-----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, MMnGL6kbO3ahF+CgB8aArCrGm9N1Cbbdmze3fMq4bgid26P/XBFzkmQBRoarlpWk sbPi9RPgb8NLfo9cEovDAw== 0001047469-98-029397.txt : 19980806 0001047469-98-029397.hdr.sgml : 19980806 ACCESSION NUMBER: 0001047469-98-029397 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 6 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 14D9 SEC ACT: SEC FILE NUMBER: 005-48969 FILM NUMBER: 98677299 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: 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 14D9 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 SC 14D9 1 14D9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------- SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 ZEIGLER COAL HOLDING COMPANY (NAME OF SUBJECT COMPANY) ZEIGLER COAL HOLDING COMPANY (NAME OF PERSON FILING STATEMENT) COMMON STOCK, $.01 PAR VALUE (TITLE OF CLASS OF SECURITIES) 989286 10 9 (CUSIP NUMBER OF CLASS OF SECURITIES) -------------- BRENT L. MOTCHAN VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY ZEIGLER COAL HOLDING COMPANY 50 JEROME LANE FAIRVIEW HEIGHTS, ILLINOIS 62208 (618) 394-2400 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT) WITH COPIES TO: GLEN E. HESS, P.C. KIRKLAND & ELLIS 153 EAST 53RD STREET NEW YORK, NY 10022 (212) 446-4800 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND SUBJECT COMPANY The name of the subject company is Zeigler Coal Holding Company, a Delaware corporation (the "COMPANY" or "ZEIGLER"). The address of the principal executive offices of the Company is 50 Jerome Lane, Fairview Heights, Illinois 62208. This Solicitation/Recommendation Statement on Schedule 14D-9 (this "STATEMENT" or this "SCHEDULE 14D-9") relates to the Company's common stock, $.01 par value (the "Shares"). ITEM 2. TENDER OFFER OF BIDDER This statement relates to a tender offer by Zeigler Acquisition Corporation ("PURCHASER"), a Delaware corporation and a wholly owned subsidiary of AEI Resources, Inc., a Delaware corporation ("PARENT"), as set forth in a Tender Offer Statement on Schedule 14D-1, dated August 5, 1998 (the "SCHEDULE 14D-1"), to purchase all outstanding Shares at a price of $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 the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "OFFER"). The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of August 3, 1998 (the "MERGER AGREEMENT"), by and among Parent, Purchaser and the Company. The Offer is subject to certain conditions. The Merger Agreement provides that, if the Offer is consummated pursuant to its terms, Purchaser will be merged with and into the Company (the "MERGER"), and the Company will continue as the surviving corporation (the "SURVIVING CORPORATION"). A copy of the Merger Agreement is filed as EXHIBIT 1 hereto and incorporated herein by reference. As set forth in the Schedule 14D-1, the principal executive offices of Purchaser and Parent are located at 1500 North Big Run Road, Ashland, Kentucky 41102. ITEM 3. IDENTITY AND BACKGROUND (a) The name and business address of the Company, which is the person filing this Statement, are set forth in Item 1 above. (b) Except as described herein or on pages 5 and 6 of the Company's proxy statement dated April 2, 1998 (the "1998 PROXY STATEMENT") relating to the Company's 1998 Annual Meeting of Stockholders, which are filed as EXHIBIT 2 to this Statement and are incorporated herein by reference, to the knowledge of the Company, as of the date hereof, there are no material contracts, agreements, arrangements or understandings, or any actual or potential conflicts of interest, between the Company or its affiliates and (i) the Company, its executive officers, directors or affiliates or (ii) Purchaser, Parent or their respective executive officers, directors or affiliates. Certain information pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder is contained in the Information Statement attached as Annex I hereto. THE MERGER AGREEMENT The summary of the Merger Agreement contained in the Offer to Purchase is incorporated herein by reference. The Offer to Purchase has been filed with the Securities and Exchange Commission (the "COMMISSION") as an exhibit to the Schedule 14D-1, a copy of which Schedule 14D-1 is enclosed with this Schedule 14D-9. The Merger Agreement is also incorporated herein by reference. The Merger Agreement and the summary thereof should be read in its entirety for a more complete description of the terms and provisions of the Merger Agreement. The following is a summary of certain portions of the Merger Agreement which relate to arrangements among the Company, Purchaser, Parent and the Company's executive officers and directors and is qualified in its entirety by reference to the Merger 2 Agreement. For the purposes of this Item 3(b), capitalized terms used and not otherwise defined herein have the meanings given to such terms in the Merger Agreement. 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 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 3 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. 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 4 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 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 5 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. 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 6 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 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, 7 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 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 8 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. ITEM 4. THE SOLICITATION OR RECOMMENDATION (a) RECOMMENDATION OF THE BOARD OF DIRECTORS. The Board 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. 9 (b) BACKGROUND; REASONS FOR THE RECOMMENDATION. The Company's Board of Directors has regularly discussed the Company's performance, consolidation in the coal industry and various coal properties that were for sale, operational issues affecting the Company, the level of the Company's stock price and other factors. As a result of these discussions, the Board at a meeting on December 1, 1997, authorized Messrs. Manley and Reilly, acting as a special committee of the Board (the "Special Committee"), to interview investment banking firms to assist the Company in exploring various alternatives to maximize shareholder value, including a possible sale of the Company. Shortly thereafter, the Company issued a press release announcing such action. At a meeting on December 18, 1997, the Board authorized the retention of Credit Suisse First Boston Corporation ("CSFB"), and such firm was retained to act as financial advisor to assist the Company in this regard. At such Board meeting, representatives of CSFB reviewed with the Board various potential alternatives that the Company could consider in order to maximize shareholder value, including the sale of certain assets of the Company and the sale of the entire Company. Following discussion of these alternatives, the Board instructed CSFB to initiate a process for exploring a sale of the Company or certain of its assets and to prepare an offering memorandum for that purpose. During January and early February 1998, a confidential offering memorandum (the "MEMORANDUM") was prepared describing the Company's coal operations and properties and including historical and projected financial data regarding the Company. Beginning on February 5, 1998, the Memorandum was sent to 69 prospective purchasers. The prospective purchasers were selected by the Special Committee and the Company's management, after discussion with CSFB, as parties that might be interested in the acquisition of the Company or principal coal properties of the Company, and included companies in the coal and energy industries as well as financial buyers. At the beginning of March, preliminary bids were received from seven prospective purchasers who expressed an interest in acquiring the entire Company and from other prospective purchasers who indicated various levels of interest in certain assets of the Company. Following the receipt of preliminary bids, representatives of Addington Enterprises, Inc. ("AEI") and another prospective investor (the "PROSPECTIVE INVESTOR"), two of the prospective purchasers who had received copies of the Memorandum, requested and were permitted to act jointly in connection with a possible acquisition of the Company. Based on the preliminary bids, five prospective purchasers (including the two who determined to proceed jointly) attended presentations by management regarding the Company's historical and projected operations and four prospective purchasers (including three who had attended the management presentations) visited certain coal mines and other properties of the Company. Following the preliminary indications of interest the Special Committee requested its advisors to further evaluate the alternative of selling the Company's assets to several purchasers. On April 7, 1998 certain of the prospective purchasers were provided with copies of a form of acquisition agreement prepared by the Company's counsel pursuant to which the buyer would acquire the Company in a two step transaction involving a cash tender offer followed by a merger. Recipients were advised to indicate any changes to the form of acquisition agreement as part of any final bid they might make to acquire the Company. Final bids were received on May 22, 1998. Following analysis and discussion of the bids among the Special Committee and the other directors of the Company and the Company's legal and financial advisors, the Board authorized negotiations with respect to the joint bid submitted by Parent, a newly formed holding company for the natural resource operations conducted by AEI, and the Prospective Investor (the "Joint Venture") which had bid to purchase the Company in a cash merger transaction for $21.25 per Share. Following discussions between representatives of CSFB and the Joint Venture which clarified certain aspects of the Joint Venture's bid, the Company and the Joint Venture entered into an agreement to negotiate for sale of the Company exclusively with the Joint Venture until June 25, 1998. Such negotiations occurred between representatives of the Joint Venture and the Company's legal and financial advisors on behalf of the Company through July 7, 1998, at which time representatives of the Prospective Investor advised Mr. Manley that the Prospective Investor had been unable to reach agreement with Parent concerning the terms and structure of the Joint Venture and that accordingly the Prospective Investor would not be involved in an acquisition of the Company. 