SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to ________.
Commission File No. 0-752
WESTMORELAND COAL COMPANY
(Exact name of registrant as specified in its charter)
Delaware 23-1128670
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
700 The Bellevue, 200 S. Broad Street, Philadelphia, Pennsylvania 19102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215)
545-2500
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF STOCK EXCHANGE
ON WHICH
REGISTERED
Common Stock, par value $2.50 per share New York Stock
Exchange
Depository Shares, each representing New York Stock
Exchange
a one-quarter share of Series A Convertible
Exchangeable Preferred Stock
Preferred Stock Purchase Rights New York Stock
Exchange
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS NAME OF STOCK EXCHANGE
ON WHICH
REGISTERED
Series A Convertible Exchangeable New York Stock
Exchange
Preferred Stock, par value $1.00 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No _______
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
____x____
The aggregate market value of voting stock held by non-affiliates as of
February 27, 1995 is estimated to be $67,144,000. Voting stock held by
affiliates is designated as voting stock beneficially held by executive
officers and directors and by holders of more than 10% of the
outstanding voting stock.
There were 6,960,881 shares outstanding of the registrant's Common
Stock, $2.50 Par Value (the registrant's only class of common stock),
as of February 27, 1995.
There were 2,300,000 depository shares, each representing one quarter
of a share of the registrant's Preferred Stock, $0.25 Par Value per
depository share, outstanding as of February 27, 1995.
The following documents have been incorporated by reference into the
Parts of this Form 10-K (i.e., Part I, Part II, etc.) indicated in
parentheses:
Definitive proxy statement to be filed on or about April 28, 1995.
(Part III)
Westmoreland Coal Company's 1994 Annual Report to Shareholders:
Management's Discussion and Analysis of Financial Condition and Results
of Operations, Five-Year Review, Consolidated Financial Statements, the
Notes to the Consolidated Financial Statements and Market Information
on Capital Stock. (Part II)
PART I
ITEM 1 - BUSINESS
Westmoreland Coal Company's (the "Company") principal business is the
production and sale of coal in the United States and until recently
the marketing of coal on a worldwide basis. Marketed coal has in the
past included significant amounts produced by unaffiliated producers.
Beginning in 1992, the Company commenced a strategic review of
operations as part of a plan to improve cash flows, eliminate
non-strategic or underperforming assets and to reposition itself to
achieve meaningful and sustainable profitability. Pursuant to this
plan, the Company has sold or shut down a number of assets and
operations, paid off the majority of its principal debt obligations,
withdrawn from the export market and substantially reduced its
representation of unaffiliated producers. As part of this effort the
Company successfully filed and completed a pre-packaged plan of
reorganization (the "Plan of Reorganization") under Chapter 11 of the
Federal Bankruptcy Code in the fourth quarter of 1994.
The Company is also engaged in the business of developing and owning
interests in cogeneration and other non-regulated independent power
plants, through its wholly-owned subsidiary, Westmoreland Energy,
Inc.("WEI"). The Company's investment in WEI has grown over the past
several years and increased substantially in 1994.
COAL OPERATIONS
Coal Production
The Company produces coal in the Eastern and Western United States.
Eastern operations are conducted on 60,000 acres of reserves located
in Virginia through the Virginia Division and a wholly-owned
subsidiary, Pine Branch Mining Incorporated ("Pine Branch"). A
portion of the reserves in Virginia extend underground into eastern
Kentucky. Powder River Basin coal is produced by Westmoreland
Resources, Inc. ("WRI") from reserves owned by the Crow Indians in
Montana.
The following sections describe the Company's current production
facilities, as well as certain mining operations closed or sold.
Virginia Division. The Company's Virginia Division consists of eight
mines of which five are underground mines operated by the Company and
three are underground mines operated by independent contractors.
After closing the Wentz mine and reducing employment at the Wentz
preparation plant at the end of 1994, the Company continues to operate
two preparation plants and one transloading facility. The Virginia
Division shipped 4,512,000 tons, 4,878,000 tons and 4,708,000 tons of
coal in 1994, 1993 and 1992, respectively, including coal produced by
independent contractors, coal purchased from Pine Branch and coal
purchased from off-property locations. As of December 31, 1994, the
Virginia Division properties employed 664 people.
The Company is continuing its efforts to improve the
competitiveness and profitability of its Virginia Division
through cost control, productivity improvement and closure of
non-essential high cost operations. By July 1996, the Virginia
Division will lose the benefit of two coal supply contracts
having sales prices substantially above the current market price
for similar types of coal. The Georgia Power Company coal supply
contract, with shipments of 942,000 tons in 1994, expires in
April 1995. The above market price of the Duke Power Company
coal supply contract, with shipments of 2,792,000 tons in 1994,
expires in July 1996; however, the contract can be extended
through December 31, 2000 provided the parties can reach an
agreement on the sales price after July 1996. It is likely that
the new sales price would be at current market prices. In 1994,
shipments to these two customers accounted for approximately 83%
of the Virginia Division's sales tons. In 1994, the Company's
Virginia Division experienced an operating loss of $3,726,000,
including approximately $18,000,000 of non-cash expenses for
depreciation and postretirement medical costs. The Virginia
Division will not be able to operate profitably or generate
positive cash flow from operations after July 1996, even after
excluding the ongoing fixed cash costs of idled operations
(estimated to be in excess of $10,000,000 annually), which
primarily consist of postretirement medical and workers'
compensation benefits, unless market prices for eastern coals
increase significantly and/or the Company is able to
substantially reduce the cost per ton of the coal produced. The
projected cash flows during the next two years, including
anticipated cash shutdown costs but excluding postretirement
medical costs, exceed the carrying value of the assets at
December 31, 1994. Therefore, the Virginia Division's assets are
not deemed to be impaired at this time.
The Company is reviewing its options, which include the possible
future sale, downsizing or shutdown of all or a portion of the
Virginia Division, at which time the Company may be required to
recognize, for accounting purposes, a significant portion of its
postretirement medical liabilities. The total amount of the
postretirement medical liabilities which would be expensed at the
time the Virginia Division's shutdown, downsizing or sale occurs
is not known at this time, however the impact of this non-cash
expense on shareholders' equity could affect the Company's
ability to pay preferred stock dividends. Refer to Note 10 to
the Consolidated Financial Statements for further information
regarding the actuarially estimated net present value of
postretirement medical benefits related to the Company's self-
insured single employer plans and the UMWA Benefit Trust Funds
which are multiemployer plans. Refer to Note 12 to the
Consolidated Financial Statements for additional information
regarding dividend restrictions under Delaware law.
Pine Branch Mining Incorporated. Pine Branch is a wholly-owned
subsidiary of the Company with surface mining operations on reserves
subleased from the Virginia Division. Pine Branch began operations in
1992 and consists of one mine. Pine Branch also performs reclamation
work for the Virginia Division at certain sites that were previously
abandoned by independent contractors. Pine Branch shipped 270,000
tons, 215,000 tons, and 117,000 tons of coal in 1994, 1993 and 1992
respectively. The majority of Pine Branch's production (188,000 tons,
174,000 tons and 73,000 tons in 1994, 1993 and 1992, respectively) is
sold to the Virginia Division where it is processed and loaded into
railcars for shipment to customers.
Westmoreland Resources, Inc. WRI is 60% owned by the Company.
Morrison Knudsen Corporation owns 24% and Penn Virginia Equities
Corporation owns 16%. WRI operates one large surface mine on
approximately 15,000 acres of subbituminous coal reserves in eastern
Montana. WRI shipped 4,364,000 tons, 3,224,000 tons and 3,491,000
tons of coal in 1994, 1993 and 1992, respectively. Morrison Knudsen
Corporation currently mines WRI's coal reserves under a contract with
WRI. The Company received cash dividends from WRI of $1,500,000 and
$540,000 in 1994 and 1993, respectively, however, WRI did not pay a
cash dividend in 1992.
Criterion Coal Company. The Company sold the assets of Criterion Coal
Company, a wholly-owned subsidiary, and its affiliated companies,
("Criterion") on December 22, 1994 to CONSOL of Kentucky,
Inc.("CONSOL"). Criterion consisted of six mines, including two
surface mines and four underground mines, and a preparation plant.
All of the mining operations were conducted by independent contractors
on Criterion's properties. Refer to Management's Discussion and
Analysis of Financial Condition and Results of Operations and Note 2
to the Consolidated Financial Statements for additional information
regarding the sale of Criterion.
Hampton Division. From January 1994 through April 1994, the Hampton
Division operations consisted of two underground mines, a large
surface mine, a central machine shop and a preparation plant. It
operated on approximately 14,000 acres in West Virginia and employed
130 people. The Hampton Division, except for a contractor-operated
surface mine with an annual production capacity of approximately
840,000 tons and the loadout portion of the preparation plant, was
closed down in May 1994. This action was necessitated by high
production costs and market conditions, including the termination of
an above-market coal sales contract. The Company sold the assets of
its Hampton Division in January 1995 and concurrently sold the related
mining lease back to the lessor, Penn Virginia Resources Corporation.
Refer to Management's Discussion and Analysis of Financial Condition
and Results of Operations and Note 2 to the Consolidated Financial
Statements for additional discussion related to the sale of the
Hampton Division.
Coal Marketing
The Company markets coal primarily through its wholly-owned
subsidiary, Westmoreland Coal Sales Company, Inc. ("WCSC"),
headquartered in Philadelphia, Pennsylvania.
Most of the coal now sold by WCSC is processed at and shipped from
Company properties to electric utilities within the United States.
Historically, WCSC has also sold steam and metallurgical coal into the
domestic and export markets. A significant portion of this coal was
produced by unaffiliated producers. These markets and affiliations
have increasingly suffered from decreasing prices, declining demand
and/or higher costs and limited supply. Activities related to
unaffiliated producers tied up a substantial amount of the Company's
working capital. During the five year period from 1990 through 1994,
the Company established $4,801,000 in reserves for potentially
uncollectible accounts receivable related to coal sold for
unaffiliated producers. Additionally, in 1992 the Company fully
reserved $20,489,000 of loans, a debt guarantee and other related
items on behalf of Adventure Resources, Inc. ("Adventure"), an
unaffiliated producer. Refer to the Adventure Resources, Inc. section
of Note 7 to the Consolidated Financial Statements for further details
related to the establishment of this reserve.
During 1994 the Company withdrew from the export market and severed
most of its relationships with remaining unaffiliated producers. The
Company's retrenchment in these areas helped conserve capital for
Company coal production and independent power activities in the face
of significantly reduced debt resources available to the Company.
The following tables show, for each of the past five years, tons sold
and revenues derived from Company and unaffiliated production as well
as revenues from domestic and export activities. Included in Company
tonnage below are amounts of produced tonnage purchased from non-
Company properties, but processed through Company facilities.
Coal Sales in Tons (tons in 000's)
Year Total Company Produced Sold for Others
1994 14,815 12,031 2,784
1993 16,687 11,551 5,136
1992 19,380 11,774 7,606
1991 20,627 11,570 9,057
1990 20,279 11,679 8,600
Coal Revenues ($'s in 000's)
Year Total Company Produced Sold for Others
1994 370,166 286,970 83,196
1993 465,256 307,468 157,788
1992 536,289 309,243 227,046
1991 567,075 284,399 282,676
1990 551,099 283,831 267,268
Coal Revenues ($'s in 000's)
Year Total Domestic Export
1994 370,166 340,489 29,677
1993 465,256 365,429 99,827
1992 536,289 399,130 137,159
1991 567,075 395,162 171,913
1990 551,099 372,479 178,620
Curtailment of the representation of unaffiliated producers reduced
substantially the requirements for capital by the Company. WCSC was
the exclusive sales agent for Adventure, whose other affiliated
companies include M.A.E. Services, Inc. and Maben Energy Corporation.
As sales agent for Adventure, the Company purchased all of Adventure's
clean coal production at the time it was produced and carried all
inventory and accounts receivable related to the sale of Adventure's
coal production. Adventure supplied 1,664,000 tons of the total sales
tons purchased by the Company from unaffiliated producers in 1994. On
December 2, 1992 Adventure, and certain of its affiliated companies,
filed voluntary petitions for reorganization under Chapter 11 of the
Bankruptcy Code with the United States Bankruptcy Court for the
Southern District of West Virginia. In 1992, the Company fully
reserved the $20,489,000 of loans, a debt guarantee and other related
items on behalf of Adventure. Pursuant to a plan, whose terms were
fully discussed and negotiated with Adventure and related customers,
the Company terminated its obligation to buy coal from Adventure and
to provide financial support as of November 8, 1994.
In January 1993, another large coal operation for which the Company
acted as sales agent stopped producing coal. The Company sold
2,178,000 tons for this producer in 1992.
As a result of its asset dispositions, withdrawal from the export
market and reduction in activities related to unaffiliated producers
during 1994, the Company closed related sales and field offices
located in Banner, Kentucky; Beckley, West Virginia; and Charlotte,
North Carolina.
Criterion and the Hampton Division were responsible for 26% of the
tons sold and 31% of the coal revenues derived from Company production
in 1994. The following tables show, for each of the past five years,
tons sold and revenue derived from coal produced at Criterion and the
Hampton Division.
Coal Sales in Tons (tons in 000's)
Year Total Criterion Hampton
1994 3,073 1,954 1,119
1993 3,414 1,853 1,561
1992 3,531 1,786 1,745
1991 3,143 1,600 1,543
1990 2,715 1,380 1,335
Revenues ($ in 000's)
Year Total Criterion Hampton
1994 89,436 55,800 33,636
1993 105,711 51,837 53,874
1992 104,242 48,940 55,302
1991 93,233 43,449 49,784
1990 82,898 38,943 43,955
Approximately 81% of the tonnage sold by the Company in 1994 was sold
under contracts calling for deliveries over a period longer than one
year ("long-term contracts"). The table below presents total sales
tonnage and the amount of coal tonnage sold under long-term contracts
for the last five years:
Total Sales Sales Under Long-
Tonnage (000s) Term Contracts
Tons (000s) %
1994 14,815 11,981 81%
1993 16,687 12,774 77%
1992 19,380 13,867 72%
1991 20,627 13,969 68%
1990 20,279 14,761 73%
The table below presents total sales tonnage the Company expects to
ship under existing long-term contracts for the next five years from
the Company's mining operations at WRI and the Virginia Division:
Projected Sales Tonnage
Under Existing Long-
Term Contracts (000s)
Virginia
Division WRI Total
1995 3,471 4,020 7,491
1996 1,820 4,400 6,220
1997 70 4,400 4,470
1998 70 4,400 4,470
1999 40 4,400 4,440
The decrease in future long-term contract sales tonnage is due to: (1)
the expiration in April 1995 of the Georgia Power Company contract,
with shipments of 942,000 tons in 1994, and; (2) the assumed July 1996
expiration of the Duke Power Company contract, with shipments of
2,792,000 tons in 1994. However, although not reflected in the above
table, the Duke Power Company contract can be extended through
December 31, 2000, provided the parties can reach agreement on the
sales price after July 1996. It is likely that the new sales price
would be at current market prices.
The majority of the coal produced by WRI is sold under long-term
contracts. The long-term contract with its largest customer expires
in 2005 and accounted for 60% of the tons sold by WRI in 1994.
WRI has entered into an option agreement whereby it agreed to sell up
to an additional 200,000,000 tons of coal through December 31, 2050 to
a current customer under a long-term contract. As compensation for
the option granted, WRI receives 1 1/4 cents, payable quarterly (with
applicable price adjustments) for each optioned ton. The option may
be exercised at any time in whole or in part through December 31,
2007. If exercised, the sales price will be based on the market price
at the time the option is exercised. WRI recorded income totalling
$2,961,000 (net of a negotiated $300,000 reduction) and $3,202,000
during 1994 and 1993, respectively, relative to the option agreement.
No coal has been delivered under the option agreement.
In 1994, the 10 largest customers of the Company accounted for 70% of
its coal revenues. Its two largest customers, Duke Power Company and
Georgia Power Company, accounted for 28% and 12%, respectively, of the
Company's coal revenues in 1994 and are expected to account for
approximately 65% and 8%, respectively, of the Company's coal revenues
in 1995. No other customer accounted for as much as 10% of the
Company's 1994 coal revenues. WRI's customers accounted for
$30,728,000 in coal revenues in 1994 from the sale of 4,364,000 tons
of coal, which represent 8% of the Company's total 1994 coal revenues
and 29% of the Company's total tons sold in 1994.
Cleancoal Terminal Company ("Cleancoal"), a wholly-owned subsidiary of
the Company, is a rail-to-barge transloading and storage facility on
the Ohio River in Kentucky between Louisville, Kentucky and
Cincinnati, Ohio. The terminal ceased operations in January 1995 as a
result of continuing operating losses and an agreement to sell
Cleancoal's assets in 1995 to an indirect wholly-owned subsidiary of
the CSX Corporation. Refer to Note 3 of the Consolidated Financial
Statements for more details related to the Cleancoal sale. The
majority of Cleancoal's employees were laid off on January 31, 1995.
The terminal was utilized by the Company to blend and transport coal
from producers in Kentucky for shipments to midwestern, southern and
foreign markets. Cleancoal has an annual transloading capacity of
6,000,000 tons. In a highly competitive market, Cleancoal transloaded
1,304,000 tons, 2,511,000 tons and 2,144,000 tons in 1994, 1993 and
1992, respectively.
Westmoreland Terminal Company, a wholly-owned subsidiary of the
Company, has a 20% interest in Dominion Terminal Associates ("DTA"),
the owner of a coal storage and vessel-loading facility in Newport
News, Virginia. DTA's annual throughput capacity is 22,000,000 tons,
and its ground storage capacity is 1,700,000 tons. In 1994, DTA
loaded 12,340,000 tons, including 1,250,000 tons for the Company. The
terminal was utilized by the Company for most of its coal exporting
and intracoastal business. Presently, the Company utilizes the
terminal to supply domestic customers via intracoastal waterways and
leases ground storage space and vessel-loading capacity and facilities
to others. Refer to Note 7 of the Consolidated Financial Statements
for further information regarding DTA.
INDEPENDENT POWER OPERATIONS
WEI is engaged in the business of developing and owning interests in
cogeneration and other non-regulated independent power plants.
Cogeneration is a power production process that provides for the
sequential generation of two or more useful forms of energy (e.g.,
electricity and steam) from a single primary fuel source (e.g., coal).
The key elements of a cogeneration project are a long-term contract
for the sale of electricity, another long-term contract for the sale
of the steam or other thermal energy, long-term contracts for the fuel
supply, a suitable site, required permits and project financing. The
economic benefits of cogeneration can be substantial because, in
addition to generating electricity, a significant portion of the
energy is used to produce steam or high temperature water (thermal
energy) for industrial processes. Electricity is sold to utilities
and in certain situations to end-users of electrical power, including
large industrial facilities. Thermal energy from the cogeneration
plant is sold to commercial enterprises and other institutions. Large
industrial users of thermal energy include plants in the chemical
processing, petroleum refining, food processing, pharmaceutical, pulp
and paper industries.
A significant market has developed in the United States for power
generated by cogeneration and other independent power plants. This
development was fostered by the energy crises of the 1970's, which led
to the enactment of legislation that encouraged companies to enter the
cogeneration and independent power generation industry by reducing
regulatory requirements and facilitating the sale of electricity by
such companies to utilities. WEI is currently pursuing development
opportunities within the United States.
Opportunities are also available in many foreign countries for
independent power companies to develop, own and operate electrical
power facilities. Using its experience in the United States, WEI has
pursued opportunities in China, Western Europe and Mexico.
WEI, through various subsidiaries, currently has interests in eight
independent power projects which are summarized in the table filed as
Exhibit 99 to this report. The Roanoke Valley I ("ROVA I" or "ROVA I
Project"), the Rensselaer and the Ft. Lupton projects became
operational during 1994, bringing the number of projects in commercial
service to seven. WEI has a 50% interest in both the ROVA I and
Rensselaer projects and made equity funding investments for them
totalling $23,178,000 in 1994. The Ft. Lupton project did not require
equity funding by WEI. Refer to Note 6 of the Consolidated Financial
Statements for additional information concerning WEI.
As part of its plan to raise cash to address short-term liquidity
requirements, the Company offered WEI for sale in 1993. During the
third quarter of 1994, the Company announced that WEI was no longer
being offered for sale.
GENERAL
Employees and Labor Relations
The Company, including subsidiaries, employed 829 people on December
31, 1994 compared with 1,090 on December 31, 1993. Included in these
figures are 576 and 758 employees represented by the United Mine
Workers of America ("UMWA"), at December 31, 1994 and December 31,
1993, respectively.
The Independent Bituminous Coal Bargaining Alliance ("IBCBA"), an
alliance of four coal companies, including Westmoreland Coal
Company, was formed in 1992 to negotiate a wage agreement with the
UMWA. The IBCBA and the UMWA successfully reached an interim
agreement on July 1, 1993. A successor five year agreement between
the Company and the UMWA, which retained the major features of the
interim agreement, became effective as of December 16, 1993 (the
"1993 Agreement"). The 1993 Agreement provides for the Company and
the UMWA at the local level to work together to reduce health care
costs, maximize the utilization of the Company's investments,
recognize special local operating and competitive conditions,
provide flexibility in work and scheduling, create incentive
programs, recognize employees' skills and performance, involve and
integrate employees and the UMWA in the success of their mines and
the Company, and improve overall labor management relations.
Pursuant to the interim agreement and the 1993 Agreement, the
Company implemented a managed care network in southwest Virginia,
where most of its active employees are located, and in West
Virginia, where most of its retired employees are located, in an
effort to control health care costs. Participation for retired
employees covered by the Coal Industry Health Benefit Act of 1992 is
voluntary. The 1993 Agreement provided for a wage increase of $.50
per hour, retroactive to February 1, 1993, the date on which the
prior five-year agreement expired. The 1993 Agreement also provides
for additional wage increases of $.40 per hour on December 16, 1994
and December 16, 1995, and for additional wage reopeners in 1996 and
1997.
Competition
The coal industry is highly competitive, and the Company competes
(principally on price and quality of coal) with many other coal
producers of all sizes. The Company, including the production of WRI,
accounted for an estimated 1% of coal production in the United States
in 1994. The nation's largest coal producer accounted for an
estimated 9% of coal production in the United States in 1994. Coal
production in the United States reached a record level in 1994. Coal
usage by electric utilities reached record levels in 1994. Coal fired
generation was responsible for 56% of all electricity generated within
the United States.
The Company's steam coal production also competes with other energy
sources in the production of electricity. For example, a significant,
but indirect, cause of lower coal demand in the future in the electric
utility sector could be low gas prices which could encourage utilities
to meet a substantial portion of future electricity growth with
natural gas-fired capacity additions. Such a strategy would displace
some potential new coal-fired capacity.
WEI is subject to increasing competition with respect to the
development of new cogeneration projects from unregulated affiliates
of utility companies, affiliates of fuel and equipment suppliers and
other independent developers. WEI ranks approximately fortieth in
size in the independent power industry with net ownership of 233
megawatts of generation capacity, including 25 megawatts for a project
under construction, as compared to its largest competitor which has
net ownership of approximately 5,700 megawatts of generation capacity.
Mining Safety and Health Legislation
The Company is subject to state and federal legislation prescribing
mining health and safety standards, including the Federal Coal Mine
Safety and Health Act of 1969 and the 1977 Amendments thereto. In
addition to authorizing fines and other penalties for violations, the
Act empowers the Mine Safety and Health Administration to suspend or
halt offending operations.
Energy Regulation
WEI's cogeneration operations are subject to the provisions of various
laws and regulations, including the federal Public Utilities
Regulatory Policies Act of 1978 ("PURPA"). PURPA provides qualifying
cogeneration facility status ("QF") to operations such as WEI's which
allows those facilities to operate with certain exemptions from
substantial federal and state regulation, including regulation of the
rates at which electricity can be sold.
The most significant recent change in energy regulation was the
passage of the National Energy Policy Act of 1992 ("EP Act").
Companies can now apply for Exempt Wholesale Generator ("EWG") status
with the Federal Energy Regulatory Commission ("FERC"). An EWG
project can provide electrical energy without the requirement to sell
thermal energy to a user. The EP Act permits an EWG project to also
be a QF project. An EWG that is not a QF project must have its power
rates approved. An EWG project that is a QF project can receive
avoided cost rates that are not subject to approval by FERC. WEI
received EWG status and power rate approval for its ROVA I project in
December 1993 as permitted in its power purchase agreement. In order
to provide additional flexibility, in March 1995 WEI received EWG
status for all of its other projects except Ft. Lupton and Fort Drum.
WEI intends to maintain the QF status for all its current projects
except ROVA I. For projects developed in the future, a case-by-case
determination of QF and/or EWG status will be completed to optimize
project returns. Refer to the 'Recent Developments Relating to
Independent Power Projects' section of Note 6 to the Consolidated
Financial Statements for further information regarding QF issues and
ROVA I's "forced outage" issue.
Protection of the Environment
Mining Operations. The Company believes its mining operations are
substantially in compliance with applicable federal, state and local
environmental laws and regulations, including those relating to
surface mining and reclamation, and it is the policy of the Company to
operate in compliance with such standards. Present compliance is
largely a result of capital expenditures and maintenance and
monitoring activities. In 1994 the Company invested approximately
$597,000 for capital additions and accrued approximately $1,245,000
against earnings in order to comply with environmental regulations
applicable to its mining operations. The $1,245,000 accrual does not
include a $3,135,000 credit to earnings resulting from a reversal of
reclamation accruals in connection with the sales of inactive
properties in West Virginia and the assets of Criterion in Kentucky.
Actual cash paid to perform reclamation in 1994 amounted to
$1,000,000. In 1993 the Company invested approximately $413,000 for
capital additions and charged $7,247,000 to earnings which included a
$4,235,000 accrual as part of the Company's mine closure costs. In
addition, reclamation fees imposed by the Federal Surface Mining
Control and Reclamation Act of 1977 (the "Surface Mining Act")
amounted to approximately $2,414,000 in 1994.
The Company projects that in 1995 it will spend approximately $100,000
for capital additions and it will expense approximately $930,000 for
maintenance and monitoring activities to meet environmental
requirements for operations it continues to own. The reduction in
overall expenditures for environmental purposes is largely due to the
asset dispositions that took place in 1994 and early 1995, pursuant to
which the buyers assumed reclamation and environmental liabilities.
Expenditures could change either to reflect the impact of new
regulations or because presently unforeseeable conditions may be
imposed on future mining permits.
The Surface Mining Act regulations set forth standards, limitations
and requirements for surface mining operations and for the surface
effects of underground mining operations. Under the regulatory scheme
contemplated by the Surface Mining Act, the Federal Office of Surface
Mining ("OSM") issued regulations which set the minimum standards to
which State agencies concerned with the regulation of coal mining must
adhere. States that wish to regulate such coal mining must present
their regulatory plans to OSM for approval. Once a State plan
receives final approval, the State agency has primary regulatory
authority over mining within the State, and OSM acts principally in a
supervisory role. State agencies may impose standards more stringent
than those required by OSM. The three states in which the Company
currently mines coal, Virginia, Kentucky and Montana, have all
submitted regulatory plans to OSM, and these plans have received final
approval. There would be potential risk to the Company in the event
it, or any of its independent contractors, fails to satisfy the
obligations created by the Surface Mining Act. Independent
contractors mining on Company properties, pursuant to their
agreements with the Company, are primarily responsible for compliance
with environmental laws relating to those properties. In the event,
however, that any of its independent contractors fail to satisfy their
obligations under the Surface Mining Act, the Company, depending upon
the circumstances, might have, and has had, to carry out such
obligations in order to avoid having its existing permits revoked or
applications for new permits or permit modifications blocked.
Compliance with the Surface Mining Act regulations has been costly for
the Company and the coal mining industry in general.
In 1990 certain amendments were enacted to the Clean Air Act ("1990
Amendments"). As the first major revisions to the Clean Air Act since
1977, the 1990 Amendments vastly expanded the scope of federal
regulations and enforcement in several significant respects. In
particular, the 1990 Amendments require that the United States
Environmental Protection Agency issue new regulations related to ozone
non-attainment, air toxics and acid rain. Phase I of the acid rain
provisions required, among other things, that electric utilities
reduce their sulfur dioxide emissions to less than 2.5 lbs per million
Btu by January 1, 1995. Phase II requires an additional reduction in
emissions to less than 1.2 lbs per million Btu by January 1, 2000.
The 1990 Amendments allow utilities the freedom to choose the manner
in which they will effect compliance with the required emission
standards, including switching to lower sulfur coal, scrubbing and
using SO2 credit allowances. The Company currently anticipates little
or no impact from the ozone non-attainment and air toxic provisions of
the 1990 Amendments.
Independent Power. The environmental laws and regulations applicable
to the projects in which WEI participates primarily involve the
discharge of emissions into the water and air, but can also include
wetlands preservation and noise regulation. These laws and
regulations in many cases require a lengthy and complex process of
obtaining licenses, permits and approvals from federal, state and
local agencies. Meeting the requirements of each jurisdiction with
authority over a project can delay or sometimes prevent the completion
of a proposed project, as well as require extensive modifications to
existing projects. The partnership owners of the projects in which
WEI has its interests have the primary responsibility for obtaining
the required permits and complying with the relevant environmental
laws.
The Clean Air Act and the 1990 Amendments contain provisions that
regulate the amount of sulfur dioxide and nitrogen oxides that may be
emitted by a project. Most of the projects in which WEI has
investments are fueled by low sulfur coal and are not expected to be
significantly affected by the acid rain provisions of the 1990
Amendments. New domestic projects will be required to obtain
allowance offsets for SO2 emissions if they do not meet emission
standards.
Segment Information
For financial information about Westmoreland's industry segments and
export sales for the years 1994, 1993 and 1992 refer to Note 16 to the
Consolidated Financial Statements.
For a discussion of certain factors affecting the business of
Westmoreland in 1994, 1993 and 1992 refer to Management's Discussion
and Analysis of Financial Condition and Results of Operations, and the
Notes to the Consolidated Financial Statements.
ITEM 2 - PROPERTIES
As of December 31, 1994, the Company owned or leased coal properties
located in Virginia, West Virginia, Kentucky and Montana. The
Company's estimated demonstrated reserves (excluding reserves deemed
by the Company to be uneconomic to mine) in owned or leased property
on December 31, 1994 in the three eastern states were 36,552,000 tons
and in Montana were 664,495,000 tons. In the three eastern states the
Company also owned or leased 320,467,000 tons currently classified by
the Company as Unassigned Uneconomic. Unassigned Uneconomic tonnages
are legally recoverable with current technology, but require
significant capital expenditures and construction of new mine openings
and are not in the Company's mining plans today, because they cannot
be mined profitably based on current projected economic conditions.
Nearly all of the Company's eastern reserves are leased from others
including 334,848,000 tons under lease from Penn Virginia Resources
Corporation, a wholly-owned subsidiary of Penn Virginia Corporation,
("Penn Virginia") which controlled an 18.95% and 18.96% voting
interest in the Company at December 31, 1994 and December 31, 1993,
respectively. All leases with Penn Virginia run to exhaustion of the
coal reserves. Properties located in Montana are leased by WRI from
the Crow Tribe of Indians and run to exhaustion. The balance of the
Company's leases are for varying terms, including to exhaustion. In
January 1995, as part of its sale of the Hampton Division, the Company
sold back coal reserve leases in West Virginia (the Hampton Division)
of 62,875,000 tons to the lessor, Penn Virginia. These reserves
consisted of 8,091,000 tons of demonstrated reserves and the balance
were Unassigned Uneconomic reserves. Refer to Notes 2 and 11 to the
Consolidated Financial Statements for additional discussion about this
sale.
The following table shows the Company's estimated demonstrated coal
reserve base and production in 1994. The term "demonstrated coal
reserve base" is as defined in the "Coal Resource Classification
System of the U.S. Geological Survey" (Circular 891). This
represents the sum of the measured and indicated reserve bases and
includes assigned and unassigned economic reserves.
<TABLE>
Summary of Demonstrated Coal Reserve Base and Production Tons
as of December 31, 1994
(in thousands)
<CAPTION> Total Demonstrated
1994 Unassigned Coal Reserve
Production Sulfur <1> Assigned <2> Economic<3> Base
<S> <C> <C> <C> <C> <C>
Eastern Operations
Virginia <4>
Steam 3,504 1.05/1.24 20,796 5,741 26,537
Metallurgical 189 .58 0 1,924 1,924
West Virginia <5>
Steam 980 .77/.85 8,091 0 8,091
Kentucky <6>
Steam 1,886 .76/.95/1.35 0 0 0
Subtotal-Steam 6,370 28,887 5,741 34,628
Subtotal-Met 189 0 1,924 1,924
Subtotal Eastern
Operations 6,559 28,887 7,665 36,552
Western Operations
Montana
Steam 4,364 .65 664,495 0 664,495
Total All Operations 10,923 693,382 7,665 701,047
<FN>
<1> Percent Sulfur applies to the 1994 production tonnages.
<2> Assigned tonnages are legally recoverable through existing facilities based on current
mining plans with current technology and the Company's infrastructure.
<3> Unassigned Economic tonnages require significant capital expenditures and construction of
new mine openings before mining could begin and are legally and economically recoverable
with current technology and the Company's infrastructure.
<4> A portion of the reserves in Virginia extend underground into eastern Kentucky. Those reserves
are included with Virginia reserves.
<5> These reserves were sold back to the lessor in January 1995. See Notes 2 and 11 to the
Consolidated Financial Statements.
<6> These reserves were sold in December 1994. See Note 2 to the Consolidated Financial Statements.
</FN>
</TABLE>
Estimates of reserves in the eastern states are based mainly upon
yearly evaluations made by the Company's professional engineers and
geologists. The Company periodically modifies estimates of reserves
under lease which may increase or decrease previously reported
amounts. The reserve evaluations are based on new information
developed by bore-hole drilling, examination of outcrops,
acquisitions, dispositions, production, changes in mining methods,
abandonments and other information.
Coal reserves in Montana represent recoverable tonnage held under the
terms of the Crow Tribe Lease, as amended in 1982, and other minor
leases. These reserves were estimated to be 799,803,000 tons as of
January 1, 1980 based principally upon a report by independent
consulting geologists, prepared in February 1980. The reserves
consist of two main seams and a stray seam between the upper and lower
main seams. Currently, the upper seam, with estimated assigned
reserves of 250,000,000 tons, is the only seam being mined in response
to a quality modification currently required by a significant
customer. Annually, estimated remaining recoverable reserves are
reduced by production in the upper main seam and by the amount of
reserves in the lower and stray seams bypassed after mining the upper
main seam.
In addition to the coal reserves mentioned above, as of December 31,
1994 the Company owns several coal preparation and loading facilities
in Virginia and West Virginia. WRI owns and operates a dragline and
coal crushing and loading facilities at its mine in Montana.
Refer to Note 6 to the Consolidated Financial Statements for a
description of the properties in which WEI has an interest.
ITEM 3 - LEGAL PROCEEDINGS
Bankruptcy Proceedings
On November 8, 1994, the Company filed a petition under Chapter 11 of
the Federal Bankruptcy Code seeking the confirmation of a so-called
"pre-packaged" Plan of Reorganization. This measure was taken to
obtain protection from the Company's principal lenders pending the
closing of the sale of the assets of Criterion which closing was also
facilitated by the filing. The Federal Bankruptcy Court approved the
Company's Plan of Reorganization on December 16, 1994. As approved in
the Plan of Reorganization, the Company proceeded to complete its sale
of the assets of Criterion on December 22, 1994 and paid in full its
maturing debt obligations, at which time it emerged from bankruptcy.
Refer to Note 1 to the Consolidated Financial Statements for
additional information concerning the Company's Plan of
Reorganization.
Westmoreland Energy, Inc.
WEI owns a 50% partnership interest in Westmoreland-LG&E Partners (the
"ROVA Partnership"). The ROVA Partnership's principal customer
contracted to purchase the electricity generated by ROVA I under a
long-term contract. In the second quarter of 1994, that customer
disputed the ROVA Partnership's interpretation of the provisions of
the contract dealing with the payment of the capacity purchase price
when the facility experiences a forced outage day. A forced outage
day is a day when ROVA I is not able to generate a specified level of
electrical output. The ROVA Partnership believes that the customer is
required to pay the ROVA Partnership the full capacity purchase price
unless forced outage days exceed a contractually stated annual number.
The customer asserts that it is not required to do so.
Through December 31, 1994, the customer withheld approximately
$5,856,000 of capacity purchase price payments to the ROVA Partnership
because of this dispute. On October 31, 1994, the ROVA Partnership
filed a complaint in the Circuit Court of the City of Richmond,
Virginia to recover these amounts and to confirm that such payments
may not be withheld in the future. On December 12, 1994 the customer
filed a motion to dismiss the complaint and on March 17, 1995 the
Court granted this motion. The ROVA Partnership is evaluating its
legal options which include the possibility of an appeal of this
ruling. The capacity purchase price withheld had been included in the
revenues and earnings of the ROVA Partnership until a reserve was
recorded as of December 31, 1994 for the full amount withheld by the
customer. WEI had recognized its 50% share of the withheld payments
in earnings in the second, third and fourth quarters of 1994. In the
fourth quarter of 1994, WEI's revenues were reduced by $2,928,000,
representing its 50% share of the disputed amount. The customer has
withheld an additional $872,000 from the ROVA Partnership through
March 24, 1995. No earnings are being recognized by WEI in 1995 for
payments withheld by the customer relating to forced outage days. The
Company believes that the ROVA Partnership's position is correct.
However, the Company is unable to predict the outcome of this
proceeding, or the amount, if any, that the customer may be ordered to
pay related to this matter. Additionally, WEI has been evaluating
ways to minimize the number of forced outage days in the future.
Regardless of the outcome, the Company believes ROVA I will continue
to operate profitably and generate positive cash flows. Refer to the
Recent Developments Relating to Independent Power Projects' section of
Note 6 to the Consolidated Financial Statements for a discussion of
other legal issues involving WEI.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
This item is inapplicable.
Executive Officers of the Registrant
Below is a table showing the executive officers of the Company, their
ages as of March 1, 1995, positions held and year of election to their
present offices. No family relationships exist among them. All of
the officers are elected annually by the Board of Directors and serve
at the pleasure of the Board of Directors.
Name Age Position(s) Held Since
(1) Christopher K. Seglem 48 President and 1992
Chief Executive Officer 1993
(2) Ronald W. Stucki 50 Senior Vice President-
Operations 1992
(3) Matthew S. Sakurada 42 President,
Westmoreland Energy, Inc. 1994
(4) Joseph W. Lee 51 President,
Westmoreland Coal Sales Company 1991
(5) Francis J. Boyle 49 Senior Vice President, Chief
Financial Officer and Treasurer 1993
(6) Theodore E. Worcester 54 Senior Vice President and 1992
General Counsel 1990
(7) R. Page Henley, Jr. 59 Senior Vice President-
Development 1992
(8) Thomas C. Sharpe 42 Controller 1994
____________________________
(1) Effective January 1988, Mr. Seglem was elected to the positions
of Vice President, General Counsel, and Secretary for the
Company. In November 1988 he was elected a Senior Vice
President of the Company. In May 1990, he relinquished the
position of Secretary. In December 1990, he was elected an
Executive Vice President of the Company, at which time he
relinquished the position of General Counsel. In June 1992, he
was elected President and Chief Operating Officer, and in
December 1992 he was elected a Director of the Company. In
June 1993, he was elected Chief Executive Officer of the
Company, at which time he relinquished the position of Chief
Operating Officer. He is a member of the bar of Pennsylvania.
(2) Mr. Stucki was General Manager and Vice President of Colorado
Westmoreland Inc. (a former wholly-owned subsidiary of the
Company) until the operation was sold to Cyprus Coal Company
("Cyprus") in November 1988, where he continued employment and
became Vice President of the Colorado and Wyoming operations. He
left Cyprus to rejoin the Company as Senior Vice President-
Operations in July 1992. Mr. Stucki is a registered professional
engineer.
(3) Mr. Sakurada was elected Vice President-Project Development of
the WEI in 1988, which position he held until he was elected Vice
President and General Manager of WEI in 1993. Mr. Sakurada was
elected President of WEI on April 13, 1994. Mr. Sakurada is a
registered professional engineer.
(4) Mr. Lee was elected Vice President-Purchasing and Northern Sales
of WCSC in 1988, which position he held until he was elected
Senior Vice President of WCSC on July 1, 1991. Mr. Lee was
elected President of WCSC on August 1, 1991.
(5) Mr. Boyle was Chief Financial Officer and Senior Vice President
of El Paso Natural Gas Company from 1985 through 1992. He was
elected Senior Vice President, Chief Financial Officer and
Treasurer of the Company, effective August 9, 1993.
(6) Mr. Worcester was a member of the law firm of Sherman & Howard,
with its principal office in Denver, Colorado, from 1972, and a
partner in the firm from 1978 until December 1990, at which time
he was elected Vice President & General Counsel of the Company.
In June 1992, he was elected Senior Vice President while
retaining his position of General Counsel of the Company. He is
a member of the bar of Colorado.
(7) Mr. Henley was elected Vice President-Development and Government
Affairs in May 1988, which position he held until he was elected
Senior Vice President-Development and Government Affairs in May
1990. In June 1992, he was elected Senior Vice President-
Government Affairs. In 1993, Mr. Henley was also elected Vice
President, General Counsel and Secretary of the Company's WEI
subsidiary, and undertook additional duties, including project
development. In 1994, Mr. Henley was elected Senior Vice
President-Development of the Company, and retained his position
as Vice President of the Company's WEI subsidiary. He is a
member of the bars of West Virginia and Virginia.
(8) Mr. Sharpe was elected Assistant Controller of the Company in
March 1989, which position he held until he was appointed Acting
Controller on April 7, 1994. He was elected Controller of the
Company on May 3, 1994.
Each of the foregoing persons held the offices indicated at the
time of the Company's bankruptcy filing and emergence from
bankruptcy.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Reference is hereby made to the section entitled "Market Information
on Capital Stock" in Exhibit 13.
ITEM 6 - SELECTED FINANCIAL DATA
Reference is hereby made to the section entitled "Five-Year Review" in
Exhibit 13.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Reference is hereby made to the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in Exhibit 13.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is hereby made to Financial Statements and related Notes in
Exhibit 13.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
This item is inapplicable.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11 - EXECUTIVE COMPENSATION
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For Items 10-13, inclusive, except for information concerning
executive officers of Westmoreland included as an unnumbered item in
Part I above, reference is hereby made to Westmoreland's definitive
proxy statement dated April 28, 1995, to be filed in accordance with
Regulation 14A pursuant to Section 14(a) of the Securities Exchange
Act of 1934, which is incorporated herein by reference thereto.
PART IV
ITEM 14- EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM
8-K
a) 1. The financial statements filed herewith are the Consolidated
Balance Sheets of the Company and subsidiaries as of December
31, 1994 and December 31, 1993, and the related Consolidated
Statements of Income, Shareholders' Equity and Cash Flows for
each of the years in the three-year period ended December 31,
1994 together with the related Notes and the Summary of
Significant Accounting Policies which are contained in
Exhibit 13.
2. The financial statement schedule (Schedule VIII) - Valuation
and qualifying accounts filed herewith is included at the end
of this report.
3. The following exhibits are filed herewith as required by Item
601 of Regulation S-K:
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession
(a) Westmoreland's Plan of Reorganization was
confirmed by an order of the United States
Bankruptcy Court for the District of Delaware on
December 16, 1994, and upon complying with the
conditions of the order, Westmoreland emerged
from bankruptcy on December 22, 1994. A copy of
the confirmed Plan of Reorganization was filed
as an Exhibit to Westmoreland's Report on Form
8-K filed December 30, 1994, which is
incorporated herein by reference thereto.
(3) (a) Articles of incorporation:
Restated Certificate of Incorporation, filed
with the Office of the Secretary of State of
Delaware on February 21, 1995.
(b) Bylaws, as amended on June 6, 1994.
(4) Instruments defining the rights of security holders
(a) Certificate of Designation of Series A
Convertible Exchangeable Preferred Stock of the
Company defining the rights of holders of such
stock, filed July 8, 1992 as an amendment to the
Company's Certificate of Incorporation, and
filed as Exhibit 3(a) to Westmoreland's Form 10-
K for 1992.
(b) Form of Indenture between Westmoreland and
Fidelity Bank, National Association, as Trustee
relating to the Exchange Debentures. Reference is
hereby made to Exhibit 4.1 to Form S-2
Registration 33-47872 filed May 13, 1992, and
Amendments 1 through 4 thereto, which Exhibit is
incorporated herein by reference.
(c) Form of Exchange Debenture Reference is hereby
made to Exhibit 4.2 to Form S-2 Registration 33-
47872 filed May 13, 1992, and Amendments 1 through
4 thereto, which Exhibit is incorporated herein by
reference.
(d) Form of Deposit Agreement among Westmoreland,
First Chicago Trust Company of New York, as
Depository and the holders from time to time of
the Depository Receipts. Reference is hereby made
to Exhibit 4.3 to Form S-2 Registration 33-47872
filed May 13, 1992, and Amendments 1 through 4
thereto, which Exhibit is incorporated herein by
reference.
(e) Form of Certificate of Designation for the
Series A Convertible Exchangeable Preferred
Stock. Reference is hereby made to Exhibit 4.4
to Form S-2 Registration 33-47872 filed May 13,
1992, and Amendments 1 through 4 thereto, which
Exhibit is incorporated herein by reference.
(f) Specimen certificate representing the common
stock of Westmoreland, filed as Exhibit 4(c) to
Westmoreland's Registration Statement on Form S-
2, Registration No. 33-1950, filed December 4,
1985, is hereby incorporated by reference.
(g) Specimen certificate representing the
Preferred Stock. Reference is hereby made to
Exhibit 4.6 to Form S-2 Registration 33-47872
filed May 13, 1992, and Amendments 1 through 4
thereto, which Exhibit is incorporated herein
by reference.
(h) Form of Depository Receipt. Reference is
hereby made to Exhibit 4.7 to Form S-2
Registration 33-47872 filed May 13, 1992, and
Amendments 1 through 4 thereto, which Exhibit
is incorporated herein by reference.
(i) In accordance with paragraph (b)(4)(iii) of
Item 601 of Regulation S-K, Westmoreland
hereby agrees to furnish to the Commission,
upon request, copies of all other long-term
debt instruments.
(10) Material Contracts
(a) On January 5, 1982, the Board of Directors of
Westmoreland adopted a Management by
Objectives Plan ("MBO Plan") for senior
management. A description of this MBO Plan is
set forth on page 9 of Westmoreland's
definitive proxy statement dated March 31,
1982, which description is incorporated herein
by reference thereto.
(b) Westmoreland Coal Company 1982 Incentive
Stock Option and Stock Appreciation Rights
Plan--Reference is hereby made to Exhibit
10(b) to Westmoreland's Annual Report on Form
10-K for 1981 (SEC File #0-752), which Exhibit
10(b) is incorporated herein by reference
thereto.
(c) Westmoreland Coal Company 1985 Incentive
Stock Option and Stock Appreciation Rights
Plan--Reference is hereby made to Exhibits
10(d) to Westmoreland's Annual Report on Form
10-K for 1984 (SEC File #0-752), which Exhibit
10(d) is incorporated herein by reference
thereto.
(d) Agreement dated July 1, 1984 between Georgia
Power Company and Westmoreland. Reference is
hereby made to pages 33 - 79, inclusive, of
Westmoreland's Annual Report on Form 10-K for
1985 (SEC File #0-752), which pages 33 - 79,
inclusive, is incorporated herein by reference
thereto.
(e) Letter agreement dated June 11, 1987 relating
to the coal supply agreement between Georgia
Power Company and Westmoreland Coal Company.
See (10)(d) above.
(f) Agreement dated January 1, 1986 between Mill-
Power Supply Company, agent for Duke Power
Company, and Westmoreland Coal Sales Company,
agent for Westmoreland, which is incorporated
herein by reference thereto. Reference is
hereby made to pages 80 - 103, inclusive, of
Westmoreland's Annual Report on Form 10-K for
1985 (SEC File #0-752), which pages are
incorporated herein by reference thereto.
(g) In 1990, the Board of Directors established an
Executive Severance Policy for certain executive
officers, which provides a severance award in the
event of termination of employment. Reference is
hereby made to Exhibit 10(h) to Westmoreland's
Annual Report on Form 10-K for 1990 (SEC File #0-
752), which Exhibit 10(h) is incorporated herein by
reference thereto.
(h) Westmoreland Coal Company 1991 Non-Qualified Stock
Option Plan for Non-Employee Directors - Reference
is hereby made to Exhibit 10(i) to Westmoreland's
Annual Report on Form 10-K for 1990 (SEC File #0-
752), which Exhibit 10(i) is incorporated herein by
reference thereto.
(i) Effective January 1, 1992, the Board of Directors
established a Supplemental Executive Retirement
Plan ("SERP") for certain executive officers and
other key individuals, to supplement Westmoreland's
Retirement Plan by not being limited to certain
Internal Revenue Code limitations. A description
of this SERP is set forth on page 11 of
Westmoreland's definitive proxy statement dated
June 9, 1992, which description is incorporated
herein by reference thereto.
(j) Amended Coal Mining Agreement between Westmoreland
Resources, Inc. and Crow Tribe of Indians, dated
November 26, 1974, as further amended in 1982,
filed as Exhibit (10)(a) to Westmoreland's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1992, is incorporated by reference
thereto.
(k) Amendment and Restatement of Virginia Lease
between Penn Virginia Resources Corporation and
Westmoreland, effective as of July 1, 1988, as
further amended May 6, 1992, filed as Exhibit
10(b) to Westmoreland's Quarterly Report on Form
10-Q for the quarter ended March 31, 1992, is
incorporated by reference thereto.
(l) Amendment and Restatement of Hampton Lease
between Penn Virginia Resources Corporation and
Westmoreland, effective as of July 1, 1988, as
further amended May 6, 1992, filed as Exhibit
10(c) to Westmoreland's Quarterly Report on Form
10-Q for the quarter ended March 31, 1992, is
incorporated by reference thereto.
(m) Acquisition Agreement, dated May 6, 1992 by and
among Westmoreland, Penn Virginia Resources
Corporation and Penn Virginia Equities
Corporation, including as Exhibit A thereto, a
form of agreement to be executed by the parties
on the Closing Date described therein, filed as
Exhibit 10(d) to Westmoreland's Quarterly Report
on Form 10-Q for the quarter ended March 31,
1992, is incorporated by reference thereto.
(n) Agreement dated July 9, 1992 by and among
Westmoreland, Penn Virginia Resources Corporation
and Penn Virginia Equities Corporation, with
respect to (i) registration rights granted to Penn
Virginia, (ii) the number of directors which Penn
Virginia for a period of two years may designate
to be elected to Westmoreland's Board of Directors
and (iii) other conditions, as set forth therein,
which is discussed in Item 13 of Westmoreland's
Form 10-K for 1992.
(o) Agreement dated October 9, 1992 by and among
Westmoreland, Penn Virginia Resources Corporation
and Penn Virginia Equities Corporation amending
and modifying prior agreements by and among the
parties as set forth therein, which is discussed
in Item 13 of Westmoreland's Form 10-K for 1992.
(p) Effective February 1, 1995, the Board of Directors
established a Long-Term Incentive Stock Plan for
officers and other salaried employees of
Westmoreland and its subsidiaries, subject to
shareholder approval. A description of this Plan
is set forth in Westmoreland's definitive proxy to
be dated on or before April 28, 1995, which
description is incorporated herein by reference
thereto.
(q) On July 28, 1994, the Company reached a definitive
agreement to sell the assets of its wholly-owned
subsidiary, Criterion Coal Company and its
affiliates to CONSOL of Kentucky, Inc. The sale
was consummated on December 22, 1994, upon
complying with the order of the Bankruptcy Court
for the District of Delaware, on which date the
Company emerged from bankruptcy. A copy of the
agreement of sale, and pertinent amendments and
supplements thereto are attached as an Exhibit.
(13) Westmoreland Coal Company's 1994 Annual
Report to Shareholders: Management's
Discussion and Analysis of Financial
Condition and Results of Operations, Five-
Year Review, Consolidated Financial
Statements, the Notes to the Consolidated
Financial Statements and Market Information
on Capital Stock.
(21) Subsidiaries of the Registrant
(23) Consent of Independent Certified Public Accountants
(27) Financial data Schedule
(99) WEI Project Chart
b) Reports on Form 8-K.
(1) On November 3, 1994 Westmoreland Coal Company filed a
Report on Form 8-K. This report contained discussion that
Westmoreland's lenders had agreed to extend the date of
repayment of Westmoreland restructured debt until November
8, 1994 and its press release dated November 1, 1994 as an
exhibit.
(2) On December 30, 1994 Westmoreland Coal Company filed a
Report on Form 8-K. This report contained discussions
related to the sale of the assets of its subsidiary,
Criterion Coal Company, to CONSOL of Kentucky, Inc. and to
the confirmation of Westmoreland's Plan of Reorganization
by the Bankruptcy Court for the District of Delaware and
its emergence from bankruptcy on December 22, 1994, upon
complying with the Court's order, and the press releases
dated December 16, 1994 and December 22, 1994,
respectively.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
WESTMORELAND COAL COMPANY
March 31, 1995 By /s/ Francis J. Boyle
Francis J. Boyle
Senior Vice President,
Chief Financial
Officer & Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signature Title Date
Principal Executive Officer:
President,
Chief Executive Officer
/s/ Christopher K. Seglem and Director March 31, 1995
Christopher K. Seglem
Directors:
/s/ Pemberton Hutchinson Chairman of the Board March 31,
1995
Pemberton Hutchinson
/s/ E. B. Leisenring, Jr. Director March 31,
1995
E. B. Leisenring, Jr.
/s/ William R. Klaus Director March 31,
1995
William R. Klaus
/s/ Brenton S. Halsey Director March 31, 1995
Brenton S. Halsey
/s/ Edwin E. Tuttle Director March 31, 1995
Edwin E. Tuttle
/s/ Lennox K. Black Director March 31, 1995
Lennox K. Black
Principal Accounting Officer:
/s/ Thomas C. Sharpe Controller March 31, 1995
Thomas C. Sharpe
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Westmoreland Coal Company:
Under date of March 24, 1995, we reported on the consolidated
balance sheets of Westmoreland Coal Company and subsidiaries as
of December 31, 1994 and 1993, and the related statements of
income, shareholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1994, as
contained in the annual report on Form 10-K for the year 1994.
In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related
consolidated financial statement schedule VIII. This
consolidated financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick LLP
Philadelphia, PA
March 24, 1995
<TABLE>
Schedule VIII
WESTMORELAND COAL COMPANY AND SUBSIDIARIES
Valuations and Qualifying Accounts
Years ended December 31, 1994, 1993 and 1992
(in thousands)
<CAPTION>
Additions
Balance at (deductions) Other
beginning charged (credited) additions Balance at
of year to earnings (deductions) end of year
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Allowance for doubtful accounts $ 28,530 (2,738) (5,421) 20,371 <B>
Accrual for workers' compensation $ 26,457 5,107 (4,384) 27,180
Accrual for pneumoconiosis benefits $ 17,475 (2,471) - 15,004
Accrual for postretirement medical
benefits $ 37,290 21,053 (13,863) 44,480
Year ended December 31, 1993:
Allowance for doubtful accounts $ 31,813 (257) (3,026) 28,530 <B>
Accrual for workers' compensation $ 16,370 17,204 (7,117) 26,457
Accrual for pneumoconiosis benefits $ 19,522 (2,047) - 17,475
Accrual for postretirement medical
costs $ - 48,721 <A> (11,431) 37,290
Year ended December 31, 1992:
Allowance for doubtful accounts $ 2,416 29,055 342 31,813
Accrual for workers' compensation $ 10,879 11,033 (5,542) 16,370
Accrual for pneumoconiosis benefits $ 21,501 (1,979) - 19,522
Amounts above include current and non-current valuation accounts.
<FN>
<A> See Note 10 to the Consolidated Financial Statements.
<B> Includes reserves of $18,854,000 and $22,234,000 as of December 31, 1994 and 1993,
respectively, netted against Other Assets in the Company's Consolidated Balance Sheets.
