any
obligations of Debtor or any Other Liable Party paid or discharged by Secured
Party pursuant to the provisions of this Agreement or the other Obligation
Documents, and of any expenses of Secured Party payable by Debtor hereunder or
under the other Obligation Documents;
(d) To the satisfaction of any other Secured Obligations;
(e) By holding the same as Collateral;
(f) To the payment of any other amounts required by applicable law
(including any provision of the UCC); and
11
<PAGE> 12
(g) By delivery to Debtor or to whomever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 4.4. Deficiency. In the event that the proceeds of any sale,
collection or realization of or upon Collateral by Secured Party are
insufficient to pay all Secured Obligations and any other amounts to which
Secured Party is legally entitled, Debtor shall be liable for the deficiency,
together with interest thereon as provided in the governing Obligation Documents
or (if no interest is so provided) at such other rate as shall be fixed by
applicable law, together with the costs of collection and the reasonable fees of
any attorneys employed by Secured Party to collect such deficiency.
Section 4.5. Indemnity and Expenses. In addition to, but not in
qualification or limitation of, any similar obligations under other Obligation
Documents:
(a) DEBTOR WILL INDEMNIFY SECURED PARTY AND EACH LENDER FROM AND
AGAINST ANY AND ALL CLAIMS, LOSSES AND LIABILITIES GROWING OUT OF OR RESULTING
FROM THIS AGREEMENT (INCLUDING ENFORCEMENT OF THIS AGREEMENT), WHETHER OR NOT
SUCH CLAIMS, LOSSES AND LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY OR
ARISING OUT OF SUCH INDEMNIFIED PARTY'S OWN NEGLIGENCE, EXCEPT TO THE EXTENT
SUCH CLAIMS, LOSSES OR LIABILITIES ARE PROXIMATELY CAUSED BY SUCH INDEMNIFIED
PARTY'S INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(b) Debtor will upon demand pay to Secured Party the amount of any and
all costs and expenses, including the fees and disbursements of Secured Party's
counsel and of any experts and agents, which Secured Party may incur in
connection with (i) the transactions which give rise to this Agreement, (ii) the
preparation of this Agreement and the perfection and preservation of this
security interest created under this Agreement, (iii) the administration of this
Agreement; (iv) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any Collateral; (v) the exercise or
enforcement of any of the rights of Secured Party hereunder; or (vi) the failure
by Debtor to perform or observe any of the provisions hereof, except expenses
resulting from Secured Party's individual gross negligence or willful
misconduct.
Section 4.6. Non-Judicial Remedies. In granting to Secured Party the
power to enforce its rights hereunder without prior judicial process or judicial
hearing, Debtor expressly waives, renounces and knowingly relinquishes any legal
right which might otherwise require Secured Party to enforce its rights by
judicial process. In so providing for non-judicial remedies, Debtor recognizes
and concedes that such remedies are consistent with the usage of trade, are
responsive to commercial necessity, and are the result of a bargain at arm's
length. Nothing herein is intended, however, to prevent Secured Party or Debtor
from resorting to judicial process at its option.
Section 4.7. Other Recourse. Debtor waives any right to require Secured
Party to proceed against any other Person, to exhaust any Collateral or other
security for the Secured
12
<PAGE> 13
Obligations, or to have any Other Liable Party joined with Debtor in any suit
arising out of the Secured Obligations or this Agreement, or pursue any other
remedy in Secured Party's power. Debtor further waives any and all notice of
acceptance of this Agreement and of the creation, modification, rearrangement,
renewal or extension for any period of any of the Secured Obligations of any
Other Liable Party from time to time. Debtor further waives any defense arising
by reason of any disability or other defense of any Other Liable Party or by
reason of the cessation from any cause whatsoever of the liability of any Other
Liable Party. This Agreement shall continue irrespective of the fact that the
liability of any Other Liable Party may have ceased and irrespective of the
validity or enforceability of any other Obligation Document to which Debtor or
any Other Liable Party may be a party, and notwithstanding any death,
incapacity, reorganization, or bankruptcy of any Other Liable Party or any other
event or proceeding affecting any Other Liable Party. Until all of the Secured
Obligations shall have been paid in full, Debtor shall have no right to
subrogation and Debtor waives the right to enforce any remedy which Secured
Party has or may hereafter have against any Other Liable Party, and waives any
benefit of and any right to participate in any other security whatsoever now or
hereafter held by Secured Party. Debtor authorizes Secured Party, without notice
or demand, without any reservation of rights against Debtor, and without in any
way affecting Debtor's liability hereunder or on the Secured Obligations, from
time to time to (a) take or hold any other property of any type from any other
Person as security for the Secured Obligations, and exchange, enforce, waive and
release any or all of such other property, (b) apply the Collateral or such
other property and direct the order or manner of sale thereof as Secured Party
may in its discretion determine, (c) renew, extend for any period, accelerate,
modify, compromise, settle or release any of the obligations of any Other Liable
Party in respect to any or all of the Secured Obligations or other security for
the Secured Obligations, (d) waive, enforce, modify, amend, restate or
supplement any of the provisions of any Obligation Document with any Person
other than Debtor, and (e) release or substitute any Other Liable Party.
Section 4.8. Voting Rights, Dividends, Etc. in Respect of Pledged
Shares.
(a) So long as no Default or Event of Default shall have occurred and
be continuing Debtor may receive and retain any and all dividends or interest
paid in respect of the Pledged Shares; provided, however, that any and all
(i) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of or in exchange for,
any Pledged Shares,
(ii) dividends and other distributions paid or payable in
cash in respect of any Pledged Shares in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, and
(iii) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Shares,
13
<PAGE> 14
shall be, and shall forthwith be delivered to Secured Party to hold as, Pledged
Shares and shall, if received by Debtor, be received in trust for the benefit of
Secured Party, be segregated from the other property or funds of Debtor, and be
forthwith delivered to Secured Party in the exact form received with any
necessary indorsement or appropriate stock powers duly executed in blank, to be
held by Secured Party as Collateral.
(b) Upon the occurrence and during the continuance of a Default or an
Event of Default:
(i) all rights of Debtor to receive and retain the dividends
and interest payments which it would otherwise be authorized to receive
and retain pursuant to subsection (a) of this section shall
automatically cease, and all such rights shall thereupon become vested
in Secured Party which shall thereupon have the sole right to receive
and hold as Pledged Shares such dividends and interest payments;
(ii) without limiting the generality of the foregoing,
Secured Party may at its option exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any of the Pledged Shares as if it were the
absolute owner thereof, including, without limitation, the right to
exchange, in its discretion, any and all of the Pledged Shares upon the
merger, consolidation, reorganization, recapitalization or other
adjustment of any Issuer, or upon the exercise by any Issuer of any
right, privilege or option pertaining to any Pledged Shares, and, in
connection therewith, to deposit and deliver any and all of the Pledged
Shares with any committee, depository, transfer, agent, registrar or
other designated agent upon such terms and conditions as it may
determine; and
(iii) all dividends and interest payments which are received
by Debtor contrary to the provisions of subsection (b)(i) of this
section shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Debtor, and shall be forthwith
paid over to Secured Party as Pledged Shares in the exact form
received, to be held by Secured Party as Collateral.
Anything herein to the contrary notwithstanding, Debtor may at all times
exercise any and all voting rights pertaining to the Pledged Shares or any part
thereof for any purpose not inconsistent with the terms of this Agreement or any
other Obligation Document.
Section 4.9. Private Sale of Pledged Shares. Debtor recognizes that
Secured Party may deem it impracticable to effect a public sale of all or any
part of the Pledged Shares and that Secured Party may, therefore, determine to
make one or more private sales of any such securities to a restricted group of
purchasers who will be obligated to agree, among other things, to acquire such
securities for their own account, for investment and not with a view to the
distribution or resale thereof. Debtor acknowledges that any such private sale
may be at prices and on terms less favorable to the seller than the prices and
other terms which might have been obtained at a public sale and, notwithstanding
the foregoing, agrees that such private sales shall be deemed to have been made
in a commercially reasonable manner and that Secured Party shall have no
14
<PAGE> 15
obligation to delay sale of any such securities for the period of time necessary
to permit the Issuer of such securities to register such securities for public
sale under the Securities Act of 1933, as amended. Debtor further acknowledges
and agrees that any offer to sell such securities which has been (a) publicly
advertised on a bona fide basis in a newspaper or other publication of general
circulation in the financial community of Dallas, Texas (to the extent that such
an offer may be so advertised without prior registration under the Securities
Act), or (b) made privately in the manner described above to not less than
fifteen (15) bona fide offerees shall be deemed to involve a "public sale" for
the purposes of Section 9.504(c) of the UCC (or any successor or similar,
applicable statutory provision) as then in effect in the State of Texas,
notwithstanding that such sale may not constitute a "public offering" under the
Securities Act of 1933, as amended, and that Secured Party may, in such event,
bid for the purchase of such securities.
ARTICLE V. -- Miscellaneous
Section 5.1. Notices. Any notice or communication required or permitted
hereunder shall be given as provided in the Credit Agreement.
Section 5.2. Amendments. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Debtor and
Secured Party, and no waiver of any provision of this Agreement, and no consent
to any departure by Debtor therefrom, shall be effective unless it is in writing
and signed by Secured Party, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given and
to the extent specified in such writing.
Section 5.3. Preservation of Rights. No failure on the part of Secured
Party to exercise, and no delay in exercising, any right hereunder or under any
other Obligation Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. Neither the execution nor
the delivery of this Agreement shall in any manner impair or affect any other
security for the Secured Obligations. The rights and remedies of Secured Party
provided herein and in the other Obligation Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The
rights of Secured Party under any Obligation Document against any party thereto
are not conditional or contingent on any attempt by Secured Party to exercise
any of its rights under any other Obligation Document against such party or
against any other Person.
Section 5.4. Unenforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or invalidity without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
Section 5.5. Survival of Agreements. All representations and warranties
of Debtor herein, and all covenants and agreements herein shall survive the
execution and delivery of this
15
<PAGE> 16
Agreement, the execution and delivery of any other Obligation Documents and the
creation of the Secured Obligations.
Section 5.6. Other Liable Party. Neither this Agreement nor the
exercise by Secured Party or the failure of Secured Party to exercise any right,
power or remedy conferred herein or by law shall be construed as relieving any
Other Liable Party from liability on the Secured Obligations or any deficiency
thereon. This Agreement shall continue irrespective of the fact that the
liability of any Other Liable Party may have ceased or irrespective of the
validity or enforceability of any other Obligation Document to which Debtor or
any Other Liable Party may be a party, and notwithstanding the reorganization,
death, incapacity or bankruptcy of any Other Liable Party, and notwithstanding
the reorganization or bankruptcy or other event or proceeding affecting any
Other Liable Party.
Section 5.7. Binding Effect and Assignment. This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Debtor and its successors and permitted assigns and (b) shall inure, together
with all rights and remedies of Secured Party hereunder, to the benefit of
Secured Party and its successors, transferees and assigns. Without limiting the
generality of the foregoing, Secured Party may (except as otherwise provided in
the Credit Agreement) pledge, assign or otherwise transfer any or all of its
rights under any or all of the Obligation Documents to any other Person, and
such other Person shall thereupon become vested with all of the benefits in
respect thereof granted to Secured Party, herein or otherwise. None of the
rights or duties of Debtor hereunder may be assigned or otherwise transferred
without the prior written consent of Secured Party.
Section 5.8. Termination. It is contemplated by the parties hereto that
there may be times when no Secured Obligations are outstanding, but
notwithstanding such occurrences, this Agreement shall remain valid and shall be
in full force and effect as to subsequent outstanding Secured Obligations. Upon
the satisfaction in full of the Secured Obligations, upon the termination or
expiration of the Credit Agreement and any other commitment of Secured Party to
extend credit to Debtor, and upon written request for the termination hereof
delivered by Debtor to Secured Party, this Agreement and the security interest
created hereby shall terminate and all rights to the Collateral shall revert to
Debtor. Secured Party will, upon Debtor's request and at Debtor's expense, (a)
return to Debtor such of the Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof; and (b) execute and deliver
to Debtor such documents as Debtor shall reasonably request to evidence such
termination.
SECTION 5.9. GOVERNING LAW; SUBMISSION TO PROCESS. (I) THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE
EXTENT THAT THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE
SECURITY INTEREST CREATED HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL,
ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. DEBTOR HEREBY
AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST DEBTOR WITH RESPECT TO THIS
16
<PAGE> 17
AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED
STATES OF AMERICA FOR THE NORTHERN DISTRICT OF TEXAS AS SECURED PARTY MAY ELECT,
AND, BY EXECUTION AND DELIVERY HEREOF, DEBTOR ACCEPTS AND CONSENTS FOR HIMSELF
AND IN RESPECT TO HIS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS, AND FURTHER AGREES TO A TRANSFER OF ANY SUCH PROCEEDING
TO A FEDERAL COURT SITTING IN THE STATE OF TEXAS TO THE EXTENT THAT IT HAS
SUBJECT MATTER JURISDICTION, AND OTHERWISE TO A STATE COURT IN TEXAS. DEBTOR
WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE
SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS. IN FURTHERANCE OF THE
FOREGOING, DEBTOR HEREBY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, 350
NORTH ST. PAUL STREET, DALLAS, TEXAS 75201, AS AGENT OF DEBTOR TO RECEIVE
SERVICE OF ALL PROCESS BROUGHT AGAINST DEBTOR WITH RESPECT TO ANY SUCH
PROCEEDING IN ANY SUCH COURT IN TEXAS, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY
DEBTOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. COPIES OF ANY SUCH
PROCESS SO SERVED SHALL ALSO, IF PERMITTED BY LAW, BE SENT BY REGISTERED MAIL TO
DEBTOR AT HIS ADDRESS SET FORTH ABOVE, BUT THE FAILURE OF DEBTOR TO RECEIVE SUCH
COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS AS AFORESAID.
DEBTOR SHALL FURNISH TO SECURED PARTY A CONSENT OF CT CORPORATION SYSTEM
AGREEING TO ACT HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THE CREDIT AGREEMENT.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF SECURED PARTY TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF SECURED PARTY TO BRING
PROCEEDINGS AGAINST DEBTOR IN THE COURTS OF ANY OTHER JURISDICTION. DEBTOR SHALL
NOT REVOKE SUCH APPOINTMENT BUT IF FOR ANY REASON CT CORPORATION SYSTEM SHALL
RESIGN OR OTHERWISE CEASE TO ACT AS DEBTOR'S AGENT, DEBTOR HEREBY IRREVOCABLY
AGREES TO (A) IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT ACCEPTABLE TO AGENT
TO SERVE IN SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW AGENT SHALL BE DEEMED TO
BE SUBSTITUTED FOR CT CORPORATION SYSTEM FOR ALL PURPOSES HEREOF AND (B)
PROMPTLY DELIVER TO SECURED PARTY THE WRITTEN CONSENT (IN FORM AND SUBSTANCE
SATISFACTORY TO AGENT) OF SUCH NEW AGENT AGREEING TO SERVE IN SUCH CAPACITY.
Section 5.10. Counterparts. This Agreement may be separately executed
in any number of counterparts, all of which when so executed shall be deemed to
constitute one and the same Agreement.
Section 5.11. "Loan Document." This Agreement is a "Loan Document", as
defined in the Credit Agreement, and, except as expressly provided herein to the
contrary, this Agreement is subject to all provisions of the Credit Agreement
governing such Loan Documents.
Section 5.12. Final Agreement.
THIS WRITTEN STOCK PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
17
<PAGE> 18
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
18
<PAGE> 19
IN WITNESS WHEREOF, Debtor has caused this Agreement to be executed and
delivered as of the date first above written.
Address of Debtor: DEBTOR:
ADDINGTON ENTERPRISES, INC.
1500 North Big Run Road
Ashland, Kentucky 41102
By: /s/ John Lynch
-----------------------------------
Name: John Lynch
Title: V.P.
Address of Records
Concerning Collateral:
1500 North Big Run Road
Ashland, Kentucky 41102
<PAGE> 20
EXHIBIT A
Description of Interests in Issuers
<TABLE>
<CAPTION>
Name of Issuer Certificate No. No. of Shares Percentage Interest
- -------------- --------------- ------------- -------------------
<S> <C> <C> <C>
AEI Holding 2 1 1
Company, Inc.
AEI Holding 4 49 49
Company, Inc.
</TABLE>
1
<PAGE> 1
EXHIBIT 10.13
FINANCING STATEMENT
This instrument is prepared and is intended to be a Financing Statement
complying with the formal requisites therefor as set forth in the Uniform
Commercial Code.
1. The name and address of the debtor ("Debtor") is:
ADDINGTON ENTERPRISES, INC.
1500 North Big Run Road
Ashland, Kentucky 41102
2. The name and address of the secured party ("Secured Party") is:
NATIONSBANK OF TEXAS, N.A., INDIVIDUALLY AND AS AGENT
901 Main Street
Dallas, Texas 75202
Attention: Paul L. Colon
Secured Party is agent for itself and various other financial
institutions (and their successors and assigns).
3. This Financing Statement covers the following types or items of
property (collectively, the "Collateral"):
All rights, titles, and interests now owned or hereafter acquired by
Debtor in:
(a) Pledged Shares. All of the following, whether now or hereafter
existing, which are owned by Debtor or in which Debtor otherwise has
any rights: all shares of stock of AEI Holding Company, Inc. including
but not limited to the shares described in Exhibit A hereto, all
certificates representing any such shares, all options and other
rights, contractual or otherwise, at any time existing with respect to
such shares, and all dividends, cash, instruments and other property
now or hereafter received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares (any and all
such shares, certificates, options, rights, dividends, cash,
instruments and other property being herein called the "Pledged
Shares").
(b) Proceeds. All proceeds of any and all of the foregoing Collateral
and, to the extent not otherwise included, all payments under insurance
(whether or not Secured Party is the loss payee thereof) or under any
indemnity, warranty or guaranty by reason of loss to or otherwise with
respect to any of the foregoing Collateral.
4. This Financing Statement is presented for filing to County Clerk of
Boyd County, Kentucky.
ADDINGTON ENTERPRISES, INC. ,
Debtor
By: /s/ John Lynch
----------------------------------------
Name: John Lynch
Title: V.P.
1
<PAGE> 1
EXHIBIT 10.14(a)
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") is made as of November
11, 1997, by the following Persons (all of whom are herein collectively called
"Related Persons"):
AEI Holding Company, Inc., a Delaware corporation ("Borrower"), Larry
Addington, owner of 50% of the outstanding shares of capital stock of
Borrower, Addington Enterprises, Inc., a Kentucky corporation
("Addington"), owner of 50% of the outstanding shares of capital stock
of Borrower, (collectively referred to as the "Stockholders" and
individually as "Stockholder"), all of Borrower's wholly-owned direct
and indirect subsidiaries, Tennessee Mining, Inc., a Kentucky
corporation ("Tennessee Mining"), Ikerd-Bandy Co., Inc., a Kentucky
corporation ("Ikerd-Bandy"), Addington Mining, Inc., a Kentucky
corporation ("Addington Mining") (Tennessee Mining, Ikerd-Bandy, and
Addington Mining being hereinafter referred to individually as
"Subsidiary" and collectively with all wholly-owned direct and
indirect subsidiaries as "Subsidiaries"), and each other Subsidiary of
Borrower which at any time hereafter executes and delivers a
counterpart of this Agreement to Agent (as defined below).
RECITALS:
1. Borrower, Agent, and Lenders (as defined below) have entered
into a Credit Agreement of even date herewith (herein, as from time to time
supplemented, amended or restated, called the "Credit Agreement"), pursuant to
which Lenders have agreed to extend credit to Borrower, subject to the terms
and conditions expressed therein.
2. One of such conditions precedent is that the Related Persons
shall subordinate all of their obligations to each other to all obligations of
any Related Person to any of Agent and Lenders.
3. Borrower owns directly, or indirectly through one or more
subsidiaries, one hundred percent (100%) of the outstanding shares of capital
stock of Tennessee Mining, Ikerd-Bandy, and Addington Mining; and the
Subsidiaries, Borrower, and the other direct and indirect subsidiaries of
Borrower are mutually dependent on each other in the conduct of their
respective businesses under a holding company structure, and Borrower's ability
to obtain credit under the Credit Agreement will inure to the benefit of all of
the Related Persons.
4. The board of directors of each Related Person (other than Larry
Addington) has determined that the execution, delivery and performance of this
Agreement may reasonably be expected to benefit such Related Person, directly
or indirectly, and is in the best interests of such Related Person. Larry
Addington has determined that the execution, delivery and performance of this
Agreement may reasonably be expected to benefit him, directly or indirectly,
and is in his best interests.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to
1
<PAGE> 2
induce Lenders to extend credit under the Credit Agreement, the Related Persons
hereby agree, with and for the benefit of Agent and Lenders, as follows:
Section 1. Definitions.
(a) Reference to Credit Agreement. Reference is hereby made to the
Credit Agreement for the meaning of certain capitalized terms which are defined
therein and which are used but not defined herein.
(b) Specific Definitions. As used herein, the terms "Agreement" and
"Credit Agreement" have the meanings indicated above, and the following
additional terms have the following meanings:
"Agent" means the Person who, at the time in question, is the "Agent"
under the Credit Agreement. Whenever there is only one Lender under the Credit
Agreement, "Agent" shall also refer to such Lender in such capacity as the only
Lender.
"Final Payment Date" means the earliest date after the date hereof on
which all Senior Obligations have been paid in cash and satisfied in full and
no Senior Creditor has any outstanding commitment (whether or not conditioned
on the satisfaction of any condition precedent) to lend money or otherwise
extend credit to any Related Person.
"Insolvency Proceeding" means, with respect to any Person, any
voluntary or involuntary liquidation, dissolution, sale of all or substantially
all assets, marshaling of assets or liabilities, receivership, conservatorship,
assignment for the benefit of creditors, insolvency, bankruptcy,
reorganization, arrangement or composition of such person or entity (whether or
not pursuant to bankruptcy, insolvency or other similar laws) and any other
proceeding under laws for the protection of debtors involving such Person or
any of its assets.
"Lender" means NationsBank of Texas, N.A. and all other Persons who
at any time are "Lenders" under the Credit Agreement.
"Liable Party" means Borrower and any endorsers, guarantors or other
obligors, primary or secondary, of any or all of the Obligations.
"Obligations" means, with respect to any creditor, all debts,
liabilities and obligations (of any character whatsoever) which are owed to
such creditor by any Related Person, whether as principal, surety, endorser,
guarantor, accommodation party or otherwise, whether now existing or hereafter
incurred or arising, whether principal, interest, fees or expenses, whether
direct, indirect, contingent, primary, secondary, joint and several, joint or
several, or otherwise, and irrespective of the manner in which (or the Person
or Persons in whose favor) such debts, liabilities, or other obligations were
at their inception (or may hereafter be) created, or the manner in which such
creditor may have acquired rights with respect thereto.
"Permitted Distribution" has the meaning given it in Section 2.
2
<PAGE> 3
"Person" means an individual, corporation, partnership, association,
joint stock company, trust or trustee thereof, estate or executor thereof,
unincorporated organization or joint venture, court or governmental unit or any
agency or subdivision thereof, or any other legally recognizable entity.
"Senior Creditors" means Agent and each Lender.
"Senior Obligations" means all Obligations owed by any Related Person
to any Senior Creditor, including all Obligations arising under the Credit
Agreement and the other Loan Documents and including any interest accruing
after the commencement of any Insolvency Proceeding whether or not such
interest is an allowed claim enforceable against such Related Person in such
Insolvency Proceeding.
"Subordinated Obligations" means all Obligations owed by any Related
Person to any other Related Person, including all Obligations arising out of
any cash management activities and including any interest accruing after the
commencement of any Insolvency Proceeding whether or not such interest is an
allowed claim enforceable against such Related Person in such Insolvency
Proceeding.
"Termination Date" means the 91st day following the Final Payment
Date; provided, however, that this Agreement shall continue to be effective or
be reinstated, as though such payment had not been made, if at any time any
payment of any of the Senior Obligations is rescinded or must otherwise be
returned by any Senior Creditor in connection with an Insolvency Proceeding
involving any Related Person.
(c) References and Headings. Unless the context otherwise requires or
unless otherwise provided herein, references in this Agreement to a particular
agreement, instrument or document (including references to promissory notes,
loan agreements, guaranties and security documents) also refer to and include
all renewals, extensions, amendments, modifications, supplements or
restatements of any such agreement, instrument or document, provided that
nothing contained in this Section shall be construed to authorize any party
hereto to execute or enter into any such renewal, extension, amendment,
modification, supplement or restatement. The headings used herein are for
purposes of convenience only and shall not be used in construing the provisions
hereof. The words "this Agreement," "this instrument," "herein," "hereof,"
"hereby" and words of similar import refer to this Agreement as a whole and not
to any particular subdivision unless expressly so limited. The word "or" is not
exclusive, and the word "including" (in its various forms) means "including
without limitation". Pronouns in masculine, feminine and neuter genders shall
be construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa, unless the context otherwise
requires.
Section 2. Subordination of Obligations. Each Related Person hereby,
expressly and in all respects, subordinates and makes junior and inferior:
(i) all Subordinated Obligations owed to it and the payment
and enforcement of such Subordinated Obligations, to
3
<PAGE> 4
(ii) the Senior Obligations and the payment and enforcement
of the Senior Obligations.
Prior to the Termination Date, no Related Person to whom Subordinated
Obligations are owed shall accept, receive or collect (by set-off or other
manner) any payment or distribution on account of, or ask for, demand or
accelerate, directly or indirectly, any Subordinated Obligation, and no Related
Person owing any Subordinated Obligation shall make any such payment except as
expressly provided below in this section. Borrower may make payments (i) to any
Subsidiary if no Default or Event of Default has occurred and is continuing,
(ii) to Stockholders with respect to the amounts that the Borrower is permitted
to pay them pursuant to Section 7.6 of the Credit Agreement (the "Permitted
Distribution"), and (iii) to Larry Addington with proceeds of the Senior
Unsecured Notes for the repayment of loans made by Larry Addington to Addington
Enterprises, Inc. and assumed by Borrower.
Section 3. No Obligations Which Cause Default. No Related Person
shall at any time incur any Subordinated Obligations to any other Related
Person if in so doing a Default or Event of Default would thereby occur.
Section 4. Subordination of Liens. Any Liens at any time securing the
Subordinated Obligations are hereby made, and will at all times prior to the
Termination Date be, subject, subordinate, junior and inferior in all respects
to all Liens securing the Senior Obligations; provided that this section shall
not be construed as a consent by Senior Creditors to any Liens prohibited by
the Credit Agreement or any other Loan Document.
Section 5. Assets Wrongly Received. If any Related Person receives
any payment or distribution of any kind (whether in cash, securities or other
property) in contravention of this Agreement, it shall hold such payment or
distribution in trust for Senior Creditors, shall segregate the same from all
other cash or assets it holds, and shall immediately deliver the same to Agent
for the benefit of Senior Creditors in the form received by such Related Person
(together with any necessary endorsement) to be applied to or, at Agent's
option held as collateral for, the payment or prepayment of the Senior
Obligations.
Section 6. Specific Performance. Agent is hereby authorized to demand
specific performance of this Agreement at any time when any Related Person
shall have failed to comply with any of the provisions of this Agreement. Each
Related Person hereby irrevocably waives any defense based upon the adequacy of
a remedy at law which might be asserted as a bar to such remedy of specific
performance and waives any requirement of the posting of any bond which might
otherwise be required before such remedy of specific performance is granted.
Section 7. No Acceleration or Institution of Collection Proceedings.
Prior to the Termination Date, no Related Person shall accelerate or collect or
attempt to collect any part of the Subordinated Obligations --whether through
the commencement or joinder of an action or proceeding (judicial or otherwise)
or an Insolvency Proceeding, the enforcement of any rights against any property
of another Related Person (including any such enforcement by foreclosure,
repossession or sequestration proceedings), or otherwise -- except (a) when
Agent shall either request that Related Persons join it in bringing any such
proceeding or request that any Related
4
<PAGE> 5
Person file claims in connection with any such proceeding, or (b) to receive
payments as permitted under Section 2.
Section 8. Insolvency Proceedings, Power of Attorney.
(a) Upon any distribution of all or any of the assets of any Related
Person, upon the dissolution, winding up, liquidation or reorganization of any
Related Person (whether or not in any Insolvency Proceeding), or upon an
assignment for the benefit of creditors or any other marshaling of the assets
and liabilities of any Related Person, then any payment or distribution of any
kind (whether in cash, securities or other property) which otherwise would be
payable or deliverable upon or with respect to the Subordinated Obligations
owed by such Related Person, except the Permitted Distribution, shall be paid
and delivered directly to Agent to be applied to or, at Agent's option held as
collateral for, the payment or prepayment of the Senior Obligations.
(b) During the pendency of any Insolvency Proceeding with respect to
any Related Person, each Related Person shall promptly execute, deliver and
file any documents and instruments which Agent may from time to time request in
order to (i) file appropriate proofs of claim in respect of the Subordinated
Obligations in such Insolvency Proceeding, except the Permitted Distribution,
(ii) instruct any receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making any payment or distribution in such Insolvency
Proceeding to make all payments which might otherwise be payable or deliverable
in respect of the Subordinated Obligations, except the Permitted Distribution,
directly to Agent, and (iii) otherwise effect the purposes of this Agreement.
(c) Cumulative of the foregoing, each Related Person hereby grants to
Agent the express power and authority (which power and authority are coupled
with an interest and shall be irrevocable) to do the following until the
Termination Date in the name of and on behalf of such Related Person:
(i) to file appropriate claims (whether by proofs of claim
or otherwise) in any Insolvency Proceeding and to take such other
actions in such Insolvency Proceeding as may be necessary or desirable
to prevent the waiver or release of any claims for Subordinated
Obligations or to enforce the terms of this Agreement.
(ii) to prosecute and enforce such claims in such Insolvency
Proceeding, to initiate and participate in other proceedings to
enforce such Subordinated Obligations, and to collect and receive any
and all such cash or other assets which may be paid on account of
Subordinated Obligations in such Insolvency Proceeding or in any other
proceeding.
(iii) to exercise any vote with respect to Subordinated
Obligations which any Related Person may have in any Insolvency
Proceeding.
Agent shall, however, have no duty to any Related Person to exercise any of the
foregoing power and authority, and Agent may do so or decline to do so in its
sole and absolute discretion.
5
<PAGE> 6
Section 9. Assignment and Marking of Subordinated Obligations.
Prior to the Termination Date, no Related Person shall without the prior
consent of Agent:
(a) transfer, assign, pledge, encumber or (except for
payments allowed under Section 2 hereof) otherwise dispose of any
right, claim or interest in all or any part of the Subordinated
Obligations to any Person other than another Related Person or Agent,
acting for the benefit of Senior Creditors.
(b) subordinate any of the Subordinated Obligations to any
Obligations other than the Senior Obligations.
(c) permit any amendment or modification to the terms of the
Subordinated Obligations or any agreement or document executed in
connection therewith.
Each Related Person shall upon Agent's request cause each instrument to which
it is a party that evidences all or any part of the Subordinated Obligations to
bear upon its face a conspicuous statement or legend to the effect that such
instrument and the indebtedness evidenced thereby are subordinate to the
payment of all Senior Obligations pursuant to this Agreement, and each Related
Person shall, in the case of any Subordinated Obligations to which it is a
party that is not evidenced by any instrument, upon Agent's request cause such
Subordinated Obligations to be evidenced by an appropriate instrument or
instruments endorsed with such statement or legend.
Section 10. Obligations Hereunder Not Affected. No action or inaction
of any Senior Creditor or any other Person, and no change of law or
circumstances, shall release or diminish the obligations, liabilities,
agreements or duties hereunder of any Related Person, affect this Agreement in
any way, or afford any Person any recourse against any Senior Creditor. Without
limiting the generality of the foregoing, none of the obligations, liabilities,
agreements and duties of the Related Persons under this Agreement shall be
released, diminished, impaired, reduced or affected by the occurrence of any of
the following at any time or from time to time, even if occurring without
notice to or without the consent of any or all Related Persons (any right of
any of the Related Persons to be so notified or to require such consent being
hereby waived):
(a) the release (by operation of law or otherwise) of any
Related Person from its duty to pay any of the Senior Obligations.
(b) any invalidity, deficiency, illegality or
unenforceability of any of the Senior Obligations or the documents and
instruments evidencing, governing or securing the Senior Obligations,
in whole or in part, any bar by any statute of limitations or other
law to recovery on any of the Senior Obligations, or any defense or
excuse for failure to perform on account of force majeure, act of God,
casualty, impracticability or other defense or excuse with respect to
the Senior Obligations whatsoever.
(c) the taking or accepting by any Senior Creditor of any
additional security for or subordination to any or all of the Senior
Obligations.
6
<PAGE> 7
(d) any release, discharge, surrender, exchange,
subordination, non-perfection, impairment, modification or stay of
actions or lien enforcement proceedings against, or loss of any
security at any time existing with respect to, the Senior Obligations.
(e) the modification or amendment of, or waiver of compliance
with, any terms of the documents and instruments evidencing, governing
or securing the Senior Obligations.
(f) the insolvency, bankruptcy or disability of any Related
Person or the filing or commencement of any Insolvency Proceeding
involving any Related Person or other proceeding with respect thereto.
(g) any increase or decrease in the amount of the Senior
Obligations or in the time, manner or terms in accordance with which
the Senior Obligations are to be paid, or any adjustment, indulgence,
forbearance, waiver or compromise that may be granted or given with
respect to the Senior Obligations.
(h) any neglect, delay, omission, failure or refusal of any
Senior Creditor to take or prosecute any action for the collection of
the Senior Obligations or to foreclose or take or prosecute any action
in connection with any instrument or agreement evidencing or securing
all or part of the Senior Obligations.
(i) any release of the proceeds of collateral which may come
into the possession of any Senior Creditor or its Affiliates.
(j) any judgment, order or decree by any court or
governmental agency or authority that a payment or distribution by any
Related Person to any Senior Creditor upon the Senior Obligations is a
preference or fraudulent transfer under applicable bankruptcy or
similar laws for the protection of creditors or is for any other
reason required to be refunded by such Senior Creditor or paid by such
Senior Creditor to any other Person.
(k) the release or discharge for any reason of any Liable
Party hereto from any of its obligations under this Agreement.
(l) any modification of, or waiver of compliance with, any
terms of this Agreement with respect to any party hereto.
(m) any neglect, delay, omission, failure or refusal of any
Senior Creditor to take or prosecute any action against any Person in
connection with this Agreement.
Section 11. Waiver. Each Related Person hereby waives promptness,
diligence, notice of acceptance, notice of any Default or Event of Default,
notice of acceleration of any Senior Obligations, and any other notice with
respect to any of the Senior Obligations and this Agreement, and any
requirement that Senior Creditors exhaust any other right or take any action
against any Related Person or any other Person or any collateral.
7
<PAGE> 8
Section 12. Subrogation.
(a) No payment or distribution to any Senior Creditor pursuant to the
provisions of this Agreement shall entitle any Related Person to exercise any
rights of subrogation in respect thereof prior to the Termination Date, and
until such time no Related Person shall have any right of subrogation to any
Senior Creditor, or any right to receive contribution or reimbursement from any
other Related Person, on account of this Agreement or any other Loan Document.
(b) After the Termination Date, and provided that no payments received
by Senior Creditors are voidable or must otherwise be returned, each Related
Person shall be subrogated to the rights of each Senior Creditor to receive
distributions applicable to Senior Obligations to the extent that distributions
otherwise payable to such Related Person have been applied to the payment of
Senior Obligations owing to such Senior Creditor.
(c) Any distribution made pursuant to this Agreement to a Senior
Creditor on account of Subordinated Obligations owing by one Related Person to
a second Related Person, shall not, as between such Related Persons, be
considered a payment of such Subordinated Obligations.
(d) If any Senior Creditor ever enforces any security interests or
otherwise obtains any ownership interests in the stock of or partnership
interests in any Related Person (whether by foreclosure, in an Insolvency
Proceeding, as part of a settlement, or otherwise), thereby causing such first
Related Person to cease to be owned by another Related Person and to instead
become owned by a Senior Creditor or by any other Person which is not a Related
Person, then all claims of any Related Persons for Subordinated Obligations
owed by such first Related Person shall thereupon be deemed terminated and
released, and no Related Person shall at any time thereafter have any right of
subrogation to any claims of any Senior Creditor against such first Related
Person or any right to receive contribution or reimbursement from such first
Related Person.
Section 13. Representations and Warranties of the Related Persons.
Each Related Person hereby represents and warrants to each Senior Creditor
that:
(a) The recitals at the beginning of this Agreement are true and
correct in all respects.
(b) Each Related Person (other than Larry Addington) is duly
organized, validly existing and in good standing under the laws of the state of
its organization or formation. Each Related Person has all requisite power and
authority to execute, deliver and perform this Agreement.
(c) The execution, delivery and performance by each Related Person
(other than Larry Addington) of this Agreement have been duly authorized by all
necessary corporate action and do not and will not contravene its certificate
or articles of incorporation or bylaws.
(d) The execution, delivery and performance by the Related Persons of
this Agreement do not and will not contravene any law or governmental
regulation or any contractual restriction binding on or affecting any Related
Person or any of its properties, and do not and will not result in or require
the creation of any Lien upon or with respect to any of its properties.
8
<PAGE> 9
(e) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body or third
party, is required for the due execution, delivery and performance by any
Related Person of this Agreement.
(f) This Agreement is a legal, valid and binding obligation of each
Related Person, enforceable against each Related Person in accordance with its
terms except as limited by bankruptcy, insolvency or other similar laws of
general application relating to the enforcement of creditors' rights.
(g) There is no action, suit or proceeding pending or, to the
knowledge of any Related Person, threatened against or otherwise affecting any
Related Person before any court, arbitrator or governmental department,
commission, board, bureau, agency or instrumentality which may materially and
adversely affect any Related Person's financial condition or its ability to
perform its obligations hereunder.
Section 14. No Oral Change. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Related
Persons and Agent (with the consent of Senior Creditors to the extent required
under Section 10.1 of the Credit Agreement). No waiver of any provision of this
Agreement, and no consent to any departure by Related Persons therefrom, shall
be effective unless it is in writing and signed by Agent (with the consent of
Senior Creditors to the extent required under Section 10.1 of the Credit
Agreement), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 15. Governing Law. This Agreement shall be deemed a contract
and instrument made under the laws of the State of Texas and shall be construed
and enforced in accordance with and governed by the laws of such state and the
laws of the United States of America, without regard to principles of conflicts
of law.
Section 16. Invalidity of Particular Provisions. If any term or
provision of this Agreement shall be determined to be illegal or unenforceable,
all other terms and provisions hereof shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by applicable law.
Section 17. Additional Documentation. Upon Agent's request, each
Related Person will execute any further instruments and take all other action
which, in Agent's opinion, may be necessary or desirable to carry out more
fully the purposes of this Agreement.
Section 18. Notices. All notices provided for hereunder shall be in
writing or by facsimile and, if to any Related Person, addressed, delivered or
transmitted to it at the address or facsimile number of Borrower set forth in
the Credit Agreement, and, if to the Agent, addressed, delivered or transmitted
to it at the address or facsimile number of the Agent specified in the Credit
Agreement, or as to any party at such other address as shall be designated by
such party in a written notice to each other party complying as to delivery
with the terms of this Section. All such notices and other communications, if
mailed and properly addressed with postage prepaid or if properly addressed and
sent by prepaid courier service, shall be deemed given when
9
<PAGE> 10
received; any such notice or communication, if transmitted by facsimile, shall
be deemed given when transmitted (upon receipt of electronic confirmation of
transmission).
Section 19. Successors and Assigns. No rights or obligations hereunder
of any Related Person may be assigned or delegated, but this Agreement and such
obligations shall pass to and be fully binding upon the successors of each
Related Person. This Agreement shall apply to and inure to the benefit of each
Senior Creditor, its successors, and its assigns which are permitted under the
Credit Agreement.
Section 20. Counterparts. This Agreement may be separately executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement. Any Subsidiary of Borrower may from time to time be
added hereto as a Related Person by executing and delivering a counterpart
hereof to Agent; no consent or other writing from any other Related Person
shall be required for the addition hereto of any such Subsidiary as a Related
Person and as a party hereto.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
10
<PAGE> 11
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
BORROWER:
AEI HOLDING COMPANY, INC.
By: /s/ Vic Grubb
-----------------------
Name: Vic Grubb
Title: Controller/Treasurer
SUBSIDIARIES:
TENNESSEE MINING, INC.
By: /s/ John Lynch
-----------------------
Name: John Lynch
Title: Vice President
IKERD-BANDY CO., INC.
By: /s/ John Lynch
-----------------------
Name: John Lynch
Title: Secretary
ADDINGTON MINING, INC.
By: /s/ John Lynch
-----------------------
Name: John Lynch
Title: Secretary
STOCKHOLDERS:
ADDINGTON ENTERPRISES, INC.
By: /s/ John Lynch
-----------------------
Name: John Lynch
Title: Vice President
/s/ LARRY ADDINGTON
--------------------------
LARRY ADDINGTON
<PAGE> 1
EXHIBIT 10.14(b)
SUPPLEMENT TO SUBORDINATION AGREEMENT
January 2, 1998
Reference is made to the Credit Agreement dated as of November 11, 1997
by and among AEI Holding Company, Inc. ("Borrower"), NationsBank of Texas, N.A.,
individually and as Agent, and the other lenders parties thereto (the "Credit
Agreement") and to the Subordination Agreement dated as of November 11, 1997 by
and among Borrower, Larry Addington, Addington Enterprises, Inc., Tennessee
Mining, Inc., Ikerd- Bandy Co., Inc., and Addington Mining, Inc. (the
"Subordination Agreement") executed pursuant thereto. Terms defined in the
Credit Agreement and Subordination Agreement are used herein with the same
meaning.
WHEREAS, Section 6.17 of the Credit Agreement requires each Subsidiary
of Borrower acquired after the date thereof to execute and deliver to Agent a
supplement to the Subordination Agreement by which such Subsidiary shall become
a party thereto as a "Subsidiary".
NOW, THEREFORE, Mining Technologies, Inc., a Kentucky corporation
("Mining Technologies") hereby agrees as follows:
1. Upon and from its execution hereof, Mining Technologies shall be a
party to the Subordination Agreement and shall comply with all the obligations
of the Related Persons and Subsidiaries thereunder.
2. The Subordination Agreement, as supplemented hereby, is hereby
ratified and confirmed in all respects. The execution, delivery, and
effectiveness of this Supplement Agreement shall not, except as expressly
provided herein, operate as a waiver of any right, power, or remedy of Agent or
any Lender under the Subordination Agreement nor constitute a waiver of any
provision of the Subordination Agreement.
THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
1
<PAGE> 2
IN WITNESS WHEREOF, this instrument is executed by the undersigned as
of the date first written above.
MINING TECHNOLOGIES, INC.
By: /s/ Vic Grubb
---------------------------------
Name: Vic Grubb
Title: Treasurer
2
<PAGE> 1
EXHIBIT 10.15
AEI HOLDING COMPANY, INC.
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is made as of November 11,
1997 by AEI Holding Company, Inc., a Delaware corporation ("Debtor"), in favor
of NationsBank of Texas, N.A., individually and as agent for the other Lenders
that hereafter become parties to the Credit Agreement referenced below
("Secured Party").
W I T N E S S E T H:
WHEREAS, Debtor, Agent, and Lenders have entered into that certain
Credit Agreement of even date herewith, (herein, as from time to time amended,
supplemented or restated, called the "Credit Agreement"), pursuant to which
funds are to be advanced to Debtor under the Notes (as such term is defined
below) which funds may be further advanced by Debtor to its Affiliates;
WHEREAS, Debtor has executed (i) that certain Promissory Note of even
date herewith payable to the order of NationsBank in the original principal
amount of $30,000,000 on or before the Maturity Date and (ii) that certain
Promissory Note of even date herewith payable to the order of The Provident
Bank in the original principal amount of $20,000,000 on or before the Maturity
Date (such promissory notes, as from time to time amended, and all promissory
notes given in substitution, renewal or extension therefor or thereof, in whole
or in part, being herein collectively called the "Notes"), which Notes renewed
and extended the Original Promissory Note;
WHEREAS, it is a condition precedent to Lenders' obligations to
advance funds pursuant to the Credit Agreement that Debtor shall execute and
deliver to Secured Party a security agreement covering substantially all of its
personal assets;
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to extend such credit under the Credit Agreement, Debtor hereby
agrees with Secured Party, for the benefit of Lenders and Secured Party, as
follows:
<PAGE> 2
ARTICLE I
Definitions and References
Section 1.1. General Definitions. As used herein, the terms
"Agreement", "Debtor", and "Credit Agreement" shall have the meanings indicated
above, and the following terms shall have the following meanings:
"Collateral" means all property, of whatever type, which is described
in Section 2.1 as being at any time subject to a security interest granted
hereunder to Secured Party.
"Collateral Account" has the meaning given it in Section 4.1(e).
"Commitment" means the agreement or commitment by Lenders to make
loans or otherwise extend credit to Debtor under the Credit Agreement, and any
other agreement, commitment, statement of terms or other document contemplating
the making of loans or advances or other extension of credit by Lenders to or
for the account of Debtor which is now or at any time hereafter intended to be
secured by the Collateral under this Agreement.
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing inventory, equipment, or other
goods.
"Equipment" means all equipment (as defined in the UCC) in whatever
form, wherever located, and whether now or hereafter existing, and all parts
thereof, all accessions thereto, and all replacements therefor, including but
not limited to the Operating Equipment.
"Excluded Collateral" means, collectively, all of the following which
are being sold in connection with the sale by Borrower of its Mining
Technologies Division:
(a) Receivables relating: (i) to the assets listed in
Schedules 2.1(b), 2.1(c)(1) and 2.1(c)(2) and 2.1(h); (ii) to coal
mining operations performed under contracts with third parties for the
benefit of such third parties and (iii) Receivables arising from
services performed by Borrower for third parties in Borrower's shops.
(b) General Intangibles listed in Schedule 2.1(b), 2.1(c)(1)
and 2.1(c)(2) or relating to the assets listed in Schedule 2.1(h);
(c) Documents relating to the assets listed in Schedules
2.1(b) or 2.1(h) or assets subject to the leases listed in Schedule
2.1(c)(2);
(d) Instruments relating to the assets listed in Schedules
2.1(b), 2.1(c)(1) and 2.1(c)(2) and 2.1(h);
(e) Inventory listed in Schedule 2.1(h);
2
<PAGE> 3
(f) Investment Property listed in Schedules 2.1(c)(1) or (c)
(2); and
(g) Equipment listed in Schedule 2.1(h) or relating to the
Contracts listed in Schedule 2.1(c)(2);
"General Intangibles" means all general intangibles (as defined in the
UCC) of any kind (including choses in action, tax refunds, insurance proceeds,
and contract rights), and all instruments, security agreements, leases,
contracts, and other rights (except those constituting Receivables, Documents,
or Instruments) to receive payments of money or the ownership or possession of
property. The General Intangibles include, among other items, all Intellectual
Property.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (as each is defined in" the UCC).
"Intellectual Property" means any Patents, Patent Licenses,
Trademarks, and Trademark Licenses.
"Inventory" means all inventory (as defined in the UCC) in all of its
forms, wherever located and whether now or hereafter existing, including (a)
all movable property and other goods held for sale or lease, all movable
property and other goods furnished or to be furnished under contracts of
service, all raw materials and work in process, and all materials and supplies
used or consumed in a business, including but not limited to all coal and other
minerals after extraction, all stockpiles thereof, and related products, (b)
all movable property and other goods which are part of a product or mass, (c)
all movable property and other goods which are returned to or repossessed by
the seller, lessor, or supplier thereof, (d) all goods and substances in which
any of the foregoing is commingled or to which any of the foregoing is added,
and (e) all accessions to, products of, and documents for any of the foregoing.
"Issuer" means any issuer of Subsidiary Shares and any successor of
such Issuer.
"Investment Property" means all "certificated securities",
"uncertificated securities", "security entitlements", "security accounts",
"commodity contracts" or "commodity accounts" (as each is defined in the UCC)
and shall include, without limitation, all Subsidiary Shares, except the shares
of Ikerd Bandy, Co., Inc.
"Lenders" means the Persons who are from time to time "Lenders" as
defined in the Credit Agreement.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure indebtedness of any kind which is owed
to him or any other arrangement with such creditor which provides for the
payment of such indebtedness out of such property or assets or which allows him
to have such indebtedness satisfied out of such property or assets prior to the
general creditors of any owner thereof, including without limitation any lien,
mortgage,
3
<PAGE> 4
security interest, pledge, deposit, production payment, rights of a vendor
under any title retention or conditional sale agreement or lease substantially
equivalent thereto, tax lien, mechanic's or materialman's lien, or any other
charge or encumbrance for security purposes, whether arising by law or
agreement or otherwise, but excluding any right of offset which arises without
agreement in the ordinary course of business. "Lien" also means any filed
financing statement, any registration with an issuer of uncertificated
securities, or any other arrangement which would serve to perfect a Lien
described in the preceding sentence, regardless of whether such financing
statement is filed, such registration is made, or such arrangement is
undertaken before or after such Lien exists.
"Lockbox" has the meaning given it in Section 4.1(e).
"Obligation Documents" means the Credit Agreement, the Notes, the Loan
Documents, and all other documents and instruments under, by reason of which,
or pursuant to which any or all of the Secured Obligations are evidenced,
governed, secured, or otherwise dealt with, and all other agreements,
certificates, and other documents, instruments and writings heretofore or
hereafter delivered in connection herewith or therewith.
"Other Liable Party" means any Person, other than Debtor, who may now
or may at any time hereafter be primarily or secondarily liable for any of the
Secured Obligations or who may now or may at any time hereafter have granted to
Secured Party or Lenders a Lien upon any property as security for the Secured
Obligations.
"Patent License" means any license or other agreement, whether now or
hereafter in existence, under which is granted or authorized any right with
respect to any Patent or any invention now or hereafter in existence, whether
patentable or not, whether a patent or application for patent is in existence
on such invention or not, and whether a patent or application for patent on
such invention may come into existence.
"Patents" means all the following: (a) all letters patent and design
letters patent of the United States or any other country and all applications
for letters patent and design letters patent of the United States or any other
country, including applications in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or other country, or any political subdivision thereof. (b) all
reissues, divisions, continuations, continuations-in-part, renewals and
extensions thereof, (c) all claims for, and rights to sue for, past or future
infringements of any of the foregoing, and (d) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements
thereof.
"Perfection Certificate" means the Collateral Certificate
appropriately completed to the satisfaction of Secured Party and duly executed
by the indicated officer or officers of Debtor.
"Permitted Liens" means any Liens expressly permitted under Section
7.2 of the Credit Agreement.
4
<PAGE> 5
"Person" means an individual, corporation, partnership, association,
joint stock company, trust, unincorporated organization or joint venture, or a
court or governmental unit or any agency or subdivision thereof, or any other
legally recognizable entity.
"Proceeds" means, with respect to any property of any kind, all
proceeds of, and all other profits, products, rentals or receipts, in whatever
form, arising from any sale, exchange, collection, lease, licensing or other
disposition of, distribution in respect of, or other realization upon, such
property, including all claims against third parties for loss of, damage to or
destruction of, or for proceeds payable under (or unearned premiums with
respect to) insurance in respect of, such property (regardless of whether
Secured Party is named a loss payee thereunder), and any payments paid or owing
by any third party under any indemnity, warranty, or guaranty with respect to
such property, and any condemnation or requisition payments with respect to
such property, in each case whether now existing or hereafter arising.
"Receivables" means (a) all accounts (as defined in the UCC) and all
other rights to payment for goods or other personal property which have been
(or are to be) sold, leased, or exchanged or for services which have been (or
are to be) rendered, regardless of whether such accounts or other rights to
payment have been earned by performance and regardless of whether such accounts
or other rights to payment are evidenced by or characterized as accounts
receivable, contract rights, book debts, notes, drafts or other obligations of
indebtedness, (b) all Documents and Instruments of any kind relating to such
accounts or other rights to payment or otherwise arising out of or in
connection with the sale, lease or exchange of goods or other personal property
or the rendering of services, (c) all rights in, to, or under all security
agreements, leases and other contracts securing or otherwise relating to any
such accounts, rights to payment, Documents, or Instruments, (d) all rights in,
to and under any purchase orders, service contracts, or other contracts out of
which such accounts and other rights to payment arose (or will arise on
performance), and (e) all rights in or pertaining to any goods arising out of
or in connection with any such purchase orders, service contracts, or other
contracts, including rights in returned or repossessed goods and rights of
replevin, repossession, and reclamation.
"Related Person" means Debtor, each Subsidiary of Debtor and each
Other Liable Party.
"Secured Obligations" has the meaning given such term in Section 2.2.
"Secured Party" means the Person named as such at the beginning of
this Agreement, together with its successors and assigns as the "Agent" under
the Credit Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.
"Subsidiary Shares" means all of the following issued by any
Subsidiary of Debtor (other than Ikerd Bandy Co., Inc.: (a) all shares of
capital stock , (b) all units of membership
5
<PAGE> 6
interest, (c) all certificates representing any such shares and units, (d) all
options and other rights, contractual or otherwise, at any time existing with
respect to such shares and units, and (e) all dividends, cash, instruments and
other property now or hereafter received, receivable or otherwise distributed
in respect of or in exchange for any or all of such shares or units.
"Trademark License" means any license or agreement, whether now or
hereafter in existence, under which is granted or authorized any right to use
any Trademark.
"Trademarks" means all of the following: (a) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, brand names, trade dress, prints and
labels on which any of the foregoing have appeared or appear, package and other
designs, and any other source or business identifiers, and general intangibles
of like nature, and the rights in any of the foregoing which arise under
applicable law, (b) the goodwill of the business symbolized thereby or
associated with each of them, (c) all registrations and applications in
connection therewith, including registrations and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or other country, or any political subdivision
thereof, (d) all reissues, extensions and renewals thereof, (e) all claims for,
and rights to sue for, past or future infringements of any of the foregoing,
and (f) all income, royalties, damages and payments now or hereafter due or
payable with respect to any of the foregoing, including damages and payments
for past or future infringements thereof.
"UCC" means the Uniform Commercial Code in effect in the State of
Texas on the date hereof.
Section 1.2. Other Definitions. Reference is hereby made to the Credit
Agreement for a statement of the terms thereof. All capitalized terms used in
this Agreement which are defined in the Credit Agreement and not otherwise
defined herein shall have the same meanings herein as set forth therein. All
terms used in this Agreement which are defined in the UCC and not otherwise
defined herein or in the Credit Agreement shall have the same meanings herein
as set forth therein, except where the context otherwise requires.
Section 1.3. Attachments. All exhibits or schedules which may be
attached to this Agreement are a part hereof for all purposes.
Section 1.4. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document (including, but not
limited to, references in Section 2.1) also refer to and include all renewals,
extensions, amendments, modifications, supplements or restatements of any such
agreement, instrument or document, provided that nothing contained in this
Section shall be construed to authorize any Person to execute or enter into any
such renewal, extension, amendment, modification, supplement or restatement.
6
<PAGE> 7
Section 1.5. References and Titles. All references in this Agreement
to Exhibits, Articles, Sections, subsections, and other subdivisions refer to
the Exhibits, Articles, Sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any subdivision are for convenience only and do not constitute any
part of any such subdivision and shall be disregarded in construing the
language contained in this Agreement. The words "this Agreement", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited. The phrases "this Section" and "this subsection" and similar phrases
refer only to the Sections or subsections hereof in which the phrase occurs.
The word "or" is not exclusive, and the word "including" (in all of its forms)
means "including without limitation". Pronouns in masculine, feminine and
neuter gender shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa unless
the context otherwise requires.
ARTICLE II
Security Interest
Section 2.1. Grant of Security Interest. As collateral security for
all of the Secured Obligations, Debtor hereby pledges and assigns to Secured
Party and grants to Secured Party a continuing security interest, for the
benefit of Lenders, in and to all right, title and interest of Debtor in and to
any and all of the following property, whether now owned or existing or
hereafter acquired or arising and regardless of where located, SAVE AND EXCEPT
the Excluded Collateral.
(a) all Receivables.
(b) all General Intangibles.
(c) all Documents.
(d) all Instruments.
(e) all Inventory.
(f) all Investment Property.
(g) all Equipment.
(h) The Collateral Account and the Lockbox, all cash deposited therein
from time to time, and all Liquid Investments referred to in Section 4.1(e).
(i) All books and records (including, without limitation, customer
lists, marketing information, credit files, price lists, operating records,
vendor and supplier price lists, sales
7
<PAGE> 8
literature, computer software, computer hardware, computer disks and tapes and
other storage media, printouts and other materials and records) of Debtor
pertaining to any of the Collateral.
(j) All moneys and property of any kind of Debtor in the possession or
under the control of Secured Party except for moneys and property paid to
Debtor in connection with the Asset Purchase Agreement to be executed by
Debtor, Mining Technologies Limited and Mining Technologies, Inc. relating to
the assets listed in Schedule 2.1.
(k) All Proceeds of any and all of the foregoing Collateral.
In each case, the foregoing shall be covered by this Agreement, whether
Debtor's ownership or other rights therein are presently held or hereafter
acquired and howsoever Debtor's interests therein may arise or appear (whether
by ownership, security interest, claim or otherwise).
Section 2.2. Secured Obligations Secured. The security interest
created hereby in the Collateral constitutes continuing collateral security for
all of the following obligations, indebtedness and liabilities, whether now
existing or hereafter incurred or arising:
(a) Credit Agreement Indebtedness. The payment by Debtor, as and when
due and payable, of the "Obligations", as defined in the Credit Agreement, and
of all amounts from time to time owing by Debtor under or in respect of the
Credit Agreement, the Notes or any of the other Obligation Documents.
(b) Interest Rate Hedges. The payment and performance of any and all
present or future obligations of Debtor according to the terms of any present
or future interest rate or currency rate swap, rate cap, rate floor, rate
collar, exchange transaction, forward rate agreement, or other exchange rate
protection agreements or any option with respect to any such transaction now
existing or hereafter entered into between Debtor, any Subsidiary of Debtor,
and one or more parties constituting any Lender (or any affiliate of any
Lender).
(c) Other Indebtedness. All loans and future advances made by Lenders
to Debtor and all other debts, obligations and liabilities of every kind and
character of Debtor now or hereafter existing in favor of Lenders, whether such
debts, obligations or liabilities be direct or indirect, primary or secondary,
joint or several, fixed or contingent, and whether originally payable to
Lenders or to a third party and subsequently acquired by Lenders and whether
such debts, obligations or liabilities are evidenced by notes, open account,
overdraft, endorsement, security agreement, guaranty or otherwise (it being
contemplated that Debtor may hereafter become indebted to Lenders in further
sum or sums but Lenders shall have no obligation to extend further indebtedness
by reason of this Agreement).
(d) Renewals. All renewals, extensions, amendments, modifications,
supplements, or restatements of or substitutions for any of the foregoing.
8
<PAGE> 9
(e) Performance. The due performance and observance by Debtor of all
of its other obligations from time to time existing under or in respect of any
of the Obligation Documents.
As used herein, the term "Secured Obligations" refers to all present and future
indebtedness, obligations and liabilities of whatever type which are described
above in this section, including any interest which accrues after the
commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of Debtor. Debtor hereby acknowledges
that the Secured Obligations are owed to the various Lenders and that each
Lender is entitled to the benefits of the Liens given under this Agreement.
ARTICLE III
Representations, Warranties and Covenants
Section 3.1. Representations and Warranties. Debtor hereby represents
and warrants to Secured Party and Lenders as follows:
(a) Ownership Free of Liens. Debtor has good and marketable title to
the Collateral, free and clear of all Liens, encumbrances or adverse claims
except for the security interest created by this Agreement and any Permitted
Liens. No effective financing statement or other registration or instrument
similar in effect covering all or any part of the Collateral is on file in any
recording office except any which have been filed in favor of Secured Party
relating to this Agreement and any which have been filed to perfect or protect
any Permitted Lien. None of the Collateral is in the possession of any Person
other than Debtor or Secured Party, except for Collateral being transported in
the ordinary course of business.
(b) No Conflicts or Consents. Neither the ownership or the intended
use of the Collateral by Debtor, nor the grant of the security interest by
Debtor to Secured Party herein, nor the exercise by Secured Party of its rights
or remedies hereunder, will (i) conflict with any provision of (a) any domestic
or foreign law, statute, rule or regulation, (b) the articles or certificate of
incorporation, charter or bylaws of Debtor, or (c) any agreement, judgment,
license, order or permit applicable to or binding upon Debtor, or (ii) result
in or require the creation of any Lien, charge or encumbrance upon any assets
or properties of Debtor or of any Related Person except for Permitted Liens
expressly contemplated in the Obligation Documents. Except as expressly
contemplated in the Obligation Documents, no consent, approval, authorization
or order of, and no notice to or filing with any court, governmental authority,
or third party is required in connection with the grant by Debtor of the
security interest herein, or the exercise by Secured Party of its rights and
remedies hereunder.
(c) Security Interest. Debtor has and will have at all times full
right, power and authority to grant a security interest in the Collateral to
Secured Party as provided herein, free and clear of any Lien, adverse claim, or
encumbrance. This Agreement creates a valid and binding security interest in
favor of Secured Party in the Collateral, which security interest secures all
of the Secured Obligations.
9
<PAGE> 10
(d) Perfection Certificate. Debtor has previously completed and
delivered the Perfection Certificate to Secured Party. The Perfection
Certificate as so delivered is true, correct and complete.
(e) Receivables. Each Receivable included within the Collateral
represents the valid and legally binding indebtedness of a bona fide account
debtor arising from the sale or lease by Debtor of goods or the rendition by
Debtor of services, subject to no contra-accounts, setoffs, defenses,
counterclaims, discounts, allowances, rebates, credits or adjustments by or
available to account debtors obligated on such Receivable, except for
Receivables of Debtor which do not in the aggregate exceed five percent (5%) of
the aggregate face amount of all of Debtor's Receivables. No material amount of
Debtor's Receivables is otherwise doubtful of collection except as has been
disclosed to Secured Party in writing.
(f) General Intangibles. Each General Intangible included within the
Collateral which is material to Debtor's business represents the valid and
legally binding obligation of each other Person who is a party thereto or who
is otherwise stated to be obligated thereunder, subject to no contra-accounts,
setoffs, defenses, counterclaims, discounts, allowances, rebates, credits or
adjustments by or available to account debtors obligated thereon, except for
those which (i) in the case of General Intangibles under which money is owing
to Debtor, do not in the aggregate exceed five percent (5%) of the aggregate
face amount of all such General Intangibles, and (ii) in the case of other
General Intangibles, do not materially impair the value to Debtor or the
enforcement by Debtor of such General Intangibles.
(g) Intellectual Property. There is no Intellectual Property included
within the Collateral which is material to Debtor's business.
(h) Documents and Instruments. All Documents and Instruments included
within the Collateral are valid and genuine. Any such Document or Instrument
has only one original counterpart which constitutes collateral within the
meaning of the UCC or the law of any applicable jurisdiction, and all such
original counterparts (other than checks delivered in payment of Receivables in
the ordinary course of business) have been delivered into the possession of
Secured Party.
(i) Goods. None of the Collateral which constitutes goods (i) is
covered by any Document (other than Documents which are subject hereto and have
been delivered to Secured Party), (ii) is subject to any landlord's lien or
similar Lien (other than Permitted Liens), (iii) has been related to, attached
to, or used in connection with any real property so as to constitute a fixture
upon such real property (except for real property which is subject to a Lien in
favor of Secured Party), (iv) is now kept or is intended to be kept at any
location other than as set forth in the Perfection Certificate (except for
goods in transit in the ordinary course of Debtor's business), (v) is installed
in or affixed to other goods so as to be an accession to such other goods
(unless such other goods are included in the Collateral), or (vi) has been
produced in violation of the Fair Labor Standards Act, as amended. All such
goods are insured to the extent required under the Credit Agreement.
10
<PAGE> 11
(k) Investment Property. Debtor has delivered to Secured Party all
Certificates, instruments, and writings evidencing Investment Property included
within the Collateral. All such certificates, instruments, and writings are
valid and genuine and have not been altered.
(j) Subsidiary Shares. Debtor has delivered to Secured Party all
certificates evidencing Subsidiary Shares. All such certificates are valid and
genuine and have not been altered. All shares, units and other securities
constituting the Subsidiary Shares have been duly authorized and validly
issued, are fully paid and non-assessable, and were not issued in violation of
the preemptive rights of any Person or of any agreement by which Debtor or the
Issuer thereof is bound. All documentary, stamp or other taxes or fees owing in
connection with the issuance, transfer or pledge of Subsidiary Shares (or
rights in respect thereof) have been paid. No restrictions or conditions exist
with respect to the transfer, voting or capital of any Subsidiary Shares. The
Subsidiary Shares constitute the percentage of the class of issued shares of
capital stock which is indicated on Exhibit B. No Issuer of any Subsidiary
Shares has any outstanding stock rights, rights to subscribe, options, warrants
or convertible securities outstanding or any other rights outstanding whereby
any Person would be entitled to have issued to him capital stock of such
Issuer.
Section 3.2. General Covenants Applicable to All Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this Section 3.2 from the date hereof
and so long as any part of the Secured Obligations or the Commitment is
outstanding.
(a) Change of Name, Location, or Structure; Additional Filings. Debtor
recognizes that financing statements pertaining to the Collateral have been or
may be filed where Debtor maintains any Collateral, has its records concerning
any Collateral or has its chief executive office or chief place of business.
Without limitation of any other covenant herein, Debtor will not cause or
permit any change to be made in its name, identity or corporate or partnership
structure, or any change to be made to a jurisdiction other than as represented
in Section 3.1 hereof in (i) the location of any Collateral, (ii) the location
of any records concerning any Collateral or (iii) in the location of Debtor's
chief executive office or principal place of business, unless Debtor shall have
first (1) notified Secured Party of such change at least twenty (20) days prior
to the effective date of such change, (2) taken all action requested by Secured
Party (under the following subsection (b) or otherwise) for the purpose of
further confirming and protecting Secured Party's security interests and rights
under this Agreement and the perfection and priority thereof, and (3) if
requested by Secured Party, provided to Secured Party a legal opinion to its
satisfaction confirming that such change will not adversely affect in any way
Secured Party's security interests and rights under this Agreement or the
perfection or priority thereof. In any notice furnished pursuant to this
subsection, Debtor will expressly state that the notice is required by this
Agreement and contains facts that may require additional filings of financing
statements or other notices for the purposes of continuing perfection of
Secured Party's security interest in the Collateral.
11
<PAGE> 12
(b) Further Assurances. Debtor will, at its expense as from time to
time requested by Secured Party, promptly execute and deliver all further
instruments, agreements, filings and registrations, and take all further
action, in order: (i) to confirm and validate this Agreement and Secured
Party's rights and remedies hereunder, (ii) to correct any errors or omissions
in the descriptions herein of the Secured Obligations or the Collateral or in
any other provisions hereof, (iii) to perfect, register and protect the
security interests and rights created or purported to be created hereby or to
maintain or upgrade in rank the priority of such security interests and rights,
(iv) to enable Secured Party to exercise and enforce its rights and remedies
hereunder in respect of the Collateral, or (v) to otherwise give Secured Party
the full benefits of the rights and remedies described in or granted under this
Agreement. As part of the foregoing Debtor will, whenever requested by Secured
Party (1) execute and file any financing statements, continuation statements,
and other filings or registrations relating to Secured Party's security
interests and rights hereunder, and any amendments thereto, and (2) mark its
books and records relating to any Collateral to reflect that such Collateral is
subject to this Agreement and the security interests hereunder. To the extent
requested by Secured Party from time to time, Debtor will obtain from any
material account debtor or other obligor on the Collateral the acknowledgment
of such account debtor or obligor that such Collateral is subject to this
Agreement.
(c) Inspection of Collateral. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all representatives
appointed by Secured Party, including independent accountants, agents,
attorneys, appraisers and any other persons, to inspect any of the Collateral
and the books and records of or relating to the Collateral at any time during
normal business hours, and to make photocopies and photographs thereof, and to
write down and record any information which such representatives obtain;
provided that such actions do not unreasonably interfere with Debtor's
business.
(d) Information. Upon the reasonable request from time to time by
Secured Party, Debtor will furnish to Secured Party (i) any information
concerning any covenant, provision or representation contained herein or any
other matter in connection with the Collateral or Debtor's business,
properties, or financial condition, and (ii) statements and schedules
identifying and describing the Collateral and other reports and information
requested in connection with the Collateral, all in reasonable detail.
(e) Ownership, Liens, Possession and Transfers. Debtor will maintain
good and marketable title to all Collateral (except Collateral which is sold in
accordance with Section 7.5 of the Credit Agreement), free and clear of all
Liens, encumbrances or adverse claims except for the security interest created
by this Agreement and any Permitted Liens, and Debtor will not grant or allow
any such Liens, encumbrances or adverse claims to exist. Debtor will not grant
or allow to remain in effect, and Debtor will cause to be terminated, any
financing statement or other registration or instrument similar in effect
covering all or any part of the Collateral, except any which have been filed in
favor of Secured Party relating to this Agreement and any which have been filed
to perfect or protect any Permitted Lien. Debtor will defend Secured Party's
right, title and special property and security interest in and to the
Collateral against the claims of any Person. Except as expressly allowed in
Section 3.3 below for Inventory and Equipment,
12
<PAGE> 13
Debtor (i) will insure that all of the Collateral -- whether goods, Documents,
Instruments, or otherwise -- is and remains in the possession of Debtor or
Secured Party (or a bailee selected by Secured Party who is holding such
Collateral for the benefit of Secured Party), except for goods being
transported in the ordinary course of business, and (ii) will not sell, assign
(by operation of law or otherwise), transfer, exchange, lease or otherwise
dispose of any of the Collateral.
(f) Impairment of Security Interest. Debtor will not take or fail to
take any action which would in any manner impair the value or enforceability of
Secured Party's security interest in any Collateral.
Section 3.3. Covenants for Specified Types of Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this Section 3.3 from the date hereof
and so long as any part of the Secured Obligations or the Commitment is
outstanding.
(a) Receivables. Debtor will, except as otherwise provided in Sections
4.1(d) or 4.2(a), collect at its own expense all amounts due or to become due
under each Receivable which is included within the Collateral. In connection
with such collections, Debtor may (and, at Secured Party's direction, will)
take such action (not otherwise forbidden hereunder) as Debtor or Secured Party
may deem necessary or advisable to enforce collection or performance of each
such Receivable. Except for actions and omissions in the ordinary course of
business which do not in the aggregate cause losses or reductions in excess of
five percent (5%) of the aggregate face amount of all such Receivables
outstanding at any time, Debtor (i) will duly perform and cause to be performed
all of its obligations with respect to the goods or services, the sale or lease
or rendering of which gave rise or will give rise to each such Receivable, and
(ii) will not (whether through failure to duly perform its obligations under
any contracts, instruments, and agreements which are related to any such
Receivable, or by any written instrument, or otherwise) take or allow any
action or omission which causes any such Receivable to become subject to any
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to account debtors obligated on
such Receivable, unless such action involves a good faith contest (promptly
instituted and diligently concluded) to the validity of amounts claimed to be
owed to another Person.
(b) General Intangibles. Debtor will, except as otherwise provided in
Sections 4.1(e) or 4.2(a), collect at its own expense all amounts due or to
become due under each General Intangible included within the Collateral. In
connection with such collections, Debtor may (and, at Secured Party's
direction, will) take such action (not otherwise forbidden hereunder) as Debtor
or Secured Party may deem necessary or advisable to enforce collection or
performance of each such General Intangible. Unless the failure to do so is the
result of a good faith contest (promptly and diligently concluded) of the
validity of such obligations, Debtor will duly perform and cause to be
performed all of its obligations under any contracts, instruments, and
agreements which are, or which are related to, any material General Intangibles
of Debtor. Debtor will not (whether through failure to duly perform its
obligations under any contracts, instruments, and agreements which are related
to any such General Intangibles, or by any written instrument, or
13
<PAGE> 14
otherwise) take or allow any action or omission which causes any such General
Intangibles to become subject to any contra-accounts, setoffs, defenses,
counterclaims, discounts, allowances, rebates, credits or adjustments by or
available to account debtors obligated on such General Intangibles, except for
those which (i) in the case of such General Intangibles under which money is
owing to Debtor, do not in the aggregate exceed five percent (5%) of the
aggregate face amount of all such General Intangibles, and (ii) in the case of
other General Intangibles included within the Collateral, do not materially
impair the value or enforcement of such General Intangibles.
(c) Intellectual Property. Debtor will maintain and protect the
validity and enforceability of all Intellectual Property included within the
Collateral which is material to Debtor's business. Debtor will defend and
protect such Intellectual Property and its rights thereunder against any
infringement, dilution, or misappropriation and will defend any claim or
administrative or arbitral challenge that questions the validity or
enforceability of such Intellectual Property, Debtor's purported rights therein
and thereunder, or Debtor's rights to register or patent the same or to use and
practice the same in its business. Debtor will give Secured Party notice of any
proceeding in which such defense is being carried on. Debtor will diligently
prosecute and maintain all applications and registrations for any such
Intellectual Property, and Debtor will notify Secured Party whenever it learns
that any application or registration relating to any such Intellectual Property
has been (or is alleged to have been) abandoned, dedicated or otherwise
terminated. At least thirty days prior to filing any application for
registration of any Intellectual Property (or any similar request) with the
United States Patent and Trademark Office, or any similar office or agency of
the United States, any State thereof or other country, or any political
subdivision thereof, Debtor will give Secured Party notice of such intended
filing and will, upon Secured Party's request, execute, deliver and file any
agreements, instruments, registrations and filings which Secured Party may
request to confirm Secured Party's security interest therein and to put such
security interest of record in such office. Debtor hereby appoints Secured
Party as its agent and attorney in fact to do the same, and hereby ratifies and
confirms all actions of Secured Party as such agent and attorney in fact, and
hereby acknowledges that such agency and power of attorney are irrevocable and
coupled with an interest.
(d) Documents and Instruments. Debtor will at all times cause any
Documents or Instruments which are included within the Collateral to be valid
and genuine. Debtor will cause all Instruments included within the Collateral
to have only one original counterpart. Upon request by Secured Party, Debtor
will promptly deliver to Secured Party all originals of Documents or
Instruments which are included within the Collateral. Debtor will not (whether
through failure to duly perform its obligations under any contracts,
instruments, and agreements which are related to any Documents or Instruments
which are included within the Collateral, or by any written instrument, or
otherwise) take or allow any action or omission which causes any Documents or
Instruments which are included within the Collateral to become subject to any
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to the Persons obligated
thereon. Upon request by Secured Party, Debtor will mark each chattel paper
which is included within the Collateral with a legend indicating that such
chattel paper is subject to the security interest granted by this Agreement.
14
<PAGE> 15
(e) Inventory. Debtor will maintain, preserve, protect and store all
Inventory included within the Collateral in good condition, repair and working
order and in a manner which will not make void or cancelable any insurance with
respect to such Collateral. Debtor will promptly furnish to Secured Party a
statement respecting any loss or damage to any such Inventory with an aggregate
value in excess of $500,000. Except for transportation of Inventory in the
ordinary course of business, Debtor will not allow any such Inventory to be
located in any jurisdiction other than those in which is filed an effective
financing statement which perfects Secured Party's security interest hereunder
in such Inventory. Except for Documents delivered into the possession of
Secured Party, Debtor will not allow any Inventory included within the
Collateral to be covered by any Document. Debtor will not cause or permit the
removal of any item of Inventory from Debtor's possession, control and risk of
loss, and Debtor will not sell, assign (by operation of law or otherwise),
transfer, exchange, lease or otherwise dispose of any Inventory, other than in
connection with the following:
(i) Sales or leases, other than during the continuance of an
Event of Default, of Inventory in the ordinary course of business, and
(ii) Possession of Inventory by Secured Party or by a bailee
selected by Secured Party who is holding such Inventory for the
benefit of Secured Party.
(f) Equipment. Debtor will maintain, preserve, protect and keep all
Equipment included within the Collateral in good condition, repair and working
order and will cause such Equipment to be used and operated in a good and
workmanlike manner, in accordance with applicable law and in a manner which
will not make void or cancelable any insurance with respect to such Equipment.
Debtor will promptly furnish to Secured Party a statement respecting any loss
or damage to any of such Equipment with an aggregate value in excess of
$500,000. Except for transportation of Equipment in the ordinary course of
business, Debtor will not allow any Equipment included within the Collateral to
be located in any jurisdiction other than those in which is filed an effective
financing statement which perfects Secured Party's security interest hereunder
in such Equipment. Debtor will not cause or permit the removal of any item of
Equipment from Debtor's possession, control and risk of loss, and Debtor will
not sell, assign (by operation of law or otherwise), transfer, exchange, lease
or otherwise dispose of any Equipment, other than in connection with the
following:
(i) Sale or other disposal, other than during the
continuance of an Event of Default, of any item of Equipment (i) in
the ordinary course of business or (ii) which is worn out or obsolete
and which has been replaced by an item of equal suitability and value,
owned by Debtor and made subject to the security interest under this
Agreement, but which is otherwise free and clear of any Liens,
encumbrances or adverse claims, and
(ii) Possession of Equipment by Secured Party or by a bailee
selected by Secured Party who is holding such Equipment for the
benefit of Secured Party.
15
<PAGE> 16
Debtor will not permit any of the Collateral which constitutes Equipment to at
any time become so related to attached to, or used in connection with any
particular real property so as to become a fixture upon such real property, or
to be installed in or affixed to other goods so as to become an accession to
such other goods unless such other goods are also included in the Collateral.
(g) Certificates of Title. To the extent that there is at any time any
Collateral in which a security interest may be perfected by a notation on the
certificate of title or similar evidence of ownership of such Collateral,
Debtor will:
(i) concurrently with the execution hereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor presently has any interest,
(ii) promptly after the acquisition thereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor hereafter acquires any interest, and
(iii) promptly upon request by Secured Party, with respect to
any other items of such Collateral,
deliver to Secured Party all such certificates of title and similar evidences
of ownership, all applications therefor, and all other documents needed or
helpful in registering Secured Party's security interest in such Collateral on
such certificates of title, other evidences of ownership, and applications and
in otherwise perfecting Secured Party's security interest in such Collateral.
(h) Investment Property.
(i) Debtor will at all times cause (A) Secured Party to have control
(within the meaning of the UCC) over all Investment Property included
within the Collateral and (B) any certificates, documents, or
instruments evidencing Investment Property included within the
Collateral to be valid and genuine. All instruments and writings
evidencing Investment Property included within the Collateral shall be
delivered to Secured Party concurrently with or prior to the execution
and delivery of this Agreement. )
(ii) All instruments and writings evidencing the Investment Property
shall be delivered to Secured Party on or prior to the execution and
delivery of this Agreement. All other instruments and writings
hereafter evidencing or constituting Investment Property shall be
delivered to Secured Party promptly upon the receipt thereof by or on
behalf of Debtor. All such Investment Property shall be held by or on
behalf of Secured Party pursuant hereto and shall be delivered in
suitable form for transfer by delivery with any necessary endorsement
or shall be accompanied by fully executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Secured
Party.
16
<PAGE> 17
(iii) If Debtor shall receive, by virtue of its being or having been
an owner of any Subsidiary Shares, any (i) stock certificate
(including any certificate representing a stock dividend or
distribution in connection with any increase or reduction of capital,
reorganization, reclassification, merger, consolidation, sale of
assets, combination of shares, stock split, spinoff or split-off),
promissory note or other instrument or writing; (ii) option or right,
whether as an addition to, substitution for, or in exchange for, any
Subsidiary Shares, or otherwise; (iii) dividends payable in cash
(except such dividends permitted to be retained by Debtor pursuant to
Section 4.10 hereof, or (iv) dividends or other distributions in
connection with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or paid-in
surplus, Debtor shall receive the same in trust for the benefit of
Secured Party, shall segregate it from Debtor's other property, and
shall promptly deliver it to Secured Party in the exact form received,
with any necessary endorsement or appropriate stock powers duly
executed in blank, to be held by Secured Party as Collateral.
(iv) Status of Subsidiary Shares. The certificates evidencing the
Subsidiary Shares shall at all times be valid and genuine and shall
not be altered. The Subsidiary Shares at all times shall be duly
authorized, validly issued, fully paid, and non-assessable, and shall
not be issued in violation of the preemptive rights of any Person or
of any agreement by which Debtor or the Issuer thereof is bound and
shall not be subject to any restrictions with respect to transfer,
voting or Capital of such Subsidiary Shares.
(v) Notices from Issuer. Debtor will promptly deliver to Secured
Party a copy of each notice or other communication received by Debtor
from any Issuer in respect of any Investment Property.
ARTICLE IV.
Remedies, Powers and Authorizations
Section 4.1. Normal Provisions Concerning the Collateral.
(a) Additional Financing Statement Filings. Debtor hereby authorizes
Secured Party to file, without the signature of Debtor where permitted by law,
one or more financing or continuation statements, and amendments thereto,
relating to the Collateral. Debtor further agrees that a carbon, photographic
or other reproduction of this Agreement or any financing statement describing
any Collateral is sufficient as a financing statement and may be filed in any
jurisdiction by Secured Party.
(b) Power of Attorney. Debtor hereby appoints Secured Party as
Debtor's attorney-in-fact and proxy, with full authority in the place and stead
of Debtor and in the name of Debtor or otherwise, from time to time in Secured
Party's discretion, to take any action and to execute any instrument which
Secured Party may deem necessary or advisable to accomplish the
17
<PAGE> 18
purposes of this Agreement including any action or instrument: (i) to request
or instruct each Issuer (and each registrar, transfer agent, or similar Person
acting on behalf of each Issuer) including any action or instrument: (i) to
request or instruct each to register the pledge or transfer of the Collateral
to Secured Party; (ii) to otherwise give notification to any Issuer, registrar,
transfer agent, financial intermediary, or other Person of Secured Party's
security interests hereunder; (iii) to obtain and adjust any insurance required
to be paid to Secured Party pursuant hereto; (iv) to ask, demand, collect, sue
for, recover, compound, receive and give acquittance and receipts for moneys
due and to become due under or in respect of any of the Collateral; (v) to
receive, indorse and collect any drafts or other Instruments or Documents; (vi)
to enforce any obligations included among the Collateral; and (vii) to file any
claims or take any action or institute any proceedings which Secured Party may
deem necessary or desirable for the collection of any of the Collateral or
otherwise to enforce the rights of Debtor or Secured Party with respect to any
of the Collateral. Debtor hereby acknowledges that such power of attorney and
proxy are coupled with an interest, are irrevocable, and are to be used by
Secured Party for the sole benefit of Lenders.
(c) Performance by Secured Party. If Debtor fails to perform any
agreement or obligation contained herein, Secured Party may itself perform, or
cause performance of, such agreement or obligation, and the expenses of Secured
Party incurred in connection therewith shall be payable by Debtor under Section
4.5.
(d) Bailees. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of Debtor's agents or processors,
Debtor shall, upon the request of Secured Party, notify such warehouseman,
bailee, agent or processor of Secured Party's rights hereunder and instruct
such Person to hold all such Collateral for Secured Party's account subject to
Secured Party's instructions. (No such request by Secured Party shall be deemed
a waiver of any provision hereof which was otherwise violated by such
Collateral being held by such Person prior to such instructions by Debtor.)
(e) Collection. Secured Party shall have the right at any time, upon
the occurrence and during the continuance of a Default or an Event of Default,
to notify (or to require Debtor to notify) any and all obligors under any
Receivables, General Intangibles, Instruments, Investment Property or other
rights to payment included among the Collateral of the assignment thereof to
Secured Party under this Agreement and to direct such obligors to make payment
of all amounts due or to become due to Debtor thereunder directly to Secured
Party and, upon such notification and at the expense of Debtor and to the
extent permitted by law, to enforce collection of any such Receivables, General
Intangibles, Instruments, Investment Property or other rights to payment and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Debtor could have done. After Debtor receives notice
that Secured Party has given (and after Secured Party has required Debtor to
give) any notice referred to above in this subsection: all amounts and proceeds
(including instruments and writings) received by Debtor in respect of such
Receivables, General Intangibles, Instruments, Investment Property or other
rights to payment upon the occurrence and during the continuance of a Default
or Event of Default shall be received in trust for the benefit of Secured Party
hereunder, shall be
18
<PAGE> 19
segregated from other funds of Debtor and shall be forthwith paid over to
Secured Party in the same form as so received (with any necessary indorsement)
to be, at Secured Party's discretion, either (A) held as cash collateral and
released to Debtor upon the remedy of all Defaults and Events of Default, or
(B) while any Event of Default is continuing, applied as specified in Section
4.3.
(f) Collection and Collateral Account. There is hereby established
with Secured Party a cash collateral account (the "Collateral Account") in the
name and under the control of Secured Party into which there shall be deposited
from time to time the cash proceeds of the Collateral (and of any other
collateral under other Obligation Document) required to be delivered to Secured
Party pursuant to the following subsections of this Section 4.1 or pursuant to
any other provision of this Agreement or any other Obligation Document. Debtor
and Secured Party shall deal with the Collateral Account as follows:
(i) Concurrently with the execution hereof (or promptly
thereafter), Debtor shall instruct all account debtors and other
Persons obligated to make payments to Debtor on any Receivables,
General Intangibles, Instruments, or other rights to payment included
within the Collateral to make such payments either (A) directly to
Secured Party, in which case Debtor shall instruct that such payments
be remitted to a post office box ("Lockbox) which shall be in the name
and under the control of Secured Party, or (B) if Secured Party
agrees, to one or more banks acceptable to Secured Party, in which
case Debtor shall instruct that such payments be remitted to a post
office box in the name and under the control of such bank which is
subject to the terms of a lockbox agreement in a form satisfactory to
Agent, duly executed by Debtor and such bank, pursuant to which Debtor
shall have irrevocably instructed such other bank (and such other bank
shall have agreed) to remit all proceeds of such payments directly to
Secured Party for deposit into the Collateral Account or as Secured
Party may otherwise instruct such bank. All such payments made to
Secured Party shall be deposited in the Collateral Account. In
addition to the foregoing, Debtor agrees that if the proceeds of any
Collateral (including any payments with respect to which instructions
have been given as provided above) shall be received by it, Debtor
shall as promptly as possible deposit such proceeds into the
Collateral Account. Until so deposited, all such proceeds shall be
held in trust by Debtor for Secured Party and shall not be commingled
with any other funds or property of Debtor, and Debtor will not
adjust, settle or compromise the amount or payment of any such
Receivable, General Intangible, Instrument, or other right to payment
or release wholly or partly any account debtor or obligor thereof or
allow any credit or discount thereon.
(ii) As long as no Default or Event of Default has occurred
or is continuing, amounts on deposit in the Collateral Account shall,
upon receipt by Secured Party, be deposited by Secured Party in
Borrower's operating account maintained with Secured Party.
19
<PAGE> 20
(iii) If a Default or an Event of Default has occurred or is
continuing, Secured Party shall, at Secured Party's discretion, either
(A) continue to hold the balance of the Collateral Account and all
Liquid Investments as Collateral, or (B) apply any or all of the
balance from time to time standing to the credit of the Collateral
Account (subject to collection) as specified in Section 4.3 and
liquidate any or all Liquid Investments and apply the proceeds thereof
as specified in Section 4.3.
(iv) Amounts on deposit in the Collateral Account pursuant
to subsection (iii) shall either remain on deposit therein or be
invested and re-invested from time to time in such Liquid Investments
as Secured Party shall determine, which Liquid Investments shall be
held in the name and be under the control of Secured Party in a
securities account established by Secured Party with one of its
Affiliates until liquidated and applied as provided in subsection
(iii). Any income received by Secured Party with respect to the
balance from time to time standing to the credit of the Collateral
Account, including any interest on or proceeds of Liquid Investments,
shall also remain, or be deposited, in the Collateral Account. All
right, title and interest in and to the amounts on deposit from time
to time in the Collateral Account, together with any Liquid
Investments from time to time made pursuant to this section shall vest
in Secured Party, shall constitute part of the Collateral hereunder,
and shall not constitute payment of the Secured Obligations until
applied thereto as herein provided.
(v) As used in this section, "Liquid Investment" means any
investment in the name of Secured Party (and, in the opinion of
counsel to Secured Party, appropriately subject to a perfected
security interest in favor of Secured Party) which matures within one
month after it is acquired by Secured Party and is either (A) a
certificate of deposit or time deposit issued by Secured Party or (B)
an obligation entitled to the full faith and credit of the United
States which is in book-entry form and subject to pledge under
applicable state law and Treasury regulations.
