-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OHg7m3UxmCGwr0Im8JxuDKyMg9bnWz5tJnOF5Kj0JLYX6YK9Hu6YY4mrM1WfBt+a WyqfJVDMunYMMvgWUOwZ7w== 0001047469-98-029396.txt : 19980806 0001047469-98-029396.hdr.sgml : 19980806 ACCESSION NUMBER: 0001047469-98-029396 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 19980805 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ZEIGLER COAL HOLDING CO CENTRAL INDEX KEY: 0000925942 STANDARD INDUSTRIAL CLASSIFICATION: BITUMINOUS COAL & LIGNITE MINING [1220] IRS NUMBER: 363344449 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-48969 FILM NUMBER: 98677294 BUSINESS ADDRESS: STREET 1: 50 JEROME LANE CITY: FAIRVIEW HEIGHTS STATE: IL ZIP: 62208 BUSINESS PHONE: 6183942400 MAIL ADDRESS: STREET 1: 50 JEROME LANE CITY: FAIRVIEW HEIGHTS STATE: IL ZIP: 62208 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: AEI RESOURCES INC CENTRAL INDEX KEY: 0001067356 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 1500 NORTH BIG RUN ROAD CITY: ASHLAND STATE: KY ZIP: 41102 BUSINESS PHONE: 6069280450 SC 14D1 1 SC14D1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-1 ------------------ TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------ ZEIGLER COAL HOLDING COMPANY (Name of Subject Company) ------------------------ ZEIGLER ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF AEI RESOURCES, INC. (BIDDER) COMMON STOCK, $.01 PAR VALUE (Title of Class of Securities) ------------------------ 989286109 (CUSIP Number of Class of Securities) ------------------------ DONALD P. BROWN, PRESIDENT AND CHIEF EXECUTIVE OFFICER AEI RESOURCES, INC. 1500 NORTH BIG RUN ROAD ASHLAND, KENTUCKY 41102 (606) 928-3433 WITH A COPY TO: ALAN K. MACDONALD JAMES A. GIESEL BROWN, TODD & HEYBURN PLLC 400 WEST MARKET STREET, 32ND FLOOR LOUISVILLE, KENTUCKY 40202-3363 (502) 589-5400 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER) CALCULATION OF FILING FEE
TRANSACTION VALUATION AMOUNT OF FILING FEE $608,975,852 $121,795.17
* For purposes of calculating the filing fee only. This amount assumes the purchase of 28,222,671 shares of common stock (the "Shares") of the subject company at $21.25 in cash per Share and the cancellation of options to purchase 1,666,760 shares and stock appreciation units and payment therefor of the difference between the exercise price of such options and units and $21.25 for consideration totalling $9,244,093. / / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Not Applicable. Form or Registration Number: Not Applicable. Filing Party: Not Applicable. Date Filed: Not Applicable.
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PAGE 1 OF 7 PAGES EXHIBIT INDEX IS LOCATED ON PAGE 7 SCHEDULE 14D-1 CUSIP NO.: 989286109 PAGE 2 OF 7 PAGES
1. NAME OF REPORTING PERSON: Zeigler Acquisition Corporation S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: None. NAME OF REPORTING PERSON: AEI Resources, Inc. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 61-1325837 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) / / (b) / / 3. SEC USE ONLY: 4. SOURCES OF FUNDS: BK 5. CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f): / / 6. CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware (Zeigler Acquisition Corporation); Delaware (AEI Resources, Inc.) 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 0 Shares 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES: / / 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7): 0.0% 10. TYPE OF REPORTING PERSON: CO (Zeigler Acquisition Corporation) CO (AEI Resources, Inc.)
2 ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Zeigler Coal Holding Company, a corporation organized under the laws of Delaware (the "Company"), which has its principal executive offices at 50 Jerome Lane, Fairview Heights, Illinois 62208. Capitalized terms used in this Schedule 14D-1 and not defined herein shall have the meanings set forth in the Offer to Purchase dated August 5, 1998 (the "Offer to Purchase") attached hereto as Exhibit (a)(1). (b) The information set forth in the "Introduction" of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in "The Tender Offer--6. Price Range of the Shares" of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d) and (g) The information set forth in "Introduction" and "The Tender Offer--8. Certain Information Concerning Purchaser and Parent" of the Offer to Purchase is incorporated herein by reference. (e) and (f) During the last five years, neither AEI Resources, Inc., a Delaware corporation ("Parent"), nor Zeigler Acquisition Corporation, a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Parent, nor, to the best of their knowledge, any of the individuals listed in "The Tender Offer--8. Certain Information Concerning Purchaser and Parent" or in Schedule I of the Offer to Purchase have (i) been convicted in a criminal proceeding or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and, as a result of such proceeding, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a)-(b) The information set forth in "The Tender Offer--8. Certain Information Concerning Purchaser and Parent" and "The Tender Offer--9. Background of the Offer" of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(c) The information set forth in "The Tender Offer--11. Source and Amount of Funds" of the Offer to Purchase is incorporated herein by reference. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(g) The information set forth in "The Tender Offer--10. Purpose of the Offer; the Merger Agreement" and "The Tender Offer--12. Certain Effects of the Offer" of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a)-(b) None. 3 ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in "The Tender Offer--8. Certain Information Concerning Purchaser and Parent" and "The Tender Offer--10. Purpose of the Offer; the Merger Agreement" of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in "The Tender Offer--16. Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. Not applicable. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in "The Tender Offer--10. Purpose of the Offer; Merger Agreement" is incorporated herein by reference. (b)-(d) The information set forth in "The Tender Offer--15. Certain Legal Matters; Regulatory Approvals" of the Offer to Purchase is incorporated herein by reference. (e) None. (f) Reference is hereby made to the Offer to Purchase and the related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, and which are incorporated herein in their entirety by reference. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase dated August 5, 1998. (a)(2) Form of Letter of Transmittal. (a)(3) Form of Letter to Shareholders dated August 5, 1998. (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees dated August 5, 1998. (a)(5) Form of Notice of Guaranteed Delivery. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement. (a)(8) Press Release. (b)(1) Credit Facility Commitment Letter to Parent from UBS AG dated August 3, 1998. (b)(2) Bridge Loan Commitment Letter to Parent from UBS AG dated August 3, 1998. (c)(1) Agreement and Plan of Merger by and among AEI Resources, Inc., Zeigler Acquisition Corporation and Zeigler Coal Holding Company, dated as of August 3, 1998. (c)(2) Confidentiality Agreement between Zeigler Coal Holding Company and Addington Enterprises, Inc. dated as of March 6, 1998. (c)(3) Support Agreement between Parent and Kinman Ltd. Partners. 4 (c)(4) Support Agreement between Parent and Michael K. Reilly. (c)(5) Support Agreement between Parent and Chand B. Vyas. (c)(6) Support Agreement between Parent and Roland E. Casati. (d) None. (e)-(f) Not Applicable. 5 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: August 5, 1998. ZEIGLER ACQUISITION CORPORATION By: /s/ DONALD P. BROWN ----------------------------------------- Donald P. Brown PRESIDENT AEI RESOURCES, INC. By: /s/ DONALD P. BROWN ----------------------------------------- Donald P. Brown PRESIDENT AND CHIEF EXECUTIVE OFFICER
6 EXHIBIT INDEX
SEQUENTIALLY NUMBERED EXHIBIT DESCRIPTION PAGE - --------- ------------------------------------------------------------------------------------------- --------------- (a)(1) Offer to Purchase dated August 5, 1998..................................................... (a)(2) Form of Letter of Transmittal.............................................................. (a)(3) Form of Letter to Shareholders dated August 5, 1998........................................ (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees, dated August 5, 1998....................................................................... (a)(5) Form of Notice of Guaranteed Delivery...................................................... (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9...... (a)(7) Summary Advertisement...................................................................... (a)(8) Press Release.............................................................................. (b)(1) Credit Facility Commitment Letter to Parent from UBS AG dated August 3, 1998............... (b)(2) Bridge Loan Commitment Letter to Parent from UBS AG dated August 3, 1998................... (c)(1) Agreement and Plan of Merger by and among AEI Resources, Inc., Zeigler Acquisition Corporation and Zeigler Coal Holding Company dated as of August 3, 1998.................... (c)(2) Confidentiality Agreement between Zeigler Coal Holding Company and Addington Enterprises, Inc. dated as of March 6, 1998............................................................. (c)(3) Support Agreement between Parent and Kinman Ltd. Partners.................................. (c)(4) Support Agreement between Parent and Michael K. Reilly..................................... (c)(5) Support Agreement between Parent and Chand B. Vyas......................................... (c)(6) Support Agreement between Parent and Roland E. Casati...................................... (d) None....................................................................................... (e)-(f) Not applicable.............................................................................
7 EX-99.(A)(1) 2 OFFER TO PURCHASE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF ZEIGLER COAL HOLDING COMPANY AT $21.25 NET PER SHARE BY ZEIGLER ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF AEI RESOURCES, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, SEPTEMBER 1, 1998 UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES OF COMMON STOCK (THE "SHARES") OF ZEIGLER COAL HOLDING COMPANY (THE "COMPANY") WHICH CONSTITUTES AT LEAST 90% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS, EXCLUDING OPTIONS TENDERED FOR CANCELLATION (THE "MINIMUM CONDITION"), (2) ZEIGLER ACQUISITION CORPORATION ("PURCHASER") HAVING OBTAINED FUNDS, PURSUANT TO EXISTING FINANCING COMMITMENTS DESCRIBED HEREIN OR OTHERWISE, SUFFICIENT TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE PURCHASE OF ALL OF THE SHARES PURSUANT TO THE OFFER OR THE MERGER, ALL PAYMENTS WITH RESPECT TO OPTIONS TO PURCHASE SHARES, AND ALL RELATED COSTS AND EXPENSES (THE "FINANCING CONDITION"), AND (3) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"). THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE INTRODUCTION AND SECTIONS 1 AND 13. THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER DATED AS OF AUGUST 3, 1998 BY AND AMONG AEI RESOURCES, INC. ("PARENT"), PURCHASER AND THE COMPANY, PURSUANT TO WHICH, FOLLOWING THE CONSUMMATION OF THE OFFER, PURCHASER WILL BE MERGED WITH AND INTO THE COMPANY (THE "MERGER") AND THE COMPANY WILL BECOME A WHOLLY OWNED SUBSIDIARY OF PARENT. CERTAIN DIRECTORS AND SHAREHOLDERS HOLDING APPROXIMATELY 33% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS (BEFORE ANY OPTIONS ARE TENDERED FOR CANCELLATION) HAVE AGREED TO TENDER THEIR SHARES IN THE OFFER. THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY HAS APPROVED THE OFFER AND RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. THE OFFER IS BEING EFFECTED TO FACILITATE THE MERGER. SEE "RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS." ---------------- IMPORTANT Any shareholder desiring to tender all or any portion of such shareholder's Shares should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and deliver it and any other required documents to the Depositary and either deliver the certificate(s) representing such Shares to the Depositary along with the Letter of Transmittal or tender such Shares pursuant to the procedure for book-entry transfer set forth in Section 3 hereof or (2) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. Any shareholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if such shareholder desires to tender such Shares. Any shareholder who desires to tender Shares and whose certificates representing such Shares are not immediately available, or who cannot comply with the procedure for book-entry transfer on a timely basis, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. Questions and requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to Warburg Dillon Read LLC or to the Information Agent, at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. ---------------- The Dealer Manager for the Offer is: WARBURG DILLON READ LLC --------- The date of this Offer to Purchase is August 5, 1998. TABLE OF CONTENTS
PAGE ----------- INTRODUCTION................................................................................................. 1 RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS........................................................... 2 THE TENDER OFFER............................................................................................. 3 1. Terms of the Offer; Extension of Tender Period; Termination; Amendment............................ 3 2. Acceptance for Payment and Payment for Shares..................................................... 4 3. Procedure for Tendering Shares.................................................................... 5 4. Withdrawal Rights................................................................................. 7 5. Certain Federal Income Tax Consequences of the Offer and the Merger............................... 8 6. Price Range of the Shares......................................................................... 9 7. Certain Information Concerning the Company........................................................ 9 8. Certain Information Concerning Purchaser and Parent............................................... 12 9. Background of the Offer........................................................................... 13 10. Purpose of the Offer; the Merger Agreement........................................................ 14 11. Source and Amount of Funds........................................................................ 22 12. Certain Effects of the Offer...................................................................... 24 13. Certain Conditions of the Offer................................................................... 24 14. Dividends and Distributions....................................................................... 25 15. Certain Legal Matters; Regulatory Approvals....................................................... 26 16. Fees and Expenses................................................................................. 28 17. Miscellaneous..................................................................................... 29 Schedule I--Information Concerning the Directors and Officers of Parent and Purchaser............................................................................... I-1
i To the Shareholders of Zeigler Coal Holding Company: INTRODUCTION Zeigler Acquisition Corporation, a Delaware corporation ("Purchaser") and a wholly owned subsidiary of AEI Resources, Inc., a Delaware corporation ("Parent"), hereby offers to purchase all of the outstanding shares of common stock, $.01 par value per share (the "Shares"), of Zeigler Coal Holding Company (the "Company"), at a purchase price of $21.25 per Share (the "Offer Price"), net to the seller in cash, in accordance with the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, as amended or supplemented from time to time, collectively constitute the "Offer"). The Offer is being made in connection with an Agreement and Plan of Merger (the "Merger Agreement") dated as of August 3, 1998, by and among Parent, Purchaser and the Company. The Merger Agreement requires, on the terms and subject to the conditions set forth therein, Purchaser to offer to purchase all of the outstanding Shares of the Company pursuant to the Offer. If Shares representing at least 90% of the outstanding Shares are validly tendered in the Offer and purchased by Purchaser and the other conditions to the Merger are satisfied or waived, Purchaser will merge with and into the Company, and in the Merger any Shares not purchased in the Offer (other than shares as to which appraisal rights are properly exercised under Delaware law) will be converted by operation of law into the right to receive cash in the amount of $21.25 per Share (the "Merger Consideration"). For more information concerning the terms of the Merger Agreement, see Section 10. THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND UNANIMOUSLY HAS APPROVED THE OFFER AND THE MERGER AND RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER. SEE "RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS." Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 7 of the Letter of Transmittal, transfer taxes on the transfer and sale of Shares pursuant to the Offer. Purchaser will pay all fees and expenses of Warburg Dillon Read LLC, which is acting as Dealer Manager for the Offer (in such capacity, the "Dealer Manager"), IBJ Schroder Bank & Trust Company (the "Depositary") and MacKenzie Partners, Inc. (the "Information Agent") incurred in connection with the Offer. See Section 16. The Offer is being made pursuant to the Merger Agreement. The purpose of the Offer, the Merger, and the Merger Agreement is to enable Parent to obtain control of, and to own the entire equity interest in, the Company. On August 3, 1998, the closing market price of the Company's Shares was $15.94. The Offer provides an opportunity for existing shareholders of the Company to sell Shares at a premium over recent trading prices. See Section 6. THE OFFER IS CONDITIONED, AMONG OTHER THINGS, UPON SATISFACTION OF THE FOLLOWING CONDITIONS: (1) THERE HAVING BEEN VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN ON OR PRIOR TO THE EXPIRATION DATE OF THE OFFER A NUMBER OF SHARES WHICH CONSTITUTES AT LEAST 90% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS, EXCLUDING OPTIONS TENDERED FOR CANCELLATION (THE "MINIMUM CONDITION"), (2) PURCHASER HAVING OBTAINED FUNDS, PURSUANT TO EXISTING FINANCING COMMITMENTS DESCRIBED HEREIN OR OTHERWISE, SUFFICIENT TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE PURCHASE OF ALL OF THE SHARES PURSUANT TO THE OFFER OR THE MERGER, ALL PAYMENTS WITH RESPECT TO OPTIONS TO PURCHASE SHARES, AND ALL RELATED COSTS AND EXPENSES (THE "FINANCING CONDITION"), AND (3) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HSR ACT. THE OFFER IS SUBJECT TO OTHER TERMS AND CONDITIONS AS DESCRIBED IN SECTIONS 1 AND 13. Subject to certain exceptions set forth below, Purchaser expressly reserves the right to waive any one or more of the conditions to the Offer. See Sections 1 and 13. As of July 28, 1998, there were outstanding 28,222,671 Shares. As of July 28, 1998, options covering a total of 1,666,760 Shares were outstanding. Purchaser estimates that up to approximately 25,550,412 Shares will need to be validly tendered (and not validly withdrawn) to satisfy the Minimum Condition, assuming that 90% of the outstanding options will be tendered for cancellation. Certain directors and shareholders who own approximately 33% of the Shares on a fully diluted basis before any tender of options for cancellation. See Section 10. have agreed with the Company to tender their Shares in accordance with the terms and conditions of the Offer. Parent estimates that approximately $1.22 billion of financing will be required to consummate the Offer and Merger, to refinance certain obligations of Parent and the Company, and to pay estimated financing and transaction fees and expenses. An additional $130 million will be available under a working capital facility. Parent plans to obtain the necessary funds under the Senior Credit Facility and the Bridge Loan Facilities, as described below, and to use proceeds from the sale of senior subordinated notes and discount notes to refinance the Bridge Loan Facilities. In connection with financing arrangements for the Offer and the Merger, the existing shareholders of Parent intend to contribute all of the outstanding capital stock of Parent to a newly formed holding company ("New Holdings"), such that Parent will become a wholly owned subsidiary of New Holdings. Parent has received from UBS AG, Stamford Branch ("UBS") (i) a written financing commitment (the "Credit Facility Commitment Letter") consisting of a $450 million senior secured term loan facility and a $300 million senior secured revolving credit facility and (ii) a written financing commitment ("the "Bridge Loan Commitment Letter") consisting of a $100 million senior unsecured term loan to New Holdings (the "New Holdings Bridge Loan") and a $500 million senior subordinated term loan to Parent. New Holdings would contribute the proceeds of the $100 million New Holdings Bridge Loan to Parent to acquire equity capital of Parent. For more information concerning the financing of the Offer and the Merger and related transactions, see Section 11. * * * * * Shareholders are urged to read this Offer to Purchase and the related Letter of Transmittal carefully before deciding whether to tender their Shares. RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS The Company's Board of Directors unanimously has determined that the Offer and the Merger are fair to and in the best interests of the Company and its shareholders and unanimously has approved the Offer and the Merger and recommends that the shareholders of the Company accept the Offer (the "Board Recommendation"). The purpose of the Offer, the Merger, and the Merger Agreement is to enable Parent to obtain control of, and to own the entire equity interest in, the Company. The Offer allows shareholders to receive cash at a premium over recent trading prices for the Company's Shares. See Sections 6 and 9. The Company's financial advisor, Credit Suisse First Boston Corporation ("CSFB"), has delivered to the Company's Board of Directors its written opinion dated August 3, 1998 to the effect that, as of such date and based upon and subject to certain matters stated in such opinion, the $21.25 per Share cash consideration to be received by the holders of Shares (other than Parent and its affiliates) pursuant to the Offer and the Merger was fair to such holders from a financial point of view. A copy of CSFB's opinion is contained in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Company's Schedule 14D-9"), which is being distributed to the Company's shareholders. Shareholders are urged to read the opinion in its entirety. 2 THE TENDER OFFER 1. TERMS OF THE OFFER; EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and pay for all Shares validly tendered and not properly withdrawn on or prior to the Expiration Date (as hereinafter defined) at a price of $21.25 per Share, net to the seller in cash. The term "Expiration Date" means 12:00 Midnight, New York City time, on Tuesday, September 1, 1998, unless Purchaser shall have extended the period during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. The Offer is conditioned upon, among other things, satisfaction of the Minimum Condition and the Financing Condition and the expiration or termination of any waiting period under the HSR Act. The Offer is also subject to certain other conditions set forth in Section 13. Subject to certain exceptions set forth below, Purchaser expressly reserves the right, in its sole discretion, to waive, in whole or in part, any or all of the conditions of the Offer other than the Minimum Condition, which can be waived only with the consent of the Company. Subject to the terms of the Merger Agreement, Purchaser may extend the Offer. The Merger Agreement provides that Purchaser has the right to extend the Offer up to an additional ten business days in order to satisfy any of the conditions specified in Section 13 other than the Financing Condition, provided that the failure of such conditions to be satisfied is not due to a breach of the Merger Agreement by Parent or Purchaser, by giving oral or written notice of such extension to the Depositary. During any such extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw such shareholder's Shares. There can be no assurance that Purchaser will exercise its right to extend the Offer. Purchaser also expressly reserves the right, subject to applicable laws (including applicable regulations of the Securities and Exchange Commission (the "Commission")) at any time or from time to time, to (i) delay acceptance for payment of or, regardless of whether such Shares were theretofore accepted for payment, payment for any Shares in order to comply, in whole or in part, with any applicable law, government regulation or any other condition contained in Sections 13 and 15, (ii) terminate the Offer (whether or not any Shares have theretofore been accepted for payment) if any of the conditions referred to in Section 13 have not been satisfied or upon the occurrence of any of the events specified in Section 13, (iii) waive any condition other than the Minimum Condition, or (iv) subject to certain exceptions set forth below, amend the Offer in any respect; in each case by giving oral or written notice of such delay, termination, waiver or amendment to the Depositary. Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act requires Purchaser to pay the consideration offered or return the Shares tendered promptly after the termination or withdrawal of the Offer and (ii) Purchaser may not delay acceptance for payment of, or payment for (except as provided by clause (i) of the preceding sentence), any Shares upon the occurrence of any of the conditions specified in Section 13 without extending the period of time during which the Offer is open. Without the prior written consent of the Company, Purchaser may not decrease the Offer Price or change the form of consideration payable in the Offer, decrease the number of Shares Purchaser seeks to purchase in the Offer, change the conditions to the Offer set forth in Section 13, impose additional conditions to the Offer, or amend any other term of the Offer in any manner adverse to the holders of Shares. Purchaser may waive any condition to the Offer other than the Minimum Condition without the consent of the Company. Any such extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of 3 Rules 14d-4(c) and 14d-6(d) under the Exchange Act. Without limiting the obligation of Purchaser under such rules or the manner in which Purchaser may choose to make any public announcement, Purchaser currently intends to make any such announcement by issuing a release to the Dow Jones News Service and making any appropriate filing with the Commission. If Purchaser makes a material change in the terms of the Offer or if Purchaser waives a material condition of the Offer, Purchaser will extend the Offer to the extent required by Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the Offer, other than a change in price or a change in the percentages of securities sought, will depend on the facts and circumstances, including the materiality, of the changes. With respect to a change in price or, subject to certain limitations, a change in the percentage of securities sought, a minimum ten business day period from the day of such change is generally required to allow for adequate dissemination to shareholders. Accordingly, if prior to the Expiration Date, Purchaser decreases the number of Shares being sought or increases or decreases the consideration offered pursuant to the Offer and if the Offer is scheduled to expire at any time earlier than the period ending on the tenth business day from the date of that notice of such increase or decrease is first published, sent or given to shareholders, the Offer will be extended at least until the expiration of such ten business day period. Any extension of the Offer will not constitute a waiver by Purchaser of any of the conditions set forth in Section 13. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and will pay for all Shares validly tendered and not properly withdrawn on or prior to the Expiration Date as soon as practicable after the later to occur of: (i) the Expiration Date and (ii) the date of satisfaction or waiver of the conditions set forth in Section 13. In addition, Purchaser reserves the right, in its sole discretion and subject to applicable law, to delay acceptance for payment of or payment for Shares in order to comply, in whole or in part, with any applicable law, government regulation or any other condition contained herein. See Section 13. For purposes of the Offer, Purchaser shall be deemed to have accepted for payment and thereby purchased tendered Shares of the Company if, as and when Purchaser gives oral or written notice to the Depositary of its acceptance of such Shares for payment pursuant to the Offer. Payment for Shares of the Company accepted for payment pursuant to the Offer will be made by deposit by Purchaser of the purchase price to be paid by it with the Depositary, which Depositary will act as agent for the tendering shareholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering shareholders. Any person who tenders Shares representing more than 1% of the outstanding Shares (282,227 Shares) may receive payment of the purchase price by wire transfer. See Instruction 11 of the Letter of Transmittal. Under no circumstances will interest be paid by Purchaser on the consideration paid for the Shares of the Company pursuant to the Offer, regardless of any delay in making such payment. Purchaser will pay all stock transfer taxes, if any, payable on the transfer of Shares of the Company purchased by it pursuant to the Offer, except as set forth in Instruction 7 of the Letter of Transmittal. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of a certificate(s) for such Shares or a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility (as defined in Section 3), a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in Section 3), and any other documents required by the Letter of Transmittal. For a description of the procedure for tendering Shares pursuant to the Offer, see Section 3. If any tendered Shares are not accepted for payment for any reason or if certificate(s) are submitted for more Shares than are tendered, certificates evidencing unpurchased or untendered Shares will be 4 returned without expense to the tendering shareholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained at such Book-Entry Transfer Facility) as promptly as practicable following the expiration, termination or withdrawal of the Offer. If Purchaser increases the consideration offered to shareholders pursuant to the Offer, such increased consideration will be paid to all shareholders whose Shares are purchased pursuant to the Offer, whether or not such Shares were tendered or accepted for payment prior to such increase in consideration. Purchaser reserves the right to assign, in whole or from time to time in part, to Parent or another direct or indirect subsidiary of Parent, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such assignment will not relieve Purchaser of its obligations under the Offer nor will any such assignment prejudice in any way the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. PROCEDURE FOR TENDERING SHARES VALID TENDER OF SHARES. Except as set forth below, in order for Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message (as defined below) in connection with a book-entry delivery of Shares as described below, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchaser. In addition, either (i) certificates evidencing tendered Shares must be received by the Depositary at any such address or such Shares must be tendered pursuant to the procedure for book-entry transfer (and a confirmation of receipt of such delivery must be received by the Depositary), in each case on or prior to the Expiration Date or (ii) the guaranteed delivery procedures set forth below must be complied with. The term "Agent's Message" means a message transmitted by The Depositary Trust Company (the "Book-Entry Transfer Facility") to and received by the Depositary and forming a part of a book-entry transfer confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares which are the subject of such Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect to the Shares at each Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of any Book-Entry Transfer Facility may make book-entry delivery of Shares by causing a Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with that Book-Entry Transfer Facility's procedures for such transfer. Although delivery of Shares may be effected through book-entry transfer at a Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other required documents, must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, or the guaranteed delivery procedures described below must be complied with. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. SIGNATURE GUARANTEES. Except as otherwise provided below, signatures on Letters of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) which is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program, or the Stock Exchange Medallion Program (each of the foregoing constituting an "Eligible Institution"). Signatures on Letters of Transmittal need not be 5 guaranteed if (i) the Letter of Transmittal is signed by the registered holder of Shares tendered and such holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal, or (ii) such Shares are tendered for the account of an Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal. If the certificates representing Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not accepted for payment or not tendered are to be returned to a person other than the registered holder, then the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the certificates, with the signatures on the certificates or stock powers guaranteed as described above. See Instructions 1 and 5 of the Letter of Transmittal. GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's certificates are not immediately available, or time will not permit the certificates and all other required documents to reach the Depositary on or prior to the Expiration Date, or such shareholder cannot complete the procedure for book-entry transfer on a timely basis, such Shares may nevertheless be tendered if the following guaranteed delivery procedures are satisfied: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, is received by the Depositary as provided below on or prior to the Expiration Date; and (iii) the certificates (or a book-entry transfer confirmation) representing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof) properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by the Letter of Transmittal are received by the Depositary within three New York Stock Exchange ("NYSE") trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, telex, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY. BACKUP FEDERAL INCOME TAX WITHHOLDING. To prevent backup federal income tax withholding on payments made to shareholders with respect to the price of Shares purchased pursuant to the Offer, each such shareholder must provide the Depositary with such shareholder's correct taxpayer identification number ("TIN") and certify that such shareholder is not subject to backup United States federal income tax withholding by completing the substitute Form W-9 included in the Letter of Transmittal. See Instruction 10 of the Letter of Transmittal. If the shareholder is a nonresident alien or foreign entity not subject to back-up withholding, the shareholder must give the Depositary a completed Form W-8 Certificate of Foreign Status prior to receipt of any payments. APPOINTMENT AS PROXY. By executing a Letter of Transmittal, a tendering shareholder irrevocably appoints designees of Purchaser as such shareholder's proxies in the manner set forth in the Letter of Transmittal to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by Purchaser (and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of this Offer to 6 Purchase). All such proxies shall be irrevocable and coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior proxies and consents granted by such shareholder with respect to such Shares and other securities will be revoked without further action, and no subsequent proxies may be given nor subsequent written consents executed (and, if given or executed, such proxies or consents will not be deemed effective). The designees of Purchaser will be empowered to exercise all voting and other rights of such shareholder as they, in their sole discretion, may deem proper at any annual, special or adjourned meeting of the Company's shareholders, by written consent or otherwise. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's payment for such Shares, Purchaser must be able to exercise full voting rights with respect to such Shares, including voting at any meeting of shareholders scheduled or acting by written consent without a meeting. DETERMINATION OF VALIDITY. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser in its sole discretion, which determination shall be final and binding. Purchaser reserves the absolute right to reject any and all tenders of Shares determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of Purchaser's counsel, be unlawful. Purchaser reserves the absolute right to waive any defect or irregularity in any tender of Shares of any particular shareholder. Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the Instructions thereto) will be final and binding. None of Purchaser, Parent, any of their affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. 4. WITHDRAWAL RIGHTS Tenders of Shares pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn after October 4, 1998 unless theretofore accepted for payment as provided in this Offer to Purchase. If Purchaser extends the Offer, is delayed in accepting for payment or paying for Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, on behalf of Purchaser, retain all Shares tendered, and such Shares may not be withdrawn except to the extent that tendering shareholders are entitled to withdrawal rights as set forth in this Section 4. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder, if different from that of the person who tendered such Shares. If certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary, and the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer set forth in Section 3, the notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered at any time prior to the Expiration Date by again following one of the procedures described in Section 3. 7 All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, whose determination shall be final and binding. None of Purchaser, Parent, any of their affiliates or assigns, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give such notification. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER The following is a summary of the principal United States federal income tax considerations of the Offer and the Merger to holders whose Shares are purchased pursuant to the Offer or the Merger (including any cash amounts received by dissenting shareholders pursuant to the exercise of appraisal rights). The discussion is for general information only and does not purport to consider all aspects of United States federal income taxation that may be relevant to holders of Shares. The discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing, proposed and temporary regulations promulgated thereunder and administrative and judicial interpretations thereof, all of which are subject to change. The discussion applies only to holders of Shares in whose hands Shares are capital assets within the meaning of Section 1221 of the Code, and may not apply to Shares received pursuant to the exercise of employee stock options or otherwise as compensation, or to certain types of holders of Shares (such as insurance companies, tax-exempt organizations and broker-dealers) who may be subject to special rules under the United States federal income tax laws. This discussion does not discuss the United States federal income tax consequences to a holder of Shares who, for United States federal income tax purposes, is a non-resident alien individual, a foreign corporation, a foreign partnership or a foreign estate or trust, nor does it consider the effect of any foreign, state or local tax laws. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH HOLDER AND THE PARTICULAR TAX EFFECTS TO SUCH HOLDER OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER INCOME TAX LAWS. The receipt of cash for Shares pursuant to the Offer or the Merger (including any cash amounts received by dissenting shareholders pursuant to the exercise of appraisal rights) will be a taxable transaction for United States federal income tax purposes and also may be a taxable transaction under applicable state, local and other income tax law. In general, for United States federal income tax purposes, a tendering shareholder will recognize gain or loss equal to the difference between (i) the holder's adjusted tax basis in the Shares tendered pursuant to the Offer or the Merger and (ii) the amount of cash received by the shareholder pursuant to the Offer or the Merger. Gain or loss must be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold pursuant to the Offer or the Merger. Assuming that Shares are held as a capital asset, such gain or loss will be a capital gain or loss. Under the recently enacted Internal Revenue Service Restructuring and Reform Act of 1998, such capital gain will be a long-term capital gain taxable to a non-corporate holder at a maximum rate of 20% if the Shares have been held for more than one year on the date of sale (in the case of the Offer) or the Effective Time of the Merger (in the case of the Merger); and a short-term capital gain taxable to a non-corporate holder at ordinary income tax rates (a maximum rate of up to 39.6%) if the Shares have been held for one year or less on the date of sale (or the Effective Time of the Merger). These rates are effective for taxable years of individual taxpayers ending after December 31, 1997. The maximum net capital gain tax rate for corporations is 35%. Payments in connection with the Offer or the Merger may be subject to "backup withholding" at a rate of 31%, unless a holder of Shares (i) is a corporation or comes within certain exempt categories and, when required, demonstrates this fact or (ii) provides a correct TIN to the payor, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A holder who does not provide a correct TIN may be subject to penalties imposed by the Internal Revenue Service. Any amount paid as backup withholding does not constitute an additional 8 tax and will be creditable against the holder's Untied States federal income tax liability. Each holder of Shares should consult with his or her tax advisor to determine qualification for exemption from backup withholding and the procedure for obtaining such exemption. Holders tendering their Shares in the Offer may avoid backup withholding by completing the Substitute Form W-9 included in the Letter of Transmittal. See Section 3. 6. PRICE RANGE OF THE SHARES The Company's Shares are listed and traded on the NYSE under the symbol ZEI. The following table sets forth, for the periods indicated, the high and low closing prices per share for the Shares for the periods indicated as reported by the National Quotation Bureau, LLC.