10 On July 10, 1998, representatives of Parent informed the Company's financial advisor that Parent was interested in acquiring the Company without the participation of the Prospective Investor and with financing to be arranged by Warburg Dillon Read LLC ("WDR"). After discussion with and instruction from Mr. Manley (who had reviewed the matter with other directors), representatives of CSFB advised representatives of Parent and WDR of the circumstances under which a proposal to purchase the Company would be considered, including the requirement that adequate financing be available so that a tender offer for any and all of the Company's Shares could close the week of August 31. During the week of July 27, Parent obtained financing commitments from USB AG, Stamford Branch, necessary to fund the acquisition of the Company, including a bridge loan commitment and a bank loan commitment sufficient to close a tender offer for the Company's common stock, subject to various conditions, during the week of August 31, 1998. The Company's representatives had provided a form of acquisition agreement to the representatives of Parent on July 20, 1998, which agreement was negotiated between representatives of Parent and the Company during the week of July 27. By July 31, the principal terms of the acquisition were agreed upon and set forth in a draft merger agreement. Prior to the meeting of the Board that was held on August 3, the draft Merger Agreement, financing commitments and a copy of CSFB's financial presentation were sent to each director of the Company. On August 3, the Board of Directors of the Company met to consider the sale of the Company contemplated by the Merger Agreement. At the meeting, the Board reviewed and discussed with management and the Company's legal and financial advisors the proposed Merger Agreement, the financing commitments, the process leading up to the transaction contemplated by the Merger Agreement and other matters. CSFB rendered to the Board its opinion 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 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. Following discussion, the Board of Directors approved the Merger Agreement and resolved to recommend acceptance of the Offer to the Company's stockholders. Each of the directors also agreed to tender his Shares in the Offer and each of the directors, other than Mr. Ericson, executed an agreement with the Company setting forth his obligation to tender such Shares. In approving the Merger Agreement and the transactions contemplated thereby and recommending that all holders tender their Shares pursuant to the Offer, the Board considered a number of factors, including the following: (i) the Board's familiarity with, and information provided by the Company's management as to, the business, financial condition, results of operations, current business strategy and future prospects of the Company, material developments affecting the coal and energy industries, the nature of the markets in the coal industry and the Company's position in such markets, the historical and current market prices for the Common Stock and the costs, uncertainties and risks of seeking to grow through acquisition of substantial coal properties; (ii) a consideration of strategic and other alternatives to the sale of the Company, including the sale of certain assets of the Company, the development of proposals with other parties and continuing to maintain the Company as a public corporation and not engaging in any extraordinary transaction, and the information provided by CSFB as to such alternatives; (iii) the terms of the Merger Agreement, including the financing condition and the other conditions to the Offer, the terms of the financing commitments issued by WDR and the business reputation of WDR; (iv) that the $21.25 per Share price contemplated by the Merger Agreement represented a significant premium to the trading prices of the Shares prior to the announcement of the process to seek strategic alternatives, and, later, prior to announcement of the Tender Offer, and represented the highest cash price any potential acquiror of the entire Company was willing to offer on acceptable terms; 11 (v) the process undertaken on behalf of the Company, which included discussions with potential acquirors, as a result of which the Board had what it believed to be an accurate sense of the values that could be achieved in a third party transaction; (vi) the opinion of CSFB 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 holders of the Shares (other than Parent and its affiliates) in the Offer and the Merger was fair, from a financial point of view, to such holders. The full text of CSFB's written opinion dated August 3, 1998, which sets forth the assumptions made, matters considered and limitations on the review undertaken by CSFB, is attached hereto as Exhibit 3 and is incorporated herein by reference. CSFB'S OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE CASH CONSIDERATION TO BE RECEIVED IN THE OFFER AND THE MERGER BY HOLDERS OF SHARES (OTHER THAN PARENT AND ITS AFFILIATES) AND IS NOT INTENDED TO CONSTITUTE, AND DOES NOT CONSTITUTE, A RECOMMENDATION OF CSFB AS TO WHETHER ANY STOCKHOLDER SHOULD TENDER SHARES PURSUANT TO THE OFFER. HOLDERS OF SHARES ARE URGED TO READ SUCH OPINION CAREFULLY IN ITS ENTIRETY; (vii) that the Merger Agreement permits the Company to furnish nonpublic information to, and to participate in negotiations with, any third party that has submitted an unsolicited written acquisition proposal to the Company, if the Board determines in good faith that taking such action is necessary in the exercise of its fiduciary obligations under applicable law and the Merger Agreement permits the Company's Board to terminate the Merger Agreement in certain circumstances in the exercise of its fiduciary duties; (viii) the termination provisions of the Merger Agreement, which under certain circumstances could obligate the Company to pay termination fees to Parent and, subject to limitation, to reimburse Parent for its actual expenses incurred in connection with the transaction, and the Board's belief that such fees and expense reimbursement provisions are acceptable in view of the short duration of the Tender Offer, the length of time since the public announcement that the Company was exploring strategic opportunities to maximize shareholder value, including a possible sale of the Company, and the process conducted on behalf of the Company leading to the approval of the Merger Agreement; (ix) the desirability of providing liquidity to holders of substantial amounts of the Shares; and (x) strategic considerations, such as the Company's competitive position and the rapid changes, including consolidation, currently occurring in the coal industry. The foregoing discussion addresses the material information and factors considered by the Board in its consideration of the Offer. In view of the variety of factors, the amount of information considered and the relationships between the various factors the Board did not find it practicable to provide specific assessments of, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. The determination to recommend that stockholders accept the Offer was made after consideration of all of the factors taken as a whole. In addition, individual members of the Board may have given different weights to different factors. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED The Company has retained CSFB as its financial advisor in connection with the Offer and the Merger. Pursuant to the terms of CSFB's engagement, the Company has agreed to pay CSFB for its services an aggregate financial advisory fee equal to 0.7% of the total consideration (including net debt assumed) payable in connection with the Offer and the Merger. The Company also has agreed to reimburse CSFB for reasonable out-of-pocket expenses, including the fees of legal counsel and any other advisor retained by CSFB, and to indemnify CSFB and certain related parties against certain liabilities, including liabilities under the federal securities laws, arising out of CSFB's engagement. CSFB has in the past provided financial services to the Company unrelated to the Offer and the Merger, for 12 which services CSFB has received compensation. In the ordinary course of business, CSFB and its affiliates may actively trade or hold the securities of the Company for their own account or for the account of customers and, accordingly, may at any time hold a long or short position in such securities. Neither the Company nor any person acting on its behalf currently intends to employ, retain or compensate any person to make solicitations or recommendations to stockholders on its behalf concerning the Offer. ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES (a) To the knowledge of the Company, no transactions in Shares have been effected within the past 60 days by the Company or any executive officer, director, affiliate or subsidiary of the Company, other than routine contributions to the Ziegler Stock Fund under the Company's 401(k) plan. See Item 8 below, which sets forth certain information as to certain related matters. (b) To the knowledge of the Company, its executive officers, directors, affiliates and subsidiaries presently intend to tender, pursuant to the Offer, all Shares which are held of record or are beneficially owned by such persons. Each of the directors has agreed to tender his Shares in the tender offer and each of the directors, other than Mr. Ericson, has executed an agreement with the Company setting forth his obligation to tender such Shares. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY (a) Except as set forth in this Schedule 14D-9, the Company is not engaged in any negotiation in response to the Offer which relates to or would result in (i) an extraordinary transaction, such as a merger or reorganization, involving the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a material amount of assets by the Company or any subsidiary of the Company; (iii) a tender offer for or other acquisition of securities by or of the Company; or (iv) any material change in the present capitalization or dividend policy of the Company. (b) None. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED The following information is in addition to the information set forth in Item 4. CERTIFICATE OF INCORPORATION. The Company's Restated Certificate of Incorporation, as amended (the "CERTIFICATE OF INCORPORATION"), contains certain provisions that may delay, defer or prevent a takeover of the Company. The Company's Board of Directors has the authority to issue up to 1,000,000 shares of preferred stock (the "PREFERRED STOCK") and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of these shares, without further vote or action by the stockholders. The purpose of authorizing the Board of Directors to determine such rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The Board of Directors may issue Preferred Stock with voting, conversion and exchange rights which would adversely affect the voting power of the holders of Common Stock, and which could, among other things, have the effect of delaying, deferring or preventing a change in control of the Company. One of the effects of the existence of unissued and unreserved Common Stock and Preferred Stock may be to enable the Board of Directors to issue shares to persons friendly to current management which could render more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of the Company's management. Such additional shares also could be used to dilute the stock ownership of persons seeking to obtain control of the Company. In the Merger Agreement, the Company has agreed not to issue any such additional shares. 13 The Company is subject to the "business combination" section of the Delaware General Corporation Law. In general, such statute prohibits a publicly held Delaware corporation from engaging in various "business combination" transactions with any "interested stockholder" for a period of three years after the date of the transaction in which the person became an "interested stockholder," unless (i) the business combination or the transaction in which the person becomes an interested stockholder is approved by the Board of Directors prior to the date the interested stockholder obtained such status, (ii) upon consummation of the transaction which resulted in the stockholder becoming an "interested stockholder," the "interested stockholder" owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding those shares owned by (a) persons who are directors and also officers and (b) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or (iii) on or subsequent to such date the "business combination" is approved by the Board of Directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the "interested stockholder." A "business combination" includes mergers, asset sales and other transactions resulting in financial benefit to a stockholder. An "interested stockholder" is a person who owns 15% or more of a corporation's voting stock or is an affiliate or associate of the corporation and was the owner of 15% or more of its voting stock at any time within the three year period prior to the transaction. The statute could prohibit or delay mergers or other takeover or change in control attempts with respect to the Company and, accordingly, may discourage attempts to acquire the Company. The foregoing summary of the Certificate of Incorporation is qualified in its entirety by reference to the Certificate of Incorporation, a copy of which is filed as Exhibit 4 to this Statement and is incorporated herein by reference. 14 MATERIAL TO BE FILED AS EXHIBITS The following Exhibits are filed herewith: Exhibit 1--Agreement and Plan of Merger, dated as of August 3, 1998, by and among Parent, Purchaser and the Company (filed herewith). Exhibit 2--Pages 5 and 6 of Proxy Statement, dated April 2, 1998, relating to the Company's 1998 Annual Meeting of Stockholders (filed herewith). Exhibit 3*--Opinion of Credit Suisse First Boston Corporation, dated August 3, 1998 (filed herewith). Exhibit 4--Restated Certificate of Incorporation of the Company, as amended (filed as an exhibit to the Company's Registration Statement No. 33-80646, and incorporated herein by reference). Exhibit 5--Employment Agreement, dated February 24, 1993, between the Company and Chand B. Vyas (filed as an exhibit to the Company's Form 10-K dated March 30, 1995, and incorporated herein by reference). Exhibit 6--Special Bonus and Severance Pay Plan (filed as an exhibit to the Company's Form 10-K dated March 24, 1998 and incorporated herein by reference). Exhibit 7--Press Release, dated August 3, 1998 (filed herewith). Exhibit 8*--Letter to Stockholders of the Company, dated August 5, 1998 (filed herewith). - -------------- * Included in the materials sent to stockholders. 15 SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. ZEIGLER COAL HOLDING COMPANY By: /s/ BRENT L. MOTCHAN ----------------------------------------- Brent L. Motchan VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
Dated: August 5, 1998 ANNEX I INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER This Information Statement is being mailed on or about August 5, 1998 as a part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") of Zeigler Coal Holding Company (the "Company") to the holders of record of shares of Common Stock, $.01 par value, of the Company (the "Shares" or "Common Stock"). You are receiving this Information Statement in connection with the possible election of persons designated by Parent (as defined below) to a majority of the seats on the Board of Directors of the Company (the "Board of Directors"). On August 3, 1998, the Company, AEI Resources, Inc., a Delaware corporation ("Parent"), and Zeigler Acquisition Corporation ("Purchaser"), a Delaware corporation and a wholly owned subsidiary of Parent, entered into an Agreement and Plan of Merger (the "Merger Agreement") and, in accordance with the terms and subject to the conditions therein, (i) Parent and Purchaser commenced a tender offer (the "Offer") for any and all outstanding Shares at a price of $21.25 per Share, net to the seller in cash, without interest thereon (the "Purchase Price"), and (ii) at the Effective Time (as such term is defined in the Merger Agreement), Purchaser will be merged with and into the Company (the "Merger"). As a result of the Offer and the Merger, the Company will become a wholly owned subsidiary of Parent. The Merger Agreement provides that, promptly upon the purchase of Shares by Parent or Purchaser pursuant to the Offer, 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. The Company expects that all of the current members of the Board of Directors will resign effective upon the purchase of Shares by Parent or Purchaser pursuant to the Offer. The Purchaser intends to designate five individuals for election to the Board of Directors, who would constitute all of the Company's directors upon the consummation of the Merger and the resignation of all of the Company's current directors. This Information Statement is required by Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1 thereunder. The following information is given as of the date of the Schedule 14D-9, August 5, 1998, unless indicated otherwise. You are urged to read this Information Statement carefully. You are not, however, required to take any action. Capitalized terms used herein and not otherwise defined herein shall have the meaning set forth in the Schedule 14D-9. Pursuant to the Merger Agreement, the Purchaser commenced the Offer on August 5, 1998. The Offer is scheduled to expire at 12:00 midnight, New York City time, on Tuesday, September 1, 1998, unless extended. The information contained in this Information Statement concerning Parent and Purchaser has been furnished to the Company by the Parent, and the Company assumes no responsibility for the accuracy or completeness of such information. CERTAIN INFORMATION WITH RESPECT TO THE COMPANY VOTING RIGHTS AND PROCEDURES The Common Stock is the only issued and outstanding class of stock. At the close of business on July 28, 1998, the Company had issued and outstanding 28,222,671 shares of Common Stock. Each Share entitles the holder thereof to one vote on each matter submitted to a vote of stockholders. BOARD OF DIRECTORS INFORMATION ABOUT DIRECTORS MICHAEL K. REILLY. Age 65. Mr. Reilly has been Chairman of the Board since 1985, and from 1985 until December 31, 1994, was Chief Executive Officer of the Company. Mr. Reilly was President of the Company from its organization in 1983 until 1991. Mr. Reilly was President of Zeigler Coal Company from 1980 until its acquisition by the Company in 1985. Mr. Reilly is also a past chairman of the Bituminous Coal Operators Association ("BCOA"), past chairman of the Illinois Coal Association, a past director and past chairman of the National Coal Association, a past director of the National Mining Association and is currently a director of Newmont Mining Corporation and Newmont Gold Company. CHAND B. VYAS. Age 53. Mr. Vyas has been President and Chief Executive Officer of the Company since January 1, 1995. Prior to his election as President and Chief Executive Officer, Mr. Vyas held the following positions with the Company: 1991-1994 President and Chief Operating Officer; 1989-1991 Executive Vice President; February 1989 to November 1989 Senior Vice President--Finance and Administration; 1985-1988 Vice President and Chief Financial Officer. ROLAND E. CASATI. Age 67. Mr. Casati has been a real estate developer and has also been active in venture capital investments for more than the last five years. ROBERT W. ERICSON. Age 49. Mr. Ericson has been a Partner of the law firm of Winston & Strawn since 1983. JOHN F. MANLEY. Age 47. Mr. Manley has been President of Chicago City Capital Group and the General Partner for the Kinman Limited Partnership, a private investment partnership, for more than the last five years. COMMITTEES OF THE BOARD The Company has established standing Audit and Compensation Committees. The Audit Committee reviews and makes recommendations to the Board of Directors regarding internal accounting and financial controls and accounting principles, auditing practices, the engagement of independent public accountants and the scope of the audit to be undertaken by such accountants. The members of the Audit Committee in 1997 were Messrs. Reilly and Ericson. The Audit Committee held two meetings in 1997. The Compensation Committee has the authority of the Board of Directors with respect to the compensation, benefit and employment policies and arrangements for all officers of the Company. The Committee also administers the Company's Stock Appreciation Plan and its Stock Option Plan and has authority to grant options to eligible employees of the Company and of its subsidiaries. The members of the Compensation Committee in 1997 were Messrs. Manley and Casati. The Compensation Committee held two meetings in 1997. DIRECTORS' COMPENSATION Directors who are not employees of the Company receive a quarterly retainer of $5,000 for their service as directors and receive a fee of $2,000 for each Board meeting and each meeting of the Audit Committee or Compensation Committee they attend. The Directors who are also employees of the Company do not receive any additional compensation for serving on the Board of Directors or attending board or committee meetings. 