Section 4.2. Event of Default Remedies. If an Event of Default shall
have occurred and be continuing, Secured Party may from time to time in its
discretion, without limitation and without notice except as expressly provided
below:
(a) exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein, under the other Obligation Documents,
or otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral);
(b) require Debtor to, and Debtor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of
the Collateral as directed by Secured Party and make it (together with all
books, records and information of Debtor relating thereto) available to Secured
Party at a place to be designated by Secured Party which is reasonably
convenient to both parties;
20
<PAGE> 21
(c) prior to the disposition of any Collateral, (i) to the extent
permitted by applicable law, enter, with or without process of law and without
breach of the peace, any premises where any of the Collateral is or may be
located, and without charge or liability to Secured Party seize and remove such
Collateral from such premises, (ii) have access to and use the Company's books,
records, and information relating to the Collateral, and (iii) store or
transfer any of the Collateral without charge in or by means of any storage or
transportation facility owned or leased by Debtor, process, repair or
recondition any of the Collateral or otherwise prepare it for disposition in
any manner and to the extent Secured Party deems appropriate and, in connection
with such preparation and disposition, use without charge any copyright,
trademark, trade name, patent or technical process used by Debtor;
(d) reduce its claim to judgment or foreclose or otherwise enforce, in
whole or in part, the security interest created hereby by any available
judicial procedure;
(e) dispose of, at its office, on the premises of Debtor or elsewhere,
all or any part of the Collateral, as a unit or in parcels, by public or
private proceedings, and by way of one or more contracts (it being agreed that
the sale of any part of the Collateral shall not exhaust Secured Party's power
of sale, but sales may be made from time to time, and at any time, until all of
the Collateral has been sold or until the Secured Obligations have been paid
and performed in full), and at any such sale it shall not be necessary to
exhibit any of the Collateral;
(f) buy (or allow one or more of the Lenders to buy) the Collateral,
or any part thereof, at any public sale;
(g) buy (or allow one or more of the Lenders to buy) the Collateral,
or any part thereof, at any private sale if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations; and
(h) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Debtor hereby consents to
any such appointment.
Debtor agrees that, to the extent notice of sale shall be required by law, at
least five (5) days' notice to Debtor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
In addition to the foregoing, if any Event of Default has occurred and is
continuing:
(i) Secured Party may license, or sublicense, whether
general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any Patents or Trademarks included in the
Collateral throughout the world for such term or terms, on
21
<PAGE> 22
such conditions and in such manner as Secured Party shall in its sole
discretion determine;
(ii) Secured Party may (without assuming any obligations or
liability thereunder), at any time and from time to time, in its sole
discretion, enforce (and shall have the exclusive right to enforce)
against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any Patent Licenses or Trademark Licenses which
relate to Patents or Trademarks included in the Collateral and take or
refrain from taking any action under any thereof, and DEBTOR HEREBY
RELEASES SECURED PARTY AND THE LENDERS FROM, AND AGREES TO HOLD
SECURED PARTY AND THE LENDERS FREE AND HARMLESS FROM AND AGAINST, ANY
CLAIMS AND EXPENSES ARISING OUT OF ANY LAWFUL ACTION SO TAKEN OR
OMITTED TO BE TAKEN WITH RESPECT THERETO; and
(iii) upon request by Secured Party, Debtor will execute and
deliver to Secured Party a power of attorney, in form and substance
satisfactory to Secured Party, for the implementation of any lease,
assignment, license, sublicense, grant of option, sale or other
disposition of a Patent or Trademark included in the Collateral or any
action related thereto. In the event of any such disposition pursuant
to this Section, Debtor shall supply its know-how and expertise
relating to the manufacture and sale of the products bearing
Trademarks or the products or services made or rendered in connection
with Patents, and its customer lists and other records relating to
such Patents or Trademarks and to the distribution of said products,
to Secured Party.
Section 4.3. Application of Proceeds. If any Event of Default shall
have occurred and be continuing, Secured Party may in its discretion apply any
cash held by Secured Party as Collateral, and any cash proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral, to any or all of the following in such
order as Secured Party may (subject to the rights of Lenders under the Credit
Agreement) elect:
(a) To the repayment of the reasonable costs and expenses, including
reasonable attorneys' fees and legal expenses, incurred by Secured Party in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (iii) the exercise or enforcement of any of
the rights of Secured Party hereunder, or (iv) the failure of Debtor to perform
or observe any of the provisions hereof;
(b) To the payment or other satisfaction of any Liens, encumbrances,
or adverse claims upon or against any of the Collateral;
(c) To the reimbursement of Secured Party for the amount of any
obligations of Debtor or any Other Liable Party paid or discharged by Secured
Party pursuant to the provisions of this
22
<PAGE> 23
Agreement or the other Obligation Documents, and of any expenses of Secured
Party payable by Debtor hereunder or under the other Obligation Documents;
(d) To the satisfaction of any other Secured Obligations;
(e) By holding the same as Collateral;
(f) To the payment of any other amounts required by applicable law
(including any provision of the UCC); and
(g) By delivery to Debtor or to whoever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 4.4. Deficiency. In the event that the proceeds of any sale,
collection or realization of or upon Collateral by Secured Party are
insufficient to pay all Secured Obligations and any other amounts to which
Secured Party is legally entitled, Debtor shall be liable for the deficiency,
together with interest thereon as provided in the governing Obligation
Documents or (if no interest is so provided) at such other rate as shall be
fixed by applicable law, together with the costs of collection and the
reasonable fees of any attorneys employed by Secured Party or Lenders to
collect such deficiency.
Section 4.5. Indemnity and Expenses. In addition to, but not in
qualification or limitation of, any similar obligations under other Obligation
Documents:
(a) DEBTOR WILL INDEMNIFY SECURED PARTY AND EACH LENDER FROM AND
AGAINST ANY AND ALL CLAIMS, LOSSES AND LIABILITIES GROWING OUT OF OR RESULTING
FROM THIS AGREEMENT (INCLUDING ENFORCEMENT OF THIS AGREEMENT), WHETHER OR NOT
SUCH CLAIMS, LOSSES AND LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY
OR ARISING OUT OF SUCH INDEMNIFIED PARTY'S OWN NEGLIGENCE, EXCEPT TO THE EXTENT
SUCH CLAIMS, LOSSES OR LIABILITIES ARE PROXIMATELY CAUSED BY SUCH INDEMNIFIED
PARTY'S INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(b) Debtor will upon demand pay to Secured Party the amount of any and
all reasonable costs and expenses, including the reasonable fees and
disbursements of Secured Party's counsel and of any experts and agents, which
Secured Party may incur in connection with (i) the transactions which give rise
to this Agreement, (ii) the preparation of this Agreement and the perfection
and preservation of this security interest created under this Agreement, (iii)
the administration of this Agreement; (iv) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Collateral; (v) the exercise or enforcement of any of the rights of Secured
Party hereunder; or (vi) the failure by Debtor to perform or observe any of the
provisions hereof, except expenses resulting from Secured Party's individual
gross negligence or willful misconduct.
23
<PAGE> 24
Section 4.6. Non-Judicial Remedies. In granting to Secured Party the
power to enforce its rights hereunder without prior judicial process or
judicial hearing, Debtor expressly waives, renounces and knowingly relinquishes
any legal right which might otherwise require Secured Party to enforce its
rights by judicial process. In so providing for non-judicial remedies, Debtor
recognizes and concedes that such remedies are consistent with the usage of
trade, are responsive to commercial necessity, and are the result of a bargain
at arm's length. Nothing herein is intended, however, to prevent Secured Party
from resorting to judicial process at its option.
Section 4.7. Other Recourse. Debtor waives any right to require
Secured Party or any Lender to proceed against any other Person, to exhaust any
Collateral or other security for the Secured Obligations, to have any Other
Liable Party joined with Debtor in any suit arising out of the Secured
Obligations or this Agreement, or to pursue any other remedy in Secured Party's
power. Debtor further waives any and all notice of acceptance of this Agreement
and of the creation, modification, rearrangement, renewal or extension for any
period of any of the Secured Obligations of any Other Liable Party from time to
time. Debtor further waives any defense arising by reason of any disability or
other defense of any Other Liable Party or by reason of the cessation from any
cause whatsoever of the liability of any Other Liable Party. This Agreement
shall continue irrespective of the fact that the liability of any Other Liable
Party may have ceased and irrespective of the validity or enforceability of any
other Obligation Document to which Debtor or any Other Liable Party may be a
party, and notwithstanding any death, incapacity, reorganization, or bankruptcy
of any Other Liable Party or any other event or proceeding affecting any Other
Liable Party. Until all of the Secured Obligations shall have been paid in
full, Debtor shall have no right to subrogation and Debtor waives the right to
enforce any remedy which Secured Party or any Lender has or may hereafter have
against any Other Liable Party, and waives any benefit of and any right to
participate in any other security whatsoever now or hereafter held by Secured
Party. Debtor authorizes Secured Party and each Lender, without notice or
demand, without any reservation of rights against Debtor, and without in any
way affecting Debtor's liability hereunder or on the Secured Obligations, from
time to time to (a) take or hold any other property of any type from any other
Person as security for the Secured Obligations, and exchange, enforce, waive
and release any or all of such other property, (b) apply the Collateral or such
other property and direct the order or manner of sale thereof as Secured Party
may in its discretion determine, (c) renew, extend for any period, accelerate,
modify, compromise, settle or release any of the obligations of any Other
Liable Party in respect to any or all of the Secured Obligations or other
security for the Secured Obligations, (d) waive, enforce, modify, amend or
supplement any of the provisions of any Obligation Document with any Person
other than Debtor, and (e) release or substitute any Other Liable Party.
Section 4.8. Limitation on Duty of Secured Party in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof,
Secured Party shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or as to the
preservation of rights against prior parties or any other rights pertaining
24
<PAGE> 25
thereto. Secured Party shall be deemed to have exercised reasonable care in the
custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by Secured Party in good faith.
Section 4.9. Appointment of Collateral Agents. At any time or times,
in order to comply with any legal requirement in any jurisdiction, Secured
Party may appoint any bank or trust company or one or more other Persons,
either to act as co-agent or co-agents, jointly with Secured Party, or to act
as separate agent or agents on behalf of the Lenders, with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment. In so doing
Secured Party may, in the name and on behalf of Debtor, give to such co-agent
or separate agent indemnities and other protections similar to those provided
in Section 4.5.
Section 4.10. Voting Rights, Dividends, Etc. in Respect of Subsidiary
Shares.
(a) So long as no Default or Event of Default shall have occurred and
be continuing Debtor may receive and retain any and all dividends or interest
paid in respect of the Subsidiary Shares; provided, however, that any and all
(i) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of or in exchange for,
any Subsidiary Shares,
(ii) dividends and other distributions paid or payable in
cash in respect of any Subsidiary Shares in connection with a partial
or total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in surplus, and
(iii) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Subsidiary Shares,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Subsidiary Shares and shall, if received by Debtor, be received in trust for
the benefit of Secured Party, be segregated from the other property or funds of
Debtor, and be forthwith delivered to Secured Party in the exact form received
with any necessary indorsement or appropriate stock powers duly executed in
blank, to be held by Secured Party as Collateral.
(b) Upon the occurrence and during the continuance of a Default or an
Event of Default:
(i) all rights of Debtor to receive and retain the dividends
and interest payments which it would otherwise be authorized to
receive and retain pursuant to
25
<PAGE> 26
subsection (a) of this section shall automatically cease, and all such
rights shall thereupon become vested in Secured Party which shall
thereupon have the sole right to receive and hold as Subsidiary Shares
such dividends and interest payments;
(ii) without limiting the generality of the foregoing,
Secured Party may at its option exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any of the Subsidiary Shares as if it were the
absolute owner thereof, including, without limitation, the right to
exchange, in its discretion, any and all of the Subsidiary Shares upon
the merger, consolidation, reorganization, recapitalization or other
adjustment of any Issuer, or upon the exercise by any Issuer of any
right, privilege or option pertaining to any Subsidiary Shares, and,
in connection therewith, to deposit and deliver any and all of the
Subsidiary Shares with any committee, depository, transfer, agent,
registrar or other designated agent upon such terms and conditions as
it may determine; and
(iii) all dividends and interest payments which are received
by Debtor contrary to the provisions of subsection (b)(i) of this
section shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Debtor, and shall be forthwith
paid over to Secured Party as Subsidiary Shares in the exact form
received, to be held by Secured Party as Collateral.
Anything herein to the contrary notwithstanding, Debtor may at all times
exercise any and all voting rights pertaining to the Subsidiary Shares or any
part thereof for any purpose not inconsistent with the terms of this Agreement
or any other Obligation Document.
Section 4.11. Private Sale of Subsidiary Shares. Debtor recognizes
that Secured Party may deem it impracticable to effect a public sale of all or
any part of the Subsidiary Shares and that Secured Party may, therefore,
determine to make one or more private sales of any such securities to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and
not with a view to the distribution or resale thereof. Debtor acknowledges that
any such private sale may be at prices and on terms less favorable to the
seller than the prices and other terms which might have been obtained at a
public sale and, notwithstanding the foregoing, agrees that such private sales
shall be deemed to have been made in a commercially reasonable manner and that
Secured Party shall have no obligation to delay sale of any such securities for
the period of time necessary to permit the Issuer of such securities to
register such securities for public sale under the Securities Act of 1933, as
amended. Debtor further acknowledges and agrees that any offer to sell such
securities which has been (a) publicly advertised on a bona fide basis in a
newspaper or other publication of general circulation in the financial
community of Dallas, Texas (to the extent that such an offer may be so
advertised without prior registration under the Securities Act), or (b) made
privately in the manner described above to not less than fifteen (15) bona fide
offerees shall be deemed to involve a "public sale" for the purposes of Section
9.504(c) of the UCC (or any successor or similar, applicable statutory
provision) as then in effect in the State of Texas, notwithstanding that such
sale may not
26
<PAGE> 27
constitute a "public offering" under the Securities Act of 1933, as amended,
and that Secured Party may, in such event, bid for the purchase of such
securities.
ARTICLE V.
Miscellaneous
Section 5.1. Notices. Any notice or communication required or
permitted hereunder shall be given as provided in the Credit Agreement.
Section 5.2. Amendments. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Debtor and
Secured Party, and no waiver of any provision of this Agreement, and no consent
to any departure by Debtor therefrom, shall be effective unless it is in
writing and signed by Secured Party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given and to the extent specified in such writing. In addition, all such
amendments and waivers shall be effective only if given with the necessary
approvals of Lenders as required in the Credit Agreement.
Section 5.3. Preservation of Rights. No failure on the part of Secured
Party or any Lender to exercise, and no delay in exercising, any right
hereunder or under any other Obligation Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or the exercise of any other right.
Neither the execution nor the delivery of this Agreement shall in any manner
impair or affect any other security for the Secured Obligations. The rights and
remedies of Secured Party provided herein and in the other Obligation Documents
are cumulative and are in addition to, and not exclusive of, any rights or
remedies provided by law or otherwise. The rights of Secured Party under any
Obligation Document against any party thereto are not conditional or contingent
on any attempt by Secured Party to exercise any of its rights under any other
Obligation Document against such party or against any other Person.
Section 5.4. Unenforceability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or invalidity
without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 5.5. Survival of Agreements. All representations and
warranties of Debtor herein, and all covenants and agreements herein shall
survive the execution and delivery of this Agreement, the execution and
delivery of any other Obligation Documents and the creation of the Secured
Obligations.
Section 5.6. Other Liable Parties. Neither this Agreement nor the
exercise by Secured Party or the failure of Secured Party to exercise any
right, power or remedy conferred herein or
27
<PAGE> 28
by law shall be construed as relieving any Other Liable Party from liability
on the Secured Obligations or any deficiency thereon.
Section 5.7. Binding Effect and Assignment. This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Debtor and its successors and permitted assigns and (b) shall inure, together
with all rights and remedies of Secured Party hereunder, to the benefit of
Secured Party and Lenders and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing, Secured Party and
any Lender may (except as otherwise provided in the Credit Agreement) pledge,
assign or otherwise transfer any or all of their respective rights under any or
all of the Obligation Documents to any other Person, and such other Person
shall thereupon become vested with all of the benefits in respect thereof
granted herein or otherwise. None of the rights or duties of Debtor hereunder
may be assigned or otherwise transferred without the prior written consent of
Secured Party.
Section 5.8. Termination. It is contemplated by the parties hereto
that there may be times when no Secured Obligations are outstanding, but
notwithstanding such occurrences, this Agreement shall remain valid and shall
be in full force and effect as to subsequent outstanding Secured Obligations.
Upon the satisfaction in full of the Secured Obligations, upon the termination
or expiration of the Credit Agreement and any other commitment of Lenders to
extend credit to Debtor, and upon written request for the termination hereof
delivered by Debtor to Secured Party, this Agreement and the security interest
created hereby shall terminate and all rights to the Collateral shall revert to
Debtor. Secured Party will thereafter, upon Debtor's request and at Debtor's
expense, (a) return to Debtor such of the Collateral in Secured Party's
possession as shall not have been sold or otherwise disposed of or applied
pursuant to the terms hereof, and (b) execute and deliver to Debtor such
documents as Debtor shall reasonably request to evidence such termination.
Section 5.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas applicable to
contracts made and to be performed entirely within such state, except as
required by mandatory provisions of law and except to the extent that the
perfection and the effect of perfection or non-perfection of the security
interest created hereby hereunder, in respect of any particular Collateral, are
governed by the laws of a jurisdiction other than the State of Texas.
Section 5.10. Counterparts. This Agreement may be separately executed
in any number of counterparts, all of which when so executed shall be deemed to
constitute one and the same Agreement.
Section 5.11. "Loan Document". This Agreement is a "Loan Document", as
defined in the Credit Agreement, and, except as expressly provided herein to
the contrary, this Agreement is subject to all provisions of the Credit
Agreement governing such Loan Documents.
THIS WRITTEN SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES
28
<PAGE> 29
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
29
<PAGE> 30
IN WITNESS WHEREOF, Debtor has executed and delivered this Agreement
as of the date first above written.
AEI HOLDING COMPANY, INC.
By: /s/ Vic Grubb
---------------------------
Name: Vic Grubb
Title: Controller/Treasurer
<PAGE> 1
EXHIBIT 10.16
GUARANTY
MINING TECHNOLOGIES, INC.
THIS GUARANTY is made as of January 2, 1998, by Mining
Technologies, Inc., a Kentucky corporation ("Guarantor"), in favor of
NationsBank of Texas, N.A., a national banking association, individually and as
agent for Lenders, as such term is defined in the Credit Agreement described
below (in such capacities "Agent").
RECITALS:
1. AEI Holding Company, Inc., a Kentucky corporation ("Borrower"), has
executed that certain Promissory Note dated November 11, 1997, payable to the
order of NationsBank of Texas, N.A. in the original principal amount of
$30,000,000 and that certain Promissory Note dated November 11, 1997, payable
to the order of The Provident Bank in the original principal amount of
$20,000,000 (such Promissory Notes, as from time to time amended, and all
promissory notes given in substitution, renewal or extension therefor or
thereof, in whole or in part, being herein collectively called the "Notes").
2. The Notes were executed pursuant to a Credit Agreement dated as of
November 11, 1997, (herein, as from time to time amended, supplemented or
restated, called the "Credit Agreement"), by and between Borrower and Agent,
pursuant to which funds are to be advanced to Borrower under the Notes which
funds may be advanced by Borrower to its Affiliates, including Guarantor.
3. It is a condition precedent to Lenders' obligations to advance
funds pursuant to the Credit Agreement that Guarantor shall execute and deliver
to Agent a satisfactory guaranty of Borrower's obligations under the Notes and
the Credit Agreement.
4. Borrower owns directly, or indirectly through one or more
subsidiaries, one hundred percent (100%) of the outstanding shares of stock of
Guarantor.
5. Borrower, Guarantor, and the other direct and indirect subsidiaries
of Borrower are mutually dependent on each other in the conduct of their
respective businesses under a holding company structure, with the credit needed
from time to time by each often being provided by another or by means of
financing obtained by one such affiliate with the support of the others for
their mutual benefit and the ability of each to obtain such financing being
dependent on the successful operations of the others.
6. The board of directors of Guarantor has determined that Guarantor's
execution, delivery and performance of this Guaranty may reasonably be expected
to benefit Guarantor, directly or indirectly, and are in the best interests of
Guarantor.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises, of the benefits
which will inure to Guarantor from Lenders' advances of funds to Borrower under
the Credit Agreement, and of Ten Dollars and other good and valuable
consideration, the receipt and sufficiency of all of which are hereby
acknowledged, and in order to induce Lenders to advance funds under the Credit
Agreement, Guarantor hereby agrees with Agent, for the benefit of Agent and
Lenders as follows:
AGREEMENTS
Section 1. Definitions. Reference is hereby made to the Credit
Agreement for all purposes. All terms used in this Guaranty which are defined
in the Credit Agreement and not otherwise defined herein shall have the same
meanings when used herein. All references herein to any Obligation Document,
Loan Document, or other document or instrument refer to the same as from time
to time amended, supplemented or restated. As used herein the following terms
shall have the following meanings:
"Agent" means the Person who, at the time in question, is the "Agent"
under the Credit Agreement. Whenever there is only one Lender under the Credit
Agreement, "Agent" shall also refer to such Lender in such capacity as the only
Lender.
"Lenders" means NationsBank of Texas, N.A. and all other Persons who
at any time are "Lenders" under the Credit Agreement.
"Obligations" means collectively all of the indebtedness, obligations,
and undertakings which are guaranteed by Guarantor and described in subsections
(a) and (b) of Section 2.
"Obligation Documents" means this Guaranty, the Notes, the Credit
Agreement, the Loan Documents.
"Obligors" means Borrower, Guarantor and any other endorsers,
guarantors or obligors, primary or secondary, of any or all of the Obligations.
"Security" means any rights, properties, or interests of Agent or
Lenders, under the Obligation Documents or otherwise, which provide recourse or
other benefits to Agent or Lenders in connection with the Obligations or the
non-payment or non-performance thereof, including collateral (whether real or
personal, tangible or intangible) in which Agent or Lenders have rights under
or pursuant to any Obligation Documents, guaranties of the payment or
performance of any Obligation, bonds, surety agreements, keep-well agreements,
letters of credit, rights of subrogation, rights of offset, and rights pursuant
to which other claims are subordinated to the Obligations.
2
<PAGE> 3
Section 2. Guaranty.
(a) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to Agent and each Lender the prompt, complete, and full payment when
due, and no matter how the same shall become due, of:
(i) the Notes, including all principal, all interest
thereon and all other sums payable thereunder; and
(ii) All other sums payable under the other Obligation
Documents, whether for principal, interest, fees or otherwise; and
(iii) Any and all other indebtedness or liabilities which
Borrower may at any time owe to Agent or any Lender, whether incurred
heretofore or hereafter or concurrently herewith, voluntarily or
involuntarily, whether owed alone or with others, whether fixed,
contingent, absolute, inchoate, liquidated or unliquidated, whether
such indebtedness or liability arises by notes, discounts, overdrafts,
open account indebtedness or in any other manner whatsoever, and
including interest, attorneys' fees and collection costs as may be
provided by law or in any instrument evidencing any such indebtedness
or liability.
Without limiting the generality of the foregoing, Guarantor's obligations
hereunder shall extend to and include all post-petition interest, expenses, and
other duties and liabilities of Borrower described above in this subsection
(a), or below in the following subsection (b), which would be owed by Borrower
but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization, or similar proceeding involving
Borrower.
(b) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to Agent and each Lender the prompt, complete and full performance,
when due, and no matter how the same shall become due, of all obligations and
undertakings of Borrower to Agent or such Lender under, by reason of, or
pursuant to any of the Obligation Documents.
(c) If Borrower shall for any reason fail to pay any Obligation, as
and when such Obligation shall become due and payable, whether at its stated
maturity, as a result of the exercise of any power to accelerate, or otherwise,
Guarantor will, forthwith upon demand by Agent, pay such Obligation in full to
Agent for the benefit of Agent or the Lender to whom such Obligation is owed.
If Borrower shall for any reason fail to perform promptly any Obligation,
Guarantor will, forthwith upon demand by Agent, cause such Obligation to be
performed or, if specified by Agent, provide sufficient funds, in such amount
and manner as Agent shall in good faith determine, for the prompt, full and
faithful performance of such Obligation by Agent or such other Person as Agent
shall designate.
3
<PAGE> 4
(d) If either Borrower or Guarantor fails to pay or perform any
Obligation as described in the immediately preceding subsections (a), (b), or
(c) Guarantor will incur the additional obligation to pay to Agent, and
Guarantor will forthwith upon demand by Agent pay to Agent, the amount of any
and all expenses, including fees and disbursements of Agent's counsel and of
any experts or agents retained by Agent, which Agent may incur as a result of
such failure.
(e) As between Guarantor and Agent or Lenders, this Guaranty shall be
considered a primary and liquidated liability of Guarantor.
(f) The obligations of Guarantor hereunder shall be limited to an
aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provisions of any applicable state or
federal law.
Section 3. Unconditional Guaranty.
(a) No action which Agent or any Lender may take or omit to take in
connection with any of the Obligation Documents, any of the Obligations (or any
other indebtedness owing by Borrower to Agent or any Lender), or any Security,
and no course of dealing of Agent or any Lender with any Obligor or any other
Person, shall release or diminish Guarantor's obligations, liabilities,
agreements or duties hereunder, affect this Guaranty in any way, or afford
Guarantor any recourse against Agent or any Lender, regardless of whether any
such action or inaction may increase any risks to or liabilities of Agent or
any Lender or any Obligor or increase any risk to or diminish any safeguard of
any Security. Without limiting the foregoing, Guarantor hereby expressly agrees
that Agent and Lenders may, from time to time, without notice to or the consent
of Guarantor, do any or all of the following:
(i) Amend, change or modify, in whole or in part, any one
or more of the Obligation Documents and give or refuse to give any
waivers or other indulgences with respect thereto.
(ii) Neglect, delay, fail, or refuse to take or prosecute
any action for the collection or enforcement of any of the
Obligations, to foreclose or take or prosecute any action in
connection with any Security or Obligation Document, to bring suit
against any Obligor or any other Person, or to take any other action
concerning the Obligations or the Obligation Documents.
(iii) Accelerate, change, rearrange, extend, or renew the
time, rate, terms, or manner for payment or performance of any one or
more of the Obligations (whether for principal, interest, fees,
expenses, indemnifications, affirmative or negative covenants, or
otherwise).
4
<PAGE> 5
(iv) Compromise or settle any unpaid or unperformed
Obligation or any other obligation or amount due or owing, or claimed
to be due or owing, under any one or more of the Obligation Documents.
(v) Take, exchange, amend, eliminate, surrender, release, or
subordinate any or all Security for any or all of the Obligations,
accept additional or substituted Security therefor, and perfect or
fail to perfect Agent's or Lenders' rights in any or all Security.
(vi) Discharge, release, substitute or add Obligors.
(vii) Apply all monies received from Obligors or others, or
from any Security for any of the Obligations, as Agent or Lenders may
determine to be in their best interest, without in any way being
required to marshall Security or assets or to apply all or any part of
such monies upon any particular Obligations.
(b) No action or inaction of any Obligor or any other Person, and no
change of law or circumstances, shall release or diminish Guarantor's
obligations, liabilities, agreements, or duties hereunder, affect this Guaranty
in any way, or afford Guarantor any recourse against Agent or any Lender.
Without limiting the foregoing, the obligations, liabilities, agreements, and
duties of Guarantor under this Guaranty shall not be released, diminished,
impaired, reduced, or affected by the occurrence of any or all of the following
from time to time, even if occurring without notice to or without the consent
of Guarantor:
(i) Any voluntary or involuntary liquidation, dissolution,
sale of all or substantially all assets, marshalling of assets or
liabilities, receivership, conservatorship, assignment for the benefit
of creditors, insolvency, bankruptcy, reorganization, arrangement, or
composition of any Obligor or any other proceedings involving any
Obligor or any of the assets of any Obligor under laws for the
protection of debtors, or any discharge, impairment, modification,
release, or limitation of the liability of, or stay of actions or lien
enforcement proceedings against, any Obligor, any properties of any
Obligor, or the estate in bankruptcy of any Obligor in the course of
or resulting from any such proceedings.
(ii) The failure by Agent or any Lender to file or enforce a
claim in any proceeding described in the immediately preceding
subsection (i) or to take any other action in any proceeding to which
any Obligor is a party.
(iii) The release by operation of law of any Obligor from any
of the Obligations or any other obligations to Agent or any Lender.
(iv) The invalidity, deficiency, illegality, or
unenforceability of any of the Obligations or the Obligation
Documents, in whole or in part, any bar by any statute of limitations
or other law of recovery on any of the Obligations, or any defense or
excuse
5
<PAGE> 6
for failure to perform on account of force majeure, act of God,
casualty, impossibility, impracticability, or other defense or excuse
whatsoever.
(v) The failure of any Obligor or any other Person to sign
any guaranty or other instrument or agreement within the contemplation
of any Obligor, Agent or any Lender.
(vi) The fact that Guarantor may have incurred directly part
of the Obligations or is otherwise primarily liable therefor.
(vii) Without limiting any of the foregoing, any fact or
event (whether or not similar to any of the foregoing) which in the
absence of this provision would or might constitute or afford a legal
or equitable discharge or release of or defense to a guarantor or
surety other than the actual payment and performance by Guarantor
under this Guaranty.
(c) Agent and Lenders may invoke the benefits of this Guaranty before
pursuing any remedies against any Obligor or any other Person and before
proceeding against any Security now or hereafter existing for the payment or
performance of any of the Obligations. Agent and Lenders may maintain an action
against Guarantor on this Guaranty without joining any other Obligor therein
and without bringing a separate action against any other Obligor.
(d) If any payment to Agent or any Lender by any Obligor is held to
constitute a preference or a voidable transfer under applicable state or
federal laws, or if for any other reason Agent or any Lender is required to
refund such payment to the payor thereof or to pay the amount thereof to any
other Person, such payment to Agent or such Lender shall not constitute a
release of Guarantor from any liability hereunder, and Guarantor agrees to pay
such amount to Agent or such Lender on demand and agrees and acknowledges that
this Guaranty shall continue to be effective or shall be reinstated, as the
case may be, to the extent of any such payment or payments. Any transfer by
subrogation which is made as contemplated in Section 6 prior to any such
payment or payments shall (regardless of the terms of such transfer) be
automatically voided upon the making of any such payment or payments, and all
rights so transferred shall thereupon revert to and be vested in Agent and
Lenders.
(e) This is a continuing guaranty and shall apply to and cover all
Obligations and renewals and extensions thereof and substitutions therefor from
time to time.
Section 4. Waiver. Guarantor hereby waives, with respect to the
Obligations, this Guaranty, and the other Obligation Documents:
(a) notice of the incurrence of any Obligation by Borrower, and notice
of any kind concerning the assets, liabilities, financial condition,
creditworthiness, businesses, prospects, or other affairs of Borrower (it being
understood and agreed that: (i) Guarantor shall take full responsibility for
informing itself of such matters, (ii) neither Agent nor any Lender shall have
6
<PAGE> 7
any responsibility of any kind to inform Guarantor of such matters, and (iii)
Agent and Lenders are hereby authorized to assume that Guarantor, by virtue of
its relationships with Borrower which are independent of this Guaranty, has
full and complete knowledge of such matters whenever Lenders extend credit to
Borrower or take any other action which may change or increase Guarantor's
liabilities or losses hereunder).
(b) notice that Agent, any Lender, any Obligor, or any other Person
has taken or omitted to take any action under any Obligation Document or any
other agreement or instrument relating thereto or relating to any Obligation.
(c) notice of acceptance of this Guaranty and all rights of Guarantor
under Section 34.02 of the Texas Business and Commerce Code.
(d) demand, presentment for payment, and notice of demand, dishonor,
nonpayment, or nonperformance.
(e) notice of intention to accelerate, notice of acceleration,
protest, notice of protest, notice of any exercise of remedies (as described in
the following Section 5 or otherwise), and all other notices of any kind
whatsoever.
Section 5. Exercise of Remedies. Agent, on behalf of Lenders, shall
have the right to enforce, from time to time, in any order and at Agent's sole
discretion, any rights, powers and remedies which Agent, on behalf of Lenders,
may have under the Obligation Documents or otherwise, including judicial
foreclosure, the exercise of rights of power of sale, the taking of a deed or
assignment in lieu of foreclosure, the appointment of a receiver to collect
rents, issues and profits, the exercise of remedies against personal property,
or the enforcement of any assignment of leases, rentals, oil or gas production,
or other properties or rights, whether real or personal, tangible or
intangible; and Guarantor shall be liable to Agent, on behalf of Lenders,
hereunder for any deficiency resulting from the exercise by Agent or any Lender
of any such right or remedy even though any rights which Guarantor may have
against Borrower or others may be destroyed or diminished by exercise of any
such right or remedy. No failure on the part of Agent, on behalf of Lenders, to
exercise, and no delay in exercising, any right hereunder or under any other
Obligation Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any right preclude any other or further exercise thereof or
the exercise of any other right. The rights, powers and remedies of Agent, on
behalf of Lenders, provided herein and in the other Obligation Documents are
cumulative and are in addition to, and not exclusive of, any other rights,
powers or remedies provided by law or in equity. The rights of Agent, on behalf
of Lenders, hereunder are not conditional or contingent on any attempt by Agent
or any Lender to exercise any of its rights under any other Obligation Document
against any Obligor or any other Person.
Section 6. Limited Subrogation. Until all of the Obligations have been
paid and performed in full Guarantor shall have no right to exercise any right
of subrogation, reimbursement, indemnity, exoneration, contribution or any
other claim which it may now or
7
<PAGE> 8
hereafter have against or to any Obligor or any Security in connection with
this Guaranty (including any right of subrogation under Section 34.04 of the
Texas Business and Commerce Code), and Guarantor hereby waives any rights to
enforce any remedy which Guarantor may have against Borrower and any right to
participate in any Security until such time. If any amount shall be paid to
Guarantor on account of any such subrogation or other rights, any such other
remedy, or any Security at any time when all of the Obligations and all other
expenses guaranteed pursuant hereto shall not have been paid in full, such
amount shall be held in trust for the benefit of Agent, shall be segregated
from the other funds of Guarantor and shall forthwith be paid over to Agent to
be held by Agent as collateral for, or then or at any time thereafter applied
in whole or in part by Agent against, all or any portion of the Obligations,
whether matured or unmatured, in such order as Agent shall elect. If Guarantor
shall make payment to Agent of all or any portion of the Obligations and if all
of the Obligations shall be finally paid in full, Agent will, at Guarantor's
request and expense, execute and deliver to Guarantor (without recourse,
representation or warranty) appropriate documents necessary to evidence the
transfer by subrogation to Guarantor of an interest in the Obligations
resulting from such payment by Guarantor; provided that such transfer shall be
subject to Section [3(d)] above and that without the consent of Agent (which
Agent may withhold in its discretion) Guarantor shall not have the right to be
subrogated to any claim or right against any Obligor which has become owned by
Agent or any Lender, whose ownership has otherwise changed in the course of
enforcement of the Obligation Documents, or which Agent otherwise has released
or wishes to release from its Obligations.
Section 7. Successors and Assigns. Guarantor's rights or obligations
hereunder may not be assigned or delegated, but this Guaranty and such
obligations shall pass to and be fully binding upon the successors of
Guarantor, as well as Guarantor. This Guaranty shall apply to and inure to the
benefit of Agent and Lenders and their successors or assigns. Without limiting
the generality of the immediately preceding sentence, Agent and each Lender may
assign, grant a participation in, or otherwise transfer any Obligation held by
it or any portion thereof, and Agent and each Lender may assign or otherwise
transfer its rights or any portion thereof under any Obligation Document, to
any other Person, and such other Person shall thereupon become vested with all
of the benefits in respect thereof granted to Agent or such Lender hereunder
unless otherwise expressly provided by Agent or such Lender in connection with
such assignment or transfer.
Section 8. Offset. Guarantor hereby grants to Lenders a right of
offset to secure the payment of the Obligations and Guarantor's obligations and
liabilities hereunder, which right of offset shall be upon any and all monies,
securities and other property (and the proceeds therefrom) of Guarantor now or
hereafter held or received by or in transit to Agent or any Lender from or for
the account of Guarantor, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special), credits and claims of Guarantor at any time existing
against Agent or any Lender. Upon the occurrence of any Default or Event of
Default Agent and each Lender is hereby authorized at any time and from time to
time, without notice to Guarantor, to offset, appropriate and apply
8
<PAGE> 9
any and all items hereinabove referred to against the Obligations and
Guarantor's obligations and liabilities hereunder irrespective of whether or
not Agent or such Lender shall have made any demand under this Guaranty and
although such obligations and liabilities may be contingent or unmatured. Agent
and each Lender agrees promptly to notify Guarantor after any such offset and
application made by Agent or such Lender, provided that the failure to give
such notice shall not affect the validity of such offset and application. The
rights of Agent and each Lender under this section are in addition to, and
shall not be limited by, any other rights and remedies (including other rights
of offset) which Agent and Lenders may have.
Section 9. Representations and Warranties. Guarantor hereby represents
and warrants to Agent and each Lender as follows:
(a) The Recitals at the beginning of this Guaranty are true and
correct in all respects.
(b) Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation as set forth in
the Recitals to this Guaranty; and Guarantor has all requisite power and
authority to execute, deliver and perform this Guaranty.
(c) The execution, delivery and performance by Guarantor of this
Guaranty have been duly authorized by all necessary corporate action and do not
and will not contravene its certificate or articles of incorporation or bylaws.
(d) The execution, delivery and performance by Guarantor of this
Guaranty do not and will not contravene any law or governmental regulation or
any contractual restriction binding on or affecting Guarantor or any of its
Affiliates or properties, and do not and will not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties.
(e) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body or third
party is required for the due execution, delivery and performance by Guarantor
of this Guaranty.
(f) This Guaranty is a legal, valid and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its terms except as
limited by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors' rights.
(g) There is no action, suit or proceeding pending or, to the
knowledge of Guarantor, threatened against or otherwise affecting Guarantor
before any court, arbitrator or governmental department, commission, board,
bureau, agency or instrumentality which may materially and adversely affect
Guarantor's financial condition or its ability to perform its obligations
hereunder.
9
<PAGE> 10
(h) The direct or indirect value of the consideration received and to
be received by Guarantor in connection herewith is reasonably worth at least as
much as the liability and obligations of Guarantor hereunder, and the
incurrence of such liability and obligations in return for such consideration
may reasonably be expected to benefit Guarantor, directly or indirectly.
(i) Guarantor is not "insolvent" on the date hereof (that is, the sum
of Guarantor's absolute and contingent liabilities, including the Obligations,
does not exceed the fair market value of Guarantor's assets). Guarantor's
capital is adequate for the businesses in which Guarantor is engaged and
intends to be engaged. Guarantor has not incurred (whether hereby or
otherwise), nor does Guarantor intend to incur or believe that it will incur,
debts which will be beyond its ability to pay as such debts mature.
(j) All balance sheets, earning statements, financial data and other
information concerning Guarantor which have been furnished to Agent and each
Lender to induce it to accept this Guaranty (or otherwise furnished to Agent
and each Lender in connection with the transactions contemplated hereby or
associated herewith) fairly represent the financial condition of Guarantor as
of the dates and the results of Guarantor's operations for the periods for
which the same are furnished. None of such balance sheets, earnings and cash
flow statements, financial data and other information contains any untrue
statement of a material fact or omits to state any material fact which is
necessary to make any statements contained therein not misleading.
Section 10. No Oral Change. No amendment of any provision of this
Guaranty shall be effective unless it is in writing and signed by Guarantor and
Lenders, and no waiver of any provision of this Guaranty, and no consent to any
departure by Guarantor therefrom, shall be effective unless it is in writing
and signed by Lenders, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
Section 11. Invalidity of Particular Provisions. If any term or
provision of this Guaranty shall be determined to be illegal or unenforceable
all other terms and provisions hereof shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by applicable law.
Section 12. Headings and References. The headings used herein are for
purposes of convenience only and shall not be used in construing the provisions
hereof. The words "this Guaranty," "this instrument," "herein," "hereof,"
"hereby" and words of similar import refer to this Guaranty as a whole and not
to any particular subdivision unless expressly so limited. The phrases "this
section" and "this subsection" and similar phrases refer only to the
subdivisions hereof in which such phrases occur. The word "or" is not
exclusive, and the word "including" (in its various forms) means "including
without limitation". Pronouns in masculine, feminine and neuter genders shall
be construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa, unless the context otherwise
requires.
10
<PAGE> 11
Section 13. Term. This Guaranty shall be irrevocable until all of the
Obligations have been completely and finally paid and performed, no Lender has
any obligation to make any loans or other advances to Borrower, and all
obligations and undertakings of Borrower under, by reason of, or pursuant to
the Obligation Documents have been completely performed, and this Guaranty is
thereafter subject to reinstatement as provided in Section 3(d). All extensions
of credit and financial accommodations heretofore or hereafter made by Agent or
Lenders to Borrower shall be conclusively presumed to have been made in
acceptance hereof and in reliance hereon.
Section 14. Notices. Any notice or communication required or permitted
hereunder shall be given as provided in the Credit Agreement.
Section 15. Limitation on Interest. Agent, Lenders and Guarantor
intend to contract in strict compliance with applicable usury law from time to
time in effect, and the provisions of the Credit Agreement limiting the
interest for which Guarantor is obligated are expressly incorporated herein by
reference.
Section 16. Loan Document. This Guaranty is a Loan Document, as
defined in the Credit Agreement, and is subject to the provisions of the Credit
Agreement governing Loan Documents. Guarantor hereby approves all provisions of
the Credit Agreement and the other Loan Documents and ratifies and confirms any
provisions thereof which relate to Guarantor.
Section 17. Counterparts. This Guaranty may be executed in any number
of counterparts, each of which when so executed shall be deemed to constitute
one and the same Guaranty.
SECTION 18. GOVERNING LAW; SUBMISSION TO PROCESS. (I) THIS GUARANTY
SHALL BE DEEMED A CONTRACT MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. GUARANTOR HEREBY AGREES THAT ANY LEGAL ACTION
OR PROCEEDING AGAINST GUARANTOR WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT
IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE
NORTHERN DISTRICT OF TEXAS AS LENDER PARTIES MAY ELECT, AND, BY EXECUTION AND
DELIVERY HEREOF, GUARANTOR ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS, AND FURTHER AGREES TO A TRANSFER OF ANY SUCH PROCEEDING TO A FEDERAL
COURT SITTING IN THE STATE OF TEXAS TO THE EXTENT THAT IT HAS SUBJECT MATTER
JURISDICTION, AND OTHERWISE TO A STATE COURT IN TEXAS. GUARANTOR WAIVES ANY
RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS
ON THE BASIS OF FORUM NON CONVENIENS. IN FURTHERANCE OF THE
11
<PAGE> 12
FOREGOING, GUARANTOR HEREBY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, 350
NORTH ST. PAUL STREET, DALLAS, TEXAS 75201, AS AGENT OF GUARANTOR TO RECEIVE
SERVICE OF ALL PROCESS BROUGHT AGAINST GUARANTOR WITH RESPECT TO ANY SUCH
PROCEEDING IN ANY SUCH COURT IN TEXAS, SUCH SERVICE BEING HEREBY ACKNOWLEDGED
BY GUARANTOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. COPIES OF
ANY SUCH PROCESS SO SERVED SHALL ALSO, IF PERMITTED BY LAW, BE SENT BY
REGISTERED MAIL TO GUARANTOR AT ITS ADDRESS SET FORTH IN THE CREDIT AGREEMENT,
BUT THE FAILURE OF GUARANTOR TO RECEIVE SUCH COPIES SHALL NOT AFFECT IN ANY WAY
THE SERVICE OF SUCH PROCESS AS AFORESAID. GUARANTOR SHALL FURNISH TO LENDER
PARTIES A CONSENT OF CT CORPORATION SYSTEM AGREEING TO ACT HEREUNDER PRIOR TO
THE EFFECTIVE DATE OF THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
LENDER PARTIES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT OF LENDER PARTIES TO BRING PROCEEDINGS AGAINST GUARANTOR IN THE
COURTS OF ANY OTHER JURISDICTION. GUARANTOR SHALL NOT REVOKE SUCH APPOINTMENT
BUT IF FOR ANY REASON CT CORPORATION SYSTEM SHALL RESIGN OR OTHERWISE CEASE TO
ACT AS GUARANTOR'S AGENT, GUARANTOR HEREBY IRREVOCABLY AGREES TO (A)
IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT ACCEPTABLE TO AGENT TO SERVE IN
SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW AGENT SHALL BE DEEMED TO BE
SUBSTITUTED FOR CT CORPORATION SYSTEM FOR ALL PURPOSES HEREOF AND (B) PROMPTLY
DELIVER TO LENDER PARTIES THE WRITTEN CONSENT (IN FORM AND SUBSTANCE
SATISFACTORY TO AGENT) OF SUCH NEW AGENT AGREEING TO SERVE IN SUCH CAPACITY.
(II) GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND
IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (B) WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW, (C) CERTIFIES THAT NEITHER
IT NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR GUARANTOR HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION,
"SPECIAL DAMAGES"
12
<PAGE> 13
INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS
OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH GUARANTOR HAS
EXPRESSLY PROMISED TO PAY OR DELIVER TO AGENT OR LENDERS.
THIS WRITTEN GUARANTY AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
13
<PAGE> 14
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date first written above.
MINING TECHNOLOGIES, INC.
By: /s/ Vic Grubb
--------------------------
Name: Vic Grubb
Title: Treasurer
<PAGE> 1
EXHIBIT 10.17
SUBSIDIARY SECURITY AGREEMENT
MINING TECHNOLOGIES, INC.
THIS SECURITY AGREEMENT (this "Agreement") is made as of January 2,
1998 by Mining Technologies, Inc., a Kentucky corporation ("Debtor"), in
favor of NationsBank of Texas, N.A., individually and as agent for the other
Lenders parties to the Credit Agreement referenced below ("Secured Party").
W I T N E S S E T H:
WHEREAS, AEI Holding Company, Inc., a Delaware corporation
("Borrower"), entered into a Credit Agreement dated as of November 11, 1997
with Secured Party (as from time to time amended, supplemented or restated, the
"Credit Agreement"), pursuant to which funds were advanced to Borrower under
the Notes (as such term is defined below) which funds, along with future
advances to Borrower under the Notes, may be further advanced by Borrower to
its Affiliates, including Debtor;
WHEREAS, Borrower has executed (i) that certain Promissory Note dated
November 11, 1997 payable to the order of NationsBank in the original principal
amount of $30,000,000 on or before the Maturity Date and (ii) that certain
Promissory Note dated November 11, 1997 payable to the order of The Provident
Bank in the original principal amount of $20,000,000 on or before the Maturity
Date (such promissory notes, as from time to time amended, and all promissory
notes given in substitution, renewal or extension therefor or thereof, in whole
or in part, being herein collectively called the "Notes");
WHEREAS, pursuant to the Credit Agreement, Debtor is concurrently
herewith giving to Agent for the benefit of Lenders a Guaranty of even date
herewith (herein, as from time to time amended, supplemented or restated,
called the "Guaranty") of all of the indebtedness of Borrower under the Credit
Agreement and the Notes;
WHEREAS, it is a condition precedent to Lenders' obligations to
advance funds pursuant to the Credit Agreement that Debtor shall execute and
deliver this Agreement to Secured Party;
WHEREAS, Borrower owns all of the issued and outstanding shares of
capital stock of Debtor;
WHEREAS, the board of directors of Debtor has determined that Debtor's
execution, delivery and performance of this Agreement may reasonably be
expected to benefit Debtor, directly or indirectly, and is in the best
interests of Debtor;
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to extend such credit under the Credit Agreement, Debtor hereby
agrees with Secured Party, for the benefit of Lenders and Secured Party, as
follows:
- 1 -
<PAGE> 2
ARTICLE I
Definitions and References
Section 1.1. General Definitions. As used herein, the terms
"Agreement", "Debtor", and "Credit Agreement" shall have the meanings indicated
above, and the following terms shall have the following meanings:
"Collateral" means all property, of whatever type, which is described
in Section 2.1 as being at any time subject to a security interest granted
hereunder to Secured Party.
"Collateral Account" has the meaning given it in Section 4.1(e).
"Commitment" means the agreement or commitment by Lenders to make
loans or otherwise extend credit to Debtor under the Credit Agreement, and any
other agreement, commitment, statement of terms or other document contemplating
the making of loans or advances or other extension of credit by Lenders to or
for the account of Debtor which is now or at any time hereafter intended to be
secured by the Collateral under this Agreement.
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing inventory, equipment, or other
goods.
"Equipment" means all equipment (as defined in the UCC) in whatever
form, wherever located, and whether now or hereafter existing, and all parts
thereof, all accessions thereto, and all replacements therefor, including but
not limited to the Operating Equipment.
"Excluded Collateral" means the Documents or leases relating to the
assets listed in Schedule 1 or assets subject to the leases listed in Schedule
1.
"General Intangibles" means all general intangibles (as defined in the
UCC) of any kind (including choses in action, tax refunds, insurance proceeds,
and contract rights), and all instruments, security agreements, leases,
contracts, and other rights (except those constituting Receivables, Documents,
or Instruments) to receive payments of money or the ownership or possession of
property. The General Intangibles include, among other items, all Intellectual
Property.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (as each is defined in" the UCC).
"Intellectual Property" means any Patents, Patent Licenses,
Trademarks, and Trademark Licenses.
- 2 -
<PAGE> 3
"Inventory" means all inventory (as defined in the UCC) in all of its
forms, wherever located and whether now or hereafter existing, including (a)
all movable property and other goods held for sale or lease, all movable
property and other goods furnished or to be furnished under contracts of
service, all raw materials and work in process, and all materials and supplies
used or consumed in a business, including but not limited to all coal and other
minerals after extraction, all stockpiles thereof and related products, (b) all
movable property and other goods which are part of a product or mass, (c) all
movable property and other goods which are returned to or repossessed by the
seller, lessor, or supplier thereof, (d) all goods and substances in which any
of the foregoing is commingled or to which any of the foregoing is added, and
(e) all accessions to, products of, and documents for any of the foregoing.
"Issuer" means any issuer of Subsidiary Shares and any successor of
such Issuer.
"Investment Property" means all "certificated securities",
"uncertificated securities", "security entitlements", "security accounts",
"commodity contracts" or "commodity accounts" (as each is defined in the UCC)
and shall include, without limitation, all Subsidiary Shares.
"Lenders" means the Persons who are from time to time "Lenders" as
defined in the Credit Agreement.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure indebtedness of any kind which is owed
to him or any other arrangement with such creditor which provides for the
payment of such indebtedness out of such property or assets or which allows him
to have such indebtedness satisfied out of such property or assets prior to the
general creditors of any owner thereof, including without limitation any lien,
mortgage, security interest, pledge, deposit, production payment, rights of a
vendor under any title retention or conditional sale agreement or lease
substantially equivalent thereto, tax lien, mechanic's or materialman's lien,
or any other charge or encumbrance for security purposes, whether arising by
law or agreement or otherwise, but excluding any right of offset which arises
without agreement in the ordinary course of business. "Lien" also means any
filed financing statement, any registration with an issuer of uncertificated
securities, or any other arrangement which would serve to perfect a Lien
described in the preceding sentence, regardless of whether such financing
statement is filed, such registration is made, or such arrangement is
undertaken before or after such Lien exists.
"Lockbox" has the meaning given it in Section 4.1(e).
"Obligation Documents" means the Credit Agreement, the Notes, the Loan
Documents, and all other documents and instruments under, by reason of which,
or pursuant to which any or all of the Secured Obligations are evidenced,
governed, secured, or otherwise dealt with, and all other agreements,
certificates, and other documents, instruments and writings heretofore or
hereafter delivered in connection herewith or therewith.
- 3 -
<PAGE> 4
"Other Liable Party" means any Person, other than Debtor, who may now
or may at any time hereafter be primarily or secondarily liable for any of the
Secured Obligations or who may now or may at any time hereafter have granted to
Secured Party or Lenders a Lien upon any property as security for the Secured
Obligations.
"Patent License" means any license or other agreement, whether now or
hereafter in existence, under which is granted or authorized any right with
respect to any Patent or any invention now or hereafter in existence, whether
patentable or not, whether a patent or application for patent is in existence
on such invention or not, and whether a patent or application for patent on
such invention may come into existence.
"Patents" means all the following: (a) all letters patent and design
letters patent of the United States or any other country and all applications
for letters patent and design letters patent of the United States or any other
country, including applications in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or other country, or any political subdivision thereof. (b) all
reissues, divisions, continuations, continuations-in-part, renewals and
extensions thereof, (c) all claims for, and rights to sue for, past or future
infringements of any of the foregoing, and (d) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements
thereof.
"Perfection Certificate" means a certificate substantially in the form
of Exhibit A, appropriately completed to the satisfaction of Secured Party and
duly executed by the indicated officer or officers of Debtor.
"Permitted Liens" means any Liens expressly permitted under Section
7.2 of the Credit Agreement.
"Person" means an individual, corporation, partnership, association,
joint stock company, trust, unincorporated organization or joint venture, or a
court or governmental unit or any agency or subdivision thereof, or any other
legally recognizable entity.
"Proceeds" means, with respect to any property of any kind, all
proceeds of, and all other profits, products, rentals or receipts, in whatever
form, arising from any sale, exchange, collection, lease, licensing or other
disposition of, distribution in respect of, or other realization upon, such
property, including all claims against third parties for loss of, damage to or
destruction of, or for proceeds payable under (or unearned premiums with
respect to) insurance in respect of, such property (regardless of whether
Secured Party is named a loss payee thereunder), and any payments paid or owing
by any third party under any indemnity, warranty, or guaranty with respect to
such property, and any condemnation or requisition payments with respect to
such property, in each case whether now existing or hereafter arising.
- 4 -
<PAGE> 5
"Receivables" means (a) all accounts (as defined in the UCC) and all
other rights to payment for goods or other personal property which have been
(or are to be) sold, leased, or exchanged or for services which have been (or
are to be) rendered, regardless of whether such accounts or other rights to
payment have been earned by performance and regardless of whether such accounts
or other rights to payment are evidenced by or characterized as accounts
receivable, contract rights, book debts, notes, drafts or other obligations of
indebtedness, (b) all Documents and Instruments of any kind relating to such
accounts or other rights to payment or otherwise arising out of or in
connection with the sale, lease or exchange of goods or other personal property
or the rendering of services, (c) all rights in, to, or under all security
agreements, leases and other contracts securing or otherwise relating to any
such accounts, rights to payment, Documents, or Instruments, (d) all rights in,
to and under any purchase orders, service contracts, or other contracts out of
which such accounts and other rights to payment arose (or will arise on
performance), and (e) all rights in or pertaining to any goods arising out of
or in connection with any such purchase orders, service contracts, or other
contracts, including rights in returned or repossessed goods and rights of
replevin, repossession, and reclamation.
"Related Person" means Debtor, each Subsidiary of Debtor, Borrower and
each Other Liable Party.
"Secured Obligations" has the meaning given such term in Section 2.2.
"Secured Party" means the Person named as such at the beginning of
this Agreement, together with its successors and assigns as the "Agent" under
the Credit Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.
"Subsidiary Shares" means all of the following issued by any
Subsidiary of Debtor; (a) all shares of capital stock , (b) all units of
membership interest, (c) all certificates representing any such shares and
units, (d) all options and other rights, contractual or otherwise, at any time
existing with respect to such shares and units, and (e) all dividends, cash,
instruments and other property now or hereafter received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares or units.
"Trademark License" means any license or agreement, whether now or
hereafter in existence, under which is granted or authorized any right to use
any Trademark.
"Trademarks" means all of the following: (a) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, brand names, trade dress, prints and
labels on which any of the foregoing have appeared or appear, package and other
designs, and any other source or business identifiers, and general
- 5 -
<PAGE> 6
intangibles of like nature, and the rights in any of the foregoing which arise
under applicable law, (b) the goodwill of the business symbolized thereby or
associated with each of them, (c) all registrations and applications in
connection therewith, including registrations and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or other country, or any political subdivision
thereof, (d) all reissues, extensions and renewals thereof, (e) all claims for,
and rights to sue for, past or future infringements of any of the foregoing,
and (f) all income, royalties, damages and payments now or hereafter due or
payable with respect to any of the foregoing, including damages and payments
for past or future infringements thereof.
"UCC" means the Uniform Commercial Code in effect in the State of
Texas on the date hereof.
Section 1.2. Other Definitions. Reference is hereby made to the Credit
Agreement for a statement of the terms thereof. All capitalized terms used in
this Agreement which are defined in the Credit Agreement and not otherwise
defined herein shall have the same meanings herein as set forth therein. All
terms used in this Agreement which are defined in the UCC and not otherwise
defined herein or in the Credit Agreement shall have the same meanings herein
as set forth therein, except where the context otherwise requires.
Section 1.3. Attachments. All exhibits or schedules which may be
attached to this Agreement are a part hereof for all purposes.
Section 1.4. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document (including, but not
limited to, references in Section 2.1) also refer to and include all renewals,
extensions, amendments, modifications, supplements or restatements of any such
agreement, instrument or document, provided that nothing contained in this
Section shall be construed to authorize any Person to execute or enter into any
such renewal, extension, amendment, modification, supplement or restatement.
Section 1.5. References and Titles. All references in this Agreement
to Exhibits, Articles, Sections, subsections, and other subdivisions refer to
the Exhibits, Articles, Sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any subdivision are for convenience only and do not constitute any
part of any such subdivision and shall be disregarded in construing the
language contained in this Agreement. The words "this Agreement", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited. The phrases "this Section" and "this subsection" and similar phrases
refer only to the Sections or subsections hereof in which the phrase occurs.
The word "or" is not exclusive, and the word "including" (in all of its forms)
means "including without limitation". Pronouns in masculine, feminine and
neuter gender shall
- 6 -
<PAGE> 7
be construed to include any other gender, and words in the singular form shall
be construed to include the plural and vice versa unless the context otherwise
requires.
ARTICLE II
Security Interest
Section 2.1. Grant of Security Interest. As collateral security for
all of the Secured Obligations, Debtor hereby pledges and assigns to Secured
Party and grants to Secured Party a continuing security interest, for the
benefit of Lenders, in and to all right, title and interest of Debtor in and to
any and all of the following property, whether now owned or existing or
hereafter acquired or arising and regardless of where located, SAVE AND EXCEPT
the Excluded Collateral:
(a) all Receivables.
(b) all General Intangibles.
(c) all Documents.
(d) all Instruments.
(e) all Inventory.
(f) all Investment Property.
(g) all Equipment.
(h) The Collateral Account and the Lockbox, all cash deposited therein
from time to time, and all Liquid Investments referred to in Section 4.1(e).
(i) All books and records (including, without limitation, customer
lists, marketing information, credit files, price lists, operating records,
vendor and supplier price lists, sales literature, computer software, computer
hardware, computer disks and tapes and other storage media, printouts and other
materials and records) of Debtor pertaining to any of the Collateral.
(j) All moneys and property of any kind of Debtor in the possession or
under the control of Secured Party.
(k) All Proceeds of any and all of the foregoing Collateral.
- 7 -
<PAGE> 8
In each case, the foregoing shall be covered by this Agreement, whether
Debtor's ownership or other rights therein are presently held or hereafter
acquired and howsoever Debtor's interests therein may arise or appear (whether
by ownership, security interest, claim or otherwise).
Section 2.2. Secured Obligations Secured. The security interest
created hereby in the Collateral constitutes continuing collateral security for
all of the following obligations, indebtedness and liabilities, whether now
existing or hereafter incurred or arising:
(a) Credit Agreement Indebtedness. The payment by Debtor, as and when
due and payable, of the "Obligations", as defined in the Credit Agreement, and
of all amounts from time to time owing by Debtor under or in respect of the
Credit Agreement, the Notes or any of the other Obligation Documents.
(b) Guaranteed Indebtedness. The payment by Debtor, when due and
payable, of all amounts from time to time owing by Debtor under or in respect
of the Guaranty or any of the other Obligation Documents to which Debtor is a
party, and the due performance by Debtor of all of its other respective
obligations under or in respect of the Guaranty and such other Obligation
Documents.
(c) Interest Rate Hedges. The payment and performance of any and all
present or future obligations of Debtor according to the terms of any present
or future interest rate or currency rate swap, rate cap, rate floor, rate
collar, exchange transaction, forward rate agreement, or other exchange rate
protection agreements or any option with respect to any such transaction now
existing or hereafter entered into between Debtor, any Subsidiary of Debtor,
and one or more parties constituting any Lender (or any affiliate of any
Lender).
(d) Other Indebtedness. All loans and future advances made by Lenders
to Debtor and all other debts, obligations and liabilities of every kind and
character of Debtor now or hereafter existing in favor of Lenders, whether such
debts, obligations or liabilities be direct or indirect, primary or secondary,
joint or several, fixed or contingent, and whether originally payable to
Lenders or to a third party and subsequently acquired by Lenders and whether
such debts, obligations or liabilities are evidenced by notes, open account,
overdraft, endorsement, security agreement, guaranty or otherwise (it being
contemplated that Debtor may hereafter become indebted to Lenders in further
sum or sums but Lenders shall have no obligation to extend further indebtedness
by reason of this Agreement).
(e) Renewals. All renewals, extensions, amendments, modifications,
supplements, or restatements of or substitutions for any of the foregoing.
(f) Performance. The due performance and observance by Debtor of all
of its other obligations from time to time existing under or in respect of any
of the Obligation Documents.
- 8 -
<PAGE> 9
As used herein, the term "Secured Obligations" refers to all present and future
indebtedness, obligations and liabilities of whatever type which are described
above in this section, including any interest which accrues after the
commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of Debtor. Debtor hereby acknowledges
that the Secured Obligations are owed to the various Lenders and that each
Lender is entitled to the benefits of the Liens given under this Agreement. It
is the intention of the Debtor, Secured Party and each Lender that this
Agreement not constitute a fraudulent transfer or fraudulent conveyance under
any state or federal law that may be applied hereto. Debtor and, by their
acceptance hereof, Secured Party and each Lender hereby acknowledge and agree
that, notwithstanding any other provision of this Agreement: (a) the
indebtedness secured hereby shall be limited to the maximum amount of
indebtedness that can be incurred or secured by Debtor without rendering this
Agreement subject to avoidance under Section 548 of the United States
Bankruptcy Code or any comparable provisions of any applicable state or federal
law, and (b) the Collateral pledged by Debtor hereunder shall be limited to the
maximum amount of Collateral that can be pledged by Debtor without rendering
this Agreement subject to avoidance under Section 548 of the United States
Bankruptcy Code or any comparable provisions of any applicable state or federal
law.
ARTICLE III
Representations, Warranties and Covenants
Section 3.1. Representations and Warranties. Debtor hereby represents
and warrants to
Secured Party and Lenders as follows:
(a) Ownership Free of Liens. Debtor has good and marketable title to
the Collateral, free and clear of all Liens, encumbrances or adverse claims
except for the security interest created by this Agreement and any Permitted
Liens. No effective financing statement or other registration or instrument
similar in effect covering all or any part of the Collateral is on file in any
recording office except any which have been filed in favor of Secured Party
relating to this Agreement and any which have been filed to perfect or protect
any Permitted Lien. None of the Collateral is in the possession of any Person
other than Debtor or Secured Party, except for Collateral being transported in
the ordinary course of business.
(b) No Conflicts or Consents. Neither the ownership or the intended
use of the Collateral by Debtor, nor the grant of the security interest by
Debtor to Secured Party herein, nor the exercise by Secured Party of its rights
or remedies hereunder, will (i) conflict with any provision of (a) any domestic
or foreign law, statute, rule or regulation, (b) the articles or certificate of
incorporation, charter or bylaws of Debtor, or (c) any agreement, judgment,
license, order or permit applicable to or binding upon Debtor, or (ii) result
in or require the creation of any Lien, charge or encumbrance upon any assets
or properties of Debtor or of any Related Person except for Permitted Liens
expressly contemplated in the Obligation Documents. Except as expressly
- 9 -
<PAGE> 10
contemplated in the Obligation Documents, no consent, approval, authorization
or order of, and no notice to or filing with any court, governmental authority,
or third party is required in connection with the grant by Debtor of the
security interest herein, or the exercise by Secured Party of its rights and
remedies hereunder.
(c) Security Interest. Debtor has and will have at all times full
right, power and authority to grant a security interest in the Collateral to
Secured Party as provided herein, free and clear of any Lien, adverse claim, or
encumbrance. This Agreement creates a valid and binding security interest in
favor of Secured Party in the Collateral, which security interest secures all
of the Secured Obligations.
(d) Perfection Certificate. Debtor has previously completed and
delivered the Perfection Certificate to Secured Party. The Perfection
Certificate as so delivered is true, correct and complete.
(e) Receivables. Each Receivable included within the Collateral
represents the valid and legally binding indebtedness of a bona fide account
debtor arising from the sale or lease by Debtor of goods or the rendition by
Debtor of services, subject to no contra-accounts, setoffs, defenses,
counterclaims, discounts, allowances, rebates, credits or adjustments by or
available to account debtors obligated on such Receivable, except for
Receivables of Debtor which do not in the aggregate exceed five percent (5%) of
the aggregate face amount of all of Debtor's Receivables. No material amount of
Debtor's Receivables is otherwise doubtful of collection except as has been
disclosed to Secured Party in writing.
(f) General Intangibles. Each General Intangible included within the
Collateral which is material to Debtor's business represents the valid and
legally binding obligation of each other Person who is a party thereto or who
is otherwise stated to be obligated thereunder, subject to no contra-accounts,
setoffs, defenses, counterclaims, discounts, allowances, rebates, credits or
adjustments by or available to account debtors obligated thereon, except for
those which (i) in the case of General Intangibles under which money is owing
to Debtor, do not in the aggregate exceed five percent (5%) of the aggregate
face amount of all such General Intangibles, and (ii) in the case of other
General Intangibles, do not materially impair the value to Debtor or the
enforcement by Debtor of such General Intangibles.
(g) Intellectual Property. There is no Intellectual Property included
within the Collateral which is material to Debtor's business.
(h) Documents and Instruments. All Documents and Instruments included
within the Collateral are valid and genuine. Any such Document or Instrument
has only one original counterpart which constitutes collateral within the
meaning of the UCC or the law of any applicable jurisdiction, and all such
original counterparts (other than checks delivered in payment of Receivables in
the ordinary course of business) have been delivered into the possession of
Secured Party.
- 10 -
<PAGE> 11
(i) Goods. None of the Collateral which constitutes goods (i) is
covered by any Document (other than Documents which are subject hereto and have
been delivered to Secured Party), (ii) is subject to any landlord's lien or
similar Lien (other than Permitted Liens), (iii) has been related to, attached
to, or used in connection with any real property so as to constitute a fixture
upon such real property (except for real property which is subject to a Lien in
favor of Secured Party), (iv) is now kept or is intended to be kept at any
location other than as set forth in the Perfection Certificate (except for
goods in transit in the ordinary course of Debtor's business), (v) is installed
in or affixed to other goods so as to be an accession to such other goods
(unless such other goods are included in the Collateral), or (vi) has been
produced in violation of the Fair Labor Standards Act, as amended. All such
goods are insured to the extent required under the Credit Agreement.
(j) Investment Property. Debtor has delivered to Secured Party all
Certificates, instruments, and writings evidencing Investment Property included
within the Collateral. All such certificates, instruments, and writings are
valid and genuine and have not been altered.
(k) Subsidiary Shares. Debtor has delivered to Secured Party all
certificates evidencing Subsidiary Shares. All such certificates are valid and
genuine and have not been altered. All shares, units and other securities
constituting the Subsidiary Shares have been duly authorized and validly
issued, are fully paid and non-assessable, and were not issued in violation of
the preemptive rights of any Person or of any agreement by which Debtor or the
Issuer thereof is bound. All documentary, stamp or other taxes or fees owing in
connection with the issuance, transfer or pledge of Subsidiary Shares (or
rights in respect thereof) have been paid. No restrictions or conditions exist
with respect to the transfer, voting or capital of any Subsidiary Shares. The
Subsidiary Shares constitute the percentage of the class of issued shares of
capital stock which is indicated on Exhibit B. No Issuer of any Subsidiary
Shares has any outstanding stock rights, rights to subscribe, options, warrants
or convertible securities outstanding or any other rights outstanding whereby
any Person would be entitled to have issued to him capital stock of such
Issuer.
Section 3.2. General Covenants Applicable to All Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this Section 3.2 from the date hereof
and so long as any part of the Secured Obligations or the Commitment is
outstanding.
(a) Change of Name, Location, or Structure; Additional Filings. Debtor
recognizes that financing statements pertaining to the Collateral have been or
may be filed where Debtor maintains any Collateral, has its records concerning
any Collateral or has its chief executive office or chief place of business.
Without limitation of any other covenant herein, Debtor will not cause or
permit any change to be made in its name, identity or corporate or partnership
structure, or any change to be made to a jurisdiction other than as represented
in Section 3.1 hereof in (i) the location of any Collateral, (ii) the location
of any records concerning any Collateral or (iii) in the location of Debtor's
chief executive office or principal place of business,
- 11 -
<PAGE> 12
unless Debtor shall have first (1) notified Secured Party of such change at
least twenty (20) days prior to the effective date of such change, (2) taken
all action requested by Secured Party (under the following subsection (b) or
otherwise) for the purpose of further confirming and protecting Secured Party's
security interests and rights under this Agreement and the perfection and
priority thereof, and (3) if requested by Secured Party, provided to Secured
Party a legal opinion to its satisfaction confirming that such change will not
adversely affect in any way Secured Party's security interests and rights under
this Agreement or the perfection or priority thereof. In any notice furnished
pursuant to this subsection, Debtor will expressly state that the notice is
required by this Agreement and contains facts that may require additional
filings of financing statements or other notices for the purposes of continuing
perfection of Secured Party's security interest in the Collateral.
(b) Further Assurances. Debtor will, at its expense as from time to
time requested by Secured Party, promptly execute and deliver all further
instruments, agreements, filings and registrations, and take all further
action, in order: (i) to confirm and validate this Agreement and Secured
Party's rights and remedies hereunder, (ii) to correct any errors or omissions
in the descriptions herein of the Secured Obligations or the Collateral or in
any other provisions hereof, (iii) to perfect, register and protect the
security interests and rights created or purported to be created hereby or to
maintain or upgrade in rank the priority of such security interests and rights,
(iv) to enable Secured Party to exercise and enforce its rights and remedies
hereunder in respect of the Collateral, or (v) to otherwise give Secured Party
the full benefits of the rights and remedies described in or granted under this
Agreement. As part of the foregoing Debtor will, whenever requested by Secured
Party (1) execute and file any financing statements, continuation statements,
and other filings or registrations relating to Secured Party's security
interests and rights hereunder, and any amendments thereto, and (2) mark its
books and records relating to any Collateral to reflect that such Collateral is
subject to this Agreement and the security interests hereunder. To the extent
requested by Secured Party from time to time, Debtor will obtain from any
material account debtor or other obligor on the Collateral the acknowledgment
of such account debtor or obligor that such Collateral is subject to this
Agreement.
(c) Inspection of Collateral. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all representatives
appointed by Secured Party, including independent accountants, agents,
attorneys, appraisers and any other persons, to inspect any of the Collateral
and the books and records of or relating to the Collateral at any time during
normal business hours, and to make photocopies and photographs thereof, and to
write down and record any information which such representatives obtain;
provided that such actions do not unreasonably interfere with Debtor's
business..
(d) Information. Upon the reasonable request from time to time by
Secured Party, Debtor will furnish to Secured Party (i) any information
concerning any covenant, provision or representation contained herein or any
other matter in connection with the Collateral or Debtor's business,
properties, or financial condition, and (ii) statements and schedules
identifying and
- 12 -
<PAGE> 13
describing the Collateral and other reports and information requested in
connection with the Collateral, all in reasonable detail.
(e) Ownership, Liens, Possession and Transfers. Debtor will maintain
good and marketable title to all Collateral (except Collateral which is sold in
accordance with Section 7.5 of the Credit Agreement), free and clear of all
Liens, encumbrances or adverse claims except for the security interest created
by this Agreement and any Permitted Liens, and Debtor will not grant or allow
any such Liens, encumbrances or adverse claims to exist. Debtor will not grant
or allow to remain in effect, and Debtor will cause to be terminated, any
financing statement or other registration or instrument similar in effect
covering all or any part of the Collateral, except any which have been filed in
favor of Secured Party relating to this Agreement and any which have been filed
to perfect or protect any Permitted Lien. Debtor will defend Secured Party's
right, title and special property and security interest in and to the
Collateral against the claims of any Person. Except as expressly allowed in
Section 3.3 below for Inventory and Equipment, Debtor (i) will insure that all
of the Collateral -- whether goods, Documents, Instruments, or otherwise -- is
and remains in the possession of Debtor or Secured Party (or a bailee selected
by Secured Party who is holding such Collateral for the benefit of Secured
Party), except for goods being transported in the ordinary course of business,
and (ii) will not sell, assign (by operation of law or otherwise), transfer,
exchange, lease or otherwise dispose of any of the Collateral.
(f) Impairment of Security Interest. Debtor will not take or fail to
take any action which would in any manner impair the value or enforceability of
Secured Party's security interest in any Collateral.
Section 3.3. Covenants for Specified Types of Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this Section 3.3 from the date hereof
and so long as any part of the Secured Obligations or the Commitment is
outstanding.
(a) Receivables. Debtor will, except as otherwise provided in Sections
4.1(d) or 4.2(a), collect at its own expense all amounts due or to become due
under each Receivable which is included within the Collateral. In connection
with such collections, Debtor may (and, at Secured Party's direction, will)
take such action (not otherwise forbidden hereunder) as Debtor or Secured Party
may deem necessary or advisable to enforce collection or performance of each
such Receivable. Except for actions and omissions in the ordinary course of
business which do not in the aggregate cause losses or reductions in excess of
five percent (5%) of the aggregate face amount of all such Receivables
outstanding at any time, Debtor (i) will duly perform and cause to be performed
all of its obligations with respect to the goods or services, the sale or lease
or rendering of which gave rise or will give rise to each such Receivable, and
(ii) will not (whether through failure to duly perform its obligations under
any contracts, instruments, and agreements which are related to any such
Receivable, or by any written instrument, or otherwise) take or allow any
action or omission which causes any such Receivable to become subject to any
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or
- 13 -
<PAGE> 14
adjustments by or available to account debtors obligated on such Receivable,
unless such action involves a good faith contest (promptly instituted and
diligently concluded) to the validity of amounts claimed to be owed to another
Person.
(b) General Intangibles. Debtor will, except as otherwise provided in
Sections 4.1(e) or 4.2(a), collect at its own expense all amounts due or to
become due under each General Intangible included within the Collateral. In
connection with such collections, Debtor may (and, at Secured Party's
direction, will) take such action (not otherwise forbidden hereunder) as Debtor
or Secured Party may deem necessary or advisable to enforce collection or
performance of each such General Intangible. Unless the failure to do so is the
result of a good faith contest (promptly and diligently concluded) of the
validity of such obligations, Debtor will duly perform and cause to be
performed all of its obligations under any contracts, instruments, and
agreements which are, or which are related to, any material General Intangibles
of Debtor. Debtor will not (whether through failure to duly perform its
obligations under any contracts, instruments, and agreements which are related
to any such General Intangibles, or by any written instrument, or otherwise)
take or allow any action or omission which causes any such General Intangibles
to become subject to any contra-accounts, setoffs, defenses, counterclaims,
discounts, allowances, rebates, credits or adjustments by or available to
account debtors obligated on such General Intangibles, except for those which
(i) in the case of such General Intangibles under which money is owing to
Debtor, do not in the aggregate exceed five percent (5%) of the aggregate face
amount of all such General Intangibles, and (ii) in the case of other General
Intangibles included within the Collateral, do not materially impair the value
or enforcement of such General Intangibles.
(c) Intellectual Property. Debtor will maintain and protect the
validity and enforceability of all Intellectual Property included within the
Collateral which is material to Debtor's business. Debtor will defend and
protect such Intellectual Property and its rights thereunder against any
infringement, dilution, or misappropriation and will defend any claim or
administrative or arbitral challenge that questions the validity or
enforceability of such Intellectual Property, Debtor's purported rights therein
and thereunder, or Debtor's rights to register or patent the same or to use and
practice the same in its business. Debtor will give Secured Party notice of any
proceeding in which such defense is being carried on. Debtor will diligently
prosecute and maintain all applications and registrations for any such
Intellectual Property, and Debtor will notify Secured Party whenever it learns
that any application or registration relating to any such Intellectual Property
has been (or is alleged to have been) abandoned, dedicated or otherwise
terminated. At least thirty days prior to filing any application for
registration of any Intellectual Property (or any similar request) with the
United States Patent and Trademark Office, or any similar office or agency of
the United States, any State thereof or other country, or any political
subdivision thereof, Debtor will give Secured Party notice of such intended
filing and will, upon Secured Party's request, execute, deliver and file any
agreements, instruments, registrations and filings which Secured Party may
request to confirm Secured Party's security interest therein and to put such
security interest of record in such office. Debtor hereby appoints Secured
Party as its agent and attorney in fact to do the same, and hereby ratifies and
confirms all actions of Secured
- 14 -
<PAGE> 15
Party as such agent and attorney in fact, and hereby acknowledges that such
agency and power of attorney are irrevocable and coupled with an interest.
(d) Documents and Instruments. Debtor will at all times cause any
Documents or Instruments which are included within the Collateral to be valid
and genuine. Debtor will cause all Instruments included within the Collateral
to have only one original counterpart. Upon request by Secured Party, Debtor
will promptly deliver to Secured Party all originals of Documents or
Instruments which are included within the Collateral. Debtor will not (whether
through failure to duly perform its obligations under any contracts,
instruments, and agreements which are related to any Documents or Instruments
which are included within the Collateral, or by any written instrument, or
otherwise) take or allow any action or omission which causes any Documents or
Instruments which are included within the Collateral to become subject to any
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to the Persons obligated
thereon. Upon request by Secured Party, Debtor will mark each chattel paper
which is included within the Collateral with a legend indicating that such
chattel paper is subject to the security interest granted by this Agreement.
(e) Inventory. Debtor will maintain, preserve, protect and store all
Inventory included within the Collateral in good condition, repair and working
order and in a manner which will not make void or cancelable any insurance with
respect to such Collateral. Debtor will promptly furnish to Secured Party a
statement respecting any loss or damage to any such Inventory with an aggregate
value in excess of $500,000. Except for transportation of Inventory in the
ordinary course of business, Debtor will not allow any such Inventory to be
located in any jurisdiction other than those in which is filed an effective
financing statement which perfects Secured Party's security interest hereunder
in such Inventory. Except for Documents delivered into the possession of
Secured Party, Debtor will not allow any Inventory included within the
Collateral to be covered by any Document. Debtor will not cause or permit the
removal of any item of Inventory from Debtor's possession, control and risk of
loss, and Debtor will not sell, assign (by operation of law or otherwise),
transfer, exchange, lease or otherwise dispose of any Inventory, other than in
connection with the following:
(i) Sales or leases, other than during the continuance of an
Event of Default, of Inventory in the ordinary course of business, and
(ii) Possession of Inventory by Secured Party or by a bailee
selected by Secured Party who is holding such Inventory for the
benefit of Secured Party.
(f) Equipment. Debtor will maintain, preserve, protect and keep all
Equipment included within the Collateral in good condition, repair and working
order and will cause such Equipment to be used and operated in a good and
workmanlike manner, in accordance with applicable law and in a manner which
will not make void or cancelable any insurance with respect to such Equipment.
Debtor will promptly furnish to Secured Party a statement respecting any loss
or damage to any of such Equipment with an aggregate value in excess of
$500,000. Except for
- 15 -
<PAGE> 16
transportation of Equipment in the ordinary course of business, Debtor will not
allow any Equipment included within the Collateral to be located in any
jurisdiction other than those in which is filed an effective financing
statement which perfects Secured Party's security interest hereunder in such
Equipment. Debtor will not cause or permit the removal of any item of Equipment
from Debtor's possession, control and risk of loss, and Debtor will not sell,
assign (by operation of law or otherwise), transfer, exchange, lease or
otherwise dispose of any Equipment, other than in connection with the
following:
(i) Sale or other disposal, other than during the
continuance of an Event of Default, of any item of Equipment (i) in
the ordinary course of business or (ii) which is worn out or obsolete
and which has been replaced by an item of equal suitability and value,
owned by Debtor and made subject to the security interest under this
Agreement, but which is otherwise free and clear of any Liens,
encumbrances or adverse claims, and
(ii) Possession of Equipment by Secured Party or by a bailee
selected by Secured Party who is holding such Equipment for the
benefit of Secured Party.
Debtor will not permit any of the Collateral which constitutes Equipment to at
any time become so related to attached to, or used in connection with any
particular real property so as to become a fixture upon such real property, or
to be installed in or affixed to other goods so as to become an accession to
such other goods unless such other goods are also included in the Collateral.
(g) Certificates of Title. To the extent that there is at any time any
Collateral in which a security interest may be perfected by a notation on the
certificate of title or similar evidence of ownership of such Collateral,
Debtor will:
(i) concurrently with the execution hereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor presently has any interest,
(ii) promptly after the acquisition thereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor hereafter acquires any interest, and
(iii) promptly upon request by Secured Party, with respect to
any other items of such Collateral,
deliver to Secured Party all such certificates of title and similar evidences
of ownership, all applications therefor, and all other documents needed or
helpful in registering Secured Party's security interest in such Collateral on
such certificates of title, other evidences of ownership, and applications and
in otherwise perfecting Secured Party's security interest in such Collateral.
(h) Investment Property.
- 16 -
<PAGE> 17
(i) Debtor will at all times cause (A) Secured Party to have control
(within the meaning of the UCC) over all Investment Property included
within the Collateral and (B) any certificates, documents, or
instruments evidencing Investment Property included within the
Collateral to be valid and genuine. All instruments and writings
evidencing Investment Property included within the Collateral shall be
delivered to Secured Party concurrently with or prior to the execution
and delivery of this Agreement.)
(ii) All instruments and writings evidencing the Investment Property
shall be delivered to Secured Party on or prior to the execution and
delivery of this Agreement. All other instruments and writings
hereafter evidencing or constituting Investment Property shall be
delivered to Secured Party promptly upon the receipt thereof by or on
behalf of Debtor. All such Investment Property shall be held by or on
behalf of Secured Party pursuant hereto and shall be delivered in
suitable form for transfer by delivery with any necessary endorsement
or shall be accompanied by fully executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Secured
Party.
(iii) If Debtor shall receive, by virtue of its being or having been
an owner of any Subsidiary Shares, any (i) stock certificate
(including any certificate representing a stock dividend or
distribution in connection with any increase or reduction of capital,
reorganization, reclassification, merger, consolidation, sale of
assets, combination of shares, stock split, spinoff or split-off),
promissory note or other instrument or writing; (ii) option or right,
whether as an addition to, substitution for, or in exchange for, any
Subsidiary Shares, or otherwise; (iii) dividends payable in cash
(except such dividends permitted to be retained by Debtor pursuant to
Section 4.10 hereof, or (iv) dividends or other distributions in
connection with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or paid-in
surplus, Debtor shall receive the same in trust for the benefit of
Secured Party, shall segregate it from Debtor's other property, and
shall promptly deliver it to Secured Party in the exact form received,
with any necessary endorsement or appropriate stock powers duly
executed in blank, to be held by Secured Party as Collateral.
(iv) Status of Subsidiary Shares. The certificates evidencing the
Subsidiary Shares shall at all times be valid and genuine and shall
not be altered. The Subsidiary Shares at all times shall be duly
authorized, validly issued, fully paid, and non-assessable, and shall
not be issued in violation of the preemptive rights of any Person or
of any agreement by which Debtor or the Issuer thereof is bound and
shall not be subject to any restrictions with respect to transfer,
voting or Capital of such Subsidiary Shares.
(v) Notices from Issuer. Debtor will promptly deliver to Secured
Party a copy of each notice or other communication received by Debtor
from any Issuer in respect of any Investment Property.
- 17 -
<PAGE> 18
ARTICLE IV.
Remedies, Powers and Authorizations
Section 4.1. Normal Provisions Concerning the Collateral.
(a) Additional Financing Statement Filings. Debtor hereby authorizes
Secured Party to file, without the signature of Debtor where permitted by law,
one or more financing or continuation statements, and amendments thereto,
relating to the Collateral. Debtor further agrees that a carbon, photographic
or other reproduction of this Agreement or any financing statement describing
any Collateral is sufficient as a financing statement and may be filed in any
jurisdiction by Secured Party.
(b) Power of Attorney. Debtor hereby appoints Secured Party as
Debtor's attorney-in-fact and proxy, with full authority in the place and stead
of Debtor and in the name of Debtor or otherwise, from time to time in Secured
Party's discretion, to take any action and to execute any instrument which
Secured Party may deem necessary or advisable to accomplish the purposes of
this Agreement including any action or instrument: (i) to request or instruct
each Issuer (and each registrar, transfer agent, or similar Person acting on
behalf of each Issuer) including any action or instrument: (i) to request or
instruct each to register the pledge or transfer of the Collateral to Secured
Party; (ii) to otherwise give notification to any Issuer, registrar, transfer
agent, financial intermediary, or other Person of Secured Party's security
interests hereunder; (iii) to obtain and adjust any insurance required to be
paid to Secured Party pursuant hereto; (iv) to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral; (v) to receive,
indorse and collect any drafts or other Instruments or Documents; (vi) to
enforce any obligations included among the Collateral; and (vii) to file any
claims or take any action or institute any proceedings which Secured Party may
deem necessary or desirable for the collection of any of the Collateral or
otherwise to enforce the rights of Debtor or Secured Party with respect to any
of the Collateral. Debtor hereby acknowledges that such power of attorney and
proxy are coupled with an interest, are irrevocable, and are to be used by
Secured Party for the sole benefit of Lenders.
(c) Performance by Secured Party. If Debtor fails to perform any
agreement or obligation contained herein, Secured Party may itself perform, or
cause performance of, such agreement or obligation, and the expenses of Secured
Party incurred in connection therewith shall be payable by Debtor under Section
4.5.
(d) Bailees. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of Debtor's agents or processors,
Debtor shall, upon the request of Secured Party, notify such warehouseman,
bailee, agent or processor of Secured Party's rights hereunder and instruct
such Person to hold all such Collateral for Secured Party's account subject to
Secured Party's instructions. (No such request by Secured Party shall be deemed
a waiver of
- 18 -
<PAGE> 19
any provision hereof which was otherwise violated by such Collateral being held
by such Person prior to such instructions by Debtor.)
(e) Collection. Secured Party shall have the right at any time, upon
the occurrence and during the continuance of a Default or an Event of Default,
to notify (or to require Debtor to notify) any and all obligors under any
Receivables, General Intangibles, Instruments, Investment Property or other
rights to payment included among the Collateral of the assignment thereof to
Secured Party under this Agreement and to direct such obligors to make payment
of all amounts due or to become due to Debtor thereunder directly to Secured
Party and, upon such notification and at the expense of Debtor and to the
extent permitted by law, to enforce collection of any such Receivables, General
Intangibles, Instruments, Investment Property or other rights to payment and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Debtor could have done. After Debtor receives notice
that Secured Party has given (and after Secured Party has required Debtor to
give) any notice referred to above in this subsection: all amounts and proceeds
(including instruments and writings) received by Debtor in respect of such
Receivables, General Intangibles, Instruments, Investment Property or other
rights to payment upon the occurrence and during the continuance of a Default
or Event of Default shall be received in trust for the benefit of Secured Party
hereunder, shall be segregated from other funds of Debtor and shall be
forthwith paid over to Secured Party in the same form as so received (with any
necessary indorsement) to be, at Secured Party's discretion, either (A) held as
cash collateral and released to Debtor upon the remedy of all Defaults and
Events of Default, or (B) while any Event of Default is continuing, applied as
specified in Section 4.3.
(f) Collection and Collateral Account. There is hereby established
with Secured Party a cash collateral account (the "Collateral Account") in the
name and under the control of Secured Party into which there shall be deposited
from time to time the cash proceeds of the Collateral (and of any other
collateral under other Obligation Document) required to be delivered to Secured
Party pursuant to the following subsections of this Section 4.1 or pursuant to
any other provision of this Agreement or any other Obligation Document. Debtor
and Secured Party shall deal with the Collateral Account as follows:
(i) Concurrently with the execution hereof (or promptly
thereafter), Debtor shall instruct all account debtors and other
Persons obligated to make payments to Debtor on any Receivables,
General Intangibles, Instruments, or other rights to payment included
within the Collateral to make such payments either (A) directly to
Secured Party, in which case Debtor shall instruct that such payments
be remitted to a post office box ("Lockbox) which shall be in the name
and under the control of Secured Party, or (B) if Secured Party
agrees, to one or more banks acceptable to Secured Party, in which
case Debtor shall instruct that such payments be remitted to a post
office box in the name and under the control of such bank which is
subject to the terms of a lockbox agreement in a form satisfactory to
Agent, duly executed by Debtor and such bank, pursuant to which Debtor
shall have irrevocably instructed such other bank (and such other bank
shall have agreed) to remit all proceeds of such payments directly to
Secured Party for deposit into
- 19 -
<PAGE> 20
the Collateral Account or as Secured Party may otherwise instruct such
bank. All such payments made to Secured Party shall be deposited in
the Collateral Account. In addition to the foregoing, Debtor agrees
that if the proceeds of any Collateral (including any payments with
respect to which instructions have been given as provided above) shall
be received by it, Debtor shall as promptly as possible deposit such
proceeds into the Collateral Account. Until so deposited, all such
proceeds shall be held in trust by Debtor for Secured Party and shall
not be commingled with any other funds or property of Debtor, and
Debtor will not adjust, settle or compromise the amount or payment of
any such Receivable, General Intangible, Instrument, or other right to
payment or release wholly or partly any account debtor or obligor
thereof or allow any credit or discount thereon.