HIGH LOW ------------ ------------ Quarter Ended: 1998 Third (through August 3, 1998)..................................... $ 1715/16 $ 157/8 Second............................................................. 2011/16 167/16 First.............................................................. 171/8 131/16 1997 Fourth............................................................. $ 24 $ 151/4 Third.............................................................. 271/4 227/8 Second............................................................. 277/8 23 First.............................................................. 271/2 211/4 1996 Fourth............................................................. $ 213/4 $ 171/4 Third.............................................................. 175/8 131/4 Second............................................................. 173/8 141/2 First.............................................................. 141/2 121/4
On August 3, 1998, the last full trading day prior to announcement of the execution of the Merger Agreement and Purchaser's intention to commence the Offer, the closing sale price of the Shares on the NYSE was $15.94 per Share. On August 4, 1998, the last full trading day prior to the commencement of the Offer, such closing sale price was $20.44 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. 7. CERTAIN INFORMATION CONCERNING THE COMPANY GENERAL. The Company is a Delaware corporation with its principal office located at 50 Jerome Lane, Fairview Heights, Illinois 62208. The Company, through its subsidiaries, currently operates seven active underground and surface coal mining complexes located in five states, two east coast transloading terminals, a power marketing business, and other energy-related businesses. FINANCIAL INFORMATION. Set forth below is certain selected consolidated financial information with respect to the Company and its subsidiaries. More comprehensive financial information is included in reports and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to such reports and other documents and all of the financial information (including any related notes) contained therein. Such reports and other documents are available for inspection and copies thereof are obtainable in the manner set forth below under "Available Information." 9 ZEIGLER COAL HOLDING COMPANY SELECTED CONSOLIDATED FINANCIAL DATA STATEMENT OF OPERATIONS DATA (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, -------------------------- ---------------------------------------- 1998 1997 1997 1996 1995 ------------ ------------ ------------ ------------ ------------ (UNAUDITED) Total revenues............................................ $ 388,598 $ 348,055 $ 800,756 $ 731,624 $ 783,103 Costs and expenses: Cost of coal sales...................................... 259,991 240,533 503,946 613,166 686,232 Selling, general and administrative expenses.............................................. 6,057 10,159 16,017 21,271 20,740 Other costs and expenses................................ 88,238 54,879 194,809 6,219 109,850 ------------ ------------ ------------ ------------ ------------ Total costs and expenses............................ 354,286 305,571 714,772 640,656 816,822 Other income.............................................. 3,766 -- -- -- 45,500 Net interest expense...................................... 5,763 8,637 16,997 21,704 27,478 Income taxes (benefit).................................... 4,847 6,090 10,348 11,300 (4,484) Extraordinary item--loss on early extinguishment of debt (net of taxes)................... 6,637 -- -- -- -- ------------ ------------ ------------ ------------ ------------ Net earnings (loss)....................................... $ 20,831 $ 27,757 $ 58,639 $ 57,964 ($ 11,213) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Net earnings (loss) per common share Basic-- Net earnings before extraordinary item................ $ .97 $ .98 $ 2.07 $ 2.04 ($ .40) Extraordinary item.................................... (.23) -- -- -- -- ------------ ------------ ------------ ------------ ------------ Net earnings........................................ $ .74 $ .98 $ 2.07 $ 2.04 ($ .40) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Diluted-- Net earnings before extraordinary item................ $ .96 $ .96 $ 2.05 $ 2.04 ($ .40) Extraordinary item.................................... (.23) -- -- -- -- ------------ ------------ ------------ ------------ ------------ Net earnings........................................ $ .73 $ .96 $ 2.05 $ 2.04 ($ .40) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Weighted average shares outstanding Basic................................................... 28,207 28,342 28,261 28,362 28,356 Diluted................................................. 28,365 28,795 28,646 28,483 28,356
CONSOLIDATED BALANCE SHEET DATA (AMOUNTS IN THOUSANDS)
AT JUNE 30, AT DECEMBER 31, ------------ -------------------------- 1998 1997 1996 ------------ ------------ ------------ (UNAUDITED) Total assets.............................................. $ 984,900 $ 1,077,404 $ 1,050,625 Long-term debt, including current maturities.............. 255,800 344,142 344,770 Accrued post retirement benefit obligations............... 257,893 253,700 245,385 Total liabilities......................................... 790,222 899,664 918,019
10 PROJECTED FINANCIAL INFORMATION. Prior to entering into the Merger Agreement, the Purchaser conducted a due diligence review of the Company and in connection with such review received certain non-public information from the Company. The non-public information included, among other things, projected financial information (the "Financial Model") for the coal segment of the business for fiscal years ending December 31, 1998 to 2002. The Financial Model was prepared by the Company's management based on numerous assumptions, including among others, the estimated 1997 financial results and projections of total tons sold, revenue, net gross profit, operating expenses, depreciation, depletion and amortization and capital expenditure requirements. Set forth below is a summary of projected income statement and cash flow items for fiscal years ending December 31, 1998 to 2002. None of the assumptions in the Financial Model give effect to the Offer, the Merger or the financing thereof or the potential combined operations of the Parent and the Company after consummation of such transactions. The Company has advised Purchaser that it does not as a matter of course disclose projections as to future revenues or earnings, and the projections discussed in the Financial Model were not intended to forecast likely or anticipated operating revenues. The projections discussed in the Financial Model were not prepared with a view to public disclosure or compliance with published guidelines of the Commission or the American Institute of Certified Public Accountants for projections. The forecasted information is included herein solely because such information was furnished to Parent and the Purchaser or its financial advisors. Accordingly, the inclusion of the projections in this Offer should not be regarded as an indication that Parent or Purchaser or the Company or their respective financial advisors or their respective officers and directors consider such information to be accurate or reliable, and none of such persons assumes any responsibility for the accuracy therefor. The Financial Model was prepared for internal use and is subjective in many respects and thus susceptible to various interpretations and periodic revision based upon actual experience and business development. In addition, because the estimates and assumptions underlying the Financial Model are inherently subject to significant economic and competitive uncertainties and contingencies which are difficult or impossible to predict accurately and are beyond the control of the Company and/or Parent and/or the Purchaser, there can be no assurance that the Financial Model will be realized. Accordingly, it is expected that there will be differences between actual and projected results, and actual results may be materially higher or lower than those set forth below. ZEIGLER COAL HOLDING COMPANY SUMMARY BUSINESS PLAN FOR COAL BUSINESS ($ IN MILLIONS)
PROJECTED FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998 1999 2000 2001 2002 --------- --------- --------- --------- --------- Tons Sold..................................................... 37.2 54.0 59.8 60.2 68.4 Revenue....................................................... $ 627.1 $ 749.3 $ 806.2 $ 818.9 $ 910.9 EBITDA(1)..................................................... 157.5 184.8 193.0 193.9 219.7 EBIT(1)....................................................... 97.3 108.0 109.4 113.3 133.0 Selected Cash Flow Items: Depreciation, Depletion and Amortization.................... $ 60.2 $ 76.8 $ 83.6 $ 80.6 $ 86.7 Capital Expenditures........................................ 103.5 85.1 44.9 64.6 55.1
Note 1: Before allocation of corporate overhead. AVAILABLE INFORMATION. The Company is registered under the Exchange Act and, accordingly, is subject to the informational filing requirements of the Exchange Act. In accordance therewith the Company files periodic reports, proxy statements and other information with the Commission under the 11 Exchange Act relating to its business, financial condition and other matters. The Company is required to disclose in such proxy statements certain information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company. Such reports, proxy statements and other information may be inspected at the Commission's office at 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be available for inspection and copying at the regional offices of the Commission located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies may be obtained by mail from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission also maintains a World Wide Website on the Internet at http://www.sec.gov which site contains registration statements, reports, proxy and information statements and other information regarding registrants that file electronically with the Commission, including the Company. In addition, such material should be available for inspection at the offices of the NYSE, 20 Broad Street, New York, New York 10005. 8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT GENERAL. Purchaser, a Delaware corporation and a wholly owned subsidiary of Parent, recently was organized for the purpose of effecting the Offer and the Merger, and has not carried on any activities except in connection with the Offer and the Merger. The principal executive offices of Purchaser are located at 1500 North Big Run Road, Ashland, Kentucky 41102. All the outstanding capital stock of Purchaser is owned by Parent. Parent is a Delaware corporation with its principal offices located at 1500 North Big Run Road, Ashland, Kentucky 41102. Parent's principal business is the mining and marketing of bituminous coal, which is sold primarily to electric utilities under long-term agreements. Parent also mines and markets metallurgical coal. Parent currently operates mines in Kentucky, Tennessee, Colorado, Indiana and West Virginia. Parent was incorporated in May 1998 to become the holding company for AEI Holding Company, Inc. ("AEI Holding"). Parent has two stockholders, Larry Addington and Addington Enterprises, Inc. ("AEI"), each of whom holds a 50% equity interest in Parent. Mr. Addington holds an 80% equity interest in AEI. AEI Holding, the predecessor corporation to Parent, was incorporated in September 1997 as a holding company for certain operating companies affiliated with Mr. Addington and AEI. Parent acquired all of the outstanding capital stock of AEI Holding from Mr. Addington and AEI on June 26, 1998, in exchange for an equal number of shares of Parent. The name, business address, present principal occupation or employment, five-year employment history and citizenship of each director and executive officer of Purchaser and Parent are set forth in Schedule I. Except as described in this Offer to Purchase, (i) none of Purchaser or Parent or, to the best knowledge of Purchaser or Parent, any of the persons listed in Schedule I or any associate or majority owned subsidiary of any such persons, beneficially owns or has a right to acquire any equity security of the Company and (ii) none of Purchaser or Parent or, to the best knowledge of Purchaser or Parent, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during either the past 60 days or the past six months. Except as described in this Offer to Purchase, (i) none of Purchaser, Parent or, to the best knowledge of Purchaser or Parent, any of the persons listed in Schedule I has any contract, arrangement, understanding or relationship (whether or not legally enforceable) with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer of the voting of any such securities, joint ventures, loan or option 12 arrangements, puts or calls, guarantees of loans, guarantees against loss, or the giving or withholding of proxies; (ii) there have been no contacts, negotiations or transactions between Purchaser, Parent or any of their respective subsidiaries or, to the best knowledge of Purchaser or Parent, any of the persons listed on Schedule I on the one hand, and the Company or any of its directors, officers or affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors, a sale or other transfer of a material amount of assets or concerning any other transactions with the Company that are required to be disclosed pursuant to the rules and regulations of the Commission. 9. BACKGROUND OF THE OFFER From May to July 1997, representatives of AEI and the Company held several discussions relating to the possible sale of coal mining assets held by AEI and related parties to the Company. These discussions concluded without any agreement between the Company and AEI. In February 1998, on behalf of the Company, representatives of CSFB contacted AEI and several other companies regarding their potential interest in pursuing a strategic transaction with the Company. AEI entered into a confidentiality agreement with the Company on March 6, 1998 and shortly thereafter received an Offering Memorandum describing the Company. On or about March 9, 1998, AEI indicated its preliminary interest in exploring a possible transaction and its desire to conduct a business, financial and legal review of the Company. In mid-March 1998, AEI was notified that it was among the bidders with whom the Company was interested in holding further discussions and the Company scheduled a management presentation for AEI. Shortly thereafter, AEI entered into discussions with a potential investor (the "Prospective Investor") in connection with AEI's proposal to purchase the Company. In late March and early April 1998, senior management of the Company made its presentation to representatives of AEI and the Prospective Investor, who performed due diligence and conducted site visits to the Company's mining and other co-related facilities. On April 22, 1998, AEI received guidelines for submitting proposals, and, on May 22, 1998, Parent, a newly formed holding company for the natural resource operations conducted by AEI, submitted its proposal to the Company. On May 26, 1998, a representative of the Company notified AEI that the Company had decided to commence negotiations with Parent. Promptly thereafter, the Company and Parent entered into an agreement providing for an exclusive negotiating period through June 25, 1998. These negotiations continued through July 7, 1998. In addition, Parent and the Prospective Investor held discussions regarding the structure, financing and nature of their relationship. On July 10, 1998, Parent terminated discussions with the Prospective Investor, and representatives of Parent contacted the Company through its financial advisor to express Parent's interest in submitting a new proposal. AEI then engaged Warburg Dillon Read LLC as its financial advisor in connection with its proposal to acquire the Company. Shortly thereafter, representatives of Parent and Warburg Dillon Read LLC met with CSFB to discuss possible terms of a new proposal and conducted additional due diligence with respect to the Company. On July 20, 1998, Parent received a proposed acquisition agreement on behalf of the Company reflecting the prior discussions between the parties. From July 27 to August 3, 1998, representatives of Parent and the Company, and their respective legal and financial advisors conducted extensive negotiations of the definitive terms of the Offer, the Merger Agreement and related agreements. Representatives of certain principal shareholders of the Company actively participated in the negotiations. On August 3, 1998, the respective directors and stockholders of Parent and Purchaser approved the Merger Agreement, the Offer and the other related transactions. The Merger Agreement, the Offer and the other related transactions were approved by the Board of Directors of the Company at a meeting on August 3, 1998. Parent, Purchaser and the Company entered into the Merger Agreement following the close of business on August 3, 1998, and promptly thereafter the parties issued press releases to announce the transaction. 13 10. PURPOSE OF THE OFFER; THE MERGER AGREEMENT PURPOSE OF THE OFFER The Offer is being made pursuant to the Merger Agreement. The purpose of the Offer, the Merger and the Merger Agreement is to enable Parent to obtain control of and to own the entire equity interest in, the Company. See Section 6. THE MERGER AGREEMENT The following is a brief summary of certain provisions of the Merger Agreement. This summary does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is an exhibit to the Schedule 14D-1 filed by Parent with the Commission in connection with the Offer. THE OFFER The Merger Agreement requires that no later than two business days after the public announcement of the terms of this Agreement, (i) Parent and Purchaser file Purchaser's Tender Offer Statement on Schedule 14D-1 with the Commission and commence the Offer in accordance with the requirements of Regulations 14D and 14E promulgated under the Exchange Act and (ii) the Company file with the Commission the Company's Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer, which will be mailed to the holders of Shares and contains the recommendation of the Company's Board of Directors that holders of Shares accept the Offer. Parent, Purchaser and the Company have each agreed to use its reasonable best efforts to cause all the Offer Conditions to be fulfilled and to avoid the occurrence of any event or to cure any event that may prevent the Offer Conditions from being fulfilled. The obligation of Purchaser to accept for payment and pay for any Shares tendered pursuant to the Offer is subject only to the conditions to the Offer set forth in Section 13 (the "Offer Conditions"). Without the prior written consent of the Company, Purchaser may not decrease the Offer Price or change the form of consideration payable in the Offer, decrease the number of Shares Purchaser seeks to purchase in the Offer, change the Offer Conditions, impose additional conditions to the Offer, or amend any other term of the Offer in any manner adverse to the holders of Shares. Purchaser may waive any condition to the Offer other than the Minimum Condition without the consent of the Company. Subject to the satisfaction of all the Offer Conditions as of any Expiration Date, Purchaser will accept for payment and pay for all Shares validly tendered and not withdrawn pursuant to the Offer as soon as practicable after such Expiration Date. Parent must make reasonable provision for payment of the Offer proceeds to be made by wire transfer of immediately available funds to any person tendering Shares representing more than 1% of the outstanding Shares. BOARD REPRESENTATION Promptly upon the purchase by Purchaser of Shares pursuant to the Offer and from time to time thereafter, Purchaser will be entitled to designate at least a number of directors on the Company's Board of Directors equal to the product of (i) the total number of directors on the Company's Board of Directors and (ii) Purchaser's percentage ownership of the outstanding Shares of the Company. The Company will either increase the size of the Company's Board of Directors or secure the resignation of the necessary number of directors to enable Purchaser's designees to be elected to the Company's Board of Directors, and will cause such designees to be elected to the Company's Board of Directors. COMPANY STOCK OPTIONS The Merger Agreement provides that promptly after the commencement of the Offer, the Company must offer to cancel any and all of the outstanding options to purchase Shares and each outstanding stock appreciation right (each such option to purchase one share and each such unit representing one share being referred to as an "Option") granted under the Company's Incentive Stock Option Plan and 14 the Company's Stock Appreciation Rights Plan (together, the "Option Plan") for cash consideration as follows. Each holder of a vested Option (after giving consideration to any acceleration of vesting provided in the Option Plan or the Company's Special Bonus and Severance Plan (the "SBS Plan")) will be offered the right to have 100% of his or her Options canceled by the Company in consideration of a payment by the Company for each Option in an amount equal to the excess of the Offer Price over the applicable exercise price of such Option (the "Option Consideration"). Cancellation of and payment of the consideration for the Options will be conditioned upon the purchase of Shares by the Purchaser pursuant to the Offer. If the Purchaser purchases Shares pursuant to the Offer, the Options will be canceled and the consideration therefor will be paid as promptly as possible following the purchase of Shares by the Purchaser upon expiration of the Offer. The Merger Agreement also provides that at the Effective Time, each then outstanding Option will be converted automatically into the right to receive the Option Consideration, but only to the extent then vested and exercisable, taking into account any acceleration of vesting provided for in the Option Plan or the SBS Plan. The Option Consideration will be paid upon delivery of any then outstanding Options by or on behalf of the Option holder. THE MERGER The Merger Agreement provides that at the Effective Time (as defined below) and upon the terms and subject to the conditions of the Merger Agreement and Delaware law, Purchaser will merge with and into the Company, the separate corporate existence of Purchaser will cease, and the Company will continue as the surviving corporation, succeeding to and assuming all the rights and obligations of Purchaser in accordance with Delaware law. As soon as practicable after the satisfaction or waiver of the conditions to the Merger, the parties will file a certificate of ownership and merger with the Secretary of State of the State of Delaware and will make all other filings or recordings required under Delaware law. The Merger will become effective upon the filing of the certificate of ownership and merger or such later time specified in such certificate (the "Effective Time"). At the Effective Time, (i) each Share not purchased by Purchaser in the Offer (other than Shares held by stockholders who properly exercise appraisal rights under Delaware law and Shares owned by the Company or one of its subsidiaries or by Parent or Purchaser or one of its subsidiaries) will be converted by operation of law into the right to receive the Merger Consideration in cash, payable to the holder, without interest, upon surrender of the certificate formerly representing such Common Share, (ii) each Share owned by the Company or one of its subsidiaries or by Parent or Purchaser or one of its subsidiaries will be canceled without payment, and (iii) each share of the common stock of the Purchaser outstanding immediately before the Effective Time will be converted into one share of common stock of the Company, as the surviving corporation of the Merger. Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing will have the right to demand appraisal for such Shares in accordance with Delaware law unless such holder fails to perfect or withdraws or otherwise loses his or her right to appraisal and payment under Delaware law. If, after the Effective Time, any such holder fails to perfect or withdraws or loses his right to appraisal, the holder's Shares will be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration without interest. Promptly after the Effective Time, the surviving corporation will mail each record holder as of the Effective Time a letter of transmittal and instructions for effecting the surrender of certificates that represented Shares prior to the Effective Time for the Merger Consideration. Upon surrender of the certificate(s) representing a holder's Shares, together with a completed and validly executed letter of transmittal, such holder will be entitled to receive the Merger Consideration in respect thereof. Until so surrendered or exchanged, each certificate will represent only the right to receive the Merger Consideration. 15 REPRESENTATIONS AND WARRANTIES The Merger Agreement contains various customary representations and warranties of the Company, including representations by the Company as to: (i) organization, qualification and similar corporate matters of the Company and its subsidiaries, (ii) capitalization of the Company and its subsidiaries, (iii) the authorization, execution, delivery, performance and enforceability of the Merger Agreement, (iv) the non-contravention of the Merger Agreement and related transactions with any provision of the Company's certificate of incorporation or bylaws, material contract, order, law or regulation to which the Company or its subsidiaries is a party or by which it is bound or obligated, (v) the filing of required Commission reports and the absence of untrue statements of material facts or omissions of material facts in such reports, (vi) the absence of changes or events which have had a material adverse effect on the Company, (vii) the absence of any untrue statement of a material fact or omission of any material fact required to be stated in any recommendation statement of the Company's Board of Directors or document related to the Offer, (viii) material transactions outside the ordinary course of the Company's business consistent with past practice, (ix) real property ownership and the possession and enforceability of real property leases, (x) ownership of personal property and operating condition of machinery and equipment, (xi) claims and litigation, (xii) the filing of tax returns and the payment of taxes, (xiii) possession and validity of mining permits necessary to carry on the Company's business as presently conducted, (xiv) compliance with laws, rules, statutes, orders, ordinances or regulations, and material notes, bonds, mortgages, indentures, contracts, agreements, leases, licenses, permits, franchise or other instruments or obligations of the Company or any of its subsidiaries, (xv) the absence of environmental claims and compliance with all environmental, mining and safety laws and regulations, (xvi) possession of necessary rights and licenses in intellectual property, (xvii) contracts, agreements, indentures, leases, mortgages, licenses, plans, arrangements, understandings, commitments and other instruments (the "Significant Agreements"), (xviii) employee benefit matters, (xix) required consents and approvals of governmental or regulatory authorities, (xx) possession of insurance policies, (xxi) the absence of payments to any intermediary other than listed intermediaries of any finder's, professional or other fee or commission, (xxii) labor matters, (xxiii) continued eligibility of the Company and its subsidiaries to receive mining permits, (xxiv) transactions between the Company, its affiliates and related parties, and (xxv) the inapplicability of state takeover statutes. Many of the representations and warranties are qualified by materiality requirements. The Merger Agreement contains various customary representations and warranties of Parent and Purchaser, including representations by Parent and Purchaser as to: (i) organization, qualification and similar corporate matters of Parent and Purchaser, (ii) the authorization, execution, delivery, performance and enforceability of the Merger Agreement, (iii) the non-contravention of the Merger Agreement and related transactions with any provision of the certificate of incorporation or by-laws of Parent or Purchaser, material contract, order, law or regulation to which Parent or Purchaser is a party or by which it is bound or obligated, (iv) required consents and approvals of governmental or regulatory authorities, (v) the absence of untrue statements of material facts or omissions of material facts in any documents related to the Offer and in information provided to the Company in connection with the Schedule 14D-1 and proxy statement, (vi) Purchaser's receipt and the continued effectiveness of the Commitment Letter from UBS AG to provide the funds necessary to satisfy Purchaser's obligations under the Merger Agreement, (vii) the solvency of the Company after the Effective Time of the Merger, and (viii) the beneficial ownership of Shares by Parent or Purchaser immediately prior to execution of the Merger Agreement. COVENANTS CONDUCT OF BUSINESS OF THE COMPANY. During the term of the Merger Agreement until the purchase of Shares by Purchaser, the Company and its subsidiaries will each conduct its operations in the ordinary course of business consistent with past practice, and the Company and its subsidiaries will each use all reasonable efforts to preserve its business organization, to keep available the services of its 16 present officers and key employees and to preserve the goodwill of those having business relationships with it. Accordingly, prior to the purchase of Shares by Purchaser, neither the Company nor any of its subsidiaries may, without the prior written consent of Parent, which consent will not be unreasonably withheld or delayed, engage or agree to engage in an enumerated list of transactions. The types of transactions requiring Parent's prior approval, subject to certain threshhold amounts or levels in certain cases, include actions by the Company or its subsidiaries to: (i) amend its Certificate of Incorporation or by-laws or comparable organizational documents; (ii) authorize for issuance, issue, reissue, pledge, sell, any stock of any class or any other securities, except for issuances of capital stock of the subsidiaries to the Company or a wholly owned subsidiary of the Company and the issuance of Shares pursuant to the exercise of Options outstanding as of the date of the Merger Agreement; (iii) declare, set aside or pay any dividend or other distribution in respect of any class or series of its capital stock other than between any of the Company and any of its wholly owned subsidiaries; (iv) split, combine, subdivide, reclassify or redeem, purchase or otherwise acquire, or propose to redeem, purchase or otherwise acquire, any Shares or any other capital stock of the Company; (v) make any loans, advances or capital contributions to, or investments in, any other person in excess of $500,000, except for loans, advances, capital contributions or investments between any subsidiary of the Company and the Company or another wholly owned subsidiary of the Company; (vi) fail to (a) maintain the real property in a manner consistent with past practice, subject to certain specified exceptions, (b) pay when due all taxes, water and sewer rents, assessments and insurance premiums affecting the real property and (c) timely comply with the terms and provisions of all leases, contracts and agreements relating to or affecting the real property and the use and operation thereof, other than such failures that would not have a material adverse effect on the Company; (vii) enter into, establish, adopt, amend or renew any material employment, consulting, severance or similar agreements or arrangements with any director, officer or employee; grant any salary or wage increase or establish, adopt, amend, or increase benefits under, any pension, retirement, stock option, stock purchase, savings, profit sharing, deferred compensation, consulting, welfare benefit contract, plan or arrangement; (viii) enter into any material labor or collective bargaining agreement, memorandum of understanding, grievance settlement or any other agreement or commitment to or relating to any labor union other than in the ordinary course of business consistent with past practice; (ix) take other specified actions outside the ordinary course of business consistent with past practice; (x) consummate its investment in Louisiana Generating LLC, or waive, modify or terminate in any manner adverse to the Company its rights under the joint development agreement, among the Company, Southern Electric International, Inc. and NRG Energy Inc., in connection with Cajun Electric Power Cooperative, Inc. (the "Joint Development Agreement"); (xi) waive, modify, amend or terminate any confidentiality, standstill or other similar agreement to which the Company or any of its subsidiaries is a party; or (xii) agree to take any action which would violate the foregoing covenants. ACCESS TO INFORMATION. The Company will give Parent and Purchaser and their representatives reasonable access to all necessary information. Parent and Purchaser have agreed to be bound by a Confidentiality Agreement dated March 6, 1998. REASONABLE EFFORTS; NOTICE OF CERTAIN DEVELOPMENTS. Each of the parties will use its reasonable efforts to take all actions and do all things necessary, proper or advisable to consummate and make effective the transactions contemplated by the Offer and the Merger Agreement. Each of the parties will promptly inform the other party of any event or circumstance that is discovered at any time before the Effective Time that should be set forth in an amendment to the Schedule 14D-1 or Schedule 14D-9. PUBLIC ANNOUNCEMENTS. Parent and Purchaser, on the one hand, and the Company, on the other hand, will consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by the Merger Agreement except as required by applicable law or by any rule or regulation of the NYSE. 17 INDEMNIFICATION. For a period not less than six years from the Effective Time, (i) all existing rights of directors and officers to indemnification as provided in the respective charters or by-laws of the Company and its subsidiaries or in an agreement with the Company will remain in full force, and (ii) in accordance with such rights, Parent will indemnify and hold harmless the directors and officers of the Company and its subsidiaries from and against any action, proceeding or investigation arising out of events occurring prior to, and including, the Effective Time and will pay all reasonable expenses (including legal and the cost of any investigation and preparation) incurred in connection therewith. Parent will cause the Company to maintain in effect for six years after the Effective Time, for the benefit of all current and former directors and officers of the Company the coverage provided by the current directors' and officers' liability insurance policies maintained by the Company; provided, however, that (i) the Company will not be required to incur any annual premium in excess of 300% of the last annual premium paid prior to the date of the Merger Agreement for all current directors' and officers' liability insurance policies maintained by the Company and if the Company is unable to obtain the required insurance it shall obtain as much comparable insurance as possible for an annual premium equal to this maximum amount and (ii) the Company may substitute policies that are not less advantageous. NOTIFICATION OF CERTAIN MATTERS. The Company will give prompt notice to Parent, and Parent will give prompt notice to the Company, as the case may be, of (i) the occurrence or non-occurrence of any event which would be reasonably likely to demonstrate that any representation or warranty contained in the Merger Agreement was or is untrue or inaccurate or reasonably likely to cause any material covenant, condition or agreement not to be satisfied in all material respects and (ii) any failure of the Company, Parent or Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement under the Merger Agreement in any material respect. NO SOLICITATION. The Merger Agreement requires the Company immediately to cease any existing activities, discussions and negotiations with any third parties with respect to any inquiry, proposal or offer for any recapitalization, merger, consolidation or other business combination involving the Company, or acquisition of any capital stock (other than upon exercise of the Options which are outstanding as of the date of the Merger Agreement) or any portion of the assets (except for certain specified assets and acquisitions of assets in the ordinary course of business consistent with past practice) of the Company and its subsidiaries, or any combination of the foregoing (a "Competing Transaction"). The Company will not, directly or indirectly, through any officer, director, employee, representative or agent or any of its subsidiaries, (i) solicit, initiate, encourage, facilitate, furnish or disclose non-public information in furtherance of a Competing Transaction or negotiate with any person for the purpose of facilitating any Competing Transaction provided that prior to the purchase of the Shares by the Purchaser pursuant to the Offer, the Company may furnish information to, and negotiate or otherwise engage in discussions with, any party who makes a bona fide proposal regarding a Competing Transaction which was not solicited by the Company after the date of the Merger Agreement and which does not violate any standstill agreement if the Board of Directors after consultation with its counsel determines in good faith that failing to consider and cooperate with such other party regarding such Competing Transaction would constitute a breach of the fiduciary duties of the Board to the Company's stockholders under applicable law, and, provided further, that in no event does the term "Competing Transaction" include a sale or other disposition of any non-coal assets. The Company must immediately advise Parent in writing of the receipt, directly or indirectly, of any inquiries, discussions, negotiations, or proposals relating to a Competing Transaction, which becomes known to the Company's Board of Directors during the term of the Merger Agreement. The Company must keep Parent fully apprised of the status and terms of any proposal relating to a Competing Transaction on a current basis. If, prior to the purchase of Shares by the Purchaser pursuant to the Offer, the Company's Board of Directors after consultation with its financial and legal advisors determines in good faith that any written 18 proposal from a third party for a Competing Transaction received after the date of the Merger Agreement that was not solicited by the Company or any of its subsidiaries in violation of the Merger Agreement is more favorable to the stockholders of the Company from a financial point of view than the transactions contemplated by the Merger Agreement and is in the best interest of the stockholders of the Company, the Company may terminate the Merger Agreement at any time prior to the purchase of Shares by Purchaser and enter into a letter of intent, agreement-in-principle, acquisition agreement or other similar agreement with respect to such Competing Transaction provided that, (i) the Company provides written notice of such termination to Parent at least three full business days prior to the effectiveness of such termination, (ii) the Company delivers to Parent within five business days following such termination cash in an amount equal to Parent's costs as estimated by Parent in good faith prior to the date of such delivery but in no event to exceed $10,000,000 and the Termination Fee described below, and (iii) the Company and the other party to the Competing Transaction deliver a written acknowledgment that the Company and such other party have irrevocably waived any right to contest any payments as provided above. CONDITIONS TO CONSUMMATION OF THE MERGER The obligations of the Company, Parent and Purchaser to consummate the Merger are subject to the satisfaction or, if appropriate, waiver of the following conditions: PURCHASE OF SHARES. The Purchaser shall have accepted for payment and paid for Shares pursuant to the Offer in accordance with the terms of the Merger Agreement, provided that the condition shall be deemed satisfied as to Parent and Purchaser if Purchaser fails to accept for payment or pay for Shares pursuant to the Offer in violation of the terms of the Offer. All conditions to the Offer, which are set forth in Annex I to the Merger Agreement, are summarized in Section 13. NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No order or preliminary or permanent injunction shall be entered in any action or proceeding before any court, and no statute, rule, regulation, legislation, or order shall be enacted, entered, enforced, amended or issued by any United States legislative body, court, government or governmental, administrative or regulatory authority or agency (other than the waiting period provisions of the HSR Act) which shall remain in effect and which shall have the effect of (x) making illegal or restraining or prohibiting the making of the Offer, the acceptance for payment of, or payment for, the Shares by Parent, Purchaser or any other affiliate of Parent, or the consummation of the Offer or the Merger or (y) imposing limitations on the ability of Purchaser effectively to acquire or hold or exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares on all matters properly presented to the shareholders of the Company; provided, that Parent, to the extent provided in the Merger Agreement, shall, if necessary to prevent the taking of such action, or the enactment, enforcement, amendment, issuance or application of any statute, rule, regulation, legislation, judgment, order or injunction, offer to accept an order to divest such of the Company's or Parent's assets and businesses as may be necessary to forestall such injunction or order and to hold separate such assets and business pending such divestiture; (ii) no proceeding brought by an administrative agency or commission or other domestic governmental entity seeking any of the foregoing shall be pending; and (iii) no action or proceeding shall be commenced following the date of the Merger Agreement and be pending before any court which, if adversely determined, could reasonably be expected to have a material adverse effect on the Company. TERMINATION; AMENDMENTS; WAIVER TERMINATION. The Merger Agreement provides that at any time prior to the Effective Time the Merger Agreement may be terminated and the Merger may be abandoned: (i) by the mutual written consent of Parent and the Company; (ii) by the Company if the Purchaser fails to commence the Offer in accordance with the Merger Agreement or fails to purchase validly tendered Shares in violation of the terms of the Offer or the Merger Agreement; (iii) by Parent or Company if the Offer is terminated or withdrawn 19 without any Shares being purchased, provided that neither Parent nor the Company may terminate the Merger Agreement if such party materially breached the Merger Agreement, or in the case of Parent, if it or the Purchaser materially violated the terms of the Offer; (iv) by Parent or the Company to the extent that performance is prohibited, enjoined or otherwise materially restrained by any final, non-appealable judgment, provided the party seeking to terminate the Merger Agreement has used its reasonable efforts to remove such judgment; (v) by Parent or the Company if (a) the Financing Condition shall be impossible to satisfy by the end of the twentieth business day following commencement of the Offer, or (b) any of the conditions to the Offer shall be impossible to satisfy by the end of the thirtieth business day following commencement of the Offer unless such circumstance results from the failure of the terminating party to perform its obligations under the Merger Agreement, provided that the Company may not terminate the Merger Agreement if Parent is willing to waive the relevant condition (other than the Minimum Condition, which cannot be waived without the consent of the Company); (vi) by Parent if, prior to the purchase of Shares by Purchaser, the Company's Board of Directors withdraws or modifies in a manner adverse to Parent, or refrains from making the Board Recommendation, or publicly discloses its intention to change such recommendation, or fails to reaffirm the Board Recommendation within five days of receipt from Parent or the Purchaser of a request to so reaffirm the Board Recommendation; (vii) by the Company prior to the purchase of Shares pursuant to the Offer, if the Board after consultation with its financial and legal advisors determines in good faith that any written proposal from a third party for a Competing Transaction received after the date of the Merger Agreement that was not solicited by the Company or any of its Subsidiaries or affiliates in violation of the Merger Agreement is more favorable to the stockholders of the Company from a financial point of view than the transactions contemplated by the Merger Agreement and is in the best interest of the stockholders of the Company; (viii) by the Company in the event of any breach of the covenants and/or representations and warranties of Parent and Purchaser contained in the Merger Agreement which has a material adverse effect on the consummation of the transactions contemplated by the Merger Agreement; or (ix) by Parent, if any Stockholder who holds more than five percent of the Shares breaches any of his, her or its obligations under his, her or its Support Agreement, as defined below. EFFECT OF TERMINATION; FEES AND EXPENSES. Purchaser must terminate the Offer as soon as practicable following the termination of the Merger Agreement for any reason. If the Merger Agreement is terminated as a result of (i) the Company's Board of Directors withdrawing its recommendation or (ii) the Company's Board of Directors entering into a Competing Transaction, the Company will repay Parent in cash an amount equal to the aggregate amount of reasonable documented expenses not to exceed $10,000,000 and a termination fee of $18,000,000. AMENDMENT. The Merger Agreement may be amended by the Company, Parent and Purchaser in a writing signed on behalf of each of the parties; however, after the purchase of Shares pursuant to the Offer, no amendment may be made to decrease the Merger Consideration or which materially adversely affects the rights of the shareholders without approval of such shareholders. EXTENSION; WAIVER. Subject to approval by the Company's Board of Directors in the manner described above under "Board Representation," at any time prior to the Effective Time, the Company, on the one hand, and Parent and Purchaser, on the other hand, may in writing (i) extend the time for the performance of any of the obligations or other acts of the other party, (ii) waive any inaccuracies in the representations and warranties of the other party or (iii) waive compliance by the other party with any of the agreements or conditions contained in the Merger Agreement. SUPPORT AGREEMENTS As a condition to entering into the Merger Agreement and making the Offer, Parent and Purchaser have required that Kinman Limited Partnership, Michael K. Reilly, Chand B. Vyas, and Roland E. Casati (each, a "Stockholder" and, together, the "Stockholders") enter into a Support Agreement (the "Support Agreements") with the Company. Pursuant to the Support Agreements, each Stockholder has 20 agreed to tender and not withdraw, pursuant to and in accordance with the terms of the Offer, all of the Shares owned by such Stockholder (the "Owned Shares"). As of August 3, 1998, the Stockholders owned approximately 9,882,000 Shares in the aggregate, or 33% of the outstanding Shares on a fully diluted basis before any options have been tendered for cancellation. Pursuant to the Support Agreements, each Stockholder has agreed that, during the time the Support Agreement is in effect, such Stockholder will not vote the Owned Shares in favor of any Competing Transaction. The Support Agreements provide that, with certain exceptions, each Stockholder will not (i) transfer, or consent to any transfer of, any or all of the Owned Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Owned Shares, (iii) grant any proxy, power-of-attorney or other authorization in or with respect to the Owned Shares, (iv) deposit the Owned Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Owned Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of his obligations contemplated by the Merger Agreement. The Support Agreements provide that each Stockholder will not, and will not permit or authorize any of his affiliates to, solicit, participate in or initiate discussions or negotiations with, or provide or disclose any information to, any person or group (other than Parent, Purchaser or any of their affiliates or representatives) concerning any Competing Transaction or enter into any agreement, arrangement or understanding requiring the Company to abandon the Merger. Each Stockholder agreed to promptly cease any existing activities, discussions or negotiations with any parties with respect to any Competing Transaction. Each Stockholder also agreed to waive any rights of appraisal or rights to dissent from the Merger. Each Support Agreement and all rights and obligations of the parties thereunder will terminate upon the earlier of the (i) Effective Time, (ii) termination of the Merger Agreement, (iii) upon a change of the Board Recommendation that would give Parent the right to terminate the Merger Agreement, (iv) termination or withdrawal of the Offer by Parent or Purchaser, (v) written notice of termination of the Support Agreement by the Company to the Stockholder and (vi) Purchaser's purchase of the Owned Shares pursuant to the Offer. The Company and each of the Stockholders have agreed that (i) neither of them will amend, modify, supplement, terminate or in any other manner change their respective rights and obligations under the Support Agreements in any manner that will adversely effect the consummation of the Offer by Purchaser, (ii) Parent and/or Purchaser may, in the event of a breach of the Support Agreement by Stockholder, require the Company to exercise its rights under the Support Agreement to obtain compliance therewith by the Stockholder, and (iii) to the extent the Company does not comply with any demand by Parent and/or Purchaser as contemplated by the preceding clause (ii), Parent and/or Purchaser will have the right to seek damages from the Company for the Company's failure to take the action contemplated by clause (ii). SURVIVAL OF REPRESENTATIONS AND WARRANTIES The representations and warranties in the Merger Agreement shall not survive beyond the Effective Time. The covenants and agreements in the Merger Agreement shall survive in accordance with their respective terms, including, but not limited to, the "Indemnification" paragraph above. PLANS FOR THE COMPANY It is expected that, initially following the Offer and the Merger, the business and operations of the Company will, except as set forth in this Offer to Purchase, be continued by the Company substantially as they are currently being conducted. Parent currently has no plans to change the Company's management other than replacing certain senior executive officers. Following consummation of the Merger, 21 however, Parent intends to conduct a review of the Company and its assets, its corporate structure, operations, properties, management and personnel and consider what, if any, changes would be desirable in light of the circumstances which then exist. Such changes could include the acquisition or disposition of assets or other changes in the Company's capitalization, dividend policy, corporate structure, business, certificate of incorporation, bylaws, board of directors or management. GOVERNING LAW The Merger Agreement is governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflict of laws thereof. 11. SOURCE AND AMOUNT OF FUNDS Parent estimates that approximately $1.22 billion will be required to acquire all of the Shares pursuant to the Offer and the Merger, to refinance certain obligations of Parent and the Company, and to pay fees and expenses related to the Offer and the Merger. An additional $130 million will be available under a working credit facility. Parent expects to obtain these funds from capital contributions from New Holdings, borrowings under an interim term loan facility (the "Parent Bridge Loan Facility") and borrowings under a senior secured credit facility (the "Senior Credit Facility"). New Holdings expects to obtain the funds required to make a capital contribution to Parent from borrowings under an interim term loan facility (the "New Holdings Bridge Loan Facility" and together with the Purchaser Bridge Loan Facility, the "Bridge Loan Facilities"). New Holdings and Parent have received a commitment letter dated August 3, 1998 (the "Bridge Commitment Letter") from UBS AG, Stamford Branch ("UBS"), to provide the New Holdings Bridge Facility and the Purchaser Bridge Loan Facility. Purchaser has received a commitment letter dated August 3, 1998 (the "Credit Facility Commitment Letter" and together with the Bridge Commitment Letter, the "Commitment Letters") from UBS to provide the Senior Credit Facility. The commitments and agreements of UBS under the Commitment Letters are subject to customary conditions. The Committment Letters have been accepted and the related committment fees have been paid by the Company. BRIDGE LOAN FACILITIES. The New Holdings Bridge Loan Facility will consist of a $100.0 million term loan that will mature one year from the closing date and the Parent Bridge Loan Facility will consist of a $500.0 million term loan that will mature one year from the closing date. Loans under the New Holdings Bridge Loan Facility may be converted into a term loan with a maturity of eight years after the closing date upon payment of a fee equal to 3.25% of the accreted value of the initial amount of the loans thereunder and Loans under the Parent Bridge Loan Facility may be converted into a term loan with a maturity of eight years after the closing date upon payment of a fee equal to 2.75% of the principal amount of the loans thereunder. Loans under the Bridge Loan Facilities may be prepaid at any time without penalty. Once converted into a term loan, loans under the Bridge Loan Facilities will be subject to prepayment restrictions and premiums. The Bridge Loan Facilities will provide for mandatory prepayments with proceeds from the issuance of additional debt or equity. The New Holdings Bridge Loan Facility will not accrue any cash interest, but will accrete at the rate of 7.0% per annum, increasing by 0.50% for each 90 day period any loans are outstanding, not to exceed 18.00% per annum. The Parent Bridge Loan Facility will bear interest at the three month London Interbank Offered Rate ("LIBOR") plus 4.75%, increasing 0.50% for each 90 day period any loans are outstanding. 22 The Bridge Loan Facilities will contain customary affirmative and negative covenants, including, without limitation, restrictions on the ability of New Holdings, Parent and their subsidiaries to incur additional indebtedness, pay certain dividends and make certain other restricted payments and investments, impose restrictions on the ability of the Purchaser's subsidiaries to pay dividends or make certain payments to the Purchaser, create liens, enter into transactions with affiliates, enter into transactions resulting in a change of control, merge, consolidate or transfer substantially all of their respective assets, and maintain certain financial ratios and meet other financial tests. The Bridge Loan Facilities will contain customary events of default. SENIOR CREDIT FACILITY. The Senior Credit Facility will consist of a Term Loan A Facility in an aggregate principal amount of $150.0 million (the "Term Loan A Facility"); (ii) a Term Loan B Facility in an aggregate principal amount of $300.0 million (the "Term Loan B Facility" and together with the Term Loan A Facility, the "Term Loan Facilities"); and (iii) a $300 million revolving credit facility (the "Revolving Credit Facility" and together with the Term Loan Facilities, the "Credit Facility"). The Term Loan A Facility will amortize on a quarterly basis in amounts to be determined and will mature five years after the closing date; the Term Loan B Facility will amortize on a quarterly basis, with nominal amounts in the first five years and thereafter in amounts to be determined and will mature seven years after the closing date. The Revolving Credit Facility will be payable in its entirety seven years after the closing date. The Revolving Credit Facility will be available for general corporate purposes, including working capital. Loans under the Senior Credit Facility may be prepaid at any time without penalty. The Senior Credit Facility will provide for customary mandatory prepayments with a percentage of excess cash flow and with certain proceeds from asset sales and certain proceeds from the issuance of additional debt or equity. Loans under the Term Loan A Facility and the Revolving Credit Facility will initially bear interest, at the election of Purchaser, at either (i) 1.50% plus the higher of (a) UBS's prime rate or (b) the federal funds rate plus 1/2% or (ii) the LIBOR plus 2.50%. Loans under the Term Loan B Facility will initially bear interest, at the election of Purchaser, at either (i) 1.75% plus the higher of (a) UBS's prime rate or (b) the federal funds rate plus 1/2% or (ii) the LIBOR plus 2.75%. After a period to be determined, spreads over LIBOR will be adjusted in accordance with the financial performance of Parent. The obligations of Parent under the Senior Credit Facility will be secured by substantially all assets of Parent and its subsidiaries (including the Company after consummation of the Merger). The Senior Credit Facility will contain customary affirmative and negative covenants, including, without limitation, restrictions on the ability of the Parent and its subsidiaries to incur additional indebtedness, pay certain dividends and make certain other restricted payments and investments, impose restrictions on the ability of the Parent's subsidiaries to pay dividends or make certain payments to Parent, create liens, enter into transactions with affiliates, enter into transactions resulting in a change of control, merge, consolidate or transfer substantially all of their respective assets and maintain certain financial ratios and meet other financial tests (including, but not limited to, interest coverage, minimum net worth, maximum capital expenditures and maximum ratio of debt to earnings before income taxes, depreciation, and amortization), in each case satisfactory to the Lender. The Senior Credit Facility will contain customary events of default. It is anticipated that the indebtedness incurred through borrowings under the Bridge Loan Facility and the Credit Facility will be repaid from funds generated internally by Parent and its subsidiaries, including the Company and its subsidiaries, and from other sources, which may include the proceeds of the private or public sale of debt or equity securities or asset dispositions. 23 12. CERTAIN EFFECTS OF THE OFFER Following the consummation of the Offer, Purchaser will own at least 90% of the outstanding Shares of the Company. As a result of such ownership, Purchaser will have the ability to approve the Merger and adopt the Merger Agreement without any action by the remaining stockholders of the Company. Purchaser intends to so approve the Merger and adopt the Merger Agreement without any action by the remaining stockholders of the Company. In the Merger, each remaining Share (other than Shares held by Parent, Purchaser or the Company or by any holders of Shares who properly exercise their appraisal rights) will be canceled and converted into the right to receive $21.25 per Share in cash. Following the Merger, the Company will be a wholly owned subsidiary of Parent. Promptly upon the purchase by Purchaser of Shares pursuant to the Offer and from time to time thereafter, Purchaser will be entitled to designate at least a number of directors on the Company's Board of Directors equal to the product of (i) the total number of directors on the Company's Board of Directors and (ii) Purchaser's percentage ownership of the outstanding Shares of the Company. The Company will either increase the size of the Company's Board of Directors or secure the resignation of the necessary number of directors to enable Purchaser's designees to be elected to the Company's Board of Directors, and will cause such designees to be elected to the Company's Board of Directors. Following the election or appointment of Purchaser's designees and before the Effective Time, the Company will not amend or terminate the Merger Agreement, extend the time for performance of any of the obligations or other acts of Parent or Purchaser, waive any of the Company's rights under the Merger Agreement, or take any other action if the amendment, termination, waiver or action would have an adverse effect on the minority stockholders of the Company. As a result of the purchase of Shares by Purchaser in the Offer and the consummation of the Merger, Parent will become the sole stockholder of the Company, and the Shares will no longer meet the standards for continued listing on the NYSE. In addition, Parent intends to terminate the registration on the Shares under the Exchange Act upon the consummation of the Merger. The Shares are currently "margin securities," as such term is defined under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Following the consummation of the Offer, it is anticipated that the Shares will no longer constitute "margin securities" for purposes of the margin regulations of the Federal Reserve Board and will no longer be able to be used as collateral for loans made by brokers. 13. CONDITIONS OF THE OFFER Notwithstanding any other provision of the Offer, the obligation of Purchaser to accept for payment or pay for any Shares tendered pursuant to the Offer shall be subject to (the following being referred to as the "Offer Conditions") (i) the Minimum Condition, (ii) the Financing Condition, and (iii) the occurrence of none of the following events at any time before payment for any Shares: (a) (i) the waiting period applicable to the Offer or the Merger pursuant to the provisions of the HSR Act and any applicable foreign or supranational antitrust laws shall fail to have expired or to have been terminated, or (ii) action by the Department of Justice or Federal Trade Commission or any foreign or supranational agency or entity charged with enforcement of antitrust laws that are applicable to the transactions contemplated hereby challenging or seeking to enjoin the consummation of the Offer or the Merger shall have been instituted and be pending; (b) (i) any order or preliminary or permanent injunction shall be entered in any action or proceeding before any court or any statute, rule, regulation, legislation, or order shall be enacted, entered, enforced, 24 amended or issued by any United States legislative body, court, government or governmental, administrative or regulatory authority or agency (other than the waiting period provisions of the HSR Act) which shall remain in effect and which shall have the effect of (x) making illegal or restraining or prohibiting the making of the Offer, the acceptance for payment of, or payment for, the Shares by Parent, Purchaser or any other affiliate of Parent, or the consummation of the Offer or the Merger or (y) imposing limitations on the ability of Purchaser effectively to acquire or hold or exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares on all matters properly presented to the stockholders of the Company; provided, that Parent, to the extent provided in the Merger Agreement, shall, if necessary to prevent the taking of such action, or the enactment, enforcement, amendment, issuance or application of any statute, rule, regulation, legislation, judgment, order or injunction, offer to accept an order to divest such of the Company's or Parent's assets and businesses as may be necessary to forestall such injunction or order and to hold separate such assets and business pending such divestiture; (ii) any proceeding brought by an administrative agency or commission or other domestic governmental entity seeking any of the foregoing shall be pending; or (iii) any action or proceeding shall be commenced following the date of the Merger Agreement and be pending before any court which, if adversely determined, could reasonably be expected to have a material adverse effect on the Company; (c) the Company, Purchaser and Parent shall have agreed that the Offer or the Merger Agreement be terminated, or the Merger Agreement shall have been terminated in accordance with its terms; (d) the Company or any of its subsidiaries shall have breached one or more of its representations and warranties set forth in the Merger Agreement or failed to perform any of its obligations, covenants or agreements under the Merger Agreement and such breaches or failures to perform shall in the aggregate materially and adversely affect the ability of Parent to own or control the Company, its equity securities and its assets; (e) any material adverse effect on the Company shall have occurred or be occurring; or (f) the representations and warranties of the Company relating to the capitalization of the Company and its subsidiaries and the Company's rights under the Joint Development Agreement shall not be true and correct in all material respects. The foregoing conditions are for the sole benefit of Parent and Purchaser and may be asserted by Parent or Purchaser regardless of the circumstances giving rise to any such condition or may be waived by Parent or Purchaser in whole or in part at any time and from time to time in their reasonable discretion. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each such right shall be deemed an ongoing right that may be asserted at any time or from time to time. 14. DIVIDENDS AND DISTRIBUTIONS The Merger Agreement provides that prior to the Effective Time, neither the Company nor any of its subsidiaries, without the written consent of Parent or as otherwise permitted by the Merger Agreement, will declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) in respect of any class or series of its capital stock other than between any of the Company and any of its wholly owned subsidiaries, or split, combine, subdivide, reclassify or redeem, purchase or otherwise acquire, or propose to redeem, purchase or otherwise acquire, any Shares or any other capital stock of the Company. If in violation of the Merger Agreement, the Company should (a) split, combine or otherwise change the Shares or its capitalization, (b) acquire currently outstanding securities or otherwise cause a reduction in the number of outstanding Securities or (c) issue or sell additional securities, shares of any other 25 class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, then subject to the provisions of Section 15 below, Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. If, during the term of the Merger Agreement, the Company should declare or pay any cash dividend on the Shares or other distribution on the Shares, or issue with respect to the Shares any additional Shares, shares of any other class of capital stock, other voting securities or any securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to shareholders of record on a date prior to the transfer of the Shares purchased pursuant to the Offer to Purchaser or its nominee or transferee on the Company's stock transfer records, then, subject to the provisions of Section 15 below, (a) the amount per Share paid pursuant to the Offer may, in the sole discretion of Purchaser, be reduced by the amount of any such cash dividend or cash distribution and (b) the whole of any such noncash dividend, distribution or issuance to be received by the tendering shareholders will (i) be received and held by the tendering shareholders for the account of Purchaser and will be required to be promptly remitted and transferred by each tendering shareholder to the Depositary for the account of Purchaser, accompanied by appropriate documentation of transfer, or (ii) at the direction of Purchaser, be exercised for the benefit of Purchaser, in which case the proceeds of such exercise will promptly be remitted to Purchaser. Pending such remittance and subject to applicable law, Purchaser will be entitled to all rights and privileges as owner of any such noncash dividend, distribution, issuance or proceeds and may withhold the entire Offer Price or deduct from the amount per Share paid pursuant to the Offer the amount or value thereof, as determined by Purchaser in its sole discretion. Pursuant to the terms of the Merger Agreement, the Company is prohibited from taking any of the actions described in the two preceeding paragraphs and nothing herein shall constitute a waiver by Purchaser or Parent of any of its rights under the Merger Agreement or a limitation of remedies available to Purchaser or Parent for any breach of the Merger Agreement, including termination thereof. 15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS GENERAL Except as described below, Purchaser is not aware of any governmental license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by Purchaser's acquisition of the Company's Shares as contemplated herein or of any approval or other action by any governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of Shares by Purchaser as contemplated herein. Should any such approval or other action be required, Purchaser and Parent currently contemplate that such approval or other action will be sought. Except as otherwise expressly described in this Section 15, Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter. Purchaser is unable to predict whether it may determine that it is required to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter. There can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of, any of which could cause Purchaser to decline to accept for payment or pay for any Shares tendered. See Section 13 for certain conditions to the Offer. 26 ANTITRUST Under the HSR Act and the rules that have been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. The purchase of Shares of the Company by Purchaser pursuant to the Offer is subject to such requirements. Under the provisions of the HSR Act applicable to the Offer, the purchase of Shares under the Offer may be consummated following the expiration of a 15 calendar day waiting period following the filing by Parent of a Notification and Report Form with respect to the Offer, unless Parent receives a request for additional information or documentary material from the Antitrust Division or the FTC or unless early termination of the waiting period is granted. Parent expects that such filing will be made on or about August 7, 1998, in which event such waiting period will expire at 11:59 p.m., New York City time, on or about August 22, 1998. If, within their initial 15 calendar day waiting period, either the Antitrust Division or the FTC requests additional information or documentary material from Parent concerning the Offer, the waiting period will be extended and would expire at 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance by Parent with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only by court order or with the consent of Parent. Although the Company is required to file certain information and documentary material with the Antitrust Division and the FTC in connection with the Offer, neither the Company's failure to make such filings nor a request to the Company from the Antitrust Division or the FTC for additional information or documentary material will extend the waiting period. In practice, complying with a request for additional information or documentary material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. A request will be made pursuant to the HSR Act for early termination of the waiting period applicable to the Offer at the time of filing by Parent of the Notification and Report Form. There can be no assurance, however, that the 15 calendar day HSR Act waiting period will be terminated early. Shares of the Company will not be accepted for payment or paid for pursuant to the Offer until the expiration or earlier termination of the applicable waiting period under the HSR Act. See Section 13. Any extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law. See Section 4. If Purchaser's acquisition of Shares is delayed pursuant to a request by the Antitrust Division or the FTC for additional information or documentary material pursuant to the HSR Act, the Offer may, but need not, be extended. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the acquisition of Shares of the Company by Purchaser pursuant to the Offer. At any time before or after Purchaser's purchase of Shares pursuant to the Offer, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or the consummation of the Merger or seeking the divestiture of Shares acquired by Purchaser or the divestiture of substantial assets of Parent or its subsidiaries, or the Company or its subsidiaries. Private parties may also bring legal action under the antitrust laws under certain circumstances. Purchaser does not believe that the consummation of the Offer will result in a violation of any applicable antitrust laws. However, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made, of the result thereof. 27 STATE TAKEOVER LAWS A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, stockholders, executive offices or places of business in such states. In EDGAR V. MITE CORP., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws, that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS CORP. V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders, provided that such laws were applicable only under certain conditions. Section 203 of the DGCL limits the ability of a Delaware corporation to engage in business combinations with "interested stockholders" (defined as any beneficial owner of 15% or more of the outstanding voting stock of the corporation) unless, among other things, the corporation's board of directors has given its prior approval to either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder." Section 203 of the DGCL is inapplicable to the Offer and the Merger. Based on information supplied by the Company and the Company's representations in the Merger Agreement, Purchaser does not believe that any state takeover statutes apply to the Offer or the Merger. Neither Purchaser nor Parent has currently complied with any state takeover statute or regulation. Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Merger is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or the Merger, Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities, and Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer or the Merger. In such case, Purchaser may not be obligated to accept for payment or pay for any Shares tendered pursuant to the Offer. 16. FEES AND EXPENSES Warburg Dillon Read LLC is acting as Dealer Manager in connection with the Offer and has provided certain financial advisory services in connection with the acquisition of the Company. The Company will pay Warburg Dillon Read an advisory fee in connection with the transactions contemplated by the Merger Agreement as well as a fee in connection with its services as Dealer Manager. The advisory fee will be payable upon consummation of the Offer and will equal 0.625% of the aggregate consideration paid in the Offer and the Merger. For its services as Dealer Manager, Warburg Dillon Read will receive a transaction fee of $1.5 million payable upon the expiration of the Offer, which amount will be reduced by $1 million if the Offer and the Merger are consummated and the advisory fee due thereon is paid. Parent has also agreed to reimburse Warburg Dillon Read for all reasonable out-of-pocket expenses incurred by Warburg Dillon Read, including the reasonable fees and expenses of legal counsel, and to indemnify Warburg Dillon Read against certain liabilities and expenses in connection with its engagement, including certain liabilities under the federal securities laws. Warburg Dillon Read has from time to time, and continues to, render various investment banking services to Parent and its affiliates, for which it is paid customary fees. Warburg Dillon Read LLC is a subsidiary of UBS AG, which is providing the Senior Credit Facility and the Bridge Loan Facilities. Parent will pay UBS certain fees, receive certain expenses, and provide certain indemnities, all of which Parent believes to be customary for commitments of this type. 28 Purchaser has retained MacKenzie Partners, Inc. to act as the Information Agent, and IBJ Schroder Bank & Trust Company to act as the Depositary, in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominee shareholders to forward the Offer materials to beneficial owners. Each of the Information Agent and the Depositary will receive reasonable and customary compensation for their respective services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. Except as set forth above, Purchaser will not pay any fees or commissions to any broker or dealer or other person for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies (including the Dealer Manager) will, upon request, be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding the Offer materials to their customers. 17. MISCELLANEOUS Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of Purchaser by the Dealer Manager or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. Parent and Purchaser have filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act containing certain additional information with respect to the Offer. Such Schedule and any amendments thereto, including exhibits, may be examined and copies may be obtained from the principal office of the Commission in the manner set forth in Section 7 (except that they will not be available at the regional offices of the Commission). NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF PURCHASER OR PARENT NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. ZEIGLER ACQUISITION CORPORATION August 5, 1998 29 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER A. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT The following table sets forth the name, present principal occupation or employment and material occupation, positions, offices or employment for the past five years of each director and executive officer of Parent. Unless otherwise indicated below, the address of each director and officer is 1500 North Big Run Road, Ashland, Kentucky 41102 and each such person is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND FIVE-YEAR NAME EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Larry Addington........................... Mr. Addington has been a director of Parent since its organization and has substantial experience in the operation of coal mining ventures. His first mining company, Addington Brothers Mining Company, began mining coal in eastern Kentucky in 1972 and was sold to Ashland Oil in 1976. In 1978, Larry Addington formed Pyramid, which mined coal in western Kentucky and was sold to First Mississippi in 1981. In 1984, Larry Addington formed Addington Resources, Inc. which became a public company in 1987, and which primarily conducted coal mining and integrated solid waste disposal operations. Larry Addington is the brother of Robert and Stephen Addington, who are directors of Parent and Purchaser. Don Brown................................. Mr. Brown, President and Chief Executive Officer and a director of Parent since September 1997, has worked in the coal industry since 1968, and has extensive experience in all phases of coal mining operations. Previously, Mr. Brown served as President of Cyprus Coal Company from 1987 to 1993, as President of Cyprus Amax Coal Company from 1993 to 1995 and as Chief Executive Officer of International Executive Service, LLC from 1995 to 1997. Kevin Crutchfield......................... Mr. Crutchfield, who joined Parent as Chief Operating Officer on July 30, 1998, has worked in the coal industry for 15 years. From 1995 until his employment by the Company, he served in various capacities for Cyprus Amax Coal Company, including President and Chairman of Cyprus Australia Coal Company. From 1993 to 1995, he worked for Pittston Coal Company and its subsidiaries as Vice President of Mining Operations. Robert Addington.......................... Mr. Addington, Senior Vice President--Eastern Operations and a director of Parent, has been involved in the coal mining business since 1970. With Larry Addington and Bruce Addington, he founded Addington Brothers Mining, which was sold to Ashland Oil in 1976. He served as an officer and director of Addington Resources from 1986 until 1995. John Baum................................. Mr. Baum, Chief Financial Officer, has been involved in the coal industry since 1981, and was self-employed as a general consultant from June 1995 until his employment by Parent in November 1997. Prior to June 1995, Mr. Baum was employed by Cyprus Amax Coal Company as Chief Financial Officer of its Australian operations.