</FN>
</TABLE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated July 28, 1994, by
and among WESTMORELAND COAL COMPANY, a Delaware corporation
("WCC"), CRITERION COAL COMPANY, a Delaware corporation ("CCC"),
KENTUCKY CRITERION COAL COMPANY, a Delaware Corporation ("KCC"),
DEANE PROCESSING COMPANY, a Delaware corporation ("DPC" and
together with KCC and CCC, "Seller"), and CONSOL OF KENTUCKY
INC., a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller desires to sell, and Buyer desires to
purchase, certain of the assets of Seller located in Knott, Pike,
and Letcher Counties, Kentucky, as more particularly described
herein, upon the terms and subject to the conditions herein set
forth; and
WHEREAS, WCC owns 100% of the issued and outstanding
stock of CCC and CCC owns 100% of the issued and outstanding
stock of each of KCC and DPC and WCC desires to cause Seller to
enter into the transactions contemplated hereby; and
WHEREAS, certain terms used herein are used as defined
in Exhibit A hereto; and
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained, the parties hereto hereby
agree as follows:
1. Purchase and Sale of the Purchased Assets.
1.1. Purchased Assets. Upon the terms and subject to
the conditions set forth in this Agreement, Seller shall, and WCC
shall cause Seller to, sell, transfer, convey and assign to
Buyer, and Buyer shall purchase and acquire from Seller, at the
Closing on the Closing Date, the following assets of Seller,
excluding the Excluded Assets as provided in paragraph 1.2 hereof
(herein collectively referred to as the "Purchased Assets"):
1.1.1. the tracts of land described in Schedule 1.1.1
other than the tracts transferred by KCC to third parties and
listed on Schedule 1.1.1 under the heading "off-conveyances" (the
"Owned Real Property");
1.1.2. all rights, title and interests of Seller, as
lessee, in and to the real property (the "Leased Real Property")
under those certain leases (the "In Leases") described in
Schedule 1.1.2;
1.1.3. all buildings, structures and other real
improvements of Seller located in and on the Owned Real Property
and the Leased Real Property (the "Real Improvements"), including
without limitation those described in Schedule 1.1.3 (the Owned
Real Property, the Leased Real Property and the Real Improvements
shall hereinafter be referred to, collectively, as the "Real
Property") and all rights, title and interests of Seller in and
to all tangible personal property located in and on the Real
Property on the Closing Date, including, without limitation the
coal, machinery, equipment, vehicles, furniture and other
tangible personal property of Seller listed or referred to in
Schedule 1.1.3 (the "Tangible Personal Property");
1.1.4. all rights, title and interests of Seller
under, in and to the leases pursuant to which Seller leases to
any third Person portions of the Real Property (the "Out Leases")
described in Schedule 1.1.4;
1.1.5. all rights, title and interests of Seller
under, in and to the personal property leases listed in Schedule
1.1.5 (the "Personal Property Leases") (all personal property
owned or leased by Seller being referred to herein as the
"Personal Property");
1.1.6. all rights and interests of Seller in the
contracts described in Schedule 1.1.6 and relating to mining of
coal by third parties on the Real Property and transportation of
coal mined on the Real Property (the "Mining Contracts");
1.1.7. all of Seller's rights under the contracts
identified on Schedule 1.1.7 and relating to the sale of coal
mined on the Real Property (the "Coal Sale Contracts," and
together with the Mining Contracts, the "Other Purchased
Contracts");
1.1.8. all of Seller's rights, claims or causes of
action against third parties relating to the Real Property, the
In Leases, the Out Leases, the Personal Property, the Personal
Property Leases and the Other Purchased Contracts arising or
occurring on or after the Closing Date;
1.1.9. all books and records (including all data and
other information stored on discs or other media) of Seller
relating to the Real Property, the In Leases, the Out Leases, the
Personal Property, the Personal Property Leases and the Other
Purchased Contracts, including mine maps, geologic data, surveys,
consulting reports, surface mapping, aerial photography,
environmental reports, core hole data, unmined mineral tax
filings and accounting data;
1.1.10. all deposits held by Seller with respect to
the Out Leases and all advance or minimum royalty payments under
the Out Leases paid to Seller under the Out Leases in each case
relating to periods after the Valuation Date;
1.1.11. the Governmental Permits listed in Schedule
5.1.4; and
1.1.12. Seller's rights under the miscellaneous
contracts listed in Schedule 1.1.12.
1.2. Excluded Assets. Notwithstanding anything
contained in this Agreement to the contrary, the following assets
of Seller are excluded from the Purchased Assets and are not
being purchased and sold hereunder (herein referred to as the
"Excluded Assets"):
1.2.1. all cash, cash equivalents and bank accounts of
Seller (except as provided in paragraph 1.1.10);
1.2.2. all advance or minimum royalty payments under
the Out Leases paid or due Seller under the Out Leases relating
to periods on or prior to the Valuation Date;
1.2.3. all claims and causes of action of Seller
against third parties relating to the Real Property, the In
Leases, the Out Leases, the Personal Property, the Personal
Property Leases and the Other Purchased Contracts (i) which may
arise in connection with the indemnity obligations of Seller
pursuant to paragraph 8.1 hereof or (ii) for which damages in
respect thereto relate to the period prior to the Closing Date;
1.2.4. all rights and obligations, including all
receivables as adjusted by applicable penalties or premiums,
relating to coal shipped prior to the Closing Date, together with
all responsibilities for invoicing and collection;
1.2.5. all of Seller's insurance policies including,
without limitation, policies for health, general liability and
property insurance, and any and all premium refunds and claims
with respect to such refunds and all related refund payments,
proceeds and other amounts due or payable, or hereafter becoming
due or payable, thereunder;
1.2.6. each of the assets listed on Schedule 1.2.6;
and
1.2.7. all of the employees, active or retired, of
Seller or any predecessor of Seller.
2. Purchase Price.
2.1. Purchase Price. The Purchase Price for the
Purchased Assets (the "Purchase Price") shall be $85,000,000.
2.2. Purchase Price Adjustment.
2.2.1. WCC and Seller covenant that, on the Closing
Date, the clean coal included in the Personal Property shall
consist of 28,000 tons of Compliance Coal, 0 tons of <1% Sulfur
Coal and 2,000 tons of >1% Sulfur Coal.
2.2.2. Within fifteen business days following the
Closing Date, which period may be extended because of inclement
weather or the need for aerial photography, Buyer and Seller,
using Seller's records and assays of the coal stockpile
customarily used in the coal business, shall determine the actual
amount of Compliance Coal, <1% Sulfur Coal, and >1% Sulfur Coal
included in the Personal Property on the Closing Date. The
Purchase Price shall be increased by $19.89 for each ton of
Compliance Coal in excess of the amount specified in paragraph
2.2.1 and decreased by a like amount for each ton of Compliance
Coal below such amount, shall be increased by $19.89 for each ton
of <l% Sulfur Coal in excess of the amount specified in paragraph
2.2.1 and decreased by a like amount for each ton of <1% Sulfur
Coal below such amount, and shall be increased by $23.53 for each
ton of >1% Sulfur Coal in excess of the amount specified in
paragraph 2.2.1 and decreased by a like amount for each ton of
>1% Sulfur Coal below such amount. Each of Buyer and Seller
shall pay the salaries of its own employees and the costs
associated with the use of its own equipment used in conducting
such tests. The cost of any outside services used in conducting
such tests shall be shared equally by Seller and Buyer.
2.2.3. All adjustments to the Purchase Price required
by paragraph 2.2.2 shall be netted. Within twenty business days
following the Closing Date, Buyer or Seller, as the case may be,
shall make any payment required so that the net amount actually
paid by Buyer hereunder shall be equal to the Purchase Price as
adjusted by paragraph 2.2.2.
2.3. Allocation of Purchase Price. Buyer and Seller
have agreed to allocate the Purchase Price to the Purchased
Assets as set forth in Exhibit F.
3. Assumption of Obligations and Liabilities; Excluded
Liabilities.
3.1. Assumed Liabilities. On the Closing Date, Buyer
shall deliver to Seller the Instrument of Assumption pursuant to
which Buyer shall assume and agree to discharge, in accordance
with their respective terms and subject to the respective
conditions thereof, all liabilities and obligations of Seller to
be paid or performed after the Valuation Date under the Out
Leases, the In Leases, the Personal Property Leases and the Other
Purchased Contracts, except in each case, to the extent such
liabilities and obligations, but for a breach or default by
Seller, would have been paid, performed or otherwise discharged
on or prior to the Closing Date or to the extent the same arise
out of any such breach or default. All of the foregoing
liabilities and obligations to be assumed by Buyer hereunder
(excluding any Excluded Liabilities) are referred to herein as
the "Assumed Liabilities."
3.2. Excluded Liabilities. Notwithstanding anything
contained in this Agreement to the contrary, Buyer shall not
assume or be obligated to pay, perform or otherwise discharge any
liability or obligation of WCC or Seller, direct or indirect,
known or unknown, absolute or contingent, not expressly assumed
by Buyer pursuant to the Instrument of Assumption (all such
liabilities and obligations not being assumed being herein called
the "Excluded Liabilities") and, notwithstanding anything to the
contrary in paragraph 3.1, none of the following shall be
"Assumed Liabilities" for purposes of this Agreement:
3.2.1. any costs and expenses incurred by WCC or
Seller incident to its negotiation and preparation of this
Agreement and its performance and compliance with the agreements
and conditions contained herein;
3.2.2. any liabilities or costs of WCC, Seller or any
related party of or successor to WCC or Seller under the Act or
any amendments thereto, it being the express intent of the
parties hereto that WCC and Seller retain and WCC and Seller do
hereby retain in full any and all liabilities, duties and
obligations either may have under the Act and that neither WCC
nor Seller is transferring to Buyer and Buyer is not assuming
from WCC nor Seller any liabilities, duties or obligations under
the Act and that Buyer is not a "Related Party" or "successor" to
WCC or Seller as those terms are used in the Act;
3.2.3. any liabilities or obligations in respect of
any Excluded Assets;
3.2.4. any liabilities in respect of the claims or
proceedings described in Schedule 5.1.11; or
3.2.5. any liabilities and obligations related in any
way to the employees of Seller or WCC, active or retired,
including employees of predecessors or successors of Seller or
WCC or any related party.
4. The Closing.
4.1. Time and Place. The closing of the transactions
contemplated in this Agreement (the "Closing") shall be at 9:00
A.M. on the thirtieth day after the conditions precedent
specified in paragraph 9 shall have been satisfied or waived, or
on such earlier date as may be mutually agreed to by the parties
hereto (the "Closing Date"), at the offices of Sidley & Austin,
875 Third Avenue, New York, New York 10022. It is the intention
of the parties to close on the last Business Day of a calendar
month.
4.2. Deliveries by Seller and WCC. Subject to
fulfillment or waiver of the conditions set forth in paragraph
9.1 hereof, at the Closing and against the payment and deliveries
to be made by Buyer pursuant to paragraph 4.3 hereof, Seller
shall, and WCC shall cause Seller to, deliver or cause to be
delivered to Buyer the following:
4.2.1. A copy of the resolutions of the Boards of
Directors of WCC and Seller authorizing the execution and
delivery of this Agreement and each of the agreements and
instruments executed in connection herewith or delivered pursuant
hereto and the transactions contemplated hereby, certified by the
Secretary or an Assistant Secretary of WCC and Seller as of the
Closing Date;
4.2.2. The opinion of Theodore E. Worcester, Senior
Vice President and General Counsel of WCC, in the form set forth
in Exhibit B;
4.2.3. All consents, waivers or approvals obtained by
WCC or Seller with respect to the Purchased Assets or the
consummation of the transactions contemplated by this Agreement;
4.2.4. The Instrument of Assignment duly executed by
Seller;
4.2.5. The certificates contemplated by paragraphs
9.2.1 and 9.2.2 hereof, duly executed by an authorized officer of
WCC and Seller;
4.2.6. Certificates of title or origin (or like
documents) with respect to any vehicles included in the Purchased
Assets and other equipment for which a certificate of title or
origin is required in order to transfer title;
4.2.7. A special warranty deed with respect to each of
the parcels of Owned Real Property, duly executed by Seller and
in form and substance reasonably satisfactory to Buyer;
4.2.8. Instruments of Conveyance with respect to each
of the In Leases, Out Leases, Personal Property Leases (including
the rail car lease), Mining Contracts, and Coal Sale Contracts,
in each case duly executed by Seller and in form and substance
reasonably satisfactory to Buyer, together with a consent from
each party to such documents other than WCC or Seller from whom a
consent is required;
4.2.9. Such other bills of sale, assignments and other
instruments of transfer or conveyance as Buyer may reasonably
request or as may be otherwise necessary to evidence and effect
the sale, assignment, transfer, conveyance and delivery of the
Purchased Assets to Buyer;
4.2.10. Such other documents, instruments and writings
as shall be reasonably required in connection with the
consummation of the transactions contemplated hereby; and
4.2.11. A Non-Foreign Affidavit as required by Section
1445 of the Internal Revenue Code.
In addition to the above deliveries, WCC and Seller
shall take all steps and actions as Buyer may reasonably request
or as may otherwise be necessary to put Buyer in actual
possession or control of the Purchased Assets.
4.3. Payment on the Closing Date; Deliveries by Buyer.
Subject to fulfillment or waiver of the conditions set forth in
paragraph 9.2 hereof, at the Closing and against the deliveries
to be made by Seller pursuant to paragraph 4.2 hereof, Buyer
shall:
(a) pay to Seller the Purchase Price by wire transfer
of immediately available funds to the account specified in
Schedule 4.3; and
(b) deliver or cause to be delivered to Seller the
following:
4.3.1. A copy of resolutions of the Board of Directors
or the executive committee of Buyer authorizing the execution and
delivery of this Agreement and each of the agreements and
instruments executed in connection herewith or delivered pursuant
hereto and the consummation of the transactions contemplated
hereby, certified by the Secretary or an Assistant Secretary of
Buyer as of the Closing Date;
4.3.2. The opinion of in-house counsel in the form set
forth in Exhibit C;
4.3.3. [Intentionally omitted];
4.3.4. The Instrument of Assumption duly executed by
Buyer;
4.3.5. The certificates contemplated by paragraph
9.1.1 hereof, duly executed by the President or any Vice
President of Buyer;
4.3.6. The guarantee of CONSOL Inc. in the form set
forth in Exhibit G; and
4.3.7. Such other documents, instruments and writings
as shall be reasonably required in connection with the
consummation of the transactions contemplated hereby.
4.4. Effect of Closing. By its election to close,
each of the parties hereto shall be deemed to have acknowledged
the full performance by the other party of every agreement and
obligation of the other party contained herein which is to be
performed on or before the Closing.
5. Representations and Warranties.
5.1. Representations and Warranties of WCC and Seller.
WCC and Seller hereby jointly and severally represent and warrant
to Buyer and agree as follows:
5.1.1. Organization and Existence. Each of WCC, CCC,
KCC and DPC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and
each is duly qualified and in good standing as a foreign
corporation in the Commonwealth of Kentucky.
5.1.2. Authority; Approval; No Violations; Consents.
5.1.2.1. Each of WCC, CCC, KCC and DPC has corporate
power and authority to execute, deliver and perform this
Agreement and all of the Westmoreland Ancillary Agreements and to
consummate the transactions contemplated hereby and thereby.
5.1.2.2. The execution of this Agreement does not
require the consent of the Board of Directors of WCC, CCC, KCC or
DPC. The performance of this Agreement and the execution,
delivery and performance of the Westmoreland Ancillary Agreements
requires authorization and approval by the Board of Directors of
WCC, CCC, KCC and DPC. WCC is in the process of selling certain
of its assets other than the Purchased Assets, and, if in
connection with one or more of those sales WCC shall solicit its
stockholders pursuant to section 271 of the General Corporation
Law of the State of Delaware (or any comparable provision of
State or federal law), the transactions contemplated hereby will
be subject to approval by WCC's stockholders. Except as set
forth above and in Schedule 5.1.2, neither the execution and
delivery of this Agreement or any of the Westmoreland Ancillary
Agreements or the consummation of any of the transactions
contemplated hereby or thereby nor compliance with or fulfillment
of the terms, conditions and provisions hereof or thereof will:
(i) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an
event creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in the creation
or imposition of any Encumbrance upon any of the Purchased
Assets, under (1) the Certificate of Incorporation or By-laws of
WCC or Seller, (2) any Seller Contract, (3) any other material
note, instrument, agreement, mortgage, lease, license, franchise,
permit or other authorization, right, restriction or obligation
to which WCC or Seller is a party or any of the Purchased Assets
is subject or by which WCC or Seller is bound, (4) any Court
Order to which WCC or Seller is a party or any of the Purchased
Assets is subject or by which WCC or Seller is bound, or (5) any
Requirements of Laws affecting WCC or Seller or the Purchased
Assets; or (ii) require the approval, consent, authorization or
act of, or the making by WCC or Seller of any declaration, filing
or registration with, any Person, except as provided under the
HSR Act. This Agreement has been duly executed by WCC, CCC, KCC
and DPC. Upon the receipt of approval from the Board of
Directors of WCC, CCC, KCC and DPC, and if WCC shall solicit its
stockholders, then upon the receipt of the requisite vote of
stockholders, this Agreement will have been duly authorized,
executed and delivered by WCC, CCC, KCC and DPC and will be the
legal, valid and binding obligation of each of WCC, CCC, KCC and
DPC enforceable in accordance with its terms, and each of the
other Westmoreland Ancillary Agreements upon execution and
delivery by WCC, CCC, KCC and DPC will be a legal, valid and
binding obligation of such Person enforceable in accordance with
its terms, in each case subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and other
similar laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity.
5.1.3. Availability of Assets. Except as set forth in
Schedule 5.1.3, (i) the Personal Property and the Real
Improvements are in good condition (subject to normal wear and
tear) and serviceable condition and are suitable for the uses for
which intended, and (ii) Seller has, with respect to the Owned
Real Property and the Leased Real Property such easements and
other rights of ingress and egress and for utilities and services
as are necessary to permit the mining and processing of coal
thereon and the removal of coal therefrom, in each case as such
operations are currently conducted. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES SPECIFICALLY SET FORTH HEREIN,
NEITHER WCC NOR SELLER MAKES ANY REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, CONCERNING THE TANGIBLE PERSONAL PROPERTY
OWNED OR LEASED BY SELLER.
5.1.4. Governmental Permits. Seller owns, holds or
possesses all licenses, franchises, permits, privileges,
immunities, approvals and other authorizations from a
Governmental Body which are necessary to entitle it to own or
lease, operate and use the Purchased Assets in the manner in
which such Purchased Assets are being leased, operated and used
on the date of this Agreement (herein collectively called
"Governmental Permits") and, to the Knowledge of Seller, each
Contractor owns, holds and possesses all licenses, franchises,
permits, privileges, immunities, approvals and other
authorizations from a Governmental Body which are necessary for
the coal mining, transporting and processing operations of such
Contractor being conducted on the date of this Agreement on the
Real Property. Schedule 5.1.4 sets forth a list and brief
description of each Governmental Permit. Complete and correct
copies of all of the Governmental Permits have heretofore been
delivered to Buyer.
Except as set forth in Schedule 5.1.4, (i) Seller has
fulfilled and performed its obligations under each of the
Governmental Permits, and no event has occurred or condition or
state of facts exists which constitutes or, after notice or lapse
of time or both, would constitute a breach or default under any
such Governmental Permit or which permits or, after notice or
lapse of time or both, would permit revocation or termination of
any such Governmental Permit, or which might adversely affect in
any material respect the rights of Seller under any such
Governmental Permit; (ii) no notice of cancellation, of default
or of any material dispute concerning any Governmental Permit, or
of any event, condition or state of facts described in the
preceding clause, has been received by or is known to Seller
(which has not been remedied); and (iii) subject to paragraphs
9.1.4 and 9.1.5, each of the Governmental Permits is valid,
subsisting and in full force and effect and may be assigned and
transferred to Buyer in accordance with this Agreement and will
continue in full force and effect thereafter, in each case
without (x) the occurrence of any breach, default or forfeiture
of rights thereunder, or (y) the consent, approval, or act of, or
the making of any filing with, any Governmental Body.
5.1.5. Owned Real Property. Schedule 1.1.1 sets forth
a list and a brief description of each tract of Owned Real
Property (showing the record title holder, legal description,
permanent index number, and location). Complete and correct
copies of any title opinions, abstracts, surveys and appraisals
in Seller's possession or any policies of title insurance
currently in force and in the possession of Seller with respect
to each such tract of Owned Real Property will be delivered to
the Buyer and Buyer shall have the opportunity to examine
Seller's title to such Owned Real Property prior to the Closing
Date.
5.1.6. Real Property Leases. Schedule 1.1.2 sets
forth a list and a brief description of each In Lease (showing
the lessor and lessee, execution date, annual rental, expiration
date, renewal and purchase options, if any, and the location and
a summary description of the Real Property covered by each such
In Lease). Each In Lease conveys to Seller good and marketable
title to the coal on the premises covered by such In Lease and
grants Seller the exclusive right to mine all coal thereon.
Complete and correct copies of any title opinions, abstracts,
surveys and appraisals in the possession of Seller or WCC or any
policies of title insurance currently in force and in the
possession of Seller or WCC with respect to each tract of Leased
Real Property under the In Leases will be delivered to Buyer.
Schedule 1.1.4 sets forth a list of each Out Lease showing, in
the case of each Farm Lease, the name of the lessee and the tract
or portion thereof leased to such Person, and, in the case of
each Coal Lease, the names of the lessor and lessee and the date
of the execution of each such lease. Seller agrees that it will
provide such additional information regarding the Out Leases as
Buyer may reasonably request.
5.1.7. Condemnation. Neither the whole nor any part
of any Real Property owned, leased, used or occupied by Seller is
subject to any pending suit for condemnation or other taking by
any public authority, and, to the knowledge of Seller, no such
condemnation or other taking is threatened or contemplated.
5.1.8. Personal Property Leases. Schedule 1.1.5 sets
forth a list and a brief description (including in each case the
lessor, the annual rental, the expiration date thereof, the
renewal and purchase options, and a brief description of the
property covered) of each Personal Property Lease.
5.1.9. Mining Contracts. Schedule 1.1.6 and the
letter agreement with Baltimore Gas & Electric dated March 12,
1990 described on Schedule 1.1.7 set forth a list of all
contracts pursuant to which third parties have agreed to mine or
process coal on the Real Property or to which WCC, Seller or WCSC
is a party and relating to the transportation of coal from the
Real Property.
5.1.10. Status of Contracts. Except as set forth in
Schedule 5.1.10 or in any other Schedule hereto, each of the In
Leases, the Out Leases, the Personal Property Leases and the
Other Purchased Contracts (collectively, the "Seller Contracts")
constitutes a valid and binding obligation of Seller and, to the
knowledge of Seller, each other party thereto and is in full
force and effect and (except as set forth in Schedule 5.1.2) may
be transferred to Buyer pursuant to this Agreement and will
continue in full force and effect thereafter, in each case
without breaching the terms thereof or resulting in the
forfeiture or impairment of any rights thereunder and without the
consent, approval or act of, or the making of any filing with,
any other Person. Seller has fulfilled and performed in all
material respects its obligations under each of the Seller
Contracts, and Seller is not in, or alleged to be in, breach or
default under, nor is there or is there alleged to be any basis
for termination of, any of the Seller Contracts and, to the
knowledge of Seller, no other party to any of the Seller
Contracts has materially breached or defaulted thereunder, and no
event has occurred and no condition or state of facts exists
which, with the passage of time or the giving of notice or both,
would constitute such a default or breach by Seller or, to the
knowledge of Seller, by any such other Person. Seller is not
currently renegotiating any of the Seller Contracts or paying
liquidated damages in lieu of performance thereunder. Complete
and correct copies of each of the Seller Contracts will be
delivered to Buyer.
5.1.11. Title to Property. Seller has good and
marketable title in fee simple absolute to all Owned Real
Property and to all Real Improvements thereon, in each case free
and clear of all Encumbrances, except for Permitted Encumbrances.
Seller has good and marketable title to all of the Personal
Property and the other Purchased Assets, free and clear of all
Encumbrances, except for Permitted Encumbrances and except as set
forth in Schedule 5.1.11. Upon delivery to Buyer on the Closing
Date of the instruments of transfer contemplated by paragraph 4.2
hereof, Seller will thereby transfer to Buyer good and marketable
title to the Purchased Assets, free and clear of all
Encumbrances, except Permitted Encumbrances.
5.1.12. No Violation, Litigation or Regulatory Action.
Except as set forth in Schedule 5.1.12:
(i) the Purchased Assets and their uses comply in all
material respects with all applicable Requirements of Laws
and Court Orders;
(ii) WCC and Seller have complied in all material
respects with all Requirements of Laws and Court Orders
which are applicable to the Purchased Assets;
(iii) there are no lawsuits, claims, suits,
proceedings or investigations pending or, to the knowledge
of WCC or Seller, threatened against or affecting WCC or
Seller in respect of the Purchased Assets nor, to the
knowledge of WCC or Seller, is there any basis for any of
the same, and there are no lawsuits, suits or proceedings
pending in which WCC or Seller is the plaintiff or claimant
which relate to the Purchased Assets; and
(iv) there is no action, suit or proceeding pending or,
to the knowledge of WCC or Seller, threatened which
questions the legality or propriety of the transactions
contemplated by this Agreement.
5.1.13. Environmental Matters.
5.1.13.1. Except as set forth in Schedule 5.1.13(I):
(i) the operations of WCC and Seller with respect to
the Purchased Assets comply with all applicable
Environmental Laws;
(ii) WCC or Seller has obtained all environmental,
health and safety Governmental Permits necessary for its
operation with respect to the Purchased Assets, and all such
Governmental Permits are in good standing and WCC and Seller
are in compliance with all terms and conditions of such
permits;
(iii) Neither WCC nor Seller, with respect to the
Purchased Assets, nor any of the Real Property is subject to
any on-going investigation by, order from or agreement with
any Person (including without limitation any prior owner or
operator of the Real Property) respecting (A) any
Environmental Law, (B) any Remedial Action or (C) any claim
of Loss or Expense arising from the Release or threatened
Release of a Contaminant into the environment;
(iv) WCC and Seller, with respect to the Purchased
Assets, are not subject to any judicial or administrative
proceeding, order, judgment, decree or settlement alleging
or addressing a violation of or liability under any
Environmental Law;
(v) WCC and Seller have not, with respect to any Real
Property:
(a) reported a Release of a hazardous substance
pursuant to CERCLA, or any state equivalent;
(b) filed a notice pursuant to CERCLA;
(c) filed a notice pursuant to RCRA, indicating
the generation of any hazardous waste, as that term is
defined under 40 CFR Part 261 or any state equivalent;
or
(d) filed any notice under any applicable
Environmental Law reporting a substantial violation of
any applicable Environmental Law;
(vi) there is not now, nor to the Knowledge of WCC or
Seller has there ever been, on or in any Real Property:
(a) any treatment, recycling, storage or disposal
of any hazardous waste, as that term is defined under
40 CFR Part 261 or any state equivalent that requires
or required a Governmental Permit pursuant to RCRA; or
(b) any underground storage tank or Surface
Impoundment, except as may have been created by tenants
on non-coal out leases;
(vii) to the Knowledge of WCC and Seller, there is not
now on or in any Real Property any polychlorinated biphenyls
(PCB) used in pigments, hydraulic oils, electrical
transformers or other equipment;
(viii) Neither WCC nor Seller has received any notice
or claim to the effect that it is or may be liable to any
Person as a result of the Release or threatened Release of a
Contaminant into the environment from or on any Real
Property;
(ix) Neither WCC nor Seller has, with respect to the
Purchased Assets, received any request for information in an
enforcement context pursuant to the Clean Air Act; the
Surface Mining and Reclamation Act; the Clean Water Act; the
Toxic Substances Control Act; RCRA; CERCLA; and MSHA or
equivalent provisions of applicable state law;
(x) no Environmental Encumbrance has attached to any
Seller Real Property; and
(xi) any asbestos-containing material which is on or
part of any Real Property is in good repair according to the
current standards and practices governing such material, and
its presence or condition does not violate any currently
applicable Environmental Law.
5.1.13.2. Except as set forth in Schedule 5.1.13(II),
to the Knowledge of WCC and Seller:
(i) the operations of the Contractors and Lessees
on the Real Property substantially comply with all
applicable Environmental Laws;
(ii) each of the Contractors and Lessees, with
respect to its operations on the Real Property, has
obtained all environmental, health and safety
governmental permits necessary for its operations on
the Real Property, and all such governmental permits
are in good standing and each of the Contractors and
Lessees is in substantial compliance with all terms and
conditions of such permits;
(iii) none of the Contractors and Lessees, with
respect to its operation on the Real Property, is
subject to any on-going investigation by, order from or
agreement with any Person (including without limitation
any prior owner or operator of the Real Property)
respecting (A) any Environmental Law, (B) any Remedial
Action or (C) any claim of Loss or Expense arising from
the Release or threatened Release of a Contaminant into
the environment;
(iv) none of the Contractors and Lessees, with
respect to the Real Property, is subject to any
judicial or administrative proceeding, order, judgment,
decree or settlement alleging or addressing a violation
of or liability under any Environmental Law;
(v) none of the Contractors and Lessees has, with
respect to any Real Property:
(a) reported a Release of a hazardous
substance pursuant to CERCLA, or any state
equivalent;
(b) filed a notice pursuant to CERCLA;
(c) filed a notice pursuant to RCRA,
indicating the generation of any hazardous waste,
as that term is defined under 40 CFR Part 261 or
any state equivalent; or
(d) filed any notice under any applicable
Environmental Law reporting a substantial
violation of any applicable Environmental Law;
(vi) None of the Contractors and Lessees has
received any notice or claim to the effect that it is
or may be liable to any Person as a result of the
Release or threatened Release of a Contaminant into the
environment from or on any Real Property; and
(vii) None of the Contractors and Lessees has,
with respect to its operations on the Real Property,
received any request for information in an enforcement
context pursuant to the Clean Air Act; the Surface
Mining and Reclamation Act; the Clear Water Act; the
Toxic Substances Control Act; RCRA; CERCLA; and MSHA or
equivalent provisions of applicable state law.
5.1.14. Reclamation and Surety Bonds. Schedule 5.1.14
contains a list of all reclamation and surety bonds posted by
Seller with respect to the Purchased Assets (in each case
specifying the surety, amount of bond and mining or other
Governmental Permit or other item to which such bond pertains)
and any pending claims thereunder. The bonds listed in Schedule
5.1.14 are in full force and effect and all premiums billed with
respect thereto have been paid. To the knowledge of WCC and
Seller, the bonds listed in such Schedule 5.1.14 satisfy all
contractual requirements and Requirements of Laws applicable to
WCC or Seller with respect to the Purchased Assets, including the
Real Property. WCC and Seller have complied in all respects with
each of such bonds. True and complete copies of each such bond
have been delivered to Buyer.
5.1.15. Insurance. Schedule 5.1.15 sets forth a list
(including nature of coverage, limits, deductibles, premiums and
the loss experience for the most recent five years with respect
to each type of coverage) of all policies of insurance
maintained, owned or held by WCC or Seller on the date hereof
with respect to the Purchased Assets. WCC or Seller shall keep
such insurance or comparable insurance in full force and effect
through the Closing Date. WCC and Seller have complied with each
of such insurance policies and have not failed to give any notice
or present any claim thereunder in a due and timely manner.
Correct and complete copies of the most recent inspection
reports, if any, received from insurance underwriters as to the
condition of the Purchased Assets, have been delivered to Buyer.
5.1.16. Brokers. Neither WCC nor Seller nor any
Person acting on its or their behalf has engaged or used the
services of any broker, finder or similar Person for or on
account of the transactions contemplated by this Agreement and,
based upon the actions of WCC, its agents or its Affiliates, no
Person shall be entitled to a brokerage commission, finder's fee
or like payment in connection with this Agreement or in
connection with the consummation of the transactions contemplated
hereby; provided, that WCC has engaged Merrill Lynch & Co. to act
as its financial advisor and WCC shall be solely responsible for
the payment of fees and expenses of Merrill Lynch & Co. for such
services.
5.1.17. Disclosure. None of the representations or
warranties of WCC or Seller contained herein, none of the
information contained in the Schedules referred to in this
paragraph 5.1, is false or misleading in any material respect or
omits to state a fact herein or therein necessary to make the
statements herein or therein not misleading in any material
respect. There is no fact which adversely affects or in the
future is likely to adversely affect the Purchased Assets in any
material respect which has not been set forth or referred to in
this Agreement or the Schedules hereto.
5.1.18. Subsequent Events or Knowledge. If any event
shall occur after the date of this Agreement but prior to the
Closing Date that renders materially incorrect any of the
representations and warranties contained in paragraph 5.1, or if
WCC or Seller acquires knowledge after the date of this Agreement
that any of the representations and warranties contained in
paragraph 5.1 is materially incorrect, then WCC and Seller shall
modify such representation and warranty by giving written notice
thereof in reasonable detail promptly after receiving knowledge
thereof to Buyer (the "Seller Additional Disclosure"). If the
Seller Additional Disclosure would have a material adverse effect
on the Purchased Assets or the transactions contemplated herein,
then Buyer may either (a) terminate this Agreement pursuant to
paragraph 10.1(c)(3) by giving Seller written notice of such
termination within 5 Business Days after receiving the Seller
Additional Disclosure or (b) waive any breach of representation
or warranty by Seller under paragraph 5.1, and any claim for
indemnification under paragraph 8.1, in respect of the Seller
Additional Disclosure, which waiver shall be deemed to have been
made by Buyer unless Buyer elects to terminate this Agreement as
provided in clause (a) of this sentence. In determining whether
any Seller Additional Disclosure would have a material adverse
effect on Buyer or the transactions contemplated herein, Buyer
may consider any and all prior Seller Additional Disclosure.
5.2. Representations and Warranties of Buyer. Buyer
represents and warrants to WCC and Seller as follows:
5.2.1. Organization and Existence. Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
5.2.2. Authority; Approval; No Violations; Consents.
5.2.2.1. Buyer has corporate power and authority to
execute, deliver and perform this Agreement and all of the Buyer
Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby.
5.2.2.2. The execution, delivery and performance of
this Agreement and the Buyer Ancillary Agreements have been duly
authorized and approved by the Board of Directors of Buyer and do
not require any further authorization or consent of Buyer or its
stockholders. Except as set forth in Schedule 5.2.2, neither the
execution and delivery of this Agreement or any of the Buyer
Ancillary Agreements or the consummation of any of the
transactions contemplated hereby or thereby nor compliance with
or fulfillment of the terms, conditions and provisions hereof or
thereof will: (i) conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of
default or an event creating rights of acceleration, termination
or cancellation or a loss of rights under (1) the Certificate of
Incorporation or By-laws of Buyer, (2) any material note,
instrument, agreement, mortgage, lease, license, franchise,
permit or other authorization, right, restriction or obligation
to which Buyer is a party or any of its assets or properties is
subject or by which Buyer is bound, (3) any Court Order to which
Buyer is a party or any of its assets or properties is subject or
by which Buyer is bound, or (4) any Requirements of Laws
affecting Buyer or its assets or properties, or (ii) require the
approval, consent, authorization or act of, or the making by
Buyer of any declaration, filing or registration with, any
Person, except as provided under the HSR Act. This Agreement has
been duly authorized, executed and delivered by Buyer and is the
legal, valid and binding obligation of Buyer enforceable in
accordance with its terms, and each of the other Buyer Ancillary
Agreements has been duly authorized by Buyer and upon execution
and delivery by Buyer will be a legal, valid and binding
obligation of Buyer enforceable in accordance with its terms, in
each case subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance and other similar laws
affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.
5.2.3. Litigation. Buyer has not received written
notice of any actions, suits or legal, administrative or arbitral
proceedings pending to which Buyer is a party, or written notice
of any threatened actions, suits or legal, administrative or
arbitral proceedings against Buyer that questions the validity of
this Agreement, or of the transactions contemplated herein, or of
any action taken or to be taken by Buyer in connection with this
Agreement.
5.2.4. Brokers. Neither Buyer nor any Person acting
on its behalf has engaged or used the services of any broker,
finder or similar Person for or on account of the transactions
contemplated by this Agreement and, based upon the actions of
Buyer, its agents or its Affiliates, no Person shall be entitled
to a brokerage commission, finder's fee or like payment in
connection with this Agreement or in connection with the
consummation of the transactions contemplated hereby.
5.3. Disclaimers of WCC and Seller. Except as set
forth in this Agreement, neither WCC nor Seller has made and
neither does make hereby any representation or warranty, express
or implied, concerning the Purchased Assets. Neither WCC nor
Seller makes any projection concerning the income to be derived
by Buyer after the Closing Date with respect to the Purchased
Assets or makes any representation or warranty concerning the
quantity or quality of coal included in the Owned Real Property
or the Leased Real Property, except that, to the Knowledge of
Seller or WCC, such information as has been supplied to Buyer
concerning the quality and quantity of coal located upon the
Owned Real Property and the Leased Real Property is not
materially false.
6. Action Prior to the Closing Date.
The respective parties hereto covenant and agree to
take the following actions between the date hereof and the
Closing Date:
6.1. Investigation of the Purchased Assets by Buyer.
WCC and Seller shall afford to the officers, employees and
authorized representatives of Buyer (including, without
limitation, independent public accountants, engineering and
environmental consulting firms, and attorneys) complete access
during normal business hours to the offices, properties,
employees and business and financial records (including computer
files, retrieval programs and similar documentation) of WCC and
Seller to the extent Buyer shall deem necessary or desirable and
shall furnish to Buyer or its authorized representatives such
additional information concerning the Purchased Assets as shall
be reasonably requested, including all such information as shall
be reasonably necessary to enable Buyer or its representatives to
verify the accuracy of the representations and warranties
contained in this Agreement, to verify that the covenants of
Seller contained in this Agreement have been complied with and to
determine whether the conditions set forth in paragraph 9.2
hereof have been satisfied. Buyer agrees that such investigation
shall be conducted in such a manner as not to interfere
unreasonably with the operations of WCC or Seller. No
investigation made by Buyer or its representatives hereunder
shall affect the representations and warranties of WCC or Seller
hereunder.
6.2. Preserve Accuracy of Representations and
Warranties. Each of the parties hereto shall refrain from taking
any action which would render any representation or warranty
contained in paragraph 5.1 or 5.2 of this Agreement inaccurate as
of the Closing Date. Each party shall promptly notify the other
of any action, suit or proceeding that shall be instituted or
threatened against such party to restrain, prohibit or otherwise
challenge the legality of any transaction contemplated by this
Agreement. WCC and Seller shall promptly notify Buyer of any
lawsuit, claim, proceeding or investigation that may be
threatened, brought, asserted or commenced against WCC or Seller
which would have been listed in Schedule 5.1.12 if such lawsuit,
claim, proceeding or investigation had arisen prior to the date
hereof.
6.3. Consents of Third Parties; Governmental
Approvals. (a) WCC and Seller will act diligently and
reasonably to secure, before the Closing Date, the consent,
approval or waiver, in form and substance reasonably satisfactory
to Buyer, from any party to any Seller Contract required to be
obtained by the terms thereof or otherwise for the consummation
of the transaction contemplated by this Agreement or to otherwise
satisfy the conditions set forth in paragraphs 9.1.4 and 9.2.5
hereof; provided that WCC and Seller shall not have any
obligation to offer or pay any consideration in order to obtain
any such consents or approvals; and provided, further, that WCC
and Seller shall not make any agreement or understanding
affecting the Purchased Assets as a condition for obtaining any
such consents or waivers except with the prior written consent of
Buyer. During the period prior to the Closing Date, Buyer shall
act diligently and reasonably to cooperate with WCC and Seller to
obtain the consents, approvals and waivers contemplated by this
paragraph 6.3(a).
(b) During the period prior to the Closing Date, WCC,
Seller and Buyer shall act diligently and reasonably, and shall
cooperate with each other, to secure any consents and approvals
of any Governmental Body required to be obtained by them in order
to permit the consummation of the transactions contemplated by
this Agreement, or to otherwise satisfy the conditions set forth
in paragraphs 9.1.3 and 9.2.4 hereof; provided that WCC and
Seller shall not make any agreement or understanding affecting
the Purchased Assets as a condition for obtaining any such
consents or approvals except with the prior written consent of
Buyer.
6.4. Operations Prior to the Closing Date. (a) WCC
and Seller shall keep and maintain the Purchased Assets in good
operating condition and repair. Prior to the Closing Date,
Seller shall operate the Purchased Assets in the same general
manner and procedure as it operated such Purchased Assets prior
to execution of this Agreement, maintaining a normal supply of
spare parts and producing a reasonably like quantity and quality
of coal as is adequate to meet then-existing requirements of Coal
Supply Contracts.
(b) Notwithstanding paragraph 6.4(a) hereof, except as
expressly contemplated by this Agreement or except with the
express written approval of Buyer, WCC and Seller shall not:
(i) enter into any contract for the sale, lease or
contract mining of any Owned Real Property or exercise any
option to extend an In Lease or an Out Lease;
(ii) sell, lease (as lessor), transfer or otherwise
dispose of (including any transfers from Seller to any of
its Affiliates), or mortgage or pledge, or impose or suffer
to be imposed any Encumbrance on, any of the Purchased
Assets except for Permitted Encumbrances; or
(iii) without the prior written consent of Buyer,
terminate, modify or amend in any material respect any
Seller Contract, except as contemplated by this Agreement.
6.5. Antitrust Law Compliance. As promptly as
practicable after the date hereof, Buyer and WCC shall file or
cause to be filed with the Federal Trade Commission and the
Antitrust Division of the Department of Justice the notifications
and other information required to be filed under the HSR Act, or
any rules and regulations promulgated thereunder, with respect to
the transactions contemplated hereby. Each party shall make its
best efforts to assure that all such filings will be done in a
professional manner and in accordance with the HSR Act and any
such rules and regulations. Each of Buyer and WCC agrees to make
available to the other such information as each of them may
reasonably request relative to the business, assets and property
of Buyer or WCC, as the case may be, as may be required of each
of them to file any additional information requested by such
agencies under the HSR Act and any such rules and regulations.
Each of WCC and Buyer shall, and shall cause each of its
Affiliates to, provide such additional information and
documentary materials and take all reasonable actions necessary,
and will cooperate with each other, to obtain approval of the
transactions contemplated hereunder by the Federal Trade
Commission and the Department of Justice.
7. Additional Agreements.
7.1. Discharge of Seller's Liabilities. WCC and
Seller covenant and agree that they will pay and discharge, and
hold Buyer harmless from, each and every liability and obligation
of WCC and Seller in respect of the Purchased Assets arising from
events occurring on or prior to the Closing Date, excepting only
those liabilities and obligations expressly assumed by Buyer at
the Closing pursuant to instruments of assumption delivered to
WCC and Seller at the Closing, it being understood and agreed
that Buyer is assuming no liabilities or obligations of WCC or
Seller other than liabilities and obligations so expressly
assumed by Buyer.
7.2. Expenses. Each of the parties shall be
responsible for and shall pay all costs and expenses incurred by
it in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, all fees,
expenses and disbursements of its counsel and accountants and
other expenses incident to its negotiation and preparation of
this Agreement and to its performance and compliance with all
agreements and conditions contained herein on its part to be
performed or complied with. In all events, Buyer shall be solely
responsible for all costs and expenses incurred by Buyer in any
examination or investigation regarding Seller, which Buyer
elected to carry out, including, without limitation, the cost of
any examination of title to the Real Property.
7.3. Further Assurances. On the Closing Date WCC and
Seller shall (i) deliver to Buyer such other bills of sale,
deeds, endorsements, assignments and other good and sufficient
instruments of conveyance and transfer, in form reasonably
satisfactory to Buyer and its counsel, as Buyer may reasonably
request or as may be otherwise reasonably necessary to vest in
Buyer all the right, title and interest of Seller in, to or under
any or all of the Purchased Assets, and (ii) take all steps as
may be reasonably necessary to put Buyer in actual possession and
control of all the Purchased Assets. From time to time following
the Closing, WCC and Seller shall execute and deliver, or cause
to be executed and delivered, to Buyer such other instruments of
conveyance and transfer as Buyer may reasonably request or as may
be otherwise necessary to more effectively convey and transfer
to, and vest in, Buyer and put Buyer in possession of, any part
of the Purchased Assets, and, in the case of licenses,
certificates, approvals, authorizations, agreements, contracts,
leases, easements and other commitments included in the Purchased
Assets (a) which cannot be transferred or assigned effectively
without the consent of third parties which consent has not been
obtained prior to the Closing, to cooperate with Buyer at its
request in endeavoring to obtain such consent promptly, and if
any such consent is unobtainable, to use its best efforts to
secure to Buyer the benefits thereof in some other manner, or (b)
which are otherwise not transferable or assignable, to use its
best efforts jointly with Buyer to secure to Buyer the benefits
thereof in some other manner (including the exercise of the
rights of Seller thereunder); provided, however, that nothing
herein shall relieve WCC or Seller of its obligations under
paragraph 6.3. Notwithstanding anything in this Agreement to the
contrary, this Agreement shall not constitute an agreement to
assign any license, certificate, approval, authorization,
agreement, contract, lease, easement or other commitment included
in the Purchased Assets if an attempted assignment thereof
without the consent of a third party thereto would constitute a
breach thereof. Should title to any real property located within
the outer boundary of or abutting the Owned Real Property or
Leased Real Property be owned by WCC or Seller on the Closing
Date and not transferred to Buyer at the Closing Date, then WCC
or Seller shall transfer same to Buyer without additional
consideration.
7.4. Prorations. (a) The income, expenses and
liabilities attributable to the Purchased Assets through the
Valuation Date shall be for the account of Seller. Seller shall
be responsible for all Taxes attributable to the Purchased Assets
and the business operations of Seller for the period including
and prior to the Valuation Date. Buyer shall be responsible for
all Taxes attributable to the Purchased Assets for the period
beginning after the Valuation Date. Seller and Buyer shall each
pay half of any recording, transfer, sales and similar taxes
required to be paid in connection with the sale of the Purchased
Assets. All royalties, rentals and other payments due under the
Seller Contracts shall be prorated between Buyer and Seller as of
the Valuation Date, with Seller paying to Buyer all amounts
received by Seller prior to the Closing Date under the Out Leases
in respect of the period after the Valuation Date and Buyer
reimbursing Seller for all amounts paid by Seller prior to the
Closing Date under the Seller Contracts in respect of the period
after the Valuation Date (including all unrecouped advance or
minimum royalties under the In Leases paid by Seller prior to the
Closing Date in respect of the period after the Closing Date).
(b) Seller shall deliver to Buyer, within 75 days
after the Closing Date, a statement setting forth in reasonable
detail the calculation of amounts due Seller or Buyer under
paragraph 7.4(a). Buyer shall have 60 days after receipt thereof
to review the details thereof. If Buyer does not object thereto
in writing during such review period, then such calculations
shall be final and binding. If Buyer objects thereto in writing
within such review period, then the parties shall use their
reasonable efforts to resolve their differences and, in the event
Seller and Buyer so resolve any such differences, the
calculations, as adjusted by the adjustments agreed to by the
parties, shall be final and binding. If Seller and Buyer are
unable to resolve such differences within the next 30 days
following such review period, then Buyer and Seller shall submit
the objections that are unresolved to the Accounting Firm, which
shall be instructed to resolve the unresolved objections as
promptly as reasonably practicable and to deliver written notice
to Buyer and Seller setting forth its resolution of the disputed
matters. The calculations, after giving effect to any
adjustments agreed to by the parties and to the resolution of
disputed matters by the Accounting Firm, shall be final and
binding. Any payments required to be made by Buyer or Seller in
respect of such calculations shall be made promptly (but not
later than five days) after the determination of such
calculations that is final and binding. The Accounting Firm may
employ legal counsel if necessary to its resolution and all costs
of such Accounting Firm shall be shared equally by Seller and
Buyer.
7.5. Litigation Assistance. Following the Closing,
Buyer shall provide to WCC, and WCC and Seller shall provide to
Buyer, such information and documents as may be reasonably
requested in connection with any suit, claim, investigation or
proceeding, pending or threatened, which relates to the Purchased
Assets and in connection therewith each party shall, without
limitation, make available to the other party during normal
business hours (i) all books and records relating thereto in its
possession, and (ii) all employees of such party or its
Affiliates having knowledge of the matters in controversy. Such
access shall be afforded upon receipt of reasonable advance
notice and shall not unreasonably interfere with the operations
of the party being requested to furnish the information. The
party requesting the information shall be responsible for any
significant costs or expenses incurred by the party furnishing
the information pursuant to this paragraph 7.5.
7.6. Post-Closing Remittances. If, after the Closing
Date, WCC or Seller shall receive any remittance with respect to
a Seller Contract which relates to the period after the Valuation
Date, WCC or Seller shall endorse such remittance to the order of
Buyer and forward it to Buyer promptly following receipt thereof.
Conversely, if, after the Closing Date, Buyer shall receive any
remittance with respect to a Seller Contract which relates to the
period on or prior to the Valuation Date, then Buyer shall
endorse such remittance to the order of Seller and forward it to
Seller promptly following receipt thereof.
7.7. Maintenance of Corporate Existence. WCC
covenants and agrees that it will, for a period of not less than
fifteen years from and after the closing, take all necessary
action to maintain its corporate existence, and to maintain the
corporate existence of KCC, CCC and DPC, or to cause such
corporations to maintain their corporate existence, and to keep
itself and such other corporations in good standing (or to cause
such other corporations to remain in good standing) and properly
qualified to do business in the applicable jurisdiction of
incorporation; provided, however, that this covenant by WCC shall
be subject to the following exceptions and qualifications:
(i) WCC may consolidate with, or merge with or into
any other corporation (whether or not WCC shall be the
surviving corporation), or sell, assign, transfer or lease
all or substantially all of its properties and assets as an
entirety or substantially as an entirety to any Person or
group of affiliated Persons, in one transaction or a series
of related transactions, if either: (A) WCC shall be the
surviving corporation or surviving Person; or (B) the
surviving corporation or surviving Person (if other than
WCC) formed by such consolidation or with which or into
which WCC is merged or the Person (or group of affiliated
Persons) to which all or substantially all the properties or
assets of WCC as an entirety or substantially as an entirety
are sold, assigned, transferred or leased shall be a
corporation organized and existing under the laws of the
United States of America or any state thereof or the
District of Columbia and shall expressly assume all the
obligations of WCC under this Agreement, including but not
limited to paragraph 8.1(iv) and (v) hereof.
(ii) WCC may dissolve voluntarily under applicable
state law if, prior to such dissolution, WCC has provided
for all liabilities it may then have under the Act. WCC
shall be deemed to have provided for such liabilities under
the Act only if: (A) the trustees under the Act shall agree
in writing that they will release all claims against WCC and
any Related Persons or "successors in interest" (as such
terms are used and defined in the Act) if WCC pays to the
trustees the amounts so provided for in the dissolution
proposal to be submitted to the stockholders of WCC for
approval; and (B) WCC pays, or deposits funds with a third
party that will provide for payment of, such amounts to the
trustees.
(iii) This paragraph 7.7 shall have no further force and
effect if (A) the Act in its entirety, or the provisions
thereof imposing liability on any "successor in interest,"
shall be determined by a court of competent jurisdiction to
be unconstitutional or otherwise invalid, provided that, in
such case, the ruling of such court is not subject to
further appeal, and such Act is not, with sixty months
thereafter, amended or replaced by legislation which would
impose a liability upon any Buyer Group Member for health or
death benefits of former employees of WCC or Seller, or (B)
Congress repeals the Act or the provision thereof that
imposes liability on "successors in interest" and Congress
does not, within sixty months after such repeal, enact new
legislation the effect of which is to impose liability upon
any Buyer Group Member for the health or death benefits of
former employees of WCC or Seller.
(iv) Capitalized terms used in this paragraph but not
defined in this Agreement shall have the meaning assigned
thereto in the Act.
7.8. [Intentionally omitted].
7.9. Permits and Bonds. Buyer and Seller shall
promptly submit an "Operator Change Application" with the
Kentucky Environmental Cabinet on Form MPA-08 (or any successor
thereto) with a cover letter requesting that the effective date
of the change be the Closing Date. With respect to each of the
Governmental Permits and each of the bonds listed on Schedule
5.1.14, from and after the Closing Date, Buyer shall indemnify
and hold WCC and Seller harmless from and against any Losses or
Expenses WCC or Seller may incur under any such permit or bond by
reason of Buyer's operations on and after the Closing Date.
Promptly after the Closing Date, Buyer shall submit permit
transfer applications to the Kentucky Environmental Cabinet on
Form MPA-07 (or any successor thereto) for each such Governmental
Permit and provide a replacement for each such bond.
7.10. Transfer of Certain Interests of WCSC. WCC
agrees that, at the Closing and upon the satisfaction of all
conditions precedent to the obligations of WCC under this
Agreement, WCC shall, on behalf of its wholly owned subsidiary
WCSC, cause WCSC to transfer to Buyer all of WCSC's interest in
(a) each of the contracts listed on Schedule 1.1.7 other than the
agreement listed on such schedule under the heading "Boise
Cascade" and (b) the Rail Transportation Agreement dated May 17,
1991, between CSX Transportation, Inc. and WCSC, as amended.
8. Indemnification.
8.1. Indemnification by WCC and Seller. WCC and
Seller, jointly and severally, agree to indemnify and hold
harmless each Buyer Group Member from and against any and all
Loss and Expense imposed upon or incurred by such Buyer Group
Member as a result of, in connection with or arising from:
(i) any breach by WCC or Seller of, or default in the
performance by WCC or Seller of, any covenant, agreement or
obligation to be performed by WCC or Seller pursuant to this
Agreement or any Westmoreland Ancillary Agreement;
(ii) any breach of any warranty or the inaccuracy of
any representation of WCC or Seller contained or referred to
in this Agreement or any certificate delivered by or on
behalf of WCC or Seller pursuant hereto;
(iii) any failure of WCC or Seller to obtain prior
to the Closing any consent required for the consummation of
the transactions contemplated hereby or by the Westmoreland
Ancillary Agreements, including, without limitation, those
set forth in Schedule 5.1.2;
(iv) the failure of WCC or Seller to satisfy or perform
any of the liabilities or obligations not assumed by Buyer
pursuant to this Agreement; and
(v) any Loss and Expense resulting from an increase in
unassigned beneficiaries premium or costs paid by any Buyer
Group Member under Section 9704(d) of the Act or increase in
any Buyer Group Member's "applicable percentage" under
Section 9704(f) of the Act resulting from the transfer of
eligible beneficiaries assigned to Seller or WCC under the
Act to unassigned beneficiaries or from the transfer of any
beneficiaries from any employer funds of WCC or Seller to
any fund under the Act, provided that such transfer is
caused by a breach by WCC or Seller of this Agreement or is
caused by actions taken by WCC or Seller pursuant to clause
(i) or (ii) of paragraph 7.7 of this Agreement;
provided, however, that WCC and Seller shall be required to
indemnify and hold harmless with respect to Loss and Expense
incurred by Buyer Group Members under clauses (i), (ii) and (iii)
of this paragraph 8.1 (other than Loss and Expense incurred as a
result of inaccuracies of the representations and warranties
contained in paragraphs 5.1.1, 5.1.2 and 5.1.11, as to which this
proviso shall have no effect) only to the extent that the
aggregate amount of such Loss and Expense exceeds $1,000,000 and
is no greater than $15,000,000. The indemnification provided for
in this paragraph 8.1 shall terminate two years after the Closing
Date (and no claims shall be made by any Buyer Group Member under
this paragraph 8.1 thereafter), except that the indemnification
by WCC and Seller shall continue as to:
(A) the obligations and representations of Seller
under the Instrument of Assignment, as to which no time
limitation shall apply;
(B) the representations and warranties set forth in
paragraphs 5.1.1 and 5.1.2 and the covenants and agreements
of WCC and Seller set forth in paragraphs 7.1, 7.2, 7.3,
7.5, 7.7, 8.1(iv), 8.1(v), 11.1 and 11.15 hereof, as to all
of which no time limitation shall apply;
(C) the representations and warranties set forth in
paragraph 5.1.11, as to which the indemnification provided
for in this paragraph 8.1 shall terminate ten years after
the Closing Date; and
(D) any Loss or Expense of which any Buyer Group
Member has notified WCC or Seller in accordance with the
requirements of paragraph 8.3 hereof on or prior to the date
such indemnification would otherwise terminate in accordance
with this paragraph 8.1, as to which the obligation of WCC
and Seller shall continue until the liability of WCC and
Seller shall have been determined pursuant to this paragraph
8.1, and WCC or Seller shall have reimbursed all Buyer Group
Members for the full amount of such Loss and Expense in
accordance with this paragraph 8.1.
8.2. Indemnification by Buyer. Buyer agrees to
indemnify and hold harmless each Seller Group Member from and
against any and all Loss and Expense imposed upon or incurred by
such Seller Group Member as a result of, in connection with or
arising from:
(i) any breach by Buyer, or default in the performance
by Buyer of, any covenant, agreement or obligation to be
performed by Buyer pursuant to this Agreement or any Buyer
Ancillary Agreement; or
(ii) any breach of any warranty or the inaccuracy of
any representation of Buyer contained or referred to in this
Agreement or in any certificate delivered by or on behalf of
Buyer pursuant hereto;
(iii) any and all claims by any third Person
arising from the failure to pay, perform or discharge any of
the Assumed Liabilities after the Closing Date, including,
without limitation, any lease, sublease or agreement
expressly assumed by Buyer pursuant to the terms of this
Agreement, or any act or omission by Buyer occurring on or
after the Closing Date with respect to any of the Assumed
Liabilities; and
(iv) any and all debts, obligations and liabilities
(other than Excluded Liabilities) resulting from or in
connection with Buyer's ownership of the Purchased Assets
arising or occurring after the Closing;
provided, however, that Buyer shall be required to indemnify and
hold harmless under clauses (i) and (ii) of this paragraph 8.2
with respect to Loss and Expense incurred by Seller Group Members
only to the extent that the aggregate amount of such Loss and
Expense exceeds $1,000,000 (except with respect to Loss or
Expense under paragraph 7.9, as to which this limitation shall
not apply) but is not greater than $15,000,000. The
indemnification provided for in this paragraph 8.2 shall
terminate two years after the Closing Date (and no claims shall
be made by any Seller Group Member under this paragraph 8.2
thereafter), except that the indemnification by Buyer shall
continue as to:
(a) the covenants and agreements of Buyer set forth in
paragraphs 7.2, 7.5, 7.9, 11.1 and 11.15 hereof, as to all
of which no time limitation shall apply; and
(b) any Loss or Expense of which WCC or Seller has
notified Buyer in accordance with the requirements of
paragraph 8.3 hereof on or prior to the date such
indemnification would otherwise terminate in accordance with
this paragraph 8.2, as to which the obligation of Buyer
shall continue until the liability of Buyer shall have been
determined pursuant to this paragraph 8.2, and Buyer shall
have reimbursed all Seller Group Members for the full amount
of such Loss and Expense in accordance with this paragraph
8.2.
