1992-08-13_GENERAL DOCUMENTS - C1981017

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5. Mid - Continent Coal & Coke, Inc. ( "Coal & Coke "). This subsidiary operates a business in which it purchases coke waste products from steel companies, sorts it and processes it, and then sells it, in large part back to the steel companies themselves. More on Coal & Coke later in this memo. Pitkin Iron Corporation is owned by Bob Delaney, John Reeves, Donald Joyce, and Thomas Gibbs -- 4 out of 5 of Minerals' shareholders -- plus two other individuals. It thus has a close relationship with Resources, although it is not a corporate affiliate. Pitkin Iron leases a limestone quarry and rock dust plant from Resources, the production from which is used in the operation of Resources' mine. This business does remain in operation, although it has been substantially affected by the shutdown of Resources' mine. Pitkin Iron is providing some of the personnel used in the mine mothball program, and it has offered to purchase the remaining real estate owned by Redstone Corporation. Sanwa Loans Cross - Guaranteed and Cross - Collateralized by Resources and its Corporate Affiliates Although the subsidiaries of Minerals each have, or once had, discrete businesses, each with their own sets of creditors, the Sanwa loans are cross - guaranteed and cross - collateralized by Minerals and its subsidiaries. This is summarized below, with a bit of historical background. In 1982, Minerals and Resources, as co- obligors, borrowed $14 million from Continental Illinois. An additional $38 million was borrowed by Minerals and Resources during 1983 through 1986, for a total of $52.7 million. Substantially all of the loan proceeds were used by Resources, for capital improvements, mine development, and financing Resources' operating losses. The balance of the Continental Illinois loans, with interest, eventually grew to $60.9 million. In 1988, Resources and Minerals began work -out negotiations with Continental Illinois' successor, the FDIC. This eventually resulted in a restructuring, in April 1989, whereby the FDIC wrote off $34.8 million of debt, Minerals and its subsidiaries paid off $5.7 million of debt, and Sanwa acquired the notes and liens of Continental Illinois with respect to the remaining loan amount, $20.4 million. At the time of the restructuring with Sanwa, the surviving debt was apportioned among Resources and its sister companies. Resources had a $1.5 million term loan and a $2 million revolving credit line. Coal & Coke had a $5 million term loan and a $10.8 million revolving credit line. The Historic -3-