(ii) As long as no Default or Event of Default has occurred
or is continuing, amounts on deposit in the Collateral Account shall,
upon receipt by Secured Party, be deposited by Secured Party in
Borrower's operating account maintained with Secured Party.
(iii) If a Default or an Event of Default has occurred or is
continuing, Secured Party shall, at Secured Party's discretion, either
(A) continue to hold the balance of the Collateral Account and all
Liquid Investments as Collateral, or (B) apply any or all of the
balance from time to time standing to the credit of the Collateral
Account (subject to collection) as specified in Section 4.3 and
liquidate any or all Liquid Investments and apply the proceeds thereof
as specified in Section 4.3.
(iv) Amounts on deposit in the Collateral Account pursuant
to subsection (iii) shall either remain on deposit therein or be
invested and re-invested from time to time in such Liquid Investments
as Secured Party shall determine, which Liquid Investments shall be
held in the name and be under the control of Secured Party in a
securities account established by Secured Party with one of its
Affiliates until liquidated and applied as provided in subsection
(iii). Any income received by Secured Party with respect to the
balance from time to time standing to the credit of the Collateral
Account, including any interest on or proceeds of Liquid Investments,
shall also remain, or be deposited, in the Collateral Account. All
right, title and interest in and to the amounts on deposit from time
to time in the Collateral Account, together with any Liquid
Investments from time to time made pursuant to this section shall vest
in Secured Party, shall constitute part of the Collateral hereunder,
and shall not constitute payment of the Secured Obligations until
applied thereto as herein provided.
(v) As used in this section, "Liquid Investment" means any
investment in the name of Secured Party (and, in the opinion of
counsel to Secured Party, appropriately subject to a perfected
security interest in favor of Secured Party) which matures within one
month after it is acquired by Secured Party and is either (A) a
certificate of deposit or time deposit issued by Secured Party or (B)
an obligation entitled to the full faith and
- 20 -
<PAGE> 21
credit of the United States which is in book-entry form and subject to
pledge under applicable state law and Treasury regulations.
Section 4.2. Event of Default Remedies. If an Event of Default shall
have occurred and be continuing, Secured Party may from time to time in its
discretion, without limitation and without notice except as expressly provided
below:
(a) exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein, under the other Obligation Documents,
or otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral);
(b) require Debtor to, and Debtor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of
the Collateral as directed by Secured Party and make it (together with all
books, records and information of Debtor relating thereto) available to Secured
Party at a place to be designated by Secured Party which is reasonably
convenient to both parties;
(c) prior to the disposition of any Collateral, (i) to the extent
permitted by applicable law, enter, with or without process of law and without
breach of the peace, any premises where any of the Collateral is or may be
located, and without charge or liability to Secured Party seize and remove such
Collateral from such premises, (ii) have access to and use the Company's books,
records, and information relating to the Collateral, and (iii) store or
transfer any of the Collateral without charge in or by means of any storage or
transportation facility owned or leased by Debtor, process, repair or
recondition any of the Collateral or otherwise prepare it for disposition in
any manner and to the extent Secured Party deems appropriate and, in connection
with such preparation and disposition, use without charge any copyright,
trademark, trade name, patent or technical process used by Debtor;
(d) reduce its claim to judgment or foreclose or otherwise enforce, in
whole or in part, the security interest created hereby by any available
judicial procedure;
(e) dispose of, at its office, on the premises of Debtor or elsewhere,
all or any part of the Collateral, as a unit or in parcels, by public or
private proceedings, and by way of one or more contracts (it being agreed that
the sale of any part of the Collateral shall not exhaust Secured Party's power
of sale, but sales may be made from time to time, and at any time, until all of
the Collateral has been sold or until the Secured Obligations have been paid
and performed in full), and at any such sale it shall not be necessary to
exhibit any of the Collateral;
(f) buy (or allow one or more of the Lenders to buy) the Collateral,
or any part thereof, at any public sale;
- 21 -
<PAGE> 22
(g) buy (or allow one or more of the Lenders to buy) the Collateral,
or any part thereof, at any private sale if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations; and
(h) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Debtor hereby consents to
any such appointment.
Debtor agrees that, to the extent notice of sale shall be required by law, at
least five (5) days' notice to Debtor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
In addition to the foregoing, if any Event of Default has occurred and is
continuing:
(i) Secured Party may license, or sublicense, whether
general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any Patents or Trademarks included in the
Collateral throughout the world for such term or terms, on such
conditions and in such manner as Secured Party shall in its sole
discretion determine;
(ii) Secured Party may (without assuming any obligations or
liability thereunder), at any time and from time to time, in its sole
discretion, enforce (and shall have the exclusive right to enforce)
against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any Patent Licenses or Trademark Licenses which
relate to Patents or Trademarks included in the Collateral and take or
refrain from taking any action under any thereof, and DEBTOR HEREBY
RELEASES SECURED PARTY AND THE LENDERS FROM, AND AGREES TO HOLD
SECURED PARTY AND THE LENDERS FREE AND HARMLESS FROM AND AGAINST, ANY
CLAIMS AND EXPENSES ARISING OUT OF ANY LAWFUL ACTION SO TAKEN OR
OMITTED TO BE TAKEN WITH RESPECT THERETO; and
(iii) upon request by Secured Party, Debtor will execute and
deliver to Secured Party a power of attorney, in form and substance
satisfactory to Secured Party, for the implementation of any lease,
assignment, license, sublicense, grant of option, sale or other
disposition of a Patent or Trademark included in the Collateral or any
action related thereto. In the event of any such disposition pursuant
to this Section, Debtor shall supply its know-how and expertise
relating to the manufacture and sale of the products bearing
Trademarks or the products or services made or rendered in connection
with Patents, and its customer lists and other records relating to
such Patents or Trademarks and to the distribution of said products,
to Secured Party.
- 22 -
<PAGE> 23
Section 4.3. Application of Proceeds. If any Event of Default shall
have occurred and be continuing, Secured Party may in its discretion apply any
cash held by Secured Party as Collateral, and any cash proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral, to any or all of the following in such
order as Secured Party may (subject to the rights of Lenders under the Credit
Agreement) elect:
(a) To the repayment of the reasonable costs and expenses, including
reasonable attorneys' fees and legal expenses, incurred by Secured Party in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (iii) the exercise or enforcement of any of
the rights of Secured Party hereunder, or (iv) the failure of Debtor to perform
or observe any of the provisions hereof;
(b) To the payment or other satisfaction of any Liens, encumbrances,
or adverse claims upon or against any of the Collateral;
(c) To the reimbursement of Secured Party for the amount of any
obligations of Debtor or any Other Liable Party paid or discharged by Secured
Party pursuant to the provisions of this Agreement or the other Obligation
Documents, and of any expenses of Secured Party payable by Debtor hereunder or
under the other Obligation Documents;
(d) To the satisfaction of any other Secured Obligations;
(e) By holding the same as Collateral;
(f) To the payment of any other amounts required by applicable law
(including any provision of the UCC); and
(g) By delivery to Debtor or to whoever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 4.4. Deficiency. In the event that the proceeds of any sale,
collection or realization of or upon Collateral by Secured Party are
insufficient to pay all Secured Obligations and any other amounts to which
Secured Party is legally entitled, Debtor shall be liable for the deficiency,
together with interest thereon as provided in the governing Obligation
Documents or (if no interest is so provided) at such other rate as shall be
fixed by applicable law, together with the costs of collection and the
reasonable fees of any attorneys employed by Secured Party or Lenders to
collect such deficiency.
Section 4.5. Indemnity and Expenses. In addition to, but not in
qualification or limitation of, any similar obligations under other Obligation
Documents:
- 23 -
<PAGE> 24
(a) DEBTOR WILL INDEMNIFY SECURED PARTY AND EACH LENDER FROM AND
AGAINST ANY AND ALL CLAIMS, LOSSES AND LIABILITIES GROWING OUT OF OR RESULTING
FROM THIS AGREEMENT (INCLUDING ENFORCEMENT OF THIS AGREEMENT), WHETHER OR NOT
SUCH CLAIMS, LOSSES AND LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY
OR ARISING OUT OF SUCH INDEMNIFIED PARTY'S OWN NEGLIGENCE, EXCEPT TO THE EXTENT
SUCH CLAIMS, LOSSES OR LIABILITIES ARE PROXIMATELY CAUSED BY SUCH INDEMNIFIED
PARTY'S INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(b) Debtor will upon demand pay to Secured Party the amount of any and
all reasonable costs and expenses, including the reasonable fees and
disbursements of Secured Party's counsel and of any experts and agents, which
Secured Party may incur in connection with (i) the transactions which give rise
to this Agreement, (ii) the preparation of this Agreement and the perfection
and preservation of this security interest created under this Agreement, (iii)
the administration of this Agreement; (iv) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Collateral; (v) the exercise or enforcement of any of the rights of Secured
Party hereunder; or (vi) the failure by Debtor to perform or observe any of the
provisions hereof, except expenses resulting from Secured Party's individual
gross negligence or willful misconduct.
Section 4.6. Non-Judicial Remedies. In granting to Secured Party the
power to enforce its rights hereunder without prior judicial process or
judicial hearing, Debtor expressly waives, renounces and knowingly relinquishes
any legal right which might otherwise require Secured Party to enforce its
rights by judicial process. In so providing for non-judicial remedies, Debtor
recognizes and concedes that such remedies are consistent with the usage of
trade, are responsive to commercial necessity, and are the result of a bargain
at arm's length. Nothing herein is intended, however, to prevent Secured Party
from resorting to judicial process at its option.
Section 4.7. Other Recourse. Debtor waives any right to require
Secured Party or any Lender to proceed against any other Person, to exhaust any
Collateral or other security for the Secured Obligations, to have any Other
Liable Party joined with Debtor in any suit arising out of the Secured
Obligations or this Agreement, or to pursue any other remedy in Secured Party's
power. Debtor further waives any and all notice of acceptance of this Agreement
and of the creation, modification, rearrangement, renewal or extension for any
period of any of the Secured Obligations of any Other Liable Party from time to
time. Debtor further waives any defense arising by reason of any disability or
other defense of any Other Liable Party or by reason of the cessation from any
cause whatsoever of the liability of any Other Liable Party. This Agreement
shall continue irrespective of the fact that the liability of any Other Liable
Party may have ceased and irrespective of the validity or enforceability of any
other Obligation Document to which Debtor or any Other Liable Party may be a
party, and notwithstanding any death, incapacity, reorganization, or bankruptcy
of any Other Liable Party or any other event or proceeding affecting any Other
Liable Party. Until all of the Secured Obligations shall have been paid in
full, Debtor shall have no right to subrogation and Debtor waives the right to
- 24 -
<PAGE> 25
enforce any remedy which Secured Party or any Lender has or may hereafter have
against any Other Liable Party, and waives any benefit of and any right to
participate in any other security whatsoever now or hereafter held by Secured
Party. Debtor authorizes Secured Party and each Lender, without notice or
demand, without any reservation of rights against Debtor, and without in any
way affecting Debtor's liability hereunder or on the Secured Obligations, from
time to time to (a) take or hold any other property of any type from any other
Person as security for the Secured Obligations, and exchange, enforce, waive
and release any or all of such other property, (b) apply the Collateral or such
other property and direct the order or manner of sale thereof as Secured Party
may in its discretion determine, (c) renew, extend for any period, accelerate,
modify, compromise, settle or release any of the obligations of any Other
Liable Party in respect to any or all of the Secured Obligations or other
security for the Secured Obligations, (d) waive, enforce, modify, amend or
supplement any of the provisions of any Obligation Document with any Person
other than Debtor, and (e) release or substitute any Other Liable Party.
Section 4.8. Limitation on Duty of Secured Party in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof,
Secured Party shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. Secured Party shall be deemed to have exercised reasonable care in the
custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by Secured Party in good faith.
Section 4.9. Appointment of Collateral Agents. At any time or times,
in order to comply with any legal requirement in any jurisdiction, Secured
Party may appoint any bank or trust company or one or more other Persons,
either to act as co-agent or co-agents, jointly with Secured Party, or to act
as separate agent or agents on behalf of the Lenders, with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment. In so doing
Secured Party may, in the name and on behalf of Debtor, give to such co-agent
or separate agent indemnities and other protections similar to those provided
in Section 4.5.
Section 4.10. Voting Rights, Dividends, Etc. in Respect of Subsidiary
Shares.
(a) So long as no Default or Event of Default shall have occurred and
be continuing Debtor may receive and retain any and all dividends or interest
paid in respect of the Subsidiary Shares; provided, however, that any and all
- 25 -
<PAGE> 26
(i) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of or in exchange for,
any Subsidiary Shares,
(ii) dividends and other distributions paid or payable in
cash in respect of any Subsidiary Shares in connection with a partial
or total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in surplus, and
(iii) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Subsidiary Shares,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Subsidiary Shares and shall, if received by Debtor, be received in trust for
the benefit of Secured Party, be segregated from the other property or funds of
Debtor, and be forthwith delivered to Secured Party in the exact form received
with any necessary indorsement or appropriate stock powers duly executed in
blank, to be held by Secured Party as Collateral.
(b) Upon the occurrence and during the continuance of a Default or an
Event of Default:
(i) all rights of Debtor to receive and retain the dividends
and interest payments which it would otherwise be authorized to
receive and retain pursuant to subsection (a) of this section shall
automatically cease, and all such rights shall thereupon become vested
in Secured Party which shall thereupon have the sole right to receive
and hold as Subsidiary Shares such dividends and interest payments;
(ii) without limiting the generality of the foregoing,
Secured Party may at its option exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any of the Subsidiary Shares as if it were the
absolute owner thereof, including, without limitation, the right to
exchange, in its discretion, any and all of the Subsidiary Shares upon
the merger, consolidation, reorganization, recapitalization or other
adjustment of any Issuer, or upon the exercise by any Issuer of any
right, privilege or option pertaining to any Subsidiary Shares, and,
in connection therewith, to deposit and deliver any and all of the
Subsidiary Shares with any committee, depository, transfer, agent,
registrar or other designated agent upon such terms and conditions as
it may determine; and
(iii) all dividends and interest payments which are received
by Debtor contrary to the provisions of subsection (b)(i) of this
section shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Debtor, and shall be forthwith
paid over to Secured Party as Subsidiary Shares in the exact form
received, to be held by Secured Party as Collateral.
- 26 -
<PAGE> 27
Anything herein to the contrary notwithstanding, Debtor may at all times
exercise any and all voting rights pertaining to the Subsidiary Shares or any
part thereof for any purpose not inconsistent with the terms of this Agreement
or any other Obligation Document.
Section 4.11. Private Sale of Subsidiary Shares. Debtor recognizes
that Secured Party may deem it impracticable to effect a public sale of all or
any part of the Subsidiary Shares and that Secured Party may, therefore,
determine to make one or more private sales of any such securities to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and
not with a view to the distribution or resale thereof. Debtor acknowledges that
any such private sale may be at prices and on terms less favorable to the
seller than the prices and other terms which might have been obtained at a
public sale and, notwithstanding the foregoing, agrees that such private sales
shall be deemed to have been made in a commercially reasonable manner and that
Secured Party shall have no obligation to delay sale of any such securities for
the period of time necessary to permit the Issuer of such securities to
register such securities for public sale under the Securities Act of 1933, as
amended. Debtor further acknowledges and agrees that any offer to sell such
securities which has been (a) publicly advertised on a bona fide basis in a
newspaper or other publication of general circulation in the financial
community of Dallas, Texas (to the extent that such an offer may be so
advertised without prior registration under the Securities Act), or (b) made
privately in the manner described above to not less than fifteen (15) bona fide
offerees shall be deemed to involve a "public sale" for the purposes of Section
9.504(c) of the UCC (or any successor or similar, applicable statutory
provision) as then in effect in the State of Texas, notwithstanding that such
sale may not constitute a "public offering" under the Securities Act of 1933,
as amended, and that Secured Party may, in such event, bid for the purchase of
such securities.
ARTICLE V.
Miscellaneous
Section 5.1. Notices. Any notice or communication required or
permitted hereunder shall be given as provided in the Credit Agreement.
Section 5.2. Amendments. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Debtor and
Secured Party, and no waiver of any provision of this Agreement, and no consent
to any departure by Debtor therefrom, shall be effective unless it is in
writing and signed by Secured Party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given and to the extent specified in such writing. In addition, all such
amendments and waivers shall be effective only if given with the necessary
approvals of Lenders as required in the Credit Agreement.
- 27 -
<PAGE> 28
Section 5.3. Preservation of Rights. No failure on the part of Secured
Party or any Lender to exercise, and no delay in exercising, any right
hereunder or under any other Obligation Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or the exercise of any other right.
Neither the execution nor the delivery of this Agreement shall in any manner
impair or affect any other security for the Secured Obligations. The rights and
remedies of Secured Party provided herein and in the other Obligation Documents
are cumulative and are in addition to, and not exclusive of, any rights or
remedies provided by law or otherwise. The rights of Secured Party under any
Obligation Document against any party thereto are not conditional or contingent
on any attempt by Secured Party to exercise any of its rights under any other
Obligation Document against such party or against any other Person.
Section 5.4. Unenforceability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or invalidity
without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 5.5. Survival of Agreements. All representations and
warranties of Debtor herein, and all covenants and agreements herein shall
survive the execution and delivery of this Agreement, the execution and
delivery of any other Obligation Documents and the creation of the Secured
Obligations.
Section 5.6. Other Liable Parties. Neither this Agreement nor the
exercise by Secured Party or the failure of Secured Party to exercise any
right, power or remedy conferred herein or by law shall be construed as
relieving any Other Liable Party from liability on the Secured Obligations or
any deficiency thereon.
Section 5.7. Binding Effect and Assignment. This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Debtor and its successors and permitted assigns and (b) shall inure, together
with all rights and remedies of Secured Party hereunder, to the benefit of
Secured Party and Lenders and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing, Secured Party and
any Lender may (except as otherwise provided in the Credit Agreement) pledge,
assign or otherwise transfer any or all of their respective rights under any or
all of the Obligation Documents to any other Person, and such other Person
shall thereupon become vested with all of the benefits in respect thereof
granted herein or otherwise. None of the rights or duties of Debtor hereunder
may be assigned or otherwise transferred without the prior written consent of
Secured Party.
Section 5.8. Termination. It is contemplated by the parties hereto
that there may be times when no Secured Obligations are outstanding, but
notwithstanding such occurrences, this Agreement shall remain valid and shall
be in full force and effect as to subsequent outstanding Secured Obligations.
Upon the satisfaction in full of the Secured Obligations, upon the termination
or expiration of the Credit Agreement and any other commitment of Lenders to
- 28 -
<PAGE> 29
extend credit to Debtor, and upon written request for the termination hereof
delivered by Debtor to Secured Party, this Agreement and the security interest
created hereby shall terminate and all rights to the Collateral shall revert to
Debtor. Secured Party will thereafter, upon Debtor's request and at Debtor's
expense, (a) return to Debtor such of the Collateral in Secured Party's
possession as shall not have been sold or otherwise disposed of or applied
pursuant to the terms hereof, and (b) execute and deliver to Debtor such
documents as Debtor shall reasonably request to evidence such termination.
Section 5.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of TEXAS applicable to
contracts made and to be performed entirely within such state, except as
required by mandatory provisions of law and except to the extent that the
perfection and the effect of perfection or non-perfection of the security
interest created hereby hereunder, in respect of any particular Collateral, are
governed by the laws of a jurisdiction other than the State of Texas.
Section 5.10. Counterparts. This Agreement may be separately executed
in any number of counterparts, all of which when so executed shall be deemed to
constitute one and the same Agreement.
Section 5.11. "Loan Document". This Agreement is a "Loan Document", as
defined in the Credit Agreement, and, except as expressly provided herein to
the contrary, this Agreement is subject to all provisions of the Credit
Agreement governing such Loan Documents.
THIS WRITTEN SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
- 29 -
<PAGE> 30
IN WITNESS WHEREOF, Debtor has executed and delivered this Agreement
as of the date first above written.
MINING TECHNOLOGIES, INC.
By: /s/ Vic Grubb
----------------------------------
Name: Vic Grubb
Title: Treasurer
<PAGE> 1
EXHIBIT 10.18
GUARANTY
TENNESSEE MINING
THIS GUARANTY is made as of November 11, 1997, by Tennessee Mining,
Inc. a Kentucky corporation ("Guarantor"), in favor of NationsBank of Texas,
N.A., a national banking association, individually and as agent for Lenders, as
such term is defined in the Credit Agreement of even date herewith described
below (in such capacities "Agent").
RECITALS:
1. Addington Enterprises, Inc., a Kentucky corporation ("Addington"),
entered into a Credit Agreement dated as of October 8, 1997 with Agent (the
"Original Credit Agreement"), pursuant to which NationsBank made loans to
Addington. Funds were advanced to Addington pursuant to that certain promissory
note dated October 8, 1997 and executed by Addington in the original principal
amount of $50,000,000 payable to the order of NationsBank (the "Original
Promissory Note").
2. As a condition precedent to Agent's obligations to advance funds
pursuant to the Original Credit Agreement, Guarantor (then a wholly owned
subsidiary of Addington) executed that certain Guaranty dated as of October 8,
1997 in favor of Agent (the "Original Guaranty").
3. Contemporaneously with the execution and delivery hereof, Addington
has sold a substantial portion of its assets, including but not limited to all
of the outstanding capital stock of Guarantor, to AEI Holding Company, Inc., a
Delaware corporation ("Borrower"), and Borrower has assumed substantially all of
the outstanding indebtedness and obligations of Addington, including but not
limited to all indebtedness and obligations of Addington owing to NationsBank
and Agent under the Original Credit Agreement and the Original Promissory Note.
4. Borrower, Agent, and Lenders have entered into that certain Credit
Agreement of even date herewith, (herein, as from time to time amended,
supplemented or restated, called the "Credit Agreement"), pursuant to which
funds are to be advanced to Borrower under the Notes (as such term is defined
below) which funds may be further advanced by Borrower to its Affiliates,
including Guarantor. The Credit Agreement amended and restated the Original
Credit Agreement in its entirety.
5. Borrower has executed (i) that certain Promissory Note of even date
herewith payable to the order of NationsBank in the original principal amount of
$30,000,000 on or before the Maturity Date and (ii) that certain Promissory Note
of even date herewith payable to the order of The Provident Bank in the original
principal amount of $20,000,000 on or before the Maturity Date (such promissory
notes, as from time to time amended, and all
<PAGE> 2
promissory notes given in substitution, renewal or extension therefor or
thereof, in whole or in part, being herein collectively called the "Notes"). The
Notes renewed and extended the Original Promissory Note.
6. It is a condition precedent to Lenders' obligations to advance funds
pursuant to the Credit Agreement that Guarantor shall execute and deliver to
Agent an amendment and restatement of the Original Guaranty.
7. Borrower owns one hundred percent (100%) of the outstanding shares
of stock of Guarantor.
8. Borrower, Guarantor, and the other direct and indirect subsidiaries
of Borrower are mutually dependent on each other in the conduct of their
respective businesses under a holding company structure, with the credit needed
from time to time by each often being provided by another or by means of
financing obtained by one such affiliate with the support of the others for
their mutual benefit and the ability of each to obtain such financing being
dependent on the successful operations of the others.
9. The board of directors of Guarantor has determined that Guarantor's
execution, delivery and performance of this Guaranty may reasonably be expected
to benefit Guarantor, directly or indirectly, and are in the best interests of
Guarantor.
NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Guarantor from Lenders' advances of funds to Borrower under the
Credit Agreement, and of Ten Dollars and other good and valuable consideration,
the receipt and sufficiency of all of which are hereby acknowledged, and in
order to induce Lenders to advance funds under the Credit Agreement, Guarantor
hereby agrees with Agent, for the benefit of Agent and Lenders as follows:
AGREEMENTS
Section 1. Definitions. Reference is hereby made to the Credit
Agreement for all purposes. All terms used in this Guaranty which are defined in
the Credit Agreement and not otherwise defined herein shall have the same
meanings when used herein. All references herein to any Obligation Document,
Loan Document, or other document or instrument refer to the same as from time to
time amended, supplemented or restated. As used herein the following terms shall
have the following meanings:
"Agent" means the Person who, at the time in question, is the "Agent"
under the Credit Agreement. Whenever there is only one Lender under the Credit
Agreement, "Agent" shall also refer to such Lender in such capacity as the only
Lender.
"Lenders" means NationsBank of Texas, N.A. and all other Persons who at
any time are "Lenders" under the Credit Agreement.
2
<PAGE> 3
"Obligations" means collectively all of the indebtedness, obligations,
and undertakings which are guaranteed by Guarantor and described in subsections
(a) and (b) of Section 2.
"Obligation Documents" means this Guaranty, the Notes, the Credit
Agreement, the Loan Documents.
"Obligors" means Borrower, Guarantor and any other endorsers,
guarantors or obligors, primary or secondary, of any or all of the Obligations.
"Security" means any rights, properties, or interests of Agent or
Lenders, under the Obligation Documents or otherwise, which provide recourse or
other benefits to Agent or Lenders in connection with the Obligations or the
non-payment or non-performance thereof, including collateral (whether real or
personal, tangible or intangible) in which Agent or Lenders have rights under or
pursuant to any Obligation Documents, guaranties of the payment or performance
of any Obligation, bonds, surety agreements, keep-well agreements, letters of
credit, rights of subrogation, rights of offset, and rights pursuant to which
other claims are subordinated to the Obligations.
Section 2. Guaranty.
(a) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to Agent and each Lender the prompt, complete, and full payment when
due, and no matter how the same shall become due, of:
(i) the Notes, including all principal, all interest thereon
and all other sums payable thereunder; and
(ii) All other sums payable under the other Obligation
Documents, whether for principal, interest, fees or otherwise; and
(iii) Any and all other indebtedness or liabilities which
Borrower may at any time owe to Agent or any Lender, whether incurred
heretofore or hereafter or concurrently herewith, voluntarily or
involuntarily, whether owed alone or with others, whether fixed,
contingent, absolute, inchoate, liquidated or unliquidated, whether
such indebtedness or liability arises by notes, discounts, overdrafts,
open account indebtedness or in any other manner whatsoever, and
including interest, attorneys' fees and collection costs as may be
provided by law or in any instrument evidencing any such indebtedness
or liability.
Without limiting the generality of the foregoing, Guarantor's obligations
hereunder shall extend to and include all post-petition interest, expenses, and
other duties and liabilities of Borrower described above in this subsection (a),
or below in the following subsection (b), which would be owed by Borrower but
for the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization, or similar proceeding involving Borrower.
3
<PAGE> 4
(b) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to Agent and each Lender the prompt, complete and full performance,
when due, and no matter how the same shall become due, of all obligations and
undertakings of Borrower to Agent or such Lender under, by reason of, or
pursuant to any of the Obligation Documents.
(c) If Borrower shall for any reason fail to pay any Obligation, as and
when such Obligation shall become due and payable, whether at its stated
maturity, as a result of the exercise of any power to accelerate, or otherwise,
Guarantor will, forthwith upon demand by Agent, pay such Obligation in full to
Agent for the benefit of Agent or the Lender to whom such Obligation is owed. If
Borrower shall for any reason fail to perform promptly any Obligation, Guarantor
will, forthwith upon demand by Agent, cause such Obligation to be performed or,
if specified by Agent, provide sufficient funds, in such amount and manner as
Agent shall in good faith determine, for the prompt, full and faithful
performance of such Obligation by Agent or such other Person as Agent shall
designate.
(d) If either Borrower or Guarantor fails to pay or perform any
Obligation as described in the immediately preceding subsections (a), (b), or
(c) Guarantor will incur the additional obligation to pay to Agent, and
Guarantor will forthwith upon demand by Agent pay to Agent, the amount of any
and all expenses, including fees and disbursements of Agent's counsel and of any
experts or agents retained by Agent, which Agent may incur as a result of such
failure.
(e) As between Guarantor and Agent or Lenders, this Guaranty shall be
considered a primary and liquidated liability of Guarantor.
(f) The obligations of Guarantor hereunder shall be limited to an
aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provisions of any applicable state or
federal law.
Section 3. Unconditional Guaranty.
(a) No action which Agent or any Lender may take or omit to take in
connection with any of the Obligation Documents, any of the Obligations (or any
other indebtedness owing by Borrower to Agent or any Lender), or any Security,
and no course of dealing of Agent or any Lender with any Obligor or any other
Person, shall release or diminish Guarantor's obligations, liabilities,
agreements or duties hereunder, affect this Guaranty in any way, or afford
Guarantor any recourse against Agent or any Lender, regardless of whether any
such action or inaction may increase any risks to or liabilities of Agent or any
Lender or any Obligor or increase any risk to or diminish any safeguard of any
Security. Without limiting the foregoing, Guarantor hereby expressly agrees that
Agent and Lenders may, from time to time, without notice to or the consent of
Guarantor, do any or all of the following:
4
<PAGE> 5
(i) Amend, change or modify, in whole or in part, any one or
more of the Obligation Documents and give or refuse to give any waivers
or other indulgences with respect thereto.
(ii) Neglect, delay, fail, or refuse to take or prosecute any
action for the collection or enforcement of any of the Obligations, to
foreclose or take or prosecute any action in connection with any
Security or Obligation Document, to bring suit against any Obligor or
any other Person, or to take any other action concerning the
Obligations or the Obligation Documents.
(iii) Accelerate, change, rearrange, extend, or renew the
time, rate, terms, or manner for payment or performance of any one or
more of the Obligations (whether for principal, interest, fees,
expenses, indemnifications, affirmative or negative covenants, or
otherwise).
(iv) Compromise or settle any unpaid or unperformed
Obligation or any other obligation or amount due or owing, or claimed
to be due or owing, under any one or more of the Obligation Documents.
(v) Take, exchange, amend, eliminate, surrender, release, or
subordinate any or all Security for any or all of the Obligations,
accept additional or substituted Security therefor, and perfect or fail
to perfect Agent's or Lenders' rights in any or all Security.
(vi) Discharge, release, substitute or add Obligors.
(vii) Apply all monies received from Obligors or others, or
from any Security for any of the Obligations, as Agent or Lenders may
determine to be in their best interest, without in any way being
required to marshall Security or assets or to apply all or any part of
such monies upon any particular Obligations.
(b) No action or inaction of any Obligor or any other Person, and no
change of law or circumstances, shall release or diminish Guarantor's
obligations, liabilities, agreements, or duties hereunder, affect this Guaranty
in any way, or afford Guarantor any recourse against Agent or any Lender.
Without limiting the foregoing, the obligations, liabilities, agreements, and
duties of Guarantor under this Guaranty shall not be released, diminished,
impaired, reduced, or affected by the occurrence of any or all of the following
from time to time, even if occurring without notice to or without the consent of
Guarantor:
(i) Any voluntary or involuntary liquidation, dissolution,
sale of all or substantially all assets, marshalling of assets or
liabilities, receivership, conservatorship, assignment for the benefit
of creditors, insolvency, bankruptcy, reorganization, arrangement, or
composition of any Obligor or any other proceedings involving any
Obligor or any of the assets of any Obligor under laws for the
protection of debtors, or any discharge, impairment, modification,
release, or
5
<PAGE> 6
limitation of the liability of, or stay of actions or lien enforcement
proceedings against, any Obligor, any properties of any Obligor, or the estate
in bankruptcy of any Obligor in the course of or resulting from any such
proceedings.
(ii) The failure by Agent or any Lender to file or enforce a
claim in any proceeding described in the immediately preceding
subsection (i) or to take any other action in any proceeding to which
any Obligor is a party.
(iii) The release by operation of law of any Obligor from any
of the Obligations or any other obligations to Agent or any Lender.
(iv) The invalidity, deficiency, illegality, or
unenforceability of any of the Obligations or the Obligation Documents,
in whole or in part, any bar by any statute of limitations or other law
of recovery on any of the Obligations, or any defense or excuse for
failure to perform on account of force majeure, act of God, casualty,
impossibility, impracticability, or other defense or excuse whatsoever.
(v) The failure of any Obligor or any other Person to sign
any guaranty or other instrument or agreement within the contemplation
of any Obligor, Agent or any Lender.
(vi) The fact that Guarantor may have incurred directly part
of the Obligations or is otherwise primarily liable therefor.
(vii) Without limiting any of the foregoing, any fact or event
(whether or not similar to any of the foregoing) which in the absence
of this provision would or might constitute or afford a legal or
equitable discharge or release of or defense to a guarantor or surety
other than the actual payment and performance by Guarantor under this
Guaranty.
(c) Agent and Lenders may invoke the benefits of this Guaranty before
pursuing any remedies against any Obligor or any other Person and before
proceeding against any Security now or hereafter existing for the payment or
performance of any of the Obligations. Agent and Lenders may maintain an action
against Guarantor on this Guaranty without joining any other Obligor therein and
without bringing a separate action against any other Obligor.
(d) If any payment to Agent or any Lender by any Obligor is held to
constitute a preference or a voidable transfer under applicable state or federal
laws, or if for any other reason Agent or any Lender is required to refund such
payment to the payor thereof or to pay the amount thereof to any other Person,
such payment to Agent or such Lender shall not constitute a release of Guarantor
from any liability hereunder, and Guarantor agrees to pay such amount to Agent
or such Lender on demand and agrees and acknowledges that this Guaranty shall
continue to be effective or shall be reinstated, as the case may be, to the
extent of any such payment or payments. Any transfer by subrogation which is
made as contemplated in Section 6 prior to any such payment or payments shall
(regardless of the
6
<PAGE> 7
terms of such transfer) be automatically voided upon the making of any such
payment or payments, and all rights so transferred shall thereupon revert to and
be vested in Agent and Lenders.
(e) This is a continuing guaranty and shall apply to and cover all
Obligations and renewals and extensions thereof and substitutions therefor from
time to time.
Section 4. Waiver. Guarantor hereby waives, with respect to the
Obligations, this Guaranty, and the other Obligation Documents:
(a) notice of the incurrence of any Obligation by Borrower, and notice
of any kind concerning the assets, liabilities, financial condition,
creditworthiness, businesses, prospects, or other affairs of Borrower (it being
understood and agreed that: (i) Guarantor shall take full responsibility for
informing itself of such matters, (ii) neither Agent nor any Lender shall have
any responsibility of any kind to inform Guarantor of such matters, and (iii)
Agent and Lenders are hereby authorized to assume that Guarantor, by virtue of
its relationships with Borrower which are independent of this Guaranty, has full
and complete knowledge of such matters whenever Lenders extend credit to
Borrower or take any other action which may change or increase Guarantor's
liabilities or losses hereunder).
(b) notice that Agent, any Lender, any Obligor, or any other Person has
taken or omitted to take any action under any Obligation Document or any other
agreement or instrument relating thereto or relating to any Obligation.
(c) notice of acceptance of this Guaranty and all rights of Guarantor
under ss.34.02 of the Texas Business and Commerce Code.
(d) demand, presentment for payment, and notice of demand, dishonor,
nonpayment, or nonperformance.
(e) notice of intention to accelerate, notice of acceleration, protest,
notice of protest, notice of any exercise of remedies (as described in the
following Section 5 or otherwise), and all other notices of any kind whatsoever.
Section 5. Exercise of Remedies. Agent, on behalf of Lenders, shall
have the right to enforce, from time to time, in any order and at Agent's sole
discretion, any rights, powers and remedies which Agent, on behalf of Lenders,
may have under the Obligation Documents or otherwise, including judicial
foreclosure, the exercise of rights of power of sale, the taking of a deed or
assignment in lieu of foreclosure, the appointment of a receiver to collect
rents, issues and profits, the exercise of remedies against personal property,
or the enforcement of any assignment of leases, rentals, oil or gas production,
or other properties or rights, whether real or personal, tangible or intangible;
and Guarantor shall be liable to Agent, on behalf of Lenders, hereunder for any
deficiency resulting from the exercise by Agent or any Lender of any such right
or remedy even though any rights which Guarantor may have against Borrower or
others may be destroyed or diminished by exercise of any
7
<PAGE> 8
such right or remedy. No failure on the part of Agent, on behalf of Lenders, to
exercise, and no delay in exercising, any right hereunder or under any other
Obligation Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any right preclude any other or further exercise thereof or
the exercise of any other right. The rights, powers and remedies of Agent, on
behalf of Lenders, provided herein and in the other Obligation Documents are
cumulative and are in addition to, and not exclusive of, any other rights,
powers or remedies provided by law or in equity. The rights of Agent, on behalf
of Lenders, hereunder are not conditional or contingent on any attempt by Agent
or any Lender to exercise any of its rights under any other Obligation Document
against any Obligor or any other Person.
Section 6. Limited Subrogation. Until all of the Obligations have been
paid and performed in full Guarantor shall have no right to exercise any right
of subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which it may now or hereafter have against or to any Obligor or any
Security in connection with this Guaranty (including any right of subrogation
under ss.34.04 of the Texas Business and Commerce Code), and Guarantor hereby
waives any rights to enforce any remedy which Guarantor may have against
Borrower and any right to participate in any Security until such time. If any
amount shall be paid to Guarantor on account of any such subrogation or other
rights, any such other remedy, or any Security at any time when all of the
Obligations and all other expenses guaranteed pursuant hereto shall not have
been paid in full, such amount shall be held in trust for the benefit of Agent,
shall be segregated from the other funds of Guarantor and shall forthwith be
paid over to Agent to be held by Agent as collateral for, or then or at any time
thereafter applied in whole or in part by Agent against, all or any portion of
the Obligations, whether matured or unmatured, in such order as Agent shall
elect. If Guarantor shall make payment to Agent of all or any portion of the
Obligations and if all of the Obligations shall be finally paid in full, Agent
will, at Guarantor's request and expense, execute and deliver to Guarantor
(without recourse, representation or warranty) appropriate documents necessary
to evidence the transfer by subrogation to Guarantor of an interest in the
Obligations resulting from such payment by Guarantor; provided that such
transfer shall be subject to Section 3(d) above and that without the consent of
Agent (which Agent may withhold in its discretion) Guarantor shall not have the
right to be subrogated to any claim or right against any Obligor which has
become owned by Agent or any Lender, whose ownership has otherwise changed in
the course of enforcement of the Obligation Documents, or which Agent otherwise
has released or wishes to release from its Obligations.
Section 7. Successors and Assigns. Guarantor's rights or obligations
hereunder may not be assigned or delegated, but this Guaranty and such
obligations shall pass to and be fully binding upon the successors of Guarantor,
as well as Guarantor. This Guaranty shall apply to and inure to the benefit of
Agent and Lenders and their successors or assigns. Without limiting the
generality of the immediately preceding sentence, Agent and each Lender may
assign, grant a participation in, or otherwise transfer any Obligation held by
it or any portion thereof, and Agent and each Lender may assign or otherwise
transfer its rights or any portion thereof under any Obligation Document, to any
other Person, and such other Person shall thereupon become vested with all of
the benefits in respect thereof granted to Agent or such
8
<PAGE> 9
Lender hereunder unless otherwise expressly provided by Agent or such Lender in
connection with such assignment or transfer.
Section 8. Offset. Guarantor hereby grants to Lenders a right of offset
to secure the payment of the Obligations and Guarantor's obligations and
liabilities hereunder, which right of offset shall be upon any and all monies,
securities and other property (and the proceeds therefrom) of Guarantor now or
hereafter held or received by or in transit to Agent or any Lender from or for
the account of Guarantor, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special), credits and claims of Guarantor at any time existing
against Agent or any Lender. Upon the occurrence of any Default or Event of
Default Agent and each Lender is hereby authorized at any time and from time to
time, without notice to Guarantor, to offset, appropriate and apply any and all
items hereinabove referred to against the Obligations and Guarantor's
obligations and liabilities hereunder irrespective of whether or not Agent or
such Lender shall have made any demand under this Guaranty and although such
obligations and liabilities may be contingent or unmatured. Agent and each
Lender agrees promptly to notify Guarantor after any such offset and application
made by Agent or such Lender, provided that the failure to give such notice
shall not affect the validity of such offset and application. The rights of
Agent and each Lender under this section are in addition to, and shall not be
limited by, any other rights and remedies (including other rights of offset)
which Agent and Lenders may have.
Section 9. Representations and Warranties. Guarantor hereby represents
and warrants to Agent and each Lender as follows:
(a) The Recitals at the beginning of this Guaranty are true and correct
in all respects.
(b) Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation as set forth in
the Recitals to this Guaranty; and Guarantor has all requisite power and
authority to execute, deliver and perform this Guaranty.
(c) The execution, delivery and performance by Guarantor of this
Guaranty have been duly authorized by all necessary corporate action and do not
and will not contravene its certificate or articles of incorporation or bylaws.
(d) The execution, delivery and performance by Guarantor of this
Guaranty do not and will not contravene any law or governmental regulation or
any contractual restriction binding on or affecting Guarantor or any of its
Affiliates or properties, and do not and will not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties.
(e) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body or third
party is required for the due execution, delivery and performance by Guarantor
of this Guaranty.
9
<PAGE> 10
(f) This Guaranty is a legal, valid and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its terms except as
limited by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors' rights.
(g) There is no action, suit or proceeding pending or, to the knowledge
of Guarantor, threatened against or otherwise affecting Guarantor before any
court, arbitrator or governmental department, commission, board, bureau, agency
or instrumentality which may materially and adversely affect Guarantor's
financial condition or its ability to perform its obligations hereunder.
(h) The direct or indirect value of the consideration received and to
be received by Guarantor in connection herewith is reasonably worth at least as
much as the liability and obligations of Guarantor hereunder, and the incurrence
of such liability and obligations in return for such consideration may
reasonably be expected to benefit Guarantor, directly or indirectly.
(i) Guarantor is not "insolvent" on the date hereof (that is, the sum
of Guarantor's absolute and contingent liabilities, including the Obligations,
does not exceed the fair market value of Guarantor's assets). Guarantor's
capital is adequate for the businesses in which Guarantor is engaged and intends
to be engaged. Guarantor has not incurred (whether hereby or otherwise), nor
does Guarantor intend to incur or believe that it will incur, debts which will
be beyond its ability to pay as such debts mature.
(j) All balance sheets, earning statements, financial data and other
information concerning Guarantor which have been furnished to Agent and each
Lender to induce it to accept this Guaranty (or otherwise furnished to Agent and
each Lender in connection with the transactions contemplated hereby or
associated herewith) fairly represent the financial condition of Guarantor as of
the dates and the results of Guarantor's operations for the periods for which
the same are furnished. None of such balance sheets, earnings and cash flow
statements, financial data and other information contains any untrue statement
of a material fact or omits to state any material fact which is necessary to
make any statements contained therein not misleading.
Section 10. No Oral Change. No amendment of any provision of this
Guaranty shall be effective unless it is in writing and signed by Guarantor and
Lenders, and no waiver of any provision of this Guaranty, and no consent to any
departure by Guarantor therefrom, shall be effective unless it is in writing and
signed by Lenders, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
Section 11. Invalidity of Particular Provisions. If any term or
provision of this Guaranty shall be determined to be illegal or unenforceable
all other terms and provisions hereof shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by applicable law.
10
<PAGE> 11
Section 12. Headings and References. The headings used herein are for
purposes of convenience only and shall not be used in construing the provisions
hereof. The words "this Guaranty," "this instrument," "herein," "hereof,"
"hereby" and words of similar import refer to this Guaranty as a whole and not
to any particular subdivision unless expressly so limited. The phrases "this
section" and "this subsection" and similar phrases refer only to the
subdivisions hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
Section 13. Term. This Guaranty shall be irrevocable until all of the
Obligations have been completely and finally paid and performed, no Lender has
any obligation to make any loans or other advances to Borrower, and all
obligations and undertakings of Borrower under, by reason of, or pursuant to the
Obligation Documents have been completely performed, and this Guaranty is
thereafter subject to reinstatement as provided in Section 3(d). All extensions
of credit and financial accommodations heretofore or hereafter made by Agent or
Lenders to Borrower shall be conclusively presumed to have been made in
acceptance hereof and in reliance hereon.
Section 14. Notices. Any notice or communication required or permitted
hereunder shall be given as provided in the Credit Agreement.
Section 15. Limitation on Interest. Agent, Lenders and Guarantor intend
to contract in strict compliance with applicable usury law from time to time in
effect, and the provisions of the Credit Agreement limiting the interest for
which Guarantor is obligated are expressly incorporated herein by reference.
Section 16. Loan Document. This Guaranty is a Loan Document, as defined
in the Credit Agreement, and is subject to the provisions of the Credit
Agreement governing Loan Documents. Guarantor hereby approves all provisions of
the Credit Agreement and the other Loan Documents and ratifies and confirms any
provisions thereof which relate to Guarantor.
Section 17. Counterparts. This Guaranty may be executed in any number
of counterparts, each of which when so executed shall be deemed to constitute
one and the same Guaranty.
SECTION 18. GOVERNING LAW; SUBMISSION TO PROCESS. (I) THIS GUARANTY
SHALL BE DEEMED A CONTRACT MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. GUARANTOR HEREBY AGREES THAT ANY LEGAL ACTION OR
PROCEEDING AGAINST GUARANTOR WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF
11
<PAGE> 12
TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF TEXAS AS
LENDER PARTIES MAY ELECT, AND, BY EXECUTION AND DELIVERY HEREOF, GUARANTOR
ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS, AND FURTHER AGREES TO
A TRANSFER OF ANY SUCH PROCEEDING TO A FEDERAL COURT SITTING IN THE STATE OF
TEXAS TO THE EXTENT THAT IT HAS SUBJECT MATTER JURISDICTION, AND OTHERWISE TO A
STATE COURT IN TEXAS. GUARANTOR WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY
ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUM NON
CONVENIENS. IN FURTHERANCE OF THE FOREGOING, GUARANTOR HEREBY DESIGNATES AND
APPOINTS CT CORPORATION SYSTEM, 350 NORTH ST. PAUL STREET, DALLAS, TEXAS 75201,
AS AGENT OF GUARANTOR TO RECEIVE SERVICE OF ALL PROCESS BROUGHT AGAINST
GUARANTOR WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH COURT IN TEXAS, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED BY GUARANTOR TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. COPIES OF ANY SUCH PROCESS SO SERVED SHALL ALSO, IF
PERMITTED BY LAW, BE SENT BY REGISTERED MAIL TO GUARANTOR AT ITS ADDRESS SET
FORTH IN THE CREDIT AGREEMENT, BUT THE FAILURE OF GUARANTOR TO RECEIVE SUCH
COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS AS AFORESAID.
GUARANTOR SHALL FURNISH TO LENDER PARTIES A CONSENT OF CT CORPORATION SYSTEM
AGREEING TO ACT HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF LENDER PARTIES TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER PARTIES TO BRING
PROCEEDINGS AGAINST GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION. GUARANTOR
SHALL NOT REVOKE SUCH APPOINTMENT BUT IF FOR ANY REASON CT CORPORATION SYSTEM
SHALL RESIGN OR OTHERWISE CEASE TO ACT AS GUARANTOR'S AGENT, GUARANTOR HEREBY
IRREVOCABLY AGREES TO (A) IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT
ACCEPTABLE TO AGENT TO SERVE IN SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW AGENT
SHALL BE DEEMED TO BE SUBSTITUTED FOR CT CORPORATION SYSTEM FOR ALL PURPOSES
HEREOF AND (B) PROMPTLY DELIVER TO LENDER PARTIES THE WRITTEN CONSENT (IN FORM
AND SUBSTANCE SATISFACTORY TO AGENT) OF SUCH NEW AGENT AGREEING TO SERVE IN SUCH
CAPACITY.
(II) GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND
IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (B) WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO
12
<PAGE> 13
CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW,
(C) CERTIFIES THAT NEITHER IT NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR
GUARANTOR HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS,
AND (D) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY,
AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION. AS
USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL,
EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE
ANY PAYMENTS OR FUNDS WHICH GUARANTOR HAS EXPRESSLY PROMISED TO PAY OR DELIVER
TO AGENT OR LENDERS.
Section 19. Amendment and Restatement. This Guaranty amends and
restates in its entirety the Original Guaranty, and all of the terms hereof
shall supersede the terms and provisions thereof.
THIS WRITTEN GUARANTY AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
13
<PAGE> 14
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date first written above.
TENNESSEE MINING, INC.
By: /s/ John Lynch
-------------------------------
Name: John Lynch
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ Denise A. Smith
-------------------------------
Name: Denise A. Smith
Title: SVP
<PAGE> 1
EXHIBIT 10.19
SUBSIDIARY SECURITY AGREEMENT
TENNESSEE MINING, INC.
THIS SECURITY AGREEMENT (this "Agreement") is made as of November 11,
1997 by Tennessee Mining, Inc., a Kentucky corporation ("Debtor"), in favor of
NationsBank of Texas, N.A., individually and as agent for the other Lenders
that hereafter become parties to the Credit Agreement referenced below
("Secured Party").
W I T N E S S E T H:
WHEREAS, Addington Enterprises, Inc., a Kentucky corporation
("Addington"), entered into a Credit Agreement dated as of October 8, 1997 with
Secured Party (the "Original Credit Agreement"), pursuant to which NationsBank
made loans to Addington, and funds were advanced to Addington pursuant to that
certain promissory note dated October 8, 1997 and executed by Addington in the
original principal amount of $50,000,000 payable to the order to NationsBank
(the "Original Promissory Note");
WHEREAS, as a condition precedent to Secured Party's obligations to
advance funds pursuant to the Original Credit Agreement, Debtor (then a wholly
owned subsidiary of Addington) executed that certain Guaranty dated as of
October 8, 1997 in favor of Secured Party (the "Original Guaranty") and that
certain Subsidiary Security Agreement dated as of October 8, 1997 in favor of
Secured Party (the "Original Security Agreement");
WHEREAS, contemporaneously with the execution and delivery hereof,
Addington has sold all of its assets, including but not limited to all of the
outstanding capital stock of Debtor, to AEI Holding Company, Inc., a Delaware
corporation ("Borrower"), and Borrower has assumed substantially all of the
outstanding indebtedness and obligations of Addington, including but not
limited to all indebtedness and obligations of Addington owing to NationsBank
and Secured Party under the Original Credit Agreement and the Original
Promissory Note;
WHEREAS, Borrower, Agent, and Lenders have entered into that certain
Credit Agreement of even date herewith, (herein, as from time to time amended,
supplemented or restated, called the "Credit Agreement"), pursuant to which
funds are to be advanced to Borrower under the Notes (as such term is defined
below) which funds may be further advanced by Borrower to its Affiliates,
including Debtor (the Credit Agreement amended and restated the Original Credit
Agreement in its entirety);
WHEREAS, Borrower has executed (i) that certain Promissory Note of
even date herewith payable to the order of NationsBank in the original
principal amount of $30,000,000 on or before the Maturity Date and (ii) that
certain Promissory Note of even
-1-
<PAGE> 2
date herewith payable to the order of The Provident Bank in the original
principal amount of $20,000,000 on or before the Maturity Date (such promissory
notes, as from time to time amended, and all promissory notes given in
substitution, renewal or extension therefor or thereof, in whole or in part,
being herein collectively called the "Notes"), which Notes renewed and extended
the Original Promissory Note;
WHEREAS, pursuant to the Credit Agreement, Debtor is concurrently
herewith giving to Agent for the benefit of Lenders a Guaranty of even date
herewith which amends and restates in its entirety the Original Guaranty
(herein, as from time to time amended, supplemented or restated, called the
"Guaranty");
WHEREAS, it is a condition precedent to Lenders' obligations to
advance funds pursuant to the Credit Agreement that Debtor shall execute and
deliver to Secured Party an amendment and restatement of the Original Security
Agreement;
WHEREAS, Borrower owns all of the issued and outstanding shares of
capital stock of Debtor;
WHEREAS, the board of directors of Debtor has determined that Debtor's
execution, delivery and performance of this Agreement may reasonably be
expected to benefit Debtor, directly or indirectly, and is in the best
interests of Debtor;
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to extend such credit under the Credit Agreement, Debtor hereby
agrees with Secured Party, for the benefit of Lenders and Secured Party, as
follows:
ARTICLE I
Definitions and References
Section 1.1. General Definitions. As used herein, the terms
"Agreement", "Debtor", and "Credit Agreement" shall have the meanings indicated
above, and the following terms shall have the following meanings:
"Collateral" means all property, of whatever type, which is described
in Section 2.1 as being at any time subject to a security interest granted
hereunder to Secured Party.
"Collateral Account" has the meaning given it in Section 4.1(e).
"Commitment" means the agreement or commitment by Lenders to make
loans or otherwise extend credit to Debtor under the Credit Agreement, and any
other agreement, commitment, statement of terms or other document contemplating
the making of loans or advances or other extension of credit by Lenders to or
for the account of Debtor which is now or at any time hereafter intended to be
secured by the Collateral under this Agreement.
- 2 -
<PAGE> 3
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing inventory, equipment, or other
goods.
"Equipment" means all equipment (as defined in the UCC) in whatever
form, wherever located, and whether now or hereafter existing, and all parts
thereof, all accessions thereto, and all replacements therefor, including but
not limited to the Operating Equipment.
"General Intangibles" means all general intangibles (as defined in the
UCC) of any kind (including choses in action, tax refunds, insurance proceeds,
and contract rights), and all instruments, security agreements, leases,
contracts, and other rights (except those constituting Receivables, Documents,
or Instruments) to receive payments of money or the ownership or possession of
property. The General Intangibles include, among other items, all Intellectual
Property.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (as each is defined in" the UCC).
"Intellectual Property" means any Patents, Patent Licenses,
Trademarks, and Trademark Licenses.
"Inventory" means all inventory (as defined in the UCC) in all of its
forms, wherever located and whether now or hereafter existing, including (a)
all movable property and other goods held for sale or lease, all movable
property and other goods furnished or to be furnished under contracts of
service, all raw materials and work in process, and all materials and supplies
used or consumed in a business, including but not limited to all coal and other
minerals after extraction, all stockpiles thereof and related products, (b) all
movable property and other goods which are part of a product or mass, (c) all
movable property and other goods which are returned to or repossessed by the
seller, lessor, or supplier thereof, (d) all goods and substances in which any
of the foregoing is commingled or to which any of the foregoing is added, and
(e) all accessions to, products of, and documents for any of the foregoing.
"Issuer" means any issuer of Subsidiary Shares and any successor of
such Issuer.
"Investment Property" means all "certificated securities",
"uncertificated securities", "security entitlements", "security accounts",
"commodity contracts" or "commodity accounts" (as each is defined in the UCC)
and shall include, without limitation, all Subsidiary Shares.
"Lenders" means the Persons who are from time to time "Lenders" as
defined in the Credit Agreement.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure indebtedness of any kind which is owed
to him or any other arrangement with such creditor which provides for the
payment of such indebtedness out of such property or assets or which allows him
to have such indebtedness satisfied out of such property or assets prior to
- 3 -
<PAGE> 4
the general creditors of any owner thereof, including without limitation any
lien, mortgage, security interest, pledge, deposit, production payment, rights
of a vendor under any title retention or conditional sale agreement or lease
substantially equivalent thereto, tax lien, mechanic's or materialman's lien,
or any other charge or encumbrance for security purposes, whether arising by
law or agreement or otherwise, but excluding any right of offset which arises
without agreement in the ordinary course of business. "Lien" also means any
filed financing statement, any registration with an issuer of uncertificated
securities, or any other arrangement which would serve to perfect a Lien
described in the preceding sentence, regardless of whether such financing
statement is filed, such registration is made, or such arrangement is
undertaken before or after such Lien exists.
"Lockbox" has the meaning given it in Section 4.1(e).
"Obligation Documents" means the Credit Agreement, the Notes, the Loan
Documents, and all other documents and instruments under, by reason of which,
or pursuant to which any or all of the Secured Obligations are evidenced,
governed, secured, or otherwise dealt with, and all other agreements,
certificates, and other documents, instruments and writings heretofore or
hereafter delivered in connection herewith or therewith.
"Other Liable Party" means any Person, other than Debtor, who may now
or may at any time hereafter be primarily or secondarily liable for any of the
Secured Obligations or who may now or may at any time hereafter have granted to
Secured Party or Lenders a Lien upon any property as security for the Secured
Obligations.
"Patent License" means any license or other agreement, whether now or
hereafter in existence, under which is granted or authorized any right with
respect to any Patent or any invention now or hereafter in existence, whether
patentable or not, whether a patent or application for patent is in existence
on such invention or not, and whether a patent or application for patent on
such invention may come into existence.
"Patents" means all the following: (a) all letters patent and design
letters patent of the United States or any other country and all applications
for letters patent and design letters patent of the United States or any other
country, including applications in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or other country, or any political subdivision thereof. (b) all
reissues, divisions, continuations, continuations-in-part, renewals and
extensions thereof, (c) all claims for, and rights to sue for, past or future
infringements of any of the foregoing, and (d) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements
thereof.
"Perfection Certificate" means a certificate substantially in the form
of Exhibit A, appropriately completed to the satisfaction of Secured Party and
duly executed by the indicated officer or officers of Debtor.
- 4 -
<PAGE> 5
"Permitted Liens" means any Liens expressly permitted under Section
7.2 of the Credit Agreement.
"Person" means an individual, corporation, partnership, association,
joint stock company, trust, unincorporated organization or joint venture, or a
court or governmental unit or any agency or subdivision thereof, or any other
legally recognizable entity.
"Proceeds" means, with respect to any property of any kind, all
proceeds of, and all other profits, products, rentals or receipts, in whatever
form, arising from any sale, exchange, collection, lease, licensing or other
disposition of, distribution in respect of, or other realization upon, such
property, including all claims against third parties for loss of, damage to or
destruction of, or for proceeds payable under (or unearned premiums with
respect to) insurance in respect of, such property (regardless of whether
Secured Party is named a loss payee thereunder), and any payments paid or owing
by any third party under any indemnity, warranty, or guaranty with respect to
such property, and any condemnation or requisition payments with respect to
such property, in each case whether now existing or hereafter arising.
"Receivables" means (a) all accounts (as defined in the UCC) and all
other rights to payment for goods or other personal property which have been
(or are to be) sold, leased, or exchanged or for services which have been (or
are to be) rendered, regardless of whether such accounts or other rights to
payment have been earned by performance and regardless of whether such accounts
or other rights to payment are evidenced by or characterized as accounts
receivable, contract rights, book debts, notes, drafts or other obligations of
indebtedness, (b) all Documents and Instruments of any kind relating to such
accounts or other rights to payment or otherwise arising out of or in
connection with the sale, lease or exchange of goods or other personal property
or the rendering of services, (c) all rights in, to, or under all security
agreements, leases and other contracts securing or otherwise relating to any
such accounts, rights to payment, Documents, or Instruments, (d) all rights in,
to and under any purchase orders, service contracts, or other contracts out of
which such accounts and other rights to payment arose (or will arise on
performance), and (e) all rights in or pertaining to any goods arising out of
or in connection with any such purchase orders, service contracts, or other
contracts, including rights in returned or repossessed goods and rights of
replevin, repossession, and reclamation.
"Related Person" means Debtor, each Subsidiary of Debtor, Borrower and
each Other
Liable Party.
"Secured Obligations" has the meaning given such term in Section 2.2.
"Secured Party" means the Person named as such at the beginning of
this Agreement, together with its successors and assigns as the "Agent" under
the Credit Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which
- 5 -
<PAGE> 6
is directly or indirectly (through one or more intermediaries) controlled by or
owned fifty percent or more by such Person.
"Subsidiary Shares" means all of the following issued by any
Subsidiary of Debtor; (a) all shares of capital stock , (b) all units of
membership interest, (c) all certificates representing any such shares and
units, (d) all options and other rights, contractual or otherwise, at any time
existing with respect to such shares and units, and (e) all dividends, cash,
instruments and other property now or hereafter received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares or units.
"Trademark License" means any license or agreement, whether now or
hereafter in existence, under which is granted or authorized any right to use
any Trademark.
"Trademarks" means all of the following: (a) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, brand names, trade dress, prints and
labels on which any of the foregoing have appeared or appear, package and other
designs, and any other source or business identifiers, and general intangibles
of like nature, and the rights in any of the foregoing which arise under
applicable law, (b) the goodwill of the business symbolized thereby or
associated with each of them, (c) all registrations and applications in
connection therewith, including registrations and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or other country, or any political subdivision
thereof, (d) all reissues, extensions and renewals thereof, (e) all claims for,
and rights to sue for, past or future infringements of any of the foregoing,
and (f) all income, royalties, damages and payments now or hereafter due or
payable with respect to any of the foregoing, including damages and payments
for past or future infringements thereof.
"UCC" means the Uniform Commercial Code in effect in the State of
Texas on the date hereof.
Section 1.2. Other Definitions. Reference is hereby made to the Credit
Agreement for a statement of the terms thereof. All capitalized terms used in
this Agreement which are defined in the Credit Agreement and not otherwise
defined herein shall have the same meanings herein as set forth therein. All
terms used in this Agreement which are defined in the UCC and not otherwise
defined herein or in the Credit Agreement shall have the same meanings herein
as set forth therein, except where the context otherwise requires.
Section 1.3. Attachments. All exhibits or schedules which may be
attached to this Agreement are a part hereof for all purposes.
Section 1.4. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document (including, but not
limited to, references in Section 2.1) also refer to and include all renewals,
extensions, amendments, modifications, supplements or restatements of any
- 6 -
<PAGE> 7
such agreement, instrument or document, provided that nothing contained in this
Section shall be construed to authorize any Person to execute or enter into any
such renewal, extension, amendment, modification, supplement or restatement.
Section 1.5. References and Titles. All references in this Agreement
to Exhibits, Articles, Sections, subsections, and other subdivisions refer to
the Exhibits, Articles, Sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any subdivision are for convenience only and do not constitute any
part of any such subdivision and shall be disregarded in construing the
language contained in this Agreement. The words "this Agreement", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited. The phrases "this Section" and "this subsection" and similar phrases
refer only to the Sections or subsections hereof in which the phrase occurs.
The word "or" is not exclusive, and the word "including" (in all of its forms)
means "including without limitation". Pronouns in masculine, feminine and
neuter gender shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa unless
the context otherwise requires.
ARTICLE II
Security Interest
Section 2.1. Grant of Security Interest. As collateral security for
all of the Secured Obligations, Debtor hereby pledges and assigns to Secured
Party and grants to Secured Party a continuing security interest, for the
benefit of Lenders, in and to all right, title and interest of Debtor in and to
any and all of the following property, whether now owned or existing or
hereafter acquired or arising and regardless of where located:
(a) all Receivables.
(b) all General Intangibles.
(c) all Documents.
(d) all Instruments.
(e) all Inventory.
(f) all Investment Property.
(g) all Equipment.
- 7 -
<PAGE> 8
(h) The Collateral Account and the Lockbox, all cash deposited therein
from time to time, and all Liquid Investments referred to in Section 4.1(e).
(i) All books and records (including, without limitation, customer
lists, marketing information, credit files, price lists, operating records,
vendor and supplier price lists, sales literature, computer software, computer
hardware, computer disks and tapes and other storage media, printouts and other
materials and records) of Debtor pertaining to any of the Collateral.
(j) All moneys and property of any kind of Debtor in the possession or
under the control of Secured Party.
(k) All Proceeds of any and all of the foregoing Collateral.
In each case, the foregoing shall be covered by this Agreement, whether
Debtor's ownership or other rights therein are presently held or hereafter
acquired and howsoever Debtor's interests therein may arise or appear (whether
by ownership, security interest, claim or otherwise).
Section 2.2. Secured Obligations Secured. The security interest
created hereby in the Collateral constitutes continuing collateral security for
all of the following obligations, indebtedness and liabilities, whether now
existing or hereafter incurred or arising:
(a) Credit Agreement Indebtedness. The payment by Debtor, as and when
due and payable, of the "Obligations", as defined in the Credit Agreement, and
of all amounts from time to time owing by Debtor under or in respect of the
Credit Agreement, the Notes or any of the other Obligation Documents.
(b) Guaranteed Indebtedness. The payment by Debtor, when due and
payable, of all amounts from time to time owing by Debtor under or in respect
of the Guaranty or any of the other Obligation Documents to which Debtor is a
party, and the due performance by Debtor of all of its other respective
obligations under or in respect of the Guaranty and such other Obligation
Documents.
(c) Interest Rate Hedges. The payment and performance of any and all
present or future obligations of Debtor according to the terms of any present
or future interest rate or currency rate swap, rate cap, rate floor, rate
collar, exchange transaction, forward rate agreement, or other exchange rate
protection agreements or any option with respect to any such transaction now
existing or hereafter entered into between Debtor, any Subsidiary of Debtor,
and one or more parties constituting any Lender (or any affiliate of any
Lender).
(d) Other Indebtedness. All loans and future advances made by Lenders
to Debtor and all other debts, obligations and liabilities of every kind and
character of Debtor now or hereafter existing in favor of Lenders, whether such
debts, obligations or liabilities be direct or indirect, primary or secondary,
joint or several, fixed or contingent, and whether originally payable to
Lenders or to a third party and subsequently acquired by Lenders and whether
such debts,
- 8 -
<PAGE> 9
obligations or liabilities are evidenced by notes, open account, overdraft,
endorsement, security agreement, guaranty or otherwise (it being contemplated
that Debtor may hereafter become indebted to Lenders in further sum or sums but
Lenders shall have no obligation to extend further indebtedness by reason of
this Agreement).
(e) Renewals. All renewals, extensions, amendments, modifications,
supplements, or restatements of or substitutions for any of the foregoing.
(f) Performance. The due performance and observance by Debtor of all
of its other obligations from time to time existing under or in respect of any
of the Obligation Documents.
As used herein, the term "Secured Obligations" refers to all present and future
indebtedness, obligations and liabilities of whatever type which are described
above in this section, including any interest which accrues after the
commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of Debtor. Debtor hereby acknowledges
that the Secured Obligations are owed to the various Lenders and that each
Lender is entitled to the benefits of the Liens given under this Agreement. It
is the intention of the Debtor, Secured Party and each Lender that this
Agreement not constitute a fraudulent transfer or fraudulent conveyance under
any state or federal law that may be applied hereto. Debtor and, by their
acceptance hereof, Secured Party and each Lender hereby acknowledge and agree
that, notwithstanding any other provision of this Agreement: (a) the
indebtedness secured hereby shall be limited to the maximum amount of
indebtedness that can be incurred or secured by Debtor without rendering this
Agreement subject to avoidance under Section 548 of the United States
Bankruptcy Code or any comparable provisions of any applicable state or federal
law, and (b) the Collateral pledged by Debtor hereunder shall be limited to the
maximum amount of Collateral that can be pledged by Debtor without rendering
this Agreement subject to avoidance under Section 548 of the United States
Bankruptcy Code or any comparable provisions of any applicable state or federal
law.
ARTICLE III
Representations, Warranties and Covenants
Section 3.1. Representations and Warranties. Debtor hereby represents
and warrants to Secured Party and Lenders as follows:
(a) Ownership Free of Liens. Debtor has good and marketable title to
the Collateral, free and clear of all Liens, encumbrances or adverse claims
except for the security interest created by this Agreement and any Permitted
Liens. No effective financing statement or other registration or instrument
similar in effect covering all or any part of the Collateral is on file in any
recording office except any which have been filed in favor of Secured Party
relating to this Agreement and any which have been filed to perfect or protect
any Permitted Lien. None of the Collateral is in
- 9 -
<PAGE> 10
the possession of any Person other than Debtor or Secured Party, except for
Collateral being transported in the ordinary course of business.
(b) No Conflicts or Consents. Neither the ownership or the intended
use of the Collateral by Debtor, nor the grant of the security interest by
Debtor to Secured Party herein, nor the exercise by Secured Party of its rights
or remedies hereunder, will (i) conflict with any provision of (a) any domestic
or foreign law, statute, rule or regulation, (b) the articles or certificate of
incorporation, charter or bylaws of Debtor, or (c) any agreement, judgment,
license, order or permit applicable to or binding upon Debtor, or (ii) result
in or require the creation of any Lien, charge or encumbrance upon any assets
or properties of Debtor or of any Related Person except for Permitted Liens
expressly contemplated in the Obligation Documents. Except as expressly
contemplated in the Obligation Documents, no consent, approval, authorization
or order of, and no notice to or filing with any court, governmental authority,
or third party is required in connection with the grant by Debtor of the
security interest herein, or the exercise by Secured Party of its rights and
remedies hereunder.
(c) Security Interest. Debtor has and will have at all times full
right, power and authority to grant a security interest in the Collateral to
Secured Party as provided herein, free and clear of any Lien, adverse claim, or
encumbrance. This Agreement creates a valid and binding security interest in
favor of Secured Party in the Collateral, which security interest secures all
of the Secured Obligations.
(d) Perfection Certificate. Debtor has previously completed and
delivered the Perfection Certificate to Secured Party. The Perfection
Certificate as so delivered is true, correct and complete.
(e) Receivables. Each Receivable included within the Collateral
represents the valid and legally binding indebtedness of a bona fide account
debtor arising from the sale or lease by Debtor of goods or the rendition by
Debtor of services, subject to no contra-accounts, setoffs, defenses,
counterclaims, discounts, allowances, rebates, credits or adjustments by or
available to account debtors obligated on such Receivable, except for
Receivables of Debtor which do not in the aggregate exceed five percent (5%) of
the aggregate face amount of all of Debtor's Receivables. No material amount of
Debtor's Receivables is otherwise doubtful of collection except as has been
disclosed to Secured Party in writing.
(f) General Intangibles. Each General Intangible included within the
Collateral which is material to Debtor's business represents the valid and
legally binding obligation of each other Person who is a party thereto or who
is otherwise stated to be obligated thereunder, subject to no contra-accounts,
setoffs, defenses, counterclaims, discounts, allowances, rebates, credits or
adjustments by or available to account debtors obligated thereon, except for
those which (i) in the case of General Intangibles under which money is owing
to Debtor, do not in the aggregate exceed five percent (5%) of the aggregate
face amount of all such General Intangibles, and (ii) in the case of other
General Intangibles, do not materially impair the value to Debtor or the
enforcement by Debtor of such General Intangibles.
- 10 -
<PAGE> 11
(g) Intellectual Property. There is no Intellectual Property included
within the Collateral which is material to Debtor's business.
(h) Documents and Instruments. All Documents and Instruments included
within the Collateral are valid and genuine. Any such Document or Instrument
has only one original counterpart which constitutes collateral within the
meaning of the UCC or the law of any applicable jurisdiction, and all such
original counterparts (other than checks delivered in payment of Receivables in
the ordinary course of business) have been delivered into the possession of
Secured Party.
(i) Goods. None of the Collateral which constitutes goods (i) is
covered by any Document (other than Documents which are subject hereto and have
been delivered to Secured Party), (ii) is subject to any landlord's lien or
similar Lien (other than Permitted Liens), (iii) has been related to, attached
to, or used in connection with any real property so as to constitute a fixture
upon such real property (except for real property which is subject to a Lien in
favor of Secured Party), (iv) is now kept or is intended to be kept at any
location other than as set forth in the Perfection Certificate (except for
goods in transit in the ordinary course of Debtor's business), (v) is installed
in or affixed to other goods so as to be an accession to such other goods
(unless such other goods are included in the Collateral), or (vi) has been
produced in violation of the Fair Labor Standards Act, as amended. All such
goods are insured to the extent required under the Credit Agreement.
(k) Investment Property. Debtor has delivered to Secured Party all
Certificates, instruments, and writings evidencing Investment Property included
within the Collateral. All such certificates, instruments, and writings are
valid and genuine and have not been altered.
(j) Subsidiary Shares. Debtor has delivered to Secured Party all
certificates evidencing Subsidiary Shares. All such certificates are valid and
genuine and have not been altered. All shares, units and other securities
constituting the Subsidiary Shares have been duly authorized and validly
issued, are fully paid and non-assessable, and were not issued in violation of
the preemptive rights of any Person or of any agreement by which Debtor or the
Issuer thereof is bound. All documentary, stamp or other taxes or fees owing in
connection with the issuance, transfer or pledge of Subsidiary Shares (or
rights in respect thereof) have been paid. No restrictions or conditions exist
with respect to the transfer, voting or capital of any Subsidiary Shares. The
Subsidiary Shares constitute the percentage of the class of issued shares of
capital stock which is indicated on Exhibit B. No Issuer of any Subsidiary
Shares has any outstanding stock rights, rights to subscribe, options, warrants
or convertible securities outstanding or any other rights outstanding whereby
any Person would be entitled to have issued to him capital stock of such
Issuer.
Section 3.2. General Covenants Applicable to All Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this
- 11 -
<PAGE> 12
Section 3.2 from the date hereof and so long as any part of the Secured
Obligations or the Commitment is outstanding.
(a) Change of Name, Location, or Structure; Additional Filings. Debtor
recognizes that financing statements pertaining to the Collateral have been or
may be filed where Debtor maintains any Collateral, has its records concerning
any Collateral or has its chief executive office or chief place of business.
Without limitation of any other covenant herein, Debtor will not cause or
permit any change to be made in its name, identity or corporate or partnership
structure, or any change to be made to a jurisdiction other than as represented
in Section 3.1 hereof in (i) the location of any Collateral, (ii) the location
of any records concerning any Collateral or (iii) in the location of Debtor's
chief executive office or principal place of business, unless Debtor shall have
first (1) notified Secured Party of such change at least twenty (20) days prior
to the effective date of such change, (2) taken all action requested by Secured
Party (under the following subsection (b) or otherwise) for the purpose of
further confirming and protecting Secured Party's security interests and rights
under this Agreement and the perfection and priority thereof, and (3) if
requested by Secured Party, provided to Secured Party a legal opinion to its
satisfaction confirming that such change will not adversely affect in any way
Secured Party's security interests and rights under this Agreement or the
perfection or priority thereof. In any notice furnished pursuant to this
subsection, Debtor will expressly state that the notice is required by this
Agreement and contains facts that may require additional filings of financing
statements or other notices for the purposes of continuing perfection of
Secured Party's security interest in the Collateral.
(b) Further Assurances. Debtor will, at its expense as from time to
time requested by Secured Party, promptly execute and deliver all further
instruments, agreements, filings and registrations, and take all further
action, in order: (i) to confirm and validate this Agreement and Secured
Party's rights and remedies hereunder, (ii) to correct any errors or omissions
in the descriptions herein of the Secured Obligations or the Collateral or in
any other provisions hereof, (iii) to perfect, register and protect the
security interests and rights created or purported to be created hereby or to
maintain or upgrade in rank the priority of such security interests and rights,
(iv) to enable Secured Party to exercise and enforce its rights and remedies
hereunder in respect of the Collateral, or (v) to otherwise give Secured Party
the full benefits of the rights and remedies described in or granted under this
Agreement. As part of the foregoing Debtor will, whenever requested by Secured
Party (1) execute and file any financing statements, continuation statements,
and other filings or registrations relating to Secured Party's security
interests and rights hereunder, and any amendments thereto, and (2) mark its
books and records relating to any Collateral to reflect that such Collateral is
subject to this Agreement and the security interests hereunder. To the extent
requested by Secured Party from time to time, Debtor will obtain from any
material account debtor or other obligor on the Collateral the acknowledgment
of such account debtor or obligor that such Collateral is subject to this
Agreement.
(c) Inspection of Collateral. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all representatives
appointed by Secured Party, including independent accountants, agents,
attorneys, appraisers and any other persons, to inspect any of
- 12 -
<PAGE> 13
the Collateral and the books and records of or relating to the Collateral at
any time during normal business hours, and to make photocopies and photographs
thereof, and to write down and record any information which such
representatives obtain; provided that such actions do not unreasonably
interfere with Debtor's business..
(d) Information. Upon the reasonable request from time to time by
Secured Party, Debtor will furnish to Secured Party (i) any information
concerning any covenant, provision or representation contained herein or any
other matter in connection with the Collateral or Debtor's business,
properties, or financial condition, and (ii) statements and schedules
identifying and describing the Collateral and other reports and information
requested in connection with the Collateral, all in reasonable detail.
(e) Ownership, Liens, Possession and Transfers. Debtor will maintain
good and marketable title to all Collateral (except Collateral which is sold in
accordance with Section 7.5 of the Credit Agreement), free and clear of all
Liens, encumbrances or adverse claims except for the security interest created
by this Agreement and any Permitted Liens, and Debtor will not grant or allow
any such Liens, encumbrances or adverse claims to exist. Debtor will not grant
or allow to remain in effect, and Debtor will cause to be terminated, any
financing statement or other registration or instrument similar in effect
covering all or any part of the Collateral, except any which have been filed in
favor of Secured Party relating to this Agreement and any which have been filed
to perfect or protect any Permitted Lien. Debtor will defend Secured Party's
right, title and special property and security interest in and to the
Collateral against the claims of any Person. Except as expressly allowed in
Section 3.3 below for Inventory and Equipment, Debtor (i) will insure that all
of the Collateral -- whether goods, Documents, Instruments, or otherwise -- is
and remains in the possession of Debtor or Secured Party (or a bailee selected
by Secured Party who is holding such Collateral for the benefit of Secured
Party), except for goods being transported in the ordinary course of business,
and (ii) will not sell, assign (by operation of law or otherwise), transfer,
exchange, lease or otherwise dispose of any of the Collateral.
(f) Impairment of Security Interest. Debtor will not take or fail to
take any action which would in any manner impair the value or enforceability of
Secured Party's security interest in any Collateral.
Section 3.3. Covenants for Specified Types of Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this Section 3.3 from the date hereof
and so long as any part of the Secured Obligations or the Commitment is
outstanding.
(a) Receivables. Debtor will, except as otherwise provided in Sections
4.1(d) or 4.2(a), collect at its own expense all amounts due or to become due
under each Receivable which is included within the Collateral. In connection
with such collections, Debtor may (and, at Secured Party's direction, will)
take such action (not otherwise forbidden hereunder) as Debtor or Secured Party
may deem necessary or advisable to enforce collection or performance of each
such Receivable. Except for actions and omissions in the ordinary course of
business which do
- 13 -
<PAGE> 14
not in the aggregate cause losses or reductions in excess of five percent (5%)
of the aggregate face amount of all such Receivables outstanding at any time,
Debtor (i) will duly perform and cause to be performed all of its obligations
with respect to the goods or services, the sale or lease or rendering of which
gave rise or will give rise to each such Receivable, and (ii) will not (whether
through failure to duly perform its obligations under any contracts,
instruments, and agreements which are related to any such Receivable, or by any
written instrument, or otherwise) take or allow any action or omission which
causes any such Receivable to become subject to any contra-accounts, setoffs,
defenses, counterclaims, discounts, allowances, rebates, credits or adjustments
by or available to account debtors obligated on such Receivable, unless such
action involves a good faith contest (promptly instituted and diligently
concluded) to the validity of amounts claimed to be owed to another Person.
(b) General Intangibles. Debtor will, except as otherwise provided in
Sections 4.1(e) or 4.2(a), collect at its own expense all amounts due or to
become due under each General Intangible included within the Collateral. In
connection with such collections, Debtor may (and, at Secured Party's
direction, will) take such action (not otherwise forbidden hereunder) as Debtor
or Secured Party may deem necessary or advisable to enforce collection or
performance of each such General Intangible. Unless the failure to do so is the
result of a good faith contest (promptly and diligently concluded) of the
validity of such obligations, Debtor will duly perform and cause to be
performed all of its obligations under any contracts, instruments, and
agreements which are, or which are related to, any material General Intangibles
of Debtor. Debtor will not (whether through failure to duly perform its
obligations under any contracts, instruments, and agreements which are related
to any such General Intangibles, or by any written instrument, or otherwise)
take or allow any action or omission which causes any such General Intangibles
to become subject to any contra-accounts, setoffs, defenses, counterclaims,
discounts, allowances, rebates, credits or adjustments by or available to
account debtors obligated on such General Intangibles, except for those which
(i) in the case of such General Intangibles under which money is owing to
Debtor, do not in the aggregate exceed five percent (5%) of the aggregate face
amount of all such General Intangibles, and (ii) in the case of other General
Intangibles included within the Collateral, do not materially impair the value
or enforcement of such General Intangibles.
(c) Intellectual Property. Debtor will maintain and protect the
validity and enforceability of all Intellectual Property included within the
Collateral which is material to Debtor's business. Debtor will defend and
protect such Intellectual Property and its rights thereunder against any
infringement, dilution, or misappropriation and will defend any claim or
administrative or arbitral challenge that questions the validity or
enforceability of such Intellectual Property, Debtor's purported rights therein
and thereunder, or Debtor's rights to register or patent the same or to use and
practice the same in its business. Debtor will give Secured Party notice of any
proceeding in which such defense is being carried on. Debtor will diligently
prosecute and maintain all applications and registrations for any such
Intellectual Property, and Debtor will notify Secured Party whenever it learns
that any application or registration relating to any such Intellectual Property
has been (or is alleged to have been) abandoned, dedicated or otherwise
terminated. At least thirty days prior to filing any application for
registration of any Intellectual
- 14 -
<PAGE> 15
Property (or any similar request) with the United States Patent and Trademark
Office, or any similar office or agency of the United States, any State thereof
or other country, or any political subdivision thereof, Debtor will give
Secured Party notice of such intended filing and will, upon Secured Party's
request, execute, deliver and file any agreements, instruments, registrations
and filings which Secured Party may request to confirm Secured Party's security
interest therein and to put such security interest of record in such office.
Debtor hereby appoints Secured Party as its agent and attorney in fact to do
the same, and hereby ratifies and confirms all actions of Secured Party as such
agent and attorney in fact, and hereby acknowledges that such agency and power
of attorney are irrevocable and coupled with an interest.
(d) Documents and Instruments. Debtor will at all times cause any
Documents or Instruments which are included within the Collateral to be valid
and genuine. Debtor will cause all Instruments included within the Collateral
to have only one original counterpart. Upon request by Secured Party, Debtor
will promptly deliver to Secured Party all originals of Documents or
Instruments which are included within the Collateral. Debtor will not (whether
through failure to duly perform its obligations under any contracts,
instruments, and agreements which are related to any Documents or Instruments
which are included within the Collateral, or by any written instrument, or
otherwise) take or allow any action or omission which causes any Documents or
Instruments which are included within the Collateral to become subject to any
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to the Persons obligated
thereon. Upon request by Secured Party, Debtor will mark each chattel paper
which is included within the Collateral with a legend indicating that such
chattel paper is subject to the security interest granted by this Agreement.
(e) Inventory. Debtor will maintain, preserve, protect and store all
Inventory included within the Collateral in good condition, repair and working
order and in a manner which will not make void or cancelable any insurance with
respect to such Collateral. Debtor will promptly furnish to Secured Party a
statement respecting any loss or damage to any such Inventory with an aggregate
value in excess of $500,000. Except for transportation of Inventory in the
ordinary course of business, Debtor will not allow any such Inventory to be
located in any jurisdiction other than those in which is filed an effective
financing statement which perfects Secured Party's security interest hereunder
in such Inventory. Except for Documents delivered into the possession of
Secured Party, Debtor will not allow any Inventory included within the
Collateral to be covered by any Document. Debtor will not cause or permit the
removal of any item of Inventory from Debtor's possession, control and risk of
loss, and Debtor will not sell, assign (by operation of law or otherwise),
transfer, exchange, lease or otherwise dispose of any Inventory, other than in
connection with the following:
(i) Sales or leases, other than during the continuance of an
Event of Default, of Inventory in the ordinary course of business, and
(ii) Possession of Inventory by Secured Party or by a bailee
selected by Secured Party who is holding such Inventory for the
benefit of Secured Party.
- 15 -
<PAGE> 16
(f) Equipment. Debtor will maintain, preserve, protect and keep all
Equipment included within the Collateral in good condition, repair and working
order and will cause such Equipment to be used and operated in a good and
workmanlike manner, in accordance with applicable law and in a manner which
will not make void or cancelable any insurance with respect to such Equipment.
Debtor will promptly furnish to Secured Party a statement respecting any loss
or damage to any of such Equipment with an aggregate value in excess of
$500,000. Except for transportation of Equipment in the ordinary course of
business, Debtor will not allow any Equipment included within the Collateral to
be located in any jurisdiction other than those in which is filed an effective
financing statement which perfects Secured Party's security interest hereunder
in such Equipment. Debtor will not cause or permit the removal of any item of
Equipment from Debtor's possession, control and risk of loss, and Debtor will
not sell, assign (by operation of law or otherwise), transfer, exchange, lease
or otherwise dispose of any Equipment, other than in connection with the
following:
(i) Sale or other disposal, other than during the
continuance of an Event of Default, of any item of Equipment (i) in
the ordinary course of business or (ii) which is worn out or obsolete
and which has been replaced by an item of equal suitability and value,
owned by Debtor and made subject to the security interest under this
Agreement, but which is otherwise free and clear of any Liens,
encumbrances or adverse claims, and
(ii) Possession of Equipment by Secured Party or by a bailee
selected by Secured Party who is holding such Equipment for the
benefit of Secured Party.
Debtor will not permit any of the Collateral which constitutes Equipment to at
any time become so related to attached to, or used in connection with any
particular real property so as to become a fixture upon such real property, or
to be installed in or affixed to other goods so as to become an accession to
such other goods unless such other goods are also included in the Collateral.
(g) Certificates of Title. To the extent that there is at any time any
Collateral in which a security interest may be perfected by a notation on the
certificate of title or similar evidence of ownership of such Collateral,
Debtor will:
(i) concurrently with the execution hereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor presently has any interest,
(ii) promptly after the acquisition thereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor hereafter acquires any interest, and
(iii) promptly upon request by Secured Party, with respect to
any other items of such Collateral,
- 16 -
<PAGE> 17
deliver to Secured Party all such certificates of title and similar evidences
of ownership, all applications therefor, and all other documents needed or
helpful in registering Secured Party's security interest in such Collateral on
such certificates of title, other evidences of ownership, and applications and
in otherwise perfecting Secured Party's security interest in such Collateral.
(h) Investment Property.
(i) Debtor will at all times cause (A) Secured Party to have control
(within the meaning of the UCC) over all Investment Property included
within the Collateral and (B) any certificates, documents, or
instruments evidencing Investment Property included within the
Collateral to be valid and genuine. All instruments and writings
evidencing Investment Property included within the Collateral shall be
delivered to Secured Party concurrently with or prior to the execution
and delivery of this Agreement.)
(ii) All instruments and writings evidencing the Investment Property
shall be delivered to Secured Party on or prior to the execution and
delivery of this Agreement. All other instruments and writings
hereafter evidencing or constituting Investment Property shall be
delivered to Secured Party promptly upon the receipt thereof by or on
behalf of Debtor. All such Investment Property shall be held by or on
behalf of Secured Party pursuant hereto and shall be delivered in
suitable form for transfer by delivery with any necessary endorsement
or shall be accompanied by fully executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Secured
Party.
(iii) If Debtor shall receive, by virtue of its being or having been an
owner of any Subsidiary Shares, any (i) stock certificate (including
any certificate representing a stock dividend or distribution in
connection with any increase or reduction of capital, reorganization,
reclassification, merger, consolidation, sale of assets, combination of
shares, stock split, spinoff or split-off), promissory note or other
instrument or writing; (ii) option or right, whether as an addition
to, substitution for, or in exchange for, any Subsidiary Shares, or
otherwise; (iii) dividends payable in cash (except such dividends
permitted to be retained by Debtor pursuant to Section 4.10 hereof, or
(iv) dividends or other distributions in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, Debtor shall receive the
same in trust for the benefit of Secured Party, shall segregate it from
Debtor's other property, and shall promptly deliver it to Secured Party
in the exact form received, with any necessary endorsement or
appropriate stock powers duly executed in blank, to be held by Secured
Party as Collateral.
(iv) Status of Subsidiary Shares. The certificates evidencing the
Subsidiary Shares shall at all times be valid and genuine and shall
not be altered. The Subsidiary Shares at all times shall be duly
authorized, validly issued, fully paid, and non-assessable, and shall
not be issued in violation of the preemptive rights of any Person or
of any agreement by which Debtor or the Issuer thereof is bound and
shall not be subject to any restrictions with respect to transfer,
voting or Capital of such Subsidiary Shares.
- 17 -
<PAGE> 18
(v) Notices from Issuer. Debtor will promptly deliver to Secured Party
a copy of each notice or other communication received by Debtor from
any Issuer in respect of any Investment Property.
ARTICLE IV.
Remedies, Powers and Authorizations
Section 4.1. Normal Provisions Concerning the Collateral.
