SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____ TO ____
COMMISSION FILE NUMBER 1-9993
ASHLAND COAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 61-0880012
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2205 FIFTH STREET ROAD, HUNTINGTON, WEST VIRGINIA 25701
(Address of principal executive offices) (Zip Code)
P. O. BOX 6300, HUNTINGTON, WEST VIRGINIA 25771
(Mailing Address) (Zip Code)
Registrant's telephone number, including area code (304)526-3333
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
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
At May 5, 1994, there were 13,694,159 shares of registrant's
common stock outstanding.
1<PAGE>
Part I - Financial Information
ASHLAND COAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31 December 31
1994 1993
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,250 $556
Trade accounts receivable 56,658 45,513
Other receivables 5,127 4,467
Inventories 29,755 22,304
Prepaid royalties 15,483 15,098
Deferred income taxes 2,821 2,116
Other 3,012 4,829
114,106 94,883
OTHER ASSETS
Prepaid royalties 66,901 53,557
Coal supply agreements 44,167 47,032
Other 27,075 29,328
138,143 129,917
PROPERTY, PLANT, AND EQUIPMENT
Cost 835,559 829,089
Less accumulated depreciation, depletion,
and amortization 230,532 217,898
605,027 611,191
$857,276 $835,991
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $46,205 $27,302
Accrued expenses 31,212 28,036
Income taxes payable 3,290 -
Current portion of long-term debt 32,738 37,260
113,445 92,598
LONG-TERM DEBT 252,178 244,342
ACCRUED POSTRETIREMENT BENEFITS 69,576 67,845
OTHER LONG-TERM LIABILITIES 39,943 41,571
DEFERRED INCOME TAXES 39,133 42,584
DEFERRED GAIN ON SALE AND LEASEBACK OF ASSETS 3,481 3,624
STOCKHOLDERS' EQUITY
Convertible Class B preferred stock 33,050 33,050
Convertible Class C preferred stock 34,791 34,791
Common stock 137 136
Paid-in capital 108,061 107,087
Retained earnings 163,481 168,363
339,520 343,427
$857,276 $835,991
</TABLE>
See notes to condensed consolidated financial statements.
2<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
1994 1993
<S> <C> <C>
REVENUES
Coal sales $132,875 $133,859
Operating revenues 4,613 4,308
137,488 138,167
COSTS AND EXPENSES
Cost of coal sold 123,685 120,677
Operating expenses 2,853 2,859
Selling, general, and administrative
expenses 8,491 9,104
135,029 132,640
OPERATING INCOME 2,459 5,527
OTHER INCOME (EXPENSE)
Interest income 8 344
Interest expense (5,485) (6,431)
LOSS BEFORE INCOME TAXES AND THE
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING (3,018) (560)
Income tax expense (benefit) 39 (2,094)
INCOME (LOSS) BEFORE THE CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING (3,057) 1,534
Cumulative effect of changes in accounting - (18,836)
NET LOSS $(3,057) $(17,302)
Earnings (loss) per common share
Primary:
Earnings (loss) before cumulative
effect adjustments $(.18) $.06
Cumulative effect adjustments - (1.11)
Net Loss $(.18) $(1.05)
Fully diluted:
Earnings (loss) before cumulative
effect adjustments $(.18) $.06
Cumulative effect adjustments - (1.11)
Net Loss $(.18) $(1.05)
Dividends declared per common share $.10 $.10
</TABLE>
See notes to condensed consolidated financial statements.
3<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
1994 1993
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(3,057) $(17,302)
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation, depletion, and amortization 17,717 18,989
Prepaid royalties expensed 4,657 5,464
Deferred income taxes (4,156) (3,872)
(Gain) loss on disposition of assets 181 (97)
Cumulative effect of changes in accounting - 18,836
Partnership costs in excess of cash
advances 250 99
Changes in operating assets and
liabilities 7,290 8,104
NET CASH PROVIDED BY
OPERATING ACTIVITIES 22,882 30,221
INVESTING ACTIVITIES
Property, plant, and equipment:
Purchases (8,869) (4,264)
Proceeds from sales 450 345
Proceeds from sale and leaseback of equipment - 64,182
Advances on prepaid royalties (16,232) (4,342)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (24,651) 55,921
FINANCING ACTIVITIES
Proceeds from long-term borrowings 200,803 43,817
Payments on long-term borrowings (197,489) (164,134)
Dividends paid (1,825) (1,701)
Proceeds from sale of common stock 974 278
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 2,463 (121,740)
Increase (decrease) in cash and cash
equivalents 694 (35,598)
Balance at beginning of period 556 37,609
Cash and cash equivalents at end of period $1,250 $2,011
</TABLE>
See notes to condensed consolidated financial statements.
4<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994
(Unaudited)
NOTE A - GENERAL
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial reporting and Securities and Exchange
Commission regulations, but are subject to any year-end audit adjustments
which may be necessary. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. These financial statements should be
read in conjunction with the Annual Report of Ashland Coal, Inc. (Ashland
Coal or the Company) on Form 10-K for the year ended December 31, 1993.
Results of operations for the period ended March 31, 1994, are not
necessarily indicative of results to be expected for the year ending
December 31, 1994.
NOTE B - INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
March 31, 1994 December 31, 1993
(In thousands)
<S> <C> <C>
Coal $13,099 $6,884
Supplies 16,656 15,420
$29,755 $22,304
</TABLE>
NOTE C - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, 1994 December 31, 1993
(In thousands)
<S> <C> <C>
9.78% senior unsecured notes payable
in four equal annual installments
beginning September 15, 1997 $100,000 $100,000
9.66% senior unsecured notes payable
in six equal annual installments
beginning May 15, 2001 52,900 52,900
8.92% senior unsecured notes due
May 15, 1996 22,100 22,100
Indebtedness to banks under revolving
credit agreement 83,000 50,000
Indebtedness to banks under lines of credit 26,668 56,332
Other 248 270
284,916 281,602
Less current portion 32,738 37,260
$252,178 $244,342
</TABLE>
5<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE D - CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions. SFAS No. 106 requires the
accrual method of accounting for postretirement health care and life
insurance benefits based on actuarially determined costs to be recognized
over the period the employee provides service to the Company. As of
January 1, 1993, the Company recognized the full amount of its
actuarially estimated accumulated postretirement benefit obligation
(APBO) as of that date which had not been previously recognized. The
APBO represents the present value of the estimated future benefits
payable to current retirees and a pro rata portion of estimated benefits
payable to active employees after retirement. The pretax charge to
earnings in the first quarter of 1993 was $40,856,000, which was
$25,331,000 ($1.49 per share) net of tax. The latter amount has been
reflected in the consolidated statement of income as a cumulative effect
of an accounting change.
Also effective January 1, 1993, the Company adopted the provisions of
SFAS No. 109, Accounting for Income Taxes. SFAS No. 109 requires a
liability approach for measuring deferred taxes based on temporary
differences between the financial statement and tax bases of assets and
liabilities existing at each balance sheet date using enacted tax rates
for years during which taxes are expected to be paid or recovered.
Adoption of SFAS No. 109 required the adjustment of the carrying value of
certain assets, which had been acquired in prior business combinations,
to their pretax amounts. That adjustment increased income in the first
quarter of 1993 by $10,476,000, which was $6,495,000 ($.38 per share) net
of tax. The latter amount has been reflected in the consolidated
statement of income as a cumulative effect of an accounting change.
6<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE E - COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended March 31
1994 1993
(In thousands, except per share data)
<S> <C> <C>
Income (loss) before the cumulative
effect of changes in accounting $(3,057) $1,534
Less: Common stock dividends 1,366 1,355
Preferred stock dividends 631 605
Accretion of discount on preferred
stock (subject to redemption) - 328
Undistributed earnings less accretion
before cumulative effect adjustments (5,054) (754)
Cumulative effect of changes in accounting - (18,836)
Undistributed earnings less accretion $(5,054) $(19,590)
Primary
Average shares and equivalents
outstanding:
Shares outstanding 13,664 13,553
Shares issuable upon conversion
of preferred stock 4,587 3,461
Total 18,251 17,014
Per share amounts:
Undistributed loss less accretion
before cumulative effect adjustments $(.28) $(.04)
Dividends (except preference dividends) .10 .10
Earnings (loss) before cumulative
effect adjustments (.18) .06
Cumulative effect adjustments - (1.11)
Net loss $(.18) $(1.05)
Fully Diluted
Average shares and equivalents
outstanding:
Shares outstanding 13,664 13,553
Shares issuable upon conversion of
preferred stock 5,212 4,899
Total 18,876 18,452
Per share amounts:
Undistributed loss less accretion
before cumulative effect adjustments $(.28) $(.04)
Dividends (except preference dividends) .10 .10
Earnings before cumulative effect
adjustments (.18) .06
Cumulative effect adjustments - (1.11)
Net loss $(.18)<F1> $(1.05)<F1>
<FN>
<F1> Because the calculation of primary loss per share yields a
more dilutive result, that amount is shown here.