8.3. Notice of Indemnity Claims. (a) Any Buyer Group
Member or Seller Group Member (the "Indemnified Party") seeking
indemnification hereunder shall give to the party obligated to
provide indemnification to such Indemnified Party (the
"Indemnitor") a notice (a "Claim Notice") describing in
reasonable detail the facts giving rise to any claim for
indemnification hereunder and shall include in such Claim Notice
(if then known) the amount or the method of computation of the
amount of such claim, and a reference to the provision of this
Agreement or any other agreement, document or instrument executed
hereunder or in connection herewith upon which such claim is
based; provided, that a Claim Notice in respect of any action at
law or suit in equity by or against a third Person as to which
indemnification will be sought shall be given promptly after the
action or suit is commenced; and provided, further, that failure
to give such notice shall not relieve the Indemnitor of its
obligations hereunder except to the extent it shall have been
prejudiced by such failure.
(b) After the giving of any Claim Notice pursuant
hereto, the amount of indemnification to which an Indemnified
Party shall be entitled under this paragraph 8 shall be
determined: (i) by the written agreement between the Indemnified
Party and the Indemnitor; (ii) by a final judgment or decree of
any court of competent jurisdiction; or (iii) by any other means
to which the Indemnified Party and the Indemnitor shall agree.
The judgment or decree of a court shall be deemed final when the
time for appeal, if any, shall have expired and no appeal shall
have been taken or when all appeals taken shall have been finally
determined. The Indemnified Party shall have the burden of proof
in establishing the amount of Loss and Expense suffered by it.
8.4. Third Person Claims. (a) Subject to paragraph
8.4(b), the Indemnified Party shall have the right to conduct and
control, through counsel of its choosing, the defense, compromise
or settlement of any third Person claim, action or suit against
such Indemnified Party as to which indemnification will be sought
by any Indemnified Party from any Indemnitor hereunder, and in
any such case the Indemnitor shall cooperate in connection
therewith and shall furnish such records, information and
testimony and attend such conferences, discovery proceedings,
hearings, trials and appeals as may be reasonably requested by
the Indemnified Party in connection therewith; provided, that the
Indemnitor may participate, through counsel chosen by it and at
its own expense, in the defense of any such claim, action or suit
as to which the Indemnified Party has so elected to conduct and
control the defense thereof; and provided, further, that the
Indemnified Party shall not, without the written consent of the
Indemnitor (which written consent shall not be unreasonably
withheld), pay, compromise or settle any such claim, action or
suit, except that no such consent shall be required if, following
a written request from the Indemnified Party, the Indemnitor
shall fail, within 14 days after the making of such request, to
acknowledge and agree in writing that, if such claim, action or
suit shall be adversely determined, such Indemnitor has an
obligation to provide indemnification hereunder to such
Indemnified Party.
(b) If any third Person claim, action or suit against
any Indemnified Party is solely for money damages or, where WCC
or Seller is the Indemnitor, will have no continuing effect in
any material respects on the Purchased Assets, then the
Indemnitor shall have the right to conduct and control, through
counsel of its choosing, the defense, compromise or settlement of
any such third Person claim, action or suit against such
Indemnified Party as to which indemnification will be sought by
any Indemnified Party from any Indemnitor hereunder if the
Indemnitor has acknowledged and agreed in writing that, if the
same is adversely determined, the Indemnitor has an obligation to
provide indemnification to the Indemnified Party in respect
thereof, and in any such case the Indemnified Party shall
cooperate in connection therewith and shall furnish such records,
information and testimony and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably
requested by the Indemnitor in connection therewith; provided,
that the Indemnified Party may participate, through counsel
chosen by it and at its own expense, in the defense of any such
claim, action or suit as to which the Indemnitor has so elected
to conduct and control the defense thereof. Notwithstanding the
foregoing, the Indemnified Party shall have the right to pay,
settle or compromise any such claim, action or suit; provided,
that in such event the Indemnified Party shall waive any right to
indemnity therefor hereunder.
9. Conditions Precedent.
9.1. Conditions Precedent to Performance by WCC and
Seller. The performance of the obligations of WCC and Seller
hereunder is subject to the satisfaction, on or before the
Closing Date, of each of the following conditions, any of which
may be waived by WCC and Seller, in whole or in part, without
prior notice:
9.1.1. Performance of Agreement; Accuracy of
Representations and Warranties. Buyer shall have performed,
satisfied and complied with all covenants, agreements and
obligations required by this Agreement to be performed or
complied with by Buyer on or prior to the Closing Date; each of
the representations and warranties of Buyer contained or referred
to in this Agreement shall be true and correct on the Closing
Date in all material respects as though made on and as of the
Closing Date, except for changes therein specifically permitted
by any such agreement or resulting from any transaction expressly
consented to in writing by WCC and Seller or any transaction
contemplated by any such agreement; and there shall have been
delivered to WCC and Seller a certificate to such effect, dated
the Closing Date and signed on behalf of Buyer by the President
or any Vice President thereof.
9.1.2. No Restraint or Litigation. The waiting period
under the HSR Act shall have expired or been terminated, and no
action, suit or proceeding by any Governmental Body shall have
been instituted or threatened to restrain, prohibit or otherwise
challenge the legality or validity of the transactions
contemplated hereby.
9.1.3. Necessary Governmental Approvals. WCC and
Seller shall have received all approvals and actions of or by all
Governmental Bodies necessary to consummate the transactions
contemplated hereby, which are required to be obtained prior to
the Closing by applicable Requirements of Laws.
9.1.4. Material Consents. WCC and Seller shall have
received, on or before the Closing Date, the material consents
from third parties to complete the transactions contemplated by
this Agreement set forth in Schedule 9.1.4.
9.1.5. Releases. WCC, WCSC and Seller shall have been
released from each of the leases, surety bonds, performance and
reclamation bonds and other obligations set forth in Schedule
9.1.5.
9.1.6. Documents Delivered. The form and substance of
all documents to be delivered by or relating to Buyer or CONSOL
Inc. under this Agreement shall be satisfactory in all reasonable
respects to WCC and Seller.
9.1.7. Corporate Approval. The Boards of Directors of
WCC, CCC, KCC and DPC shall have approved the performance of this
Agreement and the transactions contemplated hereby. If WCC shall
have solicited its stockholders pursuant to section 271 of the
General Corporation Law of the State of Delaware (or any
comparable provision of State or federal law), the requisite
percentage of WCC's stockholders shall have approved the
transactions contemplated hereby.
9.2. Conditions Precedent to Performance by Buyer.
The performance of the obligations of Buyer hereunder is subject
to the satisfaction, on or before the Closing Date, of each of
the following conditions, any of which may be waived by Buyer, in
whole or in part, without prior notice:
9.2.1. Performance of Agreement; Accuracy of
Representations and Warranties. WCC and Seller shall have
performed, satisfied and complied with all covenants, agreements
and obligations required by this Agreement to be performed or
complied with by WCC and Seller on or prior to the Closing Date;
each of the representations and warranties of WCC and Seller
contained or referred to in this Agreement shall be true and
correct on the Closing Date in all material respects as though
made on and as of the Closing Date, except for changes therein
specifically permitted by any such agreement or resulting from
any transaction expressly consented to in writing by Buyer or any
transaction contemplated by any such agreement; and there shall
have been delivered to Buyer a certificate to such effect, dated
the Closing Date and signed on behalf of WCC and Seller by the
President or any Vice President thereof.
9.2.2. No Changes or Destruction of Purchased Assets.
Between the date hereof and the Closing Date, there shall have
been (a) no material adverse change in the Purchased Assets; (b)
no material adverse federal or state legislative or regulatory
change affecting the Purchased Assets; and (c) no material damage
to the Purchased Assets by fire, flood, casualty, act of God or
the public enemy or other cause, regardless of insurance coverage
for such damage; and there shall have been delivered to Buyer a
certificate to such effect, dated the Closing Date and signed on
behalf of WCC and Seller by the President or any Vice President
thereof.
9.2.3. No Restraint or Litigation. The waiting period
under the HSR Act shall have expired or been terminated, and no
action, suit, investigation or proceeding shall have been
instituted or threatened to restrain or prohibit or otherwise
challenge the legality or validity of the transactions
contemplated hereby.
9.2.4. Necessary Governmental Approvals. The parties
shall have received all approvals and actions of or by all
Governmental Bodies which are necessary to consummate the
transactions contemplated hereby, which are either specified in
Schedule 5.1.4 or otherwise required to be obtained prior to the
Closing by applicable Requirements of Laws or which are necessary
to prevent a material adverse change in the Purchased Assets.
9.2.5. Necessary Consents. WCC and Seller shall have
received consents, in form and substance reasonably satisfactory
to Buyer, to the transactions contemplated hereby from the other
parties to all contracts, leases, agreements and permits to which
WCC or Seller is a party or by which WCC or Seller or any of
Seller's assets is affected and which are specified in Schedule
9.1.4 or are otherwise necessary to prevent a material adverse
change in the Purchased Assets.
9.2.6. Documents Delivered. The form and substance of
all documents to be delivered by or relating to WCC or Seller
under this Agreement shall be satisfactory in all reasonable
respects to Buyer.
10. Termination.
10.1. Termination. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement may be
terminated at any time prior to the Closing Date:
(a) by the mutual consent of the Board of Directors of
Buyer and the Board of Directors of WCC;
(b) by Buyer or WCC if the Closing shall not have
occurred on or before October 31, 1994, or December 31, 1994 if
WCC has mailed to its stockholders on or before October 31, 1994
a proxy soliciting stockholder approval of the transactions
contemplated hereby (or such later date as may be mutually agreed
to by Buyer and WCC) (the "Terminal Date");
(c) by Buyer (1) in the event all conditions precedent
set forth in paragraph 9.2 have not been satisfied by the
Terminal Date or (2) in the event of any material breach by WCC
or Seller of any agreements, representations, or warranties of
WCC or Seller contained herein and the failure of WCC or Seller
to cure such breach within thirty business days after receipt of
notice from Buyer requesting such breach to be cured or (3) if
between the date hereof and the Closing Date, Buyer has received
Seller Additional Disclosure and such Seller Additional
Disclosure would have a material adverse effect on the Purchased
Assets or the transactions contemplated hereby, by giving written
notice of termination within 5 Business Days after receiving such
Seller Additional Disclosure; or
(d) by WCC in the event all conditions precedent set
forth in paragraph 9.1 have not been satisfied by the Terminal
Date or in the event of any material breach by Buyer of any
agreements, representations, or warranties of Buyer contained
herein and the failure of Buyer to cure such breach within ten
business days after receipt of notice from WCC requesting such
breach to be cured.
10.2. Notice of Termination. Any party desiring to
terminate this Agreement pursuant to paragraph 10.1 hereof shall
give notice of such termination to the other parties to this
Agreement.
10.3. Effect of Termination. In the event that this
Agreement shall be terminated pursuant to this paragraph 10, all
further obligations of the parties under this Agreement (other
than paragraphs 7.2 and 11.15) shall be terminated without
further liability of any party to the other, provided that
nothing herein shall relieve any party from liability for its
willful breach of this Agreement.
11. Miscellaneous Agreements.
11.1. Retention of and Access to Records after
Closing. (a) For a period of three years after the Closing Date,
WCC and its representatives shall have reasonable access to all
of the books and records of WCC and Seller relating to the
Purchased Assets and transferred to Buyer pursuant to this
Agreement to the extent that such access may reasonably be
required by WCC or Seller in connection with matters relating to
or affected by the Purchased Assets prior to the Closing Date
(including, without limitation, for the preparation of Tax
returns and financial statements and other reasonable purposes).
Such access shall be afforded by Buyer upon receipt of reasonable
advance notice and during normal business hours. WCC and Seller
shall be solely responsible for any costs or expenses incurred by
either of them pursuant to this paragraph 11.1(a). If Buyer
shall desire to dispose of any of such books and records prior to
the expiration of such three-year period, Buyer shall, prior to
such disposition, give WCC a reasonable opportunity, at WCC's
expense, to segregate and remove such books and records as WCC
may select.
(b) For a period of three years after the Closing
Date, Buyer and its representatives shall have reasonable access
to all of the books and records of WCC and Seller relating to the
Purchased Assets which WCC or any of its Affiliates may retain
after the Closing Date. Such access shall be afforded by WCC and
its Affiliates upon receipt of reasonable advance notice and
during normal business hours. Buyer shall be solely responsible
for any costs and expenses incurred by it pursuant to this
paragraph 11.1(b). If WCC or any of its Affiliates shall desire
to dispose of any of such books and records prior to the
expiration of such three-year period, WCC shall, prior to such
disposition, give Buyer a reasonable opportunity, at Buyer's
expense, to segregate and remove such books and records as Buyer
may select.
11.2. Exhibits and Schedules. The Exhibits and
Schedules referred to in this Agreement shall be deemed to be
incorporated herein by reference and made a part hereof as if set
out in full herein.
11.3. Time of the Essence. Time is of the essence of
this Agreement.
11.4. Assignment. The rights of Buyer and Seller
under this Agreement shall not be assignable by such party
hereto, except to an Affiliate, prior to the Closing without the
written consent of the other, which consent may be withheld for
any reason. Following the Closing, either party may assign any
of its rights hereunder, but no such assignment shall relieve it
of its obligations hereunder.
11.5. Survival of Provisions. The representations,
warranties, covenants and obligations contained in this Agreement
shall survive the consummation of the transactions contemplated
by this Agreement but solely for the purpose of creating rights
under Section 8 of this Agreement.
11.6. Headings. The titles and headings contained in
this Agreement (including, without limitation, in the Exhibits
and Schedules hereto) are included for purposes of convenience
only and shall not be considered a part of this Agreement in
construing or interpreting any provision hereof.
11.7. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the internal laws (as
opposed to the conflicts of law provisions) of the State of New
York.
11.8. Notices. All notices, requests, demands and
other communications required or permitted to be given or made
under this Agreement shall be in writing and shall be deemed to
have been given on the date of delivery personally or of deposit
in the United States mail, postage prepaid, by registered or
certified mail, return receipt requested, addressed as follows or
to such other person or address as either party shall designate
by notice to the other party in accordance herewith:
To WCC or Seller: Westmoreland Coal Company
700 The Bellevue
200 South Broad Street
Philadelphia, PA 19102
Attn: General Counsel
To Buyer: CONSOL of Kentucky, Inc.
Consol Plaza
1800 Washington Road
Pittsburgh, PA 15241
Attn: General Counsel
11.9. Counterparts. This Agreement may be executed by
the parties in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become binding
when one or more counterparts have been signed by each of the
parties hereto and delivered to each of Seller and Buyer.
11.10. Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of each of the parties
hereto, and their respective successors and permitted assigns.
11.11. Subrogation. Nothing in this Agreement,
express or implied, including, without limitation, the
indemnities of paragraph 8 hereof, shall be deemed to create in
any Person other than the parties signatory hereto and successors
and assigns permitted by paragraph 11.10 hereof (i) any right,
remedy or claim under or by reason of this Agreement or (ii) any
rights of subrogation from, through or under any indemnified
party because of any claim paid or defense provided or otherwise.
11.12. Recording. This Agreement shall not be filed
or recorded in any office for the recording of deeds or
documents.
11.13. Severability of Provisions. Wherever possible,
each provision hereof shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision
of this Agreement or the application thereof to any person or
circumstances shall, to any extent and for any reason, be held in
any proceeding to be invalid, illegal or unenforceable, such
provision, or the application thereof to any person or
circumstance, shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability
without invalidating the remainder of such invalid, illegal or
unenforceable provision or any other provisions hereof or the
application of such provision to persons or circumstances other
than those to which it was held to be invalid, illegal or
unenforceable, but only if and to the extent such construction
would not materially and adversely frustrate the parties'
essential objectives as expressed herein.
11.14. Entire Agreement; Amendments; Waivers. This
Agreement (including the Exhibits and Schedules referred to
herein and the documents delivered pursuant hereto) constitutes
the entire agreement of the parties here to pertaining to the
subject matter contained hereof, and supersedes all prior
agreements, representations, understandings or letters of intent
of the parties hereto, including without limitation the
Confidentiality Agreement. This Agreement shall not be amended,
modified or supplemented except by a written instrument signed by
an authorized representative of each of the parties hereto. Any
term or provision of this Agreement may be waived, or the time
for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be
validly and sufficiently authorized for the purposes of this
Agreement if, as to any party, it is authorized in writing by an
authorized representative of such party. The failure of any
party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such
provision, nor in any way to affect the validity of this
Agreement or any part hereof or the right of any party thereafter
to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of
any other or subsequent breach.
11.15. Confidential Nature of Information. Each party
agrees that it will treat in confidence all documents, materials
and other information which it shall have obtained regarding the
other party during the course of the negotiations leading to the
consummation of the transactions contemplated hereby (whether
obtained before or after the date of this Agreement), the
investigation provided for herein and the preparation of this
Agreement and other related documents, and, in the event the
transactions contemplated hereby shall not be consummated, each
party will return to the other party all copies of nonpublic
documents and materials which have been furnished in connection
therewith. Such documents, materials and information shall not
be communicated to any third Person (other than, in the case of
Buyer, to its counsel, accountants, financial advisors or
lenders, and in the case of Seller, to its counsel, accountants
or financial advisors). No other party shall use any
confidential information in any manner whatsoever except solely
for the purpose of evaluating the proposed purchase and sale of
the Purchased Assets; provided, however, that after the Closing
Buyer may use or disclose any confidential information related to
the Purchased Assets. The obligation of each party to treat such
documents, materials and other information in confidence shall
not apply to any information which (i) is or becomes available to
such party from a source other than such party, (ii) is or
becomes available to the public other than as a result of
disclosure by such party or its agents, (iii) is required to be
disclosed under applicable law or judicial process, but only to
the extent it must be disclosed, or (iv) such party reasonably
deems necessary to disclose to obtain any of the consents or
approvals contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
WESTMORELAND COAL COMPANY
Witness:
By:________________________________
Name:
_________________________ Title:
CRITERION COAL COMPANY
Witness:
By:________________________________
Name
__________________________ Title:
KENTUCKY CRITERION COAL COMPANY
Witness:
By:________________________________
Name
__________________________ Title:
DEANE PROCESSING COMPANY
Witness:
By:________________________________
Name:
__________________________ Title:
CONSOL OF KENTUCKY INC.
Witness:
By:________________________________
Name:
_________________________ Title:
MJL94B24.WPD ( 3/27/95 1:11PM)
TABLE OF CONTENTS
Paragraph Page
1. Purchase and Sale of the Purchased Assets 2
1.1. Purchased Assets 2
1.2. Excluded Assets 4
2. Purchase Price 5
2.1. Purchase Price 5
2.2. Purchase Price Adjustment 5
2.3. Allocation of Purchase Price 7
3. Assumption of Obligations and Liabilities; Excluded
Liabilities 7
3.1. Assumed Liabilities 7
3.2. Excluded Liabilities 7
4. The Closing 9
4.1. Time and Place 9
4.2. Deliveries by Seller and WCC 9
4.3. Payment on the Closing Date; Deliveries by Buyer 11
4.4. Effect of Closing 12
5. Representations and Warranties 12
5.1. Representations and Warranties of WCC and Seller 12
5.1.1. Organization and Existence 12
5.1.2. Authority; Approval; No Violations; Consents 13
5.1.3. Availability of Assets 15
5.1.4. Governmental Permits 15
5.1.5. Owned Real Property 16
5.1.6. Real Property Leases 17
5.1.7. Condemnation 18
5.1.8. Personal Property Leases 18
5.1.9. Mining Contracts 18
5.1.10. Status of Contracts 18
5.1.11. Title to Property 19
5.1.12. No Violation, Litigation or Regulatory Action 20
5.1.13. Environmental Matters 20
5.1.14. Reclamation and Surety Bonds 25
5.1.15. Insurance 25
5.1.16. Brokers 26
5.1.17. Disclosure 26
5.1.18. Subsequent Events or Knowledge. 27
5.2. Representations and Warranties of Buyer 28
5.2.1. Organization and Existence 28
5.2.2. Authority; Approval; No Violations; Consents 28
5.2.3. Litigation 29
5.2.4. Brokers 30
5.3. Disclaimers of WCC and Seller 30
6. Action Prior to the Closing Date 30
6.1. Investigation of the Purchased Assets by Buyer 30
6.2. Preserve Accuracy of Representations and Warranties 31
6.3. Consents of Third Parties; Governmental Approvals 32
6.4. Operations Prior to the Closing Date 33
6.5. Antitrust Law Compliance 34
7. Additional Agreements 35
7.1. Discharge of Seller's Liabilities 35
7.2. Expenses 35
7.3. Further Assurances 36
7.4. Prorations 37
7.5. Litigation Assistance 39
7.6. Post-Closing Remittances 39
7.7. Maintenance of Corporate Existence. 40
7.8. [Intentionally omitted] 42
7.9. Permits and Bonds. 42
7.10. Transfer of Certain Interests of WCSC 43
8. Indemnification 43
8.1. Indemnification by WCC and Seller 43
8.2. Indemnification by Buyer 46
8.3. Notice of Indemnity Claims 47
8.4. Third Person Claims 49
9. Conditions Precedent 50
9.1. Conditions Precedent to Performance by WCC and Seller 50
9.1.1. Performance of Agreement; Accuracy of
Representations and Warranties 51
9.1.2. No Restraint or Litigation 51
9.1.3. Necessary Governmental Approvals 51
9.1.4. Material Consents 52
9.1.5. Releases 52
9.1.6. Documents Delivered 52
9.1.7. Corporate Approval 52
9.2. Conditions Precedent to Performance by Buyer 52
9.2.1. Performance of Agreement; Accuracy of
Representations and Warranties 53
9.2.2. No Changes or Destruction of Purchased Assets 53
9.2.3. No Restraint or Litigation 54
9.2.4. Necessary Governmental Approvals 54
9.2.5. Necessary Consents 54
9.2.6. Documents Delivered 54
10. Termination 55
10.1. Termination 55
10.2. Notice of Termination 56
10.3. Effect of Termination 56
11. Miscellaneous Agreements 56
11.1. Retention of and Access to Records after Closing 56
11.2. Exhibits and Schedules 57
11.3. Time of the Essence 58
11.4. Assignment 58
11.5. Survival of Provisions 58
11.6. Headings 58
11.7. Governing Law 58
11.8. Notices 58
11.9. Counterparts 59
11.10. Successors and Assigns 59
11.11. Subrogation 59
11.12. Recording 60
11.13. Severability of Provisions 60
11.14. Entire Agreement; Amendments; Waivers 60
11.15. Confidential Nature of Information 61
Schedule Index
Schedule 1.1.1 - Owned Real Property
Schedule 1.1.2 - In Leases
Schedule 1.1.3 - Real Improvements and Personal Property
Schedule 1.1.4 - Out Leases
Schedule 1.1.5 - Personal Property Leases
Schedule 1.1.6 - Mining Contracts
Schedule 1.1.7 - Coal Sale Contracts
Schedule 1.1.12 - Miscellaneous Contracts
Schedule 1.2.6 - Excluded Assets
Schedule 4.3 - Bank Account of Seller
Schedule 5.1.2 - Seller - Violations, Conflicts, Consents
and Approvals
Schedule 5.1.3 - Availability of Assets
Schedule 5.1.4 - Governmental Permits
Schedule 5.1.10 - Status of Contracts
Schedule 5.1.11 - Exceptions to Title
Schedule 5.1.12 - Violation, Litigation or Regulatory
Action
Schedule 5.1.13(I) - Environmental Matters -- Seller
Schedule 5.1.13(II) - Environmental Matters -- Contractors
Schedule 5.1.14 - Reclamation and Surety Bonds
Schedule 5.1.15 - Insurance
Schedule 5.2.2 - Buyer - Violations, Conflicts, Consents
and Approvals
Schedule 9.1.4 - Material Consents
Schedule 9.1.5 - Releases
ASSET PURCHASE AGREEMENT
Dated July 28, 1994
among
WESTMORELAND COAL COMPANY,
CRITERION COAL COMPANY,
KENTUCKY CRITERION COAL COMPANY,
DEANE PROCESSING COMPANY
and
CONSOL OF KENTUCKY INC.
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated July 28, 1994, by
and among WESTMORELAND COAL COMPANY, a Delaware corporation
("WCC"), CRITERION COAL COMPANY, a Delaware corporation ("CCC"),
KENTUCKY CRITERION COAL COMPANY, a Delaware Corporation ("KCC"),
DEANE PROCESSING COMPANY, a Delaware corporation ("DPC" and
together with KCC and CCC, "Seller"), and CONSOL OF KENTUCKY
INC., a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller desires to sell, and Buyer desires to
purchase, certain of the assets of Seller located in Knott, Pike,
and Letcher Counties, Kentucky, as more particularly described
herein, upon the terms and subject to the conditions herein set
forth; and
WHEREAS, WCC owns 100% of the issued and outstanding
stock of CCC and CCC owns 100% of the issued and outstanding
stock of each of KCC and DPC and WCC desires to cause Seller to
enter into the transactions contemplated hereby; and
WHEREAS, certain terms used herein are used as defined
in Exhibit A hereto; and
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained, the parties hereto hereby
agree as follows:
1. Purchase and Sale of the Purchased Assets.
1.1. Purchased Assets. Upon the terms and subject to
the conditions set forth in this Agreement, Seller shall, and WCC
shall cause Seller to, sell, transfer, convey and assign to
Buyer, and Buyer shall purchase and acquire from Seller, at the
Closing on the Closing Date, the following assets of Seller,
excluding the Excluded Assets as provided in paragraph 1.2 hereof
(herein collectively referred to as the "Purchased Assets"):
1.1.1. the tracts of land described in Schedule 1.1.1
other than the tracts transferred by KCC to third parties and
listed on Schedule 1.1.1 under the heading "off-conveyances" (the
"Owned Real Property");
1.1.2. all rights, title and interests of Seller, as
lessee, in and to the real property (the "Leased Real Property")
under those certain leases (the "In Leases") described in
Schedule 1.1.2;
1.1.3. all buildings, structures and other real
improvements of Seller located in and on the Owned Real Property
and the Leased Real Property (the "Real Improvements"), including
without limitation those described in Schedule 1.1.3 (the Owned
Real Property, the Leased Real Property and the Real Improvements
shall hereinafter be referred to, collectively, as the "Real
Property") and all rights, title and interests of Seller in and
to all tangible personal property located in and on the Real
Property on the Closing Date, including, without limitation the
coal, machinery, equipment, vehicles, furniture and other
tangible personal property of Seller listed or referred to in
Schedule 1.1.3 (the "Tangible Personal Property");
1.1.4. all rights, title and interests of Seller
under, in and to the leases pursuant to which Seller leases to
any third Person portions of the Real Property (the "Out Leases")
described in Schedule 1.1.4;
1.1.5. all rights, title and interests of Seller
under, in and to the personal property leases listed in Schedule
1.1.5 (the "Personal Property Leases") (all personal property
owned or leased by Seller being referred to herein as the
"Personal Property");
1.1.6. all rights and interests of Seller in the
contracts described in Schedule 1.1.6 and relating to mining of
coal by third parties on the Real Property and transportation of
coal mined on the Real Property (the "Mining Contracts");
1.1.7. all of Seller's rights under the contracts
identified on Schedule 1.1.7 and relating to the sale of coal
mined on the Real Property (the "Coal Sale Contracts," and
together with the Mining Contracts, the "Other Purchased
Contracts");
1.1.8. all of Seller's rights, claims or causes of
action against third parties relating to the Real Property, the
In Leases, the Out Leases, the Personal Property, the Personal
Property Leases and the Other Purchased Contracts arising or
occurring on or after the Closing Date;
1.1.9. all books and records (including all data and
other information stored on discs or other media) of Seller
relating to the Real Property, the In Leases, the Out Leases, the
Personal Property, the Personal Property Leases and the Other
Purchased Contracts, including mine maps, geologic data, surveys,
consulting reports, surface mapping, aerial photography,
environmental reports, core hole data, unmined mineral tax
filings and accounting data;
1.1.10. all deposits held by Seller with respect to
the Out Leases and all advance or minimum royalty payments under
the Out Leases paid to Seller under the Out Leases in each case
relating to periods after the Valuation Date;
1.1.11. the Governmental Permits listed in Schedule
5.1.4; and
1.1.12. Seller's rights under the miscellaneous
contracts listed in Schedule 1.1.12.
1.2. Excluded Assets. Notwithstanding anything
contained in this Agreement to the contrary, the following assets
of Seller are excluded from the Purchased Assets and are not
being purchased and sold hereunder (herein referred to as the
"Excluded Assets"):
1.2.1. all cash, cash equivalents and bank accounts of
Seller (except as provided in paragraph 1.1.10);
1.2.2. all advance or minimum royalty payments under
the Out Leases paid or due Seller under the Out Leases relating
to periods on or prior to the Valuation Date;
1.2.3. all claims and causes of action of Seller
against third parties relating to the Real Property, the In
Leases, the Out Leases, the Personal Property, the Personal
Property Leases and the Other Purchased Contracts (i) which may
arise in connection with the indemnity obligations of Seller
pursuant to paragraph 8.1 hereof or (ii) for which damages in
respect thereto relate to the period prior to the Closing Date;
1.2.4. all rights and obligations, including all
receivables as adjusted by applicable penalties or premiums,
relating to coal shipped prior to the Closing Date, together with
all responsibilities for invoicing and collection;
1.2.5. all of Seller's insurance policies including,
without limitation, policies for health, general liability and
property insurance, and any and all premium refunds and claims
with respect to such refunds and all related refund payments,
proceeds and other amounts due or payable, or hereafter becoming
due or payable, thereunder;
1.2.6. each of the assets listed on Schedule 1.2.6;
and
1.2.7. all of the employees, active or retired, of
Seller or any predecessor of Seller.
2. Purchase Price.
2.1. Purchase Price. The Purchase Price for the
Purchased Assets (the "Purchase Price") shall be $85,000,000.
2.2. Purchase Price Adjustment.
2.2.1. WCC and Seller covenant that, on the Closing
Date, the clean coal included in the Personal Property shall
consist of 28,000 tons of Compliance Coal, 0 tons of <1% Sulfur
Coal and 2,000 tons of >1% Sulfur Coal.
2.2.2. Within fifteen business days following the
Closing Date, which period may be extended because of inclement
weather or the need for aerial photography, Buyer and Seller,
using Seller's records and assays of the coal stockpile
customarily used in the coal business, shall determine the actual
amount of Compliance Coal, <1% Sulfur Coal, and >1% Sulfur Coal
included in the Personal Property on the Closing Date. The
Purchase Price shall be increased by $19.89 for each ton of
Compliance Coal in excess of the amount specified in paragraph
2.2.1 and decreased by a like amount for each ton of Compliance
Coal below such amount, shall be increased by $19.89 for each ton
of <l% Sulfur Coal in excess of the amount specified in paragraph
2.2.1 and decreased by a like amount for each ton of <1% Sulfur
Coal below such amount, and shall be increased by $23.53 for each
ton of >1% Sulfur Coal in excess of the amount specified in
paragraph 2.2.1 and decreased by a like amount for each ton of
>1% Sulfur Coal below such amount. Each of Buyer and Seller
shall pay the salaries of its own employees and the costs
associated with the use of its own equipment used in conducting
such tests. The cost of any outside services used in conducting
such tests shall be shared equally by Seller and Buyer.
2.2.3. All adjustments to the Purchase Price required
by paragraph 2.2.2 shall be netted. Within twenty business days
following the Closing Date, Buyer or Seller, as the case may be,
shall make any payment required so that the net amount actually
paid by Buyer hereunder shall be equal to the Purchase Price as
adjusted by paragraph 2.2.2.
2.3. Allocation of Purchase Price. Buyer and Seller
have agreed to allocate the Purchase Price to the Purchased
Assets as set forth in Exhibit F.
3. Assumption of Obligations and Liabilities; Excluded
Liabilities.
3.1. Assumed Liabilities. On the Closing Date, Buyer
shall deliver to Seller the Instrument of Assumption pursuant to
which Buyer shall assume and agree to discharge, in accordance
with their respective terms and subject to the respective
conditions thereof, all liabilities and obligations of Seller to
be paid or performed after the Valuation Date under the Out
Leases, the In Leases, the Personal Property Leases and the Other
Purchased Contracts, except in each case, to the extent such
liabilities and obligations, but for a breach or default by
Seller, would have been paid, performed or otherwise discharged
on or prior to the Closing Date or to the extent the same arise
out of any such breach or default. All of the foregoing
liabilities and obligations to be assumed by Buyer hereunder
(excluding any Excluded Liabilities) are referred to herein as
the "Assumed Liabilities."
3.2. Excluded Liabilities. Notwithstanding anything
contained in this Agreement to the contrary, Buyer shall not
assume or be obligated to pay, perform or otherwise discharge any
liability or obligation of WCC or Seller, direct or indirect,
known or unknown, absolute or contingent, not expressly assumed
by Buyer pursuant to the Instrument of Assumption (all such
liabilities and obligations not being assumed being herein called
the "Excluded Liabilities") and, notwithstanding anything to the
contrary in paragraph 3.1, none of the following shall be
"Assumed Liabilities" for purposes of this Agreement:
3.2.1. any costs and expenses incurred by WCC or
Seller incident to its negotiation and preparation of this
Agreement and its performance and compliance with the agreements
and conditions contained herein;
3.2.2. any liabilities or costs of WCC, Seller or any
related party of or successor to WCC or Seller under the Act or
any amendments thereto, it being the express intent of the
parties hereto that WCC and Seller retain and WCC and Seller do
hereby retain in full any and all liabilities, duties and
obligations either may have under the Act and that neither WCC
nor Seller is transferring to Buyer and Buyer is not assuming
from WCC nor Seller any liabilities, duties or obligations under
the Act and that Buyer is not a "Related Party" or "successor" to
WCC or Seller as those terms are used in the Act;
3.2.3. any liabilities or obligations in respect of
any Excluded Assets;
3.2.4. any liabilities in respect of the claims or
proceedings described in Schedule 5.1.11; or
3.2.5. any liabilities and obligations related in any
way to the employees of Seller or WCC, active or retired,
including employees of predecessors or successors of Seller or
WCC or any related party.
4. The Closing.
4.1. Time and Place. The closing of the transactions
contemplated in this Agreement (the "Closing") shall be at 9:00
A.M. on the thirtieth day after the conditions precedent
specified in paragraph 9 shall have been satisfied or waived, or
on such earlier date as may be mutually agreed to by the parties
hereto (the "Closing Date"), at the offices of Sidley & Austin,
875 Third Avenue, New York, New York 10022. It is the intention
of the parties to close on the last Business Day of a calendar
month.
4.2. Deliveries by Seller and WCC. Subject to
fulfillment or waiver of the conditions set forth in paragraph
9.1 hereof, at the Closing and against the payment and deliveries
to be made by Buyer pursuant to paragraph 4.3 hereof, Seller
shall, and WCC shall cause Seller to, deliver or cause to be
delivered to Buyer the following:
4.2.1. A copy of the resolutions of the Boards of
Directors of WCC and Seller authorizing the execution and
delivery of this Agreement and each of the agreements and
instruments executed in connection herewith or delivered pursuant
hereto and the transactions contemplated hereby, certified by the
Secretary or an Assistant Secretary of WCC and Seller as of the
Closing Date;
4.2.2. The opinion of Theodore E. Worcester, Senior
Vice President and General Counsel of WCC, in the form set forth
in Exhibit B;
4.2.3. All consents, waivers or approvals obtained by
WCC or Seller with respect to the Purchased Assets or the
consummation of the transactions contemplated by this Agreement;
4.2.4. The Instrument of Assignment duly executed by
Seller;
4.2.5. The certificates contemplated by paragraphs
9.2.1 and 9.2.2 hereof, duly executed by an authorized officer of
WCC and Seller;
4.2.6. Certificates of title or origin (or like
documents) with respect to any vehicles included in the Purchased
Assets and other equipment for which a certificate of title or
origin is required in order to transfer title;
4.2.7. A special warranty deed with respect to each of
the parcels of Owned Real Property, duly executed by Seller and
in form and substance reasonably satisfactory to Buyer;
4.2.8. Instruments of Conveyance with respect to each
of the In Leases, Out Leases, Personal Property Leases (including
the rail car lease), Mining Contracts, and Coal Sale Contracts,
in each case duly executed by Seller and in form and substance
reasonably satisfactory to Buyer, together with a consent from
each party to such documents other than WCC or Seller from whom a
consent is required;
4.2.9. Such other bills of sale, assignments and other
instruments of transfer or conveyance as Buyer may reasonably
request or as may be otherwise necessary to evidence and effect
the sale, assignment, transfer, conveyance and delivery of the
Purchased Assets to Buyer;
4.2.10. Such other documents, instruments and writings
as shall be reasonably required in connection with the
consummation of the transactions contemplated hereby; and
4.2.11. A Non-Foreign Affidavit as required by Section
1445 of the Internal Revenue Code.
In addition to the above deliveries, WCC and Seller
shall take all steps and actions as Buyer may reasonably request
or as may otherwise be necessary to put Buyer in actual
possession or control of the Purchased Assets.
4.3. Payment on the Closing Date; Deliveries by Buyer.
Subject to fulfillment or waiver of the conditions set forth in
paragraph 9.2 hereof, at the Closing and against the deliveries
to be made by Seller pursuant to paragraph 4.2 hereof, Buyer
shall:
(a) pay to Seller the Purchase Price by wire transfer
of immediately available funds to the account specified in
Schedule 4.3; and
(b) deliver or cause to be delivered to Seller the
following:
4.3.1. A copy of resolutions of the Board of Directors
or the executive committee of Buyer authorizing the execution and
delivery of this Agreement and each of the agreements and
instruments executed in connection herewith or delivered pursuant
hereto and the consummation of the transactions contemplated
hereby, certified by the Secretary or an Assistant Secretary of
Buyer as of the Closing Date;
4.3.2. The opinion of in-house counsel in the form set
forth in Exhibit C;
4.3.3. [Intentionally omitted];
4.3.4. The Instrument of Assumption duly executed by
Buyer;
4.3.5. The certificates contemplated by paragraph
9.1.1 hereof, duly executed by the President or any Vice
President of Buyer;
4.3.6. The guarantee of CONSOL Inc. in the form set
forth in Exhibit G; and
4.3.7. Such other documents, instruments and writings
as shall be reasonably required in connection with the
consummation of the transactions contemplated hereby.
4.4. Effect of Closing. By its election to close,
each of the parties hereto shall be deemed to have acknowledged
the full performance by the other party of every agreement and
obligation of the other party contained herein which is to be
performed on or before the Closing.
5. Representations and Warranties.
5.1. Representations and Warranties of WCC and Seller.
WCC and Seller hereby jointly and severally represent and warrant
to Buyer and agree as follows:
5.1.1. Organization and Existence. Each of WCC, CCC,
KCC and DPC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and
each is duly qualified and in good standing as a foreign
corporation in the Commonwealth of Kentucky.
5.1.2. Authority; Approval; No Violations; Consents.
5.1.2.1. Each of WCC, CCC, KCC and DPC has corporate
power and authority to execute, deliver and perform this
Agreement and all of the Westmoreland Ancillary Agreements and to
consummate the transactions contemplated hereby and thereby.
5.1.2.2. The execution of this Agreement does not
require the consent of the Board of Directors of WCC, CCC, KCC or
DPC. The performance of this Agreement and the execution,
delivery and performance of the Westmoreland Ancillary Agreements
requires authorization and approval by the Board of Directors of
WCC, CCC, KCC and DPC. WCC is in the process of selling certain
of its assets other than the Purchased Assets, and, if in
connection with one or more of those sales WCC shall solicit its
stockholders pursuant to section 271 of the General Corporation
Law of the State of Delaware (or any comparable provision of
State or federal law), the transactions contemplated hereby will
be subject to approval by WCC's stockholders. Except as set
forth above and in Schedule 5.1.2, neither the execution and
delivery of this Agreement or any of the Westmoreland Ancillary
Agreements or the consummation of any of the transactions
contemplated hereby or thereby nor compliance with or fulfillment
of the terms, conditions and provisions hereof or thereof will:
(i) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default, an event of default or an
event creating rights of acceleration, termination or
cancellation or a loss of rights under, or result in the creation
or imposition of any Encumbrance upon any of the Purchased
Assets, under (1) the Certificate of Incorporation or By-laws of
WCC or Seller, (2) any Seller Contract, (3) any other material
note, instrument, agreement, mortgage, lease, license, franchise,
permit or other authorization, right, restriction or obligation
to which WCC or Seller is a party or any of the Purchased Assets
is subject or by which WCC or Seller is bound, (4) any Court
Order to which WCC or Seller is a party or any of the Purchased
Assets is subject or by which WCC or Seller is bound, or (5) any
Requirements of Laws affecting WCC or Seller or the Purchased
Assets; or (ii) require the approval, consent, authorization or
act of, or the making by WCC or Seller of any declaration, filing
or registration with, any Person, except as provided under the
HSR Act. This Agreement has been duly executed by WCC, CCC, KCC
and DPC. Upon the receipt of approval from the Board of
Directors of WCC, CCC, KCC and DPC, and if WCC shall solicit its
stockholders, then upon the receipt of the requisite vote of
stockholders, this Agreement will have been duly authorized,
executed and delivered by WCC, CCC, KCC and DPC and will be the
legal, valid and binding obligation of each of WCC, CCC, KCC and
DPC enforceable in accordance with its terms, and each of the
other Westmoreland Ancillary Agreements upon execution and
delivery by WCC, CCC, KCC and DPC will be a legal, valid and
binding obligation of such Person enforceable in accordance with
its terms, in each case subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance and other
similar laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity.
5.1.3. Availability of Assets. Except as set forth in
Schedule 5.1.3, (i) the Personal Property and the Real
Improvements are in good condition (subject to normal wear and
tear) and serviceable condition and are suitable for the uses for
which intended, and (ii) Seller has, with respect to the Owned
Real Property and the Leased Real Property such easements and
other rights of ingress and egress and for utilities and services
as are necessary to permit the mining and processing of coal
thereon and the removal of coal therefrom, in each case as such
operations are currently conducted. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES SPECIFICALLY SET FORTH HEREIN,
NEITHER WCC NOR SELLER MAKES ANY REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, CONCERNING THE TANGIBLE PERSONAL PROPERTY
OWNED OR LEASED BY SELLER.
5.1.4. Governmental Permits. Seller owns, holds or
possesses all licenses, franchises, permits, privileges,
immunities, approvals and other authorizations from a
Governmental Body which are necessary to entitle it to own or
lease, operate and use the Purchased Assets in the manner in
which such Purchased Assets are being leased, operated and used
on the date of this Agreement (herein collectively called
"Governmental Permits") and, to the Knowledge of Seller, each
Contractor owns, holds and possesses all licenses, franchises,
permits, privileges, immunities, approvals and other
authorizations from a Governmental Body which are necessary for
the coal mining, transporting and processing operations of such
Contractor being conducted on the date of this Agreement on the
Real Property. Schedule 5.1.4 sets forth a list and brief
description of each Governmental Permit. Complete and correct
copies of all of the Governmental Permits have heretofore been
delivered to Buyer.
Except as set forth in Schedule 5.1.4, (i) Seller has
fulfilled and performed its obligations under each of the
Governmental Permits, and no event has occurred or condition or
state of facts exists which constitutes or, after notice or lapse
of time or both, would constitute a breach or default under any
such Governmental Permit or which permits or, after notice or
lapse of time or both, would permit revocation or termination of
any such Governmental Permit, or which might adversely affect in
any material respect the rights of Seller under any such
Governmental Permit; (ii) no notice of cancellation, of default
or of any material dispute concerning any Governmental Permit, or
of any event, condition or state of facts described in the
preceding clause, has been received by or is known to Seller
(which has not been remedied); and (iii) subject to paragraphs
9.1.4 and 9.1.5, each of the Governmental Permits is valid,
subsisting and in full force and effect and may be assigned and
transferred to Buyer in accordance with this Agreement and will
continue in full force and effect thereafter, in each case
without (x) the occurrence of any breach, default or forfeiture
of rights thereunder, or (y) the consent, approval, or act of, or
the making of any filing with, any Governmental Body.
5.1.5. Owned Real Property. Schedule 1.1.1 sets forth
a list and a brief description of each tract of Owned Real
Property (showing the record title holder, legal description,
permanent index number, and location). Complete and correct
copies of any title opinions, abstracts, surveys and appraisals
in Seller's possession or any policies of title insurance
currently in force and in the possession of Seller with respect
to each such tract of Owned Real Property will be delivered to
the Buyer and Buyer shall have the opportunity to examine
Seller's title to such Owned Real Property prior to the Closing
Date.
5.1.6. Real Property Leases. Schedule 1.1.2 sets
forth a list and a brief description of each In Lease (showing
the lessor and lessee, execution date, annual rental, expiration
date, renewal and purchase options, if any, and the location and
a summary description of the Real Property covered by each such
In Lease). Each In Lease conveys to Seller good and marketable
title to the coal on the premises covered by such In Lease and
grants Seller the exclusive right to mine all coal thereon.
Complete and correct copies of any title opinions, abstracts,
surveys and appraisals in the possession of Seller or WCC or any
policies of title insurance currently in force and in the
possession of Seller or WCC with respect to each tract of Leased
Real Property under the In Leases will be delivered to Buyer.
Schedule 1.1.4 sets forth a list of each Out Lease showing, in
the case of each Farm Lease, the name of the lessee and the tract
or portion thereof leased to such Person, and, in the case of
each Coal Lease, the names of the lessor and lessee and the date
of the execution of each such lease. Seller agrees that it will
provide such additional information regarding the Out Leases as
Buyer may reasonably request.
5.1.7. Condemnation. Neither the whole nor any part
of any Real Property owned, leased, used or occupied by Seller is
subject to any pending suit for condemnation or other taking by
any public authority, and, to the knowledge of Seller, no such
condemnation or other taking is threatened or contemplated.
5.1.8. Personal Property Leases. Schedule 1.1.5 sets
forth a list and a brief description (including in each case the
lessor, the annual rental, the expiration date thereof, the
renewal and purchase options, and a brief description of the
property covered) of each Personal Property Lease.
5.1.9. Mining Contracts. Schedule 1.1.6 and the
letter agreement with Baltimore Gas & Electric dated March 12,
1990 described on Schedule 1.1.7 set forth a list of all
contracts pursuant to which third parties have agreed to mine or
process coal on the Real Property or to which WCC, Seller or WCSC
is a party and relating to the transportation of coal from the
Real Property.
5.1.10. Status of Contracts. Except as set forth in
Schedule 5.1.10 or in any other Schedule hereto, each of the In
Leases, the Out Leases, the Personal Property Leases and the
Other Purchased Contracts (collectively, the "Seller Contracts")
constitutes a valid and binding obligation of Seller and, to the
knowledge of Seller, each other party thereto and is in full
force and effect and (except as set forth in Schedule 5.1.2) may
be transferred to Buyer pursuant to this Agreement and will
continue in full force and effect thereafter, in each case
without breaching the terms thereof or resulting in the
forfeiture or impairment of any rights thereunder and without the
consent, approval or act of, or the making of any filing with,
any other Person. Seller has fulfilled and performed in all
material respects its obligations under each of the Seller
Contracts, and Seller is not in, or alleged to be in, breach or
default under, nor is there or is there alleged to be any basis
for termination of, any of the Seller Contracts and, to the
knowledge of Seller, no other party to any of the Seller
Contracts has materially breached or defaulted thereunder, and no
event has occurred and no condition or state of facts exists
which, with the passage of time or the giving of notice or both,
would constitute such a default or breach by Seller or, to the
knowledge of Seller, by any such other Person. Seller is not
currently renegotiating any of the Seller Contracts or paying
liquidated damages in lieu of performance thereunder. Complete
and correct copies of each of the Seller Contracts will be
delivered to Buyer.
5.1.11. Title to Property. Seller has good and
marketable title in fee simple absolute to all Owned Real
Property and to all Real Improvements thereon, in each case free
and clear of all Encumbrances, except for Permitted Encumbrances.
Seller has good and marketable title to all of the Personal
Property and the other Purchased Assets, free and clear of all
Encumbrances, except for Permitted Encumbrances and except as set
forth in Schedule 5.1.11. Upon delivery to Buyer on the Closing
Date of the instruments of transfer contemplated by paragraph 4.2
hereof, Seller will thereby transfer to Buyer good and marketable
title to the Purchased Assets, free and clear of all
Encumbrances, except Permitted Encumbrances.
5.1.12. No Violation, Litigation or Regulatory Action.
Except as set forth in Schedule 5.1.12:
(i) the Purchased Assets and their uses comply in all
material respects with all applicable Requirements of Laws
and Court Orders;
(ii) WCC and Seller have complied in all material
respects with all Requirements of Laws and Court Orders
which are applicable to the Purchased Assets;
(iii) there are no lawsuits, claims, suits,
proceedings or investigations pending or, to the knowledge
of WCC or Seller, threatened against or affecting WCC or
Seller in respect of the Purchased Assets nor, to the
knowledge of WCC or Seller, is there any basis for any of
the same, and there are no lawsuits, suits or proceedings
pending in which WCC or Seller is the plaintiff or claimant
which relate to the Purchased Assets; and
(iv) there is no action, suit or proceeding pending or,
to the knowledge of WCC or Seller, threatened which
questions the legality or propriety of the transactions
contemplated by this Agreement.
5.1.13. Environmental Matters.
5.1.13.1. Except as set forth in Schedule 5.1.13(I):
(i) the operations of WCC and Seller with respect to
the Purchased Assets comply with all applicable
Environmental Laws;
(ii) WCC or Seller has obtained all environmental,
health and safety Governmental Permits necessary for its
operation with respect to the Purchased Assets, and all such
Governmental Permits are in good standing and WCC and Seller
are in compliance with all terms and conditions of such
permits;
(iii) Neither WCC nor Seller, with respect to the
Purchased Assets, nor any of the Real Property is subject to
any on-going investigation by, order from or agreement with
any Person (including without limitation any prior owner or
operator of the Real Property) respecting (A) any
Environmental Law, (B) any Remedial Action or (C) any claim
of Loss or Expense arising from the Release or threatened
Release of a Contaminant into the environment;
(iv) WCC and Seller, with respect to the Purchased
Assets, are not subject to any judicial or administrative
proceeding, order, judgment, decree or settlement alleging
or addressing a violation of or liability under any
Environmental Law;
(v) WCC and Seller have not, with respect to any Real
Property:
(a) reported a Release of a hazardous substance
pursuant to CERCLA, or any state equivalent;
(b) filed a notice pursuant to CERCLA;
(c) filed a notice pursuant to RCRA, indicating
the generation of any hazardous waste, as that term is
defined under 40 CFR Part 261 or any state equivalent;
or
(d) filed any notice under any applicable
Environmental Law reporting a substantial violation of
any applicable Environmental Law;
(vi) there is not now, nor to the Knowledge of WCC or
Seller has there ever been, on or in any Real Property:
(a) any treatment, recycling, storage or disposal
of any hazardous waste, as that term is defined under
40 CFR Part 261 or any state equivalent that requires
or required a Governmental Permit pursuant to RCRA; or
(b) any underground storage tank or Surface
Impoundment, except as may have been created by tenants
on non-coal out leases;
(vii) to the Knowledge of WCC and Seller, there is not
now on or in any Real Property any polychlorinated biphenyls
(PCB) used in pigments, hydraulic oils, electrical
transformers or other equipment;
(viii) Neither WCC nor Seller has received any notice
or claim to the effect that it is or may be liable to any
Person as a result of the Release or threatened Release of a
Contaminant into the environment from or on any Real
Property;
(ix) Neither WCC nor Seller has, with respect to the
Purchased Assets, received any request for information in an
enforcement context pursuant to the Clean Air Act; the
Surface Mining and Reclamation Act; the Clean Water Act; the
Toxic Substances Control Act; RCRA; CERCLA; and MSHA or
equivalent provisions of applicable state law;
(x) no Environmental Encumbrance has attached to any
Seller Real Property; and
(xi) any asbestos-containing material which is on or
part of any Real Property is in good repair according to the
current standards and practices governing such material, and
its presence or condition does not violate any currently
applicable Environmental Law.
5.1.13.2. Except as set forth in Schedule 5.1.13(II),
to the Knowledge of WCC and Seller:
(i) the operations of the Contractors and Lessees
on the Real Property substantially comply with all
applicable Environmental Laws;
(ii) each of the Contractors and Lessees, with
respect to its operations on the Real Property, has
obtained all environmental, health and safety
governmental permits necessary for its operations on
the Real Property, and all such governmental permits
are in good standing and each of the Contractors and
Lessees is in substantial compliance with all terms and
conditions of such permits;
(iii) none of the Contractors and Lessees, with
respect to its operation on the Real Property, is
subject to any on-going investigation by, order from or
agreement with any Person (including without limitation
any prior owner or operator of the Real Property)
respecting (A) any Environmental Law, (B) any Remedial
Action or (C) any claim of Loss or Expense arising from
the Release or threatened Release of a Contaminant into
the environment;
(iv) none of the Contractors and Lessees, with
respect to the Real Property, is subject to any
judicial or administrative proceeding, order, judgment,
decree or settlement alleging or addressing a violation
of or liability under any Environmental Law;
(v) none of the Contractors and Lessees has, with
respect to any Real Property:
(a) reported a Release of a hazardous
substance pursuant to CERCLA, or any state
equivalent;
(b) filed a notice pursuant to CERCLA;
(c) filed a notice pursuant to RCRA,
indicating the generation of any hazardous waste,
as that term is defined under 40 CFR Part 261 or
any state equivalent; or
(d) filed any notice under any applicable
Environmental Law reporting a substantial
violation of any applicable Environmental Law;
(vi) None of the Contractors and Lessees has
received any notice or claim to the effect that it is
or may be liable to any Person as a result of the
Release or threatened Release of a Contaminant into the
environment from or on any Real Property; and
(vii) None of the Contractors and Lessees has,
with respect to its operations on the Real Property,
received any request for information in an enforcement
context pursuant to the Clean Air Act; the Surface
Mining and Reclamation Act; the Clear Water Act; the
Toxic Substances Control Act; RCRA; CERCLA; and MSHA or
equivalent provisions of applicable state law.
5.1.14. Reclamation and Surety Bonds. Schedule 5.1.14
contains a list of all reclamation and surety bonds posted by
Seller with respect to the Purchased Assets (in each case
specifying the surety, amount of bond and mining or other
Governmental Permit or other item to which such bond pertains)
and any pending claims thereunder. The bonds listed in Schedule
5.1.14 are in full force and effect and all premiums billed with
respect thereto have been paid. To the knowledge of WCC and
Seller, the bonds listed in such Schedule 5.1.14 satisfy all
contractual requirements and Requirements of Laws applicable to
WCC or Seller with respect to the Purchased Assets, including the
Real Property. WCC and Seller have complied in all respects with
each of such bonds. True and complete copies of each such bond
have been delivered to Buyer.
5.1.15. Insurance. Schedule 5.1.15 sets forth a list
(including nature of coverage, limits, deductibles, premiums and
the loss experience for the most recent five years with respect
to each type of coverage) of all policies of insurance
maintained, owned or held by WCC or Seller on the date hereof
with respect to the Purchased Assets. WCC or Seller shall keep
such insurance or comparable insurance in full force and effect
through the Closing Date. WCC and Seller have complied with each
of such insurance policies and have not failed to give any notice
or present any claim thereunder in a due and timely manner.
Correct and complete copies of the most recent inspection
reports, if any, received from insurance underwriters as to the
condition of the Purchased Assets, have been delivered to Buyer.
5.1.16. Brokers. Neither WCC nor Seller nor any
Person acting on its or their behalf has engaged or used the
services of any broker, finder or similar Person for or on
account of the transactions contemplated by this Agreement and,
based upon the actions of WCC, its agents or its Affiliates, no
Person shall be entitled to a brokerage commission, finder's fee
or like payment in connection with this Agreement or in
connection with the consummation of the transactions contemplated
hereby; provided, that WCC has engaged Merrill Lynch & Co. to act
as its financial advisor and WCC shall be solely responsible for
the payment of fees and expenses of Merrill Lynch & Co. for such
services.
5.1.17. Disclosure. None of the representations or
warranties of WCC or Seller contained herein, none of the
information contained in the Schedules referred to in this
paragraph 5.1, is false or misleading in any material respect or
omits to state a fact herein or therein necessary to make the
statements herein or therein not misleading in any material
respect. There is no fact which adversely affects or in the
future is likely to adversely affect the Purchased Assets in any
material respect which has not been set forth or referred to in
this Agreement or the Schedules hereto.
