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ASHLAND COAL, INC. P.O. Box 6300 Huntington, WV 25771-6300 (304) 526-3333
April 8, 1996
Dear Fellow Stockholder:
As you know from our proxy materials sent to you in connection with our
annual meeting of stockholders set for April 26, 1996, one of the items of
business is the consideration of the amendment and restatement of our
certificate of incorporation. This is Item II of our proxy statement mailed to
you on March 22, 1996. As you consider this issue, please bear in mind the
following points.
AUTHORIZATION, NOT ISSUANCE OF SERIAL PREFERRED STOCK
The principal feature of the proposed amendment and restatement is to
authorize 20,000,000 shares of serial preferred stock, par value $.01 ("serial
preferred stock"). The proposal is to amend our certificate of incorporation to
provide solely for the authorization of serial preferred stock, not the issuance
of it. There is no present intention to issue serial preferred stock.
SUPER-MAJORITY BOARD VOTE REQUIRED FOR ISSUANCE
If the amendment and restatement is approved, in order for any of the serial
preferred stock to be issued, under Ashland Coal's By-laws (which cannot be
amended without an 85% vote of the stockholders), 76% of the Board would have to
vote to issue it. This means 8 of the 10 Directors would have to vote to issue
it, and agree upon the designation, number, voting rights, powers, preferences
and other rights associated with any such stock.
VOTING RIGHTS OF THE SERIAL PREFERRED STOCK
With respect to voting rights of the serial preferred stock and the possible
dilution of voting rights of current stockholders, it is important to note that
holders of shares of serial preferred stock would not be entitled to more than
the LESSER of one vote per $100 of liquidation value or one vote per share. It
is not possible for the Board to grant to holders of the serial preferred stock
voting rights disproportionate to the shares held by them. Frequently there are
no voting rights at all associated with serial preferred stock issued for
financing purposes. In no event will there be more than one vote per share.
OWNERSHIP DILUTION
With respect to dilution of ownership in general, the issuance of serial
preferred stock as a means of raising capital frequently is less dilutive than
issuing common stock, particularly if the serial preferred stock is not
convertible into shares of common stock.
As noted in the proxy statement, management and the Board have represented
that they will not issue, without prior stockholder approval, serial preferred
stock for anti-takeover purposes, to implement any stockholders' rights plan, or
with features intended to make the attempted acquisition of Ashland Coal more
costly.
The availability of serial preferred stock adds an important degree of
flexibility to our business strategy of expanding production from our current
reserve base and making acquisitions. I urge you to review our proxy statement
carefully with respect to Item II and for the reasons set forth, vote FOR it.
Enclosed for your convenience is a proxy card for this purpose. If you use this
card to vote, it will revoke any prior vote by you.
Sincerely yours,
/s/ WILLIAM C. PAYNE
WILLIAM C. PAYNE
Chairman of the Board,
President and Chief
Executive Officer