</TABLE>
7<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F - CONTINGENCIES
Ashland Coal is a party to numerous claims and lawsuits with respect to
various matters. The Company provides for costs related to contingencies
when a loss is probable and the amount is reasonably determinable. The
Company estimates that its probable aggregate loss as a result of such
claims is $2.6 million (included in other long-term liabilities) and
believes that probable insurance recoveries of $1.9 million (included in
other assets) related to these claims will be realized. The Company
estimates that its reasonably possible aggregate losses from all
currently pending litigation could be as much as $3.6 million (before
tax) in excess of the probable loss previously recognized. However, the
Company believes it is probable that substantially all of such losses, if
any occur, will be insured. After conferring with counsel, it is the
opinion of management that the ultimate resolution of these claims, to
the extent not previously provided for, will not have a material adverse
effect on the consolidated financial condition, results of operations, or
liquidity of the Company.
In the quarter ended March 31, 1994, Ashland Coal recovered $1.0 million
from a contractor for business interruption losses related to the
collapse of a silo in 1992. Another claim is outstanding against the
same contractor for business interruption losses sustained in 1993, when
a second silo was unavailable during repairs. Recoveries under this
claim are not expected to be material.
8<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
Quarter Ended March 31, 1994, Compared
to Quarter Ended March 31, 1993
Ashland Coal lost $3.1 million in the quarter ended March 31, 1994. For
the quarter ended March 31, 1993, the Company earned $1.5 million before
adjustments for the cumulative effect of changes in accounting. After the
cumulative effect of those accounting changes, the Company lost $17.3
million in the first quarter of 1993.
Coal sales volume and revenue for the current quarter were 4.5 million tons
and $132.9 million, respectively, slightly below the levels of the same
quarter a year ago. Average selling price in 1994 increased $.25 per ton
over that of the first quarter of 1993.
The cost of coal sold was $1.10 per ton above the cost in the first quarter
of 1993. The severe winter weather experienced during January and February
1994 significantly affected operations at all subsidiaries of the Company.
The longwall mine at Mingo Logan Coal Company experienced difficult
geological conditions in both quarters. In addition, the operational
aftereffects of the seven-month strike by the United Mine Workers of
America (UMWA) significantly increased mining costs at both Hobet Mining,
Inc. and Dal-Tex Coal Corporation.
Operating revenue in 1994 includes the recovery of $1.0 million from a
contractor for business interruption losses related to the 1992 silo
collapse at Mingo Logan's preparation plant.
Selling, general, and administrative expenses decreased $.6 million
primarily due to a reduction in the amortization of the carrying value of
one of Dal-Tex's sales contracts. This decrease resulted from a change in
contract amortization rates as a result of the contract renegotiations
described below. Interest expense net of interest income decreased $.6
million, reflecting lower average debt levels.
The Company recorded income tax expense of less than $.1 million for the
first quarter of 1994, compared to an income tax benefit of $2.1 million
for the same period a year ago. The income tax expense for the first
quarter of 1994 was based on the estimated annual effective income tax rate
for 1994 of negative 1.3%. The estimated effective tax rate for 1994
reflects greater projected profitability coupled with the effects of
percentage depletion. The effective tax rate is sensitive to changes in
profitability because of the effects of percentage depletion.
Balance Sheet
The balance of trade accounts receivable at March 31, 1994, increased $11.1
million from the balance at December 31, 1993. Ashland Coal's trade
accounts receivable balance generally represents four to five weeks of coal
sales, dependent upon the specific customer accounts and payment terms
thereon. The balances of trade receivables at December 31, 1993, and March
31, 1994, reflect the levels of coal sales in December 1993 and March 1994,
respectively. Coal sales in December 1993 were markedly lower because of
the strike by the UMWA and the aftereffects of the strike once it was
settled.
Inventories at March 31, 1994 were $7.5 million higher than at December 31,
1993. This increase was primarily due to higher levels of coal inventory,
because of normal fluctuations in inventory levels and unusually low levels
at December 31, 1993, resulting from the drawdown of coal stockpiles during
the UMWA strike.
The noncurrent balance of prepaid royalties increased $13.3 million from
the balance at December 31, 1993. This increase was largely due to an
annual royalty payment of $16 million made at the end of March. Because
the check for that royalty payment had not been cleared by the Company's
bank as of March 31, the amount of the payment was included in accounts
payable at that date.
9<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS--CONTINUED
Outlook
The Company's 1994 results of operations will be adversely affected by the
first-quarter results as discussed above. However, for the full year of
1994 the Company still believes that average cost per ton will approximate
the 1992 level. With higher sales volume than in 1993 and resultant lower
fixed costs per ton, the Company expects 1994 operating income to be
substantially improved over 1993's level.
Spot market prices have fallen since the settlement of the UMWA strike, but
still remain above the level that prevailed prior to the strike. Current
spot market prices are being supported by rebuilding of utility stockpiles,
which had been substantially depleted by the strike and by heavy electric
demand arising from both the recent severe winter weather and economic
growth, which has increased electric generation, much of it by utilities
utilizing coal as a fuel. The approach of the January 1, 1995, effective
date of the 1990 Clean Air Act Amendments will further increase demand for
low-sulfur coal. Sales to a major contract customer are expected to be
above normal contract levels during 1994 as shortfalls in shipments that
were scheduled for the strike-affected period are made up. The price on
these contract sales is above the Company's average selling price.
In 1993, the Company completed negotiations with two customers, including
the Company's largest customer, concerning the price, extension of the
term, and the quality and quantity of future deliveries under existing coal
sales contracts with these customers. These new agreements will result in
reduced coal sales revenues and cash flow in 1994. A substantial part of
these decreases will be offset by additional sales volumes in later years.
In addition, adjustments will be made in the rates of amortization of the
carrying value of certain of these contracts, reducing amortization expense
in 1994. Contracts with another major customer are expected to expire at
the end of 1995, but could be renegotiated prior to then, based on current
market prices. Because these contracts are priced above current market
prices, these expirations will have a significant effect on earnings in
1996 and subsequent years.
Ashland Coal's export sales volume continues at a low level because of
weakness in the European economy and increased competition from both other
fuels and other exporting countries. The Company expects its export sales
to show gradual growth from current levels, but does not expect that export
sales will have any significant effect on its results of operations. The
Company sells some metallurgical coal, which is used in the manufacture of
steel. Although metallurgical coal ordinarily results in somewhat better
profitability than similar sales of steam coal sold to electric utilities,
Ashland Coal does not expect that sales of metallurgical coal will become a
significant part of its total marketing strategy. Both export and
metallurgical coal sales do, however, enhance Ashland Coal's market
flexibility.
The Company does not now expect that coal prices will be as high during the
remainder of this decade as was anticipated in the mid-1980's, when the
dragline development at Hobet 07 commenced. To compensate for these
expected lower prices, it may be necessary, if costs at Hobet's 07 mine are
not reduced, for Hobet to suspend operations at such mine by the end of the
decade. In addition, costs are expected to be reduced by an expansion of
the Hobet 21 mine. This expansion is expected to include the development
of contract underground mines and the construction of a raw coal handling
and blending facility beginning in 1994 and expansion of the preparation
plant in 1995.
The National Bituminous Coal Wage Agreement of 1993, which covers the UMWA
employees of Hobet and of Dal-Tex's subsidiaries, provides for wage
increases totaling $1.30 per hour over the first three years, changes in
the health care plan intended to reduce costs, and improvements in work
rules. Wage levels are subject to renegotiation after both the third and
fourth years of the contract. In connection with the Agreement, a
Memorandum of Understanding was entered into that provides for positions at
mines of Ashland Coal's nonunion subsidiaries to be offered to UMWA miners
under certain conditions. The Company believes that the provisions of the
new Agreement and the Memorandum, taken as a whole, will not have an
adverse effect on costs.
10<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS--CONTINUED
The Company expects to continue to investigate acquisition opportunities
involving companies or projects having low-cost operations, low-sulfur
coal, a good contract position, and the potential for synergies or margin
improvement. Such acquisitions, if they occur, may be in the central
Appalachian coal fields, which is currently the Company's primary area of
operations, or in coal fields in other regions of the U.S.