2 EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers and certain key employees of the Company, their ages as of December 31, 1997, and positions held during the last five years are as follows:
NAME AGE POSITION - --------------------------------------------------- --- ------------------------------------------------------ Chand B. Vyas...................................... 53 President, Chief Executive Officer and Director Michael V. Altrudo................................. 49 President of Franklin Coal Sales Company Francis L. Barkofske............................... 58 Senior Vice President & Chief Financial Officer Michael D. Bauersachs.............................. 33 President of Phoenix Land Company W. Douglas Blackburn, Jr........................... 47 Senior Vice President, Operations Sharad M. Desai.................................... 49 Treasurer Paul D. Femmer..................................... 45 Controller Bruce W. Kranz..................................... 49 Vice President, Zeigler Environmental Services Company Coy K. Lane........................................ 37 President of Bluegrass Coal Development Company James W. Mahler.................................... 49 President of Americoal Development Company Robert L. McPeak................................... 45 President, Zeigler Property Development Company Brent L. Motchan................................... 48 Vice President, General Counsel and Secretary Tayeb B. Tahir..................................... 43 President of EnerZ Corporation Alan D. Williams................................... 51 President of Zenergy, Inc. John C. Willson.................................... 48 President of Trinton Coal Company David M. Young..................................... 47 President of Mountaineer Coal Development Company
CHAND B. VYAS--Mr. Vyas has been President since 1991 and Chief Executive Officer since January 1, 1995. Prior to his election as Chief Executive Officer, Mr. Vyas held the following positions with the Company: 1991-1994 Chief Operating Officer; 1989-1991 Executive Vice President; February 1989 to November 1989 Senior Vice President--Finance and Administration; 1985-1989 Vice President and Chief Financial Officer. Mr. Vyas joined Zeigler Coal Company in 1982 as a Director and Vice President, Finance. He is a past director of the Center for Energy and Economic Development, the National Coal Association and the National Mining Association. MICHAEL V. ALTRUDO--Mr. Altrudo has been President of Franklin Coal Sales Company, the Company's marketing and sales subsidiary since November 1995. From November 1992 to October 1995, he was Executive Vice President of Sales for Franklin Coal Sales Company. He was Vice President of Sales for Franklin Coal Sales Company from April 1992 to October 1992. From February 1988 to March 1992, he was Vice President of Domestic Coal & Coke Sales with Drummond Coal Sales Company. FRANCIS L. BARKOFSKE--Mr. Barkofske has been Senior Vice President and Chief Financial Officer since October 1997. From September 1996 to October 1997 he was Vice President, Administration; from November 1995 to August 1996, he was Vice President, Corporate Affairs; from October 1994 to October 1995, he was Vice President, External Affairs; and from July 1992 to October 1994, he was Vice President, Government Relations. From October 1990 to July 1992, Mr. Barkofske was a partner and Chairman of the Natural Resources Practice area of the law firm of Thompson & Mitchell. Prior thereto, he was Senior Vice President, Legal & Public Affairs and Secretary of Peabody Holding Company, Inc. MICHAEL D. BAUERSACHS--Mr. Bauersachs has been President of Phoenix Land Company since May 1996. From January 1996 to April 1996, he was General Manager of Land and Development and from August 1994 to December 1995, he was Manager of Property Development for Phoenix Land Company. 3 Prior to joining the Company, Mr. Bauersachs was Vice President of Real Estate for Ark Land Company, a subsidiary of Arch Mineral Corporation. From 1993 and prior thereto, he held various real estate positions within Ark Land Company. W. DOUGLAS BLACKBURN, JR.--Mr. Blackburn has been Senior Vice President, Operations since November 1994. Mr. Blackburn joined the Company on June 20, 1994 as the President of Old Ben Coal Company. Prior thereto, he served as a consultant to the coal industry from 1992 to 1994 and as Senior Vice President of Operations at Mapco Coal, a coal mining company, from 1990 to 1992. SHARAD M. DESAI--Mr. Desai has been Treasurer of the Company since January 1993. He previously held various positions in the financial and accounting areas at Zeigler since joining the Company at its inception. PAUL D. FEMMER--Mr. Femmer has been Controller of the Company since March 1994. From May 1990 to March 1994 he was Controller of Sigma Chemical Company. Prior thereto, he was a Senior Manager with Price Waterhouse, LLP. BRUCE W. KRANZ--Mr. Kranz has been Vice President of Zeigler Environmental Services Company since December 1996. From 1992 until joining Zeigler Environmental Services Company, Mr. Kranz was a Branch Manager and Principal-in-Charge for the Cleveland, Ohio office of Metcalf & Eddy, Inc., a professional services consulting company. COY K. LANE--Mr. Lane has been President of Bluegrass Coal Development Company since November 1995. From March 1995 to October 1995, he was President of Old Ben Coal Company. In October 1994, he joined Zeigler Coal Holding Company as General Manager of the Indiana Operations of Old Ben Coal Company until February 1995. From January 1994 to September 1994, he was General Manager of the Ashland Division of Pittston Coal Group for Addington, Inc. operations. From April 1993 to December 1993, he was Manager of Operations Development for Addington, Inc. From May 1990 to March 1993, he was Assistant Vice President of Operations for Pen Coal Corporation. JAMES W. MAHLER--Mr. Mahler has been President of Americoal Development Company, the Company's non-mining and business development subsidiary, since 1992. Prior thereto, he was Vice President, Administration for Zeigler, a position he held from 1990 to 1992. From 1988 to 1990, Mr. Mahler was Controller of BP Coal (U.S.A.) Inc. ROBERT L. MCPEAK--Mr. McPeak has been President of Zeigler Property Development Company since May 1997. Prior thereto he was Manager of Material Service of the Company, a position he held from 1986 to 1997. BRENT L. MOTCHAN--Mr. Motchan has been Vice President, General Counsel and Secretary of the Company since 1985. From 1977 to 1985, he was the Assistant General Counsel and Director of Real Estate for Arch Mineral Corporation, a coal mining company. TAYEB B. TAHIR--Mr. Tahir has been President of EnerZ Corporation since September 1996. From 1994 to August 1996, he was with PIRA Energy Group in New York where he was Director, International Global Gas Group. Prior to 1994, he served various positions with Consolidated Edison Company. ALAN D. WILLIAMS--Mr. Williams has been President of Zenergy, Inc. since August 1997. From March 1997 to July 1997 he was Vice President Business Development & Marketing of the Company. From February 1996 to March 1997, he was Manager of Business Development of the Company and from April 1993 to January 1996, he was Senior Vice President of Marketing for Franklin Coal Sales, the Company's marketing subsidiary. Prior thereto, he was President of Triton Coal Company. 4 JOHN C. WILLSON--Mr. Willson has been President of Triton Coal Company since January 1996. From March 1995 to December 1995, he was Vice President of SMC Western Operations. From 1989 to 1994, Mr. Willson was President of the Eastern Division of Costain Coal, Inc. DAVID M. YOUNG--Since November 1995, Mr. Young has been President of Mountaineer Coal Development Company. Prior thereto, he was President of Marrowbone Development Company and Wolf Creek Collieries Company. From November 1992 to June 1994, Mr. Young was President of Old Ben Coal Company. He was Vice President of the Company's Illinois Division of mining operations from September 1991 to November 1992. Mr. Young was employed in various capacities by Old Ben Coal Company's West Virginia Division prior to September 1991. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table sets forth information as of January 31, 1998, (unless otherwise noted) with respect to beneficial ownership of the Company's Common Stock by any person who is known to the Company to be the beneficial owner of more than 5% of the outstanding shares, each director, each nominee for director, the five named executive officers and all directors and executive officers as a group. Unless otherwise indicated, each beneficial owner possesses sole voting and investment power with respect to the shares listed in this table.