(a) Additional Financing Statement Filings. Debtor hereby authorizes
Secured Party to file, without the signature of Debtor where permitted by law,
one or more financing or continuation statements, and amendments thereto,
relating to the Collateral. Debtor further agrees that a carbon, photographic
or other reproduction of this Agreement or any financing statement describing
any Collateral is sufficient as a financing statement and may be filed in any
jurisdiction by Secured Party.
(b) Power of Attorney. Debtor hereby appoints Secured Party as
Debtor's attorney-in-fact and proxy, with full authority in the place and stead
of Debtor and in the name of Debtor or otherwise, from time to time in Secured
Party's discretion, to take any action and to execute any instrument which
Secured Party may deem necessary or advisable to accomplish the purposes of
this Agreement including any action or instrument: (i) to request or instruct
each Issuer (and each registrar, transfer agent, or similar Person acting on
behalf of each Issuer) including any action or instrument: (i) to request or
instruct each to register the pledge or transfer of the Collateral to Secured
Party; (ii) to otherwise give notification to any Issuer, registrar, transfer
agent, financial intermediary, or other Person of Secured Party's security
interests hereunder; (iii) to obtain and adjust any insurance required to be
paid to Secured Party pursuant hereto; (iv) to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral; (v) to receive,
indorse and collect any drafts or other Instruments or Documents; (vi) to
enforce any obligations included among the Collateral; and (vii) to file any
claims or take any action or institute any proceedings which Secured Party may
deem necessary or desirable for the collection of any of the Collateral or
otherwise to enforce the rights of Debtor or Secured Party with respect to any
of the Collateral. Debtor hereby acknowledges that such power of attorney and
proxy are coupled with an interest, are irrevocable, and are to be used by
Secured Party for the sole benefit of Lenders.
(c) Performance by Secured Party. If Debtor fails to perform any
agreement or obligation contained herein, Secured Party may itself perform, or
cause performance of, such agreement or obligation, and the expenses of Secured
Party incurred in connection therewith shall be payable by Debtor under Section
4.5.
- 18 -
<PAGE> 19
(d) Bailees. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of Debtor's agents or processors,
Debtor shall, upon the request of Secured Party, notify such warehouseman,
bailee, agent or processor of Secured Party's rights hereunder and instruct
such Person to hold all such Collateral for Secured Party's account subject to
Secured Party's instructions. (No such request by Secured Party shall be deemed
a waiver of any provision hereof which was otherwise violated by such
Collateral being held by such Person prior to such instructions by Debtor.)
(e) Collection. Secured Party shall have the right at any time, upon
the occurrence and during the continuance of a Default or an Event of Default,
to notify (or to require Debtor to notify) any and all obligors under any
Receivables, General Intangibles, Instruments, Investment Property or other
rights to payment included among the Collateral of the assignment thereof to
Secured Party under this Agreement and to direct such obligors to make payment
of all amounts due or to become due to Debtor thereunder directly to Secured
Party and, upon such notification and at the expense of Debtor and to the
extent permitted by law, to enforce collection of any such Receivables, General
Intangibles, Instruments, Investment Property or other rights to payment and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Debtor could have done. After Debtor receives notice
that Secured Party has given (and after Secured Party has required Debtor to
give) any notice referred to above in this subsection: all amounts and proceeds
(including instruments and writings) received by Debtor in respect of such
Receivables, General Intangibles, Instruments, Investment Property or other
rights to payment upon the occurrence and during the continuance of a Default
or Event of Default shall be received in trust for the benefit of Secured Party
hereunder, shall be segregated from other funds of Debtor and shall be
forthwith paid over to Secured Party in the same form as so received (with any
necessary indorsement) to be, at Secured Party's discretion, either (A) held as
cash collateral and released to Debtor upon the remedy of all Defaults and
Events of Default, or (B) while any Event of Default is continuing, applied as
specified in Section 4.3.
(f) Collection and Collateral Account. There is hereby established
with Secured Party a cash collateral account (the "Collateral Account") in the
name and under the control of Secured Party into which there shall be deposited
from time to time the cash proceeds of the Collateral (and of any other
collateral under other Obligation Document) required to be delivered to Secured
Party pursuant to the following subsections of this Section 4.1 or pursuant to
any other provision of this Agreement or any other Obligation Document. Debtor
and Secured Party shall deal with the Collateral Account as follows:
(i) Concurrently with the execution hereof (or promptly
thereafter), Debtor shall instruct all account debtors and other
Persons obligated to make payments to Debtor on any Receivables,
General Intangibles, Instruments, or other rights to payment included
within the Collateral to make such payments either (A) directly to
Secured Party, in which case Debtor shall instruct that such payments
be remitted to a post office box ("Lockbox) which shall be in the name
and under the control of Secured Party, or (B) if Secured Party
agrees, to one or more banks acceptable to Secured Party, in which
case
- 19 -
<PAGE> 20
Debtor shall instruct that such payments be remitted to a post office
box in the name and under the control of such bank which is subject to
the terms of a lockbox agreement in a form satisfactory to Agent, duly
executed by Debtor and such bank, pursuant to which Debtor shall have
irrevocably instructed such other bank (and such other bank shall have
agreed) to remit all proceeds of such payments directly to Secured
Party for deposit into the Collateral Account or as Secured Party may
otherwise instruct such bank. All such payments made to Secured Party
shall be deposited in the Collateral Account. In addition to the
foregoing, Debtor agrees that if the proceeds of any Collateral
(including any payments with respect to which instructions have been
given as provided above) shall be received by it, Debtor shall as
promptly as possible deposit such proceeds into the Collateral
Account. Until so deposited, all such proceeds shall be held in trust
by Debtor for Secured Party and shall not be commingled with any other
funds or property of Debtor, and Debtor will not adjust, settle or
compromise the amount or payment of any such Receivable, General
Intangible, Instrument, or other right to payment or release wholly or
partly any account debtor or obligor thereof or allow any credit or
discount thereon.
(ii) As long as no Default or Event of Default has occurred
or is continuing, amounts on deposit in the Collateral Account shall,
upon receipt by Secured Party, be deposited by Secured Party in
Borrower's operating account maintained with Secured Party.
(iii) If a Default or an Event of Default has occurred or is
continuing, Secured Party shall, at Secured Party's discretion, either
(A) continue to hold the balance of the Collateral Account and all
Liquid Investments as Collateral, or (B) apply any or all of the
balance from time to time standing to the credit of the Collateral
Account (subject to collection) as specified in Section 4.3 and
liquidate any or all Liquid Investments and apply the proceeds thereof
as specified in Section 4.3.
(iv) Amounts on deposit in the Collateral Account pursuant
to subsection (iii) shall either remain on deposit therein or be
invested and re-invested from time to time in such Liquid Investments
as Secured Party shall determine, which Liquid Investments shall be
held in the name and be under the control of Secured Party in a
securities account established by Secured Party with one of its
Affiliates until liquidated and applied as provided in subsection
(iii). Any income received by Secured Party with respect to the
balance from time to time standing to the credit of the Collateral
Account, including any interest on or proceeds of Liquid Investments,
shall also remain, or be deposited, in the Collateral Account. All
right, title and interest in and to the amounts on deposit from time
to time in the Collateral Account, together with any Liquid
Investments from time to time made pursuant to this section shall vest
in Secured Party, shall constitute part of the Collateral hereunder,
and shall not constitute payment of the Secured Obligations until
applied thereto as herein provided.
- 20 -
<PAGE> 21
(v) As used in this section, "Liquid Investment" means any
investment in the name of Secured Party (and, in the opinion of
counsel to Secured Party, appropriately subject to a perfected
security interest in favor of Secured Party) which matures within one
month after it is acquired by Secured Party and is either (A) a
certificate of deposit or time deposit issued by Secured Party or (B)
an obligation entitled to the full faith and credit of the United
States which is in book-entry form and subject to pledge under
applicable state law and Treasury regulations.
Section 4.2. Event of Default Remedies. If an Event of Default shall
have occurred and be continuing, Secured Party may from time to time in its
discretion, without limitation and without notice except as expressly provided
below:
(a) exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein, under the other Obligation Documents,
or otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral);
(b) require Debtor to, and Debtor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of
the Collateral as directed by Secured Party and make it (together with all
books, records and information of Debtor relating thereto) available to Secured
Party at a place to be designated by Secured Party which is reasonably
convenient to both parties;
(c) prior to the disposition of any Collateral, (i) to the extent
permitted by applicable law, enter, with or without process of law and without
breach of the peace, any premises where any of the Collateral is or may be
located, and without charge or liability to Secured Party seize and remove such
Collateral from such premises, (ii) have access to and use the Company's books,
records, and information relating to the Collateral, and (iii) store or
transfer any of the Collateral without charge in or by means of any storage or
transportation facility owned or leased by Debtor, process, repair or
recondition any of the Collateral or otherwise prepare it for disposition in
any manner and to the extent Secured Party deems appropriate and, in connection
with such preparation and disposition, use without charge any copyright,
trademark, trade name, patent or technical process used by Debtor;
(d) reduce its claim to judgment or foreclose or otherwise enforce, in
whole or in part, the security interest created hereby by any available
judicial procedure;
(e) dispose of, at its office, on the premises of Debtor or elsewhere,
all or any part of the Collateral, as a unit or in parcels, by public or
private proceedings, and by way of one or more contracts (it being agreed that
the sale of any part of the Collateral shall not exhaust Secured Party's power
of sale, but sales may be made from time to time, and at any time, until all of
the Collateral has been sold or until the Secured Obligations have been paid
and performed in full), and at any such sale it shall not be necessary to
exhibit any of the Collateral;
- 21 -
<PAGE> 22
(f) buy (or allow one or more of the Lenders to buy) the Collateral,
or any part thereof, at any public sale;
(g) buy (or allow one or more of the Lenders to buy) the Collateral,
or any part thereof, at any private sale if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations; and
(h) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Debtor hereby consents to
any such appointment.
Debtor agrees that, to the extent notice of sale shall be required by law, at
least five (5) days' notice to Debtor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
In addition to the foregoing, if any Event of Default has occurred and is
continuing:
(i) Secured Party may license, or sublicense, whether
general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any Patents or Trademarks included in the
Collateral throughout the world for such term or terms, on such
conditions and in such manner as Secured Party shall in its sole
discretion determine;
(ii) Secured Party may (without assuming any obligations or
liability thereunder), at any time and from time to time, in its sole
discretion, enforce (and shall have the exclusive right to enforce)
against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any Patent Licenses or Trademark Licenses which
relate to Patents or Trademarks included in the Collateral and take or
refrain from taking any action under any thereof, and DEBTOR HEREBY
RELEASES SECURED PARTY AND THE LENDERS FROM, AND AGREES TO HOLD
SECURED PARTY AND THE LENDERS FREE AND HARMLESS FROM AND AGAINST, ANY
CLAIMS AND EXPENSES ARISING OUT OF ANY LAWFUL ACTION SO TAKEN OR
OMITTED TO BE TAKEN WITH RESPECT THERETO; and
(iii) upon request by Secured Party, Debtor will execute and
deliver to Secured Party a power of attorney, in form and substance
satisfactory to Secured Party, for the implementation of any lease,
assignment, license, sublicense, grant of option, sale or other
disposition of a Patent or Trademark included in the Collateral or any
action related thereto. In the event of any such disposition pursuant
to this Section, Debtor shall supply its know-how and expertise
relating to the manufacture and sale of the products bearing
Trademarks or the products or services made or rendered in connection
with Patents, and
- 22 -
<PAGE> 23
its customer lists and other records relating to such Patents or
Trademarks and to the distribution of said products, to Secured Party.
Section 4.3. Application of Proceeds. If any Event of Default shall
have occurred and be continuing, Secured Party may in its discretion apply any
cash held by Secured Party as Collateral, and any cash proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral, to any or all of the following in such
order as Secured Party may (subject to the rights of Lenders under the Credit
Agreement) elect:
(a) To the repayment of the reasonable costs and expenses, including
reasonable attorneys' fees and legal expenses, incurred by Secured Party in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (iii) the exercise or enforcement of any of
the rights of Secured Party hereunder, or (iv) the failure of Debtor to perform
or observe any of the provisions hereof;
(b) To the payment or other satisfaction of any Liens, encumbrances,
or adverse claims upon or against any of the Collateral;
(c) To the reimbursement of Secured Party for the amount of any
obligations of Debtor or any Other Liable Party paid or discharged by Secured
Party pursuant to the provisions of this Agreement or the other Obligation
Documents, and of any expenses of Secured Party payable by Debtor hereunder or
under the other Obligation Documents;
(d) To the satisfaction of any other Secured Obligations;
(e) By holding the same as Collateral;
(f) To the payment of any other amounts required by applicable law
(including any provision of the UCC); and
(g) By delivery to Debtor or to whoever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 4.4. Deficiency. In the event that the proceeds of any sale,
collection or realization of or upon Collateral by Secured Party are
insufficient to pay all Secured Obligations and any other amounts to which
Secured Party is legally entitled, Debtor shall be liable for the deficiency,
together with interest thereon as provided in the governing Obligation
Documents or (if no interest is so provided) at such other rate as shall be
fixed by applicable law, together with the costs of collection and the
reasonable fees of any attorneys employed by Secured Party or Lenders to
collect such deficiency.
- 23 -
<PAGE> 24
Section 4.5. Indemnity and Expenses. In addition to, but not in
qualification or limitation of, any similar obligations under other Obligation
Documents:
(a) DEBTOR WILL INDEMNIFY SECURED PARTY AND EACH LENDER FROM AND
AGAINST ANY AND ALL CLAIMS, LOSSES AND LIABILITIES GROWING OUT OF OR RESULTING
FROM THIS AGREEMENT (INCLUDING ENFORCEMENT OF THIS AGREEMENT), WHETHER OR NOT
SUCH CLAIMS, LOSSES AND LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY
OR ARISING OUT OF SUCH INDEMNIFIED PARTY'S OWN NEGLIGENCE, EXCEPT TO THE EXTENT
SUCH CLAIMS, LOSSES OR LIABILITIES ARE PROXIMATELY CAUSED BY SUCH INDEMNIFIED
PARTY'S INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(b) Debtor will upon demand pay to Secured Party the amount of any and
all reasonable costs and expenses, including the reasonable fees and
disbursements of Secured Party's counsel and of any experts and agents, which
Secured Party may incur in connection with (i) the transactions which give rise
to this Agreement, (ii) the preparation of this Agreement and the perfection
and preservation of this security interest created under this Agreement, (iii)
the administration of this Agreement; (iv) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Collateral; (v) the exercise or enforcement of any of the rights of Secured
Party hereunder; or (vi) the failure by Debtor to perform or observe any of the
provisions hereof, except expenses resulting from Secured Party's individual
gross negligence or willful misconduct.
Section 4.6. Non-Judicial Remedies. In granting to Secured Party the
power to enforce its rights hereunder without prior judicial process or
judicial hearing, Debtor expressly waives, renounces and knowingly relinquishes
any legal right which might otherwise require Secured Party to enforce its
rights by judicial process. In so providing for non-judicial remedies, Debtor
recognizes and concedes that such remedies are consistent with the usage of
trade, are responsive to commercial necessity, and are the result of a bargain
at arm's length. Nothing herein is intended, however, to prevent Secured Party
from resorting to judicial process at its option.
Section 4.7. Other Recourse. Debtor waives any right to require
Secured Party or any Lender to proceed against any other Person, to exhaust any
Collateral or other security for the Secured Obligations, to have any Other
Liable Party joined with Debtor in any suit arising out of the Secured
Obligations or this Agreement, or to pursue any other remedy in Secured Party's
power. Debtor further waives any and all notice of acceptance of this Agreement
and of the creation, modification, rearrangement, renewal or extension for any
period of any of the Secured Obligations of any Other Liable Party from time to
time. Debtor further waives any defense arising by reason of any disability or
other defense of any Other Liable Party or by reason of the cessation from any
cause whatsoever of the liability of any Other Liable Party. This Agreement
shall continue irrespective of the fact that the liability of any Other Liable
Party may have ceased and irrespective of the validity or enforceability of any
other Obligation Document to which Debtor or any Other Liable Party may be a
party, and notwithstanding any death, incapacity, reorganization, or bankruptcy
of
- 24 -
<PAGE> 25
any Other Liable Party or any other event or proceeding affecting any Other
Liable Party. Until all of the Secured Obligations shall have been paid in
full, Debtor shall have no right to subrogation and Debtor waives the right to
enforce any remedy which Secured Party or any Lender has or may hereafter have
against any Other Liable Party, and waives any benefit of and any right to
participate in any other security whatsoever now or hereafter held by Secured
Party. Debtor authorizes Secured Party and each Lender, without notice or
demand, without any reservation of rights against Debtor, and without in any
way affecting Debtor's liability hereunder or on the Secured Obligations, from
time to time to (a) take or hold any other property of any type from any other
Person as security for the Secured Obligations, and exchange, enforce, waive
and release any or all of such other property, (b) apply the Collateral or such
other property and direct the order or manner of sale thereof as Secured Party
may in its discretion determine, (c) renew, extend for any period, accelerate,
modify, compromise, settle or release any of the obligations of any Other
Liable Party in respect to any or all of the Secured Obligations or other
security for the Secured Obligations, (d) waive, enforce, modify, amend or
supplement any of the provisions of any Obligation Document with any Person
other than Debtor, and (e) release or substitute any Other Liable Party.
Section 4.8. Limitation on Duty of Secured Party in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof,
Secured Party shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. Secured Party shall be deemed to have exercised reasonable care in the
custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by Secured Party in good faith.
Section 4.9. Appointment of Collateral Agents. At any time or times,
in order to comply with any legal requirement in any jurisdiction, Secured
Party may appoint any bank or trust company or one or more other Persons,
either to act as co-agent or co-agents, jointly with Secured Party, or to act
as separate agent or agents on behalf of the Lenders, with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment. In so doing
Secured Party may, in the name and on behalf of Debtor, give to such co-agent
or separate agent indemnities and other protections similar to those provided
in Section 4.5.
Section 4.10. Voting Rights, Dividends, Etc. in Respect of Subsidiary
Shares.
(a) So long as no Default or Event of Default shall have occurred and
be continuing Debtor may receive and retain any and all dividends or interest
paid in respect of the Subsidiary Shares; provided, however, that any and all
- 25 -
<PAGE> 26
(i) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of or in exchange for,
any Subsidiary Shares,
(ii) dividends and other distributions paid or payable in
cash in respect of any Subsidiary Shares in connection with a partial
or total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in surplus, and
(iii) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Subsidiary Shares,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Subsidiary Shares and shall, if received by Debtor, be received in trust for
the benefit of Secured Party, be segregated from the other property or funds of
Debtor, and be forthwith delivered to Secured Party in the exact form received
with any necessary indorsement or appropriate stock powers duly executed in
blank, to be held by Secured Party as Collateral.
(b) Upon the occurrence and during the continuance of a Default or an
Event of Default:
(i) all rights of Debtor to receive and retain the
dividends and interest payments which it would otherwise be authorized
to receive and retain pursuant to subsection (a) of this section shall
automatically cease, and all such rights shall thereupon become vested
in Secured Party which shall thereupon have the sole right to receive
and hold as Subsidiary Shares such dividends and interest payments;
(ii) without limiting the generality of the foregoing,
Secured Party may at its option exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any of the Subsidiary Shares as if it were the
absolute owner thereof, including, without limitation, the right to
exchange, in its discretion, any and all of the Subsidiary Shares upon
the merger, consolidation, reorganization, recapitalization or other
adjustment of any Issuer, or upon the exercise by any Issuer of any
right, privilege or option pertaining to any Subsidiary Shares, and,
in connection therewith, to deposit and deliver any and all of the
Subsidiary Shares with any committee, depository, transfer, agent,
registrar or other designated agent upon such terms and conditions as
it may determine; and
(iii) all dividends and interest payments which are received
by Debtor contrary to the provisions of subsection (b)(i) of this
section shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Debtor, and shall be forthwith
paid over to Secured Party as Subsidiary Shares in the exact form
received, to be held by Secured Party as Collateral.
- 26 -
<PAGE> 27
Anything herein to the contrary notwithstanding, Debtor may at all times
exercise any and all voting rights pertaining to the Subsidiary Shares or any
part thereof for any purpose not inconsistent with the terms of this Agreement
or any other Obligation Document.
Section 4.11. Private Sale of Subsidiary Shares. Debtor recognizes
that Secured Party may deem it impracticable to effect a public sale of all or
any part of the Subsidiary Shares and that Secured Party may, therefore,
determine to make one or more private sales of any such securities to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and
not with a view to the distribution or resale thereof. Debtor acknowledges that
any such private sale may be at prices and on terms less favorable to the
seller than the prices and other terms which might have been obtained at a
public sale and, notwithstanding the foregoing, agrees that such private sales
shall be deemed to have been made in a commercially reasonable manner and that
Secured Party shall have no obligation to delay sale of any such securities for
the period of time necessary to permit the Issuer of such securities to
register such securities for public sale under the Securities Act of 1933, as
amended. Debtor further acknowledges and agrees that any offer to sell such
securities which has been (a) publicly advertised on a bona fide basis in a
newspaper or other publication of general circulation in the financial
community of Dallas, Texas (to the extent that such an offer may be so
advertised without prior registration under the Securities Act), or (b) made
privately in the manner described above to not less than fifteen (15) bona fide
offerees shall be deemed to involve a "public sale" for the purposes of Section
9.504(c) of the UCC (or any successor or similar, applicable statutory
provision) as then in effect in the State of Texas, notwithstanding that such
sale may not constitute a "public offering" under the Securities Act of 1933,
as amended, and that Secured Party may, in such event, bid for the purchase of
such securities.
ARTICLE V.
Miscellaneous
Section 5.1. Notices. Any notice or communication required or
permitted hereunder shall be given as provided in the Credit Agreement.
Section 5.2. Amendments. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Debtor and
Secured Party, and no waiver of any provision of this Agreement, and no consent
to any departure by Debtor therefrom, shall be effective unless it is in
writing and signed by Secured Party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given and to the extent specified in such writing. In addition, all such
amendments and waivers shall be effective only if given with the necessary
approvals of Lenders as required in the Credit Agreement.
- 27 -
<PAGE> 28
Section 5.3. Preservation of Rights. No failure on the part of Secured
Party or any Lender to exercise, and no delay in exercising, any right
hereunder or under any other Obligation Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or the exercise of any other right.
Neither the execution nor the delivery of this Agreement shall in any manner
impair or affect any other security for the Secured Obligations. The rights and
remedies of Secured Party provided herein and in the other Obligation Documents
are cumulative and are in addition to, and not exclusive of, any rights or
remedies provided by law or otherwise. The rights of Secured Party under any
Obligation Document against any party thereto are not conditional or contingent
on any attempt by Secured Party to exercise any of its rights under any other
Obligation Document against such party or against any other Person.
Section 5.4. Unenforceability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or invalidity
without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 5.5. Survival of Agreements. All representations and
warranties of Debtor herein, and all covenants and agreements herein shall
survive the execution and delivery of this Agreement, the execution and
delivery of any other Obligation Documents and the creation of the Secured
Obligations.
Section 5.6. Other Liable Parties. Neither this Agreement nor the
exercise by Secured Party or the failure of Secured Party to exercise any
right, power or remedy conferred herein or by law shall be construed as
relieving any Other Liable Party from liability on the Secured Obligations or
any deficiency thereon.
Section 5.7. Binding Effect and Assignment. This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Debtor and its successors and permitted assigns and (b) shall inure, together
with all rights and remedies of Secured Party hereunder, to the benefit of
Secured Party and Lenders and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing, Secured Party and
any Lender may (except as otherwise provided in the Credit Agreement) pledge,
assign or otherwise transfer any or all of their respective rights under any or
all of the Obligation Documents to any other Person, and such other Person
shall thereupon become vested with all of the benefits in respect thereof
granted herein or otherwise. None of the rights or duties of Debtor hereunder
may be assigned or otherwise transferred without the prior written consent of
Secured Party.
Section 5.8. Termination. It is contemplated by the parties hereto
that there may be times when no Secured Obligations are outstanding, but
notwithstanding such occurrences, this Agreement shall remain valid and shall
be in full force and effect as to subsequent outstanding Secured Obligations.
Upon the satisfaction in full of the Secured Obligations, upon the termination
or expiration of the Credit Agreement and any other commitment of Lenders to
extend credit to Debtor, and upon written request for the termination hereof
delivered by Debtor
- 28 -
<PAGE> 29
to Secured Party, this Agreement and the security interest created hereby shall
terminate and all rights to the Collateral shall revert to Debtor. Secured
Party will thereafter, upon Debtor's request and at Debtor's expense, (a)
return to Debtor such of the Collateral in Secured Party's possession as shall
not have been sold or otherwise disposed of or applied pursuant to the terms
hereof, and (b) execute and deliver to Debtor such documents as Debtor shall
reasonably request to evidence such termination.
Section 5.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of TEXAS applicable to
contracts made and to be performed entirely within such state, except as
required by mandatory provisions of law and except to the extent that the
perfection and the effect of perfection or non-perfection of the security
interest created hereby hereunder, in respect of any particular Collateral, are
governed by the laws of a jurisdiction other than the State of Texas.
Section 5.10. Counterparts. This Agreement may be separately executed
in any number of counterparts, all of which when so executed shall be deemed to
constitute one and the same Agreement.
Section 5.11. "Loan Document". This Agreement is a "Loan Document", as
defined in the Credit Agreement, and, except as expressly provided herein to
the contrary, this Agreement is subject to all provisions of the Credit
Agreement governing such Loan Documents.
Section 5.12. Amendment and Restatement. This Agreement amends and
restates in its entirety the Original Security Agreement, and all of the terms
hereof shall supersede the terms and provisions thereof. This Agreement renews
and extends all Liens existing by virtue of the Original Security Agreement,
but the terms, provisions and conditions of such Liens shall hereafter be
governed in all respects by this Agreement.
THIS WRITTEN SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
- 29 -
<PAGE> 30
IN WITNESS WHEREOF, Debtor has executed and delivered this Agreement
as of the date first above written.
TENNESSEE MINING, INC.
By: /s/ John Lynch
--------------------------------
Name: John Lynch
Title: Vice President
NATIONSBANK OF TEXAS, N.A.
By: /s/ Denise A. Smith
----------------------------------
Name: Denise A. Smith
Title: SVP
<PAGE> 1
EXHIBIT 10.20
GUARANTY
IKERD-BANDY CO., INC.
THIS GUARANTY is made as of November 11, 1997, by Ikerd-Bandy Co., Inc.
a Kentucky corporation ("Guarantor"), in favor of NationsBank of Texas, N.A., a
national banking association, individually and as agent for Lenders, as such
term is defined in the Credit Agreement of even date herewith described below
(in such capacities "Agent").
RECITALS:
1. Addington Enterprises, Inc., a Kentucky corporation ("Addington"),
entered into a Credit Agreement dated as of October 8, 1997 with Agent (the
"Original Credit Agreement"), pursuant to which NationsBank made loans to
Addington. Funds were advanced to Addington pursuant to that certain promissory
note dated October 8, 1997 and executed by Addington in the original principal
amount of $50,000,000 payable to the order of NationsBank (the "Original
Promissory Note").
2. As a condition precedent to Agent's obligations to advance funds
pursuant to the Original Credit Agreement, Guarantor (then a wholly owned
subsidiary of Addington) executed that certain Guaranty dated as of October 17,
1997 in favor of Agent (the "Original Guaranty").
3. Contemporaneously with the execution and delivery hereof, Addington
has sold a substantial portion of its assets, including but not limited to all
of the outstanding capital stock of Guarantor, to AEI Holding Company, Inc., a
Delaware corporation ("Borrower"), and Borrower has assumed substantially all of
the outstanding indebtedness and obligations of Addington, including but not
limited to all indebtedness and obligations of Addington owing to NationsBank
and Agent under the Original Credit Agreement and the Original Promissory Note.
4. Borrower, Agent, and Lenders have entered into that certain Credit
Agreement of even date herewith, (herein, as from time to time amended,
supplemented or restated, called the "Credit Agreement"), pursuant to which
funds are to be advanced to Borrower under the Notes (as such term is defined
below) which funds may be further advanced by Borrower to its Affiliates,
including Guarantor. The Credit Agreement amended and restated the Original
Credit Agreement in its entirety.
5. Borrower has executed (i) that certain Promissory Note of even date
herewith payable to the order of NationsBank in the original principal amount of
$30,000,000 on or before the Maturity Date and (ii) that certain Promissory Note
of even date herewith payable to the order of The Provident Bank in the original
principal amount of $20,000,000 on or before the Maturity Date (such promissory
notes, as from time to time amended, and all promissory notes given in
substitution, renewal or extension therefor or thereof, in whole or in part,
being herein collectively called the "Notes"). The Notes renewed and extended
the Original Promissory Note.
<PAGE> 2
6. It is a condition precedent to Lenders' obligations to advance funds
pursuant to the Credit Agreement that Guarantor shall execute and deliver to
Agent an amendment and restatement of the Original Guaranty.
7. Borrower owns one hundred percent (100%) of the outstanding shares
of stock of Guarantor.
8. Borrower, Guarantor, and the other direct and indirect subsidiaries
of Borrower are mutually dependent on each other in the conduct of their
respective businesses under a holding company structure, with the credit needed
from time to time by each often being provided by another or by means of
financing obtained by one such affiliate with the support of the others for
their mutual benefit and the ability of each to obtain such financing being
dependent on the successful operations of the others.
9. The board of directors of Guarantor has determined that Guarantor's
execution, delivery and performance of this Guaranty may reasonably be expected
to benefit Guarantor, directly or indirectly, and are in the best interests of
Guarantor.
NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Guarantor from Lenders' advances of funds to Borrower under the
Credit Agreement, and of Ten Dollars and other good and valuable consideration,
the receipt and sufficiency of all of which are hereby acknowledged, and in
order to induce Lenders to advance funds under the Credit Agreement, Guarantor
hereby agrees with Agent, for the benefit of Agent and Lenders as follows:
AGREEMENTS
Section 1. Definitions. Reference is hereby made to the Credit
Agreement for all purposes. All terms used in this Guaranty which are defined in
the Credit Agreement and not otherwise defined herein shall have the same
meanings when used herein. All references herein to any Obligation Document,
Loan Document, or other document or instrument refer to the same as from time to
time amended, supplemented or restated. As used herein the following terms shall
have the following meanings:
"Agent" means the Person who, at the time in question, is the "Agent"
under the Credit Agreement. Whenever there is only one Lender under the Credit
Agreement, "Agent" shall also refer to such Lender in such capacity as the only
Lender.
"Lenders" means NationsBank of Texas, N.A. and all other Persons who at
any time are "Lenders" under the Credit Agreement.
"Obligations" means collectively all of the indebtedness, obligations,
and undertakings which are guaranteed by Guarantor and described in subsections
(a) and (b) of Section 2.
"Obligation Documents" means this Guaranty, the Notes, the Credit
Agreement, the Loan Documents.
<PAGE> 3
"Obligors" means Borrower, Guarantor and any other endorsers,
guarantors or obligors, primary or secondary, of any or all of the Obligations.
"Security" means any rights, properties, or interests of Agent or
Lenders, under the Obligation Documents or otherwise, which provide recourse or
other benefits to Agent or Lenders in connection with the Obligations or the
non-payment or non-performance thereof, including collateral (whether real or
personal, tangible or intangible) in which Agent or Lenders have rights under or
pursuant to any Obligation Documents, guaranties of the payment or performance
of any Obligation, bonds, surety agreements, keep-well agreements, letters of
credit, rights of subrogation, rights of offset, and rights pursuant to which
other claims are subordinated to the Obligations.
Section 2. Guaranty.
(a) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to Agent and each Lender the prompt, complete, and full payment when
due, and no matter how the same shall become due, of:
(i) the Notes, including all principal, all interest thereon
and all other sums payable thereunder; and
(ii) All other sums payable under the other Obligation
Documents, whether for principal, interest, fees or otherwise; and
(iii) Any and all other indebtedness or liabilities which
Borrower may at any time owe to Agent or any Lender, whether incurred
heretofore or hereafter or concurrently herewith, voluntarily or
involuntarily, whether owed alone or with others, whether fixed,
contingent, absolute, inchoate, liquidated or unliquidated, whether
such indebtedness or liability arises by notes, discounts, overdrafts,
open account indebtedness or in any other manner whatsoever, and
including interest, attorneys' fees and collection costs as may be
provided by law or in any instrument evidencing any such indebtedness
or liability.
Without limiting the generality of the foregoing, Guarantor's obligations
hereunder shall extend to and include all post-petition interest, expenses, and
other duties and liabilities of Borrower described above in this subsection (a),
or below in the following subsection (b), which would be owed by Borrower but
for the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization, or similar proceeding involving Borrower.
(b) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to Agent and each Lender the prompt, complete and full performance,
when due, and no matter how the same shall become due, of all obligations and
undertakings of Borrower to Agent or such Lender under, by reason of, or
pursuant to any of the Obligation Documents.
(c) If Borrower shall for any reason fail to pay any Obligation, as and
when such Obligation shall become due and payable, whether at its stated
maturity, as a result of the
<PAGE> 4
exercise of any power to accelerate, or otherwise, Guarantor will, forthwith
upon demand by Agent, pay such Obligation in full to Agent for the benefit of
Agent or the Lender to whom such Obligation is owed. If Borrower shall for any
reason fail to perform promptly any Obligation, Guarantor will, forthwith upon
demand by Agent, cause such Obligation to be performed or, if specified by
Agent, provide sufficient funds, in such amount and manner as Agent shall in
good faith determine, for the prompt, full and faithful performance of such
Obligation by Agent or such other Person as Agent shall designate.
(d) If either Borrower or Guarantor fails to pay or perform any
Obligation as described in the immediately preceding subsections (a), (b), or
(c) Guarantor will incur the additional obligation to pay to Agent, and
Guarantor will forthwith upon demand by Agent pay to Agent, the amount of any
and all expenses, including fees and disbursements of Agent's counsel and of any
experts or agents retained by Agent, which Agent may incur as a result of such
failure.
(e) As between Guarantor and Agent or Lenders, this Guaranty shall be
considered a primary and liquidated liability of Guarantor.
(f) The obligations of Guarantor hereunder shall be limited to an
aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provisions of any applicable state or
federal law.
Section 3. Unconditional Guaranty.
(a) No action which Agent or any Lender may take or omit to take in
connection with any of the Obligation Documents, any of the Obligations (or any
other indebtedness owing by Borrower to Agent or any Lender), or any Security,
and no course of dealing of Agent or any Lender with any Obligor or any other
Person, shall release or diminish Guarantor's obligations, liabilities,
agreements or duties hereunder, affect this Guaranty in any way, or afford
Guarantor any recourse against Agent or any Lender, regardless of whether any
such action or inaction may increase any risks to or liabilities of Agent or any
Lender or any Obligor or increase any risk to or diminish any safeguard of any
Security. Without limiting the foregoing, Guarantor hereby expressly agrees that
Agent and Lenders may, from time to time, without notice to or the consent of
Guarantor, do any or all of the following:
(i) Amend, change or modify, in whole or in part, any one or
more of the Obligation Documents and give or refuse to give any waivers
or other indulgences with respect thereto.
(ii) Neglect, delay, fail, or refuse to take or prosecute any
action for the collection or enforcement of any of the Obligations, to
foreclose or take or prosecute any action in connection with any
Security or Obligation Document, to bring suit against any Obligor or
any other Person, or to take any other action concerning the
Obligations or the Obligation Documents.
<PAGE> 5
(iii) Accelerate, change, rearrange, extend, or renew the
time, rate, terms, or manner for payment or performance of any one or
more of the Obligations (whether for principal, interest, fees,
expenses, indemnifications, affirmative or negative covenants, or
otherwise).
(iv) Compromise or settle any unpaid or unperformed
Obligation or any other obligation or amount due or owing, or claimed
to be due or owing, under any one or more of the Obligation Documents.
(v) Take, exchange, amend, eliminate, surrender, release, or
subordinate any or all Security for any or all of the Obligations,
accept additional or substituted Security therefor, and perfect or fail
to perfect Agent's or Lenders' rights in any or all Security.
(vi) Discharge, release, substitute or add Obligors.
(vii) Apply all monies received from Obligors or others, or
from any Security for any of the Obligations, as Agent or Lenders may
determine to be in their best interest, without in any way being
required to marshall Security or assets or to apply all or any part of
such monies upon any particular Obligations.
(b) No action or inaction of any Obligor or any other Person, and no
change of law or circumstances, shall release or diminish Guarantor's
obligations, liabilities, agreements, or duties hereunder, affect this Guaranty
in any way, or afford Guarantor any recourse against Agent or any Lender.
Without limiting the foregoing, the obligations, liabilities, agreements, and
duties of Guarantor under this Guaranty shall not be released, diminished,
impaired, reduced, or affected by the occurrence of any or all of the following
from time to time, even if occurring without notice to or without the consent of
Guarantor:
(i) Any voluntary or involuntary liquidation, dissolution,
sale of all or substantially all assets, marshalling of assets or
liabilities, receivership, conservatorship, assignment for the benefit
of creditors, insolvency, bankruptcy, reorganization, arrangement, or
composition of any Obligor or any other proceedings involving any
Obligor or any of the assets of any Obligor under laws for the
protection of debtors, or any discharge, impairment, modification,
release, or limitation of the liability of, or stay of actions or lien
enforcement proceedings against, any Obligor, any properties of any
Obligor, or the estate in bankruptcy of any Obligor in the course of or
resulting from any such proceedings.
(ii) The failure by Agent or any Lender to file or enforce a
claim in any proceeding described in the immediately preceding
subsection (i) or to take any other action in any proceeding to which
any Obligor is a party.
(iii) The release by operation of law of any Obligor from any
of the Obligations or any other obligations to Agent or any Lender.
<PAGE> 6
(iv) The invalidity, deficiency, illegality, or
unenforceability of any of the Obligations or the Obligation Documents,
in whole or in part, any bar by any statute of limitations or other law
of recovery on any of the Obligations, or any defense or excuse for
failure to perform on account of force majeure, act of God, casualty,
impossibility, impracticability, or other defense or excuse whatsoever.
(v) The failure of any Obligor or any other Person to sign
any guaranty or other instrument or agreement within the contemplation
of any Obligor, Agent or any Lender.
(vi) The fact that Guarantor may have incurred directly part
of the Obligations or is otherwise primarily liable therefor.
(vii) Without limiting any of the foregoing, any fact or event
(whether or not similar to any of the foregoing) which in the absence
of this provision would or might constitute or afford a legal or
equitable discharge or release of or defense to a guarantor or surety
other than the actual payment and performance by Guarantor under this
Guaranty.
(c) Agent and Lenders may invoke the benefits of this Guaranty before
pursuing any remedies against any Obligor or any other Person and before
proceeding against any Security now or hereafter existing for the payment or
performance of any of the Obligations. Agent and Lenders may maintain an action
against Guarantor on this Guaranty without joining any other Obligor therein and
without bringing a separate action against any other Obligor.
(d) If any payment to Agent or any Lender by any Obligor is held to
constitute a preference or a voidable transfer under applicable state or federal
laws, or if for any other reason Agent or any Lender is required to refund such
payment to the payor thereof or to pay the amount thereof to any other Person,
such payment to Agent or such Lender shall not constitute a release of Guarantor
from any liability hereunder, and Guarantor agrees to pay such amount to Agent
or such Lender on demand and agrees and acknowledges that this Guaranty shall
continue to be effective or shall be reinstated, as the case may be, to the
extent of any such payment or payments. Any transfer by subrogation which is
made as contemplated in Section 6 prior to any such payment or payments shall
(regardless of the terms of such transfer) be automatically voided upon the
making of any such payment or payments, and all rights so transferred shall
thereupon revert to and be vested in Agent and Lenders.
(e) This is a continuing guaranty and shall apply to and cover all
Obligations and renewals and extensions thereof and substitutions therefor from
time to time.
Section 4. Waiver. Guarantor hereby waives, with respect to the
Obligations, this Guaranty, and the other Obligation Documents:
(a) notice of the incurrence of any Obligation by Borrower, and notice
of any kind concerning the assets, liabilities, financial condition,
creditworthiness, businesses, prospects, or other affairs of Borrower (it being
understood and agreed that: (i) Guarantor shall take full
<PAGE> 7
responsibility for informing itself of such matters, (ii) neither Agent nor any
Lender shall have any responsibility of any kind to inform Guarantor of such
matters, and (iii) Agent and Lenders are hereby authorized to assume that
Guarantor, by virtue of its relationships with Borrower which are independent of
this Guaranty, has full and complete knowledge of such matters whenever Lenders
extend credit to Borrower or take any other action which may change or increase
Guarantor's liabilities or losses hereunder).
(b) notice that Agent, any Lender, any Obligor, or any other Person has
taken or omitted to take any action under any Obligation Document or any other
agreement or instrument relating thereto or relating to any Obligation.
(c) notice of acceptance of this Guaranty and all rights of Guarantor
under ss.34.02 of the Texas Business and Commerce Code.
(d) demand, presentment for payment, and notice of demand, dishonor,
nonpayment, or nonperformance.
(e) notice of intention to accelerate, notice of acceleration, protest,
notice of protest, notice of any exercise of remedies (as described in the
following Section 5 or otherwise), and all other notices of any kind whatsoever.
Section 5. Exercise of Remedies. Agent, on behalf of Lenders, shall
have the right to enforce, from time to time, in any order and at Agent's sole
discretion, any rights, powers and remedies which Agent, on behalf of Lenders,
may have under the Obligation Documents or otherwise, including judicial
foreclosure, the exercise of rights of power of sale, the taking of a deed or
assignment in lieu of foreclosure, the appointment of a receiver to collect
rents, issues and profits, the exercise of remedies against personal property,
or the enforcement of any assignment of leases, rentals, oil or gas production,
or other properties or rights, whether real or personal, tangible or intangible;
and Guarantor shall be liable to Agent, on behalf of Lenders, hereunder for any
deficiency resulting from the exercise by Agent or any Lender of any such right
or remedy even though any rights which Guarantor may have against Borrower or
others may be destroyed or diminished by exercise of any such right or remedy.
No failure on the part of Agent, on behalf of Lenders, to exercise, and no delay
in exercising, any right hereunder or under any other Obligation Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right preclude any other or further exercise thereof or the exercise of any
other right. The rights, powers and remedies of Agent, on behalf of Lenders,
provided herein and in the other Obligation Documents are cumulative and are in
addition to, and not exclusive of, any other rights, powers or remedies provided
by law or in equity. The rights of Agent, on behalf of Lenders, hereunder are
not conditional or contingent on any attempt by Agent or any Lender to exercise
any of its rights under any other Obligation Document against any Obligor or any
other Person.
Section 6. Limited Subrogation. Until all of the Obligations have been
paid and performed in full Guarantor shall have no right to exercise any right
of subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which it may now or hereafter have against or to any Obligor or any
Security in connection with this Guaranty
<PAGE> 8
(including any right of subrogation under ss.34.04 of the Texas Business and
Commerce Code), and Guarantor hereby waives any rights to enforce any remedy
which Guarantor may have against Borrower and any right to participate in any
Security until such time. If any amount shall be paid to Guarantor on account of
any such subrogation or other rights, any such other remedy, or any Security at
any time when all of the Obligations and all other expenses guaranteed pursuant
hereto shall not have been paid in full, such amount shall be held in trust for
the benefit of Agent, shall be segregated from the other funds of Guarantor and
shall forthwith be paid over to Agent to be held by Agent as collateral for, or
then or at any time thereafter applied in whole or in part by Agent against, all
or any portion of the Obligations, whether matured or unmatured, in such order
as Agent shall elect. If Guarantor shall make payment to Agent of all or any
portion of the Obligations and if all of the Obligations shall be finally paid
in full, Agent will, at Guarantor's request and expense, execute and deliver to
Guarantor (without recourse, representation or warranty) appropriate documents
necessary to evidence the transfer by subrogation to Guarantor of an interest in
the Obligations resulting from such payment by Guarantor; provided that such
transfer shall be subject to Section 3(d) above and that without the consent of
Agent (which Agent may withhold in its discretion) Guarantor shall not have the
right to be subrogated to any claim or right against any Obligor which has
become owned by Agent or any Lender, whose ownership has otherwise changed in
the course of enforcement of the Obligation Documents, or which Agent otherwise
has released or wishes to release from its Obligations.
Section 7. Successors and Assigns. Guarantor's rights or obligations
hereunder may not be assigned or delegated, but this Guaranty and such
obligations shall pass to and be fully binding upon the successors of Guarantor,
as well as Guarantor. This Guaranty shall apply to and inure to the benefit of
Agent and Lenders and their successors or assigns. Without limiting the
generality of the immediately preceding sentence, Agent and each Lender may
assign, grant a participation in, or otherwise transfer any Obligation held by
it or any portion thereof, and Agent and each Lender may assign or otherwise
transfer its rights or any portion thereof under any Obligation Document, to any
other Person, and such other Person shall thereupon become vested with all of
the benefits in respect thereof granted to Agent or such Lender hereunder unless
otherwise expressly provided by Agent or such Lender in connection with such
assignment or transfer.
Section 8. Offset. Guarantor hereby grants to Lenders a right of offset
to secure the payment of the Obligations and Guarantor's obligations and
liabilities hereunder, which right of offset shall be upon any and all monies,
securities and other property (and the proceeds therefrom) of Guarantor now or
hereafter held or received by or in transit to Agent or any Lender from or for
the account of Guarantor, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special), credits and claims of Guarantor at any time existing
against Agent or any Lender. Upon the occurrence of any Default or Event of
Default Agent and each Lender is hereby authorized at any time and from time to
time, without notice to Guarantor, to offset, appropriate and apply any and all
items hereinabove referred to against the Obligations and Guarantor's
obligations and liabilities hereunder irrespective of whether or not Agent or
such Lender shall have made any demand under this Guaranty and although such
obligations and liabilities may be contingent or unmatured. Agent and each
Lender agrees promptly to notify Guarantor after any such offset and application
made by Agent or such Lender, provided that the failure to
<PAGE> 9
give such notice shall not affect the validity of such offset and application.
The rights of Agent and each Lender under this section are in addition to, and
shall not be limited by, any other rights and remedies (including other rights
of offset) which Agent and Lenders may have.
Section 9. Representations and Warranties. Guarantor hereby represents
and warrants to Agent and each Lender as follows:
(a) The Recitals at the beginning of this Guaranty are true and correct
in all respects.
(b) Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation as set forth in
the Recitals to this Guaranty; and Guarantor has all requisite power and
authority to execute, deliver and perform this Guaranty.
(c) The execution, delivery and performance by Guarantor of this
Guaranty have been duly authorized by all necessary corporate action and do not
and will not contravene its certificate or articles of incorporation or bylaws.
(d) The execution, delivery and performance by Guarantor of this
Guaranty do not and will not contravene any law or governmental regulation or
any contractual restriction binding on or affecting Guarantor or any of its
Affiliates or properties, and do not and will not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties.
(e) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body or third
party is required for the due execution, delivery and performance by Guarantor
of this Guaranty.
(f) This Guaranty is a legal, valid and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its terms except as
limited by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors' rights.
(g) There is no action, suit or proceeding pending or, to the knowledge
of Guarantor, threatened against or otherwise affecting Guarantor before any
court, arbitrator or governmental department, commission, board, bureau, agency
or instrumentality which may materially and adversely affect Guarantor's
financial condition or its ability to perform its obligations hereunder.
(h) The direct or indirect value of the consideration received and to
be received by Guarantor in connection herewith is reasonably worth at least as
much as the liability and obligations of Guarantor hereunder, and the incurrence
of such liability and obligations in return for such consideration may
reasonably be expected to benefit Guarantor, directly or indirectly.
(i) Guarantor is not "insolvent" on the date hereof (that is, the sum
of Guarantor's absolute and contingent liabilities, including the Obligations,
does not exceed the fair market
<PAGE> 10
value of Guarantor's assets). Guarantor's capital is adequate for the businesses
in which Guarantor is engaged and intends to be engaged. Guarantor has not
incurred (whether hereby or otherwise), nor does Guarantor intend to incur or
believe that it will incur, debts which will be beyond its ability to pay as
such debts mature.
(j) All balance sheets, earning statements, financial data and other
information concerning Guarantor which have been furnished to Agent and each
Lender to induce it to accept this Guaranty (or otherwise furnished to Agent and
each Lender in connection with the transactions contemplated hereby or
associated herewith) fairly represent the financial condition of Guarantor as of
the dates and the results of Guarantor's operations for the periods for which
the same are furnished. None of such balance sheets, earnings and cash flow
statements, financial data and other information contains any untrue statement
of a material fact or omits to state any material fact which is necessary to
make any statements contained therein not misleading.
Section 10. No Oral Change. No amendment of any provision of this
Guaranty shall be effective unless it is in writing and signed by Guarantor and
Lenders, and no waiver of any provision of this Guaranty, and no consent to any
departure by Guarantor therefrom, shall be effective unless it is in writing and
signed by Lenders, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
Section 11. Invalidity of Particular Provisions. If any term or
provision of this Guaranty shall be determined to be illegal or unenforceable
all other terms and provisions hereof shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by applicable law.
Section 12. Headings and References. The headings used herein are for
purposes of convenience only and shall not be used in construing the provisions
hereof. The words "this Guaranty," "this instrument," "herein," "hereof,"
"hereby" and words of similar import refer to this Guaranty as a whole and not
to any particular subdivision unless expressly so limited. The phrases "this
section" and "this subsection" and similar phrases refer only to the
subdivisions hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
Section 13. Term. This Guaranty shall be irrevocable until all of the
Obligations have been completely and finally paid and performed, no Lender has
any obligation to make any loans or other advances to Borrower, and all
obligations and undertakings of Borrower under, by reason of, or pursuant to the
Obligation Documents have been completely performed, and this Guaranty is
thereafter subject to reinstatement as provided in Section 3(d). All extensions
of credit and financial accommodations heretofore or hereafter made by Agent or
Lenders to Borrower shall be conclusively presumed to have been made in
acceptance hereof and in reliance hereon.
<PAGE> 11
Section 14. Notices. Any notice or communication required or permitted
hereunder shall be given as provided in the Credit Agreement.
Section 15. Limitation on Interest. Agent, Lenders and Guarantor intend
to contract in strict compliance with applicable usury law from time to time in
effect, and the provisions of the Credit Agreement limiting the interest for
which Guarantor is obligated are expressly incorporated herein by reference.
Section 16. Loan Document. This Guaranty is a Loan Document, as defined
in the Credit Agreement, and is subject to the provisions of the Credit
Agreement governing Loan Documents. Guarantor hereby approves all provisions of
the Credit Agreement and the other Loan Documents and ratifies and confirms any
provisions thereof which relate to Guarantor.
Section 17. Counterparts. This Guaranty may be executed in any number
of counterparts, each of which when so executed shall be deemed to constitute
one and the same Guaranty.
SECTION 18. GOVERNING LAW; SUBMISSION TO PROCESS. (I) THIS GUARANTY
SHALL BE DEEMED A CONTRACT MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. GUARANTOR HEREBY AGREES THAT ANY LEGAL ACTION OR
PROCEEDING AGAINST GUARANTOR WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE
NORTHERN DISTRICT OF TEXAS AS LENDER PARTIES MAY ELECT, AND, BY EXECUTION AND
DELIVERY HEREOF, GUARANTOR ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS, AND FURTHER AGREES TO A TRANSFER OF ANY SUCH PROCEEDING TO A FEDERAL
COURT SITTING IN THE STATE OF TEXAS TO THE EXTENT THAT IT HAS SUBJECT MATTER
JURISDICTION, AND OTHERWISE TO A STATE COURT IN TEXAS. GUARANTOR WAIVES ANY
RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS
ON THE BASIS OF FORUM NON CONVENIENS. IN FURTHERANCE OF THE FOREGOING, GUARANTOR
HEREBY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, 350 NORTH ST. PAUL STREET,
DALLAS, TEXAS 75201, AS AGENT OF GUARANTOR TO RECEIVE SERVICE OF ALL PROCESS
BROUGHT AGAINST GUARANTOR WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH COURT
IN TEXAS, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY GUARANTOR TO BE EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT. COPIES OF ANY SUCH PROCESS SO SERVED SHALL
ALSO, IF PERMITTED BY LAW, BE SENT BY REGISTERED MAIL TO GUARANTOR AT ITS
ADDRESS SET FORTH IN THE CREDIT AGREEMENT, BUT THE FAILURE OF GUARANTOR TO
RECEIVE SUCH COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS AS
AFORESAID. GUARANTOR SHALL FURNISH TO LENDER PARTIES A CONSENT OF CT CORPORATION
SYSTEM AGREEING TO
<PAGE> 12
ACT HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF LENDER PARTIES TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER PARTIES TO BRING PROCEEDINGS
AGAINST GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION. GUARANTOR SHALL NOT
REVOKE SUCH APPOINTMENT BUT IF FOR ANY REASON CT CORPORATION SYSTEM SHALL RESIGN
OR OTHERWISE CEASE TO ACT AS GUARANTOR'S AGENT, GUARANTOR HEREBY IRREVOCABLY
AGREES TO (A) IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT ACCEPTABLE TO AGENT
TO SERVE IN SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW AGENT SHALL BE DEEMED TO
BE SUBSTITUTED FOR CT CORPORATION SYSTEM FOR ALL PURPOSES HEREOF AND (B)
PROMPTLY DELIVER TO LENDER PARTIES THE WRITTEN CONSENT (IN FORM AND SUBSTANCE
SATISFACTORY TO AGENT) OF SUCH NEW AGENT AGREEING TO SERVE IN SUCH CAPACITY.
(II) GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND
IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (B) WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW, (C) CERTIFIES THAT NEITHER
IT NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR GUARANTOR HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE WAIVERS
AND CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION, "SPECIAL
DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES
(REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH
GUARANTOR HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO AGENT OR LENDERS.
Section 19. Amendment and Restatement. This Guaranty amends and
restates in its entirety the Original Guaranty, and all of the terms hereof
shall supersede the terms and provisions thereof.
THIS WRITTEN GUARANTY AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
<PAGE> 13
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 14
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date first written above.
IKERD-BANDY CO., INC.
By: /s/ John Lynch
--------------------------
Name: John Lynch
Title: Secretary
NATIONSBANK OF TEXAS, N.A.
By: /s/ Denise A. Smith
--------------------------
Name: Denise A. Smith
Title: SVP
<PAGE> 1
EXHIBIT 10.21
SUBSIDIARY SECURITY AGREEMENT
IKERD-BANDY
THIS SECURITY AGREEMENT (this "Agreement") is made as of November 11,
1997 by Ikerd Bandy, Inc., a Kentucky corporation ("Debtor"), in favor of
NationsBank of Texas, N.A., individually and as agent for the other Lenders that
hereafter become parties to the Credit Agreement referenced below ("Secured
Party").
W I T N E S S E T H:
WHEREAS, Addington Enterprises, Inc., a Kentucky corporation
("Addington"), entered into a Credit Agreement dated as of October 8, 1997 with
Secured Party (the "Original Credit Agreement"), pursuant to which NationsBank
made loans to Addington, and funds were advanced to Addington pursuant to that
certain promissory note dated October 8, 1997 and executed by Addington in the
original principal amount of $50,000,000 payable to the order to NationsBank
(the "Original Promissory Note");
WHEREAS, as a condition precedent to Secured Party's obligations to
advance funds pursuant to the Original Credit Agreement, Debtor (then a wholly
owned subsidiary of Addington) executed that certain Guaranty dated as of
October 17, 1997 in favor of Secured Party (the "Original Guaranty") and that
certain Subsidiary Security Agreement dated as of October 17, 1997 in favor of
Secured Party (the "Original Security Agreement");
WHEREAS, contemporaneously with the execution and delivery hereof,
Addington has sold all of its assets, including but not limited to all of the
outstanding capital stock of Debtor, to AEI Holding Company, Inc., a Delaware
corporation ("Borrower"), and Borrower has assumed substantially all of the
outstanding indebtedness and obligations of Addington, including but not limited
to all indebtedness and obligations of Addington owing to NationsBank and
Secured Party under the Original Credit Agreement and the Original Promissory
Note;
WHEREAS, Borrower, Agent, and Lenders have entered into that certain
Credit Agreement of even date herewith, (herein, as from time to time amended,
supplemented or restated, called the "Credit Agreement"), pursuant to which
funds are to be advanced to Borrower under the Notes (as such term is defined
below) which funds may be further advanced by Borrower to its Affiliates,
including Debtor (the Credit Agreement amended and restated the Original Credit
Agreement in its entirety);
WHEREAS, Borrower has executed (i) that certain Promissory Note of even
date herewith payable to the order of NationsBank in the original principal
amount of $30,000,000 on or before the Maturity Date and (ii) that certain
Promissory Note of even
- 1 -
<PAGE> 2
date herewith payable to the order of The Provident Bank in the original
principal amount of $20,000,000 on or before the Maturity Date (such promissory
notes, as from time to time amended, and all promissory notes given in
substitution, renewal or extension therefor or thereof, in whole or in part,
being herein collectively called the "Notes"), which Notes renewed and extended
the Original Promissory Note;
WHEREAS, pursuant to the Credit Agreement, Debtor is concurrently
herewith giving to Agent for the benefit of Lenders a Guaranty of even date
herewith which amends and restates in its entirety the Original Guaranty
(herein, as from time to time amended, supplemented or restated, called the
"Guaranty");
WHEREAS, it is a condition precedent to Lenders' obligations to advance
funds pursuant to the Credit Agreement that Debtor shall execute and deliver to
Secured Party an amendment and restatement of the Original Security Agreement;
WHEREAS, Borrower owns all of the issued and outstanding shares of
capital stock of Debtor;
WHEREAS, the board of directors of Debtor has determined that Debtor's
execution, delivery and performance of this Agreement may reasonably be expected
to benefit Debtor, directly or indirectly, and is in the best interests of
Debtor;
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to extend such credit under the Credit Agreement, Debtor hereby agrees
with Secured Party, for the benefit of Lenders and Secured Party, as follows:
ARTICLE I
Definitions and References
Section 1.1. General Definitions. As used herein, the terms
"Agreement", "Debtor", and "Credit Agreement" shall have the meanings indicated
above, and the following terms shall have the following meanings:
"Collateral" means all property, of whatever type, which is described
in Section 2.1 as being at any time subject to a security interest granted
hereunder to Secured Party.
"Collateral Account" has the meaning given it in Section 4.1(e).
"Commitment" means the agreement or commitment by Lenders to make loans
or otherwise extend credit to Debtor under the Credit Agreement, and any other
agreement, commitment, statement of terms or other document contemplating the
making of loans or advances or other extension of credit by Lenders to or for
the account of Debtor which is now or at any time hereafter intended to be
secured by the Collateral under this Agreement.
- 2 -
<PAGE> 3
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing inventory, equipment, or other
goods.
"Equipment" means all equipment (as defined in the UCC) in whatever
form, wherever located, and whether now or hereafter existing, and all parts
thereof, all accessions thereto, and all replacements therefor, including but
not limited to the Operating Equipment.
"General Intangibles" means all general intangibles (as defined in the
UCC) of any kind (including choses in action, tax refunds, insurance proceeds,
and contract rights), and all instruments, security agreements, leases,
contracts, and other rights (except those constituting Receivables, Documents,
or Instruments) to receive payments of money or the ownership or possession of
property. The General Intangibles include, among other items, all Intellectual
Property.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (as each is defined in" the UCC).
"Intellectual Property" means any Patents, Patent Licenses, Trademarks,
and Trademark Licenses.
"Inventory" means all inventory (as defined in the UCC) in all of its
forms, wherever located and whether now or hereafter existing, including (a) all
movable property and other goods held for sale or lease, all movable property
and other goods furnished or to be furnished under contracts of service, all raw
materials and work in process, and all materials and supplies used or consumed
in a business, including but not limited to all coal and other minerals after
extraction, all stockpiles thereof and related products, (b) all movable
property and other goods which are part of a product or mass, (c) all movable
property and other goods which are returned to or repossessed by the seller,
lessor, or supplier thereof, (d) all goods and substances in which any of the
foregoing is commingled or to which any of the foregoing is added, and (e) all
accessions to, products of, and documents for any of the foregoing.
"Issuer" means any issuer of Subsidiary Shares and any successor of
such Issuer.
"Investment Property" means all "certificated securities",
"uncertificated securities", "security entitlements", "security accounts",
"commodity contracts" or "commodity accounts" (as each is defined in the UCC)
and shall include, without limitation, all Subsidiary Shares.
"Lenders" means the Persons who are from time to time "Lenders" as
defined in the Credit Agreement.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure indebtedness of any kind which is owed
to him or any other arrangement with such creditor which provides for the
payment of such indebtedness out of such property or assets or which allows him
to have such indebtedness satisfied out of such property or assets prior to
- 3 -
<PAGE> 4
the general creditors of any owner thereof, including without limitation any
lien, mortgage, security interest, pledge, deposit, production payment, rights
of a vendor under any title retention or conditional sale agreement or lease
substantially equivalent thereto, tax lien, mechanic's or materialman's lien, or
any other charge or encumbrance for security purposes, whether arising by law or
agreement or otherwise, but excluding any right of offset which arises without
agreement in the ordinary course of business. "Lien" also means any filed
financing statement, any registration with an issuer of uncertificated
securities, or any other arrangement which would serve to perfect a Lien
described in the preceding sentence, regardless of whether such financing
statement is filed, such registration is made, or such arrangement is undertaken
before or after such Lien exists.
"Lockbox" has the meaning given it in Section 4.1(e).
"Obligation Documents" means the Credit Agreement, the Notes, the Loan
Documents, and all other documents and instruments under, by reason of which, or
pursuant to which any or all of the Secured Obligations are evidenced, governed,
secured, or otherwise dealt with, and all other agreements, certificates, and
other documents, instruments and writings heretofore or hereafter delivered in
connection herewith or therewith.
"Other Liable Party" means any Person, other than Debtor, who may now
or may at any time hereafter be primarily or secondarily liable for any of the
Secured Obligations or who may now or may at any time hereafter have granted to
Secured Party or Lenders a Lien upon any property as security for the Secured
Obligations.
"Patent License" means any license or other agreement, whether now or
hereafter in existence, under which is granted or authorized any right with
respect to any Patent or any invention now or hereafter in existence, whether
patentable or not, whether a patent or application for patent is in existence on
such invention or not, and whether a patent or application for patent on such
invention may come into existence.
"Patents" means all the following: (a) all letters patent and design
letters patent of the United States or any other country and all applications
for letters patent and design letters patent of the United States or any other
country, including applications in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
other country, or any political subdivision thereof. (b) all reissues,
divisions, continuations, continuations-in-part, renewals and extensions
thereof, (c) all claims for, and rights to sue for, past or future infringements
of any of the foregoing, and (d) all income, royalties, damages and payments now
or hereafter due or payable with respect to any of the foregoing, including
damages and payments for past or future infringements thereof.
"Perfection Certificate" means a certificate substantially in the form
of Exhibit A, appropriately completed to the satisfaction of Secured Party and
duly executed by the indicated officer or officers of Debtor.
- 4 -
<PAGE> 5
"Permitted Liens" means any Liens expressly permitted under Section 7.2
of the Credit Agreement.
"Person" means an individual, corporation, partnership, association,
joint stock company, trust, unincorporated organization or joint venture, or a
court or governmental unit or any agency or subdivision thereof, or any other
legally recognizable entity.
"Proceeds" means, with respect to any property of any kind, all
proceeds of, and all other profits, products, rentals or receipts, in whatever
form, arising from any sale, exchange, collection, lease, licensing or other
disposition of, distribution in respect of, or other realization upon, such
property, including all claims against third parties for loss of, damage to or
destruction of, or for proceeds payable under (or unearned premiums with respect
to) insurance in respect of, such property (regardless of whether Secured Party
is named a loss payee thereunder), and any payments paid or owing by any third
party under any indemnity, warranty, or guaranty with respect to such property,
and any condemnation or requisition payments with respect to such property, in
each case whether now existing or hereafter arising.
"Receivables" means (a) all accounts (as defined in the UCC) and all
other rights to payment for goods or other personal property which have been (or
are to be) sold, leased, or exchanged or for services which have been (or are to
be) rendered, regardless of whether such accounts or other rights to payment
have been earned by performance and regardless of whether such accounts or other
rights to payment are evidenced by or characterized as accounts receivable,
contract rights, book debts, notes, drafts or other obligations of indebtedness,
(b) all Documents and Instruments of any kind relating to such accounts or other
rights to payment or otherwise arising out of or in connection with the sale,
lease or exchange of goods or other personal property or the rendering of
services, (c) all rights in, to, or under all security agreements, leases and
other contracts securing or otherwise relating to any such accounts, rights to
payment, Documents, or Instruments, (d) all rights in, to and under any purchase
orders, service contracts, or other contracts out of which such accounts and
other rights to payment arose (or will arise on performance), and (e) all rights
in or pertaining to any goods arising out of or in connection with any such
purchase orders, service contracts, or other contracts, including rights in
returned or repossessed goods and rights of replevin, repossession, and
reclamation.
"Related Person" means Debtor, each Subsidiary of Debtor, Borrower and
each Other Liable Party.
"Secured Obligations" has the meaning given such term in Section 2.2.
"Secured Party" means the Person named as such at the beginning of this
Agreement, together with its successors and assigns as the "Agent" under the
Credit Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which
- 5 -
<PAGE> 6
is directly or indirectly (through one or more intermediaries) controlled by or
owned fifty percent or more by such Person.
"Subsidiary Shares" means all of the following issued by any Subsidiary
of Debtor; (a) all shares of capital stock , (b) all units of membership
interest, (c) all certificates representing any such shares and units, (d) all
options and other rights, contractual or otherwise, at any time existing with
respect to such shares and units, and (e) all dividends, cash, instruments and
other property now or hereafter received, receivable or otherwise distributed in
respect of or in exchange for any or all of such shares or units.
"Trademark License" means any license or agreement, whether now or
hereafter in existence, under which is granted or authorized any right to use
any Trademark.
"Trademarks" means all of the following: (a) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, brand names, trade dress, prints and
labels on which any of the foregoing have appeared or appear, package and other
designs, and any other source or business identifiers, and general intangibles
of like nature, and the rights in any of the foregoing which arise under
applicable law, (b) the goodwill of the business symbolized thereby or
associated with each of them, (c) all registrations and applications in
connection therewith, including registrations and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or other country, or any political subdivision
thereof, (d) all reissues, extensions and renewals thereof, (e) all claims for,
and rights to sue for, past or future infringements of any of the foregoing, and
(f) all income, royalties, damages and payments now or hereafter due or payable
with respect to any of the foregoing, including damages and payments for past or
future infringements thereof.
"UCC" means the Uniform Commercial Code in effect in the State of Texas
on the date hereof.
Section 1.2. Other Definitions. Reference is hereby made to the Credit
Agreement for a statement of the terms thereof. All capitalized terms used in
this Agreement which are defined in the Credit Agreement and not otherwise
defined herein shall have the same meanings herein as set forth therein. All
terms used in this Agreement which are defined in the UCC and not otherwise
defined herein or in the Credit Agreement shall have the same meanings herein as
set forth therein, except where the context otherwise requires.
Section 1.3. Attachments. All exhibits or schedules which may be
attached to this Agreement are a part hereof for all purposes.
Section 1.4. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document (including, but not
limited to, references in Section 2.1) also refer to and include all renewals,
extensions, amendments, modifications, supplements or restatements of any
- 6 -
<PAGE> 7
such agreement, instrument or document, provided that nothing contained in this
Section shall be construed to authorize any Person to execute or enter into any
such renewal, extension, amendment, modification, supplement or restatement.
Section 1.5. References and Titles. All references in this Agreement to
Exhibits, Articles, Sections, subsections, and other subdivisions refer to the
Exhibits, Articles, Sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the beginning
of any subdivision are for convenience only and do not constitute any part of
any such subdivision and shall be disregarded in construing the language
contained in this Agreement. The words "this Agreement", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited. The
phrases "this Section" and "this subsection" and similar phrases refer only to
the Sections or subsections hereof in which the phrase occurs. The word "or" is
not exclusive, and the word "including" (in all of its forms) means "including
without limitation". Pronouns in masculine, feminine and neuter gender shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa unless the context otherwise
requires.
ARTICLE II
Security Interest
Section 2.1. Grant of Security Interest. As collateral security for all
of the Secured Obligations, Debtor hereby pledges and assigns to Secured Party
and grants to Secured Party a continuing security interest, for the benefit of
Lenders, in and to all right, title and interest of Debtor in and to any and all
of the following property, whether now owned or existing or hereafter acquired
or arising and regardless of where located:
(a) all Receivables.
(b) all General Intangibles.
(c) all Documents.
(d) all Instruments.
(e) all Inventory.
(f) all Investment Property.
(g) all Equipment.
- 7 -
<PAGE> 8
(h) The Collateral Account and the Lockbox, all cash deposited therein
from time to time, and all Liquid Investments referred to in Section 4.1(e).
(i) All books and records (including, without limitation, customer
lists, marketing information, credit files, price lists, operating records,
vendor and supplier price lists, sales literature, computer software, computer
hardware, computer disks and tapes and other storage media, printouts and other
materials and records) of Debtor pertaining to any of the Collateral.
(j) All moneys and property of any kind of Debtor in the possession or
under the control of Secured Party.
(k) All Proceeds of any and all of the foregoing Collateral.
In each case, the foregoing shall be covered by this Agreement, whether Debtor's
ownership or other rights therein are presently held or hereafter acquired and
howsoever Debtor's interests therein may arise or appear (whether by ownership,
security interest, claim or otherwise).
Section 2.2. Secured Obligations Secured. The security interest created
hereby in the Collateral constitutes continuing collateral security for all of
the following obligations, indebtedness and liabilities, whether now existing or
hereafter incurred or arising:
(a) Credit Agreement Indebtedness. The payment by Debtor, as and when
due and payable, of the "Obligations", as defined in the Credit Agreement, and
of all amounts from time to time owing by Debtor under or in respect of the
Credit Agreement, the Notes or any of the other Obligation Documents.
(b) Guaranteed Indebtedness. The payment by Debtor, when due and
payable, of all amounts from time to time owing by Debtor under or in respect of
the Guaranty or any of the other Obligation Documents to which Debtor is a
party, and the due performance by Debtor of all of its other respective
obligations under or in respect of the Guaranty and such other Obligation
Documents.
(c) Interest Rate Hedges. The payment and performance of any and all
present or future obligations of Debtor according to the terms of any present or
future interest rate or currency rate swap, rate cap, rate floor, rate collar,
exchange transaction, forward rate agreement, or other exchange rate protection
agreements or any option with respect to any such transaction now existing or
hereafter entered into between Debtor, any Subsidiary of Debtor, and one or more
parties constituting any Lender (or any affiliate of any Lender).
(d) Other Indebtedness. All loans and future advances made by Lenders
to Debtor and all other debts, obligations and liabilities of every kind and
character of Debtor now or hereafter existing in favor of Lenders, whether such
debts, obligations or liabilities be direct or indirect, primary or secondary,
joint or several, fixed or contingent, and whether originally payable to Lenders
or to a third party and subsequently acquired by Lenders and whether such debts,
- 8 -
<PAGE> 9
obligations or liabilities are evidenced by notes, open account, overdraft,
endorsement, security agreement, guaranty or otherwise (it being contemplated
that Debtor may hereafter become indebted to Lenders in further sum or sums but
Lenders shall have no obligation to extend further indebtedness by reason of
this Agreement).
(e) Renewals. All renewals, extensions, amendments, modifications,
supplements, or restatements of or substitutions for any of the foregoing.
(f) Performance. The due performance and observance by Debtor of all of
its other obligations from time to time existing under or in respect of any of
the Obligation Documents.
As used herein, the term "Secured Obligations" refers to all present and future
indebtedness, obligations and liabilities of whatever type which are described
above in this section, including any interest which accrues after the
commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of Debtor. Debtor hereby acknowledges
that the Secured Obligations are owed to the various Lenders and that each
Lender is entitled to the benefits of the Liens given under this Agreement. It
is the intention of the Debtor, Secured Party and each Lender that this
Agreement not constitute a fraudulent transfer or fraudulent conveyance under
any state or federal law that may be applied hereto. Debtor and, by their
acceptance hereof, Secured Party and each Lender hereby acknowledge and agree
that, notwithstanding any other provision of this Agreement: (a) the
indebtedness secured hereby shall be limited to the maximum amount of
indebtedness that can be incurred or secured by Debtor without rendering this
Agreement subject to avoidance under Section 548 of the United States Bankruptcy
Code or any comparable provisions of any applicable state or federal law, and
(b) the Collateral pledged by Debtor hereunder shall be limited to the maximum
amount of Collateral that can be pledged by Debtor without rendering this
Agreement subject to avoidance under Section 548 of the United States Bankruptcy
Code or any comparable provisions of any applicable state or federal law.
ARTICLE III
Representations, Warranties and Covenants
Section 3.1. Representations and Warranties. Debtor hereby represents
and warrants to Secured Party and Lenders as follows:
(a) Ownership Free of Liens. Debtor has good and marketable title to
the Collateral, free and clear of all Liens, encumbrances or adverse claims
except for the security interest created by this Agreement and any Permitted
Liens. No effective financing statement or other registration or instrument
similar in effect covering all or any part of the Collateral is on file in any
recording office except any which have been filed in favor of Secured Party
relating to this Agreement and any which have been filed to perfect or protect
any Permitted Lien. None of the Collateral is in
- 9 -
<PAGE> 10
the possession of any Person other than Debtor or Secured Party, except for
Collateral being transported in the ordinary course of business.
(b) No Conflicts or Consents. Neither the ownership or the intended use
of the Collateral by Debtor, nor the grant of the security interest by Debtor to
Secured Party herein, nor the exercise by Secured Party of its rights or
remedies hereunder, will (i) conflict with any provision of (a) any domestic or
foreign law, statute, rule or regulation, (b) the articles or certificate of
incorporation, charter or bylaws of Debtor, or (c) any agreement, judgment,
license, order or permit applicable to or binding upon Debtor, or (ii) result in
or require the creation of any Lien, charge or encumbrance upon any assets or
properties of Debtor or of any Related Person except for Permitted Liens
expressly contemplated in the Obligation Documents. Except as expressly
contemplated in the Obligation Documents, no consent, approval, authorization or
order of, and no notice to or filing with any court, governmental authority, or
third party is required in connection with the grant by Debtor of the security
interest herein, or the exercise by Secured Party of its rights and remedies
hereunder.
(c) Security Interest. Debtor has and will have at all times full
right, power and authority to grant a security interest in the Collateral to
Secured Party as provided herein, free and clear of any Lien, adverse claim, or
encumbrance. This Agreement creates a valid and binding security interest in
favor of Secured Party in the Collateral, which security interest secures all of
the Secured Obligations.
(d) Perfection Certificate. Debtor has previously completed and
delivered the Perfection Certificate to Secured Party. The Perfection
Certificate as so delivered is true, correct and complete.
(e) Receivables. Each Receivable included within the Collateral
represents the valid and legally binding indebtedness of a bona fide account
debtor arising from the sale or lease by Debtor of goods or the rendition by
Debtor of services, subject to no contra-accounts, setoffs, defenses,
counterclaims, discounts, allowances, rebates, credits or adjustments by or
available to account debtors obligated on such Receivable, except for
Receivables of Debtor which do not in the aggregate exceed five percent (5%) of
the aggregate face amount of all of Debtor's Receivables. No material amount of
Debtor's Receivables is otherwise doubtful of collection except as has been
disclosed to Secured Party in writing.
(f) General Intangibles. Each General Intangible included within the
Collateral which is material to Debtor's business represents the valid and
legally binding obligation of each other Person who is a party thereto or who is
otherwise stated to be obligated thereunder, subject to no contra-accounts,
setoffs, defenses, counterclaims, discounts, allowances, rebates, credits or
adjustments by or available to account debtors obligated thereon, except for
those which (i) in the case of General Intangibles under which money is owing to
Debtor, do not in the aggregate exceed five percent (5%) of the aggregate face
amount of all such General Intangibles, and (ii) in the case of other General
Intangibles, do not materially impair the value to Debtor or the enforcement by
Debtor of such General Intangibles.
- 10 -
<PAGE> 11
(g) Intellectual Property. There is no Intellectual Property included
within the Collateral which is material to Debtor's business.
(h) Documents and Instruments. All Documents and Instruments included
within the Collateral are valid and genuine. Any such Document or Instrument has
only one original counterpart which constitutes collateral within the meaning of
the UCC or the law of any applicable jurisdiction, and all such original
counterparts (other than checks delivered in payment of Receivables in the
ordinary course of business) have been delivered into the possession of Secured
Party.
(i) Goods. None of the Collateral which constitutes goods (i) is
covered by any Document (other than Documents which are subject hereto and have
been delivered to Secured Party), (ii) is subject to any landlord's lien or
similar Lien (other than Permitted Liens), (iii) has been related to, attached
to, or used in connection with any real property so as to constitute a fixture
upon such real property (except for real property which is subject to a Lien in
favor of Secured Party), (iv) is now kept or is intended to be kept at any
location other than as set forth in the Perfection Certificate (except for goods
in transit in the ordinary course of Debtor's business), (v) is installed in or
affixed to other goods so as to be an accession to such other goods (unless such
other goods are included in the Collateral), or (vi) has been produced in
violation of the Fair Labor Standards Act, as amended. All such goods are
insured to the extent required under the Credit Agreement.
(k) Investment Property. Debtor has delivered to Secured Party all
Certificates, instruments, and writings evidencing Investment Property included
within the Collateral. All such certificates, instruments, and writings are
valid and genuine and have not been altered.
(j) Subsidiary Shares. Debtor has delivered to Secured Party all
certificates evidencing Subsidiary Shares. All such certificates are valid and
genuine and have not been altered. All shares, units and other securities
constituting the Subsidiary Shares have been duly authorized and validly issued,
are fully paid and non-assessable, and were not issued in violation of the
preemptive rights of any Person or of any agreement by which Debtor or the
Issuer thereof is bound. All documentary, stamp or other taxes or fees owing in
connection with the issuance, transfer or pledge of Subsidiary Shares (or rights
in respect thereof) have been paid. No restrictions or conditions exist with
respect to the transfer, voting or capital of any Subsidiary Shares. The
Subsidiary Shares constitute the percentage of the class of issued shares of
capital stock which is indicated on Exhibit B. No Issuer of any Subsidiary
Shares has any outstanding stock rights, rights to subscribe, options, warrants
or convertible securities outstanding or any other rights outstanding whereby
any Person would be entitled to have issued to him capital stock of such Issuer.
Section 3.2. General Covenants Applicable to All Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this
- 11 -
<PAGE> 12
Section 3.2 from the date hereof and so long as any part of the Secured
Obligations or the Commitment is outstanding.
(a) Change of Name, Location, or Structure; Additional Filings. Debtor
recognizes that financing statements pertaining to the Collateral have been or
may be filed where Debtor maintains any Collateral, has its records concerning
any Collateral or has its chief executive office or chief place of business.
Without limitation of any other covenant herein, Debtor will not cause or permit
any change to be made in its name, identity or corporate or partnership
structure, or any change to be made to a jurisdiction other than as represented
in Section 3.1 hereof in (i) the location of any Collateral, (ii) the location
of any records concerning any Collateral or (iii) in the location of Debtor's
chief executive office or principal place of business, unless Debtor shall have
first (1) notified Secured Party of such change at least twenty (20) days prior
to the effective date of such change, (2) taken all action requested by Secured
Party (under the following subsection (b) or otherwise) for the purpose of
further confirming and protecting Secured Party's security interests and rights
under this Agreement and the perfection and priority thereof, and (3) if
requested by Secured Party, provided to Secured Party a legal opinion to its
satisfaction confirming that such change will not adversely affect in any way
Secured Party's security interests and rights under this Agreement or the
perfection or priority thereof. In any notice furnished pursuant to this
subsection, Debtor will expressly state that the notice is required by this
Agreement and contains facts that may require additional filings of financing
statements or other notices for the purposes of continuing perfection of Secured
Party's security interest in the Collateral.
(b) Further Assurances. Debtor will, at its expense as from time to
time requested by Secured Party, promptly execute and deliver all further
instruments, agreements, filings and registrations, and take all further action,
in order: (i) to confirm and validate this Agreement and Secured Party's rights
and remedies hereunder, (ii) to correct any errors or omissions in the
descriptions herein of the Secured Obligations or the Collateral or in any other
provisions hereof, (iii) to perfect, register and protect the security interests
and rights created or purported to be created hereby or to maintain or upgrade
in rank the priority of such security interests and rights, (iv) to enable
Secured Party to exercise and enforce its rights and remedies hereunder in
respect of the Collateral, or (v) to otherwise give Secured Party the full
benefits of the rights and remedies described in or granted under this
Agreement. As part of the foregoing Debtor will, whenever requested by Secured
Party (1) execute and file any financing statements, continuation statements,
and other filings or registrations relating to Secured Party's security
interests and rights hereunder, and any amendments thereto, and (2) mark its
books and records relating to any Collateral to reflect that such Collateral is
subject to this Agreement and the security interests hereunder. To the extent
requested by Secured Party from time to time, Debtor will obtain from any
material account debtor or other obligor on the Collateral the acknowledgment of
such account debtor or obligor that such Collateral is subject to this
Agreement.
(c) Inspection of Collateral. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all representatives
appointed by Secured Party, including independent accountants, agents,
attorneys, appraisers and any other persons, to inspect any of
- 12 -
<PAGE> 13
the Collateral and the books and records of or relating to the Collateral at any
time during normal business hours, and to make photocopies and photographs
thereof, and to write down and record any information which such representatives
obtain; provided that such actions do not unreasonably interfere with Debtor's
business..
(d) Information. Upon the reasonable request from time to time by
Secured Party, Debtor will furnish to Secured Party (i) any information
concerning any covenant, provision or representation contained herein or any
other matter in connection with the Collateral or Debtor's business, properties,
or financial condition, and (ii) statements and schedules identifying and
describing the Collateral and other reports and information requested in
connection with the Collateral, all in reasonable detail.
(e) Ownership, Liens, Possession and Transfers. Debtor will maintain
good and marketable title to all Collateral (except Collateral which is sold in
accordance with Section 7.5 of the Credit Agreement), free and clear of all
Liens, encumbrances or adverse claims except for the security interest created
by this Agreement and any Permitted Liens, and Debtor will not grant or allow
any such Liens, encumbrances or adverse claims to exist. Debtor will not grant
or allow to remain in effect, and Debtor will cause to be terminated, any
financing statement or other registration or instrument similar in effect
covering all or any part of the Collateral, except any which have been filed in
favor of Secured Party relating to this Agreement and any which have been filed
to perfect or protect any Permitted Lien. Debtor will defend Secured Party's
right, title and special property and security interest in and to the Collateral
against the claims of any Person. Except as expressly allowed in Section 3.3
below for Inventory and Equipment, Debtor (i) will insure that all of the
Collateral -- whether goods, Documents, Instruments, or otherwise -- is and
remains in the possession of Debtor or Secured Party (or a bailee selected by
Secured Party who is holding such Collateral for the benefit of Secured Party),
except for goods being transported in the ordinary course of business, and (ii)
will not sell, assign (by operation of law or otherwise), transfer, exchange,
lease or otherwise dispose of any of the Collateral.
(f) Impairment of Security Interest. Debtor will not take or fail to
take any action which would in any manner impair the value or enforceability of
Secured Party's security interest in any Collateral.
Section 3.3. Covenants for Specified Types of Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this Section 3.3 from the date hereof and
so long as any part of the Secured Obligations or the Commitment is outstanding.
(a) Receivables. Debtor will, except as otherwise provided in Sections
4.1(d) or 4.2(a), collect at its own expense all amounts due or to become due
under each Receivable which is included within the Collateral. In connection
with such collections, Debtor may (and, at Secured Party's direction, will) take
such action (not otherwise forbidden hereunder) as Debtor or Secured Party may
deem necessary or advisable to enforce collection or performance of each such
Receivable. Except for actions and omissions in the ordinary course of business
which do
- 13 -
<PAGE> 14
not in the aggregate cause losses or reductions in excess of five percent (5%)
of the aggregate face amount of all such Receivables outstanding at any time,
Debtor (i) will duly perform and cause to be performed all of its obligations
with respect to the goods or services, the sale or lease or rendering of which
gave rise or will give rise to each such Receivable, and (ii) will not (whether
through failure to duly perform its obligations under any contracts,
instruments, and agreements which are related to any such Receivable, or by any
written instrument, or otherwise) take or allow any action or omission which
causes any such Receivable to become subject to any contra-accounts, setoffs,
defenses, counterclaims, discounts, allowances, rebates, credits or adjustments
by or available to account debtors obligated on such Receivable, unless such
action involves a good faith contest (promptly instituted and diligently
concluded) to the validity of amounts claimed to be owed to another Person.
(b) General Intangibles. Debtor will, except as otherwise provided in
Sections 4.1(e) or 4.2(a), collect at its own expense all amounts due or to
become due under each General Intangible included within the Collateral. In
connection with such collections, Debtor may (and, at Secured Party's direction,
will) take such action (not otherwise forbidden hereunder) as Debtor or Secured
Party may deem necessary or advisable to enforce collection or performance of
each such General Intangible. Unless the failure to do so is the result of a
good faith contest (promptly and diligently concluded) of the validity of such
obligations, Debtor will duly perform and cause to be performed all of its
obligations under any contracts, instruments, and agreements which are, or which
are related to, any material General Intangibles of Debtor. Debtor will not
(whether through failure to duly perform its obligations under any contracts,
instruments, and agreements which are related to any such General Intangibles,
or by any written instrument, or otherwise) take or allow any action or omission
which causes any such General Intangibles to become subject to any
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to account debtors obligated on
such General Intangibles, except for those which (i) in the case of such General
Intangibles under which money is owing to Debtor, do not in the aggregate exceed
five percent (5%) of the aggregate face amount of all such General Intangibles,
and (ii) in the case of other General Intangibles included within the
Collateral, do not materially impair the value or enforcement of such General
Intangibles.
(c) Intellectual Property. Debtor will maintain and protect the
validity and enforceability of all Intellectual Property included within the
Collateral which is material to Debtor's business. Debtor will defend and
protect such Intellectual Property and its rights thereunder against any
infringement, dilution, or misappropriation and will defend any claim or
administrative or arbitral challenge that questions the validity or
enforceability of such Intellectual Property, Debtor's purported rights therein
and thereunder, or Debtor's rights to register or patent the same or to use and
practice the same in its business. Debtor will give Secured Party notice of any
proceeding in which such defense is being carried on. Debtor will diligently
prosecute and maintain all applications and registrations for any such
Intellectual Property, and Debtor will notify Secured Party whenever it learns
that any application or registration relating to any such Intellectual Property
has been (or is alleged to have been) abandoned, dedicated or otherwise
terminated. At least thirty days prior to filing any application for
registration of any Intellectual
- 14 -
<PAGE> 15
Property (or any similar request) with the United States Patent and Trademark
Office, or any similar office or agency of the United States, any State thereof
or other country, or any political subdivision thereof, Debtor will give Secured
Party notice of such intended filing and will, upon Secured Party's request,
execute, deliver and file any agreements, instruments, registrations and filings
which Secured Party may request to confirm Secured Party's security interest
therein and to put such security interest of record in such office. Debtor
hereby appoints Secured Party as its agent and attorney in fact to do the same,
and hereby ratifies and confirms all actions of Secured Party as such agent and
attorney in fact, and hereby acknowledges that such agency and power of attorney
are irrevocable and coupled with an interest.
(d) Documents and Instruments. Debtor will at all times cause any
Documents or Instruments which are included within the Collateral to be valid
and genuine. Debtor will cause all Instruments included within the Collateral to
have only one original counterpart. Upon request by Secured Party, Debtor will
promptly deliver to Secured Party all originals of Documents or Instruments
which are included within the Collateral. Debtor will not (whether through
failure to duly perform its obligations under any contracts, instruments, and
agreements which are related to any Documents or Instruments which are included
within the Collateral, or by any written instrument, or otherwise) take or allow
any action or omission which causes any Documents or Instruments which are
included within the Collateral to become subject to any contra-accounts,
setoffs, defenses, counterclaims, discounts, allowances, rebates, credits or
adjustments by or available to the Persons obligated thereon. Upon request by
Secured Party, Debtor will mark each chattel paper which is included within the
Collateral with a legend indicating that such chattel paper is subject to the
security interest granted by this Agreement.
(e) Inventory. Debtor will maintain, preserve, protect and store all
Inventory included within the Collateral in good condition, repair and working
order and in a manner which will not make void or cancelable any insurance with
respect to such Collateral. Debtor will promptly furnish to Secured Party a
statement respecting any loss or damage to any such Inventory with an aggregate
value in excess of $500,000. Except for transportation of Inventory in the
ordinary course of business, Debtor will not allow any such Inventory to be
located in any jurisdiction other than those in which is filed an effective
financing statement which perfects Secured Party's security interest hereunder
in such Inventory. Except for Documents delivered into the possession of Secured
Party, Debtor will not allow any Inventory included within the Collateral to be
covered by any Document. Debtor will not cause or permit the removal of any item
of Inventory from Debtor's possession, control and risk of loss, and Debtor will
not sell, assign (by operation of law or otherwise), transfer, exchange, lease
or otherwise dispose of any Inventory, other than in connection with the
following:
(i) Sales or leases, other than during the continuance of an
Event of Default, of Inventory in the ordinary course of business, and
(ii) Possession of Inventory by Secured Party or by a bailee
selected by Secured Party who is holding such Inventory for the benefit
of Secured Party.
