1994-01-31_GENERAL DOCUMENTS - C1981017 (3)

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Cheryl A. Linden February 1, 1994 Page 4 from the persons who have been sued by the Division. There is no point dwelling on this. Second, there was a hint from the Board that a schedule of deferred payments might become acceptable if persons other than Resources "guaranteed" that distributions would be timely made. Presumably, such guarantors would be one or more of the defendants in the Division's pending litigation. We are advised that none of the defendants have deep pockets, and that this option. simply is not an We thus deal with the reality that deferred payments are all that can be offered under the Plan. As drafted, the Plan offers deferred payments in exchange for a deferral of litigation against Resources' corporate parent and officers and directors. The deferral of litigation would last only so long as proceeds are provided which permit the timely implementation of the reclamation plan. The problem, as best as we can discern it, is that the Board assumes that Resources will be unable to liquidate its assets in timely fashion, that it is inevitable that the litigation against the parent and officers and directors would inevitably be resumed, and, accordingly, that there is no reason to defer the litigation in the first place. One Board member stated that the Plan and the Division's litigation should be de-coupled. We are willing to pursue this. The deferral of the Division's litigation was not Resources ' requirement. Rather, it was Sanwa Is condition for the voluntary subordination of its senior liens, which makes it possible to fund reclamation from the sale of Resources' assets. Sanwa's insistence that the litigation be deferred gives the litigation more prominence than it really deserves. The parent corporation, Mid-Continent Minerals, is a holding company which owns nothing except its stock in another subsidiary, Mid-Continent Coal & Coke. All of the underlying assets of Coal & Coke are encumbered by liens securing Sanwa's loans in excess of $25 million. All of Coal & Coke's revenues flow through a Sanwa lockbox. It thus should make little difference to Sanwa whether litigation against Minerals is stayed. I am willing to try to persuade Sanwa that it should agree to a voluntary subordination of its liens on Resources' assets even if there is no stay of the Division's litigation. The Board then would receive, in addition to the Rockdust Plant, 70% of the proceeds of all other assets in the bankruptcy estate, with no strings attached. The Board would retain its ability to pursue all legal remedies that are otherwise available. At the same time, the