NAME NUMBER OF SHARES PERCENTAGE - ------------------------------------------------------------ ------------------ ----------- Kinman Limited Partnership(1)............................... 5,801,738 20.6% Neuberger & Berman, LLC(2).................................. 1,480,700 5.3% Michael K. Reilly(3)........................................ 1,254,350 4.4% Chand B. Vyas(4)(7)......................................... 1,036,307 3.6% Roland E. Casati(5)......................................... 2,176,000 7.7% Robert W. Ericson........................................... 2,000 * John F. Manley(6)........................................... 5,801,738 20.6% W.D. Blackburn, Jr.(7)...................................... 82,611 * John C. Willson(7).......................................... 23,288 * Coy K. Lane(7).............................................. 22,585 * David M. Young(7)........................................... 43,776 * All directors and executive officers as a group (20 persons)(3)(4)(5)(6)(7)............................... 10,932,556 38.0%
- ------------------------ * Represents less than 1% (1) The address of the Kinman Limited Partnership ("Kinman") is c/o Chicago City Capital Group, Suite 9300, Sears Tower, Chicago, Illinois 60606. Mr. Manley, a director of the Company, is the sole general partner of, and as such effectively controls Kinman. (2) The source of this information is the Schedule 13G of Neuberger & Berman, LLC dated February 9, 1998 filed with the Securities and Exchange Commission. The address of Neuberger & Berman, LLC is 605 Third Avenue, New York, New York 10158. Neuberger & Berman, LLC reported that it had shared power of disposition with respect to 1,480,700 shares, shared power to vote 1,175,200 shares and sole power to vote 162,400 shares. (3) Includes 391,100 shares held by MKR Investments L.P., a family partnership. Does not include shares of Common Stock owned by Mr. Reilly's children and trusts for the benefit of Mr. Reilly's grandchildren as to which Mr. Reilly disclaims beneficial ownership. (4) Includes 639,920 shares held through a trust for Mr. Vyas and 150,400 shares owned by trusts for Mr. Vyas' children for which Mr. Vyas acts as trustee. Mr. Vyas disclaims beneficial ownership of the shares owned by trusts for his children. 5 (5) The address of Mr. Casati is 2700 River Road, Des Plaines, Illinois 60018. (6) Reflects 5,801,738 shares held of record by Kinman. Mr. Manley is the sole general partner of Kinman and, as such, may be deemed to own beneficially shares owned by Kinman. The address of Mr. Manley is c/o Chicago City Capital Group, Suite 9300, Sears Tower, Chicago, Illinois 60606. (7) Includes shares which may be acquired upon exercise of options granted under the Company's Stock Option Plan which were exercisable within 60 days of the mailing date of this Proxy Statement, as follows: Mr. Vyas--242,880 shares; Mr. Blackburn--62,800 shares; Mr. Willson--14,000 shares; Mr. Lane--14,400 shares; Mr. Young--31,200 shares; and all directors and executive officers as a group--577,600 shares. COMPLIANCE WITH THE SECURITIES EXCHANGE ACT The Company's executive officers and directors are required under the Securities Exchange Act of 1934 to file reports of ownership and changes of ownership of common stock of the Company with the Securities and Exchange Commission and the New York Stock Exchange. Copies of these reports must also be furnished to the Company. Based solely on a review of the copies of reports furnished to the Company and written representations that no other reports were required, the Company believes that during 1997 all executive officers and directors complied with all applicable filing requirements. COMPENSATION OF EXECUTIVE OFFICERS EXECUTIVE COMPENSATION The following table sets forth the annual and long-term compensation during the last three fiscal years paid or granted by the Company or its subsidiaries to, or accrued for, the Chief Executive Officer and the four highest paid executive officers of the Company and its subsidiaries during 1997:
ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------------------------------- ---------------------------------- NAME AND PRINCIPAL OTHER ANNUAL AWARD LTIP POSITION DURING 1997 YEAR SALARY($) BONUS($) COMPENSATION OPTIONS/SAUS(#) PAYOUTS($) - ----------------------- --------- ----------- ----------- ----------------- ----------------- --------------- Chand B. Vyas-- 1997 487,500 -- 10,750 100,000 -- President and Chief 1996 425,000 600,000 10,500 100,000 -- Executive Officer 1995 425,000 250,000 10,500 -- -- W.D. Blackburn, Jr.-- 1997 198,750 -- 3,950 30,000 -- Senior Vice President 1996 189,583 188,650 3,950 40,000 -- Operations 1995 175,000 65,000 17,678 -- -- John C. Willson-- 1997 164,167 25,000 4,500 10,000 -- President Triton Coal 1996 158,333 120,000 47,113 15,000 -- Company(1) 1995 125,000 37,500 3,000 16,000 -- Coy K. Lane-- 1997 143,333 36,250 4,300 10,000 -- President Bluegrass 1996 133,333 101,250 27,645 25,000 -- Coal Development 1995 122,759 35,000 2,602 -- -- Company David M. Young-- 1997 164,231 15,000 5,830 10,000 -- President Mountaineer 1996 166,211 120,000 37,099 10,000 -- Coal Development 1995 160,000 30,000 4,231 -- -- Company NAME AND PRINCIPAL ALL OTHER POSITION DURING 1997 COMPENSATION($) - ----------------------- ----------------------- Chand B. Vyas-- -- President and Chief -- Executive Officer -- W.D. Blackburn, Jr.-- -- Senior Vice President -- Operations -- John C. Willson-- -- President Triton Coal -- Company(1) -- Coy K. Lane-- -- President Bluegrass -- Coal Development -- Company David M. Young-- -- President Mountaineer -- Coal Development -- Company
- ------------------------ (1) Mr. Willson's employment commenced in March 1995. EMPLOYMENT AGREEMENTS Mr. Vyas has an employment agreement with the Company, dated as of February 24, 1993, as amended, which provides for his employment by the Company as President and, if so elected, Chief 6 Executive Officer at an annual salary and bonus to be determined by the Board of Directors. Mr. Vyas' employment may be terminated by him or the Company on 30 days' notice. If he is terminated for other than cause, or he terminates his employment as a result of an unacceptable change in his duties, a change of control of Zeigler or other "Good Reason" (as defined therein), Mr. Vyas would be entitled to severance payments for three years following termination in an amount equal to three times his Average Compensation as well as certain other benefits related to his supplemental retirement payments and acceleration of vesting of his stock options. In the event of Mr. Vyas' death, his estate is entitled to receive two times his Average Compensation. The employment agreement provides that upon retirement, Mr. Vyas would be entitled to supplemental retirement payments equal to the excess, if any, of (i) the amount he would receive under the Company's pension plan (described below) if effect were not given to limitations imposed by the Internal Revenue Code and if his compensation included his bonuses over (ii) the annual amount payable to Mr. Vyas under such pension plan plus annual social security benefits payable to him. The estimated annual supplemental retirement payment payable to Mr. Vyas upon his normal retirement date was $315,000 as of December 31, 1997. Mr. Vyas' employment agreement also provides that he will not compete with the Company during the employment term and for a period of one year following termination. CHANGE IN CONTROL ARRANGEMENTS SPECIAL BONUS AND SEVERANCE PAY PLAN. In December, 1997, Zeigler announced that it was reviewing strategic alternatives to increase stockholder value, including a possible sale of the Company. In connection therewith Zeigler adopted a special bonus and severance pay plan which provides that certain of Zeigler's executives and other non-union personnel would receive specified retention payments if a sale of Zeigler or other change of control (as defined in the plan) occurred prior to December 31, 1998 and severance payments if the employment of such person were terminated in certain circumstances during the twelve months following such sale or other change of control. The plan also provides that any unvested stock options will vest upon a sale of the Company or other change in control. Any severance payment otherwise due an executive under this plan would be reduced by severance amounts payable under his or her employment contract. The amounts of such payments vary based on the classification of the covered employee and his or her compensation level and tenure with the Company. The amounts payable to Messrs. Blackburn, Willson, Lane and Young under the plan, as of April 2, 1998 are: $220,000.00, $164,983.50, $143,550.00 and $164,983.50 respectively, in the event of change in control and $440,000.00, $330,016.50, $291,450.00 and $330,016.50, in the event such individual becomes entitled to severance payments (after reduction of the amount paid upon a change in control). In addition, if a sale of the Company occurs during 1998 each of the named individuals would be entitled to receive a special bonus of $150,000 and possibly other payments determined in the discretion of Messrs. Manley and Reilly. Change in control arrangements applicable to Mr. Vyas are discussed in "Employment Agreements" above. STOCK APPRECIATION AND STOCK OPTION PLANS STOCK APPRECIATION PLAN. Certain key employees of the Company and its subsidiaries have been granted stock appreciation units ("SAUs") under the Company's Stock Appreciation Plan (the "Stock Appreciation Plan"). Each participant in the Stock Appreciation Plan is entitled to receive a cash payment at "maturity" for each SAU which has become vested based upon the increase in fair value (as defined) of a share of the Company's Common Stock from the effective date of the award of the SAU. Vested SAUs mature on the earliest of the termination of the participant's employment with the Company, the sixth anniversary of the date of grant, the sale of the Company or the written election of the participant. The Stock Appreciation Plan is administered by the Compensation Committee of the Board of Directors. There were 73,600 SAUs outstanding as of December 31, 1997, all of which are fully vested and mature in 1998. Under the Stock Appreciation Plan, "fair value" is based on the "market price" of the Company's Common Stock. 7 STOCK OPTION PLAN. In 1994 the Company's Board of Directors and stockholders adopted its Stock Option Plan (the "Option Plan"). A total of 2,560,000 shares of Common Stock were reserved for issuance upon exercise of options granted under the Option Plan. The purpose of the Option Plan is to attract and retrain qualified personnel and to provide additional incentive to executive and other key employees of the Company and its subsidiaries. The Option Plan is administered by the Compensation Committee (the "Committee") which determines the terms of the options granted under the Option Plan, including the exercise price, number of shares subject to the option and exercisability. Generally, options may be transferred by the optionees by will or the laws of descent or distribution or to such transferees and on such terms and conditions as the Committee approves. Each option may be exercised, during the lifetime of the optionee, only by the optionee. The exercise price of all options granted under the Option Plan must equal at least the fair market value of the Common Stock of the Company on the date of grant. Unless the Committee specifies otherwise in the option grant, options granted will vest and become exercisable with respect to 20% of the Common Stock issuable upon exercise thereof on each anniversary of the grant date, and the reminder shall vest on the fifth anniversary of the grant date. At the discretion of the Committee, options may be made exercisable in one or more installments upon (i) occurrence of certain events, (ii) passage of time, (iii) fulfillment of certain conditions, or (iv) achievement of corporate performance goals. In the event of the Sale of the Company (as defined therein), the Committee may provide, in its discretion, that (i) outstanding options shall become immediately exercisable and shall terminate if not exercised as of the date of the Sale of the Company or any other designated date, or (ii) that such options shall only provide the right to receive the excess of the consideration per share of Common Stock offered in such Sale of the Company over the exercise price of such options. OPTION/SAU GRANTS, EXERCISES AND YEAR-END VALUE TABLE The following table sets forth, for the named executive officers, the number and value of options granted during 1997.