- 15 -
<PAGE> 16
(f) Equipment. Debtor will maintain, preserve, protect and keep all
Equipment included within the Collateral in good condition, repair and working
order and will cause such Equipment to be used and operated in a good and
workmanlike manner, in accordance with applicable law and in a manner which will
not make void or cancelable any insurance with respect to such Equipment. Debtor
will promptly furnish to Secured Party a statement respecting any loss or damage
to any of such Equipment with an aggregate value in excess of $500,000. Except
for transportation of Equipment in the ordinary course of business, Debtor will
not allow any Equipment included within the Collateral to be located in any
jurisdiction other than those in which is filed an effective financing statement
which perfects Secured Party's security interest hereunder in such Equipment.
Debtor will not cause or permit the removal of any item of Equipment from
Debtor's possession, control and risk of loss, and Debtor will not sell, assign
(by operation of law or otherwise), transfer, exchange, lease or otherwise
dispose of any Equipment, other than in connection with the following:
(i) Sale or other disposal, other than during the
continuance of an Event of Default, of any item of Equipment (i) in
the ordinary course of business or (ii) which is worn out or obsolete
and which has been replaced by an item of equal suitability and value,
owned by Debtor and made subject to the security interest under this
Agreement, but which is otherwise free and clear of any Liens,
encumbrances or adverse claims, and
(ii) Possession of Equipment by Secured Party or by a bailee
selected by Secured Party who is holding such Equipment for the benefit
of Secured Party.
Debtor will not permit any of the Collateral which constitutes Equipment to at
any time become so related to attached to, or used in connection with any
particular real property so as to become a fixture upon such real property, or
to be installed in or affixed to other goods so as to become an accession to
such other goods unless such other goods are also included in the Collateral.
(g) Certificates of Title. To the extent that there is at any time any
Collateral in which a security interest may be perfected by a notation on the
certificate of title or similar evidence of ownership of such Collateral, Debtor
will:
(i) concurrently with the execution hereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor presently has any interest,
(ii) promptly after the acquisition thereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor hereafter acquires any interest, and
(iii) promptly upon request by Secured Party, with respect to
any other items of such Collateral,
- 16 -
<PAGE> 17
deliver to Secured Party all such certificates of title and similar evidences of
ownership, all applications therefor, and all other documents needed or helpful
in registering Secured Party's security interest in such Collateral on such
certificates of title, other evidences of ownership, and applications and in
otherwise perfecting Secured Party's security interest in such Collateral.
(h) Investment Property.
(i) Debtor will at all times cause (A) Secured Party to have control
(within the meaning of the UCC) over all Investment Property included
within the Collateral and (B) any certificates, documents, or
instruments evidencing Investment Property included within the
Collateral to be valid and genuine. All instruments and writings
evidencing Investment Property included within the Collateral shall be
delivered to Secured Party concurrently with or prior to the execution
and delivery of this Agreement. )
(ii) All instruments and writings evidencing the Investment Property
shall be delivered to Secured Party on or prior to the execution and
delivery of this Agreement. All other instruments and writings
hereafter evidencing or constituting Investment Property shall be
delivered to Secured Party promptly upon the receipt thereof by or on
behalf of Debtor. All such Investment Property shall be held by or on
behalf of Secured Party pursuant hereto and shall be delivered in
suitable form for transfer by delivery with any necessary endorsement
or shall be accompanied by fully executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Secured
Party.
(iii) If Debtor shall receive, by virtue of its being or having been an
owner of any Subsidiary Shares, any (i) stock certificate (including
any certificate representing a stock dividend or distribution in
connection with any increase or reduction of capital, reorganization,
reclassification, merger, consolidation, sale of assets, combination of
shares, stock split, spinoff or split-off), promissory note or other
instrument or writing;
(ii) option or right, whether as an addition to, substitution for, or
in exchange for, any Subsidiary Shares, or otherwise; (iii) dividends
payable in cash (except such dividends permitted to be retained by
Debtor pursuant to Section 4.10 hereof, or (iv) dividends or other
distributions in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, Debtor shall receive the same in trust for
the benefit of Secured Party, shall segregate it from Debtor's other
property, and shall promptly deliver it to Secured Party in the exact
form received, with any necessary endorsement or appropriate stock
powers duly executed in blank, to be held by Secured Party as
Collateral.
(iv) Status of Subsidiary Shares. The certificates evidencing the
Subsidiary Shares shall at all times be valid and genuine and shall not
be altered. The Subsidiary Shares at all times shall be duly
authorized, validly issued, fully paid, and non-assessable, and shall
not be issued in violation of the preemptive rights of any Person or of
any agreement by which Debtor or the Issuer thereof is bound and shall
not be subject to any restrictions with respect to transfer, voting or
Capital of such Subsidiary Shares.
- 17 -
<PAGE> 18
(v) Notices from Issuer. Debtor will promptly deliver to Secured Party
a copy of each notice or other communication received by Debtor from
any Issuer in respect of any Investment Property.
ARTICLE IV.
Remedies, Powers and Authorizations
Section 4.1. Normal Provisions Concerning the Collateral.
(a) Additional Financing Statement Filings. Debtor hereby authorizes
Secured Party to file, without the signature of Debtor where permitted by law,
one or more financing or continuation statements, and amendments thereto,
relating to the Collateral. Debtor further agrees that a carbon, photographic or
other reproduction of this Agreement or any financing statement describing any
Collateral is sufficient as a financing statement and may be filed in any
jurisdiction by Secured Party.
(b) Power of Attorney. Debtor hereby appoints Secured Party as Debtor's
attorney-in-fact and proxy, with full authority in the place and stead of Debtor
and in the name of Debtor or otherwise, from time to time in Secured Party's
discretion, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement
including any action or instrument: (i) to request or instruct each Issuer (and
each registrar, transfer agent, or similar Person acting on behalf of each
Issuer) including any action or instrument: (i) to request or instruct each to
register the pledge or transfer of the Collateral to Secured Party; (ii) to
otherwise give notification to any Issuer, registrar, transfer agent, financial
intermediary, or other Person of Secured Party's security interests hereunder;
(iii) to obtain and adjust any insurance required to be paid to Secured Party
pursuant hereto; (iv) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral; (v) to receive, indorse and collect any
drafts or other Instruments or Documents; (vi) to enforce any obligations
included among the Collateral; and (vii) to file any claims or take any action
or institute any proceedings which Secured Party may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the rights
of Debtor or Secured Party with respect to any of the Collateral. Debtor hereby
acknowledges that such power of attorney and proxy are coupled with an interest,
are irrevocable, and are to be used by Secured Party for the sole benefit of
Lenders.
(c) Performance by Secured Party. If Debtor fails to perform any
agreement or obligation contained herein, Secured Party may itself perform, or
cause performance of, such agreement or obligation, and the expenses of Secured
Party incurred in connection therewith shall be payable by Debtor under Section
4.5.
- 18 -
<PAGE> 19
(d) Bailees. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of Debtor's agents or processors,
Debtor shall, upon the request of Secured Party, notify such warehouseman,
bailee, agent or processor of Secured Party's rights hereunder and instruct such
Person to hold all such Collateral for Secured Party's account subject to
Secured Party's instructions. (No such request by Secured Party shall be deemed
a waiver of any provision hereof which was otherwise violated by such Collateral
being held by such Person prior to such instructions by Debtor.)
(e) Collection. Secured Party shall have the right at any time, upon
the occurrence and during the continuance of a Default or an Event of Default,
to notify (or to require Debtor to notify) any and all obligors under any
Receivables, General Intangibles, Instruments, Investment Property or other
rights to payment included among the Collateral of the assignment thereof to
Secured Party under this Agreement and to direct such obligors to make payment
of all amounts due or to become due to Debtor thereunder directly to Secured
Party and, upon such notification and at the expense of Debtor and to the extent
permitted by law, to enforce collection of any such Receivables, General
Intangibles, Instruments, Investment Property or other rights to payment and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Debtor could have done. After Debtor receives notice
that Secured Party has given (and after Secured Party has required Debtor to
give) any notice referred to above in this subsection: all amounts and proceeds
(including instruments and writings) received by Debtor in respect of such
Receivables, General Intangibles, Instruments, Investment Property or other
rights to payment upon the occurrence and during the continuance of a Default or
Event of Default shall be received in trust for the benefit of Secured Party
hereunder, shall be segregated from other funds of Debtor and shall be forthwith
paid over to Secured Party in the same form as so received (with any necessary
indorsement) to be, at Secured Party's discretion, either (A) held as cash
collateral and released to Debtor upon the remedy of all Defaults and Events of
Default, or (B) while any Event of Default is continuing, applied as specified
in Section 4.3.
(f) Collection and Collateral Account. There is hereby established with
Secured Party a cash collateral account (the "Collateral Account") in the name
and under the control of Secured Party into which there shall be deposited from
time to time the cash proceeds of the Collateral (and of any other collateral
under other Obligation Document) required to be delivered to Secured Party
pursuant to the following subsections of this Section 4.1 or pursuant to any
other provision of this Agreement or any other Obligation Document. Debtor and
Secured Party shall deal with the Collateral Account as follows:
(i) Concurrently with the execution hereof (or promptly
thereafter), Debtor shall instruct all account debtors and other
Persons obligated to make payments to Debtor on any Receivables,
General Intangibles, Instruments, or other rights to payment included
within the Collateral to make such payments either (A) directly to
Secured Party, in which case
- 19 -
<PAGE> 20
Debtor shall instruct that such payments be remitted to a post office
box ("Lockbox) which shall be in the name and under the control of
Secured Party, or (B) if Secured Party agrees, to one or more banks
acceptable to Secured Party, in which case Debtor shall instruct that
such payments be remitted to a post office box in the name and under
the control of such bank which is subject to the terms of a lockbox
agreement in a form satisfactory to Agent, duly executed by Debtor and
such bank, pursuant to which Debtor shall have irrevocably instructed
such other bank (and such other bank shall have agreed) to remit all
proceeds of such payments directly to Secured Party for deposit into
the Collateral Account or as Secured Party may otherwise instruct such
bank. All such payments made to Secured Party shall be deposited in the
Collateral Account. In addition to the foregoing, Debtor agrees that if
the proceeds of any Collateral (including any payments with respect to
which instructions have been given as provided above) shall be received
by it, Debtor shall as promptly as possible deposit such proceeds into
the Collateral Account. Until so deposited, all such proceeds shall be
held in trust by Debtor for Secured Party and shall not be commingled
with any other funds or property of Debtor, and Debtor will not adjust,
settle or compromise the amount or payment of any such Receivable,
General Intangible, Instrument, or other right to payment or release
wholly or partly any account debtor or obligor thereof or allow any
credit or discount thereon.
(ii) As long as no Default or Event of Default has occurred
or is continuing, amounts on deposit in the Collateral Account shall,
upon receipt by Secured Party, be deposited by Secured Party in
Borrower's operating account maintained with Secured Party.
(iii) If a Default or an Event of Default has occurred or is
continuing, Secured Party shall, at Secured Party's discretion, either
(A) continue to hold the balance of the Collateral Account and all
Liquid Investments as Collateral, or (B) apply any or all of the
balance from time to time standing to the credit of the Collateral
Account (subject to collection) as specified in Section 4.3 and
liquidate any or all Liquid Investments and apply the proceeds thereof
as specified in Section 4.3.
(iv) Amounts on deposit in the Collateral Account pursuant to
subsection (iii) shall either remain on deposit therein or be invested
and re-invested from time to time in such Liquid Investments as Secured
Party shall determine, which Liquid Investments shall be held in the
name and be under the control of Secured Party in a securities account
established by Secured Party with one of its Affiliates until
liquidated and applied as provided in subsection (iii). Any income
received by Secured Party with respect to the balance from time to time
standing to the credit of the Collateral Account, including any
interest on or proceeds of Liquid Investments, shall also remain, or be
deposited, in the Collateral Account. All right, title and interest in
and to the amounts on deposit from time to time in the Collateral
Account, together with any Liquid Investments from time to time made
pursuant to this section shall vest in Secured Party, shall constitute
part of the Collateral hereunder, and shall not constitute payment of
the Secured Obligations until applied thereto as herein provided.
- 20 -
<PAGE> 21
(v) As used in this section, "Liquid Investment" means any
investment in the name of Secured Party (and, in the opinion of counsel
to Secured Party, appropriately subject to a perfected security
interest in favor of Secured Party) which matures within one month
after it is acquired by Secured Party and is either (A) a certificate
of deposit or time deposit issued by Secured Party or (B) an obligation
entitled to the full faith and credit of the United States which is in
book-entry form and subject to pledge under applicable state law and
Treasury regulations.
Section 4.2. Event of Default Remedies. If an Event of Default shall
have occurred and be continuing, Secured Party may from time to time in its
discretion, without limitation and without notice except as expressly provided
below:
(a) exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein, under the other Obligation Documents,
or otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral);
(b) require Debtor to, and Debtor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral as directed by Secured Party and make it (together with all books,
records and information of Debtor relating thereto) available to Secured Party
at a place to be designated by Secured Party which is reasonably convenient to
both parties;
(c) prior to the disposition of any Collateral, (i) to the extent
permitted by applicable law, enter, with or without process of law and without
breach of the peace, any premises where any of the Collateral is or may be
located, and without charge or liability to Secured Party seize and remove such
Collateral from such premises, (ii) have access to and use the Company's books,
records, and information relating to the Collateral, and (iii) store or transfer
any of the Collateral without charge in or by means of any storage or
transportation facility owned or leased by Debtor, process, repair or
recondition any of the Collateral or otherwise prepare it for disposition in any
manner and to the extent Secured Party deems appropriate and, in connection with
such preparation and disposition, use without charge any copyright, trademark,
trade name, patent or technical process used by Debtor;
(d) reduce its claim to judgment or foreclose or otherwise enforce, in
whole or in part, the security interest created hereby by any available judicial
procedure;
(e) dispose of, at its office, on the premises of Debtor or elsewhere,
all or any part of the Collateral, as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it being agreed that the sale
of any part of the Collateral shall not exhaust Secured Party's power of sale,
but sales may be made from time to time, and at any time, until all of the
Collateral has been sold or until the Secured Obligations have been paid and
performed in full), and at any such sale it shall not be necessary to exhibit
any of the Collateral;
- 21 -
<PAGE> 22
(f) buy (or allow one or more of the Lenders to buy) the Collateral, or
any part thereof, at any public sale;
(g) buy (or allow one or more of the Lenders to buy) the Collateral, or
any part thereof, at any private sale if the Collateral is of a type customarily
sold in a recognized market or is of a type which is the subject of widely
distributed standard price quotations; and
(h) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Debtor hereby consents to
any such appointment.
Debtor agrees that, to the extent notice of sale shall be required by law, at
least five (5) days' notice to Debtor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
In addition to the foregoing, if any Event of Default has occurred and is
continuing:
(i) Secured Party may license, or sublicense, whether general,
special or otherwise, and whether on an exclusive or non-exclusive
basis, any Patents or Trademarks included in the Collateral throughout
the world for such term or terms, on such conditions and in such
manner as Secured Party shall in its sole discretion determine;
(ii) Secured Party may (without assuming any obligations or
liability thereunder), at any time and from time to time, in its sole
discretion, enforce (and shall have the exclusive right to enforce)
against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any Patent Licenses or Trademark Licenses which relate
to Patents or Trademarks included in the Collateral and take or refrain
from taking any action under any thereof, and DEBTOR HEREBY RELEASES
SECURED PARTY AND THE LENDERS FROM, AND AGREES TO HOLD SECURED PARTY
AND THE LENDERS FREE AND HARMLESS FROM AND AGAINST, ANY CLAIMS AND
EXPENSES ARISING OUT OF ANY LAWFUL ACTION SO TAKEN OR OMITTED TO BE
TAKEN WITH RESPECT THERETO; and
(iii) upon request by Secured Party, Debtor will execute and
deliver to Secured Party a power of attorney, in form and substance
satisfactory to Secured Party, for the implementation of any lease,
assignment, license, sublicense, grant of option, sale or other
disposition of a Patent or Trademark included in the Collateral or any
action related thereto. In the event of any such disposition pursuant
to this Section, Debtor shall supply its know-how and expertise
relating to the manufacture and sale of the products bearing Trademarks
or the products or services made or rendered in connection with
Patents, and
- 22 -
<PAGE> 23
its customer lists and other records relating to such Patents or
Trademarks and to the distribution of said products, to Secured Party.
Section 4.3. Application of Proceeds. If any Event of Default shall
have occurred and be continuing, Secured Party may in its discretion apply any
cash held by Secured Party as Collateral, and any cash proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral, to any or all of the following in such
order as Secured Party may (subject to the rights of Lenders under the Credit
Agreement) elect:
(a) To the repayment of the reasonable costs and expenses, including
reasonable attorneys' fees and legal expenses, incurred by Secured Party in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (iii) the exercise or enforcement of any of
the rights of Secured Party hereunder, or (iv) the failure of Debtor to perform
or observe any of the provisions hereof;
(b) To the payment or other satisfaction of any Liens, encumbrances, or
adverse claims upon or against any of the Collateral;
(c) To the reimbursement of Secured Party for the amount of any
obligations of Debtor or any Other Liable Party paid or discharged by Secured
Party pursuant to the provisions of this Agreement or the other Obligation
Documents, and of any expenses of Secured Party payable by Debtor hereunder or
under the other Obligation Documents;
(d) To the satisfaction of any other Secured Obligations;
(e) By holding the same as Collateral;
(f) To the payment of any other amounts required by applicable law
(including any provision of the UCC); and
(g) By delivery to Debtor or to whoever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 4.4. Deficiency. In the event that the proceeds of any sale,
collection or realization of or upon Collateral by Secured Party are
insufficient to pay all Secured Obligations and any other amounts to which
Secured Party is legally entitled, Debtor shall be liable for the deficiency,
together with interest thereon as provided in the governing Obligation Documents
or (if no interest is so provided) at such other rate as shall be fixed by
applicable law, together with the costs of collection and the reasonable fees of
any attorneys employed by Secured Party or Lenders to collect such deficiency.
- 23 -
<PAGE> 24
Section 4.5. Indemnity and Expenses. In addition to, but not in
qualification or limitation of, any similar obligations under other Obligation
Documents:
(a) DEBTOR WILL INDEMNIFY SECURED PARTY AND EACH LENDER FROM AND
AGAINST ANY AND ALL CLAIMS, LOSSES AND LIABILITIES GROWING OUT OF OR RESULTING
FROM THIS AGREEMENT (INCLUDING ENFORCEMENT OF THIS AGREEMENT), WHETHER OR NOT
SUCH CLAIMS, LOSSES AND LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY OR
ARISING OUT OF SUCH INDEMNIFIED PARTY'S OWN NEGLIGENCE, EXCEPT TO THE EXTENT
SUCH CLAIMS, LOSSES OR LIABILITIES ARE PROXIMATELY CAUSED BY SUCH INDEMNIFIED
PARTY'S INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(b) Debtor will upon demand pay to Secured Party the amount of any and
all reasonable costs and expenses, including the reasonable fees and
disbursements of Secured Party's counsel and of any experts and agents, which
Secured Party may incur in connection with (i) the transactions which give rise
to this Agreement, (ii) the preparation of this Agreement and the perfection and
preservation of this security interest created under this Agreement, (iii) the
administration of this Agreement; (iv) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Collateral; (v) the exercise or enforcement of any of the rights of Secured
Party hereunder; or (vi) the failure by Debtor to perform or observe any of the
provisions hereof, except expenses resulting from Secured Party's individual
gross negligence or willful misconduct.
Section 4.6. Non-Judicial Remedies. In granting to Secured Party the
power to enforce its rights hereunder without prior judicial process or judicial
hearing, Debtor expressly waives, renounces and knowingly relinquishes any legal
right which might otherwise require Secured Party to enforce its rights by
judicial process. In so providing for non-judicial remedies, Debtor recognizes
and concedes that such remedies are consistent with the usage of trade, are
responsive to commercial necessity, and are the result of a bargain at arm's
length. Nothing herein is intended, however, to prevent Secured Party from
resorting to judicial process at its option.
Section 4.7. Other Recourse. Debtor waives any right to require Secured
Party or any Lender to proceed against any other Person, to exhaust any
Collateral or other security for the Secured Obligations, to have any Other
Liable Party joined with Debtor in any suit arising out of the Secured
Obligations or this Agreement, or to pursue any other remedy in Secured Party's
power. Debtor further waives any and all notice of acceptance of this Agreement
and of the creation, modification, rearrangement, renewal or extension for any
period of any of the Secured Obligations of any Other Liable Party from time to
time. Debtor further waives any defense arising by reason of any disability or
other defense of any Other Liable Party or by reason of the cessation from any
cause whatsoever of the liability of any Other Liable Party. This Agreement
shall continue irrespective of the fact that the liability of any Other Liable
Party may have ceased and irrespective of the validity or enforceability of any
other Obligation Document to which Debtor or any Other Liable Party may be a
party, and notwithstanding any death, incapacity, reorganization, or bankruptcy
of
- 24 -
<PAGE> 25
any Other Liable Party or any other event or proceeding affecting any Other
Liable Party. Until all of the Secured Obligations shall have been paid in full,
Debtor shall have no right to subrogation and Debtor waives the right to enforce
any remedy which Secured Party or any Lender has or may hereafter have against
any Other Liable Party, and waives any benefit of and any right to participate
in any other security whatsoever now or hereafter held by Secured Party. Debtor
authorizes Secured Party and each Lender, without notice or demand, without any
reservation of rights against Debtor, and without in any way affecting Debtor's
liability hereunder or on the Secured Obligations, from time to time to (a) take
or hold any other property of any type from any other Person as security for the
Secured Obligations, and exchange, enforce, waive and release any or all of such
other property, (b) apply the Collateral or such other property and direct the
order or manner of sale thereof as Secured Party may in its discretion
determine, (c) renew, extend for any period, accelerate, modify, compromise,
settle or release any of the obligations of any Other Liable Party in respect to
any or all of the Secured Obligations or other security for the Secured
Obligations, (d) waive, enforce, modify, amend or supplement any of the
provisions of any Obligation Document with any Person other than Debtor, and (e)
release or substitute any Other Liable Party.
Section 4.8. Limitation on Duty of Secured Party in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof,
Secured Party shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. Secured Party shall be deemed to have exercised reasonable care in the
custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by Secured Party in good faith.
Section 4.9. Appointment of Collateral Agents. At any time or times, in
order to comply with any legal requirement in any jurisdiction, Secured Party
may appoint any bank or trust company or one or more other Persons, either to
act as co-agent or co-agents, jointly with Secured Party, or to act as separate
agent or agents on behalf of the Lenders, with such power and authority as may
be necessary for the effectual operation of the provisions hereof and may be
specified in the instrument of appointment. In so doing Secured Party may, in
the name and on behalf of Debtor, give to such co-agent or separate agent
indemnities and other protections similar to those provided in Section 4.5.
Section 4.10. Voting Rights, Dividends, Etc. in Respect of Subsidiary
Shares.
(a) So long as no Default or Event of Default shall have occurred and
be continuing Debtor may receive and retain any and all dividends or interest
paid in respect of the Subsidiary Shares; provided, however, that any and all
- 25 -
<PAGE> 26
(i) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of or in exchange for,
any Subsidiary Shares,
(ii) dividends and other distributions paid or payable in
cash in respect of any Subsidiary Shares in connection with a partial
or total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in surplus, and
(iii) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Subsidiary Shares,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Subsidiary Shares and shall, if received by Debtor, be received in trust for the
benefit of Secured Party, be segregated from the other property or funds of
Debtor, and be forthwith delivered to Secured Party in the exact form received
with any necessary indorsement or appropriate stock powers duly executed in
blank, to be held by Secured Party as Collateral.
(b) Upon the occurrence and during the continuance of a Default or an
Event of Default:
(i) all rights of Debtor to receive and retain the dividends
and interest payments which it would otherwise be authorized to receive
and retain pursuant to subsection (a) of this section shall
automatically cease, and all such rights shall thereupon become vested
in Secured Party which shall thereupon have the sole right to receive
and hold as Subsidiary Shares such dividends and interest payments;
(ii) without limiting the generality of the foregoing,
Secured Party may at its option exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any of the Subsidiary Shares as if it were the
absolute owner thereof, including, without limitation, the right to
exchange, in its discretion, any and all of the Subsidiary Shares upon
the merger, consolidation, reorganization, recapitalization or other
adjustment of any Issuer, or upon the exercise by any Issuer of any
right, privilege or option pertaining to any Subsidiary Shares, and, in
connection therewith, to deposit and deliver any and all of the
Subsidiary Shares with any committee, depository, transfer, agent,
registrar or other designated agent upon such terms and conditions as
it may determine; and
(iii) all dividends and interest payments which are received
by Debtor contrary to the provisions of subsection (b)(i) of this
section shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Debtor, and shall be forthwith
paid over to Secured Party as Subsidiary Shares in the exact form
received, to be held by Secured Party as Collateral.
- 26 -
<PAGE> 27
Anything herein to the contrary notwithstanding, Debtor may at all times
exercise any and all voting rights pertaining to the Subsidiary Shares or any
part thereof for any purpose not inconsistent with the terms of this Agreement
or any other Obligation Document.
Section 4.11. Private Sale of Subsidiary Shares. Debtor recognizes that
Secured Party may deem it impracticable to effect a public sale of all or any
part of the Subsidiary Shares and that Secured Party may, therefore, determine
to make one or more private sales of any such securities to a restricted group
of purchasers who will be obligated to agree, among other things, to acquire
such securities for their own account, for investment and not with a view to the
distribution or resale thereof. Debtor acknowledges that any such private sale
may be at prices and on terms less favorable to the seller than the prices and
other terms which might have been obtained at a public sale and, notwithstanding
the foregoing, agrees that such private sales shall be deemed to have been made
in a commercially reasonable manner and that Secured Party shall have no
obligation to delay sale of any such securities for the period of time necessary
to permit the Issuer of such securities to register such securities for public
sale under the Securities Act of 1933, as amended. Debtor further acknowledges
and agrees that any offer to sell such securities which has been (a) publicly
advertised on a bona fide basis in a newspaper or other publication of general
circulation in the financial community of Dallas, Texas (to the extent that such
an offer may be so advertised without prior registration under the Securities
Act), or (b) made privately in the manner described above to not less than
fifteen (15) bona fide offerees shall be deemed to involve a "public sale" for
the purposes of Section 9.504(c) of the UCC (or any successor or similar,
applicable statutory provision) as then in effect in the State of Texas,
notwithstanding that such sale may not constitute a "public offering" under the
Securities Act of 1933, as amended, and that Secured Party may, in such event,
bid for the purchase of such securities.
ARTICLE V.
Miscellaneous
Section 5.1. Notices. Any notice or communication required or
permitted hereunder shall be given as provided in the Credit Agreement.
Section 5.2. Amendments. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Debtor and
Secured Party, and no waiver of any provision of this Agreement, and no consent
to any departure by Debtor therefrom, shall be effective unless it is in writing
and signed by Secured Party, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given and
to the extent specified in such writing. In addition, all such amendments and
waivers shall be effective only if given with the necessary approvals of Lenders
as required in the Credit Agreement.
- 27 -
<PAGE> 28
Section 5.3. Preservation of Rights. No failure on the part of Secured
Party or any Lender to exercise, and no delay in exercising, any right hereunder
or under any other Obligation Document shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. Neither the
execution nor the delivery of this Agreement shall in any manner impair or
affect any other security for the Secured Obligations. The rights and remedies
of Secured Party provided herein and in the other Obligation Documents are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law or otherwise. The rights of Secured Party under any Obligation
Document against any party thereto are not conditional or contingent on any
attempt by Secured Party to exercise any of its rights under any other
Obligation Document against such party or against any other Person.
Section 5.4. Unenforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or invalidity without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
Section 5.5. Survival of Agreements. All representations and warranties
of Debtor herein, and all covenants and agreements herein shall survive the
execution and delivery of this Agreement, the execution and delivery of any
other Obligation Documents and the creation of the Secured Obligations.
Section 5.6. Other Liable Parties. Neither this Agreement nor the
exercise by Secured Party or the failure of Secured Party to exercise any right,
power or remedy conferred herein or by law shall be construed as relieving any
Other Liable Party from liability on the Secured Obligations or any deficiency
thereon.
Section 5.7. Binding Effect and Assignment. This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Debtor and its successors and permitted assigns and (b) shall inure, together
with all rights and remedies of Secured Party hereunder, to the benefit of
Secured Party and Lenders and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing, Secured Party and any
Lender may (except as otherwise provided in the Credit Agreement) pledge, assign
or otherwise transfer any or all of their respective rights under any or all of
the Obligation Documents to any other Person, and such other Person shall
thereupon become vested with all of the benefits in respect thereof granted
herein or otherwise. None of the rights or duties of Debtor hereunder may be
assigned or otherwise transferred without the prior written consent of Secured
Party.
Section 5.8. Termination. It is contemplated by the parties hereto that
there may be times when no Secured Obligations are outstanding, but
notwithstanding such occurrences, this Agreement shall remain valid and shall be
in full force and effect as to subsequent outstanding Secured Obligations. Upon
the satisfaction in full of the Secured Obligations, upon the termination or
expiration of the Credit Agreement and any other commitment of Lenders to extend
credit to Debtor, and upon written request for the termination hereof delivered
by Debtor
- 28 -
<PAGE> 29
to Secured Party, this Agreement and the security interest created hereby shall
terminate and all rights to the Collateral shall revert to Debtor. Secured Party
will thereafter, upon Debtor's request and at Debtor's expense, (a) return to
Debtor such of the Collateral in Secured Party's possession as shall not have
been sold or otherwise disposed of or applied pursuant to the terms hereof, and
(b) execute and deliver to Debtor such documents as Debtor shall reasonably
request to evidence such termination.
Section 5.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of TEXAS applicable to
contracts made and to be performed entirely within such state, except as
required by mandatory provisions of law and except to the extent that the
perfection and the effect of perfection or non-perfection of the security
interest created hereby hereunder, in respect of any particular Collateral, are
governed by the laws of a jurisdiction other than the State of Texas.
Section 5.10. Counterparts. This Agreement may be separately executed
in any number of counterparts, all of which when so executed shall be deemed to
constitute one and the same Agreement.
Section 5.11. "Loan Document". This Agreement is a "Loan Document", as
defined in the Credit Agreement, and, except as expressly provided herein to the
contrary, this Agreement is subject to all provisions of the Credit Agreement
governing such Loan Documents.
Section 5.12. Amendment and Restatement. This Agreement amends and
restates in its entirety the Original Security Agreement, and all of the terms
hereof shall supersede the terms and provisions thereof. This Agreement renews
and extends all Liens existing by virtue of the Original Security Agreement, but
the terms, provisions and conditions of such Liens shall hereafter be governed
in all respects by this Agreement.
THIS WRITTEN SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
- 29 -
<PAGE> 30
IN WITNESS WHEREOF, Debtor has executed and delivered this Agreement as
of the date first above written.
IKERD BANDY, INC.
By: /s/ John Lynch
------------------------
Name: John Lynch
Title: Secretary
NATIONSBANK OF TEXAS, N.A.
By: /s/ Denise A. Smith
------------------------
Name: Denise A. Smith
Title: SVP
<PAGE> 1
EXHIBIT 10.22
SUBSIDIARY SECURITY AGREEMENT
BOWIE RESOURCES, LIMITED
THIS SECURITY AGREEMENT (this "Agreement") is made as of November 11,
1997 by Bowie Resources, Limited, a Colorado corporation ("Debtor"), in favor of
AEI Holding Company, Inc., a Delaware corporation ("Secured Party").
W I T N E S S E T H:
WHEREAS, Debtor and The Provident Bank, an Ohio banking corporation
("Provident") entered into a Loan and Security Agreement dated as of June 17,
1997 (the "Provident Security Agreement"), pursuant to which Provident made
loans to Debtor (the "Provident Loan") and funds were advanced to Debtor
pursuant to: (i) that certain term loan promissory note dated June 17, 1997 and
executed by Debtor in the original principal amount of $12,000,000 payable to
the order to Provident (the "Provident Term Loan Note"); (ii) that certain
revolving loan promissory note dated June 17, 1997 and executed by Debtor in the
original principal amount of $3,000,000 payable to the order to Provident (the
"Provident Revolving Loan Note"); (iii) that certain letter of credit promissory
note dated June 17, 1997 and executed by Debtor in the original principal amount
of $500,000 payable to the order to Provident (the "Provident Letter of Credit
Note" and collectively with the Provident Term Loan Note, the Provident
Revolving Loan Note, the "Provident Notes"); and
WHEREAS, pursuant to an Assignment of Note and Liens of even date
herewith, the Provident Notes were assigned to Secured Party;
WHEREAS, the Provident Notes were renewed and extended by a single
promissory note of even date herewith from Debtor to Secured Party in the
original principal amount of $15,500,000 (the "Intercompany 15.5 Million Note");
WHEREAS, Debtor has executed a promissory note of even date herewith
payable to the order of the Secured Party in the original principal amount of
$44,500,000 (the "Intercompany 44.5 Million Note" and together with the Secured
Intercompany Note, the "Intercompany Notes").
WHEREAS, it is a condition precedent to Secured Party's obligations to
advance funds pursuant to the Intercompany Notes that Debtor shall execute and
deliver to Secured Party an renewal, amendment and restatement of the Provident
Security Agreement;
WHEREAS, Secured Party owns seventy-seven and one-half percent (77.5%)
of the capital stock of Debtor;
1
<PAGE> 2
WHEREAS, the board of directors of Debtor has determined that Debtor's
execution, delivery and performance of this Agreement may reasonably be expected
to benefit Debtor, directly or indirectly, and is in the best interests of
Debtor;
NOW, THEREFORE, in consideration of the premises and in order to induce
Secured Party to extend such credit under the Intercompany Notes, Debtor hereby
agrees with Secured Party, for the benefit of Secured Party, as follows:
ARTICLE I
Definitions and References
Section 1.1. General Definitions. As used herein, the terms
"Agreement", "Debtor", "Intercompany Notes", "Provident", "Provident Security
Agreement", "Provident Loan", "Provident Term Loan Note", "Provident Revolving
Loan Note", "Provident Letter of Credit Note", "Provident Notes", "Intercompany
15.5 Million Note", "Secured Party" and "Intercompany 44.5 Million Note" shall
have the meanings indicated above, and the following terms shall have the
following meanings:
"Collateral" means all property, of whatever type, which is described
in Section 2.1 as being at any time subject to a security interest granted
hereunder to Secured Party.
"Commitment" means the agreement or commitment by Secured Party to make
loans or otherwise extend credit to Debtor under any agreement, commitment,
statement of terms or other document contemplating the making of loans or
advances or other extension of credit by Secured Party to or for the account of
Debtor which is now or at any time hereafter intended to be secured by the
Collateral under this Agreement.
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing inventory, equipment, or other
goods.
"Equipment" means all equipment (as defined in the UCC) in whatever
form, wherever located, and whether now or hereafter existing, and all parts
thereof, all accessions thereto, and all replacements therefor.
"Event of Default" means any of the following: (i) the failure of
Debtor to pay any indebtedness owing under the Intercompany Notes when due, and
(ii) the occurrence of an Event of Default under that certain Credit Agreement
dated as of November 11, 1997 among Secured Party, NationsBank of Texas, N.A.,
as Agent, and certain lenders.
"General Intangibles" means all general intangibles (as defined in the
UCC) of any kind (including choses in action, tax refunds, insurance proceeds,
and contract rights), and all instruments, security agreements, leases,
contracts, and other rights (except those constituting
2
<PAGE> 3
Receivables, Documents, or Instruments) to receive payments of money or the
ownership or possession of property. The General Intangibles include, among
other items and all Intellectual Property.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (as each is defined in" the UCC).
"Intellectual Property" means any Patents, Patent Licenses, Trademarks,
and Trademark Licenses.
"Inventory" means all inventory (as defined in the UCC) in all of its
forms, wherever located and whether now or hereafter existing, including (a) all
movable property and other goods held for sale or lease, all movable property
and other goods furnished or to be furnished under contracts of service, all raw
materials and work in process, and all materials and supplies used or consumed
in a business, including but not limited to all coal and other minerals after
extraction, all stockpiles thereof and related products, (b) all movable
property and other goods which are part of a product or mass, (c) all movable
property and other goods which are returned to or repossessed by the seller,
lessor, or supplier thereof, (d) all goods and substances in which any of the
foregoing is commingled or to which any of the foregoing is added, and (e) all
accessions to, products of, and documents for any of the foregoing.
"Intercompany Notes" means the Intercompany 15.5 Million Note and the
Intercompany 44.5 Million Note.
"Investment Property" means all "certificated securities",
"uncertificated securities", "security entitlements", "security accounts",
"commodity contracts" or "commodity accounts" (as each is defined in the UCC).
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure indebtedness of any kind which is owed
to him or any other arrangement with such creditor which provides for the
payment of such indebtedness out of such property or assets or which allows him
to have such indebtedness satisfied out of such property or assets prior to the
general creditors of any owner thereof, including without limitation any lien,
mortgage, security interest, pledge, deposit, production payment, rights of a
vendor under any title retention or conditional sale agreement or lease
substantially equivalent thereto, tax lien, mechanic's or materialman's lien, or
any other charge or encumbrance for security purposes, whether arising by law or
agreement or otherwise, but excluding any right of offset which arises without
agreement in the ordinary course of business. "Lien" also means any filed
financing statement, any registration with an issuer of uncertificated
securities, or any other arrangement which would serve to perfect a Lien
described in the preceding sentence, regardless of whether such financing
statement is filed, such registration is made, or such arrangement is undertaken
before or after such Lien exists.
3
<PAGE> 4
"Obligation Documents" means the Intercompany Notes and all other
documents and instruments under, by reason of which, or pursuant to which any or
all of the Secured Obligations are evidenced, governed, secured, or otherwise
dealt with, and all other agreements, certificates, and other documents,
instruments and writings heretofore or hereafter delivered in connection
herewith or therewith.
"Other Liable Party" means any Person, other than Debtor, who may now
or may at any time hereafter be primarily or secondarily liable for any of the
Secured Obligations or who may now or may at any time hereafter have granted to
Secured Party or Secured Party a Lien upon any property as security for the
Secured Obligations.
"Patent License" means any license or other agreement, whether now or
hereafter in existence, under which is granted or authorized any right with
respect to any Patent or any invention now or hereafter in existence, whether
patentable or not, whether a patent or application for patent is in existence on
such invention or not, and whether a patent or application for patent on such
invention may come into existence.
"Patents" means all the following: (a) all letters patent and design
letters patent of the United States or any other country and all applications
for letters patent and design letters patent of the United States or any other
country, including applications in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
other country, or any political subdivision thereof. (b) all reissues,
divisions, continuations, continuations-in-part, renewals and extensions
thereof, (c) all claims for, and rights to sue for, past or future infringements
of any of the foregoing, and (d) all income, royalties, damages and payments now
or hereafter due or payable with respect to any of the foregoing, including
damages and payments for past or future infringements thereof.
"Perfection Certificate" means a certificate providing information
about the Collateral, appropriately completed to the satisfaction of Secured
Party and duly executed by the indicated officer or officers of Debtor.
"Person" means an individual, corporation, partnership, association,
joint stock company, trust, unincorporated organization or joint venture, or a
court or governmental unit or any agency or subdivision thereof, or any other
legally recognizable entity.
"Proceeds" means, with respect to any property of any kind, all
proceeds of, and all other profits, products, rentals or receipts, in whatever
form, arising from any sale, exchange, collection, lease, licensing or other
disposition of, distribution in respect of, or other realization upon, such
property, including all claims against third parties for loss of, damage to or
destruction of, or for proceeds payable under (or unearned premiums with respect
to) insurance in respect of, such property (regardless of whether Secured Party
is named a loss payee thereunder), and any payments paid or owing by any third
party under any indemnity, warranty, or guaranty with respect to such property,
and any condemnation or requisition payments with respect to such property, in
each case whether now existing or hereafter arising.
4
<PAGE> 5
"Receivables" means (a) all accounts (as defined in the UCC) and all
other rights to payment for goods or other personal property which have been (or
are to be) sold, leased, or exchanged or for services which have been (or are to
be) rendered, regardless of whether such accounts or other rights to payment
have been earned by performance and regardless of whether such accounts or other
rights to payment are evidenced by or characterized as accounts receivable,
contract rights, book debts, notes, drafts or other obligations of indebtedness,
(b) all Documents and Instruments of any kind relating to such accounts or other
rights to payment or otherwise arising out of or in connection with the sale,
lease or exchange of goods or other personal property or the rendering of
services, (c) all rights in, to, or under all security agreements, leases and
other contracts securing or otherwise relating to any such accounts, rights to
payment, Documents, or Instruments, (d) all rights in, to and under any purchase
orders, service contracts, or other contracts out of which such accounts and
other rights to payment arose (or will arise on performance), and (e) all rights
in or pertaining to any goods arising out of or in connection with any such
purchase orders, service contracts, or other contracts, including rights in
returned or repossessed goods and rights of replevin, repossession, and
reclamation.
"Related Person" means Debtor, each Subsidiary of Debtor, and each
Other Liable Party.
"Secured Obligations" has the meaning given such term in Section 2.2.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.
"Trademark License" means any license or agreement, whether now or
hereafter in existence, under which is granted or authorized any right to use
any Trademark.
"Trademarks" means all of the following: (a) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, brand names, trade dress, prints and
labels on which any of the foregoing have appeared or appear, package and other
designs, and any other source or business identifiers, and general intangibles
of like nature, and the rights in any of the foregoing which arise under
applicable law, (b) the goodwill of the business symbolized thereby or
associated with each of them, (c) all registrations and applications in
connection therewith, including registrations and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or other country, or any political subdivision
thereof, (d) all reissues, extensions and renewals thereof, (e) all claims for,
and rights to sue for, past or future infringements of any of the foregoing, and
(f) all income, royalties, damages and payments now or hereafter due or payable
with respect to any of the foregoing, including damages and payments for past or
future infringements thereof.
"UCC" means the Uniform Commercial Code in effect in the State of
Colorado on the date hereof.
5
<PAGE> 6
Section 1.2. Other Definitions. All terms used in this Agreement which
are defined in the UCC and not otherwise defined herein shall have the same
meanings herein as set forth therein, except where the context otherwise
requires.
Section 1.3. Attachments. All exhibits or schedules which may be
attached to this Agreement are a part hereof for all purposes.
Section 1.4. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document (including, but not
limited to, references in Section 2.1) also refer to and include all renewals,
extensions, amendments, modifications, supplements or restatements of any such
agreement, instrument or document, provided that nothing contained in this
Section shall be construed to authorize any Person to execute or enter into any
such renewal, extension, amendment, modification, supplement or restatement.
Section 1.5. References and Titles. All references in this Agreement to
Exhibits, Articles, Sections, subsections, and other subdivisions refer to the
Exhibits, Articles, Sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the beginning
of any subdivision are for convenience only and do not constitute any part of
any such subdivision and shall be disregarded in construing the language
contained in this Agreement. The words "this Agreement", "herein", "hereof",
"hereby", "hereunder" and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited. The
phrases "this Section" and "this subsection" and similar phrases refer only to
the Sections or subsections hereof in which the phrase occurs. The word "or" is
not exclusive, and the word "including" (in all of its forms) means "including
without limitation". Pronouns in masculine, feminine and neuter gender shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa unless the context otherwise
requires.
ARTICLE II
Security Interest
Section 2.1. Grant of Security Interest. As collateral security for all
of the Secured Obligations, Debtor hereby pledges and assigns to Secured Party
and grants to Secured Party a continuing security interest, for the benefit of
Secured Party, in and to all right, title and interest of Debtor in and to any
and all of the following property, whether now owned or existing or hereafter
acquired or arising and regardless of where located; provided however, that with
respect to the following property in which Debtor has granted to Coors Energy
Company a security interest under the Deed of Trust to Public Trustee, Mortgage,
Security Agreement, Assignment of Production and Proceeds, Financing Statement
and Fixture Filing dated February 10, 1995 (the "Coors Deed of Trust"), the
security interest granted to Secured Party shall apply only to Secured
Obligations owing under or with respect to the Bowie 15.5 Million Note up to a
6
<PAGE> 7
maximum total amount of Nineteen Million Dollars ($19,000,000) and such security
interest shall be in accordance with and subject to the terms of the
Intercreditor Agreement dated as of June 27, 1997, among Debtor, Coors Energy
Company and Provident Bank, as assigned (the "Intercreditor Agreement"):
(a) all Receivables.
(b) all General Intangibles.
(c) all Documents.
(d) all Instruments.
(e) all Inventory.
(f) all Investment Property.
(g) all Equipment.
(h) The Collateral Account and the Lockbox, all cash deposited therein
from time to time, and all Liquid Investments referred to in Section 4.1(e).
(i) All books and records (including, without limitation, customer
lists, marketing information, credit files, price lists, operating records,
vendor and supplier price lists, sales literature, computer software, computer
hardware, computer disks and tapes and other storage media, printouts and other
materials and records) of Debtor pertaining to any of the Collateral.
(j) All moneys and property of any kind of Debtor in the possession or
under the control of Secured Party.
(k) All Proceeds of any and all of the foregoing Collateral.
In each case, the foregoing shall be covered by this Agreement, whether Debtor's
ownership or other rights therein are presently held or hereafter acquired and
howsoever Debtor's interests therein may arise or appear (whether by ownership,
security interest, claim or otherwise).
Section 2.2. Secured Obligations Secured. The security interest created
hereby in the Collateral constitutes continuing collateral security for all of
the following obligations, indebtedness and liabilities, whether now existing or
hereafter incurred or arising; provided however, that the security interest in
the Collateral in which Coors Energy Company has a security interest under the
Coors Deed of Trust shall secure only the Secured Obligations under the Bowie
15.5 Million Note.
7
<PAGE> 8
(a) Intercompany Notes Indebtedness. The payment by Debtor, when due
and payable, of all amounts from time to time owing by Debtor under or in
respect of the Intercompany Notes or any of the other Obligation Documents to
which Debtor is a party, and the due performance by Debtor of all of its other
respective obligations under or in respect of the Obligation Documents.
.
(b) Other Indebtedness. All loans and future advances made by Secured
Party to Debtor and all other debts, obligations and liabilities of every kind
and character of Debtor now or hereafter existing in favor of Secured Party
whether such debts, obligations or liabilities be direct or indirect, primary or
secondary, joint or several, fixed or contingent, and whether originally payable
to Secured Party or to a third party and subsequently acquired by Secured Party
and whether such debts, obligations or liabilities are evidenced by notes, open
account, overdraft, endorsement, security agreement, guaranty or otherwise (it
being contemplated that Debtor may hereafter become indebted to Secured Party in
further sum or sums but Secured Party shall have no obligation to extend further
indebtedness by reason of this Agreement).
(c) Renewals. All renewals, extensions, amendments, modifications,
supplements, or restatements of or substitutions for any of the foregoing.
(d) Performance. The due performance and observance by Debtor of all of
its other obligations from time to time existing under or in respect of any of
the Obligation Documents.
As used herein, the term "Secured Obligations" refers to all present and future
indebtedness, obligations and liabilities of whatever type which are described
above in this section, including any interest which accrues after the
commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of Debtor.
ARTICLE III
Representations, Warranties and Covenants
Section 3.1. Representations and Warranties. Debtor hereby represents
and warrants to Secured Party as follows:
(a) Ownership Free of Liens. Debtor has good and marketable title to
the Collateral, free and clear of all Liens, encumbrances or adverse claims
except for the security interest created by this Agreement and except for the
security interest existing under the Coors Deed of Trust. No effective financing
statement or other registration or instrument similar in effect covering all or
any part of the Collateral is on file in any recording office except any which
have been filed in favor of Secured Party relating to this Agreement and any
which have been filed to perfect or protect any Permitted Lien except for the
Coors Deed of Trust. None of the Collateral is in the possession of any Person
other than Debtor or Secured Party, except for Collateral being transported in
the ordinary course of business.
8
<PAGE> 9
(b) No Conflicts or Consents. Neither the ownership or the intended use
of the Collateral by Debtor, nor the grant of the security interest by Debtor to
Secured Party herein, nor the exercise by Secured Party of its rights or
remedies hereunder, will (i) conflict with any provision of (a) any domestic or
foreign law, statute, rule or regulation, (b) the articles or certificate of
incorporation, charter or bylaws of Debtor, or (c) any agreement, judgment,
license, order or permit applicable to or binding upon Debtor, or (ii) result in
or require the creation of any Lien, charge or encumbrance upon any assets or
properties of Debtor or of any Related Person. Except as expressly contemplated
in the Obligation Documents, no consent, approval, authorization or order of,
and no notice to or filing with any court, governmental authority, or third
party is required in connection with the grant by Debtor of the security
interest herein, or the exercise by Secured Party of its rights and remedies
hereunder.
(c) Security Interest. Subject to the Intercreditor Agreement, Debtor
has and will have at all times full right, power and authority to grant a
security interest in the Collateral to Secured Party as provided herein, free
and clear of any Lien, adverse claim, or encumbrance. This Agreement creates a
valid and binding security interest in favor of Secured Party in the Collateral,
which security interest secures all of the Secured Obligations.
(d) Perfection Certificate. Debtor has previously completed and
delivered the Perfection Certificate to Secured Party. The Perfection
Certificate as so delivered is true, correct and complete.
(e) Receivables. Each Receivable included within the Collateral
represents the valid and legally binding indebtedness of a bona fide account
debtor arising from the sale or lease by Debtor of goods or the rendition by
Debtor of services, subject to no contra-accounts, setoffs, defenses,
counterclaims, discounts, allowances, rebates, credits or adjustments by or
available to account debtors obligated on such Receivable, except for
Receivables of Debtor which do not in the aggregate exceed five percent (5%) of
the aggregate face amount of all of Debtor's Receivables. No material amount of
Debtor's Receivables is otherwise doubtful of collection except as has been
disclosed to Secured Party in writing.
(f) General Intangibles. Each General Intangible included within the
Collateral which is material to Debtor's business represents the valid and
legally binding obligation of each other Person who is a party thereto or who is
otherwise stated to be obligated thereunder, subject to no contra-accounts,
setoffs, defenses, counterclaims, discounts, allowances, rebates, credits or
adjustments by or available to account debtors obligated thereon, except for
those which (i) in the case of General Intangibles under which money is owing to
Debtor, do not in the aggregate exceed five percent (5%) of the aggregate face
amount of all such General Intangibles, and (ii) in the case of other General
Intangibles, do not materially impair the value to Debtor or the enforcement by
Debtor of such General Intangibles.
(g) Intellectual Property. There is no Intellectual Property included
within the Collateral which is material to Debtor's business.
9
<PAGE> 10
(h) Documents and Instruments. All Documents and Instruments included
within the Collateral are valid and genuine. Any such Document or Instrument has
only one original counterpart which constitutes collateral within the meaning of
the UCC or the law of any applicable jurisdiction, and all such original
counterparts (other than checks delivered in payment of Receivables in the
ordinary course of business) have been delivered into the possession of Secured
Party.
(i) Goods. None of the Collateral which constitutes goods (i) is
covered by any Document (other than Documents which are subject hereto and have
been delivered to Secured Party), (ii) is subject to any landlord's lien or
similar Lien, except statutory liens covering equipment or other goods in favor
of the owner of real property on which such equipment or other goods is located
(iii) has been related to, attached to, or used in connection with any real
property so as to constitute a fixture upon such real property (except for real
property which is subject to a Lien in favor of Secured Party), (iv) is now kept
or is intended to be kept at any location other than as set forth in the
Perfection Certificate (except for goods in transit in the ordinary course of
Debtor's business), (v) is installed in or affixed to other goods so as to be an
accession to such other goods (unless such other goods are included in the
Collateral), or (vi) has been produced in violation of the Fair Labor Standards
Act, as amended. Secured Party will keep or cause the Collateral to be kept
insured by financially sound and reputable insurers.
(k) Investment Property. Debtor has delivered to Secured Party all
Certificates, instruments, and writings evidencing Investment Property included
within the Collateral. All such certificates, instruments, and writings are
valid and genuine and have not been altered.
Section 3.2. General Covenants Applicable to All Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this Section 3.2 from the date hereof and
so long as any part of the Secured Obligations or the Commitment is outstanding.
(a) Change of Name, Location, or Structure; Additional Filings. Debtor
recognizes that financing statements pertaining to the Collateral have been or
may be filed where Debtor maintains any Collateral, has its records concerning
any Collateral or has its chief executive office or chief place of business.
Without limitation of any other covenant herein, Debtor will not cause or permit
any change to be made in its name, identity or corporate or partnership
structure, or any change to be made to a jurisdiction other than as represented
in Section 3.1 hereof in (i) the location of any Collateral, (ii) the location
of any records concerning any Collateral or (iii) in the location of Debtor's
chief executive office or principal place of business, unless Debtor shall have
first (1) notified Secured Party of such change at least twenty (20) days prior
to the effective date of such change, (2) taken all action requested by Secured
Party (under the following subsection (b) or otherwise) for the purpose of
further confirming and protecting Secured Party's security interests and rights
under this Agreement and the perfection and priority thereof, and (3) if
requested by Secured Party, provided to Secured Party a legal opinion to its
satisfaction confirming that such change will not adversely affect in any way
Secured Party's
10
<PAGE> 11
security interests and rights under this Agreement or the perfection or priority
thereof. In any notice furnished pursuant to this subsection, Debtor will
expressly state that the notice is required by this Agreement and contains facts
that may require additional filings of financing statements or other notices for
the purposes of continuing perfection of Secured Party's security interest in
the Collateral.
(b) Further Assurances. Debtor will, at its expense as from time to
time requested by Secured Party, promptly execute and deliver all further
instruments, agreements, filings and registrations, and take all further action,
in order: (i) to confirm and validate this Agreement and Secured Party's rights
and remedies hereunder, (ii) to correct any errors or omissions in the
descriptions herein of the Secured Obligations or the Collateral or in any other
provisions hereof, (iii) to perfect, register and protect the security interests
and rights created or purported to be created hereby or to maintain or upgrade
in rank the priority of such security interests and rights, (iv) to enable
Secured Party to exercise and enforce its rights and remedies hereunder in
respect of the Collateral, or (v) to otherwise give Secured Party the full
benefits of the rights and remedies described in or granted under this
Agreement. As part of the foregoing Debtor will, whenever requested by Secured
Party (1) execute and file any financing statements, continuation statements,
and other filings or registrations relating to Secured Party's security
interests and rights hereunder, and any amendments thereto, and (2) mark its
books and records relating to any Collateral to reflect that such Collateral is
subject to this Agreement and the security interests hereunder. To the extent
requested by Secured Party from time to time, Debtor will obtain from any
material account debtor or other obligor on the Collateral the acknowledgment of
such account debtor or obligor that such Collateral is subject to this
Agreement.
(c) Inspection of Collateral. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all representatives
appointed by Secured Party, including independent accountants, agents,
attorneys, appraisers and any other persons, to inspect any of the Collateral
and the books and records of or relating to the Collateral at any time during
normal business hours, and to make photocopies and photographs thereof, and to
write down and record any information which such representatives obtain;
provided that such actions do not unreasonably interfere with Debtor's business.
(d) Information. Upon the reasonable request from time to time by
Secured Party, Debtor will furnish to Secured Party (i) any information
concerning any covenant, provision or representation contained herein or any
other matter in connection with the Collateral or Debtor's business, properties,
or financial condition, and (ii) statements and schedules identifying and
describing the Collateral and other reports and information requested in
connection with the Collateral, all in reasonable detail.
(e) Ownership, Liens, Possession and Transfers. Debtor will maintain
good and marketable title to all Collateral, free and clear of all Liens,
encumbrances or adverse claims except for Permitted Liens, the security interest
created by this Agreement and the security interest created under the Coors Deed
of Trust, and Debtor will not grant or allow any such Liens, encumbrances or
adverse claims to exist. Debtor will not grant or allow to remain in
11
<PAGE> 12
effect, and Debtor will cause to be terminated, any financing statement or other
registration or instrument similar in effect covering all or any part of the
Collateral, except any which have been filed in favor of Secured Party relating
to this Agreement and any which have been filed to perfect or protect any
Permitted Lien and any which has been filed in favor of Coors Energy Company in
connection with the security interest granted under the Coors Deed of Trust.
Debtor will defend Secured Party's right, title and special property and
security interest in and to the Collateral against the claims of any Person,
except that such defense against the claims of Coors Energy Company shall be
subject to the terms of the Intercreditor Agreement. Except as expressly allowed
in Section 3.3 below for Inventory and Equipment, Debtor (i) will insure that
all of the Collateral -- whether goods, Documents, Instruments, or otherwise --
is and remains in the possession of Debtor or Secured Party (or a bailee
selected by Secured Party who is holding such Collateral for the benefit of
Secured Party), except for goods being transported in the ordinary course of
business, and (ii) will not sell, assign (by operation of law or otherwise),
transfer, exchange, lease or otherwise dispose of any of the Collateral.
(f) Impairment of Security Interest. Debtor will not take or fail to
take any action which would in any manner impair the value or enforceability of
Secured Party's security interest in any Collateral.
(g) Agreement to Deliver Security Documents. Debtor agrees to deliver,
to further secure the Secured Obligations whenever requested by Secured Party in
its sole and absolute discretion, deeds of trust, mortgages, chattel mortgages,
security agreements, and financing statements in form and substance satisfactory
to Secured Party for the purpose of granting, confirming, and perfecting first
and prior liens or security interests in any real or personal property now owned
or hereafter acquired by Debtor.
Section 3.3. Covenants for Specified Types of Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this Section 3.3 from the date hereof and
so long as any part of the Secured Obligations or the Commitment is outstanding.
(a) Receivables. Debtor will, except as otherwise provided in Sections
4.1(d) or 4.2(a), collect at its own expense all amounts due or to become due
under each Receivable which is included within the Collateral. In connection
with such collections, Debtor may (and, at Secured Party's direction, will) take
such action (not otherwise forbidden hereunder) as Debtor or Secured Party may
deem necessary or advisable to enforce collection or performance of each such
Receivable. Except for actions and omissions in the ordinary course of business
which do not in the aggregate cause losses or reductions in excess of five
percent (5%) of the aggregate face amount of all such Receivables outstanding at
any time, Debtor (i) will duly perform and cause to be performed all of its
obligations with respect to the goods or services, the sale or lease or
rendering of which gave rise or will give rise to each such Receivable, and (ii)
will not (whether through failure to duly perform its obligations under any
contracts, instruments, and agreements which are related to any such Receivable,
or by any written instrument, or otherwise) take or allow any action or omission
which causes any such Receivable to become subject to any
12
<PAGE> 13
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to account debtors obligated on
such Receivable, unless such action involves a good faith contest (promptly
instituted and diligently concluded) to the validity of amounts claimed to be
owed to another Person.
(b) General Intangibles. Debtor will, except as otherwise provided in
Sections 4.1(e) or 4.2(a), collect at its own expense all amounts due or to
become due under each General Intangible included within the Collateral. In
connection with such collections, Debtor may (and, at Secured Party's direction,
will) take such action (not otherwise forbidden hereunder) as Debtor or Secured
Party may deem necessary or advisable to enforce collection or performance of
each such General Intangible. Unless the failure to do so is the result of a
good faith contest (promptly and diligently concluded) of the validity of such
obligations, Debtor will duly perform and cause to be performed all of its
obligations under any contracts, instruments, and agreements which are, or which
are related to, any material General Intangibles of Debtor. Debtor will not
(whether through failure to duly perform its obligations under any contracts,
instruments, and agreements which are related to any such General Intangibles,
or by any written instrument, or otherwise) take or allow any action or omission
which causes any such General Intangibles to become subject to any
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to account debtors obligated on
such General Intangibles, except for those which (i) in the case of such General
Intangibles under which money is owing to Debtor, do not in the aggregate exceed
five percent (5%) of the aggregate face amount of all such General Intangibles,
and (ii) in the case of other General Intangibles included within the
Collateral, do not materially impair the value or enforcement of such General
Intangibles.
(c) Intellectual Property. Debtor will maintain and protect the
validity and enforceability of all Intellectual Property included within the
Collateral which is material to Debtor's business. Debtor will defend and
protect such Intellectual Property and its rights thereunder against any
infringement, dilution, or misappropriation and will defend any claim or
administrative or arbitral challenge that questions the validity or
enforceability of such Intellectual Property, Debtor's purported rights therein
and thereunder, or Debtor's rights to register or patent the same or to use and
practice the same in its business. Debtor will give Secured Party notice of any
proceeding in which such defense is being carried on. Debtor will diligently
prosecute and maintain all applications and registrations for any such
Intellectual Property, and Debtor will notify Secured Party whenever it learns
that any application or registration relating to any such Intellectual Property
has been (or is alleged to have been) abandoned, dedicated or otherwise
terminated. At least thirty days prior to filing any application for
registration of any Intellectual Property (or any similar request) with the
United States Patent and Trademark Office, or any similar office or agency of
the United States, any State thereof or other country, or any political
subdivision thereof, Debtor will give Secured Party notice of such intended
filing and will, upon Secured Party's request, execute, deliver and file any
agreements, instruments, registrations and filings which Secured Party may
request to confirm Secured Party's security interest therein and to put such
security interest of record in such office. Debtor hereby appoints Secured
13
<PAGE> 14
Party as its agent and attorney in fact to do the same, and hereby ratifies and
confirms all actions of Secured Party as such agent and attorney in fact, and
hereby acknowledges that such agency and power of attorney are irrevocable and
coupled with an interest.
(d) Documents and Instruments. Debtor will at all times cause any
Documents or Instruments which are included within the Collateral to be valid
and genuine. Debtor will cause all Instruments included within the Collateral to
have only one original counterpart. Upon request by Secured Party, Debtor will
promptly deliver to Secured Party all originals of Documents or Instruments
which are included within the Collateral. Debtor will not (whether through
failure to duly perform its obligations under any contracts, instruments, and
agreements which are related to any Documents or Instruments which are included
within the Collateral, or by any written instrument, or otherwise) take or allow
any action or omission which causes any Documents or Instruments which are
included within the Collateral to become subject to any contra-accounts,
setoffs, defenses, counterclaims, discounts, allowances, rebates, credits or
adjustments by or available to the Persons obligated thereon. Upon request by
Secured Party, Debtor will mark each chattel paper which is included within the
Collateral with a legend indicating that such chattel paper is subject to the
security interest granted by this Agreement.
(e) Inventory. Debtor will maintain, preserve, protect and store all
Inventory included within the Collateral in good condition, repair and working
order and in a manner which will not make void or cancelable any insurance with
respect to such Collateral. Debtor will promptly furnish to Secured Party a
statement respecting any loss or damage to any such Inventory with an aggregate
value in excess of $500,000. Except for transportation of Inventory in the
ordinary course of business, Debtor will not allow any such Inventory to be
located in any jurisdiction other than those in which is filed an effective
financing statement which perfects Secured Party's security interest hereunder
in such Inventory. Except for Documents delivered into the possession of Secured
Party, Debtor will not allow any Inventory included within the Collateral to be
covered by any Document. Debtor will not cause or permit the removal of any item
of Inventory from Debtor's possession, control and risk of loss, and Debtor will
not sell, assign (by operation of law or otherwise), transfer, exchange, lease
or otherwise dispose of any Inventory, other than in connection with the
following:
(i) Sales or leases, other than during the continuance of an
Event of Default, of Inventory in the ordinary course of business, and
(ii) Possession of Inventory by Secured Party or by a bailee
selected by Secured Party who is holding such Inventory for the benefit
of Secured Party.
(f) Equipment. Debtor will maintain, preserve, protect and keep all
Equipment included within the Collateral in good condition, repair and working
order and will cause such Equipment to be used and operated in a good and
workmanlike manner, in accordance with applicable law and in a manner which will
not make void or cancelable any insurance with respect to such Equipment. Debtor
will promptly furnish to Secured Party a statement respecting any loss or damage
to any of such Equipment with an aggregate value in excess of $500,000. Except
for transportation of Equipment in the ordinary course of business, Debtor will
not allow any
14
<PAGE> 15
Equipment included within the Collateral to be located in any jurisdiction other
than those in which is filed an effective financing statement which perfects
Secured Party's security interest hereunder in such Equipment. Debtor will not
cause or permit the removal of any item of Equipment from Debtor's possession,
control and risk of loss, and Debtor will not sell, assign (by operation of law
or otherwise), transfer, exchange, lease or otherwise dispose of any Equipment,
other than in connection with the following:
(i) Sale or other disposal, other than during the
continuance of an Event of Default, of any item of Equipment (i) in the
ordinary course of business or (ii) which is worn out or obsolete or
which has been replaced by an item of equal suitability and value,
owned by Debtor and made subject to the security interest under this
Agreement, but which is otherwise free and clear of any Liens,
encumbrances or adverse claims, and
(ii) Possession of Equipment by Secured Party or by a bailee
selected by Secured Party who is holding such Equipment for the benefit
of Secured Party.
Debtor will not permit any of the Collateral which constitutes Equipment to at
any time become so related to attached to, or used in connection with any
particular real property so as to become a fixture upon such real property, or
to be installed in or affixed to other goods so as to become an accession to
such other goods unless such other goods are also included in the Collateral.
(g) Certificates of Title. To the extent that there is at any time any
Collateral in which a security interest may be perfected by a notation on the
certificate of title or similar evidence of ownership of such Collateral, Debtor
will:
(i) concurrently with the execution hereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor presently has any interest,
(ii) promptly after the acquisition thereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor hereafter acquires any interest, and
(iii) promptly upon request by Secured Party, with respect to
any other items of such Collateral,
deliver to Secured Party all such certificates of title and similar evidences of
ownership, all applications therefor, and all other documents needed or helpful
in registering Secured Party's security interest in such Collateral on such
certificates of title, other evidences of ownership, and applications and in
otherwise perfecting Secured Party's security interest in such Collateral.
(h) Investment Property.
15
<PAGE> 16
(i) Debtor will at all times cause (A) Secured Party to have control
(within the meaning of the UCC) over all Investment Property included
within the Collateral and (B) any certificates, documents, or
instruments evidencing Investment Property included within the
Collateral to be valid and genuine. All instruments and writings
evidencing Investment Property included within the Collateral shall be
delivered to Secured Party concurrently with or prior to the execution
and delivery of this Agreement. ) and
(ii)All instruments and writings evidencing the Investment Property
shall be delivered to Secured Party on or prior to the execution and
delivery of this Agreement. All other instruments and writings
hereafter evidencing or constituting Investment Property shall be
delivered to Secured Party promptly upon the receipt thereof by or on
behalf of Debtor. All such Investment Property shall be held by or on
behalf of Secured Party pursuant hereto and shall be delivered in
suitable form for transfer by delivery with any necessary endorsement
or shall be accompanied by fully executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to Secured
Party.
ARTICLE IV.
Remedies, Powers and Authorizations
Section 4.1. Normal Provisions Concerning the Collateral.
(a) Additional Financing Statement Filings. Debtor hereby authorizes
Secured Party to file, without the signature of Debtor where permitted by law,
one or more financing or continuation statements, and amendments thereto,
relating to the Collateral. Debtor further agrees that a carbon, photographic or
other reproduction of this Agreement or any financing statement describing any
Collateral is sufficient as a financing statement and may be filed in any
jurisdiction by Secured Party.
(b) Power of Attorney. Debtor hereby appoints Secured Party as Debtor's
attorney-in-fact and proxy, with full authority in the place and stead of Debtor
and in the name of Debtor or otherwise, from time to time in Secured Party's
discretion, to take any action and to execute any instrument which Secured Party
may deem necessary or advisable to accomplish the purposes of this Agreement
including any action or instrument: (i) to obtain and adjust any insurance
required to be paid to Secured Party pursuant hereto; (ii) to ask, demand,
collect, sue for, recover, compound, receive and give acquittance and receipts
for moneys due and to become due under or in respect of any of the Collateral;
(iii) to receive, indorse and collect any drafts or other Instruments or
Documents; (iv) to enforce any obligations included among the Collateral; and
(v) to file any claims or take any action or institute any proceedings which
Secured Party may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Debtor or Secured Party with
respect to any of the Collateral. Debtor hereby acknowledges that such power of
attorney and proxy are coupled with an interest, are irrevocable, and are to be
used by Secured Party for the sole benefit of Secured Party.
16
<PAGE> 17
(c) Performance by Secured Party. If Debtor fails to perform any
agreement or obligation contained herein, Secured Party may itself perform, or
cause performance of, such agreement or obligation, and the expenses of Secured
Party incurred in connection therewith shall be payable by Debtor under Section
4.5.
(d) Bailees. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of Debtor's agents or processors,
Debtor shall, upon the request of Secured Party, notify such warehouseman,
bailee, agent or processor of Secured Party's rights hereunder and instruct such
Person to hold all such Collateral for Secured Party's account subject to
Secured Party's instructions. (No such request by Secured Party shall be deemed
a waiver of any provision hereof which was otherwise violated by such Collateral
being held by such Person prior to such instructions by Debtor.)
(e) Collection. Secured Party shall have the right at any time, to
notify (or to require Debtor to notify) any and all obligors under any
Receivables, General Intangibles, Instruments, Investment Property or other
rights to payment included among the Collateral of the assignment thereof to
Secured Party under this Agreement and to direct such obligors to make payment
of all amounts due or to become due to Debtor thereunder directly to Secured
Party, any assignee of Secured Party or any person designated by Secured Party
and, upon such notification and at the expense of Debtor and to the extent
permitted by law, to enforce collection of any such Receivables, General
Intangibles, Instruments, Investment Property or other rights to payment and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Debtor could have done. After Debtor receives notice
that Secured Party has given (and after Secured Party has required Debtor to
give) any notice referred to above in this subsection: all amounts and proceeds
(including instruments and writings) received by Debtor in respect of such
Receivables, General Intangibles, Instruments, Investment Property or other
rights to payment upon the occurrence and during the continuance of a Default or
Event of Default shall be received in trust for the benefit of Secured Party
hereunder, shall be segregated from other funds of Debtor and shall be forthwith
paid over to Secured Party in the same form as so received (with any necessary
indorsement) to be, at Secured Party's discretion, either (A) held as cash
collateral and released to Debtor upon the remedy of all Defaults and Events of
Default, or (B) while any Event of Default is continuing, applied as specified
in Section 4.3.
Section 4.2. Event of Default Remedies. If an Event of Default shall
have occurred and be continuing, Secured Party may from time to time in its
discretion, without limitation and without notice except as expressly provided
below:
(a) exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein, under the other Obligation Documents,
or otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral);
17
<PAGE> 18
(b) require Debtor to, and Debtor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral as directed by Secured Party and make it (together with all books,
records and information of Debtor relating thereto) available to Secured Party
at a place to be designated by Secured Party which is reasonably convenient to
both parties;
(c) prior to the disposition of any Collateral, (i) to the extent
permitted by applicable law, enter, with or without process of law and without
breach of the peace, any premises where any of the Collateral is or may be
located, and without charge or liability to Secured Party seize and remove such
Collateral from such premises, (ii) have access to and use the Debtor's books,
records, and information relating to the Collateral, and (iii) store or transfer
any of the Collateral without charge in or by means of any storage or
transportation facility owned or leased by Debtor, process, repair or
recondition any of the Collateral or otherwise prepare it for disposition in any
manner and to the extent Secured Party deems appropriate and, in connection with
such preparation and disposition, use without charge any copyright, trademark,
trade name, patent or technical process used by Debtor;
(d) reduce its claim to judgment or foreclose or otherwise enforce, in
whole or in part, the security interest created hereby by any available judicial
procedure;
(e) dispose of, at its office, on the premises of Debtor or elsewhere,
all or any part of the Collateral, as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it being agreed that the sale
of any part of the Collateral shall not exhaust Secured Party's power of sale,
but sales may be made from time to time, and at any time, until all of the
Collateral has been sold or until the Secured Obligations have been paid and
performed in full), and at any such sale it shall not be necessary to exhibit
any of the Collateral;
(f) buy (or allow one or more of the Secured Parties to buy) the
Collateral, or any part thereof, at any public sale;
(g) buy (or allow one or more of the Secured Parties to buy) the
Collateral, or any part thereof, at any private sale if the Collateral is of a
type customarily sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations; and
(h) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Debtor hereby consents to
any such appointment.
Debtor agrees that, to the extent notice of sale shall be required by law, at
least five (5) days' notice to Debtor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
18
<PAGE> 19
In addition to the foregoing, if any Event of Default has occurred and is
continuing:
(i) Secured Party may license, or sublicense, whether
general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any Patents or Trademarks included in the
Collateral throughout the world for such term or terms, on such
conditions and in such manner as Secured Party shall in its sole
discretion determine;
(ii) Secured Party may (without assuming any obligations or
liability thereunder), at any time and from time to time, in its sole
discretion, enforce (and shall have the exclusive right to enforce)
against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any Patent Licenses or Trademark Licenses which relate
to Patents or Trademarks included in the Collateral and take or refrain
from taking any action under any thereof, and DEBTOR HEREBY RELEASES
SECURED PARTY FROM, AND AGREES TO HOLD SECURED PARTY FREE AND HARMLESS
FROM AND AGAINST, ANY CLAIMS AND EXPENSES ARISING OUT OF ANY LAWFUL
ACTION SO TAKEN OR OMITTED TO BE TAKEN WITH RESPECT THERETO; and
(iii) upon request by Secured Party, Debtor will execute and
deliver to Secured Party a power of attorney, in form and substance
satisfactory to Secured Party, for the implementation of any lease,
assignment, license, sublicense, grant of option, sale or other
disposition of a Patent or Trademark included in the Collateral or any
action related thereto. In the event of any such disposition pursuant
to this Section, Debtor shall supply its know-how and expertise
relating to the manufacture and sale of the products bearing Trademarks
or the products or services made or rendered in connection with
Patents, and its customer lists and other records relating to such
Patents or Trademarks and to the distribution of said products, to
Secured Party.
Section 4.3. Application of Proceeds. If any Event of Default shall
have occurred and be continuing, Secured Party may in its discretion apply any
cash held by Secured Party as Collateral, and any cash proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral, to any or all of the following in such
order as Secured Party may elect:
(a) To the repayment of the reasonable costs and expenses, including
reasonable attorneys' fees and legal expenses, incurred by Secured Party in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (iii) the exercise or enforcement of any of
the rights of Secured Party hereunder, or (iv) the failure of Debtor to perform
or observe any of the provisions hereof;
(b) To the payment or other satisfaction of any Liens, encumbrances, or
adverse claims upon or against any of the Collateral;
19
<PAGE> 20
(c) To the reimbursement of Secured Party for the amount of any
obligations of Debtor or any Other Liable Party paid or discharged by Secured
Party pursuant to the provisions of this Agreement or the other Obligation
Documents, and of any expenses of Secured Party payable by Debtor hereunder or
under the other Obligation Documents;
(d) To the satisfaction of any other Secured Obligations;
(e) By holding the same as Collateral;
(f) To the payment of any other amounts required by applicable law
(including any provision of the UCC); and
(g) By delivery to Debtor or to whoever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 4.4. Deficiency. In the event that the proceeds of any sale,
collection or realization of or upon Collateral by Secured Party are
insufficient to pay all Secured Obligations and any other amounts to which
Secured Party is legally entitled, Debtor shall be liable for the deficiency,
together with interest thereon as provided in the governing Obligation Documents
or (if no interest is so provided) at such other rate as shall be fixed by
applicable law, together with the costs of collection and the reasonable fees of
any attorneys employed by Secured Party or Secured Party to collect such
deficiency.
Section 4.5. Indemnity and Expenses. In addition to, but not in
qualification or limitation of, any similar obligations under other Obligation
Documents:
(a) DEBTOR WILL INDEMNIFY SECURED PARTY FROM AND AGAINST ANY AND ALL
CLAIMS, LOSSES AND LIABILITIES GROWING OUT OF OR RESULTING FROM THIS AGREEMENT
(INCLUDING ENFORCEMENT OF THIS AGREEMENT), WHETHER OR NOT SUCH CLAIMS, LOSSES
AND LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY OR ARISING OUT OF SUCH
INDEMNIFIED PARTY'S OWN NEGLIGENCE, EXCEPT TO THE EXTENT SUCH CLAIMS, LOSSES OR
LIABILITIES ARE PROXIMATELY CAUSED BY SUCH INDEMNIFIED PARTY'S INDIVIDUAL GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
(b) Debtor will upon demand pay to Secured Party the amount of any and
all reasonable costs and expenses, including the reasonable fees and
disbursements of Secured Party's counsel and of any experts and agents, which
Secured Party may incur in connection with (i) the transactions which give rise
to this Agreement, (ii) the preparation of this Agreement and the perfection and
preservation of this security interest created under this Agreement, (iii) the
administration of this Agreement; (iv) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Collateral; (v) the exercise or enforcement of any of the rights of Secured
Party hereunder; or (vi) the failure by Debtor to perform or observe any of the
provisions hereof, except expenses resulting from Secured Party's individual
gross negligence or willful misconduct.
20
<PAGE> 21
Section 4.6. Non-Judicial Remedies. In granting to Secured Party the
power to enforce its rights hereunder without prior judicial process or judicial
hearing, Debtor expressly waives, renounces and knowingly relinquishes any legal
right which might otherwise require Secured Party to enforce its rights by
judicial process. In so providing for non-judicial remedies, Debtor recognizes
and concedes that such remedies are consistent with the usage of trade, are
responsive to commercial necessity, and are the result of a bargain at arm's
length. Nothing herein is intended, however, to prevent Secured Party from
resorting to judicial process at its option.
Section 4.7. Other Recourse. Debtor waives any right to require Secured
Party to proceed against any other Person, to exhaust any Collateral or other
security for the Secured Obligations, to have any Other Liable Party joined with
Debtor in any suit arising out of the Secured Obligations or this Agreement, or
to pursue any other remedy in Secured Party's power. Debtor further waives any
and all notice of acceptance of this Agreement and of the creation,
modification, rearrangement, renewal or extension for any period of any of the
Secured Obligations of any Other Liable Party from time to time. Debtor further
waives any defense arising by reason of any disability or other defense of any
Other Liable Party or by reason of the cessation from any cause whatsoever of
the liability of any Other Liable Party. This Agreement shall continue
irrespective of the fact that the liability of any Other Liable Party may have
ceased and irrespective of the validity or enforceability of any other
Obligation Document to which Debtor or any Other Liable Party may be a party,
and notwithstanding any death, incapacity, reorganization, or bankruptcy of any
Other Liable Party or any other event or proceeding affecting any Other Liable
Party. Until all of the Secured Obligations shall have been paid in full, Debtor
shall have no right to subrogation and Debtor waives the right to enforce any
remedy which Secured Party has or may hereafter have against any Other Liable
Party, and waives any benefit of and any right to participate in any other
security whatsoever now or hereafter held by Secured Party. Debtor authorizes
Secured Party, without notice or demand, without any reservation of rights
against Debtor, and without in any way affecting Debtor's liability hereunder or
on the Secured Obligations, from time to time to (a) take or hold any other
property of any type from any other Person as security for the Secured
Obligations, and exchange, enforce, waive and release any or all of such other
property, (b) apply the Collateral or such other property and direct the order
or manner of sale thereof as Secured Party may in its discretion determine, (c)
renew, extend for any period, accelerate, modify, compromise, settle or release
any of the obligations of any Other Liable Party in respect to any or all of the
Secured Obligations or other security for the Secured Obligations, (d) waive,
enforce, modify, amend or supplement any of the provisions of any Obligation
Document with any Person other than Debtor, and (e) release or substitute any
Other Liable Party.
Section 4.8. Limitation on Duty of Secured Party in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof,
Secured Party shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or as to the
preservation of rights against prior parties or any other rights pertaining
thereto. Secured Party shall be deemed to have exercised reasonable care in the
custody of
21
<PAGE> 22
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords its own property, and shall not be
liable or responsible for any loss or damage to any of the Collateral, or for
any diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by Secured Party in good faith.
Section 4.9. Appointment of Collateral Agents. At any time or times, in
order to comply with any legal requirement in any jurisdiction, Secured Party
may appoint any bank or trust company or one or more other Persons, either to
act as co-agent or co-agents, jointly with Secured Party, or to act as separate
agent or agents on behalf of the Secured Party, with such power and authority as
may be necessary for the effectual operation of the provisions hereof and may be
specified in the instrument of appointment. In so doing Secured Party may, in
the name and on behalf of Debtor, give to such co-agent or separate agent
indemnities and other protections similar to those provided in Section 4.5.
ARTICLE V.
Miscellaneous
Section 5.1. Notices. All notices, requests, consents, demands and
other communications required or permitted hereunder shall be in writing and
shall be deemed sufficiently given or furnished if delivered by personal
delivery, by telecopy or telex, by delivery service with proof of delivery, or
by registered or certified United States mail, postage prepaid as follows:
To Secured Party: 1500 N. Big Run Road
Ashland, Kentucky 41102
Tel: 606/928-0428
Fax: 606/928-0450
To Debtor: 1500 N. Big Run Road
Ashland, Kentucky 41102
Tel: 606/928-0428
Fax: 606/928-0450
Any such notice or communication shall be deemed to have been given (a) in the
case of personal delivery or delivery service, as of the date of first attempted
delivery during normal business hours at the address provided herein, (b) in the
case of telecopy or telex, upon receipt, or (c) in the case of registered or
certified United States mail, three days after deposit in the mail.
Section 5.2. Amendments. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Debtor and
Secured Party, and no waiver of any provision of this Agreement, and no consent
to any departure by Debtor therefrom, shall be effective unless it is in writing
and signed by Secured Party, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given and
to the extent specified in such writing.
22
<PAGE> 23
Section 5.3. Preservation of Rights. No failure on the part of Secured
Party to exercise, and no delay in exercising, any right hereunder or under any
other Obligation Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. Neither the execution nor
the delivery of this Agreement shall in any manner impair or affect any other
security for the Secured Obligations. The rights and remedies of Secured Party
provided herein and in the other Obligation Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law or
otherwise. The rights of Secured Party under any Obligation Document against any
party thereto are not conditional or contingent on any attempt by Secured Party
to exercise any of its rights under any other Obligation Document against such
party or against any other Person.
Section 5.4. Unenforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or invalidity without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
Section 5.5. Survival of Agreements. All representations and warranties
of Debtor herein, and all covenants and agreements herein shall survive the
execution and delivery of this Agreement, the execution and delivery of any
other Obligation Documents and the creation of the Secured Obligations.
Section 5.6. Other Liable Parties. Neither this Agreement nor the
exercise by Secured Party or the failure of Secured Party to exercise any right,
power or remedy conferred herein or by law shall be construed as relieving any
Other Liable Party from liability on the Secured Obligations or any deficiency
thereon.
Section 5.7. Binding Effect and Assignment. This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Debtor and its successors and permitted assigns and (b) shall inure, together
with all rights and remedies of Secured Party hereunder, to the benefit of
Secured Party and its respective successors, transferees and assigns. Without
limiting the generality of the foregoing, Secured Party may pledge, assign or
otherwise transfer any or all of their respective rights under any or all of the
Obligation Documents to any other Person, and such other Person shall thereupon
become vested with all of the benefits in respect thereof granted herein or
otherwise. None of the rights or duties of Debtor hereunder may be assigned or
otherwise transferred without the prior written consent of Secured Party.
Section 5.8. Termination. It is contemplated by the parties hereto that
there may be times when no Secured Obligations are outstanding, but
notwithstanding such occurrences, this Agreement shall remain valid and shall be
in full force and effect as to subsequent outstanding Secured Obligations. Upon
the satisfaction in full of the Secured Obligations, upon the termination or
expiration of any other commitment of Secured Party to extend credit to Debtor,
and upon written request for the termination hereof delivered by Debtor to
Secured Party, this Agreement and the security interest created hereby shall
terminate and all rights to the Collateral
23
<PAGE> 24
shall revert to Debtor. Secured Party will thereafter, upon Debtor's request and
at Debtor's expense, (a) return to Debtor such of the Collateral in Secured
Party's possession as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof, and (b) execute and deliver to Debtor such
documents as Debtor shall reasonably request to evidence such termination.
Section 5.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of COLORADO applicable to
contracts made and to be performed entirely within such state, except as
required by mandatory provisions of law and except to the extent that the
perfection and the effect of perfection or non-perfection of the security
interest created hereby hereunder, in respect of any particular Collateral, are
governed by the laws of a jurisdiction other than the State of Colorado.
Section 5.10. Counterparts. This Agreement may be separately executed
in any number of counterparts, all of which when so executed shall be deemed to
constitute one and the same Agreement.
Section 5.12. Amendment and Restatement. This Agreement amends and
restates in its entirety the Provident Security Agreement, and all of the terms
hereof shall supersede the terms and provisions thereof. This Agreement renews
and extends all Liens existing by virtue of the Provident Security Agreement,
but the terms, provisions and conditions of such Liens shall hereafter be
governed in all respects by this Agreement.
THIS WRITTEN SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
24
<PAGE> 25
IN WITNESS WHEREOF, Debtor has executed and delivered this Agreement as
of the date first above written.
BOWIE RESOURCES, LIMITED
By: /s/ John Baum
---------------------
Name: John Baum
Title: Secretary
<PAGE> 1
EXHIBIT 10.23
GUARANTY
ADDINGTON MINING, INC.
THIS GUARANTY is made as of November 11, 1997, by Addington Mining,
Inc. a Kentucky corporation ("Guarantor"), in favor of NationsBank of Texas,
N.A., a national banking association, individually and as agent for Lenders, as
such term is defined in the Credit Agreement of even date herewith described
below (in such capacities "Agent").
RECITALS:
1. Addington Enterprises, Inc., a Kentucky corporation ("Addington"),
entered into a Credit Agreement dated as of October 8, 1997 with Agent (the
"Original Credit Agreement"), pursuant to which NationsBank made loans to
Addington. Funds were advanced to Addington pursuant to that certain promissory
note dated October 8, 1997 and executed by Addington in the original principal
amount of $50,000,000 payable to the order of NationsBank (the "Original
Promissory Note").
2. Guarantor executed that certain Guaranty dated as of October 31,
1997 in favor of Agent (the "Original Guaranty").
3. Contemporaneously with the execution and delivery hereof, Addington
has sold a substantial portion of its assets to AEI Holding Company, Inc., a
Delaware corporation ("Borrower"), and Borrower has assumed substantially all of
the outstanding indebtedness and obligations of Addington, including but not
limited to all indebtedness and obligations of Addington owing to NationsBank
and Agent under the Original Credit Agreement and the Original Promissory Note.
4. Borrower, Agent, and Lenders have entered into that certain Credit
Agreement of even date herewith, (herein, as from time to time amended,
supplemented or restated, called the "Credit Agreement"), pursuant to which
funds are to be advanced to Borrower under the Notes (as such term is defined
below) which funds may be further advanced by Borrower to its Affiliates,
including Guarantor. The Credit Agreement amended and restated the Original
Credit Agreement in its entirety.
5. Borrower has executed (i) that certain Promissory Note of even date
herewith payable to the order of NationsBank in the original principal amount of
$30,000,000 on or before the Maturity Date and (ii) that certain Promissory Note
of even date herewith payable to the order of The Provident Bank in the original
principal amount of $20,000,000 on or before the Maturity Date (such promissory
notes, as from time to time amended, and all promissory notes given in
substitution, renewal or extension therefor or thereof, in whole or in part,
being herein collectively called the "Notes"). The Notes renewed and extended
the Original Promissory Note.
<PAGE> 2
6. It is a condition precedent to Lenders' obligations to advance funds
pursuant to the Credit Agreement that Guarantor shall execute and deliver to
Agent an amendment and restatement of the Original Guaranty.
7. Borrower owns one hundred percent (100%) of the outstanding shares
of stock of Guarantor.
8. Borrower, Guarantor, and the other direct and indirect subsidiaries
of Borrower are mutually dependent on each other in the conduct of their
respective businesses under a holding company structure, with the credit needed
from time to time by each often being provided by another or by means of
financing obtained by one such affiliate with the support of the others for
their mutual benefit and the ability of each to obtain such financing being
dependent on the successful operations of the others.
9. The board of directors of Guarantor has determined that Guarantor's
execution, delivery and performance of this Guaranty may reasonably be expected
to benefit Guarantor, directly or indirectly, and are in the best interests of
Guarantor.
