PURPOSE: This rule establishes procedures for obtaining approval from the director of the Department of Natural Resources of a financial assurance instrument in the form of a company guarantee.

1. (1) Definitions. The terms defined in section

2. (1) of this rule are used in the specifications for the financial test which shall accompany a company guarantee. The definitions are intended to assist in understanding the rule and are not intended to limit the term definitions in any way that conflicts with generally accepted accounting practices.

   (4/19/91) Roy 0. Blunt

   1. (A) Assets. All existing and all probable future economic benefits obtained or controlled by a particular entity.
   2. (B) Company. The owner/operator of the metallic mineral waste management area.
   3. (C) Current assets. Cash or other assets or resources commonly identified as those which are reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business.
   4. (D) Current liabilities. Obligations whose liquidation is reasonably expected to require the use of existing resources properly classifiable as current assets or the creation of other current liabilities.
   5. (E) Liabilities. Probable future sacrifices of economic benefits arising from present obligations to transfer assets or provide services to other entities in the future as a result of past transactions or events.
   6. (F) Net working capital. Current assets minus current liabilities.
   7. (G) Net worth. Total assets minus total liabilities and is equivalent to owner’s equity.
   8. (H) Owner/operator. Owner and operator.
   9. (I) Parent corporation. A corporation which directly owns at least fifty percent (50%) of the voting stock of the corporation which is the facility owner or operator; the latter corporation is deemed a subsidiary of the parent corporation.
   10. (J) Tangible net worth. The tangible assets that remain after deducting liabilities. These assets would not include intangibles such as goodwill and rights to patents or royalties.

3. (2) Company Guarantee and Financial Test. The requirements for a financial assurance instrument may be satisfied by passing a financial test and submitting a letter from the company guaranteeing the required amount of financial assurance. A corporate guarantee submitted by the parent corporation of the owner/operator as specified in subsection (2)(J) of this rule may also be used to satisfy the requirement for financial assurance.

   1. (A) To pass the financial test the owner/operator must meet the criteria of either paragraph (2)(A)l. or 2. of this rule.

      1. 1. The owner/operator must have-

         1. A. Two (2) of the following three (3)

ratios: a ratio of total liabilities to net worth less than 2.0; a ratio of the sum of net income plus depreciation, depletion and amortization to total liabilities greater than 0.1; and a ratio of current assets to current liabilities greater than 1.5;

1. B. Tangible net worth at least three (3)

times the required financial assurance covered by the test; and

1. C. Total assets in Missouri amounting

to at least three (3) times the required financial assurance covered by the test.

1. 2. The owner/operator must have-

   1. A. A current rating for his/her most

recent bond issuance of AAA, AA, A or BBB as issued by Standard and Poor’s or Aaa, Aa, A or Baa as issued by Moody’s;

1. B. Tangible net worth at least three (3)

times the sum of the required financial assurance covered by the test; and

1. C. Total assets located in the state of

Missouri amounting to at least three (3) times the sum of the required financial assurance covered by the test.

1. (B) The phrase “required financial assurance” as used in subparagraph (2)(A)l.C. of this rule refers to the penal sum required by section 444.368, RSMo (Cum. Supp. 1989) and named in the letter from the owner/operator’s chief financial officer (Appendix Form 1). The penal sum is one thousand dollars ($1000) for each acre or fraction of an acre of the metallic minerals waste management area but not less than twenty thousand dollars ($20,000) for each permit.

2. (C) To demonstrate that s/he meets this test, the owner/operator must submit the following items to the director:

   1. 1. A letter signed by the owner/operator’s

chief financial officer and worded as specified in the Appendix Form l-l;

1. 2. A copy of the independent certified

public accountant’s report on examination of the owner/operator’s financial statements for the latest completed fiscal year; and

1. 3. A special report from the

owner/operator’s independent certified public accountant to the owner/operator stating that-

1. A. S/he has compared the data which

the letter from the chief financial officer specifies as having been derived from the independently audited year-end financial statements for the latest fiscal year with the amounts in those financial statements; and

1. B. No matters in connection with that

procedure, came to his/her attention which caused him/her to believe that the specified data should be adjusted.

1. (D) After the initial submission. of items specified in subsection (2)(C) of this rule, the owner/operator must send updated information to the director within ninety (90) days after the close of each succeeding fiscal year. This information must consist of all three (3) items specified in subsection (2)(C) of this rule.

