SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 1-9993
ASHLAND COAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 61-0880012
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2205 Fifth Street Road, Huntington, West Virginia 25701
(Address of principal executive offices) (Zip Code)
P. O. Box 6300, Huntington, West Virginia 25771
(Mailing Address) (Zip Code)
Registrant's telephone number, including area code (304)526-3333
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
At August 9, 1995, there were 13,748,583 shares of registrant's
common stock outstanding.
1
<PAGE>
Part I - Financial Information
<TABLE>
<CAPTION>
ASHLAND COAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30 December 31
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,418 $ 1,120
Trade accounts receivable 57,731 62,362
Other receivables 3,530 9,124
Inventories 39,913 30,211
Prepaid royalties 15,127 15,568
Deferred income taxes 3,270 3,158
Other 5,152 4,020
130,141 125,563
OTHER ASSETS
Prepaid royalties 69,076 58,779
Coal supply agreements 33,585 35,527
Other 22,914 25,108
125,575 119,414
PROPERTY, PLANT, AND EQUIPMENT
Cost 875,728 858,138
Less accumulated depreciation,
depletion, and amortization 293,212 264,723
582,516 593,415
$838,232 $838,392
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 31,187 $ 35,988
Accrued expenses 31,467 33,352
Income taxes payable 1,254 305
Current portion of debt 34,847 43,963
98,755 113,608
LONG-TERM DEBT 197,726 200,000
ACCRUED POSTRETIREMENT BENEFITS 79,113 75,196
OTHER LONG-TERM LIABILITIES 49,674 48,217
DEFERRED INCOME TAXES 27,314 32,388
STOCKHOLDERS' EQUITY
Convertible preferred stock 67,841 67,841
Common stock 137 137
Paid-in capital 109,014 108,711
Retained earnings 208,687 192,294
Treasury stock, at cost (29) -
385,650 368,983
$838,232 $838,392
See notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
ASHLAND COAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES
Coal sales $147,919 $150,706 $300,328 $283,581
Operating revenues 3,695 3,944 7,910 8,557
151,614 154,650 308,238 292,138
COSTS AND EXPENSES
Cost of coal sold 123,415 125,702 255,002 249,387
Operating expenses 2,865 2,917 5,536 5,770
Selling, general, and
administrative expenses 7,119 8,600 14,310 17,091
133,399 137,219 274,848 272,248
OPERATING INCOME 18,215 17,431 33,390 19,890
OTHER INCOME (EXPENSE)
Interest income 46 50 57 58
Interest expense (5,333) (5,667) (10,473) (11,152)
INCOME BEFORE
INCOME TAXES 12,928 11,814 22,974 8,796
Income tax expense 1,362 295 2,367 334
NET INCOME $ 11,566 $ 11,519 $ 20,607 $ 8,462
Earnings per common share
Primary $ .62 $ .62 $ 1.10 $ .44
Fully diluted $ .60 $ .60 $ 1.07 $ .44
Dividends declared per
common share $ .115 $ .10 $ .23 $ .20
See notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
ASHLAND COAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 20,607 $ 8,462
Adjustments to reconcile to cash
provided by operating activities:
Depreciation, depletion, and amortization 34,948 35,955
Prepaid royalties expensed 10,681 10,604
Deferred income taxes (5,186) (7,305)
Gain on disposition of assets (399) (20)
Partnership costs in excess of
cash advances 417 425
Changes in operating assets and
liabilities (1,018) (4,802)
CASH PROVIDED BY
OPERATING ACTIVITIES 60,050 43,319
INVESTING ACTIVITIES
Property, plant, and equipment:
Purchases (20,975) (18,714)
Proceeds from sales 1,359 1,137
Advances on prepaid royalties (18,242) (17,688)
CASH USED IN
INVESTING ACTIVITIES (37,858) (35,265)
FINANCING ACTIVITIES
Proceeds from borrowings 605,244 376,887
Payments on borrowings (619,197) (380,241)
Dividends paid (4,214) (3,652)
Proceeds from sale of common stock 273 1,115
CASH USED IN
FINANCING ACTIVITIES (17,894) (5,891)
Increase in cash and cash equivalents 4,298 2,163
Cash and cash equivalents at beginning
of period 1,120 556
Cash and cash equivalents at end of period $ 5,418 $ 2,719
See notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
(Unaudited)
NOTE A - GENERAL
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial reporting and Securities and Exchange
Commission regulations, but are subject to any year-end audit
adjustments which may be necessary. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. These financial
statements should be read in conjunction with the Annual Report of
Ashland Coal, Inc. (Ashland Coal or the Company) on Form 10-K for the
year ended December 31, 1994. Results of operations for the periods
ended June 30, 1995, are not necessarily indicative of results to be
expected for the year ending December 31, 1995.
NOTE B - RECLASSIFICATIONS
Certain amounts in the 1994 financial statements have been reclassified
to conform with the classifications in the 1995 financial statements.
NOTE C - INVENTORIES
Inventories are comprised of the following:
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
(In thousands)
<S> <C> <C>
Coal $21,759 $14,198
Supplies and other 18,154 16,013
$39,913 $30,211
</TABLE>
NOTE D - DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
(In thousands)
<S> <C> <C>
9.78% senior unsecured notes
payable in four equal annual
installments beginning
September 15, 1997 $100,000 $100,000
9.66% senior unsecured notes
payable in six equal annual
installments beginning
May 15, 2001 52,900 52,900
8.92% senior unsecured notes
due May 15, 1996 22,100 22,100
Indebtedness to banks under
revolving credit agreement 55,000 25,000
Indebtedness to banks under
lines of credit - 43,858
Other 2,573 105
232,573 243,963
Less current portion 34,847 43,963
Long-term debt $197,726 $200,000
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
ASHLAND COAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE E - COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net income $11,566 $11,519 $20,607 $ 8,462
Less: Common stock dividends 1,580 1,369 3,159 2,735
Preferred stock
dividends 702 633 1,402 1,264
Undistributed earnings $ 9,284 $ 9,517 $16,046 $ 4,463
Primary
Average shares and
equivalents outstanding:
Shares outstanding 13,742 13,694 13,734 13,679
Shares issuable upon
Conversion of preferred
stock 4,587 4,587 4,587 4,587
Exercise of stock options 57 65 59 33
Total 18,386 18,346 18,380 18,299
Per share amounts:
Undistributed earnings $ .50 $ .52 $ .87 $ .24
Dividends (except
preference dividends) .12 .10 .23 .20
Net income $ .62 $ .62 $ 1.10 $ .44
Fully Diluted
Average shares and
equivalents outstanding:
Shares outstanding 13,742 13,694 13,734 13,679
Shares issuable upon
Conversion of preferred
stock 5,212 5,212 5,212 5,212
Exercise of stock options 57 65 63 33
Total 19,011 18,971 19,009 18,924
Per share amounts:
Undistributed earnings $ .48 $ .50 $ .84 $ .24
Dividends (except
preference dividends) .12 .10 .23 .20
Net income $ .60 $ .60 $ 1.07 $ .44
</TABLE>
6
<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F - CONTINGENCIES
Ashland Coal is a party to numerous claims and lawsuits with respect
to various matters. The Company provides for costs related to
contingencies when a loss is probable and the amount is reasonably
determinable. The Company estimates that its probable aggregate loss
as a result of such claims is $2.9 million (included in other long-term
liabilities) and believes that probable insurance recoveries of $1.8
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 $5.0
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 consoli
dated financial condition, results of operations, or liquidity of the
Company.
7
<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
Management's Discussion and Analysis
Results of Operations
Quarter Ended June 30, 1995, Compared
to Quarter Ended June 30, 1994
Net income for the quarter ended June 30 was $11.6 million in 1995 and
$11.5 million in 1994.
Gross profit on coal sales (selling price less cost of sales) declined
$.40 per ton from the second quarter of 1994 to the second quarter of
1995, but that reduction was largely offset by an increase in sales
volume from 5.1 million to 5.5 million tons. The reduction in gross
profit stemmed from scheduled price and volume reductions on an
important sales contract, expiration of another contract at the end of
1994, deferral of some second quarter 1995 contract shipments to
Cincinnati Gas & Electric Company (CG&E), and lower prices under short-
term agreements. Those factors were nearly offset by a lower average
cost of sales per ton, which was an outgrowth of recent cost reduction
initiatives and higher production levels (without appreciable changes in
the amounts of labor and equipment) at some of the mines. The average
cost of sales in the second quarter was the lowest ever recorded by the
Company.
Selling, general, and administrative expenses declined $1.5 million.
This decrease was primarily attributable to a reduction in sales
contract amortization because of the sales contract expiration at the
end of 1994. Interest expense decreased $.3 million, reflecting lower
average debt levels.
The Company recorded income tax expense of $1.4 million for the second
quarter of 1995 and $.3 million in the same period of 1994. As
discussed below, this increase relates to higher estimated profitability
in 1995.
Six Months Ended June 30, 1995, Compared
to Six Months Ended June 30, 1994
For the six months ended June 30, 1995, net income was $20.6 million.
In the comparable period of 1994, net income was $8.5 million.
Gross profit on coal sales rose $.58 per ton from 1994 to 1995. The
effects of the contract modifications and expiration discussed above and
of lower short-term prices were more than offset by cost reductions. In
addition to the factors affecting second quarter comparisons, the
effects of severe winter weather during the first two months of 1994 and
the operational aftereffects of the 1993 strike by the United Mine
Workers of America (UMWA) on production during the first quarter of 1994
adversely affected 1994 costs. The seven-month strike ended in December
1993.
Operating revenues were $.6 million lower in 1995 than in 1994,
principally because of the inclusion in 1994 of a $1.0 million recovery
from a contractor for business interruption losses related to the 1992
silo collapse at Mingo Logan's preparation plant.
Selling, general, and administrative expenses declined $2.8 million,
from $17.1 million in 1994 to $14.3 million in 1995. That change
related primarily to the change in sales contract amortization because
of the expired contract. Interest expense was reduced by $.7 million,
principally because of lower average debt levels.
Income tax expense rose to $2.4 million in 1995 from $.3 million in
1994. The estimated annual effective tax rate for 1995 is currently
10.3%; the rate at June 30, 1994, was 3.8%. That increase in estimated
effective tax rate reflects higher projected profitability in 1995
coupled with the effects of percentage depletion. The effective tax
rate is sensitive to changes in profitability because of the effects of
percentage depletion.
8
<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
Management's Discussion and Analysis--Continued
Balance Sheet
The balance of trade accounts receivable at June 30, 1995, was $4.6
million less than the balance at December 31, 1994. 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 June 30,
1995, and December 31, 1994, reflect the levels of coal sales in June
1995 and December 1994, respectively. If, as the Company expects, the
level of the Company's export sales increases, the number of weeks of
sales in receivables will likely also increase, because receivables from
export sales typically bear longer payment terms. All significant
customer accounts are being paid within credit terms.
Other receivables decreased from $9.1 million at December 31, 1994, to
$3.5 million at June 30, 1995. The balance at December 31, 1994, was
unusually high because of amounts due for business interruption losses
related to the 1993 silo failure at Mingo Logan Coal Company (Mingo
Logan) and a compensation agreement for an easement which rendered
certain coal unminable. In addition, the receivable under a railroad
freight contract was higher at December 31, 1994, than at June 30, 1995,
because that contract provides for an annual payment in the first
quarter of each year of the amount earned in the preceding calendar
year.
Inventories increased $9.7 million from December 31, 1994, to June 30,
1995. An increase in coal inventories accounted for $7.6 million of
this increase, and the remainder of the increase was in supplies. Coal
inventories increased because of the deferral of shipments to CG&E,
higher inventories at export terminals in support of increased export
sales, and higher inventory levels after start-up of improvements to the
coal handling facilities at the Hobet 21 complex of Hobet Mining, Inc.
(Hobet). Those factors were partially offset by seasonal and other
normal fluctuations. Supplies inventories increased in part because of
seasonal factors. Both coal and supplies inventories are expected to
decline over the remainder of 1995 from the levels at June 30, 1995.
The noncurrent balance of prepaid royalties increased $10.3 million from
the balance at December 31, 1994. This increase was largely because of
an annual royalty payment of $16 million due at the end of March 1995.
Accounts payable and accrued expenses declined $4.8 million and $1.9
million, respectively, from December 31, 1994, to June 30, 1995, as the
result of normal fluctuations.
Outlook
Ashland Coal anticipates that over the remainder of 1995 its gross
profit per ton will approximate that of the six months ended June 30,
1995, and that sales volume will be about the same as in the first half.
Average selling price is expected to rise, principally as a result of
higher shipments to CG&E as shipments deferred in the second quarter are
made. In addition, it is expected that prices on the spot market will
improve somewhat, although this will not have a great impact on Ashland
Coal because the amount of uncommitted tonnage through the end of 1995
is relatively small. Average cost of sales is expected to remain at a
low level in the second half of 1995, but above that achieved in the
second quarter. Primary factors responsible for the projected costs are
improved mining conditions, increased blending of surface-mined raw coal
with high-quality deep-mined coal beginning at the end of the first
quarter, and other operational efficiencies.
The Company expects the effective tax rate for 1995 to be significantly
higher than the rate in 1994, because income in 1995 is expected to be
higher relative to percentage depletion. The Company's effective tax
rate is sensitive to changes in profitability relative to the level 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 a
9
<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
Management's Discussion and Analysis--Continued
substantial portion of its 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
recognize all of the AMT credits generated in 1995.