Liquidity and Capital Resources
The following is a summary of cash provided by or used in each of the
indicated types of activities during the three months ended March 31, 1994
and 1993:
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Net cash provided by (used in)
Operating activities
Before changes in operating assets
and liabilities . . . . . . . . . . . . . $15,592 $22,117
Changes in operating assets and liabilities 7,290 8,104
22,882 30,221
Investing activities . . . . . . . . . . . . (24,651) 55,921
Financing activities . . . . . . . . . . . . 2,463 (121,740)
Increase (decrease) in cash and cash equivalents $694 $(35,598)
</TABLE>
Cash provided by operating activities before changes in operating assets
and liabilities decreased in the first quarter of 1994 from 1993 primarily
because of higher costs that resulted from the aftereffects of the UMWA
strike and severe winter weather. Cash provided by changes in operating
assets and liabilities decreased slightly in the first quarter of 1994 from
1993 primarily reflecting growth in accounts receivable balances in 1994,
largely offset by growth in accounts payable balances during the same
period.
Cash used during the first quarter of 1994 for investing activities
primarily reflects capital expenditures of $5.4 million for Dal-Tex surface
mining equipment and a $16 million prepaid royalty payment expected to be
recovered after one year. Cash provided by investing activities in the
first quarter of 1993 resulted from the sale and leaseback of certain
mining equipment.
Proceeds from borrowings for the purpose of funding capital expenditures
and advances on prepaid royalties not funded by cash flow from operations
account for the cash provided by financing activities during 1994. Cash
used in financing activities during the first quarter of 1993 represents
payments on long-term borrowings from the cash and cash equivalents balance
at December 31, 1992, funds provided by the sale and leaseback of mining
equipment and cash flow from operations.
The Company's capital expenditures during the first quarter of 1994 were
$8.9 million, which is $4.6 million higher than the comparable period in
1993. During the first quarter of 1993, the Company deferred capital
expenditures to the extent possible in order to improve liquidity in the
event that the Company either was adversely affected by a UMWA strike or
was required to purchase its convertible Class C preferred stock, or both.
The Company estimates that during the remainder of 1994, capital
expenditures may be as much as $55 million.
Ashland Coal has a revolving credit agreement with a group of banks
providing for borrowings of up to $207.5 million, of which $83 million was
borrowed at March 31, 1994. This commitment will be reduced in each
calendar quarter until termination in 1997. The Company has $175 million
of indebtedness under senior unsecured notes maturing in 1996 through 2006.
Ashland Coal also periodically establishes uncommitted lines of credit with
banks. These agreements
11<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS--CONTINUED
generally provide for short-term borrowings at market rates. At March 31,
1994, there were $262.9 million of such agreements in effect with $26.7
million of indebtedness under these agreements. The Company expects to
repay the borrowings under the lines of credit and to make discretionary
prepayments of $5.8 million of indebtedness under the revolving credit
agreement during the remainder of 1994.
The Company expects 1994 cash flow provided by operating activities to
increase significantly from 1993 as a result of the conclusion of the UMWA
strike and anticipated higher sales by Hobet and Dal-Tex during 1994.
Ashland Coal believes that 1994 cash flow generated by operating activities
will be adequate to fund anticipated capital expenditures and to reduce
debt as discussed above. Over the longer term, Ashland Coal believes that
cash flow from operations will be adequate to fund anticipated capital
expenditures, to make discretionary debt prepayments on indebtedness under
the revolving credit agreement, and to pay scheduled debt maturities and
other commitments when due.
Contingencies
Under the 1977 Surface Mining Control and Reclamation Act, a mine operator
is responsible for postmining reclamation on every mine for at least five
years after the mine is closed. Ashland Coal performs a substantial amount
of reclamation of disturbed acreage as an integral part of its normal
mining process. All such costs are exensed as incurred. The remaining
costs of reclamation are estimated and accrued as mining progresses. The
accrual for such reclamation (included in other long-term liabilities and
in accrued expenses) was $2.4 million and $2.5 million at March 31, 1994,
and December 31, 1993, respectively. In addition, the Company accrues the
costs of removal at the conclusion of mining of roads, preparation plants,
and other facilities and other costs (closing costs) over the lives of the
various mines. Closing costs, in the aggregate, are estimated to be
approximately $46.0 million. At March 31, 1994, and December 31, 1993, the
accrual for closing costs, which is included in other long-term liabilities
and in accrued expenses, was $5.4 million and $4.7 million, respectively.
Ashland Coal is a party to numerous claims and lawsuits with respect to
various matters, such as personal injury claims, claims for property
damage, and claims by lessors, that are typical of the sorts of claims
encountered in the coal industry. The Company provides for costs related
to contingencies when a loss is probable and the amount is reasonably
determinable. The Company estimates that its probable aggregate loss as a
result of such claims is $2.6 million (included in other long-term
liabilities) and believes that probable insurance recoveries of $1.9
million (included in other assets) related to these claims will be
realized. The Company estimates that its reasonably possible aggregate
losses from all currently pending litigation could be as much as $3.6
million (before tax) in excess of the probable loss previously recognized.
However, the Company believes it is probable that substantially all of such
losses, if any occur, will be insured. After conferring with counsel, it
is the opinion of management that the ultimate resolution of these claims,
to the extent not previously provided for, will not have a material adverse
effect on the consolidated financial condition, results of operations, or
liquidity of the Company.
Ashland Coal is a partner in Dominion Terminal Associates (DTA), which
operates a ground storage-to-vessel coal transloading facility in Newport
News, Virginia. DTA leases the facility from Peninsula Ports Authority of
Virginia (PPAV) for amounts sufficient to meet debt service requirements.
Financing for DTA is provided through $132.8 million of tax exempt bonds
issued by PPAV with credit support provided in part by bank letters of
credit. One of Ashland Coal's partners in DTA is currently experiencing
financial difficulty. If that partner's financial condition prevents the
renewal of the letters of credit, the bonds would be redeemed, or the
partners may elect to purchase certain of the tax exempt bonds. Should the
partner default on its obligation to pay its share of fixed operating costs
of DTA, Ashland Coal would be obligated to pay a proportionate share of
such costs, exclusive of lease payments. Ashland Coal's share of any
purchase in lieu of redemption would be $23.2 million, which the Company
would borrow under its revolving credit agreement or under its lines of
credit, either of which would bear a slightly higher rate of interest than
the current tax-exempt bonds. In the event of the purchase of the current
tax-exempt bonds, Ashland Coal expects that the partners will take the
actions necessary to remarket the bonds or to issue replacement tax-exempt
bonds. The Company does not believe that any or all of these events, if
they should occur, would have a material adverse effect on the Company's
liquidity, financial condition, or results of operations.
12<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS--CONTINUED
On April 28, 1994, the UMWA filed with the National Labor Relations Board
(NLRB) a Petition for Certification of Representative (Petition) alleging
that Mingo Logan Coal Company and its Mountaineer Mining and Bearco
divisions, and Mahon Enterprises, Inc. (Mahon) and Golden Chance Mining,
Inc. (Golden Chance), both independent mining contractors of Mingo Logan,
are a joint employer or single integrated enterprise and certifying that a
majority of the employees of the integrated enterprise are seeking an
election. The NLRB, as is required by law, has scheduled a hearing for May
17 and 18, 1994, to determine the appropriate bargaining unit for any
election which may be set for the appropriate employees to decide if they
want to be represented by the UMWA. Mingo Logan intends to vigorously
contest the issues of joint employer and appropriateness of the bargaining
unit, and the Company believes that Mingo Logan has adequate defenses to
the allegation that it is a joint employer or single integrated enterprise
with Mahon and Golden Chance and that Mingo Logan will likely prevail on
those issues. Assuming Mingo Logan prevails and is found to be an
independent bargaining unit, Ashland Coal does not believe a majority of
the employees of Mingo Logan will vote for union representation.
Ashland Coal has a claim outstanding against a construction contractor for
business interruption losses sustained in 1993 when a coal silo was
unavailable during repairs. Recoveries under this claim are not expected
to be material.
13<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
There is a pending suit in Circuit Court for Mingo County, West
Virginia, filed September 3, 1993, by the administrator of an estate of a
deceased employee of Mingo Logan. The employee died in an accident
involving the longwall mining equipment at the Mountaineer Mine. The suit
is based on product liability, breach of warranty, and negligence claims
against Mingo Logan and other unrelated defendants, including the equipment
manufacturer, and seeks compensatory and punitive damages of $45 million.