5.1.18. Subsequent Events or Knowledge. If any event
shall occur after the date of this Agreement but prior to the
Closing Date that renders materially incorrect any of the
representations and warranties contained in paragraph 5.1, or if
WCC or Seller acquires knowledge after the date of this Agreement
that any of the representations and warranties contained in
paragraph 5.1 is materially incorrect, then WCC and Seller shall
modify such representation and warranty by giving written notice
thereof in reasonable detail promptly after receiving knowledge
thereof to Buyer (the "Seller Additional Disclosure"). If the
Seller Additional Disclosure would have a material adverse effect
on the Purchased Assets or the transactions contemplated herein,
then Buyer may either (a) terminate this Agreement pursuant to
paragraph 10.1(c)(3) by giving Seller written notice of such
termination within 5 Business Days after receiving the Seller
Additional Disclosure or (b) waive any breach of representation
or warranty by Seller under paragraph 5.1, and any claim for
indemnification under paragraph 8.1, in respect of the Seller
Additional Disclosure, which waiver shall be deemed to have been
made by Buyer unless Buyer elects to terminate this Agreement as
provided in clause (a) of this sentence. In determining whether
any Seller Additional Disclosure would have a material adverse
effect on Buyer or the transactions contemplated herein, Buyer
may consider any and all prior Seller Additional Disclosure.
5.2. Representations and Warranties of Buyer. Buyer
represents and warrants to WCC and Seller as follows:
5.2.1. Organization and Existence. Buyer is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
5.2.2. Authority; Approval; No Violations; Consents.
5.2.2.1. Buyer has corporate power and authority to
execute, deliver and perform this Agreement and all of the Buyer
Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby.
5.2.2.2. The execution, delivery and performance of
this Agreement and the Buyer Ancillary Agreements have been duly
authorized and approved by the Board of Directors of Buyer and do
not require any further authorization or consent of Buyer or its
stockholders. Except as set forth in Schedule 5.2.2, neither the
execution and delivery of this Agreement or any of the Buyer
Ancillary Agreements or the consummation of any of the
transactions contemplated hereby or thereby nor compliance with
or fulfillment of the terms, conditions and provisions hereof or
thereof will: (i) conflict with, result in a breach of the terms,
conditions or provisions of, or constitute a default, an event of
default or an event creating rights of acceleration, termination
or cancellation or a loss of rights under (1) the Certificate of
Incorporation or By-laws of Buyer, (2) any material note,
instrument, agreement, mortgage, lease, license, franchise,
permit or other authorization, right, restriction or obligation
to which Buyer is a party or any of its assets or properties is
subject or by which Buyer is bound, (3) any Court Order to which
Buyer is a party or any of its assets or properties is subject or
by which Buyer is bound, or (4) any Requirements of Laws
affecting Buyer or its assets or properties, or (ii) require the
approval, consent, authorization or act of, or the making by
Buyer of any declaration, filing or registration with, any
Person, except as provided under the HSR Act. This Agreement has
been duly authorized, executed and delivered by Buyer and is the
legal, valid and binding obligation of Buyer enforceable in
accordance with its terms, and each of the other Buyer Ancillary
Agreements has been duly authorized by Buyer and upon execution
and delivery by Buyer will be a legal, valid and binding
obligation of Buyer enforceable in accordance with its terms, in
each case subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance and other similar laws
affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.
5.2.3. Litigation. Buyer has not received written
notice of any actions, suits or legal, administrative or arbitral
proceedings pending to which Buyer is a party, or written notice
of any threatened actions, suits or legal, administrative or
arbitral proceedings against Buyer that questions the validity of
this Agreement, or of the transactions contemplated herein, or of
any action taken or to be taken by Buyer in connection with this
Agreement.
5.2.4. Brokers. Neither Buyer nor any Person acting
on its behalf has engaged or used the services of any broker,
finder or similar Person for or on account of the transactions
contemplated by this Agreement and, based upon the actions of
Buyer, its agents or its Affiliates, no Person shall be entitled
to a brokerage commission, finder's fee or like payment in
connection with this Agreement or in connection with the
consummation of the transactions contemplated hereby.
5.3. Disclaimers of WCC and Seller. Except as set
forth in this Agreement, neither WCC nor Seller has made and
neither does make hereby any representation or warranty, express
or implied, concerning the Purchased Assets. Neither WCC nor
Seller makes any projection concerning the income to be derived
by Buyer after the Closing Date with respect to the Purchased
Assets or makes any representation or warranty concerning the
quantity or quality of coal included in the Owned Real Property
or the Leased Real Property, except that, to the Knowledge of
Seller or WCC, such information as has been supplied to Buyer
concerning the quality and quantity of coal located upon the
Owned Real Property and the Leased Real Property is not
materially false.
6. Action Prior to the Closing Date.
The respective parties hereto covenant and agree to
take the following actions between the date hereof and the
Closing Date:
6.1. Investigation of the Purchased Assets by Buyer.
WCC and Seller shall afford to the officers, employees and
authorized representatives of Buyer (including, without
limitation, independent public accountants, engineering and
environmental consulting firms, and attorneys) complete access
during normal business hours to the offices, properties,
employees and business and financial records (including computer
files, retrieval programs and similar documentation) of WCC and
Seller to the extent Buyer shall deem necessary or desirable and
shall furnish to Buyer or its authorized representatives such
additional information concerning the Purchased Assets as shall
be reasonably requested, including all such information as shall
be reasonably necessary to enable Buyer or its representatives to
verify the accuracy of the representations and warranties
contained in this Agreement, to verify that the covenants of
Seller contained in this Agreement have been complied with and to
determine whether the conditions set forth in paragraph 9.2
hereof have been satisfied. Buyer agrees that such investigation
shall be conducted in such a manner as not to interfere
unreasonably with the operations of WCC or Seller. No
investigation made by Buyer or its representatives hereunder
shall affect the representations and warranties of WCC or Seller
hereunder.
6.2. Preserve Accuracy of Representations and
Warranties. Each of the parties hereto shall refrain from taking
any action which would render any representation or warranty
contained in paragraph 5.1 or 5.2 of this Agreement inaccurate as
of the Closing Date. Each party shall promptly notify the other
of any action, suit or proceeding that shall be instituted or
threatened against such party to restrain, prohibit or otherwise
challenge the legality of any transaction contemplated by this
Agreement. WCC and Seller shall promptly notify Buyer of any
lawsuit, claim, proceeding or investigation that may be
threatened, brought, asserted or commenced against WCC or Seller
which would have been listed in Schedule 5.1.12 if such lawsuit,
claim, proceeding or investigation had arisen prior to the date
hereof.
6.3. Consents of Third Parties; Governmental
Approvals. (a) WCC and Seller will act diligently and
reasonably to secure, before the Closing Date, the consent,
approval or waiver, in form and substance reasonably satisfactory
to Buyer, from any party to any Seller Contract required to be
obtained by the terms thereof or otherwise for the consummation
of the transaction contemplated by this Agreement or to otherwise
satisfy the conditions set forth in paragraphs 9.1.4 and 9.2.5
hereof; provided that WCC and Seller shall not have any
obligation to offer or pay any consideration in order to obtain
any such consents or approvals; and provided, further, that WCC
and Seller shall not make any agreement or understanding
affecting the Purchased Assets as a condition for obtaining any
such consents or waivers except with the prior written consent of
Buyer. During the period prior to the Closing Date, Buyer shall
act diligently and reasonably to cooperate with WCC and Seller to
obtain the consents, approvals and waivers contemplated by this
paragraph 6.3(a).
(b) During the period prior to the Closing Date, WCC,
Seller and Buyer shall act diligently and reasonably, and shall
cooperate with each other, to secure any consents and approvals
of any Governmental Body required to be obtained by them in order
to permit the consummation of the transactions contemplated by
this Agreement, or to otherwise satisfy the conditions set forth
in paragraphs 9.1.3 and 9.2.4 hereof; provided that WCC and
Seller shall not make any agreement or understanding affecting
the Purchased Assets as a condition for obtaining any such
consents or approvals except with the prior written consent of
Buyer.
6.4. Operations Prior to the Closing Date. (a) WCC
and Seller shall keep and maintain the Purchased Assets in good
operating condition and repair. Prior to the Closing Date,
Seller shall operate the Purchased Assets in the same general
manner and procedure as it operated such Purchased Assets prior
to execution of this Agreement, maintaining a normal supply of
spare parts and producing a reasonably like quantity and quality
of coal as is adequate to meet then-existing requirements of Coal
Supply Contracts.
(b) Notwithstanding paragraph 6.4(a) hereof, except as
expressly contemplated by this Agreement or except with the
express written approval of Buyer, WCC and Seller shall not:
(i) enter into any contract for the sale, lease or
contract mining of any Owned Real Property or exercise any
option to extend an In Lease or an Out Lease;
(ii) sell, lease (as lessor), transfer or otherwise
dispose of (including any transfers from Seller to any of
its Affiliates), or mortgage or pledge, or impose or suffer
to be imposed any Encumbrance on, any of the Purchased
Assets except for Permitted Encumbrances; or
(iii) without the prior written consent of Buyer,
terminate, modify or amend in any material respect any
Seller Contract, except as contemplated by this Agreement.
6.5. Antitrust Law Compliance. As promptly as
practicable after the date hereof, Buyer and WCC shall file or
cause to be filed with the Federal Trade Commission and the
Antitrust Division of the Department of Justice the notifications
and other information required to be filed under the HSR Act, or
any rules and regulations promulgated thereunder, with respect to
the transactions contemplated hereby. Each party shall make its
best efforts to assure that all such filings will be done in a
professional manner and in accordance with the HSR Act and any
such rules and regulations. Each of Buyer and WCC agrees to make
available to the other such information as each of them may
reasonably request relative to the business, assets and property
of Buyer or WCC, as the case may be, as may be required of each
of them to file any additional information requested by such
agencies under the HSR Act and any such rules and regulations.
Each of WCC and Buyer shall, and shall cause each of its
Affiliates to, provide such additional information and
documentary materials and take all reasonable actions necessary,
and will cooperate with each other, to obtain approval of the
transactions contemplated hereunder by the Federal Trade
Commission and the Department of Justice.
7. Additional Agreements.
7.1. Discharge of Seller's Liabilities. WCC and
Seller covenant and agree that they will pay and discharge, and
hold Buyer harmless from, each and every liability and obligation
of WCC and Seller in respect of the Purchased Assets arising from
events occurring on or prior to the Closing Date, excepting only
those liabilities and obligations expressly assumed by Buyer at
the Closing pursuant to instruments of assumption delivered to
WCC and Seller at the Closing, it being understood and agreed
that Buyer is assuming no liabilities or obligations of WCC or
Seller other than liabilities and obligations so expressly
assumed by Buyer.
7.2. Expenses. Each of the parties shall be
responsible for and shall pay all costs and expenses incurred by
it in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, all fees,
expenses and disbursements of its counsel and accountants and
other expenses incident to its negotiation and preparation of
this Agreement and to its performance and compliance with all
agreements and conditions contained herein on its part to be
performed or complied with. In all events, Buyer shall be solely
responsible for all costs and expenses incurred by Buyer in any
examination or investigation regarding Seller, which Buyer
elected to carry out, including, without limitation, the cost of
any examination of title to the Real Property.
7.3. Further Assurances. On the Closing Date WCC and
Seller shall (i) deliver to Buyer such other bills of sale,
deeds, endorsements, assignments and other good and sufficient
instruments of conveyance and transfer, in form reasonably
satisfactory to Buyer and its counsel, as Buyer may reasonably
request or as may be otherwise reasonably necessary to vest in
Buyer all the right, title and interest of Seller in, to or under
any or all of the Purchased Assets, and (ii) take all steps as
may be reasonably necessary to put Buyer in actual possession and
control of all the Purchased Assets. From time to time following
the Closing, WCC and Seller shall execute and deliver, or cause
to be executed and delivered, to Buyer such other instruments of
conveyance and transfer as Buyer may reasonably request or as may
be otherwise necessary to more effectively convey and transfer
to, and vest in, Buyer and put Buyer in possession of, any part
of the Purchased Assets, and, in the case of licenses,
certificates, approvals, authorizations, agreements, contracts,
leases, easements and other commitments included in the Purchased
Assets (a) which cannot be transferred or assigned effectively
without the consent of third parties which consent has not been
obtained prior to the Closing, to cooperate with Buyer at its
request in endeavoring to obtain such consent promptly, and if
any such consent is unobtainable, to use its best efforts to
secure to Buyer the benefits thereof in some other manner, or (b)
which are otherwise not transferable or assignable, to use its
best efforts jointly with Buyer to secure to Buyer the benefits
thereof in some other manner (including the exercise of the
rights of Seller thereunder); provided, however, that nothing
herein shall relieve WCC or Seller of its obligations under
paragraph 6.3. Notwithstanding anything in this Agreement to the
contrary, this Agreement shall not constitute an agreement to
assign any license, certificate, approval, authorization,
agreement, contract, lease, easement or other commitment included
in the Purchased Assets if an attempted assignment thereof
without the consent of a third party thereto would constitute a
breach thereof. Should title to any real property located within
the outer boundary of or abutting the Owned Real Property or
Leased Real Property be owned by WCC or Seller on the Closing
Date and not transferred to Buyer at the Closing Date, then WCC
or Seller shall transfer same to Buyer without additional
consideration.
7.4. Prorations. (a) The income, expenses and
liabilities attributable to the Purchased Assets through the
Valuation Date shall be for the account of Seller. Seller shall
be responsible for all Taxes attributable to the Purchased Assets
and the business operations of Seller for the period including
and prior to the Valuation Date. Buyer shall be responsible for
all Taxes attributable to the Purchased Assets for the period
beginning after the Valuation Date. Seller and Buyer shall each
pay half of any recording, transfer, sales and similar taxes
required to be paid in connection with the sale of the Purchased
Assets. All royalties, rentals and other payments due under the
Seller Contracts shall be prorated between Buyer and Seller as of
the Valuation Date, with Seller paying to Buyer all amounts
received by Seller prior to the Closing Date under the Out Leases
in respect of the period after the Valuation Date and Buyer
reimbursing Seller for all amounts paid by Seller prior to the
Closing Date under the Seller Contracts in respect of the period
after the Valuation Date (including all unrecouped advance or
minimum royalties under the In Leases paid by Seller prior to the
Closing Date in respect of the period after the Closing Date).
(b) Seller shall deliver to Buyer, within 75 days
after the Closing Date, a statement setting forth in reasonable
detail the calculation of amounts due Seller or Buyer under
paragraph 7.4(a). Buyer shall have 60 days after receipt thereof
to review the details thereof. If Buyer does not object thereto
in writing during such review period, then such calculations
shall be final and binding. If Buyer objects thereto in writing
within such review period, then the parties shall use their
reasonable efforts to resolve their differences and, in the event
Seller and Buyer so resolve any such differences, the
calculations, as adjusted by the adjustments agreed to by the
parties, shall be final and binding. If Seller and Buyer are
unable to resolve such differences within the next 30 days
following such review period, then Buyer and Seller shall submit
the objections that are unresolved to the Accounting Firm, which
shall be instructed to resolve the unresolved objections as
promptly as reasonably practicable and to deliver written notice
to Buyer and Seller setting forth its resolution of the disputed
matters. The calculations, after giving effect to any
adjustments agreed to by the parties and to the resolution of
disputed matters by the Accounting Firm, shall be final and
binding. Any payments required to be made by Buyer or Seller in
respect of such calculations shall be made promptly (but not
later than five days) after the determination of such
calculations that is final and binding. The Accounting Firm may
employ legal counsel if necessary to its resolution and all costs
of such Accounting Firm shall be shared equally by Seller and
Buyer.
7.5. Litigation Assistance. Following the Closing,
Buyer shall provide to WCC, and WCC and Seller shall provide to
Buyer, such information and documents as may be reasonably
requested in connection with any suit, claim, investigation or
proceeding, pending or threatened, which relates to the Purchased
Assets and in connection therewith each party shall, without
limitation, make available to the other party during normal
business hours (i) all books and records relating thereto in its
possession, and (ii) all employees of such party or its
Affiliates having knowledge of the matters in controversy. Such
access shall be afforded upon receipt of reasonable advance
notice and shall not unreasonably interfere with the operations
of the party being requested to furnish the information. The
party requesting the information shall be responsible for any
significant costs or expenses incurred by the party furnishing
the information pursuant to this paragraph 7.5.
7.6. Post-Closing Remittances. If, after the Closing
Date, WCC or Seller shall receive any remittance with respect to
a Seller Contract which relates to the period after the Valuation
Date, WCC or Seller shall endorse such remittance to the order of
Buyer and forward it to Buyer promptly following receipt thereof.
Conversely, if, after the Closing Date, Buyer shall receive any
remittance with respect to a Seller Contract which relates to the
period on or prior to the Valuation Date, then Buyer shall
endorse such remittance to the order of Seller and forward it to
Seller promptly following receipt thereof.
7.7. Maintenance of Corporate Existence. WCC
covenants and agrees that it will, for a period of not less than
fifteen years from and after the closing, take all necessary
action to maintain its corporate existence, and to maintain the
corporate existence of KCC, CCC and DPC, or to cause such
corporations to maintain their corporate existence, and to keep
itself and such other corporations in good standing (or to cause
such other corporations to remain in good standing) and properly
qualified to do business in the applicable jurisdiction of
incorporation; provided, however, that this covenant by WCC shall
be subject to the following exceptions and qualifications:
(i) WCC may consolidate with, or merge with or into
any other corporation (whether or not WCC shall be the
surviving corporation), or sell, assign, transfer or lease
all or substantially all of its properties and assets as an
entirety or substantially as an entirety to any Person or
group of affiliated Persons, in one transaction or a series
of related transactions, if either: (A) WCC shall be the
surviving corporation or surviving Person; or (B) the
surviving corporation or surviving Person (if other than
WCC) formed by such consolidation or with which or into
which WCC is merged or the Person (or group of affiliated
Persons) to which all or substantially all the properties or
assets of WCC as an entirety or substantially as an entirety
are sold, assigned, transferred or leased shall be a
corporation organized and existing under the laws of the
United States of America or any state thereof or the
District of Columbia and shall expressly assume all the
obligations of WCC under this Agreement, including but not
limited to paragraph 8.1(iv) and (v) hereof.
(ii) WCC may dissolve voluntarily under applicable
state law if, prior to such dissolution, WCC has provided
for all liabilities it may then have under the Act. WCC
shall be deemed to have provided for such liabilities under
the Act only if: (A) the trustees under the Act shall agree
in writing that they will release all claims against WCC and
any Related Persons or "successors in interest" (as such
terms are used and defined in the Act) if WCC pays to the
trustees the amounts so provided for in the dissolution
proposal to be submitted to the stockholders of WCC for
approval; and (B) WCC pays, or deposits funds with a third
party that will provide for payment of, such amounts to the
trustees.
(iii) This paragraph 7.7 shall have no further force and
effect if (A) the Act in its entirety, or the provisions
thereof imposing liability on any "successor in interest,"
shall be determined by a court of competent jurisdiction to
be unconstitutional or otherwise invalid, provided that, in
such case, the ruling of such court is not subject to
further appeal, and such Act is not, with sixty months
thereafter, amended or replaced by legislation which would
impose a liability upon any Buyer Group Member for health or
death benefits of former employees of WCC or Seller, or (B)
Congress repeals the Act or the provision thereof that
imposes liability on "successors in interest" and Congress
does not, within sixty months after such repeal, enact new
legislation the effect of which is to impose liability upon
any Buyer Group Member for the health or death benefits of
former employees of WCC or Seller.
(iv) Capitalized terms used in this paragraph but not
defined in this Agreement shall have the meaning assigned
thereto in the Act.
7.8. [Intentionally omitted].
7.9. Permits and Bonds. Buyer and Seller shall
promptly submit an "Operator Change Application" with the
Kentucky Environmental Cabinet on Form MPA-08 (or any successor
thereto) with a cover letter requesting that the effective date
of the change be the Closing Date. With respect to each of the
Governmental Permits and each of the bonds listed on Schedule
5.1.14, from and after the Closing Date, Buyer shall indemnify
and hold WCC and Seller harmless from and against any Losses or
Expenses WCC or Seller may incur under any such permit or bond by
reason of Buyer's operations on and after the Closing Date.
Promptly after the Closing Date, Buyer shall submit permit
transfer applications to the Kentucky Environmental Cabinet on
Form MPA-07 (or any successor thereto) for each such Governmental
Permit and provide a replacement for each such bond.
7.10. Transfer of Certain Interests of WCSC. WCC
agrees that, at the Closing and upon the satisfaction of all
conditions precedent to the obligations of WCC under this
Agreement, WCC shall, on behalf of its wholly owned subsidiary
WCSC, cause WCSC to transfer to Buyer all of WCSC's interest in
(a) each of the contracts listed on Schedule 1.1.7 other than the
agreement listed on such schedule under the heading "Boise
Cascade" and (b) the Rail Transportation Agreement dated May 17,
1991, between CSX Transportation, Inc. and WCSC, as amended.
8. Indemnification.
8.1. Indemnification by WCC and Seller. WCC and
Seller, jointly and severally, agree to indemnify and hold
harmless each Buyer Group Member from and against any and all
Loss and Expense imposed upon or incurred by such Buyer Group
Member as a result of, in connection with or arising from:
(i) any breach by WCC or Seller of, or default in the
performance by WCC or Seller of, any covenant, agreement or
obligation to be performed by WCC or Seller pursuant to this
Agreement or any Westmoreland Ancillary Agreement;
(ii) any breach of any warranty or the inaccuracy of
any representation of WCC or Seller contained or referred to
in this Agreement or any certificate delivered by or on
behalf of WCC or Seller pursuant hereto;
(iii) any failure of WCC or Seller to obtain prior
to the Closing any consent required for the consummation of
the transactions contemplated hereby or by the Westmoreland
Ancillary Agreements, including, without limitation, those
set forth in Schedule 5.1.2;
(iv) the failure of WCC or Seller to satisfy or perform
any of the liabilities or obligations not assumed by Buyer
pursuant to this Agreement; and
(v) any Loss and Expense resulting from an increase in
unassigned beneficiaries premium or costs paid by any Buyer
Group Member under Section 9704(d) of the Act or increase in
any Buyer Group Member's "applicable percentage" under
Section 9704(f) of the Act resulting from the transfer of
eligible beneficiaries assigned to Seller or WCC under the
Act to unassigned beneficiaries or from the transfer of any
beneficiaries from any employer funds of WCC or Seller to
any fund under the Act, provided that such transfer is
caused by a breach by WCC or Seller of this Agreement or is
caused by actions taken by WCC or Seller pursuant to clause
(i) or (ii) of paragraph 7.7 of this Agreement;
provided, however, that WCC and Seller shall be required to
indemnify and hold harmless with respect to Loss and Expense
incurred by Buyer Group Members under clauses (i), (ii) and (iii)
of this paragraph 8.1 (other than Loss and Expense incurred as a
result of inaccuracies of the representations and warranties
contained in paragraphs 5.1.1, 5.1.2 and 5.1.11, as to which this
proviso shall have no effect) only to the extent that the
aggregate amount of such Loss and Expense exceeds $1,000,000 and
is no greater than $15,000,000. The indemnification provided for
in this paragraph 8.1 shall terminate two years after the Closing
Date (and no claims shall be made by any Buyer Group Member under
this paragraph 8.1 thereafter), except that the indemnification
by WCC and Seller shall continue as to:
(A) the obligations and representations of Seller
under the Instrument of Assignment, as to which no time
limitation shall apply;
(B) the representations and warranties set forth in
paragraphs 5.1.1 and 5.1.2 and the covenants and agreements
of WCC and Seller set forth in paragraphs 7.1, 7.2, 7.3,
7.5, 7.7, 8.1(iv), 8.1(v), 11.1 and 11.15 hereof, as to all
of which no time limitation shall apply;
(C) the representations and warranties set forth in
paragraph 5.1.11, as to which the indemnification provided
for in this paragraph 8.1 shall terminate ten years after
the Closing Date; and
(D) any Loss or Expense of which any Buyer Group
Member has notified WCC or Seller in accordance with the
requirements of paragraph 8.3 hereof on or prior to the date
such indemnification would otherwise terminate in accordance
with this paragraph 8.1, as to which the obligation of WCC
and Seller shall continue until the liability of WCC and
Seller shall have been determined pursuant to this paragraph
8.1, and WCC or Seller shall have reimbursed all Buyer Group
Members for the full amount of such Loss and Expense in
accordance with this paragraph 8.1.
8.2. Indemnification by Buyer. Buyer agrees to
indemnify and hold harmless each Seller Group Member from and
against any and all Loss and Expense imposed upon or incurred by
such Seller Group Member as a result of, in connection with or
arising from:
(i) any breach by Buyer, or default in the performance
by Buyer of, any covenant, agreement or obligation to be
performed by Buyer pursuant to this Agreement or any Buyer
Ancillary Agreement; or
(ii) any breach of any warranty or the inaccuracy of
any representation of Buyer contained or referred to in this
Agreement or in any certificate delivered by or on behalf of
Buyer pursuant hereto;
(iii) any and all claims by any third Person
arising from the failure to pay, perform or discharge any of
the Assumed Liabilities after the Closing Date, including,
without limitation, any lease, sublease or agreement
expressly assumed by Buyer pursuant to the terms of this
Agreement, or any act or omission by Buyer occurring on or
after the Closing Date with respect to any of the Assumed
Liabilities; and
(iv) any and all debts, obligations and liabilities
(other than Excluded Liabilities) resulting from or in
connection with Buyer's ownership of the Purchased Assets
arising or occurring after the Closing;
provided, however, that Buyer shall be required to indemnify and
hold harmless under clauses (i) and (ii) of this paragraph 8.2
with respect to Loss and Expense incurred by Seller Group Members
only to the extent that the aggregate amount of such Loss and
Expense exceeds $1,000,000 (except with respect to Loss or
Expense under paragraph 7.9, as to which this limitation shall
not apply) but is not greater than $15,000,000. The
indemnification provided for in this paragraph 8.2 shall
terminate two years after the Closing Date (and no claims shall
be made by any Seller Group Member under this paragraph 8.2
thereafter), except that the indemnification by Buyer shall
continue as to:
(a) the covenants and agreements of Buyer set forth in
paragraphs 7.2, 7.5, 7.9, 11.1 and 11.15 hereof, as to all
of which no time limitation shall apply; and
(b) any Loss or Expense of which WCC or Seller has
notified Buyer in accordance with the requirements of
paragraph 8.3 hereof on or prior to the date such
indemnification would otherwise terminate in accordance with
this paragraph 8.2, as to which the obligation of Buyer
shall continue until the liability of Buyer shall have been
determined pursuant to this paragraph 8.2, and Buyer shall
have reimbursed all Seller Group Members for the full amount
of such Loss and Expense in accordance with this paragraph
8.2.
8.3. Notice of Indemnity Claims. (a) Any Buyer Group
Member or Seller Group Member (the "Indemnified Party") seeking
indemnification hereunder shall give to the party obligated to
provide indemnification to such Indemnified Party (the
"Indemnitor") a notice (a "Claim Notice") describing in
reasonable detail the facts giving rise to any claim for
indemnification hereunder and shall include in such Claim Notice
(if then known) the amount or the method of computation of the
amount of such claim, and a reference to the provision of this
Agreement or any other agreement, document or instrument executed
hereunder or in connection herewith upon which such claim is
based; provided, that a Claim Notice in respect of any action at
law or suit in equity by or against a third Person as to which
indemnification will be sought shall be given promptly after the
action or suit is commenced; and provided, further, that failure
to give such notice shall not relieve the Indemnitor of its
obligations hereunder except to the extent it shall have been
prejudiced by such failure.
(b) After the giving of any Claim Notice pursuant
hereto, the amount of indemnification to which an Indemnified
Party shall be entitled under this paragraph 8 shall be
determined: (i) by the written agreement between the Indemnified
Party and the Indemnitor; (ii) by a final judgment or decree of
any court of competent jurisdiction; or (iii) by any other means
to which the Indemnified Party and the Indemnitor shall agree.
The judgment or decree of a court shall be deemed final when the
time for appeal, if any, shall have expired and no appeal shall
have been taken or when all appeals taken shall have been finally
determined. The Indemnified Party shall have the burden of proof
in establishing the amount of Loss and Expense suffered by it.
8.4. Third Person Claims. (a) Subject to paragraph
8.4(b), the Indemnified Party shall have the right to conduct and
control, through counsel of its choosing, the defense, compromise
or settlement of any third Person claim, action or suit against
such Indemnified Party as to which indemnification will be sought
by any Indemnified Party from any Indemnitor hereunder, and in
any such case the Indemnitor shall cooperate in connection
therewith and shall furnish such records, information and
testimony and attend such conferences, discovery proceedings,
hearings, trials and appeals as may be reasonably requested by
the Indemnified Party in connection therewith; provided, that the
Indemnitor may participate, through counsel chosen by it and at
its own expense, in the defense of any such claim, action or suit
as to which the Indemnified Party has so elected to conduct and
control the defense thereof; and provided, further, that the
Indemnified Party shall not, without the written consent of the
Indemnitor (which written consent shall not be unreasonably
withheld), pay, compromise or settle any such claim, action or
suit, except that no such consent shall be required if, following
a written request from the Indemnified Party, the Indemnitor
shall fail, within 14 days after the making of such request, to
acknowledge and agree in writing that, if such claim, action or
suit shall be adversely determined, such Indemnitor has an
obligation to provide indemnification hereunder to such
Indemnified Party.
(b) If any third Person claim, action or suit against
any Indemnified Party is solely for money damages or, where WCC
or Seller is the Indemnitor, will have no continuing effect in
any material respects on the Purchased Assets, then the
Indemnitor shall have the right to conduct and control, through
counsel of its choosing, the defense, compromise or settlement of
any such third Person claim, action or suit against such
Indemnified Party as to which indemnification will be sought by
any Indemnified Party from any Indemnitor hereunder if the
Indemnitor has acknowledged and agreed in writing that, if the
same is adversely determined, the Indemnitor has an obligation to
provide indemnification to the Indemnified Party in respect
thereof, and in any such case the Indemnified Party shall
cooperate in connection therewith and shall furnish such records,
information and testimony and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably
requested by the Indemnitor in connection therewith; provided,
that the Indemnified Party may participate, through counsel
chosen by it and at its own expense, in the defense of any such
claim, action or suit as to which the Indemnitor has so elected
to conduct and control the defense thereof. Notwithstanding the
foregoing, the Indemnified Party shall have the right to pay,
settle or compromise any such claim, action or suit; provided,
that in such event the Indemnified Party shall waive any right to
indemnity therefor hereunder.
9. Conditions Precedent.
9.1. Conditions Precedent to Performance by WCC and
Seller. The performance of the obligations of WCC and Seller
hereunder is subject to the satisfaction, on or before the
Closing Date, of each of the following conditions, any of which
may be waived by WCC and Seller, in whole or in part, without
prior notice:
9.1.1. Performance of Agreement; Accuracy of
Representations and Warranties. Buyer shall have performed,
satisfied and complied with all covenants, agreements and
obligations required by this Agreement to be performed or
complied with by Buyer on or prior to the Closing Date; each of
the representations and warranties of Buyer contained or referred
to in this Agreement shall be true and correct on the Closing
Date in all material respects as though made on and as of the
Closing Date, except for changes therein specifically permitted
by any such agreement or resulting from any transaction expressly
consented to in writing by WCC and Seller or any transaction
contemplated by any such agreement; and there shall have been
delivered to WCC and Seller a certificate to such effect, dated
the Closing Date and signed on behalf of Buyer by the President
or any Vice President thereof.
9.1.2. No Restraint or Litigation. The waiting period
under the HSR Act shall have expired or been terminated, and no
action, suit or proceeding by any Governmental Body shall have
been instituted or threatened to restrain, prohibit or otherwise
challenge the legality or validity of the transactions
contemplated hereby.
9.1.3. Necessary Governmental Approvals. WCC and
Seller shall have received all approvals and actions of or by all
Governmental Bodies necessary to consummate the transactions
contemplated hereby, which are required to be obtained prior to
the Closing by applicable Requirements of Laws.
9.1.4. Material Consents. WCC and Seller shall have
received, on or before the Closing Date, the material consents
from third parties to complete the transactions contemplated by
this Agreement set forth in Schedule 9.1.4.
9.1.5. Releases. WCC, WCSC and Seller shall have been
released from each of the leases, surety bonds, performance and
reclamation bonds and other obligations set forth in Schedule
9.1.5.
9.1.6. Documents Delivered. The form and substance of
all documents to be delivered by or relating to Buyer or CONSOL
Inc. under this Agreement shall be satisfactory in all reasonable
respects to WCC and Seller.
9.1.7. Corporate Approval. The Boards of Directors of
WCC, CCC, KCC and DPC shall have approved the performance of this
Agreement and the transactions contemplated hereby. If WCC shall
have solicited its stockholders pursuant to section 271 of the
General Corporation Law of the State of Delaware (or any
comparable provision of State or federal law), the requisite
percentage of WCC's stockholders shall have approved the
transactions contemplated hereby.
9.2. Conditions Precedent to Performance by Buyer.
The performance of the obligations of Buyer hereunder is subject
to the satisfaction, on or before the Closing Date, of each of
the following conditions, any of which may be waived by Buyer, in
whole or in part, without prior notice:
9.2.1. Performance of Agreement; Accuracy of
Representations and Warranties. WCC and Seller shall have
performed, satisfied and complied with all covenants, agreements
and obligations required by this Agreement to be performed or
complied with by WCC and Seller on or prior to the Closing Date;
each of the representations and warranties of WCC and Seller
contained or referred to in this Agreement shall be true and
correct on the Closing Date in all material respects as though
made on and as of the Closing Date, except for changes therein
specifically permitted by any such agreement or resulting from
any transaction expressly consented to in writing by Buyer or any
transaction contemplated by any such agreement; and there shall
have been delivered to Buyer a certificate to such effect, dated
the Closing Date and signed on behalf of WCC and Seller by the
President or any Vice President thereof.
9.2.2. No Changes or Destruction of Purchased Assets.
Between the date hereof and the Closing Date, there shall have
been (a) no material adverse change in the Purchased Assets; (b)
no material adverse federal or state legislative or regulatory
change affecting the Purchased Assets; and (c) no material damage
to the Purchased Assets by fire, flood, casualty, act of God or
the public enemy or other cause, regardless of insurance coverage
for such damage; and there shall have been delivered to Buyer a
certificate to such effect, dated the Closing Date and signed on
behalf of WCC and Seller by the President or any Vice President
thereof.
9.2.3. No Restraint or Litigation. The waiting period
under the HSR Act shall have expired or been terminated, and no
action, suit, investigation or proceeding shall have been
instituted or threatened to restrain or prohibit or otherwise
challenge the legality or validity of the transactions
contemplated hereby.
9.2.4. Necessary Governmental Approvals. The parties
shall have received all approvals and actions of or by all
Governmental Bodies which are necessary to consummate the
transactions contemplated hereby, which are either specified in
Schedule 5.1.4 or otherwise required to be obtained prior to the
Closing by applicable Requirements of Laws or which are necessary
to prevent a material adverse change in the Purchased Assets.
9.2.5. Necessary Consents. WCC and Seller shall have
received consents, in form and substance reasonably satisfactory
to Buyer, to the transactions contemplated hereby from the other
parties to all contracts, leases, agreements and permits to which
WCC or Seller is a party or by which WCC or Seller or any of
Seller's assets is affected and which are specified in Schedule
9.1.4 or are otherwise necessary to prevent a material adverse
change in the Purchased Assets.
9.2.6. Documents Delivered. The form and substance of
all documents to be delivered by or relating to WCC or Seller
under this Agreement shall be satisfactory in all reasonable
respects to Buyer.
10. Termination.
10.1. Termination. Anything contained in this
Agreement to the contrary notwithstanding, this Agreement may be
terminated at any time prior to the Closing Date:
(a) by the mutual consent of the Board of Directors of
Buyer and the Board of Directors of WCC;
(b) by Buyer or WCC if the Closing shall not have
occurred on or before October 31, 1994, or December 31, 1994 if
WCC has mailed to its stockholders on or before October 31, 1994
a proxy soliciting stockholder approval of the transactions
contemplated hereby (or such later date as may be mutually agreed
to by Buyer and WCC) (the "Terminal Date");
(c) by Buyer (1) in the event all conditions precedent
set forth in paragraph 9.2 have not been satisfied by the
Terminal Date or (2) in the event of any material breach by WCC
or Seller of any agreements, representations, or warranties of
WCC or Seller contained herein and the failure of WCC or Seller
to cure such breach within thirty business days after receipt of
notice from Buyer requesting such breach to be cured or (3) if
between the date hereof and the Closing Date, Buyer has received
Seller Additional Disclosure and such Seller Additional
Disclosure would have a material adverse effect on the Purchased
Assets or the transactions contemplated hereby, by giving written
notice of termination within 5 Business Days after receiving such
Seller Additional Disclosure; or
(d) by WCC in the event all conditions precedent set
forth in paragraph 9.1 have not been satisfied by the Terminal
Date or in the event of any material breach by Buyer of any
agreements, representations, or warranties of Buyer contained
herein and the failure of Buyer to cure such breach within ten
business days after receipt of notice from WCC requesting such
breach to be cured.
10.2. Notice of Termination. Any party desiring to
terminate this Agreement pursuant to paragraph 10.1 hereof shall
give notice of such termination to the other parties to this
Agreement.
10.3. Effect of Termination. In the event that this
Agreement shall be terminated pursuant to this paragraph 10, all
further obligations of the parties under this Agreement (other
than paragraphs 7.2 and 11.15) shall be terminated without
further liability of any party to the other, provided that
nothing herein shall relieve any party from liability for its
willful breach of this Agreement.
11. Miscellaneous Agreements.
11.1. Retention of and Access to Records after
Closing. (a) For a period of three years after the Closing Date,
WCC and its representatives shall have reasonable access to all
of the books and records of WCC and Seller relating to the
Purchased Assets and transferred to Buyer pursuant to this
Agreement to the extent that such access may reasonably be
required by WCC or Seller in connection with matters relating to
or affected by the Purchased Assets prior to the Closing Date
(including, without limitation, for the preparation of Tax
returns and financial statements and other reasonable purposes).
Such access shall be afforded by Buyer upon receipt of reasonable
advance notice and during normal business hours. WCC and Seller
shall be solely responsible for any costs or expenses incurred by
either of them pursuant to this paragraph 11.1(a). If Buyer
shall desire to dispose of any of such books and records prior to
the expiration of such three-year period, Buyer shall, prior to
such disposition, give WCC a reasonable opportunity, at WCC's
expense, to segregate and remove such books and records as WCC
may select.
(b) For a period of three years after the Closing
Date, Buyer and its representatives shall have reasonable access
to all of the books and records of WCC and Seller relating to the
Purchased Assets which WCC or any of its Affiliates may retain
after the Closing Date. Such access shall be afforded by WCC and
its Affiliates upon receipt of reasonable advance notice and
during normal business hours. Buyer shall be solely responsible
for any costs and expenses incurred by it pursuant to this
paragraph 11.1(b). If WCC or any of its Affiliates shall desire
to dispose of any of such books and records prior to the
expiration of such three-year period, WCC shall, prior to such
disposition, give Buyer a reasonable opportunity, at Buyer's
expense, to segregate and remove such books and records as Buyer
may select.
11.2. Exhibits and Schedules. The Exhibits and
Schedules referred to in this Agreement shall be deemed to be
incorporated herein by reference and made a part hereof as if set
out in full herein.
11.3. Time of the Essence. Time is of the essence of
this Agreement.
11.4. Assignment. The rights of Buyer and Seller
under this Agreement shall not be assignable by such party
hereto, except to an Affiliate, prior to the Closing without the
written consent of the other, which consent may be withheld for
any reason. Following the Closing, either party may assign any
of its rights hereunder, but no such assignment shall relieve it
of its obligations hereunder.
11.5. Survival of Provisions. The representations,
warranties, covenants and obligations contained in this Agreement
shall survive the consummation of the transactions contemplated
by this Agreement but solely for the purpose of creating rights
under Section 8 of this Agreement.
11.6. Headings. The titles and headings contained in
this Agreement (including, without limitation, in the Exhibits
and Schedules hereto) are included for purposes of convenience
only and shall not be considered a part of this Agreement in
construing or interpreting any provision hereof.
11.7. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the internal laws (as
opposed to the conflicts of law provisions) of the State of New
York.
11.8. Notices. All notices, requests, demands and
other communications required or permitted to be given or made
under this Agreement shall be in writing and shall be deemed to
have been given on the date of delivery personally or of deposit
in the United States mail, postage prepaid, by registered or
certified mail, return receipt requested, addressed as follows or
to such other person or address as either party shall designate
by notice to the other party in accordance herewith:
To WCC or Seller: Westmoreland Coal Company
700 The Bellevue
200 South Broad Street
Philadelphia, PA 19102
Attn: General Counsel
To Buyer: CONSOL of Kentucky, Inc.
Consol Plaza
1800 Washington Road
Pittsburgh, PA 15241
Attn: General Counsel
11.9. Counterparts. This Agreement may be executed by
the parties in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become binding
when one or more counterparts have been signed by each of the
parties hereto and delivered to each of Seller and Buyer.
11.10. Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of each of the parties
hereto, and their respective successors and permitted assigns.
11.11. Subrogation. Nothing in this Agreement,
express or implied, including, without limitation, the
indemnities of paragraph 8 hereof, shall be deemed to create in
any Person other than the parties signatory hereto and successors
and assigns permitted by paragraph 11.10 hereof (i) any right,
remedy or claim under or by reason of this Agreement or (ii) any
rights of subrogation from, through or under any indemnified
party because of any claim paid or defense provided or otherwise.
11.12. Recording. This Agreement shall not be filed
or recorded in any office for the recording of deeds or
documents.
11.13. Severability of Provisions. Wherever possible,
each provision hereof shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision
of this Agreement or the application thereof to any person or
circumstances shall, to any extent and for any reason, be held in
any proceeding to be invalid, illegal or unenforceable, such
provision, or the application thereof to any person or
circumstance, shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability
without invalidating the remainder of such invalid, illegal or
unenforceable provision or any other provisions hereof or the
application of such provision to persons or circumstances other
than those to which it was held to be invalid, illegal or
unenforceable, but only if and to the extent such construction
would not materially and adversely frustrate the parties'
essential objectives as expressed herein.
11.14. Entire Agreement; Amendments; Waivers. This
Agreement (including the Exhibits and Schedules referred to
herein and the documents delivered pursuant hereto) constitutes
the entire agreement of the parties here to pertaining to the
subject matter contained hereof, and supersedes all prior
agreements, representations, understandings or letters of intent
of the parties hereto, including without limitation the
Confidentiality Agreement. This Agreement shall not be amended,
modified or supplemented except by a written instrument signed by
an authorized representative of each of the parties hereto. Any
term or provision of this Agreement may be waived, or the time
for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be
validly and sufficiently authorized for the purposes of this
Agreement if, as to any party, it is authorized in writing by an
authorized representative of such party. The failure of any
party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such
provision, nor in any way to affect the validity of this
Agreement or any part hereof or the right of any party thereafter
to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of
any other or subsequent breach.
11.15. Confidential Nature of Information. Each party
agrees that it will treat in confidence all documents, materials
and other information which it shall have obtained regarding the
other party during the course of the negotiations leading to the
consummation of the transactions contemplated hereby (whether
obtained before or after the date of this Agreement), the
investigation provided for herein and the preparation of this
Agreement and other related documents, and, in the event the
transactions contemplated hereby shall not be consummated, each
party will return to the other party all copies of nonpublic
documents and materials which have been furnished in connection
therewith. Such documents, materials and information shall not
be communicated to any third Person (other than, in the case of
Buyer, to its counsel, accountants, financial advisors or
lenders, and in the case of Seller, to its counsel, accountants
or financial advisors). No other party shall use any
confidential information in any manner whatsoever except solely
for the purpose of evaluating the proposed purchase and sale of
the Purchased Assets; provided, however, that after the Closing
Buyer may use or disclose any confidential information related to
the Purchased Assets. The obligation of each party to treat such
documents, materials and other information in confidence shall
not apply to any information which (i) is or becomes available to
such party from a source other than such party, (ii) is or
becomes available to the public other than as a result of
disclosure by such party or its agents, (iii) is required to be
disclosed under applicable law or judicial process, but only to
the extent it must be disclosed, or (iv) such party reasonably
deems necessary to disclose to obtain any of the consents or
approvals contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
WESTMORELAND COAL COMPANY
Witness:
By:________________________________
Name:
_________________________ Title:
CRITERION COAL COMPANY
Witness:
By:________________________________
Name
__________________________ Title:
KENTUCKY CRITERION COAL COMPANY
Witness:
By:________________________________
Name
__________________________ Title:
DEANE PROCESSING COMPANY
Witness:
By:________________________________
Name:
__________________________ Title:
CONSOL OF KENTUCKY INC.
Witness:
By:________________________________
Name:
_________________________ Title:
TABLE OF CONTENTS
Paragraph Page
1. Purchase and Sale of the Purchased Assets 2
1.1. Purchased Assets 2
1.2. Excluded Assets 4
2. Purchase Price 5
2.1. Purchase Price 5
2.2. Purchase Price Adjustment 5
2.3. Allocation of Purchase Price 7
3. Assumption of Obligations and Liabilities; Excluded
Liabilities 7
3.1. Assumed Liabilities 7
3.2. Excluded Liabilities 7
4. The Closing 9
4.1. Time and Place 9
4.2. Deliveries by Seller and WCC 9
4.3. Payment on the Closing Date; Deliveries by Buyer 11
4.4. Effect of Closing 12
5. Representations and Warranties 12
5.1. Representations and Warranties of WCC and Seller 12
5.1.1. Organization and Existence 12
5.1.2. Authority; Approval; No Violations; Consents 13
5.1.3. Availability of Assets 15
5.1.4. Governmental Permits 15
5.1.5. Owned Real Property 16
5.1.6. Real Property Leases 17
5.1.7. Condemnation 18
5.1.8. Personal Property Leases 18
5.1.9. Mining Contracts 18
5.1.10. Status of Contracts 18
5.1.11. Title to Property 19
5.1.12. No Violation, Litigation or Regulatory Action 20
5.1.13. Environmental Matters 20
5.1.14. Reclamation and Surety Bonds 25
5.1.15. Insurance 25
5.1.16. Brokers 26
5.1.17. Disclosure 26
5.1.18. Subsequent Events or Knowledge. 27
5.2. Representations and Warranties of Buyer 28
5.2.1. Organization and Existence 28
5.2.2. Authority; Approval; No Violations; Consents 28
5.2.3. Litigation 29
5.2.4. Brokers 30
5.3. Disclaimers of WCC and Seller 30
6. Action Prior to the Closing Date 30
6.1. Investigation of the Purchased Assets by Buyer 30
6.2. Preserve Accuracy of Representations and Warranties 31
6.3. Consents of Third Parties; Governmental Approvals 32
6.4. Operations Prior to the Closing Date 33
6.5. Antitrust Law Compliance 34
7. Additional Agreements 35
7.1. Discharge of Seller's Liabilities 35
7.2. Expenses 35
7.3. Further Assurances 36
7.4. Prorations 37
7.5. Litigation Assistance 39
7.6. Post-Closing Remittances 39
7.7. Maintenance of Corporate Existence. 40
7.8. [Intentionally omitted] 42
7.9. Permits and Bonds. 42
7.10. Transfer of Certain Interests of WCSC 43
8. Indemnification 43
8.1. Indemnification by WCC and Seller 43
8.2. Indemnification by Buyer 46
8.3. Notice of Indemnity Claims 47
8.4. Third Person Claims 49
9. Conditions Precedent 50
9.1. Conditions Precedent to Performance by WCC and Seller 50
9.1.1. Performance of Agreement; Accuracy of
Representations and Warranties 51
9.1.2. No Restraint or Litigation 51
9.1.3. Necessary Governmental Approvals 51
9.1.4. Material Consents 52
9.1.5. Releases 52
9.1.6. Documents Delivered 52
9.1.7. Corporate Approval 52
9.2. Conditions Precedent to Performance by Buyer 52
9.2.1. Performance of Agreement; Accuracy of
Representations and Warranties 53
9.2.2. No Changes or Destruction of Purchased Assets 53
9.2.3. No Restraint or Litigation 54
9.2.4. Necessary Governmental Approvals 54
9.2.5. Necessary Consents 54
9.2.6. Documents Delivered 54
10. Termination 55
10.1. Termination 55
10.2. Notice of Termination 56
10.3. Effect of Termination 56
11. Miscellaneous Agreements 56
11.1. Retention of and Access to Records after Closing 56
11.2. Exhibits and Schedules 57
11.3. Time of the Essence 58
11.4. Assignment 58
11.5. Survival of Provisions 58
11.6. Headings 58
11.7. Governing Law 58
11.8. Notices 58
11.9. Counterparts 59
11.10. Successors and Assigns 59
11.11. Subrogation 59
11.12. Recording 60
11.13. Severability of Provisions 60
11.14. Entire Agreement; Amendments; Waivers 60
11.15. Confidential Nature of Information 61
Schedule Index
Schedule 1.1.1 - Owned Real Property
Schedule 1.1.2 - In Leases
Schedule 1.1.3 - Real Improvements and Personal Property
Schedule 1.1.4 - Out Leases
Schedule 1.1.5 - Personal Property Leases
Schedule 1.1.6 - Mining Contracts
Schedule 1.1.7 - Coal Sale Contracts
Schedule 1.1.12 - Miscellaneous Contracts
Schedule 1.2.6 - Excluded Assets
Schedule 4.3 - Bank Account of Seller
Schedule 5.1.2 - Seller - Violations, Conflicts, Consents
and Approvals
Schedule 5.1.3 - Availability of Assets
Schedule 5.1.4 - Governmental Permits
Schedule 5.1.10 - Status of Contracts
Schedule 5.1.11 - Exceptions to Title
Schedule 5.1.12 - Violation, Litigation or Regulatory
Action
Schedule 5.1.13(I) - Environmental Matters -- Seller
Schedule 5.1.13(II) - Environmental Matters -- Contractors
Schedule 5.1.14 - Reclamation and Surety Bonds
Schedule 5.1.15 - Insurance
Schedule 5.2.2 - Buyer - Violations, Conflicts, Consents
and Approvals
Schedule 9.1.4 - Material Consents
Schedule 9.1.5 - Releases
ASSET PURCHASE AGREEMENT
Dated July 28, 1994
among
WESTMORELAND COAL COMPANY,
CRITERION COAL COMPANY,
KENTUCKY CRITERION COAL COMPANY,
DEANE PROCESSING COMPANY
and
CONSOL OF KENTUCKY INC.
AMENDMENT NO. 2
TO
ASSET PURCHASE AGREEMENT
among
WESTMORELAND COAL COMPANY,
CRITERION COAL COMPANY,
KENTUCKY CRITERION COAL COMPANY,
DEANE PROCESSING COMPANY
and
CONSOL OF KENTUCKY INC.
This Amendment No. 2 (the "Amendment") is made as of
the 7th day of November, 1994, by and among Westmoreland Coal
Company ("WCC"), Criterion Coal Company ("CCC"), Kentucky
Criterion Coal Company ("KCCC"), Deane Processing Company ("DPC")
and CONSOL of Kentucky Inc. ("Buyer").
WHEREAS, WCC, CCC, KCCC, DPC and Buyer are parties to
an Asset Purchase Agreement, dated July 28, 1994 and amended by
Amendment No. 1 dated October 31, 1994 (such agreement, as so
amended, is referred to herein as the "Asset Purchase
Agreement");
WHEREAS, the parties to the Asset Purchase Agreement
desire to amend the Asset Purchase Agreement as provided herein;
NOW, THEREFORE, the parties agree as follows:
1. The following terms shall have the following
meanings for purposes of this Amendment:
"Post-Three Year Portion" of either the ROVA I
Subcontract or the ROVA II Subcontract, as the case may
be, means the portion of such subcontract commencing in
the third anniversary of the commercial operations date
of ROVA I or ROVA II, as applicable, and ending on the
stated termination date of such subcontract.
"ROVA I" means the Roanoke Valley I co-generation
project.
"ROVA II" means the Roanoke Valley II co-
generation project.
"ROVA I Agreement" means the coal supply agreement
between TECO and ROVA I.
"ROVA II Agreement" means the coal supply
agreement between TECO and ROVA II.
"ROVA Agreements" means the ROVA I Agreement and
the ROVA II Agreements collectively.
"TECO" means TECO Coal Corporation.
"Three-Year Portion" of either the ROVA I
Subcontract or the ROVA II Subcontract, as the case may
be, means the portion of such subcontract commencing on
the effective date of such subcontract and ending on
the third anniversary of the commercial operations date
of ROVA I or ROVA II, as applicable.
"PC&H Property" means the tract of land described
in deed dated May 31, 1994 between Kentucky Criterion
Coal Company and Ricky D. Kirk, Jerry Wells, Jr. and
Donald C. Graves, and recorded at Deed Book 315, Page
118, Letcher County Clerk's Office.
"ROVA I Subcontract" means the Coal Supply and
Transportation Subcontract dated June 21, 1993 among
TECO Coal Corporation, Westmoreland Coal Sales Company,
Kentucky Criterion Coal Company and Westmoreland Coal
Company.
"ROVA II Subcontract" means the Coal Supply and
Transportation Contract dated December 1, 1993 among
TECO Coal Corporation, Westmoreland Coal Sales Company,
Kentucky Criterion Coal Company and Westmoreland Coal
Company.
"ROVA Subcontracts" means the ROVA I Subcontract
and the ROVA II Subcontract.
2. The Purchase Price set forth in Section 2.1 of the
Asset Purchase Agreement shall be reduced by $700,000.00 for the
reasons set forth in paragraphs 3 and 4.a. below and may be
further reduced in accordance with paragraphs 4.b. and 6 below.
3. Buyer acknowledges that the Purchased Assets will
not include the PC&H Property, and that the Purchase Price has
been adjusted to reflect the principle sale of the PC&H Property
by WCC.
4. a. Buyer further acknowledges that the reduction
in the Purchase Price reflected in this Amendment includes
$50,000 which the Seller has received from two mining contractors
(Fairbanks and Clas, each in the amount of $25,000) for the
purpose of building a haulage road, and Buyer agrees to either
expend the $50,000 for such purpose or to return such amount to
the mining contractors in accordance with their respective
contributions.
b. In the event that the Closing occurs after
November 10, 1994, and assuming that the two aforesaid mining
contractors have increased their aggregate contributions to
$55,000 for construction of a haulage road, then the Purchase
Price shall be reduced by an additional $5,000 (or a total of
$705,000) and Buyer shall expend an aggregate of $55,000 for the
purpose of building the aforesaid haulage road or it shall return
said amount to the mining contractors in accordance with their
respective contributions. In the event that the Closing occurs
after November 25, 1994, and assuming that the two aforesaid
mining contractors have increased their aggregate contributions
to $60,000 for construction of a haulage road, then the Purchase
Price shall be reduced by an additional $5,000 (or a total of
$710,000), and Buyer shall expend an aggregate of $60,000 for the
purpose of building the aforesaid haulage road, or it shall
return said amount to the mining contractors in accordance with
their respective contributions.
5. Buyer will withhold from payment of the Purchase
Price the amount of $1,750,000 (see Attachment 1) to pay unmined
mineral tax liabilities, including any interest or penalties
relating thereto, due to various taxing authorities in Kentucky
applicable to the years 1988 through 1994. In the event the
amount withheld exceeds the payments made to satisfy the
aforementioned tax liabilities, such excess shall be returned to
WCC plus interest thereon from the Closing Date at the 3-month
commercial paper as shown in the Federal Reserve Statistical
Release H. 15 (519), which shall be determined by averaging such
rate on the first and last day of each 6-month period commencing
on the Closing Date, compounded semi-annually. Alternatively, in
the event the payments made to satisfy the aforementioned tax
liabilities exceed the amount withheld, WCC remains liable for
such excess and agrees to pay such excess to Buyer on demand.
Prior to making payments of unmined mineral tax
liabilities from the amount withheld, Buyer shall notify WCC.
Buyer agrees that it will not pay any aforementioned tax
liability if such liability is contested in good faith by WCC,
unless (i) Buyer is made a party to any court proceeding or (ii)
a tax lien is imposed on any assets of Buyer or an affiliated
company. If an event described in clause (i) or (ii) occurs,
Buyer shall notify WCC, and WCC shall have the right at its own
expense to contest such event. If any claim against Buyer or any
tax lien on property owned by Buyer or an affiliated company
becomes final, enforceable or unappealable, Buyer may satisfy the
unpaid tax liability relating to such claim or lien without
further notice to WCC.
WCC may from time to time request that the amount
withheld be reduced for the reason that the amount withheld
exceeds the amount of unpaid mineral taxes for any of the
aforesaid years. Buyer agrees that it will not unreasonably
withhold its cooperation when WCC makes such a request for a
reduction in the withheld amount. If the withheld amount is
reduced, the amount of such reduction shall be delivered to WCC
along with any applicable interest due thereon.