Contracts with CG&E providing for the sale of coal at prices above
current market prices are scheduled to expire at the end of 1995, and it
is likely selling prices will be reduced beginning in 1996 under three
other contracts as a result of contract provisions that permit the
adjustment of contract prices for changes in market conditions. These
expirations and price reductions will have a material adverse effect on
the Company. The Company is continuing its efforts to reduce costs,
increase production and obtain long-term contracts to replace the
expiring contracts, and it continues to evaluate the amount of the
benefits to be derived from these efforts, as well as the timing for
receipt of those benefits. In addition, the Company is evaluating the
optimum level of production for 1996 and the expected level of the
Company's selling prices for that year in light of the CG&E contract
expirations, the expected price reductions in the three other contracts,
expected market price and the likely mix of contract and spot sales. At
present, the Company is unable to predict how 1996 results of operations
will relate to anticipated 1995 results.
The unseasonably mild weather experienced in the winter of 1994-1995 and
slower economic growth in the second quarter of 1995 have caused demand
and prices to weaken since late 1994. Recent hot summer weather appears
to be having a stabilizing effect on the spot market and in combination
with stronger economic growth projected in the second half of 1995
should help to move supply and demand toward equilibrium. 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. The Company has significant
uncommitted tonnage for 1996, however. The Company expects to enter
into long-term contracts and spot commitments in the second half of 1995
for 1996 deliveries.
Ashland Coal believes its export sales volume will increase signifi
cantly in 1995 as the result of a better balance of supply and demand
worldwide, but the Company does not expect that such increase 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 and to enhance profitability of the mine, the Company is
studying various courses of action relating to the future of Hobet 07,
and some action may be taken in the near term.
The National Bituminous Coal Wage Agreement of 1993 (Wage Agreement),
which covers the UMWA employees of Hobet and of the subsidiaries of Dal-
Tex Coal Corporation, 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 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, have not had and
will not have an adverse effect on costs.
10
<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
Management's Discussion and Analysis--Continued
The labor forces at Mingo Logan and its Mountaineer Mining Company and
Bearco divisions are not currently unionized. However, in a 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.
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, in coal fields in other regions of the U.S., or abroad.
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 six months ended June 30, 1995
and 1994:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Net cash provided by (used in)
Operating activities
Before changes in operating assets
and liabilities . . . . . . . . . . . . . . $ 61,068 $ 48,121
Changes in operating assets and liabilities. (1,018) (4,802)
60,050 43,319
Investing activities . . . . . . . . . . . . (37,858) (35,265)
Financing activities . . . . . . . . . . . . (17,894) (5,891)
Increase in cash and cash equivalents . . . . . . $ 4,298 $ 2,163
</TABLE>
Cash provided by operating activities before changes in operating assets
and liabilities increased in 1995 from 1994 primarily because of higher
costs and lower sales volume in the first quarter of 1994 that resulted
from the aftereffects of the UMWA strike and severe winter weather. Cash
used for changes in operating assets and liabilities decreased in 1995
from 1994 primarily as the result of growth in accounts receivable
balances in 1994, largely offset by growth in accounts payable and
accrued expense balances during the same period. The balances of trade
receivables, accounts payable, and accrued expenses at December 31,
1993, reflect the level of coal sales and mining activity in December
1993. Coal sales and mining activity in December 1993 were markedly
lower because of the strike by the UMWA and the aftereffects of the
strike once it was settled. Two other offsetting factors affecting
changes in operating assets and liabilities were a 1995 decrease in
other receivables (discussed above) and a 1994 increase in income taxes
payable.
The increase in cash used for investing activities in 1995 from 1994
primarily reflects a $2.3 million increase in capital expenditures.
A $10.6 million increase in payments on long-term borrowings with cash
provided by operating activities accounted for most of the increase in
cash used for financing activities in 1995 as compared to 1994.
11
<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
Management's Discussion and Analysis--Continued
The Company's capital expenditures during the first six months of 1995
were $21.0 million, which is $2.3 million higher than the comparable
period in 1994. The Company estimates that during the remainder of
1995, capital expenditures may be as much as $57 million.
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 for a three year term. In May 1995 the Company
completed the negotiation of a two-year extension of that lease for most
of the equipment. The equipment not included in the extension may be
repurchased at the Company's option for approximately $4 million in
January 1996. The portion of the equipment included in the two-year
extension may be repurchased at the Company's option in January 1998 for
approximately $28 million. Ashland Coal believes that such purchase, if
it should occur, would be funded under the Company's revolving credit
agreement or lines of credit.
Ashland Coal has a revolving credit agreement with a group of banks that
provides for borrowings of up to $500 million until the agreement s
termination in 1999. At June 30, 1995, the Company had $55 million
borrowed under this agreement. The Company also had $175 million of
indebtedness under senior unsecured notes maturing in 1996 through 2006.
Certain of these senior notes amounting to $22.1 million are due on May
15, 1996. The Company anticipates that it will fund this payment under
its revolving credit agreement. Ashland Coal periodically establishes
uncommitted lines of credit with banks. These agreements generally
provide for short-term borrowings at market rates. At June 30, 1995,
there were $247.9 million of such agreements in effect with no
borrowings outstanding. The Company expects to make discretionary
prepayments of approximately $12 million on indebtedness under the
revolving credit agreement from cash flow generated by operations during
the remainder of 1995 and the first half of 1996.
The Company expects cash flow provided by operating activities in 1995
to be higher than the 1994 level as a result of increased sales stemming
from higher production volumes at Hobet and Dal-Tex, but cash flow from
operations may be reduced in 1996 by the expiration of the CG&E
contracts and price adjustments under other contracts as discussed
above. Ashland Coal believes that over the next 12 months 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 reduce the
level of long-term borrowings, and to pay 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 $2.4 million
and $2.2 million at June 30, 1995, and December 31, 1994, 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 $39.0
million. At June 30, 1995, and December 31, 1994, the accrual for
closing costs, which is included in other long-term liabilities and in
accrued expenses, was $8.8 million and $7.7 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 $1.8 million (included in other assets) related
12
<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
Management's Discussion and Analysis--Continued
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 $5.0 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 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 its 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, except for
those costs related to changes in productivity. 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 $1.3 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
13
<PAGE>
ASHLAND COAL, INC. AND SUBSIDIARIES
Management's Discussion and Analysis--Continued
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. Although the Company is not currently using derivatives to manage
its interest rate risk, the board of directors has authorized such use
of derivatives in a limited fashion, and management is currently
considering swapping some of its fixed-rate debt for floating-rate debt.
The increased exposure to interest rate fluctuations would then be
mitigated through the purchase of interest rate caps.
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, most of the
Company s contracts contain a force majeure clause, which in the event
of an act of God or other event beyond the control of the customer,
allows the customer to suspend its performance under the contract for
the duration of the effect of the event.
Sometimes the contract does not require the customer to make up
purchases not made by reason of force majeure. 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 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 affected 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. If the UMWA is successful in unionizing Mingo Logan (see
discussion above), Mingo Logan also would be subject to the types of
labor disruptions described here.
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.
14
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
There is a pending suit in Circuit Court for Mingo County, West
Virginia, filed September 3, 1993, by the administrator of an estate of
a deceased employee of Mingo Logan. The employee died in an accident
involving the longwall mining equipment at the Mountaineer Mine. The
suit is based on product liability, breach of warranty, and negligence
claims against Mingo Logan and other unrelated defendants, including the
equipment manufacturer, and seeks compensatory and punitive damages of
$45 million. The case is in discovery, and a trial has been scheduled
for late 1995. 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 6. Exhibits and Reports on Form 8-K
(a) 10.1 Ashland Coal, Inc. 1995 Stock Incentive Plan
10.2 Coal Lease Agreement dated March 1, 1993, between
Oglebay Norton Company and Allegheny Land Company No.
2 (a wholly owned subsidiary of Ashland Coal, Inc.)
27 Financial Data Schedule
(b) Reports on Form 8-K
The following report on Form 8-K was filed with the Securities and
Exchange Commission during the period covered by this Report:
Current Report on Form 8-K dated April 6, 1995, reporting
(1) the termination of discussions with Quaker Coal
Company, Inc. concerning the possible purchase by Ashland
Coal of Quaker's Kentucky operations, and (2) confirmation
by Saarbergwerke AG of the termination of rights and
obligations under its existing contracts with Ashland Coal
(following Saarbergwerke AG's sale of all its Ashland Coal
Class B Preferred Stock to Ashland, Inc.).
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ASHLAND COAL, INC.
(Registrant)
Date: August 10, 1995 /s/ William M. Gerrick
William M. Gerrick
Controller (Chief Accounting Officer)
Date: August 10, 1995 /s/ Roy F. Layman
Roy F. Layman
Administrative Vice President
and Secretary
16
<PAGE>
Ashland Coal, Inc.
Form 10-Q for Quarter Ended June 30, 1995
INDEX TO EXHIBITS
ITEM
10.1 Ashland Coal, Inc. 1995 Stock Incentive Plan
10.2 Coal Lease Agreement dated March 1, 1993, between Oglebay Norton
Company and Allegheny Land Company No. 2 (a wholly owned
subsidiary of Ashland Coal, Inc.)
27 Financial Data Schedule
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 5418
<SECURITIES> 0
<RECEIVABLES> 61261
<ALLOWANCES> 0
<INVENTORY> 39913
<CURRENT-ASSETS> 130141
<PP&E> 875728
<DEPRECIATION> 293212
<TOTAL-ASSETS> 838232
<CURRENT-LIABILITIES> 98755
<BONDS> 0
<COMMON> 137
0
67841
<OTHER-SE> 317672
<TOTAL-LIABILITY-AND-EQUITY> 838232
<SALES> 147919
<TOTAL-REVENUES> 151614
<CGS> 123415
<TOTAL-COSTS> 133399
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5333
<INCOME-PRETAX> 12928
<INCOME-TAX> 1362
<INCOME-CONTINUING> 11566
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11566
<EPS-PRIMARY> .62
<EPS-DILUTED> .60
</TABLE>
EXHIBIT A
ASHLAND COAL, INC.
1995 STOCK INCENTIVE PLAN
Effective May 1, 1995
TABLE OF CONTENTS
Section Page
-------------------- ---------
ARTICLE I PURPOSE.......................................... A-1
ARTICLE II DEFINITIONS...................................... A-1
2.01. Agreement....................................... A-1
2.02. Ashland......................................... A-1
2.03. Award........................................... A-1
2.04. Beneficiary..................................... A-1
2.05. Board........................................... A-1
2.06. Change in Control............................... A-1
2.07. Code............................................ A-1
2.08. Committee....................................... A-1
2.09. Common Stock.................................... A-2
2.10. Company......................................... A-2
2.11. Disinterested................................... A-2
2.12. Employee........................................ A-2
2.13. Exchange Act.................................... A-2
2.14. Exercise Price.................................. A-2
2.15. Fair Market Value............................... A-2
2.16. Incentive Stock Option or ISO................... A-2
2.17. Merit Award..................................... A-2
2.18. Nonqualified Stock Option or NQSO............... A-2
2.19. Option.......................................... A-2
2.20. Performance Period.............................. A-2
2.21. Performance Share Award......................... A-2
2.22. Performance Shares.............................. A-2
2.23. Personal Representative......................... A-2
2.24. Phantom Stock Award............................. A-2
2.25. Plan............................................ A-2
2.26. Restricted Period............................... A-2
2.27. Restricted Stock................................ A-2
2.28. Restricted Stock Award.......................... A-3
2.29. Retained Distributions.......................... A-3
2.30. Retirement...................................... A-3
2.31. Section 16(b) Optionee.......................... A-3
2.32. Stock Appreciation Right or SAR................. A-3
2.33. Subsidiary...................................... A-3
2.34. Tax Date........................................ A-3
ARTICLE III STOCK SUBJECT TO THE PLAN....................... A-3
ARTICLE IV ADMINISTRATION.................................. A-3
ARTICLE V ELIGIBILITY..................................... A-4
ARTICLE VI STOCK OPTIONS................................... A-4
6.01. Designation and Price........................... A-4
6.02. Exercise........................................ A-4
6.03. Payment for Shares.............................. A-5
ARTICLE VII STOCK APPRECIATION RIGHTS....................... A-5
ARTICLE VIII RESTRICTED STOCK AWARDS......................... A-6
ARTICLE IX MERIT AWARDS.................................... A-7
ARTICLE X PERFORMANCE SHARES.............................. A-7
ARTICLE XI PHANTOM STOCK AWARDS.......................... A-7
i
Section Page
-------------------- ---------
ARTICLE XII SPECIAL EXERCISE RULES AND CONTINUED EMPLOYMENT AND AGREEMENT
TO SERVE....................................... A-8
12.01.Death.......................................... A-8
12.02.Disability..................................... A-8
12.03.Other Separations From Service................. A-8
12.04.Certain Accelerations.......................... A-9
12.05.Continued Employment Undertaking............... A-9
12.06.Leaves of Absence.............................. A-9
ARTICLE XIII WITHHOLDING TAXES.............................. A-9
ARTICLE XIV ADJUSTMENTS UPON CHANGES IN CAPITALIZATION..... A-10
ARTICLE XV AMENDMENTS AND TERMINATIONS.................... A-10
ARTICLE XVI MISCELLANEOUS PROVISIONS....................... A-10
16.01.No Right to Award.............................. A-10
16.02.Assignment or Alienation....................... A-10
16.03.Compliance with Securities Laws................ A-10
16.04.Expenses....................................... A-11
16.05.Consent to, Ratification of Certain Actions.... A-11
16.06.Binding Nature of Actions...................... A-11
16.07.Other Compensation Arrangements................ A-11
16.08.Time Awards Granted............................ A-11
ARTICLE XVII EFFECTIVENESS OF THE PLAN...................... A-11
ARTICLE XVIII GOVERNING LAW.................................. A-11
ARTICLE XIX UNFUNDED PLAN.................................. A-12
ARTICLE XX RULES OF CONSTRUCTION.......................... A-12
ii
Ashland Coal, Inc.