Mingo Logan denies responsibility for the accident, and the Company
believes that the claim will not have a material adverse effect on its
consolidated financial condition, results of operations, or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Stockholders was held on
April 29, 1994, at the Ashland Coal Headquarters Building, 2205 Fifth
Street Road, Huntington, West Virginia, at 10:30 a.m.
(b) At such Annual Meeting, the holders of the Company's Common
Stock elected the following nominees for director:
<TABLE>
<CAPTION>
Votes
Nominee For Against Withheld Abstentions/Broker Non-Votes
<S> <C> <C> <C> <C>
Robert A. Charpie 11,797,716 - 48,146 -
Paul W. Chellgren 11,797,919 - 47,943 -
Thomas L. Feazell 11,808,560 - 37,302 -
Robert L. Hintz 11,794,401 - 51,461 -
William C. Payne 11,797,619 - 48,243 -
J. Marvin Quin 11,808,660 - 37,202 -
Robert E. Yancey, Jr. 11,795,761 - 50,101 -
</TABLE>
The holders of the Company's Class B and C Preferred Stock elected the
following nominees for director:
<TABLE>
<CAPTION>
Votes
Nominee For Against Withheld Abstentions/Broker Non-Votes
<S> <C> <C> <C> <C>
Werner Externbrink 250 - - -
Michael G. Ziesler 250 - - -
Juan Antonio Ferrando 250 - - -
</TABLE>
(c) At such Annual Meeting, the Company's stockholders by a vote
of 16,427,172 for and 2,552 against, with 2,638 abstentions, ratified the
appointment of Ernst & Young as the Company's independent auditors for
1994. Voting on this matter assumed, as required by the Company's Amended
By-laws, conversion of the Class B and Class C Preferred Stock into Common
Stock immediately prior to the record date for such meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Form of Agreement between directors of Ashland Coal, Inc.
and Ashland Coal, Inc., providing for indemnification
of such directors by Ashland Coal to the extent
permitted by Delaware law.
10.2 Form of Agreement between certain officers of Ashland
Coal, Inc. and Ashland Coal, Inc., providing for
indemnification of such officers by Ashland Coal to the
extent permitted by Delaware law.
14<PAGE>
(b) Reports on Form 8-K
The following reports on Form 8-K were filed with the Securities and
Exchange Commission during the period covered by this Report:
(i) Current Report on Form 8-K dated January 4, 1994,
reporting that certain holders of Ashland Coal's common
stock have elected to take advantage of the Company's offer
to maintain for an additional year the effectiveness of the
shelf registration statement, as amended, currently
registering such holders' shares for public offering.
(ii) Current Report on Form 8-K dated February 16, 1994,
commenting on anticipated first quarter 1994 earnings.
15<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ASHLAND COAL, INC.
(Registrant)
Date: May 9, 1994 /s/ William M. Gerrick
William M. Gerrick
Controller (Chief Accounting Officer)
Date: May 9, 1994 /s/ Roy F. Layman
Roy F. Layman
Administrative Vice President
and Secretary
16<PAGE>
Ashland Coal, Inc.
Form 10-Q for Quarter Ended March 31, 1994
INDEX TO EXHIBITS
ITEM
10.1 Form of Agreement between directors of
Ashland Coal, Inc. and Ashland Coal, Inc.,
providing for indemnification of such
directors by Ashland Coal to the extent
permitted by Delaware law.
10.2 Form of Agreement between certain officers of
Ashland Coal, Inc. and Ashland Coal, Inc.,
providing for indemnification of such
officers by Ashland Coal to the extent
permitted by Delaware law.
17<PAGE>
EXHIBIT 10.1
1<PAGE>
AGREEMENT
This Agreement, made and entered into this ____ day
of _____________, 1994 ("Agreement"), by and between Ashland
Coal, Inc., a Delaware corporation ("Company"), and
___________________("Indemnitee"):
WHEREAS, highly competent persons are becoming more
reluctant to serve publicly-held corporations as directors or
in other capacities unless they are provided with adequate
protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of
the corporation; and
WHEREAS, the current impracticability of obtaining
adequate insurance and the uncertainties relating to in-
demnification have increased the difficulty of attracting and
retaining such persons;
WHEREAS, the Board of Directors of the Company has
determined that the inability to attract and retain such
persons is detrimental to the best interests of the Company's
stockholders and that the Company should act to assure such
persons that there will be increased certainty of such pro-
tection in the future; and
WHEREAS, it is reasonable, prudent and necessary
for the Company contractually to obligate itself to indemnify
such persons to the fullest extent permitted by applicable
law so that they will agree to initially serve or continue to
serve the Company free from undue concern that they will not
be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue
to serve and to take on additional service for or on behalf
of the Company on the condition that he be so indemnified;
NOW, THEREFORE, in consideration of the premises
and the covenants contained herein, the Company and Indem-
nitee do hereby covenant and agree as follows:
Section 1. Services by Indemnitee. Indemnitee
agrees to serve as a director of the Company. Indemnitee may
at any time and for any reason resign from such position
(subject to any other contractual obligation or any obli-
2<PAGE>
gation imposed by operation of law), in which event the
Company shall have no obligation under this Agreement to
continue Indemnitee in such position.
Section 2. Indemnification - General. The Company
shall indemnify, and advance Expenses (as hereinafter
defined) to, Indemnitee (a) as provided in this Agreement and
(b) to the fullest extent permitted by applicable law in
effect on the date hereof and as amended from time to time
thereafter. The rights of Indemnitee provided under the pre-
ceding sentence shall include, but shall not be limited to,
the rights set forth in the other Sections of this Agreement.
Section 3. Proceedings Other Than Proceedings by
or in the Right of the Company. Indemnitee shall be entitled
to the rights of indemnification provided in this Section 3
if, by reason of his Corporate Status (as hereinafter de-
fined), he is, or is threatened to be made, a party to any
threatened, pending, or completed Proceeding (as hereinafter
defined), other than a Proceeding by or in the right of the
Company, regardless of whether the events or actions giving
rise to the Proceeding occurred prior to or after the
Effective Date. Pursuant to this Section 3, Indemnitee shall
be indemnified against all Expenses, judgments, penalties,
fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such Pro-
ceeding or any claim, issue or matter therein, if he acted in
good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Company and, with
respect to any criminal Proceeding, had no reasonable cause
to believe his conduct was unlawful.
Section 4. Proceedings by or in the Right of the
Company. Indemnitee shall be entitled to the rights of in-
demnification provided in this Section 4 if, by reason of his
Corporate Status, he is, or is threatened to be made, a party
to any threatened, pending or completed Proceeding brought by
or in the right of the Company to procure a judgment in its
favor, regardless of whether the events or actions giving
rise to the Proceeding occurred prior to or after the
Effective Date. Pursuant to this Section, Indemnitee shall
be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection with such Pro-
ceeding if he acted in good faith and in a manner he reason-
ably believed to be in or not opposed to the best interests
of the Company; provided, however, that, if applicable law so
provides, no indemnification against such Expenses shall be
made in respect of any claim, issue or matter in such Pro-
ceeding as to which Indemnitee shall have been adjudged to be
liable to the Company unless and to the extent that the Court
3<PAGE>
of Chancery of the State of Delaware, or the court in which
such Proceeding shall have been brought or is pending, shall
determine that such indemnification may be made.
Section 5. Indemnification for Expenses of a Party
Who is Wholly or Partly Successful. Notwithstanding any
other provision of this Agreement, to the extent that In-
demnitee is, by reason of his Corporate Status, a party to
and is successful, on the merits or otherwise, in any Pro-
ceeding, regardless of whether the events or actions giving
rise to the Proceeding occurred prior to or after the
Effective Date, he shall be indemnified against all Expenses
actually and reasonably incurred by him or on his behalf in
connection therewith. If Indemnitee is not wholly successful
in such Proceeding but is successful, on the merits or other-
wise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify In-
demnitee against all Expenses actually and reasonably
incurred by him or on his behalf in connection with each
successfully resolved claim, issue or matter. For purposes
of this Section and without limitation, the termination of
any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
Section 6. Indemnification for Expenses of a
Witness. Notwithstanding any other provision of this Agree-
ment, to the extent that Indemnitee is, by reason of his
Corporate Status, a witness in any Proceeding to which In-
demnitee is not a party, regardless of whether the events or
actions giving rise to the Proceeding occurred prior to or
after the Effective Date, he shall be indemnified against all
Expenses actually and reasonably incurred by him or on his
behalf in connection therewith.