NOW, THEREFORE, in consideration of the premises, of the benefits which
will inure to Guarantor from Lenders' advances of funds to Borrower under the
Credit Agreement, and of Ten Dollars and other good and valuable consideration,
the receipt and sufficiency of all of which are hereby acknowledged, and in
order to induce Lenders to advance funds under the Credit Agreement, Guarantor
hereby agrees with Agent, for the benefit of Agent and Lenders as follows:
AGREEMENTS
Section 1. Definitions. Reference is hereby made to the Credit
Agreement for all purposes. All terms used in this Guaranty which are defined in
the Credit Agreement and not otherwise defined herein shall have the same
meanings when used herein. All references herein to any Obligation Document,
Loan Document, or other document or instrument refer to the same as from time to
time amended, supplemented or restated. As used herein the following terms shall
have the following meanings:
"Agent" means the Person who, at the time in question, is the "Agent"
under the Credit Agreement. Whenever there is only one Lender under the Credit
Agreement, "Agent" shall also refer to such Lender in such capacity as the only
Lender.
"Lenders" means NationsBank of Texas, N.A. and all other Persons who at
any time are "Lenders" under the Credit Agreement.
"Obligations" means collectively all of the indebtedness, obligations,
and undertakings which are guaranteed by Guarantor and described in subsections
(a) and (b) of Section 2.
"Obligation Documents" means this Guaranty, the Notes, the Credit
Agreement, the Loan Documents.
<PAGE> 3
"Obligors" means Borrower, Guarantor and any other endorsers,
guarantors or obligors, primary or secondary, of any or all of the Obligations.
"Security" means any rights, properties, or interests of Agent or
Lenders, under the Obligation Documents or otherwise, which provide recourse or
other benefits to Agent or Lenders in connection with the Obligations or the
non-payment or non-performance thereof, including collateral (whether real or
personal, tangible or intangible) in which Agent or Lenders have rights under or
pursuant to any Obligation Documents, guaranties of the payment or performance
of any Obligation, bonds, surety agreements, keep-well agreements, letters of
credit, rights of subrogation, rights of offset, and rights pursuant to which
other claims are subordinated to the Obligations.
Section 2. Guaranty.
(a) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to Agent and each Lender the prompt, complete, and full payment when
due, and no matter how the same shall become due, of:
(i) the Notes, including all principal, all interest thereon
and all other sums payable thereunder; and
(ii) All other sums payable under the other Obligation
Documents, whether for principal, interest, fees or otherwise; and
(iii) Any and all other indebtedness or liabilities which
Borrower may at any time owe to Agent or any Lender, whether incurred
heretofore or hereafter or concurrently herewith, voluntarily or
involuntarily, whether owed alone or with others, whether fixed,
contingent, absolute, inchoate, liquidated or unliquidated, whether
such indebtedness or liability arises by notes, discounts, overdrafts,
open account indebtedness or in any other manner whatsoever, and
including interest, attorneys' fees and collection costs as may be
provided by law or in any instrument evidencing any such indebtedness
or liability.
Without limiting the generality of the foregoing, Guarantor's obligations
hereunder shall extend to and include all post-petition interest, expenses, and
other duties and liabilities of Borrower described above in this subsection (a),
or below in the following subsection (b), which would be owed by Borrower but
for the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization, or similar proceeding involving Borrower.
(b) Guarantor hereby irrevocably, absolutely, and unconditionally
guarantees to Agent and each Lender the prompt, complete and full performance,
when due, and no matter how the same shall become due, of all obligations and
undertakings of Borrower to Agent or such Lender under, by reason of, or
pursuant to any of the Obligation Documents.
(c) If Borrower shall for any reason fail to pay any Obligation, as and
when such Obligation shall become due and payable, whether at its stated
maturity, as a result of the
<PAGE> 4
exercise of any power to accelerate, or otherwise, Guarantor will, forthwith
upon demand by Agent, pay such Obligation in full to Agent for the benefit of
Agent or the Lender to whom such Obligation is owed. If Borrower shall for any
reason fail to perform promptly any Obligation, Guarantor will, forthwith upon
demand by Agent, cause such Obligation to be performed or, if specified by
Agent, provide sufficient funds, in such amount and manner as Agent shall in
good faith determine, for the prompt, full and faithful performance of such
Obligation by Agent or such other Person as Agent shall designate.
(d) If either Borrower or Guarantor fails to pay or perform any
Obligation as described in the immediately preceding subsections (a), (b), or
(c) Guarantor will incur the additional obligation to pay to Agent, and
Guarantor will forthwith upon demand by Agent pay to Agent, the amount of any
and all expenses, including fees and disbursements of Agent's counsel and of any
experts or agents retained by Agent, which Agent may incur as a result of such
failure.
(e) As between Guarantor and Agent or Lenders, this Guaranty shall be
considered a primary and liquidated liability of Guarantor.
(f) The obligations of Guarantor hereunder shall be limited to an
aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance under Section 548 of the United
States Bankruptcy Code or any comparable provisions of any applicable state or
federal law.
Section 3. Unconditional Guaranty.
(a) No action which Agent or any Lender may take or omit to take in
connection with any of the Obligation Documents, any of the Obligations (or any
other indebtedness owing by Borrower to Agent or any Lender), or any Security,
and no course of dealing of Agent or any Lender with any Obligor or any other
Person, shall release or diminish Guarantor's obligations, liabilities,
agreements or duties hereunder, affect this Guaranty in any way, or afford
Guarantor any recourse against Agent or any Lender, regardless of whether any
such action or inaction may increase any risks to or liabilities of Agent or any
Lender or any Obligor or increase any risk to or diminish any safeguard of any
Security. Without limiting the foregoing, Guarantor hereby expressly agrees that
Agent and Lenders may, from time to time, without notice to or the consent of
Guarantor, do any or all of the following:
(i) Amend, change or modify, in whole or in part, any one or
more of the Obligation Documents and give or refuse to give any waivers
or other indulgences with respect thereto.
(ii) Neglect, delay, fail, or refuse to take or prosecute any
action for the collection or enforcement of any of the Obligations, to
foreclose or take or prosecute any action in connection with any
Security or Obligation Document, to bring suit against any Obligor or
any other Person, or to take any other action concerning the
Obligations or the Obligation Documents.
<PAGE> 5
(iii) Accelerate, change, rearrange, extend, or renew the
time, rate, terms, or manner for payment or performance of any one or
more of the Obligations (whether for principal, interest, fees,
expenses, indemnifications, affirmative or negative covenants, or
otherwise).
(iv) Compromise or settle any unpaid or unperformed
Obligation or any other obligation or amount due or owing, or claimed
to be due or owing, under any one or more of the Obligation Documents.
(v) Take, exchange, amend, eliminate, surrender, release, or
subordinate any or all Security for any or all of the Obligations,
accept additional or substituted Security therefor, and perfect or fail
to perfect Agent's or Lenders' rights in any or all Security.
(vi) Discharge, release, substitute or add Obligors.
(vii) Apply all monies received from Obligors or others, or
from any Security for any of the Obligations, as Agent or Lenders may
determine to be in their best interest, without in any way being
required to marshall Security or assets or to apply all or any part of
such monies upon any particular Obligations.
(b) No action or inaction of any Obligor or any other Person, and no
change of law or circumstances, shall release or diminish Guarantor's
obligations, liabilities, agreements, or duties hereunder, affect this Guaranty
in any way, or afford Guarantor any recourse against Agent or any Lender.
Without limiting the foregoing, the obligations, liabilities, agreements, and
duties of Guarantor under this Guaranty shall not be released, diminished,
impaired, reduced, or affected by the occurrence of any or all of the following
from time to time, even if occurring without notice to or without the consent of
Guarantor:
(i) Any voluntary or involuntary liquidation, dissolution,
sale of all or substantially all assets, marshalling of assets or
liabilities, receivership, conservatorship, assignment for the benefit
of creditors, insolvency, bankruptcy, reorganization, arrangement, or
composition of any Obligor or any other proceedings involving any
Obligor or any of the assets of any Obligor under laws for the
protection of debtors, or any discharge, impairment, modification,
release, or limitation of the liability of, or stay of actions or lien
enforcement proceedings against, any Obligor, any properties of any
Obligor, or the estate in bankruptcy of any Obligor in the course of or
resulting from any such proceedings.
(ii) The failure by Agent or any Lender to file or enforce a
claim in any proceeding described in the immediately preceding
subsection (i) or to take any other action in any proceeding to which
any Obligor is a party.
(iii) The release by operation of law of any Obligor from any
of the Obligations or any other obligations to Agent or any Lender.
<PAGE> 6
(iv) The invalidity, deficiency, illegality, or
unenforceability of any of the Obligations or the Obligation Documents,
in whole or in part, any bar by any statute of limitations or other law
of recovery on any of the Obligations, or any defense or excuse for
failure to perform on account of force majeure, act of God, casualty,
impossibility, impracticability, or other defense or excuse whatsoever.
(v) The failure of any Obligor or any other Person to sign
any guaranty or other instrument or agreement within the contemplation
of any Obligor, Agent or any Lender.
(vi) The fact that Guarantor may have incurred directly part
of the Obligations or is otherwise primarily liable therefor.
(vii) Without limiting any of the foregoing, any fact or event
(whether or not similar to any of the foregoing) which in the absence
of this provision would or might constitute or afford a legal or
equitable discharge or release of or defense to a guarantor or surety
other than the actual payment and performance by Guarantor under this
Guaranty.
(c) Agent and Lenders may invoke the benefits of this Guaranty before
pursuing any remedies against any Obligor or any other Person and before
proceeding against any Security now or hereafter existing for the payment or
performance of any of the Obligations. Agent and Lenders may maintain an action
against Guarantor on this Guaranty without joining any other Obligor therein and
without bringing a separate action against any other Obligor.
(d) If any payment to Agent or any Lender by any Obligor is held to
constitute a preference or a voidable transfer under applicable state or federal
laws, or if for any other reason Agent or any Lender is required to refund such
payment to the payor thereof or to pay the amount thereof to any other Person,
such payment to Agent or such Lender shall not constitute a release of Guarantor
from any liability hereunder, and Guarantor agrees to pay such amount to Agent
or such Lender on demand and agrees and acknowledges that this Guaranty shall
continue to be effective or shall be reinstated, as the case may be, to the
extent of any such payment or payments. Any transfer by subrogation which is
made as contemplated in Section 6 prior to any such payment or payments shall
(regardless of the terms of such transfer) be automatically voided upon the
making of any such payment or payments, and all rights so transferred shall
thereupon revert to and be vested in Agent and Lenders.
(e) This is a continuing guaranty and shall apply to and cover all
Obligations and renewals and extensions thereof and substitutions therefor from
time to time.
Section 4. Waiver. Guarantor hereby waives, with respect to the
Obligations, this Guaranty, and the other Obligation Documents:
(a) notice of the incurrence of any Obligation by Borrower, and notice
of any kind concerning the assets, liabilities, financial condition,
creditworthiness, businesses, prospects, or other affairs of Borrower (it being
understood and agreed that: (i) Guarantor shall take full
<PAGE> 7
responsibility for informing itself of such matters, (ii) neither Agent nor any
Lender shall have any responsibility of any kind to inform Guarantor of such
matters, and (iii) Agent and Lenders are hereby authorized to assume that
Guarantor, by virtue of its relationships with Borrower which are independent of
this Guaranty, has full and complete knowledge of such matters whenever Lenders
extend credit to Borrower or take any other action which may change or increase
Guarantor's liabilities or losses hereunder).
(b) notice that Agent, any Lender, any Obligor, or any other Person has
taken or omitted to take any action under any Obligation Document or any other
agreement or instrument relating thereto or relating to any Obligation.
(c) notice of acceptance of this Guaranty and all rights of Guarantor
under ss.34.02 of the Texas Business and Commerce Code.
(d) demand, presentment for payment, and notice of demand, dishonor,
nonpayment, or nonperformance.
(e) notice of intention to accelerate, notice of acceleration, protest,
notice of protest, notice of any exercise of remedies (as described in the
following Section 5 or otherwise), and all other notices of any kind whatsoever.
Section 5. Exercise of Remedies. Agent, on behalf of Lenders, shall
have the right to enforce, from time to time, in any order and at Agent's sole
discretion, any rights, powers and remedies which Agent, on behalf of Lenders,
may have under the Obligation Documents or otherwise, including judicial
foreclosure, the exercise of rights of power of sale, the taking of a deed or
assignment in lieu of foreclosure, the appointment of a receiver to collect
rents, issues and profits, the exercise of remedies against personal property,
or the enforcement of any assignment of leases, rentals, oil or gas production,
or other properties or rights, whether real or personal, tangible or intangible;
and Guarantor shall be liable to Agent, on behalf of Lenders, hereunder for any
deficiency resulting from the exercise by Agent or any Lender of any such right
or remedy even though any rights which Guarantor may have against Borrower or
others may be destroyed or diminished by exercise of any such right or remedy.
No failure on the part of Agent, on behalf of Lenders, to exercise, and no delay
in exercising, any right hereunder or under any other Obligation Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right preclude any other or further exercise thereof or the exercise of any
other right. The rights, powers and remedies of Agent, on behalf of Lenders,
provided herein and in the other Obligation Documents are cumulative and are in
addition to, and not exclusive of, any other rights, powers or remedies provided
by law or in equity. The rights of Agent, on behalf of Lenders, hereunder are
not conditional or contingent on any attempt by Agent or any Lender to exercise
any of its rights under any other Obligation Document against any Obligor or any
other Person.
Section 6. Limited Subrogation. Until all of the Obligations have been
paid and performed in full Guarantor shall have no right to exercise any right
of subrogation, reimbursement, indemnity, exoneration, contribution or any other
claim which it may now or hereafter have against or to any Obligor or any
Security in connection with this Guaranty
<PAGE> 8
(including any right of subrogation under ss.34.04 of the Texas Business and
Commerce Code), and Guarantor hereby waives any rights to enforce any remedy
which Guarantor may have against Borrower and any right to participate in any
Security until such time. If any amount shall be paid to Guarantor on account of
any such subrogation or other rights, any such other remedy, or any Security at
any time when all of the Obligations and all other expenses guaranteed pursuant
hereto shall not have been paid in full, such amount shall be held in trust for
the benefit of Agent, shall be segregated from the other funds of Guarantor and
shall forthwith be paid over to Agent to be held by Agent as collateral for, or
then or at any time thereafter applied in whole or in part by Agent against, all
or any portion of the Obligations, whether matured or unmatured, in such order
as Agent shall elect. If Guarantor shall make payment to Agent of all or any
portion of the Obligations and if all of the Obligations shall be finally paid
in full, Agent will, at Guarantor's request and expense, execute and deliver to
Guarantor (without recourse, representation or warranty) appropriate documents
necessary to evidence the transfer by subrogation to Guarantor of an interest in
the Obligations resulting from such payment by Guarantor; provided that such
transfer shall be subject to Section 3(d) above and that without the consent of
Agent (which Agent may withhold in its discretion) Guarantor shall not have the
right to be subrogated to any claim or right against any Obligor which has
become owned by Agent or any Lender, whose ownership has otherwise changed in
the course of enforcement of the Obligation Documents, or which Agent otherwise
has released or wishes to release from its Obligations.
Section 7. Successors and Assigns. Guarantor's rights or obligations
hereunder may not be assigned or delegated, but this Guaranty and such
obligations shall pass to and be fully binding upon the successors of Guarantor,
as well as Guarantor. This Guaranty shall apply to and inure to the benefit of
Agent and Lenders and their successors or assigns. Without limiting the
generality of the immediately preceding sentence, Agent and each Lender may
assign, grant a participation in, or otherwise transfer any Obligation held by
it or any portion thereof, and Agent and each Lender may assign or otherwise
transfer its rights or any portion thereof under any Obligation Document, to any
other Person, and such other Person shall thereupon become vested with all of
the benefits in respect thereof granted to Agent or such Lender hereunder unless
otherwise expressly provided by Agent or such Lender in connection with such
assignment or transfer.
Section 8. Offset. Guarantor hereby grants to Lenders a right of offset
to secure the payment of the Obligations and Guarantor's obligations and
liabilities hereunder, which right of offset shall be upon any and all monies,
securities and other property (and the proceeds therefrom) of Guarantor now or
hereafter held or received by or in transit to Agent or any Lender from or for
the account of Guarantor, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special), credits and claims of Guarantor at any time existing
against Agent or any Lender. Upon the occurrence of any Default or Event of
Default Agent and each Lender is hereby authorized at any time and from time to
time, without notice to Guarantor, to offset, appropriate and apply any and all
items hereinabove referred to against the Obligations and Guarantor's
obligations and liabilities hereunder irrespective of whether or not Agent or
such Lender shall have made any demand under this Guaranty and although such
obligations and liabilities may be contingent or unmatured. Agent and each
Lender agrees promptly to notify Guarantor after any such offset and application
made by Agent or such Lender, provided that the failure to
<PAGE> 9
give such notice shall not affect the validity of such offset and application.
The rights of Agent and each Lender under this section are in addition to, and
shall not be limited by, any other rights and remedies (including other rights
of offset) which Agent and Lenders may have.
Section 9. Representations and Warranties. Guarantor hereby represents
and warrants to Agent and each Lender as follows:
(a) The Recitals at the beginning of this Guaranty are true and correct
in all respects.
(b) Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation as set forth in
the Recitals to this Guaranty; and Guarantor has all requisite power and
authority to execute, deliver and perform this Guaranty.
(c) The execution, delivery and performance by Guarantor of this
Guaranty have been duly authorized by all necessary corporate action and do not
and will not contravene its certificate or articles of incorporation or bylaws.
(d) The execution, delivery and performance by Guarantor of this
Guaranty do not and will not contravene any law or governmental regulation or
any contractual restriction binding on or affecting Guarantor or any of its
Affiliates or properties, and do not and will not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties.
(e) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or other regulatory body or third
party is required for the due execution, delivery and performance by Guarantor
of this Guaranty.
(f) This Guaranty is a legal, valid and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its terms except as
limited by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors' rights.
(g) There is no action, suit or proceeding pending or, to the knowledge
of Guarantor, threatened against or otherwise affecting Guarantor before any
court, arbitrator or governmental department, commission, board, bureau, agency
or instrumentality which may materially and adversely affect Guarantor's
financial condition or its ability to perform its obligations hereunder.
(h) The direct or indirect value of the consideration received and to
be received by Guarantor in connection herewith is reasonably worth at least as
much as the liability and obligations of Guarantor hereunder, and the incurrence
of such liability and obligations in return for such consideration may
reasonably be expected to benefit Guarantor, directly or indirectly.
(i) Guarantor is not "insolvent" on the date hereof (that is, the sum
of Guarantor's absolute and contingent liabilities, including the Obligations,
does not exceed the fair market
<PAGE> 10
value of Guarantor's assets). Guarantor's capital is adequate for the businesses
in which Guarantor is engaged and intends to be engaged. Guarantor has not
incurred (whether hereby or otherwise), nor does Guarantor intend to incur or
believe that it will incur, debts which will be beyond its ability to pay as
such debts mature.
(j) All balance sheets, earning statements, financial data and other
information concerning Guarantor which have been furnished to Agent and each
Lender to induce it to accept this Guaranty (or otherwise furnished to Agent and
each Lender in connection with the transactions contemplated hereby or
associated herewith) fairly represent the financial condition of Guarantor as of
the dates and the results of Guarantor's operations for the periods for which
the same are furnished. None of such balance sheets, earnings and cash flow
statements, financial data and other information contains any untrue statement
of a material fact or omits to state any material fact which is necessary to
make any statements contained therein not misleading.
Section 10. No Oral Change. No amendment of any provision of this
Guaranty shall be effective unless it is in writing and signed by Guarantor and
Lenders, and no waiver of any provision of this Guaranty, and no consent to any
departure by Guarantor therefrom, shall be effective unless it is in writing and
signed by Lenders, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
Section 11. Invalidity of Particular Provisions. If any term or
provision of this Guaranty shall be determined to be illegal or unenforceable
all other terms and provisions hereof shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by applicable law.
Section 12. Headings and References. The headings used herein are for
purposes of convenience only and shall not be used in construing the provisions
hereof. The words "this Guaranty," "this instrument," "herein," "hereof,"
"hereby" and words of similar import refer to this Guaranty as a whole and not
to any particular subdivision unless expressly so limited. The phrases "this
section" and "this subsection" and similar phrases refer only to the
subdivisions hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
Section 13. Term. This Guaranty shall be irrevocable until all of the
Obligations have been completely and finally paid and performed, no Lender has
any obligation to make any loans or other advances to Borrower, and all
obligations and undertakings of Borrower under, by reason of, or pursuant to the
Obligation Documents have been completely performed, and this Guaranty is
thereafter subject to reinstatement as provided in Section 3(d). All extensions
of credit and financial accommodations heretofore or hereafter made by Agent or
Lenders to Borrower shall be conclusively presumed to have been made in
acceptance hereof and in reliance hereon.
<PAGE> 11
Section 14. Notices. Any notice or communication required or permitted
hereunder shall be given as provided in the Credit Agreement.
Section 15. Limitation on Interest. Agent, Lenders and Guarantor intend
to contract in strict compliance with applicable usury law from time to time in
effect, and the provisions of the Credit Agreement limiting the interest for
which Guarantor is obligated are expressly incorporated herein by reference.
Section 16. Loan Document. This Guaranty is a Loan Document, as defined
in the Credit Agreement, and is subject to the provisions of the Credit
Agreement governing Loan Documents. Guarantor hereby approves all provisions of
the Credit Agreement and the other Loan Documents and ratifies and confirms any
provisions thereof which relate to Guarantor.
Section 17. Counterparts. This Guaranty may be executed in any number
of counterparts, each of which when so executed shall be deemed to constitute
one and the same Guaranty.
SECTION 18. GOVERNING LAW; SUBMISSION TO PROCESS. (I) THIS GUARANTY
SHALL BE DEEMED A CONTRACT MADE UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. GUARANTOR HEREBY AGREES THAT ANY LEGAL ACTION OR
PROCEEDING AGAINST GUARANTOR WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE
NORTHERN DISTRICT OF TEXAS AS LENDER PARTIES MAY ELECT, AND, BY EXECUTION AND
DELIVERY HEREOF, GUARANTOR ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS, AND FURTHER AGREES TO A TRANSFER OF ANY SUCH PROCEEDING TO A FEDERAL
COURT SITTING IN THE STATE OF TEXAS TO THE EXTENT THAT IT HAS SUBJECT MATTER
JURISDICTION, AND OTHERWISE TO A STATE COURT IN TEXAS. GUARANTOR WAIVES ANY
RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS
ON THE BASIS OF FORUM NON CONVENIENS. IN FURTHERANCE OF THE FOREGOING, GUARANTOR
HEREBY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, 350 NORTH ST. PAUL STREET,
DALLAS, TEXAS 75201, AS AGENT OF GUARANTOR TO RECEIVE SERVICE OF ALL PROCESS
BROUGHT AGAINST GUARANTOR WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH COURT
IN TEXAS, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY GUARANTOR TO BE EFFECTIVE
AND BINDING SERVICE IN EVERY RESPECT. COPIES OF ANY SUCH PROCESS SO SERVED SHALL
ALSO, IF PERMITTED BY LAW, BE SENT BY REGISTERED MAIL TO GUARANTOR AT ITS
ADDRESS SET FORTH IN THE CREDIT AGREEMENT, BUT THE FAILURE OF GUARANTOR TO
RECEIVE SUCH COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS AS
AFORESAID. GUARANTOR SHALL FURNISH TO LENDER PARTIES A CONSENT OF CT CORPORATION
SYSTEM AGREEING TO
<PAGE> 12
ACT HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF LENDER PARTIES TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER PARTIES TO BRING PROCEEDINGS
AGAINST GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION. GUARANTOR SHALL NOT
REVOKE SUCH APPOINTMENT BUT IF FOR ANY REASON CT CORPORATION SYSTEM SHALL RESIGN
OR OTHERWISE CEASE TO ACT AS GUARANTOR'S AGENT, GUARANTOR HEREBY IRREVOCABLY
AGREES TO (A) IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT ACCEPTABLE TO AGENT
TO SERVE IN SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW AGENT SHALL BE DEEMED TO
BE SUBSTITUTED FOR CT CORPORATION SYSTEM FOR ALL PURPOSES HEREOF AND (B)
PROMPTLY DELIVER TO LENDER PARTIES THE WRITTEN CONSENT (IN FORM AND SUBSTANCE
SATISFACTORY TO AGENT) OF SUCH NEW AGENT AGREEING TO SERVE IN SUCH CAPACITY.
(II) GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND
IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH
THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, BEFORE OR AFTER MATURITY; (B) WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW, (C) CERTIFIES THAT NEITHER
IT NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR GUARANTOR HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE WAIVERS
AND CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION, "SPECIAL
DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES
(REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH
GUARANTOR HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO AGENT OR LENDERS.
Section 19. Amendment and Restatement. This Guaranty amends and
restates in its entirety the Original Guaranty, and all of the terms hereof
shall supersede the terms and provisions thereof.
THIS WRITTEN GUARANTY AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
<PAGE> 13
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 14
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date first written above.
ADDINGTON MINING, INC.
By: /s/ John Lynch
--------------------------
Name: John Lynch
Title: Secretary
NATIONSBANK OF TEXAS, N.A.
By: /s/ Denise A. Smith
--------------------------
Denise A. Smith
Senior Vice President
<PAGE> 1
EXHIBIT 10.24
SUBSIDIARY SECURITY AGREEMENT
ADDINGTON MINING, INC.
THIS SECURITY AGREEMENT (this "Agreement") is made as of November 11,
1997 by Addington Mining, Inc., a Kentucky corporation ("Debtor"), in favor of
NationsBank of Texas, N.A., individually and as agent for the other Lenders
that hereafter become parties to the Credit Agreement referenced below
("Secured Party").
W I T N E S S E T H:
WHEREAS, Addington Enterprises, Inc., a Kentucky corporation
("Addington"), entered into a Credit Agreement dated as of October 8, 1997 with
Secured Party (the "Original Credit Agreement"), pursuant to which NationsBank
made loans to Addington, and funds were advanced to Addington pursuant to that
certain promissory note dated October 8, 1997 and executed by Addington in the
original principal amount of $50,000,000 payable to the order to NationsBank
(the "Original Promissory Note");
WHEREAS, Debtor executed that certain Guaranty dated as of October 31,
1997 in favor of Secured Party (the "Original Guaranty") and that certain
Subsidiary Security Agreement dated as of October 31, 1997 in favor of Secured
Party (the "Original Security Agreement");
WHEREAS, contemporaneously with the execution and delivery hereof,
Addington has sold substantially all of its assets to AEI Holding Company,
Inc., a Delaware corporation ("Borrower"), and Borrower has assumed
substantially all of the outstanding indebtedness and obligations of Addington,
including but not limited to all indebtedness and obligations of Addington
owing to NationsBank and Secured Party under the Original Credit Agreement and
the Original Promissory Note;
WHEREAS, Borrower, Agent, and Lenders have entered into that certain
Credit Agreement of even date herewith, (herein, as from time to time amended,
supplemented or restated, called the "Credit Agreement"), pursuant to which
funds are to be advanced to Borrower under the Notes (as such term is defined
below) which funds may be further advanced by Borrower to its Affiliates,
including Debtor (the Credit Agreement amended and restated the Original Credit
Agreement in its entirety);
WHEREAS, Borrower has executed (I) that certain Promissory Note of
even date herewith payable to the order of NationsBank in the original
principal amount of $30,000,000 on or before the Maturity Date and (ii) that
certain Promissory Note of even date herewith payable to the order of The
Provident Bank in the original principal amount of $20,000,000 on or before the
Maturity Date (such promissory notes, as from time to time amended, and all
promissory notes given in substitution, renewal or extension therefor or
thereof, in whole or in part, being herein collectively called the "Notes"),
which Notes renewed and extended the Original Promissory Note;
- 1 -
<PAGE> 2
WHEREAS, pursuant to the Credit Agreement, Debtor is concurrently
herewith giving to Agent for the benefit of Lenders a Guaranty of even date
herewith which amends and restates in its entirety the Original Guaranty
(herein, as from time to time amended, supplemented or restated, called the
"Guaranty");
WHEREAS, it is a condition precedent to Lenders' obligations to
advance funds pursuant to the Credit Agreement that Debtor shall execute and
deliver to Secured Party an amendment and restatement of the Original Security
Agreement;
WHEREAS, Borrower owns all of the issued and outstanding shares of
capital stock of Debtor;
WHEREAS, the board of directors of Debtor has determined that Debtor's
execution, delivery and performance of this Agreement may reasonably be
expected to benefit Debtor, directly or indirectly, and is in the best
interests of Debtor;
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to extend such credit under the Credit Agreement, Debtor hereby
agrees with Secured Party, for the benefit of Lenders and Secured Party, as
follows:
ARTICLE I
Definitions and References
Section 1.1. General Definitions. As used herein, the terms
"Agreement", "Debtor", and "Credit Agreement" shall have the meanings indicated
above, and the following terms shall have the following meanings:
"Collateral" means all property, of whatever type, which is described
in Section 2.1 as being at any time subject to a security interest granted
hereunder to Secured Party.
"Collateral Account" has the meaning given it in Section 4.1(e).
"Commitment" means the agreement or commitment by Lenders to make
loans or otherwise extend credit to Debtor under the Credit Agreement, and any
other agreement, commitment, statement of terms or other document contemplating
the making of loans or advances or other extension of credit by Lenders to or
for the account of Debtor which is now or at any time hereafter intended to be
secured by the Collateral under this Agreement.
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing inventory, equipment, or other
goods.
- 2 -
<PAGE> 3
"Excluded Collateral" means, collectively, all of the following which
are being sold in connection with the sale by Borrower of its Mining
Technologies Division and which have been transferred from Borrower to Debtor:
(a) Receivables relating: (i) to the assets listed in
Schedules 2.1(b), 2.1(c)(1) and 2.1(c)(2) and 2.1(h); (ii) to coal
mining operations performed under contracts with third parties for the
benefit of such third parties and (iii) Receivables arising from
services performed by Borrower for third parties in Borrower's shops.
(b) General Intangibles listed in Schedule 2.1(b), 2.1(c)(1)
and 2.1(c)(2) or relating to the assets listed in Schedule 2.1(h);
(c) Documents relating to the assets listed in Schedules
2.1(b) or 2.1(h) or assets subject to the leases listed in Schedule
2.1(c)(2);
(d) Instruments relating to the assets listed in Schedules
2.1(b), 2.1(c)(1) and 2.1(c)(2) and 2.1(h);
(e) Inventory listed in Schedule 2.1(h);
(f) Investment Property listed in Schedules 2.1(c)(1) or (c)
(2); and
(g) Equipment listed in Schedule 2.1(h) or relating to the
Contracts listed in Schedule 2.1(c)(2);
"Equipment" means all equipment (as defined in the UCC) in whatever
form, wherever located, and whether now or hereafter existing, and all parts
thereof, all accessions thereto, and all replacements therefor, including but
not limited to the Operating Equipment.
"General Intangibles" means all general intangibles (as defined in the
UCC) of any kind (including choses in action, tax refunds, insurance proceeds,
and contract rights), and all instruments, security agreements, leases,
contracts, and other rights (except those constituting Receivables, Documents,
or Instruments) to receive payments of money or the ownership or possession of
property. The General Intangibles include, among other items, all Intellectual
Property.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit" (as each is defined in" the UCC).
"Intellectual Property" means any Patents, Patent Licenses,
Trademarks, and Trademark Licenses.
"Inventory" means all inventory (as defined in the UCC) in all of its
forms, wherever located and whether now or hereafter existing, including (a)
all movable property and other
- 3 -
<PAGE> 4
goods held for sale or lease, all movable property and other goods furnished or
to be furnished under contracts of service, all raw materials and work in
process, and all materials and supplies used or consumed in a business,
including but not limited to all coal and other minerals after extraction, all
stockpiles thereof and related products, (b) all movable property and other
goods which are part of a product or mass, (C) all movable property and other
goods which are returned to or repossessed by the seller, lessor, or supplier
thereof, (d) all goods and substances in which any of the foregoing is
commingled or to which any of the foregoing is added, and (e) all accessions
to, products of, and documents for any of the foregoing.
"Issuer" means any issuer of Subsidiary Shares and any successor of
such Issuer.
"Investment Property" means all "certificated securities",
"uncertificated securities", "security entitlements", "security accounts",
"commodity contracts" or "commodity accounts" (as each is defined in the UCC)
and shall include, without limitation, all Subsidiary Shares.
"Lenders" means the Persons who are from time to time "Lenders" as
defined in the Credit Agreement.
"Lien" means, with respect to any property or assets, any right or
interest therein of a creditor to secure indebtedness of any kind which is owed
to him or any other arrangement with such creditor which provides for the
payment of such indebtedness out of such property or assets or which allows him
to have such indebtedness satisfied out of such property or assets prior to the
general creditors of any owner thereof, including without limitation any lien,
mortgage, security interest, pledge, deposit, production payment, rights of a
vendor under any title retention or conditional sale agreement or lease
substantially equivalent thereto, tax lien, mechanic's or materialman's lien,
or any other charge or encumbrance for security purposes, whether arising by
law or agreement or otherwise, but excluding any right of offset which arises
without agreement in the ordinary course of business. "Lien" also means any
filed financing statement, any registration with an issuer of uncertificated
securities, or any other arrangement which would serve to perfect a Lien
described in the preceding sentence, regardless of whether such financing
statement is filed, such registration is made, or such arrangement is
undertaken before or after such Lien exists.
"Lockbox" has the meaning given it in Section 4.1(e).
"Obligation Documents" means the Credit Agreement, the Notes, the Loan
Documents, and all other documents and instruments under, by reason of which,
or pursuant to which any or all of the Secured Obligations are evidenced,
governed, secured, or otherwise dealt with, and all other agreements,
certificates, and other documents, instruments and writings heretofore or
hereafter delivered in connection herewith or therewith.
"Other Liable Party" means any Person, other than Debtor, who may now
or may at any time hereafter be primarily or secondarily liable for any of the
Secured Obligations or who may
- 4 -
<PAGE> 5
now or may at any time hereafter have granted to Secured Party or Lenders a
Lien upon any property as security for the Secured Obligations.
"Patent License" means any license or other agreement, whether now or
hereafter in existence, under which is granted or authorized any right with
respect to any Patent or any invention now or hereafter in existence, whether
patentable or not, whether a patent or application for patent is in existence
on such invention or not, and whether a patent or application for patent on
such invention may come into existence.
"Patents" means all the following: (a) all letters patent and design
letters patent of the United States or any other country and all applications
for letters patent and design letters patent of the United States or any other
country, including applications in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or other country, or any political subdivision thereof. (b) all
reissues, divisions, continuations, continuations-in-part, renewals and
extensions thereof, (C) all claims for, and rights to sue for, past or future
infringements of any of the foregoing, and (d) all income, royalties, damages
and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements
thereof.
"Perfection Certificate" means a certificate substantially in the form
of Exhibit A, appropriately completed to the satisfaction of Secured Party and
duly executed by the indicated officer or officers of Debtor.
"Permitted Liens" means any Liens expressly permitted under Section
7.2 of the Credit Agreement.
"Person" means an individual, corporation, partnership, association,
joint stock company, trust, unincorporated organization or joint venture, or a
court or governmental unit or any agency or subdivision thereof, or any other
legally recognizable entity.
"Proceeds" means, with respect to any property of any kind, all
proceeds of, and all other profits, products, rentals or receipts, in whatever
form, arising from any sale, exchange, collection, lease, licensing or other
disposition of, distribution in respect of, or other realization upon, such
property, including all claims against third parties for loss of, damage to or
destruction of, or for proceeds payable under (or unearned premiums with
respect to) insurance in respect of, such property (regardless of whether
Secured Party is named a loss payee thereunder), and any payments paid or owing
by any third party under any indemnity, warranty, or guaranty with respect to
such property, and any condemnation or requisition payments with respect to
such property, in each case whether now existing or hereafter arising.
"Receivables" means (a) all accounts (as defined in the UCC) and all
other rights to payment for goods or other personal property which have been
(or are to be) sold, leased, or exchanged or for services which have been (or
are to be) rendered, regardless of whether such accounts or other rights to
payment have been earned by performance and regardless of whether
- 5 -
<PAGE> 6
such accounts or other rights to payment are evidenced by or characterized as
accounts receivable, contract rights, book debts, notes, drafts or other
obligations of indebtedness, (b) all Documents and Instruments of any kind
relating to such accounts or other rights to payment or otherwise arising out
of or in connection with the sale, lease or exchange of goods or other personal
property or the rendering of services, (C) all rights in, to, or under all
security agreements, leases and other contracts securing or otherwise relating
to any such accounts, rights to payment, Documents, or Instruments, (d) all
rights in, to and under any purchase orders, service contracts, or other
contracts out of which such accounts and other rights to payment arose (or will
arise on performance), and (e) all rights in or pertaining to any goods arising
out of or in connection with any such purchase orders, service contracts, or
other contracts, including rights in returned or repossessed goods and rights
of replevin, repossession, and reclamation.
"Related Person" means Debtor, each Subsidiary of Debtor, Borrower and
each Other Liable Party.
"Secured Obligations" has the meaning given such term in Section 2.2.
"Secured Party" means the Person named as such at the beginning of
this Agreement, together with its successors and assigns as the "Agent" under
the Credit Agreement.
"Subsidiary" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.
"Subsidiary Shares" means all of the following issued by any
Subsidiary of Debtor; (a) all shares of capital stock , (b) all units of
membership interest, (C) all certificates representing any such shares and
units, (d) all options and other rights, contractual or otherwise, at any time
existing with respect to such shares and units, and (e) all dividends, cash,
instruments and other property now or hereafter received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares or units.
"Trademark License" means any license or agreement, whether now or
hereafter in existence, under which is granted or authorized any right to use
any Trademark.
"Trademarks" means all of the following: (a) all trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos, brand names, trade dress, prints and
labels on which any of the foregoing have appeared or appear, package and other
designs, and any other source or business identifiers, and general intangibles
of like nature, and the rights in any of the foregoing which arise under
applicable law, (b) the goodwill of the business symbolized thereby or
associated with each of them, (C) all registrations and applications in
connection therewith, including registrations and applications in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or other country, or any political subdivision
thereof, (d) all reissues,
- 6 -
<PAGE> 7
extensions and renewals thereof, (e) all claims for, and rights to sue for,
past or future infringements of any of the foregoing, and (f) all income,
royalties, damages and payments now or hereafter due or payable with respect to
any of the foregoing, including damages and payments for past or future
infringements thereof.
"UCC" means the Uniform Commercial Code in effect in the State of
Texas on the date hereof.
Section 1.2. Other Definitions. Reference is hereby made to the Credit
Agreement for a statement of the terms thereof. All capitalized terms used in
this Agreement which are defined in the Credit Agreement and not otherwise
defined herein shall have the same meanings herein as set forth therein. All
terms used in this Agreement which are defined in the UCC and not otherwise
defined herein or in the Credit Agreement shall have the same meanings herein
as set forth therein, except where the context otherwise requires.
Section 1.3. Attachments. All exhibits or schedules which may be
attached to this Agreement are a part hereof for all purposes.
Section 1.4. Amendment of Defined Instruments. Unless the context
otherwise requires or unless otherwise provided herein, references in this
Agreement to a particular agreement, instrument or document (including, but not
limited to, references in Section 2.1) also refer to and include all renewals,
extensions, amendments, modifications, supplements or restatements of any such
agreement, instrument or document, provided that nothing contained in this
Section shall be construed to authorize any Person to execute or enter into any
such renewal, extension, amendment, modification, supplement or restatement.
Section 1.5. References and Titles. All references in this Agreement
to Exhibits, Articles, Sections, subsections, and other subdivisions refer to
the Exhibits, Articles, Sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise. Titles appearing at the
beginning of any subdivision are for convenience only and do not constitute any
part of any such subdivision and shall be disregarded in construing the
language contained in this Agreement. The words "this Agreement", "herein",
"hereof", "hereby", "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular subdivision unless expressly so
limited. The phrases "this Section" and "this subsection" and similar phrases
refer only to the Sections or subsections hereof in which the phrase occurs.
The word "or" is not exclusive, and the word "including" (in all of its forms)
means "including without limitation". Pronouns in masculine, feminine and
neuter gender shall be construed to include any other gender, and words in the
singular form shall be construed to include the plural and vice versa unless
the context otherwise requires.
- 7 -
<PAGE> 8
ARTICLE II
Security Interest
Section 2.1. Grant of Security Interest. As collateral security for
all of the Secured Obligations, Debtor hereby pledges and assigns to Secured
Party and grants to Secured Party a continuing security interest, for the
benefit of Lenders, in and to all right, title and interest of Debtor in and to
any and all of the following property, whether now owned or existing or
hereafter acquired or arising and regardless of where located, SAVE AND EXCEPT
the Excluded Collateral:
(a) all Receivables.
(b) all General Intangibles.
(c) all Documents.
(d) all Instruments.
(e) all Inventory.
(f) all Investment Property.
(g) all Equipment.
(h) The Collateral Account and the Lockbox, all cash deposited therein
from time to time, and all Liquid Investments referred to in Section 4.1(e).
(i) All books and records (including, without limitation, customer
lists, marketing information, credit files, price lists, operating records,
vendor and supplier price lists, sales literature, computer software, computer
hardware, computer disks and tapes and other storage media, printouts and other
materials and records) of Debtor pertaining to any of the Collateral.
(j) All moneys and property of any kind of Debtor in the possession or
under the control of Secured Party.
(k) All Proceeds of any and all of the foregoing Collateral.
In each case, the foregoing shall be covered by this Agreement, whether
Debtor's ownership or other rights therein are presently held or hereafter
acquired and howsoever Debtor's interests therein may arise or appear (whether
by ownership, security interest, claim or otherwise).
Section 2.2. Secured Obligations Secured. The security interest
created hereby in the Collateral constitutes continuing collateral security for
all of the following obligations, indebtedness and liabilities, whether now
existing or hereafter incurred or arising:
(a) Credit Agreement Indebtedness. The payment by Debtor, as and when
due and payable, of the "Obligations", as defined in the Credit Agreement, and
of all amounts from time
- 8 -
<PAGE> 9
to time owing by Debtor under or in respect of the Credit Agreement, the Notes
or any of the other Obligation Documents.
(b) Guaranteed Indebtedness. The payment by Debtor, when due and
payable, of all amounts from time to time owing by Debtor under or in respect
of the Guaranty or any of the other Obligation Documents to which Debtor is a
party, and the due performance by Debtor of all of its other respective
obligations under or in respect of the Guaranty and such other Obligation
Documents.
(c) Interest Rate Hedges. The payment and performance of any and all
present or future obligations of Debtor according to the terms of any present
or future interest rate or currency rate swap, rate cap, rate floor, rate
collar, exchange transaction, forward rate agreement, or other exchange rate
protection agreements or any option with respect to any such transaction now
existing or hereafter entered into between Debtor, any Subsidiary of Debtor,
and one or more parties constituting any Lender (or any affiliate of any
Lender).
(d) Other Indebtedness. All loans and future advances made by Lenders
to Debtor and all other debts, obligations and liabilities of every kind and
character of Debtor now or hereafter existing in favor of Lenders, whether such
debts, obligations or liabilities be direct or indirect, primary or secondary,
joint or several, fixed or contingent, and whether originally payable to
Lenders or to a third party and subsequently acquired by Lenders and whether
such debts, obligations or liabilities are evidenced by notes, open account,
overdraft, endorsement, security agreement, guaranty or otherwise (it being
contemplated that Debtor may hereafter become indebted to Lenders in further
sum or sums but Lenders shall have no obligation to extend further indebtedness
by reason of this Agreement).
(e) Renewals. All renewals, extensions, amendments, modifications,
supplements, or restatements of or substitutions for any of the foregoing.
(f) Performance. The due performance and observance by Debtor of all
of its other obligations from time to time existing under or in respect of any
of the Obligation Documents.
As used herein, the term "Secured Obligations" refers to all present and future
indebtedness, obligations and liabilities of whatever type which are described
above in this section, including any interest which accrues after the
commencement of any case, proceeding, or other action relating to the
bankruptcy, insolvency, or reorganization of Debtor. Debtor hereby acknowledges
that the Secured Obligations are owed to the various Lenders and that each
Lender is entitled to the benefits of the Liens given under this Agreement. It
is the intention of the Debtor, Secured Party and each Lender that this
Agreement not constitute a fraudulent transfer or fraudulent conveyance under
any state or federal law that may be applied hereto. Debtor and, by their
acceptance hereof, Secured Party and each Lender hereby acknowledge and agree
that, notwithstanding any other provision of this Agreement: (a) the
indebtedness secured hereby shall be limited to the maximum amount of
indebtedness that can be incurred or secured by Debtor without rendering this
Agreement subject to avoidance under Section 548 of the United States
- 9 -
<PAGE> 10
Bankruptcy Code or any comparable provisions of any applicable state or federal
law, and (b) the Collateral pledged by Debtor hereunder shall be limited to the
maximum amount of Collateral that can be pledged by Debtor without rendering
this Agreement subject to avoidance under Section 548 of the United States
Bankruptcy Code or any comparable provisions of any applicable state or federal
law.
ARTICLE III
Representations, Warranties and Covenants
Section 3.1. Representations and Warranties. Debtor hereby represents
and warrants to Secured Party and Lenders as follows:
(a) Ownership Free of Liens. Debtor has good and marketable title to
the Collateral, free and clear of all Liens, encumbrances or adverse claims
except for the security interest created by this Agreement and any Permitted
Liens. No effective financing statement or other registration or instrument
similar in effect covering all or any part of the Collateral is on file in any
recording office except any which have been filed in favor of Secured Party
relating to this Agreement and any which have been filed to perfect or protect
any Permitted Lien. None of the Collateral is in the possession of any Person
other than Debtor or Secured Party, except for Collateral being transported in
the ordinary course of business.
(b) No Conflicts or Consents. Neither the ownership or the intended
use of the Collateral by Debtor, nor the grant of the security interest by
Debtor to Secured Party herein, nor the exercise by Secured Party of its rights
or remedies hereunder, will (I) conflict with any provision of (a) any domestic
or foreign law, statute, rule or regulation, (b) the articles or certificate of
incorporation, charter or bylaws of Debtor, or (C) any agreement, judgment,
license, order or permit applicable to or binding upon Debtor, or (ii) result
in or require the creation of any Lien, charge or encumbrance upon any assets
or properties of Debtor or of any Related Person except for Permitted Liens
expressly contemplated in the Obligation Documents. Except as expressly
contemplated in the Obligation Documents, no consent, approval, authorization
or order of, and no notice to or filing with any court, governmental authority,
or third party is required in connection with the grant by Debtor of the
security interest herein, or the exercise by Secured Party of its rights and
remedies hereunder.
(c) Security Interest. Debtor has and will have at all times full
right, power and authority to grant a security interest in the Collateral to
Secured Party as provided herein, free and clear of any Lien, adverse claim, or
encumbrance. This Agreement creates a valid and binding security
- 10 -
<PAGE> 11
interest in favor of Secured Party in the Collateral, which security interest
secures all of the Secured Obligations.
(d) Perfection Certificate. Debtor has previously completed and
delivered the Perfection Certificate to Secured Party. The Perfection
Certificate as so delivered is true, correct and complete.
(e) Receivables. Each Receivable included within the Collateral
represents the valid and legally binding indebtedness of a bona fide account
debtor arising from the sale or lease by Debtor of goods or the rendition by
Debtor of services, subject to no contra-accounts, setoffs, defenses,
counterclaims, discounts, allowances, rebates, credits or adjustments by or
available to account debtors obligated on such Receivable, except for
Receivables of Debtor which do not in the aggregate exceed five percent (5%) of
the aggregate face amount of all of Debtor's Receivables. No material amount of
Debtor's Receivables is otherwise doubtful of collection except as has been
disclosed to Secured Party in writing.
(f) General Intangibles. Each General Intangible included within the
Collateral which is material to Debtor's business represents the valid and
legally binding obligation of each other Person who is a party thereto or who
is otherwise stated to be obligated thereunder, subject to no contra-accounts,
setoffs, defenses, counterclaims, discounts, allowances, rebates, credits or
adjustments by or available to account debtors obligated thereon, except for
those which (i) in the case of General Intangibles under which money is owing
to Debtor, do not in the aggregate exceed five percent (5%) of the aggregate
face amount of all such General Intangibles, and (ii) in the case of other
General Intangibles, do not materially impair the value to Debtor or the
enforcement by Debtor of such General Intangibles.
(g) Intellectual Property. There is no Intellectual Property included
within the Collateral which is material to Debtor's business.
(h) Documents and Instruments. All Documents and Instruments included
within the Collateral are valid and genuine. Any such Document or Instrument
has only one original counterpart which constitutes collateral within the
meaning of the UCC or the law of any applicable jurisdiction, and all such
original counterparts (other than checks delivered in payment of Receivables in
the ordinary course of business) have been delivered into the possession of
Secured Party.
(i) Goods. None of the Collateral which constitutes goods (i) is
covered by any Document (other than Documents which are subject hereto and have
been delivered to Secured Party), (ii) is subject to any landlord's lien or
similar Lien (other than Permitted Liens), (iii) has been related to, attached
to, or used in connection with any real property so as to constitute a fixture
upon such real property (except for real property which is subject to a Lien in
favor of Secured Party), (iv) is now kept or is intended to be kept at any
location other than as set forth in the Perfection Certificate (except for
goods in transit in the ordinary course of Debtor's business), (v) is installed
in or affixed to other goods so as to be an accession to such other goods
- 11 -
<PAGE> 12
(unless such other goods are included in the Collateral), or (vi) has been
produced in violation of the Fair Labor Standards Act, as amended. All such
goods are insured to the extent required under the Credit Agreement.
(k) Investment Property. Debtor has delivered to Secured Party all
Certificates, instruments, and writings evidencing Investment Property included
within the Collateral. All such certificates, instruments, and writings are
valid and genuine and have not been altered.
(j) Subsidiary Shares. Debtor has delivered to Secured Party all
certificates evidencing Subsidiary Shares. All such certificates are valid and
genuine and have not been altered. All shares, units and other securities
constituting the Subsidiary Shares have been duly authorized and validly
issued, are fully paid and non-assessable, and were not issued in violation of
the preemptive rights of any Person or of any agreement by which Debtor or the
Issuer thereof is bound. All documentary, stamp or other taxes or fees owing in
connection with the issuance, transfer or pledge of Subsidiary Shares (or
rights in respect thereof) have been paid. No restrictions or conditions exist
with respect to the transfer, voting or capital of any Subsidiary Shares. The
Subsidiary Shares constitute the percentage of the class of issued shares of
capital stock which is indicated on Exhibit B. No Issuer of any Subsidiary
Shares has any outstanding stock rights, rights to subscribe, options, warrants
or convertible securities outstanding or any other rights outstanding whereby
any Person would be entitled to have issued to him capital stock of such
Issuer.
Section 3.2. General Covenants Applicable to All Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this Section 3.2 from the date hereof
and so long as any part of the Secured Obligations or the Commitment is
outstanding.
(a) Change of Name, Location, or Structure; Additional Filings. Debtor
recognizes that financing statements pertaining to the Collateral have been or
may be filed where Debtor maintains any Collateral, has its records concerning
any Collateral or has its chief executive office or chief place of business.
Without limitation of any other covenant herein, Debtor will not cause or
permit any change to be made in its name, identity or corporate or partnership
structure, or any change to be made to a jurisdiction other than as represented
in Section 3.1 hereof in (I) the location of any Collateral, (ii) the location
of any records concerning any Collateral or (iii) in the location of Debtor's
chief executive office or principal place of business, unless Debtor shall have
first (1) notified Secured Party of such change at least twenty (20) days prior
to the effective date of such change, (2) taken all action requested by Secured
Party (under the following subsection (b) or otherwise) for the purpose of
further confirming and protecting Secured Party's security interests and rights
under this Agreement and the perfection and priority thereof, and (3) if
requested by Secured Party, provided to Secured Party a legal opinion to its
satisfaction confirming that such change will not adversely affect in any way
Secured Party's security interests and rights under this Agreement or the
perfection or priority thereof. In any notice furnished pursuant to this
subsection, Debtor will expressly state that the notice is
- 12 -
<PAGE> 13
required by this Agreement and contains facts that may require additional
filings of financing statements or other notices for the purposes of continuing
perfection of Secured Party's security interest in the Collateral.
(b) Further Assurances. Debtor will, at its expense as from time to
time requested by Secured Party, promptly execute and deliver all further
instruments, agreements, filings and registrations, and take all further
action, in order: (i) to confirm and validate this Agreement and Secured
Party's rights and remedies hereunder, (ii) to correct any errors or omissions
in the descriptions herein of the Secured Obligations or the Collateral or in
any other provisions hereof, (iii) to perfect, register and protect the
security interests and rights created or purported to be created hereby or to
maintain or upgrade in rank the priority of such security interests and rights,
(iv) to enable Secured Party to exercise and enforce its rights and remedies
hereunder in respect of the Collateral, or (v) to otherwise give Secured Party
the full benefits of the rights and remedies described in or granted under this
Agreement. As part of the foregoing Debtor will, whenever requested by Secured
Party (1) execute and file any financing statements, continuation statements,
and other filings or registrations relating to Secured Party's security
interests and rights hereunder, and any amendments thereto, and (2) mark its
books and records relating to any Collateral to reflect that such Collateral is
subject to this Agreement and the security interests hereunder. To the extent
requested by Secured Party from time to time, Debtor will obtain from any
material account debtor or other obligor on the Collateral the acknowledgment
of such account debtor or obligor that such Collateral is subject to this
Agreement.
(c) Inspection of Collateral. Debtor will keep adequate records
concerning the Collateral and will permit Secured Party and all representatives
appointed by Secured Party, including independent accountants, agents,
attorneys, appraisers and any other persons, to inspect any of the Collateral
and the books and records of or relating to the Collateral at any time during
normal business hours, and to make photocopies and photographs thereof, and to
write down and record any information which such representatives obtain;
provided that such actions do not unreasonably interfere with Debtor's
business..
(d) Information. Upon the reasonable request from time to time by
Secured Party, Debtor will furnish to Secured Party (i) any information
concerning any covenant, provision or representation contained herein or any
other matter in connection with the Collateral or Debtor's business,
properties, or financial condition, and (ii) statements and schedules
identifying and describing the Collateral and other reports and information
requested in connection with the Collateral, all in reasonable detail.
(e) Ownership, Liens, Possession and Transfers. Debtor will maintain
good and marketable title to all Collateral (except Collateral which is sold in
accordance with Section 7.5 of the Credit Agreement), free and clear of all
Liens, encumbrances or adverse claims except for the security interest created
by this Agreement and any Permitted Liens, and Debtor will not grant or allow
any such Liens, encumbrances or adverse claims to exist. Debtor will not grant
or allow to remain in effect, and Debtor will cause to be terminated, any
financing statement or other registration or instrument similar in effect
covering all or any part of the Collateral, except
- 13 -
<PAGE> 14
any which have been filed in favor of Secured Party relating to this Agreement
and any which have been filed to perfect or protect any Permitted Lien. Debtor
will defend Secured Party's right, title and special property and security
interest in and to the Collateral against the claims of any Person. Except as
expressly allowed in Section 3.3 below for Inventory and Equipment, Debtor (i)
will insure that all of the Collateral -- whether goods, Documents,
Instruments, or otherwise -- is and remains in the possession of Debtor or
Secured Party (or a bailee selected by Secured Party who is holding such
Collateral for the benefit of Secured Party), except for goods being
transported in the ordinary course of business, and (ii) will not sell, assign
(by operation of law or otherwise), transfer, exchange, lease or otherwise
dispose of any of the Collateral.
(f) Impairment of Security Interest. Debtor will not take or fail to
take any action which would in any manner impair the value or enforceability of
Secured Party's security interest in any Collateral.
Section 3.3. Covenants for Specified Types of Collateral. Unless
Secured Party shall otherwise consent in writing, Debtor will at all times
comply with the covenants contained in this Section 3.3 from the date hereof
and so long as any part of the Secured Obligations or the Commitment is
outstanding.
(a) Receivables. Debtor will, except as otherwise provided in Sections
4.1(d) or 4.2(a), collect at its own expense all amounts due or to become due
under each Receivable which is included within the Collateral. In connection
with such collections, Debtor may (and, at Secured Party's direction, will)
take such action (not otherwise forbidden hereunder) as Debtor or Secured Party
may deem necessary or advisable to enforce collection or performance of each
such Receivable. Except for actions and omissions in the ordinary course of
business which do not in the aggregate cause losses or reductions in excess of
five percent (5%) of the aggregate face amount of all such Receivables
outstanding at any time, Debtor (i) will duly perform and cause to be performed
all of its obligations with respect to the goods or services, the sale or lease
or rendering of which gave rise or will give rise to each such Receivable, and
(ii) will not (whether through failure to duly perform its obligations under
any contracts, instruments, and agreements which are related to any such
Receivable, or by any written instrument, or otherwise) take or allow any
action or omission which causes any such Receivable to become subject to any
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to account debtors obligated on
such Receivable, unless such action involves a good faith contest (promptly
instituted and diligently concluded) to the validity of amounts claimed to be
owed to another Person.
(b) General Intangibles. Debtor will, except as otherwise provided in
Sections 4.1(e) or 4.2(a), collect at its own expense all amounts due or to
become due under each General Intangible included within the Collateral. In
connection with such collections, Debtor may (and, at Secured Party's
direction, will) take such action (not otherwise forbidden hereunder) as Debtor
or Secured Party may deem necessary or advisable to enforce collection or
performance of each such General Intangible. Unless the failure to do so is the
result of a good faith contest (promptly and diligently concluded) of the
validity of such obligations, Debtor will duly perform
- 14 -
<PAGE> 15
and cause to be performed all of its obligations under any contracts,
instruments, and agreements which are, or which are related to, any material
General Intangibles of Debtor. Debtor will not (whether through failure to duly
perform its obligations under any contracts, instruments, and agreements which
are related to any such General Intangibles, or by any written instrument, or
otherwise) take or allow any action or omission which causes any such General
Intangibles to become subject to any contra-accounts, setoffs, defenses,
counterclaims, discounts, allowances, rebates, credits or adjustments by or
available to account debtors obligated on such General Intangibles, except for
those which (i) in the case of such General Intangibles under which money is
owing to Debtor, do not in the aggregate exceed five percent (5%) of the
aggregate face amount of all such General Intangibles, and (ii) in the case of
other General Intangibles included within the Collateral, do not materially
impair the value or enforcement of such General Intangibles.
(c) Intellectual Property. Debtor will maintain and protect the
validity and enforceability of all Intellectual Property included within the
Collateral which is material to Debtor's business. Debtor will defend and
protect such Intellectual Property and its rights thereunder against any
infringement, dilution, or misappropriation and will defend any claim or
administrative or arbitral challenge that questions the validity or
enforceability of such Intellectual Property, Debtor's purported rights therein
and thereunder, or Debtor's rights to register or patent the same or to use and
practice the same in its business. Debtor will give Secured Party notice of any
proceeding in which such defense is being carried on. Debtor will diligently
prosecute and maintain all applications and registrations for any such
Intellectual Property, and Debtor will notify Secured Party whenever it learns
that any application or registration relating to any such Intellectual Property
has been (or is alleged to have been) abandoned, dedicated or otherwise
terminated. At least thirty days prior to filing any application for
registration of any Intellectual Property (or any similar request) with the
United States Patent and Trademark Office, or any similar office or agency of
the United States, any State thereof or other country, or any political
subdivision thereof, Debtor will give Secured Party notice of such intended
filing and will, upon Secured Party's request, execute, deliver and file any
agreements, instruments, registrations and filings which Secured Party may
request to confirm Secured Party's security interest therein and to put such
security interest of record in such office. Debtor hereby appoints Secured
Party as its agent and attorney in fact to do the same, and hereby ratifies and
confirms all actions of Secured Party as such agent and attorney in fact, and
hereby acknowledges that such agency and power of attorney are irrevocable and
coupled with an interest.
(d) Documents and Instruments. Debtor will at all times cause any
Documents or Instruments which are included within the Collateral to be valid
and genuine. Debtor will cause all Instruments included within the Collateral
to have only one original counterpart. Upon request by Secured Party, Debtor
will promptly deliver to Secured Party all originals of Documents or
Instruments which are included within the Collateral. Debtor will not (whether
through failure to duly perform its obligations under any contracts,
instruments, and agreements which are related to any Documents or Instruments
which are included within the Collateral, or by any written instrument, or
otherwise) take or allow any action or omission which causes any Documents or
Instruments which are included within the Collateral to become subject to any
- 15 -
<PAGE> 16
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to the Persons obligated
thereon. Upon request by Secured Party, Debtor will mark each chattel paper
which is included within the Collateral with a legend indicating that such
chattel paper is subject to the security interest granted by this Agreement.
(e) Inventory. Debtor will maintain, preserve, protect and store all
Inventory included within the Collateral in good condition, repair and working
order and in a manner which will not make void or cancelable any insurance with
respect to such Collateral. Debtor will promptly furnish to Secured Party a
statement respecting any loss or damage to any such Inventory with an aggregate
value in excess of $500,000. Except for transportation of Inventory in the
ordinary course of business, Debtor will not allow any such Inventory to be
located in any jurisdiction other than those in which is filed an effective
financing statement which perfects Secured Party's security interest hereunder
in such Inventory. Except for Documents delivered into the possession of
Secured Party, Debtor will not allow any Inventory included within the
Collateral to be covered by any Document. Debtor will not cause or permit the
removal of any item of Inventory from Debtor's possession, control and risk of
loss, and Debtor will not sell, assign (by operation of law or otherwise),
transfer, exchange, lease or otherwise dispose of any Inventory, other than in
connection with the following:
(i) Sales or leases, other than during the continuance of an
Event of Default, of Inventory in the ordinary course of business, and
(ii) Possession of Inventory by Secured Party or by a bailee
selected by Secured Party who is holding such Inventory for the
benefit of Secured Party.
(f) Equipment. Debtor will maintain, preserve, protect and keep all
Equipment included within the Collateral in good condition, repair and working
order and will cause such Equipment to be used and operated in a good and
workmanlike manner, in accordance with applicable law and in a manner which
will not make void or cancelable any insurance with respect to such Equipment.
Debtor will promptly furnish to Secured Party a statement respecting any loss
or damage to any of such Equipment with an aggregate value in excess of
$500,000. Except for transportation of Equipment in the ordinary course of
business, Debtor will not allow any Equipment included within the Collateral to
be located in any jurisdiction other than those in which is filed an effective
financing statement which perfects Secured Party's security interest hereunder
in such Equipment. Debtor will not cause or permit the removal of any item of
Equipment from Debtor's possession, control and risk of loss, and Debtor will
not sell, assign (by operation of law or otherwise), transfer, exchange, lease
or otherwise dispose of any Equipment, other than in connection with the
following:
(i) Sale or other disposal, other than during the
continuance of an Event of Default, of any item of Equipment (I) in
the ordinary course of business or (ii) which is worn out or obsolete
and which has been replaced by an item of equal suitability and value,
owned by Debtor and made subject to the security interest under this
Agreement, but which is otherwise free and clear of any Liens,
encumbrances or adverse claims, and
- 16 -
<PAGE> 17
(ii) Possession of Equipment by Secured Party or by a bailee
selected by Secured Party who is holding such Equipment for the
benefit of Secured Party.
Debtor will not permit any of the Collateral which constitutes Equipment to at
any time become so related to attached to, or used in connection with any
particular real property so as to become a fixture upon such real property, or
to be installed in or affixed to other goods so as to become an accession to
such other goods unless such other goods are also included in the Collateral.
(g) Certificates of Title. To the extent that there is at any time any
Collateral in which a security interest may be perfected by a notation on the
certificate of title or similar evidence of ownership of such Collateral,
Debtor will:
(i) concurrently with the execution hereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor presently has any interest,
(ii) promptly after the acquisition thereof, with respect to
any items of such Collateral with a book value in excess of $25,000 in
which Debtor hereafter acquires any interest, and
(iii) promptly upon request by Secured Party, with respect to
any other items of such Collateral,
deliver to Secured Party all such certificates of title and similar evidences
of ownership, all applications therefor, and all other documents needed or
helpful in registering Secured Party's security interest in such Collateral on
such certificates of title, other evidences of ownership, and applications and
in otherwise perfecting Secured Party's security interest in such Collateral.
(h) Investment Property.
(i) Debtor will at all times cause (A) Secured Party to have control
(within the meaning of the UCC) over all Investment Property included
within the Collateral and (B) any certificates, documents, or
instruments evidencing Investment Property included within the
Collateral to be valid and genuine. All instruments and writings
evidencing Investment Property included within the Collateral shall be
delivered to Secured Party concurrently with or prior to the execution
and delivery of this Agreement. )
(ii) All instruments and writings evidencing the Investment Property
shall be delivered to Secured Party on or prior to the execution and
delivery of this Agreement. All other instruments and writings
hereafter evidencing or constituting Investment Property shall be
delivered to Secured Party promptly upon the receipt thereof by or on
behalf of Debtor. All such Investment Property shall be held by or on
behalf of Secured Party pursuant hereto and shall be delivered in
suitable form for transfer by delivery with any
- 17 -
<PAGE> 18
necessary endorsement or shall be accompanied by fully executed
instruments of transfer or assignment in blank, all in form and
substance satisfactory to Secured Party.
(iii) If Debtor shall receive, by virtue of its being or having been
an owner of any Subsidiary Shares, any (I) stock certificate
(including any certificate representing a stock dividend or
distribution in connection with any increase or reduction of capital,
reorganization, reclassification, merger, consolidation, sale of
assets, combination of shares, stock split, spinoff or split-off),
promissory note or other instrument or writing; (ii) option or right,
whether as an addition to, substitution for, or in exchange for, any
Subsidiary Shares, or otherwise; (iii) dividends payable in cash
(except such dividends permitted to be retained by Debtor pursuant to
Section 4.10 hereof, or (iv) dividends or other distributions in
connection with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or paid-in
surplus, Debtor shall receive the same in trust for the benefit of
Secured Party, shall segregate it from Debtor's other property, and
shall promptly deliver it to Secured Party in the exact form received,
with any necessary endorsement or appropriate stock powers duly
executed in blank, to be held by Secured Party as Collateral.
(iv) Status of Subsidiary Shares. The certificates evidencing the
Subsidiary Shares shall at all times be valid and genuine and shall
not be altered. The Subsidiary Shares at all times shall be duly
authorized, validly issued, fully paid, and non-assessable, and shall
not be issued in violation of the preemptive rights of any Person or
of any agreement by which Debtor or the Issuer thereof is bound and
shall not be subject to any restrictions with respect to transfer,
voting or Capital of such Subsidiary Shares.
(v) Notices from Issuer. Debtor will promptly deliver to Secured
Party a copy of each notice or other communication received by Debtor
from any Issuer in respect of any Investment Property.
ARTICLE IV.
Remedies, Powers and Authorizations
Section 4.1. Normal Provisions Concerning the Collateral.
(a) Additional Financing Statement Filings. Debtor hereby authorizes
Secured Party to file, without the signature of Debtor where permitted by law,
one or more financing or continuation statements, and amendments thereto,
relating to the Collateral. Debtor further agrees that a carbon, photographic
or other reproduction of this Agreement or any financing statement describing
any Collateral is sufficient as a financing statement and may be filed in any
jurisdiction by Secured Party.
- 18 -
<PAGE> 19
(b) Power of Attorney. Debtor hereby appoints Secured Party as
Debtor's attorney-in-fact and proxy, with full authority in the place and stead
of Debtor and in the name of Debtor or otherwise, from time to time in Secured
Party's discretion, to take any action and to execute any instrument which
Secured Party may deem necessary or advisable to accomplish the purposes of
this Agreement including any action or instrument: (I) to request or instruct
each Issuer (and each registrar, transfer agent, or similar Person acting on
behalf of each Issuer) including any action or instrument: (I) to request or
instruct each to register the pledge or transfer of the Collateral to Secured
Party; (ii) to otherwise give notification to any Issuer, registrar, transfer
agent, financial intermediary, or other Person of Secured Party's security
interests hereunder; (iii) to obtain and adjust any insurance required to be
paid to Secured Party pursuant hereto; (iv) to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral; (v) to receive,
indorse and collect any drafts or other Instruments or Documents; (vi) to
enforce any obligations included among the Collateral; and (vii) to file any
claims or take any action or institute any proceedings which Secured Party may
deem necessary or desirable for the collection of any of the Collateral or
otherwise to enforce the rights of Debtor or Secured Party with respect to any
of the Collateral. Debtor hereby acknowledges that such power of attorney and
proxy are coupled with an interest, are irrevocable, and are to be used by
Secured Party for the sole benefit of Lenders.
(c) Performance by Secured Party. If Debtor fails to perform any
agreement or obligation contained herein, Secured Party may itself perform, or
cause performance of, such agreement or obligation, and the expenses of Secured
Party incurred in connection therewith shall be payable by Debtor under Section
4.5.
(d) Bailees. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of Debtor's agents or processors,
Debtor shall, upon the request of Secured Party, notify such warehouseman,
bailee, agent or processor of Secured Party's rights hereunder and instruct
such Person to hold all such Collateral for Secured Party's account subject to
Secured Party's instructions. (No such request by Secured Party shall be deemed
a waiver of any provision hereof which was otherwise violated by such
Collateral being held by such Person prior to such instructions by Debtor.)
(e) Collection. Secured Party shall have the right at any time, upon
the occurrence and during the continuance of a Default or an Event of Default,
to notify (or to require Debtor to notify) any and all obligors under any
Receivables, General Intangibles, Instruments, Investment Property or other
rights to payment included among the Collateral of the assignment thereof to
Secured Party under this Agreement and to direct such obligors to make payment
of all amounts due or to become due to Debtor thereunder directly to Secured
Party and, upon such notification and at the expense of Debtor and to the
extent permitted by law, to enforce collection of any such Receivables, General
Intangibles, Instruments, Investment Property or other rights to payment and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Debtor could have done. After Debtor receives notice
that Secured Party has given (and after Secured Party has required Debtor to
give) any notice referred to
- 19 -
<PAGE> 20
above in this subsection: all amounts and proceeds (including instruments and
writings) received by Debtor in respect of such Receivables, General
Intangibles, Instruments, Investment Property or other rights to payment upon
the occurrence and during the continuance of a Default or Event of Default
shall be received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of Debtor and shall be forthwith paid over to
Secured Party in the same form as so received (with any necessary indorsement)
to be, at Secured Party's discretion, either (A) held as cash collateral and
released to Debtor upon the remedy of all Defaults and Events of Default, or
(B) while any Event of Default is continuing, applied as specified in Section
4.3.
(f) Collection and Collateral Account. There is hereby established
with Secured Party a cash collateral account (the "Collateral Account") in the
name and under the control of Secured Party into which there shall be deposited
from time to time the cash proceeds of the Collateral (and of any other
collateral under other Obligation Document) required to be delivered to Secured
Party pursuant to the following subsections of this Section 4.1 or pursuant to
any other provision of this Agreement or any other Obligation Document. Debtor
and Secured Party shall deal with the Collateral Account as follows:
(i) Concurrently with the execution hereof (or promptly
thereafter), Debtor shall instruct all account debtors and other
Persons obligated to make payments to Debtor on any Receivables,
General Intangibles, Instruments, or other rights to payment included
within the Collateral to make such payments either (A) directly to
Secured Party, in which case Debtor shall instruct that such payments
be remitted to a post office box ("Lockbox) which shall be in the name
and under the control of Secured Party, or (B) if Secured Party
agrees, to one or more banks acceptable to Secured Party, in which
case Debtor shall instruct that such payments be remitted to a post
office box in the name and under the control of such bank which is
subject to the terms of a lockbox agreement in a form satisfactory to
Agent, duly executed by Debtor and such bank, pursuant to which Debtor
shall have irrevocably instructed such other bank (and such other bank
shall have agreed) to remit all proceeds of such payments directly to
Secured Party for deposit into the Collateral Account or as Secured
Party may otherwise instruct such bank. All such payments made to
Secured Party shall be deposited in the Collateral Account. In
addition to the foregoing, Debtor agrees that if the proceeds of any
Collateral (including any payments with respect to which instructions
have been given as provided above) shall be received by it, Debtor
shall as promptly as possible deposit such proceeds into the
Collateral Account. Until so deposited, all such proceeds shall be
held in trust by Debtor for Secured Party and shall not be commingled
with any other funds or property of Debtor, and Debtor will not
adjust, settle or compromise the amount or payment of any such
Receivable, General Intangible, Instrument, or other right to payment
or release wholly or partly any account debtor or obligor thereof or
allow any credit or discount thereon.
(ii) As long as no Default or Event of Default has occurred
or is continuing, amounts on deposit in the Collateral Account shall,
upon receipt by Secured Party, be
- 20 -
<PAGE> 21
deposited by Secured Party in Borrower's operating account maintained
with Secured Party.
(iii) If a Default or an Event of Default has occurred or is
continuing, Secured Party shall, at Secured Party's discretion, either
(A) continue to hold the balance of the Collateral Account and all
Liquid Investments as Collateral, or (B) apply any or all of the
balance from time to time standing to the credit of the Collateral
Account (subject to collection) as specified in Section 4.3 and
liquidate any or all Liquid Investments and apply the proceeds thereof
as specified in Section 4.3.
(iv) Amounts on deposit in the Collateral Account pursuant
to subsection (iii) shall either remain on deposit therein or be
invested and re-invested from time to time in such Liquid Investments
as Secured Party shall determine, which Liquid Investments shall be
held in the name and be under the control of Secured Party in a
securities account established by Secured Party with one of its
Affiliates until liquidated and applied as provided in subsection
(iii). Any income received by Secured Party with respect to the
balance from time to time standing to the credit of the Collateral
Account, including any interest on or proceeds of Liquid Investments,
shall also remain, or be deposited, in the Collateral Account. All
right, title and interest in and to the amounts on deposit from time
to time in the Collateral Account, together with any Liquid
Investments from time to time made pursuant to this section shall vest
in Secured Party, shall constitute part of the Collateral hereunder,
and shall not constitute payment of the Secured Obligations until
applied thereto as herein provided.
(v) As used in this section, "Liquid Investment" means any
investment in the name of Secured Party (and, in the opinion of
counsel to Secured Party, appropriately subject to a perfected
security interest in favor of Secured Party) which matures within one
month after it is acquired by Secured Party and is either (A) a
certificate of deposit or time deposit issued by Secured Party or (B)
an obligation entitled to the full faith and credit of the United
States which is in book-entry form and subject to pledge under
applicable state law and Treasury regulations.
Section 4.2. Event of Default Remedies. If an Event of Default shall
have occurred and be continuing, Secured Party may from time to time in its
discretion, without limitation and without notice except as expressly provided
below:
(a) exercise in respect of the Collateral, in addition to any other
rights and remedies provided for herein, under the other Obligation Documents,
or otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral);
(b) require Debtor to, and Debtor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of
the Collateral as directed by Secured Party and make it (together with all
books, records and information of Debtor relating thereto)
- 21 -
<PAGE> 22
available to Secured Party at a place to be designated by Secured Party which
is reasonably convenient to both parties;
(c) prior to the disposition of any Collateral, (i) to the extent
permitted by applicable law, enter, with or without process of law and without
breach of the peace, any premises where any of the Collateral is or may be
located, and without charge or liability to Secured Party seize and remove such
Collateral from such premises, (ii) have access to and use the Company's books,
records, and information relating to the Collateral, and (iii) store or
transfer any of the Collateral without charge in or by means of any storage or
transportation facility owned or leased by Debtor, process, repair or
recondition any of the Collateral or otherwise prepare it for disposition in
any manner and to the extent Secured Party deems appropriate and, in connection
with such preparation and disposition, use without charge any copyright,
trademark, trade name, patent or technical process used by Debtor;
(d) reduce its claim to judgment or foreclose or otherwise enforce, in
whole or in part, the security interest created hereby by any available
judicial procedure;
(e) dispose of, at its office, on the premises of Debtor or elsewhere,
all or any part of the Collateral, as a unit or in parcels, by public or
private proceedings, and by way of one or more contracts (it being agreed that
the sale of any part of the Collateral shall not exhaust Secured Party's power
of sale, but sales may be made from time to time, and at any time, until all of
the Collateral has been sold or until the Secured Obligations have been paid
and performed in full), and at any such sale it shall not be necessary to
exhibit any of the Collateral;
(f) buy (or allow one or more of the Lenders to buy) the Collateral,
or any part thereof, at any public sale;
(g) buy (or allow one or more of the Lenders to buy) the Collateral,
or any part thereof, at any private sale if the Collateral is of a type
customarily sold in a recognized market or is of a type which is the subject of
widely distributed standard price quotations; and
(h) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Debtor hereby consents to
any such appointment.
Debtor agrees that, to the extent notice of sale shall be required by law, at
least five (5) days' notice to Debtor of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. Secured Party shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
In addition to the foregoing, if any Event of Default has occurred and is
continuing:
- 22 -
<PAGE> 23
(I) Secured Party may license, or sublicense, whether
general, special or otherwise, and whether on an exclusive or
non-exclusive basis, any Patents or Trademarks included in the
Collateral throughout the world for such term or terms, on such
conditions and in such manner as Secured Party shall in its sole
discretion determine;
(ii) Secured Party may (without assuming any obligations or
liability thereunder), at any time and from time to time, in its sole
discretion, enforce (and shall have the exclusive right to enforce)
against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any Patent Licenses or Trademark Licenses which
relate to Patents or Trademarks included in the Collateral and take or
refrain from taking any action under any thereof, and DEBTOR HEREBY
RELEASES SECURED PARTY AND THE LENDERS FROM, AND AGREES TO HOLD
SECURED PARTY AND THE LENDERS FREE AND HARMLESS FROM AND AGAINST, ANY
CLAIMS AND EXPENSES ARISING OUT OF ANY LAWFUL ACTION SO TAKEN OR
OMITTED TO BE TAKEN WITH RESPECT THERETO; and
(iii) upon request by Secured Party, Debtor will execute and
deliver to Secured Party a power of attorney, in form and substance
satisfactory to Secured Party, for the implementation of any lease,
assignment, license, sublicense, grant of option, sale or other
disposition of a Patent or Trademark included in the Collateral or any
action related thereto. In the event of any such disposition pursuant
to this Section, Debtor shall supply its know-how and expertise
relating to the manufacture and sale of the products bearing
Trademarks or the products or services made or rendered in connection
with Patents, and its customer lists and other records relating to
such Patents or Trademarks and to the distribution of said products,
to Secured Party.
Section 4.3. Application of Proceeds. If any Event of Default shall
have occurred and be continuing, Secured Party may in its discretion apply any
cash held by Secured Party as Collateral, and any cash proceeds received by
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral, to any or all of the following in such
order as Secured Party may (subject to the rights of Lenders under the Credit
Agreement) elect:
(a) To the repayment of the reasonable costs and expenses, including
reasonable attorneys' fees and legal expenses, incurred by Secured Party in
connection with (I) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (iii) the exercise or enforcement of any of
the rights of Secured Party hereunder, or (iv) the failure of Debtor to perform
or observe any of the provisions hereof;
(b) To the payment or other satisfaction of any Liens, encumbrances,
or adverse claims upon or against any of the Collateral;
- 23 -
<PAGE> 24
(c) To the reimbursement of Secured Party for the amount of any
obligations of Debtor or any Other Liable Party paid or discharged by Secured
Party pursuant to the provisions of this Agreement or the other Obligation
Documents, and of any expenses of Secured Party payable by Debtor hereunder or
under the other Obligation Documents;
(d) To the satisfaction of any other Secured Obligations;
(e) By holding the same as Collateral;
(f) To the payment of any other amounts required by applicable law
(including any provision of the UCC); and
(g) By delivery to Debtor or to whoever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 4.4. Deficiency. In the event that the proceeds of any sale,
collection or realization of or upon Collateral by Secured Party are
insufficient to pay all Secured Obligations and any other amounts to which
Secured Party is legally entitled, Debtor shall be liable for the deficiency,
together with interest thereon as provided in the governing Obligation
Documents or (if no interest is so provided) at such other rate as shall be
fixed by applicable law, together with the costs of collection and the
reasonable fees of any attorneys employed by Secured Party or Lenders to
collect such deficiency.
Section 4.5. Indemnity and Expenses. In addition to, but not in
qualification or limitation of, any similar obligations under other Obligation
Documents:
(a) DEBTOR WILL INDEMNIFY SECURED PARTY AND EACH LENDER FROM AND
AGAINST ANY AND ALL CLAIMS, LOSSES AND LIABILITIES GROWING OUT OF OR RESULTING
FROM THIS AGREEMENT (INCLUDING ENFORCEMENT OF THIS AGREEMENT), WHETHER OR NOT
SUCH CLAIMS, LOSSES AND LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY
OR ARISING OUT OF SUCH INDEMNIFIED PARTY'S OWN NEGLIGENCE, EXCEPT TO THE EXTENT
SUCH CLAIMS, LOSSES OR LIABILITIES ARE PROXIMATELY CAUSED BY SUCH INDEMNIFIED
PARTY'S INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(b) Debtor will upon demand pay to Secured Party the amount of any and
all reasonable costs and expenses, including the reasonable fees and
disbursements of Secured Party's counsel and of any experts and agents, which
Secured Party may incur in connection with (I) the transactions which give rise
to this Agreement, (ii) the preparation of this Agreement and the perfection
and preservation of this security interest created under this Agreement, (iii)
the administration of this Agreement; (iv) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Collateral; (v) the exercise or enforcement of any of the rights of Secured
Party hereunder; or (vi) the failure by Debtor to perform or observe any of the
provisions hereof, except expenses resulting from Secured Party's individual
gross negligence or willful misconduct.
- 24 -
<PAGE> 25
Section 4.6. Non-Judicial Remedies. In granting to Secured Party the
power to enforce its rights hereunder without prior judicial process or
judicial hearing, Debtor expressly waives, renounces and knowingly relinquishes
any legal right which might otherwise require Secured Party to enforce its
rights by judicial process. In so providing for non-judicial remedies, Debtor
recognizes and concedes that such remedies are consistent with the usage of
trade, are responsive to commercial necessity, and are the result of a bargain
at arm's length. Nothing herein is intended, however, to prevent Secured Party
from resorting to judicial process at its option.
Section 4.7. Other Recourse. Debtor waives any right to require
Secured Party or any Lender to proceed against any other Person, to exhaust any
Collateral or other security for the Secured Obligations, to have any Other
Liable Party joined with Debtor in any suit arising out of the Secured
Obligations or this Agreement, or to pursue any other remedy in Secured Party's
power. Debtor further waives any and all notice of acceptance of this Agreement
and of the creation, modification, rearrangement, renewal or extension for any
period of any of the Secured Obligations of any Other Liable Party from time to
time. Debtor further waives any defense arising by reason of any disability or
other defense of any Other Liable Party or by reason of the cessation from any
cause whatsoever of the liability of any Other Liable Party. This Agreement
shall continue irrespective of the fact that the liability of any Other Liable
Party may have ceased and irrespective of the validity or enforceability of any
other Obligation Document to which Debtor or any Other Liable Party may be a
party, and notwithstanding any death, incapacity, reorganization, or bankruptcy
of any Other Liable Party or any other event or proceeding affecting any Other
Liable Party. Until all of the Secured Obligations shall have been paid in
full, Debtor shall have no right to subrogation and Debtor waives the right to
enforce any remedy which Secured Party or any Lender has or may hereafter have
against any Other Liable Party, and waives any benefit of and any right to
participate in any other security whatsoever now or hereafter held by Secured
Party. Debtor authorizes Secured Party and each Lender, without notice or
demand, without any reservation of rights against Debtor, and without in any
way affecting Debtor's liability hereunder or on the Secured Obligations, from
time to time to (a) take or hold any other property of any type from any other
Person as security for the Secured Obligations, and exchange, enforce, waive
and release any or all of such other property, (b) apply the Collateral or such
other property and direct the order or manner of sale thereof as Secured Party
may in its discretion determine, (C) renew, extend for any period, accelerate,
modify, compromise, settle or release any of the obligations of any Other
Liable Party in respect to any or all of the Secured Obligations or other
security for the Secured Obligations, (d) waive, enforce, modify, amend or
supplement any of the provisions of any Obligation Document with any Person
other than Debtor, and (e) release or substitute any Other Liable Party.
Section 4.8. Limitation on Duty of Secured Party in Respect of
Collateral. Beyond the exercise of reasonable care in the custody thereof,
Secured Party shall have no duty as to any Collateral in its possession or
control or in the possession or control of any agent or bailee or as to the
preservation of rights against prior parties or any other rights pertaining
- 25 -
<PAGE> 26
thereto. Secured Party shall be deemed to have exercised reasonable care in the
custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by Secured Party in good faith.
Section 4.9. Appointment of Collateral Agents. At any time or times,
in order to comply with any legal requirement in any jurisdiction, Secured
Party may appoint any bank or trust company or one or more other Persons,
either to act as co-agent or co-agents, jointly with Secured Party, or to act
as separate agent or agents on behalf of the Lenders, with such power and
authority as may be necessary for the effectual operation of the provisions
hereof and may be specified in the instrument of appointment. In so doing
Secured Party may, in the name and on behalf of Debtor, give to such co-agent
or separate agent indemnities and other protections similar to those provided
in Section 4.5.
Section 4.10. Voting Rights, Dividends, Etc. in Respect of Subsidiary
Shares.
(a) So long as no Default or Event of Default shall have occurred and
be continuing Debtor may receive and retain any and all dividends or interest
paid in respect of the Subsidiary Shares; provided, however, that any and all
(i) dividends and interest paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of or in exchange for,
any Subsidiary Shares,
(ii) dividends and other distributions paid or payable in
cash in respect of any Subsidiary Shares in connection with a partial
or total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in surplus, and
(iii) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Subsidiary Shares,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Subsidiary Shares and shall, if received by Debtor, be received in trust for
the benefit of Secured Party, be segregated from the other property or funds of
Debtor, and be forthwith delivered to Secured Party in the exact form received
with any necessary indorsement or appropriate stock powers duly executed in
blank, to be held by Secured Party as Collateral.
(b) Upon the occurrence and during the continuance of a Default or an
Event of Default:
(i) all rights of Debtor to receive and retain the dividends
and interest payments which it would otherwise be authorized to
receive and retain pursuant to
- 26 -
<PAGE> 27
subsection (a) of this section shall automatically cease, and all such
rights shall thereupon become vested in Secured Party which shall
thereupon have the sole right to receive and hold as Subsidiary Shares
such dividends and interest payments;
(ii) without limiting the generality of the foregoing,
Secured Party may at its option exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any of the Subsidiary Shares as if it were the
absolute owner thereof, including, without limitation, the right to
exchange, in its discretion, any and all of the Subsidiary Shares upon
the merger, consolidation, reorganization, recapitalization or other
adjustment of any Issuer, or upon the exercise by any Issuer of any
right, privilege or option pertaining to any Subsidiary Shares, and,
in connection therewith, to deposit and deliver any and all of the
Subsidiary Shares with any committee, depository, transfer, agent,
registrar or other designated agent upon such terms and conditions as
it may determine; and
(iii) all dividends and interest payments which are received
by Debtor contrary to the provisions of subsection (b)(I) of this
section shall be received in trust for the benefit of Secured Party,
shall be segregated from other funds of Debtor, and shall be forthwith
paid over to Secured Party as Subsidiary Shares in the exact form
received, to be held by Secured Party as Collateral.
Anything herein to the contrary notwithstanding, Debtor may at all times
exercise any and all voting rights pertaining to the Subsidiary Shares or any
part thereof for any purpose not inconsistent with the terms of this Agreement
or any other Obligation Document.
Section 4.11. Private Sale of Subsidiary Shares. Debtor recognizes
that Secured Party may deem it impracticable to effect a public sale of all or
any part of the Subsidiary Shares and that Secured Party may, therefore,
determine to make one or more private sales of any such securities to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and
not with a view to the distribution or resale thereof. Debtor acknowledges that
any such private sale may be at prices and on terms less favorable to the
seller than the prices and other terms which might have been obtained at a
public sale and, notwithstanding the foregoing, agrees that such private sales
shall be deemed to have been made in a commercially reasonable manner and that
Secured Party shall have no obligation to delay sale of any such securities for
the period of time necessary to permit the Issuer of such securities to
register such securities for public sale under the Securities Act of 1933, as
amended. Debtor further acknowledges and agrees that any offer to sell such
securities which has been (a) publicly advertised on a bona fide basis in a
newspaper or other publication of general circulation in the financial
community of Dallas, Texas (to the extent that such an offer may be so
advertised without prior registration under the Securities Act), or (b) made
privately in the manner described above to not less than fifteen (15) bona fide
offerees shall be deemed to involve a "public sale" for the purposes of Section
9.504(C) of the UCC (or any successor or similar, applicable statutory
provision) as then in effect in the State of Texas, notwithstanding that such
sale may not
- 27 -
<PAGE> 28
constitute a "public offering" under the Securities Act of 1933, as amended,
and that Secured Party may, in such event, bid for the purchase of such
securities.
ARTICLE V.
Miscellaneous
Section 5.1. Notices. Any notice or communication required or
permitted hereunder shall be given as provided in the Credit Agreement.
