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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
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
COMMISSION FILE NUMBER 1-9993
ASHLAND COAL, INC.
(Exact name of registrant as specified in its charter)
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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)
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Registrant's telephone number, including area code: (304) 526-3333
Securities registered pursuant to Section 12(b) of the Act:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, par value $.01 per share New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
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
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. [ ]
At March 1, 1995, based on the New York Stock Exchange closing price, the
aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $149,905,000. In determining this figure, Ashland
Coal, Inc. has assumed that all of its executive officers and directors, and
persons known to it to be the beneficial owners of more than five percent of its
common stock (assuming conversion of Ashland Coal, Inc. preferred stock), are
affiliates. Such assumption shall not be deemed conclusive for any other
purpose.
At March 1, 1995, there were 13,727,484 shares of registrant's common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Ashland Coal, Inc.'s definitive Proxy Statement, to be filed
with the Securities and Exchange Commission not later than April 30, 1995 (1995
Proxy Statement), are incorporated by reference into Part III of this Form 10-K.
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TABLE OF CONTENTS
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PART I
Item 1. Business..................................................................... 1
Item 2. Properties................................................................... 7
Item 3. Legal Proceedings............................................................ 9
Item 4. Submission of Matters to a Vote of Security Holders.......................... 9
Item X. Executive Officers of the Registrant......................................... 9
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........ 10
Item 6. Selected Financial Data...................................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................ 12
Item 8. Financial Statements and Supplementary Data.................................. 19
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................................... 39
PART III
Item10. Directors and Executive Officers of the Registrant........................... 39
Item11. Executive Compensation....................................................... 39
Item12. Security Ownership of Certain Beneficial Owners and Management............... 39
Item13. Certain Relationships and Related Transactions............................... 39
PART IV
Item14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.............. 40
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PART I.
ITEM 1. Business
Ashland Coal, Inc. (Ashland Coal or the Company) is engaged in the mining,
processing, marketing and distribution of low-sulfur bituminous coal. The
Company sells its coal primarily to electric utilities in the eastern United
States. The Company also exports coal, primarily to European customers. The
Company estimates that as of December 31, 1994, approximately 688 million
recoverable tons of proven and probable coal reserves were held by the Company's
subsidiaries in West Virginia and eastern Kentucky. Ashland Coal was
incorporated in Delaware in 1975.
RECENT DEVELOPMENTS
On February 8, 1995, Ashland Inc. (formerly Ashland Oil, Inc., and
hereafter referred to as Ashland) purchased for approximately $110 million all
150 shares of Ashland Coal Class B Preferred Stock held by Saarbergwerke AG
(Saarberg). Each share of the Company's Class B Preferred Stock is presently
convertible into 18,346 shares of the Company's par value $.01 common stock
(Common Stock). This conversion rate increases to 19,596 shares on August 18,
1998, and to 20,846 shares on August 18, 2003. In addition, the Class B
Preferred Stock receives an annual preference dividend and has special voting
rights in the election of directors. Under Ashland Coal's Restated Certificate
of Incorporation, as amended, a holder of the Class B or Class C Preferred
Stock, voting with other holders of preferred stock as a class and using
cumulative voting, has the right to elect one director to Ashland Coal's Board
of Directors for every 63 shares of such preferred stock held by such holder,
provided that the maximum number of directors that can be elected by voting
preferred stock is three. The remaining directors on the 10-member Board of
Directors are elected by holders of Common Stock. Ashland did not acquire the
Ashland Coal Common Stock held by Saarberg (less than 1%).
The Class B Preferred Stock acquired by Ashland represents approximately
15% of the voting stock of the Company, and the acquisition of such preferred
stock, in combination with Ashland's holdings of Common Stock, results in
Ashland having approximately 54% of the voting power of the Company and gives
Ashland the power to elect a majority of the Company's directors. Ashland's
purchase from Saarberg of the Company's Class B Preferred Stock will result in
the consolidation of the Company's financial statements into Ashland's financial
statements. Approximately 10% of the Company's voting stock is held by Carboex
International, Ltd. (Carboex), a subsidiary of Sociedad Espanola de Carbon
Exterior, S.A., a coal supply firm controlled by Spanish state-owned
corporations. The remaining 36% of the voting stock is held by the public.
The Company is in discussions with Quaker Coal Company, Inc. (Quaker)
concerning the Company's possible purchase of Quaker's Kentucky operations.
1994 SALES AND PRODUCTION
For the year ended December 31, 1994, the Company and its independent
operating subsidiaries sold approximately 20.2 million tons of coal, as compared
to approximately 16.0 and 19.1 million tons sold in 1993 and 1992, respectively.
Approximately 62% of the total number of tons sold during 1994 was sold under
long-term contracts as compared to approximately 57% for 1993 and 66% for 1992.
The balance was sold on the spot market (contracts with a duration of one year
or less). Sales of metallurgical coal in 1994 totaled 1.8 million tons, or
approximatley 9% of the Company's total 1994 coal sales. In 1994, the Company
sold approximately 1.7 million tons of coal in the export market, compared to
approximately 2.1 million tons in 1993 and 3.9 million tons in 1992. Sales of
metallurgical coal accounted for approximately 43% of these export sales in
1994, while the balance of export sales were sales of steam coal for producing
electricity. Approximately 54%, 61% and 71% of total revenues for 1994, 1993 and
1992, respectively, were derived from long-term contracts. For the year ended
December 31, 1994, the Company's independent operating subsidiaries produced
approximately 19.2 million tons of coal as compared to approximately 14.2 and
16.7 million tons for 1993 and 1992, respectively. In addition, the Company
purchased for resale approximately 1.3
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million tons of coal during 1994, approximately 1.6 million tons during 1993,
and approximately 2.0 million tons during 1992.
SALES CONTRACTS
During 1994, Ashland Coal negotiated four new long-term sales contracts.
These new long-term commitments cover an aggregate 1.58 million base tons per
year. The Company is also currently negotiating two additional long-term
contracts.
Selling prices in many of the Company's long-term coal sales contracts are
adjusted for changes in broad price indices and labor indices and costs. Most of
these contracts also provide for price adjustment related to changes in federal
and state levies on coal mining and processing. In addition, most of the
Company's long-term contracts provide that the customer may vary the quantity of
coal purchased from the base annual quantity specified in the contract, usually
by not more than 15% annually.
In addition to customary adjustment provisions, in order to accommodate
changing market or operational conditions, contracts frequently contain
"reopener" provisions which, if certain conditions are met, require the parties
to renegotiate price, and the renegotiation of coal sales contract terms after
execution of the contract also is not unusual in the industry. During 1993, the
Company completed the renegotiation of three low-sulfur coal supply agreements
with Appalachian Power Company (APCO), and as a result provisions were added
that first became effective during 1994 or thereafter. One amended contract
supplied by Hobet Mining, Inc., (Hobet) provided for significant price
reductions effective on January 1, 1994, July 1, 1994 and January 1, 1995.
During 1994, the Company agreed to a further price reduction under this Hobet
contract, effective January 1, 1995, in exchange for certain contract
modifications relating to quality and price component allocations. In addition,
pursuant to a renegotiation completed in 1993, the price under a second APCO
contract supplied by Dal-Tex Coal Corporation (Dal-Tex) was reduced during 1994
prior to expiration of the contract on December 31, 1994. In connection with the
foregoing price reductions, a third APCO contract, under which shipments from
Dal-Tex began on January 1, 1995, and which originally was to expire on December
31, 1999, was extended in a 1993 amendment through December 31, 2003.
The Company's current above-market contracts with Cincinnati Gas & Electric
Company (CG&E) are scheduled to expire at the end of 1995. The Company hopes to
negotiate additional contract deliveries with CG&E. For further information
about these CG&E contract expirations see Reliance on Major Customers at page 7
below and the discussion in Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
OPERATIONS
Mingo Logan Coal Company
Mingo Logan Coal Company (Mingo Logan), an independent operating subsidiary
of the Company, conducts its operations in Mingo and Logan Counties, West
Virginia, on approximately 20,600 acres containing approximately 89 million
recoverable tons of low-sulfur and compliance coal. Mingo Logan's mining complex
consists of surface mining operations conducted by two independent contract
miners, three underground mines operated by two other independent contract
miners, and a longwall mine (Mountaineer Mine) operated by Mingo Logan. Mingo
Logan's Black Bear preparation plant has a plant feed capacity of 1,600 tons per
hour, and is connected to the Mountaineer Mine by a two-mile overland conveyor.
The Black Bear preparation plant is connected to the loadout on the Norfolk
Southern Railway Company (Norfolk Southern) railroad by a second overland
conveyor that is approximately seven-tenths of a mile in length. The preparation
plant, loadout and conveyors are located on land leased from Pocahontas Land
Corporation, an affiliate of Norfolk Southern. The Black Bear preparation plant
and loadout have silo storage capacity of approximately 19,500 tons of raw coal
and approximately 24,000 tons of clean coal, respectively. In addition, the
loadout has ground storage capacity of approximately 100,000 tons. The loadout
facility is capable of loading a 13,000-ton unit train in less than four hours.
The Mingo Logan mining complex produced approximately 7.9 million tons of coal
during 1994.
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Dal-Tex Coal Corporation
Dal-Tex, an independent operating subsidiary of the Company, conducts its
operations on approximately 25,000 acres of coal lands located primarily in
Logan County, West Virginia, containing approximately 209 million tons of
recoverable low-sulfur and compliance coal. Dal-Tex's mining complex currently
consists of two surface mines operated by a Dal-Tex subsidiary using mountaintop
removal techniques and three deep mines, two operated by another Dal-Tex
subsidiary (hereafter the two Dal-Tex subsidiaries are together referred to as
the Dal-Tex Subsidiaries) and one operated by a contract miner. At the surface
mines, two 51-cubic-yard shovels and other large excavators are used for
overburden removal. Continuous miner units are utilized in the deep mine
operations. The Dal-Tex mining complex includes the Monclo preparation plant
which is located on the CSX Transportation (CSXT) rail system and is capable of
a raw coal feed of 2,000 tons per hour. This plant is capable of loading a
14,000-ton unit train in less than four hours. Approximately 4.8 million tons of
coal were produced at the Dal-Tex mining complex during 1994.
Hobet Mining, Inc.
Hobet, an independent operating subsidiary of the Company, operates mines
at two locations in southern West Virginia. The Hobet 21 mining complex in Boone
County, West Virginia, currently has reserves dedicated to it of approximately
59 million recoverable tons of coal, and consists of a surface mine operated by
Hobet and a deep mine (opened in 1994) that is operated by a contract miner. The
Company anticipates total contract production at Hobet 21 during 1995 will be
approximately 747,000 tons. The surface mine uses mountaintop removal techniques
and modern surface mining equipment, including a 72-cubic-yard walking dragline
and a 51-cubic-yard shovel. The complex includes the 850-ton-per-hour Beth
Station preparation plant. An expansion of the raw coal handling and blending
capabilities of this plant is expected to be completed in March 1995. The
Company is currently negotiating an order with the West Virginia Office of Air
Quality relating to the improvements. A five-mile overland conveyor belt system
transports the coal from the mine to the Beth Station preparation plant where
the coal is cleaned and loaded into railcars at the adjacent 150-car rail siding
for shipment on the CSXT rail system. Once the current expansion is completed,
the Beth Station preparation plant will have raw coal silo storage capacity of
approximately 15,000 tons and clean coal ground storage for 100,000 tons of
coal. The facility will be capable of loading a 15,000 ton unit train in less
than four hours. The Hobet 21 mining complex produced about 2.8 million tons of
coal during 1994.
The Hobet 07 mine, located in Mingo and Logan Counties, West Virginia,
currently has reserves dedicated to it of approximately 40 million recoverable
tons of coal. This mine uses mountaintop removal techniques and modern surface
mining equipment including a 72-cubic-yard walking dragline and two 27-
cubic-yard shovels. The mine's operations include the 950-ton-per-hour Pine
Creek preparation plant. This plant has the capability of loading a 10,000-ton
unit train in less than eight hours. Coal is loaded into railcars on the
facility's 100-car rail siding, which is served by the CSXT rail system. The
Pine Creek preparation plant has a storage capacity in silos of 10,000 tons of
raw coal and 15,000 tons of clean coal. This mine produced about 2.2 million
tons of coal during 1994. It is currently anticipated that operations at the
Hobet 07 mine will be suspended by the end of the decade based on current coal
price and mining cost projections. See the "Outlook" section of Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations beginning on page 12 below.
Coal-Mac, Inc.
Coal-Mac, Inc. (Coal-Mac), an independent operating subsidiary of the
Company, conducts mining operations in eastern Kentucky. Coal-Mac and other
subsidiaries of the Company control approximately 47 million recoverable tons of
coal reserves in eastern Kentucky, and of this total, approximately 10 million
recoverable tons of coal reserves in Floyd, Johnson, Martin and Pike Counties
are dedicated to Coal-Mac production. Coal-Mac operates a surface mine in Floyd
County, a surface mine in Pike County, and an independent contractor operates an
underground mine in Floyd County. During 1994, Coal-Mac reduced its production
of medium -Btu coal for sale on the river market and increased production of
high -Btu coal for sale on the CSXT rail system. Total production from
surface and underground operations during 1994 was approximately
1.6 million tons of coal.
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TRANSPORTATION
Coal from the mines of the Company's independent operating subsidiaries is
transported by rail, truck, and barge to domestic customers and to Gulf and
Atlantic coast transloading facilities for shipment to domestic and
international customers.
Tri-State Terminals, Inc., an independent operating subsidiary of the
Company, operates the Lockwood Dock on a 60-acre site on the Big Sandy River
approximately seven miles upstream from its confluence with the Ohio River. In
addition, Company subsidiaries together own a 17.5 percent interest in Dominion
Terminal Associates (DTA), which leases and operates a ground storage-to-vessel
coal transloading facility (the DTA Facility) in Newport News, Virginia. The DTA
Facility has a throughput capacity of 20 million tons of coal per year and
ground storage capacity of approximately 1.7 million tons. During 1994, DTA
loaded through the DTA Facility approximately 0.9 million tons of coal for the
Company's account. The DTA Facility serves international customers, as well as
domestic coal users located on the eastern seaboard of the United States. For
additional information concerning the Company's investment in DTA, see Note 3 to
the Company's Consolidated Financial Statements on page 27 below, and
incorporated by reference in this Item 1.
EMPLOYEES
As of February 28, 1995, the Company and its independent operating
subsidiaries employed a total of 1,660 people (including 23 part-time
employees), 831 of whom are represented by the United Mine Workers of America
(UMWA). Hobet and the Dal-Tex Subsidiaries are signatories to the National
Bituminous Coal Wage Agreement of 1993 (Wage Agreement), which was ratified on
December 14, 1993, and which expires by its terms on August 1, 1998. The Wage
Agreement provides for a total wage increase of $1.30 per hour over the first
three years of the contract, changes in medical coverage providing for
deductibles and copayments, more flexible work rules that will permit coal
production to take place 24 hours a day and seven days a week, increases in
employer contributions to an education and retraining fund, and employer
contributions to fund the new Labor Management Positive Change Program and the
new 1993 Benefit Fund created by the Wage Agreement. The contract provisions of
the Wage Agreement applicable to wages, pensions, and medical benefits are fixed
for the first three years of the contract, but thereafter wages and pension
benefits are subject to renegotiation at the UMWA's election and certain
provisions of the medical plan are subject to renegotiation at the election of
either the UMWA or the Bituminous Coal Operators' Association (BCOA). The Labor
Management Positive Change Program mandated by the Wage Agreement establishes a
board comprised of union and management representatives to explore methods of
increasing productivity and efficiency.
In connection with the Wage Agreement, the UMWA and BCOA also entered into
a Memorandum of Understanding that requires that certain jobs at mines of
Ashland Coal's nonunion subsidiaries be offered to UMWA miners under the
following conditions. At any existing, new, or newly acquired, operation of a
nonunion subsidiary of Ashland Coal, the subsidiary must offer the first three
of every five job openings for certain jobs to active and laid-off employees of
any union subsidiary. The first two jobs must be filled from among the senior
laid-off and active miners of any union subsidiary of the Company provided such
miners have the ability to step in and perform the job at the time the job is
awarded. The third job must be filled with the senior laid-off or active miner
of any union subsidiary provided such miner has the ability to step in and
perform the work of the job at the time the job is awarded and has actually
performed the job within the last three years. The final two out of five jobs
may be filled from any source at the sole discretion of the nonunion
subsidiary's management. Similarly, Ashland Coal's nonunion coal mining
subsidiaries must require certain of their lessees, licensees, contractors and
subcontractors that are engaged after the date of execution of the Memorandum of
Understanding to offer the first three of every five job openings for certain
jobs to active and laid-off UMWA-represented employees at any Ashland Coal union
subsidiary. Generally, this requirement applies only where both (i) the lessees,
licensees, contractors, and subcontractors produce and process coal for the
nonunion subsidiaries and (ii) the coal is sold by the nonunion subsidiaries.
Ashland Coal's union subsidiaries do not currently have any laid-off union
workers. Finally, the Memorandum of Understanding prohibits Ashland Coal and its
nonunion subsidiaries from engaging in any transaction, restructuring or
reorganization for the purpose of evading obligations under the Memorandum of
Understanding. For
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additional discussion, see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations beginning below on page 12.
The labor forces at Mingo Logan and its Mountaineer Mining Company and
Bearco divisions are not currently unionized. However, in a recent National
Labor Relations Board (NLRB) proceeding, Mingo Logan and certain other employers
with whom Mingo Logan contracts for construction and mining services were
determined to be joint employers by the Acting Regional Director for NLRB Region
9. As a consequence of this ruling, the bargaining unit at Mingo Logan's
Mountaineer Mine for purposes of collective bargaining has been determined to be
comprised of employees of Mingo Logan and its contractors, and these employees
voted together on January 19, 1995, on the question of whether or not to be
represented by the UMWA. The result of this vote, which was required by the NLRB
decision, is not yet known as the ballots have been sealed pending the outcome
of Mingo Logan's appeal to the NLRB of the decision of the Acting Regional
Director concerning the appropriate bargaining unit. Mingo Logan expects to
prevail in its appeal. If Mingo Logan does prevail on appeal, the January 19,
1995, representation election results will be invalidated.
REGULATIONS AFFECTING COAL MINING
Coal mining is subject to strict regulation by federal, state, and local
authorities, including, most significantly, with respect to permitting,
environmental, and health and safety matters.
Permitting and Environmental Matters
Numerous permits are required for mining operations. The Company believes
all permits required to conduct present mining operations have been obtained,
and the Company is negotiating an order with the West Virginia Office of Air
Quality relating to expansion of the load-out facilities at Hobet 21. The
Company believes that, upon the filing of the required information with the
appropriate regulatory agencies, all permits necessary for continuing operations
will be obtained.
The federal Surface Mining Control and Reclamation Act of 1977 (SMCRA) was
enacted to regulate certain surface mining of coal and the surface effects of
underground mining. Kentucky and West Virginia have similar laws and regulations
regulating surface and deep mining that impose, among other requirements,
reclamation and environmental requirements and standards.
The federal Clean Water Act affects coal mining operations by imposing
effluent discharge restrictions on pollutants discharged into waters. In
addition, the United States Environmental Protection Agency (EPA) has permitting
requirements for storm water discharges from industrial facilities. These
regulations require permits for some aspects of mining operations. Regular
monitoring, and compliance with reporting requirements and performance standards
are preconditions for the issuance and renewal of permits governing the
discharge of pollutants into waters. Further, mining operations are subject to
Clean Water Act regulations in respect of discharges into some ponds created to
treat or dispose of coal mining wastes.
Kentucky and West Virginia also have laws restricting discharges of
pollutants into the waters of those states. West Virginia has a groundwater
protection program, but coal extraction activities are excluded from such
regulations. However, related operations, such as preparation plants, are
covered by the West Virginia program. Kentucky has developed a groundwater
protection program, and groundwater protection plans must be filed by August
1995, but the requirements of this program have not been completely defined by
the regulators. As a consequence, the effect of the Kentucky groundwater
programs upon coal mining operations is unclear.
The federal Resource Conservation and Recovery Act (RCRA) and implementing
federal regulations exclude from the definition of hazardous waste all coal
extraction, beneficiation and processing wastes. Additionally, other coal mining
wastes which are subject to an SMCRA permit are exempt from RCRA permits and
standards. Kentucky and West Virginia similarly exempt coal mine waste from
their respective state hazardous waste laws and regulations. The federal
Comprehensive Environmental Response, Compensation and Liability Act, as amended
by the Superfund Amendments and Reauthorization Act, affects coal mining
operations by imposing a cleanup requirement for threatened or actual releases
of hazardous
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substances (other than waste excluded from federal and state regulation, as
noted above) that may endanger public health or welfare or the environment.
The federal Clean Air Act, as amended in 1990, imposes numerous
requirements on various categories of emission sources. While the new statutory
requirements do not directly impose new requirements on coal mining emission
sources, it is possible that the EPA will implement the statute in a way that
will impose additional regulatory requirements on industry sources, including a
duty to obtain an operating permit not previously required. The EPA previously
published rules which do not require coal mines to include fugitive emissions in
determining the applicability of the Clean Air Act's Prevention of Significant
Deterioration Program. Although this rule was challenged, the rule was upheld
and no appeal to the decision was filed. In addition, West Virginia state air
regulations impose permitting obligations and performance standards on certain
coal preparation plants and coal handling facilities such as crushers and
screeners.
Health and Safety Matters
The federal Mine Safety and Health Act of 1977 imposes health and safety
standards on all mining operations. Regulations are comprehensive and affect
numerous aspects of mining operations, including training of mine personnel,
mining procedures, blasting, and the equipment used in mining operations. The
Black Lung Benefits Reform Act of 1977 generally requires each coal mine
operator to secure payment of federal and state black lung benefits to its
employees through insurance, bonds, or contributions to a state-controlled fund.
The Black Lung Benefits Reform Act of 1977 also provides for the payment from a
trust fund of benefits and medical expenses to employees for whom no benefits
have been obtainable from their employer. This trust is financed by a tax on
coal sales.
The Coal Industry Retiree Health Benefit Act of 1992 (Benefit Act)
addressed two underfunded trust funds which were to provide medical benefits for
certain UMWA retirees. The Benefit Act provides for the funding of medical and
death benefits for certain retired members of the UMWA through premiums to be
paid by assigned operators (former employers), transfers of monies from an
overfunded pension trust established for the benefit of retired UMWA members,
and transfers from the Abandoned Mine Lands Fund, which is funded by a federal
tax on coal production. This funding arrangement commenced February 1, 1993.
Compliance with Regulatory Requirements and Existing Environmental Liability
The Company's independent operating subsidiaries endeavor to conduct their
operations in compliance with all applicable federal, state, and local laws and
regulations. However, because of the extensive and comprehensive regulatory
requirements, violations during mining operations are not unusual in the
industry. Mingo Logan and Dal-Tex are each a party to civil proceedings as a
result of alleged failures to comply with mandatory federal or state health and
safety regulations. Each of these proceedings involves a fatality and could
result in the imposition of civil penalties. The Company believes that any
adverse result, if incurred, would not have a material adverse effect on the
Company's consolidated financial condition, results of operations, or liquidity.
Hobet, Sharples Coal Company, which is a subsidiary of Dal-Tex, Mingo
Logan, and other unrelated coal mining companies, individually, are parties to a
civil proceeding with respect to the alleged failure of each of them to handle
respirable dust sampling cassettes in accordance with regulations of the Mine
Safety and Health Administration. Violations of federal and state health and
safety regulations can result in civil and criminal penalties. To date, the
monetary penalties assessed in respect of violations of these regulations have
not been material and the Company does not anticipate that future assessments in
respect of violations to date will be material to the Company's consolidated
financial condition, results of operations, or liquidity.
Mingo Logan is a party to civil and administrative proceedings brought by
owners of commercial surface property overlying part of Mingo Logan's
Mountaineer Mine. These proceedings seek revocation of mining permits for the
Mountaineer Mine and seek damages for loss in the value of the plaintiffs'
property and business. It is unlikely that Mingo Logan's mining permits will be
revoked as a result of these proceedings. It is impossible to predict the
outcome of the damage claim at this stage of the proceedings, but any adverse
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result, if incurred, is not expected to have a material adverse effect on the
Company's consolidated financial condition, results of operations, or liquidity.
Hobet recently received a Notice of Violation and a Cease and Desist Order
issued on January 20, 1995, from the West Virginia Office of Air Quality. The
Order requires that Hobet cease modifications to its preparation plant and/or
loadout facility at the Hobet 21 mine complex because of Hobet's alleged failure
to have obtained necessary approvals from the Office of Air Quality to make
modifications to these facilities. Hobet is negotiating a consent order with the
Office of Air Quality which is not expected to have any material adverse effect
on the Company's consolidated financial condition, results of operations, or
liquidity.
The Company is not aware of any existing conditions on property in which it
has an ownership or other interest that would give rise to material liability
under federal, state, and local environmental laws, regulations, or ordinances.
The Company believes that continued compliance with regulatory standards
will not substantially affect its ability to compete with similarly situated
coal mining companies. The cost of regulatory compliance, however, frequently
increases the cost of mining coal and to this extent makes coal less competitive
with alternative fuels.
TRADEMARKS AND TRADENAMES
Under an agreement executed in 1993, Ashland granted the Company permission
to continue using the Ashland Coal name on a year-to-year basis after August 11,
1993, absent written notice from Ashland to cease using the name at the end of
the then applicable one year period. If Ashland's ownership in the Company ever
falls below 35%, Ashland may require the Company to remove the name Ashland from
the Company's and its subsidiaries' names. During 1994, the Company discontinued
its use of Ashland's trademarks and adopted a new logo.
RELIANCE ON MAJOR CUSTOMERS
The Company's total sales to American Electric Power Company (AEP)
affiliates and to CG&E accounted for approximately 21 and 13 percent,
respectively, of the Company's total revenues in 1994. AEP affiliates currently
have four contracts with the Company, and CG&E currently has three contracts
with the Company. If the Company experienced an unanticipated and immediate loss
of the AEP affiliates' contracts, the loss could have a material adverse effect
on the Company's business and results of operations. The expiration of the
Company's existing above-market coal sales contracts with CG&E at the end of
1995 will have an adverse effect on the Company. However, because of steps the
Company is taking to reduce costs and increase production, the Company does not
believe that the expiration of such CG&E contracts will result in material
adverse changes in the Company's 1996 results of operations when compared to the
Company's anticipated 1995 results.
COMPETITION
The coal industry is highly competitive, and the Company competes
(principally in price, location, and quality of coal) with a large number of
other coal producers, some of which are substantially larger and have greater
financial resources and larger reserve bases than the Company. Most long-term
supply agreements and spot market orders are the result of competitive bidding.
Coal also competes with other energy sources such as oil, natural gas,
hydropower, and nuclear energy for steam and electrical power generation. Over
time, the cost and other factors, such as safety and environmental
considerations, relating to these alternative fuels will affect the overall
demand for coal as a fuel.
ITEM 2. PROPERTIES
As of December 31, 1994, the Company's subsidiaries controlled, primarily
through long-term leases, approximately 119,634 and 100,559 acres of coal lands
in West Virginia and eastern Kentucky, respectively. The Company's subsidiaries
also control through ownership or long-term leases 917 acres of land in eastern
7
<PAGE> 10
Kentucky and West Virginia which are used either for its coal processing
facilities or are being held for possible future development. The Pine Creek,
Beth Station, and Black Bear preparation plants are located on properties held
under leases which expire in 2030, 2022 and 2007 (with an optional 20-year
extension), respectively. The Company's headquarters occupy approximately 52,000
square feet of leased space at 2205 Fifth Street Road, Huntington, West
Virginia. The headquarters lease expires March 31, 1998. The descriptions of the
Mingo Logan, Dal-Tex, Hobet, and Coal-Mac mines set forth above in Item 1.
Business are hereby incorporated into this Item 2 by reference.
The Company's subsidiaries currently own or lease the equipment that is
significant to their mining operations. Hobet leases equipment under leases that
expire in 2003 and 1995. Hobet and Dal-Tex also utilize surface mining equipment
leased pursuant to a sale and leaseback transaction entered into in January
1993. The lease term expires in January 1996 but the lessee has the option to
purchase the equipment at the end of the lease. For further information about
this 1993 transaction see Note 17 to the Company's Consolidated Financial
Statements beginning on page 36 below.
The Company, through its subsidiaries, owns a 17.5 percent interest in DTA,
which is the lessee and operator of a ground storage-to-vessel coal transloading
facility at Newport News, Virginia (see Item 1. Business--Transportation).
COAL RESERVES
The Company estimates that its subsidiaries had, as of December 31, 1994,
approximately 688 million recoverable tons of proven and probable coal reserves.
Reserve totals vary from year to year for each Company subsidiary depending upon
the amount of coal mined in any year, the acquisition and disposition of
reserves in such year, and exploration and development activity. The following
table presents the Company's estimate of such reserves:
RECOVERABLE COAL
<TABLE>
<CAPTION>
PROVEN PROBABLE TOTAL
------ -------- -----
(MILLIONS OF TONS)
<S> <C> <C> <C>
West Virginia................................................. 300 341 641
Kentucky...................................................... 32 15 47
--- --- ---
Total.................................................... 332 356 688
=== === ===
</TABLE>
Substantially all of the coal reserves held by the Company's subsidiaries
are controlled by leases which will not expire until the exhaustion of minable
and merchantable coal. The remaining leases have primary terms expiring in
various years ranging from 1995 to 2013, and most contain options to renew for
stated periods. Royalties are paid to lessors either as a fixed price per ton or
as a percentage of the gross sales price of the mined coal. The majority of the
significant leases are on a percentage royalty basis. In certain cases, a lease
bonus is required, payable either at the time of execution of the lease or in
annual installments following such execution. In most cases, the lease bonus
amount is applied to reduce future production royalties. Subsidiaries of the
Company own, lease, or control 21,050 acres of coal lands upon which exploration
has not been conducted.
Federal and state legislation controlling air pollution affects the demand
for certain types of coal by limiting the amount of sulfur dioxide which may be
emitted as a result of fuel combustion and, thereby, encourages a greater demand
for low-sulfur coal. Based upon limited information obtained from preliminary
prospecting, drilling and coal seam analysis, the Company estimates that a
substantial portion of the reserves held by Company subsidiaries consists of
low-sulfur coal with a sulfur content of 1 percent or less, some of which is
compliance coal. Sulfur content of 1 percent or less refers to percentage by
weight, while "compliance coal" is coal which emits 1.2 pounds or less of sulfur
dioxide per million Btu upon combustion without the aid of sulfur reduction
technology. Most of the Company's reserves are primarily suitable for the steam
coal
8
<PAGE> 11
markets. However, a substantial portion of the coal reserves at Mingo Logan may
also be used as a high-volatile, low-sulfur, metallurgical coal.
The net book value, based on historical cost, of the Company's coal
reserves at December 31, 1994, was $444 million, consisting of $16 million of
prepaid royalties included in current assets, $59 million of prepaid royalties
classified as an other asset, and $369 million net book value of coal lands and
mineral rights. Of this carrying value, approximately $30 million is
attributable to certain reserves which are not currently in production and for
which there are no current plans for significant production. In addition, as of
December 31, 1994, future royalty commitments relating to these properties were
approximately $2 million. See Note 5 to the Company's Consolidated Financial
Statements on Page 29 below and incorporated by reference in this Item 2.
Consistent with industry practice, a limited investigation of title to coal
properties is conducted prior to leasing. The titles of the lessors or grantors
and the boundaries of leased properties are not completely verified until such
time as the Company's independent operating subsidiaries prepare to mine such
reserves. If defects in title or boundaries of undeveloped reserves are
discovered in the future, control of and the right to mine such reserves could
be adversely affected.
ITEM 3. LEGAL PROCEEDINGS
There is a pending suit in Circuit Court for Mingo County, West Virginia,
filed September 3, 1993, by the administrator of the 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 alleges
compensatory and punitive damages of $45 million. The case is in discovery.
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
There were no matters submitted to a vote of security holders of the
Company through the solicitation of proxies or otherwise during the fourth
quarter of 1994.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the Company's executive officers, their ages and
their positions and offices held during the last five years (Senior Vice
Presidents are listed alphabetically):
William C. Payne, 62, is Chairman of the Board of Directors, and
President and Chief Executive Officer, and has served in such capacities
since 1992 and 1987, respectively. He has served as a Director since 1987.
C. Henry Besten, Jr., 47, is Senior Vice President, Marketing, and has
served in this capacity since July 1990. From 1987 to 1990, he served as
Administrative Vice President, Administration and Coal Resources.
Marc R. Solochek, 48, is Senior Vice President and Chief Financial
Officer and has served in these capacities since July 1990. From 1983 to
1990, he served as Administrative Vice President and Chief Financial
Officer, and from 1983 to 1992, he served as Treasurer.
Kenneth G. Woodring, 45, is Senior Vice President, Operations, and has
served in this capacity since 1989.
Roy F. Layman, 49, is Administrative Vice President, Law and Human
Resources, and Secretary and has served in these capacities since April
1993. From 1987 to 1990, he served as Vice President, General Counsel and
Secretary, and from July 1990 to April 1993, he served as Administrative
Vice President, General Counsel, and Secretary.
9
<PAGE> 12
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed and traded on the New York Stock
Exchange and also has unlisted trading privileges on the Chicago Stock Exchange
(symbol: ACI).
Information regarding the Company's Common Stock is shown in the following
table.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------
1994 1993
----------------------------- -----------------------------
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
---- ---- ---- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend per common share................... $.10 $.10 $.10 $.115 $.10 $.10 $.10 $.10
Market price per common share
High...................................... 31 1/4 28 3/4 30 1/8 31 27 3/4 25 7/8 31 1/2 31 3/4
Low....................................... 27 3/8 22 1/2 26 3/4 27 3/4 24 1/2 22 23 1/2 27 1/8
</TABLE>
The Company paid its first quarterly dividend in the fourth quarter of
1988. The Company increased its dividend in the fourth quarter of 1989, the
third quarter of 1990, and the fourth quarter of 1994. The Company expects to
continue paying regular cash dividends, although there is no assurance as to the
amount or payment of dividends in the future because they are dependent on the
Company's future earnings, capital requirements, and financial condition. In
addition, the payment of dividends is subject to the restriction described in
Note 7 to the Company's Consolidated Financial Statements below on Page 30.
As of February 27, 1995, there were 678 holders of record of the Company's
Common Stock.
10
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
(In thousands except per share data) 1994 1993 1992(1) 1991 1990(2)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Coal sales..................................... $589,141 $484,390 $563,932 $430,301 $393,875
Operating revenues............................. 21,003 13,952 15,792 13,688 13,481
-------- -------- -------- -------- --------
610,144 498,342 579,724 443,989 407,356
-------- -------- -------- -------- --------
Costs and expenses:
Cost of coal sold.............................. 510,125 446,754 478,286 353,990 336,556
Operating expenses............................. 11,543 10,641 11,502 10,247 9,255
Selling, general, and administrative
expenses..................................... 33,756 35,790 31,959 23,374 20,704
-------- -------- -------- -------- --------
555,424 493,185 521,747 387,611 366,515
-------- -------- -------- -------- --------
Operating income................................. 54,720 5,157 57,977 56,378 40,841
Other income (expense):
Interest income................................ 366 1,057 1,240 804 297
Interest expense............................... (22,238) (25,342) (21,781) (9,862) (10,048)
-------- -------- -------- -------- --------
Income (loss) before income taxes and the
cumulative effect of changes in accounting.... 32,848 (19,128) 37,436 47,320 31,090
Income tax expense (benefit)....................... 628 (64,502) 1,697 8,700 4,736
-------- -------- -------- -------- --------
Income before the cumulative effect of changes in
accounting........................................ 32,220 45,374 35,739 38,620 26,354
Cumulative effect of changes in accounting......... -- (18,836) -- -- --
-------- -------- -------- -------- --------
Net income......................................... $ 32,220 $ 26,538 $ 35,739 $ 38,620 $ 26,354
========= ========= ========= ========= =========
COMMON STOCK INFORMATION:
Earnings per share:
Primary........................................ $ 1.72 $ 1.41(3) $ 2.01 $ 2.40 $ 1.60
Fully diluted.................................. 1.68 1.34(3) 1.88 2.22 1.49
Dividends declared per common share.............. .415 .40 .40 .40 .36
BALANCE SHEET DATA:
Working capital.................................. $ 11,955 $ 2,285 $ 37,566 $ 22,898 $ 23,213
Total assets..................................... 838,392 835,991 993,332 546,835 478,732
Long-term debt................................... 200,000 244,342 317,958 181,066 148,392
Other long-term liabilities (excluding deferred
taxes)......................................... 120,362 109,416 54,039 24,355 21,335
Preferred stock subject to redemption(4)......... -- -- 34,021 32,741 31,509
Stockholders' equity............................. 368,983 343,427 288,275 200,580 169,347
CASH FLOW DATA:
Cash provided by operating activities............ $104,087 $ 74,170 $ 78,759 $ 88,198 $ 58,922
Depreciation, depletion, and amortization........ 71,795 71,248 67,001 37,169 29,399
Purchases of property, plant, and equipment...... 42,841 20,569 97,136 102,881 38,453
</TABLE>
- ------------------------------
(1) Information for 1992 reflects the acquisition of Dal-Tex Coal Corporation on
April 1, 1992.
(2) Information for 1990 reflects the acquisition of Mingo Logan Coal Company on
January 24, 1990.
(3) Includes a charge of $1.44 on a primary basis and $1.34 on a fully diluted
basis for the cumulative effect of the adoption of Statement of Financial
Accounting Standards (SFAS) No. 106, Employers' Accounting for
Postretirement Benefits Other than Pensions, effective January 1, 1993. Also
includes $0.37 on a primary basis and $0.34 on a fully diluted basis for the
favorable cumulative effect of the adoption of SFAS No. 109, Accounting for
Income Taxes, effective January 1, 1993.
(4) The right of the holder of Class C preferred stock to require Ashland Coal
to repurchase that stock expired during 1993. Since the expiration of that
right, the stock has been classified as an element of stockholders' equity.
11
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
1994 Compared to 1993
The net income of Ashland Coal, Inc. (Ashland Coal or the Company) for the
year ended December 31, 1994, was $32.2 million. In 1993, earnings were $45.4
million before adjustments for the cumulative effect of the changes in
accounting required by the adoption of Statement of Financial Accounting
Standards (SFAS) No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions, and SFAS No. 109, Accounting for Income Taxes. After the
cumulative effect of those changes in accounting, net income for 1993 was $26.5
million.
With the adoption of SFAS No. 106 effective January 1, 1993, Ashland Coal
immediately recognized an accumulated postretirement benefit obligation of $40.9
million ($25.3 million net of tax), which decreased income by the same amount.
The adoption of SFAS No. 109, effective the same date, 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
by $10.5 million ($6.5 million net of tax). The net-of-tax amounts are reflected
in the consolidated income statement as the cumulative effect of changes in
accounting.
In addition to the accounting changes discussed above, three other factors
significantly affected earnings during 1993. First, there was an income tax
benefit of $50.2 million principally as a result of the Company's election to
deduct for federal tax purposes the amortization of goodwill associated with the
April 1992 acquisition of Dal-Tex Coal Corporation. This amortization was not
previously deductible; however, the deduction is now permitted over 15 years as
a result of the Omnibus Budget Reconciliation Act of 1993 (OBRA). The second
factor was a charge of $9.9 million ($6.0 million after tax) to increase the
valuation allowance for certain prepaid royalties. The mineral reserves
represented by those royalties are not conducive to large-scale, low-cost
mining, and, given the Company's current expectations for future market prices
for coal, the Company now believes that the recoverability of those royalties is
doubtful. Finally, the seven-month strike by the United Mine Workers of America
(UMWA) against Hobet Mining, Inc. and two subsidiaries of Dal-Tex adversely
affected the operations of those companies and, therefore, consolidated net
income.
For the year ended December 31, 1994, coal sales volume of 20.2 million
tons and coal sales revenue of $589.1 million were above 1993 levels by 4.2
million tons and $104.8 million, respectively. These increases were attributable
to the effects of the UMWA strike during the last three quarters of 1993. The
average selling price decreased $1.09 per ton from the 1993 level primarily
because of lower prices on sales to two customers, including the Company's
largest customer, whose contracts were renegotiated in 1993.
The 1994 cost of coal sold decreased $2.64 per ton from the 1993 level,
which was negatively affected by the UMWA strike and the $9.9 million charge
relative to prepaid royalties. This decrease would have been greater except for
the fact that the unit cost of coal sold in 1994 was adversely affected by
unusually harsh winter weather in the first quarter and the aftereffects of the
UMWA strike experienced early in the year.
Operating revenues increased $7.1 million. This increase resulted largely
from the following unusual transactions that occurred in 1994: compensation for
an easement which rendered certain coal unminable, the sale of surplus mining
equipment, proceeds from an insurance settlement, and recoveries from a
contractor for business interruption losses related to the 1992 silo collapse
and the 1993 silo failure at Mingo Logan Coal Company.
A $2.0 million decrease in selling, general, and administrative expenses
related primarily to a reduction in amortization of the carrying value of
certain coal supply contracts that were renegotiated in 1993. Interest expense
decreased $3.1 million, reflecting lower average debt levels in 1994.
The effective tax rate for 1994 of 1.9% reflects an improvement in the
Company's profitability. The effective tax rate is sensitive to changes in
profitability because of the effect of percentage depletion. The
12
<PAGE> 15
income tax benefit recorded for 1993 was primarily the result of OBRA coupled
with a decrease in the Company's profitability as a result of the strike by the
UMWA.
1993 Compared to 1992
Ashland Coal's earnings for the year ended December 31, 1993, were $45.4
million before adjustments for the cumulative effect of the changes in
accounting discussed above. This compares to net income of
$35.7 million in 1992. After the cumulative effect of changes in accounting, net
income for 1993 was $26.5 million. Exclusive of the cumulative effect of changes
in accounting, the combined effect of the adoption of SFAS No. 106 and SFAS No.
109 on income before income taxes and net income for 1993 was a decrease of $8.6
million and $5.3 million, respectively. Earnings during 1993 were also affected
by OBRA, the increase in the valuation allowance for prepaid royalties, and the
UMWA strike, all discussed above.
Coal sales volume of 16.0 million tons and coal sales revenue of $484.4
million declined from 1992's levels by 3.0 million tons and $79.5 million,
respectively. The negative effects of the UMWA strike during the last three
quarters of 1993 more than offset the positive effects on sales volume and
revenue from the presence of Dal-Tex for the full year in 1993, as compared to
nine months in 1992, and the positive effects of increased production from the
Mountaineer longwall mine of Mingo Logan. The average selling price increased
$.65 per ton in 1993 primarily because of strike-related higher selling prices
in the spot market.
The unit cost of coal sold increased $2.79 per ton in 1993 because of the
effects of the UMWA strike, the charge relative to prepaid royalties, and the
effects of the adoption of the new accounting standards. In addition, early in
the year, Dal-Tex experienced a higher than normal level of equipment failures,
and Mingo Logan's longwall mine operated in difficult mining conditions with
resultant unfavorable costs.
Selling, general, and administrative expenses increased $3.8 million
primarily because of a full year's amortization of the carrying value of one of
Dal-Tex's sales contracts, higher costs for salaries, payroll taxes, and
benefits (including the effect of SFAS No. 106), and costs related to the
investigation of a possible business combination with Arch Mineral Corporation.
The Company and Arch terminated their discussions regarding such a combination
in mid-February 1994. Interest expense increased $3.6 million over 1992 largely
due to the discontinuation of the capitalization of construction period interest
after the start-up of Mingo Logan's longwall equipment late in 1992.
The income tax benefit recorded in 1993 was a result of OBRA and decreases
in profitability coupled with higher percentage depletion relative to income. As
noted above, the Company's effective tax rate is sensitive to changes in
profitability because of the effect of percentage depletion.
BALANCE SHEET
The balance of trade accounts receivable at December 31, 1994, was $16.8
million higher than 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, 1994, and December 31, 1993,
reflect the levels of coal sales in December 1994 and December 1993,
respectively. Coal sales in December 1993 were markedly lower because of the
strike by the UMWA and its immediate aftereffects.
Other receivables increased from $4.5 million at December 31, 1993, to $9.1
million at the end of 1994. This increase is primarily attributable to amounts
due for business interruption losses related to the 1993 Mingo Logan silo
failure and a compensation agreement for an easement which rendered certain coal
unminable and to an increase in railroad freight contract revenues.