Section 7. Advancement of Expenses. The Company
shall advance all reasonable Expenses incurred by or on
behalf of Indemnitee in connection with any Proceeding,
regardless of whether the events or actions giving rise to
the Proceeding occurred prior to or after the Effective Date
within ten days after the receipt by the Company of a
statement or statements from Indemnitee requesting such
advance or advances from time to time, whether prior to or
after final disposition of such Proceeding. Such statement
or statements shall reasonably evidence the Expenses incurred
by Indemnitee and shall include or be preceded or accompanied
by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that
Indemnitee is not entitled to be indemnified against such
Expenses.
4<PAGE>
Section 8. Procedure for Determination of Entitle-
ment to Indemnification.
(a) To obtain indemnification under this
Agreement, Indemnitee shall submit to the Company a written
request, including therein or therewith such documentation
and information as is reasonably available to Indemnitee and
is reasonably necessary to determine whether and to what ex-
tent Indemnitee is entitled to indemnification. The Sec-
retary of the Company shall, promptly upon receipt of such a
request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for
indemnification pursuant to the first sentence of Section
8(a) hereof, a determination, if required by applicable law,
with respect to Indemnitee's entitlement thereto shall be
made in the specific case: (i) if a Change in Control (as
hereinafter defined) shall have occurred, by Independent
Counsel (as hereinafter defined) in a written opinion to the
Board of Directors, a copy of which shall be delivered to
Indemnitee; or (ii) if a Change of Control shall not have
occurred, (A) by the Board of Directors by a majority vote of
a quorum consisting of Disinterested Directors (as herein-
after defined), or (B) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or,
even if obtainable, such quorum of Disinterested Directors so
directs, by Independent Counsel in a written opinion to the
Board of Directors, a copy of which shall be delivered to
Indemnitee or (C) if so directed by the Board of Directors,
by the stockholders of the Company; and, if it is so deter-
mined that Indemnitee is entitled to indemnification, payment
to Indemnitee shall be made within ten (10) days after such
determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including
providing to such person, persons or entity upon reasonable
advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which
is reasonably available to Indemnitee and reasonably neces-
sary to such determination. Any costs or expenses (including
attorneys' fees and disbursements) incurred by Indemnitee in
so cooperating with the person, persons or entity making such
determination shall be borne by the Company (irrespective of
the determination as to Indemnitee's entitlement to indemni-
fication) and the Company hereby indemnifies and agrees to
hold Indemnitee harmless therefrom.
(c) In the event the determination of en-
titlement to indemnification is to be made by Independent
5<PAGE>
Counsel pursuant to Section 8(b) hereof, the Independent
Counsel shall be selected as provided in this Section 8(c).
If a Change of Control shall not have occurred, the Indepen-
dent Counsel shall be selected by the Board of Directors, and
the Company shall give written notice to Indemnitee advising
him of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent
Counsel shall be selected by Indemnitee (unless Indemnitee
shall request that such selection be made by the Board of
Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the
Company advising it of the identity of the Independent
Counsel so selected. In either event, Indemnitee or the
Company, as the case may be, may, within 10 days after such
written notice of selection shall have been given, deliver to
the Company or to Indemnitee, as the case may be, a written
objection to such selection; provided, however, that such
objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the require-
ments of "Independent Counsel" as defined in Section 16 of
this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such
written objection is so made and substantiated, the
Independent Counsel so selected may not serve as Independent
Counsel unless and until such objection is withdrawn or a
court has determined that such objection is without merit.
If, within 20 days after submission by Indemnitee of a
written request for indemnification pursuant to Section 8(a)
hereof, no Independent Counsel shall have been selected and
not objected to, either the Company or Indemnitee may
petition the Court of Chancery of the State of Delaware or
other court of competent jurisdiction for resolution of any
objection which shall have been made by the Company or
Indemnitee to the other's selection of Independent Counsel
and/or for the appointment as Independent Counsel of a person
selected by the Court or by such other person as the Court
shall designate, and the person with respect to whom all
objections are so resolved or the person so appointed shall
act as Independent Counsel under Section 8(b) hereof. The
Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in
connection with acting pursuant to Section 8(b) hereof, and
the Company shall pay all reasonable fees and expenses
incident to the procedures of this Section 8(c), regardless
of the manner in which such Independent Counsel was selected
or appointed. Upon the due commencement of any judicial
proceeding or arbitration pursuant to Section 10(a)(iii) of
this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity
6<PAGE>
(subject to the applicable standards of professional conduct
then prevailing).
Section 9. Presumptions and Effect of Certain Pro-
ceedings.
(a) If a Change of Control shall have oc-
curred, in making a determination with respect to entitlement
to indemnification hereunder, the person or persons or entity
making such determination shall presume that Indemnitee is
entitled to indemnification under this Agreement if Indem-
nitee has submitted a request for indemnification in accor-
dance with Section 8(a) of this Agreement, and the Company
shall have the burden of proof to overcome that presumption
in connection with the making by any person, persons or
entity of any determination contrary to that presumption.
(b) The termination of any Proceeding or of
any claim, issue or matter therein, by judgment, order, set-
tlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the
right of Indemnitee to indemnification or create a presump-
tion that Indemnitee did not act in good faith and in a
manner which he reasonably believed to be in or not opposed
to the best interests of the Company or, with respect to any
criminal Proceeding, that Indemnitee had reasonable cause to
believe that his conduct was unlawful.
Section 10. Remedies of Indemnitee.
(a) In the event that (i) a determination is
made pursuant to Section 8 of this Agreement that Indemnitee
is not entitled to indemnification under this Agreement, (ii)
advancement of Expenses is not timely made pursuant to Sec-
tion 7 of this Agreement, (iii) no determination of entitle-
ment to indemnification shall have been made pursuant to
Section 8(b) of this Agreement within 90 days after receipt
by the Company of the request for indemnification, (iv) pay-
ment of indemnification is not made pursuant to Section 5 or
6 of this Agreement within ten (10) days after receipt by the
Company of a written request therefor, or (v) payment of
indemnification is not made within ten (10) days after a
determination has been made that Indemnitee is entitled to
indemnification, Indemnitee shall be entitled to an adjudica-
tion in an appropriate court of the State of Delaware, or in
any other court of competent jurisdiction, of his entitlement
to such indemnification or advancement of Expenses. Alterna-
tively, Indemnitee, at his option, may seek an award in
7<PAGE>
arbitration to be conducted by a single arbitrator pursuant
to the Commercial Arbitration Rules of the American Arbitra-
tion Association. Indemnitee shall commence such proceeding
seeking an adjudication or an award in arbitration within 180
days following the date on which Indemnitee first has the
right to commence such proceeding pursuant to this Section
10(a); provided, however, that the foregoing clause shall not
apply in respect of a proceeding brought by Indemnitee to
enforce his rights under Section 5 of this Agreement.
(b) In the event that a determination shall
have been made pursuant to Section 8(b) of this Agreement
that Indemnitee is not entitled to indemnification, any
judicial proceeding or arbitration commenced pursuant to this
Section 10 shall be conducted in all respects as a de novo
trial, or arbitration, on the merits and Indemnitee shall not
be prejudiced by reason of that adverse determination. If a
Change of Control shall have occurred, in any judicial pro-
ceeding or arbitration commenced pursuant to this Section 10
the Company shall have the burden of proving that Indemnitee
is not entitled to indemnification or advancement of Ex-
penses, as the case may be.
(c) If a determination shall have been made
pursuant to Section 8(b) of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by
such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 10, absent (i) a mis-
statement by Indemnitee of a material fact, or an omission of
a material fact necessary to make Indemnitee's statement not
materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnifica-
tion under applicable law.
(d) In the event that Indemnitee, pursuant to
this Section 10, seeks a judicial adjudication of or an award
in arbitration to enforce his rights under, or to recover
damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indem-
nified by the Company against, any and all expenses (of the
types described in the definition of Expenses in Section 16
of this Agreement) actually and reasonably incurred by him in
such judicial adjudication or arbitration, but only if he
prevails therein. If it shall be determined in said judicial
adjudication or arbitration that Indemnitee is entitled to
receive part but not all of the indemnification or advance-
ment of expenses sought, the expenses incurred by Indemnitee
in connection with such judicial adjudication or arbitration
shall be appropriately prorated.
8<PAGE>
Section 11. Non-Exclusivity; Survival of Rights;
Insurance; Subrogation.
(a) The rights of indemnification and to
receive advancement of Expenses as provided by this Agreement
shall not be deemed exclusive of any other rights to which
Indemnitee may at any time be entitled under applicable law,
the Certificate of Incorporation, the By-Laws, any agreement,
a vote of stockholders or a resolution of directors, or
otherwise. No amendment, alteration or repeal of this Agree-
ment or of any provision hereof shall limit or restrict any
right of Indemnitee under this Agreement in respect of any
action taken or omitted by such Indemnitee in his Corporate
Status prior to such amendment, alteration or repeal.