Section 5.2. Amendments. No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by Debtor and
Secured Party, and no waiver of any provision of this Agreement, and no consent
to any departure by Debtor therefrom, shall be effective unless it is in
writing and signed by Secured Party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given and to the extent specified in such writing. In addition, all such
amendments and waivers shall be effective only if given with the necessary
approvals of Lenders as required in the Credit Agreement.
Section 5.3. Preservation of Rights. No failure on the part of Secured
Party or any Lender to exercise, and no delay in exercising, any right
hereunder or under any other Obligation Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or the exercise of any other right.
Neither the execution nor the delivery of this Agreement shall in any manner
impair or affect any other security for the Secured Obligations. The rights and
remedies of Secured Party provided herein and in the other Obligation Documents
are cumulative and are in addition to, and not exclusive of, any rights or
remedies provided by law or otherwise. The rights of Secured Party under any
Obligation Document against any party thereto are not conditional or contingent
on any attempt by Secured Party to exercise any of its rights under any other
Obligation Document against such party or against any other Person.
Section 5.4. Unenforceability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or invalidity
without invalidating the remaining portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 5.5. Survival of Agreements. All representations and
warranties of Debtor herein, and all covenants and agreements herein shall
survive the execution and delivery of this Agreement, the execution and
delivery of any other Obligation Documents and the creation of the Secured
Obligations.
Section 5.6. Other Liable Parties. Neither this Agreement nor the
exercise by Secured Party or the failure of Secured Party to exercise any
right, power or remedy conferred herein
- 28 -
<PAGE> 29
or by law shall be construed as relieving any Other Liable Party from liability
on the Secured Obligations or any deficiency thereon.
Section 5.7. Binding Effect and Assignment. This Agreement creates a
continuing security interest in the Collateral and (a) shall be binding on
Debtor and its successors and permitted assigns and (b) shall inure, together
with all rights and remedies of Secured Party hereunder, to the benefit of
Secured Party and Lenders and their respective successors, transferees and
assigns. Without limiting the generality of the foregoing, Secured Party and
any Lender may (except as otherwise provided in the Credit Agreement) pledge,
assign or otherwise transfer any or all of their respective rights under any or
all of the Obligation Documents to any other Person, and such other Person
shall thereupon become vested with all of the benefits in respect thereof
granted herein or otherwise. None of the rights or duties of Debtor hereunder
may be assigned or otherwise transferred without the prior written consent of
Secured Party.
Section 5.8. Termination. It is contemplated by the parties hereto
that there may be times when no Secured Obligations are outstanding, but
notwithstanding such occurrences, this Agreement shall remain valid and shall
be in full force and effect as to subsequent outstanding Secured Obligations.
Upon the satisfaction in full of the Secured Obligations, upon the termination
or expiration of the Credit Agreement and any other commitment of Lenders to
extend credit to Debtor, and upon written request for the termination hereof
delivered by Debtor to Secured Party, this Agreement and the security interest
created hereby shall terminate and all rights to the Collateral shall revert to
Debtor. Secured Party will thereafter, upon Debtor's request and at Debtor's
expense, (a) return to Debtor such of the Collateral in Secured Party's
possession as shall not have been sold or otherwise disposed of or applied
pursuant to the terms hereof, and (b) execute and deliver to Debtor such
documents as Debtor shall reasonably request to evidence such termination.
Section 5.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of TEXAS applicable to
contracts made and to be performed entirely within such state, except as
required by mandatory provisions of law and except to the extent that the
perfection and the effect of perfection or non-perfection of the security
interest created hereby hereunder, in respect of any particular Collateral, are
governed by the laws of a jurisdiction other than the State of Texas.
Section 5.10. Counterparts. This Agreement may be separately executed
in any number of counterparts, all of which when so executed shall be deemed to
constitute one and the same Agreement.
Section 5.11. "Loan Document". This Agreement is a "Loan Document", as
defined in the Credit Agreement, and, except as expressly provided herein to
the contrary, this Agreement is subject to all provisions of the Credit
Agreement governing such Loan Documents.
Section 5.12. Amendment and Restatement. This Agreement amends and
restates in its entirety the Original Security Agreement, and all of the terms
hereof shall supersede the terms
- 29 -
<PAGE> 30
and provisions thereof. This Agreement renews and extends all Liens existing by
virtue of the Original Security Agreement, but the terms, provisions and
conditions of such Liens shall hereafter be governed in all respects by this
Agreement.
THIS WRITTEN SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
- 30 -
<PAGE> 31
IN WITNESS WHEREOF, Debtor has executed and delivered this Agreement
as of the date first above written.
ADDINGTON MINING, INC.
By: /s/ John Lynch
-----------------------------
Name: John Lynch
Title: Secretary
NATIONSBANK OF TEXAS, N.A.
By: /s/ Denise A. Smith
-----------------------------
Denise A. Smith
Senior Vice President
<PAGE> 32
SCHEDULE 2.1(B)
GENERAL INTANGIBLES EXCLUDED FROM THE SECURITY AGREEMENT
I. PATENTS
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apparatus and 7/625,211 5,112,111 U.S. 12/10/90 5/12/92 Addington, MTI*
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 7/795,314 5,261,729 U.S. 11/20/91 11/16/93 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 8/140,368 5,364,171 U.S. 10/21/93 11/15/94 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 88968/91 638367 Australia 12/10/91 10/19/93 Addington, BHP**
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 2,075,619-5 Pending Canada 12/9/91 Pending Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apparatus and 91112766.6 91112766.6 China 12/10/91 4/21/95 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 92902730.8 0 519 041 France, 12/9/91 9/13/95 Addington, MTI
Method for (EP); Germany, (PCT) et al.
Continuous 69113034.5-08 Spain, UK 7/22/92
Mining (GER); (EPO)
2076745 (SP)
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 1208/DEL/91 Pending India 12/9/91 Pending Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and P-002080 Pending Indonesia 1/31/92 Pending Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and P-295933 167,662 Poland 12/9/91 3/8/95 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 5053078.03 Pending Russia 8/7/92 Pending Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 34
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Apparatus and 91/9730 91/9730 South Africa 12/10/91 9/30/92 Addington, MTI
Method for et al.
Continuous
Mining
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle 7/769,408 5,232,269 U.S. 10/1/91 8/3/93 Addington, MTI
For Continuous et al.
Mining Apparatus
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle 91272/91 644257 Australia 12/9/91 8/1/95 Addington, BHP**
for Continuous et al.
Mining Apparatus
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle 2,075,638 2075638 Canada 12/9/91 5/27/97 Addington, MTI
For Continuous et al.
Mining Apparatus
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle 92902231.7 0 513 338 France, 12/9/91 1/22/97 Addington, MTI
For Continuous (EP); Germany, (PCT) et al.
Mining Apparatus 69124364.6-08 Spain & UK 7/22/92
(GER); (EPO)
2096746 (SP)
- ----------------------------------------------------------------------------------------------------------------------------------
Launch Vehicle P-295643 167,642 Poland 8/10/92 3/9/95 Addington, MTI
For Continuous et al.
Mining Apparatus
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 8/328,642 5,522,647 U.S. 10/25/94 6/4/96 Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 35
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Continuous P-952188 Pending Indonesia 10/24/95 Pending Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 95/8543 95/8543 South Africa 10/10/95 7/31/96 Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 08/553,693 Pending U.S. 11/20/95 Pending Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 2,203,625 Pending Canada 10/18/95 Pending Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 38310/95 Pending Australia 10/18/95 Pending Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
- ----------------------------------------------------------------------------------------------------------------------------------
Continuous 95/8998 95/8998 South Africa 10/24/95 10/30/96 Sartaine, et MTI
Highwall Mining al.
Machine with
Armless Conveyor
</TABLE>
4
<PAGE> 36
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE APP. # PATENT # COUNTRY FILED ISSUED INVENTORS HOLDER
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Self-Propelled 8/343,694 5,553,926 U.S. 11/22/94 9/10/96 Blackstock, MTI
Mining Apparatus et al.
and Method For
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and P-952189 Pending Indonesia 10/24/95 Pending Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 95/9629 95/9629 South Africa 11/13/95 8/28/96 Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 39644/95 Pending Australia 10/10/95 Pending Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 2,205,596 Pending Canada 10/10/95 Pending Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Apparatus and 97110226 Pending Russia 10/10/95 Pending Blackstock, MTI
Method For et al.
Cutting Arched
Opening
- ----------------------------------------------------------------------------------------------------------------------------------
Electrical Junction 08/686,830 Pending U.S. 7/26/96 Pending Slagle***
Box
- ----------------------------------------------------------------------------------------------------------------------------------
Transmission (in process of U.S. Blackstock,
Gearcase For filing) et al.
Mining Apparatus
==================================================================================================================================
</TABLE>
Addington Enterprises has begun the process of patenting a "Cutter Drum
Gearcase." Presently, the only information available for this machinery is: (a)
the U.S. Patentability Search performed by King & Schickli; and (b) the inventor
disclosure.
* MTI is Mining Technologies, Inc., formerly a subsidiary of Addington
Resources, now a division of Addington Enterprises.
5
<PAGE> 37
** MTI transferred to BHP its rights in this patent by a Technology
Exchange Agreement (the "Exchange Agreement") dated July 5, 1995.
However, pursuant to the Exchange Agreement, BHP's use of this patent
is restricted to (i) mining operations owned in whole or in part,
operated or managed in Australia by BHP; (ii) equipment owned in whole
or in part, operated or managed by BHP; (iii) mining systems used for
mining extractions; and (iv) Australia. See Paragraph 3 of the Exchange
Agreement. Furthermore, the Exchange Agreement authorizes MTI to use
the patent worldwide, assign it to a third party and license the patent
for use outside of Australia. See Paragraph 4 of the Exchange
Agreement. In addition, pursuant to a Technological Developments and
Consent Agreement (the "Consent Agreement") dated July 5, 1995, BHP
granted MTI a license to use and, subject to BHP's consent, sublicense
this patent for use in Australia. See Paragraph 2 of the Consent
Agreement.
*** Pursuant to a Patent License Agreement dated February 15, 1996, Richard
M. Slagle ("Slagle") granted AEI an exclusive worldwide royalty-free
license to make, use and sell highwall mining equipment incorporating
U.S. Patent App. No. 08/686,830 (Electrical Junction Box). AEI may not
assign or transfer its rights without consent of Slagle, which consent
may not be unreasonably withheld.
II. TRADEMARKS
================================================================================
MARK COUNTRY REGISTRATION NUMBER ISSUED
- --------------------------------------------------------------------------------
Addcar U.S. 1,795,602 9/28/93
- --------------------------------------------------------------------------------
Addcar Australia 616070 4/30/96
- --------------------------------------------------------------------------------
Addminer Australia A623145 2/21/94
================================================================================
6
<PAGE> 38
SCHEDULE 2.1(C)(1)
CONTRACTS EXCLUDED FROM THE SECURITY AGREEMENT
<TABLE>
<CAPTION>
ORIGINAL
CONTRACT TERMINATION
PARTIES DATE DATE NOTES
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A. CONSULTING AGREEMENTS
AEI/Franklin Research & Development 12/17/96 12/17/97 Can be extended by mutual consent
AEI/Richard M. Slagle 02/15/96 See note on previous schedule.
B. CONTRACT MINING AGREEMENTS
Mining Technologies/Ikerd Bandy Co., Inc. 02/01/97 When reserves are mined out.
Mining Technologies/Martiki Coal Company 05/24/97 Three years or when reserves
are mined out.
C. MISCELLANEOUS AGREEMENTS
Mining Technologies/AEP 09/18/95 Annually extended Service @ Coalton Recycling Center
Mining Technologies/AEP 09/28/95 Annually extended Service @Coalton Compost Center
Mining Technologies/Orkin Pest Control 08/15/96 Annually extended Service @ RT 60 West Coalton
Mining Technologies, Inc./Airgas/Virginia Welding Supply 01/12/94 Annually extended Cylinder Rentals
D. ASSET LEASES
All asset leases listed on Schedule 2.1(c)(2)
</TABLE>
<PAGE> 39
SCHEDULE 2.1(C)(2)
ASSET LEASES EXCLUDED FROM THE SECURITY AGREEMENT
<TABLE>
<CAPTION>
UNIT NO. LESSOR DESCRIPTION SERIAL NO. LOCATION @ 09/10/97
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DOZERS
M1021 Mining Machinery, Inc. Cat D9L 14YO2942 Martiki Coal Co.
M1004 Mining Machinery, Inc. Cat D11N 74Z00418 Crooked Fork
M1007 Mining Machinery, Inc. Cat D10N 2YD01412 Flag Knob
M1009 Mining Machinery, Inc. Cat D9N 5TJ01886 Job #17
M1011 Mining Machinery, Inc. Cat D9L 14Y75500 Job #17 South
M1017 Mining Machinery, Inc. Komatsu D85P 4RC1950 Fork Mountain
M1023 Mining Machinery, Inc. Cat D9L 14Y03774 Patterson Mtn.
M1024 Mining Machinery, Inc. Cat D9L 14Y03777 Skyline Tipple
1025 Provident Commercial Cat D8N 5TJ02071 Patterson Mtn.
M1035 Mining Machinery, Inc. Cat D9L 14Y03797 Cumberland #2 Mine
M1036 Mining Machinery, Inc. Cat D9L 2YD1093 Martiki Coal Company
M1046 Mining Machinery, Inc. Cat D10N 2YD00728 Lon Rogers
M1049 Mining Machinery, Inc. Cat D8K 77V75396 Skyline Tipple
1051 Caterpillar Finance Cat D11R 8ZR00376 Job #17 South
LOADERS
2029 Caterpillar Finance Cat 988F 8YG00524 Crooked Fork
2049 Caterpillar Finance Cat 992D 7MJ00314 Flag Knob
2051 Caterpillar Finance Cat 992D 7MJ00260 Cumberland #2 Mine
2052 Caterpillar Finance Cat 992D 7MJ00691 Job #17 South
2053 Caterpillar Finance Cat 992D 7MJ00209 Lon Rogers
2059 Caterpillar Finance Cat 973 86G1400 Lon Rogers
2065 Provident Commercial Cat 988 50W09147 Patterson Mtn.
2490 Caterpillar Finance Cat 980G 2KR00661 Cumberland #2 Mine
2500 Caterpillar Finance Cat 988F 22R00416 Cumberland #2 Mine
2501 Caterpillar Finance Cat 988F 2ZR00451 Job #17 South
2502 Caterpillar Finance Cat 980 G 2KR00936 Job #17 South
M2000 Mining Machinery, Inc. Cat 988B 50W06981 Ikerd Bandy HWM
M2882 Mining Machinery, Inc. Cat 992D 7MJ00534 Crooked Fork
M2883 Mining Machinery, Inc. Cat 988B 50W08697 Flag Knob
2898 Caterpillar Finance Cat 988B 50W11399 Lon Rogers
2038 Provident Commercial Cat 988B 50W10501 Conrich Pewee #1
2730 Provident Commercial Cat 988 87A5839 Conrich Pewee #1
</TABLE>
<PAGE> 40
<TABLE>
<S> <C> <C> <C> <C>
DRILLS
M4190 Mining Machinery, Inc. Ingersoll Rand TH 60 Drill 2HTTGDWT2JC011449 Engineering/Exploration - AM
M4290 Mining Machinery, Inc. Ingersoll Rand DM45-E 3304 Job #17 South
4300 CIT Ingersoll Rand DM45-E XL750 7252 Flag Knob
4851 CIT Ingersoll Rand DM45-E XL750 7254 Cumberland #2 Mine
4852 CIT Ingersoll Rand DM45-E XL750 7256 Lon Rogers
4853 CIT Ingersoll Rand DM45-E 7263 Job #17 South
M4993 Mining Machinery, Inc. Ingersoll Rand DM-45E-XL1050 3648 Flag Knob
M4994 Mining Machinery, Inc. Ingersoll Rand DM-45E-XL1050 3681 Crooked Fork
M4995 Mining Machinery, Inc. Ingersoll Rand DM-45E-XL1050 3722 Crooked Fork
4997 Provident Commercial Ingersoll Rand DM-45E 4087 Cumberland #2 Mine
EXCAVATORS
5050 Whayne Supply Cat 325 Excavator 7LM1300 Crooked Fork
FORK LIFTS
2915 Caterpillar Finance Cat GP30 74AM01784 MT Car Shop
2998 CIT Cat 988B 50W09278 Job #17 South - HWM#14
M2995 Mining Machinery, Inc. Cat 988B 50W08647 Patterson Mtn.-HWM#13
2915 Caterpillar Finance Cat GP30G Fork Lift 7AM01784 MT Car Shop
SCRAPERS
M0101 Mining Machinery, Inc. Cat 657 E Scraper 91Z00221 Cumberland #2 Mine
M0104 Mining Machinery, Inc. Cat 657 E Scraper 91Z00228 Cumberland #2 Mine
HEAVY TRUCKS
8752 Mining Machinery, Inc. Mack DM685S 1M2B120C3BA0504
3001 Caterpillar Finance Cat 777C 4XJ00460 Crooked Fork
3003 Caterpillar Finance Cat 777C 4XJ00490 Lon Rogers
3005 Caterpillar Finance Cat 777C 4XJ00546 Lon Rogers
3992 Caterpillar Finance Cat 785 8GB679 Crooked Fork
3993 Caterpillar Finance Cat 785 8GB680 Crooked Fork
3994 Caterpillar Finance Cat 785 8GB681 Cumberland #2 Mine
M8014 Mining Machinery, Inc. Mack Lube Truck 1M2P186C1JW001034 Job #17 South
GRADERS
6005 Provident Commercial Cat 16G 93U03550 Patterson Mtn.
M6004 Mining Machinery, Inc. Cat 16G 93U01699 Flag Knob
M6005 Mining Machinery, Inc. Cat 16G 93U01861 Job #17 South
</TABLE>
<PAGE> 41
<TABLE>
<S> <C> <C> <C> <C>
LIGHT PLANTS
15047 Whayne Supply Allmand Maxi Light SHO-1000 9705MLS12 Ikerd Bandy HWM
15048 Whayne Supply Allmand Maxi Light SHO-1000 9705MLS09 Martiki Coal Company
VEHICLES
14005 Wheels, Inc. Chevrolet K-2500 305729 General & Administrative-AEI
14012 Wheels, Inc. Chevrolet K10 - 4x4 1GCDK14K9KZ253894 MT Fab Shop
14029 Wheels, Inc. Chevrolet K-2500 2GCFK29K5R1246340 MT Car Shop
14039 Wheels, Inc. Chevrolet Tahoe, 4x4 3GNEK18R5TG165185 MT Car Shop
14053 Wheels, Inc. Chevrolet Tahoe 3GNEK18R4VG129281 Job #17 South - HWM#12
14234 Wheels, Inc. Chevrolet 1 Ton 1GBJC34KOLE197420 Operations Management - MT
14360 Wheels, Inc. Ford Bronco - 4x4 AFMEU15N6KLA41265 Engineering/Exploration - MT
14602 Wheels, Inc. Chevrolet Van 1GAGC35K5L7132097 MT Car Shop
14608 Wheels, Inc. Chevrolet K-1500 1GCEK19R4TE167167 Operations Management - MT
14897 Wheels, Inc. Chevrolet K-250 1GCGK24K7PE106166 MT Fab Shop
8631 Wheels, Inc. Ford Super Duty Mechanic Truck 2FDLF47K7RCA06485 Patterson Mtn.
14009 Wheels, Inc. Chevrolet Tahoe 1GNEK18K7SJ303101 Operations Management - TM
14011 Wheels, Inc. Chevrolet K-1500 Blazer 1GNEK18K7RJ400504 Sold
14017 Wheels, Inc. Chevrolet K-1500 Blazer 1GNEK18K7RJ398768 General & Administrative-AEI
14019 Wheels, Inc. Chevrolet K-1500 Blazer 1GNEK18K8RJ400043 Lon Rogers
14021 Wheels, Inc. Chevrolet K-1500 Blazer 1GNEK18K1RJ401115 Patterson Mtn.
14027 Wheels, Inc. Chevrolet Blazer 4WD 1GNEK18K5RJ333028 Job #17 South
14030 Wheels, Inc. Chevrolet Tahoe 3GNEK18R4TG150032 General & Administrative-AEI
14031 Wheels, Inc. Chevrolet K-1500 Blazer 1GNEK18K9RJ424562 Skyline Tipple
14032 Wheels, Inc. Ford F250 - 4X4 1FTHF26H2KNA36885 Baldwin Prep Plant
14033 Wheels, Inc. Chevrolet K-2500 2GCFK29K2R1244657 Job #17 South
14037 Wheels, Inc. Chevrolet K-2500 2GCFK29K2R1246473 Lon Rogers
14038 Wheels, Inc. Chevrolet K-1500, 4x4 1GCEK19R4TE266135 Engineering/Exploration - AE
14040 Wheels, Inc. Chevrolet Tahoe 1GNEK13R1TJ425927 General & Administrative-AEI
14041 Wheels, Inc. Chevrolet K-2500 2GCFK29K3R1246224 Job #17 South
14042 Wheels, Inc. Chevrolet K1500 1GCEK19RVE126939 Crooked Fork
14043 Wheels, Inc. Chevrolet K1500 1GCEK19RXVE124942 Patterson Mtn.
14044 Wheels, Inc. Chevrolet K1500 1GCEK19R5VE125609 Flag Knob
14047 Wheels, Inc. Chevrolet K-2500 2GCFK29KXR1246429 Idle Equipment
14048 Wheels, Inc. Chevrolet Tahoe 3GNEK18R2VG112768 Cumberland #2 Mine
14049 Wheels, Inc. Chevrolet K-2500 2GCFK29KXR1244311 Job #17 South
14051 Wheels, Inc. Chevrolet K1500 Ext. Cab 1GCEK19R8VE128326 Job #17 South
14052 Wheels, Inc. Chevrolet K1500 Ext. Cab 1GCEK19R7VE127068 Quality Control-AM
14055 Wheels, Inc. Chevrolet K-2500 2GCFK29K2R1246781 Lon Rogers
14063 Wheels, Inc. Chevrolet K-2500 1GCFK29K4RE237823 Crooked Fork
14065 Wheels, Inc. Chevrolet K-2500 1GCFK29KXRE240211 Lon Rogers
14067 Wheels, Inc. Chevrolet K-2500 1GCFK29K4RE239796 Crooked Fork
</TABLE>
<PAGE> 42
<TABLE>
<S> <C> <C> <C> <C>
14201 Wheels, Inc. Chevrolet Tahoe 1GNEK13K45J364431 General & Administrative-AEI
14203 Wheels, Inc. Chevrolet Tahoe 1GNEK13K65J365371 General & Administrative-AEI
14221 Wheels, Inc. Chevrolet K-1500 Blazer 1GNEK18K4RJ400959 Job #17 South
14223 Wheels, Inc. Chevrolet K-1500 Blazer 1GNEK18K4RJ401027 Crooked Fork
14227 Wheels, Inc. Chevrolet 3/4 Ton 4X4 1GCGK24KOLE134546 Flag Knob
14229 Wheels, Inc. Chevrolet 2500 1GCGK24K5RE153926 Job #17 South
14231 Wheels, Inc. Ford Explorer 1FMDU34X5RUA65426 Patterson Mtn.
14245 Wheels, Inc. Chevrolet K-2500 1GCGK29K0RE196658 Engineering/Exploration - AM
14246 Wheels, Inc. Chevrolet 1500 4x4 Ext. Cab 2GCEK19R6T1137895 Job #17 South
14255 Wheels, Inc. Chevrolet Tahoe 1GNEK18K9SJ329795 Cumberland #2 Mine
14611 Wheels, Inc. Ford Bronco - 4X4 1FMEU15H1MLA18781 Idle Equipment
14629 Wheels, Inc. Chevrolet K-2500 1GCFK29K3RE239028 Patterson Mtn.
14633 Wheels, Inc. Ford Super Duty 1FDLF47F1SEA54521 Patterson Mtn. HWM #13
14637 Wheels, Inc. Chevrolet K-1500-Suburban 3GNFK16RXTG103370 General & Administrative-AEI
14671 Wheels, Inc. Chevrolet K-2500 1GCFK29K1RE238783 Engineering/Exploration - AM
14673 Wheels, Inc. Chevrolet K-2500 2GCFK29K7R1247456 Flag Knob
14791 Wheels, Inc. Chevrolet K-1500 2GCEK19K8R1239257 Crooked Fork
14800 Wheels, Inc. Chevrolet Suburban 4x4 1GNFK16R5TJ360435 General & Administrative-AEI
14803 Wheels, Inc. Chevrolet Tahoe, 4Dr 1GNEK13R4VJ442787 General & Administrative-AEI
14857 Wheels, Inc. Chevrolet K-2500 1GCFK29K4RE238146 Job #17 South
14865 Wheels, Inc. GMC 2500 4x4 1GTFK24K0RE538550 Ikerd Bandy HWM
14871 Wheels, Inc. Chevrolet Blazer 4WD 1GNEK18KORJ327413 Engineering/Exploration - AM
14873 Wheels, Inc. Chevrolet Blazer 4X4 1GNEK18K7RJ351787 Engineering/Exploration - AM
14881 Wheels, Inc. Chevrolet Blazer 4WD 1GNEK18K2RJ360543 Operations Management - AM
14887 Wheels, Inc. Ford Super Duty 2FDLF47M2NCA88671 Crooked Fork
14890 Wheels, Inc. Ford Bronco - 4X4 1FMEU15H2PLA23617 Job #17 South
14892 Wheels, Inc. Chev. Van 1GDFG15M5T1000982 General & Administrative-AEI
14894 Wheels, Inc. Chevrolet Suburban 4x4 3GNFK16RSTG115137 General & Administrative-AEI
14899 Wheels, Inc. Chevrolet K1500 Ext. 4WD 1GCEK19ROTE151712 Operations Management - AM
14905 Wheels, Inc. Ford Crown Victoria 2FABP74F1KX222830 General & Administrative-AEI
14925 Wheels, Inc. Ford Crown Victoria LX 2FALP74W9RX209368 Engineering/Exploration - AM
MISCELLANEOUS
31004 Caterpillar Finance Cat 416B Backhoe 8SG13995 Skyline Tipple
31006 Stower's Cat 416B Backhoe 8ZK10467 Patterson Mtn.
GENERATOR SETS
19026 Caterpillar Finance Cat 3516 Generator 25Z02912 Ikerd Bandy HWM
19027 Caterpillar Finance Cat 3516 Generator 25Z03207 Martiki Coal Company
19029 Caterpillar Finance Cat 3516 Generator 25Z02477 Job #17 South - HWM#8
19032 Caterpillar Finance Cat 3516 Generator 25Z04477 Job #17 South - HWM#14
19018 Caterpillar Finance Cat 3516 25Z02036 Idle HWM Equipment
</TABLE>
<PAGE> 43
<TABLE>
<S> <C> <C> <C> <C>
19019 Caterpillar Finance Cat 3516 25Z02063 Patterson Mtn. HWM #13
19031 Caterpillar Finance Cat 3516 DITA 25Z03350 Job #17 South - HWM#12
19013 Provident Commercial Cat 3408 Generator 67U8413 Conrich Pewee #1
19023 Provident Commercial Rebuilt Power Center 10854-2 Conrich Pewee #1
HIGHWALL MINER ADD CAR SYSTEMS
22011 Provident Commercial Addcar System #11 - 34 Cars 011001-011034 Idle HWM Equipment
HIGHWALL MINER LAUNCH VEHICLES
23011 Provident Commercial Addcar Launch Vehicle #11 LV011 Idle HWM Equipment
HIGHWALL MINER STACKERS
23512 Provident Commercial Addcar Stacker Martiki Coal Company
CONTINUOUS MINERS
24018 Caterpillar Finance Joy 14CM15-HW11CX JM4646 Martiki Coal Company
24020 CIT Joy 14CM15-11CX JM4540 Ikerd Bandy HWM
24023 Caterpillar Finance Joy 1410-AA JM4756 Idle HWM Equipment
24031 Caterpillar Finance Joy 14CM-15 JM4837 Idle HWM Equipment
24033 Caterpillar Finance Joy 14CM-15 JM4838 Job #17 South - HWM#14
M24014 Mining Machinery, Inc. Joy 14CM15-11CX JM4496 Idle Equipment
24018 Mining Machinery, Inc. Joy 14CM15-HW11CX JM4646 Martiki Coal Company
24021 CIT Joy 14CM15-HW11CX JM4661 Martiki Coal Company
24023 CIT Joy 1410-AA JM4756 Idle HWM Equipment
24031 Caterpillar Finance Joy 1410-AA JM4837 Idle HWM Equipment
24033 Caterpillar Finance Joy 1410-AA JM4838 Job #17 South - HWM#14
24037 Provident Commercial Joy, 14CM14 Miner JM4449 Fork Mtn. Deep Mine
HIGHWALL MINER TANDEM DOLLIES
25028 CIT Tandem Dollie, 10T Ikerd Bandy HWM
HIGHWALL MINER WATER TANKS
26003 CIT Water Tank Job #17 South - HWM#14
26003-P CIT Water Tank Martiki Coal Company
26008 Provident Commercial Water Tank 71 HL 922644 Ikerd Bandy HWM
UNDERGROUND EQUIPMENT
33048 Provident Commercial Battery Powered Scoop 482-1518 Conrich Pewee #1
33049 Provident Commercial Battery Powered Scoop 482-2087 Conrich Pewee #1
33050 Provident Commercial 8 Unit Continuous Haulage Sys Fork Mtn. Deep Mine
33051 Provident Commercial 10 Man Personnel Carrier 472B-163 Conrich Pewee #1
33052 Provident Commercial 10 Man Personnel Carrier 472C-4C9 Conrich Pewee #1
</TABLE>
<PAGE> 44
<TABLE>
<S> <C> <C> <C> <C>
33053 Provident Commercial Jeffrey Mining System 38632 Conrich Pewee #1
33054 Provident Commercial RBI-50L Roof Bolters 62793R Conrich Pewee #1
33055 Provident Commercial RBI-50L Roof Bolters M022021R Conrich Pewee #1
33056 Provident Commercial Battery Powered Scoop 482-1654 Fork Mtn. Deep Mine
33057 Provident Commercial RBI-50L Roof Bolters 62-22013 Fork Mtn. Deep Mine
33058 Provident Commercial RBI-50L Roof Bolters 62-22016 Fork Mtn. Deep Mine
33059 Provident Commercial S & S, 482 Scoop 482-1711 Conrich Pewee #1
33060 Provident Commercial Joy 21SC2-56AHE ET15666 Patterson Mtn. Deep Mine
33061 Provident Commercial Joy 21SC5-ASHE ET16289 Patterson Mtn. Deep Mine
33062 Provident Commercial S & S 482 Scoop 1654 Patterson Mtn. Deep Mine
</TABLE>
<PAGE> 45
SCHEDULE 2.1(H)
EQUIPMENT, INVENTORY AND LAND EXCLUDED FROM THE SECURITY AGREEMENT
A. EQUIPMENT
<TABLE>
<CAPTION>
UNIT NO. DESCRIPTION SERIAL NO. LOCATION @ 09/10/97
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
DOZERS
M1021 Cat D9L 14YO2942 Martiki Coal Co.
1993 Cat D4C Idle Equipment
M1004 Cat D11N 74Z00418 Crooked Fork
M1007 Cat D10N 2YD01412 Flag Knob
M1009 Cat D9N 5TJ01886 Job #17
M1011 Cat D9L 14Y75500 Job #17 South
M1017 Komatsu D85P 4RC1950 Fork Mountain
M1023 Cat D9L 14Y03774 Patterson Mtn.
M1024 Cat D9L 14Y03777 Skyline Tipple
1025 Cat D8N 5TJ02071 Patterson Mtn.
M1035 Cat D9L 14Y03797 Cumberland #2 Mine
M1036 Cat D9L 2YD1093 Martiki Coal Company
M1046 Cat D10N 2YD00728 Lon Rogers
M1049 Cat D8K 77V75396 Skyline Tipple
1051 Cat D11R 8ZR00376 Job #17 South
LOADERS
2029 Cat 988F 8YG00524 Crooked Fork
2049 Cat 992D 7MJ00314 Flag Knob
2051 Cat 992D 7MJ00260 Cumberland #2 Mine
2052 Cat 992D 7MJ00691 Job #17 South
2053 Cat 992D 7MJ00209 Lon Rogers
2059 Cat 973 86G1400 Lon Rogers
2065 Cat 988 50W09147 Patterson Mtn.
2490 Cat 980G 2KR00661 Cumberland #2 Mine
2500 Cat 988F 22R00416 Cumberland #2 Mine
2501 Cat 988F 2ZR00451 Job #17 South
2502 Cat 980 G 2KR00936 Job #17 South
M2000 Cat 988B 50W06981 Ikerd Bandy HWM
M2882 Cat 992D 7MJ00534 Crooked Fork
M2883 Cat 988B 50W08697 Flag Knob
2898 Cat 988B 50W11399 Lon Rogers
</TABLE>
<PAGE> 46
<TABLE>
<S> <C> <C> <C>
2038 Cat 988B 50W10501 Conrich Pewee #1
2730 Cat 988 87A5839 Conrich Pewee #1
DRILLS
4700 Intersoll Rand LME 500C T52054 Equipment Rental - AEI
M4190 Ingersoll Rand TH 60 Drill 2HTTGDWT2JC011449 Engineering/Exploration - AM
M4290 Ingersoll Rand DM45-E 3304 Job #17 South
4300 Ingersoll Rand DM45-E XL750 7252 Flag Knob
4851 Ingersoll Rand DM45-E XL750 7254 Cumberland #2 Mine
4852 Ingersoll Rand DM45-E XL750 7256 Lon Rogers
4853 Ingersoll Rand DM45-E 7263 Job #17 South
M4993 Ingersoll Rand DM-45E-XL1050 3648 Flag Knob
M4994 Ingersoll Rand DM-45E-XL1050 3681 Crooked Fork
M4995 Ingersoll Rand DM-45E-XL1050 3722 Crooked Fork
4997 Ingersoll Rand DM-45E 4087 Cumberland #2 Mine
SHOP EQUIPMENT
All Shop Equipment Located at Main Shop and Mining Technologies Shop
FORK LIFTS
2470 Cat 988B 50W699 Martiki Coal Company
2901 Cat 988B 50W08165 Job #17 South - HWM#12
2902 Komatsu WA600 10164 Idle Equipment
2902-1 Balderson Pinion Fork W06445 Idle Equipment
2907 John Deere 480-BD 233274T MT Fab Shop
2909 Yale GLP-080 P334741 MT Fab Shop
2915 Cat GP30 74AM01784 MT Car Shop
2945 Case 580 900579 Idle Equipment
2990 Cat 966C 76J13647 MT Fab Shop
2992 Cat 966C 76J11314 MT Car Shop
2992-1 Cat 966C 76J11314 MT Car Shop
2993 Cat V80D 37W07908 MT Car Shop
2998 Cat 988B 50W09278 Job #17 South - HWM#14
M2995 Cat 988B 50W08647 Patterson Mtn.-HWM#13
2991 Cat 966C 76J12357 MMI Shop
2906 Hyster H50F MMI Shop
2908 Champ 350-HLDS CC746382 MMI Shop
2940 Cat 998B Fork Lift 50W06757 MMI Shop
2915 Cat GP30G Fork Lift 7AM01784 MT Car Shop
</TABLE>
<PAGE> 47
<TABLE>
<S> <C> <C> <C>
MECHANIC TRUCKS
8603 Ford F700 Mechanic Truck 1FDNK74N5DVA19565 Idle Equipment
8603-1 Miller Big 40 Welder KE754420 Idle Equipment
8612 Ford K646 Mechanic Truck 1FDNK64N3FVA64517 MT Fab Shop
8612-1 Quincy Air Compressor 325 FBT Kohler MT Fab Shop
8609 1987 Chevrolet C70 Mechanic Truck 1GBK7D1G1HU107293 Indiana
HEAVY TRUCKS
8752 Mack DM685S 1M2B120C3BA0504
16303 1975 Kenworth W-800 146478S MMI Shop
8751 1971 White Truck BT004HA730540 Idle Equipment
8703 Mack DM686 Boom Truck 1M2B128C2GAD12179 MMI Shop
8829 Mack RD888SX 2M2P190COJC001097 Idle Equipment
16304 1985 Mack RD821SX 1M2P154C2FA001078 MMI Shop
8806 1983 Mack RD886SX 1M2P158C5DA0010 Idle Equipment
16307 1991 Kenworth W-900 2XKWDB0XXMM560984 MMI Shop
3001 Cat 777C 4XJ00460 Crooked Fork
3003 Cat 777C 4XJ00490 Lon Rogers
3005 Cat 777C 4XJ00546 Lon Rogers
3992 Cat 785 8GB679 Crooked Fork
3993 Cat 785 8GB680 Crooked Fork
3994 Cat 785 8GB681 Cumberland #2 Mine
M8014 Mack Lube Truck 1M2P186C1JW001034 Job #17 South
LIGHT PLANTS
15047 Allmand Maxi Light SHO-1000 9705MLS12 Ikerd Bandy HWM
15048 Allmand Maxi Light SHO-1000 9705MLS09 Martiki Coal Company
YARD CRANES
11002 Galion 125KCID Crane 1241272 Idle Equipment
11003 Grove AP308 72162 Idle Equipment
11004 Grove AP308 73380 Idle Equipment
11005 Grove AP308 72170 Idle Equipment
VEHICLES
14005 Chevrolet K-2500 305729 General & Administrative-AEI
14012 Chevrolet K10 - 4x4 1GCDK14K9KZ253894 MT Fab Shop
14023 Chevrolet C-1500 1GCEK14K5NZ239385 Martiki Coal Company
14029 Chevrolet K-2500 2GCFK29K5R1246340 MT Car Shop
14039 Chevrolet Tahoe, 4x4 3GNEK18R5TG165185 MT Car Shop
14053 Chevrolet Tahoe 3GNEK18R4VG129281 Job #17 South - HWM#12
14234 Chevrolet 1 Ton 1GBJC34KOLE197420 Operations Management - MT
14360 Ford Bronco - 4x4 AFMEU15N6KLA41265 Engineering/Exploration - MT
14602 Chevrolet Van 1GAGC35K5L7132097 MT Car Shop
</TABLE>
<PAGE> 48
<TABLE>
<S> <C> <C> <C>
14608 Chevrolet K-1500 1GCEK19R4TE167167 Operations Management - MT
14897 Chevrolet K-250 1GCGK24K7PE106166 MT Fab Shop
14898 1993 Chevrolet K20 Suburban 1GNGK26N4PJ340948 General & Administrative-AEI
14891 1993 Chevrolet Blazer 4X4 1GNEK18K3PJ312451 General & Administrative-AEI
8631 Ford Super Duty Mechanic Truck 2FDLF47K7RCA06485 Patterson Mtn.
14009 Chevrolet Tahoe 1GNEK18K7SJ303101 Operations Management - TM
14011 Chevrolet K-1500 Blazer 1GNEK18K7RJ400504 Sold
14017 Chevrolet K-1500 Blazer 1GNEK18K7RJ398768 General & Administrative-AEI
14019 Chevrolet K-1500 Blazer 1GNEK18K8RJ400043 Lon Rogers
14021 Chevrolet K-1500 Blazer 1GNEK18K1RJ401115 Patterson Mtn.
14027 Chevrolet Blazer 4WD 1GNEK18K5RJ333028 Job #17 South
14030 Chevrolet Tahoe 3GNEK18R4TG150032 General & Administrative-AEI
14031 Chevrolet K-1500 Blazer 1GNEK18K9RJ424562 Skyline Tipple
14032 Ford F250 - 4X4 1FTHF26H2KNA36885 Baldwin Prep Plant
14033 Chevrolet K-2500 2GCFK29K2R1244657 Job #17 South
14037 Chevrolet K-2500 2GCFK29K2R1246473 Lon Rogers
14038 Chevrolet K-1500, 4x4 1GCEK19R4TE266135 Engineering/Exploration - AE
14040 Chevrolet Tahoe 1GNEK13R1TJ425927 General & Administrative-AEI
14041 Chevrolet K-2500 2GCFK29K3R1246224 Job #17 South
14042 Chevrolet K1500 1GCEK19RVE126939 Crooked Fork
14043 Chevrolet K1500 1GCEK19RXVE124942 Patterson Mtn.
14044 Chevrolet K1500 1GCEK19R5VE125609 Flag Knob
14047 Chevrolet K-2500 2GCFK29KXR1246429 Idle Equipment
14048 Chevrolet Tahoe 3GNEK18R2VG112768 Cumberland #2 Mine
14049 Chevrolet K-2500 2GCFK29KXR1244311 Job #17 South
14051 Chevrolet K1500 Ext. Cab 1GCEK19R8VE128326 Job #17 South
14052 Chevrolet K1500 Ext. Cab 1GCEK19R7VE127068 Quality Control-AM
14055 Chevrolet K-2500 2GCFK29K2R1246781 Lon Rogers
14063 Chevrolet K-2500 1GCFK29K4RE237823 Crooked Fork
14065 Chevrolet K-2500 1GCFK29KXRE240211 Lon Rogers
14067 Chevrolet K-2500 1GCFK29K4RE239796 Crooked Fork
14201 Chevrolet Tahoe 1GNEK13K45J364431 General & Administrative-AEI
14203 Chevrolet Tahoe 1GNEK13K65J365371 General & Administrative-AEI
14221 Chevrolet K-1500 Blazer 1GNEK18K4RJ400959 Job #17 South
14223 Chevrolet K-1500 Blazer 1GNEK18K4RJ401027 Crooked Fork
14227 Chevrolet 3/4 Ton 4X4 1GCGK24KOLE134546 Flag Knob
14229 Chevrolet 2500 1GCGK24K5RE153926 Job #17 South
14231 Ford Explorer 1FMDU34X5RUA65426 Patterson Mtn.
14245 Chevrolet K-2500 1GCGK29K0RE196658 Engineering/Exploration - AM
14246 Chevrolet 1500 4x4 Ext. Cab 2GCEK19R6T1137895 Job #17 South
14255 Chevrolet Tahoe 1GNEK18K9SJ329795 Cumberland #2 Mine
14611 Ford Bronco - 4X4 1FMEU15H1MLA18781 Idle Equipment
</TABLE>
<PAGE> 49
<TABLE>
<S> <C> <C> <C>
14629 Chevrolet K-2500 1GCFK29K3RE239028 Patterson Mtn.
14633 Ford Super Duty 1FDLF47F1SEA54521 Patterson Mtn. HWM #13
14637 Chevrolet K-1500-Suburban 3GNFK16RXTG103370 General & Administrative-AEI
14671 Chevrolet K-2500 1GCFK29K1RE238783 Engineering/Exploration - AM
14673 Chevrolet K-2500 2GCFK29K7R1247456 Flag Knob
14791 Chevrolet K-1500 2GCEK19K8R1239257 Crooked Fork
14800 Chevrolet Suburban 4x4 1GNFK16R5TJ360435 General & Administrative-AEI
14803 Chevrolet Tahoe, 4Dr 1GNEK13R4VJ442787 General & Administrative-AEI
14857 Chevrolet K-2500 1GCFK29K4RE238146 Job #17 South
14865 GMC 2500 4x4 1GTFK24K0RE538550 Ikerd Bandy HWM
14871 Chevrolet Blazer 4WD 1GNEK18KORJ327413 Engineering/Exploration - AM
14873 Chevrolet Blazer 4X4 1GNEK18K7RJ351787 Engineering/Exploration - AM
14881 Chevrolet Blazer 4WD 1GNEK18K2RJ360543 Operations Management - AM
14887 Ford Super Duty 2FDLF47M2NCA88671 Crooked Fork
14890 Ford Bronco - 4X4 1FMEU15H2PLA23617 Job #17 South
14892 Chev. Van 1GDFG15M5T1000982 General & Administrative-AEI
14894 Chevrolet Suburban 4x4 3GNFK16RSTG115137 General & Administrative-AEI
14899 Chevrolet K1500 Ext. 4WD 1GCEK19ROTE151712 Operations Management - AM
14905 Ford Crown Victoria 2FABP74F1KX222830 General & Administrative-AEI
14925 Ford Crown Victoria LX 2FALP74W9RX209368 Engineering/Exploration - AM
TRAILERS
16754 Great Dane Parts Trailer 20070 Ikerd Bandy HWM
16767 Utility Parts Trailer 1UYVS2430CT703119 Martiki Coal Company
16769 Trailmobile Parts Trailer 593688 Patterson Mtn. HWM #13
16504 Hyster RGH60TD4-T1N 14334 MMI Shop
16506 Liddell Birmingham 50 Ton Trailer 1L74S4836KAB01497 MMI Shop
16507 Talbert WK615 & 1 Talbert Axle 40FWK615XJ10073 MMI Shop
16509 Rogers 60-Ton Trailer 18337 MMI Shop
16515 1986 Transcraft Trailer 1TTF43206F1026382 MMI Shop
16508 2-Axle Trailer 102ASF2144 MMI Shop
16516 Hobbs 42' Lowboy Trailer FHV353905 MMI Shop
16517 Great Dane Trailer - 45'-75' 1GRDP902BDM044402 MMI Shop
16518 Rogers 50-Ton Lowboy 1RBH46304NAAR21655 MMI Shop
16519 Steerable Dollie Trailer KYT21404 MMI Shop
16520 Great Dane Drop Deck Trailer 1GRDN882SBM002704 MMI Shop
16514 1975 Vulcan Water Trailer VT280775 MMI Shop
16512 1972 Prog Trailer B26356 MMI Shop
16521 1995 Clark CDFBT Trailer 1CD2L4825SA0051 MMI Shop
16915 Gindy Parts Trailer 115474E Job #17 South - HWM#14
</TABLE>
<PAGE> 50
<TABLE>
<S> <C> <C> <C>
SCRAPERS
0890 Cat 631 24W2502 Idle Equipment
M0101 Cat 657 E Scraper 91Z00221 Cumberland #2 Mine
M0104 Cat 657 E Scraper 91Z00228 Cumberland #2 Mine
MISCELLANEOUS FARM EQUIPMENT
17653 Radial Arm Drill Geared Head & Drill MT Fab Shop
GENERATOR SETS
19026 Cat 3516 Generator 25Z02912 Ikerd Bandy HWM
19027 Cat 3516 Generator 25Z03207 Martiki Coal Company
19029 Cat 3516 Generator 25Z02477 Job #17 South - HWM#8
19032 Cat 3516 Generator 25Z04477 Job #17 South - HWM#14
19018 Cat 3516 25Z02036 Idle HWM Equipment
19019 Cat 3516 25Z02063 Patterson Mtn. HWM #13
19031 Cat 3516 DITA 25Z03350 Job #17 South - HWM#12
19013 Cat 3408 Generator 67U8413 Conrich Pewee #1
19023 Rebuilt Power Center 10854-2 Conrich Pewee #1
MAIN SHOP EQUIPMENT
20306 Lincoln DC400 Welder AC-751251 MT Car Shop
20366 MC-59 Pipe Bender M14821-S MT Fab Shop
20370 Doall Band Saw 90154460-60-3 MT Fab Shop
20371 Jig Manufacturi Add Car Weldment WO 1524 MT Car Shop
20372 Wellsaw Band Saw with Coolant System MD8W/1016 MT Car Shop
20376 Sabra 1000 Cutting Machine 93-VIS-9015 MT Fab Shop
21204 Hydraulic Jig Table MT Car Shop
21205 Hydraulic Jig Table MT Car Shop
HIGHWALL MINER ADDCAR SYSTEMS
22006 Addcar System #6 - 27 Cars 22006 Ikerd Bandy HWM
22003 Addcar System #3 - 27 Cars 22003-1 to 22003-27 Martiki Coal Company
22011 Addcar System #11 - 34 Cars 011001-011034 Idle HWM Equipment
22014 Addcar System #14 - 26 Cars 22014 Job #17 South - HWM#8
Addcar System #A3 (Cars only)
HIGHWALL MINER LAUNCH VEHICLES
23003 Addcar Launch Vehicle #3 23003 Martiki Coal Company
23006 Addcar Launch Vehicle #6 23006 Ikerd Bandy HWM
23011 Addcar Launch Vehicle #11 LV011 Idle HWM Equipment
23014 Addcar Launch Vehicle #14 LV014 Job #17 South - HWM#14
</TABLE>
<PAGE> 51
<TABLE>
<S> <C> <C> <C>
HIGHWALL MINER STACKERS
23503 Addcar Stacker PO#177951 WO1182 Idle HWM Equipment
23504 Mobile 48" Stacker TL04P0182526 Parked @Fab Shop
23506 Addcar Stacker PO#197151 WO1158 Job #17 South - HWM#14
23511 Addcar Mobile Stacke for HWM#11 TL011 Idle HWM Equipment
23512 Addcar Stacker for System #12 Martiki Coal Company
23514 Addcar Stacker TL-014 Ikerd Bandy HWM
CONTINUOUS MINERS
24001 Joy 14CM-1 Miner JM1634 Idle HWM Equipment
24002 Eimco 2480 Miner 70880018 Idle HWM Equipment
24004 Eimco 2810 Miner 70880051 Idle HWM Equipment
24006 Eimco 2810 Miner 70880059 Idle HWM Equipment
24007 Eimco 2810 Miner 70880060 Idle HWM Equipment
24018 Joy 14CM15-HW11CX JM4646 Martiki Coal Company
24020 Joy 14CM15-11CX JM4540 Ikerd Bandy HWM
24023 Joy 1410-AA JM4756 Idle HWM Equipment
24031 Joy 14CM-15 JM4837 Idle HWM Equipment
24033 Joy 14CM-15 JM4838 Job #17 South - HWM#14
M24014 Joy 14CM15-11CX JM4496 Idle Equipment
24021 Joy 14CM15-HW11CX JM4661 Martiki Coal Company
24023 Joy 1410-AA JM4756 Idle HWM Equipment
24031 Joy 1410-AA JM4837 Idle HWM Equipment
24033 Joy 1410-AA JM4838 Job #17 South - HWM#14
24037 Joy 14CM14 Miner JM4449 Fork Mtn. Deep Mine
GRADERS
6005 Cat 16G 93U03550 Patterson Mtn.
M6004 Cat 16G 93U01699 Flag Knob
M6005 Cat 16G 93U01861 Job #17 South
EXCAVATORS
5050 Cat 325 Excavator 7LM1300 Crooked Fork
HIGHWALL MINER TANDEM DOLLIES
25006 L. Vehicle Carry Dollies Idle HWM Equipment
25007 Tandem Dollie Martiki Coal Company
25010 Small Pull Dollie Martiki Coal Company
25012 5 Ton Dollie 233 Job #17 South - HWM#14
25015 10 Ton Dollie, 14x24 22412428 Idle HWM Equipment
25016 Large Pull Dollie -68 Co 22011023 Idle HWM Equipment
25017 Large Pull Dollie -70 Co 22413131 Idle HWM Equipment
</TABLE>
<PAGE> 52
<TABLE>
<S> <C> <C> <C>
25018 Large Pull Dollie with Tow 1009 Idle HWM Equipment
25019 Large Pull Dollie with Tow 1210 Idle HWM Equipment
25020 Large Pull Dollie with Tow 22011017 Idle HWM Equipment
25023 Jeep Dollie 6463 & 956 Job #17 South - HWM#14
25027 Jeep Dollie 16945 Job #17 South - HWM#14
25028 Tandem Dollie, 10T Ikerd Bandy HWM
25029 11:00 x 20 Dollie Idle HWM Equipment
25030 11:00 x 20 Dollie Idle HWM Equipment
25031 11:00 x 20 Dollie Idle HWM Equipment
25033 10 Ton Dollie Martiki Coal Company
25037 5 Ton Dollie Martiki Coal Company
25039 5 Ton Dollie Idle HWM Equipment
25049 11:00 x 20 Tandem Dollie 17414 Job #17 South - HWM#14
25055 11 x 20 5 Ton Dollie 33666 Ikerd Bandy HWM
25057 11 x 20 5 Ton Dollie XM211 Idle HWM Equipment
25061 14 x 24 10 Ton Dollie 075 Idle HWM Equipment
HIGHWALL MINER WATER TANKS
26003 Water Tank Job #17 South - HWM#14
26003-P Water Tank Martiki Coal Company
26007 Great Dane Water Tank HT924223 Idle HWM Equipment
26008 Water Tank 71 HL Water Tanker 922644 Ikerd Bandy HWM
HIGHWALL MINER CONVEYOR SYSTEMS
27003 74 x 22 Transfer Conveyor Idle Equipment
27005 Overland Conveyor Idle Equipment
27006 Overland Conveyor Idle Equipment
27007 Overland Conveyor Idle Equipment
27008 Overland Conveyor Idle Equipment
27009 Overland Conveyor Idle Equipment
27010 Conveyor Idle Equipment
HIGHWALL MINER MISC. EQUIPMENT
28003 Sullair Air Compressor 004-1002799 Idle Equipment
28005 Sullair 1600DPQCAT 105278 Idle Equipment
28007 Addcar Test Car W01584 Patterson Mtn HWM#13
UNDERGROUND EQUIPMENT
33048 Battery Powered Scoop 482-1518 Conrich Pewee #1
33049 Battery Powered Scoop 482-2087 Conrich Pewee #1
33050 8 Unit Continuous Haulage Sys Fork Mtn. Deep Mine
33051 10 Man Personnel Carrier 472B-163 Conrich Pewee #1
</TABLE>
<PAGE> 53
<TABLE>
<S> <C> <C> <C>
33052 10 Man Personnel Carrier 472C-4C9 Conrich Pewee #1
33053 Jeffrey Mining System 38632 Conrich Pewee #1
33054 RBI-50L Roof Bolters 62793R Conrich Pewee #1
33055 RBI-50L Roof Bolters M022021R Conrich Pewee #1
33056 Battery Powered Scoop 482-1654 Fork Mtn. Deep Mine
33057 RBI-50L Roof Bolters 62-22013 Fork Mtn. Deep Mine
33058 RBI-50L Roof Bolters 62-22016 Fork Mtn. Deep Mine
33059 S & S, 482 Scoop 482-1711 Conrich Pewee #1
33060 Joy 21SC2-56AHE ET15666 Patterson Mtn. Deep Mine
33061 Joy 21SC5-ASHE ET16289 Patterson Mtn. Deep Mine
33062 S & S 482 Scoop 1654 Patterson Mtn. Deep Mine
MISCELLANEOUS EQUIPMENT
21203 Transformer MT Car Shop
31005 Steam Jennie MT Car Shop
17504 Ford 5610 BB23601 Idle Equipment
17609 Miller 12' Offset Disc 2H14600 Idle Equipment
17610 Case 2470 8853654 Cumberland #2 Mine
17611 Kewanee 245 Tandem Disc Harrow 100061 Cumberland #2 Mine
17613 Ford 3930 BC67905 MMI Shop
17614 Finn B70 85020 Idle Equipment
17615 Versadrill GT 85027 Idle Equipment
17606 Versadrill GT 805 871711 Idle Equipment
17616 256 Bale Buster 25766W Idle Equipment
17607 John Deere 4240 861392 Cumberland #2 Mine
17608 265 Bale Buster 1632-164999 Idle Equipment
17617 Massey Ferguson 160 Manure Spreader N/A Idle Equipment
17618 1200 Spreader N/A Idle Equipment
17619 Finn 850 Hydroseeder BN2316 Cumberland #2 Mine
17620 Finn B250D Straw Blower N/A Reclamation
17624 660 Hay Rake N/A Idle Equipment
17626 Herd MD1200 Spreader 8351043 Idle Equipment
17629 Agrip Rotary Plow N/A Idle Equipment
17630 7' Rock Rake 9090273205 Idle Equipment
17631 Schulte Rock Picker 641736 Idle Equipment
17632 New Holland Roll Baler 002141 Idle Equipment
17634 Electro-Spray Fertilizer Sprayer 98849 Idle Equipment
17645 Herd MD1250C Seeder N/A MMI Shop
17651 MD276 6' Bush Hog N/A MMI Shop
17652 Blade, Scraper, 8' Bushho Reclamation
17644 Front-Mounted Loader N/A
N/A Herd 750 Seed Sower 81948 MMI Shop
</TABLE>
<PAGE> 54
<TABLE>
<S> <C> <C> <C>
17613-1 2512 Bush Hog 14344 MMI Shop
17681 Landpride RCP2560 Parallel Mower 12-00821 Idle Equipment
17683 Bush Hog 2620 3662 Reclamation
17644 Allis Front End Mower N/A MMI Shop
20358 Lietz Surveying Station 176969 MMI Shop
20354 Lincoln Wire Feed
31004 Cat 416B Backhoe 8SG13995 Skyline Tipple
31006 Cat 416B Backhoe 8ZK10467 Patterson Mtn.
</TABLE>
B. CAR SHOP INVENTORY @ 7/31/97
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
21 Electrical Boxes - From WO #242 (used) $6,980 $146,574
2 Electrical Boxes (used) 6,980 13,959
10 Electrical Boxes (new) 6,980 69,797
1 Conn. Box 017-1000 2,002 2,002
2 Skid Cyl. 203-0033 7,857 15,714
1 Bean Pump Assm. 4,000 4,000
1 Pusher Cyl. 203-0034 6,311 6,311
1 100 HP Motor 241-0004 5,000 5,000
2 40 HP Stacker Motor 501-0043 3,500 7,000
2 Transformer 601564-79 7,306 14,612
2 Stab Cylinder 016-0002 700 1,400
1 200 HP Motor 203-1193 4,235 4,235
1 L.H. Gear Pot 012-0003 23,000 23,000
1 R.H. Gear Pot 012-0002 23,000 23,000
1 Lift Cylinder 5,800 5,800
18 Roller Head Pulley 10" X 51" 3 15/16" X 5'1 3/4" Shaft 391-0003 753 13,545
18 Roller 10" X 51 " 2 15/16" X 5' 6 1/2" Shaft 391-0007 540 9,720
1 Roller 361-0002 1,610 1,610
9 Roller 8" X 51" 2 15/16" X 5' Shaft 391-0005 775 6,975
15 Roller 10" X 51" 3 7/16" X 6' 6 12" Shaft 391-0001 708 10,624
4 Old Styler Roller Box 202-1075 5,000 20,000
15 Driver Rollers 1,943 29,148
28 10:1 Speed Reducer - From WO #242 391-0013 2,470 69,164
16 10:1 Speed Reducer 391-0013 4,868 77,891
28 30 HP Motor 391-0012 2,402 67,260
26 30 HP Motor 391-0012 3,022 78,578
1 150 HP Motor 017-0001 18,500 18,500
2 350 HP A-C Motor 017-0000 38,500 77,000
2 50 HP EIMCO Motor 017-0002 19,019 38,038
</TABLE>
<PAGE> 55
<TABLE>
<S> <C> <C> <C> <C>
2 Cutter Head 011-0000 48,800 97,600
129 4" X 33" Roller 1048 37 4,809
208 5" X 33" Roller 1010 40 8,382
492 5" X 15" Roller 1009 27 13,151
48 5" X 33" Impact Roller 110 5,294
810 4" X 15" Roller 1049 25 20,120
47 4" X 30" Roller 1008 36 1,715
106 4" X 30" Impact Roller 1047 104 11,011
2 Hog Gathering Arms 2,000 4,000
12 Used 10" X 63" Lagged Pulley 624 7,488
100 1/4" X 2" X 20' Tube Steel 52 5,220
13 40 per ft 12" X 16" X 23' Tube Steel 920 11,960
2 Mukker Stacker Cyl. 1,000 2,000
1 Shear Jack Cyl. 016-0000 3,985 3,985
2 Planetary 520514552 8,800 17,600
4 Used Motorized Head Pulley 3,000 12,000
2 Starter Box 604-0224 6,673 13,346
1 Shear Jack Cylinder 016-0025 4,255 4,255
1 Siemens 100 HP Motor 8,000 8,000
1 Lincoln 100 HP Motor 5,000 5,000
1 Fork Carriage 8,550 8,550
2 Jeamar Capstan Electric Winch 12,052 24,104
4 Edge 4T6590 169 677
1 Edge 4T6589 325 325
1 Edge 140762 274 274
2 Edge 4T6511 179 359
3 Tooth 9W8552 72 217
6 Tooth 9W8559 64 384
2 Tooth 9W8452 44 89
1 Tooth 9W8451 47 47
1 Shank 7T8454 159 159
1 Protector 9W8365 286 286
8 Tooth 1U3351 26 206
2 Tooth 9W8459 44 88
1 Edge 7T4689 395 395
1 Edge 3G8281 248 248
1 Edge 4J8723 178 178
1 Edge 3G8292 181 181
1 Edge 4T6672 48 48
1 Edge 3G8282 248 248
10 Segment 6Y2931 60 604
1 Bracket 8J9011 1,351 1,351
</TABLE>
<PAGE> 56
<TABLE>
<S> <C> <C> <C> <C>
1 Edge 3G8290 219 219
3 Edge 5J3101 503 1,509
2 Bracket 3S3228 43 85
33 12" x 20" x 6' Tube 291 9,613
3 333 KVA Transformer 1,500 4,500
3 100 KVA Transformer 1,000 3,000
1 25 KVA Transformer 400 400
2 6" x 12" x 17' Beam 133 265
2 6" x 10" x 19' Beam 125 251
4 6" x 10" x 9' Beam 59 238
1 10" x 20' Channel 92 92
1 8" x 20' Channel 60 60
1 10" x 11" x 13' x 1" Beam 343 343
2 1/2" x 6" x 6" x 40' Beam 300 600
1 32" DM45 Bit Sub 495 495
1 DM45 Top Sub 495 495
4 Falk Enclosed Gear Drive 3507J-14 8,233 32,931
2 Rex Bearing ZF5407Y 1,123 2,246
1 Falk Coupling Sleeve 1150T10 594 594
10 Segment 1026686 186 1,860
4 DM45 Top Sub 495 1,980
1 GD35 6' Bottom Sub 783 783
3 DM45 Bot Sub to Wear Plate 641 1,923
2 Plate 9V5793 103 205
1 Edge 4T6760 183 183
3 Edge 9W5432 174 523
--------------------------
$1,221,806
</TABLE>
C. FAB SHOP INVENTORY @ 7/31/97
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Joy 1415 Complete Cutter Head Assembly $175,000 $175,000
5 Rex 3 15/16" Bearing 423 2,113
1 Rex 1 15/16" Bearing 149 149
1 Dodge 3 15/16" Bearing 588 588
1 18" Take Up Frame 377 377
2 Rex 2 7/16" Bearing 170 339
1 400 Watt Floodlight 250 250
1 Cross Pump Filter 41 41
1 4 7/16" Falk Bushing 328 328
10 Dodge 3 15/16" Bushing 177 1,775
</TABLE>
<PAGE> 57
<TABLE>
<S> <C> <C> <C>
2 Dodge 4 7/16" Bushing 186 373
2 5th Wheel Plate 53 106
4 Water Reel Swivel 149 598
2 Skid Clevis Pin 135 270
3 Prop Clevis Pin 65 195
2 Prop Clevis Rod End 625 1,250
4 Lift Column Rod End 525 2,100
10 Ft 160 Roller Chain 28 279
40 Ft 140 Roller Chain 14 560
20 Ft 80 Roller Chain 15 293
10 Ft 60 Roller Chain 14 139
2 140 Sprocket 138 276
2 160 Sprocket 146 291
2 BS24 1 1/14" Sprocket 17 34
2 Water Regulator 160 320
1 Goodyear Belt 305 305
3 Goodyear Belt 237 712
2 Gates Belt 602 1,204
4 Gates Belt 343 1,373
1 Gates Belt 360 360
1 Blast Sheild Cylinder 340 340
1 ISR Relay 215 215
1 Tail Roller 472 472
0 Keeper for Boom 133 0
1 Demultiplexer 5,864 5,864
2 Insulator Overload 1,562 3,124
3 Thermal Overload Relay 43 128
2 Cat Seal 566 1,132
1 Ring Carrier 740 740
0 Pinion Output Shaft 1,437 0
50 1 1/2" Hose 12 604
50 1" Hose 5 254
50 3/4" Hose 3 162
100 1/2" Hose 4 357
50 3/8" Hose 3 163
2,400 Ft 4/0 Used Cable 6 13,200
60 66" Belting 20 1,200
30 72" Belting 18 540
150 72" X 3/4" Belting 25 3,750
5 Sections Catwald 300 1,500
1 Westinghouse 100 HP Motor 2,800 2,800
25 5" X 30" Impact Roller 130 3,250
</TABLE>
<PAGE> 58
<TABLE>
<S> <C> <C> <C>
74 5" X 11" Impact Roller 66 4,884
14 4" X 33" Impact Roller 100 1,400
14 5" X 57" Roller 60 840
4 1" X 8' X 20' Plate M.S. 1,595 6,380
1 3/4" X 8' X 20 Plate M.S. 1,238 1,238
2 1/2" X 8' X 20' Plate M.S. 800 1,600
1 1/4" X 8' X 20' Plate M.S. 460 460
2 3/8" X 8' X 20' Plate M.S. 599 1,198
1 1 1/4" X 8' X 20' Plate T-1 3,100 3,100
1 1 1/2" X 8' X 20' Plate M.S. 2,400 2,400
1 1 1/2" X 8' X 17' Plate G.R.50 2,000 2,000
1 3/4" x 8' x 20' 400 Plate 1,400 1,400
8 3/8" X 5" X 5" X 40' Tube 435 3,478
17 2" X 4" X 20' Bar 169 2,873
7 1 1/2" X 24" X 20' Plate T-1 850 5,950
4 1 1/2" X 18" X 20' Plate T-1 650 2,600
5 1 1/2" X 24" X 20' Plate T-1 425 2,125
6 245 X 106 X 65' 2,300 13,800
1 245 X 106 X 60' 2,100 2,100
2 24 X 131 X 60' 2,800 5,600
4 14 X 48 X 60' 8,000 32,000
2,400 2/0 3 Cond 5000 Volt Cable 13 31,200
2,000 2/0 3 Cond 2 KV Cable 14 28,280
7 1" X 125' Wire Rope 750 5,250
3 10" X 40' Tube 1,027 3,080
--------------------------
$397,027
</TABLE>
D. IKERD-BANDY INVENTORY @ 7/1/97
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 DC CONTACTOR 601525-8 $750 $750
1 DEMULTIPLEXOR 601843-86 6,221 6,221
6 FH28 HEATER STRIP 601547-28 8 45
6 FH47 HEATER STRIP 601547-47 8 45
6 FH71 HEATER STRIP 601547-71 8 45
6 FH75 HEATER STRIP 601547-75 8 45
6 FH80 HEATER STRIP 601547-80 8 45
6 FH93 HEATER STRIP 601547-93 8 45
</TABLE>
<PAGE> 59
<TABLE>
<S> <C> <C> <C> <C>
6 FUSE 600014-102 3 16
1 OVERLOAD 601866-2021 1,665 1,665
3 OVERLOAD BASE 601548-75 44 132
1 OVERLOAD BASE 601548-44 115 115
1 POWER SUPPLY 601566-10 1,290 1,290
1 RECEIVER 601843-135 3,022 3,022
1 ANTENNA 601843-123 63 63
1 SOLENOID ASSEMBLY 570553-2 485 485
1 STARTER 601878-21 1,046 1,046
1 TRANSMITTER 601843-136 3,182 3,182
1 CABLE 601843-34 177 177
2 CLAMP 1564315-9 113 226
2 CLAMP 902224-106 1 1
1 HYD. PUMP 506227-28 926 926
2 SHEAR LOAD LOCK 534613-23 225 450
2 O-RING 910660-273 2 4
2 O-RING 910660-138 0 1
2 O-RING 910659-220 1 2
2 O-RING 910659-447 14 29
2 O-RING 910659-226 3 7
2 O-RING 910660-244 0 1
2 O-RING 910660-437 2 3
2 PIN 1069434-205 534 1,068
2 PIN 1069432-334 12 24
2 PIN 1069432-513 73 145
1 TAIL ROLLER 531840-4 523 523
2 1/4" PLUG 901924-3 0 1
2 SPRING PIN 904685-152 1 1
1 SLIDE SPRING 1069585-83 114 114
2 CONVEYOR SHAFT 1069528-490 305 610
1 CAP 1122770-1 105 105
1 SNAP RING 905362-250 4 4
1 PLUG 1069452-31 9 9
1 PLUG 906512-168 1 1
1 CAP 3069141-63 64 64
1 SNAP RING 905478-425 9 9
1 PLUG 480228 6 6
1 SNAP RING 902109-225 1 1
2 PIN 1451909 14 28
2 DOWEL PIN 1451476-1 1 2
4 SHIM 1069533-373 7 29
4 SHIM 1069533-374 8 32
</TABLE>
<PAGE> 60
<TABLE>
<S> <C> <C> <C> <C>
4 SHIM 1069533-375 8 32
1 VALVE 531872-1 430 430
12 NOZZLE 1566237-6 8 98
4 PIG EYE 3/8" 902140-1 7 29
4 PIG EYE 1/2" 902140-2 5 20
4 PIG EYE 3/4" 902140-3 9 37
4 PLUG 1/8" 901924-2 0 1
4 PLUG 1/4" 901924-3 0 1
4 PLUG 3/8" 901924-4 0 1
4 PLUG 1/2" 901924-5 0 1
4 PLUG 3/4" 901924-6 1 3
4 PLUG 1" 901924-4 3 11
4 PLUG 1 1/4" 901924-8 5 18
2 VENT 903458-10 10 19
2 BEARING/HEAD PULLY 1143 319 639
2 BEARING/L.V. TAKEUP 1018 588 1,175
12 4" X 30" ROLLER 1008 37 442
11 4" X 11" ROLLER 1007 22 244
5 ZIPPER BOOTS 1224 74 370
5 ZIPPER BOOTS 3424 69 345
5 ZIPPER BOOTS 5630 78 388
1 LOT HYDRAULIC FITTINGS 4,850 4,850
1 FILTER 2P4005 9 9
1 FILTER 8N2556 60 60
4 FILTER 1R0719 5 19
6 FILTER 4P2839 15 88
2 FILTER 7W5313 37 74
4 FILTER 8N6309 59 237
10 FILTER 1R0718 5 52
4 FILTER 7J0670 7 27
2 FILTER P181050 9 19
2 FILTER P550534 3 6
4 FILTER P552020 7 28
2 FILTER 9M2341 2 5
50 RG-59 COAX 0 10
50 RG-8 COAX 1 71
10 CONNECTOR 88-18 2 19
10 CONNECTOR 88-2 2 18
5 CONNECTOR CPGD-555 2 12
2 3 15/16" SPROCKET 1053 139 277
2 SUPPORT SKID 1042 535 1,070
1 CLEVIS JACK LIFT 1038 525 525
</TABLE>
<PAGE> 61
<TABLE>
<S> <C> <C> <C> <C>
2 1 1/4" X 4" POLY-BAR 1304 32 65
1 CLEVIS PROP ROLLER 1081 625 625
1 PIN PROP CLEVIS 1082 30 30
1 SPACER SKID CLEVIS 1021 15 15
2 18" FRAME TAKE-UP 1020 377 754
4 BEARING/HEAD/DRIVE PULLY 1017 225 899
2 BEARING/TAIL PUULEY 1263 144 288
2 BEARING/WHEEL 1015 215 431
2 BEARING/L.V. DRIVE 1016 389 779
1 CONTACTOR DPCK3035AW 396 396
6 HEATER STRIP FH47 7 42
12 250 MCM BUTT CONNECTOR 2 20
12 250 MCM LUGG 2 20
10 FUSE ATM10 4 35
10 FUSE ATM15 4 35
10 FUSE ATM30 4 35
5 3/4 FUSE KTK 4 18
30 #33 TAPE 3 82
20 #27 TAPE 7 139
30 HIGH VOLT TAPE 8 230
30 MHSA TAPE 1 26
20 SHEILDING TAPE 4 79
10 2520 TAPE 12 123
10 140 CHAIN 22 219
4 140 MASTERLINKS 5 20
4 140 1/2 LINKS 12 48
1 2" BALL VALVE 20 20
2 1 1/2" BALL VALVE 13 27
2 1 1/4" BALL VALVE 11 21
50 1/8" WIRE ROPE 0 8
200 3/8" WIRE ROPE 0 48
1 REGULATOR 1145511 641 641
2 BULB 1M5898 10 20
4 BULB 7H2976 3 12
5 FILTER P553634 6 31
2 FILTER P556245 3 6
2 FILTER 612506 37 73
2 FILTER 1R0712 7 13
2 FILTER 612506 37 73
6 50W MIN. LAMP 37498-3 4 24
6 3/4" RIDGID STRAP H68 0 1
4 PLUG CAP 1510PW 11 45
</TABLE>
<PAGE> 62
<TABLE>
<S> <C> <C> <C> <C>
4 CONNECTOR BODY 1610CW 16 65
6 3/4" GLAND A25-3/4 STR 9 54
6 3/4" GLAND A26-34 90 9 54
10 1/4" ROPE PACKING TS100014 1 6
10 3/8" ROPE PACKING TS100038 1 10
10 1/2" ROPE PACKING TS100012 1 13
4 PLUG (HEADLIGHT) A40 7 26
12 SPLIT BOLT K529 9 111
75 POWER CABLE 5KV25HD 1 102
250 14/3 CABLE 0 83
250 14/3 CABLE 0 55
50 3/4" CONDUIT HOSE 1 69
50 1 1/2" CONDUIT HOSE 2 108
50 2" CONDUIT HOSE 3 150
24 ELECTRO-KLEEN 6 134
4 20A CONNECTOR 2410-CW 24 96
4 20A PLUG CAP 2310 PW 15 60
1 400W FLOOD LAMP 195 195
1 SLIP FITTER 19 19
2 400W LAMP 34415-0 22 45
4 FILTER KM150 39 156
4 FILTER KM60 65 259
1 AUX. SWITCH 458D13 114 114
1 100 AMP BREAKER 425 425
1 800 AMP BREAKER 1,495 1,495
1 TRIP UNIT 2611D75G05 475 475
1 CONTACT AUX. J11 34 34
4 BURLE MONITOR TC-1914A 246 984
1 600V PLUNGER TYPE LIMITER 9007-AP221 54 54
1 RELAY A280-120 269 269
3 RELAY AA11P 23 68
1 RELAY 0AR2U110A 54 54
2 2 POSITION SELECTOR A779-3 64 128
1 400 AMP REVERSING SWITCH D845-5 1,558 1,558
2 TRANSFORMER TR15710 108 216
1 SW-LIMIT 548-11-01 18 18
1 300 AMP COUPLER PL30DFC067-A1EX 210 210
1 600 AMP COUPLER PL60DFC107-00EX 432 432
2 2.75" BRASS BUSHING A2427-002B 21 42
2 2.75" BRASS BUSHING A2428-002B 22 43
4 CLIP GROUND CONNECTOR A773-002 2 9
4 CLIP GROUND CONNECTOR A773-001 2 9
</TABLE>
<PAGE> 63
<TABLE>
<S> <C> <C> <C> <C>
1 DUST COVER, 400 AMP C1326 99 99
1 DUST COVER C705-001 74 74
1 RECEPTACLE 400 AMP C1458-001 312 312
1 PLUG HOUSING C2361-2 491 491
3 INSULATOR PIN 609 58 173
3 INSULATOR PIN B610 58 173
3 INSULATOR PIN 610 58 173
3 INSULATOR PIN 611 58 173
1 400 AMP PACKING HOUSING B1301 52 52
6 RETAINING RING A858 0 3
6 RETAINING RING A649 1 3
3 FEMALE GROUND PIN B462-002 26 77
3 MALE GROUND PIN B463A 18 55
3 FEMALE PILOT PIN B614 14 43
3 MALE PILOT PIN B614 13 38
3 RETAINING PIN A3464 1 3
50 WIRE LOCK SEAL A3198 0 21
2 SPIR-O-LOX RETAINING RING RR-387-S 6 13
6 FEMALE POWER PIN B613-001 35 211
6 MALE POWER PIN B612-001 26 154
1 METHANE MONITOR 80730559 1,550 1,550
1 CALIBRATION KIT 80802333 362 362
1 D502 METHAND DISP. 80860117 1,800 1,800
1 POWER SUPPLY 80860166 1,380 1,380
1 SMART SENSOR 80860109 1,478 1,478
1 SENSOR 80801459 296 296
1 SPLASH GUARD SENSOR 80800220 37 37
1 60" BELT 569 569
1 60" BOARD 778 778
10 SPLICE R5-48 19 190
10 PINS NC-48 5 52
10 SPLICE R6-60 51 510
10 PINS NAC-60 27 265
2 RIVETS SRB 187 373
2 RIVETS SRC 197 393
1 MISC. MEDICAL SUPPLIES 2,585 2,585
3 BOX CAMERA 1012 535 1,605
2 RING RETAINING LENS 1014 70 140
1 ROTART JOINT 1091 149 149
2 LENS CAMERA BOX 1013 20 40
2 CAMERA B/W 35MM 1005 376 752
1 5000 WATT GENERATOR 3MK73 599 599
1 POLY CHAIN BELT 14M-1960-68 239 239
1 HTD BELT 3360-14M-115 417 417
600 CUTTER BITS 26007542 5 2,970
-------------------------
$71,520
</TABLE>
<PAGE> 64
E. MARTIKI INVENTORY @ 7/1/97
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 DC CONTACTOR 601525-8 $750 $750
1 DEMULTIPLEXOR 601843-86 6,221 6,221
6 FH28 HEATER STRIP 601547-28 8 45
6 FH47 HEATER STRIP 601547-47 8 45
6 FH71 HEATER STRIP 601547-71 8 45
6 FH75 HEATER STRIP 601547-75 8 45
6 FH80 HEATER STRIP 601547-80 8 45
6 FH93 HEATER STRIP 601547-93 8 45
6 FUSE 600014-102 3 16
1 OVERLOAD 601866-2021 1,665 1,665
3 OVERLOAD BASE 601548-75 44 132
1 OVERLOAD BASE 601548-44 115 115
1 POWER SUPPLY 601566-10 1,290 1,290
1 RECEIVER 601843-135 3,022 3,022
1 ANTENNA 601843-123 63 63
1 SOLENOID ASSEMBLY 570553-2 485 485
1 STARTER 601878-21 1,046 1,046
1 TRANSMITTER 601843-136 3,182 3,182
1 CABLE 601843-34 177 177
2 CLAMP 1564315-9 113 226
2 CLAMP 902224-106 1 1
1 HYD. PUMP 506227-28 926 926
2 SHEAR LOAD LOCK 534613-23 225 450
2 O-RING 910660-273 2 4
2 O-RING 910660-138 0 1
2 O-RING 910659-220 1 2
2 O-RING 910659-447 14 29
2 O-RING 910659-226 3 7
2 O-RING 910660-244 0 1
2 O-RING 910660-437 2 3
2 PIN 1069434-205 534 1,068
2 PIN 1069432-334 12 24
</TABLE>
<PAGE> 65
<TABLE>
<S> <C> <C> <C> <C>
2 PIN 1069432-513 73 145
1 TAIL ROLLER 531840-4 523 523
2 1/4" PLUG 901924-3 0 1
2 SPRING PIN 904685-152 1 1
1 SLIDE SPRING 1069585-83 114 114
2 CONVEYOR SHAFT 1069528-490 305 610
1 CAP 1122770-1 105 105
1 SNAP RING 905362-250 4 4
1 PLUG 1069452-31 9 9
1 PLUG 906512-168 1 1
1 CAP 3069141-63 64 64
1 SNAP RING 905478-425 9 9
1 PLUG 480228 6 6
1 SNAP RING 902109-225 1 1
2 PIN 1451909 14 28
2 DOWEL PIN 1451476-1 1 2
4 SHIM 1069533-373 7 29
4 SHIM 1069533-374 8 32
4 SHIM 1069533-375 8 32
1 VALVE 531872-1 430 430
12 NOZZLE 1566237-6 8 98
4 PIG EYE 3/8" 902140-1 7 29
4 PIG EYE 1/2" 902140-2 5 20
4 PIG EYE 3/4" 902140-3 9 37
4 PLUG 1/8" 901924-2 0 1
4 PLUG 1/4" 901924-3 0 1
4 PLUG 3/8" 901924-4 0 1
4 PLUG 1/2" 901924-5 0 1
4 PLUG 3/4" 901924-6 1 3
4 PLUG 1" 901924-4 3 11
4 PLUG 1 1/4" 901924-8 5 18
2 VENT 903458-10 10 19
2 BEARING/HEAD PULLEY 1143 319 639
2 BEARING/L.V. TAKEUP 1018 588 1,175
12 4" X 30" ROLLER 1008 37 442
11 4" X 11" ROLLER 1007 22 244
5 ZIPPER BOOTS 1224 74 370
5 ZIPPER BOOTS 3424 69 345
5 ZIPPER BOOTS 5630 78 388
1 LOT HYDRAULIC FITTINGS 4,850 4,850
1 FILTER 2P4005 9 9
1 FILTER 8N2556 60 60
</TABLE>
<PAGE> 66
<TABLE>
<S> <C> <C> <C> <C>
4 FILTER 1R0719 5 19
6 FILTER 4P2839 15 88
2 FILTER 7W5313 37 74
4 FILTER 8N6309 59 237
10 FILTER 1R0718 5 52
4 FILTER 7J0670 7 27
2 FILTER P181050 9 19
2 FILTER P550534 3 6
4 FILTER P552020 7 28
2 FILTER 9M2341 2 5
50 RG-59 COAX 0 10
50 RG-8 COAX 1 71
10 CONNECTOR 88-18 2 19
10 CONNECTOR 88-2 2 18
5 CONNECTOR CPGD-555 2 12
2 3 15/16 SPROCKET 1053 139 277
2 SUPPORT SKID 1042 535 1,070
1 CLEVIS JACK LIFT 1038 525 525
2 1 1/4" X 4" POLY-BAR 1304 32 65
1 CLEVIS PROP ROLLER 1081 625 625
1 PIN PROP CLEVIS 1082 30 30
1 SPACER SKID CLEVIS 1021 15 15
2 18" FRAME TAKE-UP 1020 377 754
4 BEARING/HEAD/DRIVE PULLEY 1017 225 899
2 BEARING/TAIL PULLEY 1263 144 288
2 BEARING/WHEEL 1015 215 431
2 BEARING/L.V. DRIVE 1016 389 779
1 CONTACTOR DPCK3035AW 396 396
6 HEATER STRIP FH47 7 42
12 250 MCM BUTT CONNECTOR 2 20
12 250 MCM LUG 2 20
10 FUSE ATM10 4 35
10 FUSE ATM15 4 35
10 FUSE ATM30 4 35
5 3/4 FUSE KTK 4 18
30 #33 TAPE 3 82
20 #27 TAPE 7 139
30 HIGH VOLT TAPE 8 230
30 MHSA TAPE 1 26
20 SHEILDING TAPE 4 79
10 2520 TAPE 12 123
10 140 CHAIN 22 219
</TABLE>
<PAGE> 67
<TABLE>
<S> <C> <C> <C> <C>
4 140 MASTERLINKS 5 20
4 140 1/2 LINKS 12 48
1 2" BALL VALVE 20 20
2 1 1/2" BALL VALVE 13 27
2 1 1/4" BALL VALVE 11 21
50 1/8" WIRE ROPE 0 8
200 3/8" WIRE ROPE 0 48
1 REGULATOR 1145511 641 641
2 BULB 1M5898 10 20
4 BULB 7H2976 3 12
5 FILTER P553634 6 31
2 FILTER P556245 3 6
2 FILTER 612506 37 73
2 FILTER 1R0712 7 13
2 FILTER 612506 37 73
6 50W MIN. LAMP 37498-3 4 24
6 3/4" RIDGID STRAP H68 0 1
4 PLUG CAP 1510PW 11 45
4 CONNECTOR BODY 1610CW 16 65
6 3/4" GLAND A25-3/4 STR 9 54
6 3/4" GLAND A26-34 90 9 54
10 1/4" ROPE PACKING TS100014 1 6
10 3/8" ROPE PACKING TS100038 1 10
10 1/2" ROPE PACKING TS100012 1 13
4 PLUG (HEADLIGHT) A40 7 26
12 SPLIT BOLT K529 9 111
75 POWER CABLE 5KV25HD 1 102
250 14/3 CABLE 0 83
250 16/3 CABLE 0 55
50 3/4" CONDUIT HOSE 1 69
50 1 1/2" CONDUIT HOSE 2 108
50 2" CONDUIT HOSE 3 150
24 ELECTRO-KLEEN 6 134
4 20A CONNECTOR 2410-CW 24 96
4 20A PLUG CAP 2310PW 15 60
1 400W FLOOD LAMP 195 195
1 SLIP FILTER 19 19
2 400W LAMP 34415-0 22 45
4 FILTER KM150 39 156
4 FILTER KM60 65 259
1 AUX. SWITCH 458D13 114 114
1 100 AMP BREAKER 425 425
</TABLE>
<PAGE> 68
<TABLE>
<S> <C> <C> <C> <C>
1 800 AMP BREAKER 1,495 1,495
1 TRIP UNIT 2611D75G05 475 475
1 CONTACT AUX. J11 34 34
4 BURLE MONITOR TC-1914A 246 984
1 600V PLUNGER TYPE LIMITER 9007-AP221 54 54
1 RELAY A280-120 269 269
3 RELAY AA11P 23 68
1 RELAY 0AR2U110A 54 54
2 2 POSITION SELECTOR A779-3 64 128
1 400 AMP REVERSING SWITCH D845-5 1,558 1,558
2 TRANSFORMER TR15710 108 216
1 SW-LIMIT 548-11-01 18 18
1 300 AMP COUPLER PL30DFC67-A1EX 210 210
1 600 AMP COUPLER PL60DFC107-00EX 432 432
2 2.75" BRASS BUSHING A2427-002B 21 42
2 2.75" BRASS BUSHING A2428-002B 22 43
4 CLIP GROUND CONNECTOR A773-002 2 9
4 CLIP GROUND CONNECTOR A773-001 2 9
1 DUST COVER, 400 AMP C1326 99 99
1 DUST COVER C705-001 74 74
1 RECEPTACLE 400 AMP C1458-001 312 312
1 PLUG HOUSING C2361-2 491 491
3 INSULATOR PIN 609 58 173
3 INSULATOR PIN B610 58 173
3 INSULATOR PIN 610 58 173
3 INSULATOR PIN 611 58 173
1 400 AMP PACKING HOUSING B1301 52 52
6 RETAINING RING A858 0 3
6 RETAINING RING A649 1 3
3 FEMALE GROUND PIN B462-002 26 77
3 MALE GROUND PIN B463A 18 55
3 FEMALE PILOT PIN B614 14 43
3 MALE PILOT PIN B614 13 38
3 RETAINING PIN A3464 1 3
50 WIRE LOCK SEAL A3198 0 21
2 SPIR-O-LOX RETAINING RINGS RR-387-S 6 13
6 FEMALE POWER PIN B613-001 35 211
6 MALE POWER PIN B612-001 26 154
1 5000 WATT GENERATOR 3MK73 599 599
1 POLY CHAIN BELT 14M-1960-68 239 239
1 HTD BELT 3360-14M-115 417 417
--------------------------
$53,247
</TABLE>
<PAGE> 69
F. MISCELLANEOUS INVENTORY @ 7/31/97
<TABLE>
<CAPTION>
QUANTITY DESCRIPTION PART # UNIT COST TOTAL
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2,630 RG8 COAX 1001 $0.35 $921