1995 Stock Incentive Plan
ARTICLE I
PURPOSE
The purpose of the Ashland Coal, Inc. 1995 Stock Incentive Plan is to
promote the interests of Ashland Coal, Inc. and its shareholders by providing
the officers and employees of the Company and its Subsidiaries with an
incentive to continue service with Ashland. Accordingly, the Company may grant
to selected officers and employees of Ashland Stock Options (both options
qualifying under Code section 422 and options not so qualifying), Stock
Appreciation Rights, Restricted Stock, Merit Awards, Performance Share Awards
and Phantom Stock Awards in an effort to attract and retain in Ashland's
employ qualified individuals and to provide such individuals with incentives
to devote their best efforts to Ashland through ownership of the Company's
stock, thus enhancing the value of the Company for the benefit of
shareholders. The proceeds received by the Company from the exercise of
options granted pursuant to this Plan shall be used for general corporate
purposes.
ARTICLE II
DEFINITIONS
2.01. Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and an Employee specifying the terms
and conditions of an Award.
2.02. Ashland means, collectively, Ashland Coal, Inc. and its Subsidiaries.
2.03. Award means an Option, a Stock Appreciation Right, a Restricted Stock
Award, a Merit Award, a Performance Share Award, or a Phantom Stock Award, in
each case granted under this Plan.
2.04. Beneficiary means the person, persons, trust or trusts designated by an
Employee, or if no designation has been made, the person, persons, trust, or
trusts entitled by will or the laws of descent and distribution to receive the
benefits specified under this Plan in the event of an Employee's death.
2.05. Board means the Board of Directors of the Company.
2.06. Change in Control means an event or circumstance which shall be deemed
to occur (1) upon the approval by the Board (or if approval of the Board is
not required as a matter of law, the shareholders of the Company) of (A) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Common
Stock would be converted into cash, securities or other property other than a
merger in which the holders of Common Stock immediately prior to the merger
will have the same proportionate ownership of Common Stock of the surviving
corporation immediately after the merger, (B) any sale, lease, exchange, or
other transfer (in one transaction or a series of related transactions) of all
or substantially all the assets of the Company, or (C) adoption of any plan or
proposal for the liquidation or dissolution of the Company, (2) when any
"person" (as defined in Section 13(d) of the Exchange Act), other than the
Company or any subsidiary or employee benefit plan or trust maintained by the
Company, shall become the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of more than 20% of the Company's
Common Stock outstanding at the time, without the prior approval of the Board,
or (3) at any time during a period of two consecutive years, individuals who
at the beginning of such period constituted the Board shall cease for any
reason to constitute at least a majority thereof, unless the election or the
nomination for election by the Company's shareholders of each new director
during such two-year period was approved by a vote of at least two-thirds of
the directors then still in office who were directors at the beginning of such
two-year period.
2.07. Code means the Internal Revenue Code of 1986, as amended from time to
time.
2.08. Committee means the Key Employee Stock Administration or "KESA"
Committee of the Board, as from time to time constituted, or any successor
committee of the Board with similar functions, which shall consist of three or
more members, each of whom shall be Disinterested.
A-1
2.09. Common Stock means the Common Stock of the Company ($.01 par value),
subject to adjustment pursuant to Article 14.
2.10. Company means Ashland Coal, Inc.
2.11. Disinterested means disinterested within the meaning of applicable
regulatory requirements, including those promulgated under Section 16 of the
Exchange Act.
2.12. Employee means an officer or employee of Ashland.
2.13. Exchange Act means the Securities Exchange Act of 1934, as amended.
2.14. Exercise Price means, with respect to each share of Common Stock
subject to an Option, the price fixed by the Committee at which such share may
be purchased from the Company pursuant to the exercise of such Option, which
price at no time may be less than 100% of the Fair Market Value of the Common
Stock on the date the Option is granted.
2.15. Fair Market Value means, on any given date, the closing price of a
share of Common Stock as reported on the New York Stock Exchange composite
tape on such day, or, if the Common Stock was not traded on the New York Stock
Exchange on such day, then on the next preceding day that the Common Stock was
traded on such exchange, all as reported by such service as the Committee may
select. If shares of Common Stock are not then traded on the New York Stock
Exchange, the Fair Market Value shall be determined by the Committee using any
reasonable method in good faith.
2.16. Incentive Stock Option or ISO means an Option that is intended by the
Committee to meet the requirements of Section 422 of the Code or any successor
provision. No Option that is intended to be an Incentive Stock Option shall be
invalid for failure to qualify as an Incentive Stock Option.
2.17. Merit Award means an award of Common Stock issued pursuant to Article
IX of the Plan.
2.18. Nonqualified Stock Option or NQSO means an Option granted pursuant to
this Plan which does not qualify as an Incentive Stock Option.
2.19. Option means the right to purchase Common Stock at a price to be
specified and upon terms to be designated by the Committee or otherwise
determined pursuant to this Plan. An Option shall be designated by the
Committee as a Nonqualified Stock Option or an Incentive Stock Option.
2.20. Performance Period means the period designated by the Committee during
which the performance objectives shall be measured.
2.21. Performance Share Award means an award of shares of Common Stock, the
issuance of which is contingent upon attainment of performance objectives
specified by the Committee.
2.22. Performance Shares means those shares of Common Stock issuable pursuant
to a Performance Share Award.
2.23. Personal Representative means the person or persons who, upon the
disability or incompetence of an Employee, shall have acquired on behalf of
the Employee by legal proceeding or otherwise the right to receive the
benefits specified in this Plan.
2.24. Phantom Stock Award means a hypothetical or target award of a number of
shares of Common Stock, the vesting, earnout or payment of which is contingent
upon the completion of a number of years of service, the occurrence of an
event or the attainment of performance objectives established by the
Committee.
2.25. Plan means this Ashland Coal, Inc. 1995 Stock Incentive Plan.
2.26. Restricted Period means the period designated by the Committee during
which Restricted Stock may not be sold, assigned, transferred, pledged, or
otherwise encumbered, which period shall not be less than one year from the
date of grant.
2.27. Restricted Stock means those shares of Common Stock issued pursuant to
a Restricted Stock Award which are subject to the restrictions, terms, and
conditions set forth in the related Agreement.
A-2
2.28. Restricted Stock Award means an award of Restricted Stock.
2.29. Retained Distributions means any securities or other property (other
than cash dividends) distributed by the Company in respect of Restricted Stock
during any Restricted Period.
2.30. Retirement means retirement of an Employee from the employ of Ashland
as described in a tax-qualified pension or profit sharing plan maintained by
Ashland in which the Employee participates.
2.31. Section 16(b) Optionee means an Employee or former Employee who is
subject to Section 16(b) of the Exchange Act.
2.32. Stock Appreciation Right or SAR means the right of the holder to
surrender an Option or any portion thereof which is then exercisable and/or
receive in exchange therefor shares of Common Stock, cash, or a combination
thereof, as the case may be, with an aggregate value equal to the excess of
the Fair Market Value of one share of Common Stock over the Exercise Price
specified in such Option or SAR multiplied by the number of shares of Common
Stock covered by such Option or SAR or portion thereof which is so
surrendered. An SAR shall be exercisable upon any additional terms and
conditions (including, without limitation, the issuance of Restricted Stock
and the imposition of restrictions upon the timing of exercise) which may be
determined as provided in the Plan.
2.33. Subsidiary means any present or future subsidiary corporation, as
defined in Section 424 of the Code, of the Company.
2.34. Tax Date means the date the withholding tax obligation arises with
respect to the exercise of an Award.
ARTICLE III
STOCK SUBJECT TO THE PLAN
There will be reserved for issuance under the Plan (upon the exercise of
Options and Stock Appreciation Rights, upon awards of Restricted Stock,
Performance Shares, Merit Awards and Phantom Stock Awards (where such Awards
include the value of the hypothetical or target number of shares of Common
Stock) and for stock bonuses on deferred awards of Restricted Stock,
Performance Shares and Phantom Stock Awards (where such Awards include the
value of the hypothetical or target number of shares of Common Stock)), an
aggregate of 1,000,000 shares of Common Stock. Such shares shall be authorized
but unissued shares of Common Stock. Except as provided in Articles VII, VIII,
and XI, if any Award under the Plan shall expire or terminate for any reason
without having been exercised in full, or if any Award shall be forfeited, the
shares subject to the unexercised, terminated or forfeited portion of such
Award shall again be available for the purposes of this Plan.
ARTICLE IV
ADMINISTRATION
This Plan shall be administered by the Committee. No person who is (or,
within one year prior to his or her appointment as a member of the Committee,
was) eligible to participate in this Plan, or in any stock option or stock
bonus plan of the Company, or any person who is not Disinterested, shall be a
member of the Committee.
In addition to any implied powers and duties that may be needed to carry
out the provisions of the Plan, the Committee shall have all the powers vested
in it by the terms of the Plan, including, without limitation, exclusive
authority to select the Employees to be granted Awards under the Plan, to
determine the type, size and terms (not inconsistent with the provisions of
this Plan) of the Awards to be made to each Employee selected, to determine
the time when Awards will be granted, and to prescribe the form of the
Agreements embodying Awards made under the Plan. No employee may be granted
Options for more than 100,000 shares of Common Stock during any calendar year.
The terms of any Award may include conditions (in addition to those in this
Plan) on the exercisability of all or any part of an Option or on the
transferability or forfeitability of Restricted Stock or a Phantom Stock
Award. Notwithstanding any such conditions, the Committee may, in
A-3
its discretion, accelerate the time at which any Option may be exercised or
the time at which Restricted Stock or a Phantom Stock Award may become
transferable or nonforfeitable.
The Committee shall be authorized to interpret the Plan and the Awards
granted under the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan, to make any other determinations which it
believes necessary or advisable for the administration of the Plan, and to
correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any Award in the manner and to the extent the Committee deems
desirable to carry it into effect. Any decision of the Committee in the
administration of the Plan, as described herein, shall be final and
conclusive. The express grant in the Plan of any specific power to the
Committee shall not be construed as limiting any power or authority of the
Committee.
The Committee may act only by a majority of its members. Any
determination of the Committee may be made, without notice, by the written
consent of the majority of the members of the Committee. In addition, the
Committee may authorize any one or more of their number or any officer of the
Company to execute and deliver documents on behalf of the Committee. No member
of the Committee shall be liable for any action taken or omitted to be taken
by him or her or by any other member of the Committee in connection with the
Plan, except for his or her own willful misconduct or as expressly provided by
statute.
ARTICLE V
ELIGIBILITY
Awards may be granted only to individuals who are employees of the
Company or its Subsidiaries. A director of the Company or a Subsidiary who is
an employee of the Company or a Subsidiary may be granted Awards under this
Plan. A member of the Committee may not participate in this Plan or be
eligible for Awards hereunder during the time that his or her participation
would prevent the Committee from being Disinterested.
ARTICLE VI
STOCK OPTIONS
6.01. Designation and Price
(a) Any Option granted under the Plan may be granted as an Incentive
Stock Option or as a Nonqualified Stock Option as shall be designated by the
Committee at the time of the grant of such Option. Each Option shall be
evidenced by an Agreement between the recipient and the Company, which
Agreement shall specify the designation of the Option as an ISO or a NQSO, as
the case may be, and shall contain such terms and conditions as the Committee,
in its sole discretion, may determine in accordance with the Plan.
(b) Every Incentive Stock Option shall provide for a fixed expiration
date of not later than ten years from the date such Incentive Stock Option is
granted.
(c) The Exercise Price of Common Stock issued pursuant to each Option
shall be fixed by the Committee at the time of the granting of the Option;
provided, however, that such Exercise Price shall in no event be less than
100% of the Fair Market Value of the Common Stock on the date such Option is
granted.
(d) An option may be granted with or without a related SAR.
6.02. Exercise
The Committee may, in its discretion, provide for Options granted under
the Plan to be exercisable in whole or in part; provided, however, that no
Option may be exercised at any time for fewer than 50 shares (or the total
remaining shares covered by the Option if fewer than 50 shares) during the
term of the Option. The specified number of shares will be issued upon receipt
by the Company of (i) notice from the Optionee of exercise of an Option, and
(ii) either payment to the Company (as provided in this Article VI, Section
6.03 below), of the Exercise Price for the number of shares with respect to
which the Option is exercised, or with approval of the Committee, a secured
promissory note as hereinafter provided. Each such notice and payment
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shall be delivered or mailed by post-paid mail, addressed to Ashland Coal,
Inc., 2205 Fifth Street Road, Huntington, West Virginia 25701, Attn: Vice
President--Human Resources, or such other place or to the attention of such
other person as the Company may designate from time to time. Separate stock
certificates shall be issued by the Company for those shares acquired pursuant
to the exercise of an ISO and for those shares acquired pursuant to a NQSO.
6.03. Payment for Shares
Except as otherwise provided in this Article VI, the Exercise Price for
the Common Stock shall be paid in full when the Option is exercised. Subject
to such rules as the Committee may impose, the Exercise Price may be paid in
whole or in part in (i) cash, (ii) whole shares of Common Stock owned by the
Employee six months or longer and evidenced by negotiable certificates, valued
at their Fair Market Value on the date of exercise, (iii) by a combination of
such methods of payment, or (iv) such other consideration as shall constitute
lawful consideration for the issuance of Common Stock and be approved by the
Committee (including without limitation, assurance satisfactory to the
Committee from a broker registered under the Exchange Act, of the delivery of
the proceeds of an imminent sale of the stock to be issued pursuant to the
exercise of such Option, such sale to be made at the direction of the
Employee). If certificates representing shares of Common Stock are used to pay
all or part of the Exercise Price of an Option, separate certificates shall be
delivered by the Company representing the same number of shares as each
certificate so used and an additional certificate shall be delivered
representing any additional shares to which the Employee is entitled as a
result of exercise of the Option. The Committee may, in its discretion,
authorize payment of all or any part of the Exercise Price over a period of
not more than five years from the date the Option is exercised. In such
instance any unpaid balance of the Exercise Price shall be evidenced by the
Employee's promissory note payable to the order of the Company which shall be
secured by such collateral and shall bear interest at such rate or rates as
determined from time to time by the Committee.