I-1
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND FIVE-YEAR NAME EMPLOYMENT HISTORY - ------------------------------------------ --------------------------------------------------------------------- Marc Merritt.............................. Marc Merritt, Senior Vice President--Sales and Marketing, has worked in the coal industry for 21 years. From 1986 until 1994, he was a sales manager for Addington, Inc., and from 1994 until 1997, he was the Executive Vice President--Coal Sales for Pittston Coal Sales Corp. From 1997 until his employment by the Company, he was President of M&M Management, Inc., a coal industry consulting company. James Morris.............................. Senior Vice President--Technical Services and Business Development, joined AEI in January 1998 and brought with him over twenty years of experience in mining, development and technical expertise. Prior to joining AEI, Mr. Morris served as President of Valucomm, Inc., a coal industry consulting firm, since 1994. Previous to that, Mr. Morris served as Executive Vice President and Chief Operating Officer for Pen Coal Company from 1990 to 1993, and from 1979 through 1990 served in various management and technical roles with Cyprus Minerals Company. From 1971 through 1978, Mr. Morris held various mine management positions with Anschutz Coal Corporation, CF&I Steel Corporation and Peabody Corporation. Keith Sieber.............................. Mr. Sieber, Vice President--Western Operations, has worked in the coal industry for more than 20 years, and was employed in the same position by Cyprus Amax until he began his employment with Parent. Victor Grubb.............................. Mr. Grubb, Treasurer/Controller, worked for Addington Resources from 1989 to 1995, and has been the Chief Financial Officer of Addington Enterprises since 1995. He has a degree from Morehead State University in Business Administration with an emphasis in Accounting. John Lynch................................ Mr. Lynch, Vice President--Supply/Maintenance and Secretary, has worked for various Addington-affiliated companies since 1983. He is currently the Vice President and Secretary of Addington Enterprises, and the President of Mining Machinery, Inc. ("MMI"). Stephen Addington......................... Mr. Addington, a director of Parent, was the Regional Manager of southern Ohio and northeastern Kentucky surface coal mines for a subsidiary of Addington Resources from 1990 until 1992. From 1992 until 1995, he was the Vice President of Operations for Addington Environmental, Inc., and presently is a Division Manager of Tennessee Mining an a consultant to Kindill Mining , Inc. Stonie Barker............................. Mr. Barker, a director, has been involved in the coal mining business since 1951. He has served as President, Chief Executive Officer and Chairman of the Board of Island Creek Coal Company, Executive Vice President of Occidental Petroleum Corporation, and is currently President of the Executive Energy Company, and a director of Kaiser Steel Corporation. Robert Anderson, Jr....................... Mr. Anderson, a director since August 1998, has over 45 years of experience in the coal industry. He has been Chairman of the Board of Directors of Centennial Resources, which mines and markets coal, since 1995. From 1976 until 1995, Mr. Anderson served in various senior executive capacities, including as President and Vice Chairman of the Board, with ANDALEX Resources, Inc., which mines and markets coal.
I-2 B. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER The following table sets forth the name, business address, present principal occupation or employment and material occupations, positions, offices or employment for the past five years of each director and executive officer of Purchaser. Unless otherwise indicated below, the address of each director and officer is: 1500 North Big Run Road, Ashland, Kentucky 41102 and each such person is a citizen of the United States.
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT AND FIVE-YEAR NAME EMPLOYMENT HISTORY - -------------------------------------------------------- -------------------------------------------------------- Larry Addington......................................... Director. See Schedule 1A. Don Brown............................................... President. See Schedule 1A. Kevin Crutchfield....................................... Chief Operating Officer. See Schedule 1A. Robert Addington........................................ Director. See Schedule 1A. John Baum............................................... Chief Financial Officer. See Schedule 1A. Marc Merritt............................................ Senior Vice President. See Schedule 1A. Jim Morris.............................................. Senior Vice President. See Schedule 1A. Keith Sieber............................................ Vice President. See Schedule 1A. Victor Grubb............................................ Treasurer. See Schedule 1A. John Lynch.............................................. Secretary. See Schedule 1A. Stephen Addington....................................... Director. See Schedule 1A. Stonie Barker........................................... Director. See Schedule 1A. Robert Anderson, Jr..................................... Director. See Schedule 1A.
I-3 THE DEPOSITARY FOR THE OFFER IS: IBJ SCHRODER BANK & TRUST COMPANY By Mail: By Facsimile Transmission: By Hand or Overnight Courier: IBJ Schroder Bank & Trust (212) 858-2611 IBJ Schroder Bank & Trust Company Company P.O. Box 84 One State Street Bowling Green Station To Confirm New York, New York 10004 New York, New York 10274-0084 Facsimile Transmissions Call Attn: Securities Processing Attn: Reorganization Operations (212) 858-2103 Window Department
Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. Additional copies of this Offer to Purchase, the Letter of Transmittal and other tender offer materials may be obtained from the Information Agent as set forth below and will be furnished promptly at Purchaser's expense. You may also contact the Dealer Manager or your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: [MACKENZIE PARTNERS,INC. LOGO] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or CALL TOLL FREE: 1-800-322-2885 THE DEALER MANAGER FOR THE OFFER IS: WARBURG DILLON READ LLC 535 Madison Avenue New York, New York 10022 (212) 906-7836 EX-99.(A)(2) 3 FORM LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF ZEIGLER COAL HOLDING COMPANY PURSUANT TO THE OFFER TO PURCHASE DATED AUGUST 5, 1998 OF ZEIGLER ACQUISITION CORPORATION, A WHOLLY OWNED SUBSIDIARY OF AEI RESOURCES, INC. - ----------------------------------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, SEPTEMBER 1, 1998, UNLESS THE OFFER IS EXTENDED. - -------------------------------------------------------------------------------- The Depositary for the Offer is: IBJ SCHRODER BANK & TRUST COMPANY BY MAIL: BY FACSIMILE: BY HAND/OVERNIGHT DELIVERY: P.O. Box 84 (212) 858-2611 One State Street Bowling Green Station New York, NY 10004 New York, NY 10274-0084 CONFIRM FACSIMILE BY TELEPHONE: Attention: Attention: Reorganization Dept. (212) 858-2103 Securities Processing Window, SC-1
This Letter of Transmittal is to be used either if certificates for Shares (as defined below) are to be forwarded herewith or if tender of Shares is to be made by book-entry transfer to the account maintained by the Depositary at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as defined below). Shareholders who tender Shares by book-entry transfer are referred to herein as "Book-Entry Shareholders" and other shareholders are referred to herein as "Certificate Shareholders." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Shareholders whose certificates for Shares are not immediately available or who cannot deliver their certificates (or who cannot comply with the book-entry transfer procedures on a timely basis) and all other documents required hereby to the Depositary on or prior to the Expiration Date (as defined in the Offer to Purchase) must tender their Shares according to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2. IMPORTANT: THIS LETTER OF TRANSMITTAL OR FACSIMILE COPY HEREOF (TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY FOR SHARES, MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE. DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OR TELEX OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
- --------------- DESCRIPTION OF SHARES TENDERED (SEE INSTRUCTIONS 2 AND 4) ------------ CERTIFICATE(S) TENDERED NAMES(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY) (PLEASE FILL IN, IF BLANK) - --------------- TOTAL NUMBER OF SHARES NUMBER OF CERTIFICATE* REPRESENTED BY SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** - --------------- - --------------- - --------------- - --------------- - --------------- - --------------- - --------------- - --------------- TOTAL SHARES - --------------- * Need not be completed by Book-Entry Shareholders. ** Unless otherwise indicated, it will be assumed that all Shares evidenced by any certificate(s) delivered to the Depositary are being tendered. See Instruction 4. / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE GUARANTEED DELIVERY FOR SHARES PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) -------------
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to Zeigler Acquisition Corporation (the "Purchaser"), a Delaware corporation and a wholly owned subsidiary of AEI Resources, Inc. (the "Parent"), a Delaware corporation, the below-described shares of common stock, par value $.01 per share (the "Shares"), of Zeigler Coal Holding Company (the "Company"), a Delaware corporation, pursuant to Purchaser's offer to purchase all of the outstanding Shares at a price of $21.25 per Share, net to the seller in cash and without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 5, 1998 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Upon the terms and subject to the conditions of the Offer, and subject to, and effective upon, acceptance for payment of, and payment for, the Shares tendered herewith in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby (and any and all non-cash dividends, distributions, rights, other Shares and other securities issuable in respect thereof on or after August 5, 1998), and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any and all such non-cash dividends, distributions, rights, other Shares and other securities) with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest) to (i) deliver certificates for such Shares (and any and all such non-cash dividends, distributions, rights, other Shares and other securities) or transfer ownership of such Shares (and any and all such non-cash dividends, distributions, rights, other Shares and other securities) on the account books maintained by the Book-Entry Transfer Facility, together, in either such case, with all accompanying evidence of transfer and authenticity, to or upon the order of Purchaser upon receipt by the Depositary, as the undersigned's agent, of the purchase price, (ii) present such Shares (and any and all such non-cash dividends, distributions, rights, other Shares and other securities) for transfer on the books of the Company and (iii) receive all benefits (including all dividends or distributions resulting from any stock split, combination, or exchange of Shares) and otherwise exercise all rights of beneficial ownership of such Shares (and any and all such non-cash dividends, distributions, rights, other Shares and other securities) all in accordance with the terms of the Offer. The undersigned irrevocably appoints Purchaser and any other designees of Purchaser, as the attorney-in-fact and proxy of the undersigned, with full power of substitution, to exercise all voting and other rights with respect to any Shares tendered by the shareholder and accepted for payment by Purchaser (and any and all non-cash dividends, distributions, rights, other Shares and other securities issued or issuable in respect of such Shares on or after August 5, 1998). Any such power of attorney and proxy is coupled with an interest in the tendered Shares and is irrevocable and is granted in consideration of, and is effective upon, Purchaser's written notice to the Depositary of its acceptance for payment of such Shares in accordance with the terms of the Offer. Upon acceptance for payment pursuant to the Offer, all prior proxies given by the shareholder with respect to such Shares and other securities will, without further action, be revoked, and no subsequent proxies may be given, and if given, will not be effective. Purchaser and its designees will, with respect to the Shares and other securities, be empowered to exercise all voting and other rights of the shareholder as they, in their sole discretion, may deem proper at any annual, special or adjourned meeting of the Company's shareholders or by written consent or otherwise. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any and all non-cash dividends, distributions, rights, other Shares and other securities issued or issuable in respect of such Shares on or after August 5, 1998) and that, when the same are accepted for payment and paid for by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges, claims and encumbrances and the same will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby. In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of Purchaser the whole of any non-cash dividend, distribution or right issued to the undersigned on or after August 5, 1998, in respect of the Shares tendered hereby, accompanied by appropriate 2 documentation of transfer. Pending such remittance, Purchaser shall be entitled to all rights and privileges as owner of any such non-cash dividend, distribution or right and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by Purchaser in its sole discretion. Purchaser reserves the right to require that, in order for shares to be deemed validly tendered, immediately upon Purchaser's acceptance for payment of such Shares, Purchaser must be able to exercise full voting rights with respect to such Shares (including voting at any annual, special or adjourned meeting of the Company's shareholders, or by written consent or otherwise). All authority conferred or agreed to be conferred in this Letter of Transmittal shall not be affected by, and shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, legal representatives, successors, assigns, executors, administrators and trustees in bankruptcy of the undersigned. Except as stated in the Offer to Purchase, tenders of Shares are irrevocable. The undersigned understands that the valid tender of Shares (and acceptance for payment of such Shares) pursuant to any of the procedures described in "The Tender Offer--3. Procedure for Tendering Shares" of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer, including the undersigned's representation and warranty that such undersigned owns the Shares being tendered. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or return any certificates for any Shares not tendered or accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price for any Shares purchased and/or return any certificates for any Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the registered holder(s) at the address(es) appearing under "Description of Shares Tendered." In the event that either the "Special Delivery Instructions" or the "Special Payment Instructions" are completed, please issue the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment in the name of, and deliver said check and/or return such certificates to, the person or persons so indicated. Book-entry Shareholders delivering Shares by book-entry transfer may request that any Shares not accepted for payment be returned by crediting such account maintained at the Book-Entry Transfer Facility by making an appropriate entry under "Special Payment Instructions." The undersigned recognizes that Purchaser has no obligation pursuant to the Special Payment Instructions to transfer any Shares from the name(s) of the registered holder(s) thereof if Purchaser does not accept for payment any of such Shares so tendered. INSTRUCTIONS FORMING PART OF TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) which is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program, or the Stock Exchange Medallion Program (each of the foregoing constituting an "Eligible Institution"). Signatures on this Letter of Transmittal need not be guaranteed (a) if this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in one of the Book-Entry Transfer Facilities whose name appears on a security position listing as the owner of Shares) tendered herewith and such holder(s) has (have) not completed the instruction entitled "Special Payment Instruments" and/or "Special Delivery Instructions" on this Letter of Transmittal or (b) if such Shares are tendered for the account of an Eligible Institution. In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of Transmittal is to be completed by shareholders either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedure for delivery by book-entry transfer set forth in "The Tender Offer--3. Procedure for Tendering Shares" of the Offer to Purchase. For a shareholder validly to tender Shares, certificates for all 3 physically tendered Shares or any Book-Entry Confirmation (as defined in the Offer to Purchase), as the case may be, as well as a properly completed and duly executed Letter of Transmittal must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date (as defined in the Offer to Purchase), or the tendering shareholder must comply with the guaranteed delivery procedures set forth below and in "The Tender Offer--3. Procedure for Tendering Shares" of the Offer to Purchase. Shareholders whose certificates for Shares are not immediately available or who cannot deliver their certificates and all other required documents to the Depositary or complete the procedure for book-entry transfer prior to the Expiration Date may tender their Shares by properly completing and duly executing the Notice of Guaranteed Delivery for Shares pursuant to the guaranteed delivery procedures set forth in "The Tender Offer--3. Procedure for Tendering Shares" of the Offer to Purchase. Pursuant to such procedures, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery for Shares substantially in the form provided by Purchaser must be received by the Depositary prior to the Expiration Date and (iii) the certificates (or a book-entry transfer confirmation) representing all tendered Shares, in proper form for transfer, in each case together with this Letter of Transmittal (or a facsimile thereof) properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by this Letter of Transmittal are received by the Depositary within three New York Stock Exchange ("NYSE") trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in "The Tender Offer--3. Procedure for Tendering Shares" of the Offer to Purchase. THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES AND THE OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY ISSUED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering shareholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares and for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate SIGNED schedule and attached hereto. 4. PARTIAL TENDERS. If fewer than all the Shares evidenced by any certificate submitted are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such case, new certificate(s) for the remainder of the Shares that were evidenced by the old certificate(s) will be sent to the registered holder(s), unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are held of record by two or more joint holders, all such holders must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. When this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made, or certificates for Shares not tendered or purchased are to be issued, to any person other than the registered holder(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person or persons other than the registered holder(s) of the certificate(s) listed, then the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the 4 certificates. Signatures on certificates or stock powers required by this Instruction 5 must be guaranteed by an Eligible Institution, unless the signature is that of an Eligible Institution. If this Letter of Transmittal or any certificate or stock power is signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to Purchaser of their authority so to act must be submitted. 6. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in the name(s) of, and/or certificates for unpurchased or untendered Shares are to be issued to, a person(s) other than the signer(s) of this Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Shareholders tendering Shares by book-entry transfer may request that Shares not purchased be credited to such account maintained at the Book-Entry Transfer Facility. If no such instructions are given, such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facility designated above. 7. STOCK TRANSFER TAXES. Purchaser will pay or cause to be paid any stock transfer taxes applicable with respect to the transfer and sale of purchased Shares to Purchaser pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates for Shares not tendered or not accepted for payment are to be registered in the name of, any person(s) other than the registered holder(s), or if tendered certificates are registered in the name of any person(s) other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered owner or such person(s)) payable on account of the transfer to such person(s) will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. Except as provided in this Instruction 7, it will not be necessary for transfer tax stamps to be affixed to the certificates listed in this Letter of Transmittal. 8. WAIVER OF CONDITIONS. Subject to the Merger Agreement, Purchaser reserves the absolute right, in its sole discretion, to waive any of the specified conditions of the Offer, in whole or in part, in the case of any Shares tendered. 9. REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Requests for assistance may be directed to, or additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery for Shares and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be obtained from, the Information Agent or the Dealer Manager at their addresses set forth below or from your broker, dealer, commercial bank or trust company. 10. SUBSTITUTE FORM W-9. Each tendering shareholder is required to provide the Depositary with a correct taxpayer identification number ("TIN"), generally the shareholder's social security or federal employer's identification number, on Substitute Form W-9, which is provided below. You must cross out item (2) in the Certification box on Substitute Form W-9 if you are subject to backup withholding. Failure to provide the information on the form may subject the tendering shareholder to 31 percent federal income tax withholding on the payments made to the shareholder or other payee with respect to Shares purchased pursuant to the Offer. The box in Part 3 of the form may be checked if the tendering shareholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked and the Depositary is not provided with a TIN within sixty (60) days, thereafter the Depositary will withhold 31 percent on all such payments of the purchase price until a TIN is provided to the Depositary. 11. WIRE TRANSFER. Any person who tenders Shares representing more than 1% (282,227) of the Company's outstanding Shares may receive payment of Offer proceeds by wire transfer. For further information, eligible shareholders may contact the Depositary at the address set forth below. IMPORTANT TAX INFORMATION Under the federal tax law, a shareholder whose tendered Shares are accepted for payment is required by law to provide the Depositary with such shareholder's correct TIN on Substitute Form W-9 below. If such shareholder is an individual, the TIN is his social security number. If the Depositary is not provided 5 with the correct TIN, the shareholder or other payee may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such shareholder or other payee with respect to Shares purchased pursuant to the Offer may be subject to backup withholding. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that shareholder must submit to the Depositary a properly completed Internal Revenue Form W-8, signed under penalties of perjury, attesting to that shareholder's exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instruction. If backup withholding applies, the Depositary is required to withhold 31 percent of any payments made to the shareholder or other payee. Backup withholding is not an additional tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup withholding on payments made to a shareholder or other payee with respect to Shares purchased pursuant to the Offer, the shareholder is required to notify the Depositary of the shareholder's correct TIN by completing the form below, certifying that the TIN provided on Substitute Form W-9 is correct (or that such shareholder is awaiting a TIN) and that (1) the shareholder has not been notified by the Internal Revenue Service that the shareholder is subject to backup withholding as a result of failure to report all interest or dividends or (2) the Internal Revenue Service has notified the shareholder that the shareholder is no longer subject to backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the TIN (e.g., social security number or employer identification number) of the record owner of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. NOTE: FAILURE TO COMPLETE AND RETURN FORM W-9 MAY RESULT IN BACKUP WITHHOLDINGS OF 31 PERCENT OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER, PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. THE INFORMATION AGENT FOR THE OFFER IS: [MACKENZIE PARTNERS, INC. LOGO] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) OR CALL TOLL FREE: 1-800-332-2885 THE DEALER MANAGER FOR THE OFFER IS: Warburg Dillon Read LLC 535 Madison Avenue New York, New York 10022 (212) 906-7836 6 PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY - -------------------------------------------------------------------------------- SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be issued in the name of someone other than the undersigned, or if Shares delivered by book-entry transfer which are not accepted for payment are to be returned by credit to an account maintained at a Book-Entry Transfer Facility other than account indicated above. Issue: / / Check / / Certificates to: Name _______________________________________________________________________ (PLEASE PRINT) Address ____________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ (ZIP CODE) ____________________________________________________________________________ (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.) - ------------------------------------------------- - ------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for Shares not tendered or not accepted for payment and/or the check for the purchase of Shares accepted for payment are to be sent to someone other than the undersigned, or to the undersigned at an address other than that below. Mail: / / Check / / Certificates to: Name _______________________________________________________________________ (PLEASE PRINT) Address ____________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ (ZIP CODE) ____________________________________________________________________________ (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.) - -------------------------------------------------
- --------------------------------------------------------------------------------------------------- SHAREHOLDER SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9) SIGNATURE(S) OF SHAREHOLDER(S) Dated: , 1998 (Must be signed by registered holder(s) exactly as name(s) on stock certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by an officer of a corporation, attorney-in-fact, executor, administrator, trustee, guardian or other person(s) acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5.) Name(s): - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (Full Title): - --------------------------------------------------------------------------------------------------- Address: - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- (ZIP CODE) Area Code and Tel. No.: - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- GUARANTEE OF SIGNATURE(S) (IF REQUIRED--SEE INSTRUCTIONS 1 AND 5) Authorized Signature: Name: (PLEASE PRINT) Name of Firm: Address: (ZIP CODE) Area Code and Tel. No.: Dated: - ---------------------------------------------------------------------------------------------------
7 PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY, AS AGENT (SEE INSTRUCTION 10) - --------------------------------------------------------------------------------------------------- SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN Social Security Number(s) FORM W-9 IN THE BOX AT RIGHT AND CERTIFY OR ------------------- Department of the Treasury BY SIGNING AND DATING BELOW Employer Identification Number Internal Revenue Service ----------------------------------------------------------------- Payer's Request for Taxpayer PART 2-- Identification Number (TIN) Certification--Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding either because I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of failure to report all interest or dividends, or the IRS has notified me that I am no longer subject to backup withholding. ----------------------------------------------------------------- CERTIFICATION INSTRUCTIONS--You PART 3-- must cross out item (2) above WAITING TIN / / if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). SIGNATURE: ------------------ DATE: ------------------------ - ---------------------------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, 31 percent of all reportable payments made to me thereafter will be withheld until I provide a number. Signature Date - ---------------------------------------------------------------------------------------------------
EX-99.(A)(3) 4 FORM OF SHAREHOLDER LETTER ZEIGLER COAL HOLDING COMPANY 50 JEROME LANE FAIRVIEW HEIGHTS, IL 62208 August 5, 1998 Dear Shareholders: We are please to inform you that our Company has entered into an Agreement and Plan of Merger, dated as of August 3, 1998 (the "Merger Agreement"), with AEI Resources, Inc. ("Parent") and Zeigler Acquisition Corp., a wholly-owned subsidiary of Parent ("Purchaser"). Pursuant to the Merger Agreement, Purchaser has today commenced a cash tender offer (the "Offer") to purchase all of the outstanding common stock, $.01 par value (the "Shares"), of the Company at a purchase price of $21.25 per Share, net to the shareholder in cash. Following the successful consummation of the Offer, Purchaser will be merged with and into the Company (the "Merger") and the Company will become a wholly-owned subsidiary of Parent. YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER AND APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER. In arriving at its recommendation, the Board of Directors gave careful consideration to the factors described in the attached Schedule 14D-9 that is being filed today with the Securities and Exchange Commission, including, among other things, the opinion of Credit Suisse First Boston Corporation, the Company's financial advisor, that the consideration to be received by stockholders in the Offer and the subsequent Merger pursuant to the Merger Agreement is fair, from a financial point of view, to such stockholders. In addition to the attached Schedule 14D-9, enclosed is the Offer to Purchase dated August 5, 1998 together with related materials, including a Letter of Transmittal, to be used for tendering your Shares pursuant to the Offer. These documents state the terms and conditions of the Offer and the subsequent Merger, provide detailed information about the transactions and include instructions as to how to tender your Shares. We urge you to read these documents carefully in making your decision with respect to tendering your Shares pursuant to the Offer. Very truly yours, Chand B. Vyas PRESIDENT AND CHIEF EXECUTIVE OFFICER EX-99.(A)(4) 5 BROKER DEALER LETTER WARBURG DILLON READ LLC 535 MADISON AVENUE NEW YORK, NEW YORK 10022 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF ZEIGLER COAL HOLDING COMPANY AT $21.25 NET PER SHARE BY ZEIGLER ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF AEI RESOURCES, INC. THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, SEPTEMBER 1, 1998, UNLESS THE OFFER IS EXTENDED. August 5, 1998 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Zeigler Acquisition Corporation, a Delaware corporation ("Purchaser") and a wholly owned subsidiary of AEI Resources, Inc., to act as Dealer Manager in connection with Purchaser's offer to purchase all of the outstanding shares of common stock, par value $.01 per share (the "Shares"), of Zeigler Coal Holding Company (the "Company"), at $21.25 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in Purchaser's Offer to Purchase dated August 5, 1998 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). THE OFFER IS SUBJECT TO SEVERAL CONDITIONS CONTAINED IN THE OFFER TO PURCHASE INCLUDING (1) THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES WHICH CONSTITUTES AT LEAST 90% OF THE COMPANY'S OUTSTANDING SHARES ON A FULLY DILUTED BASIS, EXCLUDING OPTIONS TENDERED FOR CANCELLATION, (2) PURCHASER HAVING OBTAINED FUNDS, PURSUANT TO EXISTING FINANCING COMMITMENTS DESCRIBED IN THE OFFER TO PURCHASE OR OTHERWISE, SUFFICIENT TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE PURCHASE OF ALL OF THE SHARES PURSUANT TO THE OFFER OR THE MERGER, ALL PAYMENTS WITH RESPECT TO OPTIONS TO PURCHASE SHARES, AND ALL RELATED COSTS AND EXPENSES, AND (3) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED. CERTAIN DIRECTORS AND SHAREHOLDERS HOLDING APPROXIMATELY 33% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS HAVE AGREED TO TENDER THEIR SHARES. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THE OFFER TO PURCHASE. SEE INTRODUCTION AND SECTIONS 1 AND 13 IN THE OFFER TO PURCHASE. For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents: 1. Offer to Purchase dated August 5, 1998; 2. Letter of Transmittal to tender Shares for your use and for the information of your clients, together with GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 providing information relating to backup federal income tax withholding (facsimile copies of the Letter of Transmittal may be used to tender Shares); 3. Notice of Guaranteed Delivery to be used to accept the Offer if the certificates for the Shares being tendered and all other required documents cannot be delivered to the Depositary by the Expiration Date as defined in the Offer to Purchase or if procedures for book-entry transfer cannot be completed by the Expiration Date; 4. A printed form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; and 5. A letter to Zeigler Coal Holding Company shareholders from the President and Chief Executive Officer of Zeigler Coal Holding Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9, filed with the Securities and Exchange Commission by the Company and mailed to shareholders of the Company recommending that the Company's shareholders accept the Offer and tender their Shares. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY TIME, ON TUESDAY, SEPTEMBER 1, 1998, UNLESS THE OFFER IS EXTENDED. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and pay for the Shares which are validly tendered prior to the Expiration Date and not theretofore properly withdrawn when, as and if Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance of such Shares for payment pursuant to the Offer. Payment for the Shares purchased pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of certificates for the Shares or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, pursuant to the procedures described in "The Tender Offer--3. Procedure for Tendering Shares" of the Offer to Purchase, a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) or an Agent's Message in connection with a book-entry transfer, and all other documents required by the Letter of Transmittal. If holders of Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents on or prior to the Expiration Date or to comply with the book-entry transfer procedure on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in "The Tender Offer--3. Procedure for Tendering Shares" in the Offer to Purchase. Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than to the Dealer Manager as described in the Offer to Purchase) for soliciting tenders of the Shares pursuant to the Offer. Purchaser will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. Purchaser will pay all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, subject to Instruction 7 of the Letter of Transmittal. 2 Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained from, any of the Information Agent or the undersigned at the addresses and telephone numbers set forth on the back cover of the Offer to Purchase and the Letter of Transmittal. Very truly yours, WARBURG DILLON READ LLC NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF PURCHASER, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(A)(5) 6 NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE) TO TENDER SHARES OF COMMON STOCK OF ZEIGLER COAL HOLDING COMPANY PURSUANT TO THE OFFER TO PURCHASE DATED AUGUST 5, 1998 OF ZEIGLER ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF AEI RESOURCES, INC. This Notice of Guaranteed Delivery, or one substantially equivalent to the attached form, must be used to accept the Offer (as defined below) if (i) certificates for shares of common stock, par value $.01 per share (the "Shares"), of Zeigler Coal Holding Company and all other documents required by the Letter of Transmittal cannot be delivered to the Depositary by the expiration of the Offer (as defined in the Offer to Purchase) or (ii) the procedures for delivery of book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission or mail to the Depositary. See "The Tender Offer--3. Procedure for Tendering Shares" in the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: IBJ SCHRODER BANK & TRUST COMPANY BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER: IBJ Schroder Bank & Trust (212) 858-2611 IBJ Schroder Bank & Trust Company Company P.O. Box 84 One State Street Bowling Green Station To Confirm New York, New York 10004 New York, New York 10274-0084 Facsimile Transmissions Call Attn: Securities Processing Attn: Reorganization (212) 858-2103 Window Operations Department
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature of a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to Zeigler Acquisition Corporation ("Purchaser"), upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 5, 1998 and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged, the number (indicated below) of Shares pursuant to the guaranteed delivery procedure set forth in "The Tender Offer--3. Procedure for Tendering Shares" of the Offer to Purchase. Number of Shares being tendered hereby: Shares Certificate No(s). (if available): ____________________________________________________________________________ If Shares will be tendered by book-entry transfer: Name of Tendering Institution ______________________________________________ Account No. _____________________________________________________________ at The Depository Trust Company SIGN HERE: ____________________________________________________________________________ (SIGNATURE(S)) __________________________________________________________________________ (NAME(S) OF RECORD HOLDERS) (PLEASE PRINT) __________________________________________________________________________ (ADDRESS) __________________________________________________________________________ (ZIP CODE) __________________________________________________________________________ (TELEPHONE NO.) GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a financial institution (including most banks, savings and loan associations and brokerage houses) which is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program, or the Stock Exchange Medallion Program, hereby (a) represents that the above named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (b) represents that such tender complies with Rule 14e-4 and (c) guarantees to deliver to the Depositary the Shares tendered hereby, together with a properly completed and duly executed Letter(s) of Transmittal (or facsimile(s) thereof) or an Agent's Message as defined in the Offer to Purchase in the case of a book-entry delivery, and any other required documents, all within three New York Stock Exchange trading days of the date hereof. ____________________________________________________________________________ (NAME OF FIRM) __________________________________________________________________________ (ADDRESS) __________________________________________________________________________ (ZIP CODE) __________________________________________________________________________ (TELEPHONE NO.) Dated: ______________________________________________________________, 1998. ____________________________________________________________________________ (AUTHORIZED SIGNATURE) __________________________________________________________________________ (NAME) __________________________________________________________________________ (TITLE) DO NOT SEND STOCK CERTIFICATES WITH THIS FORM. YOUR STOCK CERTIFICATES MUST BE SENT WITH THE LETTER OF TRANSMITTAL. EX-99.(A)(6) 7 W-9 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. -- Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer.