Inventories at December 31, 1994, increased $7.9 million from the balance
at December 31, 1993. This increase resulted principally from an intentional
increase in coal inventory levels to improve operational flexibility, low levels
at the end of 1993 resulting from the drawdown of coal stockpiles during the
UMWA strike, and particularly high production by Mingo Logan in the closing
months of 1994. At December 31, 1994 and 1993, inventory tonnage represented
approximately six and four days of sales, respectively.
13
<PAGE> 16
The balance of accounts payable at December 31, 1994, was $8.7 million
higher than at December 31, 1993. Purchases of goods and services were reduced
during the strike, and deliveries of goods and services had not reached normal
levels by the end of 1993.
OUTLOOK
The Company expects improved earnings in 1995. The average cost of coal
sold is projected to decline from the 1994 level primarily because of improved
mining conditions at the surface mines, increased blending of surface-mined raw
coal with high-quality deep-mined coal beginning in the first quarter, and other
operational efficiencies. Those same factors will contribute to somewhat higher
volumes. The improvement in cost, however, will be largely offset by a lower
average selling price principally resulting from the expiration of a
higher-priced contract at the end of 1994 and a scheduled price reduction on
another contract effective the beginning of 1995. The adverse effect of the
contract expiration will be mitigated by a reduction in selling expense related
to that contract.
The Company expects its effective tax rate for 1995 to be higher than the
rate in 1994 because percentage depletion is expected to be lower relative to
income in 1995. The Company's effective tax rate is sensitive to changes in
profitability relative to the levels of percentage depletion. Ashland Coal
anticipates that its effective tax rate for 1996 may be significantly higher
than the rate for 1995. The Company currently expects that it may be unable to
recognize the alternative minimum tax credits (AMT credits) generated during
1996. The Company has recognized the deferred tax benefit of all of its AMT
credits generated through 1994 and expects to be able to recognize almost all of
the AMT credits generated in 1995.
Contracts with Cincinnati Gas & Electric Company are scheduled to expire at
the end of 1995. Because these contracts are priced above current market prices,
these expirations will have an adverse effect on the Company. However, because
of steps being taken to reduce costs and increase production, the Company does
not believe that these contract expirations will result in material adverse
changes in the Company's 1996 results of operations when compared to anticipated
1995 results.
Selling prices in the spot market stabilized in the second half of 1994 and
under normal conditions would have been expected to remain near that level.
However, the unseasonably mild weather experienced in the first part of this
winter has weakened current demand and prices, and a continuation of mild
weather could cause further short-term weakness. The Company believes that the
1990 Clean Air Act Amendments, which became effective January 1, 1995, have
increased demand for low-sulfur coal of the type that the Company sells. It
appears, however, that any further effects on spot market prices in the near
term related to this increase in demand will be mitigated by the effects of
increased supply. The Company's exposure to spot market prices is limited in
1995 because of its present level of sales commitments.
Ashland Coal's export sales volume will increase somewhat in 1995 as the
result of a better balance of supply and demand worldwide. The Company expects
its export sales to show gradual growth from current levels, but does not expect
that such changes in 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 sales may result 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
and profit potential.
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 the Hobet 07 mine in Mingo and Logan Counties, West Virginia,
commenced. As a consequence of these expected lower prices, it may be necessary,
if costs at Hobet 07 are not reduced, for Hobet to suspend operations at such
mine by the end of the decade.
The National Bituminous Coal Wage Agreement of 1993 (Wage Agreement), 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 Wage Agreement, a Memorandum of
Understanding was entered into that provides for positions at
14
<PAGE> 17
mines of Ashland Coal's nonunion subsidiaries to be offered to UMWA miners under
certain conditions. The Company believes that the provisions of the Wage
Agreement and the Memorandum, taken as a whole, will not have an adverse effect
on costs.
The Company continues 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 United States. The Company is currently in discussions
with Quaker Coal Company, Inc. concerning the possible purchase of that
company's Kentucky operations.
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 past three years:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
Cash provided by (used in)
Operating activities
Before changes in operating assets and
liabilities....................................... $111,867 $ 74,165 $ 113,807
Changes in operating assets and liabilities......... (7,780) 5 (35,048)
-------- --------- ---------
104,087 74,170 78,759
Investing activities................................... (59,051) 35,654 (330,783)
Financing activities................................... (44,472) (146,877) 281,419
-------- --------- ---------
Increase (decrease) in cash and cash equivalents......... $ 564 $ (37,053) $ 29,395
======== ========= =========
</TABLE>
Cash provided by operating activities before changes in operating assets
and liabilities increased in 1994 from 1993 and decreased in 1993 from 1992
primarily because of reduced sales volume during 1993 resulting from the strike
by the UMWA. Cash used for changes in operating assets and liabilities in 1994
reflects growth in accounts receivable balances and inventories, partially
offset by growth in the balances of accounts payable, accrued expenses, and
income taxes payable. In 1993, reduced accounts receivable balances, partially
offset by reductions in the balances of accounts payable, accrued expenses, and
income taxes payable, accounted for most of the reduction in operating assets
and liabilities from 1992. All of these changes in 1994 and 1993 were outgrowths
of the UMWA strike. Cash used in 1992 for changes in operating assets and
liabilities reflects higher accounts receivable balances, primarily related to
the acquisition of Dal-Tex and the expansion of operations at Mingo Logan, and
higher expenditures for prepaid royalties, primarily because of required
payments under a lease held by Dal-Tex.
Cash used during 1994 for investing activities primarily reflects capital
expenditures and a $16 million prepaid royalty payment expected to be recovered
after one year. Cash provided by investing activities in 1993 resulted from the
sale and leaseback of certain mining equipment (discussed below). Cash used in
investing activities in 1992 reflects the acquisition of Dal-Tex and
construction activity at Mingo Logan.
Dividend payments and payments on borrowings constitute the cash used in
financing activities during 1994. Cash used in financing activities in 1993
chiefly represents payments of $141.4 million on borrowings from cash provided
by the sale and leaseback of mining equipment, the liquidation of cash
equivalents, and cash provided by operating activities. Cash provided by
financing activities during 1992 represents the proceeds of borrowings and the
sale of common stock for the purpose of funding the Dal-Tex acquisition and for
capital expenditures not funded by cash provided by operating activities.
The Company's capital expenditures during 1994 were $42.8 million, which is
$22.3 million higher than in 1993. During 1993, the Company deferred capital
expenditures to the extent possible in order to improve liquidity in
anticipation of and during the UMWA strike and in the event that the Company was
required to purchase its convertible Class C preferred stock, or both. Ashland
Coal estimates that during 1995 capital expenditures will be approximately $69
million.
15
<PAGE> 18
On January 29, 1993, mining equipment valued at approximately $64 million
being used by Dal-Tex and Hobet was sold and leased back under an operating
lease which expires on January 29, 1996. Upon expiration of the lease, the
equipment may be purchased for approximately $43 million. The Company is,
however, currently discussing with the lessor a two-year extension of this
lease.
In November 1994, Ashland Coal amended and restated its revolving credit
agreement with a group of banks to provide for borrowings of up to $500 million
until the agreement's termination in 1999. At December 31, 1994, the Company had
$25 million borrowed under this agreement. The Company also has $175 million of
indebtedness under senior unsecured notes maturing in 1996 through 2006. Ashland
Coal periodically establishes uncommitted lines of credit with banks. These
agreements generally provide for short-term borrowings at market rates. At
December 31, 1994, there were $237.9 million of such agreements in effect with
$43.9 million of indebtedness under these agreements. The Company expects to
repay $38 million and refinance the remaining $5.9 million of indebtedness under
these lines of credit during 1995.
The Company expects 1995 cash flow provided by operating activities to be
higher than the 1994 level as a result of increased sales stemming from higher
production volumes at Hobet and Dal-Tex. Ashland Coal believes that 1995 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 repayments of
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 expensed as incurred. The remaining costs of
reclamation are estimated and accrued as mining progresses. The accrual for such
reclamation (included in other long-term liabilities and in accrued expenses)
was $2.2 million and $2.5 million at December 31, 1994 and 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 $43.0 million. At December 31, 1994
and 1993, the accrual for closing costs, which is included in other long-term
liabilities and in accrued expenses, was $7.7 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 $2.9
million (included in other long-term liabilities) and believes that probable
insurance recoveries of $2.3 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 $6.8
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.
CERTAIN RISK FACTORS
Credit risk--Ashland Coal markets its coal principally to electric
utilities in the United States and Europe. As a group, electric utilities are
stable, well capitalized entities with favorable credit ratings. Credit is
extended based on an evaluation of each customer's financial condition, and
collateral is not generally required. Credit losses have consistently been
minimal.
Price risk--Selling prices for Ashland Coal's products are determined by
long-term contracts and the spot market. Selling prices in many of Ashland
Coal's long-term contracts are adjusted for changes in certain price
16
<PAGE> 19
indices and labor costs, including wage rates and benefits under the Wage
Agreement, or any successor agreement. Some of the long-term contracts also
provide for price adjustment if certain federal and state levies on coal mining
and processing are changed or if new laws, rules, or regulations are enacted
that increase the cost of mining, processing, or transporting the coal under
those contracts. Spot prices fluctuate primarily because of changes in demand
for and supply of coal. Demand for coal in the short term is primarily driven by
changes in demand for electricity in the areas serviced by the utilities
purchasing the Company's coal. Demand for electricity in turn depends on the
level of economic activity and other factors such as temperature extremes. The
supply of coal in the spot market has historically been most affected by excess
productive capacity in the industry and short-term disruptions, frequently
labor-related.
Ashland Coal's operating subsidiaries purchase substantial amounts of
power, fuel, and supplies, generally under purchase orders at current market
prices or purchase agreements of relatively short duration. The employees of
some of Ashland Coal's operating subsidiaries are covered by the Wage Agreement,
which provides for certain wage rates and benefits during the first three years.
Thereafter, wages and certain benefits are subject to renegotiation. Employees
of other operating subsidiaries are not covered by a union contract but are
compensated at rates representative of prevailing wage rates in the local area.
Among factors influencing such wage rates is the Wage Agreement.
Although the Company cannot predict changes in its costs of production and
coal prices with certainty, Ashland Coal believes that in the current economic
environment of low to moderate inflation, the price adjustment provisions in its
long-term contracts will largely offset changes in the costs of providing coal
under those contracts. Further, because levels of general price inflation are
closely linked to levels of economic activity, it is expected that changes in
costs of producing coal for the spot market may be offset in part by changes in
spot coal prices. The Company attempts to limit its exposure to depressed spot
market prices which result from industry overcapacity by entering into long-term
coal supply agreements, which ordinarily provide for prices in excess of spot
market prices. In the event of a disruption of supply, the Company might,
depending on the level of its sales commitments, benefit from higher spot prices
if its own mines were not affected by the disruption.
Interest rate risk--Ashland Coal has significant debt and lease obligations
which are linked to short-term interest rates. If interest rates rise, Ashland
Coal's costs relative to those obligations would also rise. For example, the
Company estimates that currently a 1% increase in short-term interest rates
would reduce income before income taxes by approximately $1.5 million per year.
Because an increase in interest rates is usually an outgrowth of a higher level
of economic activity and because increased economic activity would likely lead
to a higher demand for electricity and consequently to higher spot prices for
coal, Ashland Coal believes that the negative effects of higher interest rates
on Ashland Coal's earnings could be partially offset by higher spot prices.
Additionally, the Company has the capability to fix its interest rates on
borrowings under its revolving credit agreement for periods up to 12 months and
may from time to time utilize certain types of derivative securities to manage
its interest rate risk. Either extending the term of short-term borrowings at
fixed rates or the use of derivatives may reduce the adverse impact of increases
in interest rates upon Ashland Coal. The Company is not currently using
derivatives to manage its interest rate risk.
RECURRING FACTORS AFFECTING RESULTS OF OPERATIONS
The Company's customers frequently combine nuclear, natural gas, and other
energy sources in their generating operations, and accordingly their demand for
coal varies depending on price and transportation, regulatory, and other
factors. Most of the Company's long-term contracts provide that the customer may
vary from the base annual quantity, usually by not more than 15%, the quantity
of coal purchased under the contract in a particular year. In addition, some
contracts contain "reopener" provisions that require the parties to reach new
agreements regarding price in order to maintain the contract, and from time to
time the Company has renegotiated contracts after execution to extend contract
term or to accommodate changing market conditions.
The Company's coal production is subject to a variety of operational,
geologic, and weather-related factors that routinely cause production to
fluctuate. Operational factors include anticipated and unanticipated events. For
example, at Mingo Logan's longwall mine the longwall equipment must be
dismantled and moved
17
<PAGE> 20
to a new area of the mine whenever the coal reserves in a segment of the
mine--called a panel--are exhausted. The size of a panel varies, and therefore,
the frequency of moves can also vary. Unanticipated events, such as the
unavailability of essential equipment because of breakdown or unscheduled
maintenance, would also adversely affect production. Geologic conditions within
mines are not uniform. Overburden ratios at the surface mines vary, as do roof
and floor conditions and seam thickness in the longwall mine. These variations
can be either positive or negative for production. Weather conditions can also
have a significant effect on the Company's production, depending on the severity
and duration of the condition. For example, extremely cold weather combined with
substantial snow and ice accumulations may impede surface operations directly
and all operations indirectly by making it difficult for workers and suppliers
to reach the mine sites. Any event disrupting production at Mingo Logan for a
prolonged period would have a significant adverse effect on the Company's
results of operations because of the high volume of coal produced by Mingo Logan
and the relatively high contribution to operating income by the sale of each ton
of that coal.
Hobet and subsidiaries of Dal-Tex are parties to the Wage Agreement. From
time to time in the past, strikes and work stoppages have adversely affected
production at the operations of Hobet and Dal-Tex, and have caused disruptions
at their mines. Any future strike or work stoppage that affects both Hobet and
the subsidiaries of Dal-Tex for a prolonged period would have a significant
adverse effect on the Company's results of operations.
The labor forces at Mingo Logan and its Mountaineer Mining Company and
Bearco divisions are not currently unionized. However, in a recent National
Labor Relations Board (NLRB) proceeding, Mingo Logan and certain other employers
with whom Mingo Logan contracts for construction and mining services were
determined to be joint employers by the Acting Regional Director for NLRB Region
9. As a consequence of this ruling, the bargaining unit at Mingo Logan's
Mountaineer Mine for purposes of collective bargaining has been determined to be
comprised of employees of Mingo Logan and its contractors, and these employees
voted together on January 19, 1995, on the question of whether or not to be
represented by the UMWA. The result of this vote, which was required by the NLRB
decision, is not yet known as the ballots have been sealed pending appeal of the
initial determination concerning the appropriate bargaining unit. Mingo Logan
has appealed the decision of the Acting Regional Director to the NLRB, and Mingo
Logan expects to prevail in its appeal. If Mingo Logan does prevail on appeal,
the January 19, 1995, representation election results will be invalidated.
Any one or a combination of changing demand, fluctuating selling prices,
routine operational, geologic, and weather-related factors, or labor disruptions
may occur at times or in a manner that causes results of operations to deviate
from expectations.
18
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors........................................................ 20
Audited Consolidated Financial Statements
Consolidated Statements of Income--Years ended December 31, 1994, 1993 and 1992....... 21
Consolidated Balance Sheets--December 31, 1994 and 1993............................... 22
Consolidated Statements of Stockholders' Equity--Years ended December 31, 1994, 1993
and 1992............................................................................ 23
Consolidated Statements of Cash Flows--Years ended December 31, 1994, 1993 and 1992... 24
Notes to Consolidated Financial Statements............................................ 25
</TABLE>
19
<PAGE> 22
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Stockholders and Board of Directors
Ashland Coal, Inc.
We have audited the accompanying consolidated balance sheets of Ashland
Coal, Inc. and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1994. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and the schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Ashland Coal,
Inc. and subsidiaries at December 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
As discussed in Note 1 to the consolidated financial statements, effective
January 1, 1993, the Company changed its methods of accounting for income taxes
and for postretirement benefits other than pensions.
/s/ ERNST & YOUNG LLP
Louisville, Kentucky
January 23, 1995
20
<PAGE> 23
CONSOLIDATED STATEMENTS OF INCOME
ASHLAND COAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
(In thousands except earnings per share) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Coal sales............................................... $589,141 $484,390 $563,932
Operating revenues....................................... 21,003 13,952 15,792
-------- -------- --------
610,144 498,342 579,724
COSTS AND EXPENSES:
Cost of coal sold........................................ 510,125 446,754 478,286
Operating expenses....................................... 11,543 10,641 11,502
Selling, general, and administrative expenses............ 33,756 35,790 31,959
-------- -------- --------
555,424 493,185 521,747
-------- -------- --------
Operating income........................................... 54,720 5,157 57,977
OTHER INCOME (EXPENSE):
Interest income.......................................... 366 1,057 1,240
Interest expense......................................... (22,238) (25,342) (21,781)
-------- -------- --------
Income (loss) before income taxes and the cumulative effect
of changes in accounting.................................. 32,848 (19,128) 37,436
Income tax expense (benefit)............................... 628 (64,502) 1,697
-------- -------- --------
Income before the cumulative effect of changes in
accounting............................................... 32,220 45,374 35,739
Cumulative effect of changes in accounting................. -- (18,836) --
-------- -------- --------
NET INCOME................................................. 32,220 26,538 35,739
Less:
Preferred stock dividends................................ 2,603 2,660 2,435
Accretion on preferred stock subject to redemption....... -- 770 1,280
-------- -------- --------
Income applicable to common stock.......................... $ 29,617 $ 23,108 $ 32,024
======== ======== ========
EARNINGS PER COMMON SHARE:
Primary:
Earnings before cumulative effect adjustments............ $ 1.72 $ 2.48 $ 2.01
Cumulative effect adjustments............................ -- (1.07) --
-------- -------- --------
Net income............................................... $ 1.72 $ 1.41 $ 2.01
======== ======== ========
Fully diluted:
Earnings before cumulative effect adjustments............ $ 1.68 $ 2.34 $ 1.88
Cumulative effect adjustments............................ -- (1.00) --
-------- -------- --------
Net income............................................... $ 1.68 $ 1.34 $ 1.88
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 24
CONSOLIDATED BALANCE SHEETS
ASHLAND COAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31
(In thousands) 1994 1993
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 1,120 $ 556
Trade accounts receivable........................................ 62,362 45,513
Other receivables................................................ 9,124 4,467
Inventories...................................................... 30,211 22,304
Prepaid royalties................................................ 15,568 15,098
Deferred income taxes............................................ 3,158 2,116
Other............................................................ 4,020 4,829
-------- --------
Total current assets............................................. 125,563 94,883
Other assets:
Prepaid royalties................................................ 58,779 53,557
Coal supply agreements........................................... 35,527 47,032
Other............................................................ 25,108 29,328
-------- --------
Total other assets............................................... 119,414 129,917
Property, plant, and equipment, net................................. 593,415 611,191
-------- --------
Total assets..................................................... $838,392 $835,991
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 35,988 $ 27,302
Accrued expenses................................................. 33,657 28,036
Current portion of debt.......................................... 43,963 37,260
-------- --------
Total current liabilities........................................ 113,608 92,598
Long-term debt...................................................... 200,000 244,342
Accrued postretirement benefits..................................... 75,196 67,845
Other long-term liabilities......................................... 45,166 41,571
Deferred income taxes............................................... 32,388 42,584
Deferred gain on sale and leaseback of assets....................... 3,051 3,624
Stockholders' equity:
Convertible preferred stock...................................... 67,841 67,841
Common stock, $.01 par value, 44,000,000 shares authorized,
13,722,984 and 13,658,504 shares issued and outstanding in 1994
and 1993......................................................... 137 136
Paid-in capital.................................................. 108,711 107,087
Retained earnings................................................ 192,294 168,363
-------- --------
Total stockholders' equity....................................... 368,983 343,427
-------- --------
Total liabilities and stockholders' equity....................... $838,392 $835,991
======== ========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 25
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ASHLAND COAL, INC. AND SUBSIDIARIES
Three years ended December 31, 1994
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED COMMON PAID-IN RETAINED
STOCK STOCK CAPITAL EARNINGS TOTAL
----------- ------ -------- --------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1992...................... $33,050 $116 $ 43,523 $123,891 $200,580
Net income.................................... 35,739 35,739
Cash dividends paid:
Common - $.40 per share..................... (5,224) (5,224)
Preferred - $9,738 (including $4,200
preference dividend) per share............. (2,435) (2,435)
Accretion on preferred stock subject to
redemption.................................. (1,280) (1,280)
Issuance of 1,950,000 shares of common stock,
net of $1,739,000 underwriting and stock
issuance expenses............................ 20 60,290 60,310
Issuance of 25,700 shares of common stock
under stock incentive plan................... 585 585
----------- ------ -------- --------- --------
Balance at December 31, 1992.................... 33,050 136 104,398 150,691 288,275
Net income.................................... 26,538 26,538
Cash dividends paid:
Common - $.40 per share..................... (5,436) (5,436)
Preferred - $10,638 (including $4,200
preference dividend) per share............. (2,660) (2,660)
Accretion on preferred stock subject to
redemption.................................. (770) (770)
Reclassification of Class C preferred stock no
longer subject to redemption................. 34,791 34,791
Issuance of 76,533 shares of common stock
under dividend reinvestment and stock
purchase plan................................ 2,123 2,123
Issuance of 28,725 shares of common stock
under stock incentive plan................... 566 566
----------- ------ -------- --------- --------
Balance at December 31, 1993.................... 67,841 136 107,087 168,363 343,427
Net income.................................... 32,220 32,220
Cash dividends paid:
Common - $.415 per share.................... (5,686) (5,686)
Preferred - $10,414 (including $2,800
preference dividend) per share............. (2,603) (2,603)
Issuance of 35,655 shares of common stock
under dividend reinvestment and stock
purchase plan................................ 1 980 981
Issuance of 28,825 shares of common stock
under stock incentive plan................... 644 644
----------- ------ -------- -------- --------
Balance at December 31, 1994.................... $67,841 $137 $108,711 $192,294 $368,983
========= ====== ========= ========= ========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 26
CONSOLIDATED STATEMENTS OF CASH FLOWS
ASHLAND COAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
(In thousands) 1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.......................................... $ 32,220 $ 26,538 $ 35,739
Adjustments to reconcile to cash provided by
operating activities:
Depreciation, depletion, and amortization........ 71,795 71,248 67,001
Prepaid royalties expensed....................... 19,868 26,299 20,860
Loss on notes receivable......................... -- -- 590
Deferred income taxes............................ (11,238) (69,166) (11,132)
(Gain) loss on disposition of assets............. (1,214) (43) 39
Cumulative effect of changes in accounting....... -- 18,836 --
Partnership costs in excess of cash advances..... 436 453 710
Changes in operating assets and liabilities, net
of effects of acquisition of subsidiary:
Trade accounts receivable................... (16,849) 21,315 (23,358)
Other receivables........................... (4,657) 3,954 (622)
Inventories................................. (7,907) 2,154 5,197
Prepaid royalties........................... (5,070) (16,967) (21,145)
Other current assets........................ (1,522) (1,921) 28
Other assets................................ 2,518 (6,764) 1,594
Accounts payable and accrued expenses....... 12,816 (7,688) (1,004)
Income taxes................................ 2,381 (8,146) 2,855
Accrued postretirement benefits............. 7,351 6,746 938
Other long-term liabilities................. 3,159 7,322 469
----------- ----------- -----------
Cash provided by operating activities............... 104,087 74,170 78,759
INVESTING ACTIVITIES
Property, plant, and equipment:
Purchases...................................... (42,841) (20,569) (97,136)
Proceeds from sales............................ 4,280 709 1,075
Proceeds from sale and leaseback of equipment....... -- 64,182 --
Acquisition of subsidiary, net of cash acquired..... -- -- (229,212)
Advances on prepaid royalties....................... (20,490) (8,668) (5,510)
----------- ----------- -----------
Cash provided by (used in) investing activities..... (59,051) 35,654 (330,783)
FINANCING ACTIVITIES
Proceeds from borrowings............................ 1,315,931 1,023,648 1,726,148
Payments on borrowings.............................. (1,353,570) (1,165,029) (1,485,328)
Dividends paid...................................... (8,289) (8,096) (7,659)
Proceeds from sale of common stock.................. 1,456 2,600 48,258
----------- ----------- -----------
Cash provided by (used in) financing activities..... (44,472) (146,877) 281,419
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents.... 564 (37,053) 29,395
Balance at beginning of year........................ 556 37,609 8,214
----------- ----------- -----------
Cash and cash equivalents at end of year............ $ 1,120 $ 556 $ 37,609
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for income taxes, net of
refunds.......................................... $ 9,218 $ 12,810 $ 9,974
Cash paid during the year for interest, net of
amounts capitalized................................ $ 22,126 $ 25,411 $ 22,521
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ASHLAND COAL, INC. AND SUBSIDIARIES
December 31, 1994
1. ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Ashland Coal,
Inc. and its subsidiaries (the Company or Ashland Coal), which operate in the
coal mining industry. All subsidiaries are wholly owned. Significant
intercompany transactions and accounts have been eliminated in consolidation.
Ashland Coal's 17.5% partnership interest in Dominion Terminal Associates
is accounted for on the equity method in the consolidated balance sheets.
Allocable costs of the partnership for coal loading and storage are included in
costs and expenses in the consolidated statements of income.
Changes in Accounting Methods
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 1993 earnings was $40,856,000,
which was $25,331,000 ($1.44 per share on a primary basis and $1.34 per share on
a fully diluted basis) net of tax. The latter amount has been reflected in the
consolidated statement of income as a cumulative effect of an accounting change.
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 1993 income by
$10,476,000, which was $6,495,000 ($.37 per share on a primary basis and $.34
per share on a fully diluted basis) net of tax. The latter amount has been
reflected in the consolidated statement of income as a cumulative effect of an
accounting change.
Inventories
Inventories at December 31, 1994 and 1993, are comprised of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
------- -------
<S> <C> <C>
Coal.................................................................... $14,198 $ 6,884
Supplies................................................................ 16,013 15,420
------- -------
$30,211 $22,304
======= =======
</TABLE>
Coal inventories are stated at the lower of cost (determined by the
first-in, first-out method) or market. Supplies inventories are valued at the
lower of average cost or market.
Coal Acquisition Costs and Prepaid Royalties
Coal lease rights obtained through acquisition of other companies are
capitalized and amortized primarily by the units-of-production method over the
estimated recoverable reserves.
25
<PAGE> 28
1. ACCOUNTING POLICIES (CONTINUED)
Rights to leased coal lands are often acquired through royalty payments.
Where royalty payments represent prepayments recoupable against future
production, they are capitalized, and amounts expected to be recouped within one
year are classified as a current asset. As mining occurs on these leases, the
prepayment is offset against earned royalties and is included in the cost of
coal mined. The Company provides a valuation allowance for royalties estimated
to be nonrecoupable. The valuation allowance for prepaid royalties was
$21,884,000 and $22,062,000 at December 31, 1994 and 1993, respectively.
Coal Supply Agreements
Acquisition costs allocated to coal supply agreements (sales contracts) are
capitalized and amortized to selling expense on the basis of coal to be shipped
over the term of the contract. Accumulated amortization for sales contracts was
$32,775,000 and $44,882,000 at December 31, 1994 and 1993, respectively.
Exploration and Development Costs
Coal exploration costs are expensed as incurred. Development costs, which
are recoverable, are capitalized and amortized by the units-of-production method
over the estimated recoverable reserves.
Depreciation
Depreciation is provided principally on the straight-line method over the
estimated useful lives of the assets.
Asset Impairment
If facts and circumstances suggest that a long-lived asset may be impaired,
the carrying value is reviewed. If this review indicates that the value of the
asset will not be recoverable, as determined based on the undiscounted cash
flows related to the asset over its remaining life, then the carrying value of
the asset is reduced by the estimated shortfall of cash flows.
Deferred Gain on Sale and Leaseback of Assets
Gain resulting from the sale and leaseback of assets is deferred and
amortized over the term of the operating lease as a reduction of rental expense.
Revenue Recognition
Coal sales revenues include sales to customers of coal produced at Company
operations and purchased from other companies. The Company recognizes revenue
from coal sales at the time title passes to the customer. Revenues other than
from coal sales are included in operating revenues and are recognized in income
as services are performed.
Other
Cash equivalents (none at December 31, 1994 and 1993) represent highly
liquid investments with a maturity of three months or less when purchased. Cash
equivalents are recorded at cost, plus accrued interest, which approximates
market.
Interest costs on borrowed funds are capitalized for significant asset
construction projects. Capitalized interest costs were $176,000 in 1994 and
$4,911,000 in 1992. No interest was capitalized in 1993.
2. RELATED PARTIES
The financial statements include transactions with Ashland Inc. (Ashland),
Saarbergwerke AG (Saarberg), and Carboex International, Ltd. (Carboex) and their
affiliates. Ashland owns 7,099,871 shares of the issued and outstanding common
stock and the issued and outstanding convertible Class B preferred stock, and
Carboex owns the issued and outstanding convertible Class C preferred stock.
Saarberg owns 52,216 shares of Ashland Coal's common stock. Prior to February 8,
1995, Saarberg also owned the issued and outstanding convertible Class B
preferred stock. On February 8, 1995, Ashland purchased Saarberg's Class B
preferred stock for $110,076,000. Ashland now has approximately 54% of the
voting power of Ashland Coal in matters other than the election of directors and
will be able to elect six members of the 10-member Board of Directors.
26
<PAGE> 29
2. RELATED PARTIES (CONTINUED)
Revenues include sales of coal to Saarberg and miscellaneous items of
income resulting from transactions with Ashland. In addition, Ashland Coal
receives certain services from and provides certain services to Ashland for
which fees are charged between the companies. Ashland Coal purchases fuel, oil,
and other products from Ashland for use in its mining operations.
Saarberg and Carboex are the Company's exclusive agents for the purpose of
selling metallurgical coal to the steel industry in Europe. Under the terms of
the agreement, Ashland Coal pays a 2% commission on all such sales.
Transactions with related parties are summarized below.
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Revenues:
Saarberg.......................................................... $4,124 $1,408 $ --
Ashland and affiliates............................................ 1 1 --
Service fees:
Charges from Ashland.............................................. 392 423 338
Charges to Ashland................................................ 1 1 1
Commissions paid on European sales of metallurgical coal:
Carboex........................................................... 108 135 --
Saarberg and affiliates........................................... 108 135 --
Commissions paid to Saarberg and affiliates on certain export sales
of
steam coal........................................................ -- 13 117
Purchases of fuel, oil, and other products from Ashland............. 5,881 4,205 7,174
</TABLE>
Management believes that charges between Ashland Coal and Ashland for
services were reasonable and that the other transactions summarized above were
concluded on terms equivalent to those prevailing among unaffiliated parties.
3. DOMINION TERMINAL ASSOCIATES
Ashland Coal holds a 17.5% general partnership interest in Dominion
Terminal Associates (DTA), which operates a ground storage-to-vessel coal
transloading facility in Newport News, Virginia. DTA leases the facility from
Peninsula Ports Authority of Virginia (PPAV) for amounts sufficient to meet debt
service requirements. Financing is provided through $132,800,000 of tax-exempt
bonds issued by PPAV which mature July 1, 2016.
Under the terms of a throughput and handling agreement with DTA, each
partner is charged its share of cash operating and debt service costs in
exchange for the right to use its share of the facility's loading capacity and
is required to make periodic cash advances to DTA to fund such costs. On a
cumulative basis, costs exceeded cash advances by $6,933,000 and $6,497,000 at
December 31, 1994 and 1993, respectively (included in other long-term
liabilities). Costs and cash advances for the last three years follow:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Operating and debt service costs charged to costs and expenses...... $3,316 $3,158 $3,849
Cash advances....................................................... 2,880 2,705 3,139
</TABLE>
Future payments for fixed operating costs and debt service are estimated to
approximate $3,000,000 annually through 2015 and $26,000,000 in 2016.
27
<PAGE> 30
4. TAXES
Significant components of the provision for income tax expense (benefit)
are as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
Current:
Federal...................................................... $11,037 $ 4,805 $ 12,057
State........................................................ 829 (141) 772
------- -------- --------
Total current............................................. 11,866 4,664 12,829
------- -------- --------
Deferred:
Federal...................................................... (10,253) (62,068) (10,526)
State........................................................ (985) (7,098) (606)
------- -------- --------
Total deferred............................................ (11,238) (69,166) (11,132)
------- -------- --------
$ 628 $(64,502) $ 1,697
======= ======== ========
</TABLE>
A reconciliation of the normal statutory federal income tax on Ashland
Coal's pretax income with the Company's actual income tax expense (benefit)
follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
Income tax expense (benefit) at U.S. statutory rate............ $11,497 $ (6,504) $ 12,728
Increase (decrease) in taxes resulting from:
Percentage depletion allowance............................... (10,685) (7,038) (11,200)
State income taxes, net of effect of federal taxes........... 539 (93) 509
Nontaxable income and nondeductible expenses................. (53) (172) (368)
Effect of enacted tax law changes............................ -- (50,231) --
Other items.................................................. (670) (464) 28
------- -------- --------
$ 628 $(64,502) $ 1,697
======= ======== ========
</TABLE>
Income tax benefit for 1993 includes a net $50,231,000 deferred tax benefit
resulting from the enactment of the Omnibus Budget Reconciliation Act of 1993
(OBRA). OBRA increased the marginal tax rate on corporations by 1%, which
resulted in Ashland Coal's recognizing an additional net deferred tax liability
of $3,307,000 and a like amount of deferred income tax expense. The new law also
permits the Company to elect to deduct the amortization of goodwill over 15
years. Such amortization was not previously deductible. Ashland Coal has elected
to deduct for federal tax purposes the amortization of goodwill associated with
the April 1992 acquisition of Dal-Tex Coal Corporation. As a result of this
election, the Company recognized a $53,538,000 deferred tax asset and an equal
deferred tax benefit.
28
<PAGE> 31
4. TAXES (CONTINUED)
Significant components of the Company's deferred tax liabilities and assets
at December 31, 1994 and 1993, that result from carryforwards and temporary
differences between the financial statement basis and tax basis of assets and
liabilities are summarized as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Acquisition costs allocated to mineral reserves....................... $ 91,842 $ 95,316
Property, plant, and equipment, principally due to differences in
lives and methods of depreciation, depletion, and amortization....... 28,385 29,034
Prepaid royalties capitalized for financial reporting purposes........ 18,819 18,055
Acquisition costs allocated to coal supply agreements................. 3,834 7,439
Other................................................................. 3,020 3,035
-------- --------
Total deferred tax liabilities..................................... 145,900 152,879
-------- --------
Deferred tax assets:
Goodwill for tax purposes............................................. 40,932 43,774
Postretirement benefits other than pensions........................... 29,919 27,260
Alternative minimum tax credit carryforward........................... 25,287 20,121
Costs not deductible until paid or realized........................... 15,779 13,318
Net operating loss carryforwards...................................... 499 3,584
Deferred gains not deferred for tax purposes.......................... 1,933 2,080
Other................................................................. 2,321 2,274
-------- --------
Total deferred tax assets.......................................... 116,670 112,411
-------- --------
Net deferred tax liability....................................... 29,230 40,468
Less current asset................................................. (3,158) (2,116)
-------- --------
Long-term deferred tax liability................................. $ 32,388 $ 42,584
======== ========
</TABLE>
At December 31, 1994, the Company had $515,000 of federal net operating
loss carryforwards, which expire in 2004, and $5,954,000 of state net operating
loss carryforwards, which expire from 2002 through 2008, which may be applied
against future taxable income.
5. PREPAID ROYALTIES
Ashland Coal has entered into various noncancellable royalty lease
agreements under which future minimum payments are approximately $25,000,000
annually in 1995 and 1996, $23,000,000 in 1997 through 1999, and $234,000,000 in
the aggregate thereafter.
Coal lands and mineral rights with a carrying value of $3,066,000, prepaid
royalties with a carrying value of $26,484,000 (net of the valuation allowance),
and future royalty commitments of $1,701,000 at December 31, 1994, represent
amounts attributable to coal properties for which there are no immediate plans
for significant production. Geological surveys performed by outside consultants
indicate that there are sufficient reserves relative to these properties to
permit recovery of Ashland Coal's investment.
29
<PAGE> 32
6. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at December 31, 1994 and 1993, consists of
the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
-------- --------
<S> <C> <C>
Land.................................................................. $ 5,393 $ 5,254
Coal lands and mineral rights......................................... 457,971 456,898
Buildings and improvements............................................ 34,881 27,998
Equipment and processing facilities................................... 340,035 330,671
Other................................................................. 6,607 5,688
Construction in progress.............................................. 13,251 2,580
-------- --------
858,138 829,089
Less accumulated depreciation, depletion, and amortization............ 264,723 217,898
-------- --------
$593,415 $611,191
======== ========
</TABLE>
7. DEBT AND FINANCING ARRANGEMENTS
Debt at December 31, 1994 and 1993, consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
-------- --------
<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 (rate
at December 31, 1994--6.51%; 1993--3.62%)............................ 25,000 50,000
Indebtedness to banks under lines of credit (weighted average rate
at December 31, 1994--6.74%; 1993--3.60%)............................ 43,858 56,332
Other................................................................. 105 270
-------- --------
243,963 281,602
Less current portion.................................................. 43,963 37,260
-------- --------
Long-term debt........................................................ $200,000 $244,342
======== ========
</TABLE>
Ashland Coal has a revolving credit agreement, which terminates in 1999,
with a group of banks providing for borrowings of up to $500,000,000. The rate
of interest on borrowings under this agreement is, at Ashland Coal's option, a
money market rate determined by a competitive bid process, the National
Westminster Bank PLC reference rate, a rate based on LIBOR, or a rate based on
an average market certificate of deposit rate. The provisions of the revolving
credit agreement require a facility fee, which is currently computed at the rate
of 0.225% per annum on the amount of the commitment. The rate used to compute
the facility fee is redetermined quarterly based upon the Company's ratio of
debt to equity and may vary from 0.15% to 0.35% per annum. Amounts borrowed
under the revolving credit agreement are classified as long-term as the Company
has the intent and ability to maintain these borrowings on a long-term basis.
Ashland Coal periodically establishes uncommitted lines of credit with
banks. These agreements generally provide for short-term borrowings at market
rates. At December 31, 1994, there were $237,900,000 of such agreements in
effect.
Aggregate maturities of debt at December 31, 1994, are $43,963,000 in 1995,
$47,100,000 in 1996, $25,000,000 in each of 1997, 1998, and 1999, and
$77,900,000 thereafter. Included in these maturities are discretionary
prepayments of $25,000,000 in 1996.
The credit agreements contain, among other covenants, provisions setting
forth certain requirements for current ratio and consolidated net worth and
restrictions on the payment of dividends and the creation of additional debt. At
December 31, 1994, retained earnings of $54,467,000 were available for
dividends.
30
<PAGE> 33
8. ACCRUED BLACK LUNG BENEFITS
Ashland Coal is liable under the federal Mine Safety and Health Act of
1977, as amended, to provide for pneumoconiosis (black lung) benefits to
eligible employees, former employees, and dependents with respect to claims
filed by such persons on or after July 1, 1973. Ashland Coal is also liable
under various states' statutes for black lung benefits. Ashland Coal currently
provides for federal and state claims principally through a self-insurance
program. Charges are being made to current operations in amounts sufficient to
amortize the actuarially computed liability for black lung benefits over 5 to 22
years at an assumed 8% after-tax investment return. The accrual for black lung
benefits (included in other long-term liabilities) was $14,890,000 and
$14,430,000 at December 31, 1994 and 1993, respectively.
9. ACCRUED POSTMINING RECLAMATION AND MINE CLOSING COSTS
Under the 1977 Surface Mining Control and Reclamation Act, a mine operator
is responsible for postmining reclamation on every mine for at least five years
after the mine is closed. Ashland Coal performs a substantial amount of
reclamation of disturbed acreage as an integral part of its normal mining
process. All such costs are expensed as incurred. The remaining costs of
reclamation are estimated and accrued as mining progresses.
The accrual for such reclamation (included in other long-term liabilities
and in accrued expenses) was $2,227,000 and $2,500,000 at December 31, 1994 and
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 $43,000,000. At December 31,
1994 and 1993, the accrual, which is included in other long-term liabilities and
in accrued expenses, for closing costs was $7,653,000 and $4,692,000,
respectively.
10. ACCRUED EXPENSES
Accrued expenses at December 31, 1994 and 1993, are comprised of the
following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
------- -------
<S> <C> <C>
Accrued compensation.................................................... $15,233 $13,181
Accrued taxes........................................................... 10,214 6,614
Accrued interest........................................................ 4,204 4,091
Accrued reclamation and mine closing costs.............................. 850 1,590
Other................................................................... 3,156 2,560
------- -------
$33,657 $28,036
======= =======
</TABLE>
11. CAPITAL STOCK
Convertible preferred stock consists of the following:
(In thousands)
<TABLE>
<S> <C>
Class A, $100 par value, 500 shares authorized, none outstanding................... $ --
Class B, $100 par value, 250 shares authorized, 150 shares issued and
outstanding...................................................................... 33,050
Class C, $100 par value, 250 shares authorized, 100 shares issued and
outstanding...................................................................... 34,791
-------
$67,841
=======
</TABLE>
Holders of shares of Class A, B, and C preferred stock are entitled to
receive dividends at such times and in such amounts as shall be equal to the
dividends payable on the number of shares of common stock into which each such
share of preferred stock is convertible. In addition, holders of Class B and C
preferred stock are entitled to receive cumulative dividends in preference to
common stock. Such preference dividend is currently $2,800 per share per annum,
decreases to $1,400 per share per annum in 1999, and will be zero after 2003.
Each share of Class A preferred stock (if issued) is convertible into
13,846 shares of common stock.
31
<PAGE> 34
11. CAPITAL STOCK (CONTINUED)
Each share of Class B and C preferred stock is convertible into shares of
common stock as follows:
<TABLE>
<S> <C>
Through August 17, 1998...................................................... 18,346 shares
August 18, 1998--August 17, 2003............................................. 19,596 shares
Thereafter................................................................... 20,846 shares
</TABLE>
Holders of Class B and C preferred stock, voting cumulatively and together
as a class, have the right to elect one director for each 63 shares of such
Class B and C preferred stock held by them, up to a maximum of three directors.
Ashland Coal and Carboex entered into a put agreement in 1988 granting to
Carboex the right to require Ashland Coal to purchase its 100 shares of Class C
preferred stock for $37,500,000 to be paid over two years. Carboex could have
exercised its right during the thirty day period beginning August 18, 1993, but
did not do so. These securities were recorded at their fair market value at date
of issue, and the carrying value was increased to the 1993 present value of the
redemption amount by periodic charges to retained earnings ($770,000 in 1993 and
$1,280,000 in 1992). After the expiration of the put agreement, the Class C
preferred stock was reclassified as an element of stockholders' equity.
12. EARNINGS PER SHARE
Earnings per share of common stock are based on the weighted average number
of common and common equivalent shares outstanding during each year. Shares of
common stock issuable under the Company's stock incentive plan are treated as
common stock equivalents when dilutive. Fully diluted earnings per share are
based on conversion rights that become effective within 10 years of the
respective balance sheet date.