PERCENT OF TOTAL NUMBER OF SECURITIES OPTIONS GRANTED GRANT DATE UNDERLYING OPTIONS TO EMPLOYEE IN EXERCISE PRICE EXPIRATION PRESENT VALUE NAME GRANTED(#) FISCAL YEAR ($/SH) DATE ($) - ---------------------------- --------------------- ----------------- --------------- ----------- -------------- Chand B. Vyas............... 100,000 23.0% $ 23.38 3/21/07 963,895(1) W.D. Blackburn, Jr.......... 30,000 6.9% $ 26.25 2/25/07 330,150(2) John C. Willson............. 10,000 2.3% $ 26.25 2/25/07 110,050(2) Coy K. Lane................. 10,000 2.3% $ 26.25 2/25/07 110,050(2) David M. Young.............. 10,000 2.3% $ 26.25 2/25/07 110,050(2)
- ------------------------ (1) The present value of options at date of grant was estimated using the Black-Scholes model with the following assumptions: 1) expected life of 7 years; 2) risk-free interest rate of 5.52%; 3) volatility of 34.98%; and 4) dividend yield of 1.28%. (2) The present value of options at date of grant was estimated using the Black-Scholes model with the following assumptions: 1) expected life of 7 years; 2) risk-free interest rate of 5.2%; 3) volatility of 34.98%; and 4) dividend yield of 1.14%. None of the named executive officers was granted any SAUs during 1997. 8 The following table sets forth, for the named executive officers, the number and value of exercised options and SAUs during 1997 and the number and value of unexercised options and SAUs as of December 31, 1997.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED OPTIONS/SAUS AT OPTIONS/SAUS AT FY-END(#) FY-END($)(1) ----------------------------- ----------------------------- SHARES ACQUIRED VALUE REALIZED VESTED OR UNVESTED OR VESTED OR UNVESTED OR NAME ON EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - -------------------- ----------------- --------------- ------------ --------------- ------------ --------------- Chand B. Vyas....... Options -- -- 202,880 250,720 389,857 400,639 SAUs -- -- -- -- -- -- W.D. Blackburn, Options -- -- 48,800 83,600 104,094 154,557 Jr................ SAUs -- -- -- -- -- -- John C. Willson..... Options -- -- 9,400 31,600 28,942 60,761 SAUs -- -- -- -- -- -- C.K. Lane........... Options -- -- 9,400 28,400 40,142 60,959 SAUs -- -- -- -- -- -- David M. Young...... Options -- -- 27,200 26,800 40,804 40,518 SAUs 32,000 748,689 16,000 -- 188,370 --
- ------------------------ (1) Based on the closing price on the New York Stock Exchange on December 31, 1997 of $16.31 per share. RETIREMENT PLANS All non-union employees of Zeigler Coal Holding Company and its subsidiaries are eligible to participate in the Mining Companies Pension Plan, a defined benefit pension plan intended to qualify under Section 401(a) of the Code (the "pension plan"). The pension plan is a cash balance plan whereby each participant's benefit is determined based upon the assumed cash balance credits and earnings which are credited to the participant's nominal account. The cash balance credits range from 5% to 6.5% of the participant's annual compensation. Each account is credited with assumed earnings equal to the 5-year Treasury note rate, subject to a 5% minimum and a 12% maximum rate. The normal retirement age under pension plan is age 60. Certain participants under this plan may be entitled to a minimum benefit under the pension plan equal to the amount which would have been provided under a prior defined benefit formula. Compensation under the pension plan generaly refers to the base salary (up to $150,000 for 1997 as limited by the Code) for services rendered to the Company and its subsidiaries including pre-tax deferrals, but excluding items such as bonuses, the value of stock awards and employer contributions to retirement plans at December 31, 1997. As of December 31, 1997, the estimated annual benefit (assuming a 7.5% return on each participant's nominal account) payable to Messrs. Vyas, Blackburn, Willson, Lane and Young upon their normal retirement date was $53,657, $27,438, $19,860, $65,680, and $37,155, respectively. As of December 31, 1997, Messrs, Vyas, Blackburn, Willson, Lane and Young had approximately 16, 3, 2, 3, and 13 years of credited service, respectively, under the pension plan. Benefits are computed on a straight life annuity basis and payable under several actuarially determined alternatives. All non-union employees of Zeigler Coal Holding Company are also eligible to participate in either the Zeigler Salaried Employees Savings Plan or the Mining Companies Pay Deferral Plan, defined contribution 401(k) plans intended to qualify under Section 401(a) of the Code (the "savings plan"). Participants may contribute to the savings plan on a pre-tax basis. The Company matches a portion of the amount contributed under the Zeigler Salaried Employees Savings Plan. The Company's matching contribution equals $.50 for each dollar contributed (not to exceed 3% of compensation), plus an additional match (not to exceed another 3% of compensation) if the Company meets certain performance criteria. The compensation which may be considered for this purpose is limited by the Code to 9 $150,000 in 1997. There is generally no Company matching under the Mining Companies Pay Deferral Plan. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 1997, the Company made a short-term loan for personal purposes to Paul D. Femmer, Controller of the Company. This loan, the largest aggregate amount outstanding of which was approximately $85,000 (including accrued interest), bore interest at the rate of 10% per annum and was paid in full prior to December 31, 1997. The Company intends to enter into an agreement with Paul Femmer and Chand Vyas relating to the termination of Femmer's employment and other matters arising out of business and employment relationships between Femmer, Vyas and the Company and certain claims made by Femmer. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation Committee of Zeigler's Board of Directors has responsibility for establishing the compensation (including employee benefits not generally available to salaried employees) of the Company's principal executive officers and other higher paid personnel. The Compensation Committee also serves as the committee established under Zeigler's Stock Option Plan with authority to fix the terms of, and grant options under, such plan. The Compensation Committee is comprised solely of non-employee directors. In general, the Compensation Committee strives to meet the following objectives in making compensation decisions for executive personnel: (1) provide overall compensation that enables the Company to attract and retain highly qualified personnel; (2) to authorize compensation that is fair to Zeigler employees, fair to Zeigler shareholders, and fair comparing the different organizational levels; and (3) to design compensation that creates both substantial incentives as well as alignment with short and long term shareholder interests. In general, the Committee does not intend to approve compensation to the Company's executive officers in excess of $1,000,000, unless such compensation meets the performance based standards set forth in Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as amended, or the Committee determines that such compensation is otherwise appropriate in the specific instance. The Committee consults with tax advisors as necessary to avoid any unintended results. There are currently three principal components of senior executive compensation: (i) base salaries, (ii) annual cash bonuses and (iii) stock options. Salaries are determined primarily on the basis of industry standards as applied to each executive's background, responsibilities and overall performance with the Company and are adjusted every 12 to 24 months. In general, the Committee's policy has been to have the incentive based components of compensation (i.e., bonuses and stock related plans) constitute a higher proportion of an executive's overall compensation. In its review, the Committee takes into account high growth goals for the Company balanced by the complexities of transitioning from a pure coal mining company. The Committee has also reviewed the compensation plans of high growth companies in a number of industries. Details of this review include the dollar amounts of salaries and bonuses, the relationship of stock options and bonuses to salaries, company size, total shareholder return and shares outstanding; the alignment of compensation between organization levels; and the breadth of incentive plans. Annual bonuses are considered to represent the short-term incentive portion of executive compensation and are based on actual financial performance as compared to the Company's financial plan as well as the assessment of the executive's overall performance during the year. Financial performance is measured principally by operating income cash flow of the Company and total return to shareholders (based primarily on the value of the Company's shares). In the case of officers responsible for a 10 particular business unit, the performance of that unit is a principal measure. Targeted bonus amounts are set for each executive officer. With respect to 1997, the Committee determined, based on the significant negative shareholder returns during 1997, that neither Mr. Vyas nor Mr. Blackburn would receive a bonus. For the other named executive offiers the Committee approved bonuses ranging from 9% to 25% of their base salaries. Long-term incentives for executives are provided by Zeigler's Stock Option Plan. Stock option grants under the Stock Option Plan are intended to provide rewards which are earned by executives over a substantial period of employment and which reflect growth in the value of stockholder equity and align the interests of key personnel with those of stockholders. The policy of the Compensation Committee is to consider option grants for executives annually and has been to provide option vesting in annual increments over a number of years. In making individual grants, the Committee also considers the amount and terms of prior option grants to each individual. The Committee granted options for 100,000 shares to Mr. Vyas in 1997. Finally, in 1997, the Compensation Committee participated in the development of the Special Bonus and Severance Pay Plan described elsewhere in this Information Statement. By the Compensation Committee: John F. Manley (Chairman) Roland E. Casati 11 PERFORMANCE GRAPH The following graph compares the cumulative total return on $100 invested on September 30, 1994 (the first day of public trading of the Common Stock) through December 30, 1997 in (i) the Common Stock of the Company, (ii) the S&P 400 Mid-Cap Index, and (iii) a market weighted peer company index of Ashland Coal, Inc. (now known as Arch Coal, Inc.), Cyprus Amax Minerals Co. and Pittston Minerals Group (the "Peer Companies"). COMPARISON OF CUMULATIVE TOTAL RETURN AMONG ZIEGLER COAL HOLDING COMPANY, S&P 400 MID-CAP INDEX AND PEER COMPANIES EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ZEIGLER COAL PEER COMPANIES (1) S&P 400 MID-CAP 9/30/94 100 100 100 12/31/94 76.13 86.85 100.49 12/29/95 91.41 83.83 135.24 12/31/96 142.99 81.58 166.35 12/31/97 110.56 58.3 217.95