- ----------------------------------------------------------- ----------------------------------------------------------- GIVE THE GIVE THE EMPLOYER SOCIAL SECURITY IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF -- FOR THIS TYPE OF ACCOUNT: NUMBER OF -- - ----------------------------------------------------------- ----------------------------------------------------------- 1. An individual's account The individual 8. Sole proprietorship account The owner (4) 2. Two or more individuals (joint The actual owner of the 9. A valid trust, estate or The legal entity (do not account) account or, if combined pension trust furnish the identifying funds, any one of the number of the personal individuals (1) representative or trustee unless the legal entity itself is not designated in the account title) (5) 3. Husband and wife (joint The actual owner of the 10. Corporate account The corporation account) account or, if joint funds, either person (1) 4. Custodian account of a minor The minor(2) 11. Religious, charitable, The organization (Uniform Gift to Minors Act) educational or other tax-exempt organization account 5. Adult and minor (joint The adult or, if the 12. Partnership account held in The partnership account) minor is the only the name of the business contributor, the minor (1) 6. Account in the name of The ward, minor, or 13. Association, club, or other The organization guardian or committee for a incompetent person (3) tax- exempt organization designated ward, minor, or incompetent person 7. a. The usual revocable savings The grantor-trustee (1) 14. A broker or registered The broker or nominee trust account (grantor is nominee also trustee) b. So-called trust account that The actual owner (1) 15. Account with the Department The public entity is not a legal or valid of Agriculture in the name of a trust under State law public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - ------------------------------------------------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a Social Security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your Social Security number or employer identification number (if you have one). (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you do not have a taxpayer identification number or you do not know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number (for business and all other entities), at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under Section 501(a) of the Internal Revenue Code of 1986, as amended (the "Code"), or an individual retirement plan, or a custodial account under Section 403(b)(7) if the account satisfies the requirements of Section 401(F)(7). - The United States or any of its agencies or instrumentalities. - A State, the District of Columbia, a possession of the United States, or any political subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency, or instrumentality thereof. - An international organization or any agency or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S., the District of Columbia or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under Section 584(a) of the Code. - An exempt charitable remainder trust, or a non-exempt trust described in Section 4947(a)(1) of the Code. - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. - A middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under Section 1441 of the Code. - Payments in partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. - Section 404(k) payments made by an ESOP. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. NOTE: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under Section 852 of the Code). - Payments described in Section 6049(b)(5) of the Code to nonresident aliens. - Payments on tax-free covenant bonds under Section 1451 of the Code. - Payments made by certain foreign organizations. - Payments made to a nominee. - Mortgage interest paid by you. EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS). Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under Section 6041, 6041(A)(a), 6045, and 6050A of the Code and the regulations promulgated thereunder. PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividends, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.(A)(7) 8 FORM OF SUMMARY ADVERTISEMENT Exhibit 7(a) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made only by the Offer to Purchase dated August 5, 1998 and the related Letter of Transmittal and is being made to all holders of Shares. Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with such state statute. If, after such good faith effort, Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, Blue Sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of AEI Resources, Inc. by Warburg Dillon Read LLC or one or more registered brokers or dealers licensed under the laws of such jurisdiction. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock of Zeigler Coal Holding Company at $21.25 Net Per Share by Zeigler Acquisition Corporation a wholly owned subsidiary of AEI Resources, Inc. ZEIGLER Acquisition Corporation, a Delaware corporation ("Purchaser") and wholly owned subsidiary of AEI Resources, Inc. ("Parent"), is offering to purchase all outstanding shares of Common Stock, par value $0.01 per share (the "Shares"), of ZEIGLER COAL HOLDING Company, a Delaware corporation (the "Company"), at $21.25 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 5, 1998 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, SEPTEMBER 1, 1998, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES WHICH CONSTITUTES AT LEAST 90% OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS, EXCLUDING OPTIONS TENDERED FOR CANCELLATION IN ACCORDANCE WITH THE TERMS OF THE MERGER AGREEMENT (AS DEFINED BELOW) (THE "MINIMUM CONDITION"), (2) PURCHASER HAVING OBTAINED FUNDS, PURSUANT TO EXISTING FINANCING COMMITMENTS OR OTHERWISE, SUFFICIENT TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE PURCHASE OF ALL OF THE SHARES PURSUANT TO THE OFFER OR THE MERGER (AS DEFINED BELOW), ALL PAYMENTS WITH RESPECT TO OPTIONS TO PURCHASE SHARES, AND ALL RELATED COSTS AND EXPENSES (THE "FINANCING CONDITION"), AND (3) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD IMPOSED BY THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THE OFFER TO PURCHASE. The Offer is being made in connection with the Agreement and Plan of Merger dated as of August 3, 1998 (the "Merger Agreement"), by and among Parent, Purchaser and the Company. The Merger Agreement requires, on the terms and subject to the conditions set forth therein, Purchaser to offer to purchase all of the outstanding Shares of the Company pursuant to the Offer. If Shares representing at least 90% of the outstanding Shares on a fully diluted basis (excluding options tendered for cancellation) are validly tendered in the Offer and purchased by Purchaser and the other conditions to the Merger are satisfied or waived, Purchaser will merge with and into the Company (the "Merger"), and any Shares not purchased in the Offer (other than shares with respect to which appraisal rights are properly exercised under Delaware law) will be converted in the Merger into the right to receive cash in the amount of $21.25 per Share. Certain directors and stockholders of the Company owning approximately 33% of the outstanding Shares on a fully diluted basis (before the tender of any options to the Company for cancellation) have agreed to tender their Shares into the Offer. THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER, AND RECOMMENDS THAT SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares that have been validly tendered and not properly withdrawn as, if and when Purchaser gives oral or written notice to IBJ Schroder Bank & Trust Company (the "Depositary") of the Purchaser's acceptance for payment of such Shares. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from Purchaser and transmitting such payment to tendering stockholders. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or a timely confirmation of book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility (as defined in Section 3 of the Offer to Purchase) pursuant to the procedures described in Section 3 of the Offer to Purchase), (ii) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message (as defined in Section 3 of the Offer to Purchase)), and (iii) any other documents required by the Letter of Transmittal. Under no circumstances will interest be paid on the purchase price, regardless of any extension of the Offer or any delay in making such payment. The term "Expiration Date" means 12:00 Midnight, New York City Time, on Tuesday, September 1, 1998, unless and until the Purchaser shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date in which the Offer, if so extended by the Purchaser, shall expire. Subject to the terms of the Merger Agreement, the Purchaser has the right to extend the period of time which the Offer is open, and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary. The Merger Agreement provides that the Offer may be extended to no later than Wednesday, September 16, 1998 in order to satisfy any of the conditions to the Offer other than the Financing Condition. The Merger Agreement may be terminated, and the Merger contemplated thereby may be abandoned, by either Parent or the Company if the Financing Condition shall be impossible to satisfy by the end of September 1, 1998 or if any other condition to the Offer shall be impossible to satisfy by the end of September 16, 1998 unless such an event results from the failure of the terminating party to perform its obligations under the Merger Agreement, provided that the Company may not terminate the Merger Agreement if Parent waives the relevant condition (other than the Minimum Condition which cannot be waived without the consent of the Company). Any extension of the Offer will be followed by a public announcement thereof no later than 9:00 a.m. New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer subject to the right of a tendering stockholder to withdraw such stockholder's Shares. Shares tendered pursuant to the Offer may be withdrawn at any time on or prior to the Expiration Date. Thereafter, such tenders are irrevocable, except they may be withdrawn after October 4, 1998, unless theretofore accepted for payment and paid for by Purchaser pursuant to the Offer. For a withdrawal to become effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such shares have been tendered by an Eligible Institution (as defined in Section 3 of the Offer to Purchase), the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If shares have been tendered pursuant to the procedures for book-entry transfers as set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account of the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for any purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 of the Offer to Purchase at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser in its sole discretion, whose determination will be final and binding. The Company has agreed to furnish the Purchaser with copies of the Company's stockholders list and security positions listings. The Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed to record holders of shares and furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's stockholders list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Requests for copies of the Offer to Purchase, the Letter of Transmittal and all other tender offer materials may be directed to the Information Agent or the Dealer Manager as set forth below, and copies will be furnished promptly at the Purchaser's expense. Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager. The Information Agent for the Offer is: MacKenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or Call Toll Free: 1-800-322-2885 The Dealer Manager for the Offer is: Warburg Dillon Read LLC 535 Madison Avenue New York, New York 10022 (212) 906-7836 August 5, 1998 EX-99.(A)(8) 9 FORM OF PRESS RELEASE Exhibit 99(a)(8) AEI RESOURCES ANNOUNCES MERGER WITH ZEIGLER ------------------------------------------- August 3, 1998 - AEI Resources, Inc. ("AEI") announced that it signed a definitive merger agreement with Zeigler Coal Holding Company ("Zeigler") (NYSE:ZEI) pursuant to which AEI would acquire, through a cash tender offer, all of the outstanding common stock of Zeigler at a price of $21.25 per share in cash. The transaction has a total value, including the Zeigler debt to be assumed by AEI, of approximately $855 million. The directors of Zeigler have unanimously approved the AEI transaction and recommend that Zeigler's shareholders accept the AEI offer and tender their shares. The merged company will be the fifth largest coal producer in the United States, with annual sales of more than 60 million tons and annual revenues of approximately $1.4 billion. The combined company will have over 2.7 billion tons of coal reserves, and total assets of approximately $1.8 billion. Under the terms of the merger agreement, Zeigler Acquisition Corporation, a wholly-owned subsidiary of AEI, will promptly commence a tender offer for all of the outstanding shares of Zeigler at a net price of $21.25 per share in cash. Tender offer documents are expected to be mailed to Zeigler stockholders during the week of August 3, 1998. Certain stockholders and directors of Zeigler owning an aggregate of 9,881,995 shares, representing approximately 33% of Zeigler's common stock, have agreed to tender their shares in the tender offer. The tender offer will be conditioned upon: (1) the tender of a minimum of 90% of Zeigler's outstanding shares of common stock on a fully diluted basis; (2) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976; (3) AEI having obtained funds pursuant to existing financing commitments sufficient to purchase the tendered shares and complete the merger; and (4) certain other customary conditions for transactions of this type. Warburg Dillon Read LLC, a subsidiary of UBS AG, has arranged the committed financing required for the transaction. In the merger to occur following the consummation of the tender offer, each share of Zeigler common stock outstanding and not tendered pursuant to the offer will be converted into the right to receive $21.25 in cash. There are currently approximately 28,222,671 shares of Zeigler common stock outstanding. Zeigler common stock is traded on the New York Stock Exchange. The last reported sale price of the common stock on Monday, August 3, 1998 was $15.9375. AEI mines and markets coal from Kentucky, West Virginia, Indiana, Tennessee and Colorado, principally serving mid-to-low sulfur Central and Southern Appalachian demand. Zeigler operates seven active underground and surface coal mining complexes located in Kentucky, West Virginia, Ohio, Illinois and Wyoming. /Contact: John Baum, Chief Financial Officer, 606-928-3433/ EX-99.(B)(1) 10 CREDIT FACILITY COMMITMENT LETTER TO PARENT Exhibit 99(b)(1) [UBS Credit Facility Commitment Letter] UBS AG STAMFORD BRANCH 677 WASHINGTON BOULEVARD NEW YORK, NEW YORK 06901 August 3, 1998 Coal Ventures, Inc. c/o Addington Enterprises, Inc. 1500 North Big Run Road Ashland, Kentucky 41101 Re: Zeigler Coal Acquisition Financing ---------------------------------- Ladies and Gentlemen: We understand that Coal Ventures, Inc. (together with its subsidiaries and any entities it or Addington Enterprises, Inc. or Mr. Larry Addington, individually, may use or form in connection with the Acquisition (as defined below), the "COMPANY") is considering a transaction in which the Company would acquire (the "ACQUISITION") all of the outstanding common stock (the "COMMON STOCK") of Zeigler Coal Holding Company (the "ACQUIRED BUSINESS"), pursuant to a merger (the "MERGER") of a wholly owned subsidiary of the Company with the Acquired Business. It is understood that the Merger will be preceded by a tender offer for not less than 90% of the fully-diluted Common Stock (the "TENDER OFFER") and after consummation of the Tender Offer the Company will effect a short-form merger with the Acquired Business without any shareholder approval in accordance with Section 253 of the Delaware General Corporation Law. You have advised us that the Acquired Business has no classes of capital stock outstanding (or other equity interests) other than the Common Stock. In addition, you have advised us that, in conjunction with the Acquisition, the Company will refinance approximately $250.0 million of its existing debt and approximately $110.0 million of the existing debt of the Acquired Business (the "REFINANCING"). We understand that, prior to the Acquisition, Addington Enterprises, Inc. and Mr. Larry Addington will contribute all of the outstanding capital stock of Coal Ventures, Inc. to a holding company ("HOLDINGS"), such that Coal Ventures, Inc. will be a wholly-owned subsidiary of the Holdings. In the event that the Consent referred to below -2- is obtained prior to the consummation of the Acquisition, it is intended that Coal Ventures, Inc. will be merged with its wholly owned subsidiary, AEI Holding Company, Inc., such that AEI Holding Company, Inc. will be a direct wholly owned subsidiary of Holdings. References to the Company herein shall be deemed to include the Acquired Business on a post-Acquisition basis. In the event that the Consent is not obtained, AEI Holding Company, Inc. will not be a party to the Financing Documents (as defined below). We further understand that up to approximately $1.350 billion of new funds are required to consummate the Acquisition, effect the Refinancing, to issue approximately $145.0 million in letters of credit relating to industrial revenue bonds of the Acquired Business, to pay fees and expenses in connection with the Acquisition and the Refinancing and to provide approximately $130.0 million of working capital availability to the Company on a post-Acquisition basis (collectively, the "TRANSACTIONS"). In addition to the foregoing, approximately $10.0 million of the Bridge Loans and/or Credit Facility will be used for the acquisition of Kindill Mining Inc. Of such amount, up to $500.0 million would be provided by the issuance by the Company of senior subordinated debt (the "SUBORDINATED NOTES"), up to $100.0 million would be provided by the issuance by Holdings of deferred interest senior debt of Holdings (the proceeds of which would be contributed to the Company in the form of common equity)(the "DISCOUNT NOTES" and, together with the Subordinated Notes, the "DEBT SECURITIES"), up to $450.0 million would be provided through secured term loan facilities made available to the Company, and up to $300.0 million would be provided through a secured revolving credit facility made available to the Company (together with the term facilities, the "CREDIT FACILITY"). To the extent that the issuance of the Subordinated Notes is not consummated prior to the consummation of the Acquisition and the Refinancing, the Company will raise gross cash proceeds of up to $500.0 million pursuant to an unsecured senior subordinated bridge loan (the "COMPANY BRIDGE LOAN") which would be anticipated to be replaced with the Subordinated Notes and to the extent that the issuance of the Discount Notes is not consummated prior to the consummation of the Acquisition and the Refinancing, Holdings will raise gross cash proceeds of up to $100.0 million pursuant to an unsecured senior bridge loan (the "HOLDINGS BRIDGE LOAN" and, together with the Company Bridge Loan, the "BRIDGE LOANS") which would be anticipated to be replaced with the Discount Notes. You have advised us that, other than the debt referred to in this paragraph, after giving effect to the Acquisition and the Refinancing, (x) none of the Company, the Acquired -3- Business or any of their subsidiaries will have any debt outstanding, except as set forth on Schedule 1 attached hereto, and (y) neither the Acquired Business nor any of the subsidiaries of the Company or the Acquired Business will have any equity interests outstanding. You have advised us that, in order to effect the merger of Coal Ventures, Inc. with and into AEI Holding Company, Inc., the obtaining of consents and waivers (the "CONSENT") from the requisite holders of the 10% Series B Senior Notes due 2007 of AEI Holding Company, Inc. (the "EXISTING NOTES") will be necessary, and that it is the Company's intention to seek to obtain such Consent as soon as practicable after the execution of the Acquisition Agreement referred to below. In connection with the Transactions, (i) the Company has (prior to the execution of this letter) engaged one or more investment banks to sell or place the Debt Securities for aggregate gross proceeds of up to $600.0 million and to sell or place debt securities of the Company to refinance any bridge or other temporary debt financing of the Company incurred in connection with the Transactions; and (ii) you have received a commitment from UBS AG to provide the Bridge Loans (the "UBS BRIDGE FINANCING COMMITMENT LETTER"). You have requested that UBS AG, Stamford Branch (the "LENDER") commit to provide to you funds in the amount of up to $750.0 million under the Credit Facility to be made available as described in Section 1 hereof. Drawings under the Credit Facility, together with the proceeds of the Debt Securities and/or Bridge Loans, are to be used (i) to finance the Acquisition, (ii) to effect the Refinancing and (iii) to pay fees and expenses incurred in connection with the Transactions. Accordingly, subject to the terms and conditions set forth or incorporated in this letter, the Lender agrees with you as follows: Section 1. CREDIT FACILITY. The Lender hereby commits, subject to the terms and conditions hereof and in the summary term sheet attached hereto as EXHIBIT A (the "TERM SHEET") and in the letter of even date herewith addressed to the undersigned by you providing among other things for certain fees relating to the Credit Facility (the "FEE LETTER"), to provide to the Company senior secured credit facilities aggregating $750.0 million. The Credit Facility will provide for senior secured term loans of up to $450.0 million, such amount to be allocated among (i) a Term Loan A Facility in an aggregate principal amount of $150.0 million (the "TERM LOAN A FA- -4- CILITY"), and (ii) a Term Loan B Facility in an aggregate principal amount of $300.0 million (the "TERM LOAN B FACILITY" and together with the Term Loan A Facility, the "TERM LOAN FACILITIES"), which will be available in a single drawing at the consummation of the Acquisition (the "CLOSING DATE"). The Credit Facility will also provide for a senior secured revolving credit facility (the "REVOLVING CREDIT FACILITY") of up to $300.0 million. The proceeds of the Credit Facility shall be used solely for the purposes described above. The principal terms of the Credit Facility are summarized in the Term Sheet. The effectiveness of this commitment is conditioned upon your acceptance of this letter and the Fee Letter, and the Lender's receipt of executed counterparts thereof. Unless the Lender's commitment hereunder shall have been terminated pursuant to Section 6, the Lender shall have the exclusive right to provide the Credit Facility or other bank financing required in connection with the Transactions. It is understood and agreed that the Lender shall be entitled, with your consent (which shall not be unreasonably withheld), to change the structure (including the establishment of sub-facilities and/or reallocating commitment amounts among the facilities), terms and amounts of the Credit Facility if the Lender deems such changes advisable in order to ensure a successful syndication of the Credit Facility; provided, that, the aggregate commitment under the Credit Facility remains the same. The Company hereby represents and covenants that (a) all information other than the Projections (as defined below) and other than any reserve studies prepared by third parties, which has been or is hereafter made available to the Lender by the Company or any of the Company's respective representatives, advisors or affiliates in connection with the transactions contemplated hereby (the "INFORMATION") is, or in the case of Information made available after the date hereof will be, complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein, in the light of the circumstances under which such statements were or are made, not misleading, (b) all financial projections concerning the Company or the Acquired Business that have been or are hereafter made available to the Lender by the Company or any of the Company's representatives, advisors or affiliates in connection with the transactions contemplated hereby (the "PROJECTIONS") have been or, in the case of Projections made available after the date hereof, -5- will be prepared in good faith based upon reasonable assumptions and (c) the contracts and other rights listed on Annex B are the only contracts material to the business and operations of the Company (after giving effect to the Merger) which require consents in order to collaterally assign or pledge the Company's interest therein. You agree to supplement the Information and the Projections from time to time until the Closing Date so that the representation and warranty made in the preceding sentence is correct on the Closing Date. In arranging and syndicating the Credit Facility, the Lender will be using and relying on the Information and the Projections without independent verification thereof. The representations and covenants contained in this paragraph shall remain effective until a definitive financing agreement is executed and thereafter the disclosure representations contained herein shall be superseded by those contained in such definitive financing agreement. Section 2. FINANCING DOCUMENTATION. The Credit Facility and the funding thereunder will be governed by definitive loan and related agreements and documentation (collectively, the "FINANCING DOCUMENTATION") in form and substance satisfactory to the Lender. The Financing Documentation shall be prepared by Cahill Gordon & Reindel, special counsel to the Lender. The Financing Documentation shall contain such covenants, terms and conditions as are consistent with this letter and the Term Sheet and such other customary covenants, terms, conditions, representations, warranties, events of default and remedies provisions as shall be reasonably satisfactory to the Lender and you. Section 2. CONDITIONS. The obligation of the Lender under Section 1 of this letter to provide the Credit Facility and to make any loan thereunder is subject to fulfillment of conditions precedent typical in the context of an acquisition, including the payment of all fees due and owing under the Fee Letter and the following: (a) FINANCING AND OTHER DOCUMENTATION. The Company and the Lender shall have entered into the Financing Documentation relating to the Credit Facility and the transactions contemplated thereby, on terms consistent with the Term Sheet and otherwise in form and substance satisfactory to the Lender. The Company shall have entered into definitive documentation on terms consistent with the UBS Bridge Financing Commitment Letter in form and substance satisfactory to the Lender with respect to the Bridge Loans (collectively with all documents and instruments related thereto or delivered in connection therewith, the -6- "BRIDGE DOCUMENTS") providing for commitments thereunder in an amount that is, together with the borrowings under the Credit Facility, sufficient to consummate the Transactions. The Company shall have entered into definitive documentation in connection with all aspects of the Refinancing as it relates to indebtedness of the Acquired Business, in each case on terms and conditions, and in form and substance, satisfactory to the Lender and such documentation shall be in full force and effect. Such documentation shall provide for all aspects of the Refinancing, including the release of all liens and other security arrangements to the extent required by the terms of the Financing Documentation, to occur at or prior to the time of the consummation of the Acquisition. (b) NO ADVERSE CHANGE OR DEVELOPMENT, ETC. (i) The Acquired Business shall not have sustained any loss or interference with respect to its business or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding, which loss or interference, in the reasonable judgment of the Lender, has had or has a material adverse effect on the business, condition (financial or other), or operations of the Acquired Business and its subsidiaries taken as a whole and there shall not have been, in the reasonable judgment of the Lender, any material adverse change in the business, condition (financial or other), or operations of the Acquired Business and its subsidiaries taken as a whole; (ii) trading generally shall not have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers, Inc; (iii) a general moratorium on commercial banking activities in New York shall not have been declared by either Federal or New York State governmental authorities; and (iv) there shall not have occurred any outbreak or escalation of hostilities or any material adverse change in financial markets or any calamity or crisis that, in the reasonable judgment of the Lender, makes it impracticable to sell or syndicate the Credit Facility. As used in the previous sentence, "material adverse change in financial markets" shall mean a decline of 12% or more in the Dow Jones Industrial Average from the date of this letter.. (c) NO DEFAULTS. The consummation of the Transactions, borrowings under the Bridge Loans and borrowings under the Credit Facility will not cause or result in any -7- breach or default (including any event, which, with notice or lapse of time or both would be a breach or a default) or trigger any repurchase requirements under any of the terms or provisions of any of the instruments or agreements of the Company, the Acquired Business or any affiliate of the Company or the Acquired Business to remain outstanding after the consummation of the Transactions. (d) CONSUMMATION OF THE ACQUISITION. The Company shall have entered into an acquisition agreement with respect to the Acquired Business on terms and in form and substance reasonably satisfactory to the Lender (the "ACQUISITION AGREEMENT"). All material conditions in the Acquisition Agreement shall have been satisfied, and not waived or modified except with the consent of the Lender (which shall not be unreasonably withheld), and all covenants in the Acquisition Agreement shall have been satisfied (without waiver or modification) in all material respects and all representations and warranties contained therein shall be true and correct in all material respects (without waiver or modification). Funding under the Credit Facility and consummation of the Tender Offer and Merger shall occur as outlined in Annex A hereto. In the event that the Merger is to be preceded by the Tender Offer, the Merger shall be structured so that it will be consummated within one business day of the consummation of the Tender Offer. (e) LEGAL AND SOLVENCY OPINIONS. As of the Closing Date, the Lender shall have received (x) legal opinions from attorneys, and in form and substance, reasonably satisfactory to the Lender regarding such matters relating to the Company, the Acquired Business and the Transactions as the Lender shall reasonably request and (y) a solvency opinion from experts, and in form and substance, reasonably satisfactory to the Lender and the Board of Directors of Ziegler, setting forth the conclusion that, after giving effect to the Transactions, the making of the Bridge Loans, the funding of the Credit Facility, the Company is not insolvent and will not be rendered insolvent by the Transactions and the related borrowings and will not be left with unreasonably small capital with which to engage in its business and will not have incurred debts beyond its ability to pay such debts as they mature. (f) APPLICABLE LAW. The consummation of the Transactions, borrowings under the Bridge Loans and borrowings under the Credit Facility shall be in compliance with all -8- applicable statutes, laws, rules and regulations of all applicable governmental and regulatory agencies and authorities. There shall not exist any judgment, order, injunction or other restraint prohibiting or delaying or imposing conditions upon consummation of any portion of the Transactions, the making of the Bridge Loans and the making of loans under the Credit Facility. (g) LITIGATION. No litigation or similar proceeding (governmental or other) shall exist or be threatened with respect to the Company, the Acquired Business or any of the respective affiliates which the Lender shall determine is reasonably likely to have a material adverse effect on the Company or the Acquired Business, the Financing Documentation or the making of the loans under the Credit Facility or any of the other financing arrangements contemplated herein. Section 4. INDEMNIFICATION. The Company agrees to indemnify and hold harmless the Lender and its affiliates (including, without limitation, any controlling person) and the directors, officers, employees and agents of the foregoing parties (collectively, the "INDEMNIFIED PERSONS") from and against any and all losses, claims, demands, damages, liabilities and other expenses (or actions or other proceedings commenced or threatened in relation thereto) that may arise out of or in any way relate to or result from the transactions contemplated by this letter or relate to or in any way arise from any proposed or actual use of the proceeds of the Credit Facility, and to reimburse each Indemnified Person for any reasonable legal or other expenses incurred in connection with investigating, preparing to defend or defending against any such loss, claim, demand, damage, liability or action or other proceeding (whether or not such Indemnified Person is a party to any action or proceeding out of which any such expenses arise). The Company will not, however, be responsible for any such losses, claims, demands, damages, liabilities or expenses of any Indemnified Person that are finally judicially determined to have arisen out of the gross negligence or bad faith of such Indemnified Person. The Company shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Company agrees to indemnify the Indemnified Person from and against any loss or liability by reason of such settlement or judgment subject to the rights of the Company in this paragraph to claim exemption from its indemnity obligations. The Company shall not, without the prior written consent of any Indemnified Person, effect any settlement of any -9- pending or threatened proceeding in respect of which such Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability or claims that are the subject matter of such proceeding. The Company's obligation to indemnify the Indemnified Persons and pay such expenses shall remain in effect regardless of whether any Financing Documentation is signed. The Lender shall not be liable to any other person for consequential damages which may be alleged as a result of this letter or the transactions contemplated hereby. Section 5. EXPENSES. In addition to any fees that may be payable to the Lender hereunder and in the Fee Letter and regardless of whether any of the transactions contemplated by this letter are consummated, this letter agreement is terminated, the Financing Documentation is executed and delivered or any loans are made under the Credit Facility, the Company hereby agrees to reimburse the Lender for all reasonable fees and disbursements of legal counsel and consultants, including but not limited to the fees and disbursements of Cahill Gordon & Reindel, the Lender's special counsel, and all of the Lender's travel and other reasonable out-of-pocket expenses incurred in connection with the Transactions or otherwise arising out of the Lender's commitment hereunder. Section 6. TERMINATION. The Lender's commitment hereunder to provide the Credit Facility shall terminate, unless expressly agreed to by the Lender in its sole discretion to be extended to another date, on the earlier of (A) October 15, 1998 if the Term Loans under the Credit Facility shall not have funded; (B) the termination of the agreement to consummate the Acquisition in accordance with the terms of the Acquisition Agreement and (C) immediately after the making of the loans under the Credit Facility on the Closing Date. No such termination of such commitment shall affect your obligations under Sections 4, 5, 8 and 9 hereof or this Section 6, which shall survive any such termination. Section 7. ASSIGNMENT. This letter shall not be assignable by any party hereto without the prior written consent of the other parties (other than, in the case of the Lender, to an affiliate of the Lender, it being understood that any such affiliate shall be subject to the restrictions set forth in this Section 7); PROVIDED, HOWEVER, that the Lender shall have the right, in its sole discretion to syndicate its commitment to provide the Credit Facility among banks or other financial -10- institutions pursuant to the Financing Documentation or otherwise and to sell, transfer or assign all or any portion of, or interests or participations in, the loans under the Credit Facility and any notes issued in connection therewith; PROVIDED, FURTHER, that upon delivery by the Lender of a commitment letter for all or a portion of the Credit Facility from a reputable financial institution containing terms no less favorable to the Company than the terms hereof, the Lender shall be fully relieved of its obligations hereunder to the extent of the commitment set forth in such commitment letter. Any financial institution that executes and delivers such a commitment letter shall become a "Lender" hereunder. In connection with this commitment, the Company understands that the undersigned intends to commence syndication of the Credit Facility promptly after the execution hereof by the Company, and the Company agrees actively to assist the undersigned in achieving a syndication that is satisfactory to the undersigned. Such syndication will be carried out in consultation with the Company and will be accomplished by a variety of means including direct contact during the syndication between senior management, representatives and advisors of the Company and the prospective syndicate members. In addition, the Company hereby agrees (i) to provide the undersigned and other prospective syndicate members with all information reasonably deemed necessary to the undersigned to complete syndication, including information relating to the Acquired Business, (ii) to assist the undersigned in preparing an information memorandum to be used in connection with the syndication activities and (iii) to attend, and to cause the persons referred to in the preceding sentence to attend, one or more meetings of prospective syndicate members. The Company agrees that if any other financing activities (whether in the bank or securities markets) being conducted or proposed to be conducted by or on behalf of any of the entities comprising the Company or its affiliates could, in the judgment of the undersigned, disrupt or otherwise materially adversely affect the successful syndication of the Credit Facility, the Company will cause such other financing activities to be coordinated with the syndication of the Credit Facility to avoid disruption or adverse impacts on the syndication activities contemplated hereby. Section 8. CONFIDENTIALITY. This letter is confidential and shall not be disclosed by you to any person other than your attorneys and other advisors, and to the Acquired Business and its attorneys and other advisors, and then only on a confidential basis and in connection with the Acquisition and other related transactions contemplated herein. Additionally, you may make such disclosures of this letter as are required by law -11- or judicial process or as may be required or appropriate in response to any summons or subpoena or in connection with any litigation, it being understood that in such event you shall first give the Lender prior written notice thereof. Notwithstanding the foregoing, any disclosures required under the Securities Exchange Act may be made in connection with the Tender Offer. If this letter agreement is not accepted by you as provided in the final paragraph of this letter, you are directed to immediately return this letter (and copies hereof) to the undersigned. Section 9. MISCELLANEOUS. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES GOVERNING CONFLICTS OF LAWS. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION ARISING OUT OF THIS AGREEMENT OR CONDUCT IN CONNECTION WITH THIS ENGAGEMENT IS HEREBY WAIVED. YOU HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY DISPUTE RELATED TO THIS AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY. This letter embodies the entire agreement and understanding between you and the Lender and supersedes all prior agreements and understandings relating to the subject matter hereof. This letter may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. The Lender reserves the right to employ the services of its affiliates (including Warburg Dillon Read LLC ("WDRI") in providing services contemplated by this letter and to allocate, in whole or in part, to WDRI certain fees payable to the Lender in such manner as the Lender and WDRI may agree in their sole discretion. You acknowledge that the Lender may share with any of its affiliates (including WDRI) and such affiliates may share with the Lender (in each case, subject to any confidentiality agreements applicable thereto), any information related to you or your affiliates and the Acquired Business (including information relating to creditworthiness), the Transactions or the Acquisition or the financing therefor. -12- If you are in agreement with the foregoing, please sign and return to the Lender at 677 Washington Boulevard, Stamford, Connecticut 06901, the enclosed copy of this letter no later than 5:00 p.m., New York time, on August 3, 1998, whereupon the undertakings of the parties shall become effective to the extent and in the manner provided hereby. This offer shall terminate if not so accepted by you on or prior to that time. Very truly yours, UBS AG By: /s/ Gary Riddell ---------------------------- Name: Gary Riddell Title: Executive Director Credit Risk Management By: /s/ Michael Y. Leder ---------------------------- Name: Title: WARBURG DILLON READ LLC By: /s/ Michael Y. Leder ---------------------------- Name: Michael Y. Leder Title: Executive Director Leveraged Finance By: /s/ Kay Ahlburg ---------------------------- Name: Kay Ahlburg Title: Executive Director Leveraged Finance Accepted and Agreed to as of the date first above written: COAL VENTURES, INC. By: /s/ Donald P. Brown ---------------------------- Name: Donald P. Brown Title: President CREDIT FACILITY SUMMARY TERM SHEET (1) BORROWERS, CO-OBLIGORS AND GUARANTORS: Each of the entities comprising the Company as shall be determined by the Lender (other than Bowie Resources, Limited, Yankeetown Dock Corporation, and, until the Consent has been obtained, AEI Holding Company, Inc.) (collectively, the "BORROWER"). LENDER: UBS AG, Stamford Branch. FACILITIES TYPE AND AMOUNT: (i) $450 million senior secured term loan facility consisting of a (i) a Term Loan A Facility in an aggregate principal amount of $150.0 million (the "TERM LOAN A FACILITY"), and (ii) a Term Loan B Facility in an aggregate principal amount of $300.0 million (the "TERM LOAN B FACILITY" and together with the Term Loan A Facility, the "TERM LOAN FACILITIES"); and (ii) $300 million senior secured revolving credit facility, including a sublimit for letters of credit to be determined (the "REVOLVING CREDIT FACILITY" and together with the Term Loan Facilities, the "CREDIT FACILITY"). MATURITY: The commitment to provide the Credit Facility shall automatically expire on October 15, 1998 - ---------- (1) Capitalized terms used herein and not defined herein shall have the meanings provided in the credit facility commitment letter to which this summary term sheet is attached. -2- if the Term Loans have not been made. DOMESTIC TERM LOAN FACILITIES: The Term Loan A Facility will mature on the date five years after the Closing Date, the Term Loan B Facility will mature on the date seven years after the Closing Date, and the Revolving Credit Facility will mature on the date five years after the Closing Date. The Term Loan A Facility will amortize on a quarterly basis in amounts to be determined. The Term Loan B Facility will amortize on a quarterly basis, with nominal amounts in the first five years and thereafter in amounts to be determined. COMMITMENT FEES: Unused Commitment Fees: Initially 0.50% per annum on undrawn committed amount under the Revolving Credit Facility payable in cash quarterly; thereafter as determined pursuant to a grid-based test adjusted in accordance with the financial performance of the Borrower to be mutually agreed upon by the Borrower and the Lender. USE OF PROCEEDS: Term Loan Facilities: To finance the Acquisition, to effect the Refinancing, and to pay related fees and expenses. Revolving Credit Facility: To issue letters of credit relating to existing industrial revenue bonds of the Acquired Business, to finance the Acquisition, to effect the Refinancing, to pay related fees and expenses and to provide working capital avail- -3- ability after the consummation of the Acquisition. INTEREST RATE: At the option of the Borrower as follows: LIBOR plus the Applicable LIBOR Spread or ABR plus the Applicable ABR Spread, in each case on any of the Credit Facilities. LIBOR borrowings may have interest periods of 1, 2, 3 or 6 months at the election of the Borrower. The "Applicable LIBOR Spread" shall initially be (i) under the Revolving Credit Facility, 2.50% PER ANNUM; (ii) under the Term Loan A Facility, 2.50% PER ANNUM; and (iii) under the Term Loan B Facility, 2.75% PER ANNUM. Thereafter, the Applicable LIBOR Spread shall be determined pursuant to a grid-based test adjusted in accordance with the financial performance of the Borrower to be mutually agreed upon by the Borrower and the Lender. The "Applicable ABR Spread" shall be (i) under the Revolving Credit Facility, 1.50% PER ANNUM; (ii) under the Term Loan A Facility, 1.50% PER ANNUM; and (iii) under the Term Loan B Facility, 1.75% PER ANNUM. "ABR" (Alternate Base Rate) is the higher of the Prime Rate of the reference bank set forth in the Credit Facilities documentation and the Federal Funds effective rate plus 1/2 of 1%. Interest on loans shall be on the basis of actual days elapsed in a 360-day year, except that interest on ABR loans shall be on the basis of actual days elapsed in a 365-day year. Interest will be payable in arrears (i) on the last day of each LIBOR period and on the maturity date in respect of LIBOR based loans and (ii) at the end -4- of each calendar quarter and on the maturity date in respect of ABR loans. LETTERS OF CREDIT FEES: A per annum fee equal to the Applicable LIBOR Spread will accrue on the face amount of outstanding letters of credit payable quarterly in arrears. Fronting fees of 0.25% will be payable to the issuing bank; customary issuance and administrative fees will be payable to the issuing bank. SECURITY: Loans under the Credit Facilities will be secured by perfected first priority security interests in (i) all of the capital stock of the Company and all capital stock of its subsidiaries owned by the Company and its subsidiaries, (ii) all of the capital stock of each of the entities comprising the Acquired Business, and (iii) all accounts receivable, inventory, property, plant and equipment, intangibles, contract rights, other personal property and real property of the Company, its subsidiaries and the Acquired Business, except for (a) contract and other rights that cannot be collaterally assigned or pledged without third party consents and listed on Annex B hereto (b) shares of Ziegler Coal Holding Company which would violate applicable margin requirements, (c) such other assets which, in the reasonable judgment of the Lenders, in the aggregate are not material to the business or operations of Borrower and (d) such other exceptions as the Lenders may agree to. OPTIONAL PREPAYMENT: The Borrower may prepay borrowings under the Credit Facility, -5- in whole or in part, at any time at 100% of the principal amount thereof plus accrued interest thereon plus customary breakage costs. MANDATORY PREPAYMENT: The Credit Facilities will be required to be prepaid with (a) 75% of annual Excess Cash Flow (to be defined) (such percentage to be reduced to 50% with respect to any fiscal year if the leverage ratio at the end of such fiscal year shall be less than 3.5:1.0, (b) 100% of the net proceeds (including insurance proceeds if not reinvested within a specified time period or if above a threshold amount) of asset sales and other asset dispositions by Borrower for proceeds in excess of a certain threshold to be mutually agreed, with certain exceptions to be mutually agreed, (c) 100% of the net proceeds of the issuance or incurrence of debt (other than the Take-out Securities if the Bridge Loan is drawn down) or of any sale and lease-back by Borrower for proceeds in excess of a certain threshold to be mutually agreed, and (d) 50% of the net proceeds from any issuance of equity securities in any public offering or private placement or from any capital contribution. Mandatory prepayments will be applied PRO RATA among the Term Loan Facilities based on the aggregate principal amount of Term Loans then outstanding under each such Term Loan Facility. Any application to (x) the Term Loan A Facility shall be applied PRO RATA to the remaining scheduled amortization payments thereunder and (y) the Term Loan B Facility -6- shall be applied in inverse order of maturity to the remaining amortization payments thereunder. Notwithstanding the foregoing, any holder of Term Loans under the Term Loan B Facility, to the extent that Term Loans are then outstanding under the Term A Facility, may elect not to have mandatory prepayments applied to such holder's Term Loans under the Term Loan B Facility, in which case the aggregate amount so declined shall be applied to the Term Loans under the Term Loan A Facility as provided in clause (x) above. To the extent that the amount to be applied to the prepayment of Term Loans exceeds the aggregate amount of Term Loans then outstanding, such excess shall be applied to the Revolving Credit Facility to permanently reduce the commitments thereunder. Revolving Credit Loans will be immediately prepaid to the extent that the aggregate extensions of credit under the Revolving Credit Facility exceeds the commitments then in effect under the Revolving Credit Facility. To the extent that the amount to be applied to the repayment of the Revolving Credit Loans exceeds the amount thereof then outstanding, Borrower shall cash collateralize outstanding Letters of Credit. VOTING: Amendments and waivers of the Credit Facilities will require the approval of Lenders holding more than 50% of the aggregate amount of loans and commitments under the Credit Facilities; provided, that, the consent of each Lender affected shall be required -7- for (i) reductions of principal, interests or fees or increases of commitments, (ii) extension of the maturity of any loans, or (iii) releases of any substantial collateral. PARTICIPATION/ASSIGNMENT: Assignments of loans and commitments to other Lenders or their affiliates may be made without restriction and with no minimum amounts. Assignments of loans and commitments to other financial institutions are subject to the consent of the Borrower and the Agent (not to be unreasonably withheld) and must be in minimum amounts of $5 million. The Agent will receive a processing fee of $3,500 per each assignment payable by the assignor and/or the assignee. Participations will be unrestricted; voting rights of participants will be limited to matters requiring the consent of each Lender affected (as set forth in "Voting" above). COVENANTS: The Financing Documentation will contain customary affirmative and negative covenants, including, without limitation, restrictions on the ability of the Borrower and its subsidiaries to incur additional indebtedness, pay certain dividends and make certain other restricted payments and investments, impose restrictions on the ability of the Borrower's subsidiaries to pay dividends or make certain payments to the Borrower, create liens, enter into transactions with affiliates, enter into transactions resulting in a change of control, merge, consolidate or transfer substantially all of their respective assets and maintain certain fi- -8- nancial ratios and meet other financial tests (including, but not limited to, interest coverage, minimum net worth, maximum capital expenditures and maximum ratio of debt to EBITDA) in each case satisfactory to the Lender. REPRESENTATIONS AND WARRANTIES: Customary for transactions of this type, in each case satisfactory to the Lender. CONDITIONS PRECEDENT: Customary for transactions of this type, in each case satisfactory to the Lender. EVENTS OF DEFAULT: Customary for transactions of this type, including, without limitation, payment defaults, covenant defaults, change of control, bankruptcy and insolvency, judgments, default on other indebtedness, subject to, in certain cases, notice and grace provisions. GOVERNING LAW AND FORUM: The State of New York INDEMNIFICATION AND EXPENSE REIMBURSEMENT: Customary for transactions of this type. ANNEX A Set forth below is an outline of the actions contemplated to occur in connection with the consummation of the tender offer pursuant to the Agreement and Plan of Merger ("Merger Agreement") among Coal Ventures, Inc., Ziegler Acquisition Corp. and Ziegler Coal Holding Company ("Ziegler") and the related financing. On a date before the scheduled date for acceptance and payment (the "Closing Date") for the number of shares representing at least 90% of the outstanding shares of Ziegler, all documentation relating to the Credit Facility shall have been finalized and executed, to be held in escrow. The security documents necessary to pledge, or grant a security interest in, the assets of Ziegler will be executed by the persons to become the officers of the post-acquisition Ziegler entity. Following the acceptance and payment for the tendered shares, (i) the resignation of the Ziegler directors will immediately become effective and the Borrower will elect a new Board and (ii) the Merger will be effected as soon as practicable thereafter. Promptly upon the Effective Time the security documents will be released from escrow and will be filed or recorded as promptly as practicable thereafter. Counsel for UBS AG, Stamford Branch ("UBS"), and the Lenders shall be satisfied that, after the tender offer is consummated, and upon the filing of the necessary security documents, the Lenders will have a perfected first priority security interest. Capitalized terms not define herein have the meanings ascribed to them in the Commitment Letter dated August 3, 1998 between Warburg Dillon Read LLC, UBS, and Coal Ventures, Inc. ("Borrower"). Pre-Closing Date: - Financing documents (including all security documents) finalized. Executed and placed in escrow. - Borrower receives tender of shares representing at least 90% of outstanding Ziegler shares. Closing Date: - Tender of shares accepted by Borrower. - Credit Agreement becomes effective, Lenders transmit funds to the depository. - Tendered Shares released to Borrower; Resignation of directors of Ziegler pursuant to terms of Merger Agreement becomes effective.; New Ziegler directors approve merger; merger certificate filed in Delaware. - Security documents become effective. - Filing of security documents commences. ANNEX B CONTRACTS REQUIRING CONSENTS Lease dated November 1 1992, between Big Sandy Company, L.P., as lessor, and East Kentucky Energy Corporation, as lessee. (Phoenix Land Company reference number KYL-467) Lease dated December 1, 1975, between Cotiga Development Company, as lessee, and East Kentucky Energy Corporation, as lessee. (Phoenix Land Company reference number WVL-608) Amended and Restated Agreement for Sale and Purchase of Coal dated July 1, 1996 among Carolina Power & Light Company, Mountaineer Coal Development Company, Marrow Bone Development Company and Bluegrass Coal Development Company Agreement for Sale and Purchase of Coal dated July 1, 1996 between Carolina Power & Light Company and Franklin Coal Sales Company Agreement for Sale and Purchase of Coal dated April 1, 1995 between Carolina Power & Light Company and Franklin Coal Sales Company Agreement for Sale and Purchase of Coal dated January 1, 1971 among Carolina Power & Light Company, Wolf Creek Collieries, Kermit Coal Company and Massey Coal Sales Company SCHEDULE 1 INDEBTEDNESS TO REMAIN OUTSTANDING EX-99.