2. (E) If the owner/operator no longer meets the requirements of subsection (2)(A) of this rule, s/he must send notice to the director of intent to establish alternate financial assurance. The notice must be sent by certified mail within ninety (90) days after the end of the fiscal year for which the year-end financial data show that the owner/operator no longer meets the requirements. The owner/operator

   CODEOFSTATE REGULATIONS 10 CSR 45-6

must provide the alternate financial assurance within one hundred twenty (120) days after the end of that fiscal year. (F) The director, based on a reasonable belief that the owner/operator may no longer meet the requirements of subsection (2)(A) of this rule, may require reports of financial condition at any time from the owner/operator in addition to those specified in subsection (2)(A) of this rule. If the director finds, on the basis of these reports or other information, that the owner/operator no longer meets the requirements of subsection (2)(A) of this rule, the owner/operator must provide alternate financial assurance as noted in section 444.368, RSMo (Cum. Supp. 1989) within thirty (30) days after notification of that finding.

1. (G) The director may require and evaluate additional information which relates to financial status including present or potential environmental liabilities and may deny the use of the financial test based upon that evaluation or the failure of an applicant to provide any additional information requested by the director within thirty (30) days from the date of this request. Pending approval of the use of the test by the director or pending appeal before any court of competent jurisdiction of the director’s denial of the use of the test, the owner/operator shall comply with the financial assurance requirements through the use of an alternate financial assurance mechanism as noted in section 444.368, RSMo (Cum. Supp. 1989). The burden of proof shall be on the applicant in the event of any appeal of a denial. If the director rules that the owner/ operator’s financial test is unacceptable, the owner/operator shall have thirty (30) days from the date of notification of the decision to provide alternative financial assurances.
2. (II) The director may disallow use of this test on the basis of qualifications in the opinion expressed by the independent certified public accountant in the report on examination of the owner/operator’s financial statements. An adverse opinion or a disclaimer of opinion will be cause for disallowance. The director will evaluate other qualifications on an individual basis. The owner/operator must provide alternate financial assurance as noted in section 444.368, RSMo (Cum. Supp. 1989) within thirty (30) days after notification of the disallowance.

3. (I) The owner/operator is no longer required to submit the items specified in subsection (2)(C) of this rule when-

   1. 1. An owner/operator substitutes alter-

nate financial assurance as specified in section 444.368, RSMo (Cum. Supp. 1989); or

1. 2. The director releases the owner/opera-

tor from the requirements as specified in section 444.368, RSMo (Cum. Supp. 1989). 10 CSR 456-NATURAL RESOURCES Division 45--Metallic Minerals Waste Management

1. (J) An owner/operator may meet the financial assurance requirements of section 444.368, RSMo (Cum. Supp. 1989) by obtaining a written guarantee, referred to in this rule as a corporate guarantee. The guarantor must be the parent corporation of the owner/operator. The guarantor must meet the requirements for owner/operators in subsections (2)(A)-(I) of this rule and must comply with the terms of the corporate guarantee. The wording of the corporate guarantee must be identical to the wording specified in the Appendix Form 2. The corporate guarantee must accompany the items sent to the director as specified in subsection (2)(C) of this rule. The terms of the corporate guarantee shall provide that-

   1. 1. If the owner/operator fails to perform

closure and/or inspection-maintenance of a disposal area covered by the corporate guarantee in accordance with the closure and/or inspection-maintenance plan and other permit requirements whenever required to do so, the guarantor will do so or establish alternate financial assurance as specified in section 444.368, RSMo (Cum. Supp. 1989) in the name of the owner/operator;

1. 2. The corporate guarantee will remain in

force unless the guarantor sends notice of cancellation by certified mail to the owner/ operator and to the director. Cancellation may not occur, however, during the one hundred twenty (120) days beginning on the date of receipt of the notice of cancellation by both the owner/operator and the director as evidenced by the return receipts; and

1. 3. If the owner/operator fails to provide

alternate financial assurance as specified in section 444.368, RSMo (Cum. Supp. 1989) and obtain the written approval of the alternate assurance from the director within ninety (90) days after receipt of both the owner/operator and the director of a notice of cancellation of the corporate guarantee from the guarantor, the guarantor will provide alternative financial assurance in the name of the owner/ operator.

1. (3) Registration with Missouri Secretary of State. Any company or parent corporation providing financial assurance as specified in section 444.368, RSMo (Cum. Supp. 1989) shall be registered with the Office of the Secretary of State to do business in Missouri. Auth: section 444.380, RSMo (Cum. Supp. 1989). Original rule filed Oct. 2, 1990, effective April 29,1991.