ARTICLE VII
STOCK APPRECIATION RIGHTS
The Committee may grant Stock Appreciation Rights pursuant to the
provisions of this Article VII to any Employee. Subject to the terms and
provisions of this Article VII, an SAR shall be exercisable only when the Fair
Market Value (determined as of the date of exercise of the SAR) of each share
of Common Stock with respect to which the SAR is to be exercised shall exceed
the Exercise Price per share of Common Stock subject to the SAR. An SAR
granted under the Plan shall be exercisable in whole or in part by notice to
the Company. Such notice shall state that the holder of the SAR elects to
exercise the SAR and the number of shares in respect of which the SAR is being
exercised. For purposes of this Article VII, the date of exercise of an SAR
shall mean the date on which the Company receives such notice.
Subject to the terms and provisions of this Article VII, upon the
exercise of an SAR, the holder thereof shall be entitled to receive from
Ashland consideration (in the form hereinafter provided) equal in value to the
excess of the Fair Market Value (determined as of the date of exercise of the
SAR) of each share of Common Stock with respect to which such SAR has been
exercised over the Exercise Price per share of Common Stock subject to the
SAR. The Committee may stipulate in the Agreement the form of consideration
which shall be received upon the exercise of an SAR. If no consideration is
specified therein, upon the exercise of an SAR, the holder may specify the
form of consideration to be received by such holder, which shall be in shares
of Common Stock (valued at Fair Market Value on the date of exercise of the
SAR), or in cash, or partly in cash and partly in shares of Common Stock, as
the holder shall request; provided, however, that the Committee, in its sole
discretion, may disapprove the form of consideration requested and instead
authorize the payment of such consideration in shares of Common Stock (valued
as aforesaid), or in cash, or partly in cash and partly in shares of Common
Stock.
Upon the exercise of an SAR, an Option for the number of shares of Common
Stock with respect to which such SAR is exercised shall be deemed to have been
exercised and to that extent a corresponding number of shares of Common Stock
shall not again be available for the grant of Awards under the Plan. Upon the
exercise or termination of an SAR, the number of shares with respect thereto
shall be considered to have
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been exercised or terminated to the extent of the number of shares of Common
Stock with respect to which the SAR was so exercised or terminated.
ARTICLE VIII
RESTRICTED STOCK AWARDS
The Committee may make awards of Restricted Stock, evidenced by an
Agreement which shall contain such terms and conditions as the Committee, in
its sole discretion, may determine. The amount of each Restricted Stock Award
and the respective terms and conditions of each Award (which terms and
conditions need not be the same in each case) shall be determined by the
Committee in its sole discretion. The consideration to be paid by an Employee
for any Award made hereunder shall be fixed by the Committee from time to
time, but shall in no event be less than the par value of the shares of
Restricted Stock awarded to him or her determined in a manner and on a basis
consistent with Delaware General Corporation Law. Any such Restricted Stock
Award shall automatically expire if not purchased in accordance with the
Committee's requirements within thirty (30) days after the date of grant.
Subject to the terms and conditions of each Restricted Stock Award, the
Employee, as the owner of the Common Stock issued as Restricted Stock, shall
have all rights of a shareholder including, but not limited to, voting rights
as to such Common Stock and the right to receive dividends thereon when, as
and if paid.
In the event that a Restricted Stock Award has been made to an Employee
whose employment or service is subsequently terminated for any reason prior to
the lapse of all restrictions thereon, such Restricted Stock will be forfeited
in its entirety by such Employee; provided, however, that the Committee may,
in its sole discretion, limit such forfeiture. Any Restricted Stock so
forfeited by an Employee shall not again be available for the grant of Awards
under the Plan.
Employees may be offered the opportunity to defer the receipt of payment
of vested shares of Restricted Stock, and Common Stock may be granted as a
bonus for deferral, under terms as may be established by the Committee from
time to time; however, in no event shall the Common Stock granted as a bonus
for deferral exceed 20% of the Restricted Stock so deferred.
Restricted Stock may not be sold, assigned, transferred, pledged, or
otherwise encumbered during a Restricted Period, which shall be determined by
the Committee and which shall not be less than one year from the date such
Restricted Stock was awarded. The Committee may at any time reduce the
Restricted Period with respect to any outstanding shares of Restricted Stock
awarded under the Plan to Employees, but in no event shall such Restricted
Period be less than one year.
During the Restricted Period, certificates representing the Restricted
Stock and any Retained Distributions shall be registered in the recipient's
name and bear a restrictive legend to the effect that ownership of such
Restricted Stock (and any such Retained Distributions), and the enjoyment of
all rights appurtenant thereto are subject to the restrictions, terms, and
conditions provided in this Plan and the applicable Agreement. Such
certificates shall be deposited by the recipient with the Company, together
with stock powers or other instruments of assignment, each endorsed in blank,
which will permit transfer to the Company of all or any portion of the
Restricted Stock and any securities constituting Retained Distributions which
shall be forfeited in accordance with the Plan and the applicable Agreement.
Restricted Stock shall constitute issued and outstanding shares of Common
Stock for all corporate purposes. The recipient will have the right to vote
such Restricted Stock, to receive and retain all cash dividends, and to
exercise all other rights, powers and privileges of a holder of Common Stock
with respect to such Restricted Stock, with the exception that (i) the
recipient will not be entitled to delivery of the stock certificate or
certificates representing such Restricted Stock until the restrictions
applicable thereto shall have expired; (ii) the Company will retain custody of
all Retained Distributions made or declared with respect to the Restricted
Stock (and such Retained Distributions will be subject to the same
restrictions, terms and conditions as are applicable to the Restricted Stock)
until such time, if ever, as the Restricted Stock with respect to which such
Retained Distributions shall have been made, paid, or declared shall have
become vested, and such Retained Distributions shall not bear interest or be
segregated in separate accounts; (iii) the recipient may not sell, assign,
transfer, pledge, exchange, encumber, or dispose of the Restricted Stock or
any Retained Distributions during the Restricted Period; and
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(iv) a breach of any restrictions, terms, or conditions provided in the Plan
or established by the Committee with respect to any Restricted Stock or
Retained Distributions will cause a forfeiture of such Restricted Stock and
any Retained Distributions with respect thereto.
ARTICLE IX
MERIT AWARDS
The Committee may from time to time make an award of Common Stock under
the Plan to selected Employees for such reasons and in such amounts as the
Committee, in its sole discretion, may determine. The consideration to be paid
by an Employee for any such Merit Award made hereunder shall be fixed by the
Committee from time to time, but shall in no event be less than the par value
of the shares of Common Stock awarded to him or her determined in a manner and
on a basis consistent with Delaware General Corporation Law.
ARTICLE X
PERFORMANCE SHARES
The Committee may make awards of Common Stock, evidenced by an Agreement,
to selected Employees on the basis of the Company's financial performance in
any given period. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Employees who shall receive
such Performance Shares, to determine the number of such shares to be granted
for each Performance Period, and to determine the duration of each such
Performance Period. There may be more than one Performance Period in existence
at any one time, and the duration of Performance Periods may differ from each
other.
The Committee shall establish performance measures for each Performance
Period on the basis of such criteria and to accomplish such objectives as the
Committee may from time to time, in its sole discretion, determine. Such
measures may include, but shall not be limited to, return on investment,
earnings per share, return on shareholders' equity, or return to shareholders.
The performance measures determined by the Committee shall be established
prior to the beginning of each Performance Period but may be subject to such
later revisions as the Committee shall deem appropriate. Performance Shares
may not be sold, assigned, transferred, pledged, or otherwise encumbered,
except as herein provided and as provided in Section 12.04 of Article XII,
during the Performance Period.
The Committee shall determine, in its sole discretion, the manner of
payment, which may include (i) cash, (ii) shares of Common Stock, or (iii)
shares of Restricted Stock in such proportions as the Committee shall
determine. Employees may be offered the opportunity to defer the receipt of
payment of earned Performance Shares, and Common Stock may be granted as a
bonus for deferral under terms as may be established by the Committee from
time to time; however, in no event shall the Common Stock granted as a bonus
for deferral exceed 20% of the Performance Shares so deferred.
An Employee must be employed by the Company at the end of a Performance
Period in order to be entitled to payment of Performance Shares in respect of
such period; provided, however, that in the event of an Employee's cessation
of employment before the end of such period, or upon the occurrence of his or
her death, retirement, or disability, or other reason approved by the
Committee, the Committee may, in its sole discretion, limit such forfeiture.
The preceding sentence shall not affect an Employee's right to receive payment
of Performance Shares that were earned in a Performance Period that ended
prior to the Employee's termination of employment, death, retirement or
disability.
ARTICLE XI
PHANTOM STOCK AWARDS
The Committee may make Phantom Stock Awards (which may be based solely on
the value of the underlying shares, solely on any earnings or appreciation
thereon, or both) evidenced by an Agreement, to
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selected Employees on the basis of the completion of a number of years of
service, the occurrence of an event or the attainment of personal or corporate
performance objectives established by the Committee in its sole discretion.
Subject to the provisions of the Plan, the Committee shall have sole and
complete authority to determine the Employees who shall receive Phantom Stock
Awards, to determine the number of hypothetical or target shares as to which
each such Award is subject, and to determine the terms and conditions of each
such Award. There may be more than one Phantom Stock Award in existence at any
one time with respect to a selected Employee, and the terms and conditions of
each such Award may differ from each other.
The Committee shall establish vesting or performance measures for each
Phantom Stock Award on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time, in its sole discretion,
determine. Such measures may include, but shall not be limited to, years of
service, periods of employment, the occurrence of certain events and
individual or corporate performance objectives including but not limited to
return on investment, earnings per share, return on shareholders' equity, or
return to shareholders. The vesting or performance measures determined by the
Committee shall be established at the time a Phantom Stock Award is made by
the Committee but may be subject to such later revisions as the Committee
shall deem appropriate. Phantom Stock Awards may not be sold, assigned,
transferred, pledged, or otherwise encumbered, except as herein provided and
as provided in Section 12.04 of Article XII, during the Performance Period.
The Committee shall determine, in its sole discretion, the manner of
payment, which may include (i) cash, (ii) shares of Common Stock, or (iii)
shares of Common Stock in such proportions as the Committee shall determine.
Employees may be offered the opportunity to defer the receipt of payment of
earned Phantom Stock Awards, and cash or Common Stock may be granted as a
bonus for deferral under such terms as may be established by the Committee
from time to time; however, in no event shall the cash or Common Stock granted
as a bonus for deferral exceed 20% of the applicable Phantom Stock Award so
deferred.
In the event that a Phantom Stock Award has been made to an Employee
whose employment or service is subsequently terminated for any reason before
it is vested or prior to its earnout or the lapse of all restrictions thereon,
such Phantom Stock Award or the applicable portion thereof will be forfeited
by such Employee; provided, however, that the Committee may, in its sole
discretion, limit such forfeiture. Any Phantom Stock Award so forfeited by an
Employee (relating to the value of the underlying hypothetical or target
shares of Common Stock) shall not again be available for the grant of Awards
under the Plan.
ARTICLE XII
SPECIAL EXERCISE RULES AND
CONTINUED EMPLOYMENT AND AGREEMENT TO SERVE
12.01. Death
Every Option shall provide that in the event the Employee dies (i) while
employed by the Company, (ii) during the period of disability described in
Section 12.02 of this Article XII, (iii) within three months after cessation
of employment for any cause (other than Retirement), or (iv) after Retirement
while Options remain outstanding, such Option shall be exercisable, at any
time or from time to time, prior to the fixed termination date set forth in
the Option, by the Beneficiaries of the decedent for the number of shares
which the Employee could have acquired under the Option immediately prior to
the Employee's death.
12.02. Disability
Every Option shall provide that in the event the employment of any
Employee shall cease by reason of total and permanent disability within the
meaning of Section 22(e)(3) of the Code, as determined by the Committee at any
time during the term of the Option, such Option shall be exercisable, at any
time or from time to time by such Employee prior to its termination date for
the number of shares which the Employee could have acquired under the Option
immediately prior to the Employee's total and permanent disability. The
determination by the Committee of any question involving disability shall be
conclusive and binding.
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12.03. Other Separations From Service
Except as provided in Sections 12.01 and 12.04 of this Article XII, every
Option shall provide that it shall terminate on the earlier to occur of the
fixed termination date set forth in the Option or three months after cessation
of the Employee's employment for any cause except Retirement, in which event
the Option shall be exercisable at any time prior to its termination date. If
an Option is exercised after cessation of employment or Retirement, it may be
exercised only in respect of the number of shares which the Employee could
have acquired under the Option immediately prior to such cessation of
employment or Retirement; provided, however, that no Option may be exercised
after the fixed termination date set forth in the Option.
12.04. Certain Accelerations
Notwithstanding any provision of this Article XII to the contrary, any
Award granted pursuant to the Plan, may, in the discretion of the Committee or
as provided in the relevant Agreement, become exercisable (earned or vested in
the case of a Restricted Stock, Performance Share or Phantom Stock Award), at
any time or from time to time, prior to satisfying the earnout or vesting
requirements or the fixed termination date set forth in the Award for the full
amount or number of awarded shares or any part thereof, less such amount or
number as may have theretofore become vested or been acquired under the Award
(i) from and after the time the Employee ceases to be an Employee of Ashland
as a result of the sale or other disposition by Ashland of assets or property
(including shares of any subsidiary) in respect of which such Employee had
theretofore been employed or as a result of which such Employee's continued
employment with Ashland is no longer required, and (ii) in the case of a
Change in Control of the Company, from and after the date of such Change in
Control.