(B)(2) 11 BRIDGE LOAN COMMITMENT LETTER TO PARENT Exhibit 99(b)(2) [UBS Bridge Loan Commitment Letter] UBS AG STAMFORD BRANCH 677 WASHINGTON BOULEVARD NEW YORK, NEW YORK 06901 August 3, 1998 Coal Ventures, Inc. c/o Addington Enterprises, Inc. 1500 North Big Run Road Ashland, Kentucky 41101 Re: Zeigler Coal Acquisition Financing ---------------------------------- Ladies and Gentlemen: We understand that Coal Ventures, Inc. (together with its subsidiaries and any entities it or Addington Enterprises, Inc. or Mr. Larry Addington, individually, may use or form in connection with the Acquisition (as defined below), the "COMPANY") is considering a transaction in which the Company would acquire (the "ACQUISITION") all of the outstanding common stock (the "COMMON STOCK") of Zeigler Coal Holding Company (the "ACQUIRED BUSINESS"), pursuant to a merger (the "MERGER") of a wholly owned subsidiary of the Company with the Acquired Business. It is understood that the Merger will be preceded by a tender offer for not less than 90% of the fully-diluted Common Stock (the "TENDER OFFER") such that after consummation of the Tender Offer the Company will effect a short-form merger with the Acquired Business without any shareholder approval in accordance with Section 253 of the Delaware General Corporation Law. You have advised us that the Acquired Business has no classes of capital stock outstanding (or other equity interests) other than the Common Stock. In addition, you have advised us that, in conjunction with the Acquisition, the Company will refinance approximately $250.0 million of its existing debt and approximately $110.0 million of the existing debt of the Acquired Business (the "REFINANCING"). We understand that, prior to the Acquisition, Addington Enterprises, Inc. and Mr. Larry Addington will contribute all of the outstanding capital stock of Coal Ventures, Inc. to a holding company ("HOLDINGS"), such that Coal Ventures, Inc. will be a wholly-owned subsidiary of the Holdings. In the event that the Consent referred to be- -2- low is obtained prior to the consummation of the Acquisition, it is intended that Coal Ventures, Inc. will be merged with its wholly owned subsidiary, AEI Holding Company, Inc., such that AEI Holding Company, Inc. will be a direct wholly owned subsidiary of Holdings. References to the Company herein shall be deemed to include the Acquired Business on a post-Acquisition basis. In the event that the Consent is not obtained, AEI Holding Company, Inc. will not be a party to the Financing Documents (as defined below). We further understand that up to approximately $1.350 billion of new funds are required to consummate the Acquisition, effect the Refinancing, to issue approximately $145.0 million in letters of credit relating to industrial revenue bonds of the Acquired Business, to pay fees and expenses in connection with the Acquisition and the Refinancing and to provide approximately $130.0 million of working capital availability to the Company on a post-Acquisition basis (collectively, the "TRANSACTIONS"). In addition to the foregoing, approximately $10.0 million of the Bridge Loan Facility and/or Bank Financing will be used for the acquisition of Kindill Mining Inc. Of such amount, up to $500.0 million would be provided by the issuance by the Company of senior subordinated debt, up to $100.0 million would be provided by the issuance by Holdings of deferred interest senior debt of Holdings (the proceeds of which would be contributed to the Company in the form of common equity), up to $450.0 million would be provided through secured term loan facilities made available to the Company, and up to $300.0 million would be provided through a secured revolving credit facility made available to the Company (together with the term facilities, the "BANK FINANCING"). You have advised us that, other than the debt referred to in this paragraph, after giving effect to the Acquisition and the Refinancing, (x) none of the Company, the Acquired Business or any of their subsidiaries will have any debt outstanding, except as set forth on Schedule 1 attached hereto, and (y) neither the Acquired Business nor any of the subsidiaries of the Company or the Acquired Business will have any equity interests outstanding. You have advised us that, in order to effect the merger of Coal Ventures, Inc. with and into AEI Holding Company, Inc., the obtaining of consents and waivers (the "CONSENT") from the requisite holders of the 10% Series B Senior Notes due 2007 of AEI Holding Company, Inc. (the "EXISTING NOTES") will be necessary, and that it is the Company's intention to seek to obtain such Consent as soon as practicable after the execution of the Acquisition Agreement referred to below. -3- In connection with the Transactions, (i) the Company has (prior to the execution of this letter) engaged one or more investment banks to sell or place debt securities of Holdings and the Company (the "DEBT SECURITIES") for aggregate gross proceeds of up to $600.0 million and to sell or place debt securities of the Company to refinance any bridge or other temporary debt financing of the Company incurred in connection with the Transactions; and (ii) you have received a commitment from UBS AG to provide the Bank Financing (the "UBS BANK FINANCING COMMITMENT LETTER"). You have requested that UBS AG, Stamford Branch (the "LENDER") commit to provide to Holdings funds in the amount of up to $100.0 million in the form of a senior bridge loan facility (the "HOLDINGS BRIDGE LOAN") and to the Company funds in the amount of up to $500.0 million in the form of a senior subordinated bridge loan facility to be made available as described in Section 1 hereof (the "COMPANY BRIDGE LOAN" and, together with the Holdings Bridge Loan, the "BRIDGE LOANS" which will be made under the "BRIDGE LOAN FACILITY"). Drawings under the Bridge Loan Facility, together with borrowings under the Bank Financing, are to be used (i) to finance the Acquisition, (ii) to effect the Refinancing and (iii) to pay fees and expenses incurred in connection with the Transactions. Accordingly, subject to the terms and conditions set forth or incorporated in this letter, the Lender agrees with you as follows: Section 1. BRIDGE LOAN FACILITY. The Lender hereby commits, subject to the terms and conditions hereof and in the summary term sheet attached hereto as EXHIBIT A (the "TERM SHEET") and in the letter of even date herewith addressed to the undersigned by you providing among other things for certain fees relating to the Bridge Loan Facility (the "FEE LETTER"), to provide to Holdings a senior bridge loan facility and to the Company a senior subordinated bridge loan facility, each of which will be available in a single drawing at the time of the acceptance of shares pursuant to the Tender Offer (the "CLOSING DATE") in the amount of up to $100.0 million in the case of the Holdings Bridge Loan and up to $500.0 million in the case of the Company Bridge Loan. The proceeds of the Bridge Loan Facility shall be used solely for the purposes described above. The principal terms of the Bridge Loan are summarized in the Term Sheet. The effectiveness of this commitment is conditioned upon your acceptance of this letter and the Fee Letter, and the Lender's receipt of executed counterparts thereof. -4- Unless the Lender's commitment hereunder shall have been terminated pursuant to Section 7, the Lender shall have the exclusive right to provide the Bridge Loan Facility or other bridge or interim financing required in connection with the Transactions. It is understood and agreed that the Lender shall be entitled, with your consent (which shall not be unreasonably withheld), to change the structure (including the establishment of sub-facilities and/or changing the amounts of the Holding Bridge Loan and the Company Bridge Loan), terms and amounts of the Bridge Loan Facility if the Lender deems such changes advisable in order to ensure a successful syndication of the Bridge Loan Facility; provided, that, the aggregate commitment under the Bridge Loan Facility remains the same. The Company hereby represents and covenants that (a) all information other than the Projections (as defined below) and other than any reserve studies prepared by third parties, which has been or is hereafter made available to the Lender by the Company or any of the Company's respective representatives, advisors or affiliates in connection with the transactions contemplated hereby (the "INFORMATION") is, or in the case of Information made available after the date hereof will be, complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein, in the light of the circumstances under which such statements were or are made, not misleading and (b) all financial projections concerning the Company or the Acquired Business that have been or are hereafter made available to the Lender by the Company or any of the Company's representatives, advisors or affiliates in connection with the transactions contemplated hereby (the "PROJECTIONS") have been or, in the case of Projections made available after the date hereof, will be prepared in good faith based upon reasonable assumptions. You agree to supplement the Information and the Projections from time to time until the Closing Date so that the representation and warranty made in the preceding sentence is correct on the Closing Date. In arranging and syndicating the Bridge Loan Facility, the Lender will be using and relying on the Information and the Projections without independent verification thereof. The representations and covenants contained in this paragraph shall remain effective until a definitive financing agreement is executed and thereafter the disclosure representations contained herein shall be superseded by those contained in such definitive financing agreement. -5- Section 2. FINANCING DOCUMENTATION. The Bridge Loan Facility and the funding thereunder will be governed by definitive loan and related agreements and documentation (collectively, the "FINANCING DOCUMENTATION") in form and substance satisfactory to the Lender. The Financing Documentation shall be prepared by Cahill Gordon & Reindel, special counsel to the Lender. The Financing Documentation shall contain such covenants, terms and conditions as are consistent with this letter and the Term Sheet and such other customary covenants, terms, conditions, representations, warranties, events of default and remedies provisions as shall be reasonably satisfactory to the Lender and you. Section 3. CONDITIONS. The obligation of the Lender under Section 1 of this letter to provide the Bridge Loan Facility and to make any loan thereunder is subject to fulfillment of conditions precedent typical in the context of an acquisition, including the payment of all fees due and owing under the Fee Letter and the following: (a) FINANCING AND OTHER DOCUMENTATION. Holdings, the Company and the Lender shall have entered into the Financing Documentation relating to the Bridge Loan Facility and the transactions contemplated thereby, on terms consistent with the Term Sheet and otherwise in form and substance satisfactory to the Lender. The Company shall have entered into definitive documentation on terms consistent with the UBS Bank Financing Commitment Letter in form and substance satisfactory to the Lender with respect to the Bank Financing (collectively with all documents and instruments related thereto or delivered in connection therewith, the "BANK DOCUMENTS") providing for commitments thereunder in an amount that is, together with the borrowings under the Bridge Loan Facility, sufficient to consummate the Transactions. The Company shall have entered into definitive documentation in connection with all aspects of the Refinancing as it relates to the Acquired Business, in each case on terms and conditions, and in form and substance, satisfactory to the Lender and such documentation shall be in full force and effect. Such documentation shall provide for all aspects of the Refinancing, including the release of all liens and other security arrangements to the extent required by the terms of the Financing Documentation, to occur at or prior to the time of the consummation of the Acquisition. (b) NO ADVERSE CHANGE OR DEVELOPMENT, ETC. (i) The Acquired Business shall not have sustained any loss or in- -6- terference with respect to its business or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding, which loss or interference, in the reasonable judgment of the Lender, has had or has a material adverse effect on the business, condition (financial or other), or operations of the Acquired Business and its subsidiaries taken as a whole and there shall not have been, in the reasonable judgment of the Lender, any material adverse change in the business, condition (financial or other), or operations of the Acquired Business and its subsidiaries taken as a whole; (ii) trading generally shall not have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange or the National Association of Securities Dealers, Inc.; (iii) a general moratorium on commercial banking activities in New York shall not have been declared by either Federal or New York State governmental authorities; and (iv) there shall not have occurred any outbreak or escalation of hostilities or any material adverse change in financial markets or any calamity or crisis that, in the reasonable judgment of the Lender, makes it impracticable to sell or syndicate the Bridge Loan Facility or to proceed with the offer or sale of the Securities (as defined below). As used in the previous sentence, "material adverse change in financial markets" shall mean a decline of 12% or more in the Dow Jones Industrial Average from the date of this letter. (c) NO DEFAULTS. The consummation of the Transactions, borrowings under the Bridge Loan Facility and borrowings under the Bank Financing will not cause or result in any breach or default (including any event, which, with notice or lapse of time or both would be a breach or a default) or trigger any repurchase requirements under any of the terms or provisions of any of the instruments or agreements of the Company, the Acquired Business or any affiliate of the Company or the Acquired Business to remain outstanding after the consummation of the Transactions. (d) CONSUMMATION OF THE ACQUISITION. The Company shall have entered into an acquisition agreement with respect to the Acquired Business on terms and in form and substance reasonably satisfactory to the Lender (the "ACQUISITION AGREEMENT"). All material conditions in the Acquisition Agreement shall have been satisfied, and not -7- waived or modified except with the consent of the Lender (which shall not be unreasonably withheld), and all covenants in the Acquisition Agreement shall have been satisfied (without waiver or modification) in all material respects and all representations and warranties contained therein shall be true and correct in all material respects (without waiver or modification). Funding under the Bridge Loan Facility and consummation of the Tender Offer and Merger shall occur as outlined in Annex A hereto.. In the event that the Merger is to be preceded by the Tender Offer, the Merger shall be structured so that it will be consummated within one business day of the consummation of the Tender Offer. (e) LEGAL AND SOLVENCY OPINIONS. As of the Closing Date, the Lender shall have received (x) legal opinions from attorneys, and in form and substance, reasonably satisfactory to the Lender regarding such matters relating to the Company, the Acquired Business and the Transactions as the Lender shall reasonably request and (y) a solvency opinion from experts, and in form and substance, reasonably satisfactory to the Lender and the Board of Directors of Ziegler, setting forth the conclusion that, after giving effect to the Transactions, the making of the Bridge Loans, the funding of the Bank Financing, the Company is not insolvent and will not be rendered insolvent by the Transactions and the related borrowings and will not be left with unreasonably small capital with which to engage in its business and will not have incurred debts beyond its ability to pay such debts as they mature. (f) APPLICABLE LAW. The consummation of the Transactions, borrowings under the Bridge Loans and borrowings under the Bank Financing shall be in compliance with all applicable statutes, laws, rules and regulations of all applicable governmental and regulatory agencies and authorities. There shall not exist any judgment, order, injunction or other restraint prohibiting or delaying or imposing conditions upon consummation of any portion of the Transactions, the making of loans under the Bridge Loan Facility and the making of loans under the Bank Financing. (g) LITIGATION. No litigation or similar proceeding (governmental or other) shall exist or be threatened with respect to the Company, the Acquired Business or any of the respective affiliates which the Lender shall determine is reasonably likely to have a material adverse effect on -8- the Company or the Acquired Business, the Financing Documentation or the making of the Bridge Loans, the ability to sell or place the Securities or any of the other financing arrangements contemplated herein. (h) CONTRIBUTION. Immediately upon the funding of the Holdings Bridge Loan, Holdings shall invest or contribute the proceeds thereof in Coal Ventures, Inc. Section 4. TAKE-OUT FINANCING. The Company shall take any and every action necessary or desirable, to the extent within the power of the Company, so that the Take-Out Bank can, as soon as practicable before or after the Closing Date, publicly sell or privately place the Securities. If the Bridge Loans shall not have been refinanced in full prior thereto, the Company shall agree that upon notice by the Take-Out Bank (a "SECURITIES DEMAND"), at any time and from time to time prior to the first anniversary of the Closing Date, Holdings, the Company and/or the Acquired Business will cause the issuance and sale of Securities upon such terms and conditions as specified in the Securities Demand; PROVIDED that (i) the interest rates (whether floating or fixed) shall be determined by the Take-Out Bank in light of the then prevailing market conditions; (ii) the maturity of any Securities shall not be earlier than the eighth anniversary of the Closing Date; (iii) the Securities will be issued pursuant to one or more indentures substantially in the form negotiated by the Company and the Take-Out Bank prior to the Closing Date and which shall contain such terms, conditions and covenants as are customary for similar financings and as are reasonably satisfactory in all respects to the Take-Out Bank and its counsel and the Company and its counsel; and (iv) all other arrangements with respect to the Securities shall be reasonably satisfactory in all respects to the Take-Out Bank in light of the then prevailing market conditions. Before offering common equity of Holdings in connection with the issuance and sale of Securities of the Company, the Take-Out Bank will consult with the Company regarding prevailing market conditions and the advisability of issuing common equity to facilitate the placement of such Securities. Further, if it shall reasonably be determined by the Take-Out Bank based on the prevailing market conditions that it is necessary and advisable to sell the Securities with an equity component, Holdings shall issue common equity to the purchasers of the Securities in such amount as is necessary in order for Holdings and the Company to receive net proceeds from the sale of the Securities in an amount sufficient to repay the Bridge Loans in full; PROVIDED that in no event will Holdings -9- be required to issue common equity representing more than 5% of its outstanding common equity (calculated on a fully-diluted basis) pursuant to this sentence. Section 5. INDEMNIFICATION. The Company agrees to indemnify and hold harmless the Lender and its affiliates (including, without limitation, any controlling person) and the directors, officers, employees and agents of the foregoing parties (collectively, the "INDEMNIFIED PERSONS") from and against any and all losses, claims, demands, damages, liabilities and other expenses (or actions or other proceedings commenced or threatened in relation thereto) that may arise out of or in any way relate to or result from the transactions contemplated by this letter or relate to or in any way arise from any proposed or actual use of the proceeds of the Bridge Loan Facility or the Securities, and to reimburse each Indemnified Person for any reasonable legal or other expenses incurred in connection with investigating, preparing to defend or defending against any such loss, claim, demand, damage, liability or action or other proceeding (whether or not such Indemnified Person is a party to any action or proceeding out of which any such expenses arise). The Company will not, however, be responsible for any such losses, claims, demands, damages, liabilities or expenses of any Indemnified Person that are finally judicially determined to have arisen out of the gross negligence or bad faith of such Indemnified Person. The Company shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Company agrees to indemnify the Indemnified Person from and against any loss or liability by reason of such settlement or judgment subject to the rights of the Company in this paragraph to claim exemption from its indemnity obligations. The Company shall not, without the prior written consent of any Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which such Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability or claims that are the subject matter of such proceeding. The Company's obligation to indemnify the Indemnified Persons and pay such expenses shall remain in effect regardless of whether any Financing Documentation is signed. The Lender shall not be liable to any other person for consequential damages which may be alleged as a result of this letter or the transactions contemplated hereby. -10- Section 6. EXPENSES. In addition to any fees that may be payable to the Lender hereunder and in the Fee Letter and regardless of whether any of the transactions contemplated by this letter are consummated, this letter agreement is terminated, the Financing Documentation is executed and delivered or any loans are made under the Bridge Loan Facility, the Company hereby agrees to reimburse the Lender for all reasonable fees and disbursements of legal counsel and consultants, including but not limited to the fees and disbursements of Cahill Gordon & Reindel, the Lender's special counsel, and all of the Lender's travel and other reasonable out-of-pocket expenses incurred in connection with the Transactions or otherwise arising out of the Lender's commitment hereunder. Section 7. TERMINATION. The Lender's commitment hereunder to provide the Bridge Loan Facility shall terminate, unless expressly agreed to by the Lender in its sole discretion to be extended to another date, on the earlier of (A) October 15, 1998 if the loans under the Bridge Loan Facility shall not have funded; (B) the termination of the agreement to consummate the Acquisition in accordance with the terms of the Acquisition Agreement and (C) immediately after the making of the loans under the Bridge Loan Facility on the Closing Date. No such termination of such commitment shall affect your obligations under Sections 5, 6, 9 and 10 hereof or this Section 7, which shall survive any such termination. Section 8. ASSIGNMENT. This letter shall not be assignable by any party hereto without the prior written consent of the other parties (other than, in the case of the Lender, to an affiliate of the Lender, it being understood that any such affiliate shall be subject to the restrictions set forth in this Section 8); PROVIDED, HOWEVER, that the Lender shall have the right, in its sole discretion to syndicate its commitment to provide the Bridge Loan Facility among banks or other financial institutions pursuant to the Financing Documentation or otherwise and to sell, transfer or assign all or any portion of, or interests or participations in, the Bridge Loan and any notes issued in connection therewith; PROVIDED, FURTHER, that upon delivery by the Lender of a commitment letter for all or a portion of the Bridge Loan Facility from a reputable financial institution containing terms no less favorable to the Company than the terms hereof, the Lender shall be fully relieved of its obligations hereunder to the extent of the commitment set forth in such commitment letter. Any financial institution that executes and delivers such a commitment letter shall become a "Lender" hereunder. In connection with this commitment, the Company understands that the undersigned intends to com- -11- mence syndication of the Bridge Loan Facility promptly after the execution hereof by the Company, and the Company agrees actively to assist the undersigned in achieving a syndication that is satisfactory to the undersigned. Such syndication will be carried out in consultation with the Company and will be accomplished by a variety of means including direct contact during the syndication between senior management, representatives and advisors of the Company and the prospective syndicate members. In addition, the Company hereby agrees (i) to provide the undersigned and other prospective syndicate members with all information reasonably deemed necessary to the undersigned to complete syndication, including information relating to the Acquired Business, (ii) to assist the undersigned in preparing an information memorandum to be used in connection with the syndication activities and (iii) to attend, and to cause the persons referred to in the preceding sentence to attend, one or more meetings of prospective syndicate members. The Company agrees that if any other financing activities (whether in the bank or securities markets) being conducted or proposed to be conducted by or on behalf of any of the entities comprising the Company or its affiliates could, in the judgment of the undersigned, disrupt or otherwise materially adversely affect the successful syndication of the Bridge Loan Facility, the Company will cause such other financing activities to be coordinated with the syndication of the Bridge Loan Facility to avoid disruption or adverse impacts on the syndication activities contemplated hereby. Section 9. CONFIDENTIALITY. This letter is confidential and shall not be disclosed by you to any person other than your attorneys and other advisors, and to the Acquired Business and its attorneys and other advisors, and then only on a confidential basis and in connection with the Acquisition and other related transactions contemplated herein. Additionally, you may make such disclosures of this letter as are required by law or judicial process or as may be required or appropriate in response to any summons or subpoena or in connection with any litigation, it being understood that in such event you shall first give the Lender prior written notice thereof. Notwithstanding the foregoing, any disclosures required under the Securities Exchange Act may be made in connection with the Tender Offer. If this letter agreement is not accepted by you as provided in the final paragraph of this letter, you are directed to immediately return this letter (and copies hereof) to the undersigned. Section 10. MISCELLANEOUS. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE -12- STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES GOVERNING CONFLICTS OF LAWS. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION ARISING OUT OF THIS AGREEMENT OR CONDUCT IN CONNECTION WITH THIS ENGAGEMENT IS HEREBY WAIVED. YOU HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE CITY OF NEW YORK IN CONNECTION WITH ANY DISPUTE RELATED TO THIS AGREEMENT OR ANY OF THE MATTERS CONTEMPLATED HEREBY. This letter embodies the entire agreement and understanding between you and the Lender and supersedes all prior agreements and understandings relating to the subject matter hereof. This letter may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. The Lender reserves the right to employ the services of its affiliates (including Warburg Dillon Read LLC ("WDRI") in providing services contemplated by this letter and to allocate, in whole or in part, to WDRI certain fees payable to the Lender in such manner as the Lender and WDRI may agree in their sole discretion. You acknowledge that the Lender may share with any of its affiliates (including WDRI) and such affiliates may share with the Lender (in each case, subject to any confidentiality agreements applicable thereto), any information related to you or your affiliates and the Acquired Business (including information relating to creditworthiness), the Transactions or the Acquisition or the financing therefor. -13- If you are in agreement with the foregoing, please sign and return to the Lender at 677 Washington Boulevard, Stamford, Connecticut 06901, the enclosed copy of this letter no later than 5:00 p.m., New York time, on August 3, 1998, whereupon the undertakings of the parties shall become effective to the extent and in the manner provided hereby. This offer shall terminate if not so accepted by you on or prior to that time. Very truly yours, UBS AG By: /s/ Gary Riddell ---------------------------- Name: Gary Riddell Title: Executive Director Credit Risk Management By: /s/ Michael Y. Leder ---------------------------- Name: Michael Y. Leder Title: Executive Director Leveraged Finance WARBURG DILLON READ LLC By: /s/ Michael Y. Leder ---------------------------- Name: Michael Y. Leder Title: Executive Director Leveraged Finance By: /s/ Kay Ahlburg ---------------------------- Name: Kay Ahlburg Title: Executive Director Leveraged Finance Accepted and Agreed to as of the date first above written: COAL VENTURES, INC. By: /s/ Donald P. Brown ---------------------------- Name: Donald P. Brown Title: President EXHIBIT A BRIDGE LOAN FACILITY SUMMARY TERM SHEET (1) BORROWERS, CO-OBLIGORS AND GUARANTORS: Holdings, in the case of the Holdings Loan and Coal Ventures, Inc., in the case of the Company Loan and each of the subsidiaries of Coal Ventures, Inc. and any other entity which is a borrower under, or guarantor of, the Bank Financing (other than Bowie Resources, Limited, Yankeetown Dock Corporation, and, until the Consent has been obtained, AEI Holding Company, Inc.) (collectively, the "BORROWER") as shall be determined by the Lender. LENDER: UBS AG, Stamford Branch. AMOUNT: $100.0 million senior unsecured bridge loan to Holdings (the "HOLDINGS BRIDGE LOAN"); and $500.0 million senior subordinated bridge loan to the Company (the "COMPANY BRIDGE LOAN" and, together with the Holdings Bridge Loan, the "BRIDGE LOANS"). MATURITY: The commitment to provide the Bridge Loan Facility shall automatically expire on October 15, 1998 if the loans under the - ---------- (1) Capitalized terms used herein and not defined herein shall have the meanings provided in the bridge loan commitment letter to which this summary term sheet is attached. -2- Bridge Loan Facility shall not have been funded. Any outstanding amount under the Bridge Loan Facility will be required to be repaid in full on the earlier of (a) one year following the Closing Date and (b) the closing date of any permanent financing; PROVIDED, HOWEVER, that if the Company shall have failed to raise permanent financing before the date set forth in (a) above, outstanding loans under the Bridge Loan Facility shall be converted (such date, the "CONVERSION DATE"), subject to the conditions outlined under "Conditions to Conversion of the Bridge Loans", as follows: the Holdings Bridge Loan shall be converted into a senior unsecured Holdings term loan (the "HOLDINGS TERM LOAN") and the Company Bridge Loan shall be converted into a senior subordinated Company term loan (the "COMPANY TERM LOAN" and, together with the Holdings Term Loan, the "TERM LOANS" and, collectively with the Bridge Loans, the "FACILITY") with a maturity on the eighth anniversary of the Closing Date, in the case of the Holdings Term Loan and the eighth anniversary of the Closing Date, in the case of the Company Term Loan. CONVERSION FEES: 3.25% of the accreted value of the initial amount of the Holdings Term Loan and 2.75% of the initial principal amount of the Company Term Loan. USE OF PROCEEDS: To finance the Acquisition, to effect the Refinancing and to pay related fees and expenses. -3- FUNDING DATE: Simultaneous with the Closing Date (the "FUNDING DATE"). INTEREST RATE: Holdings Bridge Loan and Holdings Term Loan: No interest shall accrue on the Holdings Bridge Loan. No interest shall accrue on the Holdings Term Loan until the fifth anniversary of the Funding Date. The Holdings Bridge Loan and the Holdings Term Loan, as the case may be, shall accrete at the rate of three-month LIBOR, reset monthly, plus initially 7.00% PER ANNUM (the "INTEREST RATE") and which spread over LIBOR shall automatically increase by 0.50% for each period of 90 days (or portion thereof) that the Holdings Bridge Loan or the Holdings Term Loan, as the case may be, is outstanding; PROVIDED, HOWEVER, that the rate of accretion shall not exceed 18.00% PER ANNUM at any time. At any time on or after the Conversion Date, the Holdings Term Loan shall, at the election of the Lender, accrete at a fixed rate PER ANNUM equal to the Holdings Fixed Rate then in effect. The "HOLDINGS FIXED RATE", as of any date of determination, shall be a rate of accretion PER ANNUM equal to the then effective yield on U.S. Treasury securities having ten year maturities plus 9.25%. The accretion on the Holdings Bridge Loan and the Holdings Term Loan until the fifth anniversary of the Funding Date shall be on a quarterly bond equivalent basis. From and after the fifth anniversary of the Funding Date, interest will accrue on the accreted value of the Holdings Term Loan and be payable -4- in cash, quarterly, at an interest rate computed on the same basis as the computation of the accretion rate above. Company Bridge Loan and Company Term Loan: The Company Bridge Loan and the Company Term Loan, as applicable, shall bear interest at the rate of three-month LIBOR, reset monthly, plus initially 4.75% PER ANNUM (the "INTEREST RATE") and which spread over LIBOR shall automatically increase by 0.50% for each period of 90 days (or portion thereof) that the Company Bridge Loan or the Company Term Loan, as the case may be, is outstanding; PROVIDED, HOWEVER, that the interest rate shall not exceed 16.00% PER ANNUM at any time. At any time on or after the Conversion Date, the Company Term Loan shall, at the election of the Lender, bear interest at a fixed rate PER ANNUM equal to the Company Fixed Rate then in effect. The "COMPANY FIXED RATE", as of any date of determination, shall be a rate of interest PER ANNUM equal to the then effective yield on U.S. Treasury securities having ten year maturities plus 7.00%. Generally: Interest on the Company Bridge Loan and the Term Loans shall be payable on a quarterly basis. Interest on the Company Bridge Loan and the Term Loans will be paid in cash if the interest rate is less than or equal to 14.00% per annum with any interest in excess of 14.00% and less than or equal to 16.00% payable in additional loans having terms and provisions identical to the Company Bridge Loan or the applica- -5- ble Term Loan, as the case may be. RANKING: The obligations of Holdings under the Holdings Bridge Loan and Holdings Term Loan will be a senior unsecured obligation and will rank PARI PASSU as to payment with all other unsubordinated indebtedness of Holdings and senior to any subordinated indebtedness of Holdings. The obligations of the Company under the Company Bridge Loan and the Company Term Loan will be senior subordinated obligations of the Company and will rank: (i) PARI PASSU with all other senior subordinated indebtedness of the Company, (ii) senior to any subordinated indebtedness of the Company and (iii) subordinated in right of payment to (a) obligations of the Company under any unsubordinated indebtedness for borrowed money and any refinancing therof; and (b) any interest rate protection agreements or similar obligations relating to such indebtedness. OPTIONAL PREPAYMENT: The Borrower may prepay the Bridge Loans, in whole or in part, at any time at 100% of the accreted value thereof, in the case of the Holdings Bridge Loan, and at 100% of the principal amount thereof plus accrued interest thereon, in the case of the Company Bridge Loan, plus in each case customary breakage costs. The Term Loans shall be subject to prepayment restrictions and premiums typical for term loans of this type and any high yield debt securities issued -6- in exchange for the Term Loans shall have prepayment restrictions and premiums typical for similar debt securities. MANDATORY PREPAYMENT: Net proceeds of sales of debt securities or equity securities in a public offering or private placement by the Borrower shall be used to prepay the Bridge Loans (plus accrued interest in the case of the Company Bridge Loan) and any other amount payable thereunder to the full extent of net proceeds so received. The Lender shall have sole discretion in determining which Bridge Loans (and the amounts thereof) will be repaid with such proceeds or otherwise. The Borrower will be required to make an offer to repay the Bridge Loans or the Term Loans, as the case may be, upon the occurrence of a Change of Control (to be defined). VOTING: Amendments and waivers of the Bridge Loan Facility will require the approval of Lenders holding more than 50% of the aggregate amount of loans and commitments under the Bridge Loan Facility; provided, that, the consent of each Lender affected shall be required for (i) reductions of principal, interests or fees or increases of commitments, or (ii) extension of the maturity of any loans. PARTICIPATION/ASSIGNMENT: Assignments of loans and commitments to other Lenders or their affiliates may be made without restriction and with no minimum amounts. Assignments of loans -7- and commitments to other financial institutions are subject to the consent of the Borrower and the Agent (not to be unreasonably withheld) and must be in minimum amounts of $5 million. The Agent will receive a processing fee of $3,500 per each assignment payable by the assignor and/or the assignee. Participations will be unrestricted; voting rights of participants will be limited to matters requiring the consent of each Lender affected (as set forth in "Voting" above). CONDITIONS TO CONVERSION OF THE BRIDGE LOAN: One year after the Funding Date, unless (A) Holdings, the Company or any significant subsidiary thereof is subject to a bankruptcy or other insolvency proceeding, (B) there exists a matured default with respect to the Bridge Loans or (C) there exists a default in the payment when due at final maturity of any indebtedness (excluding the indebtedness under the Bridge Loans) of Holdings, the Company or any of its subsidiaries, or the maturity of such indebtedness shall have been accelerated, the Bridge Loans shall automatically be converted into the Term Loans; PROVIDED, HOWEVER, that if an event described in clause (C) is continuing at the scheduled Conversion Date but the applicable grace period, if any, set forth in the events of default provision of the Bridge Loans has not expired, the Conversion Date shall be deferred until the earlier to occur of (i) the cure of such event or (ii) the expiration of any applicable grace period. -8- DEBT SECURITY EXCHANGE: The Lender may at any time after the Conversion Date require that the Borrower exchange all or a portion of any Term Loan for an equal principal amount of long-term notes which shall bear interest at the Holdings Fixed Rate or the Company Fixed Rate, as the case may be, determined at such time, and shall have similar terms and conditions to high yield debt securities issued for cash in the then prevailing market and acceptable to the Lender and shall in addition provide customary registration rights, including, without limitation, a registered exchange offer. COVENANTS: The Financing Documentation will contain customary affirmative and negative covenants, including, without limitation, restrictions on the ability of Holdings, the Borrower and its subsidiaries to incur additional indebtedness, pay certain dividends and make certain other restricted payments and investments, impose restrictions on the ability of the Borrower's subsidiaries to pay dividends or make certain payments to the Borrower, create liens, enter into transactions with affiliates, enter into transactions resulting in a change of control, merge, consolidate or transfer substantially all of their respective assets, and maintain certain financial ratios and meet other financial tests, in each case satisfactory to the Lender. Further, during the term of the Bridge Loans, the covenants will be more restrictive than the covenants applicable to the Term Loans. -9- REPRESENTATIONS AND WARRANTIES: Customary for transactions of this type, in each case satisfactory to the Lender. CONDITIONS PRECEDENT: Customary for transactions of this type, in each case satisfactory to the Lender. EVENTS OF DEFAULT: Customary for transactions of this type, including, without limitation, payment defaults, covenant defaults, bankruptcy and insolvency, judgments, cross acceleration of and failure to pay at final maturity other indebtedness, subject to, in certain cases, notice and grace provisions, in each case satisfactory to the Lender. GOVERNING LAW AND FORUM: The State of New York. INDEMNIFICATION AND EXPENSE REIMBURSEMENT: Customary for transactions of this type, in each case satisfactory to the Lender. ANNEX A Set forth below is an outline of the actions contemplated to occur in connection with the consummation of the tender offer pursuant to the Agreement and Plan of Merger ("Merger Agreement") among Coal Ventures, Inc., Ziegler Acquisition Corp. and Ziegler Coal Holding Company ("Ziegler") and the related financing. On a date before the scheduled date for acceptance and payment (the "Closing Date") for the number of shares representing at least 90% of the outstanding shares of Ziegler, all documentation relating to the Credit Facility shall have been finalized and executed, to be held in escrow. The security documents necessary to pledge, or grant a security interest in, the assets of Ziegler will be executed by the persons to become the officers of the post-acquisition Ziegler entity. Following the acceptance and payment for the tendered shares, (i) the resignation of the Ziegler directors will immediately become effective and the Borrower will elect a new Board and (ii) the Merger will be effected as soon as practicable thereafter. Promptly upon the Effective Time the security documents will be released from escrow and will be filed or recorded as promptly as practicable thereafter. Counsel for UBS AG, Stamford Branch ("UBS"), and the Lenders shall be satisfied that, after the tender offer is consummated, and upon the filing of the necessary security documents, the Lenders will have a perfected first priority security interest. Capitalized terms not define herein have the meanings ascribed to them in the Commitment Letter dated August 3, 1998 between Warburg Dillon Read LLC, UBS, and Coal Ventures, Inc. ("Borrower"). Pre-Closing Date: - Financing documents (including all security documents) finalized. Executed and placed in escrow. - Borrower receives tender of shares representing at least 90% of outstanding Ziegler shares. Closing Date: - Tender of shares accepted by Borrower. - Credit Agreement becomes effective, Lenders transmit funds to the depository. - Tendered Shares released to Borrower; Resignation of directors of Ziegler pursuant to terms of Merger Agreement becomes effective.; New Ziegler directors approve merger; merger certificate filed in Delaware - Security documents become effective. - Filing of security documents commences. EX-99.(C)(1) 12 AGREEMENT AND PLAN OF MERGER - AEI RESOURCES Exhibit (C)(1) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF MERGER by and among AEI RESOURCES, INC., ZEIGLER ACQUISITION CORPORATION and ZEIGLER COAL HOLDING COMPANY August 3, 1998 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
TABLE OF CONTENTS Page ---- ARTICLE I THE OFFER..............................................................................2 SECTION 1.01 The Offer..............................................................................2 SECTION 1.02 Company Actions........................................................................3 SECTION 1.03 Directors..............................................................................4 SECTION 1.04 Stock Options..........................................................................5 ARTICLE II THE MERGER.............................................................................5 SECTION 2.01 The Merger.............................................................................5 SECTION 2.02 Closing Effective Time.................................................................5 SECTION 2.03 Effects of the Merger..................................................................6 SECTION 2.04 Additional Actions.....................................................................6 SECTION 2.05 Conversion of Common Shares............................................................6 SECTION 2.06 Conversion of Purchaser Common Stock...................................................7 SECTION 2.07 Company Option Plans...................................................................7 SECTION 2.08 Merger Without Meeting of Stockholders.................................................7 ARTICLE III DISSENTING SHARES; PAYMENT FOR SHARES..................................................7 SECTION 3.01 Dissenting Shares......................................................................7 SECTION 3.02 Payment for Common Shares..............................................................8 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................9 SECTION 4.01 Organization and Qualification; Subsidiaries...........................................9 SECTION 4.02 Charter and By-Laws...................................................................10 SECTION 4.03 Capitalization........................................................................10 SECTION 4.04 Authority Relative to this ...........................................................11 SECTION 4.05 No Conflict; Required Filings and Consents............................................11 SECTION 4.06 SEC Reports and Financial Statements..................................................12 SECTION 4.07 Information...........................................................................13 SECTION 4.08 Absence of Certain Developments.......................................................13 SECTION 4.09 Real Property.........................................................................15 SECTION 4.10 Personal Property.....................................................................17 SECTION 4.11 Tax Matters...........................................................................17 SECTION 4.12 Contracts and Commitments.............................................................18 SECTION 4.13 Intellectual Property.................................................................19 SECTION 4.14 Licenses and Permits..................................................................19 SECTION 4.15 Litigation............................................................................20 SECTION 4.16 Governmental Consents, etc............................................................20 SECTION 4.17 Employee Benefit Plans................................................................20 SECTION 4.18 Insurance.............................................................................22 SECTION 4.19 Compliance with Laws..................................................................22 SECTION 4.20 Environmental, Mining and Safety Matters..............................................23
TABLE OF CONTENTS Page ---- SECTION 4.21 Affiliated Transactions...............................................................24 SECTION 4.22 Brokers...............................................................................24 SECTION 4.23 Labor Relations.......................................................................24 SECTION 4.24 Permit Blocking.......................................................................25 SECTION 4.25 Section 6 of the Joint Development Agreement..........................................25 SECTION 4.26 Takeover Provisions Inapplicable......................................................25 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER............................25 SECTION 5.01 Organization and Qualification.......................................26 SECTION 5.02 Authority Relative to this Agreement.................................26 SECTION 5.03 No Conflict; Required Filings and Consents...........................26 SECTION 5.04 Information..........................................................27 SECTION 5.05 Financing............................................................27 SECTION 5.06 Parent and Purchaser Not an Interested Stockholder...................27 SECTION 5.07 No Knowledge of Misrepresentations or Omissions......................27 SECTION 5.08 Solvency.............................................................27 SECTION 5.09 Disclaimer Regarding Estimates and Projections.......................28 ARTICLE VI COVENANTS.............................................................................28 SECTION 6.01 Conduct of Business of the Company....................................................28 SECTION 6.02 Access to Information.................................................................30 SECTION 6.03 Reasonable Efforts Notice of Certain Developments.....................................31 SECTION 6.04 Consents..............................................................................31 SECTION 6.05 Public Announcements..................................................................33 SECTION 6.06 Employee Benefit Arrangements.........................................................33 SECTION 6.07 Indemnification.......................................................................34 SECTION 6.08 Notification of Certain Matters.......................................................34 SECTION 6.09 No Solicitation; Termination Right....................................................35 ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER..............................................37 SECTION 7.01 Conditions............................................................................37 ARTICLE VIII TERMINATION; AMENDMENTS; WAIVER.......................................................37 SECTION 8.01 Termination...........................................................................37 SECTION 8.02 Effect of Termination; Fees and Expenses..............................................38 SECTION 8.03 Amendment.............................................................................39 SECTION 8.04 Extension; Waiver.....................................................................39 ARTICLE IX MISCELLANEOUS.........................................................................39
TABLE OF CONTENTS Page ---- SECTION 9.01 Non-Survival of Representations and Warranties........................................39 SECTION 9.02 Entire Agreement; Assignment..........................................................39 SECTION 9.03 Validity..............................................................................40 SECTION 9.04 Notices...............................................................................40 SECTION 9.05 Governing Law.........................................................................41 SECTION 9.06 Descriptive Headings..................................................................41 SECTION 9.07 Counterpart...........................................................................41 SECTION 9.08 Parties in Interest...................................................................41 SECTION 9.09 Specific Performance..................................................................41 ARTICLE X DEFINITIONS...........................................................................42 SECTION 10.01 Certain Definitions...................................................................42
AGREEMENT AND PLAN OF MERGER ---------------------------- AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of August 3, 1998 by and among AEI Resources, Inc., a Delaware corporation ("Parent"), Zeigler Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent (the "Purchaser"), and Zeigler Coal Holding Company, a Delaware corporation (the "Company"). WHEREAS, the respective Boards of Directors of Parent, the Purchaser and the Company have approved the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement; and WHEREAS, the parties hereto desire that the Purchaser commence a tender offer (the "Offer") to purchase all of the shares of Common Stock, par value $.01 per share, of the Company (the "Common Shares") in accordance with the terms of this Agreement; and WHEREAS, the Board of Directors of the Company (the "Board") has approved the terms of the Offer, which will provide that, among other things, the price to be paid thereunder for each outstanding Common Share will be not less than $21.25 net to the seller of each such share (such price, as it may hereafter be increased, the "Offer Price"), and is recommending that the Company's stockholders accept the Offer; and WHEREAS, the respective Boards of Directors of Parent, the Purchaser and the Company have approved the merger of the Purchaser with and into the Company, as set forth below (the "Merger"), in accordance with the General Corporation Law of the State of Delaware (the "GCL") and upon the terms and subject to the conditions set forth in this Agreement, whereby each issued and outstanding Common Share not owned directly or indirectly by Parent or the Company will be converted into the right to receive $21.25 per Common Share, in cash (the "Merger Consideration"); and WHEREAS, Parent, the Purchaser and the Company desire to make certain representations, warranties, covenants and agreements in connection with the acquisition of the Company by Parent pursuant to the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger; and WHEREAS, certain capitalized terms used in this Agreement have the meaning as set forth or referred to in Article X hereof. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, Parent, the Purchaser and the Company agree as follows: ARTICLE I THE OFFER SECTION 1.01 The Offer. (a) Provided that this Agreement shall not have been terminated in accordance with its terms and none of the events set forth in Paragraphs (a) through (f) of Annex I hereto shall have occurred or be existing, no later than two (2) business days after the public announcement of the terms of this Agreement, the Purchaser shall commence the Offer, in accordance with the requirements of Regulations 14D and 14E promulgated under the Exchange Act, and any applicable State securities laws, to purchase all of the issued and outstanding Common Shares for the Offer Price net to the seller thereof in cash, provided, however, that the Purchaser shall use its best efforts to commence the Offer as soon as practicable after the public announcement of the terms of this Agreement, but in no event later than two business days after such public announcement. The Offer shall expire and terminate on the twentieth (20th) business day from the commencement of the Offer (the "Expiration Date"); provided, however, that the Purchaser shall have the right to extend the Expiration Date up to ten (10) additional business days in order to satisfy any of the conditions set forth in Annex I hereto other than the Offer Financing Condition, provided that the failure of such conditions to be satisfied is not due to a breach of this Agreement by Parent or Purchaser. Provided that this Agreement shall not have been terminated in accordance with its terms and none of the events set forth in Paragraphs (a) through (f) of Annex I hereto shall have occurred or be existing, no later than (2) two business days after the public announcement of the terms of this Agreement, the Purchaser shall file with the Securities and Exchange Commission (the "SEC") the Purchaser's Tender Offer Statement on Schedule 14D-1 (together with any supplements or amendments thereto, the "Offer Documents"), which shall contain (as an exhibit) the Purchaser's offer to purchase the Common Shares (the "Offer to Purchase") which shall be mailed to the holders of Common Shares with respect to the Offer, which shall contain the conditions set forth in Annex I hereto and no others; it being understood that the Offer shall be on the terms and subject to the conditions that are agreed to by the parties hereto and no others and that the Purchaser shall use its best efforts to file the Tender Offer Statement on Schedule 14D-1 as soon as practicable, but in no event later than two business days after such public announcement. The obligation of Purchaser to accept for payment or pay for any Common Shares tendered pursuant to the Offer will be subject only to the satisfaction of the conditions set forth in Annex I hereto. Without the prior written consent of the Company, the Purchaser shall not decrease the price per Common Share or change the form of consideration payable in the Offer, decrease the number of Common Shares sought to be purchased in the Offer, change the conditions set forth in Annex I, waive the Minimum Condition (as defined in Annex I), impose additional conditions to the Offer or amend any other term of the Offer in any manner adverse to the holders of Common Shares; provided that the Purchaser expressly reserves the right to waive any condition to the Offer (other than the Minimum Condition) without the consent of the Company. Subject to the terms of the Offer and this Agreement and the satisfaction of all the conditions of the Offer set forth in Annex I hereto as of any expiration date, Purchaser will accept for payment and pay for all Common Shares validly tendered and not withdrawn pursuant to the Offer as soon as practicable after such Expiration Date (the time of such purchase being referred to herein as the "Offer Purchase Closing"). Purchaser shall make reasonable provision for the payment of Offer proceeds to be made by wire transfer of immediately available funds to any person tendering Common Shares representing more than 1% of the Company's outstanding Common Shares. Subject to Section 8.01, if any of the conditions set forth in Annex I hereto are not satisfied or, to the extent permitted by this Agreement, waived by the Purchaser as of the Expiration Date (or any subsequently scheduled expiration date), Purchaser will extend the Offer from time to time, in each case, for the shortest time period that it reasonably believes is necessary for the consummation of the Offer. Each of the parties hereto shall use its reasonable best efforts to cause all conditions precedent set forth in Annex I to be fulfilled and avoid the occurrence of any event or to cure any event which may prevent such conditions precedent set forth in Annex I from being fulfilled. (b) The Offer Documents will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by Parent or the Purchaser with respect to information supplied by the Company in writing for inclusion in the Offer Documents. Each of Parent and the Purchaser, on the one hand, and the Company, on the other hand, agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect and the Purchaser further agrees to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to stockholders of the Company, in each case, as and to the extent required by applicable federal securities laws. SECTION 1.02 Company Actions. (a) The Company shall promptly (and in any event within two (2) business days after the public announcement of the terms of this Agreement) file with the SEC and mail to the holders of Common Shares the Company's Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the Offer (together with any amendments or supplements thereto, the "Schedule 14D-9"). The Schedule 14D-9 will set forth, and the Company hereby represents, that the Board, at a meeting duly called and held, has (i) determined that the Offer and the Merger are fair to and in the best interests of the Company and its stockholders, (ii) approved the Offer and the Merger in accordance with Section 203 of the GCL, and (iii) resolved to recommend and continues to recommend acceptance of the Offer and approval and adoption of the Merger and this Agreement by the Company's stockholders (if such approval is required by applicable law) (such recommendation to the Company's stockholders being referred to as the "Board Recommendation"); provided, however, that such recommendation and approval may be withdrawn, modified or amended as provided in Section 6.09. The Company further represents that Credit Suisse First Boston Corporation ("CSFB") has delivered to the Board its written opinion to the effect that, as of the date of this Agreement, the cash consideration to be received for the Common Shares pursuant to the Offer and the Merger is fair to the holders of the Common Shares (other than Parent and its affiliates) from a financial point of view. (b) Each of the Company, on the one hand, and Parent and the Purchaser, on the other hand, agree promptly to correct any information provided by either of them for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to the holders of the Common Shares, in each case, as and to the extent required by applicable federal securities law. (c) In connection with the Offer, the Company will use reasonable best efforts to cause to be furnished to Purchaser mailing labels, security position listings and any available listing or computer file containing the names and addresses of the record holders of the Shares as of a recent date and shall furnish Purchaser with such additional information and assistance (including, without limitation, updated lists of stockholders, mailing labels and lists of securities positions) as Purchaser or its agents may reasonably request in communicating the Offer to the record and beneficial holders of Shares. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Merger, Purchaser and its affiliates and associates shall hold in confidence the information contained in any such labels, listings and files, will use such information only in connection with the Offer and the Merger, and, if this Agreement shall be terminated, will deliver to the Company all copies of such information then in their possession. SECTION 1.03 Directors. (a) Subject to compliance with applicable law, promptly upon the payment by the Purchaser for Common Shares pursuant to the Offer, and from time to time thereafter, Parent shall be entitled to designate at least such number of directors, rounded up to the next whole number, on the Board as is equal to the product of the total number of directors on the Board (determined after giving effect to the directors elected pursuant to this sentence) multiplied by the percentage that the aggregate number of Common Shares beneficially owned by Parent or its affiliates bears to the total number of Common Shares then outstanding, and the Company shall, upon request of Parent, promptly take all actions necessary to cause Parent's designees to be so elected, including, if necessary, seeking the resignations of one or more existing directors. (b) The Company's obligations to appoint Parent's designees to the Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. The Company shall promptly take all actions required pursuant to such Section and Rule in order to fulfill its obligations under this Section 1.03 and shall include in the Schedule 14D-9 such information with respect to the Company and its officers and directors as is required under such Section and Rule in order to fulfill its obligations under this Section 1.03. Parent will supply any information with respect to itself and its officers, directors and affiliates required by such Section and Rule to the Company. (c) Following the election or appointment of Parent's designees pursuant to this Section 1.03 and prior to the Effective Time, any amendment or termination of this Agreement by the Company, the Company shall not extend the time for the performance of any of the obligations or other acts of Parent or the Purchaser or waive any of the Company's rights hereunder, or take any other action if such amendment, termination, extension, waiver or action would have an adverse effect on the minority stockholders of the Company. SECTION 1.04 Stock Options. Promptly following the commencement of the Offers the Company shall offer to cancel any or all of the outstanding options to purchase Common Shares and each outstanding stock appreciation unit (each such option to purchase one share and each such unit representing one share being referred to as an "Option") granted under the Company's Incentive Stock Option Plan and the Company's Stock Appreciation Rights Plan (collectively the "Option Plan") for cash consideration as set forth herein. Each holder of an Option which is vested (after giving consideration to any acceleration of vesting provided in the Option Plan or the Company's Special Bonus and Severance Plan (the "SBS Plan")) shall be offered the right to have 100% of his or her Options canceled by the Company in consideration of a payment by the Company to such holder for each Option in an amount equal to the excess of the Offer Price over the applicable exercise price of such Option. Cancellation of the Options and payment of the consideration therefor shall be conditioned upon the purchase of Common Shares by the Purchaser pursuant to the Offer. If such condition is met, the cancellation of Options and payment of the consideration therefor in accordance with this section shall be made as promptly as possible following the Offer Purchase Closing. ARTICLE II THE MERGER SECTION 2.01 The Merger. Upon the terms and subject to the satisfaction or waiver of the conditions of this Agreement, and in accordance with the applicable provisions of this Agreement and the GCL, at the Effective Time (as defined in Section 2.02) the Purchaser shall be merged with and into the Company. Following the Merger, the separate corporate existence of the Purchaser shall cease and the Company shall continue as the surviving corporation and shall succeed to and assume all the rights and obligations of Purchaser in accordance with the GCL. In its capacity as the surviving corporation of the Merger, the Company is sometimes referred to herein as the "Surviving Corporation." SECTION 2.02 Closing Effective Time. The closing of the Merger (the "Closing") will take place as promptly as practicable following the satisfaction or waiver of the conditions set forth in Section 7.01 of this Agreement (the "Closing Date"), at the offices of Brown, Todd & Heyburn PLLC, Lexington, KY. Immediately following the Closing, the parties hereto shall cause the Merger to become effective by filing a Certificate of Merger or, if permitted, a Certificate of Ownership and Merger, with the Secretary of State of the State of Delaware, in accordance with the relevant provisions of the GCL (the time of such filing being the "Effective Time") and shall make all other filings or recordings required under the GCL. SECTION 2.03 Effects of the Merger. (a) The Merger shall have the effects set forth in the GCL. (b) The Certificate of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation, until thereafter amended in accordance with the provisions thereof and hereof and applicable law. (c) Subject to the provisions of Section 6.07 of this Agreement, the By-Laws of the Purchaser in effect at the Effective Time shall be the By-Laws of the Surviving Corporation until amended in accordance with the provisions thereof and applicable law. (d) Subject to applicable law, the directors of the Purchaser immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal. (e) The officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal. SECTION 2.04 Additional Actions. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any further deeds, assignments or assurances in law or any other acts are necessary or desirable to (a) vest, perfect or confirm, of record or otherwise, in the Surviving Corporation its rights, title or interest in, to or under any of the rights, properties or assets of the Company or its Subsidiaries, or (b) otherwise carry out the provisions of this Agreement, the Company and its officers and directors shall be deemed to have granted the Surviving Corporation an irrevocable power of attorney to execute and deliver all such deeds, assignments or assurances in law and to take all acts necessary, proper or desirable to vest, perfect or confirm title to and possession of such rights, properties or assets in the Surviving Corporation and otherwise to carry out the provisions of this Agreement, and the officers and directors of the Surviving Corporation are authorized in the name of the Company or otherwise to take any and all such action. SECTION 2.05 Conversion of Common Shares. At the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, (I) each Common Share issued and outstanding immediately prior to the Effective Time (other than Dissenting Shares (as defined in Section 3.01) and Shares held by the Company, Parent, Purchaser and their respective Subsidiaries) shall be converted into the right to receive the Merger Consideration in cash, payable to the holder thereof, without interest thereon, upon surrender of the certificate formerly representing such Common Share, and (ii) each Common Share owned by the Company or one of its Subsidiaries or by Parent or Purchaser or one of its Subsidiaries shall be canceled without payment and without surrender of the certificate formerly representing such Common Shares. SECTION 2.06 Conversion of Purchaser Common Stock. At the Effective Time, each share of common stock, par value $.01 per share, of the Purchaser issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and become one validly issued, fully paid and non-assessable share of common stock, par value $.01 per share, of the Surviving Corporation. SECTION 2.07 Company Option Plans. At the Effective Time, by virtue of the Merger and without any action on the parts of the holders thereof, each then outstanding Option shall be converted into the right to receive an amount determined by multiplying (i) the excess, if any, of the Offer Price over the applicable exercise price of such Option by (ii) the number of Common Shares such holder could have purchased if such holder had exercised such Option immediately prior to the Effective Time, but only to the extent then vested and exercisable, provided that the determination of the exercisability of Options shall take into account the acceleration of vesting provided for in the Option Plan or the SBS Plan. The Surviving Corporation will pay any amount required to be paid pursuant to this Section 2.07 upon exercise or delivery of any then outstanding Options to the Surviving Corporation by or on behalf of the holder thereof. SECTION 2.08 Merger Without Meeting of Stockholders. The Purchaser and Parent agree to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the acceptance for payment of and payment for Common Shares by the Purchaser pursuant to the Offer without a meeting of stockholders of the Company, in accordance with Section 253 of the GCL. ARTICLE III DISSENTING SHARES; PAYMENT FOR SHARES SECTION 3.01 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, Common Shares outstanding immediately prior to the Effective Time and held by a holder who has demanded appraisal for such Shares in accordance with Section 262 of the GCL, if such Section 262 provides for appraisal rights for such shares in the Merger ("Dissenting Shares"), shall not be converted into the right to receive the Merger Consideration as provided in Section 2.05, unless and until such holder fails to perfect or withdraws or otherwise loses his right to appraisal and payment under the GCL. If, after the Effective Time, any such holder fails to perfect or withdraws or loses his right to appraisal, such Dissenting Shares shall thereupon be treated as if they had been converted as of the Effective Time into the right to receive the Merger Consideration, if any, to which such holder is entitled, without interest or dividends thereon. The Company shall give Parent prompt notice of any demands received by the Company for appraisal of Common Shares and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, except with the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands. SECTION 3.02 Payment for Common Shares. (a) From and after the Effective Time, The Bank of New York, or such other bank or trust company as shall be mutually acceptable to Parent and the Company, shall act as paying agent (the "Paying Agent") in effecting the payment of the Merger Consideration in respect of certificates (the "Certificates") that, prior to the Effective Time, represented Common Shares entitled to payment of the Merger Consideration pursuant to Section 2.05. At the Effective Time, Parent or the Purchaser shall deposit, or cause to be deposited, in trust with the Paying Agent the aggregate Merger Consideration to which holders of Common Shares shall be entitled at the Effective Time pursuant to Section 2.05. (b) Promptly after the Effective Time, the Paying Agent shall mail to each record holder of Certificates that immediately prior to the Effective Time represented Common Shares (other than Certificates representing Dissenting Shares and Certificates representing Common Shares held by Parent, the Purchaser, or the Company) a form of letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent and instructions for use in surrendering such certificates and receiving the Merger Consideration in respect thereof. Upon the surrender of each such Certificate, the Paying Agent shall, in consideration for the shares represented by such Certificates, pay the holder of such Certificate the Merger Consideration multiplied by the number of Common Shares formerly represented by such Certificate, in consideration therefor, and such Certificate shall forthwith be canceled. Until so surrendered, each such Certificate (other than Certificates representing Dissenting Shares and Certificates representing Common Shares held by Parent, the Purchaser, or the Company) shall represent solely the right to receive the aggregate Merger Consideration relating thereto. No interest or dividends shall be paid or accrued on the Merger Consideration. If the Merger Consideration (or any portion thereof) is to be delivered to any person other than the person in whose name the Certificate formerly representing Common Shares surrendered therefor is registered, it shall be a condition to such right to receive such Merger Consideration that the Certificate so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the person surrendering such Common Shares shall pay to the Paying Agent any transfer or other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered, or shall establish to the satisfaction of the Paying Agent that such tax has been paid or is not applicable. Promptly after the Effective Time, the Paying Agent shall mail to each record holder of Certificates that immediately prior to the Effective Time represented Dissenting Shares a notice of appraisal rights. (c) Promptly following the date which is 180 days after the Effective Time, the Paying Agent shall deliver to the Surviving Corporation all cash, Certificates and other documents in its possession relating to the transactions described in this Agreement, and the Paying Agent's duties shall terminate. Thereafter, holders of Common Shares who have not theretofore complied with this Section 3.02 shall look only to the Surviving Corporation for payment of the Merger Consideration in respect thereof (subject to applicable abandoned property, escheat and similar laws), in each case, without interest or dividends thereon. (d) None of Parent, the Purchaser, the Surviving Corporation or the Paying Agent shall be liable to any person in respect of any Common Shares (or dividends or distributions with respect thereto) or cash deposited by Parent or the Purchaser with the Paying Agent that is delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificates shall not have been surrendered prior to seven years after the Effective Time (or immediately prior to such earlier date on which any cash would otherwise escheat to or become the property of any Governmental Entity), any such cash in respect of such Certificate shall, to the extent permitted by applicable law become the property of Parent, free and clear of all claims or interest of any person previously entitled thereto. (e) Parent, the Purchaser and the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable or issuable pursuant to this Agreement to any holder of Common Shares such amounts as Parent, the Purchaser or the Paying Agent are required to deduct and withhold with respect to such payment or issuance under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holders of Common Shares in respect of which such deduction and withholding was made. (f) All cash issued upon surrender of Certificates in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such Common Shares formerly represented thereby. After the Effective Time, there shall be no transfers on the stock transfer books of the Surviving Corporation of any Common Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates formerly representing Common Shares are presented to the Surviving Corporation or the Paying Agent, they shall be surrendered and canceled in return for the payment of the aggregate Merger Consideration relating thereto, as provided in this Article III, subject to applicable law in the case of Dissenting Shares. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent and the Purchaser that except as set forth in the Disclosure Schedules (as hereinafter defined) as of the date hereof (or such other later date as is specified): SECTION 4.01 Organization and Qualification; Subsidiaries. (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Set forth on the Subsidiary Schedule is a list of every corporation, limited liability company, partnership or other business organization or entity of which the Company owns, either directly or through its Subsidiaries, (a) more than 50% of (i) the total combined voting power of all classes of voting securities of such entity, (ii) the total combined equity interests therein, or (iii) the capital or profit interests therein, in the case of a partnership; or (b) otherwise has the power to vote or direct the voting of sufficient securities to elect a majority of the board of directors or similar governing body of such entity (the "Subsidiaries"). Each of the Subsidiaries listed on the Subsidiary Schedule is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. The Company and each of the Subsidiaries has the requisite corporate power to own, operate or lease its properties and to carry on its business as it is now being conducted, and is duly qualified or licensed to do business, and is in good standing, in each jurisdiction in which the nature of its business or the properties owned, operated or leased by it makes such qualification, licensing or good standing necessary, except where the failure to have such power, or the failure to be so qualified, licensed or in good standing, would not have a Material Adverse Effect on the Company. The term "Material Adverse Effect on the Company," as used in this Agreement, means any development, condition or circumstance having an effect on the assets, business, operations, or financial condition of the Company or any of its Subsidiaries that is materially adverse to the Company and its Subsidiaries taken as a whole other than any development, condition or circumstance resulting from general economic conditions or relating generally to the coal or electric power industries. SECTION 4.02 Charter and By-Laws. The Company has heretofore made available to Parent and the Purchaser a complete and correct copy of the charter and the by-laws or comparable organizational documents, each as amended to the date hereof, of the Company and each of the Subsidiaries. SECTION 4.03 Capitalization. The authorized capital stock of the Company consists of 50,000,000 Common Shares and 1,000,000 shares of Preferred Stock, no par value. As of the close of business on July 28, 1998, 28,222,671 Common Shares were issued and outstanding, and 244,000 Common Shares were in the Company's treasury, and no shares of Preferred Stock were issued and outstanding. The Company has no shares reserved for issuance, except that, as of July 28, 1998, there were 1,666,760 Common Shares reserved for issuance pursuant to outstanding Options under the Option Plan, all of which were granted prior to March 31, 1998. The Options Schedule sets forth the name of each holder of an outstanding Option under the Option Plan, and with respect to each Option held by any such holder, the grant date, exercise price and number of Common Shares for which such Option is exercisable. As of the date hereof, the Company has no options to purchase Common Shares outstanding other than those granted and outstanding under the Option Plan. Since December 31, 1997, the Company has not issued any shares of capital stock except pursuant to the exercise of Options outstanding as of such date. All of the outstanding Common Shares are, and all Common Shares which may be issued pursuant to the exercise of outstanding Options will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and nonassessable. There are no bonds, debentures, notes or other indebtedness having general voting rights (or convertible into securities having such rights) of the Company or any of its Subsidiaries issued and outstanding. Except as set forth on the Options Schedule and except as contemplated by this Agreement, or between the Company and one or more of its direct or indirect wholly-owned subsidiaries, there are no existing options, warrants, calls, subscriptions or other rights, agreements, arrangements or commitments of any character, relating to the issued or unissued capital stock of the Company or any of the Subsidiaries, obligating the Company or any of the Subsidiaries to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock of, or other equity interest in or voting security of, the Company or any of the Subsidiaries or securities convertible into or exchangeable for such shares or equity interests or voting securities and neither the Company nor any of the Subsidiaries is obligated to grant or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment. Except as contemplated by this Agreement or between the Company and one or more of its direct or indirect wholly-owned subsidiaries, there are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Common Shares or the capital stock of the Company or any of the Subsidiaries. Each of the outstanding shares of capital stock of each of the Company's Subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and such shares of the Company's Subsidiaries as are owned by the Company or by a subsidiary of the Company are owned in each case free and clear of any Lien (as hereinafter defined). Other than as set forth on the Contracts Schedule, the Company has not agreed to register any securities under the Securities Act or under any state securities law or granted registration rights to any person or entity. SECTION 4.04 Authority Relative to this Agreement. The Company has all necessary corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized and approved by the Board and no other corporate proceedings on the part of the Company or on the part of the stockholders of the Company are necessary to authorize or approve this Agreement or to consummate the transactions contemplated hereby except as required by Delaware law. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due and valid authorization, execution and delivery of this Agreement by Parent and the Purchaser, this Agreement constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that such enforceability (I) may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to the enforcement of creditors' rights generally and (ii) is subject to general principles of equity. SECTION 4.05 No Conflict; Required Filings and Consents. (a) None of the execution and delivery of this Agreement by the Company, the consummation by the Company of the Merger, compliance by the Company with any of the provisions hereof or consummation of the Merger or any other transaction contemplated hereby will (i) conflict with or violate the Certificate of Incorporation or By-Laws of the Company or the comparable organizational documents of any Subsidiary, (ii) conflict with or violate any statute, ordinance, rule, regulation, Order, judgment or decree applicable to the Company or its Subsidiaries, or by which any of them or any of their respective properties or assets may be bound, or (iii) result in a violation or breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in any loss of any material benefit, or the creation of any Lien on any of the property or assets of the Company or any of its Subsidiaries (any of the foregoing referred to in clause (ii) or this clause (iii) being a "Violation") pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties may be bound or affected, except, in the cases of clauses (ii) and (iii) for any such Violations which would not individually or in the aggregate have a Material Adverse Effect on the Company. (b) None of the execution and delivery of this Agreement by the Company, the consummation by the Company of the Merger or any other transaction contemplated hereby or compliance by the Company and its Subsidiaries with any of the provisions hereof will require any consent, waiver, approval, authorization or permit of, or registration or filing with or notification to (any of the foregoing being a "Consent") any government or subdivision thereof, domestic, foreign or supranational or any administrative, governmental or regulatory authority, agency, commission, tribunal or body, domestic, foreign or supranational (a "Governmental Entity") or any third party, except for (I) compliance with any applicable requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) the filing of a certificate of merger, or, if permitted, a certificate of ownership and merger, pursuant to the GCL, (iii) compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and any requirements of any foreign or supranational Antitrust Laws (as hereinafter defined), (iv) other Consents identified in the Consents Schedule (including notices and Consents relating to or in connection with mining, reclamation and environmental Permits), and (v) other Consents the failure of which to obtain or make would not individually or in the aggregate have a Material Adverse Effect on the Company. SECTION 4.06 SEC Reports and Financial Statements. (a) The Company has filed with the SEC all forms, reports, schedules, registration statements and definitive proxy statements required to be filed by the Company with the SEC since January 1, 1995 (the "SEC Reports"). As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Exchange Act or the Securities Act of 1933 and the rules and regulations of the SEC promulgated thereunder applicable, as the case may be, to such SEC Reports, and none of the SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. (b) The consolidated balance sheets as of December 31, 1997, 1996, 1995 and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1997 (including the related notes and schedules thereto) of the Company contained in the Form 10-Ks for the years ended December 31, 1997, 1996 and 1995 included in the SEC Reports and the consolidated balance sheet as of March 31, 1998 and the related consolidated statements of income, stockholders' equity and cash flows for the quarter ended March 31, 1998 contained in the Form 10-Q for the quarter ended March 31, 1998 included in the SEC Reports present, and the consolidated balance sheet as of June 30, 1998 and the related consolidated statements of income, stockholders' equity and cash flows for the six months ended June 30, 1998 contained in the Form 10-Q for the quarter ended June 30, 1998 present, fairly, in all material respects, the consolidated financial position and the consolidated results of operations and cash flows of the Company and its consolidated Subsidiaries as of the dates or for the periods presented therein in conformity with United States generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved except as otherwise noted therein, including the related notes. The audited balance sheet as of December 31, 1997 is herein referred to as the "December Balance Sheet," the unaudited balance sheet as of March 31, 1998 is herein referred to as the "March Balance Sheet," and the unaudited balance sheet as of June 30, 1998 is herein referred to as the "June Balance Sheet." The amounts accrued or reserved for in the December Balance Sheet, the March Balance Sheet and the June Balance Sheet with respect to future costs associated with workers' compensation liabilities, Reclamation Obligations (as hereinafter defined) and Black Lung liabilities (as hereinafter defined) have been accrued or reserved for in accordance with GAAP, consistently applied. The amounts reflected in the December Balance Sheet, the March Balance Sheet and the June Balance Sheet with respect to coal and mineral reserves have been included or will be included in such financial statements in accordance with GAAP, consistently applied. The Company has accrued its and its Subsidiaries' and affiliates' obligations for retiree medical benefits in accordance with Statement of Financial Account Standards No. 106. (c) Since March 31, 1998, except as disclosed in the SEC Reports or the Developments Schedule, there has not been any Material Adverse Effect on the Company or any event, condition or development which the Company believes is reasonably likely to result in a Material Adverse Effect on the Company. (d) The Company and its Subsidiaries are not subject to any material liabilities or obligations (absolute, accrued, contingent or otherwise) other than (i) arising under contracts or circumstances reflected on or otherwise referred to in the Disclosure Schedules (subject to Section 4.12(c)), (ii) reflected in, reserved against or otherwise disclosed in the December Balance Sheet, March Balance Sheet or June Balance Sheet, or (iii) incurred in the ordinary course of business consistent with past practice. SECTION 4.07 Information. None of the information supplied by the Company in writing specifically for inclusion or incorporation by reference in (i) the Offer Documents, (ii) the Schedule 14D-9, or, (iii) any other document to be filed with the SEC or any other Governmental Entity in connection with the transactions contemplated by this Agreement (the "Other Filings") will, at the respective times filed with the SEC or other Government Entity, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Schedule 14D-9 will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. SECTION 4.08 Absence of Certain Developments. Except as set forth on the Developments Schedule and except as expressly contemplated by this Agreement, since March 31, 1998, neither the Company nor any of its Subsidiaries has engaged in any material transaction outside the ordinary course of business consistent with past practice or: (a) Incurred any indebtedness for borrowed money, except borrowings from banks (or other financial institutions) necessary to meet ordinary course working capital requirements and to finance capital expenditures in the ordinary course of business consistent with past practice; (b) Mortgaged, pledged or subjected to any Lien, any asset or related group of assets having a net book value in excess of $500,000; (c) Sold, leased, assigned or transferred any tangible asset or related group of assets having a net book value in excess of $500,000 except for the sale of inventory and obsolete or used machinery and equipment in the ordinary course of business consistent with past practice; (d) Sold, leased, assigned or transferred any interest in real estate having a net book value in excess of $500,000; (e) Sold, licensed, assigned or transferred any patents, trademarks, trade names, copyrights, trade secrets or other intangible assets having a fair market value in excess of $500,000 individually or in the aggregate; (f) Waived or relinquished any right or claim or related group of rights or claims except any such item which the Company believes has a fair value of less than $500,000 individually or in the aggregate; (g) (x) Issued or sold any of its Common Shares or other equity securities or any warrants, options or other rights to acquire its Common Shares or other securities of the Company, except for the issuance of Common Shares upon exercise of Options outstanding as of March 31, 1998 or (y) purchased or redeemed or agreed to purchase or redeem any Common Shares or other equity securities; (h) Made or entered into binding commitment for any capital expenditures or related group of capital expenditures in excess of $1,000,000 other than such expenditures contemplated in the financial statements and plans provided to the Purchaser by the Company; (i) Modified or amended in any material manner or terminated or entered into any Material Contract (as hereinafter defined); (j) Granted any increase in the base compensation of, or made any other material change in the employments terms for, any of its directors, officers, and employees other than normal periodic increases or changes reflecting or based upon changed responsibilities or duties made in the ordinary course of business consistent with past practice or changes made pursuant to any collective bargaining agreements or existing contracts; (k) Adopted, modified, or terminated any bonus, profit-sharing, incentive, severance or other plan or contract for the benefit of any of its directors, officers, and employees, other than for changes which are required by law or a collective bargaining agreement; or (l) Declared or paid any dividend or other distribution with respect to the Common Shares except regular quarterly dividends not in excess of $0.075 per share. SECTION 4.09 Real Property. (a) The Owned Real Property Schedule includes all material real property interests owned in fee by the Company or its Subsidiaries and identifies those interests which constitute Active Operating Properties and Reserves and/or Operating Facilities. (b) The Company and its Subsidiaries shall promptly provide the following information with regard to each material parcel or tract of owned real property (exclusive of oil and gas properties): (i) an identification of the deed or other instrument of conveyance; (ii) recording information (if available, and if not, the state and county where the relevant parcel or tract is located); (iii) the names of at least one grantor and one grantee thereunder; and (iv) the approximate size of the relevant parcel or tract when acquired. The Company and its Subsidiaries shall also promptly provide an accurate listing of all owned real property within the currently existing five (5) year mining plan of the Company and its Subsidiaries. (c) The Leased Real Property Schedule includes all material real property interests in which the Company has or its Subsidiaries have a leasehold interest and identifies those leasehold interests which constitute Active Operating Properties and Reserves and/or Operating Facilities. (d) The Company and its Subsidiaries shall promptly provide the following information with regard to each material parcel or tract of leased real property (exclusive of oil and gas properties): (i) an identification of the lease or sublease agreement and any and all amendments, modifications and side letters; (ii) recording information (if available), and if not, the state and county where the relevant parcel or tract is located; (iii) the names of at least one lessor and one lessee (or sublessor or sublessee) thereunder; (iv) the approximate size of the relevant parcel or tract leased thereunder when acquired; and (v) the term thereof, including any extension options. The Company and its Subsidiaries shall also promptly provide an accurate listing of all leased real property within the currently existing five (5) year mining plan of the Company and its Subsidiaries. (e) Except as set forth on the Real Property Disclosure Schedule and except Permitted Encumbrances which individually or in the aggregate do not constitute a Material Adverse Effect on the Company, the Company and its Subsidiaries hold (i) good and marketable Mining Title, as hereinafter defined, to the Active Operating Properties and Reserves and to the Operating Facilities and (ii) as to the Other Real Property, an interest of record or a leasehold interest from a person or entity which the Company or its Subsidiaries reasonably believe has an interest of record. As used in this subparagraph (e), Mining Title means fee simple title to surface and/or coal or an undivided interest in fee simple title thereto or a leasehold interest in all or an undivided interest in surface and/or coal together with (i) for Active Operating Properties and Reserves designated for surface mining no less than those easements, licenses, privileges, rights, and appurtenances as are necessary to mine, remove, and transport coal by surface mining methods; (ii) for Active Operating Properties and Reserves designated for underground mining, no less than those easements, licenses, privileges, rights, and appurtenances as are necessary to mine, remove, and transport coal by underground mining methods; and (iii) for Operating Facilities, no less than those easements, licenses, privileges, rights, and appurtenances as are necessary to operate the Operating Facilities in the manner presently operated. (f) Except as disclosed in the Real Property Disclosure Schedule, neither the Company nor its Subsidiaries have received any written notice alleging that the Company or its Subsidiaries are in default under any material lease. Except as disclosed on the Real Property Disclosure Schedule and except as could not reasonably be expected to have a Material Adverse Effect on the Company, neither the Company nor its Subsidiaries are in default under any lease relating to Active Operating Properties and Reserves, Operating Facilities or Other Real Property. (g) Except for leases which would not have a Material Adverse Effect on the Company if found to be invalid or unenforceable, each of the leases on the Leased Real Property Schedule is, and will be on and immediately following the Closing Date, valid and enforceable against the lessor or other parties thereto in accordance with its terms. To the Knowledge of the Company there are no unwritten modifications to such leases. (h) To the Knowledge of the Company, except as set forth on the Real Property Disclosure Schedule, neither the Company nor any of its Subsidiaries have received any notice of claims that the Company or any Subsidiary has mined any coal that did not belong to it, or mined any coal in such reckless or imprudent fashion as to give rise to any material claims for loss, waste or trespass. (i) All existing maps, surveys, title insurance policies, title insurance, abstracts and other evidence of title have been made available by the Company and its Subsidiaries to the Purchaser. (j) To the Knowledge of the Company, and other than set forth on the Real Property Disclosure Schedule, no condemnation or eminent domain proceeding against any part of such property is pending or threatened, and the Company and its Subsidiaries have no knowledge that any such proceeding is contemplated. (k) To the Knowledge of the Company, except as set forth on the Real Property Disclosure Schedule, there are no adverse possession claims regarding those real property interests which constitute Active Operating Properties and Reserves and/or Operating Facilities. (l) "Permitted Encumbrances" as used in this Agreement means: (i) rights of cotenants, if any; (ii) rights and easements of owners of undivided interests in the property where the Company or its Subsidiaries own less than 100% of the fee interest; (iii) rights and easements of owners of interests in the surface where the Company or its Subsidiaries do not own or lease the surface; (iv) rights and easements of owners and lessees, if any, of coal or other minerals, including oil and gas, where the Company or its Subsidiaries do not own coal or other minerals; (v) rights and easements of owners and lessees of other coal seams and other minerals, including oil and gas, not owned or leased by the Company or its Subsidiaries; (vi) all existing easements or rights of way, whether of record or apparent on the premises, including, but not limited to, roads, highways, pipelines, underground gas storage rights, railroad and utility easements or rights-of-way, none of which could reasonably be expected to have a Material Adverse Effect on the Company; (vii) real estate taxes not yet due and payable; (viii) statutory liens for mechanics, materialmen or laborers for work and labor delivered to or performed on the premises securing obligations of the Company or its Subsidiaries or their contractors incurred in the Ordinary Course of Business and in the aggregate do not exceed $1,000,000; (ix) specific encumbrances and exceptions noted in a Disclosure Schedule; (x) conditions, encumbrances, and covenants of record and other title exceptions, defects and encumbrances which could not reasonably be expected to have a Material Adverse Effect on the Company; (xi) terms, agreements, provisions, conditions, and limitations contained in leases and rights of lessors, their heirs, executors, administrators, successors, and assigns (applies to leasehold estates); (xii) farm, grazing, hunting, recreational and residential leases in which the Company or any Subsidiary is the lessor; (xiii) royalty obligations to sellers or transferors of fee coal or lease properties; (xiv) rights of others to subjacent or lateral support and absence of subsidence rights; and (xv) rights of repurchase when mining and reclamation are completed. SECTION 4.10 Personal Property. Except as would not have a Material Adverse Effect on the Company: (a) The Company and its Subsidiaries have good and marketable title to, or a valid leasehold interest in, the personal property owned or used by them, including the Leased Personal Property that is listed on the Personal Property Lease Schedule (but excluding, to the extent applicable, any leased real property), in each case, free and clear of all Liens. (b) The machinery and equipment owned or used by the Company and its Subsidiaries have been maintained in accordance with industry practice, are in generally good operating condition and adequate for carrying out the purposes for which such personal property is employed, except for normal obsolescence and wear and tear incurred in the ordinary course of business. SECTION 4.11 Tax Matters. The Company and its Subsidiaries have filed all income Tax Returns and other Tax Returns required to be filed by them, excluding those Tax Returns the failure of which to file would not have a Material Adverse Effect on the Company. All Tax Returns for the Company in respect of all years not barred by the statute of limitations have heretofore been made available by the Company to Purchaser and such returns are true, correct, and complete in all material respects. Except as set forth on the Taxes Schedule or the Litigation Schedule: (a) all Taxes shown thereon as owing by the Company and the Subsidiaries on all such Tax Returns have been fully paid; (b) to the Company's Knowledge, (i) the provision for taxes on the March Balance Sheet and the June Balance Sheet are sufficient for all accrued and unpaid Taxes as of the date thereof and (ii) all material Taxes which the Company or any of its Subsidiaries is obligated to withhold from amounts owing to any employee, creditor or third party have been fully paid or properly accrued; (c) there are no material claims pending, or to the Company's Knowledge, threatened, for Taxes against the Company or any Subsidiary with respect to any period ending as of or prior to the date hereof; (d) neither the Company nor any Subsidiary has waived, or agreed to the extension of, the statute of limitations with respect to any Tax Return; (e) neither the Company nor any Subsidiary has any liability for Taxes for any Person (other than the Company and its Subsidiaries) under Treasury Regulation 1.1502-6 (or any similar provision of state, local or foreign income Tax law) as a transferee or successor by contract or otherwise; and (f) the Company and its Subsidiaries have maintained their respective records with respect to Taxes in a commercially reasonable manner. SECTION 4.12 Contracts and Commitments. (a) Except as set forth on the Contract Schedule, the Lease Schedules, the Employee Benefits Schedule or the Development Schedule, neither the Company nor any of its Subsidiaries is a party to any: (i) collective bargaining agreement with any labor union; (ii) bonus, pension, profit sharing, retirement or other form of deferred compensation plan which may provide compensation or benefits of at least Two Hundred Thousand Dollars ($200,000.00) or which when aggregated with all such other plans not included on the schedules may provide compensation or benefits of at least One Million Dollars ($1,000,000.00); (iii) stock purchase, stock option, stock appreciation or similar plan; (iv) contract for the employment of any officer, individual employee or other person on a full-time or consulting basis involving an annual compensation commitment by the Company or a Subsidiary in excess of $200,000; (v) agreement or indenture relating to the borrowing of money in excess of $1,000,000 or to mortgaging, pledging or otherwise placing a Lien (other than a Permitted Lien) on any portion of the Company's assets, other than assets that, individually or in the aggregate, would not be material to the operations of the Company and, its Subsidiaries in the ordinary course of business consistent with past practice; (vi) guaranty of any obligation for borrowed money in excess of $1,000,000; (vii) lease or agreement under which it is lessee of, or holds or operates any personal property owned by any other party, for which the annual rental exceeds $250,000, (viii) contract or group of related contracts with the same party for the supply of coal to any Person in an amount of more than $3,000,000 or providing for deliveries extending beyond December 31, 1998; (ix) contract or group of related contracts with the same party for the purchase of inventories, supplies or services, under which the undelivered balance of such inventories, supplies or services has a selling price in excess of $1,000,000 (other than contracts to purchase coal in the ordinary course of business in an amount less than $3,000,000); (x) contract or group of related contracts with the same party for the sale of products or services (other than coal sales or supply contracts under which the undelivered balance of such products or services has a sales price in excess of $1,000,000; (xi) tariff agreements and other transportation contracts for the shipment of coal which provides for transportation costs of, or reasonably projected to be, more than $250,000 per year; (xii) contract which prohibits or materially limits the Company or a Subsidiary in any material respect from freely engaging in business in the United States or anywhere else in the world; or (xiii) any other contract or commitment (A) involving the payment by or to the Company or any of its Subsidiaries of $1,000,000 or more (whether in cash or other assets) in any 12 month period or $5,000,000 or more (whether in cash or other assets) in the aggregate over the life of the contract or (B) the termination of which or loss of the benefits thereunder would have a Material Adverse Effect on the Company. "Material Contract" means any contract, agreement or other arrangement of a type referred to in any of clauses (i) through (xiii) of this Section 4.12(a). (b) Purchaser either has been supplied with, or has been given access to, a true and correct copy of all written contracts which are referred to on the Contracts Schedule and the Lease Schedules, together with all material amendments, arbitration decisions and grievance settlements related to collective bargaining agreements and contracts with any labor union, waivers or other changes thereto. (c) Each contract listed on the Contracts Schedule or the Lease Schedule is legal, valid, binding, enforceable and in full force and effect, and will continue to be legal, valid, binding, enforceable and in full force and effect following consummation of the transactions contemplated hereby, except as would not individually or in the aggregate, have a Material Adverse Effect on the Company. To the Company's Knowledge, neither the Company nor its Subsidiaries are in default, breach or violation (or would be in default, breach or violation with notice or lapse of time, or both) under any contract listed on the Contracts Schedule or the Lease Schedules, except for such defaults which individually or in the aggregate, would not have a Material Adverse Effect on the Company and except that Leased Real Property shall be excluded from this representation. SECTION 4.13 Intellectual Property. Set forth on the attached Intellectual Property Schedule are all of the material patents, trademarks, copyrights and service marks (and any registrations or applications therefor) and all material trade names and corporate names used in the conduct of the business of the Company and its Subsidiaries as now conducted (collectively, the "Intellectual Property"). Except as set forth on the Intellectual Property Schedule, the Company and its Subsidiaries own or have sufficient rights to use the Intellectual Property to conduct their current operations. Except as set forth on the Intellectual Property Schedule, neither the Company nor any Subsidiary has received any written notices of material infringement or misappropriation from any third party with respect to the Intellectual Property, and to the Company's Knowledge, neither the Company nor any Subsidiary has infringed nor is it currently infringing the intellectual property of any other Person, except where such infringement would not individually or in the aggregate, have a Material Adverse Effect. SECTION 4.14 Licenses and Permits. Except as would not have a Material Adverse Effect on the Company, the Company and its Subsidiaries possess all necessary mining permits, leases, mining rights, mining licenses, re-mining agreements and similar authorizations and approvals (collectively, the "Mining Permits"), including those listed on the Mining Permits Schedule, and other licenses, permits, certifications and other governmental or regulatory authorizations and approvals, including those listed on the Other Permits Schedule (collectively, "Permits"), necessary to enable the Company and its Subsidiaries to carry on their mining business as presently conducted, and all such permits are valid, and in full force and effect and there exists no default thereunder. Except as set forth on the Mining Permits Schedule, to the Company's Knowledge, the Company and its Subsidiaries have obtained all material Mining Permits necessary for the Company and its Subsidiaries to conduct the mining operations proposed to be conducted under the Company's current five-year mining plan (the "Mining Plan") within the twelve month period commencing on the date of this Agreement. Except as set forth on the Mining Permits Schedule, to the Company's Knowledge, the Company and its Subsidiaries have initiated the process to obtain all material Mining Permits necessary for the Company and its Subsidiaries to conduct the mining operations proposed to be conducted under the Mining Plan within the twelve month period following the twelve month period commencing on the date of this Agreement. Except as set forth on the Mining Permits Schedule, to the Company's Knowledge, with respect to any material Mining Permits which can reasonably be expected to take more than two years to obtain, the Company and its Subsidiaries have initiated the process so that such Mining Permits may reasonably be expected to be issued not less than six months prior to the applicable commencement date for the mining operations covered by such Mining Permits. Except as disclosed on the Mining Permits Schedule, based upon a good faith determination of Senior Managers of the Company's Subsidiaries, Engineering and/or Permitting Departments, the time remaining prior to the commencement of all mining operations under the Mining Plan is sufficient to obtain any Mining Permits not yet obtained by the Company and its Subsidiaries which are necessary to conduct the mining operations contemplated in the Mining Plan not less than six months prior to the proposed commencement of such mining operations under the Mining Plan. Except as set forth on the Permits Schedule or the Litigation Schedule, to the Company's Knowledge, there is no pending or threatened litigation or other proceeding under which any material Mining Permit or other Permit could reasonably be expected to be revoked, terminated or suspended. SECTION 4.15 Litigation. Except as set forth on the attached Litigation Schedule, there are no actions, suits or proceedings pending or, to the Company's Knowledge, threatened against the Company or any of its Subsidiaries (or, in each case, in which the Company or its Subsidiaries is a party), at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, except those which are not individually or in the aggregate, reasonably likely to have a Material Adverse Effect on the Company. Except as set forth on the attached Litigation Schedule, neither the Company nor any of its Subsidiaries is subject to any outstanding judgment, injunction, order or decree of any court or Government Entity to which this Company or its Subsidiaries is a party which adversely affects the operations of the Company or such Subsidiary. SECTION 4.16 Governmental Consents, etc.. Except as set forth in Section 4.05, on the Governmental Consents Schedule or in connection with the Purchaser's financing of the transactions contemplated in this Agreement, no consent, waiver, approval or authorization, order, permit or qualification of, or declaration to or filing with, any governmental or regulatory authority is required in connection with the execution, delivery or performance of this Agreement by the Company or the consummation by the Company of any other transaction contemplated hereby, the failure of which individually or in the aggregate have a Material Adverse Effect on the Company. SECTION 4.17 Employee Benefit Plans. (a) Except as listed on the Employee Benefits Schedule or the Contracts Schedule attached hereto, with respect to employees of the Company and its Subsidiaries , (i) neither the Company nor any of its Subsidiaries maintains or contributes to any qualified defined contribution retirement plan, or qualified defined benefit pension plan (either being referred to as a "Pension Plan") and (ii) the Company does not maintain or contribute to any welfare benefit plans (as that term is defined in Section 3(1) of ERISA) (the "Welfare Plans"). The Pension Plans and the Welfare Plans are collectively referred to as the "Plans." Each of the Pension Plans (other than the Multiemployer Plans) has received a favorable determination letter from the Internal Revenue Service that such Plan is a "qualified plan" under Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), the related trusts are exempt from tax under Section 501(a) of the Code, and the Company is not aware of any facts or circumstances that would jeopardize the qualification of such Pension Plan. The Plans (other than any Multiemployer Plans) comply in form and in operation in all material respects with the requirements of the Code and the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and any other laws, rules and regulations applicable thereto. (b) With respect to the Plans (other than the Multiemployer Plans), (i) all required contributions have been made or properly accrued, (ii) there are no actions, suits or claims pending, other than routine claims for benefits, and (iii) there have been no "prohibited transactions" (as that term is defined in Section 406 of ERISA or Section 4975 of the Code). (c) The Company has furnished to Purchaser true and complete copies of (i) the Plans and summary plan descriptions, (ii) the most recent determination letter received from the Internal Revenue Service regarding the Plans (other than the Multiemployer Plans) and (iii) the latest financial statements for the Plans (other than the Multiemployer Plans) and latest available actuarial reports. (d) Neither the Company nor any Subsidiary, nor, to the Company's Knowledge, any of its directors, officers, employees or any other "fiduciary," as such term is defined in Section 3 of ERISA, has committed any material breach of fiduciary responsibility imposed by ERISA or any other applicable law with respect to the Plans which would subject Parent or Purchaser or any of their respective directors, officers or employees to any material liability under ERISA or any applicable law. (e) The Company has not incurred any material liability for any tax or civil penalty imposed by Section 4975 of the Code or Section 502 of ERISA. (f) Except as listed on the Employee Benefits Schedule attached hereto, (i) no Plan is a Multiemployer Plan (as defined in Section 4001(a)(3) of ERISA) ("Multiemployer Plan") or a plan that has two or more contributing sponsors at least two of whom are not under common control, within the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"), and (ii) none of the Company and its Subsidiaries nor any ERISA Affiliates has incurred any withdrawal liability that has not been satisfied in full, nor been advised by a Multiemployer Plan that any withdrawal liability or potential liability, as a result of a complete or partial withdrawal from such Multiemployer Plan, as those terms are defined in Part 1 of Subtitle E of Title IV of ERISA, has been incurred. With respect to each Plan that is a Multiemployer Plan, except as set forth in the Employee Benefits Schedule: (1) none of the Company and its Subsidiaries, nor any of the respective ERISA Affiliates, has received any written notification, nor does the Company have Knowledge that any such Plan is in reorganization, has been terminated or is insolvent, or (2) reasonably expected to be in reorganization, to be insolvent, or to be terminated, and (3) the Company and its Subsidiaries and their respective ERISA Affiliates have made all required contributions to such Plans substantially when due. (g) The Company has not incurred any liability (i) under Title IV of ERISA, (ii) under section 302 of ERISA, (iii) under sections 412 and 4971 of the Code, (iv) as a result of a failure to comply with the continuation coverage requirements of section 601 et seq. of ERISA and section 4980B of the Code, (v) under Section 701, et seq. of ERISA, or (vi) under corresponding or similar provisions of foreign laws or regulations that would be a liability of the Company following the Effective Time, other than such liabilities under the Plans, or where such liability would not individually or in the aggregate have a Material Adverse Effect on the Company. No Plan subject to Title IV of ERISA nor any related trusts have been terminated or is or has been the subject of termination proceedings pursuant to Title IV of ERISA. Neither the Company nor any ERISA Affiliate of the Company has engaged in any transaction described in Section 4069 or Sections 4204 or 4212(c) of ERISA. (h) Except as disclosed in the Employee Benefits Schedule or the SEC Reports, the Company has no liability for life, health, medical or other welfare benefits to former employees or beneficiaries or dependents thereof, except for health continuation coverage as required by Section 4980B of the Code or Parts 6 and 7 of Title I of ERISA. (i) Except as disclosed in the Employee Benefits Schedule, the Contracts Schedule and the Employee Arrangements Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (either alone or in conjunction with any other event) result in, cause the accelerated vesting or delivery of, or increase the amount or value of, any payment or benefit to any employee, officer or director of the Company or any of its Subsidiaries. SECTION 4.18 Insurance. The attached Insurance Schedule lists the material insurance policies maintained by the Company and its Subsidiaries and their respective coverage and renewal dates. All of such insurance policies are in full force and effect and the Company is not in material default with respect to its obligations under any of such insurance policies. No notice of cancellation or termination or rejection of any claim in excess of $1,000,000 has been received by the Company or its Subsidiaries with respect to any such policy in the last year (or such shorter period as such entity has been in existence or has been a Subsidiary of the Company). The Company and each of its Subsidiaries has been covered during the past five years (or such shorter period as such entity has been in existence or has been a Subsidiary of the Company) by insurance in scope and amount customary and reasonable for the businesses in which they have engaged during such period, and to the Company's Knowledge, all contractors, lessees and licensees which performed services and/or engaged in the production of coal on behalf of the Company have been covered by insurance in scope and amount customary and reasonable for the business in which they have engaged during such period. SECTION 4.19 Compliance with Laws. Except as set forth on the Legal Compliance Schedule, the Taxes Schedule, the Developments Schedule or the Litigation Schedule, to the Company's Knowledge, the Company and each of its Subsidiaries is in compliance with every statute, rule, restriction, law, regulation, order, judgment or decree of any governmental entity applicable to it or by which it is bound (other than Environmental and Safety Requirements and any permit requirements or related regulations), including, without limitation, the Fair Labor Standards Act or regulations under such act or other laws and regulations relating to wages, hours, labor agreements, the payment of Social Security and similar taxes, unemployment or workers' compensation including Black Lung benefits and obligations and the West Virginia Wage Payment Collections Payment Act and/or similar state laws and regulations, except for such failures as would not have a Material Adverse Effect on the Company. Except as set forth on the Legal Compliance Schedule, the Taxes Schedule or the Developments Schedule, neither the Company nor any Subsidiary has received from any governmental or regulatory authority any written notice alleging any material violation of law or claiming any material liability of the Company or any of its Subsidiaries as a result of any such alleged material violation. SECTION 4.20 Environmental, Mining and Safety Matters. Except as set forth on the attached Environmental Compliance Schedule: (a) The Company and its Subsidiaries are in compliance in all material respects with all Environmental, Mining, and Safety Requirements (including without limitation in cases where the Company or its Subsidiaries operate any property or facility under a contractual arrangement but are not the named permittee under relevant surface mining permits), and have filed all notices and compliance reports required to be filed to maintain such compliance in all material respects under any Environmental, Mining, and Safety requirements (including without limitation, where material, notices and reports indicating past or present treatment, storage or disposal, or reporting a spill or release into the environmental, of any Hazardous Substances, Oils, Pollutants or Contaminants), and (i) neither the Company nor any of its Subsidiaries has received any written communication or other written notice from any Government Entity (which has not been substantially resolved) alleging that the Company or any of its Subsidiaries is not in compliance, in all material respects, with Environmental, Mining, and Safety Requirements, (ii) to the Company's Knowledge all contract mining activities performed on Real Property owned or leased by the Company or any of its Subsidiaries are in compliance, in all material respects, with all Environmental, Mining, and Safety Requirements, (iii) to the Company's Knowledge, no material action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against or otherwise given to the Company or any of its Subsidiaries alleging any failure so to comply in all material respects, and, to the Company's Knowledge, no such action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand or notice has been threatened, and (iv) neither the Company nor any of its Subsidiaries has any material contingent liabilities with respect to its business under any Environmental, Mining, or Safety Requirements. (b) (i) Neither the Company nor any of its Subsidiaries has received notice to the effect that it is a potentially responsible party, or that any Governmental Entity or other individual is seeking information in connection with or advising it that it is responsible for, or potentially responsible for costs under Environmental, Mining, and Safety Requirements, including, without limitation, CERCLA, for cleanup of or investigatory, remedial, or other corrective action related to Hazardous Substances, Oils, Pollutants or Contaminants at any Real Property currently or previously owned or leased by the Company or any of its Subsidiaries at any other location, (ii) no Real Property owned or leased by the Company nor any of its Subsidiaries is listed on any federal or state contaminated site list, including the national priority list under CERCLA, the CERCLIS, or any state counterparts, and (iii) neither the Company nor any of its Subsidiaries has knowledge of any release of Hazardous Substances, Oils, Pollutants, or Contaminants in quantities requiring investigation or cleanup at any of the Real Property owned or leased by the Company or any of its Subsidiaries or at any location where, in any of the foregoing cases (i)-(iii) the Company or any of its Subsidiaries could reasonably be excepted to bear material liability. (c) Each of the Company and its Subsidiaries has provided the Purchaser (to the extent in the possession of the Company or its Subsidiaries) with all material environmental audits, site assessments, or reports, all Environmental Impact Statements, and all liability studies prepared within the past five years by or for the Company or any of its Subsidiaries, or by any third party, including Government Entities or insurance companies. (d) For purposes of this Agreement, "Release" shall mean any emission, spill, release, discharge or threatened release into or upon: (i) the air; (ii) the soils or any improvements located thereon; (iii) the surface water or ground water; or (iv) the sewer, septic system or waste treatment, storage or disposal system. SECTION 4.21 Affiliated Transactions. Except as set forth on the Affiliated Transactions Schedule, the Employee Benefits Schedule, the Developments Schedule or the contracts Schedule, no officer, director, or principal stockholder of the Company or, to the Company's Knowledge, any individual in such officer's or director's immediate family is a party to any material agreement, contract, commitment or transaction with the Company or any of its Subsidiaries or has any interest in any material real or personal property used by the Company or any of its Subsidiaries other than arrangements with employees that are available to similarly situated employees. SECTION 4.22 Brokers. Except for the fees of CSFB pursuant to the engagement letter listed on the Contracts Schedule, none of the Company, any of its Subsidiaries, or any of their respective officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finder's fees in connection with the transactions contemplated by this Agreement. SECTION 4.23 Labor Relations. Except as set forth in the Compliance Schedule or the Litigation Schedule: (a) The Company and its Subsidiaries are in compliance with applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, excluding Environmental and Safety Requirements, except for such failures as would not, individually or in the aggregate, have a Material Adverse Effect on the Company. The Company and its Subsidiaries are in compliance with applicable collective bargaining agreements, and arbitration, administrative and judicial decisions interpreting and/or affecting such agreements, except for such failures as would not, individually or in the aggregate, have a Material Adverse Effect on the Company. (b) There is no unfair labor practice charge or complaint or any other labor employment matter against or involving the Company or any Subsidiary pending or threatened before the National Labor Relations Board or any court of law as of the date of this Agreement. There is, and, except as disclosed on the Compliance Schedule, since January 1, 1996 there has been, no labor organizing activity, strike, dispute, lockout, slowdown or stoppage actually pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against the Company or any of its Subsidiaries. (c) There is, and except as disclosed on the Compliance Schedule, since January 1, 1994 there has been, no certified collective bargaining representative of the Company's or any of its Subsidiaries' employees, no demand made to the Company or its Subsidiaries for recognition by any collective bargaining representative, and no petition for an election filed with the National Labor Relations Board or any other governmental authority or Person with respect to the Company's or any of its Subsidiaries' employees. (d) Except as set forth on the Litigation Schedule, there are no charges, investigations administrative proceedings or formal complaints of discrimination (including discrimination based upon sex, age, marital status, race, color, religion, national origin, sexual preference, disability, handicap or veteran status) pending or, to the knowledge of the Company or any of its Subsidiaries, threatened before the Equal Employment Opportunity Commission or any federal, state or local agency or court against the Company or any Subsidiary. SECTION 4.24 Permit Blocking. Except as set forth in the Compliance Schedule or Litigation Schedule, neither the Company nor any of its Subsidiaries has been notified in writing by the Federal Office of Surface Mining or the agency of any state administering the Surface Mining Control and Reclamation Act of 1977, as amended ("SMCRA"), or any comparable state statute, that it is (i) ineligible to receive additional surface mining permits that are material to its business; or (ii) under investigation to determine whether its eligibility to receive such permits should be revoked, i.e., "permit block," and, to the Company's Knowledge, there is no basis therefor. SECTION 4.25 Section 6 of the Joint Development Agreement. No Acquisition Closing (as such term is defined in the Joint Development Agreement) or other event has occurred, that prevents, prohibits or limits or otherwise renders moot any rights of the Company and/or one or more of its Subsidiaries pursuant to Section 6 of the Joint Development Agreement (including, without limitation, the right thereunder to withdraw from the Project (as defined in the Joint Development Agreement)). SECTION 4.26 Takeover Provisions Inapplicable. Assuming the accuracy and correctness of Section 5.06 hereof, as of the date hereof and at all times on or prior to the Effective Time, Section 203 of the GCL is and shall be inapplicable to the Merger and the transactions contemplated hereby. ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER Parent and the Purchaser represent and warrant to the Company as follows: SECTION 5.01 Organization and Qualification. Parent is a corporation duly organized, validly existing and in good standing under the laws of Delaware. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Parent and Purchaser each have the requisite corporate power and authority to own, operate or lease its properties and to carry on its business as it is now being conducted and to enter into this Agreement and to perform all of their respective obligations hereunder. SECTION 5.02 Authority Relative to this Agreement. The execution and delivery of this Agreement by Parent and the Purchaser and the consummation by Parent and the Purchaser of the transactions contemplated hereby have been duly and validly authorized and approved by the Boards of Directors of Parent and the Purchaser and by Parent as stockholder of the Purchaser and no other corporate proceedings on the part of Parent or the Purchaser are necessary to authorize or approve this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of Parent and the Purchaser and, assuming the due and valid authorization, execution and delivery by the Company, each such agreement constitutes a valid and binding obligation of each of Parent and the Purchaser enforceable against each of them in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to the enforcement of creditors' rights generally and (ii) is subject to general principles of equity. SECTION 5.03 No Conflict; Required Filings and Consents. (a) None of the execution and delivery of this Agreement by Parent or the Purchaser, the consummation by Parent or the Purchaser of the transactions contemplated hereby or compliance by Parent or the Purchaser with any of the provisions hereof will (i) conflict with or violate the organizational documents of Parent or the Purchaser, (ii) conflict with or violate any statute, ordinance, rule, regulation, order, judgment or decree applicable to Parent or the Purchaser, or any of their Subsidiaries, or by which any of them or any of their respective properties or assets may be bound or affected, or (iii) result in a Violation pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent or the Purchaser, or any of their Subsidiaries, is a party or by which any of their respective properties or assets may be bound or affected, except for any such actions which would not have a material adverse effect on Parent or adversely affect the ability of Parent or the Purchaser to consummate the transactions contemplated hereby. (b) None of the execution and delivery of this Agreement by Parent and the Purchaser, the consummation by Parent and the Purchaser of the transactions contemplated hereby or compliance by Parent and the Purchaser with any of the provisions hereof will require any Consent of any Government Entity or third party, except for (i) compliance with any applicable requirements of the Exchange Act, (ii) the filing of a certificate of merger, or, if permitted, a certificate of ownership and merger, pursuant to the GCL, and (iii) compliance with the Hart-Scot-Rodino Act and any requirements of any foreign or supranational Antitrust Laws, and (iv) Consents the failure of which to obtain or make would not have a material adverse effect on Parent or adversely affect the ability of Parent or the Purchaser to consummate the transactions contemplated hereby. SECTION 5.04 Information. None of the information supplied or to be supplied by Parent and the Purchaser in writing specifically for inclusion in (a) the Schedule 14D-1, (b) the Offer Documents or (c) the Other Filings will, at the respective times filed with the SEC or such other Governmental Entity contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. SECTION 5.05 Financing. The Purchaser is a newly formed corporation which has not conducted any business other than in connection with the transactions contemplated by this Agreement. The Purchaser has received a written commitment (the "Commitment Letters") to obtain, subject to the terms and conditions therein, the funds necessary for the consummation of the transactions contemplated hereby, including payment of the Offer Price and the Merger Consideration with respect to all Common Shares and all payments with respect to Options and all related costs and expenses. The Purchaser has delivered true, correct and complete copies of the Commitment Letters to the Company. The Purchaser has paid all commitment fees required to be paid and taken all other actions required to cause such Commitment Letters to be effective and to constitute the valid commitment of the issuer of such letter, and each such commitment Letter is a valid and binding commitment of the Purchaser and the issuer thereof. The Purchaser is not, as of the date hereof, aware of any fact, occurrence or condition that makes any of the assumptions or statements therein inaccurate in any material respect or that would cause the commitments provided in the Commitment Letters to be terminated or ineffective or any of the conditions contained therein not to be met. SECTION 5.06 Parent and Purchaser Not an Interested Stockholder. As of the date of this Agreement, neither Parent nor Purchaser nor any of their affiliates is an "Interested Stockholder" as such term is defined in Section 203 of the GCL. SECTION 5.07 No Knowledge of Misrepresentations or Omissions. Neither Parent nor Purchaser has any actual knowledge that (i) the representations and warranties of the Company in this Agreement are not true and correct in all material respects or (ii) there are any material errors in, or material omissions from, the Schedules to this Agreement which individually or in the aggregate constitute a Material Adverse Effect on the Company. SECTION 5.08 Solvency. Assuming the correctness of the representations and warranties in Article IV hereof, the Company and its Subsidiaries will immediately after the Offer Purchase Closing and immediately after the Effective Time be solvent and capable of meeting their obligations as they become due, have assets exceeding their liabilities and have a reasonable amount of capital for the conduct of their business. Parent and Purchaser will procure the solvency opinion that is required by the Commitment Letters and will provide that such opinion is addressed to and delivered to the Board as well as to the issuer of the Commitment Letters. Additionally, Parent and Purchaser will assure that a draft of such solvency opinion is provided to the Board and counsel to the Company for their review and comment not less than three days prior to the formal delivery thereof. SECTION 5.09 Disclaimer Regarding Estimates and Projections. In connection with Parent or Purchaser's investigation of the Company and its Subsidiaries, Parent or Purchaser has received certain Company projections, including projected statements of income from operations of the Company and its Subsidiaries for the fiscal year ending in December 1997 and for succeeding fiscal years and certain business plan information for such fiscal year and succeeding fiscal years. The Company makes no representation or warranty with respect to such estimates and projections and other forecasts and plans (including the reasonableness of the assumptions underlying such estimates and projections and forecasts). In addition, except as set forth herein, the Company makes no representation or warranty with respect to information relating to historical income from operations set forth in the Information Memorandum, in any supplemental due diligence information provided to Parent or Purchaser, in connection with discussions or access to management of the Company and its Subsidiaries, or otherwise, and Parent and Purchaser acknowledge and agree that it is not relying on such information in any manner whatsoever. The disclosures in the Schedules hereto are to be taken as relating to the representations and warranties of the Company as a whole. The inclusion of information in the Schedules hereto shall not be construed as an admission that such information is material to the Company or its Subsidiaries. In addition, matters reflected in the Schedules are not necessary limited to matters required by this Agreement to be reflected in such Schedules. Such additional matters are set forth for information purposes only and do not necessarily include other matters of a similar nature. ARTICLE VI COVENANTS SECTION 6.01 Conduct of Business of the Company. Except as provided in Section 6.09 hereof or as otherwise contemplated by this Agreement or with the written consent of Parent or as set forth in the Developments or Contracts Schedule, during the period from the date of this Agreement to the Offer Purchase Closing, the Company will, and will cause each of its Subsidiaries to, conduct its operations only in the ordinary course of business consistent with past practice and will use all reasonable efforts, and will cause each of its Subsidiaries to use all reasonable efforts, to preserve intact the business organization of the Company and each of its Subsidiaries, to keep available the services of its and their present officers and key employees, and to preserve the good will of those having business relationships with it. Without limiting the generality of the foregoing, and except as provided in Section 6.09 hereof, as otherwise contemplated by this Agreement with respect to the Non-Mining Assets, or with the written consent of Parent or as set forth in the Developments Schedule or Contracts Schedule, the Company will not, and will not permit any of its Subsidiaries to, prior to the Effective Time: (a) Adopt any amendment to its charter or by-laws or comparable organizational documents; (b) Except for issuances of capital stock of the Subsidiaries to the Company or a wholly owned subsidiary of the Company, and other than the issuance of Common Shares pursuant to the exercise of Options outstanding on the date hereof, issue, reissue, pledge or sell, or authorize the issuance, reissuance, pledge or sale of (i) additional Common Shares or other shares of capital stock of any class, or securities convertible into Common Shares or other capital stock of any class, or any rights, warrants or options to acquire any convertible securities or capital stock, or (ii) any other securities in respect of, in lieu of, or in substitution for, Common Shares outstanding on the date hereof; (c) Declare, set aside or pay any dividend or other distribution (whether in cash, securities or property or any combination thereof) in respect of any class or series of its capital stock other than between any of the Company and any of its wholly owned Subsidiaries. (d) Split, combine, subdivide, reclassify or redeem, purchase or otherwise acquire, or propose to redeem, purchase or otherwise acquire, any Common Shares or any other capital stock; (e) Make any loans, advances or capital contributions to, or investments in, any other person in excess of $500,000, except for loans, advances, capital contributions or investments between any Subsidiary of the Company and the Company or another wholly owned subsidiary of the Company; (f) Fail to (i) maintain (except for sales or other transactions not constituting a breach of this Agreement) the Real Property in a manner consistent with past practice, (ii) pay when due all Taxes, water and sewer rents, assessments and insurance premiums affecting the Real Property, other than those being contested in good faith for which appropriate reserves have been established on the Company's or its Subsidiary's books and records, (iii) timely comply with the terms and provisions of all Leases (including but not limited to timely payment of all minimum and production royalties, other than those being contested in good faith for which appropriate reserves have been established on the Company's or its Subsidiary's books and records), contracts and agreements relating to or affecting the Real Property and the use and operation thereof, in each case, other than such failures that would not, individually or in the aggregate, have a Material Adverse Effect on the Company; (g) Enter into, establish, adopt, amend or renew any material employment, consulting, severance or similar agreements or arrangements with any director, officer or employee; grant any salary or wage increase (other than in the ordinary course of business consistent with past practice or as may be required by law); or establish, adopt, amend, or increase benefits under, any pension, retirement, stock option, stock purchase, savings, profit sharing, deferred compensation, consulting, welfare benefit contract, plan or arrangement (other than in the ordinary course of business consistent with past practice or as may be required by law); (h) Enter into any material labor or collective bargaining agreement, memorandum of understanding, grievance settlement or any other agreement or commitment to or relating to any labor union, except in the ordinary course of business consistent with past practice; (i) Take any action that, if taken after March 31, 1998 but prior to the date hereof, would have caused the representations and warranties contained in Section 4.08 to be untrue in any material respect; (j) Consummate its investment in Louisiana Generating LLC, contemplated by, or waive, modify or terminate in any manner adverse to the Company its rights under Section 6 of, that certain Joint Development Agreement, dated September 29, 1996, as amended, among the Company, Southern Electric International, Inc. and NRG Energy Inc. (the "Joint Development Agreement"), in connection with the transactions contemplated by that certain Asset Purchase and Reorganization Agreement, dated as of July 30, 1996, with Ralph R. Mabey, Trustee in Bankruptcy of Cajun Electric Power Cooperative, Inc. ("Cajun Electric"), for the acquisition of substantially all of the non-nuclear assets of Cajun Electric; (k) Waive, modify, amend or terminate any confidentiality, standstill or other similar agreement (each a "Standstill Agreement") to which the Company or any of its Subsidiaries is a party and which was entered into in connection with the sale process undertaken by the Company to identify a purchaser of the Company that resulted in the execution of this Agreement; or (l) Agree to take any of the foregoing actions prohibited under Section 6.01. Notwithstanding the foregoing, nothing herein shall limit the Company's ability to, nor require the Company to obtain the consent of Parent in order to, sell, convey or otherwise dispose of any of the Non-Mining Assets referred to on the Non-Mining Assets Schedule attached hereto at any time following the date hereof in any transaction approved by the Board; provided that, with respect to any sale of assets, such sale is not to an Affiliate of the Company, such assets are sold in an arms-length transaction, and the Company provides at least three business days prior written notice of such sale to Parent. SECTION 6.02 Access to Information. From the date of this Agreement until the Closing, the Company will, and will cause its Subsidiaries, and each of their respective officers, directors, counsel, advisors and representatives (collectively, the "Company Representatives") to, give Parent and the Purchaser and their respective officers, employees, counsel, advisors and representatives (collectively, the "Parent Representatives") full access (subject, however, during the term of this Agreement and following any termination hereof, to Parent and Purchaser keeping and causing their respective subsidiaries and affiliates to keep such information confidential in a manner consistent with existing confidentiality and similar non-disclosure obligations, including those contained in the Confidentiality Agreement, and the preservation of attorney client and work product privileges), during normal business hours, to the offices and other facilities and to the books and records of the Company and its Subsidiaries and will cause the Company Representatives to furnish Parent, the Purchaser and the Parent Representatives to the extent available with such financial and operating data and such other information with respect to the business and operations of the Company and its Subsidiaries as Parent and the Purchaser may from time to time reasonably request; provided that if the Company determines in good faith that any such data or information is competitively sensitive, Parent and the Company will reasonably agree to appropriate limitations on the dissemination of such information within the Purchaser's and Parent's respective organizations. Prior to the Offer Purchase Closing, neither Parent or Purchaser nor the Parent Representatives shall contact or in any manner communicate with the employees, customers, lessors and suppliers of the Company and its Subsidiaries with respect to any matter related to the transactions contemplated hereby, except with the prior consent of the Company. SECTION 6.03 Reasonable Efforts Notice of Certain Developments. (a) Subject to the terms and conditions herein provided and to applicable legal requirements, each of the parties hereto agrees to use reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done (in the case of the Company consistent with the fiduciary duties of the Company's Board of Directors under applicable law), and to assist and cooperate with the other parties hereto in doing, as promptly as practicable, all things necessary, proper or advisable under applicable laws and regulations to ensure that the conditions set forth in Article VII are satisfied and to consummate and make effective the transactions contemplated by the Offer, the Merger and this Agreement. (b) If at any time prior to the Effective Time any event or circumstance relating to either the Company or Parent or the Purchaser or any of their respective Subsidiaries, is discovered by the Company or Parent, as the case may be, which should be set forth in an amendment to the Offer Documents or Schedule 14D-9, the discovering party will promptly inform the other party of such event or circumstance. If at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, including the execution of additional instruments, the proper officers and directors of each party to this Agreement shall take all such necessary action. (c) Parent and Purchaser covenant and agree to do all other things reasonably necessary to obtain the financing necessary for fulfillment of the Offer Financing Condition (whether from the issuers of the Commitment Letters or from other sources), on terms and conditions that are not less favorable in the aggregate to Parent and Purchaser than those contemplated by the Commitment Letters. (d) Parent and Purchaser further covenant and agree that they will not, at any time prior to the termination of this Agreement, terminate or modify, amend or alter the obligations of the issuer of the Commitment Letter in any way that would be materially adverse to the Parent's or Purchaser's ability to cause the Offer Financing Condition to be satisfied. SECTION 6.04 Consents. (a) Each party hereby agrees to use its reasonable best efforts to file the premerger notification report, and all other documents to be filed in connection therewith, required by the HSR Act and the Premerger Notification Rules promulgated thereunder with the United States Federal Trade Commission ("FTC") and the United States Department of Justice ("DOJ") as soon as practicable following the date hereof, but in any event (i) with respect to Parent and Purchaser, within five days following the date hereof and (ii) with respect to the Company, within ten days following the date hereof. Each party shall respond promptly to any request for additional information that may be issued by either FTC or DOJ and shall use commercially reasonable efforts to assure that the waiting period required by the HSR Act has expired or been terminated prior to the date that is 20 days following the commencement of the Offer. (b) Each of the parties will use commercially reasonable efforts to obtain as promptly as practicable all Consents of any Governmental Entity or any other person required in connection with, and waivers of any Violations that may be caused by, the consummation of the transactions contemplated by the this Agreement. (c) In furtherance and not in limitation of the foregoing, Parent shall use commercially reasonable best efforts to resolve such objections, if any, as may be asserted with respect to the transactions contemplated by this Agreement under any antitrust, competition or trade regulatory laws, rules or regulations of any domestic or foreign government or governmental authority or any multinational authority ("Antitrust Laws"). If any suit is instituted challenging any of the transactions contemplated by this Agreement as violative of any Antitrust Law, Parent shall take such action (including without limitation, agreeing to hold separate or to divest any of the businesses, product lines or assets of Parent or any of its affiliates or of any of the Company, its Subsidiaries or affiliates (a "Business Unit") (but only if the Business Units required to be held separate or divested do not in the aggregate have a fair market value of more than $25,000,000 or revenues for the most recently completed 12 months of more than $25,000,000) as may be required (a) by the applicable government or governmental or multinational authority (including, without limitation, the Antitrust Division of the United States Department of Justice, the Federal Trade Commission or the European Economic Area) in order to resolve such objections as such government or authority may have to such transactions under such Antitrust Law, or (b) by any domestic or foreign court or similar tribunal, in any suit brought by a private party or governmental or multinational authority challenging the transactions contemplated by this Agreement as violative of any Antitrust Law, in order to avoid the entry of, or to effect the dissolution of, any injunction, temporary restraining order or other order that has the effect of preventing the consummation of any of such transactions. The entry by a court, in any suit brought by a private party or governmental or multinational authority challenging the transactions contemplated by this Agreement as violative of any Antitrust Law, of an order or decree permitting the transactions contemplated by this Agreement, but requiring that any Business Units of any of Parent or its affiliates, the Company or its Subsidiaries or affiliates be divested or held separate by Parent (but only if such Business Units required to be held separate or divested do not in the aggregate have a fair market value of more than $25,000,000 or revenues for the most recently completed 12 months of more than $25,000,000), or that would otherwise limit Parent's freedom of action with respect to, or its ability to retain, the Company and its Subsidiaries or any portion thereof or any of Parent's or its affiliates' other assets or businesses, shall not be deemed a failure to satisfy the conditions specified in Annex I or Section 7.01(b) hereof. (d) Any party hereto shall promptly inform the others of any material communication from the United States Federal Trade Commission, the Department of Justice or any other domestic or foreign government or governmental or multinational authority regarding any of the transactions contemplated by this Agreement. If any party or any affiliate thereof receives a request for additional information or documentary material from any such government or authority with respect to the transactions contemplated by this Agreement, then such party will endeavor in good faith to make, or cause to be made, as soon as reasonably practicable and after consultation with the other party, an appropriate response in compliance with such request. Parent will advise the Company promptly in respect of any understandings, undertakings or agreements (oral or written) which Parent proposes to make or enter into with the Federal Trade Commission, the Department of Justice, or any other domestic or foreign government or governmental or multinational authority in connection with the transactions contemplated by this Agreement. SECTION 6.05 Public Announcements. Prior to the Closing, except as required by applicable law or by any rule or regulation of the New York Stock Exchange, no party hereto shall issue any press release or otherwise make any public statement with respect to this Agreement and the transactions contemplated hereby without the prior written consent of the other parties hereto. With respect to any public statement of either party that does not require the consent of the other party, the party making such statement shall, prior to public disclosure thereof, first consult with and provide the other party a reasonable opportunity to review the contents of such statement. SECTION 6.06 Employee Benefit Arrangements. Parent shall cause the Company to honor all accrued obligations as of the date hereof under the employee arrangements (the "Employee Arrangements") to which the Company or any of its Subsidiaries is presently a party which are listed in the Employee Arrangements Schedule and the Developments Schedule in accordance with the terms and conditions of such arrangements. In addition, from and after the Closing until the first anniversary of the Closing, subject to the remaining provisions of this Section 6.06, the Surviving Corporation shall not amend, modify, alter or terminate any severance or change of control agreements, policies or practices of the Company or its Subsidiaries, including the SBS Plan; provided that any such action after the first anniversary of the Closing shall not adversely affect the accrued or vested rights of any employees or other beneficiaries which shall have arisen under any severance or change of control agreements, policies or practices of the Company or its Subsidiaries, including the SBS Plan prior to such amendment, modification, alteration or termination. Parent shall cause the Company for a period of one year following the Effective Time, to continue to provide to employees of the Company and its Subsidiaries who are employed by the Surviving Corporation (excluding employees covered by collective bargaining agreements) broad-based employee benefit plans and Employee Arrangements which are in the aggregate no less favorable than those provided to such employees as of the date hereof provided that it is understood that the Surviving Corporation may alter, amend, modify and/or terminate specific benefit plans and/or arrangements (including Employee Arrangements) subject to the aggregate limitations set forth above. Subject to the foregoing, nothing in this Section shall be deemed to limit or otherwise affect the right of the Surviving Corporation to terminate employment or change the place of work, responsibilities, status or designation of any employee or group of employees as the Surviving Corporation may determine in the exercise of its business judgment and in compliance with applicable laws. Solely for purposes of eligibility and vesting under Employee Arrangements (including without limitation plans or programs of Parent and its affiliates after the Effective Time), and to the extent permitted by law, all service with the Company or any of its Subsidiaries or their predecessors prior to the Effective Time shall be treated as service with Parent and its affiliates (to the extent such service was recognized by the Company or any of its Subsidiaries for similar purposes under comparable plans before the Effective Time). SECTION 6.07 Indemnification. (a) Parent agrees that all rights to indemnification now existing in favor of any director or officer of the Company and its Subsidiaries (the "Indemnified Parties") as provided in their respective charters or by-laws or, in an agreement between an Indemnified Party and the Company or one of its Subsidiaries, shall survive the Merger and shall continue in full force and effect for a period of not less than six years from the Effective Time; provided that in the event any claim or claims are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until final disposition of any and all such claims. Parent agrees to cause the Surviving Corporation to honor all rights to indemnification referred to in the preceding sentence. Without limitation of the foregoing, in the event any such Indemnified Party is or becomes involved in any capacity in any action, proceeding or investigation in connection with any matter, including, without limitation, the transactions contemplated by this Agreement, occurring prior to, and including, the Effective Time, Parent will cause to be paid in accordance with the applicable charters, by-laws and agreements, as incurred such Indemnified Party's legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. The Surviving Corporation shall pay all reasonable expenses, including attorneys' fees, that may be incurred by any Indemnified Party in enforcing the indemnity and other obligations provided for in this Section 6.07 subject to the limitations of the GCL to the extent applicable. (b) Parent agrees that the Company, and from and after the Effective Time, the Surviving Corporation shall cause to be maintained in effect for not less than six years from the Effective Time for the benefit of all current and former directors and officers of the Company the current policies of the directors' and officers' liability insurance maintained by the Company; provided that the Surviving Corporation may substitute therefor other policies not less advantageous (other than to a de minimus extent) to the beneficiaries of the current policies and provided that such substitution shall not result in any gaps or lapses in coverage with respect to matters occurring prior to the Effective Time; and provided, further, that the Surviving Corporation shall not be required to pay an annual premium in excess of 300% of the last annual premium paid by the Company prior to the date hereof which is set forth in the Insurance Schedule and if the Surviving Corporation is unable to obtain the insurance required by this Section 6.07(b) it shall obtain as much comparable insurance as possible for an annual premium equal to such maximum amount. SECTION 6.08 Notification of Certain Matters. Parent and the Company shall promptly notify each other of (a) (i) it becoming aware of any fact or event which would be reasonably likely to demonstrate that any representation or warranty of any party hereto contained in this Agreement was or is untrue or inaccurate in any material respect as of the date of this Agreement or (ii) the occurrence or non-occurrence of any fact or event which would be reasonably likely to cause any material covenant, condition or agreement of any party hereto under this Agreement not to be complied with or satisfied in all material respects and (b) any failure of any party hereto to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder in any material respect; provided, however, that no such notification shall affect the representations or warranties of any party or the conditions to the obligations of any party hereunder. SECTION 6.09 No Solicitation; Termination Right. (a) The Company agrees that, during the term of this Agreement it shall not, and shall not authorize, support or encourage any of its Subsidiaries or any of its or its Subsidiaries' directors, officers, employees, agents or representatives, directly or indirectly, to solicit, initiate, encourage, facilitate or furnish or disclose non-public information in furtherance of, any inquiries or the making of any proposal with respect to any recapitalization, merger, consolidation or other business combination involving the Company, or acquisition of any capital stock (other than upon exercise of the Options which are outstanding as of the date hereof) or any portion of the assets (except for acquisition of assets in the ordinary course of business consistent with past practice) of the Company and its Subsidiaries, or any combination of the foregoing (a "Competing Transaction"), or negotiate, or otherwise engage in discussions with any person (other than Parent, the Purchaser or their respective directors, officers, employees, agents and representatives) for the purpose of facilitating any Competing Transaction or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by this Agreement; provided that the Company shall use its reasonable best efforts to ensure that none of its Subsidiaries and none of its or its Subsidiaries' directors, officers, employees, agents or representatives, directly or indirectly, undertakes any such actions, and, if the Board learns of any such action, the Company shall take reasonable steps to cause the party undertaking such action to cease such action immediately or shall immediately terminate the Company's and/or any Subsidiary's employment or other relationship with any such director, officer, employee, agent or representative that breaches this Section 6.09; provided further that prior to the purchase of the Common Shares by the Purchaser pursuant to the Offer, the Company may furnish information to, and negotiate or otherwise engage in discussions with, any party who makes a bona fide proposal regarding a Competing Transaction which was not solicited by the Company after the date of this Agreement and which does not violate any Standstill Agreement if and so long as the Board after consultation with its counsel determines in good faith that failing to consider and cooperate with such other party regarding such Competing Transaction would constitute a breach of the fiduciary duties of the Board to the Company's stockholders under applicable law, and, provided further, that in no event does the term "Competing Transaction" include a sale or other disposition of any of the assets specified on the Non-Coal Asset Schedule or that is otherwise specifically permitted hereunder. The Company shall and shall use its reasonable best efforts to cause its Subsidiaries, directors, officers, employees, agents and representatives immediately to cease all existing activities, discussions and negotiations with any parties conducted heretofore with respect to any Competing Transaction. The Company agrees that neither the Board of Directors nor any committee thereof will, during the period referenced in the first sentence of this subsection (a), (A) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent or the Purchase, the Board Recommendation, or (B) approve or recommend, or propose publicly to approve or recommend, any Competing Transaction. The foregoing notwithstanding, in the event that prior to the purchase of Common Shares by the Purchaser pursuant to the Offer the Board of Directors after consultation with its counsel determines in good faith that failure to do so will result in breach of the fiduciary duties of the Board to the Company's stockholders under applicable law, the Board of Directors may (subject to this and the following sentences) withdraw or modify the Board Recommendation, provided that it gives Parent three days' prior written notice of its intention to do so. Any such withdrawal or modification of the Board Recommendation shall not change the approval of the Board of Directors for purposes of causing any state takeover statute or other state law to be inapplicable to the transactions contemplated hereby, including the Offer, the Merger or the Tender Commitments. The Company shall immediately advise Parent in writing of the receipt, directly or indirectly, of any inquiries, discussions, negotiations, or proposals relating to a Competing Transaction, which becomes known to the Board during the term of this Agreement. The Company shall keep Parent fully apprised of the status and terms of any proposal relating to a Competing Transaction on a current basis. (b) If, prior to the purchase of Common Shares by the Purchaser pursuant to the Offer, the Board after consultation with its financial and legal advisors determines in good faith that any written proposal from a third party for a Competing Transaction received after the date hereof that was not solicited by the Company or any of its Subsidiaries or affiliates in violation of this Agreement (and that does not violate or breach any Standstill Agreement executed by such party with respect to the Company prior to the date of this Agreement) is more favorable to the stockholders of the Company from a financial point of view than the transactions contemplated by this Agreement (including any adjustment to the terms and conditions of such transaction proposed in writing by the Company in response to such Competing Transaction) and is in the best interest of the stockholders of the Company, the Company may terminate this Agreement at any time prior to the Offer Purchase Closing and enter into a letter of intent, agreement-in-principle, acquisition agreement or other similar agreement (each, an "Acquisition Agreement") with respect to such Competing Transaction provided that, the Company provides written notice of such termination to Parent at least three full business days prior to the effectiveness of such termination and, the Company delivers to Parent within five business days following such termination (A) by check or wire transfer of same day funds, (i) an amount equal to Parent's Costs (as defined in Section 8.02) as the same may have been estimated by Parent in good faith prior to the date of such delivery (subject to an adjustment payment between the parties upon Parent's definitive determination of such costs), but in any event not to exceed $10,000,000, and (ii) the amount of the Termination Fee as provided in Section 8.02 and (B) a written acknowledgment from the Company and the other party to the Competing Transaction that the Company and such other party have irrevocably waived any right to contest such payments. SECTION 6.10 Cooperation for Financing. The Company agrees that, during the term of this Agreement, it shall provide reasonable cooperation to the Purchaser to facilitate the Purchaser's efforts to obtain the financing contemplated by the Commitment Letters (including assisting the Purchaser in obtaining required consents) and provide all information reasonably requested by the Purchaser in connection with the Purchaser's efforts to satisfy the Offer Financing Condition. SECTION 6.11 Tender Commitments. The Company shall cause each of the Stockholders to execute a Tender Commitment. The Company shall not permit the amendment, modification, release under or otherwise lessen the obligations of the Stockholders under the Tender Commitments. The Company agrees to enforce fully and promptly all provisions of the Tender Commitments, including, without limitation, seeking specific performance of (or other equitable and legal remedies with respect to) each Stockholder's obligations under its Tender Commitment. ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER SECTION 7.01 Conditions. The respective obligations of Parent, the Purchaser and the Company to consummate the Merger are subject to the satisfaction, at or before the Effective Time, of each of the following conditions: (a) Purchase of Common Shares. The Purchaser shall have accepted for payment and paid for Common Shares pursuant to the Offer in accordance with the terms hereof; provided that this condition shall be deemed to have been satisfied with respect to Parent and the Purchaser if the Purchaser fails to accept for payment or pay for Common Shares pursuant to the Offer in violation of the terms of the Offer. (b) No Injunctions or Restraints; Illegality. No (i) order or preliminary or permanent injunction shall be entered in any action or proceeding before any court of competent jurisdiction or any statute, rule, regulation, legislation, or order shall be enacted, entered, enforced, promulgated, amended or issued by any United States legislative body, court, government or governmental, administrative or regulatory authority or agency (other than the waiting period provisions of the HSR Act) which shall remain in effect and which shall have the effect of (x) making illegal or restraining or prohibiting the making of the Offer, the acceptance for payment of, or payment for, the Common Shares by Parent, the Purchaser or any other affiliate of Parent, or the consummation of the Offer or the Merger or (y) imposing material limitations on the ability of the Purchaser effectively to acquire or hold or exercise full rights of ownership of the Common Shares, including, without limitation, the right to vote the Common Shares purchased by the Purchaser on all matters properly presented to the stockholders of the Company; provided, that Parent, to the extent provided in this Agreement, shall, if necessary to prevent the taking of such action, or the enactment, enforcement, promulgation, amendment, issuance or application of any statute, rule, regulation, legislation, judgment, order or injunction, offer to accept an order to divest such of the Company's or Parent's assets and businesses as may be necessary to forestall such injunction or order and to hold separate such assets and business pending such divestiture; (ii) proceeding brought by an administrative agency or commission or other domestic Governmental Entity seeking any of the foregoing shall be pending; or (iii) action or proceeding shall be commenced following the date of this Agreement and be pending before any court of competent jurisdiction which would have a Material Adverse Effect on the Company. ARTICLE VIII TERMINATION; AMENDMENTS; WAIVER SECTION 8.01 Termination. This Agreement may be terminated and the Merger contemplated hereby may be abandoned at any time prior to the Effective Time, notwithstanding approval thereof by the stockholders of the Company (with any termination by Parent also being an effective termination by the Purchaser): (a) By the mutual written consent of Parent and the Company; (b) By the Company if (i) the Purchaser fails to commence the Offer as provided in Section 1.01 hereof or, (ii) the Purchaser fails to purchase validly tendered Common Shares in violation of the terms of the Offer or this Agreement; (c) By Parent or the Company if the Offer is terminated or withdrawn pursuant to its terms without any Common Shares being purchased thereunder; provided, however, that neither Parent nor the Company may terminate this Agreement pursuant to this Section 8.01(c) if such party shall have materially breached this Agreement or, in the case of Parent, if it or the Purchaser is in material violation of the terms of the Offer. (d) By Parent or the Company if any court or other Governmental Entity shall have issued, enacted, entered, promulgated or enforced any order, judgment, decree, injunction, or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, judgment, decree, injunction, ruling or other action shall have become final and nonappealable; provided that the party seeking to terminate the Agreement shall have used its reasonable efforts to remove or lift such order, decree or ruling; (e) By Parent or the Company if the Offer Financing Conditions shall be impossible to satisfy by the end of the twentieth (20th) business day following commencement of the Offer and by the Parent or the Company if any other condition set forth in Annex I attached hereto shall be impossible to satisfy by the end of the thirtieth (30th) business day following commencement of the Offer unless such circumstance results from the failure of the terminating party to perform in any material respect its obligations under this Agreement, provided, however, that the Company may not terminate this Agreement pursuant to this Section 8.01(e) if Parent waives in writing the relevant condition (other than the Minimum Condition as defined in Annex I, which cannot be waived); (f) By Parent if prior to the Offer Purchase Closing the Board shall have withdrawn or modified in a manner adverse to Parent, or refrained from making the Board Recommendation, or shall have publicly disclosed its intention to change such recommendation, or shall have failed to reaffirm the Board Recommendation within five (5) days of receipt from Parent or the Purchaser of a request to so reaffirm the Board Recommendation, in each case except due to Parent or Purchaser's material breach of this Agreement or material violation of the terms of the Offer; (g) By the Company, pursuant to and in accordance with Section 6.09(b); (h) By the Company in the event of any breach of the covenants and/or representations and warranties of Parent and Purchaser contained in this Agreement which has a material adverse effect on the consummation of the transactions contemplated by this Agreement; or (i) By Parent, if any Stockholder who holds more than five percent of the Shares shall have breached any of his, her or its obligations under the Tender Commitment. SECTION 8.02 Effect of Termination; Fees and Expenses. (a) In the event of the termination of this Agreement pursuant to Section 8.01, this Agreement shall forthwith become void and have no effect, without any liability on the part of any party or its directors, officers or stockholders, other than the provisions of this Section 8.02 and the confidentiality provisions referenced in the first sentence of Section 6.02, which shall survive any such termination. Nothing contained in this Section 8.02 shall relieve any party from liability for any breach of this Agreement or the Confidentiality Agreement, and provided, further, however, that if it shall be judicially determined that termination of this Agreement was caused by an intentional breach of this Agreement, then, in addition to other remedies at law or equity for breach of this Agreement, the party so found to have intentionally breached this Agreement shall indemnify and hold harmless the other parties for their respective costs, fees and expenses of their counsel, accountants, financial advisors and other experts and advisors as well as fees and expenses incident to negotiation, preparation and execution of this Agreement and the transactions contemplated hereby ("Costs"). If this Agreement is terminated pursuant to Section 8.01(f) or (g), the Company will within five business days following any such termination pay to Parent in cash by wire transfer in immediately available funds to an account designated by Parent (i) in reimbursement for Parent's expenses an amount equal to the aggregate amount of Parent's reasonable documented Costs incurred in connection with pursuing the transactions contemplated by this Agreement, including, without limitation, legal, accounting and investment banking fees, up to but not in excess of $10,000,000 in the aggregate and (ii) a payment in an amount equal to $18,000,000 (the "Termination Fee"). Purchaser shall terminate the Offer as soon as practicable following termination of this Agreement for any reason. (b) The prevailing party in any legal action undertaken to enforce this Agreement or any provision hereof shall be entitled to recover from the other party the costs and expenses (including attorneys' and expert witness fees) incurred in connection with such action. SECTION 8.03 Amendment. Subject to Section 1.03(c), this Agreement and the Offer may be amended by the Company, Parent and the Purchaser at any time before or after any approval of this Agreement by the stockholders of the Company but, after any the purchase of shares pursuant to the Offer, no amendment shall be made which decreases the Merger Consideration or which materially adversely affects the rights of the Company's stockholders hereunder without the approval of such stockholders. This Agreement and the Offer may not be amended except by an instrument in writing signed on behalf of all the parties. SECTION 8.04 Extension; Waiver. Subject to Section 1.03(c), at any time prior to the Effective Time, the parties hereto may (i) extend the time for the performance of any of the obligations or other acts of any other party hereto, (ii) waive any inaccuracies in the representations and warranties contained herein by any other party or in any document, certificate or writing delivered pursuant hereto by any other party or (iii) waive compliance with any of the agreements of any other party or with any conditions to its own obligations. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. ARTICLE IX MISCELLANEOUS SECTION 9.01 Non-Survival of Representations and Warranties. The representations and warranties made in this Agreement shall not survive beyond the Effective Time. Notwithstanding the foregoing, the agreements set forth in Section 3.02, the last sentence of Section 6.02, Section 6.06 and Section 6.07 shall survive the Effective Time indefinitely (except to the extent a shorter period of time is explicitly specified therein). SECTION 9.02 Entire Agreement; Assignment. (a) This Agreement (including the documents and the instruments referred to herein) and the letter agreement dated March 6, 1998 between Credit Suisse First Boston Corporation and Addington Enterprises Inc. (the "Confidentiality Agreement"), constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof. (b) Neither this Agreement nor any of the rights, interests or obligations hereunder will be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other party; provided however that after the Effective Time Parent and/or the Purchaser may, without the consent of the Company, (i) assign their rights under this Agreement to any of their respective Affiliates, or (ii) collaterally assign their rights under this Agreement to the lender of Parent or the Purchaser. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. SECTION 9.03 Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, each of which shall remain in full force and effect. SECTION 9.04 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person, by overnight courier or facsimile to the respective parties as follows: If to Parent or the Purchaser: AEI Resources, Inc. 1500 North Big Run Road Ashland, Kentucky 41102 Attention: Corporate Secretary Telecopy: (606) 928-0450 With a copy to: Brown, Todd & Heyburn PLLC 27000 Lexington Financial Center 250 West Main Street Lexington, KY 40507-1749 Attention: Paul Sullivan Telecopy: (606) 231-0011 If to the Company: Zeigler Coal Holding Company 50 Jerome lane Fairview Heights, IL 62208 Attention: Brent L. Motchan, Esq. Fax: 618-394-2518 Phone: 618-394-2406 with a copy to: Kirkland & Ellis Citicorp Center 153 East 53rd Street New York, NY 10022-4675 Attention: Glen E. Hess, P.C. Fax: 212-446-4900 Phone: 212-446-4808 or to such other address as the person to whom notice is given may have previously furnished to the other in writing in the manner set forth above (provided that notice of any change of address shall be effective only upon receipt thereof). SECTION 9.05 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof or otherwise. SECTION 9.06 Descriptive Headings. The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. SECTION 9.07 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. SECTION 9.08 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and, except with respect to Sections 2.03(d), 3.01, 3.02 and 6.07 nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. SECTION 9.09 Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. ARTICLE X DEFINITIONS SECTION 10.01 Certain Definitions. As used in this Agreement: "Active Operating Properties and Reserves" means all property included in mining permits currently issued to the Company or any of its Subsidiaries or which will be issued prior to the Closing. "Acquisition Agreement" has the meaning given thereto in Section 6.09(b) hereof. "Affiliate", as applied to any person, shall mean any other person directly or indirectly controlling, controlled by, or under common control with, that person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" has the meaning given thereto in the preamble hereof. "Antitrust Laws" has the meaning given thereto in Section 6.04(b) hereof. "Board" has the meaning given thereto in the recitals hereof. "Board Recommendation" has the meaning given thereto in Section 1.02(a) hereof. "Certificates" has the meaning given thereto in Section 3.02 hereof. "Closing" has the meaning given thereto in Section 2.02 hereof. "Closing Date" has the meaning given thereto in Section 2.02 hereof. "Code" has the meaning given thereto in Section 4.17(a) hereof. "Commitment Letter" has the meaning given thereto in Section 5.05 hereof. "Common Share" and "Common Shares" have the meaning given thereto in the recitals hereof. "Company" has the meaning given thereto in the first paragraph hereof. "Company's Knowledge" and words of similar import shall mean actual knowledge of a particular fact being known by any of (i) the current serving directors of the Company, (ii) or any of the following officers of the Company: Chand B. Vyas, Douglas Blackburn, Frank Barkofske and Brent Motchan, (iii) with respect to labor and employment matters, David Young; (iv) with respect to information concerning any Subsidiary, division or business unit of the Company, the president or most senior executive of such Subsidiary, and (v) any person succeeding to the position currently of any of the persons indicated in clauses (ii), (iii) and (iv) above. "Company Representatives" has the meaning given thereto in Section 6.02 hereof. "Competing Transaction" has the meaning given thereto in Section 6.09(a) hereof. "Confidentiality Agreement" has the meaning given thereto in Section 9.02(a) hereof. "Consent" has the meaning given thereto in Section 4.05(b) hereof. "Costs" has the meaning given thereto in Section 8.02 hereof. "CSFB" has the meaning given thereto in Section 1.02(a) hereof. "December Balance Sheet" has the meaning given thereto in Section 4.06(b) hereof. "Disclosure Schedules" shall mean all of the separate schedules referred to in Article IV and all Supplemental Schedules taken together. "Dissenting Shares" has the meaning given thereto in Section 3.01 hereof. "Effective Time" has the meaning given thereto in Section 2.02 hereof. "Employee Arrangements" has the meaning given thereto in Section 6.06 hereof. "Environmental Mining and Safety Requirements" means all federal, state and local statutes, regulations, notices of violations, abatement orders, closure orders, ordinances, permits, judicial and administrative orders and determinations, and similar provisions having the force and effect of law, and all common law concerning public health and safety, worker health and safety, mine health or safety, surface and underground mining, mineral processing or transport, mine reclamation, pollution or protection of the environment, including without limitation all those relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, release, runoff, containment, control, or cleanup of any Hazardous Substances, Oils, Pollutants or Contaminants (as such terms as defined in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. 300.5), and any mining wastes or byproducts as the foregoing are enacted and in effect on or prior to the date hereof. "ERISA" has the meaning given thereto in Section 4.17(a) hereof. "Exchange Act" has the meaning given thereto in Section 4.05 (b) hereof. "Expiration Date" has the meaning given thereto in Section 1.01. "GAAP" has the meaning given thereto in Section 4.06(b) hereof. "GCL" has the same meaning given thereto in the recitals hereof. "Government Entity" has the meaning given thereto in Section 4.05(b) hereof. "HSR Act" has the meaning given thereto in Section 4.05(b) hereof. "Indemnified Parties" has the meaning given thereto in Section 6.07(a) hereof. "Information Memorandum" means that certain Offering Memorandum, dated February, 1998, prepared by CSFB regarding the Company and its Subsidiaries. "Intellectual Property" has the meaning given thereto in Section 4.13 hereof. "Joint Development Agreement" has the meaning given thereto in Section 6.01(j). "June Balance Sheet" has the meaning given thereto in Section 4.06(b). "Liens" means liens, security interests, options, rights of first refusal, easements, mortgages, charges, pledges, deeds of trust, rights-of-way, restrictions, encroachments, licenses, leases, permits, security agreements, or any other encumbrances, restrictions or limitations on the use of real or personal property, whether or not they constitute specific or floating charges. "March Balance Sheet" has the meaning given thereto in Section 4.06(b). "Material Adverse Effect on the Company" has the meaning given thereto in Section 4.01 hereof. "Material Contract" has the meaning given thereto in Section 4.12(a). "Merger" has the meaning given thereto in the recitals hereof. "Merger Consideration" has the meaning given thereto in Section 2.05 hereof. "Mining Permits" has the meaning given thereto in Section 4.14 hereof. "Multiemployer Plan" has the meaning given thereto in Section 4.17(f) hereof. "Non-Mining Assets" means the operations and business of the Company and its Subsidiaries and any assets related thereto that are described on the Non-Mining Assets Schedule attached hereto. "Offer" has the meaning given thereto in the recitals hereof. "Offer Documents" has the meaning given thereto in Section 1.01(a) hereof. "Offer Price" has the meaning given thereto in the recitals hereof. "Offer Purchase Closing" has the meaning given thereto in Section 1.01(a) hereof. "Offer to Purchase" has the meaning given thereto in Section 1.01(a) hereof. "Operating Facilities" means any real property rights owned, leased or otherwise controlled by the Company or any of its subsidiaries where the Company or any of its Subsidiaries has facilities currently used in the coal mining business including office and administrative buildings, mine openings, air shafts, preparation and processing plants, slurries and gob disposal areas, retention and drainage ponds, unfinished reclamation areas, coal terminals, and coal loading and storage facilities.. "Option" has the meaning given thereto in Section 1.04 hereof. "Option Plan" has the meaning given thereto in Section 1.04 hereof. "Other Filings" has the meaning given thereto in Section 4.07 hereof. "Other Real Property" means any real property rights owned, leased or otherwise controlled by the Company or any of its Subsidiaries other than "Active Operating Properties and Reserves" and "Operating Facilities." "Parent" has the meaning given thereto in the first paragraph hereof. "Parent Representatives" has the meaning given thereto in Section 6.02 hereof. "Paying Agent" has the meaning given thereto in Section 3.02 hereof. "Pension Plan" has the meaning given thereto in Section 4.17(a) hereof. "Permitted Encumbrances" has the meaning given thereto in Section 4.09 hereof. "Person" or "person" shall include individuals, corporations, partnerships, trusts, other entities and groups (which term shall include a "group" as such term is defined in Section 13(d)(3) of the Exchange Act ). "Permits" has the meaning given thereto in Section 4.15 hereof. "Plans" has the meaning given thereto in Section 4.17(a) hereof. "Proxy Statement" has the meaning given thereto in Section 2.08 (a)(ii) hereof. "Purchaser" has the meaning given thereto in the first paragraph hereof. "Release" has the meaning given thereto in Section 4.20(d) hereof. "SBS Plan" has the meaning given thereto in Section 1.04. "Schedule 14D-9" has the meaning given thereto in Section 1.02(a). "SEC" has the meaning given thereto in Section 1.01 hereof. "SEC Reports" has the meaning given thereto in Section 4.06(a) hereof. "SMCRA" has the meaning given thereto in Section 3.24 hereof. "Special Meeting" has the meaning given thereto in Section 2.08(a)(I) hereof. "Standstill Agreement" has the meaning given thereto to in Section 6.01(k). "Stockholder" means each or any of Kinman Limited Partnership, Michael K. Reilly, Chand B. Vyas, Roland E. Casati and John F. Manley, and such persons collectively are referred to as the "Stockholders." "Subsidiary" or Subsidiaries" has the meaning given thereto in Section 4.01 hereof. "Surviving Corporation" has the meaning given thereto in Section 2.01 hereof. "Taxes" mean any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code ss. 