6. All amounts being withheld from payment of the
purchase price pursuant to Paragraphs 4 and 5 hereof, shall
remain the property of Buyer until the matters set forth in
Paragraphs 4 and 5 are resolved. It is the intention of Seller,
WCC and Buyer that said funds shall remain the property of Buyer
and, to the extent WCC and Seller may be entitled to payment from
Buyer, said claim is only a chose in action and shall be asserted
in the same manner as a chose in action and not asserted as a
property right in the funds being withheld pursuant to Paragraphs
4 and 5 hereof.
7. Buyer and WCC acknowledge that, at the time of
execution of this Amendment, TECO has not granted its consent to
the assignment by WCC to Buyer of WCC's rights under the ROVA
Subcontracts.
a. In the event that TECO consents prior to
Closing to the assignment by WCC to Buyer of WCC's rights under
the ROVA Subcontracts but (i) TECO retains the right to supply
20.5% of the coal purchased by the ROVA I facility during the
Post-Three-Year Portion and (ii) TECO remains the contracting
party under the ROVA Agreements, then the Purchase Price shall be
reduced by an additional $4,000,000.00.
b. Alternatively, in the event that TECO
consents prior to Closing to the assignment by WCC to Buyer of
WCC's rights under the ROVA Subcontracts but (i) TECO retains the
right to supply 20.5% of the coal purchased by the ROVA I
facility during the Post-Three-Year Portion and (ii) TECO becomes
a subcontractor to Buyer for the delivery of such 20.5% [(or
alternatively, Buyer and TECO each have contracts directly with
the ROVA I and ROVA II facilities for their respective
obligations)], then the Purchase Price shall be reduced by
$3,500,000.00.
c. In the event that WCC's rights under the ROVA
Subcontracts are transferred to Buyer at Closing without TECO's
consent, as provided in subparagraph d. below, Buyer will
withhold from payment of the Purchase Price the amount of
$4,000,000 and will hold such amount in escrow until Buyer's
right to deliver 100% of the coal to the ROVA I facility during
the Post-Three-Year Portion has been confirmed by means of either
(i) a settlement agreement between WCC and TECO or (ii) an order
of a court of competent jurisdiction that is final and
unappealable. WCC agrees that it will seek to have the ROVA I
lenders and the ROVA II lenders take the actions necessary to
cause the ROVA I and ROVA II facilities to enter into coal supply
contracts directly with Buyer that will replace the existing coal
supply agreements between TECO and the ROVA I and ROVA II
facilities. If a new coal supply contract between Buyer and the
ROVA I facility is entered into which states that it shall become
effective on the third anniversary of the commercial operations
date of the ROVA I facility, the amount of $4,000,000 held in
escrow shall be returned to WCC at the time the new coal supply
agreement is executed, provided that the new coal supply
agreement cannot be challenged by TECO because either (i) it is
the result of a settlement between WCC and TECO or (ii) the right
of the parties to enter into such an arrangement have been
established by an order of a court of competent jurisdiction that
is final and unappealable. The escrowed amount shall be returned
with interest determined in the manner described in paragraph 5
above. If a new coal supply contract between Buyer and the ROVA
I facility is executed by such parties but does not become
effective until a date which is subsequent to the third
anniversary of the commercial operations date of the ROVA I
facility, Buyer shall return to WCC an amount determined by (i)
multiplying $4,000,000.00 by the fraction described in Attachment
2 to this Amendment, and (ii) adding interest to the amount
calculated pursuant to clause (i) of this sentence, such interest
to be determined in the manner described in paragraph 5 above.
Buyer agrees to cooperate to the fullest extent reasonable to
cause the ROVA I and ROVA II facilities to enter into the new
coal supply contracts referred to in this paragraph.
d. It is agreed by the parties that (i) Buyer
shall not be required to purchase any of the Purchased Assets
unless WCC's rights under the ROVA Subcontracts are transferred
to Buyer or other arrangements with respect to the ROVA
Subcontract are entered into that are satisfactory to Buyer and
(ii) Buyer shall not be required to accept a transfer of the ROVA
Subcontracts to Buyer unless such transfer has been approved by a
court of competent jurisdiction or TECO has consented to the
transfer.
8. Buyer and Seller agree that WCSC has in place
certain coal supply arrangements with the purchasers identified
in subparagraphs a, b, and c, below, which are requirements
arrangements based on purchase orders received from the
purchasers and which WCSC supplies with coal provided by Seller.
The following coal supply arrangements will be effective after
the Closing Date, and will be further documented by appropriate
purchase orders:
a. C.H. Sprague--Champion International. WCSC
will purchase four to five 14,500 ton barge loads of coal, for
resale to C.H. Sprague & Son Company for delivery to Champion
International (depending upon the requirements of Champion
International), with the quality specifications shown on
Attachment 3, at a purchase price of $27.99 per ton, FOB railcar
at Rapidloader 1, Deane, Ky. One barge load is presently
scheduled in January 1995, and second barge is presently
scheduled in March, 1995. An additional two to three barges are
expected to be shipped in late 1995 or early 1996. The parties
recognize, however, that these dates are tentative and may be
changed. WCSC and Seller shall have no liability to Buyer if
these dates are changed, and shall have no liability to Buyer if
the coal is not taken by Champion International or its purchasing
representative, C.H. Sprague. Buyer can cancel this purchase
order arrangement on 60 days notice, but such cancellation shall
then apply to all remaining shipments after such 60-day period
under the arrangement described in this paragraph. At the end of
this purchase order arrangement, Buyer may negotiate directly
with C.H. Sprague & Son for future shipments provided that WCSC
may bid competitively for these orders.
b. C.H. Sprague--S.D. Warren. WCSC will
purchase approximately five 14,500 ton barge loads of coal, for
resale to C.H. Sprague & Son Company for delivery to S.D. Warren
(depending upon the requirements of S.D. Warren), with the
quality specifications shown on Attachment 4, at a purchase price
of $27.50 per ton, FOB railcar at Rapidloader 1, Deane, Ky. The
first barge load is anticipated to be required in late February
1995. The parties recognize, however, that this date is
tentative and may be changed. WCSC and Seller shall have no
liability to Buyer if this date in changed, and shall have no
liability to Buyer if the coal is not taken by S.D. Warren or its
purchasing representative, C.H. Sprague. Buyer can cancel this
purchase order arrangement on 60 days notice, but such
cancellation shall then apply to all remaining shipments after
such 60-day period under the arrangement described in this
paragraph. At the end of this purchase order arrangement, Buyer
may negotiate directly with C.H. Sprague & Son for future
shipments provided that WCSC may bid competitively for these
orders.
c. C.H. Sprague-Boise Cascade. WCSC will
purchase approximately 10,000 tons of coal per month on a unit
train basis through May, 1995, for resale to C.H. Sprague & Son
Company for delivery to Boise Cascade (depending upon the
requirements of Boise Cascade), with the quality specifications
shown on Attachment 5, at a purchase price of $25.75 per ton, FOB
railcar at Rapidloader 1, Deane, Ky. The parties recognize,
however, that this shipment schedule is tentative and may be
changed. WCSC and Seller shall have no liability to Buyer if the
shipping schedule is changed, and shall have no liability to
Buyer if the coal is not taken by Boise Cascade or its purchasing
representative, C.H. Sprague. WCSC agrees to extend this
arrangement beyond May, 1995 if Buyer and Boise Cascade can agree
upon mutually acceptable terms. At the written request of Buyer,
such request to be sent to Seller within 5 business days of this
Amendment No. 2, WCSC will attempt to find another source of
coal for this arrangement and within 30 days of this Amendment
No. 2 will advise Buyer if it has found another source of coal,
in which case, this arrangement will be terminated. If no such
notice is given, Buyer will continue to supply coal under this
arrangement.
9. Phillip Morris. WCSC will purchase approximately
4,000 tons of coal per month through June 1995 for resale to
Phillip Morris, (depending upon the requirements of Phillip
Morris), with quality specifications shown on Attachment 6, at a
purchase price of $25.65 per ton, FOB railcar at Rapidloader 1,
Deane, Ky. The parties recognize, however, that this shipment
schedule is tentative and may be changed. WCSC and Seller shall
have no liability to Buyer if this shipment schedule is changed,
and shall have no liability to Buyer if the coal is not taken by
Phillip Morris. Buyer can cancel this purchase order arrangement
on 60 days notice, but such cancellation shall then apply to all
remaining shipments after such 60-day period under the
arrangement described in this paragraph. At the end of this
purchase order arrangement, Buyer may negotiate directly with
Phillip Morris for future shipments provided that WCSC may bid
competitively for these orders.
10. Georgia Power. The parties agree that all
carryover tons under the original Georgia Power contract, dated
July 1, 1988 shall be shipped from WCC's Virginia Division and
Buyer shall have no interest in this contract or the coal to be
shipped thereunder.
All terms and provisions of the Asset Purchase
Agreement not amended by this Amendment shall remain in full
force and effect.
All capitalized terms used herein but not defined
herein shall have the meaning assigned to them in the Asset
Purchase Agreement.
This Amendment may be executed in any number of
counterparts, each of which shall be considered part of one and
the same instrument, and which together shall create a binding
instrument when all counterparts have been delivered by the
respective signing parties.
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment as of the date first above written
WESTMORELAND COAL COMPANY
By:
_
Name:
Title:
CRITERION COAL COMPANY
By:
_
Name:
Title:
KENTUCKY CRITERION COAL COMPANY
By:
_
Name:
Title:
DEANE PROCESSING COMPANY
By:
_
Name:
Title:
CONSOL OF KENTUCKY INC.
By:
_
Name:
Title:
SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT, dated November 7, 1994, by
and among WESTMORELAND COAL COMPANY, a Delaware corporation
("WCC"), CRITERION COAL COMPANY. a Delaware corporation ("CCC"),
KENTUCKY CRITERION COAL COMPANY, a Delaware corporation ("KCC"),
DEANE PROCESSING COMPANY, a Delaware corporation ("DPC" and
together with KCC and CCC, "Seller"), and CONSOL OF KENTUCKY
INC., a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, the parties hereto have entered into an Asset
Purchase Agreement dated July 28, 1994, as heretofore amended
(the "Asset Purchase Agreement"); and
WHEREAS, each of the parties has the right to terminate
the Asset Purchase Agreement if the Closing (as defined therein)
shall not have occurred on or before November 8, 1994; and
WHEREAS, WCC and Seller have informed Buyer that
(i) certain conditions precedent to the Closing may not occur on
or before November 8, 1994, and (ii) in order to satisfy such
conditions, and thus to consummate the transactions contemplated
in the Asset Purchase Agreement, it may be necessary for WCC and
Seller to initiate a reorganization proceeding under title 11,
United States Code (the "Bankruptcy Code"); and
WHEREAS, WCC and Seller have requested that Buyer
extend the Terminal Date (as defined in the Asset Purchase
Agreement) to accommodate the delay in consummating such
transactions occasioned by such a proceeding; and
WHEREAS, Buyer has agreed to such an extension subject
to the terms and conditions set forth in this Supplemental
Agreement.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained, the parties hereto, with
the intent to be legally bound hereby, agree as follows:
1. Defined Terms. (a) Terms used in this
Supplemental Agreement that are defined in the Asset Purchase
Agreement shall have the meanings set forth therein.
(b) As used herein, (i) the term "Claim Period" shall
mean the period from November 1, 1994 to and including the later
of (A) October 31, 1995, and (B) thirty (30) days after
confirmation of a plan of reorganization for WCC or Seller under
the Bankruptcy Code; (ii) the term "TECO" shall mean,
collectively, TECO Coal Corporation, a Florida corporation, and
its affiliates; (iii) the term "TECO Agreements" shall mean those
certain coal supply and transportation subcontracts among TECO,
Westmoreland Coal Sales Company, KCC and WCC relating to the
Roanoke Valley I and II cogeneration projects, together with all
associated contracts and agreements (including, without
limitation, the so-called "Three-Party Agreement" executed in
connection with each such subcontract); and (iv) the term
"20%/17-Year Issue" shall mean, collectively, all issues relating
to the right of WCC, Seller or Buyer under the TECO Agreements to
supplant TECO as sole coal supplier to the Roanoke Valley I and
II cogeneration projects after three years of commercial
operation.
2. Terminal Date. Subparagraph 10.1(b) of the Asset
Purchase Agreement is deleted in its entirety, and the following
subparagraph is inserted in lieu thereof:
(b) by Buyer or WCC if the Closing shall not
have occurred on or before December 30, 1994 (or
such later date as may be mutually agreed to by
Buyer and WCC) (the "Terminal Date"); provided,
however, that notwithstanding anything contained
herein or any action by WCC, Buyer shall have the
unilateral right to extend the Terminal Date to a
date not later than March 30, 1995 by written
notice to WCC or Seller prior to December 30,
1994;
3. Chapter 11. In a reorganization proceeding for
WCC and Seller under Chapter 11 of the Bankruptcy Code:
(a) Not later than November 8, 1994, petitions
shall be filed for WCC, CCC, KCC and DPC, and for such other
entities as WCC in its sole discretion shall determine.
(b) Not later than November 8, 1994, a joint plan
of reorganization incorporating the terms of the Asset
Purchase Agreement and providing for the payment in full or
nonimpairment of all claims and interests (the "Plan"), with
accompanying disclosure statement, shall be filed; provided,
however, that financial information associated with the
disclosure statement may be filed as late as November 15,
1994.
(c) If considered advisable by both WCC and
Buyer, a separate motion to assume the Asset Purchase
Agreement pursuant to 11 U.S.C. 365 (an "Assumption
Motion") shall be filed and shall be scheduled for hearing
on the same date as the confirmation hearing for the Plan.
(d) Buyer shall have the right (i) to add parties
to the list of parties to be notified individually of the
hearing on the disclosure statement, the confirmation
hearing, and the hearing on an Assumption Motion (if any);
and (ii) to approve, in form and substance, the terms of the
Plan and the order confirming the Plan, but such right of
approval shall yield to WCC's reasonable judgment concerning
the effect of any provision of the Plan or such order on
(A) confirmation of the Plan, (B) consummation of the sale
of the Purchased Assets, (C) the success of any appeal from
such order, or (D) the success of any attempt to obtain a
stay of such order pending appeal.
(e) The sale of the Purchased Assets shall have
the benefit of 11 U.S.C. 1146(c) to the extent permitted
by law.
(f) To the extent permitted by law, the Plan will
provide that the court (including the district court if the
reference is withdrawn) will retain jurisdiction (among
other purposes) (i) to determine whether Seller has
satisfied the conditions imposed by the Asset Purchase
Agreement for its receipt of the holdback of the portion of
the purchase price associated with the 20%/17-Year Issue,
and (ii) incident thereto, to determine the meaning and
effect of the TECO Agreements (as assigned to Buyer)
relating to 20%/17-Year Issue and the rights and obligations
of the parties with respect thereto (which parties shall
include, to the extent jurisdictionally and procedurally
feasible, WCC, Seller, Buyer, TECO, each of the Project
Owners (as defined in the TECO Agreements), and the lenders
to such Project Owners). Westmoreland will cooperate with
and support Buyer in any litigation with respect to the
20%/17-year Issue, including litigation pursuant to such
retention of jurisdiction.
(g) WCC and Seller acknowledge that Buyer is not
obligated to extend the Terminal Date as set forth in
paragraph 2 hereof, and that such an extension in the face
of the imminent filing of Chapter 11 petitions by WCC and
Seller, and of the uncertainty to consummation of the
transactions contemplated by the Asset Purchase Agreement
introduced by such filings, constitutes an assumption by
Buyer of material additional risk to its investment of time,
effort, expense and committed capital with respect to such
transactions. WCC and Seller further acknowledge that if
Buyer is prepared to meet all conditions imposed upon Buyer
to consummate the transactions contemplated by the Asset
Purchase Agreement, the failure of WCC and Seller to
consummate such transactions (including compliance with
every obligation of WCC and Seller under the Asset Purchase
Agreement) will be a breach of the Asset Purchase Agreement
as amended hereby. The parties hereto acknowledge that the
damages flowing from such a breach by WCC and Seller,
including direct expenditures, loss of profits, etc., are
difficult or impossible to calculate and, therefore, Buyer
will be entitled to a claim for liquidated damages.
Accordingly, until the Terminal Date, and subject to
subparagraph (k) of this paragraph 3, (i) neither WCC nor
Seller shall solicit, accept, assist in the formulation of,
or provide information with respect to a competing bid for
the Purchased Assets or any portion thereof, and (ii) WCC
shall give Buyer prompt written notice of any expressions of
interest in purchasing the Purchased Assets received by
senior executives of WCC, and of the identity of the persons
expressing such interest, and shall provide Buyer with
copies of documents, if any, accompanying such expressions
of interest.
(h) In further recognition of the facts
acknowledged by WCC and Seller in the first three sentences
of subparagraph (g) of this paragraph 3, and to compensate
Buyer for the financial loss suffered by Buyer should the
transactions contemplated by the Asset Purchase Agreement
not be consummated prior to or on the Terminal Date, WCC and
Seller agree that if Seller shall fail to consummate a sale
of substantially all of the Purchased Assets to Buyer
pursuant to an agreement entered into during the Claim
Period, then Buyer shall have a pre-petition, unsecured
liquidated damage claim against WCC and Seller, jointly and
severally, in the amount of Ten Million Dollars
($10,000,000), which claim shall not be subject to dispute
by WCC, Seller or any affiliate of WCC or Seller.
(i) Buyer agrees that if Seller shall not
consummate a sale of a material portion of the Purchased
Assets to a buyer other than Buyer pursuant to an agreement
entered into during the Claim Period, then the liquidated
damage claim allowed pursuant to subparagraph (h) of this
paragraph 3 shall be reduced to Five Million Dollars
($5,000,000).
(j) The claim described in subparagraphs (h) and
(i) of this paragraph 3 shall be the only claim of Buyer
arising from a failure to consummate a sale pursuant to the
Asset Purchase Agreement, whether (i) the Asset Purchase
Agreement is allowed to lapse in accordance with its terms,
is terminated, or is rejected pursuant to 11 U.S.C. 365,
and (ii) such claims, or either one of them, shall be
disallowed in whole or in part. In the event that a plan is
confirmed or there is any distribution in a bankruptcy
proceeding of WCC or Seller, whether under Chapter 11 or
Chapter 7, WCC and Seller agree that to the extent that any
portion of the claim of Buyer pursuant to subparagraph
(h) or (i) of this paragraph 3 has not been fixed or
liquidated, then an adequate reserve for the contingent or
unliquidated portion of such claim will be established in
form and substance reasonably satisfactory to Buyer.
(k) Neither WCC nor Seller shall breach any
obligation imposed upon it by this paragraph 3 by taking any
action, or by omitting to take any action, which act or
omission is authorized or ordered by the court, and WCC and
Seller shall have the right to seek such authorization or
order on an expedited basis in the event that WCC concludes
that it is necessary or required in order for WCC, Seller
and their respective officers and directors to comply with
their duties to the creditors or stockholders of WCC, Seller
or any other affiliate of WCC.
(l) In making determinations pursuant to this
paragraph 3, and in particular pursuant to subparagraph (d),
(f) or (k) hereof, WCC, Seller and their respective officers
and directors shall be entitled to rely on the advice of
counsel.
IN WITNESS WHEREOF, the parties hereto have executed
this Supplemental Agreement as of the date first above written.
WESTMORELAND COAL COMPANY
Witness:
By: _
Name:
Title:
CRITERION COAL COMPANY
Witness:
By: _
Name:
Title:
KENTUCKY CRITERION COAL COMPANY
Witness:
By: _
Name:
Title:
DEANE PROCESSING COMPANY
Witness:
By: _
Name:
Title:
CONSOL OF KENTUCKY INC.
Witness:
By: _
Name:
Title:
RESTATED CERTIFICATE OF INCORPORATION
OF
WESTMORELAND COAL COMPANY
WESTMORELAND COAL COMPANY, a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Westmoreland Coal Company, and the
name under which the corporation was originally incorporated is Stonega
Coke and Coal Company. The date of filing of its original Certificate of
Incorporation with the Secretary of State was May 4, 1910.
2. This Restated Certificate of Incorporation only restates and integrates
and does not further amend the provisions of the Certificate of Incorporation
of this corporation as heretofore amended or supplemented and there is no
discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments or
changes to read as herein set forth in full:
FIRST: The name of this corporation is WESTMORELAND
COAL COMPANY.
SECOND: The location of its principal office in the State of
Delaware is Coporation Trust Center, 1209 Orange Street, in the city of
Wilmington, County of New Castle. The name of the Agent therein and in
charge thereof is The Corporation Trust Company.
THIRD: The purposes of the corporation are to mine, produce,
process, manufacture, buy, sell, own, lease, deal in and dispose of coal, oil,
gas, and all types of minerals and their products; and in addition to produce,
process, manufacture, buy, sell, own, lease, deal in and dispose of all kinds
of property and to engage in all kinds of enterprises.
FOURTH: The aggregate number of shares of all classes of
stock which the corporation has authority to issue is 25,000,000, of which (a)
5,000,000 shall be Preferred Stock of the par value of $1 per share, issuable
in series, and (b) 20,000,000 shall be Common Stock of the par value of $2.50
per share.
The designations and the powers, preferences and rights of such
classes of stock, and the qualifications, limitations and restrictions thereof,
which are fixed by this Certificate of Incorporation, and the authority of the
Board of Directors of the corporation ("Board of Directors") to fix by
resolution or resolutions providing for the issue of any series of the
Preferred Stock and the designations, preferences and rights of any such
series, and the qualifications, limitations and restrictions thereof,
which are not fixed by the Certificate of Incorporation, are as follows:
PREFERRED STOCK
1. Issue in Series. The Preferred Stock may be issued from
time to time in one or more series. Each series shall have the terms stated
herein and in the resolution of the Board of Directors providing for their
issue. All shares of any one series of Preferred Stock shall be identical.
2. Creation of Series. The Board of Directors shall have
authority by resolution to divide the Preferred Stock into one or more series
and to determine and fix with respect to each series, at any time prior to the
issuance of any shares of such series, the designations, preferences and
rights, and the qualifications, limitations and restrictions thereof, which may
vary as to shares of different series, subject to limitations provided by law
and herein. All series of Preferred Stock may have voting rights on such
terms as the Board of Directors shall determine, as shall be permitted by
applicable law. The authority of the Board of Directors shall include, but not
be limited to, the determination or fixing of the following:
(a) The designation of and the number of shares which shall
constitute the series, which number may be increased or decreased (but not
below the number of shares then outstanding) from time to time by action of
the Board of Directors;
(b) The dividend rate and time of payment of dividends on
the shares of the series, whether dividends shall be cumulative, and, if so,
from what date or dates, and whether and to what extent the shares of the
series shall have participation rights;
(c) The price or prices at which, and the terms and conditions
on which, the shares of the series may be redeemed at the option of the
corporation;
(d) Whether or not the shares of the series shall be entitled to
the benefit of a retirement or sinking fund to be applied to the purchase or
redemption of such shares, and, if so entitled, the annual amount of such
fund and the terms and provisions relative to the operation thereof;
(e) Whether or not the shares of the series shall be
convertible into, or exchangeable for, shares of any other class or classes or
of any other series of the same or any other class or classes of stock of the
corporation, and if so convertible or exchangeable, the conversion price or
prices, or the rates of exchange, and any adjustments thereof, if any, at
which such conversion or exchange may be made, and any other terms and
conditions of such conversion or exchange;
(f) The rights of the shares of the series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
corporation;
(g) Whether or not the shares of the series shall be entitled to
the benefit of limitations restricting the payment of dividends on, or the
making of other distributions in respect of stock of any class ranking junior
to the shares of the series as to dividends or assets, or restricting the
purchase or redemption of the shares of any such junior class, and the terms
of any such restrictions;
(h) The terms, as applicable, of the voting rights, in addition
to the voting rights provided by law, of any series issued on or after the
effective date of this amendment; and
(i) Any other relative rights, preferences and limitations of
that series.
COMMON STOCK
3. Dividends. Holders of Common Stock shall be entitled to
receive such dividends as may be declared by the Board of Directors except
that the corporation will not declare, pay or set apart for payment any
dividend on shares of Common Stock (other than dividends payable in
Common Stock), or directly or indirectly make any distribution on, redeem,
purchase or otherwise acquire any such shares, if at the time of such action
the corporation is in default with respect to any dividend payable on or any
sinking fund or purchase fund requirement relative to shares of Preferred
Stock.
4. Distribution of Assets. In the event of the voluntary or
involuntary liquidation of the corporation, holders of Common Stock shall be
entitled to receive pro rata all of the remaining assets of the corporation
available for distribution to its stockholders after all amounts to which the
holders of Preferred Stock are entitled have been paid or set aside in cash for
payment.
GENERAL
5. Voting Rights. Except as otherwise required by law, the
holders of Common Stock and the holders of each series of Preferred Stock
shall exclusively possess voting power in the election of directors and for all
other purposes.
DESIGNATION OF SERIES A CONVERTIBLE
EXCHANGEABLE PREFERRED STOCK
Section 1. Designation of Amount. The shares of such series
shall be designated as "Series A Convertible Exchangeable Preferred Stock"
(the "Series A Preferred Stock") and the authorized number of shares consti-
tuting such series shall be 575,000. The par value of the Series A Preferred
Stock shall be $1.00 per share.
Section 2. Dividends.
(a) The holders of shares of the Series A Preferred Stock will
be entitled to receive, when, as and if declared by the Board of Directors out
of funds of the Corporation legally available therefor, cumulative cash
dividends on the shares of the Series A Preferred Stock at the rate of $8.50
per annum per share of Series A Preferred Stock, and no more, payable in
equal quarterly installments on April 1, July 1, October 1, and January 1 in
each year, commencing October 1, 1992. Such dividends shall be cumulative
from the date of original issue of each share of the Series A Preferred Stock.
Each such dividend shall be paid to the holders of record of the shares of the
Series A Preferred Stock as they appear on the stock records of the
Corporation on such record date, not more than 30 days nor less than 10 days
preceding the dividend payment date thereof, as shall be fixed by the Board
of Directors or a duly authorized committee thereof. If a holder converts a
share or shares of the Series A Preferred Stock after the close of business on
the record date for a dividend and before the opening of business on the
payment date for such dividend, then, pursuant to Section 6 hereof, the
holder will be required to pay to the Corporation at the time of such
conversion the amount of such dividend.
(b) If dividends are not paid in full, or declared in full and
sums set apart for the payment thereof, upon the shares of the Series A
Preferred Stock and shares of any other preferred stock ranking on a parity
as to dividends with the Series A Preferred Stock, all dividends declared
upon shares of the Series A Preferred Stock and of any other preferred stock
ranking on a parity as to dividends shall be paid or declared pro rata so that
in all cases the amount of dividends paid or declared per share on the Series
A Preferred Stock and such other shares of preferred stock shall bear to each
other the same ratio that accumulated dividends per share, including
dividends accrued or in arrears, if any, on the shares of the Series A
Preferred Stock and such other shares of preferred stock bear to each other.
Except as provided in the preceding sentence, unless full cumulative
dividends on the shares of the Series A Preferred Stock have been paid or
declared in full and sums set aside for the payment thereof, no dividends
(other than dividends in shares of, or options, warrants or rights to subscribe
for or purchase shares of the Common Stock (as hereinafter defined) or in
shares of any other capital stock of the Corporation ranking junior to the
Series A Preferred Stock as to dividends and distribution of assets upon
liquidation) shall be paid or declared and set aside for payment or other
distribution made upon the Corporation's Common Stock, par value $2.50 per
share (the "Common Stock"), or any other capital stock of the Corporation
ranking junior to or on a parity with the Series A Preferred Stock as to
dividends, nor shall any shares of the Common Stock or shares of any other
capital stock of the Corporation ranking junior to or on a parity with the
Series A Preferred Stock as to dividends be redeemed, purchased or
otherwise acquired for any consideration (or any payment made to or
available for a sinking fund for the redemption of any such shares) by the
Corporation or any subsidiary of the Corporation (except by conversion into
or exchange for shares of capital stock of the Corporation ranking junior to
the Series A Preferred Stock as to dividends and distribution of assets upon
liquidation). Holders of shares of the Series A Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or shares of
capital stock, in excess of full accrued and cumulative dividends as herein
provided. No interest or sum of money in lieu of interest shall be payable in
respect of any dividend payment or payments on the shares of the Series A
Preferred Stock that may be in arrears.
The terms "accrued dividends, " "dividends accrued" and
"dividends in arrears," whenever used herein with reference to shares of
preferred stock shall be deemed to mean an amount which shall be equal to
dividends thereon at the annual dividend rates per share for the respective
series from the date or dates on which such dividends commence to accrue to
the end of the then current quarterly dividend period for such preferred stock
(or, in the case of redemption, to the date of redemption), less the amount of
all dividends paid, or declared in full and sums set aside for the payment
thereof, upon such shares of preferred stock.
(c) Dividends payable on the shares of the Series A Preferred
Stock for any period less than a full quarterly dividend period shall be
computed on the basis of a 360-day year of twelve 30-day months and the
actual number of days elapsed in the period for which payable.
Section 3. Optional Redemption.
(a) The shares of the Series A Preferred Stock will be
redeemable at the option of the Corporation by resolution of its Board of
Directors, in whole or from time to time in part, at any time on or after July
1, 1995, subject to the limitations set forth below, at the following redemp-
tion prices per share plus, in each case, all dividends accrued and unpaid on
the shares of the Series A Preferred Stock up to the date fixed for redemption,
upon giving notice as provided hereinbelow:
If redeemed during
the twelve-month
period beginning
July 1,................... Price
1996 . . . . . . . . . . . . . . . $105.10
1997 . . . . . . . . . . . . . . . 104.25
1998 . . . . . . . . . . . . . . . 103.40
1999 . . . . . . . . . . . . . . . 102.55
2000 . . . . . . . . . . . . . . . 101.70
2001 . . . . . . . . . . . . . . . 100.85
2002 and thereafter. . . . . . . $100.00
(b) If less than all of the outstanding shares of the Series A
Preferred Stock are to be redeemed, the number of shares to be redeemed
shall be determined by the Board of Directors and the shares to be redeemed
shall be determined pro rata or by lot or in such other manner and subject to
such regulations as the Board of Directors in its sole discretion shall
prescribe.
(c) At least 30 days but not more than 60 days prior to the
date fixed for the redemption of shares of the Series A Preferred Stock, a
written notice shall be mailed to each holder of record of shares of the
Series A Preferred Stock to be redeemed in a postage prepaid envelope addressed
to such holder at his post office address as shown on the records of the
Corporation, notifying such holder of the election of the Corporation to
redeem such shares, stating the date fixed for redemption thereof (the
"Redemption Date"), and calling upon such holder to surrender to the
Corporation on the Redemption Date at the place designated in such notice
his certificate or certificates representing the number of shares specified in
such notice of redemption. On or after the Redemption Date each holder of
shares of the Series A Preferred Stock to be redeemed shall present and
surrender his certificate or certificates for such shares to the Corporation at
the place designated in such notice and thereupon the redemption price of
such shares shall be paid to or on the order of the person whose name
appears on such certificate or certificates as the owner thereof and each
surrendered certificate shall be cancelled. In case less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares. From and after the Redemption
Date (unless default shall be made by the Corporation in payment of the
redemption price), all dividends on the shares of the Series A Preferred Stock
designated for redemption in such notice shall cease to accrue, and all rights
of the holders thereof as stockholders of the Corporation, except the right to
receive the redemption price of such shares (including all accrued and unpaid
dividends up to the Redemption Date) upon the surrender of certificates
representing the same, shall cease and terminate and such shares shall not
thereafter be transferred (except with the consent of the Corporation) on the
books of the Corporation, and such shares shall not be deemed to be
outstanding for any purpose whatsoever. At its election, the Corporation
prior to the Redemption Date may deposit the redemption price (including all
accrued and unpaid dividends up to the Redemption Date) of shares of the
Series A Preferred Stock so called for redemption in trust for the holders
thereof with a bank or trust company (having a capital surplus and
undivided profits aggregating not less than $50,000,000) in the Borough of
Manhattan, City and State of New York, or in any other city in which the
Corporation at the time shall maintain a transfer agency with respect to such
shares, in which case the aforesaid notice to holders of shares of the Series A
Preferred Stock to be redeemed shall state the date of such deposit, shall
specify the office of such bank or trust company as the place of payment of
the redemption price, and shall call upon such holders to surrender the
certificates representing such shares at such place on or after the date fixed
in such redemption notice (which shall not be later than the Redemption
Date) against payment of the redemption price (including all accrued and
unpaid dividends up to the Redemption Date). Any interest accrued on such
funds shall be paid to the Corporation from time to time. Any moneys so
deposited which shall remain unclaimed by the holders of such shares of the
Series A Preferred Stock at the end of two years after the Redemption Date
shall be returned by such bank or trust company to the Corporation.
If a notice of redemption has been given pursuant to this Section
3 and any holder of shares of this Series A Preferred Stock shall, prior to the
close of business on the last business day preceding the Redemption Date,
give written notice to the Corporation pursuant to Section 6 below of the
conversion of any or all of the shares to be redeemed held by such holder
(accompanied by a certificate or certificates for such shares, duly endorsed or
assigned to the Corporation, and any necessary transfer tax payment, as
required by Section 6 below), then such redemption shall not become effective
as to such shares to be converted, such conversion shall become effective as
provided in Section 6 below and any moneys set aside by the Corporation for
the redemption of such shares of converted Series A Preferred Stock shall
revert to the general funds of the Corporation.
(d) Shares of the Series A Preferred Stock redeemed,
repurchased or retired pursuant to the provisions of this Section 3 or
surrendered to the Corporation upon conversion or exchange shall thereupon
be retired and may not be reissued as shares of the Series A Preferred Stock
but shall thereafter have the status of authorized but unissued shares of the
Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series of the Preferred Stock.
Section 4. Voting Rights.
(a) In addition to the voting rights provided in Section 4(b),
7(b) or 9, and as required by law, the holders of shares of the Series A
Preferred Stock shall be entitled to vote on any matter on which the holders
of the Common Stock of the Corporation shall be entitled to vote, and when
voting on matters on which the holders of Common Stock of the Corporation
are entitled to vote, each share of the Series A Preferred Stock shall entitle
the holder thereof to four votes. In the event the Corporation shall at any
time (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each
such case the number of votes per share to which holders of shares of Series
A Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which is
the number of shares of Common Stock outstanding (which in the case of (i)
above shall include such shares of Common Stock payable pursuant to such
dividend) immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior
to such event. An adjustment made pursuant to the immediately preceding
sentence shall become effective immediately after such event. When the
holders of the Series A Preferred Stock vote on any matter as members of a
class which does not include the holders of Common Stock, the holders of
Series A Preferred Stock shall be entitled to an aggregate number of votes
which is in the same proportion to the total number of class votes as the
aggregate liquidation preference of the outstanding shares of Series A
Preferred Stock bears to the aggregate liquidation preference of all shares of
capital stock in the class; and each holder of Series A Preferred Stock shall
be entitled to his or her proportionate share of the aggregate number of votes
to which the holders of Series A Preferred Stock are entitled.
(b) In the event that the Corporation shall have failed to
declare and pay or set apart for payment in full the dividends accumulated
on the outstanding shares of the Series A Preferred Stock for any six
quarterly dividend payment periods, whether or not consecutive (a
"Preferential Dividend Non-Payment"), the number of directors of the
Corporation shall be increased by two and the holders of outstanding shares
of the Series A Preferred Stock , voting together as a class with all other
classes or series of preferred stock of the Corporation ranking on a parity
with the Series A Preferred Stock with respect to dividends and distribution
of assets upon liquidation and then entitled to vote on the election of such
additional directors, shall be entitled to elect such additional directors
until the full dividends accumulated on all outstanding shares of the Series A
Preferred Stock have been declared and paid or set apart for payment. Upon
the occurrence of a Preferential Dividend Non-Payment, the Board of
Directors shall within a reasonable period call a special meeting of the
holders of shares of the Series A Preferred Stock and all holders of other
classes or series of preferred stock of the Corporation ranking on a parity
with the Series A Preferred Stock with respect to the payment of dividends
and distribution of assets upon liquidation who are then entitled to vote on
the election of such additional directors for the purpose of electing the
additional directors provided by the foregoing provisions. If and when all
accumulated dividends on the shares of the Series A Preferred Stock have
been declared and paid or set aside for payment in full, the holders of shares
of the Series A Preferred Stock shall be divested of the special voting rights
provided by this Section 4(b), subject to revesting in the event of each and
every subsequent Preferential Dividend Non-Payment. Upon termination of
such special voting rights attributable to all holders of shares of the Series
A Preferred Stock and shares of any other class or series of preferred stock of
the Corporation ranking on a parity with the Series A Preferred Stock with
respect to payment of dividends and distribution of assets upon liquidation,
the term of office of each director elected by the holders of shares of the
Series A Preferred Stock and such parity Preferred Stock (a "Preferred Stock
Director") pursuant to such special voting rights shall forthwith terminate
and the number of voting rights shall forthwith terminate and the number of
directors constituting the entire Board of Directors shall be reduced by the
number of Preferred Stock Directors. Any Preferred Stock Director may be
removed by, and shall not be removed otherwise than by, the vote of the
holders of record of a majority of the outstanding shares of the Series A
Preferred Stock and all other series of Preferred Stock ranking on a parity
with the Series A Preferred Stock with respect to the payment of dividends
who were entitled to vote in such Preferred Stock Director's election, voting
as a separate class, at a meeting called for such purpose.
(c) So long as any shares of this Series are outstanding, the
By-Laws of the Corporation shall contain provisions ensuring that the
number of Directors constituting the entire Board of Directors of the
Corporation shall at all times be such that the exercise, by the holders of
shares of the Series A Preferred Stock and the holders of parity Preferred
Stock, of the right to elect Directors under the circumstances provided for in
subclause (a) of this Section 4 will not contravene any provision of this
Certificate of Incorporation restricting the number of Directors which may
constitute the entire Board of Directors of the Corporation.
(d) Directors elected pursuant to subclause (a) of this Section
4 shall serve until the earlier of (x) the next annual meeting of the
stockholders of the Corporation and the election (by the holders of shares of
the Series A Preferred Stock and the holders of parity Preferred Stock) and
qualification of their respective successors or (y) the next annual meeting of
the stockholders of the Corporation following the date upon which all
dividends in default on the shares of the Series A Preferred Stock shall have
been paid in full.
(e) So long as a Preferential Dividend Non-Payment shall
continue, any vacancy in the office of a Preferred Stock Director may be filled
by written consent of the Preferred Stock Director remaining in office or, if
none remains in office, by vote of the holders of record of a majority of the
outstanding shares of the Series A Preferred Stock and all other series of
Preferred Stock ranking on a parity with the Series A Preferred Stock with
respect to the payment of dividends and distribution of assets upon
liquidation who are then entitled to vote in the election of such Preferred
Stock Directors as provided above. As long as the Preferential Dividend Non-
Payment shall continue, holders of shares of the Series A Preferred Stock
shall not, as such stockholders, be entitled to vote on the election or removal
of directors other than Preferred Stock Directors, but shall not be divested of
any other voting rights provided to such stockholders by law with respect to
any other matter to be acted upon by the stockholders of the Corporation.
Section 5. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up
of the affairs of the Corporation, whether voluntary or otherwise, after
payment or provision for payment of the debts and other liabilities of the
Corporation, the holders of shares of the Series A Preferred Stock shall be
entitled to receive, in cash, out of the remaining net assets of the
Corporation, the amount of One-Hundred Dollars ($100.00) for each share of
the Series A Preferred Stock, plus an amount equal to all dividends accrued
and unpaid on each such share up to the date fixed for distribution, before
any distribution shall be made to the holders of shares of the Common Stock
or any other capital stock of the Corporation ranking (as to any such
distribution) junior to the Series A Preferred Stock. If upon any liquidation,
dissolution or winding up of the Corporation, the assets distributable among
the holders of shares of the Series A Preferred Stock and all other classes and
series of preferred stock ranking (as to any such distribution) on a parity
with the Series A Preferred Stock are insufficient to permit the payment in
full to the holders of all such shares of all preferential amounts payable to
all such holders, then the entire assets of the Corporation thus distributable
shall be distributed ratably among the holders of the shares of the Series A
Preferred Stock and such other classes and series of preferred stock ranking
(as to any such distribution) on a parity with the Series A Preferred Stock in
proportion to the respective amounts that would be payable per share if such
assets were sufficient to permit payment in full.
(b) For purposes of this Section 5, a distribution of assets in
any dissolution, winding up or liquidation shall not include (i) any consoli-
dation or merger of the Corporation with or into any other corporation, (ii)
any dissolution, liquidation, winding up or reorganization of the Corporation
immediately followed by reincorporation of another corporation or (iii) a sale
of other disposition of all or substantially all of the Corporation's assets to
another corporation; provided, however, that, in each case, effective provision
is made in the certificate of incorporation of the resulting and surviving
corporation or otherwise for the protection of the rights of the holders of
shares of the Series A Preferred Stock.
(c) After the payment of the full preferential amounts
provided for herein to the holders of shares of the Series A Preferred Stock or
funds necessary for such payment have been set aside in trust for the holders
thereof, such holders shall be entitled to no other or further participation in
the distribution of the assets of the Corporation.
Section 6. Conversion.
(a) Holders of shares of the Series A Preferred Stock shall
have the right, exercisable at any time and from time to time, except in the
case of shares of the Series A Preferred Stock called for redemption or to be
exchanged for Debentures (as described in Section 7 hereof), to convert all or
any such shares of the Series A Preferred Stock into shares of the Common
Stock (calculated as to each conversion to the nearest 1/100th of a share) at
the conversion price of $14.64 per share of the Common Stock (equivalent to
a conversion rate of 6.8306 shares of the Common Stock for each share of the
Series A Preferred Stock so converted), subject to adjustment as described
below. In the case of shares of the Series A Preferred Stock called for
redemption or to be exchanged for Debentures (as described in Section 7
hereof), conversion rights will expire at the close of business on the last
business day preceding the Redemption Date or the last business day
preceding the Exchange Date (as hereinafter defined), as the case may be.
Notice of an optional redemption or exchange must be mailed not less than
30 days and not more than 60 days prior to the Redemption Date or
Exchange Date, as the case may be. Upon conversion or exchange, no
adjustment or payment will be made for dividends or interest, but if any
holder surrenders a share of the Series A Preferred Stock for conversion after
the close of business on the record date for the payment of a dividend and
prior to the opening of business on the next dividend payment date, then,
notwithstanding such conversion, the dividend payable on such dividend
payment date will be paid to the registered holder of such share on such
record date. In such event, such share, when surrendered for conversion
during the period between the close of business on any dividend payment
record date and the opening of business on the corresponding dividend
payment date, must be accompanied by payment of an amount equal to the
dividend payable on such dividend payment date on the share so converted.
(b) Any holder of a share or shares of the Series A Preferred
Stock electing to convert such share or shares thereof shall deliver the
certificate or certificates therefor to the principal office of any transfer
agent for the Common Stock, with the form of notice of election to convert as
the Corporation shall prescribe fully completed and duly executed and (if so
required by the Corporation or any conversion agent) accompanied by
instruments of transfer in form satisfactory to the Corporation and to any
conversion agent, duly executed by the registered holder or his duly
authorized attorney, and transfer taxes, stamps or funds therefor or evidence
of payment thereof if required pursuant to Section 6(a) or 6(d) hereof. The
conversion right with respect to any such shares shall be deemed to have
been exercised at the date upon which the certificates therefor accompanied
by such duly executed notice of election and instruments of transfer and such
taxes, stamps, funds, or evidence of payment shall have been so delivered,
and the person or persons entitled to receive the shares of the Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of the Common Stock upon said date.
(c) No fractional shares of the Common Stock or scrip
representing fractional shares shall be issued upon conversion of shares of
the Series A Preferred Stock. If more than one share of the Series A
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares of the Common Stock which shall be
issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares of the Series A Preferred Stock so surrendered.
Instead of any fractional shares of the Common Stock which would otherwise
be issuable upon conversion of any shares of the Series A Preferred Stock,
the Corporation shall pay a cash adjustment in respect of such fraction in an
amount equal to the same fraction of the closing price for the Common Stock
on the last business day preceding the date of conversion. The closing price
for such day shall be the last reported sales price regular way or, in case no
such reported sale takes place on such date, the average of the reported
closing bid and asked prices regular way, in either case on the New York
Stock Exchange, or if the Common Stock is not listed or admitted to trading
on such Exchange, on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, the closing sale price of the
Common Stock or in case no reported sale takes place, the average of the
closing bid and asked prices, on NASDAQ or any comparable system. If the
Common Stock is not quoted on NASDAQ or any comparable system, the
Board of Directors shall in good faith determine the current market price on
the basis of such quotation as it considers appropriate.
(d) If a holder converts a share or shares of the Series A
Preferred Stock, the Corporation shall pay any documentary, stamp or
similar issue or transfer tax due on the issue of Common Stock upon the
conversion. The holder, however, shall pay to the Corporation the amount of
any tax which is due (or shall establish to the satisfaction of the Corporation
payment thereof) if the shares are to be issued in name other than the name
of such holder and shall pay to the Corporation any amount required by the
last sentence of Section 6(a) hereof.
(e) The Corporation shall reserve and shall at all times have
reserved out of its authorized but unissued shares of the Common Stock
enough shares of the Common Stock to permit the conversion of the then
outstanding shares of the Series A Preferred Stock. All shares of Common
Stock which may be issued upon conversion of shares of the Series A
Preferred Stock shall be validly issued, fully paid and nonassessable. In
order that the Corporation may issue shares of the Common Stock upon
conversion of shares of the Series A Preferred Stock, the Corporation will
endeavor to comply with all applicable Federal and State securities laws and
will endeavor to list such shares of the Common Stock to be issued upon
conversion on each securities exchange on which the Common Stock is listed.
(f) The conversion rate in effect at any time shall be subject
to adjustment from time to time as follows:
(i) In case the Corporation shall (1) pay a dividend in
shares of the Common Stock to holders of the Common Stock, (2)
make a distribution in shares of the Common Stock to holders of
the Common Stock, (3) subdivide the outstanding shares of the
Common Stock into a greater number of shares of the Common
Stock or (4) combine the outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, the
conversion rate immediately prior to such action shall be
adjusted so that the holder of any shares of the Series A
Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number of shares of the Common Stock
which he would have owned immediately following such action
had such shares of the Series A Preferred Stock been converted
immediately prior thereto. An adjustment made pursuant to
this Section 6(f)(i) shall become effective immediately after the
record date in the case of a dividend or distribution and shall
become effective immediately after the effective date in the case
of a subdivision or combination.
(ii) In case the Corporation shall issue rights or
warrants to substantially all holders of the Common Stock
entitling them (for a period commencing no earlier than the
record date for the determination of holders of the Common
Stock entitled to receive such rights or warrants and expiring
not more than 45 days after such record date) to subscribe for or
purchase shares of the Common Stock (or securities convertible
into shares of the Common Stock) at a price per share less than
the current market price (as determined pursuant to Section
6(f)(iv) ) of the Common Stock on such record date, the number
of shares of the Common Stock into which each share of the
Series A Preferred Stock shall be convertible shall be adjusted
so that the same shall be equal to the number determined by
multiplying the number of shares of the Common Stock into
which such share of the Series A Preferred Stock was
convertible immediately prior to such record date by a fraction
of which the numerator shall be the number of shares of the
Common Stock outstanding on such record date plus the
number of additional shares of the Common Stock offered (or
into which the convertible securities so offered are convertible),
and of which the denominator shall be the number of shares of
the Common Stock outstanding on such record date, plus the
number of shares of the Common Stock which the aggregate
offering price of the offered shares of the Common Stock (or the
aggregate conversion price of the convertible securities so
offered) would purchase at such current market price. Such
adjustments shall become effective immediately after such
record date.
(iii) In case the Corporation shall distribute to all
holders of the Common Stock shares of any class of capital stock
other than the Common Stock, evidences of indebtedness or
other assets (other than cash dividends out of current or
retained earnings), or shall distribute to substantially all
holders of the Common Stock rights or warrants to subscribe for
securities (other than those referred to in Section 6(f)(ii)), then
in each such case the number of shares of the Common Stock
into which each share of the Series A Preferred Stock shall be
convertible shall be adjusted so that the same shall equal the
number determined by multiplying the number of shares of the
Common Stock into which such share of the Series A Preferred
Stock was convertible immediately prior to the date of such
distribution by a fraction of which the numerator shall be the
current market price (determined as provided in Section 6(f)(iv))
of the Common Stock on the record date mentioned below, and
of which the denominator shall be such current market price of
the Common Stock, less the then fair market value (as
determined by the Board of Directors, whose determination
shall be conclusive evidence of such fair market value) of the
portion of the assets so distributed or of such subscription rights
or warrants applicable to one share of the Common Stock. Such
adjustment shall become effective immediately after the record
date for the determination of the holders of the Common Stock
entitled to receive such distribution. Notwithstanding the
foregoing, in the event that the Corporation shall distribute
rights or warrants (other than those referred to in Section
6(f)(ii)) ("Rights") pro rata to holders of the Common Stock, the
Corporation may, in lieu of making any adjustment pursuant to
this Section 6(f)(iii), make proper provision so that each holder
of a share of Series A Preferred Stock who converts such share
after the record date for such distribution and prior to the
expiration or redemption of the Rights shall be entitled to
receive upon such conversion, in addition to the shares of the
Common Stock issuable upon such conversion (the "Conversion
Shares"), a number of Rights to be determined as follows: (i) if
such conversion occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates
evidencing such Rights (the "Distribution Date"), the same
number of Rights to which a holder of a number of shares of the
Common Stock equal to the number of Conversion Shares is
entitled at the time of such conversion in accordance with the
terms and provisions of and applicable to the Rights; and (ii) if
such conversion occurs after the Distribution Date, the same
number of Rights to which a holder of a number of shares of the
Common Stock into which a share of the Series A Preferred
Stock so converted was convertible immediately prior to the
Distribution Date would have been entitled on the Distribution
Date in accordance with the terms and provisions of and
applicable to the Rights.
(iv) The current market price per share of the Common
Stock on any date shall be deemed to be the average of the daily
closing prices for thirty consecutive trading days commencing
forty-five trading days before the day in question. The closing
price for each day shall be the last reported sales price regular
way or, in case no such reported sale takes place on such date,
the average of the reported closing bid and asked prices regular
way, in either case on the New York Stock Exchange, or if the
Common Stock is not listed or admitted to trading on such
Exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if
not listed or admitted to trading on any national securities
exchange, the closing sale price of the Common Stock, or in case
no reported sale takes place, the average of the closing bid and
asked prices, on NASDAQ or any comparable system, or if the
Common Stock is not quoted on NASDAQ or any comparable
system, the closing sale price or, in case no reported sale takes
place, the average of the closing bid and asked prices, as
furnished by any two members of the National Association of
Securities Dealers, Inc. selected from time to time by the
Corporation for that purpose.
(v) In any case in which this Section 6 shall require
that an adjustment be made immediately following a record
date, the Corporation may elect to defer (but only until five
business days following the mailing of the notice described in
Section 6(j)) issuing to the holder of any share of the Series A
Preferred Stock converted after such record date the shares of
the Common Stock and other capital stock of the Corporation
issuable upon such conversion over and above the shares of the
Common Stock and other capital stock of the Corporation
issuable upon such conversion only on the basis of the
conversion rate prior to adjustment; and, in lieu of the shares
the issuance of which is so deferred, the Corporation shall issue
or cause its transfer agents to issue due bills or other
appropriate evidence of the right to receive such shares.
(g) No adjustment in the conversion rate shall be required
until cumulative adjustments result in a concomitant change of 1% or more
of the conversion price as existed prior to the last adjustment of the con-
version rate; provided, however, that any adjustments which by reason of
this Section 6(g) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 6 shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be. No adjustment to the conversion
rate shall be made for cash dividends.
(h) In the event that, as a result of an adjustment made
pursuant to Section 6(f), the holder of any share of the Series A Preferred
Stock thereafter surrendered for conversion shall become entitled to receive
any shares of capital stock of the Corporation other than shares of the
Common Stock, thereafter the number of such other shares so receivable
upon conversion of any shares of the Series A Preferred Stock shall be subject
to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in this Section 6.
(i) The Corporation may make such increases in the
conversion rate, in addition to those required by Sections 6(f)(i), (ii) and
(iii), as it considers to be advisable in order that any event treated for
Federal income tax purposes as a dividend of stock or stock rights shall not
be taxable to the recipients thereof.
(j) Whenever the conversion rate is adjusted, the
Corporation shall promptly mail to all holders of record of shares of the
Series A Preferred Stock a notice of the adjustment and shall cause to be
prepared a certificate signed by a principal financial officer of the corpora-
tion setting forth the adjusted conversion rate and a brief statement of the
facts requiring such adjustment and the computation thereof; such certificate
shall forthwith be filed with each transfer agent for the shares of the Series
A Preferred Stock.
(k) In the event that:
(1) the Corporation takes any action which would
require an adjustment in the conversion rate,
(2) the Corporation consolidates or merges with, or
transfers all or substantially all of its assets to,
another corporation and stockholders of the Cor-
poration must approve the transaction, or
(3) there is a dissolution or liquidation of the Cor-
poration,
a holder of shares of the Series A Preferred Stock may wish to convert some
or all of such shares into shares of the Common Stock prior to the record date
for, or the effective date of, the transaction so that he may receive the
rights, warrants, securities or assets which a holder of shares of the Common
Stock on that date may receive. Therefore, the Corporation shall mail to
holders of shares of the Series A Preferred Stock a notice stating the proposed
record or effective date of the transaction, as the case may be. The Corpora-
tion shall mail the notice at least 10 days before such date; however, failure
to mail such notice or any defect therein shall not affect the validity of any
transaction referred to in clause (1), (2) or (3) of this Section 6(k).
(l) If any of the following shall occur, namely: (i) any
reclassification or change of outstanding shares of the Common Stock
issuable upon conversion of shares of the Series A Preferred Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), (ii) any
consolidation or merger to which the Corporation is a party other than a
merger in which the Corporation is the continuing corporation and which
does not result in any reclassification of, or change (other than a change in
name, or par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination) in, outstanding
shares of the Common Stock or (iii) any sale or conveyance of all or
substantially all of the property or business of the Corporation as an
entirety, then the Corporation, or such successor or purchasing corporation,
as the case may be, shall, as a condition precedent to such reclassification,
change, consolidation, merger, sale or conveyance provide in its certificate of
incorporation or other charter document that each share of the Series A
Preferred Stock shall be convertible into the kind and amount of shares of
capital stock and other securities and property (including cash) receivable
upon such reclassification, change, consolidation, merger, sale or conveyance
by a holder of the number of shares of the Common Stock deliverable upon
conversion of such share of the Series A Preferred Stock immediately prior to
such reclassification, change, consolidation, merger, sale or conveyance.
Such certificate of incorporation or other charter document shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6. The foregoing, however, shall not
in any way affect the right a holder of a share of the Series A Preferred Stock
may otherwise have, pursuant to clause (ii) of the last sentence of Section
6(f)(iii), to receive Rights upon conversion of a share of the Series A Pre-
ferred Stock. If, in the case of any such consolidation, merger, sale or
conveyance, the stock or other securities and property (including cash)
receivable thereupon by a holder of the Common Stock includes shares of
capital stock or other securities and property of a corporation other than
the successor or purchasing corporation, as the case may be, in such consoli-
dation, merger, sale or conveyance, then the certificate of incorporation or
other charter document of such other corporation shall contain such addi-
tional provisions to protect the interests of the holders of shares of the
Series A Preferred Stock as the Board of Directors shall reasonably consider
necessary by reason of the foregoing. The provision of this Section 6(l)
shall similarly apply to successive consolidations, mergers, sales or
conveyances.
Section 7. Exchange.
(a) Requirements of Exchange. At the Corporation's option,
all, but not less than all, of the then outstanding shares of the Series A
Preferred Stock may be exchanged on any dividend payment date
commencing July 1, 1996, subject to certain conditions stated in the
immediately following sentence, for the Corporation's 8 1/2% Convertible
Subordinated Exchange Debentures due July 1, 2012 (the "Debentures") to
be issued pursuant to an indenture (the "Indenture") dated as of July 9, 1992
between the Company and Fidelity Bank, National Association in the form of
Exhibit 4.1 to the Corporation's Registration Statement on Form S-2
(Registration No. 33-47872), as amended, declared effective by the Securities
and Exchange Commission on July 1, 1992, at an exchange rate of $100.00
principal amount of the Debentures for each share of the Series A Preferred
Stock. Such exchange may be made only if, at the time of exchange (i) the
Indenture shall have been qualified under the Trust Indenture Act of 1939,
as amended, (ii) there shall be no dividend arrearage (including the dividend
payable on the date of exchange) on the shares of the Series A Preferred
Stock, and (iii) no Event of Default (as defined in the Indenture) under
Indenture shall have occurred and be continuing. In the event that such
exchange would result in the issuance of a Debenture in a principal amount
which is not an integral multiple of $25, the difference between such
principal amount and the highest integral multiple of $25 (which may be
zero) which is less than such principal amount shall be paid to the holder in
cash.