(b) In addition to the rights to
indemnification and advancement of expenses provided in this
Agreement, to the extent that the Company maintains an
insurance policy or policies providing liability insurance
for directors, officers, employees, or agents of the Company
or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall
be covered by such policy or policies in accordance with its
or their terms to the maximum extent of the coverage avail-
able for any such director, officer, employee or agent under
such policy or policies.
(c) In the event of any payment under this
Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery of Indemnitee,
who shall execute all papers required and take all action
necessary to secure such rights, including execution of such
documents as are necessary to enable the Company to bring
suit to enforce such rights.
(d) The Company shall not be liable under
this Agreement to make any payment of amounts otherwise in-
demnifiable hereunder if and to the extent that Indemnitee
has otherwise actually received such payment under any in-
surance policy, contract, agreement or otherwise.
Section 12. Severability. If any provision or
provisions of this Agreement shall be held to be invalid,
illegal or unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining pro-
visions of this Agreement (including without limitation, each
portion of any Section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall not in
9<PAGE>
any way be affected or impaired thereby; and (b) to the
fullest extent possible, the provisions of this Agreement
(including, without limitation, each portion of any Section
of this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as
to give effect to the intent manifested thereby.
Section 13. Exception to Right of Indemnification
or Advancement of Expenses. Notwithstanding any other pro-
vision of this Agreement, Indemnitee shall not be entitled to
indemnification or advancement of Expenses under this Agree-
ment with respect to any Proceeding brought by Indemnitee, or
any claim therein prior to a Change in Control, unless the
bringing of such Proceeding or making of such claim shall
have been approved by the Board of Directors.
Section 14. Identical Counterparts. This Agree-
ment may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original but
all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party
against whom enforceability is sought needs to be produced to
evidence the existence of this Agreement.
Section 15. Headings. The headings of the para-
graphs of this Agreement are inserted for convenience only
and shall not be deemed to constitute part of this Agreement
or to affect the construction thereof.
Section 16. Definitions. For purposes of this
Agreement:
(a) "Change in Control" means a change in
control of the Company occurring after the Effective Date of
a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A (or in response
to any similar item on any similar schedule or form) prom-
ulgated under the Securities Exchange Act of 1934 (the
"Act"), whether or not the Company is then subject to such
reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have
occurred if after the Effective Date (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Act) is
or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power
of the Company's then outstanding securities without the
prior approval of at least two-thirds of the members of the
Board of Directors in office immediately prior to such person
10<PAGE>
attaining such percentage interest; (ii) there occurs a proxy
contest, or the Company is a party to a merger, con-
solidation, sale of assets, plan of liquidation or other
reorganization not approved by at least two-thirds of the
members of the Board of Directors then in office, as a
consequence of which members of the Board of Directors in
office immediately prior to such transaction or event
constitute less than a majority of the Board of Directors
thereafter; or (iii) during any period of two consecutive
years, other than as a result of an event described in clause
(a)(ii) of this Section 16, individuals who at the beginning
of such period constituted the Board of Directors (including
for this purpose any new director whose election or nomina-
tion for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of such period)
cease for any reason to constitute at least a majority of the
Board of Directors.
(b) "Corporate Status" describes the status
of a person who is or was a director, officer, employee or
agent of the Company or of any other corporation, partner-
ship, joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request
of the Company.
(c) "Disinterested Director" means a director
of the Company who is not and was not a party to the Proceed-
ing in respect of which indemnification is sought by Indem-
nitee.
(d) "Effective Date" means ______________,
199_.
(e) "Expenses" shall include all reasonable
attorneys' fees, retainers, court costs, transcript costs,
fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements
or expenses of the types customarily incurred in connection
with prosecuting, defending, preparing to prosecute or
defend, investigating, or being or preparing to be a witness
in a Proceeding.
(f) "Independent Counsel" means a law firm,
or a member of a law firm, that is experienced in matters of
corporation law and neither presently is, nor in the past two
years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or
(ii) any other party to the Proceeding giving rise to a claim
11<PAGE>
for indemnification hereunder. Notwithstanding the fore-
going, the term "Independent Counsel" shall not include any
person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to
determine Indemnitee's rights under this Agreement.
(g) "Proceeding" includes any action, suit,
arbitration, mediation, mini-trial, alternate dispute
resolution mechanism, investigation, administrative hearing
or any other proceeding, whether civil, criminal,
administrative or investigative, except one (i) initiated by
an Indemnitee pursuant to Section 10 of this Agreement to
enforce his rights under this Agreement or (ii) pending on or
before the Effective Date.
Section 17. Modification and Waiver. No supple-
ment, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
Section 18. Notice by Indemnitee. Indemnitee
agrees promptly to notify the Company in writing upon being
served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification
or advancement of Expenses covered hereunder.
Section 19. Notices. All notices, requests,
demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or
(ii) mailed by certified or registered mail with postage
prepaid, on the third business day after the date on which it
is so mailed:
(a) If to Indemnitee, to:
[Name]
[Address]
(b) If to the Company to:
Roy F. Layman
Ashland Coal, Inc.
P. O. Box 6300
Huntington, WV 25771
12<PAGE>
or to such other address as may have been furnished to In-
demnitee by the Company or to the Company by Indemnitee, as
the case may be.
Section 20. Governing Law. The parties agree that
this Agreement shall be governed by, and construed and en-
forced in accordance with, the laws of the State of Delaware.
Section 21. Miscellaneous. Use of the masculine
pronoun shall be deemed to include usage of the feminine
pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the day and year first above
written.
ATTEST:
ASHLAND COAL, INC.
By_________________________
By____________________________
______________________________
[Name]
Address:
13<PAGE>
EXHIBIT 10.2
1<PAGE>
AGREEMENT
This Agreement, made and entered into this ____ day
of _____________, 1994 ("Agreement"), by and between Ashland
Coal, Inc., a Delaware corporation ("Company"), and
___________________________ ("Indemnitee"):
WHEREAS, highly competent persons are becoming more
reluctant to serve publicly-held corporations as officers or
in other positions which entail inordinate risks of claims
and actions against them arising out of their service to and
activities on behalf of the corporation unless they are
provided with adequate protection through insurance and/or
indemnification against such risks; and
WHEREAS, the current impracticability of obtaining
adequate insurance and the uncertainties relating to in-
demnification have increased the difficulty of attracting and
retaining such persons; and
WHEREAS, the Board of Directors of the Company has
determined that the inability to attract and retain such
persons is detrimental to the best interests of the Company's
stockholders and that the Company should act to assure such
persons that there will be increased certainty of such pro-
tection in the future; and
WHEREAS, it is reasonable, prudent and necessary
for the Company contractually to obligate itself to indemnify
such persons to the fullest extent permitted by applicable
law so that they will agree to initially serve or continue to
serve the Company free from undue concern that they will not
be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue
to serve and to take on additional service for or on behalf
of the Company on the condition that he be so indemnified;
and
WHEREAS, Indemnitee agrees and acknowledges that
this Agreement is not an employment agreement, is
specifically designed only to govern the Indemnitee's rights
to indemnification and affects no other aspect, term or
condition of the Indemnitee's employment.
NOW, THEREFORE, in consideration of the premises
and the covenants contained herein, the Company and Indem-
nitee do hereby covenant and agree as follows:
2<PAGE>
Section 1. Services by Indemnitee. Indemnitee
agrees to serve as an officer of the Company. Indemnitee may
at any time and for any reason resign from such position
(subject to any other contractual obligation or any obli-
gation imposed by operation of law), in which event the
Company shall have no obligation under this Agreement to
continue Indemnitee in such position.
Section 2. Indemnification - General. The Company
shall indemnify, and advance Expenses (as hereinafter
defined) to, Indemnitee (a) as provided in this Agreement and
(b) to the fullest extent permitted by applicable law in
effect on the date hereof and as amended from time to time
thereafter. The rights of Indemnitee provided under the pre-
ceding sentence shall include, but shall not be limited to,
the rights set forth in the other Sections of this Agreement.
Section 3. Proceedings Other Than Proceedings by
or in the Right of the Company. Indemnitee shall be entitled
to the rights of indemnification provided in this Section 3
if, by reason of his Corporate Status (as hereinafter de-
fined), he is, or is threatened to be made, a party to any
threatened, pending, or completed Proceeding (as hereinafter
defined), other than a Proceeding by or in the right of the
Company, regardless of whether the events or actions giving
rise to the Proceeding occurred prior to or after the
Effective Date. Pursuant to this Section 3, Indemnitee shall
be indemnified against all Expenses, judgments, penalties,
fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such Pro-
ceeding or any claim, issue or matter therein, if he acted in
good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Company and, with
respect to any criminal Proceeding, had no reasonable cause
to believe his conduct was unlawful.