Computations of earnings per share, using the "two class" method, are as
follows:
<TABLE>
<CAPTION>
(In thousands except earnings per share) 1994 1993 1992
------- -------- -------
<S> <C> <C> <C>
Income before the cumulative effect of changes in
accounting................................................. $32,220 $45,374 $35,739
Less: Common stock dividends................................. 5,686 5,436 5,224
Preferred stock dividends.............................. 2,603 2,529 2,435
Accretion of discount on preferred stock............... -- 770 1,280
------- -------- -------
Undistributed earnings less accretion before cumulative
effect adjustments.......................................... 23,931 36,639 26,800
Cumulative effect of changes in accounting................... -- (18,836) --
------- -------- -------
Undistributed earnings less accretion........................ $23,931 $17,803 $26,800
======= ======== =======
Earnings per common share:
Primary:
Undistributed earnings less accretion before cumulative
effect adjustments..................................... $ 1.30 $ 2.08 $ 1.61
Dividends (except preference dividends)................. .42 .40 .40
------- -------- -------
Earnings before cumulative effect adjustments........... 1.72 2.48 2.01
Cumulative effect adjustments........................... -- (1.07) --
------- -------- -------
Net income.............................................. $ 1.72 $ 1.41 $ 2.01
======= ======== =======
Fully diluted:
Undistributed earnings less accretion before cumulative
effect adjustments..................................... $ 1.26 $ 1.94 $ 1.48
Dividends (except preference dividends)................. .42 .40 .40
------- -------- -------
Earnings before cumulative effect adjustments........... 1.68 2.34 1.88
Cumulative effect adjustments........................... -- (1.00) --
------- -------- -------
Net income.............................................. $ 1.68 $ 1.34 $ 1.88
======= ======== =======
</TABLE>
32
<PAGE> 35
12. EARNINGS PER SHARE (CONTINUED)
Weighted average shares for computing earnings per share were as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
------- -------- -------
<S> <C> <C> <C>
Primary...................................................... 18,338 17,579 16,668
Fully diluted................................................ 18,965 18,924 18,115
</TABLE>
13. STOCK INCENTIVE PLAN
On August 8, 1988, the stockholders approved a stock incentive plan
reserving 750,000 shares of Ashland Coal common stock for awards to officers and
key employees. The plan provides for the granting of incentive stock options
(qualified stock options), nonqualified stock options, stock appreciation rights
(SARs) and restricted stock awards. Stock options generally become exercisable
in full or in part one year from date of grant and are granted at a price equal
to 100% of the fair market value of the stock on the date of grant. SARs entitle
employees to surrender stock options and receive cash or stock in an amount
equal to the excess of the market value of the optioned shares over their option
price. Unexercised options and any accompanying SARs lapse 10 years after the
date of grant. Restricted stock awards may entitle employees to purchase shares
at a nominal cost. Such awards entitle employees to vote shares acquired and to
receive any dividends thereon, but such shares cannot be sold or transferred and
are subject to forfeiture if employees terminate their employment prior to the
prescribed period, which can be from one to five years. As of December 31, 1994,
no SARs or restricted stock awards have been granted.
Information regarding this plan follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
(In thousands except per share COMMON AVERAGE COMMON AVERAGE COMMON AVERAGE
data) SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at January
1............................. 468 $21.75 432 $20.91 398 $17.99
Granted.................... 96 28.45 96 25.50 75 34.38
Exercised.................. (29) 16.49 (29) 16.61 (26) 15.44
Cancelled.................. (21) 23.29 (31) 26.37 (15) 20.38
------ ------ ------
Options outstanding at December
31............................ 514 23.23 468 21.75 432 20.91
======== ======== ========
Options exercisable at December
31............................ 351 284 204
Options available for grant at
December 31................... 95 170 235
</TABLE>
14. EMPLOYEE BENEFIT PLANS
Defined Benefit Pension Plan
The Company has a noncontributory defined benefit pension plan covering
certain of its salaried and nonunion hourly employees. Benefits for salaried
employees generally are based on years of service and the employee's
compensation during the three years prior to retirement. For hourly employees,
the plan provides for a stated benefit for each year of service. Ashland Coal
funds the plan in an amount not less than minimum statutory funding requirements
nor more than the maximum amount that can be deducted for federal income tax
purposes. Plan assets consist primarily of equity securities and fixed income
securities.
The net pension expense of the plan includes the following components:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Service cost of benefits earned.................................. $ 1,433 $ 1,047 $ 735
Interest cost on projected benefit obligation.................... 863 712 492
Actual (return) loss on plan assets.............................. 787 (506) (104)
Net amortization................................................. (1,428) 227 (158)
------- ------- -------
Net periodic pension cost...................................... $ 1,655 $ 1,480 $ 965
======= ======= =======
</TABLE>
33
<PAGE> 36
14. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the plan's funded status and amounts
recognized in the consolidated balance sheets at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
------- --------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits........................................................ $ 5,178 $ 5,707
Nonvested benefits..................................................... 728 838
------- --------
Accumulated benefit obligation...................................... 5,906 6,545
Effect of projected compensation increases............................... 5,346 5,803
------- --------
Projected benefit obligation........................................ 11,252 12,348
Plan assets at fair value................................................ 6,920 6,012
------- --------
Projected benefit obligation in excess of plan assets............... 4,332 6,336
Unrecognized transition credit........................................... 497 597
Unrecognized prior service cost.......................................... (8) (8)
Unrecognized net loss.................................................... (509) (2,998)
------- --------
Accrued pension liability........................................... 4,312 3,927
Less amount included in accrued expenses................................. 998 1,152
------- --------
Amount included in other long-term liabilities...................... $ 3,314 $ 2,775
======= ========
</TABLE>
The assumptions used in computing the information above are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Discount rate........................................................ 8.5% 7.0% 7.5%
Expected long-term rate of return on plan assets..................... 9.0% 9.0% 9.0%
Future compensation growth rate...................................... 5.0% 5.0% 5.0%
</TABLE>
Multiemployer Pension and Benefit Plans
Under the labor contract with the United Mine Workers of America (UMWA),
Ashland Coal made payments of $1,293,000 in 1994, $475,000 in 1993, and
$1,105,000 in 1992 into a multiemployer defined benefit pension plan trust
established for the benefit of union employees. Payments are based on hours
worked. Under the Multiemployer Pension Plan Amendments Act of 1980, a
contributor to a multiemployer pension plan may be liable, under certain
circumstances, for its proportionate share of the plan's unfunded vested
benefits (withdrawal liability). Ashland Coal has estimated its share of such
amount to be $18,300,000 at December 31, 1994. Ashland Coal is not aware of any
circumstances which would require it to reflect its share of unfunded vested
pension benefits in its consolidated financial statements.
The Coal Industry Retiree Health Benefit Act of 1992 (Benefit Act) provides
for the funding of medical and death benefits for certain retired members of the
UMWA through premiums to be paid by assigned operators (former employers),
transfers of monies from an overfunded pension trust established for the benefit
of retired UMWA members, and transfers from the Abandoned Mine Lands Fund, which
is funded by a federal tax on coal production. This funding arrangement
commenced February 1, 1993.
Ashland Coal treats its obligation under the Benefit Act as a participation
in a multiemployer plan and recognizes expense as premiums are paid. Ashland
Coal recognized $296,000 in 1994 and $240,000 in 1993 in expense relative to
premiums paid pursuant to the Benefit Act. The Company believes that the amount
of its obligation under the Benefit Act is not significant. Under the prior
funding arrangement for retirees now covered by the Benefit Act, Ashland Coal
paid $609,000 in 1993 and $4,809,000 in 1992 into two multiemployer benefit
trusts.
Other Postretirement Benefit Plans
Ashland Coal and its subsidiaries currently provide certain postretirement
health and life insurance coverage for eligible employees. Generally, covered
employees who terminate employment after meeting the
34
<PAGE> 37
14. EMPLOYEE BENEFIT PLANS (CONTINUED)
eligibility requirements for pension benefits are also eligible for
postretirement coverage for themselves and their dependents. The salaried
employee postretirement medical and dental plans are contributory, with retiree
contributions adjusted periodically, and contain other cost-sharing features
such as deductibles and coinsurance. The postretirement medical plan for
retirees who were members of the UMWA is not contributory. The Company's current
funding policy is to fund the cost of all postretirement health and life
insurance benefits as they are paid.
The labor contract ratified by the members of the UMWA in December of 1993
changed the manner in which health care will be provided to and paid for future
retirees. The effect of these changes was to reduce the accumulated
postretirement benefit obligation as of January 1, 1994, by approximately
$2,500,000. That reduction will be amortized over the expected future working
lifetime of active employees.
The net periodic postretirement benefit expense of these plans for 1994 and
1993 includes the following components:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
------ ------
<S> <C> <C>
Service cost................................................................ $4,522 $4,236
Interest cost............................................................... 4,591 4,988
Amortization of gain related to prior service............................... (213) --
------ ------
Net periodic postretirement benefit cost.................................... $8,900 $9,224
====== ======
</TABLE>
The following table sets forth the amounts recognized in the consolidated
balance sheets at December 31, 1994 and 1993, none of which have been funded:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................................... $16,611 $21,080
Fully eligible active plan participants................................ 6,869 8,669
Other active plan participants......................................... 35,060 39,084
------- --------
58,540 68,833
Unrecognized net gain.................................................... 15,710 323
Unrecognized gain related to prior service............................... 2,315 --
------- --------
Accrued postretirement obligation...................................... 76,565 69,156
Less amount included in accrued expenses................................. 1,369 1,311
------- --------
Amount included in accrued postretirement benefits..................... $75,196 $67,845
======= ========
</TABLE>
The discount rate used in determining the accumulated postretirement
benefit obligation was 8.5% and 7% at December 31, 1994 and 1993, respectively.
The increase in the discount rate was primarily responsible for the decrease in
the accumulated postretirement benefit obligation. The assumed health care cost
trend rate for 1995 is 11%, decreasing to 5% in the year 2010. The health care
cost trend rate assumption has a significant effect on the amounts reported. For
example, increasing the assumed health care cost trend rate by one percentage
point in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1994, by $10,500,000, or 17.9%, and the net
periodic postretirement benefit cost for 1994 by $1,700,000, or 19.0%.
Other Plans
Ashland Coal sponsors three savings plans which were established to assist
eligible employees in providing for their future retirement needs. Ashland
Coal's contributions to the plans were $1,621,000 in 1994, $1,464,000 in 1993,
and $1,135,000 in 1992.
In November 1992, the Financial Accounting Standards Board issued SFAS No.
112, Employers' Accounting for Postemployment Benefits, which requires that
employers who provide benefits to former or
35
<PAGE> 38
14. EMPLOYEE BENEFIT PLANS (CONTINUED)
inactive employees after employment but before retirement recognize the
obligation for those benefits under certain conditions. Ashland Coal adopted
SFAS No. 112 in 1994. SFAS No. 112 had no significant effect on the consolidated
financial statements.
15. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
Ashland Coal places its cash equivalents in investment grade short-term
investments and limits the amount of credit exposure to any one commercial
issuer.
Ashland Coal markets its coal principally to electric utilities in the
United States and Europe. As of December 31, 1994 and 1993, accounts receivable
from electric utilities located in the United States totaled $49,079,000 and
$31,609,000, respectively, and accounts receivable from electric utilities
located in Europe totaled $1,146,000 and $2,491,000, respectively. Credit is
extended based on an evaluation of the customer's financial condition, and
collateral is not generally required. Credit losses are provided for in the
financial statements and consistently have been minimal.
Ashland Coal is committed under several long-term contracts to supply coal
that meets certain quality requirements at specified prices. These prices are
generally adjusted based on indices. Quantities sold under some of these
contracts may vary from year to year within certain limits at the option of the
customer. Sales (including spot sales) to major customers were as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Customer A.................................................... $128,978 $ 99,251 $128,245
Customer B.................................................... 82,005 79,620 84,172
Customer C.................................................... 60,928 44,033 68,826
</TABLE>
In 1994, 1993, and 1992, Ashland Coal had export sales, principally to
European customers, of $40,608,000, $50,364,000, and $93,832,000, respectively.
16. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by Ashland Coal in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the consolidated
balance sheets for cash and cash equivalents approximates its fair value.
Debt: The carrying amounts of Ashland Coal's borrowings under its revolving
credit agreement and under lines of credit approximate their fair value. The
fair values of Ashland Coal's senior notes are estimated using discounted cash
flow analyses, based on Ashland Coal's current incremental borrowing rates for
similar types of borrowing arrangements.
The carrying amounts and fair values of Ashland Coal's financial
instruments at December 31, 1994 and 1993, are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents......................... $ 1,120 $ 1,120 $ 556 $ 556
Lines of credit................................... 43,858 43,858 56,332 56,332
Revolving credit agreement........................ 25,000 25,000 50,000 50,000
Senior notes...................................... 175,000 188,000 175,000 197,000
</TABLE>
17. SALE AND LEASEBACK
On January 29, 1993, Ashland Coal sold mining equipment valued at
approximately $64,000,000 and leased back the equipment under an operating lease
with a term of three years. The proceeds of this transaction were used to repay
borrowings under Ashland Coal's revolving credit agreement. The lease provides
for annual rental payments of approximately $10,500,000 in 1995 and
approximately $2,500,000 in
36
<PAGE> 39
17. SALE AND LEASEBACK (CONTINUED)
1996. At the end of the lease term, the Company has the option to purchase the
equipment for $43,200,000. Alternatively, the equipment may be sold by the
lessor to a third party. In the event of such a sale, the Company will be
required to make payment to the lessor in the event, and to the extent, that the
proceeds are below $35,600,000.
18. ACQUISITION
On April 1, 1992, Ashland Coal acquired Dal-Tex Coal Corporation for
consideration of approximately $242,000,000, which included the issuance to the
seller of 400,000 shares of Ashland Coal's common stock valued at $12,400,000.
The cash portion was financed through bank borrowings and the issuance of
1,550,000 shares of common stock.
This acquisition was accounted for as a purchase, with the cost of the
acquisition allocated to the assets acquired and liabilities assumed based on
their respective estimated fair values at the date of acquisition. Such
allocations were based on appraisals and Ashland Coal's evaluation of fair
value. The results of operations of Dal-Tex have been included in Ashland Coal's
consolidated financial statements since the acquisition date.
19. COMMITMENTS AND CONTINGENCIES
Ashland Coal leases office space, mining equipment, land, and various other
properties under noncancellable long-term leases, expiring at various dates.
Rental expense related to these operating leases amounted to $14,088,000 in
1994, $10,772,000 in 1993, and $3,510,000 in 1992. Minimum annual rentals due in
future years under lease agreements in effect at January 1, 1995, are
approximately $14,012,000 in 1995, $6,077,000 in 1996, $3,518,000 in 1997,
$3,187,000 in 1998, $3,118,000 in 1999, and additional amounts thereafter
aggregating $13,107,000 through 2011.
Ashland Coal is a party to numerous claims and lawsuits with respect to
various matters. The Company provides for costs related to contingencies when a
loss is probable and the amount is reasonably determinable. The Company
estimates that its probable aggregate loss as a result of such claims is
$2,884,000 (included in other long-term liabilities) and believes that probable
insurance recoveries of $2,254,000 (included in other assets) related to these
claims will be realized. The Company estimates that its reasonably possible
aggregate losses from all currently pending litigation could be as much as
$6,800,000 (before tax) in excess of the probable loss previously recognized.
However, the Company believes it is probable that substantially all of such
losses, if any occur, will be insured. After conferring with counsel, it is the
opinion of management that the ultimate resolution of these claims, to the
extent not previously provided for, will not have a material adverse effect on
the consolidated financial condition, results of operations, or liquidity of the
Company.
37
<PAGE> 40
20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial data for 1994 and 1993 are summarized below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(In thousands except earnings per share) MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1994:
Sales and operating revenues................. $137,488 $154,650 $157,425 $160,581
Operating income............................. 2,459 17,431 15,375 19,455
Net income (loss)............................ (3,057)(1) 11,519 10,163(2) 13,595(1)
Earnings (loss) per common share(5)
Primary................................... (.18) .62 .54 .73
Fully diluted............................. (.18) .60 .53 .71
1993:
Sales and operating revenues................. $138,167 $134,990 $113,751 $111,434
Operating income (loss)...................... 5,527 7,050 (7,041) (379)
Income (loss) before the cumulative effect of
changes in accounting....................... 1,534 1,724 43,699 (1,583)
Cumulative effect of changes in accounting... (18,836) -- -- --
Net income (loss)............................ (17,302) 1,724 43,699(3) (1,583)(4)
Earnings (loss) per common share(5)
Primary
Income (loss) before cumulative effect
adjustments............................ .06 .07 2.45 (.10)
Net income (loss)....................... (1.05) .07 2.45 (.10)
Fully diluted
Income (loss) before cumulative effect
adjustments............................ .06 .07 2.31 (.10)
Net income (loss)....................... (1.05) .07 2.31 (.10)
</TABLE>
- ------------------------------
(1) In the first quarter of 1994, the Company settled a claim against a
construction contractor for business interruption losses sustained by the
Company when a coal silo failed. This settlement increased net income in the
first quarter by $610,000 ($.03 per share on a primary basis and $.03 per
share on a fully diluted basis). Settlement of a second claim against the
same contractor was recognized in the fourth quarter, adding $843,000 ($.05
per share on a primary basis and $.04 on a fully diluted basis) to net
income.
(2) In the third quarter of 1994, Ashland Coal recognized compensation for an
easement which rendered certain coal unminable, sold surplus mining
equipment, and received an insurance settlement. In the aggregate, these
transactions increased net income by $2,078,000, which was $.11 per share on
a primary and on a fully diluted basis.
(3) In the third quarter of 1993, Ashland Coal recognized $50,247,000 ($2.84 per
share on a primary basis and $2.67 per share on a fully diluted basis) of
deferred tax benefit primarily as the result of a change in tax law that
allows the deduction of the amortization of goodwill associated with the
1992 acquisition of Dal-Tex. Also in the third quarter, the Company
increased the valuation allowance relative to certain prepaid royalties.
This charge of $9,900,000 reduced net income by $6,039,000, which was $.34
per share on a primary basis and $.32 on a fully diluted basis.
(4) In the fourth quarter of 1993, the Company (a) recognized $1,182,000 in
additional mine closing cost accruals, depreciation, and amortization as the
result of a shortening of the estimated life of a mine, (b) increased its
estimate of certain state taxes payable relative to the first three quarters
of 1993, increasing costs and expenses by $1,012,000, and (c) recognized a
$1,130,000 reduction in costs and expenses for payments made into a benefit
fund (established by the Coal Industry Retiree Health Benefit Act of 1992)
during 1993 which will be applied to future obligations. In the aggregate
these adjustments increased net loss for the quarter by $648,000, or $.04
per share on a primary basis and $.03 per share on a fully diluted basis.
(5) The sum of the quarterly earnings per share amounts does not equal earnings
per share for the full year, because per share amounts are computed
independently for each quarter and for the year based on the weighted
average number of common and common equivalent shares outstanding during
each period and because of certain adjustments required to avoid
antidilution of fully diluted loss per share for any period in which a loss
is experienced.
38
<PAGE> 41
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in accountants or disagreements with accountants
with respect to accounting and financial disclosure during the two most recent
fiscal years.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference into this Annual Report on Form
10-K the information appearing under the subcaption "Nominees for Director"
which appears under the caption "Election of Directors" beginning on Page 3 in
the Company's 1995 Proxy Statement and the last paragraph appearing under the
caption "Security Ownership of Certain Beneficial Owners and Management" on page
9 of the Company's 1995 Proxy Statement. See also the list of the Company's
executive officers and related information under "Executive Officers of the
Registrant" in Part I, Item X herein.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference into this Annual Report on Form
10-K the information appearing under the "Summary Compensation Table", the
"Option Grants in Last Fiscal Year" table, the "Aggregated Option Exercises in
Last Fiscal Year and FY-End Option Values" table, the Pension Plan section
(including the Pension Plan Table), the Employment Contracts and Termination of
Employment and Change in Control Arrangements section, the Compensation of
Directors section, and the Compensation Committee Interlocks and Insider
Participation section appearing on Pages 15 to 20 in the Company's 1995 Proxy
Statement. No portion of the Personnel and Compensation Committee and Key
Employee Stock Administration Committee Report on Executive Compensation for
1994 or the "Comparison of Cumulative Total Return" table is incorporated herein
in reliance on Regulation S-K, Item 402(a)(8).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference into this Annual Report on Form
10-K the information appearing under the caption "Security Ownership of Certain
Beneficial Owners and Management" beginning on Page 8 of the Company's 1995
Proxy Statement other than the last paragraph under such caption, which
paragraph already is incorporated into Item 10 of this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference into this Annual Report on Form
10-K the information appearing under the subcaptions "Restated Shareholders
Agreement" and "Registration Rights Agreement" on Page 10 of the Company's 1995
Proxy Statement and the information appearing under the caption "Certain
Relationships and Related Transactions" beginning on Page 20 of the Company's
1995 Proxy Statement.
39
<PAGE> 42
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report
<TABLE>
<CAPTION>
PAGE
------
<S> <C> <C> <C>
(1) The following consolidated financial statements of Ashland Coal, Inc. and subsidiaries
are included in Item 8 at the page indicated:
Report of Independent Auditors.............................................. 20
Consolidated Statements of Income--Years Ended December 31, 1994, 1993
and 1992.................................................................. 21
Consolidated Balance Sheets--December 31, 1994 and 1993..................... 22
Consolidated Statements of Stockholders' Equity--Years Ended December 31,
1994, 1993 and 1992....................................................... 23
Consolidated Statements of Cash Flows--Years Ended December 31, 1994, 1993
and 1992.................................................................. 24
Notes to Consolidated Financial Statements.................................. 25
(2) The following consolidated financial statement schedule of Ashland Coal, Inc. and
subsidiaries is included in Item 14 at the page indicated:
II -- Valuation and Qualifying Accounts..................................... 45
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and, therefore, have been
omitted.
<TABLE>
<S> <C> <C> <C>
(3) Exhibits filed as part of this Report are as follows:
3.1 - Restated Certificate of Incorporation of the Company, as amended (Exhibit
3.1 to Post- Effective Amendment No. 1 to the Company's Registration
Statement on Form
S-3 dated May 5, 1993, is incorporated herein by reference).
3.2 - Amended By-laws of the Company (Exh. 3.4).*
4.1 - Amended and Restated Credit Agreement (Credit Agreement) dated as of
November 15, 1994, among Ashland Coal, Inc., the Banks listed therein,
Bank of America Illinois, Morgan Guaranty Trust Company of New York,
National Westminster Bank PLC, The First National Bank of Chicago and PNC
Bank, National Association as Agents.***
4.2 - Note Agreement dated as of September 15, 1990 (September 15, 1990, Note
Agreement), among Ashland Coal, Inc. and the Purchasers named in Schedule
I thereto relating to the Company's $100,000,000 9.78% Senior Notes due
September 15, 2000 (filed as an Exhibit to the Company's Form 10-Q filed
with the SEC on November 13, 1990, and incorporated herein by reference).
4.3 - First Amendment Agreement dated as of May 15, 1991, to the September 15,
1990, Note Agreement (filed as an Exhibit to the Company's Form 10-Q filed
with the SEC on August 12, 1991, and incorporated herein by reference).
4.4 - Second Amendment Agreement dated as of March 1, 1993, to the September 15,
1990, Note Agreement. (Exhibit 4.6 to the Company's Form 10-K for the year
ended December 31, 1992, filed with the SEC on March 23, 1993, is
incorporated herein by reference).
4.5 - Third Amendment Agreement dated as of January 26, 1995, to the September
15, 1990, Note Agreement.***
</TABLE>
40
<PAGE> 43
<TABLE>
<C> <C> <S>
4.6 - Composite conformed copy of Note Agreement dated as of May 15, 1991 (May
15, 1991, Note Agreement), among the Company and the Purchasers named in
Schedule I thereto relating to the Company's $22,100,000 8.92% Senior
Notes due May 15, 1996, and $52,900,000 9.66% Senior Notes due May 15,
2006 (filed as an Exhibit to the Company's Form 10-Q filed with the SEC on
August 12, 1991, and incorporated herein by reference).
4.7 - First Amendment Agreement dated as of March 1, 1993, to the May 15, 1991,
Note Agreement. (Exhibit 4.8 to the Company's Form 10-K for the year ended
December 31, 1992, filed with the SEC on March 23, 1993, is incorporated
herein by reference).
4.8 - Second Amendment Agreement dated as of January 26, 1995, to the May 15,
1991, Note Agreement.***
4.9 - Restated Shareholders Agreement among Ashland Inc. (formerly Ashland Oil,
Inc. and hereafter referred to as Ashland), Saarberg Coal International
GmbH (SCI), a predecessor to Saarbergwerke AG (Saarberg), Carboex
International, Ltd. (Carboex) and the Company dated December 12, 1991
(Exhibit 4.3 to the Company's Form 8-K dated April 6, 1992, is
incorporated herein by reference).
4.10 - Amendment to Restated Shareholders Agreement dated August 6, 1993, among
Ashland, SCI, Carboex and the Company (Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q dated August 16, 1993, is incorporated
herein by reference).
4.11 - Stockholder Agreement, dated as of April 2, 1992, among the United
Company, United Affiliates Corporation (UAC), James W. McGlothlin, W. W.
McGlothlin, N. D. Street, Charles T. Carter and the Company (Exhibit 4.4
to the Company's Form 8-K dated April 6, 1992, is incorporated herein by
reference).
4.12 - Registration Rights Agreement dated as of August 2, 1993, among the
Company, Ashland, Saarberg and Carboex (Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q dated August 13, 1993, is incorporated
herein by reference).
10.1 - Restated Coal Off-Take Agreement among SCI, Carboex and the Company
(Exhibit 10.1 to the Company's Form 8-K dated April 6, 1992, is
incorporated herein by reference).
10.2 - Lease between Little Coal Land Company and Ashland Land & Development Co.,
a wholly owned subsidiary of the Company, which was merged into Allegheny
Land Company, a wholly owned subsidiary of the Company (Exh. 10.11).*
10.3 - Surface Lease between H. G. Schaeffer, III, et al., and Ashland Land &
Development Co., a wholly owned subsidiary of the Company, which was
merged into Allegheny Land Company, a wholly owned subsidiary of the
Company (Exh. 10.12).*
10.4 - Lease Agreement between Consolidation Coal Company and Addington Brothers
Mining, Inc., an independent operating subsidiary of the Company that
subsequently changed its name to Saarcar Coal, Inc. (Exh. 10.13).*
10.5 - Lease between Dickinson Properties, Inc., the Southern Land Company, and
F. B. Nutter, Jr. and F. B. Nutter, Sr., predecessors in interest to a
wholly owned subsidiary of the Company (Exh. 10.14).*
10.6 - Lease between Oglebay Norton Company and F. B. Nutter, Sr., predecessor in
interest to a wholly owned subsidiary of the Company (Exh. 10.15).*
10.7 - Lease between James O. Cole, et al., and Hobet Mining & Construction Co.,
Inc., an independent operating subsidiary of the Company that subsequently
changed its name to Hobet Mining, Inc. (Exh. 10.18).*
10.8 - Lease between Island Creek Coal Company and Hobet Mining & Construction
Co., Inc., an independent operating subsidiary of the Company that
subsequently changed its name to Hobet Mining, Inc. (Exh. 10.19).*
</TABLE>
41
<PAGE> 44
<TABLE>
<C> <C> <S>
10.9 - Lease Agreement between Fielden B. Nutter, Dorothy Nutter and Hobet Mining
& Construction Co., Inc., an independent operating subsidiary of the
Company that subsequently changed its name to Hobet Mining, Inc. (Exh.
10.22).*
10.10 - Lease and Modification Agreement between Horse Creek Coal Land Company,
Ashland Oil and Hobet Mining & Construction Co., Inc., an independent
operating subsidiary of the Company that subsequently changed its name to
Hobet Mining, Inc. (Exh. 10.24).*
10.11 - Lease Agreement between C. C. Lewis Heirs Limited Partnership and
Allegheny Land Company, a wholly owned subsidiary of the Company (Exh.
10.25).*
10.12 - Sublease between F. B. Nutter, Sr., et al., and Hobet Mining &
Construction Co., Inc., an independent operating subsidiary of the Company
that subsequently changed its name to Hobet Mining, Inc. (Exh. 10.27).*
10.13 - Coal Lease Agreement dated as of March 31, 1992, among Dal-Tex Coal
Corporation as lessee and UAC and Phoenix Coal Corporation, as lessors,
and related Company Guarantee (Exhibit 10.2 to the Company's Form 8-K
dated April 6, 1992, is incorporated herein by reference).
10.14 - 1988 Stock Incentive Plan for Key Employees of Ashland Coal, Inc. and its
subsidiaries (Exh. 10.34).*
10.15 - Ashland Coal, Inc. Performance Unit Plan (Exh. 10.35).*
10.16 - Ashland Coal, Inc. ERISA Forfeiture Plan, as amended.***
10.17 - Ashland Coal, Inc. Deferred Compensation Plan for Key Employees (Exh.
10.47).*
10.18 - Ashland Coal, Inc. Incentive Compensation Program for Key Employees, as
amended (Exh. 10.48).***
10.19 - Ashland Coal, Inc. Nonqualified Excess Benefit Pension Plan (Exh. 10.59).*
10.20 - Lease dated as of October 1, 1987, between Pocahontas Land Corporation and
Mingo Logan Collieries Company whose name is now Mingo Logan Coal Company.
(Exhibit 10.3 to Amendment No. 1 filed with SEC on February 14, 1990, to
the Company's Form 8-K filed with the SEC on February 8, 1990, is
incorporated herein by reference).
10.21 - Consent, Assignment of Lease and Guaranty dated January 24, 1990, among
Pocahontas Land Corporation, Mingo Logan Coal Company, Mountain Gem Land,
Inc. and Ashland Coal, Inc. (Exhibit 10.4 to Amendment No. 1 filed with
the SEC on February 14, 1990, to the Company's Form 8-K filed with the SEC
on February 8, 1990, is incorporated herein by reference).
10.22 - Letter Agreement dated November 20, 1990, between the Company and William
C. Payne regarding certain supplemental retirement benefits of Mr. Payne
(Exhibit 10.33).**
10.23 - Ashland Coal, Inc. Amended and Restated Deferred Compensation Plan for
Directors' Fees (Exhibit 10.24 to the Company's Form 10-K for the year
ended December 31, 1993, filed with the SEC on March 30, 1994, and
incorporated herein by reference).
10.24 - Coal Sales Agency Agreement dated December 12, 1991 (Met Coal Agreement)
among the Company, Saarberg and Carboex (Exhibit 10.31 to the Company's
Form 10-K for the year ended December 31, 1991, filed with the SEC on
March 4, 1992, and incorporated herein by reference).
10.25 - Amendment to Met Coal Agreement dated January 26, 1993 (Exhibit 10.29 to
the Company's Form 10-K for the year ended December 31, 1992, filed with
the SEC on March 25, 1993, and incorporated herein by reference).
</TABLE>
42
<PAGE> 45
<TABLE>
<C> <C> <S>
10.26 - Form of Agreement between the directors of the Company and the Company
providing for indemnification of such directors by the Company to the
extent permitted by Delaware law (Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1994, filed May 11,
1994, is incorporated herein by reference).
10.27 - Form of Agreement between certain officers of the Company providing for
indemnification of such officers by the Company to the extent permitted by
Delaware law (Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1994, filed May 11, 1994, is incorporated
herein by reference).
10.28 - Sales Agency Agreement (Carboex Agency Agreement) dated as of February 27,
1982, between the Company and Carboex.***
10.29 - Ratification of Carboex Agency Agreement dated as of May 17, 1983, by
Ashland Coal International Ltd., Hobet Mining, Inc., Saarcar Coal, Inc.,
and the Company.***
10.30 - Sales Agency Agreement dated as of October 4, 1990, between the Company
and Saarberg.***
10.31 - Coal Purchasing Services Agreement dated as of February 1, 1983 between
Carboex and the Company***
10.32 - Ashland Coal, Inc. Benefit Restoration Plan.***
11 - Statement re Computation of Per Share Earnings.***
22 - Subsidiaries of the Company.***
24 - Consent of Independent Auditors.***
25 - Powers of Attorney.***
27 - Financial Data Schedule.***
</TABLE>
- ------------------------------
* Incorporated by reference from the Company's Registration Statement on Form
S-1 (Registration No. 33-22425) filed with the SEC on June 9, 1988, and
Amendments No. 1, No. 2 and No. 3 filed with the SEC on July 14, 1988,
August 3, 1988, and August 5, 1988, respectively, and Post-Effective
Amendment No. 1 filed with the SEC on August 11, 1988. The exhibit number
referred to within the parentheses corresponds to the number of such exhibit
in Item 16(a) of Post-Effective Amendment No. 1 to such Registration
Statement.
** Incorporated by reference from the Company's Annual Report on Form 10-K
filed with the SEC on March 21, 1991. The Exhibit number referred to within
the parentheses corresponds to the number of such exhibit in Item 14(a)(3)
of such Form 10-K.
*** Included with this Report.
Items 10.14, 10.15, 10.16, 10.17, 10.18, 10.19, 10.22, 10.23 and 10.32 are
executive compensation plans.
Upon written or oral request to the Company's Secretary, a copy of any of
the above exhibits will be furnished at cost.
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed November 28, 1994, to report Ashland
Coal's discussions with Quaker Coal Company, Inc. concerning the possible
acquisition of Quaker's Kentucky operations.
A Current Report on Form 8-K was filed December 2, 1994, to report
execution of a $500 million Amended and Restated Revolving Credit Agreement
between Ashland Coal, Bank of America Illinois, Morgan Guaranty Trust Company of
New York, National Westminster Bank PLC, The First National Bank of Chicago, and
PNC Bank, National Association, as Agents, and to file such Agreement with the
SEC.
A Current Report on Form 8-K was filed December 8, 1994, to report the
execution of an agreement between Ashland and Saarberg giving Ashland the right
to purchase all the Ashland Coal Class B Preferred Stock held by Saarberg, which
purchase would give Ashland majority voting power in Ashland Coal and result
43
<PAGE> 46
in the consolidation of Ashland Coal's financial statements into Ashland's
financial statements. Details of this transaction, which closed February 8,
1995, are contained in the Recent Developments subsection of Item 1. Business at
page 1 of this report.
A Current Report on Form 8-K was filed December 21, 1994, to report
additional information about the transaction in Ashland Coal's Class B Preferred
Stock between Ashland and Saarberg and to report a decision by a regional
director of the National Labor Relations Board requiring that the employees of
Mingo Logan and certain of its contractors working in the Mountaineer Mine vote
together in a UMWA representation election.
44
<PAGE> 47
SCHEDULE II
ASHLAND COAL, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS(1) YEAR
- ------------------------------------------ ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1994
Reserves Deducted from Asset Accounts
Prepaid Royalties.................... $22,062 $ 1,181 $1,359 $21,884
Property, Plant and Equipment........ 1,713 100 434 1,379
Other Assets--Other
Notes and Accounts Receivable...... 8,189 6 -- 8,195
Prepaid Rent....................... 180 24 -- 204
Current Assets--Other Receivables.... 1,220 -- -- 1,220
Year Ended December 31, 1993
Reserves Deducted from Asset Accounts
Prepaid Royalties.................... $10,634 $12,720 $1,292 $22,062
Property, Plant and Equipment........ 1,638 75 -- 1,713
Other Assets--Other
Notes and Accounts Receivable...... 8,169 20 -- 8,189
Prepaid Rent....................... 156 24 -- 180
Current Assets--Other Receivables.... 1,127 93 -- 1,220
Year Ended December 31, 1992
Reserves Deducted from Asset Accounts
Prepaid Royalties.................... $10,645 $ 3,000 $3,011 $10,634
Property, Plant and Equipment........ 1,498 153 13 1,638
Other Assets--Other
Notes and Accounts Receivable...... 7,320 849 -- 8,169
Prepaid Rent....................... -- 156 -- 156
Current Assets--Other Receivables.... 993 134 -- 1,127
</TABLE>
- ------------------------------
(1) Reserves utilized, unless otherwise indicated.
45
<PAGE> 48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /S/ MARC R. SOLOCHEK
Marc R. Solochek
Senior Vice President and
Chief Financial Officer
Date: March 8, 1995
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 indicated on March 8, 1995.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY
- ------------------------------------------- -----------------------------------------------
<S> <C>
By: /S/ WILLIAM C. PAYNE Chairman of the Board, President and Chief
------------------------------ Executive Officer and Director
William C. Payne
By: /S/ MARC R. SOLOCHEK Senior Vice President and Chief Financial
------------------------------ Officer
Marc R. Solochek
By: /S/ WILLIAM M. GERRICK Controller and Principal Accounting Officer
------------------------------
William M. Gerrick
Robert A. Charpie Director
Paul W. Chellgren Director
Thomas L. Feazell Director By: /S/ ROY F. LAYMAN
Juan Antonio Ferrando Director -------------------
Robert L. Hintz Director Roy F. Layman
J. Marvin Quin Director As Attorney-in-Fact
Robert E. Yancey, Jr. Director
</TABLE>
ORIGINAL POWERS OF ATTORNEY AUTHORIZING WILLIAM C. PAYNE, MARC R. SOLOCHEK,
AND ROY F. LAYMAN, AND EACH OF THEM, TO SIGN THIS ANNUAL REPORT ON FORM 10-K AND
AMENDMENTS THERETO ON BEHALF OF THE ABOVE-NAMED PERSONS HAVE BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION AS EXHIBIT 25 TO THIS REPORT.
46
<PAGE> 49
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- ------------------------------------------------------------------------------------
<C> <S>
3.1 Restated Certificate of Incorporation of the Company, as amended (Exhibit 3.1 to the
Post-Effective Amendment No. 1 to the Company's Registration Statement on Form S-3
dated May 5, 1993, is incorporated herein by reference).
3.2 Amended By-laws of the Company (Exh. 3.4).*
4.1 Amended and Restated Credit Agreement (Credit Agreement) dated as of November 15,
1994, among Ashland Coal, Inc., the Banks listed therein, Bank of America Illinois,
Morgan Guaranty Trust Company of New York, National Westminster Bank PLC, The First
National Bank of Chicago and PNC Bank, National Association as Agents.***
4.2 Note Agreement dated as of September 15, 1990 (September 15, 1990, Note Agreement),
among Ashland Coal, Inc. and the Purchasers named in Schedule I thereto relating to
the Company's $100,000,000 9.78% Senior Notes due September 15, 2000 (filed as an
Exhibit to the Company's Form 10-Q filed with the SEC on November 13, 1990, and
incorporated herein by reference).
4.3 First Amendment Agreement dated as of May 15, 1991, to the September 15, 1990, Note
Agreement (filed as an Exhibit to the Company's Form 10-Q filed with the SEC on
August 12, 1991, and incorporated herein by reference).
4.4 Second Amendment Agreement dated as of March 1, 1993, to the September 15, 1990,
Note Agreement. (Exhibit 4.6 to the Company's Form 10-K for the year ended December
31, 1992, filed with the SEC on March 23, 1993, is incorporated herein by
reference).
4.5 Third Amendment Agreement dated as of January 26, 1995, to the September 15, 1990,
Note Agreement.***
4.6 Composite conformed copy of Note Agreement dated as of May 15, 1991 (May 15, 1991,
Note Agreement), among the Company and the Purchasers named in Schedule I thereto
relating to the Company's $22,100,000 8.92% Senior Notes due May 15, 1996, and
$52,900,000 9.66% Senior Notes due May 15, 2006 (filed as an Exhibit to the
Company's Form 10-Q filed with the SEC on August 12, 1991, and incorporated herein
by reference).
4.7 First Amendment Agreement dated as of March 1, 1993, to the May 15, 1991, Note
Agreement. (Exhibit 4.8 to the Company's Form 10-K for the year ended December 31,
1992, filed with the SEC on March 23, 1993, is incorporated herein by reference).
4.8 Second Amendment Agreement dated as of January 26, 1995, to the May 15, 1991, Note
Agreement.***
4.9 Restated Shareholders Agreement among Ashland Inc. (formerly Ashland Oil, Inc. and
hereafter referred to as Ashland), Saarberg Coal International GmbH (SCI), a
predecessor to Saarbergwerke A.G. (Saarberg), Carboex International, Ltd. (Carboex)
and the Company dated December 12, 1991 (Exhibit 4.3 to the Company's Form 8-K dated
April 6, 1992, is incorporated herein by reference).
4.10 Amendment to Restated Shareholders Agreement dated August 6, 1993, among Ashland,
SCI, Carboex and the Company (Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q dated August 16, 1993, is incorporated herein by reference).
4.11 Stockholder Agreement, dated as of April 2, 1992, among the United Company, United
Affiliates Corporation (UAC), James W. McGlothlin, W. W. McGlothlin, N. D. Street,
Charles T. Carter and the Company (Exhibit 4.4 to the Company's Form 8-K dated April
6, 1992, is incorporated herein by reference).
4.12 Registration Rights Agreement dated as of August 2, 1993, among the Company,
Ashland, Saarberg and Carboex (Exhibit 4.1 to the Company's Quarterly Report on Form
10-Q dated August 13, 1993, is incorporated herein by reference).
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- ------------------------------------------------------------------------------------
<C> <S>
10.1 Restated Coal Off-Take Agreement among SCI, Carboex and the Company (Exhibit 10.1 to
the Company's Form 8-K dated April 6, 1992, is incorporated herein by reference).
10.2 Lease between Little Coal Land Company and Ashland Land & Development Co., a wholly
owned subsidiary of the Company, which was merged into Allegheny Land Company, a
wholly owned subsidiary of the Company (Exh. 10.11).*
10.3 Surface Lease between H. G. Schaeffer, III, et al., and Ashland Land & Development
Co., a wholly owned subsidiary of the Company, which was merged into Allegheny Land
Company, a wholly owned subsidiary of the Company (Exh. 10.12).*
10.4 Lease Agreement between Consolidation Coal Company and Addington Brothers Mining,
Inc., an independent operating subsidiary of the Company that subsequently changed
its name to Saarcar Coal, Inc. (Exh. 10.13).*
10.5 Lease between Dickinson Properties, Inc., the Southern Land Company, and F. B.
Nutter, Jr. and F. B. Nutter, Sr., predecessors in interest to a wholly owned
subsidiary of the Company (Exh. 10.14).*
10.6 Lease between Oglebay Norton Company and F. B. Nutter, Sr., predecessor in interest
to a wholly owned subsidiary of the Company (Exh. 10.15).*
10.7 Lease between James O. Cole, et al., and Hobet Mining & Construction Co., Inc., an
independent operating subsidiary of the Company that subsequently changed its name
to Hobet Mining, Inc. (Exh. 10.18).*
10.8 Lease between Island Creek Coal Company and Hobet Mining & Construction Co., Inc.,
an independent operating subsidiary of the Company that subsequently changed its
name to Hobet Mining, Inc. (Exh. 10.19).*
10.9 Lease Agreement between Fielden B. Nutter, Dorothy Nutter and Hobet Mining &
Construction Co., Inc., an independent operating subsidiary of the Company that
subsequently changed its name to Hobet Mining, Inc. (Exh. 10.22).*
10.10 Lease and Modification Agreement between Horse Creek Coal Land Company, Ashland Oil
and Hobet Mining & Construction Co., Inc., an independent operating subsidiary of
the Company that subsequently changed its name to Hobet Mining, Inc. (Exh. 10.24).*
10.11 Lease Agreement between C. C. Lewis Heirs Limited Partnership and Allegheny Land
Company, a wholly owned subsidiary of the Company (Exh. 10.25).*
10.12 Sublease between F. B. Nutter, Sr., et al., and Hobet Mining & Construction Co.,
Inc., an independent operating subsidiary of the Company that subsequently changed
its name to Hobet Mining, Inc. (Exh. 10.27).*
10.13 Coal Lease Agreement dated as of March 31, 1992, among Dal-Tex Coal Corporation as
lessee and UAC and Phoenix Coal Corporation, as lessors, and related Company
Guarantee (Exhibit 10.2 to the Company's Form 8-K dated April 6, 1992, is
incorporated herein by reference).
10.14 1988 Stock Incentive Plan for Key Employees of Ashland Coal, Inc. and its
subsidiaries (Exh. 10.34).*
10.15 Ashland Coal, Inc. Performance Unit Plan (Exh. 10.35).*
10.16 Ashland Coal, Inc. ERISA Forfeiture Plan, as amended.***
10.17 Ashland Coal, Inc. Deferred Compensation Plan for Key Employees (Exh. 10.47).*
10.18 Ashland Coal, Inc. Incentive Compensation Program for Key Employees, as amended
(Exh. 10.48).***
10.19 Ashland Coal, Inc. Nonqualified Excess Benefit Pension Plan (Exh. 10.59).*
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- ------------------------------------------------------------------------------------
<C> <S>
10.20 Lease dated as of October 1, 1987, between Pocahontas Land Corporation and Mingo
Logan Collieries Company whose name is now Mingo Logan Coal Company. (Exhibit 10.3
to Amendment No. 1 filed with SEC on February 14, 1990, to the Company's Form 8-K
filed with the SEC on February 8, 1990, is incorporated herein by reference).
10.21 Consent, Assignment of Lease and Guaranty dated January 24, 1990, among Pocahontas
Land Corporation, Mingo Logan Coal Company, Mountain Gem Land, Inc. and Ashland
Coal, Inc. (Exhibit 10.4 to Amendment No. 1 filed with the SEC on February 14, 1990,
to the Company's Form 8-K filed with the SEC on February 8, 1990, is incorporated
herein by reference).