(b) Notice of Exchange. The Corporation will mail to each
holder of record of shares of the Series A Preferred Stock written notice of
its intention to exchange not less than 30 nor more than 60 days prior to the
date fixed for the exchange (the "Exchange Date"). Each such notice shall
state: (i) the Exchange Date, (ii) the place or places where certificates for
such shares of the Series A Preferred Stock are to be surrendered for
exchange into Debentures, (iii) that dividends on the shares of the Series A
Preferred Stock to be exchanged will cease to accrue on such Exchange Date
and (iv) that conversion rights in respect thereof will terminate at the close
of business on the last business day proceeding such Exchange Date. Except as
may be otherwise required by applicable law, the form of the Indenture may
not be amended or supplemented before the Exchange Date without the
affirmative vote or consent of the holders of two-thirds (2/3) of the
outstanding shares of the Series A Preferred Stock, except that those changes
which pursuant to Section 11.02 of the Indenture require the consent of each
holder affected thereby shall require the consent of all the holders of the
outstanding shares of Series A Preferred Stock. The Corporation will cause
the Debentures to be authenticated on the dividend payment date on which
the exchange is effective, and the Corporation will pay interest on the
Debentures at the rate and on the dates specified in such Indenture from and
after the Exchange Date.
(c) Rights After Exchange Date. If notice has been mailed as
aforesaid, from and after the close of business on the Exchange Date (unless
default shall be made by the Corporation in issuing Debentures in exchange
for, or in making the final dividend payment on, the outstanding shares of
the Series A Preferred Stock on the Exchange Date), dividends on the shares
of the Series A Preferred Stock shall cease to accrue, and such shares shall
no longer be deemed to be issued and outstanding, and all rights of the
holders thereof as stockholders of the Corporation (except the right to receive
from the Corporation the Debentures) shall cease and terminate. Upon
surrender in accordance with said notice of the certificates for any shares of
the Series A Preferred Stock so exchanged (properly endorsed or assigned for
transfer, if the Corporation shall so require and the notice shall so state),
such shares shall be exchanged by the Corporation into Debentures as
aforesaid. Dividends due on the quarterly dividend payment date on which
the exchange is effected will be mailed to holders in the regular course.
Section 8. Ranking. With regard to rights to receive
dividends and distributions upon dissolution of the Corporation, the Series A
Preferred Stock shall rank prior to the Common Stock and on a parity with
any other Preferred Stock issued by the Corporation, unless the terms of such
other Preferred Stock provide otherwise and, if applicable, the requirements
of Section 9 hereof have been complied with.
Section 9. Limitations. In addition to any other rights
provided by applicable law, so long as any shares of the Series A Preferred
Stock are outstanding, the Corporation shall not, without the affirmative
vote, or the written consent as provided by law, of the holders of at least two-
thirds (2/3) of the outstanding shares of the Series A Preferred Stock, voting
separately,
(a) create, authorize or issue any class or series of capital
stock or rights to subscribe to or acquire any class or series of capital stock
ranking as to payment of dividends or distribution of assets upon liquidation
prior to or on a parity with the Series A Preferred Stock; or
(b) amend, alter or appeal, whether by merger, consolidation
or otherwise, any of the provisions of the Certificate of Incorporation
(including this Certificate of Designation) that would change the
preferences, rights or powers with respect to the Series A Preferred Stock so
as to affect the Series A Preferred Stock adversely;
but (except as otherwise required by applicable law) nothing herein
contained shall require such a vote or consent (i) in connection with any
increase in the total number of authorized shares of the Common Stock, or
(ii) in connection with the authorization or increase of any class or series of
shares ranking, as to dividends and distribution of assets upon liquidation,
junior to the Series A Preferred Stock; provided, however, that no such vote
or written consent of the holders of the shares of the Series A Preferred Stock
shall be required if, at or prior to the time when the issuance of any such
shares ranking prior to the Series A Preferred Stock is to be made or any
such change is to take effect, as the case may be, provision is made for the
redemption of all the then outstanding shares of the Series A Preferred
Stock.
Section 10. No Preemptive Rights. No holder of shares of the
Series A Preferred Stock will possess any preemptive rights to subscribe for
or acquire any unissued shares of capital stock of the Corporation (whether
now or hereafter authorized) or securities of the Corporation convertible into
or carrying a right to subscribe to or acquire shares of capital stock of the
Corporation.
DESIGNATIONS OF
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
Section 1. Designation and Amount. The shares of such
series shall be designated as "Series B Junior Participating Preferred Stock"
(the "Series B Preferred Stock") and the number of shares constituting the
Series B Preferred Stock shall be 200,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors; provided, that
no decrease shall reduce the number of shares of Series B Preferred Stock to
a number less than the number of shares then outstanding plus the number
of shares reserved for issuance upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities
issued by the Corporation convertible into Series B Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of Series
A Convertible Exchangeable Preferred Stock of the Corporation or of any
other series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series B Preferred Stock with respect to dividends, the
holders of shares of Series B Preferred Stock, in preference to the holders of
shares of common stock, par value $2.50 per share of the Corporation (the
"Common Stock"), and of any other junior stock, shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first
day of March, June, September and December in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series B Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $1
or (b) subject to the provision for adjustment hereinafter set forth, 100 times
the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions, other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the shares of Common Stock since
the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series B Preferred Stock. In the event
the Corporation shall at any time declare or pay any dividend on the shares
of Common Stock payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount to which holders of shares of Series B
Preferred Stock were entitled immediately prior to such event under clause
(b) of the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series B Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the shares of
Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the shares of Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1 per share on the Series B Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series B Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the
date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issueis a Quarterly Dividend Payment Date or is a date after the record date
for determination of holders of shares of Series B Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of
Series B Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series B Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of shares of Series B
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series B Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the shares of Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the number of
votes per share to which holders of shares of Series B Preferred Stock were
entitled immediately prior to such event shall be adjusted by multiplying
such number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or any similar
stock, or by law, the holders of shares of Series B Preferred Stock and the
holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class on
all matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by
law, holders of Series B Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are entitled
to vote with holders of shares of Common Stock as set forth herein) for taking
any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series B Preferred Stock as provided in Section
2 are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series B Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series B
Preferred Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with
the Series B Preferred Stock, except dividends paid ratably on
the Series B Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series B
Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series B Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series B Preferred Stock, or any shares of stock
ranking on a parity with the Series B Preferred Stock, except in
accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A)
of this Section 4, purchase or otherwise acquire such shares at such time and
in such manner.
Section 5. Reacquired Shares. Any shares of Series B
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Certificate of Incorporation,
or in any other Certificate of Designations creating a series of Preferred
Stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series B
Preferred Stock unless, prior thereto, the holders of shares of Series B
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Series B Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of
shares of Common Stock, or (2) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series B Preferred Stock, except distributions made ratably on the
Series B Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the shares of Common Stock payable
in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into
a greater or lesser number of shares of Common Stock, then in each such
case the aggregate amount to which holders of shares of Series B Preferred
Stock were entitled immediately prior to such event under the proviso in
clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other property, then in any such
case each share of Series B Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the
aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall
at any time declare or pay any dividend on the shares of Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into
a greater or lesser number of shares of Common Stock, then in each such
case the amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series B Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series B Preferred
Stock shall not be redeemable.
Section 9. Rank. The Series B Preferred Stock shall rank,
with respect to the payment of dividends and the distribution of assets,
junior to all series of any other class of the Corporation's Preferred Stock
including without limitation the Corporation's Series A Convertible
Exchangeable Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of
the Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series B
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Series B
Preferred Stock, voting together as a single class.
FIFTH: This corporation is to have perpetual existence.
SIXTH: The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent whatever.
SEVENTH: In addition to the powers conferred by statute the
board of directors is expressly authorized to (a) make, alter, amend and
repeal the bylaws and (b) have one or more offices outside of Delaware and
keep the books and records of the corporation in any of such offices, except as
prohibited by law.
EIGHTH: No director of the corporation shall be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (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) under Section 174 of the General Corporation
Law of the State of Delaware or (iv) for any transaction from which the
director derived an improper personal benefit. Any repeal or modification of
this article Eighth shall be prospective only, and shall not affect, to the
detriment of any director, any limitation on the personal liability of a
director of the corporation existing at the time of such repeal or modification.
4. This Restated Certificate of Incorporation was duly adopted by the
Board of Directors in accordance with Section 245 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF said Westmoreland Coal Company has
caused this certificate to be signed by Theodore E. Worcester, its Senior Vice
President, this 21st day of February, 1995.
WESTMORELAND COAL COMPANY
By ___________________________________
Theodore E. Worcester
6/6/94
WESTMORELAND COAL COMPANY
(DELAWARE CORPORATION)
BYLAWS
ARTICLE I
SHAREHOLDERS
SECTION 1. Meetings
(a) Annual Meeting. Unless otherwise fixed by the Board of Directors,
the annual meeting of shareholders for the election of Directors and
for other business shall be held on the first Tuesday of May in each
year, or, if that day is a legal holiday, on the next following
business day.
(b) Special Meetings. Special meetings of the shareholders may be
called at any time by the chief executive officer, or a majority of the
Board of Directors, or the holders of at least one-fifth of the shares
of stock of the Company outstanding and entitled to vote.
(c) Place. Meetings of the shareholders shall be held at such place in
Philadelphia, Pennsylvania (where the company will maintain an
office at which it may keep its books to the extent permitted by law)
as may be fixed by the Board of Directors in the notice of meeting.
SECTION 2. Notice
Written notice of the time and place of all meetings of shareholders and of
the purpose of each special meeting of shareholders shall be given to each
shareholder entitled to vote thereat at least ten days before the date of
the meeting, unless a greater period of notice is required by law in a
particular case.
SECTION 3. Voting
(a) Voting Rights. Except as otherwise provided herein, or in the
Certificate of Incorporation, or by law, every shareholder shall have
the right at every shareholders' meeting to one vote for every share
standing in his name on the books of the Company which is entitled
to vote at such meeting. Every shareholder may vote either in
person or by proxy.
(b) Election of Directors. At each annual meeting the shareholders
shall elect seven directors, who shall constitute the entire Board.
SECTION 4. Quorum and Required Vote
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of stock of the Company entitled to vote at a meeting
shall constitute a quorum. If a quorum is not present no business shall be
transacted except to adjourn to a future time. Except as may otherwise
be provided in these Bylaws, in the Certificate of Incorporation or bylaw,
the acts of the holders of a majority of the shares present in person or by
proxy at any meeting at which a quorum is present shall be the acts of
the shareholders.
ARTICLE II
DIRECTORS
SECTION 1. Term of Office
Each director elected at an annual meeting of the shareholders shall hold
office until his successor is elected and has qualified or until his earlier
resignation or proper removal.
SECTION 2. Powers
The business of the Company shall be managed by the Board of Directors
which shall have all powers conferred by law and these bylaws. The
Board of Directors shall elect, remove and suspend officers, determine
their duties and compensations, and require security in such amounts as
it may deem proper.
SECTION 3. Meetings
(a) Regular Meetings. Regular meetings shall be held at such times as
the Board shall designate by resolution. Notice of the regular
meetings need not be given.
(b) Special Meetings. Special meetings of the Board may be called at
any time by the chief executive officer and shall be called by him
upon the written request of one-third of the directors. Written
notice of the time, place and the general nature of the business to
be transacted at each special meeting shall be given to each director
at least three days before such meeting.
(c) Place. Meetings of the Board of Directors shall be held at such
place in or out of Delaware as the Board may designate or as may
be designated in the notice calling the meeting.
SECTION 4. Quorum
A majority of all the directors in office (but not less than one-third of the
number fixed by these bylaws) shall constitute a quorum for the
transaction of business at any meeting. The vote of the majority of the
directors present at any meeting at which a quorum is present shall be
the act of the Board of Directors.
SECTION 5. Vacancies
Vacancies in the Board of Directors shall be filled by vote of a majority of
the remaining members of the Board though less than a quorum. Such
election shall be for the balance of the unexpected term or until a
successor is duly elected by the shareholders and has qualified.
ARTICLE III
EXECUTIVE COMMITTEE
The Board of Directors by resolution of a majority of the number of directors
fixed by these bylaws may designate three or more directors to constitute an
executive committee, which, to the extent provided in such resolution, shall
have and may exercise all the authority of the Board of Directors except to
amend the Company's bylaws. If an executive committee is so designated, it
will elect one of its members to be its chairman.
ARTICLE IV
OFFICERS
SECTION 1. Election
At its first meeting after each annual meeting of the shareholders, the
Board of Directors shall elect a President, Treasurer, and Secretary, and
such other officers as it deems advisable. Any two or more offices may be
held by the same person except for the offices of President and Secretary.
SECTION 2. Chairman and President
(a) If the Board in its discretion determines that there shall be a
Chairman, he may be the chief executive officer of the Company
and shall preside at all meetings of the Board and of the
shareholders. In such event the President shall be the chief
operating officer, responsible to the Chairman, with such duties as
the Board of Directors or the Chairman shall from time to time
prescribe, and he shall exercise the powers and perform the duties
of the Chairman during the Chairman's absence or inability to act.
(b) When the office of Chairman is not filled, or when the Chairman is
not the chief executive officer, the President shall be the chief
executive officer and the chief.
(c) In the event the President shall be the chief executive officer, the
Board may designate an Executive Vice President or Senior Vice
President as chief operating officer. In the absence of such
designation, the President shall also be the chief operating officer.
(d) Except as the Board of Directors may otherwise prescribe by
resolution, the chief executive officer shall have general supervision
over the business and operations of the Company and may perform
any act and execute any instrument for the conduct of such
business and operations.
SECTION 3. Other Officers
The duties of the other officers shall be those usually related to their
offices, except as otherwise prescribed by resolution of the Board of
Directors.
SECTION 4. General
(a) In the absence of the Chairman and President, any officer
designated by the Board shall exercise the powers and perform the
duties of the chief executive officer or the chief operating officer or
both.
(b) Except as otherwise determined by resolution of the Board of
Directors, the Vice Chairman, President or any Executive Vice
President or Senior Vice President may execute any instrument for
the conduct of the Company's business and operations.
SECTION 5. Agents
The chief executive officer or any officer or employee authorized by him
may appoint, remove or suspend agents or employees of the Company and
may determine their duties and compensation.
ARTICLE V
INDEMNIFICATION
SECTION 1. Right to Indemnification
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, either civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer or
supervisor or manager of the corporation or a constituent corporation
absorbed in a consolidation or merger, or while a director, officer or
supervisor or manager of the corporation is or was serving at the request
of the corporation or a constituent corporation absorbed in a consolidated
or merger, as a director, officer or supervisor or manager of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding, whether or not the indemnified liability
arises or arose from any threatened, pending or completed action by or in
the right of the corporation to the extent that such person is not otherwise
indemnified and to the extent such indemnification is not prohibited by
applicable law.
SECTION 2. Advance of Expenses
Expenses incurred by a director, officer or supervisor or manager of the
corporation in defending a civil or criminal action, suit or proceeding,
shall be paid by the corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director, officer or supervisor or manager to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by
the corporation.
SECTION 3. Procedure for Determining Permissibility
The procedure for determining the permissibility of indemnification under
the standards contained in this Article V (including the advance of
expenses) shall be that set forth in Section 145(d) of the Delaware
General Corporation Law, provided that, if there has been a change in
control of the corporation between the time of the action or failure to act
giving rise to the claim for indemnification and such claim, and at the
option of the person seeking indemnification, the permissibility of
indemnification shall be determined by independent legal counsel selected
jointly by the corporation and the person seeking indemnification. The
reasonable expenses of any director, officer or supervisor or manager in
prosecuting a successful claim for indemnification, and the fees and
expenses of any special legal counsel engaged to determine permissibility
of indemnification, shall be borne by the corporation.
SECTION 4. Contractual Obligation
The obligations of the corporation to indemnify a director, officer or
supervisor or manager under this Article V, including the duty to advance
expenses, shall be considered a contract between the corporation and such
director, officer or supervisor or manager and no modification or repeal of
any provision of this Article V shall affect, to the detriment of the director,
officer or supervisor or manager, such obligations of the corporation in
connection with a claim based on any act or failure to act occurring before
such modification or repeal.
SECTION 5. Indemnification Not Exclusive: Inuring of Benefit
The indemnification and advance of expenses provided by this Article V
shall not be deemed exclusive of any other right to which one indemnified
may be entitled, both as to action in his official capacity and as to action
in another capacity while holding such office, and shall inure to the
benefit of the heirs, executors and administrators of any such person.
SECTION 6. Insurance and Other Indemnification
The Board of Directors shall have the power to (i) authorize the
corporation to purchase and maintain, at the corporation's expense,
insurance on behalf of the corporation and on behalf of others to the
extent that power to do so has not been prohibited by applicable law, and
(ii) give other indemnification to the extent permitted by law.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 1. Share Certificates
Every shareholder of record shall be entitled to a share certificate
representing the shares held by him. Every share certificate may bear
the corporate seal and the signature of the Chairman or President or a
Vice President, and Secretary or Assistant Secretary, or the Treasurer or
an Assistant Treasurer of the Company, or may bear a facsimile
corporation seal, a facsimile signature of the Chairman or President, the
signature of the Secretary or any Assistant Secretary, or Treasurer or an
Assistant Treasurer of the Company and the signature of a transfer clerk.
SECTION 2. Transfers
Shares of stock of the Company shall be transferable on the books of the
Company only by the registered holder or by duly authorized attorney. A
transfer shall be made only upon surrender of the share certificate. The
Board of Directors may fix a record date to determine the voting and
other rights of shareholders to the extent permitted by law.
ARTICLE VII
AMENDMENTS
These bylaws may be changed at any regular or special meeting of the Board of
Directors by the vote of a majority of all the directors in office or at any
annual or special meeting of shareholders by the vote of the holders of a
majority of the outstanding stock entitled to vote. Notice of any such
meeting of the Board of Directors or of shareholders shall set forth
the proposed change or a summary thereof.
WCCo. Bylaws
12/4/90
Page 7 of 7
<TABLE>
WESTMORELAND ENERGY, INC.
Project Status Summary
<CAPTION>
Roanoke Roanoke
Southampton Altavista Hopewell Valley I Valley II Ft. Drum Ft. Lupton Rensselaer
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Location Southampton, Altavista, Hopewell, Weldon, North Weldon, North Watertown, Ft. Lupton Rensselaer
Virginia Virginia Virginia Carolina Carolina New York Colorado New York
Status Operational Operational Operational Operational Construction Operational Operational Operational
Gross
Megawatt
Capacity 70 MW 70 MW 70 MW 180 MW 50 MW 55.5 MW 290 MW 81 MW
WEI
Equity
Ownership 30.0% 30.0% 30.0% 50.0% 50.0% 1.25% 4.49% 50.0%
Electri-
city Virginia Virginia Virginia Virginia Virginia Niagara Public Ser- Niagara
Purchaser Power Power Power Power Power Mohawk vice of CO Mohawk
Steam Hercules, The Lane Firestone Patch Patch U. S. Army Rocky Mt. BASF Corp.
Host Inc. Company,Inc Tire & Rubber Co. Rubber Co. Produce Ltd.
Rubber Co.
Fuel Type Coal Coal Coal Coal Coal Coal Natural Gas Natural Gas
Fuel United Coal Westmore- United TECO Coal Co./ TECO Coal Co./ Cyprus Amex Thermo Western Gas
Supplier Co. land Coal Coal Co. Westmoreland Westmoreland Coal Co. Fuels, Inc. Marketing, Ltd.
Co. Coal Co. Coal Co.
Commer-
cial
Opera-
tions
Date 1992 1992 1992 May 1994 June 1995 1989 June 1994 April 1994
(projected)
</TABLE>
WESTMORELAND COAL COMPANY
1995 LONG-TERM INCENTIVE STOCK PLAN
SECTION 1. Purpose. The purpose of the 1995 Long-Term
Incentive Stock Plan (the "Plan") of the Company is (a) to align
the interests of shareholders and employees of the Company by
encouraging and creating ownership of Common Stock of
Westmoreland Coal Company by officers and other salaried
employees of the Company; (b) to enable the Company to attract
and retain qualified officers and employees who contribute to the
Company's success by their ability and ingenuity; and (c) to
provide meaningful long-term incentive opportunities for officers
and other employees who are responsible for the success of the
Company and who are in a position to make significant
contributions toward its objectives.
SECTION 2. Definitions. In addition to the terms defined
elsewhere in the Plan, the following shall be defined terms under
the Plan:
2.01. "Award" means any Option, Restricted Stock, or any
other right or interest relating to Shares, granted under the
Plan.
2.02. "Award Agreement" means any written agreement,
contract, or other instrument or document evidencing an Award.
2.03. "Board" means the Board of Directors of Westmoreland
Coal Company.
2.04. "Change of Control" and related terms are defined in
Section 9.
2.05. "Code" means the Internal Revenue Code of 1986, as
amended from time to time. References to any provision of the
Code shall be deemed to include successor provisions thereto and
regulations thereunder.
2.06. "Committee" means the Compensation and Benefits
Committee of the Board of Directors, or such other Board
committee as may be designated by the Board to administer the
Plan, or any subcommittee of either; provided, however, that the
Committee, and any subcommittee thereof, shall consist of three
or more directors, each of whom is a "disinterested person"
within the meaning of Rule 16b-3 and an "outside director" under
Section 162(m) of the Code.
2.07. "Company" means Westmoreland Coal Company and each of
its Subsidiaries, together with any successor thereto.
2.08 "Date of Grant" means the date on which an Award is
granted.
2.09. "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time. References to any provision
of the Exchange Act shall be deemed to include successor
provisions thereto and regulations thereunder.
2.10. "Fair Market Value" means, with respect to Shares or
Awards, the fair market value of such Shares or Awards determined
by such methods or procedures as shall be established from time
to time by the Committee. Unless otherwise determined by the
Committee, the Fair Market Value of Shares as of any date shall
be the closing sales price on that date of a Share as reported in
the New York Stock Exchange Composite Transaction Report;
provided, that if there were no sales on the valuation date, the
Fair Market Value shall be the closing price on the nearest date
after the valuation date.
2.11. "Incentive Stock Option" means an Option that is
intended by the Committee to meet the requirements of Section 422
of the Code.
2.12. "Non-Qualified Stock Option" means an Option that is
not intended by the Committee to be an Incentive Stock Option,
and is designated as such, or represents that part of an Option
in excess of the amount qualifying as an Incentive Stock Option,
under provisions of the Code.
2.13. "Option" means a right, granted to an individual who
meets the eligibility requirements under Section 5, to purchase
Shares at a specified price during specified time periods. An
Option may be either an Incentive Stock Option or a Non-Qualified
Stock Option.
2.14. "Participant" means a person who has been granted an
Award under the Plan.
2.15. "Plan" is defined in Section 1.
2.16 "Restricted Stock" means an Award, payable in Shares,
that is granted subject to a risk of forfeiture if the
Participant ceases to be employed by the Company during a
specified period (the "restriction period"), or if performance
criteria specified by the Committee are not met. A Restricted
Stock Award may provide a vesting schedule under which vesting
could occur at an earlier date than otherwise established if
specified performance criteria are met before the end of the
restriction period. The restriction period and the vesting
schedule shall be determined by the Committee in its discretion.
2.17. "Rule 16b-3" means Rule 16b-3, as from time to time
amended, promulgated by the Securities and Exchange Commission
under Section 16 of the Exchange Act.
2.18. "Shares" means the Common Stock, $2.50 par value, of
Westmoreland Coal Company and such other securities of
Westmoreland Coal Company as may be substituted for Shares or
such other securities pursuant to Section 10.
2.19. "Subsidiary" means any corporation with respect to
which the Company owns, directly or indirectly, 50 percent or
more of the total combined voting power of all classes of stock.
In addition, any other related entity may be designated by the
Board as a Subsidiary.
2.20. "Ten Percent Shareholder" means a person who on the
Date of Grant owns, either directly or within the meaning of the
attribution rules in section 425(d) of the Code, stock possessing
more than 10 percent of the total combined voting power of all
classes of stock of his or her employer corporation or of its
parent or subsidiary corporations, as defined respectively in
sections 425(e) and 425(f) of the Code.
SECTION 3. Administration.
3.01. Authority of the Committee. The Plan shall be
administered by the Committee. The Committee shall have full and
final authority to take the following actions and any other
necessary actions in administering the Plan, unless precluded in
this document:
(i) to select and designate persons to whom Awards shall
be granted;
(ii) to designate Subsidiaries;
(iii) to determine the type or types of Awards to be
granted to each person eligible under Section 5;
(iv) to determine the number of Awards to be granted,
the number of Shares to which an Award will relate, the terms
and conditions of any Award granted under the Plan
(including, but not limited to, any exercise price, grant
price, or purchase price, any restriction or condition, any
schedule for lapse of restrictions or conditions relating to
transferability or forfeiture, exercisability, or settlement
of an Award, and waivers or accelerations thereof, and waiver
of performance or other conditions relating to an Award,
based in each case on such considerations as the Committee
shall determine), and all other matters to be determined in
connection with an Award;
(v) to determine whether, to what extent, and under what
circumstances an Award may be settled, or the exercise price
of an Award may be paid, in cash, Shares, other Awards, or
other property, or an Award may be canceled, forfeited, or
surrendered;
(vi) to prescribe the form of each Award Agreement,
which need not be identical for each Participant;
(vii) to adopt, amend, suspend, waive, and rescind rules
and regulations relating to the Plan and appoint such agents
as the Committee may deem necessary or advisable to
administer the Plan;
(viii) to correct any defect or supply any omission or
reconcile any inconsistency in the Plan and to construe and
interpret the Plan and any Award, rules and regulations,
Award Agreement, or other instrument hereunder; and
(ix) to make all other decisions and determinations as
may be required under the terms of the Plan or as the
Committee may deem necessary or advisable for the
administration of the Plan.
3.02. Manner of Exercise of Committee Authority. Unless
authority is specifically reserved to the Board under the terms
of the Plan, or applicable law, the Committee shall have sole
discretion in exercising such authority under the Plan. Any
action of the Committee with respect to the Plan shall be final,
conclusive, and binding on all persons, including the Company,
Subsidiaries, Participants, any person claiming any rights under
the Plan from or through any Participant, and shareholders. The
express grant of any specific power to the Committee, and the
taking of any action by the Committee, shall not be construed as
limiting any power or authority of the Committee. A memorandum
signed by all members of the Committee shall constitute the act
of the Committee without the necessity, in such event, to hold a
meeting. The Committee may delegate to officers or managers of
the Company the authority, subject to such terms as the Committee
shall determine, to perform administrative functions under the
Plan.
3.03. Limitation of Liability. Each member of the Committee
shall be entitled to, in good faith, rely or act upon any report
or other information furnished to him by any officer or other
employee of the Company or by a professional retained by the
Company to assist in the administration of the Plan. No member
of the Committee, nor any officer or employee of the Company
acting on behalf of the Committee, shall be personally liable for
any action, determination, or interpretation taken or made in
good faith with respect to the Plan, and all members of the
Committee and any officer or employee of the Company acting on
their behalf, shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such
action, determination, or interpretation.
SECTION 4. Shares Subject to the Plan. Subject to
adjustment as provided in Section 10, the total number of Shares
reserved and available for Awards under the Plan shall be
350,000, but no more than 100,000 can be granted in the form of
Restricted Stock. If any Shares to which an Award relates are
forfeited or the Award is terminated without a distribution of
Shares, any Shares counted against the number of Shares reserved
and available under the Plan with respect to such Award shall, to
the extent of any such forfeiture or termination, again be
available for Awards under the Plan; provided, however, that such
Shares shall be available for issuance only to the extent
permitted under Rule 16b-3.
SECTION 5. Eligibility. Awards may be granted only to
individuals who are officers or other salaried employees
(including employees who are also directors) of the Company. No
Award shall be granted to any non-employee director. An
Incentive Stock Option shall not be granted to a Ten Percent
Shareholder except on such terms concerning the option price and
conditions of exercise as described in Section 6.03. with respect
to such person.
SECTION 6. Specific Terms of Awards.
6.01. General. Awards may be granted on the terms and
conditions set forth in this Section 6. In addition, the
Committee may impose on any Award or the exercise thereof, at the
date of grant or thereafter, such additional terms and
conditions, not inconsistent with the provisions of the Plan, as
the Committee shall determine, including without limitation the
acceleration of vesting of any Awards or terms requiring
forfeiture of Awards in the event of termination of employment by
the Participant.
6.02. Restricted Stock. The Committee is authorized to
grant Restricted Stock to persons eligible under Section 5 on the
following terms and conditions:
(i) Issuance and Restrictions. Restricted Stock shall
be subject to such restrictions as the Committee may impose,
which restrictions may lapse separately or in combination at
such times, under such circumstances, in such installments,
or otherwise as the Committee shall determine.
(ii) Vesting Conditions. Restricted Stock shall cease
to be subject to forfeiture at the end of the restriction
period if the Participant remains an employee of the Company
throughout the restriction period, and if applicable, any
performance criteria specified by the Committee are met
during the restriction period (or, if the Committee so
provides, vesting could occur at an earlier date than
otherwise established if the preestablished performance
criteria are met at an earlier date). Notwithstanding the
aforesaid, the Committee may determine in any individual
case, that restrictions or forfeiture conditions relating to
Restricted Stock will be waived in whole or in part in the
event of terminations resulting from specified causes.
(iii) Certificates of Shares. Restricted Stock granted
under the Plan may be evidenced in such manner as the
Committee shall determine. As soon as reasonably possible
after vesting has occurred, the Company will cause a
certificate of shares registered in the name of the
Participant to be issued and delivered to the Participant.
(iv) Rights of Shareholders. A Participant shall have
no rights as a shareholder (including the right to vote, or
to receive dividends) until the Restricted Stock has vested
and certificates of shares are registered in his or her name.
6.03 Options. The Committee is authorized to grant Options
to persons eligible under Section 5 on the following terms and
conditions:
(i) Exercise Price. The exercise price per Share
purchasable under an Option shall be determined by the
Committee; provided, however, that such exercise price shall
be not less than the Fair Market Value of a Share on the Date
of Grant of such Option. Additionally, the exercise price
per Share of any Incentive Stock Options granted to a Ten
Percent Shareholder shall not be less than 110 percent of the
Fair Market Value of a Share on the Date of Grant of such
Option.
(ii) Time and Method of Exercise. The Committee shall
determine the time or times at which an Option may be
exercised in whole or in part, the methods by which such
exercise price may be paid or deemed to be paid, the form of
such payment, including, without limitation, cash, Shares,
other Awards or awards issued under other Company plans, or
other property (including notes or other contractual
obligations of Participants to make payment on a deferred
basis, such as through "cashless exercise" arrangements), and
the methods by which Shares will be delivered or deemed to be
delivered to Participants. Options shall expire not later
than ten years after the date of grant. Incentive Stock
Options granted to a Ten Percent Shareholder shall expire not
later than five years after the Date of Grant.
(iii) Incentive Stock Options. The terms of any
Incentive Stock Option granted under the Plan shall comply in
all respects with the provisions of Section 422 of the Code,
including but not limited to the requirements that no
Incentive Stock Option shall be granted more than ten years
after the effective date of the Plan. Anything in the Plan
to the contrary notwithstanding, no term of the Plan relating
to Incentive Stock Options shall be interpreted, amended, or
altered, nor shall any discretion or authority granted under
the Plan be exercised, so as to disqualify either the Plan or
any Incentive Stock Option under Section 422 of the Code.
SECTION 7. Certain Provisions Applicable to Awards.
7.01. Maximum Individual Option Grants. For purposes of
qualifying for Section 162(m) of the Code, no Participant may
receive Options during the life of the Plan covering or
representing more than 90,000 Shares.
7.02. Term of Awards. The term of each Award shall be for
such period as may be determined by the Committee; provided,
however, that in no event shall the term of any Award granted
exceed a period of ten years from the Date of Grant.
SECTION 8. General Restrictions Applicable to Awards.
8.01. Restrictions Under Rule 16b-3.
8.01.1. Nontransferability. Awards which constitute
derivative securities (including any option or other award
in the nature of a right) shall not be transferable by a
Participant except by will or the laws of descent and
distribution or, if then permitted under Rule 16b-3, pursuant
to a qualified domestic relations order as defined under the
Code or Title I of the Employee Retirement Income Security
Act of 1974, as amended, or the rules thereunder. Incentive
Stock Options and, if then required by Rule 16b-3, any other
derivative security granted under the Plan, shall be
exercisable during the lifetime of a Participant only by such
Participant or his guardian or legal representative.
8.01.2. Compliance with Rule 16b-3. It is the intent of
the Company that this Plan comply in all respects with Rule
16b-3 in connection with any Award granted to a person who is
subject to Section 16 of the Exchange Act. Accordingly, if
any provision of this Plan or any Award Agreement does not
comply with the requirements of Rule 16b-3 as then applicable
to any such person, such provision shall be construed or
deemed amended to the extent necessary to conform to such
requirements with respect to such person.
8.02. Share Certificates. All certificates for Shares
delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop-transfer order and other
restrictions as the Committee may deem advisable under applicable
federal or state laws, rules and regulations thereunder, and the
rules of any national securities exchange on which Shares are
listed. The Committee may cause a legend or legends to be placed
on any such certificates to make appropriate reference to such
restrictions or any other restrictions that may be applicable to
Shares, including under the terms of the Plan or any Award
Agreement. In addition, during any period in which Awards or
Shares are subject to restrictions under the terms of the Plan or
any Award Agreement, the Committee may require the Participant to
enter into an agreement providing that certificates representing
Shares issuable or issued pursuant to an Award shall remain in
the physical custody of the Company or such other person as the
Committee may designate.
SECTION 9. Change of Control Provisions. Notwithstanding
any other provision of the Plan, the following acceleration and
valuation provisions shall apply in the event of a "Change in
Control" as defined in this Section 9:
9.01. Acceleration and Cash-Out Rights. In the event of a
"Change in Control," as defined in Section 9.02, automatically in
the case of Participants subject to Section 16 of the Exchange
Act, and unless otherwise determined by the Board in writing at
or after grant but prior to the occurrence of the Change of
Control in the case of Participants not subject to Section 16 of
the Exchange Act.
(i) All Restricted Stock shall be deemed fully vested;
and
(ii) Any Option that was not previously exercisable and
vested shall become fully exercisable and vested.
9.02. Change of Control. For purposes of Section 9.01, a
"Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20 percent
or more of either (i) the then outstanding shares of Common
Stock of the Company (the "Outstanding Company Common Stock")
or (ii) combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following
acquisitions shall not constitute a Change of Control; (i)
any acquisition by the Company or any of its subsidiaries,
(ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any of its
subsidiaries or (iii) any acquisition by any corporation with
respect to which, following such acquisition, more than 75
percent of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities
who were the beneficial owners; respectively, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such acquisition in
substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(b) Individuals who, as of the effective date of the
Plan, constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an
actual or threatened solicitation to which Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act applies or
other actual threatened solicitation of proxies or consents;
or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with
respect to which all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such reorganization,
merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 75 percent of,
respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting
from such reorganization, merger or consolidation in
substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or
consolidation of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be.
SECTION 10. Adjustment Provisions. In the event that
the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Shares, or other
property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate
transaction or event, affects the Shares such that an adjustment
is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the rights of Participants
under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and kind
of Shares which may thereafter be issued in connection with
Awards, (ii) the limit on the number of Shares subject to Option
Grants for any Participant, (iii) the number and kind of Shares
issued or issuable in respect of outstanding Awards, and (iv) the
exercise price, grant price, or purchase price relating to any
Award or, if deemed appropriate, make provision for a cash
payment with respect to any outstanding Award; provided, however,
in each case, that, with respect to Incentive Stock Options, no
such adjustment shall be authorized to the extent that such
authority would cause the Plan to violate Section 422(b)(1) of
the Code. In addition, the Committee is authorized to make
adjustments in the terms and conditions of, and the criteria
included in, Awards in recognition of unusual or nonrecurring
events (including, without limitation, events described in the
preceding sentence) affecting the Company or the financial
statements of the Company, or in response to changes in
applicable laws, regulations, or accounting principles.
SECTION 11. Changes to the Plan and Awards.
11.01. Changes to the Plan. The Board may amend, alter,
suspend, discontinue or terminate the Plan; provided, however,
that, without the consent of an affected Participant, no
amendment, alteration, suspension, discontinuation, or
termination of the Plan may impair the rights of such Participant
under any Award theretofore granted to him. Notwithstanding the
foregoing, without the approval of the shareholders of
Westmoreland Coal Company, no amendment may be made that would
(i) materially increase the aggregate number of Shares that may
be issued under the Plan, except by operation of section 10, (ii)
materially modify the requirements for eligibility to participate
in the Plan, or (iii) materially increase the benefits accruing
to Participants.
SECTION 12. General Provisions.
12.01. No Rights to Awards. No Participant or employee
shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of
Participants and employees.
12.02. No Shareholder Rights. No Award shall confer on any
Participant any of the rights of a shareholder of the Company
unless and until Shares are duly issued or transferred to the
Participant in accordance with the terms of the Award.
12.03. Tax Withholding. The Company is authorized to
withhold from any Award granted, any payment relating to an Award
under the Plan, including from a distribution of Shares, or any
payroll or other payment to a Participant, amounts for
withholding and other taxes due with respect thereto, its
exercise, or any payment thereunder, and to take such other
action as the Committee may deem necessary or advisable to enable
the Company and Participants to satisfy obligations for the
payment of withholding taxes and other tax liabilities relating
to any Award. This authority shall include authority to withhold
or receive Shares or other property and to make cash payments in
respect thereof in satisfaction of Participant's tax obligations.
12.04. No Right to Employment. Nothing contained in the
Plan or any Award Agreement shall confer, and no grant of an
Award shall be construed as conferring, upon any employee any
right to continue in the employ of the Company or to interfere in
any way with the right of the Company to terminate his employment
at any time or increase or decrease his compensation from the
rate in existence at the time of granting of an Award.
12.05. Unfunded Status of Awards. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company;
provided, however, that the Committee may authorize the creation
of trusts or make other arrangements to meet the Company's
obligations under the Plan to deliver cash, Shares, other Awards,
or other property pursuant to any award, which trusts or other
arrangements shall be consistent with the "unfunded" status of
the Plan unless the Committee otherwise determines with the
consent of each affected Participant.
12.06. Other Compensatory Arrangements. The Company shall
be permitted to adopt other or additional compensation
arrangements (which may include arrangements which relate to
Awards), and such arrangements may be either generally applicable
or applicable only in specific cases.
12.07. Fractional Shares. No fractional Shares shall be
issued or delivered pursuant to the Plan or any Award. The
Committee shall determine whether cash, other Awards, or other
property shall be issued or paid in lieu of fractional Shares or
whether such fractional Shares or any rights thereto shall be
forfeited or otherwise eliminated.
12.08. Governing Law. The validity, construction, and
effect of the Plan, any rules and regulations relating to the
Plan, and any Award Agreement shall be determined in accordance
with the laws of the State of Delaware, without giving effect to
principles of conflicts of laws, and applicable federal law.
SECTION 13. Effective Date. The Plan shall become effective
on February 1, 1995; provided, however, that within one year
after such date, the Plan shall have been approved by the
affirmative vote of the holders of a majority of the Shares
present or represented and entitled to vote (and the affirmative
vote of a majority of the Shares voting) at a meeting of the
Company's shareholders, or any adjournment thereof. The
termination date of the Plan shall be February 1, 2005.
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> dec-31-1994
<CASH> 15,453
<SECURITIES> 0
<RECEIVABLES> 28,646
<ALLOWANCES> 3,317
<INVENTORY> 8,604
<CURRENT-ASSETS> 50,338
<PP&E> 308,575
<DEPRECIATION> 218,847
<TOTAL-ASSETS> 229,739
<CURRENT-LIABILITIES> 51,819
<BONDS> 0
<COMMON> 17,390
0
575
<OTHER-SE> 32,759
<TOTAL-LIABILITY-AND-EQUITY> 229,739
<SALES> 377,362
<TOTAL-REVENUES> 377,362
<CGS> 347,999
<TOTAL-COSTS> 392,580
<OTHER-EXPENSES> 43,670
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,425
<INCOME-PRETAX> 23,027
<INCOME-TAX> 2,291
<INCOME-CONTINUING> 20,153
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,153
<EPS-PRIMARY> 2.19
<EPS-DILUTED> 2.19
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Plan of Reorganization
On November 8, 1994, the Company filed a petition under Chapter
11 of the Federal Bankruptcy Code seeking the confirmation of a
so-called "pre-packaged" plan of reorganization (the "Plan of
Reorganization"). This measure was taken to obtain protection
from the Company's principal lenders pending the closing of the
sale of the assets of Criterion which closing was also
facilitated by the filing. The Federal Bankruptcy Court approved
the Company's Plan of Reorganization on December 16, 1994. As
provided in the Plan of Reorganization, the Company proceeded to
complete its sale of the assets of Criterion Coal Company
("Criterion") on December 22, 1994 and paid in full its maturing
debt obligations at which time it emerged from bankruptcy. Refer
to Note 1 to the Consolidated Financial Statements for additional
information concerning the Company's Plan of Reorganization.
Years Ended December 31, 1994, 1993 and 1992
Liquidity and Capital Resources
Cash provided from operating activities totalled
$13,622,000, $32,600,000 and $1,758,000 in 1994, 1993 and
1992, respectively. The Company's withdrawal from the
export market and its related decreased participation in the
brokered coal business provided $19,208,000 of cash in 1994.
This amount resulted from reductions since December 31, 1993
of $17,940,000 related to export receivables, $6,000,000
related to domestic receivables for coal sold on behalf of
unaffiliated producers and $3,553,000 related to coal export
inventory, all of which was partially offset by an
$8,285,000 reduction in accounts payables related to
unaffiliated producers. Cash provided from operating
activities in 1993 was due principally to an aggressive
working capital management effort as the Company initiated
its withdrawal from the export market in 1993. The Company
reduced trade receivable balances by $17,199,000 and coal
inventory levels by $5,596,000 in 1993.
Cash provided from investing activities in 1994 was
$43,886,000 and cash used in investing activities totalled
$7,223,000 and $40,514,000 in 1993 and 1992, respectively.
The Company realized net proceeds from the sale of the assets
of Criterion and other assets totalling $78,273,000 in 1994.
Cash used for investment purposes at Westmoreland Energy, Inc.
("WEI") was $27,928,000 during 1994 of which $23,178,000 was
used for equity funding commitments for Independent Power
Operations. The Company invested $5,892,000 in capital
additions in 1994, consisting primarily of $3,200,000 for
underground equipment at Virginia Division and $1,544,000 at
Westmoreland Resources, Inc.("WRI"). 1993 capital additions
of $8,190,000 consisted primarily of $5,230,000 at Criterion
and $2,357,000 at the Virginia Division. The 1993 capital
additions at Criterion were comprised of $3,883,000 for mining
equipment, which was sold and leased back, $800,000 for mine
development and $547,000 for expansion of Criterion's
preparation plant. The 1993 capital additions at the Virginia
Division consisted of $1,800,000 to sustain operations and
$557,000 for mine development. The Company invested
$33,694,000 in capital additions in Coal Operations and
$9,641,000 in equity funding commitments for Independent Power
Operations in 1992. 1992 capital additions included $9,344,000
for infrastructure construction to support a new longwall
mining system at the Pierrepont Mine in Virginia and
$11,521,000 for a new coal preparation plant at Criterion.
The Company plans to invest approximately $4,600,000 for
equity funding commitments in its Roanoke Valley II ("ROVA
II") project during the second half of 1995 and $1,700,000 in
sustaining capital in coal operations during 1995 which will
be funded through existing cash balances. Refer to Note 6
for further details related to the ROVA II equity funding
commitment.
Cash used in financing activities in 1994 and 1993 totalled
$66,317,000 and $11,864,000, respectively. Cash provided
from financing activities in 1992 totalled $35,656,000.
Cash used in 1994 included the repayment of the Company's
Revolving Credit Loan of $12,000,000, its 10% Senior
Unsecured Notes of $12,825,000, the payment of the
Reimbursement Obligation related to the Dominion Terminal
Associates ("DTA") bonds of $26,560,000 (refer to Notes 5
and 7) and other debt repayments of $3,281,000. The Company
also transferred $8,210,000 during 1994 to a cash deposit
account to collateralize the Company's outstanding surety
bonds for its workers' compensation self-insurance programs.
The Company paid preferred stock dividends of $2,444,000 in
1994. Cash used in 1993 included debt repayments of
$9,346,000 of which $2,500,000 related to the Company's
Revolving Credit Loan, $2,475,000 related to the 10% Senior
Unsecured Notes and the remainder was primarily related to
capital lease obligations. Preferred stock dividends of
$4,888,000 were paid in 1993. Cash provided in 1992 was
$54,528,000 from the issuance of preferred stock and
$14,500,000 from the Company's Revolving Credit Loan.
Repayments of debt in 1992 totalled $8,479,000 and
$18,496,000 was used to purchase and retire common stock of
the Company. Preferred stock dividends of $1,140,000, and
common stock dividends of $2,433,000 were paid in 1992.
The Company's total debt to capitalization ratio (total debt,
divided by the sum of total debt, minority interest and
shareholders' equity) was 21% at December 31, 1994 and 51% at
December 31, 1993. This substantial improvement is due to the
repayment of debt out of the proceeds from the sale of the assets
of Criterion and the impact on shareholders' equity of the
related gain.
The Company's consolidated cash and cash equivalents at December
31, 1994 totalled $15,453,000 (including $2,445,000 at WRI). At
December 31, 1993, cash and cash equivalents totalled $24,262,000
(including $2,772,000 at WRI). None of the Company's cash and
cash equivalents was or is restricted as to use or disposition.
The cash at WRI, a 60%-owned subsidiary, is available to the
Company only through dividends. The Company's current ratio was
.97 at December 31, 1994, up from .93 at December 31, 1993.
Preferred stock dividends at a rate of 8.5% per annum were paid
quarterly from the third quarter of 1992 through the first
quarter of 1994. The declaration and payment of preferred stock
dividends was suspended in the second quarter of 1994 in
connection with extension agreements with the Company's principal
lenders. The last quarterly preferred stock dividend paid in
1994 was on April 1, 1994. Common stock dividend payments were
not permitted under covenants contained in the Company's loan
agreements from January 1993 through December 22, 1994. Further
payment of common stock dividends is not permitted until the
preferred stock dividends that are in arrears are made current.
On February 1, 1995 the Board of Directors declared a first
quarter 1995 preferred stock dividend to be paid April 1, 1995 to
holders of record as of March 10, 1995. The three quarterly
dividends which are in arrears at December 31, 1994 (those
dividends whose payment dates would have been July 1, 1994,
October 1, 1994 and January 1, 1995) amount to $3,666,000 in the
aggregate ($6.38 per preferred share). The Company's Board of
Directors will continue to review the payment of quarterly
preferred stock dividends as well as the three preferred stock
dividends which are in arrears, in light of the Company's ongoing
business circumstances.
There are also statutory restrictions limiting the payment of
preferred stock dividends under Delaware law, the state in which
the Company is incorporated. Under Delaware law, the Company is
permitted to pay preferred stock dividends only: (1) out of
surplus, surplus being the amount of shareholders' equity in
excess of the par value of the Company's two classes of stock; or
(2) in the event there is no surplus, out of net profits for the
fiscal year in which a preferred stock dividend is declared
(and/or out of net profits from the preceding fiscal year), but
only to the extent that shareholders equity exceeds par value of
preferred stock ($575,000). The combined par value of the
Company's preferred and common stocks is $17,965,000. The
Company's shareholders' equity at December 31, 1994 was
$50,724,000.
Liquidity Outlook
The Company continues its strategic review of operations as part
of its plan to improve cash flow, eliminate non-strategic or
underperforming assets and reposition the Company so that it can
achieve meaningful and sustainable profitability.
As a result of these efforts the Company has shutdown and/or sold
the assets of several operations and has withdrawn from certain
markets in which it once participated. In 1994, these measures
have allowed the Company to pay off its principal debt
obligations, fund $23,178,000 of equity commitments for its
independent power projects and conserve working capital. The
Company believes it now has sufficient cash resources to meet its
current obligations and working capital needs, including the
remaining equity funding commitments of an estimated $4,600,000
for current WEI projects.
The Company is continuing its efforts to improve the
competitiveness and profitability of its Virginia Division
through cost control, productivity improvement and closure of
non-essential high cost operations. By July 1996, the Virginia
Division will lose the benefit of two coal supply contracts
having sales prices substantially above the current market price
for similar types of coal. The Georgia Power Company coal supply
contract, with shipments of 942,000 tons in 1994, terminates in
April 1995. The above market price of the Duke Power Company
coal supply contract, with shipments of 2,792,000 tons in 1994,
expires in July 1996; however, the contract can be extended
through December 31, 2000 provided the parties can reach an
agreement on the sales price after July 1996. It is likely that
the new sales price would be at current market prices. In 1994,
shipments to these two customers accounted for approximately 83%
of the Virginia Division's sales tons. In 1994, the Company's
Virginia Division experienced an operating loss of $3,726,000,
including approximately $18,000,000 of non-cash expenses for
depreciation and postretirement medical costs. The Virginia
Division will not be able to operate profitably or generate
positive cash flow from operations after July 1996, even after
excluding the ongoing fixed cash costs of idled
operations(estimated to be in excess of $10,000,000 annually),
which primarily consist of postretirement medical and workers'
compensation benefits, unless market prices for eastern coals
increase significantly and/or the Company is able to
substantially reduce the cost per ton of the coal produced. The
projected cash flows during the next two years, including
anticipated cash shutdown costs but excluding postretirement
medical costs, exceed the carrying value of the assets at
December 31, 1994. Therefore, the Virginia Division's assets are
not deemed to be impaired at this time.
The Company is reviewing its options, which include the possible
future sale, downsizing or shutdown of all or a portion of the
Virginia Division, at which time the Company may be required to
recognize, for accounting purposes, a significant portion of its
postretirement medical liabilities. The total amount of the
postretirement medical liabilities which would be expensed at the
time the Virginia Division's shutdown, downsizing or sale occurs
is not known at this time, however the impact of this non-cash
expense on shareholders' equity could affect the Company's
ability to pay preferred stock dividends. Refer to Note 10 for
further information regarding the actuarially estimated net
present value of postretirement medical benefits related to the
Company's self-insured single employer plans and the UMWA Benefit
Trust Funds which are multi-employer plans. Refer to Note 12 for
additional information regarding dividend restrictions under
Delaware law.
The major factor hampering the Company's long-term liquidity
outlook is the significant "heritage costs" of the Company.
These heritage costs primarily consist of cash payments for
postretirement medical benefits and for workers'
compensation. The Company has ongoing cash expenditures in
excess of $12,000,000 per year for postretirement medical
benefits and over $6,000,000 per year for workers'
compensation benefits.
The Company expects to fund its near-term heritage costs out of
current cash balances and from positive operating cash flow of
the Virginia Division, regular cash distributions from the
Company's independent power projects and WRI, continued
divestment or improvement of underperforming assets and cost
reductions and productivity improvements. In 1995 the Company
sold its Hampton Division and has an agreement to sell the assets
of its subsidiary Cleancoal Terminal Company("Cleancoal"). Refer
to Note 3 for further details regarding the sale of Cleancoal and
Note 2 for further details regarding the sale of the Hampton
Division. The Company will attempt to address its long-term
liquidity requirements through investments in profitable
acquisitions as well as the cash sources indicated above. Refer
to Note 6 for a discussion of a potential reduction in future
cash distributions to the Company from the Roanoke Valley I
("ROVA I") project.
RESULTS OF OPERATIONS:
1994 Compared to 1993
1994 1993*
(in thousands)
Coal Operations:
Virginia Division $ (3,726) $(24,309)
Hampton Division 4,490 (42,238)
Criterion Coal Company 8,094 10,289
Pine Branch Mining Inc. (1,778) (1,356)
Westmoreland Resources, Inc. 2,592 3,152
Westmoreland Coal Sales Company 1,895 1,877
Net corporate expenses (15,230) (11,545)
West Virginia - Idled Operations (8,657) (29,779)
Cleancoal Terminal Company (3,446) (126)
Total Coal Operations (15,766) (94,035)
Independent Power Operations 548 (1,195)
Operating (loss) $ (15,218) $(95,230)
Gains on the sales of assets:
Criterion Coal Company $ 34,142 $ -
West Virginia - Idled Operations 6,988 -
Independent Power Operations - 2,000
$ 41,130 $ 2,000
* Certain amounts have been reclassified to conform to current
classifications.
Details of tons sold (in thousands) and average revenue per ton
sold for 1994 and 1993 are as follows:
1994 1993
By Segment:
Virginia Division * 4,594 4,913
Hampton Division 1,119 1,561
Criterion Coal Company 1,954 1,853
Westmoreland Resources, Inc. 4,364 3,224
Total Westmoreland Operations 12,031 11,551
For Others 2,784 5,136
Total tons sold 14,815 16,687
By Source and Geographic Sector:
Own Operations-Inland 11,845 11,136
Own Operations-Export 186 415
For Others-Inland 1,934 2,261
For Others-Export 850 2,875
Total 14,815 16,687
Average revenue per ton sold:
Eastern Operations $ 32.30 $ 32.38
Westmoreland Resources, Inc. 7.04 7.98
Weighted Average $ 24.86 $ 27.66
* Includes tons:
Sold by Pine Branch Mining Inc. 270 215
Purchased from unaffiliated producers 894 755
Summary
The Company incurred operating losses of $15,218,000
(excluding $41,130,000 of gains on the sales of assets) and
$95,230,000 (including unusual charges of $79,250,000) in
1994 and 1993, respectively.
The most significant item affecting results of operations
for 1993 was $79,250,000 of unusual charges related to the
write-off of the carrying value of certain mining operations
and coal reserves along with provisions for the termination
of certain operations and personnel. These charges resulted
from the Company's continuing strategic review of its mining
operations in light of projected costs, prices and demand.
Refer to Note 4 for details related to the unusual charges.
The most significant items affecting 1994's net income were
gains of $34,142,000 on the sale of the assets of Criterion
and $6,988,000 on the sale of several inactive properties in
West Virginia. Refer to Note 2 for details related to asset
sales.
The following sections compare the results of 1994 to 1993.
Virginia Division
Virginia Division incurred operating losses of $3,726,000 in
1994 compared to operating losses of $24,309,000 in 1993.
- Included in 1993's results were unusual charges totalling
$16,092,000. Refer to Note 4 for further details.
- The Virginia Division recognized $7,574,000 of workers'
compensation expense in 1994 compared to $14,725,000 in
1993. The amount recorded in 1993 reflects a $9,250,000
adjustment based upon management's reassessment of the
workers' compensation liability. In 1994 the Company refined
its methodology for estimating the Company's workers'
compensation liabilities by engaging an independent actuary
and as a result accrued an additional $3,200,000 expense in
1994 related to prior years' claims for the Virginia
Division. The Company will continue to utilize an actuarial
analysis in the future as it is a more reliable method of
estimating this liability.
- Due to reduced production from Company mines, the
Virginia Division purchased an additional 139,000 tons from
unaffiliated producers during 1994 compared to 1993. This
production shortfall added approximately $3,000,000 in
additional costs over the 1993 levels.
- Depreciation expense in 1994 decreased $2,553,000 over
the 1993 amount due to the write-down of certain plant and
equipment in the fourth quarter of 1993.
Hampton Division
Hampton Division recorded operating income of $4,490,000 and
operating losses of $42,238,000 in 1994 and 1993,
respectively.
- Hampton's results improved due to the elimination of
losses related to that portion of the Hampton Division that
was closed in the second quarter of 1994. Reserves for
these operating losses and shutdown costs were accrued in
the fourth quarter of 1993. The operating profit in 1994
relates to a large surface mine which was operated by a
contractor on the Hampton property and a $2,100,000 reversal
of a workers' compensation liability recorded in December
1993 in connection with the anticipated Hampton shutdown.
- The Hampton Division incurred unusual charges in 1993
totalling $43,158,000 related to the planned discontinuation of
most of the Hampton Division's operations in the second quarter
of 1994. This action was necessitated by the loss of an above-
market coal supply contract in December 1993. Based on market
conditions and cost structures, it was unlikely that there were
operational scenarios which would have resulted in future
positive cash flow had the Company continued to operate the
deep mine, the preparation plant and the support facilities.
The other major above-market coal supply contract associated
with the Hampton Division continued to be supplied by the
production from a contractor-operated surface mine on the
property. The components of the shutdown costs were $8,247,000
for fixed asset writedowns, $25,653,000 related to the accrual
of postretirement medical liabilities, $3,900,000 in
termination costs for approximately 130 employees, $1,800,000
for reclamation and $3,558,000 for anticipated operating losses
and other shutdown reserves.
Criterion Coal Company
Criterion recorded operating income of $8,094,000 and
$10,289,000 in 1994 and 1993, respectively. Criterion's
operating income in the second half of 1994 was hampered by a
temporary deterioration in geological conditions at certain
mines.
Pine Branch Mining Incorporated ("Pine Branch")
Pine Branch had operating losses of $1,778,000 and
$1,356,000 in 1994 and 1993, respectively. Pine Branch
experienced unusually severe weather conditions in the first
quarter of 1994 adversely impacting production and operating
costs which led to an operating loss for the first quarter
of 1994 of $1,180,000. Productivity increased during the
second half of 1994 as a result of a new operating plan.