Section 4. Proceedings by or in the Right of the
Company. Indemnitee shall be entitled to the rights of in-
demnification provided in this Section 4 if, by reason of his
Corporate Status, he is, or is threatened to be made, a party
to any threatened, pending or completed Proceeding brought by
or in the right of the Company to procure a judgment in its
favor, regardless of whether the events or actions giving
rise to the Proceeding occurred prior to or after the
Effective Date. Pursuant to this Section, Indemnitee shall
be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection with such Pro-
ceeding if he acted in good faith and in a manner he reason-
ably believed to be in or not opposed to the best interests
of the Company; provided, however, that, if applicable law so
provides, no indemnification against such Expenses shall be
made in respect of any claim, issue or matter in such Pro-
3<PAGE>
ceeding as to which Indemnitee shall have been adjudged to be
liable to the Company unless and to the extent that the Court
of Chancery of the State of Delaware, or the court in which
such Proceeding shall have been brought or is pending, shall
determine that such indemnification may be made.
Section 5. Indemnification for Expenses of a Party
Who is Wholly or Partly Successful. Notwithstanding any
other provision of this Agreement, to the extent that In-
demnitee is, by reason of his Corporate Status, a party to
and is successful, on the merits or otherwise, in any Pro-
ceeding, regardless of whether the events or actions giving
rise to the Proceeding occurred prior to or after the
Effective Date, he shall be indemnified against all Expenses
actually and reasonably incurred by him or on his behalf in
connection therewith. If Indemnitee is not wholly successful
in such Proceeding but is successful, on the merits or other-
wise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify In-
demnitee against all Expenses actually and reasonably
incurred by him or on his behalf in connection with each
successfully resolved claim, issue or matter. For purposes
of this Section and without limitation, the termination of
any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
Section 6. Indemnification for Expenses of a
Witness. Notwithstanding any other provision of this Agree-
ment, to the extent that Indemnitee is, by reason of his
Corporate Status, a witness in any Proceeding to which In-
demnitee is not a party, regardless of whether the events or
actions giving rise to the Proceeding occurred prior to or
after the Effective Date, he shall be indemnified against all
Expenses actually and reasonably incurred by him or on his
behalf in connection therewith.
Section 7. Advancement of Expenses. The Company
shall advance all reasonable Expenses incurred by or on
behalf of Indemnitee in connection with any Proceeding,
regardless of whether the events or actions giving rise to
the Proceeding occurred prior to or after the Effective Date
within ten days after the receipt by the Company of a
statement or statements from Indemnitee requesting such
advance or advances from time to time, whether prior to or
after final disposition of such Proceeding. Such statement
or statements shall reasonably evidence the Expenses incurred
by Indemnitee and shall include or be preceded or accompanied
by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that
4<PAGE>
Indemnitee is not entitled to be indemnified against such
Expenses.
Section 8. Procedure for Determination of Entitle-
ment to Indemnification.
(a) To obtain indemnification under this
Agreement, Indemnitee shall submit to the Company a written
request, including therein or therewith such documentation
and information as is reasonably available to Indemnitee and
is reasonably necessary to determine whether and to what ex-
tent Indemnitee is entitled to indemnification. The Sec-
retary of the Company shall, promptly upon receipt of such a
request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for
indemnification pursuant to the first sentence of Section
8(a) hereof, a determination, if required by applicable law,
with respect to Indemnitee's entitlement thereto shall be
made in the specific case: (i) if a Change in Control (as
hereinafter defined) shall have occurred, by Independent
Counsel (as hereinafter defined) in a written opinion to the
Board of Directors, a copy of which shall be delivered to
Indemnitee; or (ii) if a Change of Control shall not have
occurred, (A) by the Board of Directors by a majority vote of
a quorum consisting of Disinterested Directors (as herein-
after defined), or (B) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or,
even if obtainable, such quorum of Disinterested Directors so
directs, by Independent Counsel in a written opinion to the
Board of Directors, a copy of which shall be delivered to
Indemnitee or (C) if so directed by the Board of Directors,
by the stockholders of the Company; and, if it is so deter-
mined that Indemnitee is entitled to indemnification, payment
to Indemnitee shall be made within ten (10) days after such
determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including
providing to such person, persons or entity upon reasonable
advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which
is reasonably available to Indemnitee and reasonably neces-
sary to such determination. Any costs or expenses (including
attorneys' fees and disbursements) incurred by Indemnitee in
so cooperating with the person, persons or entity making such
determination shall be borne by the Company (irrespective of
the determination as to Indemnitee's entitlement to indemni-
fication) and the Company hereby indemnifies and agrees to
hold Indemnitee harmless therefrom.
5<PAGE>
(c) In the event the determination of en-
titlement to indemnification is to be made by Independent
Counsel pursuant to Section 8(b) hereof, the Independent
Counsel shall be selected as provided in this Section 8(c).
If a Change of Control shall not have occurred, the Indepen-
dent Counsel shall be selected by the Board of Directors, and
the Company shall give written notice to Indemnitee advising
him of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent
Counsel shall be selected by Indemnitee (unless Indemnitee
shall request that such selection be made by the Board of
Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the
Company advising it of the identity of the Independent
Counsel so selected. In either event, Indemnitee or the
Company, as the case may be, may, within 10 days after such
written notice of selection shall have been given, deliver to
the Company or to Indemnitee, as the case may be, a written
objection to such selection; provided, however, that such
objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the require-
ments of "Independent Counsel" as defined in Section 16 of
this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such
written objection is so made and substantiated, the
Independent Counsel so selected may not serve as Independent
Counsel unless and until such objection is withdrawn or a
court has determined that such objection is without merit.
If, within 20 days after submission by Indemnitee of a
written request for indemnification pursuant to Section 8(a)
hereof, no Independent Counsel shall have been selected and
not objected to, either the Company or Indemnitee may
petition the Court of Chancery of the State of Delaware or
other court of competent jurisdiction for resolution of any
objection which shall have been made by the Company or
Indemnitee to the other's selection of Independent Counsel
and/or for the appointment as Independent Counsel of a person
selected by the Court or by such other person as the Court
shall designate, and the person with respect to whom all
objections are so resolved or the person so appointed shall
act as Independent Counsel under Section 8(b) hereof. The
Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in
connection with acting pursuant to Section 8(b) hereof, and
the Company shall pay all reasonable fees and expenses
incident to the procedures of this Section 8(c), regardless
of the manner in which such Independent Counsel was selected
or appointed. Upon the due commencement of any judicial
proceeding or arbitration pursuant to Section 10(a)(iii) of
this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity
6<PAGE>
(subject to the applicable standards of professional conduct
then prevailing).
Section 9. Presumptions and Effect of Certain Pro-
ceedings.
(a) If a Change of Control shall have oc-
curred, in making a determination with respect to entitlement
to indemnification hereunder, the person or persons or entity
making such determination shall presume that Indemnitee is
entitled to indemnification under this Agreement if Indem-
nitee has submitted a request for indemnification in accor-
dance with Section 8(a) of this Agreement, and the Company
shall have the burden of proof to overcome that presumption
in connection with the making by any person, persons or
entity of any determination contrary to that presumption.
(b) The termination of any Proceeding or of
any claim, issue or matter therein, by judgment, order, set-
tlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the
right of Indemnitee to indemnification or create a presump-
tion that Indemnitee did not act in good faith and in a
manner which he reasonably believed to be in or not opposed
to the best interests of the Company or, with respect to any
criminal Proceeding, that Indemnitee had reasonable cause to
believe that his conduct was unlawful.
Section 10. Remedies of Indemnitee.