10.22 Letter Agreement dated November 20, 1990, between the Company and William C. Payne
regarding certain supplemental retirement benefits of Mr. Payne (Exhibit 10.33).**
10.23 Ashland Coal, Inc. Amended and Restated Deferred Compensation Plan for Directors'
Fees (Exhibit 10.24 to the Company's Form 10-K for the year ended December 31, 1993,
filed with the SEC on March 30, 1994, and incorporated herein by reference).
10.24 Coal Sales Agency Agreement dated December 12, 1991 (Met Coal Agreement) among the
Company, Saarberg and Carboex (Exhibit 10.31 to the Company's Form 10-K for the year
ended December 31, 1991, filed with the SEC on March 4, 1992, and incorporated
herein by reference).
10.25 Amendment to Met Coal Agreement dated January 26, 1993 (Exhibit 10.29 to the
Company's Form 10-K for the year ended December 31, 1992, filed with the SEC on
March 25, 1993, and incorporated herein by reference).
10.26 Form of Agreement between the directors of the Company and the Company providing for
indemnification of such directors by the Company to the extent permitted by Delaware
law (Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994, filed May 11, 1994, is incorporated herein by reference).
10.27 Form of Agreement between certain officers of the Company providing for
indemnification of such officers by the Company to the extent permitted by Delaware
law (Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994, filed May 11, 1994, is incorporated herein by reference).
10.28 Sales Agency Agreement (Carboex Agency Agreement) dated as of February 27, 1982,
between the Company and Carboex.***
10.29 Ratification of Carboex Agency Agreement dated as of May 17, 1983, by Ashland Coal
International, Ltd., Hobet Mining, Inc., Saarcar Coal, Inc., and the Company***
10.30 Sales Agency Agreement dated as of October 4, 1990, between the Company and
Saarberg.***
10.31 Coal Purchasing Services Agreement dated as of February 1, 1983 between Carboex and
the Company***
10.32 Ashland Coal, Inc. Benefit Restoration Plan***
11 Statement re Computation of Per Share Earnings.***
22 Subsidiaries of the Company.***
24 Consent of Independent Auditors.***
25 Powers of Attorney.***
27 Financial Data Schedule.***
</TABLE>
- ------------------------------
* Incorporated by reference from the Company's Registration Statement on Form
S-1 (Registration No. 33-22425) filed with the SEC on June 9, 1988, and
Amendments No. 1, No. 2 and No. 3 filed with the SEC on July 14, 1988,
August 3, 1988, and August 5, 1988, respectively, and Post-Effective
Amendment No. 1 filed with the SEC on August 11, 1988. The exhibit number
referred to within the parentheses corresponds to the number of such exhibit
in Item 16(a) of Post-Effective Amendment No. 1 to such Registration
Statement.
<PAGE> 52
** Incorporated by reference from the Company's Annual Report on Form 10-K
filed with the SEC on March 21, 1991. The Exhibit number referred to within
the parentheses corresponds to the number of such exhibit in Item 14(a)(3)
of such Form 10-K.
*** Included with this Report.
<PAGE> 1
Exhibit 4.1
$500,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
November 15, 1994
among
ASHLAND COAL, INC.
and
THE BANKS LISTED HEREIN
and
BANK OF AMERICA ILLINOIS
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
NATIONAL WESTMINSTER BANK PLC
THE FIRST NATIONAL BANK OF CHICAGO
PNC BANK, NATIONAL ASSOCIATION,
as Agents
and
NATIONAL WESTMINSTER BANK PLC,
as Coordinating and Administrative Agent
<PAGE> 2
|| TABLE OF CONTENTS(1)
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions............................................ 1
1.02 Accounting Terms and Determinations.................... 14
1.03 Types of Borrowings.................................... 14
ARTICLE II
THE CREDITS
SECTION 2.01 Loan Commitments....................................... 15
2.02 Notice of Syndicated Borrowings........................ 15
2.03 Money Market Borrowings................................ 16
2.04 Notice to Banks; Funding of Loans...................... 19
2.05 Notes.................................................. 20
2.06 Maturity of Loans...................................... 21
2.07 Interest Rates......................................... 21
2.08 Fees................................................... 24
2.09 Optional Termination or Reduction of Commitments....... 24
2.10 Mandatory Termination of Commitments................... 25
2.11 Optional Prepayments................................... 25
2.12 General Provisions as to Payments...................... 25
2.13 Funding Losses......................................... 26
2.14 Computation of Interest and Fees....................... 26
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01 All Borrowings......................................... 26
3.02 First Borrowing........................................ 27
3.03 Return of Existing Notes............................... 28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Corporate Existence and Power.......................... 28
4.02 Corporate and Governmental Authorization;
Contravention........................................ 28
4.03 Binding Effect......................................... 28
4.04 Government Approval, Regulation, etc................... 29
4.05 Financial Information.................................. 29
4.06 Litigation............................................. 29
4.07 Compliance with ERISA.................................. 29
- --------------------
(1) The Table of Contents is not a part of this Agreement.
<PAGE> 3
4.08 Taxes.................................................. 29
4.09 Subsidiaries........................................... 30
4.10 Full Disclosure........................................ 30
4.11 Lease Payments......................................... 30
4.12 Environmental Matters.................................. 30
ARTICLE V
COVENANTS
SECTION 5.01 Information............................................ 31
5.02 Payment of Obligations................................. 33
5.03 Maintenance of Property; Insurance..................... 33
5.04 Conduct of Business and Maintenance of Existence....... 33
5.05 Compliance with Laws................................... 33
5.06 Inspection of Property, Books and Records.............. 34
5.07 Debt Limitation........................................ 34
5.08 Minimum Consolidated Net Worth......................... 34
5.09 Restricted Payments.................................... 34
5.10 Negative Pledge........................................ 34
5.11 Consolidations, Mergers and Sales of Assets............ 36
5.12 Use of Proceeds........................................ 36
5.13 Transactions with Affiliates........................... 36
5.14 Subsidiary Debt........................................ 37
5.15 EBITDAR Ratio.......................................... 37
ARTICLE VI
DEFAULTS
SECTION 6.01 Events of Default...................................... 37
6.02 Notice of Default...................................... 39
6.03 Limitation on Remedies................................. 39
ARTICLE VII
THE ADMINISTRATIVE AGENT
SECTION 7.01 Appointment and Authorization.......................... 40
7.02 Administrative Agent and Affiliates.................... 40
7.03 Action by Administrative Agent or Agents............... 40
7.04 Consultation with Experts.............................. 40
7.05 Liability of Administrative Agent or Agents............ 40
7.06 Indemnification........................................ 41
7.07 Credit Decision........................................ 41
7.08 Successor Administrative Agent......................... 41
7.09 Administrative Agent's and Agents' Fees................ 42
(ii)
<PAGE> 4
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01 Basis for Determining Interest Rate
Inadequate or Unfair................................. 42
8.02 Illegality............................................. 43
8.03 Increased Cost and Reduced Return...................... 44
8.04 Reference Rate Loans Substituted for
Affected Fixed Rate Loans............................ 46
8.05 Change in Ownership.................................... 46
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Notices................................................ 47
9.02 No Waivers............................................. 47
9.03 Expenses; Documentary Taxes; Indemnification........... 47
9.04 Sharing of Set-Offs.................................... 48
9.05 Amendments and Waivers................................. 49
9.06 Successors and Assigns................................. 49
9.07 Confidentiality........................................ 52
9.08 Collateral............................................. 52
9.09 New York Law and Forum................................. 52
9.10 Counterparts; Integration; Effectiveness............... 53
Exhibits and Schedule
Exhibit A - Reference Rate Note
Exhibit B - CD Rate Note
Exhibit C - Euro-Dollar Note
Exhibit D - Money Market Note
Exhibit E - Money Market Quote Request
Exhibit F - Invitation for Money Market Quotes
Exhibit G - Money Market Quote
Exhibits H(1) and H(2) - Opinions of Counsels for the Borrower
Exhibit I - Opinion of Special Counsel for
the Administrative Agent
Exhibit J - Assignment Agreement
Schedule K - Disclosure Schedule||
(iii)
<PAGE> 5
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of November 15, 1994,
(the "Agreement") among ASHLAND COAL, INC., a Delaware corporation (the
"Borrower"); the BANKS listed on the signature pages hereof; BANK OF AMERICA
ILLINOIS (formerly Continental Bank N.A.), MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, NATIONAL WESTMINSTER BANK PLC, THE FIRST NATIONAL BANK OF CHICAGO AND PNC
BANK, NATIONAL ASSOCIATION, as Agents; and NATIONAL WESTMINSTER BANK PLC, as
Coordinating and Administrative Agent.
W I T N E S S E T H:
WHEREAS, the Borrower, certain of the Banks, Bank of America Illinois,
as agent for those Banks, and National Westminster Bank PLC, as co-agent for
those Banks, are parties to an Amended and Restated Credit Agreement dated as
of April 1, 1992, as amended (the "Existing Credit Agreement"), pursuant to
which such Banks made loans to the Borrower which are outstanding on the date
hereof (the "Existing Loans") and which are evidenced by promissory notes
executed by the Borrower in connection with the Existing Credit Agreement (the
"Existing Notes");
WHEREAS, the Borrower has requested that the Existing Credit Agreement
be amended and restated as set forth herein;
NOW, THEREFORE, to effectuate the foregoing the parties hereto agree
that upon the effectiveness hereof, the Existing Credit Agreement shall be
amended and restated to read in its entirety as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"ADJUSTED CD RATE" is defined in Section 2.07(b).
"ADJUSTED EURO-DOLLAR RATE" has the meaning set forth in Section
2.07(c).
"ADMINISTRATIVE AGENT" means National Westminster Bank PLC in its
capacity as coordinating and administrative agent for the Banks hereunder, and
its successors in such capacity.
"AFFILIATE" means (i) any Person (including, without limitation, any
Principal Shareholder) that directly, or indirectly
<PAGE> 6
through one or more intermediaries, controls the Borrower (a "Controlling
Person") or (ii) any Person (other than the Borrower or a Subsidiary of the
Borrower) which is controlled by or is under common control with a Controlling
Person. As used herein, the term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"AGENTS" means Bank of America Illinois, Morgan Guaranty Trust Company
of New York, National Westminster Bank PLC, The First National Bank of Chicago
and PNC Bank, National Association, in their capacities as agents for the Banks
hereunder, and their successors in such capacities.
"ALTERNATE REFERENCE RATE" means, for any day, a fluctuating rate per
annum (rounded upward to the next highest 1/8 of 1% if not already an integral
multiple of 1/8 of 1%) equal to the greater of (i) the Reference Rate in effect
on such day plus the Applicable Margin for Reference Rate Loans, or (ii) the
Federal Funds Rate in effect on such day plus 0.5% plus the Applicable Margin
for Reference Rate Loans. For purposes of this Agreement, any change in the
Alternate Reference Rate due to a change in the Federal Funds Rate shall be
effective on the effective date of such change in the Federal Funds Rate. If
for any reason National Westminster Bank PLC shall have reasonably determined
(which determination shall be conclusive in the absence of manifest error) that
it is unable to ascertain the Federal Funds Rate for any reason, including,
without limitation, the inability or failure of National Westminster Bank PLC
to obtain sufficient bids or publications in accordance with the terms hereof,
the Alternate Reference Rate shall be the Reference Rate plus the Applicable
Margin for Reference Rate Loans until the circumstances giving rise to such
inability no longer exist.
"APPLICABLE FACILITY FEE RATE" means:
(a) when the ratio of (x) Consolidated Debt to (y) the sum of
Consolidated Debt and Consolidated Net Worth is less than 35%: 0.15%;
(b) when the ratio of (x) Consolidated Debt to (y) the sum of
Consolidated Debt and Consolidated Net Worth is equal to or greater than 35%
but less than 45%: 0.1875%;
(c) when the ratio of (x) Consolidated Debt to (y) the sum of
Consolidated Debt and Consolidated Net Worth is equal to or greater than 45%
but less than 50%: 0.225%;
(2)
<PAGE> 7
(d) when the ratio of (x) Consolidated Debt to (y) the sum of
Consolidated Debt and Consolidated Net Worth is equal to or greater than 50%
but less than 55%: 0.275%;
(e) when the ratio of (x) Consolidated Debt to (y) the sum of
Consolidated Debt and Consolidated Net Worth is equal to or greater than 55%:
0.35%.
For purposes of this definition, the amount of Consolidated Debt and
Consolidated Net Worth shall be measured quarterly on each March 31, June 30,
September 30 and December 31 based on the average daily Consolidated Debt
during the quarter ending on such date and the Consolidated Net Worth on such
date as reflected on the certificate required by Section 5.01(h). If during
any quarterly period the ratio of Consolidated Debt to the sum of Consolidated
Debt and Consolidated Net Worth shall increase to an amount equal to or
exceeding a threshold which would result in the application of a higher
Applicable Facility Fee Rate for the following quarter, the higher Applicable
Facility Fee Rate shall apply retroactively to the first day of such following
quarter. If during any quarterly period the ratio of Consolidated Debt to the
sum of Consolidated Debt and Consolidated Net Worth shall decrease to an amount
less than a threshold which would result in the application of a lower
Applicable Facility Fee Rate for the following quarter, the lower Applicable
Facility Fee Rate shall apply beginning after receipt by the Administrative
Agent of the certificate required by Section 5.01(h).
"APPLICABLE MARGIN" means:
(a) when the ratio of (x) Consolidated Debt to (y) the sum of
Consolidated Debt and Consolidated Net Worth is less than 35%: (i) 0.0% for
Reference Rate Loans; (ii) 0.350% for CD Rate Loans; and (iii) 0.225% for
Euro-Dollar Loans;
(b) when the ratio of (x) Consolidated Debt to (y) the sum of
Consolidated Debt and Consolidated Net Worth is equal to or greater than 35%
but less than 45%: (i) 0.0% for Reference Rate Loans; (ii) 0.4% for CD Rate
Loans; and (iii) 0.275% for Euro-Dollar Loans;
(c) when the ratio of (x) Consolidated Debt to (y) the sum of
Consolidated Debt and Consolidated Net Worth is equal to or greater than 45%
but less than 50%: (i) 0.0% for Reference Rate Loans; (ii) 0.45% for CD Rate
Loans; and (iii) 0.325% for Euro-Dollar Loans;
(d) when the ratio of (x) Consolidated Debt to (y) the sum of
Consolidated Debt and Consolidated Net Worth is equal to or greater than 50%
but less than 55%: (i) 0.0% for Reference Rate Loans; (ii) 0.625% for CD Rate
Loans; and (iii) 0.5% for Euro-Dollar Loans;
(3)
<PAGE> 8
(e) when the ratio of (x) Consolidated Debt to (y) the sum of
Consolidated Debt and Consolidated Net Worth is equal to or greater than 55%:
(i) 0.0% for Reference Rate Loans; (ii) 0.75% for CD Rate Loans; and (iii)
0.625 Euro-Dollar Loans.
For purposes of this definition, the amount of Consolidated Debt and
Consolidated Net Worth shall be measured quarterly on each March 31, June 30,
September 30 and December 31 based on the average daily Consolidated Debt
during the quarter ending on such date and the Consolidated Net Worth on such
date as reflected on the certificate required by Section 5.01(h). If during
any quarterly period the ratio of Consolidated Debt to the sum of Consolidated
Debt and Consolidated Net Worth shall increase to an amount equal to or
exceeding a threshold which would result in the application of a higher
Applicable Margin for the following quarter, the higher Applicable Margin shall
apply retroactively to the first day of such following quarter. If during any
quarterly period the ratio of Consolidated Debt to the sum of Consolidated Debt
and Consolidated Net Worth shall decrease to an amount less than a threshold
which would result in the application of a lower Applicable Margin for the
following quarter, the lower Applicable Margin shall apply beginning after
receipt by the Administrative Agent of the certificate required by Section
5.01(h).
"ASSESSMENT RATE" has the meaning set forth in Section 2.07(b).
"ASSIGNEE" has the meaning set forth in Section 9.06(c).
"BANK" means each Bank listed on the signature pages hereof as having
a Commitment, each Assignee which becomes a Bank pursuant to Section 9.06(c),
and their respective successors.
"BORROWER" means Ashland Coal, Inc., a Delaware corporation, and its
successors.
"BORROWING" has the meaning set forth in Section 1.03.
"CD RATE" is defined in Section 2.07(b).
"CD RATE BORROWING" is defined in Section 1.03.
"CD RATE LOAN" means a Loan to be made by a Bank pursuant to Section
2.01 as a CD Rate Loan in accordance with the applicable Notice of Syndicated
Borrowing.
"CD RATE NOTE" means a promissory note of the Borrower substantially
in the form of Exhibit B hereto evidencing the obligation of the Borrower to
repay the CD Rate Loans.
(4)
<PAGE> 9
"CD REFERENCE RATE BANKS" means National Westminster Bank PLC, Bank of
America Illinois and Morgan Guaranty Trust Company of New York. If any of the
CD Reference Rate Banks shall be unable or shall fail for any reason to timely
provide notice of a rate to the Administrative Agent for any reason, the CD
Rate shall be determined on the basis of the rate of the other CD Reference
Rate Bank(s).
"CD RESERVE REQUIREMENT" is defined in Section 2.07(b).
"CLOSING DATE" means the date upon which the conditions listed in
Section 3.02 hereof have been satisfied.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
"COMMITMENT" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof, as such amount
may be reduced pursuant to Section 2.09.
"CONSOLIDATED ADJUSTED NET INCOME AVAILABLE FOR DISTRIBUTIONS" means
net earnings after income taxes of the Borrower and its Subsidiaries determined
on a consolidated basis, but excluding:
1. any gain or loss arising from the sale of capital assets;
2. any gain or loss arising from any write-up or write-down of
assets;
3. earnings of any Subsidiary accrued prior to the date it
became a Subsidiary;
4. earnings of any Person, substantially all the assets of
which have been acquired in any manner, realized by such Person prior
to the date of such acquisition;
5. net earnings of any Person (other than a Subsidiary) in
which the Borrower or any Subsidiary has an ownership interest unless
such net earnings shall have actually been received by the Borrower or
such Subsidiary in the form of cash or property distributions; and
6. any gain arising from the acquisition of any securities of
the Borrower or any Subsidiary.
"CONSOLIDATED DEBT" means at any date the consolidated Debt of the
Borrower and its Subsidiaries, determined as of such date.
"CONSOLIDATED EBITDAR" means, for any period, on a consolidated basis
for the Borrower and its Subsidiaries, (a) the
(5)
<PAGE> 10
sum of (1) net income after income taxes for such period, (2) depletion,
depreciation and amortization expense for such period, (3) interest expense net
of interest income for such period, (4) Federal and state income taxes for such
period, (5) extraordinary losses for such period, and (6) lease expense
(excluding expense for Mineral Leases and surface leases) for such period, minus
(b) the sum of extraordinary gains for such period.
"CONSOLIDATED NET WORTH" means at any date the consolidated
stockholders' equity of the Borrower and its Subsidiaries, determined as of
such date.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee under capital
leases, (v) all Debt of others secured by a Lien on any asset of such Person,
whether or not such Debt is assumed by such Person, and (vi) all Debt of others
Guaranteed by such Person.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DOMESTIC BUSINESS DAY" means any day other than a Saturday or Sunday
on which banks are open for business in New York, New York and Chicago,
Illinois.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located
at its address set forth on the signature pages hereof (or identified on the
signature pages hereof as its Domestic Lending Office) or such other office as
such Bank may hereafter designate as its Domestic Lending Office by notice to
the Borrower and the Administrative Agent.
"EBITDAR RATIO" means the average of the ratio of Consolidated EBITDAR
to consolidated interest and lease expense (excluding expense for Mineral
Leases and surface leases) of the Borrower and its Subsidiaries in each of the
four consecutive fiscal quarterly periods ending as of the end of any fiscal
quarter of the Borrower.
(6)
<PAGE> 11
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 9.10 and the obligation of any Bank to make Loans
arises under Section 3.02.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office,
branch or affiliate located at its address set forth on the signature pages
hereof (or identified on the signature pages hereof as its Euro-Dollar Lending
Office) or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower
and the Administrative Agent.
"EURO-DOLLAR LOAN" means a Loan to be made by a Bank pursuant to
Section 2.01 as a Euro-Dollar Loan in accordance with the applicable notice of
Syndicated Borrowing.
"EURO-DOLLAR NOTE" means a promissory note of the Borrower
substantially in the form of Exhibit C hereto evidencing the obligation of the
Borrower to repay the Euro-Dollar Loans.
"EURO-DOLLAR REFERENCE RATE BANKS" means National Westminster Bank
PLC, Bank of America Illinois and Morgan Guaranty Trust Company of New York.
If any of the Euro-Dollar Reference Rate Banks shall be unable or shall fail
for any reason to timely provide notice of a rate to the Administrative Agent
for any reason, the London Interbank Offered Rate shall be determined on the
basis of the rate of the other Euro-Dollar Reference Rate Bank(s).
"EURO-DOLLAR RESERVE PERCENTAGE" has the meaning set forth in Section
2.07(c).
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXISTING CREDIT AGREEMENT" has the meaning set forth in the first
recital hereof.
"EXISTING LOANS" has the meaning set forth in the first recital hereof.
"EXISTING NOTES" has the meaning set forth in the first recital hereof.
(7)
<PAGE> 12
"FEDERAL FUNDS RATE" means, for any day, an interest rate per annum
equal to the average of all the quotations for such day on overnight Federal
funds transactions received by National Westminster Bank PLC, from at least two
Federal funds brokers of recognized standing selected by it. In case of a day
which is not a Domestic Business Day, the Federal Funds Rate for such day shall
be the Federal Funds Rate for the next preceding Domestic Business Day.
"FIXED RATE LOANS" means CD Rate Loans, Euro-Dollar Loans or Money
Market Loans (excluding Money Market Loans bearing interest at the reference
rate pursuant to Section 8.01) or any combination of the foregoing.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt (whether arising by virtue of partnership arrangements, by agreement
to keepwell, to purchase assets, goods, securities or services, to take-
or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the holder of such
Debt of the payment thereof or to protect such holder against loss in respect
thereof (in whole or in part), provided, that the term Guarantee shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"HEDGING OBLIGATION" means, with respect to any Person, all
liabilities of such Person under interest rate swap agreements, interest cap
agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates, currency exchange rates, commodity prices or any other financial risk.
"INTANGIBLE ASSETS" means:
(1) deferred assets, other than prepaid royalties, prepaid
insurance and prepaid taxes;
(2) patents, copyrights, trademarks, trade names,
franchises, good will, experimental expenses and other similar
intangibles (excluding, however, any intangible assets included in the
Borrower's consolidated balance sheet under the captions "Coal lands
and mineral rights" as at the Closing Date, and "Coal supply
agreements");
(3) unamortized debt discount and expense; and
(8)
<PAGE> 13
(4) assets located, and notes and receivables, other than
notes and trade receivables arising in the ordinary course of
business, due from obligors domiciled, outside the United States of
America, Puerto Rico or Canada.
"INTEREST PERIOD" means:
(1) with respect to each Euro-Dollar Borrowing, the period
commencing on the date of such Borrowing and ending one, two, three six
or, provided the Euro-Dollar Reference Banks determine that deposits in
dollars (in applicable amounts) are being offered on the relevant
market, nine or twelve months thereafter, in each case as the Borrower
may elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on
a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall,
subject to clause (c) below, end on the last Euro-Dollar
Business Day of a calendar month;
(c) if any Interest Period includes a date on which
a payment of principal of the Loans is required to be made
under Section 2.10 but does not end on such date, then (i) the
principal amount (if any) of each Euro-Dollar Loan required to
be repaid on such date shall have an Interest Period ending on
such date and (ii) the remainder (if any) of each such
Euro-Dollar Loan shall have an Interest Period determined as
set forth above; and
(d) no Interest Period may end later than the
Termination Date.
(2) with respect to each CD Rate Loan, the period
commencing on the date of such Borrowing and ending 30, 60, 90, or 180
days or, provided the CD Reference Rate Banks determine that deposits
in dollars (in the applicable amounts) are being offered in the
relevant market, 270 or 360 days thereafter, as the Borrower may elect
in the applicable Notice of Borrowing; provided that:
(9)
<PAGE> 14
(a) any Interest Period which would otherwise end
on a day which is not a Domestic Business Day shall be
extended to the next succeeding Domestic Business Day;
(b) if any Interest Period includes a date on
which a payment of principal of the Loans is required to be
made under Section 2.10 but does not end on such date, then
(i) the principal amount (if any) of each CD Rate Loan
required to be repaid on such date shall have an Interest
Period ending on such date and (ii) the remainder (if any) of
each such CD Rate Loan shall have an Interest Period
determined as set forth above; and
(c) no Interest Period may end later than the
Termination Date.
(3) with respect to each Reference Rate Borrowing, the
period commencing on the date of such Borrowing and ending 30 days
thereafter; provided that:
(a) any Interest Period (other than an Interest
Period determined pursuant to clause (b)(i) below) which would
otherwise end on a day which is not a Domestic Business Day
shall be extended to the next succeeding Domestic Business
Day; and
(b) if any Interest Period includes a date on which
a payment of principal of the Loans is required to be made
under Section 2.10 but does not end on such date, then (i) the
principal amount (if any) of each Reference Rate Loan required
to be repaid on such date shall have an Interest Period ending
on such date and (ii) the remainder (if any) of each such
Reference Rate Loan shall have an Interest Period determined
as set forth above.
(4) with respect to each Money Market Rate Borrowing, the
period commencing on the date of such Borrowing and ending such number
of days thereafter (but not less than 7 days nor more than 183 days)
as the Borrower may elect in accordance with Section 2.03; provided
that:
(a) any Interest Period which would otherwise end on
a day which is not a Domestic Business Day shall be extended
to the next succeeding Domestic Business Day;
(b) any Interest Period which begins before the
Termination Date and would otherwise end after the Termination
Date shall end on the Termination Date.
"INVITATION FOR MONEY MARKET QUOTES" has the meaning set forth in
Section 2.03(c).
(10)
<PAGE> 15
"LENDING OFFICE" means as to any Bank its Domestic Lending Office or
its Euro-Dollar Lending Office or its Money Market Lending Office, as the
context may require.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset
(including without limitation any production payment, advance payment or
similar arrangement with respect to minerals in place) whether or not filed,
recorded or otherwise perfected under applicable law. For the purposes of this
Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"LOAN" means a Reference Rate Loan or a CD Rate Loan or a Euro-Dollar
Loan or a Money Market Loan as the context may require, and "Loans" means
Reference Rate Loans or CD Rate Loans or Euro-Dollar Loans or Money Market
Loans or any combination of the foregoing, as the context may require.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.07(c).
"MINERAL LEASES" means coal and mineral leases, subleases and
assignments thereof, operating rights with respect thereto, and shall also
include subleases and assignments of operating rights which the Borrower is
obligated to pay under such mineral leases.
"MONEY MARKET LENDING OFFICE" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Administrative Agent.
"MONEY MARKET LOAN" means a Loan to be made by a Bank pursuant to
Section 2.03.
"MONEY MARKET NOTES" means promissory notes of the Borrower,
substantially in the form of Exhibit D hereto, evidencing the obligation of the
Borrower to repay the Money Market Loans.
"MONEY MARKET QUOTE" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03.
"MONEY MARKET QUOTE REQUEST" has the meaning set forth in Section
2.03(b).
"MONEY MARKET RATE" has the meaning set forth in Section
2.03(d)(ii)(3).
(11)
<PAGE> 16
"MONEY MARKET RATE BORROWING" is defined in Section 1.03.
"NOTE" means a Reference Rate Note, a CD Rate Note, a Euro-Dollar Note
or a Money Market Note, as the context may require, and "Notes" means the
Reference Rate Notes, the CD Rate Notes, the Euro-Dollar Notes or the Money
Market Notes, or any combination of the foregoing, as the context may require.
"NOTICE OF BORROWING" means a Notice of Syndicated Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in
Section 2.03(f)).
"NOTICE OF MONEY MARKET BORROWING" has the meaning set forth in
Section 2.03(f).
"NOTICE OF SYNDICATED BORROWING" has the meaning set forth in Section
2.02.
"OPERATING LEASE" means any lease other than a Mineral Lease or
surface lease, a capital lease or a lease under which the Borrower or a
Subsidiary is lessor.
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"PLAN" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of a member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.
"PRINCIPAL SHAREHOLDERS" means Ashland Oil, Inc., Saarbergwerke A.G.
and Carboex International, Ltd., and any Subsidiary of any of the foregoing
holding, directly or indirectly, any capital stock of the Borrower.
"REFERENCE RATE" shall mean the rate of interest then most recently
announced by National Westminster Bank PLC in New York City from time to time
as its "prime rate" for calculating interest
(12)
<PAGE> 17
on certain loans (which may not be the lowest rate charged by National
Westminster Bank PLC at that time); the "Reference Rate" hereunder to change
simultaneously with any change in National Westminster Bank PLC's "prime rate".
"REFERENCE RATE LOAN" means a Loan to be made by a Bank pursuant to
Section 2.01 as a Reference Rate Loan in accordance with the applicable Notice
of Syndicated Borrowing or pursuant to Article VIII.
"REFERENCE RATE NOTES" means promissory notes of the Borrower
substantially in the form of Exhibit A hereto, evidencing the obligation of the
Borrower to repay the Reference Rate Loans.
"REFUNDING BORROWING" means a Syndicated Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Syndicated Loans made by any Bank.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"REQUIRED BANKS" means at any time Banks having at least 66 2/3% of
the aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 66 2/3% of the aggregate unpaid
principal amount of the Loans.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of the Borrower's
capital stock or (b) any option, warrant or other right to acquire shares of
the Borrower's capital stock.
"REVOLVING CREDIT PERIOD" means the period from and including the
Effective Date to and including the Termination Date.
"SUBSIDIARY" means any corporation or other entity of which more than
50% of the securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions (irrespective of whether or not at the time securities of any
other class or classes of such corporation or other entity shall or might have
voting power upon the occurrence of any contingency) are at the time directly
or indirectly owned by the Borrower (or, if such term is used with reference to
another Person, by such other Person).
"SYNDICATED BORROWING" shall have the meaning set forth in Section
1.03.
(13)
<PAGE> 18
"SYNDICATED LOAN" means a Reference Rate Loan, a CD Rate Loan or a
Euro Dollar Loan made by a Bank pursuant to Section 2.01.
"TERMINATION DATE" means November 15, 1999.
"TRANSFEREE" has the meaning set forth in Section 9.06(f).
"UNFUNDED VESTED LIABILITIES" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii) the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled Group to the
PBGC or the Plan under Title IV of ERISA.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles in the United States of America as in
effect from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the most
recent audited consolidated financial statements of the Borrower and its
consolidated Subsidiaries delivered to the Banks; provided, however, that such
interpretations, determinations and preparations in respect of postretirement
benefits other than pensions shall be made (and materials prepared) in
accordance with the generally accepted accounting principles in effect
immediately prior to Borrower's adoption of Statement of Financial Accounting
Standards No. 106.
SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant
to Article II on a single date and for a single Interest Period. Borrowings
are classified for purposes of this Agreement either (a) by reference to the
pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is
a Borrowing comprised of Euro-Dollar Loans) or (b) by reference to the
provisions of Article II under which participation therein is determined (e.g.,
a "Syndicated Borrowing" is a Borrowing under Section 2.01 in which all Banks
participate in proportion to their Commitments, while a "Money Market
Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are
determined in accordance therewith).
(14)
<PAGE> 19
ARTICLE II
THE CREDITS
SECTION 2.01. Loan Commitments.
During the Revolving Credit Period each Bank severally agrees, on the
terms and conditions set forth in this Agreement, to lend to the Borrower
pursuant to this Section from time to time amounts such that the aggregate
principal amount of Syndicated Loans by such Bank at any one time outstanding
shall not exceed the amount of its Commitment, provided that in no event may
the aggregate principal amount of Loans exceed the total Commitments of all the
Banks. Each Syndicated Borrowing under this Section shall be in minimum
principal amounts of $10,000,000, and integral multiples of $1,000,000 over
such amount (except that any such Syndicated Borrowing may be in the aggregate
amount of the unused Commitments). Each Syndicated Borrowing under this
Section shall be made from the several Banks ratably in proportion to their
respective Commitments. Within the foregoing limits, the Borrower may borrow
under this Section, repay, or to the extent permitted by Section 2.11, prepay
Loans and reborrow at any time during the Revolving Credit Period under this
Section.
SECTION 2.02. Notice of Syndicated Borrowings. The Borrower shall
give the Administrative Agent notice (a "Notice of Syndicated Borrowing") not
later than 11:00 A.M. (New York time) on (x) the date of each Reference Rate
Borrowing and (y) the second Domestic Business Day before each CD Rate
Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar
Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Reference Rate Borrowing or a CD Rate
Borrowing and a Euro-Dollar Business Day in the case of a Euro-Dollar
Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to be
Reference Rate Loans, CD Rate Loans or Euro-Dollar Loans, and
(d) in the case of CD Rate Borrowing or a Euro-Dollar
Borrowing, the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period.
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Syndicated
Borrowings pursuant to Section 2.01, the Borrower may, as set
(15)
<PAGE> 20
forth in this Section, request the Banks during the Revolving Credit
Period to make offers to make Money Market Loans to the Borrower. The
Banks may, but shall have no obligation to, make such offers and the
Borrower may, but shall have no obligation to, accept any such offers
in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to
request offers to make Money Market Loans under this Section, it shall
transmit to the Administrative Agent by facsimile a Money Market Quote
Request substantially in the form of Exhibit E hereto so as to be
received no later than 11:00 A.M. (New York time) on the Domestic
Business Day next preceding the date of Borrowing proposed therein (or
the third Euro-Dollar Business Day if a margin over London Interbank
Offered Rate is requested), specifying:
(i) whether bids are to be made at an absolute rate
or at a margin over the London Interbank Offered Rate for any
particular Interest Period,
(ii) the proposed date of Borrowing, which shall
be a Domestic Business Day,
(iii) the aggregate amount of such Borrowing, which
shall be a minimum of $10,000,000, and integral multiples of
$1,000,000 over such amount, and
(iv) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of
Interest Period.
The Borrower may request offers to make Money Market Loans for
up to four Interest Periods in a single Money Market Quote Request. No
Money Market Quote Request shall be given within four Domestic Business
Days (or such other number of days as the Borrower and the
Administrative Agent may agree) of any other Money Market Quote
Request.
(c) Invitation for Money Market Quotes. Promptly upon
receipt of a Money Market Quote Request, the Administrative Agent
shall send to the Banks by facsimile an Invitation for Money Market
Quotes substantially in the form of Exhibit F hereto, which shall
constitute an invitation by the Borrower to each Bank to submit Money
Market Quotes offering to make the Money Market Loans to which such
Money Market Quote Request relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i)
Each Bank may submit a Money Market Quote containing an offer or
offers to make Money Market Loans in response to any
(16)
<PAGE> 21
Invitation for Money Market Quotes. Each Money Market Quote must
comply with the requirements of this subsection (d) and must be
submitted to the Administrative Agent by telephone, confirmed by
facsimile, at its offices specified in or pursuant to Section 9.01 no
later than 10:00 A.M. (New York time) on the proposed date of
Borrowing; provided, that any Money Market Quote by National
Westminster Bank PLC shall be delivered to the Administrative Agent by
9:45 A.M. Subject to Articles III and VI, any Money Market Quote so
made shall be irrevocable except with the written consent of the
Administrative Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in
substantially the form of Exhibit G hereto and shall in any
case specify:
(1) the proposed date of Borrowing,
(2) the principal amount of the Money Market
Loan for which each such offer is being made,
which principal amount (x) may be greater than
or less than the Commitment of the quoting
Bank, (y) must be $5,000,000 or an integral
multiple of $1,000,000 over such amount and (z)
may not exceed the principal amount of Money
Market Loans for which offers were requested,
nor the total amount of Commitments,
(3) the rate of interest per annum (rounded to
the nearest 1/100th of 1%) (the "Money Market
Rate") offered for each such Money Market Loan,
and
(4) the identity of the quoting Bank.
A Money Market Quote may set forth up to three separate offers
by the quoting Bank with respect to each Interest Period specified in
the related Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded
that:
(1) is not substantially in the form of
Exhibit G hereto or does not specify all of the
information required by subsection (d)(ii);
(17)
<PAGE> 22
(2) contains qualifying, conditional or
similar language;
(3) proposes terms other than or in addition
to those set forth in the applicable Invitation
for Money Market Quotes; or
(4) arrives after the time set forth in
subsection (d)(i).
(e) Notice to Borrower. The Administrative Agent shall
promptly notify the Borrower of the terms (x) of any Money Market Quote
submitted by a Bank that is in accordance with subsection (d) and (y)
of any Money Market Quote that amends, modifies or is otherwise
inconsistent with a previous Money Market Quote submitted by such Bank
with respect to the same Money Market Quote Request. Any such
subsequent inconsistent Money Market Quote shall be disregarded by the
Administrative Agent unless such subsequent inconsistent Money Market
Quote is submitted solely to correct a manifest error in such former
Money Market Quote. The Administrative Agent's notice to the Borrower
shall specify (A) the aggregate principal amount of Money Market Loans
for which offers have been received for each Interest Period specified
in the related Money Market Quote Request, (B) the respective principal
amounts and Money Market Rates so offered and (C) if applicable,
limitations on the aggregate principal amount of Money Market Loans for
which offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:15
A.M. (New York time) on the proposed date of Borrowing, the Borrower
shall notify the Administrative Agent of its acceptance or
non-acceptance of the offers so notified to it pursuant to subsection
(e). In the case of acceptance, such notice (a "Notice of Money
Market Borrowing") shall specify the aggregate principal amount of
offers for each Interest Period that are accepted. The Borrower may
accept any Money Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money
Market Borrowing may not exceed the applicable amount set
forth in the related Money Market Quote Request,
(ii) the aggregate principal amount of each Money
Market Borrowing must be $10,000,000 or an integral multiple
of $1,000,000 over such amount,
(iii) acceptance of offers may only be made on the
basis of ascending Money Market Rates,
(18)
<PAGE> 23
(iv) the Borrower may not accept any offer that is
described in subsection (d)(iii) or that otherwise fails to
comply with the requirements of this Agreement,
(v) The Borrower may not accept any offer for Money
Market Loans for any Interest Period if such Interest Period
includes the Termination Date but does not end on such date.
(g) Allocation by Administrative Agent. If offers are made
by two or more Banks with the same Money Market Rates for a greater
aggregate principal amount than the amount in respect of which offers
are accepted for the related Interest Period, the principal amount of
Money Market Loans in respect of which such offers are accepted shall
be allocated by the Administrative Agent among such Banks as nearly as
possible in proportion to the aggregate principal amount of such
offers, rounded to the nearest $1,000,000. Determinations by the
Administrative Agent of the amounts of Money Market Loans shall be
conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Administrative
Agent shall promptly on the date of receipt of such notice, notify
each Bank of the contents thereof and of such Bank's share (if any) of
such Borrowing and such Notice of Borrowing shall not thereafter be
revocable by the Borrower.
(b) As soon as practicable, and in any event no later than
4:00 P.M. (New York time) on the date of Borrowing, each Bank
participating therein shall (except as provided in subsection (c) of
this Section) make available its share of such Borrowing, in Federal
or other funds immediately available in New York, to the
Administrative Agent at its address specified in or pursuant to
Section 9.01. Unless the Administrative Agent determines that any
applicable condition specified in Article III has not been satisfied,
the Administrative Agent will make the funds so received from the
Banks available to the Borrower at the Administrative Agent's
aforesaid address.
(c) If any Bank makes a new Loan or the Borrower makes a
Refunding Borrowing hereunder, if the new Loan is made on a day on
which the Borrower is to repay all or any part of an outstanding Loan
from such Bank, such Bank shall apply the proceeds of its new Loan to
make such repayment and only the amount equal to the difference (if
any) between the amount being borrowed and the amount being repaid
shall be made available by such Bank to the Administrative Agent as
provided
(19)
<PAGE> 24
in subsection (b), or remitted by the Borrower to the Administrative
Agent as provided in Section 2.12 as the case may be and, in the case
of a Refunding Borrowing, the proceeds of such Borrowing shall be
deemed to reduce the principal amount of outstanding Syndicated Loans
and shall not be made available to the Administrative Agent.
(d) With respect to any Borrowing, the Administrative Agent
may (but shall not be obligated to) assume that each Bank has made its
share thereof available to the Administrative Agent on the date of
that Borrowing and, in reliance on such assumption, the Administrative
Agent may make available to the Borrower a corresponding amount. If
such amount is made available by such Bank to the Administrative Agent
after 4:00 P.M. (New York time) on the date of such Borrowing, such
Bank shall pay to the Administrative Agent on demand interest on such
amount at the Federal Funds Rate.
SECTION 2.05. Notes.
(a) The Reference Rate Loans of each Bank shall be evidenced
by a single Reference Rate Note payable to the order of such Bank for
the account of its Domestic Lending Office in an amount equal to the
lesser of such Bank's Commitment or the aggregate unpaid principal
amount of such Bank's Reference Rate Loans.
(b) The CD Rate Loans of each Bank shall be evidenced by
a single CD Rate Note payable to the order of such Bank for the
account of its Domestic Lending Office in an amount equal to the
lesser of such Bank's Commitment or the aggregate unpaid principal
amount of such Bank's CD Rate Loans.
(c) The Euro-Dollar Loans of each Bank shall be evidenced
by a single Euro-Dollar Note payable to the order of such Bank for the
account of its Euro-Dollar Lending Office in an amount equal to the
lesser of such Bank's Commitment or the aggregate unpaid principal
amount of such Bank's Euro-Dollar Loans.
(d) The Money Market Loans of each Bank shall be evidenced by
a single Money Market Note payable to the order of such Bank for the
account of its Money Market Lending Office in an amount equal to the
aggregate unpaid principal amount of such Bank's Money Market Loans.
(e) Upon receipt of each Bank's Notes pursuant to Section
3.02(a), the Administrative Agent shall mail such Notes to such Bank.
Each Bank shall record, and prior to any transfer of its Notes shall
endorse on the schedules forming a part thereof appropriate notations
to evidence, the date,
(20)
<PAGE> 25
amount and maturity of each Loan made by it and the date and amount of
each payment of principal made by the Borrower with respect thereto;
provided that the failure of any Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder
or under the Notes. Each Bank is hereby irrevocably authorized by the
Borrower so to endorse its Notes and to attach to and make a part of
any Note a continuation of any such schedule as and when required.
SECTION 2.06. Maturity of Loans. Each Loan included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing;
provided, that, in the case of a Refunding Borrowing and in the absence of a
Default, any Loan maturity that would otherwise occur hereunder shall be deemed
not to have occurred and the Borrower will not be required to repay any of the
principal amount thereof.
SECTION 2.07. Interest Rates.
(a) Each Reference Rate Loan shall bear interest on the
outstanding principal amount thereof, for each day from the date such
Loan is made until it becomes due, at a rate per annum equal to the
Alternate Reference Rate. Such interest shall be payable for each
Interest Period on the last day thereof. Any overdue principal of
and, to the extent permitted by law, overdue interest on any Reference
Rate Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 1% plus the otherwise
applicable rate for such day.
(b) Each CD Rate Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the
Applicable Margin plus the applicable Adjusted CD Rate. Such interest
shall be payable for each Interest Period on the last day thereof and,
if such Interest Period is longer than three months, at intervals of
three months after the first day thereof. Any overdue principal of
and, to the extent permitted by law, overdue interest on any CD Rate
Loan shall bear interest, payable on demand, for each day until paid at
a rate per annum equal to the sum of 1% plus the Alternative Reference
Rate.
The "Adjusted CD Rate" applicable to any Interest
Period means a rate per annum equal to the sum of (x) the
quotient obtained (rounded upwards, if necessary, to the next
higher 1/100 of 1%) by dividing (i) the applicable CD Rate by
(ii) 1.00 minus the CD Reserve Requirement and (y) the
Assessment Rate.
(21)
<PAGE> 26
The "CD Rate" applicable to any Interest Period means
the rate of interest determined by the Administrative Agent to
be the average (rounded upwards, if necessary, to the nearest
1/16 of 1%) of the prevailing rates per annum bid at 10:00
a.m., New York time (or as soon thereafter as practicable), on
the first day of such Interest Period by two or more
certificate of deposit dealers of recognized standing located
in New York for the purchase at face value from each CD
Reference Rate Bank of its certificates of deposit in an
amount approximately equal to the CD Rate Loan being made or
maintained by each such CD Reference Rate Bank to which such
Interest Period applies and having a maturity approximately
equal to such Interest Period.