PEER S&P 400 DATE ZEIGLER COAL COMPANIES(1) MID-CAP - ---------------------- ---------------------- ---------------------- ---------------------- 9/30/94 100.00 100.00 100.00 12/31/94 76.13 86.85 100.49 12/29/95 91.41 83.83 135.24 12/31/96 142.99 81.58 166.35 12/31/97 110.56 58.30 217.95
(1) The Peer Companies index no longer reflects the trading activities of Addington Resources, Inc. (the stock of which is no longer traded because of the acquisition of such company as of December 20, 1996 by Republic Industries, Inc., a diversified company operating in several industries other than coal mining) nor the trading activities of Westmoreland Coal Company (trading in the stock of which was halted by the New York Stock Exchange on December 23, 1996). In 1997, Ashland Coal, Inc. was merged with Arch Mineral Corporation, with the surviving corporation now known as Arch Coal, Inc. CERTAIN INFORMATION WITH RESPECT TO PARENT PARENT DESIGNEES Set forth below are the names, ages, present principal occupations, five year employment history and other directorships held in public companies of the persons designated by Parent for appointment or election to the Board of Directors (the "Parent Designees"). Such information has been provided by Parent to the Company. The address of each Parent Designee is 1500 North Big Run Road, Ashland, Kentucky 41102 and each such person is a citizen of the United States. 12
PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ------------------------------------------ --------------------------------------------------------------------- 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. 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. 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.
13 SECURITY OWNERSHIP OF PARENT DESIGNEES The Company has been advised by Parent that no Parent Designee directly or beneficially owns shares of Common Stock of the Company. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Based solely on the information provided by Parent, there have been no transactions or series of transactions, since January 1, 1997, to which the Company or any of its Subsidiaries was or is to be a party in which the amount involved exceeds $60,000 and in which any of the Parent Designees had or will have a direct or indirect material interest, nor has any Parent Designee been indebted to the Company or its subsidiaries in an amount in excess of $60,000 or been involved in a material business relationship with the Company or its subsidiaries. 14 EX-99.1 2 EXHIBIT 99.1 Exhibit 99.1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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: ---------------------------------- Name: Title: ZEIGLER ACQUISITION CORPORATION By: ---------------------------------- Name: Title: ZEIGLER COAL HOLDING COMPANY By: ---------------------------------- Name: Title: 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-99.2 3 EXHIBIT 99.2 COMPENSATION OF EXECUTIVE OFFICERS EXECUTIVE COMPENSATION The following table sets forth the annual and long-term compensation during the last three fiscal years paid or granted by the Company or its subsidiaries to, or accrued for, the Chief Executive Officer and the four highest paid executive officers of the Company and its subsidiaries during 1997:
ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------------------------------- ---------------------------------- NAME AND PRINCIPAL OTHER ANNUAL AWARD LTIP POSITION DURING 1997 YEAR SALARY($) BONUS($) COMPENSATION OPTIONS/SAUS(#) PAYOUTS($) - ------------------------------ --------- ----------- ----------- ----------------- ----------------- --------------- Chand B. Vyas-- 1997 487,500 -- 10,750 100,000 -- President and Chief 1996 425,000 600,000 10,500 100,000 -- Executive Officer 1995 425,000 250,000 10,500 -- -- W.D. Blackburn, Jr.-- 1997 198,750 -- 3,950 30,000 -- Senior Vice President 1996 189,583 188,650 3,950 40,000 -- Operations 1995 175,000 65,000 17,678 -- -- John C. Willson-- 1997 164,167 25,000 4,500 10,000 -- President Triton Coal 1996 158,333 120,000 47,113 15,000 -- Company(1) 1995 125,000 37,500 3,000 16,000 -- Coy K. Lane-- 1997 143,333 36,250 4,300 10,000 -- President Bluegrass Coal 1996 133,333 101,250 27,645 25,000 -- Development Company 1995 122,759 35,000 2,602 -- -- David M. Young-- 1997 164,231 15,000 5,830 10,000 -- President Mountaineer Coal 1996 166,211 120,000 37,099 10,000 -- Development Company 1995 160,000 30,000 4,231 -- -- NAME AND PRINCIPAL ALL OTHER POSITION DURING 1997 COMPENSATION($) - ------------------------------ --------------------- Chand B. Vyas-- -- President and Chief -- Executive Officer -- W.D. Blackburn, Jr.-- -- Senior Vice President -- Executive Operations -- John C. Willson-- -- President Triton Coal -- Company(1) -- Coy K. Lane-- -- President Bluegrass Coal -- Development Company -- David M. Young-- -- President Mountaineer Coal -- Development Company --
- ------------------------ (1) Mr. Willson's employment commenced in March 1995. EMPLOYMENT AGREEMENTS Mr. Vyas has an employment agreement with the Company, dated as of February 24, 1993, as amended, which provides for his employment by the Company as President and, if so elected, Chief Executive Officer at an annual salary and bonus to be determined by the Board of Directors. Mr. Vyas' employment may be terminated by him or the Company on 30 days' notice. If he is terminated for other than cause, or he terminates his employment as a result of an unacceptable change in his duties, a change 1 of control of Zeigler or other "Good Reason" (as defined therein), Mr. Vyas would be entitled to severance payments for three years following termination in an amount equal to three times his Average Compensation as well as certain other benefits related to his supplemental retirement payments and acceleration of vesting of his stock options. In the event of Mr. Vyas' death, his estate is entitled to receive two times his Average Compensation. The employment agreement provides that upon retirement, Mr. Vyas would be entitled to supplemental retirement payments equal to the excess, if any, of (i) the amount he would receive under the Company's pension plan (described below) if effect were not given to limitations imposed by the Internal Revenue Code and if his compensation included his bonuses over (ii) the annual amount payable to Mr. Vyas under such pension plan plus annual social security benefits payable to him. The estimated annual supplemental retirement payment payable to Mr. Vyas upon his normal retirement date was $315,000 as of December 31, 1997. Mr. Vyas' employment agreement also provides that he will not compete with the Company during the employment term and for a period of one year following termination. CHANGE IN CONTROL ARRANGEMENTS SPECIAL BONUS AND SEVERANCE PAY PLAN. In December, 1997, Zeigler announced that it was reviewing strategic alternatives to increase stockholder value, including a possible sale of the Company. In connection therewith Zeigler adopted a special bonus and severance pay plan which provides that certain of Zeigler's executives and other non-union personnel would receive specified retention payments if a sale of Zeigler or other change of control (as defined in the plan) occurred prior to December 31, 1998 and severance payments if the employment of such person were terminated in certain circumstances during the twelve months following such sale or other change of control. The plan also provides that any unvested stock options will vest upon a sale of the Company or other change in control. Any severance payment otherwise due an executive under this plan would be reduced by severance amounts payable under his or her employment contract. The amounts of such payments vary based on the classification of the covered employee and his or her compensation level and tenure with the Company. The amounts payable to Messrs. Blackburn, Willson, Lane and Young under the plan, as of the date of this Proxy Statement are: $220,000.00, $164,983.50, $143,550.00 and $164,983.50 respectively, in the event of change in control and $440,000.00, $330,016.50, $291,450.00 and $330,016.50, in the event such individual becomes entitled to severance payments (after reduction of the amount paid upon a change in control). In addition, if a sale of the Company occurs during 1998 each of the named individuals would be entitled to receive a special bonus of $150,000 and possibly other payments determined in the discretion of Messrs. Manley and Reilly. Change in control arrangements applicable to Mr. Vyas are discussed in "Employment Agreements" above. STOCK APPRECIATION AND STOCK OPTION PLANS STOCK APPRECIATION PLAN. Certain key employees of the Company and its subsidiaries have been granted stock