Westmoreland Resources, Inc.
WRI had operating income of $2,592,000 and $3,152,000 in
1994 and 1993, respectively. The decrease in earnings was
due to lower "take or pay" payments received in 1994
compared to 1993 from contracts whose terms have since ended
and increased legal costs of $390,000 in 1994 related to a
dispute with the Crow Indian Tribe. Also, the price
received from WRI's second largest customer was reduced as
part of the renegotiation of its contract. This
deterioration was partially offset by earnings on higher
levels of shipments in 1994. The Company received cash
dividends from WRI of $1,500,000 and $540,000 in 1994 and
1993, respectively.
Westmoreland Coal Sales Company ("WCSC")
WCSC had operating income of approximately $1,900,000 in
both 1994 and 1993. Included in the 1994 results was
$2,833,000 in income generated from the reversal of bad debt
allowances related to a contract assigned to CONSOL of
Kentucky, Inc. ("CONSOL"). Excluding this benefit, the
decrease in 1994's operating income was primarily due to the
absence of profits from sales to the export market and the
related brokering business. WCSC reduced its selling and
administrative expenses by $1,000,000 in 1994.
Net Corporate Expenses
Net corporate expenses increased $3,685,000 in 1994 over
1993. The increase was due to $4,382,000 of expenses
related to the Company's bankruptcy proceedings. $1,050,000
of the bankruptcy cost was related to legal fees, $2,332,000
was related to the settlement of non-Criterion related
claims and $1,000,000 was accrued for the buyout of the
Company's building lease in Philadelphia under a settlement
negotiated during the bankruptcy proceedings. The Company
plans to move to less costly office facilities during 1995.
The Company also experienced higher legal costs prior to the
bankruptcy proceedings, primarily related to debt
restructuring negotiations. Other corporate expenses were
reduced in 1994 as a result of the August 1993 workforce
reduction.
West Virginia - Idled Operations
The Company had operating losses of $8,657,000 in 1994 and
$29,779,000 (including $20,000,000 of unusual charges) in
1993. The unusual charges in 1993 represented the write-off
of the partially developed Triangle Mine Complex
("Triangle"). Refer to Note 4 for details related to the
write-off of Triangle in 1993 and refer to Note 2 for the
subsequent sale of Triangle in 1994. Excluding the unusual
charges in 1993, West Virginia - Idled Operations are made
up of costs (principally postretirement and workers'
compensation costs) associated with mining operations in
West Virginia which had been closed in prior years. In 1994
the Company refined its methodology for estimating the
Company's workers' compensation liabilities by engaging an
independent actuary and as a result reduced the workers'
compensation liability by $622,000 in 1994 for the idled
operations in West Virginia. The Company will continue to
utilize an actuarial analysis in the future as it is a more
reliable method of estimating this liability.
Cleancoal Terminal Company
The Company announced, during the fourth quarter of 1994,
that it had reached agreement with an indirect wholly-owned
subsidiary of CSX Corporation ("CSX") to release the
Company from an $8,864,000 loan guarantee reflected in Long-
Term Debt in the Company's Consolidated Balance Sheet in
exchange for the transfer of the assets of Cleancoal and the
payment of $2,500,000 to CSX. The Company will also be
released from related interest payments to CSX of
approximately $70,000 per month when this transaction
closes. The transaction is expected to be completed in
1995. The anticipated loss of $1,882,000 related to this
transaction was recognized in 1994. The Cleancoal terminal
was shut down in January 1995 and the majority of its
employees were laid off on January 31, 1995.
Cleancoal incurred operating losses in 1994 of $3,446,000,
including the anticipated loss of $1,882,000 on the pending
sale of its assets, and $126,000 in 1993. Cleancoal has an
annual transloading capacity of 6,000,000 tons. In a highly
competitive market, Cleancoal transloaded 1,304,000 tons,
2,511,000 tons and 2,144,000 tons in 1994, 1993 and 1992,
respectively.
Independent Power Operations
The Company's Independent Power Operations, through its
wholly-owned subsidiary WEI, recorded operating income of
$548,000 in 1994 and incurred operating losses of $1,195,000
in 1993. WEI has interests in eight projects, of which
seven were operational as of December 31, 1994 and the
eighth is scheduled to become operational in the second
quarter of 1995. The Company expects WEI to remain
profitable with increased earnings and cash distributions in
1995 as a result of a full year's operation of the
facilities which began commercial operations in 1994.
WEI owns a 50% partnership interest in Westmoreland-LG&E
Partners (the "ROVA Partnership"). The ROVA Partnership's
principal customer contracted to purchase the electricity
generated by ROVA I under a long-term contract. In the
second quarter of 1994, that customer disputed the ROVA
Partnership's interpretation of the provisions of the
contract dealing with the payment of the capacity purchase
price when the facility experiences a forced outage day. A
forced outage day is a day when ROVA I is not able to
generate a specified level of electrical output. The ROVA
Partnership believes that the customer is required to pay
the ROVA Partnership the full capacity purchase price unless
forced outage days exceed a contractually stated annual
number. The customer asserts that it is not required to do
so.
Through December 31, 1994, the customer withheld
approximately $5,856,000 of capacity purchase price payments
to the ROVA Partnership because of this dispute. On
October 31, 1994, the ROVA Partnership filed a complaint in
the Circuit Court of the City of Richmond, Virginia to
recover these amounts and to confirm that such payments may
not be withheld in the future. On December 12, 1994 the
customer filed a motion to dismiss the complaint and on
March 17, 1995 the Court granted this motion. The ROVA
Partnership is evaluating its legal options which include
the possibility of an appeal of this ruling. The capacity
purchase price withheld had been included in the revenues
and earnings of the ROVA Partnership until a reserve was
recorded as of December 31, 1994 for the full amount
withheld by the customer. WEI had recognized its 50% share
of the withheld payments in earnings in the second, third
and fourth quarters of 1994. In the fourth quarter of 1994,
WEI's revenues were reduced by $2,928,000, representing its
50% share of the disputed amount. The customer has withheld
an additional $872,000 from the ROVA Partnership through
March 24, 1995. No earnings are being recognized by WEI in
1995 for payments withheld by the customer relating to
forced outage days. The Company believes that the ROVA
Partnership's position is correct. However, the Company is
unable to predict the outcome of this proceeding, or the
amount, if any, that the customer may be ordered to pay
related to this matter. Additionally, WEI has been
evaluating ways to minimize the number of forced outage days
in the future. Regardless of the outcome, the Company
believes ROVA I will continue to operate profitably and
generate positive cash flows.
Gains on the sales of assets
The Company realized gains in 1994 of $34,142,000 on the
sale of the assets of Criterion and $6,988,000 on the sale
of several inactive properties in West Virginia. The
Company realized a $2,000,000 gain in 1993 from the sale of
a portion of its interest in the Ft. Lupton independent
power project. Refer to Note 2 for details related to asset
sales.
Other
Coal revenues in 1994 decreased $95,090,000 (20%) from 1993
due principally to the Company's decision to withdraw from
the export market ($70,150,000 decline in revenues) and the
partial shutdown of the Hampton Division in May of 1994
($18,326,000 decline in revenues).
Income tax expense in 1994 and 1993 included the provision
for WRI, which is not consolidated with the Company for
Federal income tax purposes, and state taxes related to the
Company's other operations. Also included in 1993 was a
$683,000 benefit related to the settlement of a state income
tax dispute.
Inflation did not have a material impact on the Company's
operations in 1994.
Trends and Uncertainties
There are a number of factors that may impact the future
earnings of the Company. Based on information available to
the Company at this time, the following factors or future
actions have been identified for which the impact is
uncertain but could be substantial:
- The Company entered into a five-year agreement with the
United Mine Workers' of America ("UMWA") effective December
16, 1993 (the "1993 Agreement"). This agreement provides
mechanisms for flexibility which can contribute to those
operations becoming more competitive.
- The 1993 Agreement provides for wage increases of $.40
per hour on December 16, 1994 and December 16, 1995 and for
additional wage "reopeners" in 1996 and 1997.
- The Company is continuing its efforts to improve the
competitiveness and profitability of its Virginia Division
through cost control, productivity improvement and closure
of non-essential high cost operations. By July 1996, the
Virginia Division will lose the benefit of two coal supply
contracts having sales prices substantially above the
current market price for similar types of coal. The Georgia
Power Company coal supply contract, with shipments of
942,000 tons in 1994, expires in April 1995. The above
market price of the Duke Power Company coal supply contract,
with shipments of 2,792,000 tons in 1994, expires in July
1996; however, the contract can be extended through December
31, 2000 provided the parties can reach an agreement on the
sales price after July 1996. It is likely that the new sales
price would be at current market prices. In 1994, shipments
to these two customers accounted for approximately 83% of
the Virginia Division's sales tons. In 1994, the Company's
Virginia Division experienced an operating loss of
$3,726,000, including approximately $18,000,000 of non-cash
expenses for depreciation and postretirement medical costs.
The Virginia Division will not be able to operate profitably
or generate positive cash flow from operations after July
1996, even after excluding the ongoing fixed cash costs of
idled operations (estimated to be in excess of $10,000,000
annually), which primarily consist of postretirement medical
and workers' compensation benefits, unless market prices for
eastern coals increase significantly and/or the Company is
able to substantially reduce the cost per ton of the coal
produced. The projected cash flows during the next two
years, including anticipated cash shutdown costs but
excluding postretirement medical costs, exceed the carrying
value of the assets at December 31, 1994. Therefore, the
Virginia Division's assets are not deemed to be impaired at
this time.
The Company is reviewing its options, which include the
possible future sale, downsizing or shutdown of all or a
portion of the Virginia Division, at which time the Company
may be required to recognize, for accounting purposes, a
significant portion of its postretirement medical
liabilities. The total amount of the postretirement medical
liabilities which would be expensed at the time the Virginia
Division's shutdown, downsizing or sale occurs is not known
at this time, however the impact of this non-cash expense on
shareholders' equity could affect the Company's ability to
pay preferred stock dividends. Refer to Note 10 for further
information related to the actuarially estimated net present
value of postretirement medical benefits related to the
Company's self-insured single employer plans and the UMWA
Benefit Trust Funds, which are multiemployer plans. Refer to
Note 12 for additional information regarding dividend
restrictions under Delaware law.
- The major factor hampering the Company's long-term
liquidity outlook is the significant "heritage costs" of the
Company. These heritage costs primarily consist of cash
payments for postretirement medical benefits and for
workers' compensation. The Company has ongoing cash
expenditures in excess of $12,000,000 per year for
postretirement medical benefits and over $6,000,000 per year
for workers' compensation benefits.
The Company expects to fund its near-term heritage costs, out of
current cash balances and from positive operating cash flow of
the Virginia Division, regular cash distributions from the
Company's independent power projects and WRI, continued
divestment or improvement of underperforming assets and cost
reductions and productivity improvements. In 1995 the Company
sold its Hampton Division and has an agreement to sell the assets
of its subsidiary Cleancoal. Refer to Note 3 for further details
regarding the sale of Cleancoal and Note 2 for further details
regarding the sale of the Hampton Division. The Company will
attempt to address its long-term liquidity requirements through
investments in profitable acquisitions as well as the cash
sources indicated above. Refer to Note 6 for a discussion of a
potential reduction in future cash distributions to the Company
from the ROVA I project.
- WEI owns a 50% partnership interest in the ROVA Partnership.
The ROVA Partnership's principal customer contracted to purchase
the electricity generated by ROVA I under a long-term contract.
In the second quarter of 1994, that customer disputed the ROVA
Partnership's interpretation of the provisions of the contract
dealing with the payment of the capacity purchase price when the
facility experiences a forced outage day. A forced outage day is
a day when ROVA I is not able to generate a specified level of
electrical output. The ROVA Partnership believes that the
customer is required to pay the ROVA Partnership the full
capacity purchase price unless forced outage days exceed a
contractually stated annual number. The customer asserts that it
is not required to do so.
Through December 31, 1994, the customer withheld approximately
$5,856,000 of capacity purchase price payments to the ROVA
Partnership because of this dispute. On October 31, 1994, the
ROVA Partnership filed a complaint in the Circuit Court of the
City of Richmond, Virginia to recover these amounts and to
confirm that such payments may not be withheld in the future. On
December 12, 1994 the customer filed a motion to dismiss the
complaint and on March 17, 1995 the Court granted this motion.
The ROVA Partnership is evaluating its legal options which
include the possibility of an appeal of this ruling. The
capacity purchase price withheld had been included in the
revenues and earnings of the ROVA Partnership until a reserve was
recorded as of December 31, 1994 for the full amount withheld by
the customer. WEI had recognized its 50% share of the withheld
payments in earnings in the second, third and fourth quarters of
1994. In the fourth quarter of 1994, WEI's revenues were reduced
by $2,928,000, representing its 50% share of the disputed amount.
The customer has withheld an additional $872,000 from the ROVA
Partnership through March 24, 1995. No earnings are being
recognized by WEI in 1995 for payments withheld by the customer
relating to forced outage days. The Company believes that the
ROVA Partnership's position is correct. However, the Company is
unable to predict the outcome of this proceeding, or the amount,
if any, that the customer may be ordered to pay related to this
matter. Additionally, WEI has been evaluating ways to minimize
the number of forced outage days in the future. Regardless of
the outcome, the Company believes ROVA I will continue to operate
profitably and generate positive cash flows. Refer to the Recent
Developments Relating to Independent Power Projects' section of
Note 6 for a discussion of other issues involving WEI.
RESULTS OF OPERATIONS:
1993 Compared to 1992
1993* 1992*
(in thousands)
Coal Operations:
Virginia Division $ (24,309) $ (8,786)
Hampton Division (42,238) (967)
Criterion Coal Company 10,289 6,492
Pine Branch Mining Inc. (1,356) (485)
Westmoreland Resources, Inc. 3,152 5,911
Westmoreland Coal Sales Company 1,877 (6,608)
Net corporate expenses (11,545) (25,718)
West Virginia - Idled Operations (29,779) (4,310)
Cleancoal Terminal Company (126) (854)
Total Coal Operations (94,035) (35,325)
Independent Power Operations (1,195) 1,679
Operating income (loss) $ (95,230) $(33,646)
Gains on the sale of assets:
Independent Power Operations $ 2,000 $ -
*Certain amounts have been reclassified to conform with current
classifications.
Details of tons sold (in thousands) and average revenue per ton
sold for 1993 and 1992 are as follows:
1993 1992
By Segment:
Virginia Division * 4,913 4,752
Hampton Division 1,561 1,745
Criterion Coal Company 1,853 1,786
Westmoreland Resources, Inc. 3,224 3,491
Total Westmoreland Operations 11,551 11,774
For Others 5,136 7,606
Total tons sold 16,687 19,380
By Source and Geographic Sector:
Own Operations-Inland 11,136 10,722
Own Operations-Export 415 1,052
For Others-Inland 2,261 3,845
For Others-Export 2,875 3,761
Total 16,687 19,380
Average revenue per ton sold:
Eastern Operations $ 32.38 $ 31.75
Westmoreland Resources, Inc. 7.98 8.30
Weighted Average $ 27.66 $ 27.53
* Includes tons:
Sold by Pine Branch Mining Inc. 215 117
Purchased from unaffiliated producers 755 645
Summary
The Company reported operating losses of $95,230,000 and
$33,646,000 for 1993 and 1992, respectively. The most
significant item in 1993 was $79,250,000 of unusual charges
related to the write-off of the carrying value of certain
mining operations and coal reserves along with provisions
for the termination of certain operations. These charges
resulted from the Company's strategic review of its mining
operations in light of projected costs, prices and demand.
The $79,250,000 was comprised of $43,158,000 for the planned
shut-down in 1994 of most of the Hampton Division's
operations, $20,000,000 for the write-off of the Triangle
mine complex idled since 1980 and classified within West
Virginia - Idled Operations and $16,092,000 for the planned
closedown in 1994 of the Wentz mine complex and the write-
off of certain other assets within the Virginia Division.
Refer to Note 4 for information concerning these unusual
charges.
Also impacting 1993 results was an additional $9,250,000
accrual for Virginia Division workers' compensation
liabilities.
The final major variance in 1993 was the impact of SFAS 106
which was adopted effective January 1993. As a result of
adopting SFAS 106, and electing the option which permits
recognition of these postretirement medical benefits over a
twenty year period, the Company incurred an increase of
$10,527,000 of non-cash charges in 1993 as compared to 1992.
Operating losses from operations for 1992 included a number
of charges totalling $34,610,000.
- $20,489,000 was related to loans and a guarantee
obligation and other related items on behalf of Adventure,
a coal supplier, that filed for bankruptcy.
- The Company also increased reserves for potentially
uncollectible trade receivables and additional reclamation
costs by $7,747,000 and $2,074,000 respectively.
- An additional $3,900,000 was accrued for a change in
estimates of previously established workers' compensation
obligations
- $400,000 valuation adjustment was made to its mining
supplies inventories.
Virginia Division
The Virginia Division incurred operating losses of
$24,309,000 and $8,786,000 in 1993 and 1992, respectively.
Included in 1993's results were unusual charges totalling
$16,092,000. Refer to Note 4 for further details.
The adoption of SFAS 106 increased expenses in the Virginia
Division by $6,173,000 in 1993 compared to 1992.
The Duke Power Company contract price was reduced in 1993
under a market reopener, which resulted in decreased
revenues and earnings of $7,100,000.
Total workers' compensation expense for the Virginia
Division was $14,725,000 and $11,100,000 in 1993 and 1992,
respectively.
Offsetting these increased costs and decreased revenues was
an improvement in operating efficiency over 1992. This
improvement is mainly attributable to increased productivity
levels and better mining conditions. Also, the Pierrepont
mine had its longwall mining system in place for the entire
year of 1993 compared to 1992 when it was only operational
in the fourth quarter.
Hampton Division
The Hampton Division had operating losses of $42,238,000 and
$967,000 in 1993 and 1992, respectively.
Included in 1993 were unusual charges of $43,158,000. Refer
to Note 4 for further details.
Included in 1993 was the increased expense related to SFAS
106 totalling $652,000.
1992's losses were mainly attributable to environmental
costs of $946,000 related to the treatment of water being
discharged from a closed mine.
Criterion Coal Company
Criterion had operating income of $10,289,000 and $6,492,000
in 1993 and 1992, respectively. Operating costs at Criterion
were reduced as a result of its preparation plant becoming
operational in the first quarter of 1993. The increased
profitability was also attributable to a higher average
revenue per ton, due to tons sold under contract that were
previously sold on the spot market.
Westmoreland Resources, Inc.
WRI had operating income of $3,152,000 and $5,911,000 in 1993 and
1992, respectively. Included in 1993 was the settlement of a
coal severance tax dispute between WRI and the state of Montana
which decreased earnings by $900,000. Included in 1992's
earnings was income from a settlement of a dispute with a
customer totalling $3,000,000. Net of the above non-recurring
items, operating income for 1993 improved by $1,141,000. The
Company received a cash dividend of $540,000 in 1993. The
Company did not receive a cash dividend from WRI in 1992.
West Virginia - Idled Operations
West Virginia - Idled Operations consists of costs associated
with mining operations in West Virginia which have been idled or
disposed. In 1993 these operations had costs totalling
$29,779,000 versus costs of $4,310,000 in 1992. Impacting West
Virginia - Idled Operations in 1993 was $20,000,000 for the
write-off of the Triangle mine complex, $2,730,000 of non-cash
postretirement medical expense resulting from the adoption of
SFAS 106 in 1993 and $2,400,000 of charges related to retirees,
which in previous years had been allocated to the Company's
active mining operations.
Pine Branch Mining Inc.
Pine Branch, the strip mining operation in Virginia,
incurred operating losses of $1,356,000 and $485,000 in 1993
and 1992, respectively. The increase in the operating
losses were primarily due to the areas being mined during
1993. Pine Branch was mining in a much steeper area, with a
higher ratio of overburden that needed to be removed during
1993. This resulted in a significant increase in the cost
in 1993.
Westmoreland Coal Sales Company
WCSC had operating profits of $1,877,000 in 1993 and
operating losses of $6,608,000 in 1992. In 1992, WCSC
recorded bad debt expense of $5,578,000 related to Adventure
and $8,299,000 related to trade receivables from customers.
Operating income in 1993 diminished primarily as a result of
decling profits relating to the export market and
transactions with unaffiliated producers.
Net Corporate Expenses
Net corporate expenses were $11,545,000 and $25,718,000 in
1993 and 1992, respectively. 1992 included $14,911,000 of
charges related to loans and guarantees related to
Adventure.
Cleancoal Terminal Company
Cleancoal the rail-to-barge transloading and ground storage
facility located on the Ohio River in Kentucky reported
operating losses of $126,000 and $854,000 in 1993 and 1992,
respectively. Cleancoal experienced a 17% increase in tons
transloaded over 1992, which decreased Cleancoal's operating
losses in 1993.
Independent Power Operations
WEI incurred an operating loss of $1,195,000 in 1993 and had
operating income of $1,679,000 in 1992. WEI incurred an
expense of $2,459,000 in 1993 relating to the amortization of
fees paid as consideration for guarantees of equity funding
Commitments, which is further discussed in Note 6. WEI's
income from operations in 1992 included $2,300,000 in
development fees partially offset by a $1,500,000 reduction
in the carrying value of an investment in a plant under
development.
Gain on the sales of assets
The Company realized a $2,000,000 gain in 1993 from the sale
of a portion of its interest in the Ft. Lupton independent
power project.
Other
Interest expense increased $772,000 or 19% in 1993 due to
interest payments being made on a $8,864,000 loan being
guaranteed by the Company on behalf of Adventure, which
guarantee will be eliminated when the Cleancoal transaction
with CSX is completed. Refer to Note 3 for details
regarding this transaction.
Interest income increased $180,000, or 30%, due to higher
overall investments.
Other income in 1993 reflects increased income from scrap
sales and royalties.
Income taxes in 1993 and 1992 principally reflected the
provision for WRI, which is not consolidated with the
Company for Federal income tax, and state taxes related to
the Company's other operations. Also included in 1993 was a
$683,000 benefit related to the settlement of a state income
tax dispute.
Inflation did not have a material impact on the Company's
operations in 1993.
<TABLE>
Westmoreland Coal Company and Subsidiaries
Five-Year Review
<CAPTION>
1994 1993* 1992* 1991* 1990*
<S> <C> <C> <C> <C> <C>
Consolidated Income Statements
(in thousands)
Revenue -Coal <1> $ 370,166 $ 465,256 $ 536,289 $ 567,075 $ 551,099
-Independent Power 7,196 4,642 4,679 1,330 288
Total revenues 377,362 469,898 540,968 568,405 551,387
Cost and expenses <2> 394,680 485,878 574,614 575,405 535,228
Unusual charges <4> 2.100 (79,250) - - -
Operating income (loss) (15,218) (95,230) (33,646) (7,000) 16,159
Gains on sales of assets, net <3> 41,130 2,000 - - 1,339
Interest expense 5,425 4,936 4,164 4,416 4,718
Interest and other income 2,540 2,755 1,824 1,887 4,784
Income (loss) from operations before
income taxes and minority interest 23,027 (95,411) (35,986) (9,529) 17,564
Income taxes 2,291 1,487 3,495 2,753 3,028
Minority interest <5> 583 748 1,543 1,120 2,007
Net income (loss) 20,153 (97,646) (41,024) (13,402) 12,529
Less preferred stock dividends:
Declared <6> 1,222 4,888 2,362 - -
In arrears <6> 3,666 - - - -
Net income (loss)
applicable to common shareholders 15,265 (102,534) (43,386) (13,402) 12,529
Common Stock Information
(in thousands except per share data)
Net income (loss) applicable to common
shareholders <6> $ 2.19 $ (14.74) $ (5.68) $ (1.62) $ 1.51
Dividends declared per common share - - .32 .32 .32
Weighted average number of common
and common equivalent shares <7> 6,956 6,954 7,635 8,250 8,296
Balance Sheet Data
(in thousands)
Working capital (deficit) <8> $ (1,481) $ (6,839) $ 33,650 $ 42,215 $ 60,854
Net property, plant and
equipment <3> <4> 89,728 146,450 204,051 193,155 201,130
Total assets <3> <4> 229,739 265,498 324,625 320,724 338,090
Total debt <9> 15,931 44,034 53,191 38,352 47,076
Shareholders' equity 50,724 31,790 134,477 144,279 160,462
Additions to property, plant
and equipment <10> 5,895 8,298 33,729 15,766 15,243
Percentage of debt to capitalization <9> 21% 51% 27% 20% 21%
* Certain amounts have been reclassified to conform with current classifications.
<FN>
<1> In 1994 and 1993, the Company significantly reduced the
level of activity related to selling coal in the export
market and coal sourced from unaffiliated producers
thus reducing revenues and costs and expenses. Coal
revenues include the revenues of Cleancoal Terminal
Company.
<2> In 1992, the Company established a provision for
doubtful accounts totalling $29,055,000; $20,489,000
was related to loans and a guarantee obligation on
behalf of Adventure, a coal supplier that filed for
bankruptcy, and $7,747,000 was established for
potentially uncollectible trade receivables. In 1994
the Company reversed $2,833,000 of the trade receivable
reserve into income.
<3> In 1994, the Company recognized a $34,142,000 gain on
the sale of the assets of Criterion to CONSOL and a
gain of $6,988,000 on the sale of several inactive
properties in West Virginia. Refer to Note 2 to the
Consolidated Financial Statements for further details
on the sales of assets.
<4> In 1993, the Company recorded unusual charges related
to the write-off of the carrying value of certain
mining operations and coal reserves along with
provisions for the termination of certain coal
operations and personnel. Refer to Note 4 to the
Consolidated Financial Statements for further details.
<5> Reflects the 40% interest in Westmoreland Resources,
Inc. not owned by the Company.
<6> On July 1, 1992, the Company issued 575,000 shares of
Preferred Stock previously authorized. Two quarterly
dividends at (8.5% per annum) were declared in 1992,
four quarterly dividends were declared in 1993 and one
quarterly dividend was declared in 1994. As of
December 31, 1994, there were three cumulative
undeclared quarterly preferred stock dividends in
arrears. Cumulative undeclared preferred dividends are
deducted from net income (loss) in determining net
income (loss) applicable to common shareholders. Refer
to Note 12 to the Consolidated Financial Statements for
further information on the Company's Capital Stock.
<7> In 1992, the Company purchased 1,295,589 of its own
shares from Penn Virginia and in December 1992 retired
the shares.
<8> The increase in working capital from 1993 to 1994
resulted from the Company's sale of the assets of
Criterion and the subsequent repayment of the majority
of its debt obligations, then classified as current
liabilities. See Notes 2 and 5 for additional
information.
The decrease in working capital from 1992 to 1993
resulted from the reclassification of long-term debt to
current, the adoption of SFAS 106 and the accruals for
mine closure costs, all in 1993.
<9> Refer to Note 5 to the Consolidated Financial
Statements for information regarding the Company's debt
structure.
<10> 1992 capital additions included $9,344,000 for
infrastructure construction to support a new longwall
mining system at the Pierrepont Mine in Virginia and
$11,521,000 for a new coal preparation plant at
Criterion.
</FN>
</TABLE>
<TABLE>
Westmoreland Coal Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, 1994 1993*
(in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 15,453 $ 24,262
Receivables:
Coal sales 21,333 52,087
Notes 4,946 2,612
Other 2,367 1,911
28,646 56,610
Less allowance for doubtful accounts 3,317 6,296
25,329 50,314
Inventories:
Coal 3,554 10,293
Mine supplies 5,050 5,763
8,604 16,056
Other current assets 952 3,609
Total current assets 50,338 94,241
Property, plant and equipment:
Land and mineral rights 30,175 50,838
Plant and equipment 278,400 320,839
308,575 371,677
Less accumulated depreciation and depletion 218,847 225,227
89,728 146,450
Assets of Cleancoal Terminal Company held for sale 6,149 -
Net assets of discontinued operation held for sale (WEI) - 12,972
Investment in independent power operations 43,046 -
Investment in DTA 20,375 1,489
Other assets 20,103 10,346
Total Assets $ 229,739 $ 265,498
<FN>
See accompanying Summary of Significant Accounting Policies and
Notes to Consolidated Financial Statements.
* Certain amounts have been reclassified to conform with current classifications.
</FN>
<CAPTION>
December 31, 1994 1993*
(in thousands except share data)
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt $ 3,561 $ 28,101
Accounts payable and accrued expenses:
Trade 9,796 22,080
Taxes, other than taxes on income 6,099 5,757
Payroll 2,668 2,739
Workers' compensation 5,409 5,675
Postretirement medical costs 8,075 9,185
Shutdown accruals 3,078 3,871
Other 8,670 18,958
43,795 68,265
Preferred dividends payable - 1,222
Taxes on income 3,963 2,992
Deferred income taxes 500 500
Total current liabilities 51,819 101,080
Long-term debt 12,370 15,933
Accrual for pneumoconiosis benefits 15,004 17,475
Accrual for workers' compensation 21,771 20,782
Accrual for postretirement medical costs 36,405 28,105
Other liabilities 16,613 25,242
Deferred income taxes 14,732 14,373
Minority interest 10,301 10,718
Commitments and contingent liabilities
Shareholders' equity:
Preferred stock of $1.00 par value
Authorized 5,000,000 shares:
Issued 575,000 shares 575 575
Common stock of $2.50 par value
Authorized 20,000,000 shares;
Issued 6,957,084 shares at 12/31/94
Issued 6,955,477 shares at 12/31/93 17,390 17,389
Other paid-in capital 94,653 94,651
Accumulated deficit (61,894) (80,825)
Total shareholders' equity 50,724 31,790
Total Liabilities and Shareholders' Equity $ 229,739 $ 265,498
<FN>
* Certain amounts have been reclassified to conform to current classifications.
</FN>
</TABLE>
<TABLE>
Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Income
<CAPTION>
Years Ended December 31, 1994 1993* 1992*
(in thousands except per share data)
<S> <C> <C> <C>
Revenues
Coal $ 370,166 $ 465,256 $ 536,289
Independent Power 7,196 4,642 4,679
377,362 469,898 540,968
Cost and expenses:
Cost of coal sold 345,430 433,074 498,205
Cost of sales-Independent Power 2,569 2,552 2,380
Depreciation, depletion and amortization 16,800 21,503 22,570
Selling and administrative 32,619 29,006 22,404
Provision for doubtful accounts (2,738) (257) 29,055
394,680 485,878 574,614
Unusual charges 2,100 (79,250) -
Operating (loss) (15,218) (95,230) (33,646)
Gains on the sales of assets 41,130 2,000 -
Interest expense 5,425 4,936 4,164
Interest income 1,198 783 603
Other income 1,342 1,972 1,221
Income (loss) before income taxes and
minority interest 23,027 (95,411) (35,986)
Income taxes 2,291 1,487 3,495
Minority interest 583 748 1,543
Net income (loss) 20,153 (97,646) (41,024)
Less preferred stock dividends:
Declared 1,222 4,888 2,362
In arrears 3,666 - -
Net income (loss) applicable to common
shareholders $ 15,265 $ (102,534) $(43,386)
Net income (loss) per share applicable to
common shareholders $ 2.19 $ (14.74) $ (5.68)
Weighted average number of common
shares outstanding 6,956 6,954 7,635
<FN>
* Certain amounts have been reclassified to
conform with current classifications.
See accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements.
</FN>
</TABLE>
<TABLE>
Westmoreland Coal Company and Subsidiaries
Consolidated Statements of Shareholders' Equity
Years Ended December 31, 1992, 1993 and 1994
<CAPTION>
Class A
Convertible
Exchangeable Retained
Preferred Common Paid-In Earnings
(in thousands except per share) Stock Stock Capital (Deficit) Total
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1992 $ - 20,625 56,126 67,528 144,279
Net loss - - - (41,024) (41,024)
Net proceeds from issuance
of preferred stock 575 - 53,953 - 54,528
Cash dividends declared:
Common stock ($.32 per share) - - - (2,433) (2,433)
Preferred stock (8.5% per annum) - - - (2,362) (2,362)
Purchase of treasury stock <1> - (3,239) (15,257) - (18,496)
Incentive Stock Option transactions - - (15) - (15)
Balance at December 31, 1992 575 17,386 94,807 21,709 134,477
Net loss - - - (97,646) (97,646)
Cash dividends declared:
Preferred stock (8.5% per annum) - - - (4,888) (4,888)
Other - 3 (156) - (153)
Balance at December 31, 1993 575 17,389 94,651 (80,825) 31,790
Net income - - - 20,153 20,153
Cash dividends declared:
Preferred stock (8.5% per annum) - - - (1,222) (1,222)
Other - 1 2 - 3
Balance December 31, 1994 $ 575 17,390 94,653 (61,894) 50,724
<FN>
<1> 1,295,589 treasury shares were retired by the Company in December 1992.
As of December 31, 1994, there were three cumulative undeclared quarterly stock
preferred dividends in arrears.
See accompanying Summary of Significant Accounting Policies
and Notes to Consolidated Financial Statements.
</FN>
</TABLE>
<TABLE>
Westmoreland Coal Company and Subsidiaries
Consolidated Statements
of Cash Flows
<CAPTION>
Years Ended December 31, 1994 1993* 1992*
(in thousands )
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 20,153 $ (97,646) $(41,024)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Unusual charges (2,100) 79,250 -
Gains on the sales of assets (41,130) (2,000) -
Recognition of development fee income - - (2,136)
Equity earnings from independent power projects (6,450) (3,195) (2,114)
Development fees from independent power projects 88 2,250 -
Cash distributions from independent power
projects 1,105 395 -
Depreciation, depletion and amortization 16,800 21,503 22,570
(Increase) decrease in deferred
income taxes 359 (853) 766
Decrease in accrual for pneumoconiosis benefits (2,471) (2,047) (1,979)
Minority interest in WRI's income 583 748 1,543
Decrease in customers' accounts
receivable net of allowance for doubtful
accounts 28,161 17,199 3,141
(Increase) decrease in other receivables (103) 361 3,717
Decrease in inventories 6,945 5,596 5,403
Decrease in trade payables (12,284) (9,984) (10,081)
Increase (decrease) in other accounts payable
and accrued expenses (8,235) 4,196 1,698
Increase in income taxes payable 869 737 472
Increase in accrual for postretirement
medical costs 7,183 18,745 -
Increase in workers' compensation accrual 723 10,087 5,491
Increase (decrease) in long-term accruals 455 (5,265) 13,460
Other 2,971 (7,477) 831
Net cash provided by operating activities 13,622 32,600 1,758
Cash flows from investing activities:
Fixed asset additions (5,892) (8,190) (33,694)
(Increase) decrease in long-term investments (567) (1,286) 2,546
Net proceeds from sales of investments and assets 78,273 2,253 275
Equity funding of independent power projects (23,178) - (9,641)
LG&E support fee payment (4,750) - -
Net cash provided (used) in investing activities 43,886 (7,223) (40,514)
Cash flows from financing activities:
Proceeds from sale/leaseback - 3,883 -
Proceeds from long-term debt - - 14,500
Repayment of long-term debt (28,106) (9,346) (8,479)
Cash used to buy DTA bonds (26,560) - -
Net proceeds from issuance of preferred stock - - 54,528
Cash deposits to support surety bonds (8,210) (1,000) -
Purchase of treasury shares - - (18,496)
Dividends paid to shareholders (2,444) (4,888) (3,573)
Dividends paid and other adjustments relative
to minority shareholders (1,000) (360) (2,809)
Other 3 (153) (15)
Net cash provided (used) in financing activities (66,317) (11,864) 35,656
Net increase (decrease) in cash and cash
equivalents (8,809) 13,513 (3,100)
Cash and cash equivalents, beginning of year 24,262 10,749 13,849
Cash and cash equivalents, end of year $ 15,453 $ 24,262 $ 10,749
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 5,489 $ 5,152 $ 4,057
Income taxes, net 1,115 1,642 2,950
Supplemental disclosures of non-cash investing
and financing activities:
The Company, in 1992, recorded a loan guarantee it had provided on behalf of one
of its coal suppliers for $8,864,000. Refer to Note 5 for additional details.
<FN>
*Certain amounts have been reclassified to conform with current classifications.
See accompanying Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements.
</FN>
</TABLE>
Westmoreland Coal Company and Subsidiaries
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation Policy
The consolidated financial statements include the accounts
of the Company and its subsidiaries after elimination of
intercompany balances and transactions. To the extent that
Westmoreland Coal Company (the "Company") owns 20% or more
in any subsidiary, corporate joint venture or partnership,
but less than a majority interest, it accounts for such
investments using the equity method. The excess of the cost
of the Company's investment in Westmoreland Resources, Inc.
("WRI"), a 60%-owned subsidiary, over the portion of net
assets acquired in 1979, equal to $11,600,000, has been
allocated to coal reserves. Such excess is being amortized
at a fixed rate per ton based on estimated recoverable coal
reserves.
Independent Power Development
In connection with the development of independent power
projects, certain costs are incurred during the development
process. These costs are expensed in the period incurred
until certain events have taken place, including the
execution of certain contracts which are critical to a
project's construction and operation. After these events
have taken place all subsequent costs are capitalized as
part of a project's investment basis. At the time when non-
recourse bank financing has been obtained, costs previously
expensed by the Company, to the extent reimbursed, are
reported as income. All other income in connection with a
project's development is deferred until the project achieves
commercial operation, the required equity funding commitment
is made and the conversion of the loan from a construction
loan to a term loan is completed.
Cash and Cash Equivalents
Cash equivalents consists of Eurodollar time deposits, money
market funds and bank repurchase agreements.
All are carried at cost and have maturities of not longer
than ninety days. The Company considers all highly liquid
debt instruments purchased with maturities of three months
or less to be cash equivalents.
Inventory Valuation
Inventories are stated at the lower of average cost or
market.
Property, Plant and Equipment
Property, plant and equipment are carried at cost and
include expenditures for new facilities and those
expenditures that substantially increase the productive
lives of existing plant and equipment. Maintenance and
repair costs are expensed as incurred. Mineral rights are
depleted at a rate based upon the cost of the mineral
properties and estimated recoverable tonnage therein. The
Company uses the straight-line depreciation method over the
assets' estimated useful lives, ranging from 3 to 40 years,
which conforms to prevalent industry practice. When an
asset is retired or sold, its cost and related accumulated
depreciation are removed from the accounts. The difference
between undepreciated cost and proceeds of disposition is
recorded as a gain or loss. Fully depreciated plant and
equipment remaining in use are not eliminated from the
accounts. The development costs of mines in the pre-
operating stage are capitalized and amortized over the
assets' estimated useful lives after commercial operations
commence.
Financial Instruments
Financial instruments are presented at the lower of cost or
fair value as required by generally accepted accounting
principles. The fair value of the Company's financial
instruments approximate carrying value.
Coal Revenues
Coal revenues include the sale of coal loaded at Company
operations and sales of coal produced by unaffiliated mining
companies where the Company, through a subsidiary, is a
sales agent or acts as a broker. The Company recognizes the
full sales revenue of the coal sold for unaffiliated
companies since the Company assumes the credit risk for the
sale, performs other services such as invoicing, quality
control and shipment monitoring, and in most cases takes
title to the coal. Coal revenues pertaining to coal sold
for other companies amounted to $83,196,000, $157,788,000
and $227,046,000 in 1994, 1993 and 1992, respectively. For
all coal sales the Company recognizes revenue at the time
title passes to the customer. The Company also records as
coal revenues, the revenues received from coal related
activities, such as the buy-out of coal contracts, coal
option payments and revenues related to Cleancoal Terminal
Company.
Reclamation
Reclamation costs at active sites are accrued over the
expected mine life using the units of production method
based on recoverable reserves and environmental and
regulatory requirements. If a mine shuts down prior to the
expected mine life, the Company accrues the remaining
reclamation obligation at the time of the shutdown.
Estimates are periodically reviewed and adjustments are made
in accruals to provide for future costs, as needed.
Postretirement Benefits Other Than Pensions
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (SFAS 106) on
January 1, 1993. The Company elected to amortize its
accumulated postretirement benefit obligation at the time of
adoption ("the transition obligation"), over 20 years.
Under SFAS 106 the cost of postretirement benefits other
than pensions which are currently being earned must be
recognized on an accrual basis.
The Company is subject to the Coal Industry Retiree Health
Benefit Act of 1992. The Company pays a premium each month
to multiemployer plans based upon the number of
beneficiaries assigned to it. This amount is expensed at
the time it is paid by the Company.
Income Taxes
The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"). SFAS 109 requires a company to
recognize deferred tax liabilities and assets for the
expected future tax consequences of events that have been
recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the
financial statement carrying amounts and tax bases of assets
and liabilities using enacted tax rates in effect in the
years in which the differences are expected to reverse.
Net Income (Loss) Per Share Applicable to Common
Shareholders
Declared and undeclared cumulative preferred dividends are
deducted from net income in determining net income (loss)
applicable to common shareholders.
Net income (loss) per share applicable to common
shareholders was computed by dividing net income (loss)
applicable to common shareholders by the weighted average
number of shares of common stock and common stock
equivalents outstanding during the year. Common stock
equivalents are not included when they would have an anti-
dilutive effect on income (loss) per share.
Westmoreland Coal Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
1. Plan of Reorganization
In order to satisfy its maturing debt obligations,
Westmoreland and several of its subsidiaries filed petitions
under Chapter 11 of the Federal Bankruptcy Code on November
8, 1994 seeking the confirmation of a so-called
"prepackaged" plan of reorganization (the "Plan of
Reorganization"). The subsidiaries involved in the filing
were Westmoreland Coal Sales Company ("WCSC"), Criterion
Coal Company, Kentucky Criterion Coal Company and Deane
Processing Company.
The Plan of Reorganization was premised on the necessity of
consummating the sale of the assets of Criterion Coal
Company and its affiliates ("Criterion") in order to realize
sufficient funds to satisfy $39,250,000 of the Company's
debt obligations which matured on November 8, 1994 and to
satisfy $23,178,000 of equity funding commitments of
Westmoreland Energy, Inc.("WEI") which were due December 30,
1994.
The sale of Criterion, which had been announced on July 28,
1994, was subject to numerous third party consents, all of
which were obtained except those related to TECO Coal
Corporation ("TECO"), an affiliate of TECO Energy, Inc.
Westmoreland announced on November 8, 1994 that it had not
been able to obtain the consent of TECO to the assignment of
two coal supply subcontracts.
On December 16, 1994 the Company announced that it had reached
agreement with TECO whereby TECO consented to the assignment of
the two coal supply subcontracts. The resolution of this dispute
was approved by the Bankruptcy Court as part of the Court's
approval of the Company's Plan of Reorganization. The Company
proceeded to complete its sale of the assets of Criterion on
December 22, 1994 and paid in full its maturing debt obligations
of $39,250,000, at which time it emerged from bankruptcy. The
Company incurred $1,050,000 in legal fees related to the
bankruptcy and $2,332,000 to settle other claims that were not
related to the Criterion sale and accrued $1,000,000 for the
buyout of its building lease in Philadelphia under a settlement
negotiated during the bankruptcy proceedings. Refer to Note 2
for expenses related to the Criterion sale which were not related
to the cost of bankruptcy.
2. Gains on the Sales of Assets
In 1994, the Company reported gains on the sales of assets
amounting to $41,130,000.
Criterion
In the fourth quarter of 1994, the Company sold the assets
of Criterion to CONSOL of Kentucky Inc. ("CONSOL") for cash
proceeds of $74,375,000 (net of related cash expenses of
$4,165,000), resulting in a gain of $34,142,000. With the
net proceeds from the sale of the Criterion assets, maturing
debt obligations of $39,250,000 were repaid and equity
funding of $23,178,000 was made for independent power
projects of WEI.
The revenues, costs and earnings of Criterion for 1994, 1993
and 1992 are summarized below:
1994 1993 1992
(in thousands)
Revenues $ 55,800 $ 51,837 $ 48,940
Costs and expense 47,706 41,548 42,448
Operating income $ 8,094 $ 10,289 $ 6,492
West Virginia-Idled Operations
In the fourth quarter of 1994, the Company sold several
inactive properties located in Raleigh County, West Virginia
to Pine Valley Coal Company for $3,800,000 in cash proceeds
resulting in a gain of $6,988,000. The assets had no book
value at the time of the sale and the Company reversed
reserves related to reclamation liabilities, which were also
transferred as part of the sales transaction. The sale
included the Company's Eccles and Triangle complexes and the
Gallagher Research facility. The Eccles complex was last
operated in 1986. Development of the Triangle complex began
in the late 1970's but ceased in 1980. The proceeds from
the sale were transferred to a cash deposit account to
collateralize the Company's outstanding surety bonds for its
workers' compensation self-insurance programs.
Independent Power Operations
In the second quarter of 1993, the Company recognized a
$2,000,000 gain on the sale of a portion of its interest in
the Ft. Lupton independent power project. WEI retains a
limited partnership interest of 4.49%. Cash flows
distributable to WEI from the Ft. Lupton project are limited
to $500,000 (escalatable) annually.
Hampton Division
In January of 1995 the Company sold the assets of its Hampton
Division located in Boone and Logan Counties, West Virginia to
the Anker Group and sold its Hampton Division mineral lease to
the lessor, Penn Virginia Resources Corporation("Penn Virginia"),
for $9,045,000 in cash. The Company wrote off a substantial
portion of the Hampton Division's assets in 1993. Refer to Note 4
for further details related to the shutdown of the Hampton
Division. The net proceeds to the Company were approximately
$7,376,000 after the buy out of a related capital lease. The buy
out of this capital lease resulted in a further reduction of the
Company's long-term debt. The gain on the sale, to be recognized
in the Company's financial statements in 1995, is estimated to be
$9,200,000 after the reversal of certain liabilities. The
purchasers assumed the reclamation and environmental liabilities
associated with the Hampton Division as part of the sales
transaction.
The revenues, costs and earnings of the Hampton Division for
1994, 1993 and 1992 are summarized below:
1994 1993 1992
(in thousands)
Revenues $ 33,636 $ 53,874 $ 55,302
Costs and expenses 31,246 52,954 56,269
Unusual charges 2,100 (43,158) -
Operating income (loss) $ 4,490 $(42,238) $ (967)
3. Cleancoal Terminal Company
In the fourth quarter of 1994, the Company recognized a loss
of $1,882,000 related to the pending sale of Cleancoal
Terminal Company ("Cleancoal") to an indirect wholly-owned
subsidiary of CSX Corporation ("CSX"). The provision for the
loss included $1,556,000 for the write-down of property,
plant and equipment. This loss is included in Cost of coal
sold in the Company's Consolidated Statement of Income. In
exchange for the assets of Cleancoal and payment of
$2,500,000, CSX has agreed to release the Company from its
$8,864,000 loan guarantee obligation. The loan guarantee
obligation was made to CSX in 1987 in connection with a loan
from CSX to affiliates of Adventure Resources,
Inc.("Adventure"). The Company will also be released from
related interest payments to CSX for this guarantee of
approximately $70,000 per month when this transaction
closes. Cleancoal was closed in January 1995 and the
majority of its employees were laid off on January 31, 1995.
The Company expects to complete the Cleancoal transaction
with CSX in 1995.
4. Unusual Charges
In 1993, the Company incurred unusual charges totalling
$79,250,000 related to the write-off in the carrying value
of certain mining operations and coal reserves along with
provisions for the termination of certain operations and
personnel. These charges resulted from the Company's
continuing strategic review of its mining operations in
light of projected costs, prices and demand. Of the
$79,250,000 of charges, $43,158,000 was for the shutdown of
most of the Hampton Division's operations in 1994;
$20,000,000 related to the write-off of the Triangle mine
complex, on which the Company ceased development in 1980;
and $16,092,000 was for the shutdown in 1994 of the Wentz
mine complex and the write-off of certain other assets
within the Virginia Division.
Accruals for the above unusual charges as they relate to the
Hampton Division, West Virginia - Idled Operations and the
Virginia Division, included in the balance sheet of the
Company as of December 31, 1994 and 1993 respectively, are
as follows:
December 31,
1994 1993
(in thousands)
Accrual for postretirement medical costs
at Hampton $ 26,004 $ 25,653
Other liabilities (long-term) 2,963 5,224
Accounts payable and accrued expenses 4,624 6,601
Workers' compensation 200 2,300
Total $ 33,791 $ 39,778
Hampton Division
In 1994, $2,100,000 of the reserves established in 1993 for
workers' compensation were reversed based upon the results of
an actuarial study of the Company's Hampton Division liability.
The Hampton Division incurred unusual charges in 1993
totaling $43,158,000 related to the shutdown of most of the
Hampton Division's operations in the second quarter of 1994.
This action was necessitated by the loss of an above-market
coal supply contract in December 1993. The other major
above-market coal supply contract associated with the
Hampton Division continued to be supplied by the production
from a contractor operated surface mine on the property.
The components of the shutdown costs were:
- $8,247,000 for fixed asset writedowns.
- $25,653,000 related to the accrual of postretirement
medical liabilities.
- $3,900,000 in termination costs for approximately 130
employees.
- $1,800,000 for reclamation.
- $3,558,000 for anticipated operating losses and other
shutdown reserves.
The entire Hampton Division was subsequently sold in January
1995, which is explained in Note 2.
West Virginia - Idled Operations
The Company incurred unusual charges in 1993 of $20,000,000
for the write-off of the partially developed Triangle Mine
Complex ("Triangle"), which had been idled since 1980. As a
result of management's continued review during 1993 it
believed Triangle would neither be developed nor sold for
the then book value in the foreseeable future. The Company
was unable to attract any interest to develop the reserve by
a third party and the Company did not have the capital to
develop the reserve on its own. The latest extension of the
mining permits for this property expired in 1994 and could
not be renewed with the state of West Virginia, unless it
was put back on active status and development resumed. If
the Company elected not to resume development, it would have
been required to begin final reclamation in 1994. Based on
these facts, the Company wrote off the remaining $18,000,000
book value of Triangle and accrued $2,000,000 for the final
reclamation of the complex, which was scheduled to begin in
the second half of 1994. The Company sold Triangle in the
fourth quarter of 1994 and the buyer assumed the reclamation
liabilities as part of the sale transaction.
Virginia Division
The Virginia Division incurred unusual charges in 1993
totalling $16,092,000 relating to the following:
- $7,761,000 related to the planned closure of the Wentz
mine and preparation plant complex. The total charge
related to the Wentz complex included $4,967,000 for the
writedown of the book value of impaired assets, $2,141,000
in termination costs for approximately 90 employees,
$363,000 for reclamation and $290,000 for anticipated future
operating losses. The decision to close this complex was
based on the continuing high cost of production and the
scheduled expiration of a coal supply contract.
- $7,636,000 for the write-off of an undeveloped block of
reserves which is owned in fee and which the Company has
determined will not be economically mineable based on
current and anticipated production costs and market
conditions.
- $695,000 related to the write-off of certain other assets.
5. Debt
The Company's total debt is summarized in the following
tables:
December 31
1994 1993
(in thousands)
Revolving Credit Loan at prime + 1% (7% at
December 31, 1993) $ - $12,000
10% Senior Unsecured Notes placed with
private lenders dated August 10, 1977
- 12,825
Capital lease obligations payable in
installments through 1996 with varying
interest rates from 7% to 14% 4,666 7,746
WRI:
Contracts for deed and mortgage notes,
payable with specified interest rates
from 4% to 7% net of unamortized
discount (1994-$385 and 1993-$445)
maturing through 2005 2,401 2,599
Loan guarantee on behalf of Adventure
at an interest rate of
9.5% maturing on February 1, 1998 8,864 8,864
Total debt 15,931 44,034
Less current installments 3,561 28,101
Long-term portion of debt $ 12,370 $ 15,933
December 31
Current Maturities 1994 1993
(in thousands)
Revolving Credit Loan $ - $ 12,000
10% Senior Unsecured Notes - 12,825
Capital leases 3,423 3,077
WRI debt 138 199
Total current maturities $ 3,561 $ 28,101
Principal payments on long-term debt, including capital
leases, maturing in the next five years are as follows:
Year Ending Amount
(in thousands)
December 31, 1995 $ 3,561
December 31, 1996 1,390
December 31, 1997 171
December 31, 1998 9,046
December 31, 1999 200
The minimum future obligation, including principal and
interest, on capital leases, primarily for mining equipment,
is as follows:
Year Ending Amount
(in thousands)
December 31, 1995 $ 3,796
December 31, 1996 1,317
December 31, 1997 5
5,118
Less interest 452
Obligation on capital leases $ 4,666
As of December 31, 1993, the Company was not in compliance with
certain of the financial covenants contained in the Amended
Revolver maturing July 1994, the 10% Senior Unsecured Notes due
July 1994 and the Company's DTA guaranty in connection with a
$26,560,000 letter of credit expiring July 1994.
On June 9, 1994 the $26,560,000 letter of credit issued to
support Westmoreland's share of the bonds sold to finance the
DTA export terminal was drawn (the "Reimbursement Obligation").
The Company recorded the Reimbursement Obligation as a current
liability in June 1994.
The Company's three principal credit facilities, summarized
below, with an aggregate outstanding balance of $39,250,000 on
December 22, 1994, were repaid on December 22, 1994 from the
proceeds of the sale of the assets of Criterion. Refer to Note
2 for a discussion of the sale transaction.
- The Company's Revolving Credit Agreement with a then
outstanding balance of $2,102,000. The Company had repaid
$9,898,000 from working capital in 1994 prior to the
Criterion sale.
- 10% Senior Unsecured Notes with an outstanding balance of
$12,088,000, including prepayment penalties of $763,000.
The Company had repaid $1,500,000 from working capital in
1994 prior to the Criterion sale.
- The Reimbursement Obligation with an outstanding balance of
$25,060,000. The Company had repaid $1,500,000 on July 1,
1994.
The contracts for deed and mortgage notes payable of WRI are
secured by land and surface rights with an aggregate cost, net
of amortization, of approximately $12,300,000 at December
31,1994.
6. Westmoreland Energy, Inc.
WEI, through subsidiaries and 100%-owned partnerships, holds
general and limited equity interests in partnerships which
were formed to develop and own cogeneration and other non-
regulated independent power plants. Equity interests in
these partnerships range from 1.25 percent to 50 percent.
Refer to the Project Status Summary table filed as Exhibit
99 for a summary of these projects. Generally, the lenders
to these partnerships have recourse only against these
projects and the income and revenues therefrom. The debt
agreements contain various restrictive covenants including
restrictions on making cash distributions to the partners,
of which the partnerships are in compliance.
In 1993, the Company offered WEI for sale in an effort to
raise cash to meet its maturing debt obligations and WEI was
reclassified as a discontinued operation in the financial
statements. On August 25, 1994 the Company announced that
negotiations had terminated for the sale of the assets of
WEI and that the Company was no longer offering WEI for
sale. It had been reclassified as a continuing operation
in the financial statements since the third quarter of 1994.
The following is a summary of aggregated financial
information for all investments owned by WEI and accounted
for under the equity method:
BALANCE SHEETS (in thousands)
Dec. 31, 1994 Dec. 31,1993
ASSETS
Current assets $ 94,946 $ 52,734
Property, plant and
equipment, net 727,597 669,107
Other assets 66,849 72,166
Total assets $ 889,392 $ 794,007
LIABILITIES & EQUITY
Current liabilities $ 35,798 $ 46,144
Long-term debt
and other liabilities 729,451 682,211
Equity 124,143 65,652
Total liabilities & equity $ 889,392 $ 794,007
WEI's share of equity $ 38,981 $ 14,523
INCOME STATEMENTS (in thousands)
For years ended December 31,
1994 1993 1992
Revenues $ 186,979 $ 110,199 $ 87,970
Operating income 81,650 48,921 42,217
Net income 25,259 16,624 15,293
WEI's share of
equity earnings 6,670 3,195 2,114
WEI performs project development and venture and asset
management services for the partnerships and has recognized
related revenues and income of $712,000 and $363,000 for the
years ended December 31, 1994 and 1993, respectively.
These management fees are recorded as revenues when the
service is performed. WEI receives development fees from
certain projects. Income recognition of these fees is
deferred until the related project achieves commercial
operation, the required equity funding commitment is made
and the conversion of the loan from a construction loan to a
term loan is completed. WEI had deferred $4,000,000 and
$3,913,000 at December 31, 1994 and 1993, respectively. Of
the amount deferred as of the end of 1994, $1,750,000 was
recognized in January 1995 and $2,250,000 is expected to be
recognized in the second half of 1995.
WEI's capitalized acquisition cost balances for the
Rensselaer project were $1,147,000 and $1,160,000 at
December 31, 1994 and 1993, respectively. Such costs are
being amortized over the term of the power contract of the
project. Amortization for the year ended December 31, 1994
was not material to the financial statements.
WEI had subordinated loans receivable from project
partnerships of $2,424,000 and $997,000 at December 31, 1994
and 1993, respectively. In January 1995 WEI collected
$1,229,000 of the receivables outstanding as of December 31,
1994.
Prior to May 1994 WEI had interests in four operating
projects. Since that time three additional projects became
operational. The Rensselaer, Roanoke Valley I ("ROVA I")
and Ft. Lupton Projects achieved commercial operations in
April, May and June 1994, respectively. The equity
commitment was funded for Rensselaer of $8,557,000 and ROVA
I of $14,621,000 was made on December 30, 1994. The Ft.