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest penalty, or addition thereto, whether disputed or not. "Tax Returns" means any return, declaration, report, estimate, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. "Tender Commitment" means each of those certain Support Agreements, dated the date hereof, by and between the Company and each of the Stockholders, and such agreements collectively are referred to as the "Tender Commitments." "Violation" has the meaning given thereto in Section 4.05(a) hereof. "Welfare Plans" has the meaning given thereto in Section 4.17(a) hereof. * * * * IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its respective officer thereunto duly authorized, all as of the day and year first above written. AEI RESOURCES, INC. By: /s/ Donald P. Brown ---------------------------------- Name: Donald P. Brown Title: President ZEIGLER ACQUISITION CORPORATION By: /s/ Donald P. Brown ---------------------------------- Name: Donald P. Brown Title: President ZEIGLER COAL HOLDING COMPANY By: /s/ Chand B. Vyas ---------------------------------- Name: Chand B. Vyas Title: President and Chief Executive Officer ANNEX I ------- Conditions to the Offer. Notwithstanding any other provisions of the Offer, the Purchaser shall not be required to accept for payment or pay for any tendered Common Shares, unless (I) there are validly tendered and not properly withdrawn prior to the Expiration Date that number of Common Shares which represent at least 90% of the total number of outstanding Common Shares on a fully diluted basis (excluding options tendered for cancellation under Section 1.04) on the date of purchase (the "Minimum Condition"), and (ii) the Purchaser shall have obtained, as contemplated by the Commitment Letters, on terms that are not less favorable to Parent and the Purchaser (or from such alternative financing sources on terms and conditions that are not less favorable to Parent and the Purchaser than those contemplated by the Commitment Letters), the funds necessary for the consummation of the transactions contemplated by the Merger Agreement, including the purchase of all of the Common Shares tendered in the Offer, payment of the Merger Consideration with respect to all Common Shares, all payments with respect to Options and all related costs and expenses (the "Offer Financing Condition"). Furthermore, notwithstanding any other provisions of the Offer, the Purchaser shall not be required to accept for payment and may, subject to the terms of the Merger Agreement, amend the Offer, postpone the acceptance for payment of or payment for tendered Common Shares or terminate the Offer and not accept for payment any Common Shares if at any time on or after the date of the Merger Agreement (unless otherwise indicated below) and before the time of payment for any Common Shares, any of the following events (each, an "Event") shall occur: (a) (i) The waiting period applicable to the Offer or the Merger pursuant to the provisions of the HSR Act and any applicable foreign or supranational Antitrust Laws shall fail to have expired or to have been terminated; or (ii) action by the Department of Justice or Federal Trade Commission or any foreign or supranational agency or entity charged with enforcement of Antitrust Laws that are applicable to the transactions contemplated hereby challenging or seeking to enjoin the consummation of the Offer or the Merger shall have been instituted and be pending; or (b) (i) Any order or preliminary or permanent injunction shall be entered in any action or proceeding before any court of competent jurisdiction or any statute, rule, regulation, legislation, or order shall be enacted, entered, enforced, promulgated, amended or issued by any United States legislative body, court, government or governmental, administrative or regulatory authority or agency (other than the waiting period provisions of the HSR Act) which shall remain in effect and which shall have the effect of (x) making illegal or restraining or prohibiting the making of the Offer, the acceptance for payment of, or payment for, the Common Shares by Parent, the Purchaser or any other affiliate of Parent, or the consummation of the Offer or the Merger or (y) imposing material limitations on the ability of the Purchaser effectively to acquire or hold or exercise full rights of ownership of the Common Shares, including, without limitation, the right to vote the Common Shares purchased by the Purchaser on all matters properly presented to the stockholders of the Company; provided, that Parent, to the extent provided in the Merger Agreement, shall, if necessary to prevent the taking of such action, or the enactment, enforcement, promulgation, amendment, issuance or application of any statute, rule, regulation, legislation, judgment, order or injunction, offer to accept an order to divest such of the Company's or Parent's assets and businesses as may be necessary to forestall such injunction or order and to hold separate such assets and business pending such divestiture; (ii) any proceeding brought by an administrative agency or commission or other domestic Governmental Entity seeking any of the foregoing shall be pending; or (iii) any action or proceeding shall be commenced following the date of the Merger Agreement and be pending before any court of competent jurisdiction which would have a Material Adverse Effect on the Company; or (c) The Company and the Purchaser and Parent shall have reached an agreement that the Offer or the Merger Agreement be terminated, or the Merger Agreement shall have been terminated in accordance with its terms; or (d) The Company or any of its Subsidiaries shall have breached one or more of its representations and warranties set forth in the Merger Agreement or failed to perform any of its obligations, covenants or agreements under the Merger Agreement and such breaches or failures to perform shall in the aggregate materially and adversely affect the ability of Parent to own or control the Company, its equity securities and its assets; or (e) On or after the date of the Merger Agreement, any Material Adverse Effect on the Company shall have occurred or be occurring; or (f) The representations and warranties set forth in Section 4.03 or Section 4.25 shall not be true and correct in all material respects. The Offer shall terminate if the Merger Agreement is terminated pursuant to its terms. Pursuant to the Merger Agreement, Parent and Purchaser have agreed to use their respective reasonable best efforts to obtain financing for the Offer and to cause all other conditions to be fulfilled. The foregoing conditions are for the benefit of Parent and the Purchaser and may be asserted by Parent or the Purchaser regardless of the circumstances giving rise to any such conditions and may be waived by Parent or the Purchaser in whole or in part at any time and from time to time in their reasonable discretion, in each case, subject to the terms of the Merger Agreement. The failure by Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such Right shall be deemed an ongoing right which may be asserted at any time and from time to time. The capitalized terms used in this Annex I shall have the meanings set forth in the Agreement to which it is annexed, except that the term "Merger Agreement" shall be deemed to refer to the Agreement to which this Annex I is appended. EX-99.(C)(2) 13 CONFIDENTIALITY AGREEMENT - ZEIGLER COAL Exhibit 99(c)(2) Mr. Larry Addington Addington Enterprises, Inc. 1500 North Big Run Road Ashland, KY 41102 March 6, 1998 Dear Mr. Addington: You (which term shall include your subsidiaries or other entities controlled by you) have requested information regarding Zeigler Coal Holding Company (which term, together with its subsidiaries or other controlled entities, the "Company", "us" or "we") in connection with your consideration of the possible acquisition of the Company (a "Possible Transaction"). In consideration of our furnishing you with the Evaluation Materials (as defined below) you agree as follows: CONFIDENTIALITY OF EVALUATION MATERIALS You will treat confidentially any information (whether written or oral) that either we or our financial advisor, CREDIT SUISSE FIRST BOSTON CORPORATION ("CSFB"), or our other representatives furnish to you in connection with a Possible Transaction involving the Company, together with analyses, compilations, studies or other documents prepared by you, or by your representatives (as defined below) which contain or otherwise reflect such information or your review of, or interest in the Company (collectively, the "Evaluation Materials"). You recognize and acknowledge the competitive value of the Evaluation Materials and the damage that could result to the Company if the Evaluation Materials were used or disclosed except as authorized by this Agreement. The term "Evaluation Materials" includes information furnished to you orally or in writing (whatever the form or storage medium) or gathered by inspection,and regardless of whether such information is specifically identified as "confidential." The term "Evaluation Materials" does not include information which (i) is or becomes generally available to the public other than as a result of a disclosure by you or your representatives, (ii) was or becomes available to you on a non-confidential BASIS from a source other than the Company or its representatives, provided that such source is not prohibited from disclosing such information to you by a contractual, legal or fiduciary obligation to the Company or its representatives, or (iii) is independently developed by you. USE OF EVALUATION MATERIALS You will not use any of the Evaluation Materials for any purpose other than the exclusive purpose of evaluating a Possible Transaction. You and your representatives will keep the Evaluation Materials completely confidential; PROVIDED, HOWEVER, that (i) any of such information may only be disclosed to those of your directors, officers, employees, agents, representatives (including attorneys, accountants and financial advisors), lenders and other sources of financing (collectively, "your representatives") who need to know such information for the purpose of evaluating a Possible Transaction between you and the Company (it being understood that your representatives shall be informed by you of the confidential nature of such information and shall be directed by you, and shall each expressly agree, to treat such information confidentially in accordance with this Agreement) and (ii) any other disclosure of such information may only be made if the Company consents by writing prior to any such disclosure. Without limiting the generosity of the foregoing, in the event that a Possible Transaction is not consummated neither you nor your representatives shall use any of the Evaluation Materials for any purpose. You will be responsible for any breach of this Agreement by your representatives. In the event that you or any of your representatives receive a request or are required (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose all or any part of the Evaluation Materials, you or your representatives as the case may be, agree to (i) immediately notify the Company of the existence terms and circumstances surrounding such a request, (ii) consult with the Company on the advisability of taking legally available steps to resist, or narrow such request and (iii) assist the Company in seeking a protective order or other appropriate remedy. In the event that such protective order or other remedy is not obtained or that the Company waives compliance with the provisions hereof, (i) you or your representatives, as the case may be, may disclose to any tribunal only that portion of the Evaluation Materials which you are advised by counsel is legally required to be disclosed, and shall exercise your best efforts to obtain assurance that confidential treatment will be accorded such Evaluation Materials and (ii) you shall not be liable for such disclosure unless disclosure to any such tribunal was caused by or resulted from a previous disclosure by you or your representatives not permitted by this Agreement. NON-DISCLOSURES The disclosure of your possible interest in purchasing the Company could have a material adverse effect on the Company's business if for any reason an agreement of purchase and sale is not consummated. Accordingly, unless required by applicable law, you agree that prior to the closing of a Possible Transaction, without the prior written consent of the Company, you will not, and you will direct your representatives not to, disclose to any person either the fact that discussions or negotiations are taking place concerning a possible transaction between you and the Company or any of the terms, conditions or other facts with respect to any such Possible Transaction, including the status thereof. The term "person" as used in this letter shall be broadly interpreted to include, without limitation, any corporation, the Company, governmental agency or body, stock exchange, partnership, association or individual. RETURN OF DOCUMENTS Upon the Company's request, you shall promptly deliver to the Company or destroy all written Evaluation Materials and any other written materials without retaining, in whole or in part, any copies, extracts or other reproductions (whatever the form or storage medium) of such material, and shall certify the destruction of such materials in writing to the Company. NO UNAUTHORIZED CONTACT OR SOLICITATION During the course of your evaluation, all inquiries and other communications are to be made directly to CSFB or employees or representatives of the Company specified by CSFB. Accordingly, you agree not to directly or indirectly contact or communicate with any executive or other employee of the Company concerning is Possible Transaction, or to seek any information in connection therewith from such person, without the express consent of CSFB. You also agree not to discuss with or offer to any third party an equity participation in a Possible Transaction or any other form of joint acquisition by you and such third party without CSFB's prior written consent. Without the Company's prior consent, neither your or anybody acting on your behalf shall directly or indirectly for a period of two years from the date hereof (a) induce or encourage any employee of Zeigler to leave employment with Zeigler or (b) employ or hire the services of any executive, managerial, supervisory, technical, or geological employee, of Zeigler, provided that you shall not be prohibited by clause (b) above from employing or hiring the services of any person who has to be an employee of Zeigler for a period of at least 180 days prior to any direct or indirect communication of any kind between such person and you relating to possible or actual employment of such Person or hiring such Person's services. STANDSTILL You agree that until two years from the date of this Agreement, you will not without the prior approval of the Board of Directors (I) acquire or make any proposal to acquire any securities or property of the Company, (ii) propose to enter into any merger or business combination involving the Company or purchase a material portion of the assets of the Company, (iii) make or participate in any Of to vote, or seek to advise or influence any person with respect to the voting of any securities of the Company, (iv) form, join or participate in a "group" (within the meaning of Section 13( )( ) of the Securities Exchange Act of 1834) with respect to any voting securities of the Company, (v) otherwise act or seek to control or influence the management Board of Directors or policies of the Company, (vi) disclose any intention, plan or arrangement inconsistent with the foregoing or (vii) take any action which might require the Company to make a public announcement regarding the possibility of a business combination or merger. Except as provided above, you also agree during such period not to request the Company (or its directors, officers, employees, agents or representatives) to amend or waive any provision of this paragraph. NO REPRESENTATION OR WARRANTY Although the Company and CSFB have endeavored to included in the Evaluation Materials Information known to them which they believe to be relevant for the purpose of your investigation, you acknowledge and agree that non of the Company, CSFB or any of the Company's other representatives or agents is making any representation or warranty, expressed or implied, as to the accuracy or completeness of the Evaluation Materials, and riches of the Company, CSFB or any of the Company's other representatives or agents, nor any of their respective officers, directors, employees, representatives, stockholders, owners, affiliates, advisors or agents, will have any liability to you of any other person resulting from the use of Evaluation Materials by you or any other person resulting from the use of Evaluation Materials by you or any of your representatives. Only those representatives or warranties that are made to a purchaser in a definitive sale agreement for the Company ("Sale Agreement") when, as, and if it is executed, and subject to such limitations and restrictions as may be specified in such Sale Agreement, will have any legal effect. You also acknowledge and agree that no contract or agreement providing for the sale of the Company shall be deemed to exist between you and the Company unless and until a Sale Agreement has been executed and delivered by you and each of the other parties thereof, and you hereby waive, in advance, any claims (including, without limitation, breach of contract) in connection with the sale of the Company unless and until a Sale Agreement has been executed and delivered by you and each of the other parties thereto. You also agree that unless and until a Sale Agreement between the Company and you with respect to the acquisition of the Company has been executed and delivered by you and each of the other parties thereto, there shall not be any legal obligation of any kind whatsoever with respect to any such transaction by virtue of this agreement or any other written or oral expression with respect to such transaction except, in the case of this Agreement, for the matters specifically agreed to herein. For purposes of this Agreement, the term "Sale Agreement" does not include an executed letter of or any other preliminary written agreement, nor does it include any oral acceptance of an offer or bid by you. You further understand and agree that (I) the Company and CSFB shall be free to conduct the process for the Company's sale as they in their sole discretion shall determine (including, without limitation, negotiating with any of the prospective buyers and entering into a Sale Agreement without prior notice to you or to any other person). (ii) Any procedures relating to such sale may be changed at any time without notice to you or any other person and (iii) you shall not have any claims whatsoever against the Company, CSFB or any of their respective directors, officers, employees, stockholders, owners, affiliates, agents or representatives arising out of or relating to the sale of the Company (either than those as against the parties to a Sale Agreement with you in accordance with the terms thereof). LEGAL REMEDY You understand and agree that money damages would not be a sufficient remedy for any breach of this Agreement by you or your representatives and that the Company will be entitled to specific performance and injunctive relief as remedies for any such breach. Such remedies shall not be deemed to be the exclusive remedies for a breach of this Agreement by you or your representatives but shall be in addition to all other remedies available at law or equity. OTHER This Agreement constitutes the entire agreement between the parties hereto regarding the subject matter hereof. This Agreement may be changed only by a written agreement signed by the parties herein or their authorized representatives. This Agreement shall be governed and construed in accordance with the laws of the State of New York, without regard to the conflicts of law principles thereof. If you are in agreement with the foregoing, please sign and return one copy of this letter, it being understood that all counterpart copies will constitute but one agreement with respect to the subject matter of this letter. Very truly yours, ZEIGLER GOAL HOLDING COMPANY By CREDIT SUISSE FIRST BOSTON CORPORATION, solely as the Company's representative By: Illegible ------------------------------------------- Name: Title: Accepted and agreed to as of my date hereof: ADDINGTON ENTERPRISES INC. By: /s/ Stephen Addington ------------------------------------------- Name: Stephen Addington EX-99.(C)(3) 14 SUPPORT AGREEMENT - KINMAN FORM OF SUPPORT AGREEMENT SUPPORT AGREEMENT (this "Agreement"), dated as of August 3, 1998, by and between Zeigler Coal Holding Company, a Delaware corporation (the "Company"), and Kinman Ltd. Partners ("Stockholder") . WHEREAS, concurrently herewith, the Company, Coal Ventures, Inc., a Delaware corporation ("Parent") and Zeigler Acquisition Corporation, a Delaware corporation and a subsidiary of Parent (the "Purchaser") are entering into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement"). Capitalized terms used but not defined herein have the meanings set forth in the Merger Agreement. Pursuant to the Merger Agreement, the Purchaser has agreed to make a tender offer on the terms and conditions set forth in the Merger Agreement (the "Offer") for any and all outstanding shares of common stock, par value $.01 per share (the "Shares"), of the Company, at $21.25 per share (the "Offer Price") net to the seller in cash, to be followed by a merger (the "Merger") of the Purchaser with and into the Company; WHEREAS, as of the date hereof, Stockholder is the beneficial owner of 5,801,738 Shares (the "Owned Shares"); and WHEREAS, in recognition of the benefits to be received by the Stockholder in connection with and in order to facilitate and support the transactions contemplated by the Merger Agreement and the Offer, the Stockholder and the Company have agreed, subject to the terms and conditions of this Agreement, that the Stockholder will, among other things, tender pursuant to the Offer the Owned Shares, together with any Shares acquired after the date hereof and prior to the termination of the Offer, whether upon the exercise of options, conversion of convertible securities or otherwise (collectively with the Owned Shares, the "Tender Shares"). NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Agreement to Tender. 1.1 Tender. Stockholder hereby agrees to tender (or cause the record owner of such shares to tender), pursuant to and in accordance with the terms of the Offer no later than three business days prior to the Expiration Date, the Tender Shares and to not withdraw such Tender Shares, except following termination of this Agreement pursuant to Section 2 hereof. Stockholder hereby acknowledges and agrees that Purchaser's obligation to accept for payment and pay for the Tender Shares is subject to the terms and conditions of the Offer. Stockholder hereby authorizes the Company to permit Parent and the Purchaser to publish and disclose in the Offer Documents and, if approval of the Company's stockholders is required under applicable law, the Proxy Statement (including all documents and schedules filed with the Securities and Exchange Commission) the Stockholder's identity and ownership of the Tender Shares and the nature of Stockholder's commitments, arrangements and understandings under this Agreement. 1.2 Voting. Stockholder hereby agrees that, during the time this Agreement is in effect, at any meeting of the stockholders of the Company, however called (or in any written consent in lieu thereof), Stockholder shall not vote the Tender Shares in favor of any Competing Transaction. 1.3 No Inconsistent Arrangements. Stockholder hereby covenants and agrees that, except as contemplated by this Agreement, it shall not (i) transfer (which term shall include, without limitation, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Tender Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Tender Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization in or with respect to the Tender Shares, other than those that are intended to facilitate or which do not impede or impair Stockholder's compliance with the terms of this Agreement, (iv) deposit the Tender Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Tender Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of his obligations hereunder or the transactions contemplated hereby or by the Merger Agreement. Notwithstanding the foregoing, Stockholder may distribute or otherwise transfer the Tender Shares to its general partner and limited partners or other transferee, if applicable, provided that each such person will take such share subject to the terms and conditions of this Agreement and agrees so in writing at the time of transfer. 1.4 No Solicitation. Stockholder hereby agrees that Stockholder shall not, and shall not permit or authorize any of his affiliates, representatives or agents to, directly or indirectly, solicit, participate in or initiate discussions or negotiations with, or provide or disclose any information to, any corporation, partnership, person or other entity or group (other than Parent, the Purchaser or any of their affiliates or representatives) concerning any Competing Transaction or enter into any agreement, arrangement or understanding requiring the Company to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by the Merger Agreement. Seller will promptly cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Competing Transaction. Any action taken by the Company or any member of the Board of Directors of the Company including, if applicable, Seller acting solely in such capacity, in accordance with the provisions of Section 6.09 of the Merger Agreement shall be deemed not to violate this Section 1.4. 1.5 Reasonable Efforts. Subject to the terms and conditions of this Agreement, Stockholder hereby agrees to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to tender the Tender Shares as contemplated by this Agreement. 1.6 Waiver of Appraisal Rights. Stockholder hereby waives any rights of appraisal or rights to dissent from the Merger that he may have. 2. Termination. This Agreement and Stockholder's obligation to tender and vote the Tender Shares as provided herein shall terminate on the Termination Date. As used herein, the term "Termination Date" means the first to occur of (a) the Effective Time, (b) contemporaneous with the termination of the Merger Agreement, (c) upon a change of the Board Recommendation that would give Parent the right to terminate the Merger Agreement, (d) termination or withdrawal of the Offer by Parent or the Purchaser, (e) written notice of termination of this Agreement by the Company to Stockholder, and (f) Purchaser's purchase of the Tender Shares pursuant to the Offer. Nothing contained in this Article 2 shall relieve any party from liability for any breach of this Agreement. 3. Representation and Warranties. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer Tender Shares and that, when the same are accepted for payment and paid for by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges, claims and encumbrances and the same will not be subject to any adverse claim. In addition, to the extent that this Agreement is not terminated the undersigned shall promptly remit and transfer to the Depositary (as defined in the Offer Documents) for the account of the Purchaser the whole of any non-cash dividend, distribution or right issued to the undersigned on or after August [3], 1998, in respect of the Owned Shares, accompanied by appropriate documentation of transfer. 4. Further Assurances. From time to time, at the Company's request and expense and without further consideration, Stockholder shall execute and deliver such additional documents and take all such further action as may be reasonably necessary to consummate and make effective the transactions contemplated by Section 1 of this Agreement. 5. Miscellaneous. 5.1 Non-Survival. The representations and warranties made herein shall terminate on the Termination Date. 5.2 Entire Agreement; Assignment. This Agreement (i) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and (ii) shall not be assigned by operation of law or otherwise. 5.3 Amendments. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. 5.4 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given by hand delivery, telegram, telex or telecopy or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to (i) the Stockholder at the most recent address of the Stockholder shown on the records of the Company and (ii) the Company at 50 Jerome Lane, Fairview Heights, Illinois 62208, telecopy # 618-394-2411, Attention: General Counsel, with a copy to Kirkland & Ellis, 153 East 53rd Street, New York, New York 10022, telecopy # 212-446-4900, Attention: Glen E. Hess, P.C., or, in any case, to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 5.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 5.6 Specific Performance. Stockholder recognizes and acknowledges that a breach by him of any covenants or agreements contained in this Agreement will cause the Company to sustain damages for which it would not have an adequate remedy at law for money damages, and therefore Stockholder agrees that in the event of any such breach the Company shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 5.7 Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original, but both of which shall constitute one and the same Agreement. 5.8 Descriptive Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 5.9 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. 5.10 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and, other than as specifically set forth below, nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Notwithstanding the foregoing, the Company and Stockholder hereby agree that (i) neither of them shall amend, modify, supplement, terminate or in any other manner change their respective rights and obligations hereunder in any manner that will adversely effect the consummation of the Offer by Purchaser, (ii) that Parent and/or Purchaser may, in the event of a breach of this Agreement by Stockholder, require the Company to exercise its rights hereunder in order to obtain compliance herewith by the Stockholder, and (iii) to the extent the Company does not comply with any demand by Parent and/or Purchaser as contemplated by clause (ii) above, Parent and/or Purchaser will have the right to seek damages from the Company for the Company's failure to take the action contemplated by clause (ii) above. * * * * * * IN WITNESS WHEREOF, the Company and Stockholder have caused this Agreement to be duly executed as of the day and year first above written. ZEIGLER COAL HOLDING COMPANY By: /s/ Chand B. Vyas -------------------------- Name: Chand B. Vyas Title: President and CEO Kinman Ltd. Partners by: John F. Manley, General Partner ------------------------------ Print Name Kinman Ltd. Partners NUMBER OF SHARES OWNED 5,801,738 ---------- EX-99.(C)(4) 15 SUPPORT AGREEMENT - MICHAEL K. REILLY Exhibit 99(c)(4) FORM OF SUPPORT AGREEMENT SUPPORT AGREEMENT (this "Agreement"), dated as of August 3, 1998, by and between Zeigler Coal Holding Company, a Delaware corporation (the "Company"), and Michael K. Reilly ("Stockholder") . WHEREAS, concurrently herewith, the Company, Coal Ventures, Inc., a Delaware corporation ("Parent") and Zeigler Acquisition Corporation, a Delaware corporation and a subsidiary of Parent (the "Purchaser") are entering into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement"). Capitalized terms used but not defined herein have the meanings set forth in the Merger Agreement. Pursuant to the Merger Agreement, the Purchaser has agreed to make a tender offer on the terms and conditions set forth in the Merger Agreement (the "Offer") for any and all outstanding shares of common stock, par value $.01 per share (the "Shares"), of the Company, at $21.25 per share (the "Offer Price") net to the seller in cash, to be followed by a merger (the "Merger") of the Purchaser with and into the Company; WHEREAS, as of the date hereof, Stockholder is the beneficial owner of 1,254,350 Shares (the "Owned Shares"); and WHEREAS, in recognition of the benefits to be received by the Stockholder in connection with and in order to facilitate and support the transactions contemplated by the Merger Agreement and the Offer, the Stockholder and the Company have agreed, subject to the terms and conditions of this Agreement, that the Stockholder will, among other things, tender pursuant to the Offer the Owned Shares, together with any Shares acquired after the date hereof and prior to the termination of the Offer, whether upon the exercise of options, conversion of convertible securities or otherwise (collectively with the Owned Shares, the "Tender Shares"). NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Agreement to Tender. 1.1 Tender. Stockholder hereby agrees to tender (or cause the record owner of such shares to tender), pursuant to and in accordance with the terms of the Offer no later than three business days prior to the Expiration Date, the Tender Shares and to not withdraw such Tender Shares, except following termination of this Agreement pursuant to Section 2 hereof. Stockholder hereby acknowledges and agrees that Purchaser's obligation to accept for payment and pay for the Tender Shares is subject to the terms and conditions of the Offer. Stockholder hereby authorizes the Company to permit Parent and the Purchaser to publish and disclose in the Offer Documents and, if approval of the Company's stockholders is required under applicable law, the Proxy Statement (including all documents and schedules filed with the Securities and Exchange Commission) the Stockholder's identity and ownership of the Tender Shares and the nature of Stockholder's commitments, arrangements and understandings under this Agreement. 1.2 Voting. Stockholder hereby agrees that, during the time this Agreement is in effect, at any meeting of the stockholders of the Company, however called (or in any written consent in lieu thereof), Stockholder shall not vote the Tender Shares in favor of any Competing Transaction. 1.3 No Inconsistent Arrangements. Stockholder hereby covenants and agrees that, except as contemplated by this Agreement, it shall not (i) transfer (which term shall include, without limitation, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Tender Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Tender Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization in or with respect to the Tender Shares, other than those that are intended to facilitate or which do not impede or impair Stockholder's compliance with the terms of this Agreement, (iv) deposit the Tender Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Tender Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of his obligations hereunder or the transactions contemplated hereby or by the Merger Agreement. Notwithstanding the foregoing, Stockholder may distribute or otherwise transfer the Tender Shares to its general partner and limited partners or other transferee, if applicable, provided that each such person will take such share subject to the terms and conditions of this Agreement and agrees so in writing at the time of transfer. 1.4 No Solicitation. Stockholder hereby agrees that Stockholder shall not, and shall not permit or authorize any of his affiliates, representatives or agents to, directly or indirectly, solicit, participate in or initiate discussions or negotiations with, or provide or disclose any information to, any corporation, partnership, person or other entity or group (other than Parent, the Purchaser or any of their affiliates or representatives) concerning any Competing Transaction or enter into any agreement, arrangement or understanding requiring the Company to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by the Merger Agreement. Seller will promptly cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Competing Transaction. Any action taken by the Company or any member of the Board of Directors of the Company including, if applicable, Seller acting solely in such capacity, in accordance with the provisions of Section 6.09 of the Merger Agreement shall be deemed not to violate this Section 1.4. 1.5 Reasonable Efforts. Subject to the terms and conditions of this Agreement, Stockholder hereby agrees to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to tender the Tender Shares as contemplated by this Agreement. 1.6 Waiver of Appraisal Rights. Stockholder hereby waives any rights of appraisal or rights to dissent from the Merger that he may have. 2. Termination. This Agreement and Stockholder's obligation to tender and vote the Tender Shares as provided herein shall terminate on the Termination Date. As used herein, the term "Termination Date" means the first to occur of (a) the Effective Time, (b) contemporaneous with the termination of the Merger Agreement, (c) upon a change of the Board Recommendation that would give Parent the right to terminate the Merger Agreement, (d) termination or withdrawal of the Offer by Parent or the Purchaser, (e) written notice of termination of this Agreement by the Company to Stockholder, and (f) Purchaser's purchase of the Tender Shares pursuant to the Offer. Nothing contained in this Article 2 shall relieve any party from liability for any breach of this Agreement. 3. Representation and Warranties. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer Tender Shares and that, when the same are accepted for payment and paid for by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges, claims and encumbrances and the same will not be subject to any adverse claim. In addition, to the extent that this Agreement is not terminated the undersigned shall promptly remit and transfer to the Depositary (as defined in the Offer Documents) for the account of the Purchaser the whole of any non-cash dividend, distribution or right issued to the undersigned on or after August [3], 1998, in respect of the Owned Shares, accompanied by appropriate documentation of transfer. 4. Further Assurances. From time to time, at the Company's request and expense and without further consideration, Stockholder shall execute and deliver such additional documents and take all such further action as may be reasonably necessary to consummate and make effective the transactions contemplated by Section 1 of this Agreement. 5. Miscellaneous. 5.1 Non-Survival. The representations and warranties made herein shall terminate on the Termination Date. 5.2 Entire Agreement; Assignment. This Agreement (i) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and (ii) shall not be assigned by operation of law or otherwise. 5.3 Amendments. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. 5.4 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given by hand delivery, telegram, telex or telecopy or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to (i) the Stockholder at the most recent address of the Stockholder shown on the records of the Company and (ii) the Company at 50 Jerome Lane, Fairview Heights, Illinois 62208, telecopy # 618-394-2411, Attention: General Counsel, with a copy to Kirkland & Ellis, 153 East 53rd Street, New York, New York 10022, telecopy # 212-446-4900, Attention: Glen E. Hess, P.C., or, in any case, to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 5.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 5.6 Specific Performance. Stockholder recognizes and acknowledges that a breach by him of any covenants or agreements contained in this Agreement will cause the Company to sustain damages for which it would not have an adequate remedy at law for money damages, and therefore Stockholder agrees that in the event of any such breach the Company shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 5.7 Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original, but both of which shall constitute one and the same Agreement. 5.8 Descriptive Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 5.9 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. 5.10 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and, other than as specifically set forth below, nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Notwithstanding the foregoing, the Company and Stockholder hereby agree that (i) neither of them shall amend, modify, supplement, terminate or in any other manner change their respective rights and obligations hereunder in any manner that will adversely effect the consummation of the Offer by Purchaser, (ii) that Parent and/or Purchaser may, in the event of a breach of this Agreement by Stockholder, require the Company to exercise its rights hereunder in order to obtain compliance herewith by the Stockholder, and (iii) to the extent the Company does not comply with any demand by Parent and/or Purchaser as contemplated by clause (ii) above, Parent and/or Purchaser will have the right to seek damages from the Company for the Company's failure to take the action contemplated by clause (ii) above. * * * * * * IN WITNESS WHEREOF, the Company and Stockholder have caused this Agreement to be duly executed as of the day and year first above written. ZEIGLER COAL HOLDING COMPANY By: /s/ Chand B. Vyas -------------------------- Name: Chand B. Vyas Title: President and CEO /s/ Michael K. Reilly ------------------------------ Print Name Michael K. Reilly NUMBER OF SHARES OWNED 1,254,350 ---------- EX-99.(C)(5) 16 SUPPORT AGREEMENT - CHAND B. VYAS Exhibit 99(c)(5) FORM OF SUPPORT AGREEMENT SUPPORT AGREEMENT (this "Agreement"), dated as of August 3, 1998, by and between Zeigler Coal Holding Company, a Delaware corporation (the "Company"), and Chand B. Vyas ("Stockholder") . WHEREAS, concurrently herewith, the Company, Coal Ventures, Inc., a Delaware corporation ("Parent") and Zeigler Acquisition Corporation, a Delaware corporation and a subsidiary of Parent (the "Purchaser") are entering into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement"). Capitalized terms used but not defined herein have the meanings set forth in the Merger Agreement. Pursuant to the Merger Agreement, the Purchaser has agreed to make a tender offer on the terms and conditions set forth in the Merger Agreement (the "Offer") for any and all outstanding shares of common stock, par value $.01 per share (the "Shares"), of the Company, at $21.25 per share (the "Offer Price") net to the seller in cash, to be followed by a merger (the "Merger") of the Purchaser with and into the Company; WHEREAS, as of the date hereof, Stockholder is the beneficial owner of 639,920 Shares (the "Owned Shares"); and WHEREAS, in recognition of the benefits to be received by the Stockholder in connection with and in order to facilitate and support the transactions contemplated by the Merger Agreement and the Offer, the Stockholder and the Company have agreed, subject to the terms and conditions of this Agreement, that the Stockholder will, among other things, tender pursuant to the Offer the Owned Shares, together with any Shares acquired after the date hereof and prior to the termination of the Offer, whether upon the exercise of options, conversion of convertible securities or otherwise (collectively with the Owned Shares, the "Tender Shares"). NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Agreement to Tender. 1.1 Tender. Stockholder hereby agrees to tender (or cause the record owner of such shares to tender), pursuant to and in accordance with the terms of the Offer no later than three business days prior to the Expiration Date, the Tender Shares and to not withdraw such Tender Shares, except following termination of this Agreement pursuant to Section 2 hereof. Stockholder hereby acknowledges and agrees that Purchaser's obligation to accept for payment and pay for the Tender Shares is subject to the terms and conditions of the Offer. Stockholder hereby authorizes the Company to permit Parent and the Purchaser to publish and disclose in the Offer Documents and, if approval of the Company's stockholders is required under applicable law, the Proxy Statement (including all documents and schedules filed with the Securities and Exchange Commission) the Stockholder's identity and ownership of the Tender Shares and the nature of Stockholder's commitments, arrangements and understandings under this Agreement. 1.2 Voting. Stockholder hereby agrees that, during the time this Agreement is in effect, at any meeting of the stockholders of the Company, however called (or in any written consent in lieu thereof), Stockholder shall not vote the Tender Shares in favor of any Competing Transaction. 1.3 No Inconsistent Arrangements. Stockholder hereby covenants and agrees that, except as contemplated by this Agreement, it shall not (i) transfer (which term shall include, without limitation, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Tender Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Tender Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization in or with respect to the Tender Shares, other than those that are intended to facilitate or which do not impede or impair Stockholder's compliance with the terms of this Agreement, (iv) deposit the Tender Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Tender Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of his obligations hereunder or the transactions contemplated hereby or by the Merger Agreement. Notwithstanding the foregoing, Stockholder may distribute or otherwise transfer the Tender Shares to its general partner and limited partners or other transferee, if applicable, provided that each such person will take such share subject to the terms and conditions of this Agreement and agrees so in writing at the time of transfer. 1.4 No Solicitation. Stockholder hereby agrees that Stockholder shall not, and shall not permit or authorize any of his affiliates, representatives or agents to, directly or indirectly, solicit, participate in or initiate discussions or negotiations with, or provide or disclose any information to, any corporation, partnership, person or other entity or group (other than Parent, the Purchaser or any of their affiliates or representatives) concerning any Competing Transaction or enter into any agreement, arrangement or understanding requiring the Company to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by the Merger Agreement. Seller will promptly cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Competing Transaction. Any action taken by the Company or any member of the Board of Directors of the Company including, if applicable, Seller acting solely in such capacity, in accordance with the provisions of Section 6.09 of the Merger Agreement shall be deemed not to violate this Section 1.4. 1.5 Reasonable Efforts. Subject to the terms and conditions of this Agreement, Stockholder hereby agrees to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to tender the Tender Shares as contemplated by this Agreement. 1.6 Waiver of Appraisal Rights. Stockholder hereby waives any rights of appraisal or rights to dissent from the Merger that he may have. 2. Termination. This Agreement and Stockholder's obligation to tender and vote the Tender Shares as provided herein shall terminate on the Termination Date. As used herein, the term "Termination Date" means the first to occur of (a) the Effective Time, (b) contemporaneous with the termination of the Merger Agreement, (c) upon a change of the Board Recommendation that would give Parent the right to terminate the Merger Agreement, (d) termination or withdrawal of the Offer by Parent or the Purchaser, (e) written notice of termination of this Agreement by the Company to Stockholder, and (f) Purchaser's purchase of the Tender Shares pursuant to the Offer. Nothing contained in this Article 2 shall relieve any party from liability for any breach of this Agreement. 3. Representation and Warranties. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer Tender Shares and that, when the same are accepted for payment and paid for by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges, claims and encumbrances and the same will not be subject to any adverse claim. In addition, to the extent that this Agreement is not terminated the undersigned shall promptly remit and transfer to the Depositary (as defined in the Offer Documents) for the account of the Purchaser the whole of any non-cash dividend, distribution or right issued to the undersigned on or after August [3], 1998, in respect of the Owned Shares, accompanied by appropriate documentation of transfer. 4. Further Assurances. From time to time, at the Company's request and expense and without further consideration, Stockholder shall execute and deliver such additional documents and take all such further action as may be reasonably necessary to consummate and make effective the transactions contemplated by Section 1 of this Agreement. 5. Miscellaneous. 5.1 Non-Survival. The representations and warranties made herein shall terminate on the Termination Date. 5.2 Entire Agreement; Assignment. This Agreement (i) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and (ii) shall not be assigned by operation of law or otherwise. 5.3 Amendments. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. 5.4 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given by hand delivery, telegram, telex or telecopy or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to (i) the Stockholder at the most recent address of the Stockholder shown on the records of the Company and (ii) the Company at 50 Jerome Lane, Fairview Heights, Illinois 62208, telecopy # 618-394-2411, Attention: General Counsel, with a copy to Kirkland & Ellis, 153 East 53rd Street, New York, New York 10022, telecopy # 212-446-4900, Attention: Glen E. Hess, P.C., or, in any case, to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 5.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 5.6 Specific Performance. Stockholder recognizes and acknowledges that a breach by him of any covenants or agreements contained in this Agreement will cause the Company to sustain damages for which it would not have an adequate remedy at law for money damages, and therefore Stockholder agrees that in the event of any such breach the Company shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 5.7 Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original, but both of which shall constitute one and the same Agreement. 5.8 Descriptive Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 5.9 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. 5.10 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and, other than as specifically set forth below, nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Notwithstanding the foregoing, the Company and Stockholder hereby agree that (i) neither of them shall amend, modify, supplement, terminate or in any other manner change their respective rights and obligations hereunder in any manner that will adversely effect the consummation of the Offer by Purchaser, (ii) that Parent and/or Purchaser may, in the event of a breach of this Agreement by Stockholder, require the Company to exercise its rights hereunder in order to obtain compliance herewith by the Stockholder, and (iii) to the extent the Company does not comply with any demand by Parent and/or Purchaser as contemplated by clause (ii) above, Parent and/or Purchaser will have the right to seek damages from the Company for the Company's failure to take the action contemplated by clause (ii) above. * * * * * * IN WITNESS WHEREOF, the Company and Stockholder have caused this Agreement to be duly executed as of the day and year first above written. ZEIGLER COAL HOLDING COMPANY By: /s/ Chand B. Vyas -------------------------- Name: Chand B. Vyas Title: President and CEO /s/ Chand B. Vyas ------------------------------ Print Name Chand B. Vyas NUMBER OF SHARES OWNED 639,920 --------- EX-99.(C)(6) 17 SUPPORT AGREEMENT - ROLAND E. CASATI Exhibit 99(c)(6) FORM OF SUPPORT AGREEMENT SUPPORT AGREEMENT (this "Agreement"), dated as of August 3, 1998, by and between Zeigler Coal Holding Company, a Delaware corporation (the "Company"), and Roland E. Casati ("Stockholder") . WHEREAS, concurrently herewith, the Company, Coal Ventures, Inc., a Delaware corporation ("Parent") and Zeigler Acquisition Corporation, a Delaware corporation and a subsidiary of Parent (the "Purchaser") are entering into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement"). Capitalized terms used but not defined herein have the meanings set forth in the Merger Agreement. Pursuant to the Merger Agreement, the Purchaser has agreed to make a tender offer on the terms and conditions set forth in the Merger Agreement (the "Offer") for any and all outstanding shares of common stock, par value $.01 per share (the "Shares"), of the Company, at $21.25 per share (the "Offer Price") net to the seller in cash, to be followed by a merger (the "Merger") of the Purchaser with and into the Company; WHEREAS, as of the date hereof, Stockholder is the beneficial owner of 2,176,000 Shares (the "Owned Shares"); and WHEREAS, in recognition of the benefits to be received by the Stockholder in connection with and in order to facilitate and support the transactions contemplated by the Merger Agreement and the Offer, the Stockholder and the Company have agreed, subject to the terms and conditions of this Agreement, that the Stockholder will, among other things, tender pursuant to the Offer the Owned Shares, together with any Shares acquired after the date hereof and prior to the termination of the Offer, whether upon the exercise of options, conversion of convertible securities or otherwise (collectively with the Owned Shares, the "Tender Shares"). NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Agreement to Tender. 1.1 Tender. Stockholder hereby agrees to tender (or cause the record owner of such shares to tender), pursuant to and in accordance with the terms of the Offer no later than three business days prior to the Expiration Date, the Tender Shares and to not withdraw such Tender Shares, except following termination of this Agreement pursuant to Section 2 hereof. Stockholder hereby acknowledges and agrees that Purchaser's obligation to accept for payment and pay for the Tender Shares is subject to the terms and conditions of the Offer. Stockholder hereby authorizes the Company to permit Parent and the Purchaser to publish and disclose in the Offer Documents and, if approval of the Company's stockholders is required under applicable law, the Proxy Statement (including all documents and schedules filed with the Securities and Exchange Commission) the Stockholder's identity and ownership of the Tender Shares and the nature of Stockholder's commitments, arrangements and understandings under this Agreement. 1.2 Voting. Stockholder hereby agrees that, during the time this Agreement is in effect, at any meeting of the stockholders of the Company, however called (or in any written consent in lieu thereof), Stockholder shall not vote the Tender Shares in favor of any Competing Transaction. 1.3 No Inconsistent Arrangements. Stockholder hereby covenants and agrees that, except as contemplated by this Agreement, it shall not (i) transfer (which term shall include, without limitation, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Tender Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Tender Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization in or with respect to the Tender Shares, other than those that are intended to facilitate or which do not impede or impair Stockholder's compliance with the terms of this Agreement, (iv) deposit the Tender Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Tender Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of his obligations hereunder or the transactions contemplated hereby or by the Merger Agreement. Notwithstanding the foregoing, Stockholder may distribute or otherwise transfer the Tender Shares to its general partner and limited partners or other transferee, if applicable, provided that each such person will take such share subject to the terms and conditions of this Agreement and agrees so in writing at the time of transfer. 1.4 No Solicitation. Stockholder hereby agrees that Stockholder shall not, and shall not permit or authorize any of his affiliates, representatives or agents to, directly or indirectly, solicit, participate in or initiate discussions or negotiations with, or provide or disclose any information to, any corporation, partnership, person or other entity or group (other than Parent, the Purchaser or any of their affiliates or representatives) concerning any Competing Transaction or enter into any agreement, arrangement or understanding requiring the Company to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by the Merger Agreement. Seller will promptly cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Competing Transaction. Any action taken by the Company or any member of the Board of Directors of the Company including, if applicable, Seller acting solely in such capacity, in accordance with the provisions of Section 6.09 of the Merger Agreement shall be deemed not to violate this Section 1.4. 1.5 Reasonable Efforts. Subject to the terms and conditions of this Agreement, Stockholder hereby agrees to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to tender the Tender Shares as contemplated by this Agreement. 1.6 Waiver of Appraisal Rights. Stockholder hereby waives any rights of appraisal or rights to dissent from the Merger that he may have. 2. Termination. This Agreement and Stockholder's obligation to tender and vote the Tender Shares as provided herein shall terminate on the Termination Date. As used herein, the term "Termination Date" means the first to occur of (a) the Effective Time, (b) contemporaneous with the termination of the Merger Agreement, (c) upon a change of the Board Recommendation that would give Parent the right to terminate the Merger Agreement, (d) termination or withdrawal of the Offer by Parent or the Purchaser, (e) written notice of termination of this Agreement by the Company to Stockholder, and (f) Purchaser's purchase of the Tender Shares pursuant to the Offer. Nothing contained in this Article 2 shall relieve any party from liability for any breach of this Agreement. 3. Representation and Warranties. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer Tender Shares and that, when the same are accepted for payment and paid for by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, charges, claims and encumbrances and the same will not be subject to any adverse claim. In addition, to the extent that this Agreement is not terminated the undersigned shall promptly remit and transfer to the Depositary (as defined in the Offer Documents) for the account of the Purchaser the whole of any non-cash dividend, distribution or right issued to the undersigned on or after August [3], 1998, in respect of the Owned Shares, accompanied by appropriate documentation of transfer. 4. Further Assurances. From time to time, at the Company's request and expense and without further consideration, Stockholder shall execute and deliver such additional documents and take all such further action as may be reasonably necessary to consummate and make effective the transactions contemplated by Section 1 of this Agreement. 5. Miscellaneous. 5.1 Non-Survival. The representations and warranties made herein shall terminate on the Termination Date. 5.2 Entire Agreement; Assignment. This Agreement (i) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and (ii) shall not be assigned by operation of law or otherwise. 5.3 Amendments. This Agreement may not be modified, amended, altered or supplemented, except upon the execution and delivery of a written agreement executed by the parties hereto. 5.4 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given by hand delivery, telegram, telex or telecopy or by any courier service, such as Federal Express, providing proof of delivery. All communications hereunder shall be delivered to (i) the Stockholder at the most recent address of the Stockholder shown on the records of the Company and (ii) the Company at 50 Jerome Lane, Fairview Heights, Illinois 62208, telecopy # 618-394-2411, Attention: General Counsel, with a copy to Kirkland & Ellis, 153 East 53rd Street, New York, New York 10022, telecopy # 212-446-4900, Attention: Glen E. Hess, P.C., or, in any case, to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. 5.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 5.6 Specific Performance. Stockholder recognizes and acknowledges that a breach by him of any covenants or agreements contained in this Agreement will cause the Company to sustain damages for which it would not have an adequate remedy at law for money damages, and therefore Stockholder agrees that in the event of any such breach the Company shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 5.7 Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original, but both of which shall constitute one and the same Agreement. 5.8 Descriptive Headings. The descriptive headings used herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 5.9 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein. 5.10 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and, other than as specifically set forth below, nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Notwithstanding the foregoing, the Company and Stockholder hereby agree that (i) neither of them shall amend, modify, supplement, terminate or in any other manner change their respective rights and obligations hereunder in any manner that will adversely effect the consummation of the Offer by Purchaser, (ii) that Parent and/or Purchaser may, in the event of a breach of this Agreement by Stockholder, require the Company to exercise its rights hereunder in order to obtain compliance herewith by the Stockholder, and (iii) to the extent the Company does not comply with any demand by Parent and/or Purchaser as contemplated by clause (ii) above, Parent and/or Purchaser will have the right to seek damages from the Company for the Company's failure to take the action contemplated by clause (ii) above. * * * * * * IN WITNESS WHEREOF, the Company and Stockholder have caused this Agreement to be duly executed as of the day and year first above written. ZEIGLER COAL HOLDING COMPANY By: /s/ Chand B. Vyas -------------------------- Name: Chand B. Vyas Title: President and CEO /s/ Roland E. Casati ------------------------------ Print Name Roland E. Casati NUMBER OF SHARES OWNED 2,176,000 ---------- -----END PRIVACY-ENHANCED MESSAGE-----