The "CD Reserve Requirement" means, relative to any
Interest Period for CD Rate Loans, a percentage (expressed as
a decimal) equal to the maximum aggregate reserve requirements
(including all basic, supplemental, marginal and other
reserves and taking into account any transitional adjustments
or other scheduled changes in reserve requirements), specified
under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) and
then applicable to the class of banks of which the
Administrative Agent is a member, on deposits of the type used
as a reference in determining the CD Rate and having a
maturity approximately equal to such Interest Period. The
Adjusted CD Rate shall be adjusted automatically on and as of
the effective date of any change in the CD Reserve
Requirement.
The "Assessment Rate" means, for any Interest Period
for CD Rate Loans, the net annual assessment rate (rounded
upwards, if necessary, to the next higher 1/100 of 1%)
estimated by the Administrative Agent to be the then current
annual assessment payable by banks similar to the CD Reference
Rate Banks to the Federal Deposit Insurance Corporation (or
any successor) for insuring time deposits at offices of the
Administrative Agent in the United States.
(c) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period
applicable thereto, at a Rate per annum equal to the sum of the
Applicable Margin plus the applicable Adjusted Euro-Dollar Rate. Such
interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof.
(22)
<PAGE> 27
The "Adjusted Euro-Dollar Rate" applicable to
any Interest Period means a rate per annum equal to the
quotient obtained (rounded upwards, if necessary, to the next
higher 1/100 of 1%) by dividing (i) the applicable London
Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
The "London Interbank Offered Rate" applicable to any
Interest Period means the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective
rates per annum at which deposits in dollars are offered to
the Euro-Dollar Reference Rate Banks in the London interbank
market at approximately 11:00 A.M. (London time) two
Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan being made or
maintained by each such Euro-Dollar Reference Rate Bank to
which such Interest Period applies and having a maturity
approximately equal to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day
that percentage (expressed as a decimal) which is in effect on
such day, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining the
maximum reserve requirement for a member bank of the Federal
Reserve System. The Adjusted Euro-Dollar Rate shall be
adjusted automatically on and as of the effective date of any
change in the Euro-Dollar Reserve Percentage.
Any overdue principal of and, to the extent permitted
by law, overdue interest on any Euro-Dollar Loan shall bear
interest, payable on demand, for each day from and including
the date payment thereof was due to but excluding the date of
actual payment, at a rate per annum equal to the sum of 1%
plus the Applicable Margin plus the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100 of 1%) by
dividing (i) the average (rounded upward, if necessary, to the
next higher 1/16 of 1%) of the respective rates per annum at
which one day (or, if such amount due remains unpaid more than
three Euro-Dollar Business Days, then for such other period of
time not longer than three months as the Administrative Agent
may elect) deposits in dollars in an amount approximately
equal to such overdue payment due to National Westminster Bank
PLC are offered to the Euro-Dollar Reference Rate Banks in the
London interbank market for the applicable period determined
as provided above by (ii) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause
(23)
<PAGE> 28
(a) or (b) of Section 8.01 shall exist, at a rate per annum
equal to the sum of 1% plus the rate applicable to Reference
Rate Loans for such day).
(d) Each Money Market Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the Money Market Rate
quoted by the Bank making such Loan in accordance with Section 2.04.
Such interest shall be payable for each Interest Period on the last
day thereof and, if such Interest Period is longer than three months,
at intervals of three months after the first day thereof. Any overdue
principal of and, to the extent permitted by law, overdue interest on
any Money Market Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 1% plus the
Reference Rate for such day.
(e) The Administrative Agent shall determine each
interest rate applicable to the Loans hereunder. The Administrative
Agent shall give prompt notice to the Borrower and the participating
Banks by facsimile, telex or cable of each rate of interest so
determined, and its determination thereof shall be conclusive in the
absence of manifest error.
SECTION 2.08. Fees.
(a) Facility Fees. From the Effective Date until the
Termination Date, the Borrower shall pay to the Administrative Agent
for the account of the Banks ratably in proportion to their
outstanding Commitments, facility fees for each calendar quarter or
part thereof in arrears at the Applicable Facility Fee Rate per annum
on the daily average amount of the Commitments without regard to usage
for such calendar quarter or part thereof.
(b) Payments of Facility Fees. Accrued facility fees
pursuant to Section 2.08(a) shall be payable quarterly in arrears on
each March 31, June 30, September 30 and December 31 and upon the
Termination Date or, if earlier, the date of termination of the
Commitments in their entirety.
SECTION 2.09. Optional Termination or Reduction of Commitments.
During the Revolving Credit Period, the Borrower may, upon at least three
Domestic Business Days' notice to the Administrative Agent, (i) terminate the
Commitments at any time, if no Loans are outstanding at such time, or (ii)
ratably reduce from time to time by an aggregate amount of $25,000,000 or any
larger multiple thereof, the aggregate amount of the Commitments in excess of
the aggregate outstanding principal amount of the Loans.
(24)
<PAGE> 29
SECTION 2.10. Mandatory Termination of Commitments. The Commitments
shall terminate on the Termination Date and all Loans then outstanding (together
with accrued interest thereon) shall be due and payable on such date.
SECTION 2.11. Optional Prepayments.
(a) The Borrower may, upon at least one Domestic Business
Day's notice to the Administrative Agent, prepay any Reference Rate
Borrowing (or any Money Market Borrowing bearing interest at the
Reference Rate pursuant to Section 8.01) in whole at any time, or from
time to time in part in amounts aggregating $1,000,000 or any larger
multiple thereof, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment.
Each such optional prepayment shall be applied to prepay ratably the
Loans of the several Banks included in such Borrowing.
(b) Subject to the provisions of Section 2.13, the Borrower
may prepay in whole (but not in part) the principal amount of,
together with accrued interest thereon to the date of prepayment, any
Fixed Rate Loan (excluding Money Market Loans) prior to the maturity
thereof.
(c) Upon receipt of a notice of prepayment pursuant to this
Section, the Administrative Agent shall promptly notify each Bank of
the contents thereof and of such Bank's ratable share (if any) of such
prepayment and such notice shall not thereafter be revocable by the
Borrower.
SECTION 2.12. General Provisions as to Payments. The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 1:00 P.M. (New York time) on the date when due, in
Federal or other funds immediately available in New York, to the Administrative
Agent at its address referred to in Section 9.01. The Administrative Agent
will promptly distribute to each Bank its ratable share of each such payment
received by the Administrative Agent for the account of the Banks. Whenever
any payment of principal of, or interest on, the Reference Rate Loans, the CD
Rate Loans, the Money Market Loans or of fees shall be due on a day which is
not a Domestic Business Day, the date for payment thereof shall be extended to
the next succeeding Domestic Business Day. Whenever any payment of principal
of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(25)
<PAGE> 30
SECTION 2.13. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article II, VI or
VIII or otherwise) on any day other than the last day of the Interest Period
applicable thereto, or if the Borrower fails to borrow any Fixed Rate Loans
after notice has been given to any Bank in accordance with Section 2.04(a), the
Borrower shall reimburse each Bank on demand for any resulting loss or expense
incurred by it (or by an existing or prospective Participant in the related
Loan), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after any such payment or failure to borrow, provided
that such Bank shall have delivered to the Borrower a certificate as to the
amount of such loss or expense, which certificate shall be conclusive in the
absence of manifest error.
SECTION 2.14. Computation of Interest and Fees. Interest based on
the Alternate Reference Rate hereunder shall be computed on the basis of a year
of 365 days (or 366 days in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last day). All other
interest and fees shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding
the last day).
ARTICLE III
CONDITIONS TO BORROWINGS
The obligation of any Bank to make a Loan or to permit a Refunding
Borrowing on the occasion of any Borrowing is subject to the satisfaction of
the following conditions:
SECTION 3.01. All Borrowings. In the case of each Borrowing:
(a) receipt by the Administrative Agent of a Notice of
Borrowing as required by Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Loans will not exceed
the aggregate amount of the Commitments;
(c) the fact that, immediately after such Borrowing, no
Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the
Borrower contained in this Agreement (except, in the case of a
Refunding Borrowing, the representation and warranty set forth in
Section 4.05(b) as to any material adverse change which has
theretofore been disclosed in writing by the Borrower
(26)
<PAGE> 31
to the Banks) shall be true in all material respects on and as of the
date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(b), (c) and (d) of this Section.
SECTION 3.02. First Borrowing. In the case of the first Borrowing:
(a) receipt by the Administrative Agent for the account of
each Bank of a duly executed Reference Rate Note, CD Rate Note,
Euro-Dollar Note and Money Market Note, each dated on or before the
date of such Borrowing, complying with the provisions of Section 2.05;
(b) concurrently with the funding of the first Borrowing,
receipt by the Administrative Agent for the account of each Bank party
to the Existing Credit Agreement of funds from the Borrower repaying
or paying any and all amounts outstanding as Existing Loans or
otherwise under the Existing Credit Agreement;
(c) concurrently with the funding of the first Borrowing,
receipt by the Administrative Agent of satisfactory documentary
evidence cancelling the Commitments of the Banks (as defined in the
Existing Credit Agreement) under or pursuant to the Existing Credit
Agreement;
(d) receipt by the Administrative Agent of an opinion of
counsel to the Borrower, substantially in the form of Exhibits H(1)
and H(2) hereto and covering such additional matters relating to the
transactions contemplated hereby as the Required Banks may reasonably
request;
(e) receipt by the Administrative Agent of an opinion of
Mayer, Brown & Platt, special counsel for the Administrative Agent,
substantially in the form of Exhibit I hereto and covering such
additional matters relating to the transactions contemplated hereby as
the Required Banks may reasonably request;
(f) receipt by the Administrative Agent of a certificate
signed by the chief financial officer and either the president or any
vice president of the Borrower, to the effect set forth in clauses (c)
and (d) of Section 3.01;
(g) receipt by the Administrative Agent of all documents it
may reasonably request relating to the existence of the Borrower, the
corporate authority for and the validity of this Agreement and the
Notes, and any other matters relevant hereto,
(27)
<PAGE> 32
all in form and substance satisfactory to the Administrative Agent; and
(h) concurrently with the funding of the first Borrowing,
receipt by the Administrative Agent of all fees required to be paid by
Borrower hereunder;
The certificate and opinions referred to in clauses (d), (e), (f) and (g) above
shall be dated no more than three Domestic Business Days before the date of the
first Borrowing.
SECTION 3.03. Return of Existing Notes. The Administrative Agent
shall use its best efforts to secure from each bank party to the Existing
Credit Agreement the delivery of the "Existing Notes of that bank marked
"cancelled" or "paid", and the Administrative Agent shall deliver such Existing
Notes to the Borrower as soon as possible after the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that as of the Effective Date:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization;
Contravention. The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or result in the creation or imposition of any Lien
on any asset of the Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and the Notes, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations
of the Borrower.
(28)
<PAGE> 33
SECTION 4.04. Government Approval, Regulation, etc. No authorization
or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or other Person is required for the
due execution, delivery or performance by the Borrower of this Agreement, the
Notes or any other instrument or writing furnished in connection herewith to
which it is a party.
SECTION 4.05. Financial Information.
(a) The audited consolidated balance sheet of the Borrower
and its Subsidiaries as of December 31, 1993 and the related
consolidated statements of income, stockholders' equity and cash flows
for the fiscal year then ended, reported on by Ernst & Young, and the
unaudited consolidated balance sheet of the Borrower and its
Subsidiaries as of June 30, 1994, and the related unaudited
consolidated statements of income and cash flows for the 6 months then
ended, as certified by the chief financial officer or the chief
accounting officer of the Borrower, fairly present, in conformity with
generally accepted accounting principles, the consolidated financial
position of the Borrower and its Subsidiaries as of such date and
their consolidated results of operations and cash flows for such
fiscal periods.
(b) Since December 31, 1993, there has been no material
adverse change in the business, operations, prospects or condition,
financial or otherwise, of the Borrower and its consolidated
Subsidiaries, considered as a whole.
SECTION 4.06. Litigation. Except as has been disclosed to the Banks
in Item 3 of Schedule K hereto, there is no action, suit, investigation or
proceeding pending against, or to the knowledge of the Borrower threatened
against or affecting, the Borrower or any of its Subsidiaries before any court
or arbitrator or any governmental body, agency or official the probable outcome
of which could materially adversely affect the business, consolidated financial
position, properties or operations of the Borrower and its Subsidiaries taken
as a whole or which in any manner draws into question the validity of this
Agreement or the Notes.
SECTION 4.07. Compliance with ERISA. Except as disclosed in Item 6
of Schedule K hereto, each member of the Controlled Group has fulfilled its
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code, and has not incurred any
material liability to the PBGC or a Plan under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.08. Taxes. United States Federal income tax returns of the
Borrower and its Subsidiaries have been examined and closed
(29)
<PAGE> 34
through the taxable year ended December 31, 1990. The Borrower and its
Subsidiaries have filed all United States Federal income tax returns and all
other material tax returns which are required to be filed by them and have paid
all taxes due pursuant to such returns or pursuant to any assessment received by
the Borrower or any Subsidiary except for tax assessments being contested in
good faith in appropriate proceedings or directly with taxing authorities and
for which adequate reserves have been established. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of taxes
or other governmental charges are, in the opinion of the Borrower, adequate.
SECTION 4.09. Subsidiaries. Each of the Borrower's corporate
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted. The
names, jurisdictions of incorporation, ownership information and business
descriptions of all of the Borrower's existing Subsidiaries are as set forth in
Item 2 of Schedule K hereto.
SECTION 4.10. Full Disclosure. All information heretofore furnished
by or on behalf of the Borrower to the Administrative Agent or any Bank for
purposes of or in connection with this Agreement or any transaction
contemplated hereby (including without limitation the information set forth in
Schedule K hereto) is, and all such information hereafter furnished by the
Borrower to the Administrative Agent or any Bank will be, true, accurate and
complete in every material respect or based on reasonable estimates on the date
as of which such information is stated or certified.
SECTION 4.11. Lease Payments. As of the date this Agreement becomes
effective pursuant to Section 9.10, the aggregate amount of minimum lease
payments that the Borrower and its Subsidiaries have incurred or assumed under
Operating Leases does not exceed $50,000,000.
SECTION 4.12. Environmental Matters. Except as disclosed in Item 7
of Schedule K hereto, neither the Borrower nor any Subsidiary is in violation
of any environmental law of any Federal, state or local governmental authority
or has incurred or reasonably expects to incur any liability to reimburse or to
pay any penalty to any Federal, state or local governmental authority for the
costs of any environmental clean-up, which violation or liability, if incurred,
would have a material adverse effect on the financial condition or results of
operations of the Borrower and its Subsidiaries taken as a whole.
(30)
<PAGE> 35
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days
after the end of each fiscal year of the Borrower, an audited
consolidated balance sheet of the Borrower and its Subsidiaries as of
the end of such fiscal year and the related consolidated statements of
income, stockholders' equity and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on in a manner acceptable to the
Securities and Exchange Commission by Ernst & Young or other
independent public accountants of nationally recognized standing, and
unaudited financial statements for each of the Borrower's operating
Subsidiaries designated by the Administrative Agent and Required Banks
specifically including Dal-Tex Coal Corporation, Coal-Mac, Inc., Hobet
Mining, Inc., and Mingo Logan Coal Company;
(b) as soon as available and in any event within 45 days
after the end of each of the first three quarters of each fiscal year
of the Borrower, a consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such quarter and the related
consolidated statements of income, stockholders' equity and cash flows
for such quarter and for the portion of the Borrower's fiscal year
ended at the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding quarter and the
corresponding portion of the Borrower's previous fiscal year
(deliveries of the Borrower's reports on Form 10-Q shall satisfy the
preceding requirements of this subsection), and unaudited financial
statements for each of the Borrower's operating Subsidiaries
designated by the Administrative Agent and Required Banks specifically
including Dal-Tex Coal Corporation, Coal-Mac, Inc., Hobet Mining,
Inc., and Mingo Logan Coal Company, all certified (subject to normal
year-end audit adjustments) as to fairness of presentation, generally
accepted accounting principles and consistency by the chief financial
officer or the chief accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of
the chief financial officer or the chief accounting officer of the
Borrower (i) setting forth in
(31)
<PAGE> 36
reasonable detail the calculations required to establish whether the
Borrower was in compliance with the requirements of Sections 5.07 to
5.10 and 5.15, inclusive, on the date of such financial statements and
(ii) stating whether any Default exists on the date of such
certificate and, if any Default then exists, setting forth the details
thereof and the action which the Borrower is taking or proposes to
take with respect thereto;
(d) as soon as possible after the occurrence of each Default
continuing on the date of such statement, a certificate of the chief
financial officer or the chief accounting officer of the Borrower
setting forth the details thereof and the information then available
as to the action which the Borrower is taking or proposes to take with
respect thereto;
(e) promptly upon the mailing thereof to the shareholders of
the Borrower generally, copies of all financial statements, reports
and proxy statements so mailed;
(f) promptly upon the filing thereof, and to the extent not
provided pursuant to clause (a) or (b) above, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and reports on
Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower
shall have filed with the Securities and Exchange Commission;
(g) if and when any member of the Controlled Group (i) gives
or is required to give notice to the PBGC of any "reportable event"
(as defined in Section 4043 of ERISA) with respect to any Plan which
might constitute grounds for a termination of such Plan under Title IV
of ERISA, or knows that the plan administrator of any Plan has given
or is required to give notice of any such reportable event, a copy of
the notice of such reportable event given or required to be given to
the PBGC; (ii) receives notice of complete or partial withdrawal
liability under Title IV of ERISA, a copy of such notice; or (iii)
receives notice from the PBGC under Title IV of ERISA of an intent to
terminate or appoint a trustee to administer any Plan, a copy of such
notice;
(h) as soon as available and in any event within 45 days
after each March 31, June 30, September 30 and December 31, from and
including September 30, 1994 through the Termination Date, a
certificate of the chief financial officer or the chief accounting
officer of the Borrower setting forth the information necessary to
calculate the Applicable Margin and the Applicable Facility Fee Rate;
and
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(i) from time to time such additional information regarding
the financial position or business of the Borrower as the
Administrative Agent, at the request of any Bank, may reasonably
request.
SECTION 5.02. Payment of Obligations. The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity, all their respective material obligations and liabilities, including,
without limitation, tax liabilities, except where the same may be contested in
good faith by appropriate proceedings, and will maintain, and will cause each
Subsidiary to maintain, in accordance with generally accepted accounting
principles, appropriate book accruals for any of the same.
SECTION 5.03. Maintenance of Property; Insurance. The Borrower will
keep, and will cause each Subsidiary to keep, all property useful and necessary
in its business in good working order and condition, ordinary wear and tear
excepted, except to the extent that failure to do so would not have a material
adverse effect on the operations of the Borrower and its Subsidiaries,
considered as a whole, and except in the case of property no longer
economically useful in the conduct of the Borrower's business; will maintain
and will cause each Subsidiary to maintain with insurers of recognized
responsibility, insurance on all their respective properties in at least such
amounts and against at least such risks as are usually insured against in the
same general area by companies of established repute engaged in the same or a
similar business; and will furnish, and will cause each Subsidiary to furnish,
to any Bank, upon written request, a certificate as to the insurance carried.
Subject to the foregoing, the Borrower may maintain, and may cause each
Subsidiary to maintain, the insurance described in this Section under the
blanket insurance policies of Ashland Oil, Inc. containing deductibles
negotiated by Ashland Oil, Inc. in such blanket insurance policies.
SECTION 5.04. Conduct of Business and Maintenance of Existence. The
Borrower will preserve, renew and keep in full force and effect, and will cause
each Subsidiary, to the extent the Borrower reasonably deems necessary in the
normal conduct of business, to preserve, renew and keep in full force and
effect their respective corporate existence and their respective rights,
privileges and franchises material to the Borrower's business.
SECTION 5.05. Compliance with Laws. The Borrower will comply, and
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities, noncompliance with which would materially adversely affect the
business or credit of the Borrower or the Subsidiary (including, without
limitation, ERISA and the rules and regulations thereunder and all applicable
environmental regulations) except where the necessity of compliance therewith is
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contested in good faith by appropriate proceedings.
SECTION 5.06. Inspection of Property, Books and Records. The
Borrower will keep, and will cause each Subsidiary to keep, proper books of
record and account in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities; and will
permit, and will cause each Subsidiary to permit, upon reasonable notice,
representatives of any Bank at such Bank's expense to visit and inspect any of
their respective properties, to examine and make abstracts from any of their
respective books and records. The Banks acknowledge that certain of the
properties of the Borrower and its Subsidiaries where mining and related
operations are carried on are inherently dangerous workplaces and any
inspection of these properties shall be at the sole risk of the Bank or Banks
conducting such inspection. Any such inspection shall be conditioned upon the
execution by the persons making such inspection of a release to the foregoing
effect. Should the Banks wish to discuss the affairs, finances and accounts of
the Borrower and its Subsidiaries with their respective officers (other than
financial officers), employees and independent public accountants, the
Administrative Agent shall contact the Borrower's chief financial officer who
shall make such persons available for discussions with the Banks, which shall
be held in the presence of an officer of the Borrower, if the Borrower so
requests.
SECTION 5.07. Debt Limitation. The ratio of (x) Consolidated Debt of
the Borrower to (y) the sum of Consolidated Debt and Consolidated Net Worth
will at no time be greater than 60%.
SECTION 5.08. Minimum Consolidated Net Worth. Consolidated Net Worth
will not at any time be less than $285,000,000.
SECTION 5.09. Restricted Payments. Neither the Borrower nor any
Subsidiary will declare or make any Restricted Payment unless, after giving
effect thereto (i) the aggregate of all Restricted Payments declared or made
subsequent to November 15, 1994 does not exceed the sum of (x) $49,000,000 plus
(y) 50% (or minus 50% in the case of a deficit) of Consolidated Adjusted Net
Income Available for Distributions accumulated after January 1, 1994 and (ii)
no Default shall have occurred and be continuing. Nothing in this Section
shall prohibit the payment of any dividend or distribution within 60 days after
the declaration thereof if such declaration was not prohibited by this Section.
SECTION 5.10. Negative Pledge. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset
(including stock issued by any subsidiary and owned by the Borrower or any
Subsidiary) now owned or hereafter acquired by it, except:
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(a) Liens existing on the date of this Agreement securing
guaranty obligations relating to Dominion Terminal Associates in an
aggregate principal amount not exceeding $24,000,000;
(b) Liens securing ad valorem taxes not yet delinquent;
(c) Liens securing taxes, assessments or governmental charges
or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons, provided the payment
thereof is at the time being contested in good faith and by
appropriate proceedings, and provided further that adequate book
reserves have been established with respect thereto, and provided
further that the owing company's title to, and its right to use, its
property is not materially adversely affected thereby. In the case of
any item of the foregoing description involving in excess of
$1,000,000, the appropriateness of the proceedings shall be supported
by an opinion of the counsel responsible for such proceedings and the
adequacy of such reserves shall be supported by the opinion of the
independent accountants of the contesting company;
(d) Liens incurred or deposits made in the ordinary course of
business (i) in connection with workmen's compensation, unemployment
insurance, social security and other like laws, or (ii) to secure the
performance of letters of credit, bids, tenders, sales contracts,
leases, statutory obligations, surety, appeal and performance bonds
and other similar obligations not incurred in connection with the
borrowing of money, the obtaining of advances or the payment of the
deferred purchase price of property;
(e) Attachment, judgment and other similar Liens arising in
connection with court proceedings, provided the execution or other
enforcement of such Liens is effectively stayed and the claims secured
thereby are being actively contested in good faith and by appropriate
proceedings;
(f) Liens on property of a Subsidiary securing only
obligations owing to the Borrower or another Subsidiary;
(g) Reservations, exceptions, encroachments, easements,
rights of way, covenants, conditions, restrictions, leases and other
similar title exceptions or encumbrances affecting real property,
provided they do not in the aggregate materially detract from the
value of said properties or materially interfere with their use in the
ordinary conduct of the owing company's business;
(h) Any Lien existing on any property of any corporation at
the time it becomes a Subsidiary, or existing prior to the time of
acquisition upon any property acquired by the Borrower
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or any Subsidiary through purchase, merger or consolidation or
otherwise, whether or not assumed by the Borrower or such Subsidiary,
or placed upon property (x) within 90 days of the date such property
is placed in service if such property constitutes equipment or
facilities, or (y) within 90 days of acquisition thereof by the
Borrower or any Subsidiary in the case of all other property, to
secure all or a portion of (or to secure indebtedness incurred to pay
all or a portion of) the purchase price thereof, provided that any
such Lien shall not encumber any other property of the Borrower or
such Subsidiary;
(i) Any Lien renewing, extending or refunding any Lien
permitted by clause (h) above, provided that the principal amount
secured is not increased, the Lien is not extended to other property,
and at the time of, and immediately after giving effect to, any such
renewal, extension or refunding, the Borrower and its Subsidiaries
would be permitted by the provisions of Section 5.07 to incur at least
$1.00 of additional Consolidated Debt; and
(j) Liens not otherwise permitted by the foregoing clauses of
this Section securing Debt in an aggregate principal amount at any
time outstanding not to exceed the greater of (i) 5% of Consolidated
Net Worth and (ii) $20,000,000.
SECTION 5.11. Consolidations, Mergers and Sales of Assets. The
Borrower will not (i) consolidate or merge with or into any other Person or
(ii) sell, lease or otherwise transfer all or any substantial part of the
assets of the Borrower and its Subsidiaries, taken as a whole, to any other
Person; provided that the Borrower may merge with another Person if (A) the
corporation surviving such merger is organized under the laws of the United
States of America or a state thereof and, if the Borrower is not the surviving
corporation, the surviving corporation expressly assumes the obligations of the
Borrower hereunder and under the Notes by an instrument satisfactory in form
and substance to the Required Banks, such approval not to be unreasonably
withheld, and (B) before and immediately after giving effect to such merger, no
Default shall have occurred and be continuing.
SECTION 5.12. Use of Proceeds. The proceeds of the Loans made under
this Agreement will be used by the Borrower for the repayment of the Existing
Notes and for its general corporate purposes, including without limitation,
acquisitions. None of such proceeds will be used in violation of any
applicable law or regulation, including, without limitation, Regulation U or
any other margin regulation of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
SECTION 5.13. Transactions with Affiliates. The Borrower will not,
and will not permit any Subsidiary to, enter into any
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transaction, including without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any Affiliate except as under
Section 5.11 or in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary than would
obtain in a comparable arms's length transaction with a Person not an Affiliate.
SECTION 5.14. Subsidiary Debt. The Borrower will not permit any
Subsidiary to incur or permit to exist, any Debt, except
(i) Debt hereafter incurred in connection with the liens permitted
by Section 5.10,
(ii) Debt of the Subsidiaries to each other or the Borrower,
(iii) other Debt of the Subsidiaries not in excess of that listed
and outstanding or available as of the date of this Agreement
and listed in Item 4 of Schedule K hereto as being debt of the
Borrower or of a Subsidiary.
SECTION 5.15. EBITDAR RATIO. The EBITDAR Ratio will not at any time
be less than 3 to 1.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of
or interest on any Loan, any fees or any other amount payable
hereunder;
(b) the Borrower shall fail to observe or perform any
covenant contained in Sections 5.07, 5.09,5.10, 5.11, 5.12, 5.13, 5.14
or 5.15;
(c) the Borrower shall fail to observe or perform the
covenant contained in Section 5.08 for 30 days after an officer of the
Borrower obtains knowledge of such failure;
(d) the Borrower shall fail to observe or perform any covenant
or agreement contained in this Agreement (other than those covered by
clause (a), (b) or (c) above) for 30 days
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after written notice thereof has been given to the Borrower by the
Administrative Agent at the request of any Bank;
(e) any representation, warranty, certification or statement
made by the Borrower in this Agreement or in any certificate,
financial statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect in any material respect
when made (or deemed made);
(f) the Borrower or any Subsidiary shall fail to make any
payment in respect of any Debt (other than the Notes) in an aggregate
outstanding principal amount exceeding $10,000,000 when due or within
any applicable grace period;
(g) any event or condition shall occur which results in the
acceleration of the maturity of any Debt of the Borrower or any
Subsidiary in an aggregate principal amount exceeding $10,000,000 or
enables the holder of such Debt or any Person acting on such holder's
behalf to accelerate the maturity thereof;
(h) the Borrower or any Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due, or shall take any corporate action to authorize
any of the foregoing;
(i) an involuntary case or other proceeding shall be
commenced against the Borrower or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or an order
for relief shall be entered against the Borrower or any Subsidiary
under the Federal bankruptcy laws as now or hereafter in effect;
(j) any member of the Controlled Group shall fail to pay when
due an amount or amounts aggregating in excess of
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$1,000,000 which it shall have become liable to pay to the PBGC or to
a Plan under Title IV of ERISA; or notice of intent to terminate a
Plan or Plans having aggregate Unfunded Vested Liabilities in excess
of $1,000,000 (collectively, a "Material Plan") shall be filed under
Title IV of ERISA by any member of the Controlled Group, any plan
administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate or to cause
a trustee to be appointed to administer any Material Plan or a
proceeding shall be instituted by a fiduciary of any Material Plan
against any member of the Controlled Group to enforce Section 515 or
4219(c)(5) of ERISA; or a condition shall exist by reason of which the
PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated;
(k) a final and unappealable judgment or order for the
payment of money in excess of $5,000,000 shall be rendered against the
Borrower or any Subsidiary and such judgment or order shall continue
unsatisfied and unstayed for a period of 10 days; or
(l) the termination as a result of breach of Hedging
Obligations of the Borrower or any Subsidiary which require as a
consequence of such breach the payment by the Borrower or any
Subsidiary of more than $10,000,000 in the aggregate;
then and in every such event, the Administrative Agent shall (i) if requested
by the Required Banks, by notice to the Borrower terminate all the Commitments
and they shall thereupon terminate, and (ii) if requested by Banks holding
Notes evidencing more than 66 2/3% in aggregate principal amount of the Loans,
by notice to the Borrower declare the Notes (together with accrued interest
thereon) to be, and the Notes shall thereupon become, immediately due and
payable without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by the Borrower; provided that in the case of any of
the Events of Default specified in clause (h) or (i) above with respect to the
Borrower, without any notice to the Borrower or any other act by the
Administrative Agent or the Banks, the Commitments shall thereupon terminate
and the Notes (together with accrued interest thereon) shall become immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Administrative Agent shall give
notice to the Borrower under Section 6.01(d) promptly upon being requested to
do so by any Bank and shall thereupon notify all the Banks thereof.
SECTION 6.03. Limitation on Remedies. With respect to any breach or
violation of any covenant contained in Sections 5.02
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through 5.15 inclusive, the Banks are limited to the remedies set forth in
Section 6.01.
ARTICLE VII
THE ADMINISTRATIVE AGENT AND THE AGENTS
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Administrative Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement and the Notes as
are delegated to the Administrative Agent by the terms hereof or thereof,
together with all such powers as are reasonably incidental thereto.
SECTION 7.02. Administrative Agent and Affiliates. National
Westminster Bank PLC shall have the same rights and powers under this Agreement
as any other Bank and may exercise or refrain from exercising the same as
though it were not the Administrative Agent, and National Westminster Bank PLC
and its affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrower or any Subsidiary or Affiliate
of the Borrower as if it were not the Administrative Agent hereunder.
SECTION 7.03. Action by Administrative Agent or Agents. The
obligations of the Administrative Agent or the Agents hereunder are only those
expressly set forth herein. Without limiting the generality of the foregoing,
neither the Administrative Agent nor the Agents shall be required to take any
action with respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. The Administrative Agent
may consult with legal counsel (who may be counsel for the Borrower),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Administrative Agent or Agents. None of
the Administrative Agent, any of the Agents nor any of their directors,
officers, agents, or employees shall be liable for any action taken or not
taken by any of them in connection herewith (i) with the consent or at the
request of the Required Banks or (ii) in the absence of any of their own gross
negligence or willful misconduct. None of the Administrative Agent, any of the
Agents nor any of their directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement or
any Borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Borrower; (iii) the satisfaction of any
condition specified in Article III, except receipt of items required to be
delivered to the
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Administrative Agent; or (iv) the validity, effectiveness or genuineness of
this Agreement, the Notes or any other instrument or writing furnished in
connection herewith. The Administrative Agent shall not incur any liability by
acting in reliance upon any notice, consent, certificate, statement, or other
writing (which may be a Bank wire, telex or similar writing) believed by it to
be genuine or to be signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Administrative Agent and each of
the Agents (to the extent not reimbursed by the Borrower) against any cost,
expense (including the Administrative Agent's counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from the
Administrative Agent's or such Agent's gross negligence or willful misconduct)
that the Administrative Agent or such Agent may suffer or incur in connection
with this Agreement or any action taken or omitted by the Administrative Agent
or such Agent hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Administrative Agent, any Agent or
any other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Administrative Agent, any Agent or any other Bank, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking any action
under this Agreement.
SECTION 7.08. Successor Administrative Agent. The Administrative
Agent may resign at any time by giving written notice thereof to the Banks and
the Borrower. Upon any such resignation, Bank of America Illinois or, if so
designated by Bank of America Illinois, Bank of America NT & SA shall
automatically become successor Administrative Agent; provided, that if (i) the
Borrower objects to Bank of America Illinois's (or, in case of such designation
by Bank of America Illinois as referred to above, Bank of America NT & SA's)
succession as Administrative Agent in a writing delivered to all of the Banks,
or (ii) Bank of America Illinois (or, in case of such designation by Bank of
America Illinois as referred to above, Bank of America NT & SA) declines its
automatic succession in a writing delivered to all of the Banks, then the
Required Banks shall appoint another Bank or commercial banking institution as
a successor Administrative Agent which shall thereupon become the
Administrative Agent hereunder; provided, however, that if any commercial
banking institution is not a party to this Agreement, such commercial banking
institution shall not become the Administrative Agent hereunder without the
prior consent of the Borrower, which consent shall not be unreasonably
withheld. If no successor Administrative Agent shall have been so appointed by
the Required
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Banks and approved by the Borrower, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent's giving of notice of
resignation, then the retiring Administrative Agent may, on behalf of the
Banks, appoint a successor Administrative Agent, which shall be a commercial
bank organized or licensed under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$50,000,000. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's resignation hereunder as Administrative Agent,
the provisions of this Article shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent.
SECTION 7.09. Administrative Agent's and Agents' Fees. The Borrower
shall pay to the Administrative Agent for its own account fees in the amounts
and at the times previously agreed upon between the Borrower and the
Administrative Agent pursuant to a fee agreement letter dated October 18, 1994,
from the Administrative Agent to the Borrower, as amended. Pursuant to that
October 18, 1994 letter, on the Closing Date, the Borrower shall pay to the
Administrative Agent for the account of the Agents an arrangement fee as
specified in said letter.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If prior to 10:00 A.M. New York time on the first day of any Interest
Period for any Fixed Rate Loan:
(a) deposits in dollars (in the applicable amounts) are
not being offered to any of the CD Rate Reference Banks or the
Euro-Dollar Reference Banks in the relevant market for such Interest
Period, or
(b) in the case of a CD Rate Loan or Euro-Dollar Loan, as
the case may be, the Required Banks advise the Administrative Agent
that (i) the Adjusted CD Rate as determined by the Administrative
Agent will not adequately and fairly reflect the cost to such Banks of
funding their CD Rate Loans for such Interest Period, or (ii) that the
Adjusted Euro-Dollar Rate as determined by the Administrative Agent
will not adequately and fairly reflect the cost to such Banks of
funding their Euro-Dollar Loans for such Interest Period,
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the Administrative Agent shall forthwith give notice thereof by 10:00
A.M. New York time to the Borrower and the Banks, whereupon until the
Administrative Agent notifies the Borrower that the circumstances
giving rise to such suspension no longer exist, the obligations of the
Banks to make CD Rate Loans, if such circumstances affect the ability
to make CD Rate Loans, or Euro-Dollar Loans, if such circumstances
affect the ability to make Euro-Dollar Loans, shall be suspended.
Unless the Borrower notifies the Administrative Agent by 12:00 P.M.
New York time on the date of any Fixed Rate Loans for which a Notice
of Borrowing has previously been given that it elects not to borrow on
such date, (i) if such Fixed Rate Loans are CD Rate Loans or
Euro-Dollar Loans, as the case may be, such Loans shall instead be
made as a Reference Rate Borrowing and (ii) if such Fixed Rate Loans
are Money Market Loans, such Money Market Loans shall bear interest
for each day from and including the first day to but excluding the
last day of the Interest Period applicable thereto at the Alternate
Reference Rate. The conditions to Borrowing set forth in Section
3.01(a) shall not apply to the Reference Rate Borrowing referred to in
(i) or the Alternate Reference Rate Borrowing referred to in (ii).
SECTION 8.02. Illegality. If, after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Euro-Dollar Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it unlawful
or impossible for any Bank (or its Euro-Dollar Lending Office) to make,
maintain or fund its CD Rate Loans or its Euro-Dollar Loans and such Bank shall
so notify the Administrative Agent, the Administrative Agent shall forthwith
give notice thereof to the other Banks and the Borrower, whereupon until such
Bank notifies the Borrower and the Administrative Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make CD Rate Loans, if such circumstances affect the ability to make CD Rate
Loans, or Euro-Dollar Loans, if such circumstances affect the ability to make
Euro- Dollar Loans, shall be suspended. Before giving any notice to the
Administrative Agent pursuant to this Section, such Bank shall designate a
different Lending Office or a different Euro-Dollar Lending Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank
shall determine that it may not lawfully continue to maintain and fund in such
notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each such affected CD Rate Loan or Euro-Dollar Loan,
together with accrued interest thereon. Concurrently with prepaying each such
affected CD Rate Loan or Euro-Dollar Loan, the Borrower shall borrow a
Reference Rate Loan in an equal principal amount from such Bank (on which
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interest and principal shall be payable contemporaneously with the related CD
Rate Loans or Euro-Dollar Loans of the other Banks), and such Bank shall make
such a Reference Rate Loan. In such event, the conditions to Borrowing set
forth in Section 3.01(a) shall not apply to such Reference Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return.
(a) If on or after (x) the date hereof, in the case of any
Syndicated Loan or any obligation to make Syndicated Loans or (y) the
date of the related Money Market Quote, in the case of any Money
Market Loan, the adoption of any applicable law, rule or regulation,
or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Lending office) with any
request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency:
(i) shall subject any Bank (or its Lending Office)
to any tax, duty or other charge with respect to its Fixed
Rate Loans, its Notes or its obligation to make Fixed Rate
Loans, or shall change the basis of taxation of payments to
any Bank (or its Lending Office) of the principal of or
interest on its Fixed Rate Loans or any other amounts due
under this Agreement in respect of its Fixed Rate Loans or its
obligation to make Fixed Rate Loans (except for changes in the
Rate of tax on the overall net income of such Bank or its
Lending Office imposed by the jurisdiction in which such
Bank's principal executive office or Lending Office is
located); or
(ii) shall impose, modify or deem applicable any
reserve, special deposit or similar requirement (including,
without limitation, any such requirement imposed by the Board
of Governors of the Federal Reserve System, but excluding with
respect to any CD Rate Loan any such requirement included in
an applicable CD Reserve Requirement or with respect to any
Euro-Dollar Loan any such requirement included in an
applicable Euro-Dollar Reserve Percentage) against assets of,
deposits with or for the account of, or credit extended by,
any Bank (or its Lending Office) or shall impose on any Bank
(or its Lending Office) or on the United States market for
certificates of deposit or the London interbank market any
other condition affecting its Fixed Rate Loans, its Notes or
its obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such
Bank (or its Lending Office) of making or maintaining
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<PAGE> 49
any Fixed Rate Loan, or to reduce the amount of any sum received or
receivable by such Bank (or its Lending Office) under this Agreement
or under its Notes with respect thereto, by an amount deemed by such
Bank to be material, then, within 15 days after demand by such Bank
(with a copy to the Administrative Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such
Bank for such increased cost or reduction.
(b) If any Bank shall have determined that the application or
adoption after the date hereof of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any
Bank (or its Lending Office) with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Bank's (or the holding
company thereof) capital as a consequence of its obligations hereunder
to a level below that which such Bank could have achieved but for such
adoption, change or compliance (taking into consideration such Bank's
policies with respect to capital adequacy in effect prior to such
application, adoption or change) by an amount deemed by such Bank to
be material, then from time to time, within 15 days after demand by
such Bank (with a copy to the Administrative Agent), the Borrower
shall pay to such Bank such additional amount or amounts as will
compensate such Bank for such reduction provided, however, that to the
extent any reduction in the rate of return on such Bank's capital
results both from its obligations hereunder and from developments in
its business or financial position not related to this Agreement, such
Bank shall, in determining the amount necessary to compensate it under
this paragraph, attempt in good faith to take account of the relative
contributions of such obligations hereunder and such other
developments or change in its financial position to such reduction.
(c) Each Bank will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring
after the date hereof, which will entitle such Bank to compensation
pursuant to this Section and will designate a different Lending Office
if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. If any Bank requests
compensation under this Section 8.03, the Borrower may, by notice to
such Bank and the Administrative Agent, require that: (x) such Bank
furnish to the Borrower a statement setting forth the basis for
requesting such compensation and the method for determining the amount
(45)
<PAGE> 50
thereof; or (y) the Loans of the type with respect to which such
compensation is requested be either prepaid or converted into Loans of
another type in accordance with Section 8.04. Notwithstanding the
foregoing, no Bank shall be entitled to request compensation under this
Section 8.03 with respect to any Money Market Loan if the regulatory
change giving rise to such request shall, or in good faith should, have
been taken into account in formulating the Money Market Quote pursuant
to which such Money Market Loan shall have been made. The statement of
any Bank claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such
amount, such Bank may use any reasonable averaging and attribution
methods.
SECTION 8.04. Reference Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make CD Rate Loans or Euro-Dollar
Loans, as the case may be, has been suspended pursuant to Section 8.02 or (ii)
any Bank has demanded compensation under Section 8.03(a) and the Borrower shall,
by at least five Euro-Dollar Business Days' prior notice to such Bank through
the Administrative Agent, have elected that the provisions of this Section shall
apply to such Bank, then, unless and until such Bank notifies the Borrower that
the circumstances giving rise to such suspension or demand for compensation no
longer apply:
(a) all Loans which would otherwise be made by such Bank as CD
Rate Loans, if the ability to make CD Loans is affected, or all Loans
which would otherwise be made by such Bank as Euro-Dollar Loans, if the
ability to make Euro-Dollar Loans is affected, shall be made instead as
Reference Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Loans of the other
Banks), and
(b) after each of its CD Rate Loans or its Euro-Dollar Loans,
as the case may be, has been repaid, all payments of principal which
would otherwise be applied to repay such Loans shall be applied to
repay its Reference Rate Loans instead.
SECTION 8.05. Change in Ownership. If, after the date hereof, any
person or group of persons (within the meaning of Section 13 or 14 of the
Securities Exchange Act of 1934, as amended) other than a Principal Shareholder,
acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated by
the Securities and Exchange Commission under said Act) of shares of capital
stock of the Borrower having 30% or more of the combined ordinary voting power
of all capital stock in the election of directors of the Borrower, then upon 90
days' written notice to the Borrower by the Required Banks, the Commitments
shall be reduced (i) on the 90th day after the giving of such notice, to an
amount equal to the aggregate principal amount of the outstanding Loans and (ii)
on the date of the maturity of each
(46)
<PAGE> 51
outstanding Loan on or after such 90th day, by an amount equal to the aggregate
principal amount of Loans maturing, so that on the last maturity date, all the
Commitments will have terminated in their entirety.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, facsimile,
telex, or similar writing) and shall be given to such party at its address or
facsimile or telex number set forth on the signature pages hereof or such other
address or facsimile or telex number as such party may hereafter specify in
writing for the purpose by notice to the Administrative Agent and the Borrower.
Each such notice, request or other communication shall be effective (i) if given
by facsimile or telex, when such facsimile or telex is transmitted to the
facsimile or telex number specified in this Section and the appropriate
answerback is received or (ii) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the
Administrative Agent under Article II or Article VIII shall not be effective
until received.
SECTION 9.02. No Waivers. No failure or delay by the Administrative
Agent, any Agent or any Bank in exercising any right, power or privilege
hereunder or under any Note shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes; Indemnification.