Lupton project did not require equity funding.
Effective July 1, 1994 the Company elected to record project
equity earnings on a current basis. Prior to July 1994,
WEI's equity earnings were reported on a one month lag. As
a result of this reporting adjustment, the Company
recognized four months of equity earnings in the third
quarter of 1994. The impact increased third quarter 1994
earnings by approximately $600,000. The ongoing annual
impact is expected to be immaterial.
WEI has one remaining equity funding commitment estimated to
be $4,600,000 for the Roanoke Valley II ("ROVA II") project
which is expected to be paid in the second half of 1995. In
the event that after the start-up of this project the
conversion of the project construction loan to a term loan
is delayed beyond December 31, 1995, WEI's required equity
funding commitment could be up to $14,600,000. The
conversion from a construction loan to a term loan is
expected to occur in the fourth quarter of 1995.
Additionally, if the total cost of this project exceeds
$91,700,000, WEI's equity funding commitment would increase
by 50% of the amount of such overrun. The project is
scheduled to commence commercial operation in the second
quarter of 1995 with a total expected cost of less than
$91,700,000.
Equity Support Agreement
On April 15, 1993, the Company entered into an equity
support agreement with LG&E Power Inc. ("LG&E") whereby
WEI's equity funding commitments of the ROVA I, Rensselaer
and ROVA II projects were guaranteed by LG&E. The
anticipated $4,600,000 equity funding commitment of the ROVA
II project is a portion of the amount guaranteed by LG&E.
As consideration for these guarantees, the Company had
pledged its interest in all three of these projects as
security to LG&E. WEI's ownership interest in the
Rensselaer, ROVA I and ROVA II projects will continue to be
pledged to LG&E until the ROVA II project equity funding
commitments are satisfied. The Company paid fees of 1.25
percent per annum on the aggregate amount of the guarantees
and a fee of $4,750,000. These fees are being amortized
over the period beginning on April 15, 1993 through the
required equity funding dates of the respective projects. A
total of $5,416,000 was amortized from April 15, 1993
through December 31, 1994. Of this amount, $2,957,000 was
expensed in 1994 and $2,459,000 was expensed in 1993.
Recent Developments Relating to Independent Power Projects
Southampton Project WEI owns a 30% general partnership
interest in LG&E-Westmoreland Southampton ("Southampton
Partnership"), which owns the Southampton Project. The
Southampton Project, which was engaged in start-up and
testing operations from September 1991 through March 1992,
failed to meet Federal Energy Regulatory Commission ("FERC")
operating standards for a qualifying facility ("QF") in
1992. The failure was due to three factors: (i) the
facility was not dispatched by its power customer, Virginia
Electric and Power Company ("Virginia Power"), on a baseload
schedule as anticipated, (ii) the facility was engaged in
start-up and testing operations during a portion of that
year, and (iii) the facility operator mistakenly delivered
non-sequential steam to the host over a significant period
of time. On February 23, 1994, the Southampton Partnership
filed a request with the FERC for a waiver of the FERC's QF
operating standard for 1992. Virginia Power intervened in
the FERC proceeding, opposed the granting of a waiver, and
alleged that its power contract with the Southampton
Partnership had been breached due to the failure of the
facility to maintain QF status in 1992.
On July 7, 1994, the FERC issued an order (1) denying the
application of the Southampton Partnership for a waiver of
the FERC's QF operating standard in 1992 with respect to the
Southampton Project and (2) directing the Southampton
Partnership to show cause why it should not be required to
file rate schedules with the FERC governing its 1992
electricity sales for resale to Virginia Power. In 1994 the
Southampton Project established a reserve for the
anticipated refund obligations relating to this issue. On
August 9, 1994, the Southampton Partnership filed a request
for rehearing of FERC's order or, alternatively, a motion
for reconsideration. If the FERC were to deny the requested
waiver on rehearing and to determine that the Southampton
Partnership had been a "public utility" in 1992, then the
Southampton Partnership's 1992 actions could be subject to
regulation under the Federal Power Act and state laws and
regulations; two other cogeneration projects in which the
Company holds ownership interests could also be subject to
such regulation; the Company and certain of its subsidiaries
could become subject to regulation for 1992 under the Public
Utility Holding Company Act; and defaults might be created
under certain existing agreements. No assurance can be
provided as to the timing of the FERC's decision or the
outcome. The Company believes that a denial by FERC of a
waiver for the Southampton facility would not have a
material adverse effect on the financial condition of the
Company.
Rensselaer Project WEI owns a 50% general partnership
interest in LG&E-Westmoreland Rensselaer (the "Rensselaer
Partnership"), which owns the Rensselaer Project. The
Rensselaer Project failed to meet the FERC's QF operating
and efficiency standards in 1993 and did not meet the QF
efficiency standard in 1994 as a result of a single start-up
and testing period that overlapped both years and was
prolonged due to a delay in the construction of necessary
gas pipeline facilities and unexpected equipment problems.
On October 17, 1994, the Rensselaer Partnership filed a
request with the FERC for waivers of the applicable QF
standards in 1993 and 1994. Its power customer, Niagara
Mohawk Power Corporation, filed an intervention to the
waiver request on November 21, 1994. This intervention was
anticipated as the Power Purchase Agreement with the utility
will be significantly impacted should the waiver be denied.
No assurance can be provided as to the timing of the FERC's
decision or the outcome, although recently several projects
owned by other companies have received a waiver based on
similar circumstances. The Company believes the risk is
remote that FERC will deny a waiver for the Rensselaer
facility.
- WEI owns a 50% partnership interest in Westmoreland-LG&E
Partners (the "ROVA Partnership"). The ROVA Partnership's
principal customer contracted to purchase the electricity
generated by ROVA I under a long-term contract. In the second
quarter of 1994, that customer disputed the ROVA Partnership's
interpretation of the provisions of the contract dealing with the
payment of the capacity purchase price when the facility
experiences a forced outage day. A forced outage day is a day
when ROVA I is not able to generate a specified level of
electrical output. The ROVA Partnership believes that the
customer is required to pay the ROVA Partnership the full
capacity purchase price unless forced outage days exceed a
contractually stated annual number. The customer asserts that it
is not required to do so.
Through December 31, 1994, the customer withheld
approximately $5,856,000 of capacity purchase price payments
to the ROVA Partnership because of this dispute. On
October 31, 1994, the ROVA Partnership filed a complaint in
the Circuit Court of the City of Richmond, Virginia to
recover these amounts and to confirm that such payments may
not be withheld in the future. On December 12, 1994 the
customer filed a motion to dismiss the complaint and on
March 17, 1995 the Court granted this motion. The ROVA
Partnership is evaluating its legal options which include
the possibility of an appeal of this ruling. The capacity
purchase price withheld had been included in the revenues
and earnings of the ROVA Partnership until a reserve was
recorded as of December 31, 1994 for the full amount
withheld by the customer. WEI had recognized its 50% share
of the withheld payments in earnings in the second, third
and fourth quarters of 1994. In the fourth quarter of 1994,
WEI's revenues were reduced by $2,928,000, representing its
50% share of the disputed amount. The customer has withheld
an additional $872,000 from the ROVA Partnership through
March 24, 1995. No earnings are being recognized by WEI in
1995 for payments withheld by the customer relating to
forced outage days. The Company believes that the ROVA
Partnership's position is correct. However, the Company is
unable to predict the outcome of this proceeding, or the
amount, if any, that the customer may be ordered to pay
related to this matter. Additionally, WEI has been
evaluating ways to minimize the number of forced outage days
in the future. Regardless of the outcome, the Company
believes ROVA I will continue to operate profitably and
generate positive cash flows.
7. Commitments and Contingencies
Westmoreland Terminal Company
Westmoreland Terminal Company ("WTC"), a wholly-owned
subsidiary of the Company, has a 20% interest in Dominion
Terminal Associates ("DTA"), a partnership formed for the
construction and operation of a coal-storage and vessel-
loading facility in Newport News, Virginia. DTA's annual
throughput capacity is 22 million tons, and its ground
storage capacity is 1.7 million tons.
The Company currently utilizes the terminal's facilities for
supplying coal to domestic customers via coastal waterways.
The Company also leases the ground storage space and the
vessel-loading facilities to certain unaffiliated parties.
Historically, the Company utilized the terminal for most of
its coal exporting business. In 1994, the Company
disengaged from the export sales market due to poor margins
and the amount of working capital needed to participate in
that market. The Company has conducted studies to evaluate
the future of the export coal market and believes the export
sales market is a cyclical business that will recover. The
Company will continue to market the use of its share of DTA,
aggressively manage related costs, and monitor the
performance and value of this asset.
Although WTC is not currently generating sufficient revenues
to cover its share of DTA's fixed cash costs, the Company
fully expects to recover its investment in DTA.
The facility began operations in March 1984. Financing was
provided through $132,800,000 of refunding 30-year, non-
amortizing, tax-exempt bonds (the "DTA Bonds"). The
Company's portion of the DTA Bonds was supported by a
$26,560,000, 7-year direct-pay letter of credit, which was
scheduled to expire in July 1994 (the "DTA Letter of
Credit"). As a 20% owner, WTC and the Company have a joint
and several obligation for interest and principal
obligations with respect to its share of the DTA Bonds
($26,560,000 principal balance). These obligations were
supported by the DTA Letter of Credit on which the Company
was the ultimate obligor.
In 1994, the Company was in violation of certain covenant
requirements in connection with the DTA Letter of Credit.
As a result, on June 9, 1994 the DTA Letter of Credit was
drawn. The proceeds of the draw were used to purchase
$26,560,000 (par value) of DTA Bonds. The Company repaid
the amounts drawn under the DTA Letter of Credit on December
22, 1994. The $26,560,000 of DTA Bonds are now owned by
WTC.
The DTA partners have a Throughput and Handling Agreement
whereby WTC is committed to fund its proportionate share of
DTA's operating expenses. WTC's total cash funding
obligations, including interest on the bonds, were
$2,991,000, $3,129,000, and $3,784,000 for 1994, 1993 and
1992, respectively.
The following is a summary of financial information for DTA:
BALANCE SHEETS
December 31, 1994 1993
(in thousands)
ASSETS
Current assets $ 5,334 $ 4,460
Non-current assets 101,568 104,651
Total assets $106,902 $ 109,111
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities $ 1,580 $ 1,650
Long-term debt
and other liabilities 117,777 144,803
Partners' equity (deficit) (12,455) (37,342)
Total liabilities
& partners' deficit $106,902 $109,111
WTC's share
of partners' equity (deficit) $ 18,945 $ (7,401)
INCOME STATEMENTS
For the Years ended December 31, 1994 1993 1992
(in thousands)
Contribution from Partners $ 15,946 $ 18,592 $ 20,462
Operating expenses 19,425 19,176 21,454
Excess of expenses over
partners' capital (4,208) (1,685) (4,419)
WTC's share of
net income (loss) $ (214) $ (545)$ (768)
The Company's investment in DTA at December 31, 1994 was
$20,375,000, including $1,430,000 of goodwill, and was
classified separately on the Company's Consolidated Balance
Sheet. The Company had a net negative investment in DTA at
December 31, 1993 of $5,912,000. The negative investment at
December 31, 1993 was classified on the Company's
Consolidated Balance Sheet as two separate line items.
$1,489,000 was classified as an Investment in DTA, and a
negative investment of $7,401,000 was classified in Other
long-term liabilities. The increase in the Company's
Investment in DTA was due to the purchase of $26,560,000 in
bonds which were primarily supported by letters of credit,
which is further explained in Note 5.
Adventure Resources, Inc.
WCSC, a wholly-owned subsidiary of the Company, had been
acting as the exclusive sales agent for Adventure Resources,
Inc. ("Adventure"), whose other affiliated companies include
M.A.E. Services Inc. and Maben Energy Corporation, since the
mid-1980's. On December 2, 1992 Adventure and certain of
its affiliates filed voluntary petitions for reorganization
under Chapters 7 and 11 of the Bankruptcy Code with the
United States Bankruptcy Court for the Southern District of
West Virginia. The Company continued as sales agent and
became a debtor-in-possession financier.
The Company announced on November 8, 1994 that it had
reached agreement with AMCI Coal Sales, Inc. ("AMCI") and
Adventure for AMCI to replace WCSC as sales agent and
financier for Adventure. AMCI will provide inventory and
receivable financing to Adventure. This substitution was
approved by the United States Bankruptcy Court for the
Southern District of West Virginia.
Upon transfer of its interest in Adventure's clean coal
stockpile to AMCI, the Company received a note from AMCI for
$1,000,000 payable over 18 months. As a part of this
arrangement, the Company agreed that its secured claims in
the Adventure bankruptcy would be limited to $10,000,000,
payable pursuant to two $5,000,000 interest bearing notes.
The first $5,000,000 note will be repaid to the Company on a
monthly basis starting in December 1994 through January 1998
and requires two balloon payments of $1,000,000 each in 1995
and in 1996. The required balloon payments are tied to
anticipated asset sales by Adventure. If these balloon
payments are not made, the Company has the right to
foreclose on certain assets. The second $5,000,000 note
will be paid monthly at five cents per ton for coal sold to
current customers plus additional monthly payments based on
a percentage of future coal sales price increases received
by Adventure. Payments on this second note will cease after
June 2002 regardless of the amount paid. The Company has
agreed that the secured portion of its pre-petition claims,
all of which were fully reserved by the Company in 1992,
will be satisfied by these two notes. These notes are
collateralized by first and subordinated liens on certain
assets of Adventure. The income recognition of these
payments will be recorded as the cash is received. The
Company's remaining pre-petition claims will be unsecured
claims in the Adventure bankruptcy.
Other
The Company is responsible for certain costs related to the
eventual closing of its mines. The Company accrues
estimated liabilities while each mine operates in order to
absorb these costs over the life of each mine. These costs
are related to reclamation and other environmentally related
items. The total cost to perform these activities as of
December 31, 1994 is estimated to be $15,500,000. The
Company has accrued $11,266,000 of these costs as of
December 31, 1994. Of the total amount accrued as of
December 31, 1994, $2,318,000 is classified as current in
Accounts payable and accrued expenses and the balance is
classified as long-term in Other liabilities on the
Company's Consolidated Balance Sheets. The Company may also
become responsible for similar costs associated with its
mines operated by contractors if the contractor fails to
perform. This amount is estimated to be $11,060,000 and
$16,500,000 at December 31, 1994 and 1993, respectively.
The Company's contractors held bonds for these costs
totalling $2,174,000 and $8,200,000 at December 31, 1994 and
1993, respectively. The change in the Company's exposure in
this area was primarily due to the Criterion sale as all of
the Criterion mines were operated by contractors. The
Company's exposure to reclamation liabilities decreased even
further in January of 1995 when the Company sold the assets
of the Hampton Division and the purchasers assumed the
related reclamation liabilities. The Company reversed
$3,370,000 of accrued reclamation liabilities in 1995 as a
result of this transaction.
The Company also has certain project equity funding
obligations and claims associated with its subsidiary, WEI.
Refer to Note 6 for further information.
Refer to Note 10 for information regarding the Company's
retiree medical obligations.
In addition to the above, the Company and its subsidiaries
had various claims and suits pending at December 31, 1994,
all in the ordinary course of business.
8. Workers' Compensation and Pneumoconiosis Benefits
The Company is self-insured for workers' compensation
benefits. The cash payments for workers' compensation were
$6,266,000, $6,193,000 and $5,393,000 in 1994, 1993 and
1992, respectively. The amounts charged to expense for
workers' compensation were $5,108,000, $17,204,000 and
$11,033,000 for 1994, 1993 and 1992, respectively. In 1994
the Company refined its methodology for estimating its
workers' compensation liability by engaging an independent
actuary. The Company will continue to utilize an actuarial
analysis in the future as it is a more reliable method of
estimating this liability.
The Company is also self-insured for Federal and state
pneumoconiosis benefits. The Company has created a trust
with an independent trustee to fund liabilities for payments
of these benefits and uses an actuarial method of providing
for the cost of projected benefits to current and former
employees based on existing and estimated future claims.
The projected benefit costs are accrued as a percentage of
coal operations' payroll cost over a period of twenty-five
years. This actuarial method is the most common method
being used in the industry to accrue for such costs. Based
on actuarial data the Company did not make a contribution to
the trust in 1994 or 1993 and does not anticipate making a
contribution in 1995.
The following table sets forth the plan's funded status:
December 31, 1994 1993
Actuarial present value of benefit obligation:
Terminated employees $ 5,600 $ 3,200
Claimants 17,400 26,700
Active employees 11,600 16,300
Total present value of benefit obligation 34,600 46,200
Plan assets at fair value 39,099 43,403
Plan assets in excess of (less than)
projected benefit obligation $ 4,499 $(2,797)
The decrease in the present value of the benefit obligation
is primarily due to favorable changes in discount rates and
other favorable changes in medical experience assumptions.
The decrease in the fair value of the Plan assets is due to
a lower actual return than expected.
In addition, the Company has liabilities on its books
totalling $15,004,000 and $17,475,000 as of December 31,
1994 and 1993, respectively in relation to pneumoconiosis
benefits. The Company's management believes the entire
recorded liability will ultimately be credited to earnings
in future periods due to the Trust Fund being fully funded
at December 31, 1994. Based on actuarial data, the Company
credited to earnings $2,471,000, $2,047,000, and $1,979,000
in 1994, 1993 and 1992, respectively. The credits were
primarily due to the status of the plan's funding as a
result of a decrease in the Company's disability experience
and a significant decrease in its workforce.
The Company is required to arrange for surety bonds in
connection with its self-insured workers' compensation plan.
The Company's surety bond underwriter required cash
collateral for such bonding. As of December 31, 1994,
$9,210,000 was deposited in the cash collateral account
which is classified in Other assets (long-term) in the
Company's Consolidated Balance Sheets. No additional
deposits are required at this time.
9. Retirement Plans
The Company and its subsidiaries have a non-contributory
defined benefit pension plan covering non-union employees.
Benefits are based on years of service and the employee's
average annual compensation for the highest five continuous
years of employment. The Company's funding practice is to
make the minimum annual contribution required by applicable
regulations. Prior service costs and actuarial gains are
amortized over the future service period of plan
participants on a straight-line basis. Pension income
amounted to $1,862,000, $1,682,000 and $956,000 in 1994,
1993 and 1992, respectively. The increase in pension income
in 1993 was primarily the result of the actual return on
plan assets in excess of the estimated return.
The following table sets forth the plan's funded status and
amounts recognized in the Company's financial statements:
December 31, 1994 1993
(in thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including
vested benefits of $47,125 and $53,512
in 1994 and 1993, respectively $ (47,254) $ (53,633)
Projected benefit obligations for service
rendered to date (53,416) (63,745)
Plan assets at fair value, primarily listed
stocks and fixed income investments 76,316 81,002
Plan assets in excess of projected benefit
obligations 22,900 17,257
Unrecognized net assets being recognized
over seventeen years (3,120) (3,442)
Unrecognized prior service cost 2,806 3,416
Unrecognized net gain (14,320) (10,827)
Prepaid pension cost included
in Other assets $ 8,266 $ 6,404
The components of net periodic pension
income for years ended December 31 1994 1993 1992
(in thousands)
Service cost - benefits earned during
the period $ 1,057 $ 1,051 $ 1,023
Interest cost on projected benefit
obligations 4,488 4,609 4,478
Actual return on plan assets 1,084 (8,064) (11,732)
Net amortization and deferral (8,491) 722 5,275
Net periodic pension income $ (1,862) $ (1,682) $ (956)
The 1994 discount rate and rate of increase in future
compensation levels for the plan were 8.5% and 5.0%,
respectively. The 1993 discount rate and rate of increase
in future compensation levels for the plan were 7.25% and
5.5%, respectively. The expected long-term rate of return
on assets was 9.0% for both years 1994 and 1993.
Effective January 1, 1992 the Company adopted the
Westmoreland Coal Company Supplemental Executive Retirement
Plan ("SERP"). The SERP is an unfunded non-qualified
deferred compensation plan whose purpose is to provide
benefits to certain employees that could not be paid under
the Company's defined benefit pension plan due to maximum
limits imposed by the Employee Retirement Income Security
Act ("ERISA") and the Internal Revenue Code. SERP expense
amounted to $232,000 and $199,000 in 1994 and 1993
respectively.
The following table sets forth the plan's funded status and
amounts recognized in the Company's financial statements.
December 31,
1994 1993
(in thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested
benefits of $570 and $573 in 1994 and 1993,
respectively $ (765) $ (675)
Projected benefit obligations for service
rendered to date (1,042) (827)
Unrecognized prior service cost 975 770
Unrecognized net loss (gain) (531) (351)
Additional liability (167) (267)
Accrued pension cost included in Other
liabilities $ (765) $ (675)
The components of net periodic SERP costs
for year ended December 31, 1994 1993
(in thousands)
Service cost - benefits earned during the period $ 61 $ 28
Interest cost on projected benefit obligations 83 87
Amortization of prior service cost 88 84
Net periodic SERP cost $ 232 $ 199
The 1994 discount rate and rate of increase in future
compensation levels for the plan were 8.5% and 5.0%,
respectively. The 1993 discount rate and rate of increase in
future compensation levels for the plan were 7.25% and 5.5%,
respectively.
With respect to unionized employees, the Company is required
under the national contract with the United Mine Workers' of
America (the "UMWA") to pay amounts based on hours worked or
tons processed (depending on the source of the coal) to the
UMWA Retirement Funds. These are multiemployer pension
plans which are not controlled or administered by the
Company. The amounts charged to expense, including payments
made by the Company on behalf of certain contract miners,
were $1,021,000, $1,190,000 and $1,073,000 for the years
ended December 31, 1994, 1993 and 1992, respectively. Under
ERISA, as amended by the Multiemployer Pension Plan
Amendment Act of 1980, a contributor to a multiemployer plan
is liable, upon termination of the plan or its withdrawal
from the plan, for its share of the multiemployer plan's
unfunded vested liabilities. The Company estimates that its
share of the unfunded vested liabilities amounted to
approximately $19,800,000 at June 30, 1994 and $17,100,000
at June 30, 1993. The increase over the prior year is due
to lower investment interest rates, additional benefits
granted under the plan and the Company's increased share of
retirees whose companies have gone out of business.
As part of Westmoreland's continued restructuring efforts,
the Board of Directors at its March 16, 1995 meeting
approved the establishment of a voluntary Early Retirement
Incentive Program (the "Program"). No determination has
been made as to how long this Program will remain in place.
The Program has not yet been implemented. Senior Management
and employees of WEI and WRI are not eligible to participate
in this program. Participating employees who receive
benefits under the Program would not then be eligible for
benefits under the severance policies of the Company or its
subsidiaries. The Company will benefit from this Program
because most of the benefits can be paid out of excess
pension assets rather than from the Company's operating
cash. Under ERISA, pension assets are only available to
plan participants.
10. Postretirement Medical and Life Insurance Benefits
The Company has single-employer plans and multiemployer
plans.
Single-Employer Plans
The Company and its subsidiaries provide certain health care
and life insurance benefits for retired employees and their
dependents. Should the current plans remain in effect,
substantially all of the Company's current employees
(unionized and non-unionized) may become eligible for these
benefits if they meet certain age and service requirements
at the time of termination or retirement. These benefits
are provided through self-insured programs.
In 1990, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other
than Pensions" ("SFAS 106"). Under this new standard the
cost of postretirement benefits other than pensions must be
recognized on an accrual basis as employees perform services
rather than the "pay-as-you-go" basis.
The Company adopted SFAS 106 on January 1, 1993 and elected
to amortize its unrecognized, unfunded accumulated
postretirement benefit obligation over a 20-year period.
This increased the Company's 1993 expense by $10,527,000
over the 1992 expense. The Company expensed $16,726,000 and
$18,138,000 for SFAS 106 in 1994 and 1993, respectively.
Additionally, Hampton Division in 1993 accrued $18,552,000
as a curtailment charge, including $16,162,000 of the
Company's total transition obligation as of December 31,
1993 in connection with the planned shutdown of this
Division's Company operated mines in 1994. This accounting
standard does not change the cash requirements for funding
these benefits. Cash paid for retirees (not including
payments the Company makes into the UMWA Benefit Trust
Funds) was $7,775,000, $7,604,000 and $7,866,000 in 1994,
1993 and 1992, respectively.
The following table sets forth the amounts recognized in the
Company's financial statements:
December 31
(in thousands)
1994
1993
Actuarial present value of benefit obligation:
Accumulated postretirement benefit obligation
Current retirees $ (91,766) $(101,901)
Fully eligible actives (30,816) (15,533)
Other actives (8,374) (19,891)
Total accumulated benefit obligation (130,956) (137,325)
Unrecognized net transition obligation 93,717 98,924
Unrecognized net (gain) or loss (775) 9,322
Accrued postretirement benefit cost $ (38,014) $ (29,079)
The health care cost trend rate assumed ranges from 8.0% in
1995 to 5% by the year 2001. Increasing the assumed health
care cost trend rate by one percentage point in each year
would increase the accumulated postretirement benefit
obligation as of December 31, 1994 by $16,900,000 and the
aggregate of the service and interest cost components of net
periodic postretirement benefit cost for 1994 by $1,500,000.
The discount rate used in determining the accumulated
postretirement benefit at December 31, 1994, and December
31, 1993 was 8.5% and 7.25% respectively.
The components of net periodic postretirement benefit cost
are as follows:
December 31,
(in thousands)
1994 1993
Service cost - benefits earned 689 1,271
Interest cost on projected benefit obligations 10,517 10,555
Net amortization and deferral 5,520 6,312
Net periodic postretirement benefit cost 16,726 18,138
Multiemployer Plans
Additionally, the Company makes payments into the UMWA
Benefit Trust Funds (the "Funds"). These Funds are
multiemployer health plans which are not controlled or
administered by the Company. These Funds are designed to
pay benefits to the Company's UMWA employees who retired
prior to 1976 and to the Company's pro-rata share of those
UMWA retirees whose companies are no longer in business.
Prior to February 1993, the amount paid by the Company was
based on hours worked or tons processed (depending on the
source of the coal) in accordance with the National Contract
with the UMWA. Beginning February 1993 the Company is
required by the Coal Industry Retiree Health Benefit Act of
1992 to make monthly premium payments into the Funds. These
payments are based on the number of beneficiaries assigned
to the Company. The Company is challenging the number of
beneficiaries it was assigned. The net present value of the
Company's future cash payments is estimated to be
$56,700,000. The amounts of the cash payments into the
Funds were $6,072,000, $3,827,000 and $5,582,000 in 1994,
1993 and 1992, respectively. Included in the 1994 amount
were cash payments of $635,000 that were charged against an
accrual established in 1993 for the Hampton Division
shutdown. In 1993 the Hampton Division accrued an
additional $7,101,000 for its share of this liability as
part of its mine closure costs. Exclusive of the Hampton
shutdown accrual the amounts expensed by the Company
amounted to $4,327,000, $4,937,000 and $5,582,000 in 1994,
1993 and 1992, respectively. Refer to Note 4 for further
information regarding the Hampton shutdown.
In addition, employees terminated due to layoffs may be
eligible for health care, life insurance and certain other
benefits for a period of up to 24 months. The Company
charges against earnings an estimate of all these future
costs associated with such employees in the month of layoff.
11. Lease Obligations
The Company and its subsidiaries lease coal lands from Penn
Virginia Resources Corporation, a wholly-owned subsidiary of
Penn Virginia Corporation (controlling an 18.95% voting
interest in the Company at December 31, 1994) and other
lessors. The leases provide for minimum annual royalties of
$606,000 plus real estate taxes.
The coal leases with Penn Virginia Resources Corporation are
in effect until all economically mineable reserves are
exhausted. These coal leases were renegotiated effective
July 1, 1988 at rates comparable to royalty rates charged by
other lessors at the time. Under the agreement, the royalty
rates for most deep-mined coal range from 6.5% to 7.0% of
the sales price during the 10-year period beginning July 1,
1988. Beginning July 1, 1992 either party to this lease may
call for negotiation to set new rates for these particular
seams. During the 10-year period beginning July 1, 1988,
the rates for surface-mined coal range from 8.5% to 9.0% and
the rates for highwall-mined coal range from 7.5% to 8.0%.
In January 1995, the Company sold its Hampton Division
mineral lease to the lessor, Penn Virginia Resources
Corporation. See Note 2.
WRI has an agreement to lease coal reserves from the Crow
Tribe of Indians and which is in effect until exhaustion.
This lease requires annual rentals, recoupable minimum
royalties and production royalties. The royalty rate varies
from the greater of $.30 per ton or 6% of the F.O.B. mine
price to a 12.5% rate net of all production-based taxes.
Royalties and rentals charged to expense under all lease
agreements, including those in effect for WRI, amounted to
$17,262,000, $17,761,000 and $17,292,000 in 1994, 1993 and
1992, respectively.
The Company has operating lease commitments expiring at
various dates, primarily for real property and equipment.
Minimum rental obligations existing under these leases at
December 31, 1994 are as follows:
(in thousands)
1995 $2,638
1996 2,166
1997 1,454
1998 999
1999 702
After 1999 -
12. Capital Stock
The authorized capital stock of the Company consists of
20,000,000 shares of Common Stock and 4,800,000 shares of
Series A Convertible Exchangeable Preferred Stock and
200,000 shares of Series B Junior Participating Preferred
Stock.
As of December 31, 1994, the Company had outstanding
6,957,084 shares of Common Stock and 575,000 shares of
Series A Convertible Exchangeable Preferred Stock. The
Common Stock and the Preferred Stock constitute all of the
Company's voting securities.
In July 1992, the Company sold 2,300,000 Depository Shares,
each representing one quarter of a share of Series A
Convertible Exchangeable Preferred Stock (the "Preferred
Stock") for a total public offering price of $57,500,000.
Net proceeds to the Company were $54,528,000. As a result,
575,000 shares of Preferred Stock are outstanding. The
Preferred Stock has a liquidation preference equivalent to
$25 per depository share and dividends accumulate on the
Preferred Stock at 8.5% per annum, equivalent to $2.125 per
year per depository share. There are no mandatory sinking
fund requirements on the Preferred Stock.
The Preferred Stock is convertible at the option of the
holder at any time, unless previously redeemed, into shares
of Common Stock of the Company at a rate equivalent to 1.708
shares of Common Stock for each Depository Share. The
Preferred Stock and the Depository Shares representing such
stock are not redeemable prior to July 1, 1996. The
Preferred Stock is redeemable thereafter at the option of
the Company, in whole or in part, from time to time,
initially at an amount equivalent to $26.28 per Depository
Share, if redeemed during the twelve month period beginning
July 1, 1996, and thereafter at prices declining annually to
an amount equivalent to $25 per Depository Share on and
after July 1, 2002, plus, in each case, an amount equal to
the sum of all accrued and unpaid dividends.
The Preferred Stock may be exchanged at the option of the
Company, as a whole only, on any dividend payment date
commencing July 1, 1996, for 8 1/2% Convertible Subordinated
Exchange Debentures due July 1, 2012 (the "Exchange
Debenture") in a principal amount equal to $100 per share of
Preferred Stock. The Exchange Debenture, if issued, will be
convertible at the option of the holder at any time, unless
previously redeemed, into shares of Common Stock at the then
applicable conversion rate for the Preferred Stock.
A portion of the proceeds from the sale of Preferred Stock
was used to purchase 1,295,589 shares of Company Common
Stock from a subsidiary of Penn Virginia Corporation ("Penn
Virginia"). The Company retired these shares in December
1992. Penn Virginia's voting interest in the Company prior
to this transaction was 39.6%. Penn Virginia's voting
interest in the Company was 18.95%, 18.96% and 18.96% at
December 31, 1994, 1993 and 1992, respectively.
On January 28, 1993 the Company adopted a Shareholder Rights
Plan (the "Plan") and declared a distribution under the Plan
of one Preferred Stock Purchase Right ("Right") for each
outstanding share of the Company's Common Stock. In the
event that any person or group acquires a 20% or greater
position in the Company, each holder of a Right (other than
the acquiring person or group) will be entitled to purchase
one one-hundredth of one share of Westmoreland Series B
Junior Participating Preferred Stock at a per share purchase
price of $30, or, in lieu of the Preferred Stock, the number
of shares of the Company's Common Stock having a market
value at that time of $60. If the Company is acquired in a
merger or other business combination transaction, each
holder of a Right (other than the acquiring person or group)
will be entitled to purchase a number of shares of the
acquiring company's common stock having a market value at
that time of $60.
The Company can redeem the Rights at a redemption price of
$.01 per Right at any time until the tenth business day
(subject to extension) after a public announcement that a
20% position is acquired.
The Board of Directors has the flexibility to lower the 20%
threshold to not less than 10% prior to the time any person
or group acquires a 20% position in the Company. The Rights
expire on February 11, 2003.
After obtaining a waiver to its 1977 Loan Agreement, the Company
declared and paid an $.08 dividend on Common Stock in each of the
four quarters of 1992. On January 26, 1993 the Company announced
that the regular quarterly dividend of $.08 per share of common
stock payable for the first quarter of 1993 would be suspended
and has not been resumed. Common stock dividend payments may not
be declared until the preferred stock dividends that are in
arrears are made current.
Preferred stock dividends at a rate of 8.5% per annum were paid
quarterly from the third quarter of 1992 through the first
quarter of 1994. The declaration and payment of preferred stock
dividends was suspended in the second quarter of 1994 in
connection with extension agreements with the Company's principal
lenders. The last quarterly preferred stock dividend paid in
1994 was on April 1, 1994. On February 1, 1995 the Board of
Directors declared a first quarter preferred stock dividend to be
paid April 1, 1995 to holders of record as of March 10, 1995.
The three quarterly dividends which are in arrears at December
31, 1994 (those dividends whose payment dates would have been
July 1, 1994, October 1, 1994 and January 1, 1995) amount to
$3,666,000 in the aggregate ($6.38 per preferred share). The
Company's Board of Directors will continue to review the payment
of quarterly preferred stock dividends as well as the three
preferred stock dividends which are in arrears in light of the
Company's ongoing business circumstances.
The Company is reviewing its options with respect to its Virginia
Division, which include the possible future sale, downsizing or
shutdown of all or a portion the Virginia Division, at which time
the Company may be required to recognize, for accounting
purposes, a significant portion of its postretirement medical
liabilities. The total amount of the postretirement medical
liabilities which would be expensed at the time the Virginia
Division's shutdown, downsizing or sale occurs is not known at
this time, however the impact of this noncash expense on
shareholders' equity could affect the Company's ability to pay
preferred stock dividends.
There are also statutory restrictions limiting the payment
of preferred dividends under Delaware law, the state in
which the Company is incorporated. Under Delaware law, the
Company is permitted to pay dividends only: (1) out of
surplus, surplus being the amount of shareholders' equity in
excess of the par value of the Company's two classes of
stock; or (2) in the event there is no surplus, out of net
profits for the fiscal year in which a dividend is declared
(and/or out of net profits from the preceding fiscal year),
but only to the extent that shareholders equity exceeds par
value of preferred stock ($575,000). The combined par value
of the Company's preferred and common stocks is $17,965,000.
The Company's shareholders' equity at December 31, 1994 was
$50,724,000.
13. Incentive Stock Option and
Stock Appreciation Rights Plans
As of December 31, 1994, the Company had options and stock
appreciation rights outstanding and unexercised from two
Incentive Stock Option and Stock Appreciation Rights Plans.
The Plans provide for two incentive elements, incentive
stock options ("ISOs") and stock appreciation rights
("SARs"). An ISO gives the holder the right to purchase
from the Company a specified number of shares of the
Company's common stock for a specified price during a
specified period. The 1985 Plan also provides for the grant
of non-qualified options, if so designated, and contains the
terms specified for non-qualified options. An SAR gives the
holder the right to receive, without payment to the Company,
its "value" in cash. The "value" of an SAR for this purpose
will be the excess, if any, of the fair market value of one
share of common stock of the Company on the date the right
is exercised over non-qualified exercise price of the
related option. ISOs granted under the Plans may not have
an option price that is less than the fair market value of
the stock on the date of grant. ISOs and SARs may not be
exercised until 2 years from the date of grant as to 50% of
the total number granted and as to the remaining 50% not
until 3 years from the date of grant; the right to exercise
ISOs and SARs terminates after 8 years from the date of
grant. The maximum number of shares of the Company's common
stock and SARs that may be issued or granted under the Plans
is as follows:
1982 Plan 1985 Plan
Shares of common stock 200,000 400,000
Stock appreciation rights 470,000 940,000
The 1982 Plan expired on January 4, 1992, and the 1985 Plan
expired on January 7, 1995. Therefore, no further ISOs or
SARs may now be granted from either plan. Information for
1994, 1993 and 1992 with respect to the Plans is as follows:
Stock
Issue Option Appreciation
Price Range Shares Rights
Outstanding at
December 31, 1991 14.50- 22.38 227,173 28,570
Granted on July 31, 1992 12.63 20,000 -
Granted on Sept. 9, 1992 14.28 210,000 -
Exercised in 1992 14.50 (2,696) -
Ceased to be
exercisable in 1992 18.50- 22.38 (26,928) -
Outstanding at
December 31, 1992 12.63- 18.50 427,549 28,570
Granted on
June 2, 1993 8.75 40,000 -
Granted on
December 8, 1993 5.75 65,000 -
Ceased to be
exercisable in 1993 14.28- 18.50 (101,696) (10,125)
Outstanding at 5.75- 18.50
December 31, 1993 430,853 18,445
Granted on
December 19, 1994 6.50 107,458 -
Ceased to be
exercisable in 1994 5.75- 18.50 (126,456) (3,176)
Outstanding at
December 31, 1994 5.75- 18.50 411,855 15,269
Over the periods in which the SARs become exercisable, the
Company accrues as expense the amount by which the market
price exceeds the various grant prices of the SARs
outstanding. This is adjusted in subsequent reporting
periods for increases or decreases in the market price of
the stock. In 1994 and 1993 no accrual was recorded. In
1992 the net amount credited to earnings was $143,000.
During 1992, the Company purchased 2,696 shares of its
Common Stock to fund ISOs exercised in 1992. The market
price which the Company paid to acquire the shares was more
than the option price which the employees paid to the
Company in accordance with the terms of the plan and the
difference of $15,000 was recorded as a reduction to Other
Paid-In Capital. The per share market value of the ISOs
exercised in 1992 was $20.00.
14. Transactions with Affiliated Companies
The Company leases coal lands from of Penn Virginia
Resources Corporation whose parent company, Penn Virginia
Corporation ("Penn Virginia") holds an 18.95% voting
interest in the company at December 31, 1994. Amounts paid
to Penn Virginia for royalties on coal were $11,019,000,
$11,699,000 and $10,689,000 for the years ended December 31,
1994, 1993 and 1992, respectively. In 1995 the Company sold
certain mineral leases back to Penn Virginia. Refer to Note
2.
Westmoreland Resources, Inc., a 60% owned subsidiary, has a
coal mining contract with Morrison Knudsen Company, Inc.,
one of its stockholders. Mining costs incurred under the
contract were $15,390,000, $12,131,000 and $12,651,000 in
1994, 1993 and 1992, respectively.
15. Income Taxes (Benefit)
Income tax expense attributable to income (loss) before income
taxes and minority interest consists of:
1994 1993 1992
(in thousands)
Federal:
Current $ 1,177 $ 1,421 $ 3,072
Deferred 296 (703) (418)
1,473 718 2,654
State:
Current 754 920 931
Deferred 64 (151) (90)
818 769 841
Income taxes $ 2,291 $ 1,487 $ 3,495
Income tax expense attributable to income (loss) before income
taxes and minority interest differed from the amounts computed by
applying the statutory Federal income tax rate of 34% to pretax
income (loss) from continuing operations before minority interest
as a result of the following:
1994 1993 1992
(in thousands)
Computed tax expense (benefit)
at statutory rate $ 7,829 $ (32,891) $ (12,235)
Increase (decrease) in tax
expense resulting from:
Percentage depletion (340) (1,128) (430)
State income taxes, net 540 543 555
Minimum tax 500 600 801
Net operating loss
carryforward utilized
for book purposes (6,587) 34,881 14,553
Prior year Adjustment 146 (682) -
Other 203 164 251
Income taxes $ 2,291 $ 1,487 $ 3,495
For the years ended December 31, 1994, 1993 and 1992,
deferred income tax expense (benefit) result from temporary
differences in the recognition of income and expense for
income tax and financial reporting purposes. The sources
and tax effects of those temporary differences are presented
below:
1994 1993 1992
(in thousands)
Imputed interest $ (23) $ (23) $ (24)
Excess of book over:
tax cost depletion (59) (43) (48)
tax depreciation (462) (446) (453)
tax amortization (48) (35) (38)
Taxes and royalties - (342) -
State tax ruling 346 - -
Postretirement benefits (7) (8) (69)
Mine development costs 613 43 124
Income taxes $ 360 $ (854) $ (508)
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred
tax liabilities at December 31, 1994 are presented below:
Deferred tax assets:
(in thousands)
Net operating loss carryforwards 55,243
Investment tax credit carryforwards 4,500
Operating leases; capitalized for books 1,555
Accounts receivable due to allowance
for doubtful accounts 7,309
Deferred income 1,360
Plant and equipment, differences due to
depreciation and amortization 8,608
Accruals for the following:
Workers' Compensation 9,283
Pneumoconiosis 5,203
Social costs 1,139
Reclamation 3,069
Postretirement benefit obligation 12,846
Shutdown costs 3,211
Other 776
Total gross deferred assets 114,102
Less valuation allowance (111,603)
Net deferred tax assets $ 2,499
Deferred tax liabilities:
Plant and equipment, differences due to
depreciation and amortization $ (14,750)
Prepaid Pension (2,724)
Advanced royalties, capitalized for financial
purposes (109)
Unamortized discount on long-term debt for
financial purposes (148)
Total gross deferred tax liabilities (17,731)
Net deferred tax liability $ (15,232)
The Company and subsidiaries, excluding WRI which is not included
in the consolidated federal income tax return of the Company,
have available tax basis net operating loss carryforwards to
reduce future taxable income and investment tax credit
carryforwards to offset future taxes payable. The following
table illustrates the expiration date and amounts of the net
operating loss carryforwards for both regular and minimum taxes:
(in thousands)
Expiration Date Regular Tax Minimum Tax
1995 $ 5,370 $ -
1996 24,121 -
1997 2,982 -
1998 1,735 -
1999 8,316 -
after 1999 119,956 24,049
Total $ 162,480 $ 29,049
The Company also has investment tax credit carryforwards for
regular tax and alternative minimum tax of $4,500,000 which
expires over the period from 1997 through 2000 for both.
The Company's federal consolidated income tax returns have been
examined and settled by the Internal Revenue Service through
1979. WRI's Federal income tax returns have been examined and
settled through 1990.
16. Operations
Segment Information
The Company's principal business is the production and sale
of coal in the United States and until recently the
marketing of coal on a worldwide basis. The Company
produces coal in the Eastern and Western United States.
Eastern operations are conducted through the Virginia
Division and a wholly-owned subsidiary, Pine Branch. Powder
River Basin coal is produced by WRI from reserves owned by
the Crow Indians in Montana. The Company markets coal
primarily through its wholly-owned subsidiary, WCSC,
headquartered in Philadelphia, Pennsylvania. Most of the
coal now sold by WCSC is processed at and shipped from
Company properties to electric utilities within the United
States. Historically, WCSC has also sold steam and
metallurgical coal into the domestic and export markets. In
the past a significant portion of this coal was produced by
unaffiliated producers. During 1994 the Company withdrew
from the export market and severed most of its relationships
with unaffiliated producers.
The Company is also engaged in the business of developing
and owning interests in cogeneration and other non-regulated
independent power plants, through its wholly-owned
subsidiary, WEI.
The Company has no intersegment sales for the years shown.
In presenting operating income by segment, unallocated
corporate expenses are charged to coal operations.
<TABLE>
Industry segment results for 1994 are:
<CAPTION>
Independent
Coal Power Elimination Consolidated
(in thousands)
<S> <C> <C> <C> <C>
Sales to unaffiliated
customers $ 370,166 $ 7,196 $ - $ 377,362
Intersegment transfers - - - -
Total sales 370,166 7,196 - 377,362
Operating income (loss) (15,766) 548 - (15,218)
Identifiable assets at
December 31, 1994 182,873 46,948 (82) 229,739
Depreciation, depletion
and amortization 16,748 52 - 16,800
Additions to property,
plant and equipment 5,832 63 - 5,895
<CAPTION>
Industry segment results for 1993 are:
Independent
Coal Power Elimination Consolidated
(in thousands)
<S> <C> <C> <C> <C>
Sales to unaffiliated
customers $465,256 $4,642 - $469,898
Intersegment transfers - - - -
Total sales 465,256 4,642 - 469,898
Operating income (loss) (94,035) (1,195) - (95,230)
Identifiable assets at
December 31, 1993 252,691 12,972 (165) 265,498
Depreciation, depletion
and amortization 21,441 62 - 21,503
Additions to property,
plant and equipment 8,186 112 - 8,298
<CAPTION>
Industry segment results for 1992 are:
Independent
Coal Power Eliminated Consolidated
(in thousands)
<S> <C> <C> <C> <C>
Sales to unaffiliated
customers $536,289 $4,679 $ - $ 540,968
Intersegment transfers - - - -
Total sales 536,289 4,679 - 540,968
Operating income (loss) (35,325) 1,679 - (33,646)
Identifiable assets at
December 31, 1992 323,142 14,217 (12,734) 324,625
Depreciation, depletion
and amortization 22,539 31 - 22,570
Additions to property,
plant and equipment 33,697 32 - 33,729
</TABLE>
Sales:
<TABLE>
Sales by the Company's non-coal operations are entirely within
the United States. Information concerning the Company's coal
revenues for 1994, 1993 and 1992 is shown below:
<CAPTION>
1994
Metallurgical Steam Total
<S> <C> <C> <C>
Geographic Area % % %
Europe 5 2 7
Pacific Rim Countries 1 - 1
Total sales to
foreign customers 6 2 8
United States 10 82 92
Total sales 16 84 100
</TABLE>
In 1994 the Company's 10 largest customers accounted for 70% of
its coal revenues. Its two largest customers, Duke Power and
Georgia Power, accounted for 28% and 12%, respectively, of coal
revenues. No other customer accounted for as much as 10% of 1994
coal revenues. Long-term contracts generated 80% of the coal
revenues. Coal sold to the steam market in the United States,
represented 82% of the Company's coal revenues. These sales
were distributed as follows: 9% in the Northeast, 82% in the
Southeast and 9% in the Midwest. The Company had no export
accounts receivable at December 31, 1994.
<TABLE>
<CAPTION>
1993
Metallurgical Steam Total
<S> <C> <C> <C>
Geographic Area % % %
Europe 15 4 19
Pacific Rim Countries 3 - 3
Total sales to
foreign customers 18 4 22
United States 12 66 78
Total sales 30 70 100
</TABLE>
In 1993 the Company's 10 largest customers accounted for 62% of
its coal revenues. Its two largest customers accounted for 32%
of coal revenues. No other customer accounted for as much as 10%
of 1993 coal revenues. Long-term contracts generated 86% of the
coal revenues. Coal sold to the steam market in the United
States, represented 66% of the Company's coal revenues; these
sales were distributed as follows: 22% in the Northeast, 70% in
the Southeast and 8% in the Midwest. The Company's total export
accounts receivable at December 31, 1993 was $17,940,000.
<TABLE>
<CAPTION>
1992
Metallurgical Steam Total
<S> <C> <C> <C>
Geographic Area % % %
Europe 13 8 21
Pacific Rim Countries 4 - 4
Other - 1 1
Total sales to
foreign customers 17 9 26
United States 13 61 74
Total sales 30 70 100
</TABLE>
In 1992 the Company's 10 largest customers accounted for 54% of
its coal revenues. Its largest customer accounted for 21% of
coal revenues. No other customer accounted for as much as 10% of
1992 coal revenues. Long-term contracts generated 72% of the
coal revenues. Coal sold to the steam market in the United
States, represented 61% of the Company's coal revenues; these
sales were distributed as follows: 18% in the Northeast, 73% in
the Southeast and 9% in the Midwest. The Company's total export
accounts receivable at December 31, 1992 was $24,544,000.
17. Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for 1994 and 1993 are as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31 June 30 Sep. 30 Dec. 31
(in thousands except per share data)
<S> <C> <C> <C> <C>
1994
Revenues $ 99,234 $108,762 $ 96,752 $ 72,614
Costs and expenses 102,696 109,361 95,838 86,785
Gain on sale of assets (1) - - - 41,130
Unusual charges - - - 2,100
Net income (loss) (4,788) (1,710) (703) 27,354
Less preferred stock
dividends:
Declared (2) 1,222 - - -
In arrears (2) (3) - 1,222 1,222 1,222
Net income (loss) applicable
to common shareholders (3) (6,010) (2,932) (1,925) 26,132
Net income (loss) per share
applicable to common
shareholders (3) (.86) (.42) (.28) 3.75
Number of common and common
equivalent shares outstanding
(weighted-average) (3) 6,955 6,955 6,956 6,956
1993
Revenues $115,200 $110,676 $117,275 $126,747
Costs and expenses 116,251 110,472 119,886 139,269
Gain on sale of assets (1) - 2,000 - -
Unusual charges (4) - - - (79,250)
Net income (loss) (2,719) 83 (2,715) (92,295)
Less preferred stock
dividend (2) 1,222 1,222 1,222 1,222
Net (loss) applicable
to common shareholders (3,941) (1,138) (3,937) (93,518)
Net income (loss) per share
applicable to common
shareholders (.57) (.16) (.57) (13.44)
Number of common and common
equivalent shares outstanding
(weighted-average) (2) 6,954 6,954 6,954 6,955
<FN>
<1> Refer to Note 2 to the Consolidated Financial Statements for
information on the sale of assets.
<2> Refer to Consolidated Statements of Shareholders' Equity and
Note
12 to the Consolidated Financial Statements.
<3> These amounts have been adjusted from the amounts reported in
the Company's Form 10-Q filed for the second and third
quarters of 1994 to reflect the cumulative undeclared
preferred stock dividends.
<4> Refer to Note 4 to the Consolidated Financial Statements for
information related to the unusual charges.
</FN>
</TABLE>
18. Supplementary Coal Statistics (Unaudited)
<TABLE>
Information with respect to the Company's coal reserves
is as follows:
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Demonstrated coal reserve
base at year-end
(thousands of tons) 701,047 815,169 966,843 1,081,872 1,131,552
Production tonnage
(thousands of tons) 10,923 10,463 10,405 10,121 10,606
Average price per
ton sold $ 23.24 $25.58 $25.25 $23.87 $23.23
The Company makes yearly evaluations of its reserves and
periodically modifies the amount of reserves reported. The
reserve evaluations are based on new information developed by
bore-hole drilling, examination of outcrops, acquisitions,
dispositions, production, changes in mining methods, abandonments
and other information. Substantially all of the estimated coal
reserves are leased from others. The decrease in 1994 is due to
1994 production, the sale of the assets of Criterion Coal
Company, and the removal of certain reserves due to changes in
mining plans or the elimination of reserves deemed to be
uneconomical to mine. The decrease in 1993 is due to 1993
production and the removal of certain assets due to changes in
mining plans or deemed to be uneconomical to mine.
Independent Auditor's Report
The Board of Directors and Shareholders
Westmoreland Coal Company:
We have audited the accompanying consolidated balance sheets of
Westmoreland Coal Company and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1994. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Westmoreland Coal Company and subsidiaries at
December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the years in the three-year
period ended December 31, 1994, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Philadelphia, PA
March 24, 1995
Market Information on Capital Stock
Price Range:
The following table shows the range of prices for the Common
Stock and Preferred Stock of the Company on the New York
Stock Exchange for the calendar quarters indicated:
</TABLE>
<TABLE>
Closing Prices
<CAPTION>
Common Stock Preferred Stock
High Low High Low
<S> <C> <C> <C> <C>
1993
First Quarter 11 8 3/8 26 21 3/4
Second Quarter 10 3/8 6 1/4 24 1/2 17 3/4
Third Quarter 7 3/4 5 3/4 21 7/8 17 3/8
Fourth Quarter 7 1/4 5 1/8 22 18 3/8
1994
First Quarter 5 3/4 4 1/2 20 1/2 15 1/2
Second Quarter 5 1/8 4 1/2 16 1/4 13 7/8
Third Quarter 6 1/4 4 1/2 18 1/2 15 1/4
Fourth Quarter 7 4 1/4 17 3/4 14 1/4
</TABLE>
Approximate Number of Equity Security Holders
Number of Record Holders
Title of Class (as of February 27, 1995)
Common Stock 1,979
($2.50 par value)
Preferred Stock 122
($1.00 par value)
Dividends:
After obtaining a waiver to its 1977 Loan Agreement, the Company
declared and paid an $.08 dividend on Common Stock in each of the
four quarters of 1992. On January 26, 1993 the Company announced
that the regular quarterly dividend of $.08 per share of common
stock payable for the first quarter of 1993 would be suspended
and has not been resumed. Common stock dividend payments may not
be declared until the preferred stock dividends that are in
arrears are made current.
Preferred stock dividends at a rate of 8.5% per annum were paid
quarterly from the third quarter of 1992 through the first
quarter of 1994. The declaration and payment of preferred stock
dividends was suspended in the second quarter of 1994 in
connection with extension agreements with the Company's principal
lenders. The last quarterly preferred stock dividend paid in
1994 was on April 1, 1994. Common stock dividend payments were
not permitted under covenants contained in the Company's loan
agreements from January 1993 through December 22, 1994. Further
payment of common stock dividends is not permitted until the
preferred dividend arrearages are satisfied. On February 1, 1995
the Board of Directors declared a quarterly preferred stock
dividend to be paid April 1, 1995 to holders of record of March
10, 1995. The three quarterly dividends which are in arrears at
December 31, 1994 (those dividends whose payment dates would have
been July 1, 1994, October 1, 1994 and January 1, 1995) amount to
$3,666,000 in the aggregate ($6.38 per preferred share). The
Company's Board of Directors will continue to review the payment
of quarterly preferred stock dividends as well as the three
preferred stock dividends which are in arrears, in light of the
Company's ongoing business circumstances.
The Company is reviewing its options with respect to its Virginia
Division, which include the possible future sale, downsizing or
shutdown of all or a portion the Virginia Division, at which time
the Company may be required to recognize, for accounting
purposes, a significant portion of its postretirement medical
liabilities. The total amount of the postretirement medical
liabilities which would be expensed at the time the Virginia
Division shutdown or sale occurs is not known at this time,
however the impact of this non-cash expense on shareholders'
equity could affect the Company's ability to pay preferred stock
dividends.
There are also statutory restrictions limiting the payment of
preferred dividends under Delaware law, the state in which the
Company is incorporated. Under Delaware law, the Company is
permitted to pay dividends only: (1) out of surplus, surplus
being the amount of shareholders' equity in excess of the par
value of the Company's two classes of stock; or (2) in the event
there is no surplus, out of net profits for the fiscal year in
which a dividend is declared (and/or out of net profits from the
preceding fiscal year), but only to the extent that shareholders
equity exceeds par value of preferred stock ($575,000). The
combined par value of the Company's preferred and common stocks
is $17,965,000. The Company's shareholders' equity at December
31, 1994 was $50,724,000.
WESTMORELAND COAL COMPANY
ITEM 14 - EXHIBIT 21
For the year ended December 31, 1994
State of
Subsidiary Name Incorporation
Cleancoal Terminal Company Delaware
Criterion Coal Company Delaware
Deane Processing Company Delaware
Eastern Coal & Coke Company Pennsylvania
ECC Leasing Corp. Delaware
Kentucky Criterion Coal Company Delaware
Pine Branch Mining Co. Delaware
Roda-Dendron Coal Company Delaware
Triport Tool Corporation Delaware
WEI-Ft. Lupton, Inc. Delaware
WEI-Indiana, Inc. Delaware
WEI-Rensselaer, Inc. Delaware
WEI-Roanoke Valley, Inc. Delaware
Westmoreland Coal Sales Company, Inc. Delaware
Westmoreland Energy, Inc. Delaware
Westmoreland Resources, Inc. Delaware
Westmoreland Terminal Company Delaware
Westmoreland-Altavista, Inc. Delaware
Westmoreland-Buena Vista, Inc. Delaware
Westmoreland-Covington, Inc. Delaware
Westmoreland-Fort Drum, Inc. Delaware
Westmoreland-Franklin, Inc. Delaware
Westmoreland-Greeley, Inc. Delaware
Westmoreland-Hopewell, Inc. Delaware
Consent of Independent Certified Public Accountants
The Board of Directors
Westmoreland Coal Company:
We consent to incorporation by reference in the Registration
Statements No. 2-90847 and No. 33-33620 on Forms S-8 of
Westmoreland Coal Company of our report dated March 24, 1995,
relating to the consolidated balance sheets of Westmoreland Coal
Company and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of income, shareholders'
equity and cash flows and the related financial statement
schedule for each of the years in the three-year period ended
December 31, 1994, which report appears in the December 31, 1994
annual report on Form 10-K of Westmoreland Coal Company.
KPMG Peat Marwick LLP
Philadelphia, PA
March 31, 1995