12.05. Continued Employment Undertaking
Each Employee granted an Award under this Plan shall agree by his or her
acceptance of such Award to remain in the service of Ashland for a period of
at least one year from the date of the Agreement respecting the Award. Such
service shall, subject to the terms of any contract between Ashland and such
Employee, be at the pleasure of Ashland and at such compensation as Ashland
shall reasonably determine from time to time. Nothing in the Plan, or in any
Award granted pursuant to the Plan, shall confer on any individual any right
to continue in the employment of or service to Ashland or interfere in any way
with the right of Ashland to terminate the Employee's employment at any time.
12.06. Leaves of Absence
Subject to the limitations set forth in Section 422 of the Code, the
Committee may adopt, amend, or rescind from time to time such provisions as it
deems appropriate with respect to the effect of leaves of absence approved by
any duly authorized officer of Ashland with respect to any Employee.
ARTICLE XIII
WITHHOLDING TAXES
Federal, state or local law may require the withholding of taxes
applicable to gains resulting from the exercise of an Award. Unless otherwise
prohibited by the Committee, each Employee may satisfy any such tax
withholding obligation by any of the following means, or by a combination of
such means: (i) cash withholding from a payment relating to an Award, (ii) a
cash payment, (iii) authorizing the Company to withhold from the shares of
Common Stock otherwise issuable to the Employee pursuant to the exercise or
vesting of an Award a number of shares having a Fair Market Value, as of the
Tax Date, which will satisfy the amount of the withholding tax obligation, or
(iv) by delivery to the Company of a number of shares of Common Stock having a
Fair Market Value as of the Tax Date which will satisfy the amount of the
withholding tax obligation arising from an exercise or vesting of an Award. An
Employee's election to pay the withholding tax obligation by (iii) or (iv)
above must be made on or before the Tax Date, is irrevocable, is subject to
such rules as the Committee may adopt, and may be disapproved by the
Committee. If the amount requested is not paid, the Committee may refuse to
issue Common Stock under the Plan.
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ARTICLE XIV
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any change in the outstanding Common Stock of the Company
by reason of any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination, or exchange of shares, split-up,
split-off, spin-off, liquidation or other change in capitalization, or any
distribution to common stockholders other than cash dividends, the number or
kind of shares that may be issued under the Plan pursuant to Article III and
the number or kind of shares subject to, or the price per share under any
outstanding Award shall be automatically adjusted so that the proportionate
interest of the Employee shall be maintained as before the occurrence of such
event. Any such adjustment must be made on a basis determined fair by the
Committee and in accordance with the Company's Restated Certificate of
Incorporation, as amended, and its Amended Bylaws, as in effect at the time,
and in accordance with all applicable laws. Such adjustment shall be
conclusive and binding for all purposes of the Plan.
ARTICLE XV
AMENDMENTS AND TERMINATIONS
Unless the Plan shall have been terminated as hereinafter provided, the
Plan shall terminate on, and no Award shall be granted after May 1, 2005. The
Plan may be terminated, modified or amended by the shareholders of the
Company. The Board may at any time terminate, modify or amend the Plan in such
respects as it shall deem advisable; provided, however, that the Board may
not, without approval by the holders of a majority of the outstanding shares
of stock present and voting at any annual or special meeting of shareholders
of the Company: (i) increase (except as provided in Article XIV) the maximum
number of shares which may be issued pursuant to the Awards granted under the
Plan, or the maximum number of Options which may be granted to any individual
Employee in any calendar year, (ii) change the class of persons eligible to
receive Awards, (iii) change the manner of determining the minimum Exercise
Price of Options other than to change the manner of determining the Fair
Market Value of the Common Stock as set forth in Article II, or (iv) extend
the period during which Awards may be granted or exercised.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
16.01. No Right to Award
Employees are selected for Awards at the sole discretion of the
Committee. No Employee shall have any claim or right to be granted an Award
under the Plan.
16.02. Assignment or Alienation
An Employee's rights and interest under the Plan may not be assigned,
transferred, pledged or otherwise encumbered, in whole or in part, either
directly or by operation of law or otherwise (except in the event of an
Employee's death, by will or the laws of descent and distribution), including,
but not by way of limitation, execution, levy, garnishment, attachment,
pledge, bankruptcy or in any other manner, and no such right or interest of
any Employee in the Plan shall be subject to any obligation or liability of
any such Employee. An Award shall be exercisable, during an Employee's
lifetime, only by him or her or his or her Personal Representative. Except as
specified in Article VIII, the holder of an Award shall have none of the
rights of a shareholder until the shares subject thereto shall have been
registered in the name of the person receiving or person or persons exercising
the Award on the transfer books of Ashland.
16.03. Compliance with Securities Laws
No Common Stock shall be issued hereunder unless counsel for Ashland
shall be satisfied that such issuance will be in compliance with applicable
federal, state, and other securities laws. The appropriate officers of the
Company shall cause to be filed any reports, returns, or other information
regarding Awards
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hereunder or any Common Stock issued pursuant hereto as may be required by
Section 13 or 15(d) of the Exchange Act, or any other applicable statute,
rule, or regulation.
16.04. Expenses
The expenses of the Plan shall be borne by the Company.
16.05. Consent to, Ratification of Certain Actions
By accepting any Award under the Plan, each Employee and each Personal
Representative or Beneficiary claiming under or through him or her shall be
conclusively deemed to have indicated his or her acceptance and ratification
of, and consent to, any action taken under the Plan by the Company, the Board
or the Committee.
16.06. Binding Nature of Actions
Awards granted under the Plan shall be binding upon the Company, its
successors, and assigns.
16.07. Other Compensation Arrangements
Nothing contained in this Plan shall prevent the Board of Directors from
adopting other or additional compensation arrangements, subject to shareholder
approval if such approval is required.
16.08. Time Awards Granted
Each Employee shall be deemed to have been granted any Award on the date
the Committee took action to grant such Award under the Plan or such later
date as the Committee in its sole discretion shall determine at the time such
grant is authorized.
ARTICLE XVII
EFFECTIVENESS OF THE PLAN
The Plan shall be submitted to the shareholders of the Company for their
approval and adoption on April 28, 1995, or such other date fixed for the next
meeting of shareholders or any adjournment or postponement thereof. The Plan
shall not be effective and no Award shall be made hereunder unless and until
the Plan has been so approved and adopted at a meeting of the Company's
shareholders. Subject to approval by the shareholders on April 28, 1995, the
Plan shall be effective May 1, 1995.
ARTICLE XVIII
GOVERNING LAW
The provisions of this Plan shall be interpreted and construed in
accordance with the laws of the State of Delaware.
No Option or SAR shall be exercisable, no Common Stock shall be issued,
no certificates for shares of Common Stock shall be delivered, and no payment
shall be made under this Plan except in compliance with all applicable federal
and state laws and regulations (including, without limitation, withholding tax
requirements) and the rules of all domestic stock exchanges on which shares of
Common Stock may be listed. The Company shall have the right to rely on an
opinion of its counsel as to such compliance. Any share certificate issued to
evidence Common Stock for which shares of Restricted Stock are awarded,
Performance Shares or a Phantom Stock Award were earned or for which an Option
or SAR is exercised may bear such legends and statements as the Company deems
advisable to assure compliance with federal and state laws and regulations. No
Option or SAR shall be exercisable, no Common Stock shall be issued, no
certificate for shares shall be delivered, and no payment shall be made under
this Plan until the Company has obtained such consent or approval as the
Committee may deem advisable from regulatory bodies having jurisdiction over
such matters.
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ARTICLE XIX
UNFUNDED PLAN
The Plan, insofar as it provides for grants, shall be unfunded, and the
Company shall not be required to segregate any assets that may at any time be
represented by grants under this Plan. Any liability of the Company to any
person with respect to any grant under this Plan shall be based solely upon
any contractual obligations that may be created pursuant to this Plan. No such
obligation of the Company shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of the Company.
ARTICLE XX
RULES OF CONSTRUCTION
Headings are given to the articles and sections of this Plan solely as a
convenience to facilitate reference. The reference to any statute, regulation,
or other provision of law shall be construed to refer to any amendment to or
successor of such provision of law.
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COAL LEASE AGREEMENT
THIS COAL LEASE AGREEMENT, made and entered into this 1st
day of March, 1993, by and between OGLEBAY NORTON COMPANY, a
Delaware corporation, whose mailing address is 1100 Superior
Avenue, Cleveland, Ohio 44114, Party of the First Part,
hereinbelow referred to as "Lessor", and ALLEGHENY LAND COMPANY
NO. 2, a Delaware corporation, whose mailing address is P. O. Box
6100, Huntington, West Virginia 25770, Party of the Second Part,
hereinbelow referred to as "Lessee".
WITNESSETH:
WHEREAS, Lessor owns a certain tract or parcel of land known
as Lessor's Rock Creek Property, in Peytona District, Boone
County, West Virginia, said tract or parcel of land (i) being
described in detail upon the hereto appended and herein
incorporated Exhibit A, and (ii) being hereinbelow referred to as
the "Leased Premises"; and
WHEREAS, Lessor has agreed to lease unto Lessee all the No.
2 Gas seam of coal lying and being within, upon and underneath
the Leased Premises;
NOW, THEREFORE, for and in consideration of the mutual
covenants and conditions hereinafter set forth and other good and
valuable consideration exchanged by and between the Parties
hereto, the sufficiency and receipt of which is hereby
acknowledged, Lessor does hereby grant, demise and lease unto
Lessee, for and during the Term hereinbelow specified, all of the
No. 2 Gas seam of coal lying and being within, upon and
underneath the Leased Premises, together with the exclusive right
and privilege of mining, excavating and removing the herein
leased coal, by the deep mining method, and the exclusive right
and privilege of processing, marketing, transporting and shipping
the herein leased coal. For and in consideration as aforesaid,
Lessor does further hereby grant, demise and lease unto Lessee to
the extent that it has the right to do so, for and during the
Term hereinbelow specified, the exclusive right and privilege to
exercise and use, pertaining to the Leased Premises, any and all
rights, easements and privileges which are or may become
necessary, convenient or incidental to Lessee for and in the
exploration, development, mining, excavation, removal,
processing, marketing and shipping of the herein leased coal and
coals from all other properties owned, leased or controlled by
Lessee, the herein leased coal being referred to hereinbelow as
"Leased Coal", and the other aforementioned coals being
collectively referred to hereinbelow as "Foreign Coal". The
rights, easements and privileges granted, demised and leased
hereunder to Lessee include, but are not limited to, such rights,
easements or privileges which are now owned by Lessor, and Lessee
shall have (i) the free and uninterrupted use and possession of
rights-of-way into and through the Leased Premises for the
construction, operation, repair, maintenance and reclamation of
deep mines, underground haulways, exploration sites, pollution
control structures, telephone, water, electrical and other
utility lines, devices and structures, storage areas, and all
other machinery, devices, improvements, structures and
appurtenances which, at such points and in such manner which,
from time to time, may be deemed necessary, convenient or
incidental by Lessee in or for its exploration, development,
mining, removal, processing, marketing and/or shipping of said
Leased Coal and/or Foreign Coal; (ii) to use, move, remove and
disturb, pursuant to the aforesaid, subsurfaces of the Leased
Premises.
EXCEPTING AND RESERVING, however, unto Lessor all ownership
interests in and to the Leased Premises not granted, demised and
leased hereunder, together with the right to utilize the same to
the extent that such utilization does not unreasonably interfere
with Lessee's mining operations and other activities hereunder.
This Coal Lease Agreement is furthermore made upon the
following provisions, to-wit:
1. TERM
1.1. This Coal Lease Agreement shall be for an Initial Term
of Ten (10) years, beginning on and including April 12, 1993 and
ending on and including April 11, 2003 , if not sooner
terminated, as set forth hereunder, with the right in Lessee to
extend this Coal Lease Agreement thereafter on a year-to-year
basis, unless this Coal Lease Agreement is sooner terminated,
until such time as all of the minable and merchantable Leased
Coal is mined or until such time as Lessee no longer requires the
Leased Premises to transport coal from or conduct underground
mining operations on property(ies) that is (are) adjacent to the
Leased Premises. Upon completion or cessation of coal mining
activities and coal removal by Lessee on the Leased Premises,
Lessee shall release from the Leased Premises and this Coal Lease
Agreement all lands which are not necessary for the conduct of
its mining operations in the No. 2 Gas Seam on the Leased
Premises. Lessee shall retain an easement for underground
haulage of Foreign Coal; ventilation; transportation of
personnel, supplies and equipment; and other purposes reasonably
related thereto. Such easement shall be limited to a fourteen
hundred (1400) foot wide corridor through the Leased Premises,
such easement to be located and developed by Lessee, at its sole
cost and expense, through that portion of the Leased Premises
situated to the west of Nancy Dolen Branch. Each extension of
this Coal Lease Agreement (i) shall be subject to the terms and
conditions set forth herein, and (ii) shall take effect
automatically, providing Lessee is not in default and has not
cured or begun in good faith to cure any such default of any
terms and conditions of this Coal Lease Agreement or unless
Lessee gives Lessor thirty (30) days' notice of termination of
this Coal Lease Agreement prior to the beginning of the then next
Extension Term hereof.