(a) In the event that (i) a determination is
made pursuant to Section 8 of this Agreement that Indemnitee
is not entitled to indemnification under this Agreement, (ii)
advancement of Expenses is not timely made pursuant to Sec-
tion 7 of this Agreement, (iii) no determination of entitle-
ment to indemnification shall have been made pursuant to
Section 8(b) of this Agreement within 90 days after receipt
by the Company of the request for indemnification, (iv) pay-
ment of indemnification is not made pursuant to Section 5 or
6 of this Agreement within ten (10) days after receipt by the
Company of a written request therefor, or (v) payment of
indemnification is not made within ten (10) days after a
determination has been made that Indemnitee is entitled to
indemnification, Indemnitee shall be entitled to an adjudica-
tion in an appropriate court of the State of Delaware, or in
any other court of competent jurisdiction, of his entitlement
to such indemnification or advancement of Expenses. Alterna-
tively, Indemnitee, at his option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant
to the Commercial Arbitration Rules of the American Arbitra-
tion Association. Indemnitee shall commence such proceeding
7<PAGE>
seeking an adjudication or an award in arbitration within 180
days following the date on which Indemnitee first has the
right to commence such proceeding pursuant to this Section
10(a); provided, however, that the foregoing clause shall not
apply in respect of a proceeding brought by Indemnitee to
enforce his rights under Section 5 of this Agreement.
(b) In the event that a determination shall
have been made pursuant to Section 8(b) of this Agreement
that Indemnitee is not entitled to indemnification, any
judicial proceeding or arbitration commenced pursuant to this
Section 10 shall be conducted in all respects as a de novo
trial, or arbitration, on the merits and Indemnitee shall not
be prejudiced by reason of that adverse determination. If a
Change of Control shall have occurred, in any judicial pro-
ceeding or arbitration commenced pursuant to this Section 10
the Company shall have the burden of proving that Indemnitee
is not entitled to indemnification or advancement of Ex-
penses, as the case may be.
(c) If a determination shall have been made
pursuant to Section 8(b) of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by
such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 10, absent (i) a mis-
statement by Indemnitee of a material fact, or an omission of
a material fact necessary to make Indemnitee's statement not
materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnifica-
tion under applicable law.
(d) In the event that Indemnitee, pursuant to
this Section 10, seeks a judicial adjudication of or an award
in arbitration to enforce his rights under, or to recover
damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indem-
nified by the Company against, any and all expenses (of the
types described in the definition of Expenses in Section 16
of this Agreement) actually and reasonably incurred by him in
such judicial adjudication or arbitration, but only if he
prevails therein. If it shall be determined in said judicial
adjudication or arbitration that Indemnitee is entitled to
receive part but not all of the indemnification or advance-
ment of expenses sought, the expenses incurred by Indemnitee
in connection with such judicial adjudication or arbitration
shall be appropriately prorated.
8<PAGE>
Section 11. Non-Exclusivity; Survival of Rights;
Insurance; Subrogation.
(a) The rights of indemnification and to
receive advancement of Expenses as provided by this Agreement
shall not be deemed exclusive of any other rights to which
Indemnitee may at any time be entitled under applicable law,
the Certificate of Incorporation, the By-Laws, any agreement,
a vote of stockholders or a resolution of directors, or
otherwise. No amendment, alteration or repeal of this Agree-
ment or of any provision hereof shall limit or restrict any
right of Indemnitee under this Agreement in respect of any
action taken or omitted by such Indemnitee in his Corporate
Status prior to such amendment, alteration or repeal.
(b) In addition to the rights to
indemnification and advancement of expenses provided in this
Agreement, to the extent that the Company maintains an
insurance policy or policies providing liability insurance
for directors, officers, employees, or agents of the Company
or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall
be covered by such policy or policies in accordance with its
or their terms to the maximum extent of the coverage avail-
able for any such director, officer, employee or agent under
such policy or policies.
(c) In the event of any payment under this
Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery of Indemnitee,
who shall execute all papers required and take all action
necessary to secure such rights, including execution of such
documents as are necessary to enable the Company to bring
suit to enforce such rights.
(d) The Company shall not be liable under
this Agreement to make any payment of amounts otherwise in-
demnifiable hereunder if and to the extent that Indemnitee
has otherwise actually received such payment under any in-
surance policy, contract, agreement or otherwise.
Section 12. Severability. If any provision or
provisions of this Agreement shall be held to be invalid,
illegal or unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining pro-
visions of this Agreement (including without limitation, each
portion of any Section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby; and (b) to the
fullest extent possible, the provisions of this Agreement
9<PAGE>
(including, without limitation, each portion of any Section
of this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as
to give effect to the intent manifested thereby.
Section 13. Exception to Right of Indemnification
or Advancement of Expenses. Notwithstanding any other pro-
vision of this Agreement, Indemnitee shall not be entitled to
indemnification or advancement of Expenses under this Agree-
ment with respect to any Proceeding brought by Indemnitee, or
any claim therein prior to a Change in Control, unless the
bringing of such Proceeding or making of such claim shall
have been approved by the Board of Directors.
Section 14. Identical Counterparts. This Agree-
ment may be executed in one or more counterparts, each of
which shall for all purposes be deemed to be an original but
all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party
against whom enforceability is sought needs to be produced to
evidence the existence of this Agreement.
Section 15. Headings. The headings of the para-
graphs of this Agreement are inserted for convenience only
and shall not be deemed to constitute part of this Agreement
or to affect the construction thereof.
Section 16. Definitions. For purposes of this
Agreement:
(a) "Change in Control" means a change in
control of the Company occurring after the Effective Date of
a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A (or in response
to any similar item on any similar schedule or form) prom-
ulgated under the Securities Exchange Act of 1934 (the
"Act"), whether or not the Company is then subject to such
reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have
occurred if after the Effective Date (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Act) is
or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power
of the Company's then outstanding securities without the
prior approval of at least two-thirds of the members of the
Board of Directors in office immediately prior to such person
attaining such percentage interest; (ii) there occurs a proxy
contest, or the Company is a party to a merger, con-
solidation, sale of assets, plan of liquidation or other
reorganization not approved by at least two-thirds of the
10<PAGE>
members of the Board of Directors then in office, as a
consequence of which members of the Board of Directors in
office immediately prior to such transaction or event
constitute less than a majority of the Board of Directors
thereafter; or (iii) during any period of two consecutive
years, other than as a result of an event described in clause
(a)(ii) of this Section 16, individuals who at the beginning
of such period constituted the Board of Directors (including
for this purpose any new director whose election or nomina-
tion for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then still
in office who were directors at the beginning of such period)
cease for any reason to constitute at least a majority of the
Board of Directors.
(b) "Corporate Status" describes the status
of a person who is or was a director, officer, employee or
agent of the Company or of any other corporation, partner-
ship, joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request
of the Company.
(c) "Disinterested Director" means a director
of the Company who is not and was not a party to the Proceed-
ing in respect of which indemnification is sought by Indem-
nitee.
(d) "Effective Date" means ______________,
199_.
(e) "Expenses" shall include all reasonable
attorneys' fees, retainers, court costs, transcript costs,
fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements
or expenses of the types customarily incurred in connection
with prosecuting, defending, preparing to prosecute or
defend, investigating, or being or preparing to be a witness
in a Proceeding.
(f) "Independent Counsel" means a law firm,
or a member of a law firm, that is experienced in matters of
corporation law and neither presently is, nor in the past two
years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or
(ii) any other party to the Proceeding giving rise to a claim
for indemnification hereunder. Notwithstanding the fore-
going, the term "Independent Counsel" shall not include any
person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to
determine Indemnitee's rights under this Agreement.
11<PAGE>
(g) "Proceeding" includes any action, suit,
arbitration, mediation, mini-trial, alternate dispute
resolution mechanism, investigation, administrative hearing
or any other proceeding, whether civil, criminal,
administrative or investigative, except one (i) initiated by
an Indemnitee pursuant to Section 10 of this Agreement to
enforce his rights under this Agreement or (ii) pending on or
before the Effective Date.
Section 17. Modification and Waiver. No supple-
ment, modification or amendment of this Agreement shall be
binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
Section 18. Notice by Indemnitee. Indemnitee
agrees promptly to notify the Company in writing upon being
served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification
or advancement of Expenses covered hereunder.
Section 19. Notices. All notices, requests,
demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or
(ii) mailed by certified or registered mail with postage
prepaid, on the third business day after the date on which it
is so mailed:
(a) If to Indemnitee, to:
[Name]
[Address]
(b) If to the Company to:
Roy F. Layman
Ashland Coal, Inc.
P. O. Box 6300
Huntington, WV 25771
or to such other address as may have been furnished to In-
demnitee by the Company or to the Company by Indemnitee, as
the case may be.
12<PAGE>
Section 20. Governing Law. The parties agree that
this Agreement shall be governed by, and construed and en-
forced in accordance with, the laws of the State of Delaware.
Section 21. Miscellaneous. Use of the masculine
pronoun shall be deemed to include usage of the feminine
pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the day and year first above
written.
ATTEST:
ASHLAND COAL, INC.
By_________________________
By_________________________
______________________________
[Name]
Address:
13<PAGE>