(a) The Borrower shall pay (i) all reasonable out-of-pocket
expenses of the Administrative Agent, including reasonable fees and
disbursements of Mayer, Brown & Platt, special counsel for the
Administrative Agent, in connection with the preparation of this
Agreement whether or not any Loans are made, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default
hereunder and (ii) if an Event of Default occurs, all reasonable
out-of-pocket expenses incurred by the Administrative Agent or any
Agent or any Bank, including reasonable fees and disbursements of
counsel (including, but only in the case of actual collection and other
enforcement proceedings, counsel who may be employees of the
Administrative Agent, any Agent or any Bank), in connection with such
Event of Default and collection and other enforcement proceedings
resulting therefrom. The Borrower shall indemnify each Bank against any
transfer taxes,
(47)
<PAGE> 52
documentary taxes, assessments or charges made by any governmental
authority by reason of the execution and delivery of this Agreement or
the Notes.
(b) The Borrower agrees to indemnify the Administrative Agent,
each Bank and each Agent and hold the Administrative Agent, each Bank
and each Agent harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for the Administrative Agent, any Bank or any
Agent, in connection with any investigative, administrative or judicial
proceeding, whether or not the Administrative Agent, such Bank or such
Agent shall be designated a party thereto but excluding income tax
liabilities) which may be imposed on, incurred by, or asserted against
the Administrative Agent such Bank or such Agent by any Person other
than Borrower, in any way relating to or arising out of (x) any
acquisition or proposed acquisition of equity securities for which the
proceeds of Loans hereunder may be used or (y) a transaction which is
(or may be) subject to the provisions of Section 8.05; provided that
none of the Administrative Agent, any Bank or any Agent shall have the
right to be indemnified hereunder for its own gross negligence or
willful misconduct or if any such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses
or disbursements arise out of (i) any breach by the Administrative
Agent, such Bank or such Agent of its obligations hereunder or (ii) any
false statement made by the Administrative Agent, such Bank or such
Agent in Section 9.07, in each case as determined by a court of
competent jurisdiction. The Administrative Agent, each Bank and each
Agent will promptly notify the Borrower of the commencement of any
proceeding involving it in respect of which indemnification may be
sought pursuant to this Section. The Borrower shall not be liable for
the cost of any settlement entered into without its consent (which
consent shall not be unreasonably withheld).
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest
due with respect to any Note held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of principal
and interest due with respect to any Note held by such other Bank, the Bank
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such other
adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Notes held by the Banks shall be
shared by the Banks pro rata; provided that nothing in this Section shall
impair the right of any Bank to exercise any right of
(48)
<PAGE> 53
set-off or counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of the Borrower other than its
indebtedness under the Notes. The Borrower agrees, to the fullest extent it
may effectively do so under applicable law, that any holder of a
participation in a Note, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other
rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.05. Amendments and Waivers. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower and the Required Banks
(and, if the rights or duties of the Administrative Agent are affected
thereby, by the Administrative Agent); provided that no such amendment or
waiver shall, unless signed by all the Banks, (i) increase or decrease the
Commitment of any Bank or subject any Bank to any additional obligation,
(ii) reduce the principal of or interest on any Loan or any fees hereunder,
(iii) postpone the date fixed for any payment of principal of or interest on
any Loan or any fees hereunder or for any reduction or termination of any
Commitment or (iv) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Banks,
which shall be required for the Banks or any of them to take any action
under this Section or any other provision of this Agreement.
SECTION 9.06. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not assign or
otherwise transfer any of its rights under this Agreement without the
prior written consent of all Banks and a Bank or Agent or their
respective permitted assignees or transferees may not assign or
otherwise transfer any interest in or under this Agreement without the
prior written consent of the Borrower or as otherwise expressly
provided for by this Agreement. Any attempted assignment or transfer in
violation of this Section 9.06 shall be void. Any request, authority or
consent of any Person, who at the time of making such request or giving
such authority or consent is the holder of any Note, shall be
conclusive and binding on any subsequent holder, transferee or assignee
of such Note or of any Note or Notes issued in exchange therefor,
regardless of whether any such Note shall have been marked to make
reference thereto.
(b) Any Bank may at any time grant to one or more banks or
other Persons (each a "Participant") participating interests in its
Commitment or any or all of its Loans. In the event of any such grant
by a Bank of a participating interest to a
(49)
<PAGE> 54
Participant, such Bank shall remain responsible for the performance of
its obligations hereunder, the Bank shall remain the holder of the Note
for all purposes, all amounts payable by the Borrower shall be
determined without regard to the sale of the participation, and the
Borrower and the Administrative Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Any agreement pursuant to which any
Bank may grant such a participating interest shall provide that such
Bank shall retain the sole right and responsibility to enforce the
obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any
provision of this Agreement; provided that such participation agreement
may provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement described in clause (i), (ii) or
(iii) of Section 9.05 without the consent of the Participant. The
Borrower agrees that each Participant shall be entitled to the benefits
of Article VIII with respect to its participating interest. An
assignment or other transfer which is not permitted by subsection (c)
below shall be given effect for purposes of this Agreement only to the
extent of a participating interest granted in accordance with this
subsection (b). Upon request by the Borrower or Administrative Agent, a
Bank shall provide the Borrower and the Administrative Agent with the
identities of any participants and the amounts of their participation.
(c) Any Bank may at any time assign to one or more banks,
other financial institutions or any affiliate of the Bank (each an
"Assignee") all, or a proportionate part of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall
assume such rights and obligations, pursuant to an instrument
substantially in the Form of Exhibit J executed by such Assignee and
such transferor Bank, with (and subject to) the prior subscribed
consent of the Borrower and the Administrative Agent, such consents not
to be unreasonably withheld; provided that Borrower's consent shall not
be required for an assignment or other transfer by any Bank to an
affiliate of such Bank or to a Federal Reserve Bank; and provided,
further, that no Bank shall assign less than a minimum of $10,000,000
(or other amounts approved by the Borrower) in principal amount of its
Loans or Notes or its Commitment. Upon execution and delivery of such
an instrument and payment by such Assignee to such transferor Bank of
an amount equal to the purchase price agreed between such transferor
Bank and such Assignee and payment of the fee, if applicable, set forth
below in this subsection (c), such Assignee shall be a Bank party to
this Agreement and shall have all the rights and obligations of a Bank
with a Commitment in the amount set forth in such instrument of
assumption, and the transferor Bank shall be released from its
obligations
(50)
<PAGE> 55
hereunder to a corresponding amount, and no further consent or action
by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the
Administrative Agent and the Borrower shall make appropriate
arrangements so that, if required, new Notes are issued to the
Assignee. The Administrative Agent and the Borrower may treat the
transferor Bank as the owner of its Note for all purposes under this
Agreement unless and until such Bank complies with all the requirements
of this Section. Prior to the issuance of any such new Note, the
Assignee to which such Note is issued shall pay to the Administrative
Agent a fee of $2,000.
(d) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section
8.03 than such Bank would have been entitled to receive with respect to
the rights transferred, unless such transfer is made (i) with the
Borrower's express prior written consent as provided in Section 9.06(c)
or other prior written consent or by reason of the provisions of
Section 8.02 or 8.03 requiring such Bank to designate a different
Lending Office under certain circumstances or (ii) at a time when the
circumstances giving rise to such greater payment did not exist unless
such transfer is made with the Borrower's consent as provided in
Section 9.06(c) or other prior written consent.
(e) The Borrower shall have the right to terminate this
Agreement with respect to any Bank; provided that, simultaneously with
such termination, a bank or banks (which may be one or more of the
Banks) mutually satisfactory to the Borrower and the Administrative
Agent purchases the Notes and assumes the Commitment of such Bank. The
obligations of the Borrower to any Bank pursuant to Section 9.03 shall
survive any such termination with respect to such Bank.
(f) Prior to any Bank, Assignee or Participant (each a
"Transferor") disclosing to any Participant or Assignee or prospective
Participant or Assignee (each, a "Transferee") of the Commitment or any
of the Loans any and all non-public information in such Transferor's
possession concerning the Borrower and any Subsidiary of the Borrower
which has been delivered to such Transferor by the Borrower or another
Transferor pursuant to this Agreement or which has been delivered to
such Transferor by the Borrower or another Transferor in connection
with such Transferor's credit evaluation of the Borrower prior to
entering into this Agreement or purchasing any of the Loans, such
Transferor shall obtain the subscribed consent of the Borrower and the
Administrative Agent (such consent not to be unreasonably withheld) and
shall comply with Section 9.07(b).
(51)
<PAGE> 56
SECTION 9.07. Confidentiality. The Banks shall hold confidential all
non-public information (which has been identified as such by the Borrower)
obtained pursuant to the requirements of this Agreement in accordance with safe
and sound banking practices and use such information only for the purpose of
evaluating and monitoring the creditworthiness of the Borrower and its
Subsidiaries in connection with the Bank's or Transferee's extensions of credit
pursuant to this Agreement; provided that the Banks may make disclosure to any
of their examiners, affiliates, outside auditors, counsel and other professional
advisors in connection with this Agreement or as reasonably required by any
transferee, participant or assignee or as required or requested by any
governmental agency or representative thereof or pursuant to legal process. In
addition:
(a) unless specifically prohibited by applicable law or court
order, each Bank shall notify the Borrower of any request by any
governmental agency or representative thereof (other than any such
request in connection with an examination of the financial condition of
such Bank by such governmental agency) for disclosure of any such
non-public information prior to disclosure of such information;
(b) prior to any disclosure of non-public information pursuant
to this Section 9.07, each Bank shall require any such transferee,
participant and assignee receiving a disclosure of non-public
information to agree in writing to be bound by this Section 9.07; and
(c) except as may be required by an order of a court of
competent jurisdiction and to the extent set forth therein, no Bank
shall be obligated or required to return any materials furnished by the
Borrower or any Subsidiary.
SECTION 9.08. Collateral. Each of the Banks represents to the
Administrative Agent and each of the other Banks that it in good faith is not
relying upon any "margin stock" (as defined in Regulation U) as collateral in
the extension or maintenance of the credit provided for in this Agreement.
SECTION 9.09. New York Law and Forum. THIS AGREEMENT AND EACH NOTE
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
THE ADMINISTRATIVE AGENT, THE AGENTS, THE BANKS OR THE BORROWER SHALL BE BROUGHT
AND MAINTAINED EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT
AGAINST ANY PROPERTY MAY BE BROUGHT AT THE ADMINISTRATIVE AGENT'S OPTION IN THE
JURISDICTION WHERE THE PROPERTY IS LOCATED. THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY
(52)
<PAGE> 57
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE
PURPOSE OF ANY LITIGATION AS SET FORTH ABOVE AND AGREES TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF
ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 9.10. Counterparts; Integration; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective when the Administrative Agent shall have
received counterparts hereof signed by all of the parties hereto.
(53)
<PAGE> 58
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
ASHLAND COAL, INC.
By /s/ Marc R. Solochek
--------------------
Title: Senior Vice President
By /s/ Roy F. Layman
-----------------
Title: Administrative Vice President
2205 Fifth Street Road
Huntington, West Virginia 25701
or
P.O. Box 6300
Huntington, West Virginia 65771-6300
Attention: Marc R. Solochek
Senior V.P. & C.F.O.
Telephone: (304) 526-3581
Facsimile: (304) 526-3580
Telex: (701) 931-1907
ANSWERBACK: ASHLANDCOAL
(54)
<PAGE> 59
Commitments
[31,000,000.00] NATIONAL WESTMINSTER BANK PLC,
individually, as Agent and as
Administrative Agent
By /s/ Ian M. Plester
-----------------------------
Title: Vice President
Domestic Lending Office
Credit Contact:
National Westminster Bank PLC-
New York Branch
175 Water Street
New York, New York 10038
Attention: Ian Plester
Telephone: (212) 602-4332
Telex: 233222 NWBK UR
Facsimile: (212) 602-4402
Money Market and Euro-Dollar Lending Office
National Westminster Bank PLC-
Nassau Branch
c/o New York Branch
175 Water Street
New York, New York 10038
Telex: 233222 NWBK UR
Facsimile: (212) 602-4118
Agent Services and Money
Market Quote Contact
Attention: Agency Division:
Douglas M. Burnett
Telephone: (212) 602-4250
Facsimile: (212) 602-4118
Payment Instructions
National Westminster Bank PLC-
New York Branch
Fed ABA: 026002749
A/C: 89046668
Ref: Ashland Coal
Attn: Douglas Burnett
(55)
<PAGE> 60
[31,000,000.00] BANK OF AMERICA ILLINOIS, individually
and as Agent
By /s/ Tom Pearson
----------------------------
Title: Vice President
Domestic and Euro-Dollar Lending Office
Attention: Fredric W. McClendon
231 South LaSalle Street-3Q
Chicago, Illinois 60697
Telephone: (312) 828-3419
Facsimile: (312) 987-5891 or 5896
Telex: 253460
ANSWERBACK: CONILL BK CGO B
Credit Contact:
Tom Pearson
Vice President
231 LaSalle Street
Telephone: (312) 828-3100
Facsimile: (312) 987-5614
Operations Contact:
Ida Rubens, AA
231 LaSalle Street
Telephone: (312) 828-5239
Facsimile: (312) 987-5614
Money Market Quote Contact
Attention: Michael E. Fafoutis
Telephone: (312) 828-2727
Facsimile: (312) 987-3753
Payment Instructions
Bank of America, Illinois
231 LaSalle Street-Chicago, IL
Fed ABA #071000039
A/C 6383440
Ashland Coal Inc.
Ref Ashland Coal Inc.
Attn: Loan Division 105 Bldg, 4th Floor
(56)
<PAGE> 61
[31,000,000.00] MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, individually
and as Agent
By /s/ James S. Finch
-------------------------
Title: Vice President
Domestic Lending Office and
Address for Notices
Morgan Guaranty Trust Company
of New York
Attention: Loan Department
60 Wall Street
New York, NY 10260-0060
Telephone: (302) 634-4221
Facsimile: (302) 634-4222
Administrative Contact:
Jim Finch, VP
60 Wall Street
New York, NY 10260-0060
Telephone: (212) 648-7141
Facsimile: (212) 648-5014
177615 Telex
MGT UT
Operations Contact:
Leslie Nilsen
Morgan Guaranty Trust Co.
J.P. Morgan Services, Inc.
500 Stanton-Christiana Road
Newark, DE 19713-9875
Telephone: (302) 634-4221
Facsimile: (302) 634-4222
Euro-Dollar Lending Office
Morgan Guaranty Trust Company of New York
c/o J. P. Morgan Services, Inc.
Loan Operations, 3rd Floor
Attention: Loan Department
500 Stanton Christiana Road
Newark, DE 19713-9875
Telex/Answerback: 177425/NBDELUT
Payment Instructions
Morgan Guaranty Trust Co.
New York, NY
Fed ABA 021000238 Loan Department
A/C 99999090 Attn: Corporate Processing
Ref: Ashland Coal
(57)
<PAGE> 62
[31,000,000.00] THE FIRST NATIONAL BANK OF CHICAGO
individually and as Agent
By /s/ Barbara Chapman
----------------------------
Title: Corporate Banking Officer
Domestic Lending Office
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Attention: Michele Alberico
Telephone: (312) 732-2651
Facsimile: (312) 732-3055
Telex: 433-0253
ANSWERBACK: FNBCUI
Credit Contact:
Amy Howatt, AVP
One First National Plaza
Chicago, IL 60670
Telephone: (312)732-4305
Facsimile: (312)732-3044
Operations Contact:
Bill Laird
One First National Plaza
Chicago, IL 60670
Telephone: (312)732-5635
Facsimile: (312)732-4840
Euro-Dollar Lending Office
Same as above
Payment Instructions
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Fed ABA 071000013
A/C 75217653
DES Incoming Clearance Acct.
Ref: Ashland Coal
Attn: Bill Laird
(58)
<PAGE> 63
[31,000,000.00] PNC BANK, NATIONAL ASSOCIATION
individually and as Agent
By /s/ Dale Stein
----------------------------
Title: Vice President
Domestic and Euro-Dollar Lending Office
Credit Contact:
Dale Stein, VP
Two PNC Plaza, Second Floor
620 Liberty Avenue
Pittsburgh, PA 15265
Telephone: (412) 762-7867
Facsimile: (412) 762-2784
Operations Contact:
Tina Lanuka
Two PNC Plaza, Second Floor
620 Liberty Avenue
Pittsburgh, PA 15265
Telephone: (412) 762-4826
Facsimile: (412) 762-2784
Euro-Dollar Lending Office
Same as above
Payment Instructions
PNC Bank, National Association
Pittsburgh, PA
Fed ABA 043000096
A/C 9724531
Ref: Ashland Coal, Inc.
Attn: Commercial Loans Dept.
(59)
<PAGE> 64
[26,000,000.00] THE BANK OF NOVA SCOTIA
By /s/ J. Alan Edwards
--------------------------
Title: Authorized Signatory
Domestic Lending Office
Credit Contact:
J. Alan Edwards/Meredith Wedeking
The Bank of Nova Scotia
One Liberty Plaza - 26th Floor
New York, NY 10006
Telephone: (212) 225-5015/5017
Facsimile: (212) 225-5090
Operations Contact:
Tilsa Cora
The Bank of Nova Scotia
One Liberty Plaza - 26th Floor
New York, NY 10006
Telephone: (212) 225-5044
Facsimile: (212) 225-5271
Euro-Dollar Lending Office
Same as above
Payment Instructions
The Bank of Nova Scotia
New York, NY
Fed ABA 026002532
Ref: Ashland Coal
Attn: Loan Accounting
(60)
<PAGE> 65
[26,000,000.00] FIRST UNION NATIONAL BANK OF VIRGINIA
By /s/ Lawrence Levy
-----------------------------
Title: Vice President
Domestic Lending Office
Credit Contact:
Lawrence Levy, VP
213 S. Jefferson Street
Roanoke, VA 24011
Telephone: (703) 563-7609
Facsimile: (703) 563-6320
Operations Contact:
Marlene Belcher, AVP
213 S. Jefferson Street
Roanoke, VA 24011
Telephone: (703) 563-6086
Facsimile: (703) 563-6302
Euro-Dollar Lending Office
Same as above
Payment Instructions
First Union National Bank of Virginia
213 S. Jefferson Street
Roanoke, VA 24011
Fed ABA 051400549
A/C 5001007285783
Loan Apex
Ref: Ashland
Attn: Marlene Belcher 580-6086
(61)
<PAGE> 66
[26,000,000.00] THE INDUSTRIAL BANK OF JAPAN, LIMITED,
NEW YORK BRANCH
By /s/ Robert W. Ramage, Jr.
----------------------------
Title: Senior Vice President
Domestic and Euro-Dollar Lending Office
Credit Contact:
John Dippo/Neale Broadhead
245 Park Avenue, 23rd Floor
New York, NY 10167
Telephone: (212) 309-6689/6516
Facsimile: (212) 557-3581
175599 Telex
IBJBRUT
Operations Contact:
Ms. Angus Aberin
245 Park Avenue, 23rd Floor
New York, NY 10167
Telephone: (212) 309-6793
Facsimile: (212) 949-0134
175599 Telex
IBJBRUT
Euro-Dollar Lending Office
Same as above
Payment Instructions
Industrial Bank of Japan, Ltd.
New York, NY
Fed ABA 026008345
Ref: Ashland Coal, Inc.
Attn: Credit Administration
(62)
<PAGE> 67
[26,000,000.00] MELLON BANK, N.A.
By /s/ Andrew L. Mellgard
-------------------------
Title: Assistant Vice President
Domestic and Euro-Dollar Lending Office
Credit Contact:
Attention: Andrew L. Mellgard
Assistant Vice President
Mining Section
One Mellon Bank Center, 151-4401
Pittsburgh, PA 15258-0001
Telephone: (412) 236-2781
Facsimile: (412) 234-8888
[Telex: 199 103 or 812 367]
Operations Contact:
Attention: Sandra Castelli
Three Mellon Bank Center, 153-2302
Pittsburgh, PA 15259
Telephone: (412) 234-1869
Facsimile: (412) 236-2027 or 2028
Telex: 199 103 or 812 367
ANSWERBACK: MEL BNK
Euro-Dollar Lending Office
Same as above
Money Market Quote Contact
Mellon Bank
Two Mellon Bank Center
[OMBC - 400]
Loan Administration
Pittsburgh, PA 15258
Attention: Marilyn Wagner
Telephone: (412) 234-1693
Facsimile: (412) 234-7834
Telex: 199 103 or 812 367
Payment Instructions
Mellon Bank, N.A.
Pittsburgh, PA
Account No.: 990873800
Account Name: Loan Administration
Ref: Ashland Coal
ABA No.: 043000261
(63)
<PAGE> 68
[26,000,000.00] THE MITSUBISHI BANK, LIMITED,
CHICAGO BRANCH
By /s/ Noboru Kobayashi
--------------------
Title: Joint General Manager
Domestic Lending Office
Credit Contact:
Robert Kotler, VP
115 S. LaSalle Street
Suite 2100
Chicago, IL 60603
Telephone: (312) 269-0447
Facsimile: (312) 263-2555
Operations Contact:
Janice Hennig, AVP
115 S. LaSalle Street
Suite 2100
Chicago, IL 60603
Telephone: (312) 269-0473
Facsimile: (312) 263-2555
Euro-Dollar Lending Office
Same as above
Payment Instructions
The Mitsubishi Bank Ltd Chicago Branch
115 S. LaSalle Street
Suite 2100
Chicago, IL 60603
Fed ABA 071002341
Attn: Loan Administration
(64)
<PAGE> 69
[26,000,000.00] SHAWMUT BANK, N.A.
By /s/ Kerry Day
-------------------------------
Title: Assistant Vice President
Domestic Lending Office
Credit Contact:
Kerry Day, AVP
One Federal Street Of-0324
Boston, MA 02211
Telephone: (617) 292-3064
Facsimile: (617) 292-2566
Operations Contact:
Joe DeGiacomo
One Federal Street Of-0324
Boston, MA 02211
Telephone: (617) 292-2250
Facsimile: (617) 292-2566
Euro-Dollar Lending Office
Same as above
Payment Instructions
Shawmut Bank, N.A.
Hartford, CT
Fed ABA 011900445
Ref: Ashland Coal
Attn: Comm. Loan Ops. Spec. Assets
(65)
<PAGE> 70
[21,000,000.00] ABN AMRO BANK, N.V.
By /s/ Craig Gviane
-------------------------------
Title: Assistant Vice President
Domestic Lending Office
Credit Contact:
Jim Janovsky, VP
One PPG P1, Suite 2950
Pittsburgh, PA 15222-5400
Telephone: (412) 566-2269
Facsimile: (412) 566-2266
Operations Contact:
Monica Meis/Michelle Guza
One PPG P1, Suite 2950
Pittsburgh, PA 15222-5400
Telephone: (412) 566-0979/2267
Facsimile: (412) 471-2326
Euro-Dollar Lending Office
Same as above
Payment Instructions
ABN AMRO Bank, N.V.
New York Branch
Fed ABA #026009580
A/C 651001063441
ABN AMRO PITTSBURGH
Ref: Ashland Coal
Attn: M. Meis/ M. Guza
(66)
<PAGE> 71
[21,000,000.00] BANK OF MONTREAL
By /s/ Brian Savage
---------------------
Title: Director
Domestic Lending Office
Credit Contact:
Bank of Montreal
Brian Savage
Director
430 Park Avenue, 14th Floor
New York, NY 10022
Telephone: (212) 605-1420
Facsimile: (212) 605-1618
Operations Contact:
Bank of Montreal
Dolores Rivera
430 Park Avenue, 16th Floor
New York, NY 10022
Telephone: (212) 605-1471
Facsimile: (212) 605-1618
Euro-Dollar Lending Office
Same as above
Payment Instructions
Harris Trust & Savings Bank
115 LaSalle Street- Chicago, IL
Fed ABA 071000288
A/C 1248566
Bank of Montreal
Ref: Ashland Coal
(67)
<PAGE> 72
[21,000,000.00] CREDIT LYONNAIS, NEW YORK BRANCH
By /s/ Mark Campellone
------------------------------
Title: Vice President
CREDIT LYONNAIS, GRAND CAYMAN BRANCH
By /s/ Mark Campellone
---------------------------------
Title: Vice President
Domestic Lending Office
Credit Contact:
Alexander Averbukh
1301 Avenue of the Americas
New York, NY 10019
Telephone: (212) 261-7335
Facsimile: (212) 459-3179
Operations Contact:
Kevin McCarthy
1301 Avenue of the Americas
New York, NY 10019
Telephone: (212) 261-7334
Facsimile: (212) 459-3179
Euro-Dollar Lending Office
Same as above
Payment Instructions
Credit Lyonnais NY Branch
Fed ABA 026008073
A/C 0100882000100
Credit Lyonnais Grand Cayman
Ref: Ashland Coal, Loan Servicing
(68)
<PAGE> 73
[21,000,000.00] DRESDNER BANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES
By /s/ Deborah Slusarczyk
----------------------
Title: Vice President
By /s/ Robert Gulla
----------------------
Title: Vice President
Domestic Lending Office: New York Branch
Credit Contact:
Deborah Slusarczyk, VP
75 Wall Street
New York, NY 10005
Telephone: (212) 574-0244
Facsimile: (212) 574-0130
Operations Contact:
Howard Ramlal
75 Wall Street
New York, NY 10005
Telephone: (212) 574-0279
Facsimile: (212) 574-0130
Euro-Dollar Lending Office: New York
and/or Grand Cayman Island Branches
Payment Instructions
Chase Manhattan Bank
New York, NY
Fed ABA 021000021
A/C 9201059079
Dresdner Bank, NYB
For further credit to: A/C #9-95010200
Ref: Ashland Coal
(69)
<PAGE> 74
[15,000,000.00] BARCLAYS BANK PLC
By /s/ Dennis Ruggles
---------------------------------
Title: Associate Director
Domestic and Euro-Dollar Lending Office
Attention: Adele Savoretti
CSU, 222 Broadway, 12th Floor
Telephone: (212) 412-4039
Facsimile: (212) 412-5002
Telex: 12-6946
Credit Contact:
Heather Harrison
222 Broadway
New York, NY 10038
Telephone: (212) 412-2981
Facsimile: (212) 412-7589
Operations Contact:
Adele Savoretti
222 Broadway
New York, NY 10038
Telephone: (212) 412-4039
Facsimile: (212) 412-5002
Euro-Dollar Lending Office
Same as above
Payment Instructions
Fed ABA # 026002574
Barclays Bank PLC
For Credit to the Clad Control A/C
# 050-019-104
Ref: Ashland Coal Inc.
(70)
<PAGE> 75
[15,000,000.00] THE MITSUBISHI TRUST AND BANKING CORPORATION
By /s/ M. Yamagashi
------------------------
Title: Chief Manager
Domestic Lending Office
Credit Contact:
Jordan Greene, AVP
440 S. LaSalle, Suite 3100
Chicago, IL 60605
Telephone: (312) 663-6005
Facsimile: (312) 663-0863
Operations Contact:
David Miller
440 S. LaSalle, Suite 3100
Chicago, IL 60605
Telephone: (312) 408-6023
Facsimile: (312) 663-0863
Euro-Dollar Lending Office
Same as above
Payment Instructions
Harris Bank International
New York, NY 10022
Fed ABA 776
A/C 99026677
MTBC CHGO
Ref: Deere
(71)
<PAGE> 76
[15,000,000.00] THE SANWA BANK, LIMITED,
ATLANTA AGENCY
By /s/ Peter J. Pawlak
--------------------------
Title: Peter J. Pawlak
Vice President and Senior
Manager
Domestic Lending Office
Credit Contact:
Peter J. Pawlak
Vice President and Senior Manager
133 Peachtree Street, Suite 4750
Atlanta, GA 30303
Telephone: (404) 586-6888
Facsimile: (404) 589-1629
Operations Contact:
Kristie Hartrampf
Assistant Vice President
133 Peachtree Street, Suite 4750
Atlanta, GA 30303
Telephone: (404) 586-6839
Facsimile: (404) 589-1629
Euro-Dollar Lending Office
Same as above
Payment Instructions
Sanwa Bank - NY, NY
Fed ABA 026009823
A/C 999669
Sanwa Atlanta
Ref: Ashland Coal
(72)
<PAGE> 77
[15,000,000.00] SOCIETY NATIONAL BANK
By /s/ Wayne K. Guessford
----------------------
Title: Vice President
Domestic Lending Office
Credit Contact:
Society National Bank
John Scuterud
525 Vine Street, 6th Floor
Cincinnati, OH 45202
Telephone: (513) 762-8210
Facsimile: (513) 762-8222
Operations Contact:
Society National Bank
John Scuterud
525 Vine Street, 6th Floor
Cincinnati, OH 45202
Telephone: (513) 762-8210
Facsimile: (513) 762-8222
Euro-Dollar Lending Office
Same as above
Payment Instructions
Society National Bank
Cleveland, OH 44114-1306
Fed ABA #041001039
A/C #(to be determined)
Ref: Ashland Coal
(73)
<PAGE> 78
[15,000,000.00] THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By /s/ Yoshinori Kawamura
------------------------------
Title: Joint General Manager
Domestic Lending Office
Credit Contact:
Harry Murakami
The Sumitomo Bank, Limited
New York Branch
277 Park Avenue
New York, NY 10172
Telephone: (212) 224-4130
Facsimile: (212) 224-5188
Operations Contact:
Jessica Farfan
The Sumitomo Bank, Limited
New York Branch
277 Park Avenue
New York, NY 10172
Telephone: (212) 224-4132
Facsimile: (212) 224-5197
Euro-Dollar Lending Office
Same as above
Payment Instructions
Morgan Guaranty Trust Company
Account No. 631-28256
ABA No. 0210-00238
Atten: For Further funds to Sumitomo
Bank, Ltd., NY Branch
(74)
<PAGE> 79
[15,000,000.00] SWISS BANK CORPORATION, NEW YORK BRANCH
By /s/ Nancy A. Hanrahan
--------------------------
Title: Director
By /s/ H. Clark Worthley
--------------------------
Title: Associate Director
SWISS BANK CORPORATION, CAYMAN ISLAND BRANCH
By /s/ Nancy A. Hanrahan
--------------------------
Title: Director
By /s/ H. Clark Worthley
---------------------------
Title: Associate Director
Domestic Lending Office
Credit Contact:
Nancy Hanrahan, Director
222 Broadway, 222-04-E
New York, NY 10038
Telephone: (212) 574-4102
Telephone: (212) 574-4395
Operations Contact:
Valerie Williams
222 Broadway, 222-02-E
New York, NY 10038
Telephone: (212) 574-3146
Facsimile: (212) 574-4176
Euro-Dollar Lending Office
Attention: Vallerie Williams
Swiss Bank Corporation
Cayman Island Branch
c/o 222 Broadway, 222-02-E
New York, NY 10038
Telephone: (212) 574-3146
Facsimile: (212) 574-4176
Payment Instructions
Swiss Bank Corporation
New York Branch
Fed ABA 026007993
Attn: Valerie Williams
Ref: Ashland Coal
(75)
<PAGE> 80
[15,000,000.00] YASUDA TRUST AND BANKING CO. LTD.
By /s/ Neil T. Chau
----------------------------
Title: First Vice President
Domestic Lending Office
Credit Contact:
Sanjay Sinha, VP
285 Peachtree Center Ave.
N.E. Suite 2104
Atlanta, GA 30303
Telephone: (404) 584-8230
Facsimile: (404) 584-7816
Operations Contact:
Winnie Tang/Wai Wang
666 Fifth Avenue, Suite 801
New York, NY 10103
Telephone: (212) 373-5760
Facsimile: (212) 373-5797
Euro-Dollar Lending Office
Same as above
Payment Instructions
Chemical Bank
55 Water Street, NY NY
Fed ABA 021000128
A/C 400054116
Yasuda Trust and Banking Co. Ltd.
Ref: Ashland
Attn: Winnie Tang
$500,000,000 Total Commitments
(76)
<PAGE> 81
EXHIBIT A
REFERENCE RATE NOTE
New York, New York
$ , 1994
---------------------
For value received, ASHLAND COAL, INC., a Delaware corporation (the
"Borrower"), promises to pay to the order of __________________ (the "Bank"),
for the account of its Domestic Lending Office, the lesser of the principal
amount of __________ dollars ($_________) or the aggregate unpaid principal
amount of Reference Rate Loans made by the Bank to the Borrower pursuant to the
Credit Agreement referred to below on the last day of the Interest Period
relating to such Loan. The Borrower promises to pay interest on the unpaid
principal amount of each such Reference Rate Loan on the dates and at the rate
or rates provided for in the Credit Agreement. All such payments of principal
and interest shall be made in lawful money of the United States in Federal or
other immediately available funds at the office of National Westminster Bank
PLC, 175 Water Street, New York, New York, 10038.
All Reference Rate Loans made by the Bank, the respective maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, prior to any transfer hereof, endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This note is one of the Reference Rate Notes referred to in the Amended
and Restated Credit Agreement dated as of November 15, 1994 among the Borrower,
the banks listed on the signature pages thereof, National Westminster Bank PLC,
as Coordinating and Administrative Agent, and Bank of America Illinois, Morgan
Guaranty Trust Company of New York, National Westminster Bank PLC, The First
National Bank of Chicago and PNC Bank, National Association, as Agents (as the
same may be amended from time to time, the "Credit Agreement"). Terms defined in
the Credit Agreement are used herein with the same meanings. Reference is made
to the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
ASHLAND COAL, INC.
By
---------------------------------
Title:
By
---------------------------------
Title:
(77)
<PAGE> 82
Reference Rate Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount Amount of
of Principal Maturity Notation
Date Loan Repaid Date Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(78)
<PAGE> 83
Exhibit B
CD RATE NOTE
New York, New York
$ , 1994
---------------------
For value received, ASHLAND COAL, INC., a Delaware corporation (the
"Borrower"), promises to pay to the order of __________________ (the "Bank"),
for the account of its Domestic Lending Office, the lesser of the principal
amount of_____________ dollars ($___________) or the aggregate unpaid principal
amount of CD Rate Loans made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the last day of the Interest Period relating to
such Loan. The Borrower promises to pay interest on the unpaid principal amount
of each such CD Rate Loan on the dates and at the rate or rates provided for in
the Credit Agreement. All such payments of principal and interest shall be made
in lawful money of the United States in Federal or other immediately available
funds at the office of National Westminster Bank PLC, 175 Water Street, New
York, New York, 10038.
All CD Rate Loans made by the Bank, the respective maturities thereof
and all repayments of the principal thereof shall be recorded by the Bank and,
prior to any transfer hereof, endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This note is one of the CD Rate Notes referred to in the Amended and
Restated Credit Agreement dated as of November 15, 1994 among the Borrower, the
banks listed on the signature pages thereof, National Westminster Bank PLC, as
Coordinating and Administrative Agent, and Bank of America Illinois, Morgan
Guaranty Trust Company of New York, National Westminster Bank PLC, The First
National Bank of Chicago and PNC Bank, National Association, as Agents (as the
same may be amended from time to time, the "Credit Agreement"). Terms defined in
the Credit Agreement are used herein with the same meanings. Reference is made
to the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
ASHLAND COAL, INC.
By
----------------------------------
Title:
By
----------------------------------
Title:
<PAGE> 84
CD Rate Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- -------------------------------------------------------------------------------
Amount Amount of
of Principal Maturity Notation
Date Loan Repaid Date Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 85
Exhibit C
EURO-DOLLAR NOTE
New York, New York
$ , 1994
-----------------
For value received, ASHLAND COAL, INC., a Delaware corporation (the
"Borrower"), promises to pay to the order of ____________________________ (the
"Bank"), for the account of its Euro-Dollar Lending Office, the lesser of the
principal amount of ________________ dollars ($___________) or the aggregate
unpaid principal amount of Euro-Dollar Loans made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below on the last day of the
Interest Period relating to such Loan. The Borrower promises to pay interest on
the unpaid principal amount of each such Euro-Dollar Loan on the dates and at
the rate or rates provided for in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of National
Westminster Bank PLC, 175 Water Street, New York, New York, 10038.
All Euro-Dollar Loans made by the Bank, the respective maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, prior to any transfer hereof, endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This note is one of the Euro-Dollar Notes referred to in the Amended
and Restated Credit Agreement dated as of November 15, 1994 among the Borrower,
the banks listed on the signature pages thereof, National Westminster Bank PLC,
as Coordinating and Administrative Agent, and Bank of America Illinois, Morgan
Guaranty Trust Company of New York, National Westminster Bank PLC, The First
National Bank of Chicago and PNC Bank, National Association, as Agents (as the
same may be amended from time to time, the "Credit Agreement"). Terms defined in
the Credit Agreement are used herein with the same meanings. Reference is made
to the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
ASHLAND COAL, INC.
By
---------------------------------
Title:
By
---------------------------------
Title:
<PAGE> 86
Euro-Dollar Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- -------------------------------------------------------------------------------
Amount Amount of
of Principal Maturity Notation
Date Loan Repaid Date Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 87
Exhibit D
MONEY MARKET NOTE
New York, New York
$ , 1994
-------------------
For value received, ASHLAND COAL, INC., a Delaware corporation (the
"Borrower"), promises to pay to the order of ____________________________ (the
"Bank"), for the account of its Money Market Lending Office, the aggregate
unpaid principal amount of Money Market Loans made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below on the last day of the
Interest Period relating to such Loan. The Borrower promises to pay interest on
the unpaid principal amount of each such Money Market Loan on the dates and at
the rate or rates provided for in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of National
Westminster Bank PLC, 175 Water Street, New York, New York, 10038.
All Money Market Loans made by the Bank, the respective maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, prior to any transfer hereof, endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This note is one of the Money Market Notes referred to in the Amended
and Restated Credit Agreement dated as of November 15, 1994 among the Borrower,
the banks listed on the signature pages thereof, National Westminster Bank PLC,
as Coordinating and Administrative Agent, and Bank of America Illinois, Morgan
Guaranty Trust Company of New York, National Westminster Bank PLC, The First
National Bank of Chicago and PNC Bank, NATIONAL ASSOCIATION, as Agents (as the
same may be amended from time to time, the "Credit Agreement"). Terms defined in
the Credit Agreement are used herein with the same meanings. Reference is made
to the Credit Agreement for provisions for the prepayment hereof and the
acceleration of the maturity hereof.
ASHLAND COAL, INC.
By
-----------------------------------
Title:
By
-----------------------------------
Title
<PAGE> 88
Money Market Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- -------------------------------------------------------------------------------
Amount Amount of
of Principal Maturity Notation
Date Loan Repaid Date Made By
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 89
Exhibit E
Form of Money Market Quote Request
[Date]
To: National Westminster Bank PLC (the "Administrative Agent")
From: Ashland Coal, Inc.
Re: Amended and Restated Credit Agreement, dated as of November 15,
1994 (the "Credit Agreement"), among the Borrower, the Banks
listed in the signature pages thereof, the Administrative Agent
and the Agents.
We hereby give notice pursuant to Section 2.03 of the Credit
Agreement that we request Money Market Quotes at either an absolute rate or a
margin over London Interbank Offered Rate for the following proposed Money
Market Borrowing(s):
Date of Borrowing:
----------------
Principal Interest
Amount(1) Period(2) Rate(3)
- --------- --------- -------
$
Such Money Market Quotes should offer a Money Market
Rate.
Terms used herein have the meanings assigned to them in the Credit
Agreement.
ASHLAND COAL, INC.
By
--------------------------
Title:
- ------------------------
(1) Aggregate amount must be a minimum of $10,000,000 or an integral
multiple of $1,000,000 over such amount.
(2) Not less than 7 days nor more than 183 days, subject to the
provisions of the definition of Interest Period.
(3) Specify either absolute rate or a margin over London Interbank
Offered Rate for any given Interest Period.
<PAGE> 90
Exhibit F
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Ashland Coal, Inc. (the
"Borrower")
Pursuant to Section 2.03 of the Amended and Restated Credit
Agreement dated as of November 15, 1994 among the Borrower, the Banks parties
thereto, National Westminster Bank PLC, as Coordinating and Administrative
Agent, and Bank of America Illinois, Morgan Guaranty Trust Company of New York,
National Westminster Bank PLC, The First National Bank of Chicago and PNC Bank,
National Association, as Agents, we are pleased on behalf of the Borrower to
invite you to submit Money Market Quotes to the Borrower for the following
proposed Money Market Borrowing(s):
Date of Borrowing:
------------------------
Principal Amount(1) Interest Period(2)
- ------------------- ------------------
$
Such Money Market Quotes should offer a Money Market Rate.
Please respond to this invitation by replying to National
Westminster Bank PLC, as Administrative Agent, 175 Water Street, New York,
New York, 10038, Attention: ______________________________ by no later than
10:00 A.M. (New York) on [date].
NATIONAL WESTMINSTER BANK PLC
as Administrative Agent
By
---------------------------
Authorized Officer
- -------------------------------
(1) Aggregate amount of each quote must be a minimum of $5,000,000 or an
integral multiple of $1,000,000 over such amount.
(2) Not less than 7 days nor more than 183 days, subject to the provisions
of the definition of Interest Period.
<PAGE> 91
Exhibit G
Form of Money Market Quote
National Westminster Bank PLC, as Administrative Agent,
175 Water Street
New York, New York, 10038
Attention:
Re: Money Market Quote to Ashland Coal, Inc. (the "Borrower")
In response to the invitation of National Westminster Bank PLC, as
Coordinating and Administrative Agent (the "Administrative Agent"), on behalf of
the Borrower dated ________________, _____________ we hereby make the following
Money Market Quote on the following terms:
1. Quoting Bank: ___________________________________
2. Person to contact at Quoting Bank:
____________________________
3. Date of Borrowing: _________________________(1)
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount(2) Period(3) [Rate](4)
--------- --------- ------------
$
$
- -----------------------------------------
(1) As specified in the related Invitation.
(2) Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the
individual offers exceeds the amount the Bank is willing to lend.
Bids must be made for $5,000,000 or an integral multiple of $1,000,000
over that amount.
(3) Not less than 7 days nor more than 183 days, as specified in the
related Invitation. No more than three bids are permitted for each
Interest Period.
(4) Specify Rate of interest per annum (rounded to the nearest 1/100th of
1%).
<PAGE> 92
[Provided, that the aggregate principal amount of Money Market Loans
for which the above offers may be accepted shall not exceed $____________.](5)
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Amended and
Restated Credit Agreement dated as of November 15, 1994 among the Borrower, the
Banks listed on the signature pages thereof, National Westminster Bank PLC, as
Coordinating and Administrative Agent and Bank of America Illinois, Morgan
Guaranty Trust Company of New York, National Westminster Bank PLC, The First
National Bank of Chicago and PNC Bank, National Association, as Agents,
irrevocably obligates us to make the Money Market Loan(s) for which any offer(s)
are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated: By:
-------------------- ------------------------
Authorized Officer
- --------------------------
(5) See footnote 2 above.
2
<PAGE> 93
EXHIBIT H(1)
OPINION OF
CHIEF LEGAL OFFICER OF THE BORROWER
[TO BE DATED THE DATE OF THE FIRST BORROWING]
To the Banks, the Agents and
the Administrative Agent party to the
Credit Agreement Referred to Below
c/o National Westminster Bank PLC
175 Water Street
New York, New York 10038
Ladies and Gentlemen:
I am the Administrative Vice President - Law and Human Resources of
Ashland Coal, Inc., a Delaware corporation (the "Borrower") and party to the
Amended and Restated Credit Agreement (the "Credit Agreement") dated as of
November 15, 1994 among the Borrower, the banks listed on the signature pages
thereof, National Westminster Bank PLC, as Coordinating and Administrative
Agent, and Bank of America Illinois, Morgan Guaranty Trust Company of New York,
National Westminster Bank PLC, The First National Bank of Chicago and PNC Bank,
National Association, as Agents. Terms defined in the Credit Agreement are used
herein as therein defined.
For purposes of the opinions expressed below, I have assumed (i) the
authenticity of all documents submitted to me as originals, (ii) the conformity
to the originals of all documents submitted as certified or photostatic copies
and the authenticity of the originals, (iii) the legal capacity of natural
persons, and (iv) the due authorization, execution and delivery of all documents
by all parties and the validity and binding effect thereof (other than the
authorization, execution and delivery of documents by the Borrower).