   CODE OF STATE REGULATIONS (4/19/91) Roy 0. Blunt 10 CSR 45-6

   APPENDIX

Form l-Letter from Chief Financial Officer A letter from the chief financial officer shall be worded as follows, except that instructions in brackets are to be replaced with the relevant information and the brackets deleted. LETTER FROM CHIEF FINANCIAL OFFICER

Director Missouri Department of Natural Resources P.O. Box 176 Jefferson City, Missouri 65102 Dear Sir: I am the chief financial officer of [name and address of company]. This letter is in support of this company’s use of the financial test to demonstrate financial assurance, as required by section 444.368, RSMo (Cum. Supp. 1989). [Fill out the following four (4) paragraphs regarding disposal areas and associated required financial assurance. If your company has no disposal areas that belong in a particular paragraph, write “none” in the space indicated. For each disposal area, include its name, address and the amount of the required penal sum which is equal to one thousand dollars ($1600) per acre for each acre or fraction of an acre of the metallic minerals waste management area but not less than twenty thousand dollars ($20,000) for each permit.] 1. This company is the owner/operator of the following metallic minerals waste management area(s) for which financial assurance for closure and/or inspection-maintenance care is demonstrated to the state of Missouri through the financial test. The penal sums covered by the test are shown for each disposal area: 2. This company guarantees, through a corporate guarantee, the closure and/or inspection-maintenance care of the following metallic minerals waste management area(s) located in the state of Missouri owned or operated by subsidiaries of this company. The penal sums so guaranteed are shown for each disposal area: 3. This company is the owner/operator or guarantor of the following metallic minerals waste management areas for which financial assurance for closure and/or inspection-maintenance is demonstrated through a financial test. The penal sums covered by the test are shown for each disposal area: 4. This company is the owner/operator of the following metallic minerals waste management areas for which financial assurance for closure and/or post-closure care is not demonstrated to any state through a financial test or other financial assurance instruments similar to those noted in section 444.368, RSMo (Cum. Supp. 1989). The current closure and/or post-closure cost estimates not covered by such financial assurance are shown for each disposal area: This company [insert “is required” or “is not required”] to file a Form 1OR with the Securities and Exchange Commission (SEC) for the latest fiscal year. The fiscal year of this company ends on [month, day]. The figures for the following items marked with an asterisk are derived from this company’s independently audited, year-end financial statements for the latest completed fiscal year, ended [date]. [Fill in Alternative I if the criteria of paragraph (2)(A)l. are used.] [Fill in Alternative II if the criteria of paragraph (2)(A)2. are used.] ALTERNATIVE I 1. Total of all penal sums, plus closure and post-closure cost estimates shown in the four paragraphs above . . . . . . . . . . . . $i “2. Total liabilities [This amount must include an appropriate portion of closure and/or post-closure cost estimates for mine waste management areas located in states other than Missouri.]. . . . . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ *3. Tangible net worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *4.Networth......................................................................................... : *5. Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *6,Currentliabilities................................................................................... *7. The sum of net income plus depreciation, depletion and amortization . . , . . . . .**..*................***......... i *8. Total assets in the state of Missouri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ YES NO 9. Is line 3 at least 2.0 times line l? 10. Is line 8 at least 3.0 times line l? 11. Is line 2 divided by line 4 less than 2.0? 12. Is line 7 divided by line 2 greater than O.l? 13. Is line 5 divided by line 6 greater than 1.5?

Roy D. Blunt

_ .” .-.-- ..- ~-

10 CSR 45-6-NATURAL RESOURCES

ALTERNATIVE II

1. 1. Total of all current penal sums, plus current closure and post-closure cost estimates shown in the four paragraphs above $
2. 2. Current bond rating of most recent issuance of this firm and name of rating service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.Dateofissuanceofbond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.Dateofmaturityofbond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *5.Tangiblenetworth..................................................................................$ *6.TotalassetsinthestateofMissouri . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ YES NO
3. 7. Is line 5 at least 2.0 times line l?
4. 8. Is line 6 at least 3.0 times line l? “CERTIFICATION: I certify under penalty of law that I have personally examined and am familiar with the information submitted in this and all attached documents and that, based on my inquiry of those individuals immediately responsible for obtaining the information, I believe that the submitted information is true, accurate and complete. I also hereby certify that the wording of this letter is identical to that specified in 10 CSR 45-6.030(2) as the rule was constituted on the date shown here. [Signature] [Name] [Title] IDaM Form 2-Corporate Guarantee A corporate guarantee must be worded as follows, except that instructions in brackets are to be replaced with the relevant information and the brackets deleted: CORPORATE GUARANTEE