appreciation units ("SAUs") under the Company's Stock Appreciation Plan (the "Stock Appreciation Plan"). Each participant in the Stock Appreciation Plan is entitled to receive a cash payment at "maturity" for each SAU which has become vested based upon the increase in fair value (as defined) of a share of the Company's Common Stock from the effective date of the award of the SAU. Vested SAUs mature on the earliest of the termination of the participant's employment with the Company, the sixth anniversary of the date of grant, the sale of the Company or the written election of the participant. The Stock Appreciation Plan is administered by the Compensation Committee of the Board of Directors. There were 73,600 SAUs outstanding as of December 31, 1997, all of which are fully vested and mature in 1998. Under the Stock Appreciation Plan, "fair value" is based on the "market price" of the Company's Common Stock. STOCK OPTION PLAN. In 1994 the Company's Board of Directors and stockholders adopted its Stock Option Plan (the "Option Plan"). A total of 2,560,000 shares of Common Stock were reserved for issuance upon exercise of options granted under the Option Plan. The purpose of the Option Plan is to attract and 2 retrain qualified personnel and to provide additional incentive to executive and other key employees of the Company and its subsidiaries. The Option Plan is administered by the Compensation Committee (the "Committee") which determines the terms of the options granted under the Option Plan, including the exercise price, number of shares subject to the option and exercisability. Generally, options may be transferred by the optionees by will or the laws of descent or distribution or to such transferees and on such terms and conditions as the Committee approves. Each option may be exercised, during the lifetime of the optionee, only by the optionee. The exercise price of all options granted under the Option Plan must equal at least the fair market value of the Common Stock of the Company on the date of grant. Unless the Committee specifies otherwise in the option grant, options granted will vest and become exercisable with respect to 20% of the Common Stock issuable upon exercise thereof on each anniversary of the grant date, and the reminder shall vest on the fifth anniversary of the grant date. At the discretion of the Committee, options may be made exercisable in one or more installments upon (i) occurrence of certain events, (ii) passage of time, (iii) fulfillment of certain conditions, or (iv) achievement of corporate performance goals. In the event of the Sale of the Company (as defined therein), the Committee may provide, in its discretion, that (i) outstanding options shall become immediately exercisable and shall terminate if not exercised as of the date of the Sale of the Company or any other designated date, or (ii) that such options shall only provide the right to receive the excess of the consideration per share of Common Stock offered in such Sale of the Company over the exercise price of such options. 3 EX-99.3 4 EXHIBIT 99.3 Exhibit 99.3 [Letterhead of Credit Suisse First Boston Corporation] August 3, 1998 Board of Directors Zeigler Coal Holding Company 50 Jerome Lane Fairview Heights, Illinois 62208 Members of the Board: You have asked us to advise you with respect to the fairness to the holders of the common stock of Zeigler Coal Holding Company ("Zeigler") from a financial point of view of the consideration to be received by such holders pursuant to the terms and subject to the conditions set forth in the Agreement and Plan of Merger, dated as of August 3, 1998 (the "Merger Agreement"), by and among AEI Resources, Inc. ("AEI"), Zeigler Acquisition Corporation ("Sub"), a wholly owned subsidiary of AEI, and Zeigler. The Merger Agreement provides for, among other things, (i) a tender offer by Sub to acquire all of the outstanding shares of the common stock, par value $0.01 per share, of Zeigler (the "Zeigler Common Stock") at a purchase price of $21.25 per share, net to the seller in cash (the "Cash Consideration" and, such tender offer, the "Tender Offer") and (ii) subsequent to the Tender Offer, the merger of Sub with and into Zeigler (the "Merger" and, together with the Tender Offer, the "Transaction") pursuant to which each outstanding share of Zeigler Common Stock not acquired in the Tender Offer will be converted into the right to the Cash Consideration. In arriving at our opinion, we have reviewed the Merger Agreement and certain publicly available business and financial information relating to Zeigler. We have also reviewed certain other information relating to Zeigler, including financial forecasts, provided to or discussed with us by Zeigler, and have met with the management of Zeigler to discuss the business and prospects of Zeigler. We have also considered certain financial and stock market data of Zeigler, and we have compared those data with similar data for other publicly held companies in businesses similar to Zeigler, and we have considered, to the extent publicly available, the financial terms of certain other business combinations and other transactions which have recently been effected. We also considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which we deemed relevant. In connection with our review, we have not assumed any responsibility for independent verification of any of the foregoing information and have relied on its being complete and accurate in all material respects. With respect to the financial forecasts, we have assumed that such forecasts have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Zeigler as to the future financial performance of Zeigler. In addition, we have not been requested to make, and have not made, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Zeigler, nor have we been furnished with any such evaluations or appraisals. Our opinion is necessarily based upon information available to us, and financial, economic, market and other conditions as they exist and can be evaluated, on the date hereof. Board of Directors Zeigler Coal Holding Company August 3, 1998 Page 2 We have acted as financial advisor to Zeigler in connection with the Transaction and will receive a fee for such services, a significant portion of which is contingent upon the consummation of the Transaction. In the past, we have provided financial services to Zeigler unrelated to the proposed Transaction, for which services we have received compensation. In the ordinary course of business, Credit Suisse First Boston and its affiliates may actively trade the debt and equity securities of Zeigler for their own accounts and for the accounts of customers and, accordingly, may at any time hold long or short positions in such securities. It is understood that this letter is from the Board of Directors of Zeigler in connection with its evaluation of the Transaction, does not constitute a recommendation to any stockholder as to whether such stockholder should tender shares of Zeigler Common Stock pursuant to the Tender Offer or how such stockholder should vote with respect to any matters relating to the Merger, and is not to be quoted or referred to, in whole or in part, in any registration statement, prospectus or proxy statement, or in any other document used in connection with the offering or sale of securities, nor shall this letter be used for any other purposes, without our prior written consent. Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Cash Consideration to be received in the Transaction by the holders of Zeigler Common Stock (other than AEI and its affiliates) is fair to such holders from a financial point of view. Very truly yours, CREDIT SUISSE FIRST BOSTON CORPORATION EX-99.7 5 EXHIBIT 99.7 Exhibit 99.7 FOR FURTHER INFORMATION: Francis M. Canavan 618-394-2627 www.zeigler-coal.com FOR IMMEDIATE RELEASE MONDAY, AUGUST 3, 1998 ZEIGLER ANNOUNCES SALE AGREEMENT -------------------------------- FAIRVIEW HEIGHTS, IL, AUGUST 3, 1998 - ZEIGLER COAL HOLDING COMPANY (NYSE: ZEI) announced that it has executed a definitive agreement for the sale of the Company to AEI Resources, Inc., a private coal company based in Kentucky, for $21.25 per share in cash. AEI Resources will tender for all of Zeigler's outstanding common shares with the tender expected to close during the week of August 31. Zeigler's Board of Directors voted unanimously to approve execution of the agreement with AEI Resources. The deal values Zeigler at approximately $849 million, including $608 million for the purchase of equity and $241 million for the assumption of debt. Zeigler is the second largest publicly traded coal company in the United States with coal mining assets in the Powder River Basin, Central Appalachia and the Illinois Basin. AEI Resources is a private company owned by the Addington family that has coal mining assets in the eastern United States. Credit Suisse First Boston acted as financial advisor to Zeigler on this transaction. # # # EX-99.8 6 EXHIBIT 99.8 ZEIGLER COAL HOLDING COMPANY 50 JEROME LANE FAIRVIEW HEIGHTS, IL 62208 August 5, 1998 Dear Stockholders: We are pleased 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 Corporation, 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 stockholder 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. 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 dated August 3, 1998 of Credit Suisse First Boston Corporation, the Company's financial advisor, 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 holders of Shares (other than Parent and its affiliates) in the Offer and the Merger was fair, from a financial point of view, to such holders. Certain stockholders and directors of the Company owning approximately 33% of the Shares on a fully diluted basis have agreed to tender their Shares. 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, /s/ Chand B. Vyas Chand B. Vyas PRESIDENT AND CHIEF EXECUTIVE OFFICER -----END PRIVACY-ENHANCED MESSAGE-----