In connection with this opinion, I have examined originals or copies,
certified or otherwise identified to my satisfaction, of such documents,
corporate records, certificates of public officials and other instruments and
have conducted such other investigations of fact and law as I have deemed
necessary or advisable for purposes of this opinion and, as to certain factual
matters, I have relied upon certificates of Delaware authorities.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware, and has all corporate powers
and all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
<PAGE> 94
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or result in the creation or imposition of any Lien on
any asset of the Borrower or any of its Subsidiaries.
3. Except as has been disclosed to the Banks in writing, there is no
action, suit or proceeding pending against, or to the best of my knowledge
threatened against or affecting, the Borrower or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official, the
probable outcome of which could materially adversely affect the business,
consolidated financial position, properties or operations of the Borrower and
its Subsidiaries taken as a whole or which in any manner draws into question the
validity of the Credit Agreement or the Notes.
4. Except as has been disclosed to the Banks in writing, neither the
Borrower nor any Subsidiary is in violation of any environmental law or
regulation of any Federal, state or local governmental authority or has incurred
or reasonably expects to incur any liability to reimburse or to pay any penalty
to any Federal, state or local governmental authority for the costs of any
environmental clean-up, which liability, if incurred, would have a material
adverse effect on the financial condition or results of operations of the
Borrower and its Subsidiaries taken as a whole.
I am a member of the Bars of the State of West Virginia and the
Commonwealth of Kentucky only, and I do not purport to be an expert in the laws
of the State of Delaware and I have made no independent investigation of
Delaware law generally. In rendering the opinions given above, my opinion has
been limited to such matters as involve the States of West Virginia and
Kentucky, the Federal laws of the United States, and the General Corporation Law
of the State of Delaware.
The opinions rendered above are as of the date of this opinion letter
and I do not undertake to advise you of any changes in the opinions expressed
herein after the date hereof.
Very truly yours,
Roy F. Layman
4
<PAGE> 95
EXHIBIT H(2)
OPINION OF
SPECIAL COUNSEL FOR THE BORROWER
[TO BE DATED THE DATE OF THE FIRST BORROWING]
To the Banks, the Agents and
the Administrative Agent party to the
Credit Agreement Referred to Below
c/o National Westminster Bank PLC
175 Water Street
New York, New York 10038
Ladies and Gentlemen:
Assuming the Amended and Restated Credit Agreement (the "Credit
Agreement") has been duly authorized, executed and delivered by each Bank and
the Coordinating and Administrative Agent, the Agreement constitutes a legal,
valid and binding obligation of the Borrower, enforceable in accordance with its
terms, subject to applicable bankruptcy, reorganization, fraudulent conveyance,
insolvency, moratorium and other similar laws from time to time in effect and
except that (A) rights of acceleration and the availability of equitable
remedies, including the remedy of specific performance may be limited by general
principles of equity (including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing) regardless of whether
enforceability is considered in a proceeding in equity or at law and (B) we
express no opinion as to the last sentence of Section 9.04 of the Agreement to
the extent it provides for a right of set-off in respect of participating
interests purchased pursuant to Section 9.06 of the Credit Agreement and (C) we
express no opinion as to the effect of the law of any jurisdiction (other than
the State of New York), wherein the Borrower or any Bank, including any
<PAGE> 96
lending office thereof, may be located which limits rates of interest
which may be charged or collected by such Bank. Insofar as any provision
contained in the Credit Agreement provides for indemnification, the
enforceability thereof may be limited by public policy considerations.
We are admitted to practice only in the State of New York and express no
opinion as to matters governed by any laws other than the laws of the State of
New York, the Federal laws of the United States of America and the General
Corporation Law of the State of Delaware.
Yours very truly,
6
<PAGE> 97
Exhibit I
OPINION OF
MAYER, BROWN & PLATT, SPECIAL COUNSEL
FOR THE ADMINISTRATIVE AGENT
[Dated as provided in
Section 3.02 of the
Amended and Restated
Credit Agreement]
To the Banks, the Agents and
the Administrative Agent party to the
Credit Agreement Referred to Below
National Westminster Bank PLC
175 Water Street
New York, New York 10038
Ladies and Gentlemen:
This opinion is being delivered to you pursuant to Section 3.02(c), of
the Amended and Restated Credit Agreement (the "Credit Agreement") dated as of
November 15, 1994 among Ashland Coal, Inc., a Delaware corporation, the banks
listed on the signature pages thereof, National Westminster Bank PLC, as
Coordinating and Administrative Agent, Bank of America Illinois, Morgan Guaranty
Trust Company of New York, National Westminster Bank PLC, The First National
Bank of Chicago and PNC Bank, National Association, as Agents, and have acted as
special counsel for the Administrative Agent for the purpose of rendering this
opinion pursuant to Section 3.02(c) of the Credit Agreement. Terms defined in
the Credit Agreement are used herein as therein defined.
We have acted as special counsel to Administrative Agent in connection
with the preparation, execution, and delivery of the Credit Agreement and have
participated in the closing held on the date hereof.
In so acting, we have examined counterparts of the Credit Agreement
executed on behalf of the Company, and the following documents, each of which is
dated, or dated as of, the date hereof:
a. The Notes, executed on behalf of the Company and payable to the
order of the respective Lenders,
b. The Opinions of____________________ General Counsel and
<PAGE> 98
____________________ Special Counsel of the Borrower delivered pursuant to
Section 3.02 of the Credit Agreement.
In such examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, the conformity
to the originals of all such documents submitted to us as copies, and the due
authority of the persons executing or delivering the same. We have made no
independent examination of the records of the Borrower or any of its
Subsidiaries, any Bank, any Agent, or the Administrative Agent. As to matters of
law covered by the opinion of counsel, referred to in Paragraph (d), we have
relied solely, without independent verification or investigation as to any of
the matters referred to therein, on such opinions.
Upon the basis of the foregoing and subject to the qualifications set
forth below, we are of the opinion that, under the laws of the State of New
York:
c. the Credit Agreement constitutes the valid, and binding obligation
of the Borrower, enforceable against the Borrower in accordance with its terms;
and
d. the documents referred to in Paragraphs (a) through (c) above are
substantially responsive to the requirements of the Credit Agreement.
Our opinion is subject to the following qualifications:
e. We express no opinion as to (i) the Borrower's agreement in the
Credit Agreement to pay interest on overdue interest, (ii) the effect of the law
of any jurisdiction other than the State of New York wherein any Bank or any
Bank's Lending Office for its Loans or any successor Lending Office of any Bank
may be located, or wherein enforcement of the Credit Agreement or the Notes may
be sought which limits the rates of interest legally chargeable or collectible,
or (iii) The Borrower's agreement in the Credit Agreement and other documents to
indemnify you against costs or expenses or liability arising out of or related
to the entering into, performance or enforcement of the transaction contemplated
by the Credit Agreement.
f. Our opinion in Paragraph (c) above is subject, as to enforceability,
to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the enforcement of creditors' rights
generally, and to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Such principles applied by a court might include concepts of materiality,
reasonableness, good faith, and fair dealing, and might be applied, among other
situations, to the provisions of the Credit Agreement purporting to authorize
conclusive determinations by the Administrative Agent or any Bank.
2
<PAGE> 99
We are members of the Bar of the State of New York and do not purport
to be experts on, or to express any opinions herein concerning, any law other
than the laws of the State of New York and the Federal law of the United States
of America.
This opinion is furnished by us as special counsel to the
Administrative Agent in connection with the Credit Agreement and the
transactions contemplated thereby, and is solely for the benefit of the
Administrative Agent, the Agents, and the Banks and may not be relied upon by
any other person or for any other purpose.
Very truly yours,
3
<PAGE> 100
SCHEDULE K
DISCLOSURE SCHEDULE
ITEM 1. Left intentionally blank
ITEM 2. Existing Subsidiaries.
State of Ownership Business
Name Incorporation % Description
---- ------------- --------- -----------
See Attached List
ITEM 3. Litigation.
None
ITEM 4. Ongoing Indebtedness.
Creditor Outstanding Principal Amount
See Attached List
ITEM 5. Left intentionally blank
ITEM 6. Employee Benefit Plans.
None
ITEM 7. Environmental Matters.
Current Liability Anticipated Liability
----------------- ---------------------
Site Amount($) Site Amount($)
---- --------- ---- ---------
None None None None
<PAGE> 101
SCHEDULE K
Item 2. Existing Subsidiaries
<TABLE>
<CAPTION>
State of
Name Incorporation Ownership %
---- ------------- --------------------
<S> <C> <C>
A.B.&H. Processing, Inc. Kentucky 100%
Allegheny Land Company Delaware 100%
Allegheny Land Company No. 2 Delaware 100%
Ashland Coal International, Ltd.* Barbados 100%
Ashland Coal Sales (Ohio), Inc.** Delaware
Ashland Terminal, Inc. Delaware 100%
Coal-Mac, Inc. Kentucky 100%
Mingo Logan Coal Company Delaware 100%
Mountain Gem Land, Inc. West Virginia 100%
Mountain Gem Land No. 2, Inc. West Virginia 100%
Mountain Mining, Inc. Delaware 100%
Mountaineer Land Company Delaware 100%
Mountaineer Land Company No. 2 Delaware 100%
P.C. Holding, Inc. Delaware 100%
Saarcar Coal, Inc. Kentucky 100%
Tri-State Terminals, Inc. Delaware 100%
Tri-State Testing Co., Inc. Delaware 100%
Bebe Coal Corporation Kentucky 100% by Coal-Mac,
Inc.
Filbeth Enterprises, Inc. West Virginia 100% by Mountain
Mining, Inc.
Hobet Mining, Inc. West Virginia 100% by Mountain
Mining, Inc.
Drennen Tipple Corporation Delaware 100% by Mountain
Mining, Inc.
Servco, Inc. West Virginia 100% by Mountain
Mining, Inc.
Julian Tipple, Inc. Delaware 100% by Mountain
Mining, Inc.
Dal-Tex Coal Corporation Delaware 100% by Hobet
Mining, Inc.
Sharples Coal Corporation West Virginia 100% by Dal-Tex
Coal Corporation
Old Hickory Company West Virginia 100% by Dal-Tex
Coal Corporation
</TABLE>
<TABLE>
<CAPTION>
Name Business Description
---- --------------------
<S> <C>
A.B.&H. Processing, Inc. Brokerage Company
Allegheny Land Company West Virginia land holding company
Allegheny Land Company No. 2 West Virginia land holding company
Ashland Coal International, Ltd.* Foreign Sales Corporation
Ashland Coal Sales (Ohio), Inc.** Ohio coal brokerage company
Ashland Terminal, Inc. Partner in DIA
Coal-Mac, Inc. Kentucky operating company
Mingo Logan Coal Company West Virginia operating company
Mountain Gem Land, Inc. West Virginia land holding company
Mountain Gem Land No. 2, Inc. West Virginia land holding company
Mountain Mining, Inc. First tier holding company
Mountaineer Land Company Kentucky land holding company
Mountaineer Land Company No. 2 Kentucky land holding company
P.C. Holding, Inc. Land and mine investment company
Saarcar Coal, Inc. Kentucky operating company
Tri-State Terminals, Inc. River processing company
Tri-State Testing Co., Inc. Coal analysis company
Bebe Coal Corporation Kentucky operating company
Filbeth Enterprises, Inc. Services company
Hobet Mining, Inc. West Virginia operating company
Drennen Tipple Corporation Rail processing company
Servco, Inc. West Virginia land holding company
Julian Tipple, Inc. Rail processing company
Dal-Tex Coal Corporation West Virginia operating company
Sharples Coal Corporation West Virginia operating company
Old Hickory Company West Virginia operating company
</TABLE>
* Incorporated in 1994 after the disolution of Prince Carsaar Coal Sales,
Ltd., a Virgin Islands Corporation, in December 1993. Ashland Coal
International, Ltd. is a foreign sales corporation, as was Prince Carsaar.
** On October 1, 1994, Ashland Coal International, Ltd., a Delaware
corporation, and the owner of 100% of the outstanding stock of Ashland Coal
Sales (Ohio), Inc., was merged into Ashland Coal, Inc., making Ashland Coal
Sales (Ohio), Inc. a first tier subsidiary of Ashland Coal, Inc.
2
<PAGE> 102
SCHEDULE K
ITEM 4
ASHLAND COAL, INC. AND SUBSIDIARIES
LONG TERM DEBT
==========================================
<TABLE>
<CAPTION>
-------- AS OF NOVEMBER 15, 1994 --------
FIXED RATE DEBT Current Long-Term
=============== Portion Portion TOTAL REFERENCE
------- --------- ----- ---------
<S> <C> <C> <C> <C>
$100MM SENIOR NOTES $0 $100,000,000 $100,000,000 A
$22.1MM SENIOR NOTES, SERIES A $0 $22,100,000 $22,100,000 A
$52.9MM SENIOR NOTES, SERIES B $0 $52,900,000 $52,900,000 A
Shirley P. Cline (Mt. Gem) $5,000 $0 $5,000 B
Helen & Dennis Mounts (Mt Gem) $5,000 $0 $5,000 B
Twin Star Mining (MG) $126,320 $0 $126,320 B
SUBTOTAL/FIXED RATE DEBT $136,320 $175,000,000 $175,136,320
-------- ------------ -------------
FLOATING RATE DEBT
===================
$180.0MM REVOLVING CREDIT FACILITY
-MONEY MARKET BORROWINGS $0 $0 $0 A
-REFERENCE RATE BORROWINGS $0 $0 $0 A
-EURO RATE BORROWINGS $0 $0 $0 A
UNCOMMITTED BANK LINE BORROWINGS $45,000,000 $43,405,700 $88,405,700 A
SUBTOTAL/FLOATING RATE DEBT $45,000,000 $43,405,700 $88,405,700
----------- ----------- -----------
TOTAL LONG TERM DEBT $45,136,320 $218,405,700 $263,542,020
=========== ============ ============
</TABLE>
REF #A ONGOING INDEBTEDNESS OF ASHLAND COAL, INC. (ACI)
REF #B ONGOING INDEBTEDNESS OF SUBSIDIARIES OF ACI
3
<PAGE> 1
Exhibit 4.5
ASHLAND COAL, INC.
THIRD AMENDMENT AGREEMENT
Re:
Note Agreements Dated as of September 15, 1990
Providing for the issuance of
$100,000,000 original principal amount of
9.78% Senior Notes Due September 15, 2000
Dated as of
January 26, 1995
To each of the Purchasers
listed on Schedule I hereto
Ladies and Gentlemen:
Reference is made to (i) the separate Note Agreements each dated as of
September 15, 1990, as amended by a First Amendment Agreement dated as of May
15, 1991, and a Second Amendment Agreement dated as of March 1, 1993 (the "Note
Agreements"), between Ashland Coal, Inc., a Delaware corporation (the
"Company"), and each of the Purchasers listed on Schedule I hereto and (ii) the
$22,100,000 original principal amount of 8.92% Senior Notes due May 15, 1996 and
the $52,900,000 original amount of 9.66% Senior Notes due May 15, 2006 issued
pursuant to the Note Agreements (the "Notes"). Capitalized terms used herein and
not otherwise defined shall have the same meanings as in the Note Agreements.
For good and valuable consideration, the Company requests the
amendment of certain provisions of the Note Agreements as hereinafter provided.
Upon your execution hereof, this Third Amendment Agreement shall
constitute a contract between us amending the Note Agreements, but only in
respect hereinafter set forth:
<PAGE> 2
SECTION 1. AMENDMENTS TO NOTE AGREEMENTS.
1.1 The covenants in Sections 5.7 and 5.8 of the Note Agreements are
hereby amended by deleting current Sections 5.6, 5.7 and 5.8 in their entirety
and inserting in their place the following:
"5.6 Cash Flow Ratio. The Company will maintain the Cash Flow Ratio
during the four fiscal periods then most recently ended at not less than 2.0 to
1.
5.7 Consolidated Adjusted Net Worth. The Company will at all times
keep and maintain Consolidated Adjusted Net Worth at an amount not less than
$285,000,000.
5.8 Limitations on Current Debt and Funded Debt.
(a) The Company will not, and will not permit any Restricted
Subsidiary to create, assume or incur or in any manner be or become liable in
respect of any Current Debt or Funded Debt, except
(1) Funded Debt evidenced by the Notes;
(2) Funded Debt of the Company and its Restricted Subsidiaries
outstanding as of September 15, 1990 and listed on Annex B to Exhibit B hereto;
(3) unsecured Funded Debt of the Company and Funded Debt of the
Company and its Restricted Subsidiaries secured by Liens permitted by ss.5.9 (g)
or (h), provided that at the time of issuance thereof and after giving effect
thereto and to the application of the proceeds thereof, Consolidated Funded Debt
shall not exceed 60% of Total Capitalization;
(4) unsecured Current Debt of the Company and Construction
Current Debt of the Company secured by liens permitted by ss.5.9 (g) and ss.5.9
(h), in each case, for money borrowed from banks, trust companies, insurance
companies and similar institutions, provided that during the twelve-month period
immediately preceding the date of any determination hereunder, there shall have
been a period of 30 consecutive days during which the Company shall have reduced
Current Debt to an amount not in excess of the amount of Funded Debt that could
have been issued within the limitations of ss.5.8 (a)(3) above determined on the
basis of the Company's most recent quarterly financial reports at the time
available;
(5) Current Debt or Funded Debt of a Restricted Subsidiary to the
Company or to a Wholly-owned Restricted Subsidiary;
(6) Current Debt or Funded Debt of a Restricted Subsidiary in
addition to that permitted by the foregoing clauses (2), (3) and (5); provided
that at the time of issuance and after giving effect thereto and to the
application of the proceeds thereof, Consolidated Funded Debt shall not exceed
60% of Total Capitalization and (ii) the aggregate amount of all Current
<PAGE> 3
Debt and Funded Debt of Restricted Subsidiaries owned to Persons other than the
Company and
its Wholly-owned Restricted Subsidiaries shall not exceed 20% of Consolidated
Adjusted Net Worth; and
(7) any extension, renewal or refunding of any Funded Debt
securing any Lien permitted by the provisions of ss.5.9 (i), without increase in
the principal amount of such Funded Debt.
(b) Any corporation which becomes a Restricted Subsidiary after
the date hereof shall for all purposes of this ss.5.8 be deemed to have
created, assumed or incurred at the time it becomes a Restricted Subsidiary all
Funded Debt of such corporation existing immediately after it becomes a
Restricted Subsidiary."
1.2 The definition of "Cash Flow Ratio" in Section 8.1 of the
Note Agreement is hereby amended by deleting the current Cash Flow Ratio
definition and inserting in its place the following:
"Cash Flow Ratio" shall mean, for any period the ratio of (A) the sum
for such period of (i) Adjusted Net Income plus (ii) lease payments for property
other than mineral and surface lease payments (to the extent deducted in
determining Consolidated Net Income for such period) and (iii) Interest Charges
(to the extent deducted in determining Consolidated Net Income) to (B) the sum
for such period of (1) lease payments (other than mineral and surface lease
payments), (2) Interest Charges, and (3) dividend payments on preferred stock
not satisfying the requirements of Preferred Stock (other than dividend payments
payable only at such times and in such amounts as shall be equal to the
dividends payable upon the number of shares of the Company's common stock into
which such preferred stock is convertible immediately prior to the applicable
record date for such common stock dividend).
The definition of "Long-Term Lease" in Section 8.1 of the Note
Agreement is hereby amended by adding a proviso to the end of the current
definition to exclude from the definition as used in Section 5.10 all types of
mineral and surface leases and subleases as follows:
"Long-Term Lease" shall mean any lease of real or personal property
(other than a Capitalized Lease) having an original term, including any period
for which the lease may be renewed or extended at the option of the lessor, of
more than three years, provided that for purposes of Section 5.10, the term
Long-Term Lease shall also exclude mineral and surface leases.
SECTION 2. MISCELLANEOUS
2.1 Except as amended herein, the terms and provisions of the Note
Agreements are hereby ratified, confirmed and approved in all respect.
<PAGE> 4
2.2 Any and all notices, requests, certificates and other instruments,
including the Notes, may refer to the "Note Agreements" or the "Note Agreements
dated as of May 15, 1991" without making specific reference to this Amendment,
but nevertheless all such references shall be deemed to include this Amendment
unless the context shall require otherwise. On and after the effective date of
this Amendment, prior to any sale, assignment, transfer, pledge or other
disposition of any Notes, each holder shall either (i) add to such Notes an
appropriate endorsement referring to this Third Amendment Agreement as binding
on the parties hereto and upon any and all future holders of such Notes or (ii)
at each holder's option, surrender such Notes for new notes of the same for and
tenor as the Notes so surrendered but revised to contain express textual
reference to this Third Amendment Agreement. All expenses for the preparation of
such new notes and the exchange for such notes are to be borne by the Company.
2.3 This Amendment and all covenants herein contained shall be binding
upon and inure to the benefit of the respective successors and assigns of the
parties hereunder. All covenants made by the Company herein shall survive the
closing and the delivery of this Amendment.
2.4 Each of the Note Agreements, as amended by this Amendment,
constitutes the entire agreement between the Company and each of the Purchasers
party hereto in connection with the subject matter of such Note Agreements and
supersedes all prior and contemporaneous agreements and understandings in
connection with such subject matter. No covenants or conditions not expressed in
the Note Agreements, as amended by this Amendment, shall affect or be effective
to interpret, change or restrict this Agreement. The Note Agreements, as amended
by this Amendment, and this Amendment, shall be governed by and construed in
accordance with New York law.
ASHLAND COAL, INC.
By /s/ Marc R. Solochek
----------------------
Its Sr. V.P. & CFO
---------------------
4,000,000 THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By /s/ Ina Lane
------------------------------------------
Its Investment Officer
---------------------------------------
5,000,000 AID ASSOCIATION FOR LUTHERANS
By /s/Alan D. Onstad /s/ James Abitz
------------------------------------------
Its Asst. V.P. Securities V.P. Securities
---------------------------------------
<PAGE> 5
Ashland Coal, Inc. Note Agreement
7,000,000 THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY
By /s/ Julia S. Tucker
--------------------------------------
Its Investment Officer
-----------------------------------
5,000,000 AMERICAN UNITED LIFE
INSURANCE COMPANY
By /s/ Christopher D. Palelke
--------------------------------------
Its Vice President
-----------------------------------
15,000,000 GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By /s/ James G. Lowery
--------------------------------------
Its Asst.VPPrivate Placement Investment
-----------------------------------
By /s/ E.A. Marr
--------------------------------------
Its Asst.VPPrivate Placement Investment
-----------------------------------
2,000,000 GUARANTEE MUTUAL LIFE
INSURANCE COMPANY
By /s/ Steven A. Scanlar
--------------------------------------
Its Senior Investment Officer
-----------------------------------
4,750,000 IDS LIFE INSURANCE COMPANY OF
NEW YORK
By /s/ Lorraine R. Hart
--------------------------------------
Its V.P. Insurance Investments
-----------------------------------
2,250,000 AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY
By /s/ Lorraine R. Hart
--------------------------------------
Its V.P. Insurance Investments
-----------------------------------
<PAGE> 6
Ashland Coal, Inc. Note Agreement
3,000,000 FEDERAL KEMPER LIFE ASSURANCE
COMPANY
By /s/ H.E.Guenther /s/F.Collecchia
--------------------------------------
Its Auth. Signatory Auth.Signatory
------------------------------------
7,000,000 KEMPER INVESTORS LIFE
INSURANCE COMPANY
By /s/ H.E.Guenther /s/F.Collecchia
--------------------------------------
Its Auth. Signatory Auth.Signatory
------------------------------------
7,000,000 THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By /s/ Gary MdeLambert
--------------------------------------
Its Second V.P.
------------------------------------
2,500,000 MUTUAL OF OMAHA INSURANCE
COMPANY
By /s/ M.G.Echtenkamp
--------------------------------------
Its Second V.P.
------------------------------------
1,000,000 COMPANION LIFE INSURANCE
COMPANY
By /s/ Richard A. Witt
--------------------------------------
Its Sr. V.P. & Asst. Treasurer
------------------------------------
By /s/ M.G. Echtenkamp
--------------------------------------
Its Sr. V.P. & Asst. Treasurer
------------------------------------
<PAGE> 7
Ashland Coal, Inc. Note Agreement
5,000,000 THE OHIO NATIONAL LIFE
INSURANCE COMPANY
By /s/ Michael A. Boedeker
--------------------------------------
Its V.P. Fixed Income Securities
------------------------------------
7,000,000 ALLSTATE LIFE INSURANCE
COMPANY
By /s/ Gary W. Fridley
--------------------------------------
/s/ Patricia W. Wilson
--------------------------------------
Its V. President.
------------------------------------
Asst. V. President
3,000,000 ATWELL & COMPANY
By /s/ Ronn Cornellus
--------------------------------------
Its Asst. V.P.
------------------------------------
3,000,000 INCE & CO.
By /s/ H.Von Sospe
--------------------------------------
Its A Partner
------------------------------------
8,000,000 MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By /s/ Michael L. Klofas
--------------------------------------
Its Senior V.President
------------------------------------
8,000,000 UNITED OF OMAHA LIFE
INSURANCE COMPANY
By /s/ M.G.Echtenkamp
--------------------------------------
Its Second V.President
------------------------------------
<PAGE> 8
Ashland Coal, Inc. Note Agreement
500,000 UNITED WORLD LIFE
INSURANCE COMPANY
By /s/ M.G.Echtenkamp
--------------------------------------
Its Second V.President
------------------------------------
<PAGE> 1
Exhibit 4.8
ASHLAND COAL, INC.
SECOND AMENDMENT AGREEMENT
Re:
Note Agreements Dated as of May 15, 1991
Providing for the issuance of
$22,100,000 original principal amount of
8.92% Senior Notes, Series A Due May 15, 1996
and
$52,900,000 original principal amount of
9.66% Senior Notes, Series B due May 15, 2006
Dated as of
January 26, 1995
To each of the Purchasers
listed on Schedule I hereto
Ladies and Gentlemen:
Reference is made to (i) the separate Note Agreements each dated as of
May 15, 1991, as amended by a First Amendment Agreement dated as of March 1,
1993 (the "Note Agreements"), between Ashland Coal, Inc., a Delaware corporation
(the "Company"), and each of the Purchasers listed on Schedule I hereto and (ii)
the $22,100,000 original principal amount of 8.92% Senior Notes due May 15, 1996
and the $52,900,000 original amount of 9.66% Senior Notes due May 15, 2006
issued pursuant to the Note Agreements (the "Notes"). Capitalized terms used
herein and not otherwise defined shall have the same meanings as in the Note
Agreements.
For good and valuable consideration, the Company requests the
amendment of certain provisions of the Note Agreements as hereinafter provided.
Upon your execution hereof, this Second Amendment Agreement shall
constitute a contract between us amending the Note Agreements, but only in
respect hereinafter set forth:
<PAGE> 2
SECTION 1. AMENDMENTS TO NOTE AGREEMENTS.
1.1 The covenants in Sections 5.7 and 5.8 of the Note Agreements are
hereby amended by deleting current Sections 5.6, 5.7 and 5.8 in their entirety
and inserting in their place the following:
"5.6 Cash Flow Ratio. The Company will maintain the Cash Flow Ratio
during the four fiscal periods then most recently ended at not less than 2.0 to
1.
5.7 Consolidated Adjusted Net Worth. The Company will at all times
keep and maintain Consolidated Adjusted Net Worth at an amount not less than
$285,000,000.
5.8 Limitations on Current Debt and Funded Debt.
(a) The Company will not, and will not permit any Restricted
Subsidiary to create, assume or incur or in any manner be or become liable in
respect of any Current Debt or Funded Debt, except
(1) Funded Debt evidenced by the Notes;
(2) Funded Debt of the Company and its Restricted Subsidiaries
outstanding as of May 15, 1991 and listed on Annex B to Exhibit B hereto;
(3) unsecured Funded Debt of the Company and Funded Debt of the
Company and its Restricted Subsidiaries secured by Liens permitted by ss.5.9 (g)
or (h), provided that at the time of issuance thereof and after giving effect
thereto and to the application of the proceeds thereof, Consolidated Funded Debt
shall not exceed 60% of Total Capitalization;
(4) unsecured Current Debt of the Company and Construction
Current Debt of the Company secured by liens permitted by ss.5.9 (g) and ss.5.9
(h), in each case, for money borrowed from banks, trust companies, insurance
companies and similar institutions, provided that during the twelve-month period
immediately preceding the date of any determination hereunder, there shall have
been a period of 30 consecutive days during which the Company shall have reduced
Current Debt to an amount not in excess of the amount of Funded Debt that could
have been issued within the limitations of ss.5.8 (a)(3) above determined on the
basis of the Company's most recent quarterly financial reports at the time
available;
(5) Current Debt or Funded Debt of a Restricted Subsidiary to the
Company or to a Wholly-owned Restricted Subsidiary;
<PAGE> 3
(6) Current Debt or Funded Debt of a Restricted Subsidiary in
addition to that permitted by the foregoing clauses (2), (3) and (5); provided
that at the time of issuance and after giving effect thereto and to the
application of the proceeds thereof, Consolidated Funded Debt shall not exceed
60% of Total Capitalization and (ii) the aggregate amount of all Current Debt
and Funded Debt of Restricted Subsidiaries owned to Persons other than the
Company and its Wholly-owned Restricted Subsidiaries shall not exceed 20% of
Consolidated Adjusted Net Worth; and
(7) any extension, renewal or refunding of any Funded Debt
securing any Lien permitted by the provisions of ss.5.9 (i), without increase in
the principal amount of such Funded Debt.
(b) Any corporation which becomes a Restricted Subsidiary after the
date hereof shall for all purposes of this ss.5.8 be deemed to have created,
assumed or incurred at the time it becomes a Restricted Subsidiary all Funded
Debt of such corporation existing immediately after it becomes a Restricted
Subsidiary."
1.2 The definition of "Cash Flow Ratio" in Section 8.1 of the Note
Agreement is hereby amended by deleting the current Cash Flow Ratio definition
and inserting in its place the following:
"Cash Flow Ratio" shall mean, for any period the ratio of (A) the sum
for such period of (i) Adjusted Net Income plus (ii) lease payments for property
other than mineral and surface lease payments (to the extent deducted in
determining Consolidated Net Income for such period) and (iii) Interest Charges
(to the extent deducted in determining Consolidated Net Income) to (B) the sum
for such period of (1) lease payments (other than mineral and surface lease
payments), (2) Interest Charges, and (3) dividend payments on preferred stock
not satisfying the requirements of Preferred Stock (other than dividend payments
payable only at such times and in such amounts as shall be equal to the
dividends payable upon the number of shares of the Company's common stock into
which such preferred stock is convertible immediately prior to the applicable
record date for such common stock dividend).
The definition of "Long-Term Lease" in Section 8.1 of the Note
Agreement is hereby amended by adding a proviso to the end of the current
definition to exclude from the definition as used in Section 5.10 all types of
mineral and surface leases and subleases as follows:
"Long-Term Lease" shall mean any lease of real or personal property
(other than a Capitalized Lease) having an original term, including any period
for which the lease may be renewed or extended at the option of the lessor, of
more than three years, provided that for purposes of Section 5.10, the term
Long-Term Lease shall also exclude mineral and surface leases.
<PAGE> 4
SECTION 2. MISCELLANEOUS
2.1 Except as amended herein, the terms and provisions of the Note
Agreements are hereby ratified, confirmed and approved in all respect.
2.2 Any and all notices, requests, certificates and other instruments,
including the Notes, may refer to the "Note Agreements" or the "Note Agreements
dated as of May 15, 1991" without making specific reference to this Amendment,
but nevertheless all such references shall be deemed to include this Amendment
unless the context shall require otherwise. On and after the effective date of
this Amendment, prior to any sale, assignment, transfer, pledge or other
disposition of any Notes, each holder shall either (i) add to such Notes an
appropriate endorsement referring to this Second Amendment Agreement as binding
on the parties hereto and upon any and all future holders of such Notes or (ii)
at each holder's option, surrender such Notes for new notes of the same for and
tenor as the Notes so surrendered but revised to contain express textual
reference to this Second Amendment Agreement. All expenses for the preparation
of such new notes and the exchange for such notes are to be borne by the
Company.
2.3 This Amendment and all covenants herein contained shall be binding
upon and inure to the benefit of the respective successors and assigns of the
parties hereunder. All covenants made by the Company herein shall survive the
closing and the delivery of this Amendment.
2.4 Each of the Note Agreements, as amended by this Amendment,
constitutes the entire agreement between the Company and each of the Purchasers
party hereto in connection with the subject matter of such Note Agreements and
supersedes all prior and contemporaneous agreements and understandings in
connection with such subject matter. No covenants or conditions not expressed in
the Note Agreements, as amended by this Amendment, shall affect or be effective
to interpret, change or restrict this Agreement. The Note Agreements, as amended
by this Amendment, and this Amendment, shall be governed by and construed in
accordance with New York law.
ASHLAND COAL, INC.
By /s/ Marc R. Solochek
----------------------------------
Its Sr. V.P. & CFO
--------------------------------
<PAGE> 5
Schedule I
Ashland Coal, Inc. Amendment to Note Agreement
SERIES A SERIES B
3,750,000 AID ASSOCIATION FOR LUTHERANS
By /s/ Alan Onstad /s/ James Abitz
-------------------------------------------
Its Asst. V.P. Securities V.P. Securities
-----------------------------------------
2,500,000 4,750,000 THE VARIABLE ANNUITY LIFE
INSURANCE COMPANY
By /s/ Julia S. Tucker
-------------------------------------------
Its Investment Officer
-----------------------------------------
3,750,000 AMERICAN UNITED LIFE
INSURANCE COMPANY
By /s/ Christopher D. Palalke
-------------------------------------------
Its Vice President
------------------------------------------
7,250,00 GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY
By /s/ James G. Lowery
------------------------------------------
Its Asst. V.P. Private Placement
----------------------------------------
By /s/ E.A. Marr
------------------------------------------
Its Asst. V.P. Private Placement
----------------------------------------
1,000,000 PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
By /s/ Paul M. Chute
-------------------------------------------
Its Managing Director
-----------------------------------------
7,250,000 IDS LIFE INSURANCE COMPANY
By /s/ Lorraine R. Hart
-------------------------------------------
Its V.P. Insurance Investments
-----------------------------------------
<PAGE> 6
Ashland Coal, Inc. Note Agreement
2,000,000 2,750,000 THE MINNESOTA MUTUAL LIFE
INSURANCE COMPANY
By /s/ Dianne Orbeson
-------------------------------------------
Its Second V.P.
-------------------------------------------
5,100,000 2,150,000 UNITED OF OMAHA LIFE
INSURANCE COMPANY
By /s/ M.G. Echtenkamp
-------------------------------------------
Its Second V.P.
-------------------------------------------
1,000,000 2,000,000 THE OHIO NATIONAL LIFE
INSURANCE COMPANY
By /s/ Michael A. Boedeker
-------------------------------------------
Its V.P. Fixed Income Security
-------------------------------------------
1,250,000 NORTH ATLANTIC LIFE INSURANCE
COMPANY OF AMERICA
By /s/ Frank P. Pitens
-------------------------------------------
Its Asst. Treasurer
-------------------------------------------
3,000,000 NORTHERN LIFE INSURANCE
COMPANY
By /s/ Frank P. Pitens
-------------------------------------------
Its Asst. Treasurer
-------------------------------------------
<PAGE> 7
Ashland Coal, Inc. Note Agreement
10,000,000 ALLSTATE LIFE INSURANCE
COMPANY
By /s/ Gary W. Fultz
-------------------------------------------
Its Authorized Signatory
-----------------------------------------
3,000,000 ALLSTATE LIFE INSURANCE
COMPANY OF NEW YORK
By /s/ Gary W. Fultz
-------------------------------------------
Its Authorized Signatory
-----------------------------------------
10,000,000 MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By /s/ Michael L. Klofas
-------------------------------------------
Its Second V.P.
-----------------------------------------
1,000,000 MUTUAL TRUST LIFE
INSURANCE COMPANY
By /s/ Lynne M. Mills
-------------------------------------------
Its Vice President
-----------------------------------------
1,000,000 RELIABLE LIFE INSURANCE
COMPANY
By /s/ Loren N. Haugland
-------------------------------------------
Its Vice President
-----------------------------------------
500,000 RELIABLE LIFE INSURANCE
COMPANY & ASSOCIATES
RETIREMENT PLAN
By /s/ Loren N. Haugland
-------------------------------------------
Its Vice President
-----------------------------------------
<PAGE> 1
Exhibit 10.16
ASHLAND COAL, INC.
ERISA FORFEITURE PLAN
Effective February 23, 1994, as soon as practicable after final
allocations have been completed under the Ashland Coal, Inc. Employee Thrift
Plan (the "Thrift Plan") for the plan year in question, Ashland Coal, Inc. or
its applicable affiliate shall distribute a make-whole bonus to its executive
employees and the executive employees of its affiliates participating in the
Thrift Plan.
Such bonuses shall be in amounts equal to 4.2% of each such
executive's compensation taken into account under the Thrift Plan for the plan
year in question, without regard to the compensation cap provided under Section
401(a)(17) of the Internal Revenue Code of 1986, as amended, less: (i) matching
contributions allocated to such executive under the Thrift Plan for such plan
year and (ii) applicable federal and state income tax withholding and employment
taxes. Only executives contributing the maximum amount of their compensation
subject to matching contributions under the Thrift Plan (or such lesser amount
as may be required by law), shall be eligible for make-whole bonuses under the
ERISA Forfeiture Plan.
For purposes of the ERISA Forfeiture Plan, all employees of Ashland
Coal, Inc. and its affiliates at Participation Levels I-IV under the Ashland
Coal, Inc. Incentive Compensation Program for Key Employees (and employees of
affiliates who would be at such levels if they were eligible for the Incentive
Compensation Program) constitute executive employees.
The Board of Directors of Ashland Coal, Inc. reserves the right to
amend or terminate the ERISA Forfeiture Plan at any time for any reason in any
manner not prohibited under Delaware law.
March 2, 1995
<PAGE> 1
Exhibit 10.18
ASHLAND COAL, INC.
INCENTIVE COMPENSATION PROGRAM FOR KEY EMPLOYEES
PURPOSE: To provide key employees of Ashland Coal, Inc. (the
"Company") the opportunity to earn incentive cash
compensation in relation to, and through the
achievement of, performance objectives.
EFFECTIVE DATE: August 1, 1988
PARTICIPATION: Eligibility for participation in the program is
based upon job size and accountability. Six levels
of participation have been established.
POTENTIAL PAYOUT: The Personnel and Compensation Committee has sole
discretion to determine the amount of the incentive
compensation award for each participant for each
fiscal year. Maximum potential payout is a fixed
percentage of a participant's average salary for the
fiscal year and is dependent upon the participant's
participation level for that fiscal year. These
maximums are as follows:
Maximum Payout
Participation As a Percentage
Level of Average Salary
------------- -----------------
I 72
II 54
III 42
IV 36
V 30
VI 20
PERFORMANCE GRADES: A participant's incentive compensation award is
determined by performance grades attained in the
following areas:
1. Operating Performance of the Company; and
2. Individual Performance.
WEIGHTINGS: The performance grade for the Company Operating
Performance component is weighted two-thirds and the
Individual Performance component is weighted
one-third.
<PAGE> 2
Depending upon the determination by the Company, the
Operating Performance component may be comprised of
a performance grade of a unit within the Company in
addition to the overall Company Operating
Performance grade.
DETERMINATION OF
COMPANY GRADE: Operating performance grades for the Company may be
based upon Return on Invested Capital (ROI), Return
on Equity (ROE) or another measure of performance
determined by the Company's Personnel and
Compensation (P & C) Committee. The actual
performance achieved for the year shall be compared
against a target performance measure to determine a
Company Grade. The P & C Committee shall annually
approve an overall target performance for the
Company.
Neither the performance measure nor the operating
performance grade shall directly or indirectly link
the value of an incentive compensation payment to
the value of a Company equity security.
LIMITATION ON
TOTAL PAYOUT: The total payout in a fiscal year for all plan
participants cannot exceed six (6) percent of Net
Income to Common Shareholders for that fiscal year,
calculated on a Primary Basis. Net Income shall not
include non-operating items.
INDIVIDUAL
LIMITATION: Any participant with an individual performance grade
of 5 or greater shall receive no bonus.
COMMITTEE
APPROVAL: The P & C Committee must approve the actual award to
be made to any plan participant.
P & C COMMITTEE: The P & C Committee of the Board of Directors of the
Company shall have plenary authority to administer
this Plan.
Approved by the Board on August 8, 1988.
Restated on July 16, 1993 to reflect cumulative changes authorized by the P & C
Committee.
-2-
<PAGE> 1
Exhibit 10.28
SALES AGENCY AGREEMENT
AGREEMENT, dated February 27, 1982, between ASHLAND COAL, INC., a
corporation organized under the laws of Delaware, U.S.A. ("ACI") and SOCIEDAD
ESPANOLA DE CARBON EXTERIOR, S.A., a company organized under the laws of Spain
("Carboex"):
W I T N E S S E T H:
In consideration of the mutual agreements contained herein, the
parties hereto agree as follows:
1. As used in this Agreement, "Spanish Customer" shall mean a company
or any subsidiaries and affiliates thereof, other than Carboex and its
subsidiaries and affiliates, which (i) consumes coal in Spain, (ii) is owned
principally by Spanish interest, or (iii) is part of a business enterprise whose
controlling management is headquartered in Spain.
2. ACI hereby appoints Carboex as the exclusive agent for ACI for the
purpose of selling, on behalf of ACI or its subsidiaries, coal to Spanish
Customers for consumption in Spain.
3. ACI shall pay to Carboex, as compensation for the services of
Carboex under this Agreement, a commission (determined as specified in paragraph
4 of this Agreement) upon each ton of coal which is sold by ACI or any
subsidiary of ACI to a Spanish Customer for consumption in Spain, and which is
delivered and paid for. No commission shall be paid upon any coal not delivered
and
<PAGE> 2
paid for, irrespective of the reason for such non-delivery or non-payment.
Carboex shall not be entitled to payment for any expenses incurred in connection
with its services hereunder, it being understood that payment of the commission
will be full compensation to Carboex.
4. The commission payable to Carboex under paragraph 3 hereof shall be
two percent of the selling price of the coal FOB the mine, irrespective of
whether the actual selling price is on an FOB the mine basis. It is understood
that when coal is transported by rail to a barge loading facility, the price of
the coal FOB the mine means the price FOB the point of loading into the railcar.
It is further understood that in Eastern Kentucky where coal is trucked directly
from the mine to a barge loading facility, the price of the coal FOB the mine
means the price FOB the point of loading into the barge.
5. The commission shall be payable to Carboex within 10 days after the
receipt of ACI of payment for the coal. 6. Carboex shall use its best efforts to
promote the sale of ACI coal in Spain to the maximum extent possible compatible
with the mandate by the government of Spain as to diversification of sources of
supply. Carboex shall keep ACI informed as to Spanish markets. Except as
otherwise agreed and subject to paragraph 7 and 8 hereof, it is the express
understanding of the parties hereto that Carboex, as ACI's exclusive agent
hereunder, will be in charge of all discussions with Spanish Customers as to
coal for consumption in Spain.
6. Carboex shall use its best efforts to promote the sale of ACI coal
in Spain to the maximum extent possible compatible with the mandate by the
government of Spain as to diversification of sources of supply. Carboex shall
keep ACI informed as to Spanish markets. Except as otherwise agreed and
subject to paragraph 7 and 8 hereof, it is the express understanding of the
parties hereto that Carboex, as ACI's exclusive agent hereunder, will be in
charge of all discussions with Spanish Customers as to coal for consumption in
Spain.
7. Except as otherwise expressly agreed, Carboex shall
<PAGE> 3
have no authority to bind ACI or its subsidiaries in any respect, to determine
price of any other term of sale, to execute sales contracts or to receive
payments from the purchaser. Such contracts shall be made in the name of ACI or
its subsidiary.
8. In the event Carboex fails to use its best efforts to sell ACI coal
to customers located in Spain, ACI may give Carboex written notice of such
failure, and if such failure is not cured within a period of six months from
receipt of such notice, then ACI shall have the right to use its own sales force
to sell such customers, but Carboex shall remain entitled to its commission
under paragraph 3 of this Agreement and, when and if Carboex resumes good faith
efforts to sell, ACI shall withdraw its sales force.
9. Carboex shall not assign this Agreement without the prior written
consent to ACI. ACI hereby consents to an assignment to a company in which
Carboex has no less than a 51% ownership interest.