2. MINIMUM ROYALTY
2.1. Lessee covenants and agrees to pay Lessor, as rental
hereunder, an Annual Advance Minimum Royalty or Adjusted Annual
Minimum Royalty, as follows:
a. During the Initial Term of this Coal Lease
Agreement, and any extended term, the sum of One
Hundred Thousand Dollars ($100,000.00), the
"Annual Advance Minimum Royalty", due upon the
execution hereof and on each anniversary
thereafter; provided, however, that, at such
time as the Lessee shall have mined and
removed all of the minable and merchantable
coal, as hereinafter defined, from the Leased
Premises, either during the Initial Term or
any extended term, or there no longer remains
sufficient minable and merchantable coal so
as to provide Lessee with the opportunity to
fully recoup both past and future Annual
Advance Minimum Royalty payments, the Annual
Minimum Royalty shall automatically be
reduced to the rate set forth in Paragraph
2.1(b) just below, hereinafter referred to as
the "Adjusted Annual Minimum Royalty". Upon
the commencement of the Adjusted Annual
Minimum Royalty, whether or not, during the
Initial Term, the Leased Premises shall be
reduced to such area, as is necessary for the
maintenance of the underground haulageways
referenced in paragraph 1 above. Any
disagreement as to whether or not there
remains sufficient minable and merchantable
coal on the Leased Premises so as to justify
a continuation of the $100,000.00-per-year
Annual Minimum Royalty payment during the
Initial Term shall be submitted to
arbitration pursuant to Article 18 hereof.
b. After the completion of the removal of the
remaining minable and merchantable coal on
the Leased Premises as referenced in
paragraph 2.1(a) just above and for so long
thereafter as Lessee uses a portion of the
Leased Premises to haul coal from adjacent
properties, the sum of Fifteen Thousand
Dollars ($15,000.00), the Adjusted Annual
Minimum Royalty, per Lease Year shall be paid
to Lessor during the continuance of this Coal
Lease Agreement. "Lease Year", as used
herein, shall mean and be construed as that
twelve-calendar- month period each year
extending from and including
April 12 through
April 11 .
2.2. All Annual Advance Minimum Royalty or Adjusted Annual
Minimum Royalty payments due hereunder shall be due and payable
at Lessor's offices on or before the first day of the respective
Lease Years hereof for which such payments are applicable.
2.3. Lessee does and shall have the right to recoup, at the
herein provided tonnage royalty rate and wheelage rate as
applicable, Annual Advance Minimum Royalty paid hereunder during
the first two (2) Lease Years for a period of four (4) years from
and after the date of each such payment, and for Annual Advance
Minimum Royalty paid during the third (3rd) Lease Year and during
each Lease Year thereafter for a period of two (2) years from and
after the date of each such payment by taking credit for said
Advance Minimum Royalty against the Tonnage Royalty and/or
wheelage payments otherwise due during such periods. However,
beginning with the third (3rd) Lease Year, Lessee shall have the
right and option to designate up to three (3) additional Annual
Advance Minimum Royalty payments that are made during the Initial
Term of this Lease that shall be recoupable for a period of
three (3) years from the date of such payment(s) against Tonnage
Royalty payments otherwise due hereunder. Such election shall be
made three (3) months prior to the beginning of a Lease Year
during which Lessee chooses to exercise the right set forth
herein.
2.4. At such time as Lessee shall commence paying Lessor the
sum of Fifteen Thousand Dollars ($15,000.00) in Adjusted Annual
Minimum Royalty payments per Lease Year, pursuant to paragraph
2.1(b) above, and for so long thereafter as this Lease shall
remain in effect, Lessee shall have the right, for a period of
one (1) year after making each such Adjusted Annual Minimum
Royalty payment, to recoup wheelage payments otherwise due
hereunder against the Adjusted Annual Minimum Royalty.
3. TONNAGE ROYALTY
3.1. Lessee covenants and agrees to pay Lessor as Tonnage
Royalty the greater of Five and Three-Fourths Percent (5.75%) of
the Average Gross Selling Price of the coal or the sum of One
Dollar and Seventy Cents ($1.70) per clean ton of two thousand
pounds of Leased Coal which is mined and sold hereunder. It is
agreed between the Parties hereto that, for the purposes of
accounting for such Tonnage Royalty, the Average Gross Selling
Price of the clean coal mined and sold hereunder shall be that
price received by Lessee from a bona fide sale of all coals,
f.o.b. Lessee's Beth Station coal tipple/preparation plant,
without deduction for sales commission or other sales-related
charges. For all clean Leased Coal Lessee mines, removes and
sells from the Leased Premises that is recovered while shaving or
pulling pillars, Lessee covenants and agrees to pay Lessor a
Tonnage Royalty the greater of Five Percent (5%) of the Average
Gross Selling Price, as defined above, or the sum of One Dollar
and Fifty Cents ($1.50) per ton of two thousand pounds of Leased
Coal mined and sold hereunder. Provided, however, that in the
computation of tonnage royalty due on all Leased Coal mined and
sold by Lessee from the Leased Premises, Lessee shall be allowed
to deduct from the Gross Selling Price any comprehensive energy
taxes or "BTU" taxes hereafter imposed that Lessee is required to
pay pursuant to paragraph 9 hereof. Any disagreement between
Lessor and Lessee as to the determination as to what constitutes
the Average Gross Selling Price under this Section 3.1 or under
Section 4.1 below for any clean coal mined and sold or
transported hereunder shall either be settled by parties hereto
within two (2) months or be submitted to arbitration pursuant to
Section 18 hereof. In the event Lessee's Beth Station coal
tipple preparation plant is no longer used or available for
preparation of coal mined from the Leased Premises or coal for
which wheelage is paid and another tipple/preparation plant is
selected by, the Tonnage Royalty paid to Lessee shall be the same
as set forth above in this Section 3.1.
3.2. All Tonnage Royalty payments due hereunder shall be due
and payable on or before the twenty-fifth (25th) day of the month
following the calendar month in which the Leased Coal is mined
and sold hereunder.
3.3. Lessee covenants and agrees to keep and maintain
accurate records of the gross sales price(s) received for the
Leased Coal mined and sold hereunder. All such records shall be
open to inspection by Lessor upon reasonable notice to Lessee.
4. WHEELAGE
4.1. Lessee covenants and agrees to pay Lessor a wheelage
sum of the greater of Ten Cents ($0.10) or One-Third of One
Percent (.333%) of the Average Gross Sales Price Beth Station per
clean ton of two thousand pounds of Foreign Coal which is
transported through the Leased Premises hereunder and which is
sold by Lessee.
4.2. All wheelage payments due hereunder shall be due and
payable on or before the twenty-fifth (25th) day of the month
following the calendar month in which such Foreign Coal is so
transported and sold by Lessee.
5. TONNAGE DETERMINATION
5.1. The quantity of clean tons of (i) the Leased Coal mined
and sold, and (ii) the Foreign Coal transported through the
Leased Premises and sold for which Lessee shall pay,
respectively, the aforespecified applicable Tonnage Royalty or
wheelage shall be based on the net weight of coal after it has
been sized and cleaned. The payment of the royalty for all coal
mined by Lessee and placed in stockpile, either at the mine or at
its Beth Station facilities, shall be accounted for at the time
it is actually sold and shipped from Lessee's Beth Station
facilities and the Average Gross Sales Price is thus established.
5.2. Lessor and Lessee understand and agree that Lessee will
be engaged in mining, handling or shipping coal from premises
other than the Leased Premises and that such coal will be
commingled with coal from the Leased Premises. The weight of all
coal mined and removed from other lands by Lessee and commingled
in railroad cars or otherwise with coal from Lessor's lands shall
be accurately identified and accounted for in order to verify or
correct the reports to be made by Lessee to Lessor as herein
provided, and Lessor, its engineer or agent shall have access to
all books, records and accounts of Lessee relating to the removal
and shipment of coal from the Leased Premises and from such other
premises. The system for making calculations of accurate weights
prior to any commingling of coal mined from other lands with coal
mined from the Leased Premises shall be as follows:
(a) All trucks will be weighed at the scale house at
Lessee's Beth Station tipple facility on certified
scales. Weights will be recorded and identified
as to the lease from which the coal was mined;
(b) Coal will then be commingled and processed through
Lessee's preparation plant;
(c) Clean coal will then be loaded into railroad cars
and railroad weights will be utilized to make
royalty payments or, in the event coal is loaded
into trucks for shipment, the certified truck
scale weight at Beth Station or such other truck
scales as are mutually agreed to in writing
will be utilized to make royalty payment.
(d) All required monthly information as to commingling
and plant recovery will be reported substantively
as shown by Attachment I hereto and made a part
hereof.
5.3. Lessee hereby grants to Lessor, its engineer or agent
the right to obtain from any railroad over which coal mined
hereunder shall be shipped or from any trucker transporting coal
to or from Lessee's Beth Station tipple or from purchasers whose
names shall be furnished to Lessor upon its written request
within five (5) business days of Lessor's receipt of said request
of Lessee information as to the quantity of coal mined hereunder
and shipped over such railroad or carried by such trucker at such
time or times as Lessor may desire such information. This
provision shall constitute full authority, in the absence of any
further express authority, to such railroad or trucker to give
such information to Lessor, its engineer or agent. Lessee shall
also comply with all reasonable rules and regulations which may
be prescribed by Lessor's engineer for the ascertainment of the
payment of tonnage royalties on the coal mined under this Lease.
Lessor shall have the right at any time or times to survey,
measure or check surveys of mined-out areas in the Leased
Premises to verify or correct reports made by Lessee.
6. MODE OF PAYMENT/REPORTING
6.1. All payments, reports and maps due Lessor shall be
mailed, as and when due, to Lessor at its aforestated mailing
address or at such mailing addresses which it, from time to time,
may designate with timely notice to Lessee.
6.2. As a part of the procedures set forth above in Section
5.2, Lessee covenants and agrees to furnish Lessor an accurate
and true statement, accompanying the aforesaid royalty/wheelage
payments, showing (i) the quantity of Leased Coal mined and sold
hereunder during the previous calendar month and the Tonnage
Royalty due therefor and/or the Annual Advance Royalty recouped
thereagainst, and (ii) the quantity of Foreign Coal transported
through the Leased Premises hereunder and sold during the
previous calendar month and the wheelage due thereon and/or the
Annual Advance Minimum Royalty recouped thereagainst.
7. OPERATION
7.1. In connection with its mining operations hereunder,
Lessee shall comply with all applicable laws, rules, regulations
and orders which are currently in force or which may hereafter be
enacted by the United States of America, the State of West
Virginia or any other applicable governmental authority and shall
indemnify and hold harmless Lessor from any claim, action or
suit, including attorney's fees, brought against Lessor as a
result of Lessee's conduct of its mining operations.
7.2. It is agreed and understood by the Parties hereto that,
in the event oil or gas wells, oil or gas pipelines, or any other
appurtenances or improvements of any kind located in, under or
upon the Leased Premises must be moved or relocated to permit the
mining of any area of coal, Lessee, at its sole option, may
either (i) move or relocate said gas or oil wells, pipelines,
appurtenances or improvements at its own cost and expense, or
(ii) upon six (6) months' advance written notice to Lessor bypass
so much of the coal as cannot be mined without removing or
relocating said oil or gas wells, pipelines, appurtenances or
improvements without liability to Lessor for failure to mine said
coal.
7.3. Lessee covenants and agrees to prosecute its operations
hereunder in a reasonable and prudent manner having due regard
for the minable and merchantable Leased Coal on the Leased
Premises. "Minable and merchantable coal", as used herein, means
and shall be construed to be that coal, when reached in Lessee's
deep mining operations hereunder, which can be mined and removed
at a reasonable profit to Lessee in the prevailing coal market by
Lessee's employment of modern and efficient methods of coal
mining and preparation. The Parties understand and agree that in
conducting its underground mining operations, in accordance with
good mining practices, Lessee may be required, due to safety
reasons, governmental regulations, the need to provide support to
the surface or other seams of coal lying above or below the No. 2
Gas Seam, to leave a certain amount of coal in place on the
Leased Premises. Any such coal so left shall not be considered
to be minable and merchantable coal.
7.4. In the event that Lessee bypasses, abandons or
otherwise fails to recover all of the minable and merchantable
Leased Coal on the Leased Premises (other than as permitted in
Section 7.3 hereof), it shall be the duty of Lessee to return to
such neglected area and remove such minable and merchantable coal
therefrom or, failing to do so within a reasonable time, Lessee
shall account for the coal contained therein and pay the royalty
required therefor, the same as though it had been mined. In the
event of any such payment, Lessee shall thereafter, during the
Initial Term or any extended terms, be permitted to return to the
area containing such coal and mine and remove the same free of
any obligation to pay royalty thereon.
7.5. In the event of any disagreement between Lessor and
Lessee as to the conduct of "operations" by Lessee as required by
this Section 7, any such disagreement shall be submitted to
arbitration pursuant to Section 18 hereof.
8. LESSOR'S RIGHT OF INSPECTION
8.1. Lessor, its engineer or agent, upon reasonable notice
to Lessee, shall have the right of entering the Leased Premises
and workings and mines of Lessee at their own risk in order to
inspect, examine, survey and/or measure the same, or any part
thereof, for the purpose of determining whether the provisions of
this Coal Lease Agreement are being observed by Lessee.
9. TAXES
9.1. Lessee agrees and covenants to pay all excise, license,
privilege or severance taxes which may be legally assessed,
imposed or levied by any governmental authority upon or with
respect to (i) Lessee's interest in this Coal Lease Agreement and
the leasehold estate hereby created; (ii) all improvements and
other property placed upon the Leased Premises by Lessee;
(iii) the coal mined and removed hereunder and the products
thereof; and (iv) the exercise of any right or privileges in
connection with Lessee's operations hereunder, all when and as
the same become due. In the event that a comprehensive energy
tax or "BTU" tax is imposed upon the Leased Coal produced by
Lessee from the Leased Premises, Lessee agrees that such tax
shall be paid by Lessee. Notwithstanding the foregoing, Lessee
shall have the right to challenge in good faith, by legal and
proper means, the amount, validity and equality of any such
taxes, levies or assessments; provided, however, Lessee shall at
all times protect Lessor's title to the Leased Premises from tax
liens, tax sales or any other encumbrances or impairments
resulting directly or indirectly from any such challenge and
Lessee shall be responsible for any interest, penalty or similar
charges incurred as a result of any such challenge. Lessee shall
not be responsible for any preexisting or future business and
occupation tax, corporation tax, ad valorem tax, net income tax,
federal or state income tax, gift tax, estate tax or transfer tax
imposed or assessed against Lessor, or any taxes attributable to
the value of the oil and gas in the Leased Premises or
attributable to or resulting from operation or development of the
Leased Premises with respect to oil, gas or any minerals not
hereby leased, or any improvements or other property placed on
the Leased Premises by Lessor or its predecessors in title. If
Lessee should pay any such taxes for the protection of its own
interests hereunder, Lessor shall reimburse Lessee for the same
upon demand, or Lessee may, at its option, deduct the same from
any and all payments thereafter becoming due from Lessee to
Lessor hereunder.