17,400 COAX VIDEO RG-8 1002 0 2,175
373 COAX 5 CONDUCTOR 1003 1 421
4 CAMERA B/W 35MM 1005 376 1,504
6 LENS 8.5 CAMERA 1006 88 528
4 ROLLER 4"X29-3/4 1008 37 147
400 CLIP ROLLER 1011 2 672
4 BOX CAMERA 1012 535 2,140
11 LEN CAMERA BOX 1013 20 220
3 RING RETAINING LENS 1014 70 210
4 SPACER SKID CLEVIS 1021 15 60
4 KEEPER SKID CLEVIS PIN 1022 5 20
1 VALVE 2 SECTION 1024 308 308
1 HITCH ASSY. FEMALE 1025 880 880
1 PULLY WING 10"X57" 1027 544 544
2 PULLY 11"X69" WING 1029 845 1,690
1 CYLINDER PROP 8"X228" 1032 9,498 9,498
1 CYLINDER SKID 1033 1,918 1,918
1 CYLINDER PROP. 1034 6,311 6,311
2 PIN PROP. 1037 200 400
2 ROD END SKID CYLINDER 1039 1,595 3,190
10 SPACER BRASS 1040 62 620
7 BOX ROLLER N/S 1041 1,807 12,648
12 ROLLER EX. SHAFT 4"X33" 1048 37 447
8 ROLLER EX. SHAFT 4"X15-3/4" 1049 25 199
2 LINK OFFSET 140 1050 10 19
2 CONNECTING LINK 140 CHAIN 1051 4 9
10 6.50 X 10.50 TIRES WHEELS 1054 260 2,600
2 POWER UNIT 1056 6,126 12,253
2 PUSHER ASSY. 1057 509 1,018
1 FOOT VALVE 1061 294 294
1 HANDLES 1063 32 32
2 GUARD FOR OVER HEAD HEATERS 1064 68 135
</TABLE>
<PAGE> 70
<TABLE>
<S> <C> <C> <C> <C>
1 LG. DIAMOND BAR SPOOLING DEVICE 1066 1,250 1,250
2 SM. DIAMOND BAR SPOOLING DEVICE 1067 545 1,090
98 BELTING 28" 2 PLY 3/32 X 3/32 1068 15 1,507
13 GREASE VALVE 1070 14 180
4 TAKE-UP JACK 1071 60 240
3 POLY CHAIN BELT 1075 217 650
2 100 AMP VOLT BRAKER 1078 225 450
1 100 AMP VOLT BRAKER 1078 222 222
4 30 HP MOTOR 1079 3,348 13,391
2 CLEVIS PROP ROLLER 1081 625 1,250
1 DEUBLIN UNION 3" 1000 PSI 1083 425 425
1 DENISON MAIN HYD PUMP 1086 4,790 4,790
1 SPOOLING DEVICE SM. COMPLET 1087 1,495 1,495
5 ROTARY JOINT 1091 149 747
4 CAP ROLLER PROP ASSY. 1095 195 780
2 CAP ROLLER PROP ASSY. 1095 175 350
4 SPACER PROP. ROLLER 1096 40 160
2 SPACER PROP. ROLLER 1096 20 40
4 ROLLER 8" PROP. ASSY 1097 566 2,265
3 MONITOR BURLE 1105 246 738
2 PACKING KIT DEUBLIN UNION 1106 34 68
3 PLANTARY CASE ASSY. 1108 3,600 10,800
1 TRANSFER CASE ASSY. R.H. 1109 9,200 9,200
1 ADAPTOR PLANTARY PLT. 1110 630 630
2 ADAPTOR PLANTARY PLT. 1110 819 1,637
1,500 HOSE AIR 3" 1123 6 9,180
2 CAP PIN PROP ARM 1124 50 100
1 SOLONOID POWER UNIT CABLE REEL 1126 160 160
1 PUMP MAIN HYD.P8W 1128 2,730 2,730
1 POT GEAR-44 1129 16,630 16,630
1 POT GEAR-45 1130 16,630 16,630
3 COLLER 8" PROP. CYLINDER 1133 700 2,100
78 COAX CABLE END 1135 2 148
100 COAX CABLE END 1136 2 180
3 CONNECTOR RECPT. 250MCM 1138 627 1,880
20 COAX CABLE CONNECTOR 1139 2 46
9 CLEVIS SKID CYLINDER 1140 685 6,165
3 MOTOR 40 HP 324T 1770 RPM 1150 340 1,020
1 PUMP TYRONE LIFT SKID 1151 850 850
2 SHAFT TORQUE 1153 163 325
2 SHAFT TORQUE 1153 185 370
6 TIRE AND WHEEL ASSY. 1154 489 2,932
</TABLE>
<PAGE> 71
<TABLE>
<S> <C> <C> <C> <C>
4 FILTER PALL 3 MICRON 1159 130 520
1 CARTRIDGE RELIEF 1160 82 82
1 CARTRIDGE FIXED FLOW 1161 32 32
1 PUMP COMMERCIAL PIGGY BACK 1162 760 760
4 RELAY TIMING 1163 54 216
1 COUPLER LOVEJOY COMPLET 1164 42 42
1 BRACKET DRIVE DOG RETAINER 1167 95 95
1 MOTOR CABLE REEL 1169 314 314
2 PUMP HYD.JOY MINER 1170 416 832
1 PUSHER ROLLER ASSY. COMPLET 1171 4,775 4,775
1 PUSHER ROLLER ASSY. COMPLET 1171 4,775 4,775
1 PUSHER ROLLER ASSY. COMPLET 1171 4,775 4,775
1 MOTOR CROSS CONVEYOR 1772 910 910
10 PULLY MOTORIZED DRIVE 1177 7,083 70,826
4 CYLINDER BAT WING SIDE COVER 1178 239 955
4 BEARING PBE9201-7/16 1179 63 251
1 SPOOLING DEVICE LG. 1184 3,800 3,800
1 FILTER CROSS PUMP 1185 41 41
2 MOTOR CONVYOR JOY 1187 952 1,904
2 SHAFT MOTOR HWH 1189 713 1,426
4 CHAIN CONVEYOR HWH 1190 506 2,024
4 CYLINDER BAT WING HEAD COVER 1191 240 960
2 CLUTCH KIT REBUILD HWH 1232 1,535 3,070
1 FLANGE ASSY.INPUT 1233 855 855
1 PLATE PRUSSURE ASSY. 1234 340 340
2 Misc Hardware 1251 1 2
1 REVERSING MECHANISM ASSY 1255 975 975
2 ROLLER TAIL CONVEYOR HWH 1256 1,029 2,058
1 COMMERCIAL VALVE DVG35 1261 4,591 4,591
4 ROLLER PUSHER 10" 1272 1,256 5,024
1 PUSHER ASSY. 10" 1274 4,500 4,500
1 MONITOR 1275 246 246
11 GASKET CAMERA LENS 1279 5 55
29 SLEEVE BIT HWH 1285 51 1,467
1 SLEEVE BIT HWH 1285 51 51
30 BLOCK BIT W/ SLEEVE 1286 88 2,630
1 MOTOR HOSE REEL 1288 135 135
1 DRUMS HWH COMP. SET CUTTER 1289 25,937 25,937
38 CHAIN CONVEYOR JOY 1415 1290 186 7,066
6 LINK MASTER 1415 1291 32 189
6 LINK ROLLER 1415 1292 20 117
1 TRANSFORMER ISOLATION 3 PH, 1295 4,009 4,009
</TABLE>
<PAGE> 72
<TABLE>
<S> <C> <C> <C> <C>
1 BUSHING TAPER LOCK 4-7/16" 1296 328 328
1 BUSHING TAPER LOCK 3-15/16" 1297 328 328
2 PULLY MOTORIZED DRIVE 1303 1,155 2,310
2 TRACK BELT ASSY.58 PADS 1305 10,125 20,250
1 ROLLER TAIL RECON. 1306 378 378
4 KIT CONTROL RING FLANGE 1309 10 41
3 TERMINAL 1310 2 6
4 BOLT SUPER 1-1/4 X 7 X 4.5 1313 122 487
10 BOLT SUPER 1-1/4 X 7 X 4.5 1313 122 1,218
2 CONNECTOR PLUG 4/0 CABLE 1317 622 1,243
2 CONNECTOR RECPT.4/0 CABLE 1318 563 1,126
1 SHAFT CONVEYOR DRIVE HWH 1326 1,635 1,635
80 CHAIN FLIGHT SECTION HWH 1330 386 30,880
1 DRILL RIB 1337 33,197 33,197
6 CUP TIMKEN 1346 30 179
6 CONE TIMKEN 1347 53 318
3 SEAL CAT 1348 20 61
3 RING RETAINING 1349 9 27
4 SHIM 1359 18 72
12 SHIM 1360 10 120
12 SHIM 1361 10 120
2 PUMP P7 PIGGY BACK 1363 1,150 2,300
1 PUMP MOTOR RECON. 1365 643 643
1 TRACK ASSY. 50 PADS HWH 1368 8,735 8,735
1 PUMP P7W RECON 1371 2,462 2,462
1 VALVE DIRECTIONAL CONTROL 1373 1,334 1,334
4 ACTUATOR ROTARY 1375 957 3,827
3 CONE TIMKEN 1352 34 101
3 CUP TIMKEN 1353 20 61
3 CONE TIMKEN 1354 36 107
3 CUP TIMKEN 1355 18 55
6 CONE TIMKEN 1356 18 109
6 CUP TIMKEN 1357 10 61
3 SEAL CHICAGO RAWHIDE 1358 13 39
9 BEARING WHEEL 1015 215 1,937
1 PUSHER ROLLER ASSY.COMPLET 1171 4,980 4,980
2 CONNECTING LINK 140 CHAIN 1051 4 9
2 LINK OFFSET 140 1050 10 19
10 140 ROLLER CHAIN 1052 171 1,705
50 CLIP ROLLER DOUBLE W/OFFSET 1380 2 98
1 SPROCKETT 160 W/3 15/16 1383 168 168
1 CHAIN 160 1384 24 24
</TABLE>
<PAGE> 73
<TABLE>
<S> <C> <C> <C> <C>
4 LINK MASTER 160 1385 6 23
4 LINK OFFSET 160 1386 11 45
6 TRANSFORMER FOR CAR 1387 108 648
1 VALVE BANK JOY MINER 1186 1,015 1,015
3 PULLY DRUM 10"X57" 1030 611 1,834
1 10X57 ROLLER N/SHAFT 1390 415 415
2 PIN PROP. ARM 1125 170 340
1 TRANSFER CASE ASSY. 1107 3,777 3,777
6 COUPLER LOVEJOY COMPLET 1164 49 294
2 BEARING SKID END 1391 325 650
43 POLY BAR 1 1/4 X 4 X 48 1084 25 1,078
2 SPROCK 140B1315H 3 15/16 1053 139 277
20 140 ROLLER CHAIN 1052 20 391
4 CONNECTING LINK 140 CHAIN 1051 4 18
4 LINK OFFSET 140 1050 10 38
33 POLY BAR 2" X 4" X 60" 1085 49 1,611
41 POLY BAR 1-1/4"X4"X60" 1304 30 1,237
1 MOTOR 100HP. 1394 704 704
3 VALVE BOSCH FOR STACKER 1395 208 624
1 VALVE COMPENSATOR 1396 346 346
2 INSERT 600 MAG. COUPLER 1158 45 91
1 10X57 ROLLER N/SHAFT 1390 414 414
3 10X57 ROLLER N/SHAFT 1390 472 1,415
1 ROLLER TAIL 10X51 1400 218 218
6 PLANTARY CARRIER CASTING 1402 2,425 14,550
1 GRIPPER BELT 1181 625 625
2 PROP ROLLER SHAFTS 1404 400 800
4 ROLLER LIFT COLLUMN 1122 3,348 13,392
2 PULLY WING 10"X57" 1027 991 1,983
75 ROLLER 4"X10-15/16 1007 27 2,029
100 ROLLER 4"X29-3/4 1008 38 3,848
28 CPN-8 FOR RG-8 COAX 1405 3 81
2 PIN PROP CLEVIS 1082 75 150
6 AXLE ASSY. 1055 185 1,110
6 AXLE ASSY. 1055 185 1,110
28 PIN INDEX 1090 15 420
4 PIN SKID CLEVIS 1023 185 740
6 BEARING HEAD PULLY 1143 319 1,916
13 BEARING HEAD/DRIVE PULLY 1017 215 2,799
15 BEARING TAIL PULLY 1263 144 2,160
13 BEARING TAKE UP 1089 162 2,100
4 BEARING L.V. DRIVE 1016 351 1,404
3 BEARING TAKE UP L.V. 1018 588 1,763
4 FRAME 18" TAKE UP 1020 348 1,390
1 SENSOR SMART 1407 1,478 1,478
2 CLUTCH ASSY. COMPLET HWH 1332 4,350 8,700
6 LIGHT HEAD 12 VOLT 1131 145 870
--------------------------
$549,481
</TABLE>
<PAGE> 74
G. LAND, ETC.
<TABLE>
<CAPTION>
DESCRIPTION LOCATION DATE ACQUIRED
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LAND
Land surrounding MTI buildings Coalton, KY 11/02/95
All land located in Boyd, Greenup, Carter and Elliott Counties in Kentucky Various 11/02/95
(This land has been mined and reclaimed)
BUILDINGS
Mining Technologies Office Building Coalton, KY 11/02/95
Car Shop MT Car Shop 11/02/95
Fab Shop MT Fab Shop 11/02/95
Main Shop AEI Shop 11/02/95
Accounting Office 9431 US RT 60 11/02/95
Executive Office 1500 N. Big Run 11/02/95
Aircraft Hangar Wayne Co., WV 11/02/95
House Office - Mike Johnson's Office 1932 Carter Ave. 11/02/95
Route 23 Transfer Station Greenup Co., KY 11/02/95
Stacy Tract in Greenup County Greenup Co., KY 11/02/95
Newsome Tract in Greenup County Greenup Co., KY 11/02/95
Mays Tract in Greenup County Greenup Co., KY 11/02/95
Vine Center Condominium Unit No. 1907 Lexington, KY 11/02/95
FURNITURE, FIXTURES & OFFICE EQUIPMENT
Office furniture located at above buildings Various Various
DATA PROCESSING EQUIPMENT
Data processing equipment located at above buildings Various Various
</TABLE>
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF REGISTRANT
================================================================================
STATE OR OTHER JURISDICTION OF
EXACT NAME OF SUBSIDIARY INCORPORATION OR ORGANIZATION
- --------------------------------------------------------------------------------
Addington Mining, Inc. Kentucky
- --------------------------------------------------------------------------------
Tennessee Mining, Inc. Kentucky
- --------------------------------------------------------------------------------
Ikerd-Bandy Co., Inc. Kentucky
- --------------------------------------------------------------------------------
Bowie Resources, Limited Colorado
- --------------------------------------------------------------------------------
Mining Technologies, Inc. Kentucky
- --------------------------------------------------------------------------------
Leslie Resources, Inc. Kentucky
- --------------------------------------------------------------------------------
Leslie Resources Management, Inc. Kentucky
- --------------------------------------------------------------------------------
Pro-Land, Inc. d/b/a Kem Coal Company Kentucky
- --------------------------------------------------------------------------------
Aceco, Inc. Kentucky
- --------------------------------------------------------------------------------
Mountain-Clay, Inc. d/b/a Mountain Clay, Kentucky
Inc.
- --------------------------------------------------------------------------------
Highland Coal, Inc. Kentucky
- --------------------------------------------------------------------------------
River Coal Company, Inc. Kentucky
================================================================================
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made a part of this
registration statement on Form S-4 for $200 million of 10% Series B Senior
Notes due 2007.
/s/ Arthur Andersen
Louisville, Kentucky
January 26, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made part of this
registration statement on Form S-4 for $200 million of 10% Series B Senior
Notes due 2007.
Faesy, Schmitt & Company, PSC
Frankfort, Kentucky
January 26, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF MARSHALL MILLER & ASSOCIATES
We hereby consent to (i) the reference to us under the caption "Experts,"
(ii) the use of our reserve report of July 1997, as amended, with respect to the
demonstrated coal reserves of Leslie Resources, Inc., and Leslie Resources
Management, Inc., and its subsidiaries, and (iii) the use of our reserve report
of September 1997, as amended, with respect to the demonstrated coal reserves of
AEI Holding Company, Inc. (the "Company"), and its subsidiaries, all of which
are included in the prospectus of the Company for the registration of
US$200,000,000 of the Company's Series B Senior Notes due 2007, which prospectus
is part of the registration statement to which this consent is an exhibit.
We further wish to advise that Marshall Miller & Associates was not
employed on a contingent basis and that at the time of preparation of our
report, as well as at present, neither Marshall Miller & Associates nor any of
its employees had or now has a substantial interest in the Company or any of its
subsidiaries.
Respectfully submitted,
Marshall Miller & Associates
By: /s/ Marshall S. Miller
-------------------------------
Title: President
-----------------------------
January 26, 1998
<PAGE> 1
EXHIBIT 25.1
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
------------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(State of Incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Terence Rawlins, Assistant Vice President
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
AEI HOLDING COMPANY, INC.
(Exact name of obligor as specified in its charter)
Delaware 61-1315723
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 NORTH BIG RUN ROAD
ASHLAND, KY 41102
(Address of principal executive office) (Zip code)
------------
(Title of Indenture Securities)
AEI HOLDING COMPANY, INC.*
10% SENIOR NOTES DUE 2007, SERIES B
- ------------------------------------------------------------------------------
<PAGE> 2
*TABLE OF ADDITIONAL REGISTRANT GUARANTORS
<TABLE>
<CAPTION>
STATE OR OTHER ADDRESS, INCLUDING ZIP CODE
EXACT NAME OF JURISDICTION OF AND TELEPHONE NUMBER OF
REGISTRANT INCORPORATION IRS EMPLOYER REGISTRANT GUARANTOR'S
GUARANTOR OR ORGANIZATION IDENTIFICATION NUMBER PRINCIPAL EXECUTIVE OFFICES
- ------------- --------------- --------------------- ---------------------------
<S> <C> <C> <C>
Addington Mining, Kentucky 61-1315722 1500 North Big Run Road,
Inc. Ashland, Kentucky 41102
(606) 928-3433
Tennessee Mining, Kentucky 62-1640672 1500 North Big Run Road,
Inc. Ashland, Kentucky 41102
(606) 928-3433
Ikerd-Bandy Co., Kentucky 61-0505276 1500 North Big Run Road,
Inc. Ashland, Kentucky 41102
(606) 928-3433
Mining Kentucky 1500 North Big Run Road,
Technologies, Inc. Ashland, Kentucky 41102
(606) 928-3433
Leslie Resources, Kentucky 61-1013125 1500 North Big Run Road,
Inc. Ashland, Kentucky 41102
(606) 928-3433
Leslie Resources Kentucky 61-1292388 1500 North Big Run Road,
Management, Inc. Ashland, Kentucky 41102
(606) 928-3433
Pro-Land, Inc. d/b/a Kentucky 61-0727363 1500 North Big Run Road,
Kem Coal Company Ashland, Kentucky 41102
(606) 928-3433
Aceco, Inc. Kentucky 61-0855680 1500 North Big Run Road,
Ashland, Kentucky 41102
(606) 928-3433
Mountain-Clay, Inc. Kentucky 61-0621350 1500 North Big Run Road,
d/b/a Mountain Ashland, Kentucky 41102
Clay, Inc. (606) 928-3433
Highland Coal, Inc. Kentucky 61-0923993 1500 North Big Run Road,
Ashland, Kentucky 41102
(606) 928-3433
River Coal Kentucky 61-0567214 1500 North Big Run Road,
Company, Inc. Ashland, Kentucky 41102
(606) 928-3433
</TABLE>
2
<PAGE> 3
Item 1. General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust
powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
The obligor is not an affiliate of the trustee.
Item 3. Voting securities of the trustee.
Furnish the following information as to each class of voting
securities of the trustee:
As of January 14, 1998
Col. A Col. B
Title of class Amount Outstanding
-------------- ------------------
Not Applicable
3
<PAGE> 4
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, furnish the following information:
(a) Title of the securities outstanding under each such
other indenture
Not Applicable
(b) A brief statement of the facts relied upon as a basis
for the claim that no conflicting interest within the
meaning of Section 310(b)(1) of the Act arises as a
result of the trusteeship under any such other
indenture, including a statement as to how the
indenture securities will rank as compared with the
securities issued under such other indenture.
Not Applicable
Item 5. Interlocking directorates and similar relationships with the
obligor or underwriters.
If the trustee or any of the directors or executive officers
of the trustee is a director, officer, partner, employee,
appointee, or representative of the obligor or of any
underwriter for the obligor, identify each such person having
any such connection and state the nature of each such
connection.
Not Applicable
Item 6. Voting securities of the trustee owned by the obligor or its
officials.
Furnish the following information as to the voting securities
of the trustee owned beneficially by the obligor and each
director, partner, and executive officer of the obligor:
As of January 14, 1998
Col. D
Col. C Percent of voting
Col. A Col. B Amount owned securities represented by
Name of Owner Title of class beneficially amount given in Col. C
- ------------- -------------- ------------ -------------------------
Not Applicable
Item 7. Voting securities of the trustee owned by underwriters or
their officials.
4
<PAGE> 5
Furnish the following information as to the voting securities
of the trustee owned beneficially by each underwriter for the
obligor and each director, partner and executive officer of
each such underwriter:
As of January 14, 1998
Col. D
Col. C Percent of voting
Col. A Col. B Amount owned securities represented by
Name of Owner Title of class beneficially amount given in Col. C
- ------------- -------------- ------------ -------------------------
Not Applicable
Item 8. Securities of the obligor owned or held by the trustee
Furnish the following information as to securities of the
obligor owned beneficially or held as collateral security for
obligations in default by the trustee:
As of January 14, 1998
Col. C Col. D
Amount owned Percent of voting
beneficially or held as securities
Col. A Col. B collateral security for represented by
Name of Owner Title of class obligations in default amount given in Col. C
- ------------- -------------- ----------------------- ----------------------
Not Applicable
Item 9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral
security for obligations in default any securities of an
underwriter for the obligor, furnish the following information
as to each class of securities of such underwriter any of
which are so owned or held by the trustee:
5
<PAGE> 6
As of January 14, 1998
Col. C Col. D
Amount owned Percent of voting
beneficially or held as securities
Col. A Col. B collateral security for represented by
Name of Owner Title of class obligations in default amount given in Col. C
- ------------- -------------- ----------------------- ----------------------
Not Applicable
Item 10. Ownership or holdings by the trustee of voting securities
of certain affiliates or securityholders of the obligor.
If the trustee owns beneficially or holds as collateral
security for obligations in default voting securities of a
person who, to the knowledge of the trustee (1) owns 10
percent or more of the voting securities of the obligor or (2)
is an affiliate, other than a subsidiary, of the obligor,
furnish the following information as to the voting securities
of such person:
As of January 14, 1998
Col. C Col. D
Amount owned Percent of voting
beneficially or held as securities
Col. A Col. B collateral security for represented by
Name of Owner Title of class obligations in default amount given in Col. C
- ------------- -------------- ----------------------- ----------------------
Not Applicable
Item 11. Ownership or holdings by the trustee of any securities of a
person owning 50 percent or more of the voting securities of
the obligor.
If the trustee owns beneficially or holds as collateral
security security for obligations in default any securities of
a person who, to the knowledge of the trustee, owns 50 percent
or more of the voting securities of the obligor, furnish the
following information as to each class of securities of such
any of which are so owned or held by the trustee:
6
<PAGE> 7
As of January 14, 1998
Col. A Col. B Col. C
Nature of Indebtedness Amount Outstanding Date Due
- ---------------------- ------------------ --------
Not Applicable
Item 12. Indebtedness of the Obligor to the Trustee.
Except as noted in the instructions, if the obligor is
indebted to the trustee, furnish the following information:
As of January 14, 1998
Col. C Col. D
Amount owned Percent of voting
beneficially or held as securities
Col. A Col. B collateral security for represented by
Name of Owner Title of class obligations in default amount given in Col. C
- ------------- -------------- ----------------------- ----------------------
Not Applicable
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with
respect to the securities under this indenture.
Explain the nature of any such default.
Not Applicable
(b) If the trustee is a trustee under another indenture
under which any other securities, or certificates of
interest or participation in any other securities, of
the obligor are outstanding, or is trustee for more
than one outstanding series of securities under the
indenture, state whether there has been a default
under any such indenture or series, identify the
indenture or series affected, and explain the nature
of any such default.
Not Applicable
7
<PAGE> 8
Item 14. Affiliations with the Underwriters
If any underwriter is an affiliate of the trustee, describe
each such affiliation.
Not Applicable
Item 15. Foreign Trustees.
Identify the order or rule pursuant to which the foreign
trustee is authorized to act as sole trustee under indentures
qualified or to be qualified under the Act.
Not Applicable
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of
eligibility.
*T1(a). A copy of the Charter of IBJ Schroder Bank & Trust
Company as amended to date. (See Exhibit 1A to Form
T-1, Securities and Exchange Commission File No.
22-18460).
*T1(b). A copy of the Certificate of Authority of the Trustee
to Commence Business (Included in Exhibit I above).
*T1(c). A copy of the Authorization of the Trustee, as
amended to date (See Exhibit 4 to Form T-1,
Securities and Exchange Commission File No.
22-19146).
*T1(d). A copy of the existing By-Laws of the Trustee, as
amended to date (See Exhibit 4 to Form T-1,
Securities and Exchange Commission File No. 22-
19146).
T1(e). A copy of each Indenture referred to in Item 4, if
the Obligor is in default. Not Applicable.
T1(f). The consent of the United States institutional
trustee required by Section 321(b) of the Act.
T1(g). A copy of the latest report of condition of the
trustee published pursuant to law or the requirements
of its supervising or examining authority.
* The Exhibits thus designated are incorporated herein by reference as
exhibits hereto. Following the description of such Exhibits is a
reference to the copy of the Exhibit heretofore
8
<PAGE> 9
filed with the Securities and Exchange Commission, to which there have
been no amendments or changes.
NOTE
In answering any item in this Statement of Eligibility which relates to matters
peculiarly within the knowledge of the obligor and its directors or officers,
the trustee has relied upon information furnished to it by the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of
all facts on which to base responsive answers to Item 2, the answer to said Item
are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an amendment to
this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2 and
16 of this form since to the best knowledge of the trustee as indicated in Item
13, the obligor is not in default under any indenture under which the applicant
is trustee.
9
<PAGE> 10
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility & qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 14th day of January, 1998.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Terence Rawlins
-----------------------------------
Terence Rawlins
Assistant Vice President
<PAGE> 11
EXHIBIT T1(f)
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the issue by AEI Holding Company, Inc. of
its 10% Senior Notes due 2007, Series B, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Terence Rawlins
-----------------------------------
Terence Rawlins
Assistant Vice President
Dated: As of January 14, 1998
<PAGE> 12
EXHIBIT T1(g)
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
--------------
<S> <C>
ASSETS
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin ..........................................................$ 41,358
Interest-bearing balances......................................................................................$ 314,171
Securities: Held-to-maturity securities.........................................................................$ 196,749
Available-for-sale securities.......................................................................$ 63,064
Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries and in
IBFs:
Federal Funds sold and Securities purchased under agreements to resell.........................................$ 10,151
Loans and lease financing receivables:
Loans and leases, net of unearned income.....................................................$ 1,920,916
LESS: Allowance for loan and lease losses....................................................$ 59,498
LESS: Allocated transfer risk reserve........................................................$ -0-
Loans and leases, net of unearned income, allowance, and reserve...............................................$ 1,861,418
Trading assets held in trading accounts............................................................................$ 452
Premises and fixed assets (including capitalized leases)...........................................................$ 3,381
Other real estate owned............................................................................................$ 202
Investments in unconsolidated subsidiaries and associated companies................................................$ -0-
Customers' liability to this bank on acceptances outstanding.......................................................$ 122
Intangible assets..................................................................................................$ -0-
Other assets.......................................................................................................$ 65,280
TOTAL ASSETS.......................................................................................................$ 2,556,348
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
<S> <C>
LIABILITIES
Deposits:
In domestic offices............................................................................................$ 787,592
Noninterest-bearing .....................................................................$ 239,126
Interest-bearing ........................................................................$ 548,466
In foreign offices, Edge and Agreement subsidiaries, and IBFs..................................................$ 1,125,802
Noninterest-bearing .....................................................................$ 18,827
Interest-bearing ........................................................................$ 1,106,975
Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in
IBFs:
Federal Funds purchased and Securities sold under agreements to repurchase.....................................$ 225,000
Demand notes issued to the U.S. Treasury...........................................................................$ 50,000
Trading Liabilities................................................................................................$ 61
Other borrowed money:
a) With a remaining maturity of one year or less...............................................................$ 57,291
b) With a remaining maturity of more than one year.............................................................$ 1,763
c) With a remaining maturity of more than three years..........................................................$ 2,242
Bank's liability on acceptances executed and outstanding...........................................................$ 122
Subordinated notes and debentures..................................................................................$ -0-
Other liabilities..................................................................................................$ 72,909
TOTAL LIABILITIES..................................................................................................$ 2,322,782
Limited-life preferred stock and related surplus...................................................................$ -0-
EQUITY CAPITAL
Perpetual preferred stock and related surplus......................................................................$ -0-
Common stock.......................................................................................................$ 29,649
Surplus (exclude all surplus related to preferred stock)...........................................................$ 217,008
Undivided profits and capital reserves.............................................................................$ (13,211)
Net unrealized gains (losses) on available-for-sale securities.....................................................$ 120
Cumulative foreign currency translation adjustments................................................................$ -0-
TOTAL EQUITY CAPITAL...............................................................................................$ 233,566
TOTAL LIABILITIES AND EQUITY CAPITAL...............................................................................$ 2,556,348
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001053325
<NAME>AEI HOLDING COMPANY, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 SEP-30-1997
<CASH> 834 453 1,116
<SECURITIES> 0 0 0
<RECEIVABLES> 12,862 18,941 30,228
<ALLOWANCES> 0 0 0
<INVENTORY> 11,286 14,336 20,700
<CURRENT-ASSETS> 28,482 38,638 57,361
<PP&E> 64,370 76,654 95,002
<DEPRECIATION> (2,208) (10,284) (16,033)
<TOTAL-ASSETS> 92,259 106,930 141,473
<CURRENT-LIABILITIES> 34,067 50,189 44,710
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (4,731) 325 (178)
<TOTAL-LIABILITY-AND-EQUITY> 92,259 106,930 141,473
<SALES> 28,211 106,644 116,544
<TOTAL-REVENUES> 31,694 123,200 124,081
<CGS> 24,301 94,882 103,333
<TOTAL-COSTS> 28,975 113,071 117,536
<OTHER-EXPENSES> 21 0 729
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,043 5,527 5,265
<INCOME-PRETAX> 1,748 5,063 694
<INCOME-TAX> 0 0 1,398
<INCOME-CONTINUING> 1,748 5,063 (704)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,748 5,063 (704)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001053853
<NAME>ADDINGTON MINING, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 SEP-30-1997
<CASH> 834 453 1,116
<SECURITIES> 0 0 0
<RECEIVABLES> 12,862 18,941 30,228
<ALLOWANCES> 0 0 0
<INVENTORY> 11,286 14,336 20,700
<CURRENT-ASSETS> 28,482 38,638 57,361
<PP&E> 64,370 76,654 95,002
<DEPRECIATION> (2,208) (10,284) (16,033)
<TOTAL-ASSETS> 92,259 106,930 141,473
<CURRENT-LIABILITIES> 34,067 50,189 44,710
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (4,731) 325 (178)
<TOTAL-LIABILITY-AND-EQUITY> 92,259 106,930 141,473
<SALES> 28,211 106,644 116,544
<TOTAL-REVENUES> 31,694 123,200 124,081
<CGS> 24,301 94,882 103,333
<TOTAL-COSTS> 28,975 113,071 117,536
<OTHER-EXPENSES> 21 0 729
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,043 5,527 5,265
<INCOME-PRETAX> 1,748 5,063 694
<INCOME-TAX> 0 0 1,398
<INCOME-CONTINUING> 1,748 5,063 (704)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,748 5,063 (704)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001053852
<NAME>TENNESSEE MINING, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 SEP-30-1997
<CASH> 834 453 1,116
<SECURITIES> 0 0 0
<RECEIVABLES> 12,862 18,941 30,228
<ALLOWANCES> 0 0 0
<INVENTORY> 11,286 14,336 20,700
<CURRENT-ASSETS> 28,482 38,638 57,361
<PP&E> 64,370 76,654 95,002
<DEPRECIATION> (2,208) (10,284) (16,033)
<TOTAL-ASSETS> 92,259 106,930 141,473
<CURRENT-LIABILITIES> 34,067 50,189 44,710
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (4,731) 325 (178)
<TOTAL-LIABILITY-AND-EQUITY> 92,259 106,930 141,473
<SALES> 28,211 106,644 116,544
<TOTAL-REVENUES> 31,694 123,200 124,081
<CGS> 24,301 94,882 103,333
<TOTAL-COSTS> 28,975 113,071 117,536
<OTHER-EXPENSES> 21 0 729
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,043 5,527 5,265
<INCOME-PRETAX> 1,748 5,063 694
<INCOME-TAX> 0 0 1,398
<INCOME-CONTINUING> 1,748 5,063 (704)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,748 5,063 (704)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001053854
<NAME>IKERD-BANDY CO., INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 SEP-30-1997
<CASH> 834 453 1,116
<SECURITIES> 0 0 0
<RECEIVABLES> 12,862 18,941 30,228
<ALLOWANCES> 0 0 0
<INVENTORY> 11,286 14,336 20,700
<CURRENT-ASSETS> 28,482 38,638 57,361
<PP&E> 64,370 76,654 95,002
<DEPRECIATION> (2,208) (10,284) (16,033)
<TOTAL-ASSETS> 92,259 106,930 141,473
<CURRENT-LIABILITIES> 34,067 50,189 44,710
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (4,731) 325 (178)
<TOTAL-LIABILITY-AND-EQUITY> 92,259 106,930 141,473
<SALES> 28,211 106,644 116,544
<TOTAL-REVENUES> 31,694 123,200 124,081
<CGS> 24,301 94,882 103,333
<TOTAL-COSTS> 28,975 113,071 117,536
<OTHER-EXPENSES> 21 0 729
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,043 5,527 5,265
<INCOME-PRETAX> 1,748 5,063 694
<INCOME-TAX> 0 0 1,398
<INCOME-CONTINUING> 1,748 5,063 (704)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,748 5,063 (704)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001053850
<NAME>MINING TECHNOLOGIES, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 SEP-30-1997
<CASH> 834 453 1,116
<SECURITIES> 0 0 0
<RECEIVABLES> 12,862 18,941 30,228
<ALLOWANCES> 0 0 0
<INVENTORY> 11,286 14,336 20,700
<CURRENT-ASSETS> 28,482 38,638 57,361
<PP&E> 64,370 76,654 95,002
<DEPRECIATION> (2,208) (10,284) (16,033)
<TOTAL-ASSETS> 92,259 106,930 141,473
<CURRENT-LIABILITIES> 34,067 50,189 44,710
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (4,731) 325 (178)
<TOTAL-LIABILITY-AND-EQUITY> 92,259 106,930 141,473
<SALES> 28,211 106,644 116,544
<TOTAL-REVENUES> 31,694 123,200 124,081
<CGS> 24,301 94,882 103,333
<TOTAL-COSTS> 28,975 113,071 117,536
<OTHER-EXPENSES> 21 0 729
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,043 5,527 5,265
<INCOME-PRETAX> 1,748 5,063 694
<INCOME-TAX> 0 0 1,398
<INCOME-CONTINUING> 1,748 5,063 (704)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,748 5,063 (704)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001053908
<NAME>LESLIE RESOURCES, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 SEP-30-1997
<CASH> 834 453 1,116
<SECURITIES> 0 0 0
<RECEIVABLES> 12,862 18,941 30,228
<ALLOWANCES> 0 0 0
<INVENTORY> 11,286 14,336 20,700
<CURRENT-ASSETS> 28,482 38,638 57,361
<PP&E> 64,370 76,654 95,002
<DEPRECIATION> (2,208) (10,284) (16,033)
<TOTAL-ASSETS> 92,259 106,930 141,473
<CURRENT-LIABILITIES> 34,067 50,189 44,710
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (4,731) 325 (178)
<TOTAL-LIABILITY-AND-EQUITY> 92,259 106,930 141,473
<SALES> 28,211 106,644 116,544
<TOTAL-REVENUES> 31,694 123,200 124,081
<CGS> 24,301 94,882 103,333
<TOTAL-COSTS> 28,975 113,071 117,536
<OTHER-EXPENSES> 21 0 729
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,043 5,527 5,265
<INCOME-PRETAX> 1,748 5,063 694
<INCOME-TAX> 0 0 1,398
<INCOME-CONTINUING> 1,748 5,063 (704)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,748 5,063 (704)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001053835
<NAME>LESLIE RESOURCES MANAGEMENT, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 SEP-30-1997
<CASH> 834 453 1,116
<SECURITIES> 0 0 0
<RECEIVABLES> 12,862 18,941 30,228
<ALLOWANCES> 0 0 0
<INVENTORY> 11,286 14,336 20,700
<CURRENT-ASSETS> 28,482 38,638 57,361
<PP&E> 64,370 76,654 95,002
<DEPRECIATION> (2,208) (10,284) (16,033)
<TOTAL-ASSETS> 92,259 106,930 141,473
<CURRENT-LIABILITIES> 34,067 50,189 44,710
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (4,731) 325 (178)
<TOTAL-LIABILITY-AND-EQUITY> 92,259 106,930 141,473
<SALES> 28,211 106,644 116,544
<TOTAL-REVENUES> 31,694 123,200 124,081
<CGS> 24,301 94,882 103,333
<TOTAL-COSTS> 28,975 113,071 117,536
<OTHER-EXPENSES> 21 0 729
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,043 5,527 5,265
<INCOME-PRETAX> 1,748 5,063 694
<INCOME-TAX> 0 0 1,398
<INCOME-CONTINUING> 1,748 5,063 (704)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,748 5,063 (704)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001053832
<NAME>PRO-LAND, INC. d/b/a KEM COAL COMPANY
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 SEP-30-1997
<CASH> 834 453 1,116
<SECURITIES> 0 0 0
<RECEIVABLES> 12,862 18,941 30,228
<ALLOWANCES> 0 0 0
<INVENTORY> 11,286 14,336 20,700
<CURRENT-ASSETS> 28,482 38,638 57,361
<PP&E> 64,370 76,654 95,002
<DEPRECIATION> (2,208) (10,284) (16,033)
<TOTAL-ASSETS> 92,259 106,930 141,473
<CURRENT-LIABILITIES> 34,067 50,189 44,710
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (4,731) 325 (178)
<TOTAL-LIABILITY-AND-EQUITY> 92,259 106,930 141,473
<SALES> 28,211 106,644 116,544
<TOTAL-REVENUES> 31,694 123,200 124,081
<CGS> 24,301 94,882 103,333
<TOTAL-COSTS> 28,975 113,071 117,536
<OTHER-EXPENSES> 21 0 729
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,043 5,527 5,265
<INCOME-PRETAX> 1,748 5,063 694
<INCOME-TAX> 0 0 1,398
<INCOME-CONTINUING> 1,748 5,063 (704)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,748 5,063 (704)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001053829
<NAME>ACECO, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 SEP-30-1997
<CASH> 834 453 1,116
<SECURITIES> 0 0 0
<RECEIVABLES> 12,862 18,941 30,228
<ALLOWANCES> 0 0 0
<INVENTORY> 11,286 14,336 20,700
<CURRENT-ASSETS> 28,482 38,638 57,361
<PP&E> 64,370 76,654 95,002
<DEPRECIATION> (2,208) (10,284) (16,033)
<TOTAL-ASSETS> 92,259 106,930 141,473
<CURRENT-LIABILITIES> 34,067 50,189 44,710
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (4,731) 325 (178)
<TOTAL-LIABILITY-AND-EQUITY> 92,259 106,930 141,473
<SALES> 28,211 106,644 116,544
<TOTAL-REVENUES> 31,694 123,200 124,081
<CGS> 24,301 94,882 103,333
<TOTAL-COSTS> 28,975 113,071 117,536
<OTHER-EXPENSES> 21 0 729
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,043 5,527 5,265
<INCOME-PRETAX> 1,748 5,063 694
<INCOME-TAX> 0 0 1,398
<INCOME-CONTINUING> 1,748 5,063 (704)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,748 5,063 (704)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001053828
<NAME>MOUNTAIN-CLAY, INC. d/b/a/ MOUNTAIN CLAY, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 SEP-30-1997
<CASH> 834 453 1,116
<SECURITIES> 0 0 0
<RECEIVABLES> 12,862 18,941 30,228
<ALLOWANCES> 0 0 0
<INVENTORY> 11,286 14,336 20,700
<CURRENT-ASSETS> 28,482 38,638 57,361
<PP&E> 64,370 76,654 95,002
<DEPRECIATION> (2,208) (10,284) (16,033)
<TOTAL-ASSETS> 92,259 106,930 141,473
<CURRENT-LIABILITIES> 34,067 50,189 44,710
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (4,731) 325 (178)
<TOTAL-LIABILITY-AND-EQUITY> 92,259 106,930 141,473
<SALES> 28,211 106,644 116,544
<TOTAL-REVENUES> 31,694 123,200 124,081
<CGS> 24,301 94,882 103,333
<TOTAL-COSTS> 28,975 113,071 117,536
<OTHER-EXPENSES> 21 0 729
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,043 5,527 5,265
<INCOME-PRETAX> 1,748 5,063 694
<INCOME-TAX> 0 0 1,398
<INCOME-CONTINUING> 1,748 5,063 (704)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,748 5,063 (704)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001053827
<NAME>HIGHLAND COAL, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 SEP-30-1997
<CASH> 834 453 1,116
<SECURITIES> 0 0 0
<RECEIVABLES> 12,862 18,941 30,228
<ALLOWANCES> 0 0 0
<INVENTORY> 11,286 14,336 20,700
<CURRENT-ASSETS> 28,482 38,638 57,361
<PP&E> 64,370 76,654 95,002
<DEPRECIATION> (2,208) (10,284) (16,033)
<TOTAL-ASSETS> 92,259 106,930 141,473
<CURRENT-LIABILITIES> 34,067 50,189 44,710
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (4,731) 325 (178)
<TOTAL-LIABILITY-AND-EQUITY> 92,259 106,930 141,473
<SALES> 28,211 106,644 116,544
<TOTAL-REVENUES> 31,694 123,200 124,081
<CGS> 24,301 94,882 103,333
<TOTAL-COSTS> 28,975 113,071 117,536
<OTHER-EXPENSES> 21 0 729
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,043 5,527 5,265
<INCOME-PRETAX> 1,748 5,063 694
<INCOME-TAX> 0 0 1,398
<INCOME-CONTINUING> 1,748 5,063 (704)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,748 5,063 (704)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK>0001053882
<NAME>RIVER COAL COMPANY, INC.
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1995 DEC-31-1996 SEP-30-1997
<CASH> 834 453 1,116
<SECURITIES> 0 0 0
<RECEIVABLES> 12,862 18,941 30,228
<ALLOWANCES> 0 0 0
<INVENTORY> 11,286 14,336 20,700
<CURRENT-ASSETS> 28,482 38,638 57,361
<PP&E> 64,370 76,654 95,002
<DEPRECIATION> (2,208) (10,284) (16,033)
<TOTAL-ASSETS> 92,259 106,930 141,473
<CURRENT-LIABILITIES> 34,067 50,189 44,710
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> (4,731) 325 (178)
<TOTAL-LIABILITY-AND-EQUITY> 92,259 106,930 141,473
<SALES> 28,211 106,644 116,544
<TOTAL-REVENUES> 31,694 123,200 124,081
<CGS> 24,301 94,882 103,333
<TOTAL-COSTS> 28,975 113,071 117,536
<OTHER-EXPENSES> 21 0 729
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 1,043 5,527 5,265
<INCOME-PRETAX> 1,748 5,063 694
<INCOME-TAX> 0 0 1,398
<INCOME-CONTINUING> 1,748 5,063 (704)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,748 5,063 (704)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
AEI HOLDING COMPANY, INC.
OFFER TO EXCHANGE $200,000,000 OF ITS
10% SERIES B SENIOR NOTES, DUE 2007
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933,
FOR $200,000,000 OF ITS OUTSTANDING
10% SERIES A SENIOR NOTES, DUE 2007
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED.
The Exchange Agent for the Exchange Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<C> <C> <C>
By Mail: By Hand/Overnight Courier: By Facsimile:
IBJ Schroder IBJ Schroder IBJ Schroder
Bank & Trust Company Bank & Trust Company Bank & Trust Company
P.O. Box 84 One State Street Attention:
Bowling Green Station New York, NY 10004 Reorganization Operations
New York, NY 10274-0084 Attention: Facsimile Number:
Attention: Securities Processing Window (212) 858-2611
Reorganization Operations Subcellar One (SC-1) Confirmation Number:
(212) 858-2103
</TABLE>
For Further Information Call:
(212) 858-2103
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE
INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY
BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
CAPITALIZED TERMS USED BUT NOT DEFINED HEREIN SHALL HAVE THE SAME MEANING
GIVEN THEM IN THE PROSPECTUS (AS DEFINED BELOW).
The undersigned acknowledges receipt of the Prospectus, dated
, 1998 (as the same may be amended or supplemented from time to
time, the "Prospectus"), of AEI Holding Company, Inc., a Delaware corporation
(the "Company"), and this Letter of Transmittal, which together constitute the
Company's offer (the "Exchange Offer") to exchange an aggregate of up to
$200,000,000 principal amount of 10% Series B Senior Notes, due 2007 (the
"Exchange Notes") of the Company which have been registered under the Securities
Act of 1933 (the "Securities Act") for an identical face amount of the issued
and outstanding 10% Series A Senior Notes, due 2007 (the "Old Notes") of the
Company. The terms of the Exchange Notes are identical in all material respects
(including principal amount, interest rate and maturity)
<PAGE> 2
to the terms of the Old Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes will have been registered under
the Securities Act and, therefore, will not bear legends restricting the
transfer thereof.
Unless the context requires otherwise, the term "holder" for purposes of
this Letter of Transmittal means any person in whose name Old Notes are
registered or any other person who has obtained a properly completed bond power
and any other required documents from the registered holder.
The Exchange Offer is being made pursuant to the Registration Rights
Agreement dated as of November 12, 1997 (the "Registration Rights Agreement"),
and all Old Notes validly tendered will be accepted for exchange. Any Old Notes
not tendered will remain outstanding and continue to accrue interest, but
generally will not retain any rights under the Registration Rights Agreement.
Holders electing to have Old Notes exchanged pursuant to the Exchange Offer will
be required to surrender such Old Notes, together with this Letter of
Transmittal, to the Exchange Agent at the address specified herein prior to 5:00
p.m., New York City time, on the Expiration Date. Holders will be entitled to
withdraw their election at any time prior to 5:00 p.m., New York City time, on
the Expiration Date by sending to the Exchange Agent at the address specified
herein a facsimile transmission or letter setting forth the name of such holder,
the principal amount of Old Notes delivered for exchange and a statement that
such holder is withdrawing the election to have such Old Notes exchanged.
This Letter of Transmittal is to be used either if certificates
representing Old Notes (the "Certificates") are to be forwarded herewith or if
delivery of Old Notes is to be made by book-entry transfer to an account
maintained by the Exchange Agent at The Depository Trust Company ("DTC"),
pursuant to the procedures set forth in "The Exchange Offer -- Procedures for
Tendering Old Notes" in the Prospectus.
Holders of Old Notes whose Certificates are not immediately available, or
who cannot deliver their Certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedures for book-entry transfer on a timely basis must tender their Old Notes
according to the guaranteed delivery procedures set forth in "The Exchange Offer
- -- Procedures for Tendering Old Notes" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
THE PROSPECTUS, THIS LETTER OF TRANSMITTAL AND THE INSTRUCTIONS CONTAINED
HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
The undersigned has completed the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
ALL TENDERING HOLDERS COMPLETE THIS BOX
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
- --------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) AGGREGATE PRINCIPAL
OF REGISTERED HOLDER(S) CERTIFICATE AMOUNT REPRESENTED PRINCIPAL AMOUNT
(PLEASE FILL IN) NUMBER(S) BY OLD NOTES TENDERED*
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
TOTAL
- --------------------------------------------------------------------------------------------------------------
* Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount
represented by the Old Notes. See Instruction 2. Old Notes may be tendered in whole or in part in integral
multiples of $1,000, provided that, if any Old Notes are tendered for exchange in part, the untendered
principal amount thereof must be an integral multiple of $1,000.
</TABLE>
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution:
-----------------------------------------------
DTC Account Number:
----------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):
------------------------------------------------
Window Ticket Number (if any):
-----------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------------
Name of Institution which Guaranteed Delivery:
-------------------------------
IF GUARANTEED DELIVERY IS TO BE MADE BY BOOK-ENTRY TRANSFER:
Name of Tendering Institution:
-----------------------------------------------
DTC Account Number:
----------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------
<PAGE> 4
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
AND NON-EXCHANGED OLD NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT
NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES AND WISH TO
RECEIVE ADDITIONAL COPIES OF THE PROSPECTUS AND ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
-----------------------------------------------------------------------
Address:
--------------------------------------------------------------------
Number of Copies:
-----------------------------------------------------------
<PAGE> 5
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above described aggregate
principal amount of Old Notes in exchange for a like aggregate principal amount
of Exchange Notes.
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby exchanges, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Old Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer) with respect to the tendered Old Notes, with full power and
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described in
the Prospectus, to: (i) deliver Certificates for Old Notes to the Company
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company, upon receipt by the Exchange Agent, as the
undersigned's agent, of the Exchange Notes to be issued in exchange for such Old
Notes; (ii) present Certificates for such Old Notes for transfer, and to
transfer the Old Notes on the books of the Company; and (iii) receive for the
account of the Company all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms and
conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD
NOTES TENDERED HEREBY AND TO ACQUIRE EXCHANGE NOTES UPON THE EXCHANGE OF SUCH
TENDERED OLD NOTES, AND THAT, WHEN THE OLD NOTES ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD
NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY,
AND THE UNDERSIGNED WILL COMPLETE ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS
AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Old Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The Old
Notes, along with Certificate number(s), that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer -- Certain Conditions to the
Exchange Offer." The undersigned recognizes that, as a result of these
conditions (which may be waived, in whole or in part, by the Company), as more
particularly set forth in the Prospectus, the Company may not be required to
exchange any of the Old Notes tendered hereby. If any tendered Old Notes are not
exchanged pursuant to the Exchange Offer for any reason, or if Certificates are
submitted for more Old Notes than are tendered or accepted for exchange,
Certificates for such non-exchanged or non-tendered Old Notes will be returned
(or, in the case of Old Notes tendered by book-entry transfer, such Old Notes
will be credited to an account maintained at DTC), without expense to the
tendering holder, as soon as practicable following the expiration or termination
of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any one
of the procedures described in "The Exchange Offer -- Procedures for Tendering
Old Notes" in the Prospectus and in the instructions
<PAGE> 6
attached hereto will, upon the Company's acceptance for exchange of such
tendered Old Notes, constitute a binding agreement among the undersigned and the
Company upon the terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated herein under the section entitled "Special
Issuance Instructions" below, the undersigned hereby directs that: (i) the
Exchange Notes be issued in the name(s) of the undersigned or, in the case of a
book-entry transfer of Old Notes, that such Exchange Notes be credited to the
account indicated above maintained at DTC; and (ii) if applicable, substitute
Certificates representing Old Notes not exchanged or not accepted for exchange
be issued to the undersigned or, in the case of a book-entry transfer of Old
Notes, be credited to the account indicated above maintained at DTC. Similarly,
unless otherwise indicated under "Special Delivery Instructions," the
undersigned hereby directs that the Exchange Notes or any Old Notes tendered
herewith but not accepted be delivered to the undersigned at the address shown
below the undersigned's signature or, in the case of a book-entry transfer of
Old Notes, that such Exchange Notes or Old Notes be credited to the account
indicated above maintained at DTC.
BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE
UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (A) NEITHER THE UNDERSIGNED NOR
ANY PERSON RECEIVING EXCHANGE NOTES IS AN AFFILIATE OF THE COMPANY WITHIN THE
MEANING OF RULE 405 OF THE SECURITIES ACT (AN "AFFILIATE"), (B) THE EXCHANGE
NOTES TO BE RECEIVED PURSUANT TO THE EXCHANGE OFFER ARE BEING ACQUIRED IN THE
ORDINARY COURSE OF BUSINESS OF THE PERSON RECEIVING SUCH EXCHANGE NOTES, WHETHER
OR NOT SUCH PERSON IS THE UNDERSIGNED, (C) NEITHER THE UNDERSIGNED NOR ANY SUCH
OTHER PERSON HAS ANY ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE
IN A DISTRIBUTION, WITHIN THE MEANING OF THE SECURITIES ACT, (A "DISTRIBUTION")
OF EXCHANGE NOTES TO BE RECEIVED IN THE EXCHANGE OFFER, AND (D) IF THE
UNDERSIGNED IS NOT A BROKER-DEALER OR IS A BROKER-DEALER BUT WILL NOT RECEIVE
EXCHANGE NOTES FOR ITS OWN ACCOUNT IN EXCHANGE FOR OLD NOTES, NEITHER THE
UNDERSIGNED NOR ANY SUCH OTHER PERSON IS ENGAGED IN, OR INTENDS TO ENGAGE IN, A
DISTRIBUTION OF SUCH EXCHANGE NOTES. BY TENDERING OLD NOTES PURSUANT TO THE
EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A HOLDER OF OLD NOTES
WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN
INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION FINANCE
OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT (X) SUCH OLD
NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR (Y) SUCH OLD
NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF
MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL DELIVER THE
PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) IN CONNECTION WITH ANY
RESALE OF SUCH EXCHANGE NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY
DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT
IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT).
THE UNDERSIGNED ACKNOWLEDGES THAT THIS EXCHANGE OFFER IS BEING MADE BY THE
COMPANY BASED UPON THE COMPANY'S UNDERSTANDING OF AN INTERPRETATION BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), AS SET FORTH IN NO-ACTION
LETTERS ISSUED TO THIRD PARTIES, THAT THE EXCHANGE NOTES ISSUED IN EXCHANGE FOR
OLD NOTES TO HOLDERS THEREOF (OTHER THAN TO HOLDERS THAT ARE AFFILIATES OF THE
COMPANY) MAY BE OFFERED FOR RESALE, RESOLD AND OTHERWISE TRANSFERRED WITHOUT
COMPLIANCE WITH THE REGISTRATION AND PROSPECTUS DELIVERY PROVISIONS OF THE
SECURITIES ACT, PROVIDED THAT (A) SUCH HOLDERS ARE NOT AFFILIATES OF THE
COMPANY, (B) SUCH EXCHANGE NOTES ARE ACQUIRED IN THE ORDINARY COURSE OF
<PAGE> 7
SUCH HOLDERS' BUSINESS, AND (C) SUCH HOLDERS ARE NOT ENGAGED IN, AND DO NOT
INTEND TO ENGAGE IN, A DISTRIBUTION OF SUCH EXCHANGE NOTES AND HAVE NO
ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN THE DISTRIBUTION
OF SUCH EXCHANGE NOTES. HOWEVER, THE COMMISSION HAS NOT CONSIDERED THE EXCHANGE
OFFER IN THE CONTEXT OF A NO-ACTION LETTER AND THERE CAN BE NO ASSURANCE THAT
THE COMMISSION WOULD MAKE A SIMILAR DETERMINATION WITH RESPECT TO THE EXCHANGE
OFFER AS IN OTHER CIRCUMSTANCES. IF A HOLDER OF OLD NOTES IS AN AFFILIATE OF THE
COMPANY, OR IS ENGAGED IN OR INTENDS TO ENGAGE IN A DISTRIBUTION OF THE EXCHANGE
NOTES OR HAS ANY ARRANGEMENT OR UNDERSTANDING WITH RESPECT TO THE DISTRIBUTION
OF THE EXCHANGE NOTES TO BE ACQUIRED PURSUANT TO THE EXCHANGE OFFER, SUCH HOLDER
COULD NOT RELY ON THE APPLICABLE INTERPRETATIONS OF THE COMMISSION AND MUST
COMPLY WITH THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE
SECURITIES ACT IN CONNECTION WITH ANY SECONDARY RESALE TRANSACTION.
THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION
RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME
TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS DEFINED BELOW) IN
CONNECTION WITH RESALES OF EXCHANGE NOTES RECEIVED IN EXCHANGE FOR OLD NOTES,
WHERE SUCH OLD NOTES WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES, FOR A
PERIOD ENDING ONE YEAR FROM THE DATE ON WHICH THE EXCHANGE OFFER IS CONSUMMATED
OR, IF EARLIER, WHEN ALL SUCH EXCHANGE NOTES HAVE BEEN DISPOSED OF BY SUCH
PARTICIPATING BROKER-DEALER. IN THAT REGARD, EACH BROKER-DEALER WHO RECEIVES
EXCHANGE NOTES IN THE EXCHANGE OFFER IN EXCHANGE FOR OLD NOTES ACQUIRED FOR ITS
OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER"), BY TENDERING SUCH OLD NOTES AND EXECUTING THIS
LETTER OF TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE COMPANY OF
THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES ANY
STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN ANY
MATERIAL RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT
NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE
THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE
REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE
SALE OF EXCHANGE NOTES PURSUANT TO THE PROSPECTUS UNTIL (A) THE COMPANY HAS
AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION
AND HAS FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE
PARTICIPATING BROKER-DEALER OR (B) THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF
THE EXCHANGE NOTES MAY BE RESUMED, AS THE CASE MAY BE. IF THE COMPANY GIVES SUCH
NOTICE TO SUSPEND THE SALE OF THE EXCHANGE NOTES, IT SHALL EXTEND THE ONE-YEAR
PERIOD REFERRED TO ABOVE DURING WHICH PARTICIPATING BROKER-DEALERS ARE ENTITLED
TO USE THE PROSPECTUS IN CONNECTION WITH THE RESALE OF EXCHANGE NOTES BY THE
NUMBER OF DAYS DURING THE PERIOD FROM AND INCLUDING THE DATE OF THE GIVING OF
SUCH NOTICE TO AND INCLUDING THE DATE WHEN PARTICIPATING BROKER-DEALERS SHALL
HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS NECESSARY TO
PERMIT RESALES OF THE EXCHANGE NOTES OR TO AND INCLUDING THE DATE ON WHICH THE
COMPANY HAS GIVEN NOTICE THAT THE SALE OF EXCHANGE NOTES MAY BE RESUMED, AS THE
CASE MAY BE.
<PAGE> 8
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accumulated interest on such Old Notes for any period from and after the
last date to which interest has been paid or duly provided for (the "Interest
Payment Date") on such Old Notes prior to the original issue date of the
Exchange Notes or, if no such interest has been paid or duly provided for, will
not receive any accumulated interest on such Old Notes, and the undersigned
waives the right to receive any interest on such Old Notes accumulated, from and
after such Interest Payment Date or, if no such interest has been paid or duly
provided for, from and after November 12, 1997.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES
TENDERED HEREWITH" ABOVE AND BY SIGNING THIS LETTER, WILL BE DEEMED TO HAVE
TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX. HOLDER(S) SIGN HERE (SEE
INSTRUCTIONS 2, 5 AND 6) (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 9) (NOTE:
SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2):
This Letter of Transmittal must be signed by a registered holder(s) exactly
as its name(s) appear(s) on the Certificate(s) for the Old Notes hereby tendered
or on a security position listing, or by any person(s) authorized to become the
registered holder(s) by endorsements and documents transmitted herewith
(including such opinions of counsel, certifications and other information as may
be required by the Company or the Exchange Agent for the Old Notes to comply
with the restrictions on transfer applicable to the Old Notes). If signature is
by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Date:
- ------------------------------------, 1998
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Tax Identification or Social Security Number(s):
- --------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S) (IF REQUIRED) (SEE INSTRUCTIONS 2 AND 5):
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
<PAGE> 9
Name:
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Date:
- ------------------------------------, 1998
Name of Firm:
- --------------------------------------------------------------------------------
Capacity (full title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------------
Tax Identification or Social Security Number(s):
- --------------------------------------------------------------------------------
<PAGE> 10
SPECIAL ISSUANCE INSTRUCTIONS: (SEE INSTRUCTIONS 1, 5 AND 6):
To be completed ONLY if Old Notes that are not tendered or Exchange Notes
are to be issued in the name of someone other than the registered holder(s) of
the Old Notes whose name(s) appear(s) above.
Issue
[ ] Old Notes not tendered to:
[ ] Exchange Notes, to:
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------
Tax Identification or Social Security Number(s):
- ------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5 AND 6):
To be completed ONLY if Old Notes that are not tendered or Exchange Notes
are to be sent to someone other than the registered holder(s) of the Old Notes
whose name(s) appear(s) above, or such registered holder(s) at an address other
than that shown above.
Mail
[ ] Old Notes not tendered to:
[ ] Exchange Notes, to:
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
- --------------------------------------------------------------------------
Tax Identification or Social Security Number(s):
- ------------------------------------------------------------
<PAGE> 11
TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS (SEE INSTRUCTION 9)
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY, AS PAYING AGENT
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
PART 1 -- PLEASE PROVIDE YOUR TIN ON THE LINE AT ----------------------------
SUBSTITUTE RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Social Security Number
FORM W-9 OR
----------------------------
Employer Identification Number
-----------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE PART 2 -- CERTIFICATION -- Under penalties of PART 3 --
perjury, I certify that: AWAITING TIN [ ]
(1) The number shown on this form is my correct
taxpayer identification number (or I am
waiting for a number to be issued to me);
(2) I am not subject to backup withholding either
because (i) I am exempt from backup
withholding, (ii) I have not been notified by
the Internal Revenue Service ("IRS") that I
am subject to backup withholding as a result
of a failure to report all interest or
dividends, or (iii) the IRS has notified me
that I am no longer subject to backup
withholding; and
(3) any other information provided on this form
is true and correct.
-----------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in Part 2 above if
you have been notified by the IRS that you are subject to backup withholding
PAYER'S REQUEST FOR because of underreporting interest or dividends on your tax return and you
TAXPAYER IDENTIFICATION have not been notified by the IRS that you are no longer subject to backup
NUMBER (TIN) AND withholding.
CERTIFICATION
Signature __________ Date __________, 1998
Name ______________________________
(Please Print)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO
THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9"
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9.
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to me,
and either (i) I have mailed or delivered an application to receive a taxpayer identification number to
the appropriate Internal Revenue Service Center or Social Security Administration Office or (ii) I
intend to mail or deliver an application in the near future. I understand that if I do not provide a
taxpayer identification number by the time of payment, 31% of all payments made to me on account of the
Exchange Notes shall be retained until I provide a taxpayer identification number to the Exchange Agent
and that, if I do not provide my taxpayer identification number within 60 days, such retained amounts
shall be remitted to the Internal Revenue Service as backup withholding and 31% of all reportable
payments made to me thereafter will be withheld and remitted to the Internal Revenue Service until I
provide a taxpayer identification number.
------------------------------------------------------------------- ------------------------------, 1998
Signature Date
Name
---------------------------------------------------------------
(Please Print)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth in "The Exchange
Offer -- Procedures for Tendering Old Notes" in the Prospectus. Certificates, or
timely book-entry confirmation of a book-entry transfer of such Old Notes into
the Exchange Agent's account at DTC, as well as this Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at its address set forth
herein on or prior to 5:00 p.m., New York City time, on the Expiration Date. The
term "book-entry confirmation" means a timely written confirmation from DTC of
book-entry transfer of Old Notes into the Exchange Agent's account at DTC. Old
Notes may be tendered in whole or in part in integral multiples of $1,000,
provided that, if any Old Notes are tendered for exchange in part, the
untendered principal amount thereof must be an integral multiple of $1,000.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent on or prior
to 5:00 p.m., New York City time, on the Expiration Date, or (iii) who cannot
complete the procedures for delivery by book-entry transfer on a timely basis,
may tender their Old Notes by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in
"The Exchange Offer -- Procedures for Tendering Old Notes" in the Prospectus.
Pursuant to such procedures: (a) such tender must be made by or through an
Eligible Institution (as defined below); (b) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made available
by the Company, must be received by the Exchange Agent on or prior to 5:00 p.m.,
New York City time, on the Expiration Date; and (c) the Certificates (or a
book-entry confirmation) representing all tendered Old Notes, in proper form for
transfer, together with this Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees and
any other documents required by this Letter of Transmittal, must be received by
the Exchange Agent within three business days after the Expiration Date, all as
provided in "The Exchange Offer -- Procedures for Tendering Old Notes" in the
Prospectus.
The Notice of Guaranteed Delivery (the "Notice") may be delivered by hand
or transmitted by facsimile or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution in the form set forth in such Notice. For
Old Notes to be properly tendered pursuant to the guaranteed delivery procedure,
the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to
5:00 p.m., New York City time, on the Expiration Date. As used herein and in the
Prospectus, "Eligible Institution" means a firm or other entity identified in
Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution,"
including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer,
municipal securities broker or dealer or government securities broker or dealer;
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association. THE METHOD OF DELIVERY OF OLD
NOTES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND SOLE RISK OF THE TENDERING HOLDER AND THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY
MAIL, OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
<PAGE> 13
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) This Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any participant
in DTC whose name appears on a security position listing as the owner of
the Old Notes) of Old Notes tendered herewith, unless such holder(s) has
completed either the section entitled "Special Issuance Instructions" or
the section entitled "Special Delivery Instructions" above; or
(ii) Such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes Tendered Herewith" is inadequate, the Certificate
number(s) and/or the principal amount of Old Notes and any other required
information should be listed on a separate signed schedule which is attached to
this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be
accepted only in integral multiples of $1,000, provided that if any Old Notes
are tendered for exchange in part, the untendered principal amount thereof must
be an integral multiple of $1,000. If less than all the Old Notes evidenced by
any Certificate submitted are to be tendered, fill in the principal amount of
Old Notes which are to be tendered in the column entitled "Principal Amount
Tendered." In such case, new Certificate(s) for the remainder of the Old Notes
that were evidenced by the old Certificate(s) will be sent only to the holder of
the Old Notes, as soon as practicable after the Expiration Date, unless the
appropriate boxes on this Letter of Transmittal are completed. All Old Notes
represented by Certificates delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. In
order for a withdrawal to be effective on or prior to that time, a written or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth above on or prior to 5:00
p.m., New York City time, on the Expiration Date. Any such notice of withdrawal
must: (i) specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor"); (ii) identify the Old Notes to be withdrawn
(including the Certificate number(s) and principal amount of such Old Notes);
(iii) contain a statement that such holder is withdrawing its election to have
such Old Notes exchanged; (iv) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes in the name of the person
withdrawing the tender; and (v) specify the name in which any such Old Notes are
to be registered, if different from that of the Depositor. If Old Notes have
been tendered pursuant to the procedures for book-entry transfer set forth in
"The Exchange Offer -- Procedures for Tendering Old Notes," the notice of
withdrawal must specify the name and number of the account at DTC to be credited
with the withdrawal of Old Notes. Withdrawals of tenders of Old Notes may not be
rescinded. Old Notes properly withdrawn will not be deemed validly tendered for
purposes of the Exchange Offer, but may be retendered at any subsequent time on
or prior to 5:00 p.m., New York City time, on the Expiration Date by following
any of the procedures described in the Prospectus under "The Exchange
Offer -- Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such notices of withdrawal will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
The Company, any affiliates or assigns of the Company, the Exchange Agent, or
any other person shall not be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification. Any Old Notes which have been tendered but which are
not accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer.
<PAGE> 14
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
Notes tendered hereby, the signature(s) must correspond exactly with the name(s)
as written on the face of the Certificate(s) without alteration, enlargement or
any change whatsoever. If any of the Old Notes tendered hereby are owned of
record by two or more joint owners, all such owners must sign this Letter of
Transmittal. If any tendered Old Notes are registered in different name(s) on
several Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates. If this Letter of Transmittal or any Certificates
or bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing and must
submit proper evidence satisfactory to the Company, in its sole discretion, of
each such person's authority to so act.
When this Letter of Transmittal is signed by the registered holder(s) of
the Old Notes listed and transmitted hereby, no endorsement(s) of Certificate(s)
or separate bond power(s) are required, unless Old Notes not tendered or
Exchange Notes are to be issued in the name of a person other than the
registered holder(s). Signature(s) on such Certificate(s) or bond power(s) must
be guaranteed by an Eligible Institution.
If the Old Notes not tendered or the Exchange Notes are to be issued in the
name of a person other than, or delivered to an address other than that of, the
registered holder(s) appearing on the note register for the Old Notes, the
signature in this Letter of Transmittal must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Old Notes listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
the Company or the Exchange Agent may require in accordance with the
restrictions on transfer applicable to the Old Notes. Signatures on such
Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Old Notes not tendered
or Exchange Notes are to be issued in the name of a person other than the
registered holder(s), or if Exchange Notes are to be sent to someone other than
the registered holder(s) or to an address other than the address shown above for
the registered holder(s), the appropriate boxes on this Letter of Transmittal
should be completed. Certificates for Old Notes not exchanged will be returned
by mail or, if tendered by book-entry transfer, by crediting the account
indicated above maintained at DTC, unless the appropriate boxes on this Letter
of Transmittal are completed. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance of which, or exchange for, may, in the view of
counsel to the Company, be unlawful. The Company also reserves the absolute
right, subject to applicable law, to waive any of the conditions of the Exchange
Offer set forth in the Prospectus under "The Exchange Offer -- Certain
Conditions to the Exchange Offer," or any conditions or irregularity in any
tender of Old Notes of any particular holder whether or not similar conditions
or irregularities are waived in the case of other holders. The Company's
interpretation of the terms and conditions of the Exchange Offer (including this
Letter of Transmittal and the instructions hereto) will be final and binding. No
tender of Old Notes will be deemed to have been validly made until all
irregularities with respect to such tender have been cured or waived. The
Company, any affiliates or assigns of the Company, the Exchange Agent, or any
other person shall not be under any duty to give notification of any
irregularities in tenders or incur any liability for failure to give such
notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at its address and
telephone number set forth on the front of this Letter of Transmittal.
Additional copies of the Prospectus, the Notice of Guaranteed
<PAGE> 15
Delivery and the Letter of Transmittal may be obtained from the Exchange Agent
or from your broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Old Notes are accepted for exchange is required
to provide the Exchange Agent with such holder's correct taxpayer identification
number ("TIN") on the Substitute Form W-9 above. If the Exchange Agent is not
provided with the correct TIN, the Internal Revenue Service (the "IRS") may
subject the holder or other payee to a $50 penalty. In addition, payments to
such holders or other payees with respect to Old Notes exchanged pursuant to the
Exchange Offer may be subject to 31% backup withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number above in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60-day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered holder of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the Old Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 above, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding. By completing the Substitute Form
W-9, the tendering holder certifies that the TIN provided is correct (or that
such holder is awaiting a TIN), and that (i) the holder has not been notified by
the Internal Revenue Service that such holder is subject to backup withholding
as a result of a failure to report all interest or dividends, or (ii) the
Internal Revenue Service has notified the holder that such holder is no longer
subject to backup withholding. The Substitute Form W-9 must be signed, even if
the holder is exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with its obligation regarding backup withholding.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
11. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution and delivery of this Letter of Transmittal, shall waive any right to
receive notice of the acceptance of their Old Notes for exchange.
<PAGE> 16
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes has been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Certificate(s) have been followed.
13. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, Exchange Notes are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the Old
Notes tendered, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes in connection with the Exchange Offer, then the amount of
any such transfer tax (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
<PAGE> 1
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ANY AND ALL OUTSTANDING
10% SERIES A SENIOR NOTES DUE 2007
IN EXCHANGE FOR
10% SERIES B SENIOR NOTES DUE 2007
OF
AEI HOLDING COMPANY, INC.
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for 10% Series A Senior Notes, Due 2007 of AEI Holding Company,
Inc. (the "Old Notes") are not immediately available, (ii) Old Notes, the Letter
of Transmittal and all other required documents cannot be delivered to IBJ
Schroder Bank & Trust Company (the "Exchange Agent") on or prior to the
Expiration Date (as defined in the Prospectus referred to below), or (iii) the
procedures for delivery by book-entry transfer cannot be completed on a timely
basis. This Notice of Guaranteed Delivery may be delivered by hand, overnight
courier or mail, or transmitted by facsimile transmission, to the Exchange Agent
on or prior to the Expiration Date. See "The Exchange Offer -- Procedures for
Tendering Old Notes" in the Prospectus. In addition, in order to utilize the
guaranteed delivery procedure to tender Old Notes pursuant to the Exchange
Offer, a completed, signed and dated Letter of Transmittal relating to the Old
Notes (or facsimile thereof) must also be received by the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date.
Capitalized terms used but not defined herein have the meanings given
them in the Prospectus.
The Exchange Agent for the Exchange Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Hand/Overnight Courier: By Facsimile:
IBJ Schroder IBJ Schroder IBJ Schroder
Bank & Trust Company Bank & Trust Company Bank & Trust Company
P.O. Box 84 One State Street Attention:
Bowling Green Station New York, NY 10004 Reorganization Operations
New York, NY 10274-0084 Attention: Facsimile Number:
Attention: Securities Processing Window (212) 858-2611
Reorganization Operations Subcellar One (SC-1) Confirmation Number:
212 858-2103
</TABLE>
For Further Information Call:
(212) 858-2103
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" (AS DEFINED IN THE PROSPECTUS) UNDER THE
INSTRUCTION THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE
SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
LADIES AND GENTLEMEN:
The undersigned hereby tenders to AEI Holding Company, Inc., a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated ___________, 1998 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (the "Letter of Transmittal" and, together with the Prospectus, the
"Exchange Offer"), receipt of which is hereby acknowledged, the aggregate
principal amount of Old Notes set forth below pursuant to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer -- Procedures for Tendering Old Notes." The undersigned understands that
tenders of Old Notes will be accepted only in integral multiples of $1,000.
- --------------------------------------------------------------------------------
Aggregate Principal
Amount Tendered: $
------------------
Name(s) of Registered Holder(s):
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
Address(es):
-----------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
Certificate Number(s) if available):
-----------------------
- ------------------------------------------------------------
Total Principal Amount
represented by Old Notes
Certificate(s): $
--------------------
If Old Notes will be tendered by book-entry transfer,
provide the following information:
DTC Account Number:
-------------------
Date: , 1998
---------------------------------------------
- --------------------------------------------------------------------------------
All authority herein conferred or agreed to be
conferred in this Notice of Guaranteed Delivery
shall survive the death, incapacity or
dissolution of the undersigned and any
obligation of the undersigned hereunder shall
be binding upon the heirs, executors,
administrators, personal representatives,
trustees in bankruptcy, legal representatives,
successors and assigns of the undersigned.
PLEASE SIGN HERE:
- ----------------------------------------------------------
- ----------------------------------------------------------
(Signature(s) of Registered Holder(s)
or Authorized Signatory)
Date: , 1998
---------------------------------------------
Date: , 1998
---------------------------------------------
Area Code and
Telephone Number:
----------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Must be signed by the registered holder(s) of the Old Notes exactly as their
name(s) appear(s) on certificate(s) for the Old Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by an attorney-in-fact, executor, administrator, trustee,
guardian, officer of a corporation or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES).
Name(s):
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
----------------------------------------------------------------------
Address(es):
-------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
2
<PAGE> 3
- --------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion program
within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as an "eligible guarantor institution," including
(as such terms are defined therein): (i) a bank; (ii) a broker, dealer,
municipal securities broker, municipal securities dealer, government securities
broker or government securities dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association recognized program (each of the foregoing being referred to as an
"Eligible Institution"), hereby (a) represents that each holder of Old Notes on
whose behalf this tender is being made "own(s)" the Old Notes covered hereby
within the meaning of Rule 14e-4 of the Exchange Act, (b) represents that such
tender of Old Notes complies with such Rule 14e-4, and (c) guarantees to deliver
to the Exchange Agent, at one of its addresses set forth above, either the Old
Notes tendered hereby in proper form for transfer, or confirmation of the
book-entry transfer of such Old Notes to the Exchange Agent's account at The
Depository Trust Company, pursuant to the procedures for book-entry transfer set
forth in the Prospectus, in either case together with one or more properly
completed and duly executed Letter(s) of Transmittal (or facsimile thereof) and
any other required documents within three business days after the date of
execution of this Notice of Guaranteed Delivery.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER(S) OF TRANSMITTAL
(OR FACSIMILE THEREOF) AND THE OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT
WITHIN THE TIME PERIOD SET FORTH ABOVE AND THAT FAILURE TO DO SO COULD RESULT IN
A FINANCIAL LOSS TO THE UNDERSIGNED.
- -------------------------------- ---------------------------------------
Name of Firm Authorized Signature
Name:
- -------------------------------- ---------------------------------------
Address (Please Type or Print)
Title:
- -------------------------------- ---------------------------------------
Zip Code
Date: , 1998
- -------------------------------- ---------------------------------
Area Code and Telephone Number
- --------------------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS NOTICE OF
GUARANTEED DELIVERY. ACTUAL SURRENDER OF OLD NOTES MUST BE MADE PURSUANT TO,
AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
3
<PAGE> 1
Exhibit 99.3
AEI HOLDING COMPANY, INC.
OFFER TO EXCHANGE ITS 10% SERIES B SENIOR NOTES, DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING
10% SERIES A SENIOR NOTES, DUE 2007
PURSUANT TO THE PROSPECTUS
DATED ___________, 1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON ___________, 1998, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
AEI Holding Company, Inc., a Delaware corporation (the "Company"), is
offering, upon the terms and subject to the conditions set forth in the
Prospectus dated ___________, 1998 (the "Prospectus") and the accompanying
Letter of Transmittal (the "Letter of Transmittal" and, together with the
Prospectus, the "Exchange Offer"), to exchange its 10% Series B Senior Notes,
due 2007 (the "Exchange Notes") for a like principal amount of its outstanding
10% Series A Senior Notes, due 2007 (the "Old Notes", and together with the
Exchange Notes, the "Senior Notes"). As set forth in the Prospectus, the terms
of the Exchange Notes are identical in all material respects to the Old Notes,
except that the Exchange Notes have been registered under the Securities Act of
1933, as amended, and therefore will not be subject to certain restrictions on
their transfer. Old Notes may be tendered in whole or in part in integral
multiples of $1,000.
THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS, SEE "THE
EXCHANGE OFFER -- CERTAIN CONDITIONS TO THE EXCHANGE OFFER" IN THE
PROSPECTUS.
Enclosed herewith for your information and forwarding to your clients
are copies of the following documents:
1. The Prospectus, dated ___________, 1998;
2. The Letter of Transmittal for your use and for the information of
your clients (facsimile copies of the Letter of Transmittal may be used to
tender Old Notes);
3. A form letter which may be sent to your clients for whose accounts
you hold Old Notes registered in your name or in the name of your nominee, with
space providing for obtaining such clients' instructions with regard to the
Exchange Offer;
4. A Notice of Guaranteed Delivery; and
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
<PAGE> 2
YOUR PROMPT ACTION IS REQUESTED. PLEASE NOTE THE EXCHANGE OFFER WILL
EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ___________, 1998 (THE "EXPIRATION
DATE"), UNLESS EXTENDED BY THE COMPANY. PLEASE FURNISH COPIES OF THE ENCLOSED
MATERIALS TO THOSE OF YOUR CLIENTS FOR WHOM YOU HOLD OLD NOTES REGISTERED IN
YOUR NAME OR IN THE NAME OF YOUR NOMINEE AS QUICKLY AS POSSIBLE. THE OLD NOTES
TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE, IN ACCORDANCE WITH THE
INSTRUCTIONS SET FORTH IN THE LETTER OF TRANSMITTAL.
In all cases, exchanges of Old Notes accepted for exchange pursuant to
the Exchange Offer will be made only after timely receipt by IBJ Schroder Bank &
Trust Company (the "Exchange Agent") of (a) certificates representing such Old
Notes, or a book-entry confirmation (as defined in the Prospectus), as the case
may be, (b) the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, and (c) any other required documents, all in accordance with
the instructions set forth in the Letter of Transmittal and Prospectus.
Holders who wish to tender their Old Notes and (i) whose Old Notes are
not immediately available; (ii) who cannot deliver their Old Notes, the Letter
of Transmittal and any other documents required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration Date; or (iii) who cannot complete
the procedure for book-entry transfer on a timely basis must tender their Old
Notes according to the guaranteed delivery procedures set forth under the
caption "The Exchange Offer --Procedures for Tendering Old Notes" in the
Prospectus and execute and deliver the attached Notice of Guaranteed Delivery.
The Exchange Offer is not being made to, nor will tenders be accepted
from or on behalf of, holders of Old Notes residing in any jurisdiction in which
the making of the Exchange Offer or acceptance thereof would not be in
compliance with the laws of such jurisdiction.
The Company will not make any payments to brokers, dealers or other
persons for soliciting acceptances of the Exchange Offer. The Company will,
however, upon request, reimburse you for customary clerical and mailing expenses
incurred by you in forwarding any of the enclosed materials to your clients. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Old Notes to it, except as otherwise provided in the Letter of Transmittal.
Questions and requests for assistance with respect to the Exchange
Offer of for copies of the Prospectus and Letter of Transmittal may be directed
to the Exchange Agent at its address set forth in the Prospectus or at (212)
858-2103.
Very truly yours,
AEI HOLDING COMPANY, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS AN AGENT OF THE COMPANY OR ANY AFFILIATE THEREOF OR THE
EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR
USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE EXCHANGE OFFER
OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE> 1
Exhibit 99.4
AEI HOLDING COMPANY, INC.
OFFER TO EXCHANGE ITS
10% SERIES B SENIOR NOTES, DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
10% SERIES A SENIOR NOTES, DUE 2007
PURSUANT TO THE PROSPECTUS
DATED ___________, 1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON ___________, 1998, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration are a Prospectus dated ___________,
1998 (the "Prospectus") and a Letter of Transmittal (the "Letter of
Transmittal", and together with the Prospectus, the "Exchange Offer") relating
to the offer by AEI Holding Company, Inc. (the "Issuer") to exchange its 10%
Series B Senior Notes, due 2007 (the "Exchange Notes") for a like principal
amount of its outstanding 10% Series A Senior Notes, due 2007 (the "Old Notes",
and together with the Exchange Notes, the "Senior Notes"). As set forth in the
Prospectus, the terms of the Exchange Notes are identical in all material
respects to the Old Notes, except that the Exchange Notes have been registered
under the Securities Act of 1933, as amended, and therefore will not be subject
to certain restrictions on their transfer. Old Notes may be tendered in whole or
in part in integral multiples of $1,000.
The enclosed material is being forwarded to you as the beneficial owner
of Old Notes held by us for your account or benefit but not registered in your
name. An exchange of any Old Notes may only be made by us as the registered
holder pursuant to your instructions. Therefore, the Issuer urges beneficial
owners of Old Notes registered in the name of a broker, dealer, commercial bank,
trust company or other nominee to contact such holder promptly if they wish to
exchange Old Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to
exchange any or all such Old Notes held by us for your account or benefit,
pursuant to the terms and conditions set forth in the Prospectus and the Letter
of Transmittal. We urge you to read carefully the Prospectus and the Letter of
Transmittal before instructing us to exchange your Old Notes.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to exchange Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer expires at 5:00 p.m., New
York City time, on ___________, 1998, unless extended.
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
___________, 1998, unless the Exchange Offer is extended as provided in the
Prospectus, in which case the term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended. A tender of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date by following the procedures set forth in the Letter of Transmittal.
<PAGE> 2
Your attention is directed to the following:
1. The Exchange Offer is for the exchange of $1,000 principal
amount of Exchange Notes for each $1,000 principal amount of Old Notes.
As of _________________, 1998, $200,000,000 aggregate principal amount
of Old Notes was outstanding.
2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE
"THE EXCHANGE OFFER-CERTAIN CONDITIONS TO THE EXCHANGE OFFER" IN THE
PROSPECTUS.
3. The Exchange Offer and withdrawal rights will expire at
5:00 p.m., New York City time, on ___________, 1998, unless extended.
4. The Issuer has agreed to pay certain expenses of the
Exchange Offer. Any transfer taxes incident to the transfer of Old
Notes from the tendering Holder to the Issuer will be paid by the
Issuer, except as provided in the Prospectus and the Letter of
Transmittal. See "The Exchange Offer-Solicitation of Tenders; Fees and
Expenses" and "The Exchange Offer-Transfer Taxes" in the Prospectus.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED
FROM OR ON BEHALF OF, HOLDERS OF OLD NOTES RESIDING IN ANY JURISDICTION IN WHICH
THE MAKING OF THE EXCHANGE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN
COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION OR WOULD OTHERWISE NOT BE IN
COMPLIANCE WITH ANY PROVISION OF ANY APPLICABLE SECURITIES LAW.
If you wish us to tender any or all of your Old Notes held by us for
your account or benefit, please so instruct us by completing, executing and
returning to us the attached instruction form. THE ACCOMPANYING LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATIONAL PURPOSES ONLY AND MAY NOT BE
USED BY YOU TO EXCHANGE OLD NOTES HELD BY US AND REGISTERED IN OUR NAME FOR YOUR
ACCOUNT OR BENEFIT.
- 2 -
<PAGE> 3
INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus and the related Letter of Transmittal in connection with the Exchange
Offer by the Company to exchange Exchange Notes for Old Notes.
This will instruct you to tender the principal amount of Old Notes
indicated below held by you for the account of the undersigned, upon the terms
and subject to the conditions set forth in the Prospectus and the related Letter
of Transmittal.
The undersigned represents that: (i) the Exchange Notes acquired
pursuant to the Exchange Offer are being obtained in the ordinary course of its
business; (ii) it is not participating, does not intend to participate, and has
no arrangement or understanding with any person to participate, in the
distribution of such Exchange Notes; and (iii) it is not an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company or, if it is an
affiliate, that it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
If the undersigned is a "broker" or "dealer" registered under the
Exchange Act that acquired Old Notes for its own account pursuant to its
market-making or other trading activities (other than Old Notes acquired
directly from the Company), the undersigned understands and acknowledges that it
may be deemed to be an "underwriter" within the meaning of the Securities Act
and, therefore, must deliver a prospectus relating to the Exchange Notes meeting
the requirements of the Securities Act in connection with any resales by it of
the Exchange Notes acquired for its own account in the Exchange Offer.
Notwithstanding the foregoing, the undersigned does not thereby admit that it is
an "underwriter" within the meaning of the Securities Act.
You are hereby instructed to tender all Old Notes held for the account
of the undersigned unless otherwise indicated below.
[ ] Do not tender any Old Notes.
[ ] Tender Old Notes in the principal amount of ________________.
-------------------------------------------
-------------------------------------------
(Signature(s)
-------------------------------------------
Capacity (full title) if signing in a
fiduciary or representative capacity
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
Name(s) and address, including zip code
-------------------------------------------
Date
-------------------------------------------
Area Code and Telephone Number
-------------------------------------------
Taxpayer Identification or Social Security
Number
- 3 -
<PAGE> 1
EXHIBIT 99.5
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYOR. -- Social security numbers have nine digits separated by two hyphens
(i.e., 000-00-0000). Employer identification numbers have nine digits separated
by only one hyphen (i.e., 00-0000000). The table below will help determine the
number to give the payor.
<TABLE>
<CAPTION>
- -------------------------------------------------------------
GIVE THE NAME AND
SOCIAL SECURITY
OR EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF
- -------------------------------------------------------------
<C> <S> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the
account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor or
incompetent person
7. a. The usual revocable savings The grantor-trustee(1)
trust account (grantor is
also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under state law
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------
GIVE THE NAME AND
SOCIAL SECURITY
OR EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF
- -------------------------------------------------------------
<C> <S> <C>
8. Sole proprietorship account The owner(4)
9. A valid trust, estate or The legal entity(5) (Do
pension trust not furnish the
identifying number of
the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.)
10. Corporate account The corporation
11. Association, club, religious, The organization
charitable, educational or
other tax-exempt organization
12. Partnership account The partnership
13. A broker or registered nominee The broker or nominee
14. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state
or local government, school
district or prison) that
receives agricultural program
payments
- ------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
- An organization exempt from tax under Section 501(a) of the Internal Revenue
Code (the "Code"), an individual retirement plan, or a custodial account
under Section 403(b)(7) of the Code, if the account satisfies the
requirements of Section 401(f)(2) of the Code.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government or any
agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
Other payees that may be exempt from backup withholding include:
- A corporation.
- A financial institution.
- A dealer in securities or commodities required to register in the United
States, the District of Columbia or a possession of the United States.
- A real estate investment trust.
- A common trust fund operated by a bank under Section 584(a) of the Code.
- An trust exempt from tax under Section 664 of the Code or described in
Section 4947 of the Code.
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A foreign central bank of issue.
- A middleman known in the investment community as a nominee or who is listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc. Nominee List.
- A futures commission merchant registered with the Commodity Futures Trading
Commission.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to non-resident aliens subject to withholding under Section 1441 of
the Code.
- Payments to partnerships not engaged in a trade or business in the United
States and which have at least one non-resident alien partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Code Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payor's trade or business and you have not provided
your correct taxpayer identification number to the payor.
- Payments of tax-exempt interest (including exempt-interest dividends under
Section 852 of the Code).
- Payments described in Section 6049(b)(5) of the Code to non-resident aliens.
- Payments on tax-free covenant bonds under Section 1451 of the Code.
- Payments made by certain foreign organizations.
- Payments of mortgage interest.
Exempt payees described above must still complete the Substitute Form W-9
enclosed herewith to avoid possible erroneous backup withholding. FILE THIS FORM
WITH THE PAYOR, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE EXEMPT ON THE
FACE OF THE FORM, AND RETURN IT TO THE PAYOR. IF THE PAYMENTS ARE INTEREST,
DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under Sections 6041, 6041A(a),
6042, 6044, 6045, 6049, 6050A and 6050N of the Internal Revenue Code.
PRIVACY ACT NOTICE. Section 6109 of the Internal Revenue Code requires most
recipients of dividend, interest, or other payments to give taxpayer
identification numbers to payors who must report the payments to the Internal
Revenue Service. The Internal Revenue Service uses the numbers for
identification purposes and to help verify the accuracy of the recipient's tax
return. The IRS may also provide this information to the Department of Justice
for civil and criminal litigation and to cities, states and the District of
Columbia to carry out their tax laws. Payors must be given the numbers whether
or not recipients are required to file tax returns. Payors must generally
withhold 31% of taxable interest, dividend and certain other payments to a payee
who does not furnish a taxpayer identification number to a payor. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payor, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