10. ACI shall have the right to terminate this Agreement upon (i)
consummation of a transaction as a result of which the ownership interest of
Carboex in an assignee of this Agreement becomes less than 51%, (ii)
consummation of a transaction as a result of which neither Carboex nor an
affiliate of Carboex owns any shares of the capital stock of ACI, or (iii)
aggregate sales of coal by ACI or its subsidiaries to all customers subsequent
to execution of this Agreement reaching 649,000,000 tons. Carboex shall have the
right to terminate this Agreement at any time upon two years' prior written
notice to ACI.
<PAGE> 4
11. This Agreement shall become effective upon consummation of the
pending sale by Ashland Oil, Inc. to Carboex or its affiliate of 100 shares of
the Class C capital stock of ACI.
12. It is the intent of the parties of this Agreement that, so long as
Carboex has "Unfilled Off-Take" as defined in that certain Coal Off-Take
Agreement dated May 28, 1981, between ACI and Saarberg Coal International GmbH,
as amended, ("COTA"), all quantities of coal upon which Carboex is entitled to a
commission under this Agreement shall be deducted from Carboex's "Off-Take
Tonnage" as defined in COTA. However, the parties also recognize that such
deduction from Off-Take Tonnage may not always be appropriate. Therefore, in all
circumstances, the parties hereto agree to review each contract subject to this
paragraph 12 and further agree not to make any such deduction without the prior
written consent of each party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ASHLAND COAL, INC.
By: John B. Kebbish
----------------------------------
Its: President
----------------------------------
SOCIEDAD ESPANOLA DE CARBON EXTERIOR
By: Jose Siera
----------------------------------
Its: Chairman
----------------------------------
<PAGE> 1
Exhibit 10.29
RATIFICATION OF
SALES AGENCY AGREEMENT
THIS RATIFICATION, made this 17th day of May, 1983, by ASHLAND COAL
INTERNATIONAL LTD., a Delaware corporation ("ACIL"), HOBET MINING & CONSTRUCTION
CO., INC., a West Virginia corporation ("HOBET"), ADDINGTON BROTHERS MINING,
INC., a Kentucky corporation ("Addington") and ASHLAND COAL, INC., a Delaware
corporation ("ASHLAND").
WITNESSETH:
WHEREAS, Ashland is the parent corporation, either directly or
indirectly, of ACIL, Hobet and Addington; and
WHEREAS, Ashland, as a party to that certain Sales Agency Agreement
dated February 27, 1982 with Sociedad Espanola de Carbon Exterior, S.A.
("Carboex") made certain agreements with respect to the sale of coal in Spain on
behalf of itself and its subsidiaries; and,
WHEREAS, ACIL, Hobet and Addington desire to ratify such agreements on
their own behalf and to obligate themselves consistent with the understanding
between each and Ashland.
NOW, THEREFORE, in consideration of the foregoing, ACIL, Hobet and
Addington hereby covenant and agree as follows:
<PAGE> 2
1. ACIL, Addington and Hobet hereby ratify and affirm that certain
Sales Agency Agreement dated February 27, 1982 between Ashland and Carboex and
each separately agrees to reimburse Ashland for the appropriate commissions
Ashland pays to Carboex with respect to the sale of its coal by Carboex in Spain
pursuant to the terms and conditions of said Sales Agency Agreement. This
agreement shall not in any way affect or diminish Ashland's right to receive its
own independent commission on the sale of Hobet's or Addington's coal where
Ashland, through its agency representation of said parties, effects such sale.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first above written.
ASHLAND COAL INTERNATIONAL LTD. ADDINGTON BROTHERS MINING, INC.
By: R. Rex Jones By: Paul Goad Jr.
------------------------ ------------------------------
Its: Vice President Its: President
----------------------- -----------------------------
HOBET MINING & CONSTRUCTION ASHLAND COAL, INC.
CO., INC.
By: William S. Ritchie Jr. By: Marc R. Solochek
------------------------ ------------------------------
Its: President Its: Vice President/Treasurer
----------------------- -----------------------------
<PAGE> 1
Exhibit 10.30
SALES AGENCY AGREEMENT
AGREEMENT, dated October 4, 1990, between ASHLAND COAL, INC., a
corporation organized under the laws of Delaware, U.S.A. ("ACI"), and
SAARBERGWERKE A.G., a company organized under the laws of the Federal Republic
of Germany ("SAG");
W I T N E S S E T H:
In consideration of the mutual agreements contained herein, the
parties hereto agree as follows:
1. As used in this Agreement, "German Customer" shall mean a company
or any subsidiaries and affiliates thereof, other than SAG and its subsidiaries
and affiliates, which consumes coal in the Federal Republic of Germany.
2. ACI hereby appoints SAG as the exclusive agent of ACI for the
purpose of selling, on behalf of ACI or its subsidiaries, coal to German
Customers for consumption in the Federal Republic of Germany.
3. ACI shall pay to SAG, as compensation for the services of SAG under
this Agreement, a commission (determined as specified in paragraph 4 of this
Agreement) upon each ton of coal which is sold by ACI or any subsidiary of ACI
to a German Customer for consumption in the Federal Republic of Germany and
which is delivered and paid for. No commission shall be paid upon any coal not
delivered and paid for, irrespective of the reason for such non-delivery or
non-payment. SAG shall not be entitled to payment for any expenses incurred in
connection- with its services
<PAGE> 2
hereunder, it being understood that payment of the commission will be full
compensation to SAG.
4. The commission payable to SAG under paragraph 3 hereof shall be two
percent of the selling price of the coal FOB the mine, irrespective of whether
the actual selling price is on an FOB the mine basis. It is understood that
where coal is transported by rail to a barge loading facility, the price of the
coal FOB the mine means the price FOB the point of loading into the railcar. It
is further understood that in Eastern Kentucky where coal is trucked directly
from the mine to a barge loading facility, the price of the coal FOB the mine
means the price FOB the point of loading into the barge.
5. The commission shall be payable to SAG within 10 days after the
receipt by ACI of payment for the coal. 6. SAG shall use its best efforts to
promote the sale of ACI coal in the Federal Republic of Germany consistent with
the law and regulations of the Federal Republic of Germany and the European
Community. SAG shall keep ACI informed as to the coal market in the Federal
Republic of Germany. Except as otherwise agreed and subject to paragraphs 7 and
8 hereof, it is the express understanding of the parties hereto that SAG, as
ACI's exclusive agent hereunder, will be in charge of all discussions with
German Customers as to coal for consumption in the Federal Republic of Germany.
6. SAG shall use its best efforts to promote the sale of ACI coal in
the Federal Republic of Germany consistent with the law and regulations of the
Federal Republic of Germany and the European Community. SAG shall keep ACI
informed as to the coal market in the Federal Republic of Germany. Except as
otherwise agreed and subject to paragraphs 7 and 8 hereof, it is the express
understanding of the parties hereto that SAG, as ACI's exclusive agent
hereunder, will be in charge of all discussions with German Customers as to
coal for consumption in the Federal Republic of Germany.
7. Except as otherwise expressly agreed, SAG shall have no authority
to bind ACI or its subsidiaries in any respect, to determine price or any other
term of sale, to execute sales contracts or to receive payments from the
purchaser. Such contracts
<PAGE> 3
shall be made in the name of ACI or its subsidiary.
8. In the event SAG fails to use its best efforts to sell ACI coal to
customers located in the Federal Republic of Germany, ACI may give SAG written
notice of such failure, and if such failure is not cured within a period of six
months from receipt of such notice, then ACI shall have the right to use its own
sales force to sell such customers, but SAG shall remain entitled to its
commission under paragraph 3 of the Agreement and, when and if SAG resumes good
faith efforts to sell, ACI shall withdraw its sales force.
9. SAG shall not assign this Agreement without the prior written
consent of ACI. ACI hereby consents to an assignment to a company in which SAG
has no less than a 51% ownership interest.
10. ACI shall have the right to terminate this Agreement upon (i)
consummation of a transaction as a result of which the ownership interest of SAG
in an assignee of this Agreement becomes less than 51%, or (ii) consummation of
a transaction as a result of which neither SAG nor an affiliate of SAG owns any
shares of the capital stock of ACI. SAG shall have the right to terminate this
Agreement at any time upon two years' prior written notice to ACI, or (iii)
aggregate sales of coal by ACI or its subsidiaries to all customers subsequent
to February 27, 1982 reaching 649,000,000 tons.
11. This Agreement shall become effective on the day and year first
above written.
<PAGE> 4
12. It is the intent of the parties to this Agreement that, so long as
SAG has "Unfilled Off-Take" as defined in that certain Coal Off-Take Agreement
dated May 28, 1981, between ACI and SAG, as amended, ("COTA"), all quantities of
coal upon which SAG is entitled to a commission under this Agreement shall be
deducted from SAG's "Off-Take Tonnage" as defined in COTA. However, the parties
also recognize that such deduction from Off-Take Tonnage may not always be
appropriate. Therefore, in all circumstances, the parties hereto agree to review
each contract subject to this paragraph 12 and further agree not to make any
such deduction without the prior written consent of each party.
13. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ASHLAND COAL, INC.
By: William C. Payne
-----------------------
Its: President
----------------------
SAARBERGWERKE A.G.
By: Dr. Dietrich Reinhardt
-----------------------
Its: Director
----------------------
<PAGE> 5
Ashland Coal, Inc. April 10, 1990
P.O. Box 6300
Huntington, WV 25771
United States of America
Sales Agency Agreement
Gentlemen,
Reference is made to that certain Sales Agency Agreement, dated October 4, 1990
(the "Agency Agreement") between Saarbergwerke AG, a company organized under the
laws of the Federal Republic of Germany ("SBW") and Ashland Coal, Inc., a
company organized under the laws of the State of Delaware ("ACI").
In light of the developments in Europe and, more specifically, the developments
regarding the unification of the German Democratic Republic and the Federal
Republic of Germany, SBW and ACI wish to clarify their understanding of the
Agency Agreement.
SBW and ACI agree that all references in the Agency Agreement to the "Federal
Republic of Germany" refer to the Federal Republic of Germany as it has expanded
as a result of the accession of the German Democratic Republic to the Federal
Republic of Germany as contemplated by Article 23 of the Constitution of the
Federal Republic of Germany.
Please indicate your agreement to the above by signing below and returning a
signed copy of this letter agreement to us at your earliest convenience.
Very truly yours,
SAARBERGWERKE AKTIENGESELLSCHAFT
Dr. Dietrich Reinhardt
Dirctor of Saarbergwerke AG
Agreed:
Ashland Coal, Inc.
By: W. C. Payne
---------------------
Title: President
<PAGE> 1
Exhibit 10.31
COAL PURCHASING SERVICES AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of February,
1983, by and between CARBOEX lNTERNATIONAL LTD., a company organized under the
laws of the Commonwealth of the Bahamas (hereinafter "CIL"), and ASHLAND COAL,
INC., a company organized under the laws of the state of Delaware, U.S.A.
(hereinafter "ASHLAND").
WITNESSETH:
WHEREAS, CIL steadily purchases steam and metallurgical coal from coal
producers and other suppliers in the United States on a regular and continuing
basis and, in connection with same, desires to secure certain coal purchasing
support services from a substantial coal company physically located east of the
Mississippi River in the United States (the "Eastern United States") and
actively engaged in producing, purchasing, processing and transporting coal for
export; and,
WHEREAS, ASHLAND is such a company and is willing to provide coal
purchasing support services to CIL on the terms and conditions hereinafter set
forth.
WHEREAS, these American coal suppliers are divided in two categories:
Category One: Suppliers who do not have an established regular sales
organization and/or an established regular sales representative in
Europe ("Category One Suppliers");
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Category Two: Suppliers who have an established regular sales organization
and/or an established regular sales representative in Europe
("Category Two Suppliers").
NOW, THEREFORE, in consideration of the foregoing and the performance by
each of ASHLAND and CIL of the respective covenants and agreements hereinafter
set forth, ASHLAND and CIL hereby agree as follows:
l) TERM: This Agreement shall be effective as of the date first above
written and it shall continue in full force and effect for a period of one
year and from year to year thereafter, subject to the right of either party
to terminate this Agreement at any time, without cause, on thirty (30) days
prior written notice to the other party.
2) RELATIONSHIP OF THE PARTIES: ASHLAND and CIL shall mutually agree
from time to time as required which coal suppliers shall be deemed to be
Category One Suppliers and which shall be deemed to be Category Two
Suppliers for purposes of this Agreement. CIL designates ASHLAND as its
sole and exclusive representative in the Eastern United States for the
Category One Suppliers to provide the coal purchasing support services
hereinafter described. ASHLAND shall serve in such capacity as an
independent purchase soliciting contractor with respect to all purchases
from Category One Suppliers of steam and
2
<PAGE> 3
metallurgical coal by CIL from the Eastern United States and shall be
compensated for its services on a fee per metric ton shipped basis as
described in paragraph 5.l hereof. Nothing contained in this Agreement
shall limit or otherwise restrict ASHLAND from conducting the various
activities of its own coal business, including the sale of coal directly to
CIL and the purchasing of coal from producers and suppliers on its own
behalf, and nothing in this Agreement shall limit or otherwise restrict CIL
from conducting the various activities of its own coal business with
Category Two Suppliers.
3) DESCRIPTION OF SERVICES: ASHLAND agrees to perform as and when
requested by CIL the following services for CIL:
3.1) Services to be supplied in connection with Category One Suppliers
shall include:
a) the solicitation of bids from coal producers and suppliers for
supplying coal to CIL on such terms and conditions as CIL alone shall decide;
b) the evaluation of bids received by CIL, or by ASHLAND on
behalf of CIL, which evaluation shall include review and analysis of the bidder,
its coal production operations of its contract miners and suppliers, and the
overall reputation and reliability of said parties to perform in compliance with
the terms and conditions of the bid;
c) after execution of a contract between CIL and a supplier,
ASHLAND will monitor performance, including compliance with coal quality
requirements, periodic inspections of the source
3
<PAGE> 4
mining operations, negotiations and assistance in helping coordinate scheduling,
transportation and delivery of the coal into the vessel.
3.2) Services to be supplied ln connection with Category Two Suppliers
shall include:
a) at the request of CIL, the services to be supplied by ASHLAND
are those indicated in paragraph 3.l(c).
4) AUTHORITY OF ASHLAND: ASHLAND shall provide the foregoing support
services to CIL and is empowered to act as representative for CIL in such
capacity only. ASHLAND shall have no authority to enter into contracts on behalf
of CIL or to otherwise obligate CIL. All decisions respecting the acceptance of
bids, the entering into contracts and the terms and conditions of such contracts
and the request of services set forth under paragraph 3.2 shall be made solely
by CIL.
5) COMPENSATION: As full compensation for ASHLAND's commitment and
performance of the foregoing services, CIL covenants and agrees to pay ASHLAND
the following amounts:
(a) For services supplied in connection with Category One
Suppliers, Fifty Cents ($.50; U. S. Dollars) per metric ton for each metric ton
of coal shipped to CIL from sources in the Eastern United States, other than
ASHLAND, after the effective date of this Agreement under contracts or
commitments entered into after the effective date of this Agreement; and
(b) For services supplies ln connection with Category Two
Suppliers, Twenty-Five Cents ($0.25) per metric
4
<PAGE> 5
ton of coal shipped to CIL from sources in the Eastern United States,
other than ASHLAND, after the effective date of this Agreement.
Compensation payments shall be made monthly, on or before the
20th day of the month, for all coal delivered into the vessel at a United States
port during the preceding calendar month.
6) DEFAULT: Should CIL fail or refuse to make payments as hereinabove
provided or should ASHLAND fail or refuse to perform the services reasonably
requested by CIL under the terms of this Agreement, the non-defaulting party
shall have the right to terminate this Agreement immediately with written notice
to the party in default.
7) SURVIVAL OF OBLIGATION TO COMPENSATE: Upon termination of this
Agreement, except by reason of default, CIL shall remain obligated to compensate
ASHLAND at the aforementioned rates for each metric ton of coal shipped under
contracts entered into or commitments made during the continuation of this
Agreement.
8) WORK PROCEDURE: Subject to the right of each party to nominate
other responsible agents, CIL hereby nominates Mr. Francisco Santoro and ASHLAND
hereby nominates Mr. Rex Jones as their responsible agents meaning the persons
responsible in their respective organization for the communications and
ACTIVITIES NECESSARY TO EFFECTUATE THE purpose of this Agreement. In particular:
8.1) Category One Suppliers:
Mr. Santoro and Mr. Jones will be responsible for
5
<PAGE> 6
establishing a work procedure for quick and flexible action.
ASHLAND shall have no authority to enter into contracts on behalf of
CIL or otherwise obligate CIL.
ASHLAND shall advise CIL of all proposed visits to the suppliers in
order to assure CIL the opportunity to participate in the visits.
8.2) Category Two Suppliers:
ASHLAND shall act only upon request of CIL and CIL shall inform
ASHLAND of its contacts with suppliers in order to avoid a case of
duplicity of inquiries to any one supplier.
IN WITNESS WHEREOF, CIL and ASHLAND have caused the execution of this
Agreement by their duly authorized officers as of the day and year first above
written.
CARBOEX INTERNATIONAL LTD.
By: Jose Siera
---------------------
Its: Chairman
---------------------
ASHLAND COAL, INC.
By: John B. Kebbish
---------------------
Its: President
---------------------
6
<PAGE> 7
SOCIEDAD ESPANOLA de CARBON EXTERIOR, S.A. ("CARBOEX"), parent company
of CIL, by its execution hereof, hereby ACKNOWLEDGES ITS INTENTION TO EFFECT ALL
COAL PURCHASES FROM EASTERN United States' suppliers through its subsidiary CIL
and agrees, that should any such purchases be made directly by CARBOEX, or
through any of its other subsidiaries or affiliated companies, that such
purchases shall be made subject to and under the same terms and conditions as
purchases by CIL under this Agreement, with the aforementioned compensation to
be paid to ASHLAND.
SOCIEDAD ESPANOLA de CARBON
EXTERIOR, S.A.
By: Jose Siera
-----------------------------
Its: Chairman
-----------------------------
7
<PAGE> 1
Exhibit 10.32
ASHLAND COAL, INC.
BENEFIT RESTORATION PLAN
EFFECTIVE
JANUARY 1, 1994
<PAGE> 2
Ashland Coal, Inc.
Benefit Restoration Plan
TABLE OF CONTENTS
Section Page
- ------- ----
INTRODUCTION .............................................. 1
ARTICLE I DEFINITIONS
1.01. Actuarial Equivalent .................... 3
1.02. Affiliate ............................... 3
1.03. Annuity Starting Date ................... 3
1.04. Beneficiary ............................. 3
1.05. Board ................................... 3
1.06. Code .................................... 3
1.07. Committee ............................... 3
1.08. Corporation ............................. 3
1.09. Eligible Employee ....................... 3
1.10. Participant ............................. 4
1.11. Pension Plan ............................ 4
1.12. Plan .................................... 4
1.13. Qualified Pre-retirement Survivor's
Annuity ........................... 4
1.14. Retirement and Retire ................... 4
ARTICLE II PARTICIPATION ........................... 5
ARTICLE III BENEFITS ................................ 6
ARTICLE IV VESTING ................................. 8
ARTICLE V GUARANTEES .............................. 9
ARTICLE VI TERMINATION, AMENDMENT OR
MODIFICATION OF PLAN .................... 10
ARTICLE VII OTHER BENEFITS AND AGREEMENTS ........... 11
ARTICLE VIII RESTRICTIONS ON TRANSFER OF
BENEFITS ................................ 12
ARTICLE IX ADMINISTRATION OF THE PLAN .............. 13
ARTICLE X MISCELLANEOUS ........................... 15
ARTICLE XI ADOPTION ................................ 16
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Ashland Coal, Inc.
Benefit Restoration Plan
INTRODUCTION
As of September 24, 1975, Ashland Coal, Inc. ("ACI") adopted the
Ashland Oil, Inc. Nonqualified Pension Plan (the "Oil Plan") for the purpose of
providing benefits to certain employees in excess of the maximum limitations on
contributions and benefits imposed under Section 415 of the Internal Revenue
Code of 1954, as amended (now the Internal Revenue Code of 1986, as amended (the
"Code")) with respect to plans satisfying the requirements of Code section
401(a).
As a result of the spin-off of ACI by Ashland Oil, Inc., in August,
1988, which prevented ACI's further participation in the Oil Plan, ACI adopted a
plan comparable to the Oil Plan, the Ashland Coal, Inc. Nonqualified Excess
Benefit Plan on August 8, 1988, effective August 1, 1988 (the "Excess Benefit
Plan"). The Excess Benefit Plan provides benefits in excess of the limits
imposed under Code section 415 to retirement eligible participants under the
Ashland Coal, Inc. Pension Plan (the "Pension Plan").
Effective October 1, 1989, Code section 401(a)(17) imposed limits on
the amount of a participant's compensation that could be taken into account
under the Pension Plan. The new limits apply to all plans satisfying the
requirements of Code section 401(a). The applicable limit was further reduced to
$150,000 by the Omnibus Budget Reconciliation Act of 1993 ("OBRA '93"). On
February 23, 1994, Ashland Coal, Inc.'s Personnel and Compensation Committee
authorized the amendment of the Excess Benefit Plan to also provide for the
payment of benefits thereunder lost under the Pension Plan as a result of OBRA
'93.
The effect of these changes on the Excess Benefit Plan would be to
convert it to a so-called "top-hat" plan under the Employee Retirement Income
Security Act of 1974, as amended. Coverage under such plans is required to be
more restrictive than coverage under the Excess Benefit Plan. Accordingly,
effective January 1, 1994, ACI has implemented the Benefit Restoration Plan (the
"Benefit Restoration Plan") to effect the Personnel and Compensation Committee's
actions with respect to benefits lost under Code section 401(a)(17).
The Benefit Restoration Plan is an unfunded non-qualified defined
benefit plan pursuant to which any affected participant, his contingent
annuitant or beneficiary will receive the difference between (i) the actuarially
equivalent
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Ashland Coal, Inc.
Benefit Restoration Plan
value of the benefits actually accrued by such participant under the
Pension Plan (or any similar plan of ACI or an Affiliate designated for this
purpose) and (ii) the actuarially equivalent value of the benefits such
participant would have accrued under the Pension Plan but for the application of
Code section 401(a)(17).
ACI believes that the adoption of the Benefit Restoration Plan will
assist it in attracting and retaining those employees, whose judgment, abilities
and experience will contribute to ACI's and its Affiliates' continued success.
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Ashland Coal, Inc.
Benefit Restoration Plan
ARTICLE I
DEFINITIONS
The following phrases or terms have the indicated meanings:
1.01. ACTUARIAL EQUIVALENT means a benefit of equivalent value based on the
factors and assumptions employed in determining actuarial equivalencies to the
normal form of benefit under the Ashland Coal, Inc. Pension Plan.
1.02. AFFILIATE means any entity that is a member of a controlled group of
corporations as defined in Code section 1563(a), determined without regard to
Code sections 1563(a)(4) and 1563(e)(3)(c), of which the Corporation is a member
according to Code section 414(b), and which has, with the approval of the
Personnel and Compensation Committee of the Board, adopted the Pension Plan by
action of its board.
1.03. ANNUITY STARTING DATE means the first day of the first month for which a
benefit is payable under the Plan.
1.04. BENEFICIARY means the person, persons, entity, entities or the estate of a
Participant which is designated by the Pension Plan or a Participant, contingent
annuitant or beneficiary in accordance with the Pension Plan, to receive any
benefits that may become payable under the Pension Plan as a result of the
Participant's death.
1.05. BOARD means the Board of Directors of Ashland Coal, Inc.
1.06. CODE means the Internal Revenue Code of 1986, as amended.
1.07. COMMITTEE means the Ashland Coal, Inc. Staff Administrative Committee,
which serves as the Administrative Committee in conjunction with the Ashland
Coal, Inc. Pension Plan, and which shall, in accordance with the provisions of
Article IX hereof, be responsible for the management and administration of the
Plan.
1.08. CORPORATION means Ashland Coal, Inc.
1.09. ELIGIBLE EMPLOYEE means an individual employed by the Corporation or an
Affiliate whose compensation that would
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Ashland Coal, Inc.
Benefit Restoration Plan
otherwise be taken into account under the Pension Plan exceeds the maximum that
may be taken into account thereunder under Code section 401(a)(17) for any plan
year. Such individuals are deemed to be members of a select group of management
or highly compensated employees of the Corporation and its Affiliates.
1.10. PARTICIPANT means an Eligible Employee.
1.11. PENSION PLAN means, in the case of any Plan Participant, unless another
plan or plans are specifically designated by the Committee in lieu thereof or in
addition to such plan, the Ashland Coal, Inc. Pension Plan or, in the case of a
Plan Participant employed by an Affiliate which does not participate in the
Ashland Coal, Inc. Pension Plan, any defined benefit plan sponsored by such
Affiliate in which the Participant in question participates.
1.12. PLAN means the Ashland Coal, Inc. Benefit Restoration Plan.
1.13 QUALIFIED PRE-RETIREMENT SURVIVOR'S ANNUITY means the monthly benefit
payable to the surviving spouse, if any, on the death of a Participant prior to
his Annuity Starting Date in the form determined under Section 7.01 of the
Pension Plan.
1.14. RETIREMENT and RETIRE mean the separation from service with the
Corporation or an Affiliate at or after satisfying the requirements for early
retirement under the terms of the Pension Plan or such other plan as may have
been designated by the Committee with respect to a Participant and the
commencement of benefits thereunder.
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Ashland Coal, Inc.
Benefit Restoration Plan
ARTICLE II
PARTICIPATION
Each Eligible Employee shall automatically become a Participant in the
Plan, as of the date his benefit under the Pension Plan is first limited by Code
section 401(a)(17).
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Ashland Coal, Inc.
Benefit Restoration Plan
ARTICLE III
BENEFITS
Subject to the limitations set forth in Articles IV, V and VI, the
benefits of a Participant, his contingent annuitant and his Beneficiary shall be
as follows:
3.01. A Participant shall be entitled to a benefit equal to the Actuarial
Equivalent of the difference between (i) the benefits that accrue to the
Participant under the Pension Plan and (ii) the benefits the Participant would
have accrued under the Pension Plan but for the application of Code section
401(a)(17).
3.01. (a) With respect to vested benefits accrued by a Participant, if a
Participant dies prior to what would have been his Annuity Starting Date under
the Pension Plan, the Participant's surviving spouse, if any, shall be entitled
only to a Qualified Pre-retirement Survivor's Annuity commencing on what could
have been the Participant's earliest early retirement date under the Pension
Plan. The benefit due a Participant's surviving spouse hereunder shall be
computed in the same manner as the Participant's benefit is computed under Plan
section 3.01.
(b) In the event of a Participant's death after his Annuity Starting
Date, benefits will be paid in accordance with the form of payment elected by
the Participant under the terms of the Pension Plan. In the event of a
Participant's death after his Annuity Starting Date, any benefit that should
have been paid to the Participant but had not been paid as of the date of the
Participant's death shall be paid to the Participant's personal representative,
determined in accordance with state law.
3.02. The Plan's benefit payments shall begin as of the later of (i) the date
the Participant's benefits commence under the Pension Plan, or (ii) the first
day of the month following the Participant's separation from service and shall
be paid in the manner designated by the Committee in its sole discretion. If the
Committee has made no designation of the manner in which the Plan's benefits
shall be paid as of the date such benefits become payable to the Participant,
the Committee shall be deemed to have made a designation that the Plan's benefit
payments shall be payable to the Participant, contingent annuitant, or the
Beneficiary designated pursuant to the Pension Plan for the same period and in
the
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Ashland Coal, Inc.
Benefit Restoration Plan
same form as the Participant elected under the Pension Plan. Benefits not
paid in the normal form or commencing prior to what would have been the
Participant's normal retirement date, as provided for under the Pension Plan,
must be an actuarial equivalent of the normal form of benefit and, where
applicable, reduced to reflect early commencement based on the factors and
assumptions employed under the Pension Plan.
3.03. Notwithstanding any other provision of the Plan, in the event a benefit
payable under the Plan is too small (in the Committee's judgment) to be paid
monthly, such benefit or its Actuarial Equivalent may be paid quarterly,
semi-annually, annually, or in a lump sum, as the Committee may determine in its
sole discretion.
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Ashland Coal, Inc.
Benefit Restoration Plan
ARTICLE IV
VESTING
A Participant's, contingent annuitant's (including a surviving
spouse's) or Beneficiary's right to receive a benefit under Plan section 3.01 or
3.02 exists only if the Participant's employment terminates as a result of death
or at a time as of which he would have been eligible to elect early retirement
under the terms of the Pension Plan.
Despite the foregoing, a Participant (and his contingent annuitant or
Beneficiary) forfeits all benefits from the Plan if the Committee determines
that his employment is terminated as a result of fraud, dishonesty, conviction
of or pleading guilty to a felony, or embezzlement from the Corporation or an
Affiliate. Further, in the event the Committee determines that a Participant who
has separated from service for any reason is guilty of fraud or dishonesty
against the Corporation or an Affiliate or is convicted of or pleads guilty to a
felony against or embezzlement from the Corporation or an Affiliate shall
forfeit his entitlement to any further payments or benefits under the Plan.
Likewise, if a Participant discloses confidential information to others outside
the Corporation and its Affiliates without the Corporation's consent or accepts,
during a period of five years following his Retirement, any employment which is
in direct conflict with the business of the Corporation and its Affiliates at
the time, any remaining benefits due the Participant under the Plan will be
forfeited.
In the event the Corporation, after a reasonable effort, is unable to
locate a person to whom a benefit is payable under the Plan, such benefit shall
be forfeited; provided, however, that such benefit shall be reinstated (in the
same amount and form as that of the benefit forfeited without any obligation to
pay amounts which would otherwise have previously come due) upon proper claim
made by such person prior to termination of the Plan.
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Ashland Coal, Inc.
Benefit Restoration Plan
ARTICLE V
GUARANTEES
Ashland Coal, Inc. and any Affiliate participating in the Plan has
only a contractual obligation to pay the benefits described in Article III. All
benefits are to be satisfied solely out of the general corporate assets of the
Corporation or the appropriate Affiliate which shall remain subject to the
claims of its creditors. No assets of the Corporation or a participating
Affiliate will be segregated or committed to the satisfaction of its obligations
to any Participant, contingent annuitant or Beneficiary under this Plan. If the
Corporation in its sole discretion, elects to purchase life insurance on the
life of a Participant in connection with the Plan, the Participant must submit
to a physical examination, if required by the insurer, and otherwise cooperate
in the issuance of such policy or his rights under the Plan will be forfeited.
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Ashland Coal, Inc.
Benefit Restoration Plan
ARTICLE VI
TERMINATION, AMENDMENT OR MODIFICATION OF PLAN
6.01. Except as otherwise specifically provided, the Board or its delegatee
reserves the right to modify, alter, amend or terminate the Plan, wholly or
partially, at any time and from time to time. Such action may be taken by a
majority vote of the Board's members at a meeting, by unanimous consent in lieu
of a meeting or in any other manner permissible under Delaware corporate law. In
addition, the Board or its delegatee may delegate to an appropriate officer or
officers of the Corporation or a committee, all or part of its authority to
amend the Plan. Any such modification, alteration, amendment, change or
termination may not affect or alter the benefits paid or obligations to a
Participant who died or Retired before the modification, alteration, amendment,
change, termination or whose benefits vested in accordance with Article IV.
6.02. Section 6.01 notwithstanding, no action to terminate the Plan shall be
taken except upon written notice to each Participant to be affected thereby.
6.03. Any notice which shall be or may be given under the Plan shall be in
writing and shall be delivered via normal intra-corporate delivery methods or
mailed by United States mail, postage prepaid. If notice is to be given to the
Corporation, such notice shall be addressed to it at Post Office Box 6300,
Huntington, West Virginia 25771-6300; addressed to the attention of the
Corporate Secretary. If notice is to be given to a Participant, such notice
shall be addressed to the Participant's last known address.
6.04. Except as provided in Plan section 6.01, upon the termination of this
Plan, the Plan shall no longer be of any further force or effect, and, except as
provided in Plan section 6.01, neither the Corporation nor any Participant shall
have any further obligation or right under this Plan.
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Ashland Coal, Inc.
Benefit Restoration Plan
ARTICLE VII
OTHER BENEFITS AND AGREEMENTS
The benefits provided for a Participant, his contingent annuitant and
his Beneficiary under the Plan are in addition to any other benefits available
to such Participant under any other plan or program of the Corporation or a
participating Affiliate for its employees, and, except as may otherwise be
expressly provided for, the Plan shall supplement and shall not supersede,
modify or amend any other plan or program of the Corporation or a participating
Affiliate in which a Participant is participating.
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Ashland Coal, Inc.
Benefit Restoration Plan
ARTICLE VIII
RESTRICTIONS ON TRANSFER OF BENEFITS
No right or benefit under the Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to
do so shall be void. No right or benefit hereunder shall in any manner be liable
for or subject to the debts, contracts, liabilities, or torts of the person
entitled to such benefit. If any Participant, contingent annuitant or
Beneficiary under the Plan should become bankrupt or attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge any right to a benefit
hereunder, then such right or benefit, in the discretion of the Committee, shall
cease and terminate, and, in such event, the Committee may hold or apply the
same or any part thereof for the benefit of such Participant, contingent
annuitant, or Beneficiary, his or her spouse, children, or other dependents, or
any of them, in such manner and in such portion as the Committee may deem
proper.
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Ashland Coal, Inc.
Benefit Restoration Plan
ARTICLE IX
ADMINISTRATION OF THE PLAN
9.01. The Plan shall be administered by the Committee. Subject to the provisions
of the Plan, the Committee shall have the discretion to interpret the Plan and
may adopt, amend and rescind rules and regulations pertaining to its duties
under the Plan. The Committee also shall make all other determinations necessary
or advisable to carry out or discharge its duties under the Plan. The
Committee's interpretation and construction of any provision of the Plan shall
be absolute, exclusive, final and conclusive if exercised in a uniform and
nondiscriminatory manner with respect to similarly situated Participants.
9.02. The Corporation shall indemnify and save harmless each member of the
Committee against any and all expenses and liabilities arising out of his
membership on the Committee, excepting only expenses and liabilities arising out
of his own willful misconduct. Expenses against which a member of the Committee
shall be indemnified hereunder shall include without limitation, the amount of
any settlement or judgment, costs, counsel fees, and related charges reasonably
incurred in connection with a claim asserted, or a proceeding brought or
settlement thereof. The foregoing right of indemnification shall be in addition
to any other rights to which any such member may be entitled.
9.03. In addition to the powers hereinabove specified, the Committee shall have
the power to compute and certify the amount and kind of benefits from time to
time payable to Participants, their contingent annuitants, and Beneficiaries
under the Plan, and to authorize all disbursements for such purposes.
9.04. To enable the Committee to perform its functions, the Corporation and any
participating Affiliate shall supply full and timely information to the
Committee on all matters relating to the compensation of all Participants, their
retirement, death or other cause for termination of employment, and such other
pertinent facts as the Committee may require.
9.05. No amount paid or payable under the Plan shall be deemed salary or other
compensation of a Participant for the
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Ashland Coal, Inc.
Benefit Restoration Plan
purpose of computing benefits to which such Participant or any other person may
be entitled under any employee benefit plan of the Corporation or an Affiliate.
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Ashland Coal, Inc.
Benefit Restoration Plan
ARTICLE X
MISCELLANEOUS
10.01. The Plan does not in any way limit the right of the Corporation or any
participating Affiliate at any time and for any reason to terminate the
employment of a Participant in its employ. In no event shall the Plan, by its
terms or by implication, constitute an employment contract of any nature
whatsoever between the Corporation and a Participant.
10.02. The Plan shall be binding upon the Corporation, any participating
Affiliate and successors and assigns, and, subject to the powers set forth in
Article VI, upon a Participant's, his contingent annuitant's, his Beneficiary's,
or any of their assigns, heirs, executors and administrators.
10.03. To the extent not preempted by federal law, the Plan shall be governed
and construed under the laws of the State of Delaware (other than its choice of
law rules) as in effect from time to time.
10.04. Masculine pronouns wherever used shall include feminine pronouns and the
use of the singular shall include the plural.
-15-
<PAGE> 18
Ashland Coal, Inc.
Benefit Restoration Plan
ARTICLE XI
ADOPTION
The Corporation has adopted this Plan pursuant to action taken by the
Personnel and Compensation Committee of the Board with the approval of the
Board. With the approval of the Personnel and Compensation Committee of the
Board, any Affiliate may adopt this Plan by action of its board of directors.
As evidence of its adoption of the Plan, Ashland Coal, Inc. has caused
this document to be signed by its duly authorized officer, this 10th day of
March, 1995.
ASHLAND COAL, INC.
By: /s/ Roy F. Layman
--------------------------------------
Administrative Vice President
-16-
<PAGE> 1
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1994 1993 1992
------- -------- -------
<S> <C> <C> <C>
Income before the cumulative effect of changes in
accounting................................................. $32,220 $ 45,374 $35,739
Less:
Common stock dividends..................................... 5,686 5,436 5,224
Preferred stock dividends.................................. 2,603 2,529 2,435
Accretion of discount on preferred stock................... -- 770 1,280
------- -------- -------
Undistributed earnings less accretion before cumulative
effect adjustments.................................... 23,931 36,639 26,800
Cumulative effect of changes in accounting................... -- (18,836) --
------- -------- -------
Undistributed earnings less accretion................... $23,931 $ 17,803 $26,800
======= ======== =======
PRIMARY
Average shares and equivalents outstanding:
Shares outstanding......................................... 13,699 13,593 13,060
Shares issuable upon
Conversion of preferred stock........................... 4,587 3,877 3,461
Exercise of stock options............................... 52 109 147
------- -------- -------
Total................................................... 18,338 17,579 16,668
======= ======== =======
Per share amounts:
Undistributed earnings less accretion before cumulative
effect adjustments...................................... $ 1.30 $ 2.08 $ 1.61
Dividends (except preference dividends).................... .42 .40 .40
------- -------- -------
Earnings before cumulative effect adjustments.............. 1.72 2.48 2.01
Cumulative effect adjustments.............................. -- (1.07) --
------- -------- -------
Net Income.............................................. $ 1.72 $ 1.41 $ 2.01
======= ======== =======
FULLY DILUTED
Average shares and equivalents outstanding:
Shares outstanding......................................... 13,699 13,593 13,060
Shares issuable upon
Conversion of preferred stock........................... 5,212 5,212 4,899
Exercise of stock options............................... 54 119 156
------- -------- -------
Total................................................... 18,965 18,924 18,115
======= ======== =======
Per share amounts:
Undistributed earnings less accretion before cumulative
effect adjustments...................................... $ 1.26 $ 1.94 $ 1.48
Dividends (except preference dividends).................... .42 .40 .40
------- -------- -------
Earnings before cumulative effect adjustments.............. 1.68 2.34 1.88
Cumulative effect adjustments.............................. -- (1.00) --
------- -------- -------
Net Income.............................................. $ 1.68 $ 1.34 $ 1.88
======= ======== =======
</TABLE>
<PAGE> 1
EXHIBIT 22
SUBSIDIARIES OF ASHLAND COAL, INC.
The following is a complete list of the subsidiaries of Ashland Coal, Inc.,
a Delaware corporation:
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION
- ------------------------------------------------------------------------------- ---------------
<S> <C>
A. B. & H. Processing, Inc..................................................... Kentucky
Allegheny Land Company......................................................... Delaware
Allegheny Land Company No. 2................................................... Delaware
Ashland Coal International, Ltd................................................ Barbados
Ashland Coal Sales (Ohio), Inc................................................. Delaware
Ashland Terminal, Inc.......................................................... Delaware
Coal-Mac, Inc.(1).............................................................. Kentucky
Mingo Logan Coal Company....................................................... Delaware
Mountain Gem Land, Inc......................................................... West Virginia
Mountain Gem Land No. 2, Inc................................................... West Virginia
Mountain Mining, Inc.(2)....................................................... Delaware
Mountaineer Land Company....................................................... Delaware
Mountaineer Land Company No. 2................................................. Delaware
P. C. Holding, Inc............................................................. Delaware
Saarcar Coal, Inc.............................................................. Kentucky
Tri-State Terminals, Inc....................................................... Delaware
Tri-State Testing Co., Inc..................................................... Delaware
</TABLE>
- ------------------------------
(1) Coal-Mac, Inc. has one subsidiary, which is Bebe Coal Corporation, a
Kentucky corporation.
(2) Mountain Mining, Inc. has five subsidiaries. Two are incorporated in
Delaware: Drennen Tipple Corporation and Julian Tipple, Inc.; and three are
incorporated in West Virginia: Filbeth Enterprises, Inc., Hobet Mining,
Inc., and Servco, Inc. Hobet Mining, Inc. has one subsidiary: Dal-Tex Coal
Corporation, a Delaware corporation. Dal-Tex Coal Corporation has two
subsidiaries: Sharples Coal Corporation and Old Hickory Coal Company, both
West Virginia corporations.
<PAGE> 1
EXHIBIT 24
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in (1) the Registration
Statement (Form S-8 No. 33-26548) pertaining to the 1988 Stock Incentive Plan
for Key Employees of Ashland Coal, Inc. and its subsidiaries and in the related
Prospectus, (2) the Registration Statement (Form S-8 No. 33-26549) pertaining to
the Ashland Coal, Inc. Employee Thrift Plan and in the related Prospectus, (3)
the Registration Statement (Form S-8 No. 33-38229) pertaining to the Coal-Mac,
Inc. Savings and Retirement Plan and in the related Prospectus, (4) the
Registration Statement (Form S-3 No. 33-46856) of Ashland Coal, Inc. and in the
related prospectus and (5) the Registration Statement (Form S-3 No. 33-54122) of
Ashland Coal, Inc. and in the related Prospectus of our report dated January 23,
1995, with respect to the consolidated financial statements and schedule of
Ashland Coal, Inc. and subsidiaries included in the Annual Report (Form 10-K)
for the year ended December 31, 1994.
/s/ ERNST & YOUNG LLP
Louisville, Kentucky
March 7, 1995
<PAGE> 1
EXHIBIT 25
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That each of the undersigned Directors and
Officers of ASHLAND COAL, INC., a Delaware corporation ("Ashland Coal"), hereby
constitutes and appoints William C. Payne, Marc R. Solochek and Roy F. Layman,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power to act without the others, to sign Ashland Coal's Annual Report on Form
10-K for the year ended December 31, 1994, to be filed with the Securities and
Exchange Commission under the provisions of the Securities Exchange Act of 1934,
as amended, to affix the corporate seal of Ashland Coal thereto and to attest
said seal, to file such Annual Report and the exhibits thereto and any and all
other documents in connection therewith, including without limitation amendments
thereto, with the Securities and Exchange Commission, and to do and perform any
and all other acts and things requisite and necessary to be done in connection
with the foregoing as fully as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
Dated: February 23, 1995
<TABLE>
<S> <C>
/s/ WILLIAM C. PAYNE Chairman of the Board, President, Chief
By: Executive
Officer and Director
William C. Payne
/s/ PAUL W. CHELLGREN Director
By:
Paul W. Chellgren
/s/ R. E. YANCEY, JR. Director
By:
Robert E. Yancey, Jr.
/s/ THOMAS L. FEAZELL Director
By:
Thomas L. Feazell
/s/ J. MARVIN QUIN Director
By:
J. Marvin Quin
/s/ JUAN ANTONIO FERRANDO Director
By:
Juan Antonio Ferrando
/s/ ROBERT L. HINTZ Director
By:
Robert L. Hintz
/s/ ROBERT A. CHARPIE Director
By:
Robert A. Charpie
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 1120
<SECURITIES> 0
<RECEIVABLES> 71486
<ALLOWANCES> 0
<INVENTORY> 30211
<CURRENT-ASSETS> 125563
<PP&E> 858138
<DEPRECIATION> 264723
<TOTAL-ASSETS> 838392
<CURRENT-LIABILITIES> 113608
<BONDS> 0
<COMMON> 137
0
67841
<OTHER-SE> 301005
<TOTAL-LIABILITY-AND-EQUITY> 838392
<SALES> 589141
<TOTAL-REVENUES> 610144
<CGS> 510125
<TOTAL-COSTS> 555424
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22238
<INCOME-PRETAX> 32848
<INCOME-TAX> 628
<INCOME-CONTINUING> 32220
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32220
<EPS-PRIMARY> 1.72
<EPS-DILUTED> 1.68
</TABLE>