10. SURVEYS AND MAPS; MINE PLANS
10.1. Lessee shall employ a professional mining engineer,
licensed in West Virginia, whose duty it shall be to make
surveys, determine mine elevations and prepare mining plans and
maps of the Leased Premises and Lessee's operations hereunder on
a scale of one inch equals one hundred feet. Such map(s) shall
be posted every three months, or more often as the need requires,
and shall show accurately and completely all known mine workings
within the Leased Premises. Lessee shall also prepare such
mining map(s) on a scale of one inch equals four hundred feet of
mining and shall furnish a copy of same to Lessor on a
semi-annual basis. Further, prior to commencing mining
operations on the Leased Premises, Lessee shall submit a general
mine plan to Lessor setting forth the manner in which it will
develop the Leased Premises (which plan and any maps related
thereto may be in the form required for filing with the
Department of Energy of the State of West Virginia). Within
thirty (30) days after receiving such plan, Lessor may provide
Lessee with any comments which it might have relating to such
plan.
11. INSURANCE AND INDEMNIFICATION
11.1. Lessee covenants and agrees to keep and maintain in
full force and effect at all times during the continuance of this
Coal Lease Agreement comprehensive liability insurance covering
Lessee's mining operations and other activities hereunder and to
name Lessor as an additional insured on its policy with the
greater of (i) those minimum liability coverage limits required
by law, or (ii) liability aggregate coverage single limit of not
less than One Million Dollars ($1,000,000.00) against the death
and/or injury of person(s) and aggregate single coverage limit of
not less than One Million Dollars ($1,000,000.00) against
property damage. Such insurance shall extend to the additional
risks arising from so-called Mandolitis actions and those arising
under West Virginia Code Section 23-4-2.
11.2. Lessee covenants and agrees to keep and maintain in
full force and effect at all times during the continuance of this
Coal Lease Agreement coverage concerning Workers' Compensation
and Black Lung Claims and all other insurance and coverages
concerning Lessee's mining operations and other activities
hereunder now or hereafter required by the United States of
America, State of West Virginia, and all other applicable
governmental authority.
11.3. Lessee shall be the operator of the Leased Coal in the
Leased Premises and shall be considered to be the responsible
operator with respect to any claims for benefits filed by any of
its employees or former employees, or members of the families of
either, under the Black Lung Benefits Act of 1972, the Black Lung
Reform Act of 1977, the Black Lung Benefits Revenue Acts of 1977
and 1981, and the Black Lung Benefits Amendments of 1981, as each
of said Acts may hereafter be amended, and all rules and
regulations adopted pursuant thereto (said Acts being
collectively hereinafter called the "Act"). Lessee shall secure
and shall require any other person who operates, controls or
supervises a coal mine in the Leased Coal or performs services or
construction at any time on the Leased Premises in connection
therewith or who would otherwise be liable for the payment of
black lung benefits to secure the payment of such benefits to its
employees under the Act in accordance with applicable laws and
regulations and shall provide Lessor, at least annually, with
appropriate certification that each of them has provided security
for such benefits.
11.4. Lessee agrees to indemnify and to keep Lessor free and
harmless from any and all claims for or in respect of injury
(including death) or damage of any kind or nature to the person
or property of Lessor, Lessee or any third party which occurs as
a direct result of the operations of Lessee on the Leased
Premises.
12. DEFAULT
12.1. In the event of failure of Lessee to make payment of
royalty and/or other monies due Lessor hereunder within ten (10)
days after the time(s) herein fixed for such payment(s), Lessor
may give notice to Lessee of such default(s), and Lessee shall
have a period of ten (10) business days after its receipt of such
notice of payment default(s) to correct such payment default(s).
In the event Lessee does not correct such payment default(s)
within ten (10) business days after its receipt of said notice,
Lessor, at its option, may terminate this Coal Lease Agreement
without further notice to Lessee. Thereupon, this Coal Lease
Agreement shall become null and void and of no further legal
effect, excepting only Lessee's Right of Reentry as hereinbelow
specified in Paragraph 16, and Lessor may repossess the Leased
Premises, either by act of reentry or by any other appropriate
legal proceeding(s), without any liability for damages to Lessee
for so doing.
12.2. In the event of any default on the part of the Lessee
under the provisions of this Coal Lease Agreement on its part to
be kept, performed and/or observed, other than the failure of
Lessee to make payments of royalty and/or other monies due Lessor
hereunder as hereinabove mentioned, Lessor may give notice to
Lessee of such default(s) and Lessee shall have a period of
thirty (30) days after its receipt of said notice to commence a
good faith effort to correct such default(s). In the event
Lessee does not correct such default(s) within a reasonable
period of time, Lessor, at its option, may terminate this Coal
Lease Agreement without further notice to Lessee. Thereupon,
this Coal Lease Agreement shall become null and void and of no
further legal effect, excepting only Lessee's Right of Reentry as
hereinbelow specified in Paragraph 16, and Lessor may repossess
the Leased Premises, either by act of reentry or by any other
appropriate legal proceeding(s), without any liability for
damages to Lessee for so doing.
13. WAIVER
13.1. In the event of default(s) hereunder, failure or delay
of either Party hereto at any time to avail itself of its rights
and remedies shall not be considered or construed as a waiver by
said party of its right and remedies nor as a waiver of the same
in the event of subsequent default(s) hereunder, whether or not
similar.
14. NOTICES
14.1. All notices which are anywhere in this Coal Lease
Agreement to be given by Lessor to Lessee shall be in writing and
mailed by Lessor via United States Certified Mail, postage
prepaid, to the below-listed individual and mailing address or to
other person(s) and/or mailing address(es) which Lessee may from
time to time so designate by timely notice of same to Lessor.
Allegheny Land Company
P. O. Box 6100
Huntington, West Virginia 25770
Attn.: Manager, Lease Administration
14.2. All notices which are anywhere in this Coal Lease
Agreement to be given by Lessee to Lessor shall be in writing and
mailed by Lessee to Lessor via United States Certified Mail,
postage prepaid, to the below-listed individual and mailing
address or to other person(s) and/or mailing address(es) which
Lessor may from time to time so designate by timely notice of
same to Lessee.
Oglebay Norton Company
1100 Superior Avenue
Cleveland, Ohio 44114-2598
Attn.: Secretary
15. LESSOR'S WARRANTY OF TITLE
15.1. Lessor warrants generally unto Lessee all of its
property rights, easements and privileges hereunder granted, let,
demised and leased herein. Provided, further, if the title of
Lessor to any of the coal which is herein leased shall be
defeated by the holder(s) of outstanding superior title as
adjudicated by a court of competent jurisdiction by reason
whereof any of said coal is lost to Lessee, then, and in that
event, no Tonnage Royalty (or wheelage) shall be paid Lessor by
Lessee on account of the coal so lost. In the event Tonnage
Royalty (or wheelage) on such coal (or property) so lost has been
paid to Lessor by Lessee, Lessor shall either forthwith reimburse
Lessee all such previously paid Tonnage Royalty (or wheelage),
without interest, on the coal (or property) so lost by reason of
such outstanding superior title or pay to such holder(s) of
superior title as directed by a court of competent jurisdiction
if Lessor fails to make such payment, Lessee, without waiving any
other rights it may have, shall have the right to set off such
reimbursement sums, as and when the same become due, from and
against monies thereafter becoming due to Lessor hereunder.
16. LESSEE'S RIGHT OF REENTRY
16.1. All provisions of this Coal Lease Agreement to the
contrary notwithstanding, upon the termination/expiration of this
Coal Lease Agreement, Lessee does and shall have the right to
reenter the Leased Premises (i) for a period of ninety (90) days
to remove therefrom all of its property, equipment and apparatus,
whether or not affixed or used in conjunction with its operation
hereunder, and (ii) to perform and/or complete any obligation(s)
imposed by law upon Lessee arising from or as a consequence of
its operations, including but not limited to, post-mining
reclamation work necessitated hereunder until such time as all
reclamation or performance bonds and mining permits relating to
such mining operations shall have been fully released and
discharged.
17. RIGHT OF FIRST REFUSAL
17.1. Inasmuch as this Coal Lease Agreement covers only the
No. 2 Gas seam of coal and such other rights as Lessor may own or
have the right to convey relating to the mining of the No. 2 Gas
seam of coal by the deep mining method on or in the Leased
Premises, Lessee may be required or Lessee may deem it advisable
to acquire certain rights, by deed, lease or otherwise from
owners of surface property situated above its deep mine workings
in such coal seam. In the event that this Lease should expire by
its own terms or should terminate for any reason or in the event
that Lessor, in order to conduct other mining operations in other
seams on the Leased Premises or on other property adjacent
thereto owned by Lessor, should desire to acquire or benefit from
any of such rights held by Lessee, the Parties agree that Lessor
shall have a right of first refusal to acquire, either by deed or
lease (as the Parties may agree), any or all of such rights from
Lessee at the original purchase price or original lease rates as
adjusted by the increase, if any, in the "All Items" column of
the Consumer Price Index of the Bureau of Labor Statistics of the
United States Department of Labor ("CPI") from the date of such
original purchase or original lease to the acquisition of such
rights by Lessor from Lessee. The consideration to be paid by
Lessor to Lessee for such rights or property interests shall be
determined by multiplying the original purchase price or the
original lease rates by a fraction, the numerator of which shall
be the CPI as of the date that Lessee acquired any such right or
property interest and the denominator of which shall be the CPI
as of the date Lessee receives notification from Lessor of its
desire to acquire any such right or property interest from
Lessee, such right of first refusal to be exercised no later than
ninety (90) days after the expiration or termination of this
Lease. Provided, however, that, in exercising any of such rights
acquired from Lessee, Lessor shall not interfere in any fashion
with the mining operations of Lessee hereunder in the No. 2 Gas
seam of coal.
17.2. At any time during the existence of this Coal Lease
Agreement that Lessor should desire to sell or develop, either in
its own behalf or through a lease with any prospective third
party, any of the other coal seams located on the Leased Premises
in elevation above the No. 2 Gas seam of coal, Lessor shall
advise Lessee of its desire to sell or to develop the other seams
of coal itself or through a third party. Lessee shall have sixty
(60) days from the date it receives Lessor's written notice to
advise Lessor in writing of its interest in acquiring by deed or
lease the other seams of coal located on the Leased Premises. If
Lessee fails to respond or responds negatively, Lessor may
proceed to sell or lease the other seams of coal located on the
Leased Premises without further consultation with Lessee. If
Lessee expresses an interest in acquiring the other seams of coal
located on the Leased Premises, either by deed or lease, the
Parties shall commence negotiations and continue them to
conclusion of the transaction or until either Lessee or Lessor
determines, in its sole judgement, that continued negotiations
would not be beneficial to it. In which case, Lessor or Lessee
will advise the other, as the case may be, of the termination of
negotiations and neither party shall be under any further
obligation to the other with regard to the other seams of coal
located on the property.
18. ARBITRATION
18.1. In the event of a disagreement between the Parties
hereto as to any of the questions expressly made subject to
arbitration hereunder, such question or questions shall be
submitted under the jurisdiction of and pursuant to 9 U.S.C.
Secs. 1 et seq. to three competent and disinterested arbitrators
in the following manner: The party desiring such arbitration
shall select its arbitrator and give written notice thereof to
the other party and shall in such notice state precisely the
matter or matters which it is proposed to bring before the
arbitrators, and only the matters so stated shall be considered
and decided by them. If the party receiving such notice shall
fail to name an arbitrator within fifteen (15) days after notice,
or any extension thereof, as aforesaid, has been given to it, the
arbitrator named by the party giving such notice may and shall
name and appoint an arbitrator for and in behalf of the party so
in default, and the arbitrator so named and appointed shall have
the same power and authority as if he had been appointed by such
party. The arbitrators so chosen shall appoint a third
arbitrator, and, in the event they are unable to agree on such
appointment, the appointment of the third arbitrator shall be
made by the Judge of the District Court of the United States for
the Southern District of West Virginia on the application of
either of the Parties hereto. The three arbitrators shall
immediately, upon their selection, hear and decide the question
or questions submitted for arbitration and shall give to each of
the Parties hereto reasonable notice of the time and place of
their meetings and reasonable opportunity for the production of
evidence. After hearing both Parties, the arbitrators shall
promptly make an award in writing upon the question or questions
submitted and shall serve a copy of such award upon each party
hereto. The award of such arbitrators, or a majority of them,
shall be final and binding upon the Parties hereto, and said
arbitrators, or a majority of them, shall, in their award and as
a part thereof, decide by whom and in what proportion the cost of
such arbitration shall be borne and paid and the amount of such
costs. Neither party hereto shall have or enforce any right or
remedy against the other in respect of any matter herein made the
subject of arbitration until such matter shall have been
submitted to and decided by arbitration in the manner above
provided, and then only in accordance with such decision in
arbitration.