Guarantee made this [date] by [name of guaranteeing entity], a business corporation organized under the laws of the state of [insert name of state], herein referred to as guarantor, to the Missouri Department of Natural Resources, obligee, on behalf of your subsidiary [owner/operator] of [business address]. Recitals 1. Guarantor meets or exceeds the financial test criteria and agrees to comply with the reporting requirements for guarantors as specified in 10 CSR 45-6.030(2). 2. [Owner/operator] owns or operates the following metallic minerals disposal area(s) covered by this guarantee: [List for each metallic minerals disposal area. Indicate for each whether guarantee is for closure, inspection-maintenance care or both.] 3. “Closure plans” and “inspection-maintenance plans” as used below refer to the plans maintained as required by section 444.350, RSMo (Cum. Supp. 1989) for the closure and inspection-maintenance care of disposal areas as identified above. 4. For value received from [owner/operator], guarantor guarantees to the Missouri Department of Natural Resources that in the event that [owner/ operator] fails to perform [insert “closure “, “inspection-maintenance” or “closure and inspection-maintenance“] of the above disposal area(s) in accordance with the closure or inspection-maintenance plans and other permit requirements whenever required to do so, the guarantor shall do so or establish alternate financial assurance as specified in section 444.368, RSMo (Cum. Supp. 1989) in the name of [owner/operator] in the amount of 3.0 times the penal sum required by section 444.368, RSMo (Cum. Supp. 1989). 5. Guarantor agrees that if, at the end of the fiscal year before termination of this guarantee, the guarantor fails to meet the financial test criteria, guarantor shall send within ninety (90) days, by certified mail, notice to the director or his/her authorized representative and to [owner/ operator] that s/he intends to provide alternative financial assurance as specified in section 444.368, RSMo (Cum. Supp. 1989) as applicable, in the name of [owner/operator]. Within one hundred twenty (120) days after the end of that fiscal year, the guarantor shall establish the financial assurance unless [owner/operator] has done so. 6. The guarantor agrees to notify the director or his/her authorized representative by certified mail of a voluntary or involuntary proceeding under Title 11 (bankruptcy), U.S. Code, naming guarantor as debtor, within ten (10) days after commencement of the proceeding. 7. Guarantor agrees that within thirty (30) days after being notified by director or his/her authorized representative of a determination that guarantor no longer meets the financial test criteria or that s/he is disallowed from continuing as a guarantor of closure or inspection-maintenance, s/he shall establish alternate financial assurance as specified in section 444.368, RSMo (Cum. Supp. 1989), as applicable, in the name of [owner/ operator] unless [owner/operator] has done so. 8. Guarantor agrees to remain bound under this guarantee notwithstanding any or all of the following: amendment or modification of the closure or inspection-maintenance plan, amendment or modification of the permit, the extension or reduction of the time of performance of closure or inspection-maintenance or any other modification or alteration of an obligation of the owner/operator pursuant to the requirements of sections 444.352-444.380, RSMo (Cum. Supp. 1989).

Roy il. Blunt

a CODE OF STATE REGULATIONS (4/19/91) Chapter G-Permits 10 CSR 45-6

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1. 9. Guarantor agrees to remain bound under this guarantee for so long as [owner/operator] must comply with the applicable financial assurance requirements of section 444.368, RSMo (Cum. Supp. 1989) for the above listed disposal area(s), except that guarantor may cancel this guarantee by sending notice by certified mail to the director or his/her authorized representative and to [owner/operator], such cancellation to become effective no earlier than one hundred twenty (120) days after receipt of such notice by both the director or his/her authorized representative and [owner/operator], as evidenced by return receipts.
2. 10. Guarantor agrees that if [owner/operator] fails to provide alternate financial assurance as specified in section 444.368, RSMo (Cum. Supp. 1989) as applicable, and obtain written approval of such assurance from the director or his/her authorized representative within ninety (90) days after a notice of cancellation by the guarantor is received by director or his/her authorized representative from guarantor, guarantor shall provide the alternate financial assurance in the name of [owner/operator].
3. 11. Guarantor expressly waives notice of acceptance of this guarantee by the director or his/her authorized representative or by [owner/operator]. Guarantor also expressly waives notice of amendments or modifications of the closure and/or inspection-maintenance plan and of amendments or modifications of the disposal area permit(s). I hereby certify that the wording of this guarantee is identical to that specified in 10 CSR 456.030(2) as such rule was constituted on the date written first above. Effective date: [Name of guarantor] [Authorized signature for guarantor] [Name of person signing] [Title of person signing] Thus sworn and signed before me on this the day of ) 19-

NOTARY PUBLIC