19. MISCELLANEOUS
19.1. This Coal Lease Agreement shall be construed and
enforced in accordance with the substantive laws of the State of
West Virginia.
19.2. This Coal Lease Agreement constitutes the entire
agreement of the Parties hereto with respect to the subject
matters hereof and supersedes all prior and contemporaneous
negotiations, representations and understandings of the Parties
hereto relating to the subject matters hereof.
19.3. Any modification, alteration, waiver or addition of
this Coal Lease Agreement, or any part hereof, shall be valid and
binding only if the same is in writing and fully executed by the
Parties hereto.
19.4. The captions appearing in these presents are for
identification purposes only and shall not be considered or
construed as affecting, in any way, the meaning of the provisions
hereof.
19.5. This Coal Lease Agreement shall inure to the benefit of
and be of full and binding effect upon the Parties hereto and
their respective successors and permitted assigns. Lessee may
not assign or sublease the Leased Coal and/or the Leased Premises
without obtaining the prior written consent of Lessor, which
shall not be unreasonably withheld. Provided, however, that
Lessee may freely assign or sublet its rights and obligations
under this Lease to any other company which is directly or
indirectly owned by Ashland Coal, Inc.
IN TESTIMONY WHEREOF, the Parties hereto have caused their
respective corporate signatures to be hereunto subscribed by
their respective duly authorized officers, these presents having
been executed in duplicate copies, each of which shall be treated
and considered as an original, this the date first above written.
OGLEBAY NORTON COMPANY
By: /s/August F. Bradfish
Its: Vic President
Federal Tax I.D. No. ______________
ALLEGHENY LAND COMPANY NO. 2
By: /s/David B. Peugh
Its: President
Federal Tax I.D. No. 55-0716663
STATE OF OHIO )
) SS:
COUNTY OF CUYAHOGA )
The foregoing instrument was acknowledged before me this 8th
day of April , 1993, by August F. Bradfish , Vice
President of OGLEBAY NORTON COMPANY, a Delaware
corporation, on behalf of the corporation.
My commission expires January 14, 1998 .
/s/ Ruth L. Feidner
Notary Public
STATE OF WEST VIRGINIA )
) SS:
COUNTY OF CABELL )
The foregoing instrument was acknowledged before me this
16th day of March , 1993, by David B. Peugh ,
President of ALLEGHENY LAND COMPANY NO. 2, a Delaware
corporation, on behalf of the corporation.
My commission expires May 13, 2002 .
/s/ Patty A. Patrick
Notary Public
This Instrument Prepared By:
/s/ Gary L. Colley
Gary L. Colley, Attorney
P. O. Box 6300
Huntington, West Virginia 25771
________________________________
John J. Kirn, Jr., Attorney
Oglebay Norton Company
P. O. Box 6508
Cleveland, Ohio 44101-1508
<PAGE>
COMMINGLING REPORT
LESSOR ______________________ REPORTING MONTH___________________
TONNAGE
OTHER
ITEM BASIS TOTAL LESSOR'S PROPERTY** PROPERTY
S __ %
A __ %
Truck D __ %
I. Production Current Weights
Month
Production % 100%
S __
A __
D __
II. Beginning Inventory *
Railroad
III. Total Tons Sold Weights
S __
A __
D __
IV. Prep Plant Refuse
V. Total Ending I+II-III-IV
Inventory
***
S __ %
A __ %
D __ %
VI. Allocation of Production
Ending Inventory %
S __
A __
D __
VII. Current Month's
Production Sold I-VI-IV
S __
A __
D __
VIII.Total Tonnage Sold II+VII
<PAGE>
No 2 Gas Seam
Coal Lease Description
A Part of
ONCO Rock Creek Properties
Boone Co., West Virginia
Situated on the waters of Camp Creek, a tributary of Little Coal River,
in Scott District of Boone County, West Virginia and bounded and
described as follows:
Beginning at a point in the center of Camp Creek Road on the eastern
property line of Oglebay Norton Company's tract; said point bears
southeasterly approximately a quarter of a mile from the intersection
of said road with old State Route No. 3;
Thence from said place of beginning and with the easterly property
lines of said Oglebay Norton Company's tract, being the westerly lines
of the old Pryor and Allen survey, to a point on the ridge dividing
Camp Creek and Hills Branch, said point being on a northerly line of a
12 ,149 acre coal tract conveyed by Truax-Traer Coal Company to Oglebay
Norton Company by deed dated October 1, 1959, on record in Deed Book
96, Page 332, Deed Records of Boone County, West Virginia; thence with
the northerly property lines of said tract and with the ridge as it
meanders S 57 deg. 47 min. E to a leaning chestnut oak on a knob;
thence
N 84 deg. 22 min. E 466.80 feet to a stake with four hickory
pointers on said ridge; thence
N 82 deg. 07 min. E 159.74 feet to a small hickory with a
lynn pointer on said ridge; thence
S 80 deg. 34 min. E 647.30 feet to a white oak on said
ridge; thence
N 36 deg. 38 min. E 163.83 feet to a hickory (down) with
black oak and chestnut oak pointers on
said ridge; thence
N 63 deg. 27 min. E 463.00 feet to a chestnut oak on said
ridge; thence
N 45 deg. 37 min. E 146.90 feet to a small hickory with a
dogwood pointer on said ridge;
thence
( 1 )
<PAGE>
N 61 deg. 52 min. E 943.00 feet to a hickory on a knob; thence
N 5 deg. 11 min. E 286.68 feet to a poplar (down) with a
hickory pointer on said ridge;
N 6 deg. 59 min. W 517.00 feet to a chestnut with 2 chestnuts,
Gum, sourwood pointers on said
divide between Camp Creek, Hills
Branch and Hewitt Creek; thence
leaving watershed of Hill Branch and
continuing with said divide between
camp and Hewitt Creeks.
48 deg. 59 min. E 425.88 feet to a hickory on said ridge;
thence
N 26 deg. 53 min. E 551.00 feet to a stake on said ridge;
thence
N 40 deg. 21 min. E 739.21 feet to a hickory on said ridge;
thence
N 33 deg. 01 min. E 148.99 feet to a stake on said ridge;
thence
N 24 deg. 46 min. E 324.08 feet to a stake on said ridge;
thence
N 58 deg. 40 min. E 281.78 feet to a chestnut on said ridge;
thence
S 81 deg. 26 min. E 256.07 feet to a stake on said ridge;
thence
S 77 deg. 09 min. E 198.08 feet to a chestnut on said ridge;
thence
S 59 deg. 48 min. E 649.59 feet to a stake on said ridge;
thence
S 54 deg. 08 min. E 134.17 feet to a stake in a saddle of said
ridge; thence
S 32 deg. 52 min. E 201.04 feet to a chestnut on said ridge;
thence
S 48 deg. 39 min. E 176.93 feet to a large chestnut oak on a high
knob; thence
<PAGE>
N 85 deg. 42 min. E 218.17 feet to a stake on said ridge;
thence
N 78 deg. 10 min. E 257.54 feet to a stake on said ridge;
thence
N 88 deg. 29 min. E 200.22 feet to a stake on said ridge;
thence
N 61 deg. 56 min. E 321.40 feet to a rock with a chestnut pointer on
said road; thence
S 82 deg. 43 min. E 275.68 feet to a hickory in a low gap of said
ridge; thence
S 63 deg. 27 min. E 349.61 feet to a stake on said ridge;
thence
S 67 deg. 43 min. E 268.11 feet to a stake on said ridge;
thence
N 87 deg. 0l min. E 213.31 feet to a stake on said ridge;
thence
S 75 deg. 50 min. E 160.73 feet to a stake on said ridge;
thence
N 83 deg. 23 min. E 261.16 feet to a stake on said ridge;
thence
N 67 deg. 02 min. E 126.65 feet to a stake on said ridge;
thence
S 34 deg. 53 min. E 371.83 feet to a large white oak on a knob;
thence
S 79 deg. 23 min. E 482.00 feet to a stake on said ridge;
thence
S 49 deg. 55 min. E 717.16 feet to a chestnut oak on said
ridge; thence
N 33 deg. 00 min. E 728.48 feet to a chestnut oak on said
ridge; thence
N 42 deg. 55 min. E 264.26 feet to a small hickory on said
ridge; thence
( 3 )
<PAGE>
N 86 deg. 59 min. E 796.00 feet to a stake (W. O. down) on
divide between Camp, Hewitt and Fork
Creeks; thence leaving the watershed
of Hewitt Creek and running with
divide of Camp and Fork Creeks
S 33 deg. 11 min. E 557.20 feet to a gum in low gap at head of
Nancy Dolin Branch; thence
S 45 deg. 01 min. E 904.65 feet to a small hickory on said
ridge corner of property now or
formerly owned by Armco Steel Corp.
and land now or formerly known as w.
R. Easter land, thence with 6 lines
of said Easter property
S 37 deg. 35 min. W 378.65 feet to a red oak on said ridge;
thence
S 30 deg. 53 min. W 673.80 feet to a red oak on said ridge;
thence
S 41 deg. 08 min. W 360.76 feet to a hickory on said ridge;
thence
S 6 deg. 08 min. W 449.18 feet to a red oak on said ridge;
thence
S 15 deg. 38 min. W 274.22 feet to a red oak on said ridge;
thence
S 18 deg. 51 min. W 157.25 feet to a double hickory on ridge,
corner to said Easter and property
now or formerly owned by Eliza
Wilson; thence
S 58 deg. 23 min. W 600.00 feet (approx.) to a steel rod on
said ridge, at the most northerly
corner of Oglebay Norton Company's
37.5 acre tract, as recorded in Deed
Book 142, Page 397, Boone County
Record of Deeds; thence leaving said
ridge and along the easterly
boundary lines of said 37.5 acre
tract the following 7 lines which
are common to the premises formerly
owned by Hazel Kinder
(4)
<PAGE>
S 32 deg. 58 1/2 min. E 1637.62 feet to a steel rod near the
road along Easter Fork;
thence crossing said Fork
S 41 deg. 58 1/2 min. E 51.19 feet to a steel rod where
formerly stood the black oak
tree referred to in the will
of B.D. Atkins, said rod being
on the southeast bank of said
Easter Fork; thence
S 41 deg. 58 1/2 min. E 63.20 feet to a steel rod which is
211 feet, more or less, from
a gas well; thence
S 41 deg. 58 1/2 min. E 98.96 feet to a steel rod;
thence
S 43 deg. 39 1/2 min. E 94.22 feet to a steel rod;
thence
S 41 deg. 22 min. E 527.42 feet to a steel rod;
thence
S 31 deg. 20 1/2 min. E 254.71 feet to a steel rod; thence
leaving said Kinder property
N 83 deg. 25 min. W 550 feet (approx.) to a point on a
northerly boundary line of Oglebay
Norton Company's said 12,149 acre
tract; thence leaving said 37.5 acre
tract and with the boundary lines of
said 12,149 acre tract
S 67 deg. 23 min. E 1690 feet to a chestnut oak on the ridge,
corner to Eliza Wilson
and J.H. Easter; thence with the
ridge and 4 lines of said Easter
property
N 78 deg. 47 min. E 359.62 feet to a red oak on said ridge;
thence
S 67 deg. 11 min. E 364.69 feet to a stake on said ridge
(chestnut oak down);
thence
S 86 deg. 01 min. E 262.30 feet to a stake (chestnut oak down)
on said ridge; thence
(5)
<PAGE>
N 88 deg. 00 min. E 535.70 feet to a chestnut on said ridge;
thence
S 33 deg. 03 min. E 149.40 feet to a leaning chestnut on a
high knob; thence
N 80 deg. 53 min. E 591.60 feet to a large hickory on said
ridge; thence
S 89 deg. 52 min. E 162.43 feet to a large chestnut in low gap
on said ridge; thence
N 76 deg. 18 min. E 725.25 feet to a stake on said ridge
(black oak down); thence
S 71 deg. 20 min. E 319.35 feet to a large chestnut oak on a
knob, corner to Easter and property
now or formerly owned by Coal River
Mining Company; thence leaving
Easter and with Coal River Mining
Company and divide between Camp and
Brush Creeks
S 6 deg. 00 min. W 733.20 feet to a chestnut oak snag on
a high knob; thence
S 47 deg. 12 min. E 340.70 feet to a stake on said ridge;
thence
S 6 deg. 49 min. E 673.20 feet to a large red oak on said ridge;
thence
S 5 deg. 46 min. E 418.20 feet to a hickory on a high knob;
thence
N 85 deg. 50 min. E 142.90 feet to a large white oak on
said ridge; thence
S 87 deg. 51 min. E 453.95 feet to a chestnut oak on
said ridge; thence
N 65 deg. 26 min. E 492.15 feet to a large black oak on
said ridge; thence
N 53 deg. 42 min. E 270.90 feet to a chestnut on said ridge;
thence
( 6 )
<PAGE>
N 67 deg. 08 min. E 417.30 feet to a chestnut oak on knob;
thence
S 67 deg. 59 min. E 439.00 feet to a large chestnut oak snag on
said ridge; thence
S 45 deg. 56 min. E 914.65 feet to a set stone on said ridge;
thence
S 26 deg. 39 min. E 309.95 feet to a hickory on said ridge;
thence
S 16 deg. 19 min. E 506.85 feet to a hickory on a knob; thence
S 80 deg. 27 min. E 937.55 feet to a stake (pine down) on a
knob; thence
S 5 deg. 15 min. E 359.60 feet to a chestnut oak on said
ridge; thence
S 35 deg. 26 min. E 470.60 feet to a hickory on said ridge;
thence
S 14 deg. 01 min. E 293.60 feet to the intersection point of
Camp Creek and Brush Creek Roads;
Thence along the center of said Camp Creek Road, westerly
approximately 29,500 feet to the place of beginning containing 1815
acres, more or less.
( 7 )
<PAGE>
